As filed with the Securities and Exchange Commission on June 22, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
HS RESOURCES, INC.
(Exact name of registrant as specified in its charter)
-----------------------
DELAWARE 94-3036864
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE MARITIME PLAZA
15TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
(415) 433-5795
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
HS RESOURCES, INC. EMPLOYEE INVESTMENT 401(K) AND PROFIT SHARING PLAN
(Full title of plan)
-----------------------
With a copy to:
JAMES M. PICCONE, ESQ. RONALD R. LEVINE, II, ESQ.
GENERAL COUNSEL DAVIS, GRAHAM & STUBBS LLP
1999 BROADWAY, SUITE 3600 370 SEVENTEENTH STREET, SUITE 4700
DENVER, COLORADO 80202 DENVER, COLORADO 80202
(303) 296-3600 (303) 892 -9400
(Name, address, including zip code,
and telephone number, including
area code, of agent for service)
-----------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===============================================================================================
Proposed Proposed
Amount maximum maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered per share(1) offering price(1) registration fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
($.001 par value)(2)....... 500,000 $13.3125 $6,656,250 $1,851
Interests in the shares
HS Resources, Inc.
Employee Investment 401(k)
and Profit Sharing Plan... (3) (4) (4) (4)
===============================================================================================
</TABLE>
(1) Estimated solely for the purposes of calculating the amount of the
registration fee pursuant to Rule 457(h), based upon the closing price of
the Company's Common Stock on June 17, 1999 as quoted on The New York Stock
Exchange.
(2) Each share of Common Stock includes and is traded with one Series A Junior
Preferred Stock Purchase Right which becomes exercisable only in the event,
subject to certain exceptions, an acquiring party accumulates 15% or more of
the Company's voting stock, or if a third party announces an offer to
acquire 30% or more of the Company's voting stock.
(3) Pursuant to Rule 416(c) under the Securities Act of 1933, this Registration
Statement also covers an indeterminate amount of plan interests to be
offered or sold pursuant to the HS Resources, Inc. Employee Investment
401(k) and Profit Sharing Plan.
(4) Pursuant to Rule 457(h)(2) under the Securities Act of 1933, no separate fee
is required to register plan interests.
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers the registration of 500,000 additional
shares of Common Stock of HS Resources, Inc., a Delaware corporation (the
"Company"), issuable pursuant to the Company's Employee Investment 401(k) and
Profit Sharing Plan. The Company's Employee Investment 401(k) Plan and the
Company's Profit Sharing Plan formerly constituted separate plans but were
combined into one plan on August 1, 1998 with separate 401(k) and profit sharing
components. The contents of the Registration Statement on Form S-8 filed by the
Company on May 5, 1995 (file no. 33-91934) relating to the Company's Employee
Investment 401(k) Plan and the Company's Profit Sharing Plan are incorporated
herein by reference.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The following documents filed or to be filed by HS Resources, Inc.
(the "Company") with the Securities and Exchange Commission (the "Commission")
are hereby incorporated or deemed to be incorporated in this Registration
Statement by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1998;
(b) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999;
(c) The Company's Current Reports on Form 8-K, as filed with the
Commission on January 13, 1999, March 23, 1999, April 9, 1999 and May 13, 1999;
(d) The description of the Company's Common Stock contained in the
Company's Form 10, File No. 000-18886, as filed with the Commission on October
26, 1990;
(e) The description of the Company's Series A Junior Preferred Stock
Purchase Rights contained in the Company's Form 8-A, File No. 1-13152, as filed
with the Commission on March 11, 1996 and amended on March 14, 1996.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934
subsequent to the date of this Registration Statement and prior to the filing of
a post-effective amendment to this Registration Statement indicating that all
securities offered under the Registration Statement have been sold, or
deregistering all securities then remaining unsold, shall be deemed to be
incorporated in this Registration Statement by reference and to be a part hereof
from the date of filing of such documents.
Any statement contained in a document incorporated by, or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modified or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Registration
Statement.
4. DESCRIPTION OF SECURITIES.
Not applicable.
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5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("Delaware Law")
permits, subject to certain conditions, a corporation to indemnify its
directors, officers, employees and agents against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such director, officer, employee or agent in connection with the
threatened, pending or completed actions, suits and proceedings (other than
actions by or in the right of the corporation) in or to which any of such
persons is a party or is threatened to be made a party.
Article 12 of the Company's Amended and Restated Certificate of
Incorporation and Article VI, Section 2 of the Company's Third Amended and
Restated Bylaws provide that the Company may indemnify its directors, officers,
employees and agents to the fullest extent permitted by Delaware Law.
The Company currently maintains a policy insuring, subject to
certain exceptions, its directors and officers and the directors and officers of
its subsidiaries against liabilities that may be incurred by such persons acting
in such capacities.
Pursuant to indemnification agreements, the Company has agreed to
indemnify its directors and certain officers against all costs, charges and
expenses incurred by reason of being a director or officer of the Company,
provided that indemnification is not prohibited in whole or in part under
applicable law.
7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
8. EXHIBITS.
4.1 HS Resources, Inc. Employee Investment 401(k) and Profit
Sharing Plan.
4.2 Adoption Agreement.
5.1 Opinion and Consent of Davis, Graham & Stubbs LLP.
23.1 Consent of Counsel. See Exhibit 5.1.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Williamson Petroleum Consultants, Inc.
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<PAGE>
23.4 Consent of Netherland, Sewell and Associates, Inc.
24.1 Powers of Attorney. Included on Signature Page.
9. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (i) to include
any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in this
Registration Statement; and (iii) to include any additional or changed material
information on the plan of distribution, provided, however, that paragraphs
A(1)(i) and A(1)(ii) do not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
B. The undersigned Registrant hereby undertakes that, insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described in Item 6 of this Registration Statement,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding), is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California, on the 21st day
of June, 1999.
HS RESOURCES, INC.
By: /s/ Nicholas J. Sutton
-----------------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints jointly and severally, Nicholas J. Sutton, P.
Michael Highum, James E. Duffy and James M. Piccone, or any of them, with full
power to act alone, his true and lawful attorneys-in-fact, with full power of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement on Form S-8, and file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact full
power and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact or
either of them may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ Nicholas J. Sutton Chairman of the Board and June 21, 1999
- --------------------------- Chief Executive Officer
Nicholas J. Sutton (Principal Executive Officer)
/s/ P. Michael Highum President and Director June 21, 1999
- --------------------------- (Principal Executive Officer)
P. Michael Highum
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/s/ James E. Duffy Vice President-Finance, Chief June 21, 1999
- --------------------------- Financial Officer and Director
James E. Duffy (Principal Financial Officer)
/s/ Annette M. Montoya Vice President-Accounting June 21, 1999
- --------------------------- and Administration
Annette M. Montoya (Principal Accounting Officer)
/s/ Michael J. Savage Director June 21, 1999
- --------------------------
Michael J. Savage
/s/ Philip B. Smith Director June 21, 1999
- --------------------------
Philip B. Smith
Pursuant to the requirements of the Securities Act of 1933, the plan
administrator has duly caused this registration to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of San Francisco, State
of California, on June 21, 1999.
HS Resources, Inc., Plan Administrator
By: /s/ Annette M. Montoya
-----------------------------------
Name: Annette M. Montoya
Its: Vice President-Accounting
and Administration
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<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
4.1 HS Resources, Inc. Employee Investment 401(k) and Profit Sharing
Plan.
4.2 Adoption Agreement.
5.1 Opinion and Consent of Davis, Graham & Stubbs LLP.
23.1 Consent of Counsel. See Exhibit 5.1.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Williamson Petroleum Consultants, Inc.
23.4 Consent of Netherland, Sewell and Associates, Inc.
24.1 Powers of Attorney. Included on Signature Page.
II-6
THE CHARLES SCHWAB 401(k) PROFIT SHARING PLAN,
TRUST AND CUSTODIAL AGREEMENT
BASIC PLAN DOCUMENT 02
<PAGE>
TABLE OF CONTENTS
Page No.
Introduction...................................................................1
Article 1 -- Definitions.......................................................2
1.1 Account..................................................................2
1.2 Adjustment Factor........................................................2
1.3 Adoption Agreement.......................................................2
1.4 Affiliated Employer......................................................2
1.5 Aggregate Limit..........................................................2
1.6 Annuity Contract.........................................................2
1.7 Annuity Starting Date....................................................3
1.8 Applicable Calendar Year.................................................3
1.9 Applicable Life Expectancy...............................................3
1.10 Applicable Notice Period................................................3
1.11 Authorized Fund.........................................................4
1.12 Average Contribution Percentage.........................................4
1.13 Average Deferral Percentage.............................................4
1.14 Base Contribution Percentage............................................4
1.15 Beneficiary.............................................................4
1.16 Benefiting..............................................................4
1.17 Break in Service........................................................4
1.18 Broker..................................................................4
1.19 Code....................................................................4
1.20 Committee...............................................................4
1.21 Compensation............................................................5
1.22 Contribution Percentage Amounts.........................................6
1.23 Contribution Percentage.................................................7
1.24 CSTC....................................................................7
1.25 Custodian and Custody Agreement.........................................7
1.26 Deductible Contributions................................................7
1.27 Deferral Percentage.....................................................7
1.28 Determination Date......................................................8
1.29 Directed Account........................................................8
1.30 Disability..............................................................8
1.31 Distribution Calendar Year..............................................8
1.32 Early Retirement Age....................................................8
1.33 Effective Date..........................................................8
1.34 Elapsed Time............................................................8
1.35 Election Period.........................................................9
1.36 Elective Salary Deferrals...............................................9
1.37 Eligible Employee......................................................10
1.38 Eligible Participant...................................................10
1.39 Employee...............................................................10
1.40 Employer...............................................................10
1.41 Employer Contributions.................................................10
1.42 Employer Securities....................................................10
1.43 Entry Date.............................................................10
1.44 ERISA..................................................................10
1.45 Excess Aggregate Contributions.........................................11
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1.46 Excess Compensation....................................................11
1.47 Excess Contributions...................................................11
1.48 Excess Deferrals.......................................................11
1.49 Family Member..........................................................11
1.50 Five-Percent Owner.....................................................11
1.51 Forfeiture.............................................................11
1.52 Full Discretion........................................................11
1.53 Highly Compensated Employee............................................11
1.54 Highly Compensated Employee Group......................................13
1.55 Hour of Service........................................................13
1.56 Insurer................................................................14
1.57 Integration Level......................................................14
1.58 Investment Authorization...............................................14
1.59 Investment Manager.....................................................14
1.60 Key Employee...........................................................14
1.61 Leased Employee........................................................15
1.62 Limited Discretion.....................................................15
1.63 Managed Account........................................................16
1.64 Matching Contributions.................................................16
1.65 Maximum Disparity Rate.................................................16
1.66 Nonhighly Compensated Employee.........................................16
1.67 Nonhighly Compensated Employee Group...................................16
1.68 Non-Standardized Adoption Agreement....................................16
1.69 Normal Retirement Age..................................................16
1.70 Owner-Employee.........................................................16
1.71 Participant............................................................17
1.72 Participating Employer.................................................17
1.73 Permissive Aggregation Group...........................................17
1.74 Plan...................................................................17
1.75 Plan Administrator.....................................................17
1.76 Plan Service Agreement.................................................17
1.77 Plan Year..............................................................17
1.78 Qualified Domestic Relations Order.....................................17
1.79 Qualified Election.....................................................17
1.80 Qualified Joint and Survivor Annuity...................................18
1.81 Qualified Matching Contributions.......................................18
1.82 Qualified Nonelective Contributions....................................18
1.83 Qualified Preretirement Survivor Annuity...............................18
1.84 Recordkeeper...........................................................19
1.85 Required Aggregation Group.............................................19
1.86 Required Beginning Date................................................19
1.87 Required Annuities.....................................................19
1.88 Rollover Contributions.................................................19
1.89 Salary Reduction Agreement.............................................20
1.90 Schwab.................................................................20
1.91 Self-Employed Person...................................................20
1.92 Shareholder-Employee...................................................20
1.93 Standardized Adoption Agreement........................................20
1.94 Straight Life Annuity..................................................20
1.95 Super Top-Heavy........................................................20
1.96 Survivor Annuity Rules.................................................20
1.97 Taxable Wage Base......................................................20
1.98 Terminates Service.....................................................20
1.99 Top-Heavy..............................................................21
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1.100 Trust Agreement.......................................................21
1.101 Trustee...............................................................21
1.102 Trust Fund............................................................21
1.103 Unique Assets.........................................................21
1.104 Valuation Date........................................................21
1.105 Vested................................................................21
1.106 Voluntary After-Tax Contributions.....................................21
1.107 Year of Service.......................................................21
Article 2 -- Participation....................................................24
2.1 Entry Date..............................................................24
2.2 Break in Service........................................................24
2.3 Owner-Employee..........................................................24
Article 3 -- Contributions....................................................26
3.1 Employer Contributions..................................................26
3.2 Allocation of Contributions.............................................26
3.3 Deductible Contributions................................................28
3.4 Voluntary After-Tax Contributions.......................................28
3.5 Rollover Contributions..................................................29
3.6 Return of Contributions.................................................29
3.7 401(k) Features.........................................................29
3.8 Matching and Voluntary After-Tax Contributions..........................33
3.9 401(k) Features in Plans Covering Collectively Bargained Employees......37
Article 4 -- Accounts.........................................................38
4.1 Plan Account............................................................38
4.2 Vesting.................................................................38
4.3 Limitations on Allocations..............................................39
Article 5 -- Investments......................................................49
5.1 Investment Authority....................................................49
5.2 Permitted Investments...................................................50
5.3 Plan Loans..............................................................51
5.4 Uninvested Cash.........................................................53
5.5 Earnings................................................................53
5.6 Use of Affiliates.......................................................53
5.7 Special Holding Account.................................................53
5.8 Valuation...............................................................53
5.9 Accountings.............................................................54
Article 6 -- Distributions....................................................55
6.1 Determination of Spouse.................................................55
6.2 Lifetime Benefits.......................................................55
6.3 Distributions Subject to Survivor Annuity Rules.........................59
6.4 Distributions Exempt From Survivor Annuity Rules........................60
6.5 Benefit Distribution After Death........................................61
6.6 Transfer of Assets From Another Plan....................................62
6.7 Missing Persons.........................................................62
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6.8 Disputed Payments.......................................................62
6.9 Distribution to Minors and Legally Incompetent Persons..................62
6.10 Distribution to Alternate Payees.......................................63
6.11 Pre-retirement Distributions...........................................63
6.12 Hardship Withdrawals...................................................63
6.13 Direct Rollovers.......................................................64
6.14 Tefra Transitional Rule................................................65
Article 7 -- Death Benefits and Insurance.....................................67
7.1 Retention of Life Insurance.............................................67
7.2 Rights of Trustee.......................................................67
7.3 Premium Payments........................................................67
7.4 Distribution On Death and Termination...................................68
Article 8 -- Duties of the Trustee and the Custodian..........................69
8.1 Trustee.................................................................69
8.2 Custodian...............................................................69
Article 9 -- Administration...................................................70
9.1 Plan Administrator......................................................70
9.2 Administrative Powers and Responsibilities..............................70
9.3 Funding Policy..........................................................71
9.4 Review Procedure for Denied Benefits....................................71
9.5 Standard of Conduct.....................................................71
9.6 Delegation..............................................................72
9.7 Expenses................................................................72
Article 10 -- Power, Duties and Obligations of Broker.........................73
10.1 Duties.................................................................73
10.2 Nominee................................................................73
10.3 Scope of Duties........................................................73
10.4 Scope of Liability.....................................................73
10.5 Resignation or Removal.................................................73
Article 11 -- Amendment, Termination, and Transfer............................74
11.1 Amendment or Termination by CSTC.......................................74
11.2 Amendment or Termination by Employer...................................74
11.3 Distribution After Termination.........................................75
11.4 Merger, Consolidation, or Transfer.....................................75
11.5 Maintenance of Qualified Status........................................75
Article 12 -- Determination of Top-Heavy Status...............................76
12.1 Application............................................................76
12.2 Criteria...............................................................76
12.3 Top-Heavy Ratio........................................................76
12.4 Adjustment to Fractions................................................77
12.5 Top-Heavy Minimum Contributions........................................77
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Article 13 -- Adoption of Plan by Affiliated Employers........................79
13.1 Adoption Procedure.....................................................79
13.2 Effect of Adoption by Affiliated Employer..............................79
Article 14 -- Other Information...............................................80
14.1 Employment Relationship................................................80
14.2 Prohibited Transactions................................................80
14.3 Prohibited Assignment of Benefits......................................80
14.4 Tax Qualification and Governing Law....................................80
14.5 Approval by Internal Revenue Service...................................80
14.6 Severability...........................................................80
14.7 Source of Benefits.....................................................80
14.8 Commingling............................................................81
14.9 Liquidation of Assets..................................................81
14.10 Exclusive Benefit Limitation..........................................81
14.11 Bonding and Insurance.................................................81
14.12 Rules of Construction.................................................81
TRUST AGREEMENT................................................................1
ARTICLE 1 -- ESTABLISHMENT AND GENERAL PROVISIONS..............................2
1.1 Establishment of Trust Relationship......................................2
1.2 Exclusive Purpose and Benefit............................................2
ARTICLE 2 -- TRUST FUND........................................................3
2.1 Assets...................................................................3
2.2 Transfers and Rollover Contributions.....................................3
ARTICLE 3 -- INVESTMENT AND MANAGEMENT OF PLAN ASSETS..........................4
3.1 Persons Authorized to Act................................................4
3.2 Persons Authorized to Direct Investment..................................4
3.3 Directed Trustee.........................................................5
3.4 Principal and Income.....................................................5
3.5 Responsibility for Diversification, Funding Policy, and Statutory
Limits Relating to Employer Securities...................................5
3.6 Uninvested Cash..........................................................5
3.7 Rights Incident to Securities Ownership..................................5
3.8 Securities Issued by Foreign Entities....................................5
3.9 Voting of Employer Securities............................................5
3.10 Delegation to Broker....................................................6
ARTICLE 4 -- INVESTMENTS.......................................................7
4.1 General Investments......................................................7
4.2 Collective Investments...................................................7
4.3 Insurance Contracts......................................................7
4.4 Employer Securities......................................................8
4.5 Participant Loans........................................................8
4.6 Prohibited Investments...................................................9
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4.7 Prohibited Transactions..................................................9
4.8 Trustee Powers...........................................................9
4.9 Use of Affiliates.......................................................11
ARTICLE 5 -- DISBURSEMENTS....................................................13
5.1 Directions of Plan Administrator........................................13
5.2 Withholding Taxes.......................................................13
5.3 Persons to Whom Distributions are Made..................................13
5.4 Dispute Regarding Benefit Payments......................................13
5.5 Inquiries Regarding Benefit Payments....................................13
ARTICLE 6 -- SETTLEMENT OF ACCOUNTS...........................................14
6.1 Records.................................................................14
6.2 Annual Accounting.......................................................14
6.3 Valuation Procedures....................................................14
6.4 Valuation of Employer Securities........................................14
6.5 Valuation When Fair Market Value of Securities
(Other Than Employer Securities) is Not Available.......................15
6.6 Form of Communications..................................................15
ARTICLE 7 -- INDEMNIFICATION..................................................16
ARTICLE 8 -- TAXES, EXPENSES AND COMPENSATION OF TRUSTEE......................17
8.1 Taxes Levied On Trust Fund..............................................17
8.2 Payment of Fees and Expenses of the Trustee.............................17
8.3 Payment of Fees and Expenses Incurred by the Plan Administrator.........17
ARTICLE 9 -- THE TRUSTEE......................................................18
9.1 Resignation and Removal.................................................18
9.2 Transfer to Successor Trustee...........................................18
9.3 Final Accounting........................................................18
9.4 Request for Instructions................................................18
9.5 Disclosure..............................................................18
9.6 Use of Information......................................................18
9.7 Status of Trustee.......................................................18
9.8 Trustee Reliance On Instruction.........................................19
9.9 Counsel of Trustee......................................................19
9.10 Persons Dealing With Trustee...........................................19
ARTICLE 10 -- PROCEDURES IN EVENT EMPLOYER SECURITIES.........................20
10.1 No Additional Acquisitions.............................................20
10.2 Default Investment.....................................................20
10.3 Distributions in Stock.................................................20
10.4 Put Option.............................................................20
10.5 Distributions or Transfers in Cash.....................................20
ARTICLE 11 -- AMENDMENT AND TERMINATION.......................................21
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11.1 Amendment..............................................................21
11.2 Termination............................................................21
11.3 Merger, Consolidation of Employer......................................21
Article 12 -- Miscellaneous...................................................22
12.1 Governing Law..........................................................22
12.2 Headings...............................................................22
12.3 Anti-alienation........................................................22
12.4 Disqualification of Plan...............................................22
12.5 Arbitration............................................................22
12.6 Recording Conversations................................................22
12.7 Invalid Provisions.....................................................22
12.8 Successors and Assigns.................................................22
12.9 Counsel of Employer....................................................22
12.10 Separate Trusts.......................................................23
CUSTODY AGREEMENT..............................................................1
1. Establishment of Custody Account..........................................2
2. The Parties...............................................................2
3. Appointment as Agent......................................................2
4. Investment of Property....................................................2
5. Powers of CSTC............................................................3
6. Services by and Brokerage Transacted Through the
Affiliated Organizations..................................................3
7. Income and Principal; Additions and Withdrawals...........................3
8. Proxies; Corporate Literature; Shareholder Information....................4
9. Statements................................................................4
10. Instructions.............................................................4
11. Compensation, Expenses and Other Charges.................................5
12. Indemnification; Disputes................................................5
13. Amendment and Termination................................................6
14. Removal and Appointment of an Authorized Person..........................6
15. Miscellaneous............................................................6
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<PAGE>
THE CHARLES SCHWAB 401(K) PROFIT SHARING PLAN,
TRUST AND CUSTODIAL AGREEMENT
BASIC PLAN DOCUMENT 02
INTRODUCTION
In this document, we describe The Charles Schwab 401(k) Profit Sharing
Plan, Basic Plan Document 02, (the "Plan"), its Trust Agreement and, if
applicable, the Custody Agreement. We also define important terms to help make
the Plan easier to understand.
The Plan is a model plan document called a prototype plan -- that is, a
standard plan from which an Employer can select certain options on either the
Non-Standardized Adoption Agreement or the Standardized Adoption Agreement. The
Plan document, including the Trust Agreement and, if applicable, the Custody
Agreement, together with either the Non-Standardized Adoption Agreement, Number
001, or the Standardized Adoption Agreement, Number 002, completed when the
Employer opened its account, is the agreement between the Employer and The
Charles Schwab Trust Company ("CSTC") which sponsors the prototype plan and acts
either as trustee (the "Trustee"), or as custodian (the "Custodian") if
individuals are appointed by the Employer to serve as trustee.
Any self-employed person, partnership, corporation, or limited liability
company may adopt the Plan. The Employer must establish and maintain the Plan
for the exclusive benefit of Plan Participants and their Beneficiaries. We
intend that the Plan established and maintained by Employers in this way will
qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended
from time to time, and its related Trust will be exempt from taxation under
Section 501(a) of the Internal Revenue Code.
Throughout this document, we try to explain the Plan as simply and clearly
as possible, while fully and accurately reflecting language of the Internal
Revenue Code. In Article 1 below, we define terms that have meanings specific to
this document except where the context clearly indicates otherwise. Some terms
are too complicated and lengthy to define here. When these terms appear in the
document, reference is made to the appropriate Internal Revenue Code section. To
indicate additional information contained elsewhere in this document, reference
is made to the appropriate Plan Article or section.
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ARTICLES
ARTICLE 1 -- DEFINITIONS
1.1 ACCOUNT. Accounting record maintained by the Plan Administrator
showing the Participant's interest in the Plan, including contributions,
forfeitures, income, expense and actual or allocated earnings gains and
losses attributable to contributions and/or forfeitures.
1.2 ADJUSTMENT FACTOR. Cost-of-living Adjustment Factor prescribed
by the Secretary of the Treasury according to Code section 415(d) and applied
to dollar limitations in the Plan.
1.3 ADOPTION AGREEMENT. Refers to either the Non-Standardized
Adoption Agreement, Number 001, or the Standardized Adoption Agreement,
Number 002, whichever was adopted by the Employer.
1.4 AFFILIATED EMPLOYER. Any entity that meets one of the following
criteria:
(a) Any incorporated or unincorporated trade or business that is
under common control (as described in Code section 414(b) or Code section
414(c)) with the Employer;
(b) Any incorporated or unincorporated organization that is a member
of an affiliated service group (as described in Code section 414(m)) that
includes the Employer; or
(c) Any other entity that must be aggregated with the Employer, as
described in regulations under Code section 414(o).
1.5 AGGREGATE LIMIT. The Aggregate Limit is the greater of (A) or (B):
(A) The sum of:
(i) 125 percent of the greater of the Average
Deferral Percentage or the Average Contribution Percentage of the Nonhighly
Compensated Employees, and
(ii) two percentage points plus the lesser of
the Average Deferral Percentage or the Average Contribution Percentage of the
Nonhighly Compensated Employees, but in no event twice the lesser of the Average
Deferral Percentage or Average Contribution Percentage of the
Nonhighly Compensated Employees.
(B) The sum of:
(i) 125 percent of the lesser of the Average
Deferral Percentage or Average Contribution Percentage of the Nonhighly
Compensated Employees, and
(ii) two percentage points plus the greater of
the Average Deferral Percentage or the Average Contribution Percentage of the
Nonhighly Compensated Employees, but in no event twice the greater of the
Average Deferral Percentage or Average Contribution Percentage of the
Nonhighly Compensated Employees.
1.6 ANNUITY CONTRACT. Nontransferable annuity contract issued by an
Insurer.
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1.7 ANNUITY STARTING DATE. First day of the first period for which
an amount is payable either as an annuity or in another form.
1.8 APPLICABLE CALENDAR YEAR. First distribution year, or if life
expectancy is being recalculated, a succeeding calendar year.
1.9 APPLICABLE LIFE EXPECTANCY. Life expectancy of the Participant (or
the joint life and last survivor expectancy of the Participant and the
Participant's designated Beneficiary) computed using the "expected return
multiples" in Tables V and VI of section 1.72-9 of the federal income tax
regulations. If life expectancy is being recalculated, it is based on the
attained age(s) of the Participant (and, if applicable, the Participant's
designated Beneficiary) in the Applicable Calendar Year. If life expectancy is
not being recalculated, the initial life expectancy is reduced by one for each
calendar year that has elapsed since life expectancy was first calculated.
Unless the Participant (or the Participant's spouse, if the Participant dies)
makes a contrary election by the time distributions are required to begin, life
expectancies shall be recalculated annually. Such elections will be irrevocable
as to the Participant (or spouse, as applicable) and will apply to all
subsequent years. The life expectancy of a nonspouse Beneficiary may not be
recalculated.
1.10 APPLICABLE NOTICE PERIOD. Period during which the Plan Administrator
must provide a Participant with an explanation of the Participant's options on
the timing and form of benefit distributions. The Plan Administrator must
provide the explanation during whichever of the four following periods ends
last:
(a) The period beginning the first day of the Plan Year in which the
Employee reaches age 32 and ending at the close of the Plan Year preceding the
Plan Year in which the Employee reaches age 35;
(b) A reasonable period ending after the Employee becomes a
Participant;
(c) A reasonable period ending after Code section 417(a) ceases to
apply to the Participant because the Plan no longer fully subsidizes the cost of
the Qualified Preretirement Survivor Annuity or the Qualified Joint and Survivor
Annuity.
(d) A reasonable period ending after the survivor annuity
requirements (as described in Code section 401(a)(11)) begin to apply to the
Participant.
If the Participant Terminates Service before the Participant reaches age
35, the Applicable Notice Period will be a reasonable period ending after the
date the Participant Terminates Service. The "reasonable period" referred to in
this section includes the two-year period that begins one year before the event
described.
If the Employer reemploys the Participant, the Employer will redetermine
the Applicable Notice Period.
Please note: The "Applicable Notice Period" for a Qualified Joint and
Survivor Annuity will begin at least 30 days, but not more than 90 days, before
the Participant's Annuity Starting Date; provided, however, the Participant's
Annuity Starting Date may be less than 30 days after written notice is provided
to the Participant if the requirements under Code section 417(a)(3) and the
corresponding regulations are met. The "Applicable Notice Period" for purposes
of Code section 402(f) will begin at least 30 days, but no more than 90 days,
before the date of distribution; provided, however, if the distributee
affirmatively elects a distribution after having received the notice required
under Code section 402(f), a distribution may be made less than 30 days after
such notice was provided as long as the Plan Administrator provided information
to the distributee clearly indicating that the distributee has the right to
consider the
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decision of whether to elect a direct rollover for at least 30 days after the
notice is provided. The "Applicable Notice Period" for purposes of voluntary
distributions as described in Section 6.2(b) will begin at least 30 days, but
not more than 90 days, before the date of distribution commences; provided,
however, the distribution may commence less than 30 days after the notice was
provided to the Participant if the distribution is one to which Code sections
401(a)(11) and 417 do not apply, the Plan Administrator clearly informs the
Participant that the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether to elect a
distribution (and, if applicable, a particular distribution option), and the
Participant, after receiving the notice, affirmatively elects a distribution.
1.11 AUTHORIZED FUND. An investment company registered under the
Investment Company Act of 1940, as amended, the shares of which may be
designated by the Employer with the Investment Authorization as an investment
option under the Plan.
1.12 AVERAGE CONTRIBUTION PERCENTAGE. The average (expressed as a
percentage) of the Contribution Percentages of the Highly Compensated Employee
Group and the Nonhighly Compensated Employee Group.
1.13 AVERAGE DEFERRAL PERCENTAGE. The average (expressed as a percentage)
of the Deferral Percentages of the Highly Compensated Employee Group and the
Nonhighly Compensated Employee Group.
1.14 BASE CONTRIBUTION PERCENTAGE. For a Plan that uses the Maximum
Disparity Rate to allocate Employer Contributions, the contribution rate applied
to a Participant's Compensation before the allocation to a Participant's Excess
Compensation.
1.15 BENEFICIARY. Person(s) designated by the Participant (or the
Participant's surviving spouse) to receive benefits when the Participant (or the
surviving spouse) dies. If the Participant fails to designate a Beneficiary, or
is not survived by any designated Beneficiary, the Participant's surviving
spouse, if any, will be treated as the designated Beneficiary, and if there is
no surviving spouse benefits will be distributed to the Participant's estate.
For the purpose of calculating required distributions under Code section
401(a)(9), the Beneficiary must also satisfy the requirements of Code section
401(a)(9)
1.16 BENEFITING. A Participant is treated as benefiting under the Plan
for any Plan Year during which the Participant received (or is deemed to
receive) an allocation in accordance with section 1.410(b)-3(a) of the federal
income tax regulations.
1.17 BREAK IN SERVICE. Each Year of Service during which an Employee
completes less than 501 Hours of Service with the Employer or an Affiliated
Employer.
If the Employer has elected to apply Elapsed Time in the Adoption
Agreement, then a Break in Service is a Severance Period (as defined in section
1.34(b)) of at least 12 consecutive months.
Breaks in Service will be measured using the same Year of Service that
applies for eligibility purposes.
1.18 BROKER. Charles Schwab & Co., Inc. or its successor or assign
serving from time to time, which shall be a broker-dealer registered under the
Securities Exchange Act of 1934, as amended. Charles Schwab & Co., Inc.
is an affiliate of The Charles Schwab Trust Company.
1.19 CODE. The Internal Revenue Code of 1986, as amended.
1.20 COMMITTEE. One or more persons designated by the Employer to act
as Plan Administrator in accordance with the provisions of Article 9.
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1.21 COMPENSATION.
(a) COMPENSATION FOR PURPOSES OF ALLOCATIONS UNDER A NON-INTEGRATED
PLAN AND LIMITATIONS UNDER CODE SECTION 415. For purposes of allocating Employer
Contributions, Elective Salary Deferrals, Matching Contributions and Voluntary
After-Tax Contributions, but not for purposes of calculating the Average
Deferral Percentage or the Average Contribution Percentage, Top-Heavy minimums,
determining Compensation under a Plan integrated with Social Security, or
applying Code section 415 limitations , Compensation means:
(1) For a Self-Employed Person -- Compensation will be earned
income for the Plan Year; that is, the net earnings derived from material,
income-producing, personal services rendered in the trade, business or
profession for which the person establishes the Plan. However, net earnings
shall not cover items not included in gross income or any deductions for those
items. Net earnings will be reduced by the Employer's contributions to a
qualified plan to the extent those contributions are deductible under Code
section 404 and the deduction allowed by Code section 164(f) also will be
applied.
(2) For all other Employees -- Compensation will be the amount
determined under the elections made in the Adoption Agreement, i.e., Form W-2
compensation, Code section 3401(a) compensation, or Code section 415 safe-harbor
compensation. Form W-2 compensation and Code section 3401(a) compensation will
be determined without regard to any rules under Code section 3401(a) that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in section 3401(a)(2)).
(A) As elected by the Employer in the Adoption
Agreement, Compensation shall either include or exclude contributions made by
the Employer under a salary reduction agreement that are excluded from the
Employee's gross income as described in Code sections 125, 402(e)(3),
402(h)(1)(B), and 403(b); contributions under governmental plans described in
Code section 414(h)(2); and deferred compensation within the meaning of Code
section 457(b).
(B) As elected by the Employer in the Adoption
Agreement, Compensation shall either include or exclude reimbursements or other
expense allowances, cash and noncash fringe benefits, moving expenses, deferred
compensation, and welfare benefits.
(C) If elected by the Employer in the
Non-Standardized Adoption Agreement, Compensation shall exclude overtime pay,
bonuses, commissions, or any other items elected by the Employer.
(3) Regardless of which definition the Employer elects,
Compensation means the amounts actually paid to the Employee during the Plan
Year or other applicable determination period.
(b) COMPENSATION FOR TOP-HEAVY PURPOSES, FOR ALLOCATIONS UNDER A
PLAN INTEGRATED WITH SOCIAL SECURITY, AND CALCULATING THE AVERAGE DEFERRAL
PERCENTAGE AND THE AVERAGE CONTRIBUTION PERCENTAGE. For Top-Heavy purposes, for
purposes of allocating Employer Contributions, Elective Salary Deferrals,
Matching Contributions, and Voluntary After-Tax Contributions in a Plan
integrated with Social Security, and for purposes of calculating the Average
Deferral Percentage, and the Average Contribution Percentage, Compensation shall
mean wages within the meaning of Code section 3401(a) and all other payments of
compensation to an Employee by the Employer (in the course of an Employer's
trade or business) for which the Employer is required to furnish the Employee a
written
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statement under Code sections 6041(d), 6051(a)(3), and 6052. Compensation must
be determined without regard to any rules under Code section 3401(a) that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code section 3401(a)(2)). Compensation under this Section 1.21(b) shall
exclude reimbursements or other expense allowances, cash and noncash fringe
benefits, moving expenses, deferred compensation, and welfare benefits. Such
Compensation shall include any amount contributed by the Employer pursuant to a
salary reduction agreement that is not includible in the gross income of the
Employee under Code sections 125, 402(e)(3), 402(h)(1)(B), or 403(b);
contributions under governmental plans described in Code section 414(h)(2); and
deferred compensation within the meaning of Code section 457(b). Notwithstanding
the above, for a Self-Employed Person, Compensation under this Section 1.21(b)
will be earned income for the Plan Year; that is, the next earnings derived from
material, income-producing, personal services rendered in the trade, business,
or profession for which the person establishes the Plan. However, net earnings
shall not include items not included in gross income or any deductions for those
items. Net earnings will be reduced by the Employer's contributions to a
qualified plan to the extent those contributions are deductible under Code
section 404 and the deduction allowed by Code section 164(f) also will be
applied.
(c) COMPENSATION PERIOD. Notwithstanding any other provision of this
Plan and the Adoption Agreement, for the purposes of allocating Employer
Contributions, Elective Salary Deferrals, Matching Contributions, and Voluntary
After-Tax Contributions and calculating the Average Deferral Percentage and the
Average Contribution Percentage, the Employer may limit the period taken into
account for the determination of Compensation to Compensation for the entire
Plan Year or Compensation for the portion of the Plan Year in which the Employee
became a Participant, provided that such limit is applied uniformly to all Plan
Participants for the Plan Year in which the election is made.
(d) CODE SECTION 415 CONTRIBUTION LIMITS. To apply the limitations
on annual additions to a Participant's Account, see subsection 4.3(a)(3) below.
(e) DOLLAR LIMITATION.
(1) General Rule -- For Plan Years beginning on or after
January 1, 1994, Compensation in excess of $150,000 (as adjusted pursuant to
section 401(a)(17)(B)) shall not qualify for consideration under the Plan.
(2) Limit applies to certain family members -- When applying
this limit to a Highly Compensated Employee, the limit also applies to the
"family" of the Highly Compensated Employee pursuant to Code section 414(q)(6).
Family means the Participant's spouse and the Participant's direct descendants,
if any, who have not yet reached age 19 at the end of the Plan Year. If, as a
result of applying such rules, the annual compensation limitation is exceeded,
the limitation will be prorated among the affected Participants (other than for
purposes of allocating profit sharing contributions in an integrated plan
pursuant to section 3.2(b)) up to the Integration Level in proportion to each
Participant's Compensation, as determined under this section before applying
this limitation.
(3) Limit in Short Plan Year -- If the period for determining
Compensation used in calculating an Employee's allocation for a determination
period is a short Plan Year (i.e., shorter than 12 months), the Plan
Administrator will calculate the annual Compensation limit by multiplying the
otherwise applicable annual Compensation limit by a fraction, the numerator of
which is the number of months in the short Plan Year and the denominator of
which is 12.
1.22 CONTRIBUTION PERCENTAGE AMOUNTS. The sum of the Voluntary After-Tax
Contributions, Matching Contributions, Qualified Matching Contributions (to the
extent not taken into account in calculating the Average
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Deferral Percentage test described in Plan section 3.7(c)), and Elective Salary
Deferrals and Qualified Nonelective Contributions treated as Matching
Contributions made for the Participant for the Plan Year. Notwithstanding the
foregoing, the Contribution Percentage Amounts shall exclude Elective Salary
Deferrals when determining the Contribution Percentage amounts but only if the
Average Deferral Percentage test is satisfied before the Elective Salary
Deferrals are used in the Average Contribution Percentage test and the former
test continues to be satisfied after the Elective Salary Deferrals that are used
in the Average Contribution Percentage test are excluded. Notwithstanding the
foregoing, the Contribution Percentage Amounts shall exclude any Matching
Contributions that are forfeited to correct Excess Aggregate Contributions or
because the contributions to which they relate constitute Excess Deferrals,
Excess Contributions, Excess Aggregate Contributions or Elective Salary
Deferrals refunded pursuant to Code section 415.
1.23 CONTRIBUTION PERCENTAGE. The ratio of the sum of the contributions
listed below to the Plan made for the Participant to the Participant's
Compensation for the Plan Year:
(a) Matching Contributions pursuant to Plan section 3.2(d),
excluding any Matching Contributions counted in the Participant's Deferral
Percentage;
(b) Voluntary After-Tax Contributions pursuant to Plan section 3.4;
and
(c) Qualified Nonelective Contributions, Qualified Matching
Contributions and Elective Salary Deferrals pursuant to Plan section 3.2(d) that
are treated as Matching Contributions (and not counted in the Participant's
Deferral Percentage).
For purposes of calculating the Contribution Percentage, every Participant
eligible to make a Voluntary After-Tax Contribution or an Elective Salary
Deferral shall be included. In contrast, every Participant who fails to satisfy
a service requirement elected by the Employer in the Adoption Agreement in order
to be eligible to make an Elective Salary Deferral or a Voluntary After-Tax
Contribution, or to receive an allocation of Matching Contributions for a Plan
Year, shall be excluded for purposes of calculating the Contribution Percentage
for that Plan Year.
1.24 CSTC. The Charles Schwab Trust Company, its successors and
assigns. The Charles Schwab Trust Company is an affiliate of Charles Schwab
& Co., Inc.
1.25 CUSTODIAN AND CUSTODY AGREEMENT. CSTC or, if applicable, an
affiliate or successor, shall be the Custodian, but only if the Employer has not
appointed CSTC as Trustee. In such case, the Custody Agreement in Appendix 2
shall be incorporated herein, and shall establish the arrangement by which the
Trust Fund will be held and managed by the Custodian.
1.26 DEDUCTIBLE CONTRIBUTIONS. Before-tax contributions as defined in
Code section 72(o)(5)(A) and earnings thereon made to a prior plan by an
Employee for taxable years prior to 1987 that are held, together with gain or
loss pursuant to section 5.8(b) of the Plan, in the Employee's Deductible
Contributions Account.
1.27 DEFERRAL PERCENTAGE. The ratio of the sum of the Contributions
listed below to the Plan made for the Participant to the Participant's
Compensation for the Plan Year:
(a) Elective Salary Deferrals pursuant to Plan section 3.7(a),
including excess deferrals of Highly Compensated Employees. Elective Salary
Deferrals counted in the Participant's Contribution Percentage will be excluded
only if the nondiscrimination test in Section 3.7 is satisfied whether or not
the deferrals are excluded.
(b) Qualified Nonelective Contributions and Qualified Matching
Contributions treated as
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Elective Salary Deferrals pursuant to Plan section 3.2(d) at the election of the
Employer.
(c) Matching Contributions pursuant to Plan section 3.2(d), but only
to the extent that they are:
(1) Nonforfeitable at all times, regardless of the Employee's
age and/or service or whether the Employee is employed on a specific date,
(2) Not counted in the Employee's Contribution Percentage, and
(3) Subject to the distribution restrictions described in
Section 3.7(h).
A Participant who did not enter into a Salary Reduction Agreement will be
treated as a Participant who elected to have a Deferral Percentage (based on
Elective Salary Deferrals) of zero.
1.28 DETERMINATION DATE. With respect to any Plan Year, (1) the
Determination Date shall be the last day of the preceding Plan Year, or (2) in
the case of the first Plan Year of the Plan, the last day of such Plan Year.
1.29 DIRECTED ACCOUNT. An Account for which the Participant directs
the investment of assets.
1.30 DISABILITY. Condition, certified by a physician selected by the
Employer, in which a person is unable to engage in any substantial gainful
activity due to physical or mental impairment. The physician must certify that
the condition:
(a) Has lasted (or is expected to last) at least 12 consecutive
months; or
(b) Is expected to result in death.
1.31 DISTRIBUTION CALENDAR YEAR. Calendar year for which a minimum
distribution is required. The first Distribution Calendar Year will be
determined as follows:
(a) For distributions beginning before a Participant's death, the
calendar year preceding the Participant's Required Beginning Date.
(b) For distributions beginning after a Participant's death, the
calendar year in which distributions are required to begin.
1.32 EARLY RETIREMENT AGE. If elected by an Employer, the date specified
in the Adoption Agreement. If a Participant Terminates Service before satisfying
the age requirement for Early Retirement Age, but has satisfied the Service
requirement, if any, then the Participant shall be entitled to elect an early
retirement benefit upon satisfaction of such age requirement.
1.33 EFFECTIVE DATE. Date specified in the Adoption Agreement as the
Effective Date of the Plan.
1.34 ELAPSED TIME. If elected by the Employer in the Adoption Agreement,
an Employee will receive credit for the aggregate of all time period(s) starting
with the first day the Employee performs an Hour of Service and ending on the
date a Break in Service begins. An Employee will also receive credit for any
"Severance Period" of less than 12 consecutive months. Fractional periods of a
year will be expressed in terms of days (where 365 days constitute one year).
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(a) An Hour of Service, for purposes of this section 1.34, means
each hour for which an Employee is paid or entitled to be paid for performing
duties for the Employer.
(b) A "Severance Period" is a continuous period of time during which
the Employee is not employed by the Employer, beginning on the date the Employee
retires, quits or is discharged, or if earlier, the 12 month anniversary of the
date on which the Employee was otherwise first absent from service.
(c) If an Employer is part of a group of two or more Affiliated
Employers, the Employee will be credited for employment with any other
Affiliated Employer.
(d) Credit will also be given to a Leased Employee deemed to be an
Employee.
1.35 ELECTION PERIOD.
(a) For a Qualified Joint and Survivor Annuity, the 90-day period
ending on the Participant's Annuity Starting Date.
(b) For a Qualified Preretirement Survivor Annuity, the period
beginning the first day of the Plan Year in which the Participant reaches age 35
and ending the day the Participant dies.
(1) If a Participant Terminates Service before the first day
of that period, the Election Period will begin on the date the Participant
Terminates Service and will apply to the assets in the Participant's Account on
that date.
(2) A Participant who has not yet reached age 35 by the end of
the current Plan Year may make a special Qualified Election to waive the
Qualified Preretirement Survivor Annuity for the period beginning on the date of
this election and ending on the first day of the Plan Year in which the
Participant reaches age 35.
(A) The election shall not be valid unless the
Participant receives a written explanation of the Qualified Preretirement
Survivor Annuity similar to the explanation provided in Section 6.3(d).
(B) Qualified Preretirement Survivor Annuity coverage
will be reinstated the first day of the Plan Year in which the Participant
reaches age 35. To be valid, any waiver after that date must meet the
requirements of a Qualified Election.
1.36 ELECTIVE SALARY DEFERRALS. Contributions made by the Employer at
the election of the Participant (i.e., excluding Employer Contributions,
Qualified Nonelective Contributions, Qualified Matching Contributions or
Matching Contributions) to the Plan under a qualified cash or deferred
arrangement, as defined in Code section 401(k), plus other elective deferrals
made to:
(a) A simplified employee pension, as defined in Code section
402(h)(1)(B);
(b) An annuity contract, as defined in Code section 403(b), under a
salary reduction arrangement to the extent such contributions are not includible
in the individual's gross income for the taxable year;
(c) An eligible deferred compensation plan, as defined in Code
section 457; or
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(d) A plan described in Code section 501(c)(18).
Notwithstanding the foregoing, Elective Salary Deferrals properly
distributed as excess annual additions pursuant to Code section 415 shall no
longer be considered Elective Salary Deferrals following such distribution.
1.37 ELIGIBLE EMPLOYEE. Each Employee who has satisfied the age and
service requirements, if any, elected by the Employer in the Adoption Agreement
and has not been excluded by the Employer in the Non-Standardized Adoption
Agreement.
1.38 ELIGIBLE PARTICIPANT. Each Participant who has a right to an
allocation under the elections made by the Employer in the Adoption Agreement.
1.39 EMPLOYEE.
(a) Any person (except for a person described in subsections (b) or
(c) below) who is:
(1) Employed by the Employer or any Affiliated Employer,
including a Leased Employee deemed to be an Employee; or
(2) Self-employed, including partners of a partnership, and
treated as an Employee under Code section 401(c).
(b) Unless otherwise elected by the Employer, any nonresident alien
(within the meaning of Code section 7701(b)(1)(B)) whose earned income (within
the meaning of Code section 911(d)(2)) from the Employer is not considered
income from U.S. sources under Code section 861(a)(3).
(c) Any Employee employed in a group excluded by the Employer in the
Non-Standardized Adoption Agreement.
1.40 EMPLOYER. The entity named in the Adoption Agreement and any other
entity named in the Adoption Agreement. Notwithstanding the foregoing, if the
Employer executes the Standard Adoption Agreement, the Employer shall mean the
Employer and every Affiliated Employer.
1.41 EMPLOYER CONTRIBUTIONS. Contributions made by the Employer other
than Matching Contributions, Qualified Nonelective Contributions, Qualified
Matching Contributions and Elective Salary Deferrals.
1.42 EMPLOYER SECURITIES. Common stock issued by the Employer (or by a
corporation that is a member of the same controlled group within the meaning of
Code section 414(b)) that is readily tradable on an established securities
market. If authorized by the Employer in the Investment Authorization, Employer
Securities may be acquired by one or more of the following sources: Elective
Salary Deferrals; Employer Contributions; Rollover Contributions; Matching
Contributions; Qualified Matching Contributions; Qualified Nonelective
Contributions; and Voluntary After-Tax Contributions. The aforementioned
deferrals and contributions may, in accordance with the Investment
Authorization, be invested entirely in Employer Securities.
1.43 ENTRY DATE. The Effective Date, and the dates described in section
2.1, including such dates as the Employer shall have selected in the Adoption
Agreement.
1.44 ERISA. Employee Retirement Income Security Act of 1974, as
amended.
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1.45 EXCESS AGGREGATE CONTRIBUTIONS. The amount of Matching Contributions
and Voluntary After-Tax Contributions, together with any Elective Salary
Deferrals treated as Matching Contributions, made for Highly Compensated
Employees that exceed the maximum amount of such Contributions that may be made
under the nondiscrimination test of Code section 401(m)(2)(A). Such
determination shall be made after first determining Excess Deferrals pursuant to
section 1.48 and then Excess Contributions pursuant to section 1.47.
1.46 EXCESS COMPENSATION. A Participant's Compensation above the
Integration Level for a Plan Year.
1.47 EXCESS CONTRIBUTIONS. The amount of the Participant's Elective
Salary Deferrals that exceeds the maximum amount of such Contributions that
may be made under the nondiscrimination test of Code section 401(k)(3).
Excess Contributions shall be treated as annual additions pursuant to Code
section 415.
1.48 EXCESS DEFERRALS. The Contributions made on behalf of a Participant
under any qualified cash or deferred arrangements described in Code sections
401(k), 408(k), or 403(b) for a taxable year that exceed the limitation
described in Section 3.7 and are includible in the Participant's gross income
under Code section 402(g). Excess Deferrals shall be treated as annual additions
unless distributed no later than April 15 following the close of the
Participant's taxable year in which such Excess Deferrals arose.
1.49 FAMILY MEMBER. An Employee's spouse and lineal ascendants or
descendants and the spouses of any lineal ascendants or descendants.
1.50 FIVE-PERCENT OWNER. Person who owns (or is considered to own, as
described in Code section 318):
(a) More than 5 percent of the outstanding stock of the Employer;
(b) Stock representing more than 5 percent of the total combined
voting power of all the Employer's stock; or
(c) More than 5 percent of the capital or profits interest of the
Employer.
1.51 FORFEITURE. Any portion of an Account of a Participant that is
forfeited as provided in Article 6.
1.52 FULL DISCRETION. The ability of a Participant to invest the assets
of a Directed Account in the following categories of investments as provided
under the Investment Authorization and offered by CSTC or the Broker in the
ordinary course of its business: (i) any security that is traded on an
established securities exchange; (ii) shares or units issued by an investment
company registered under the Investment Company Act of 1940, as amended; and
(iii) obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. A separate account at the Broker shall be established for
each Participant who is authorized to exercise Full Discretion.
1.53 HIGHLY COMPENSATED EMPLOYEE.
(a) Unless otherwise provided in section 414(q) of the Code or the
regulations thereunder, an active and a former Highly Compensated Employee
includes:
(1) any Employee who performs service for the Employer during
the determination year and who, during the look-back year: (A) received
Compensation from the Employer in excess of $75,000 adjusted by the Adjustment
Factor; (B) received Compensation from the Employer in excess of $50,000
adjusted by the
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Adjustment Factor and was a member of the "top-paid group" for the year; or (C)
was an officer of the Employer and received Compensation during the look-back
year in excess of 50 percent of the dollar limit in effect under Code section
415(b)(l)(A). If no officer has satisfied the Compensation requirement during
either a determination year or a look-back year, the Plan Administrator will
treat the highest-paid officer for the year as a Highly Compensated Employee.
(2) an Employee who is a Five-Percent Owner at any time during
the look-back year or determination year.
(3) SIMPLIFIED METHOD. If elected by an eligible Employer in
the Adoption Agreement, $50,000 (adjusted by the Adjustment Factor) is
substituted for $75,000 in paragraph (1)(A) above, and paragraph (1)(B) above
does not apply. An Employer is eligible to make this election only if the
Employer maintains significant business activities at which it employs Employees
in two (or more) separate geographical areas.
(4) an Employee who is described in subparagraphs (A), (B) or
(C) above if the term "determination year" is substituted for the term
"look-back" year and who is also one of the 100 Employees who received the
highest Compensation from the Employer during the determination year.
(b) A Highly Compensated former Employee includes an Employee who
Terminates Service (or was deemed to have terminated employment) before the
determination year, performs no service for the Employer during the
determination year and is a Highly Compensated active Employee in the year the
Employee Terminates Service or in any determination year ending on or after the
Employee's 55th birthday.
(c) The Plan Administrator will aggregate an Employee who is, during
a determination year or look-back year, a Family Member of either a Five-Percent
Owner (who is an active or former Employee) or one of the 10 most Highly
Compensated Employees ranked on the basis of Compensation paid by the Employer
during the year with the Family Member or top-ten Highly Compensated Employee.
The Plan Administrator will treat the Family Member and the Five-Percent Owner
or top-ten Highly Compensated Employee as a single Employee receiving
Compensation and contributions or benefits equal to the sum of such Compensation
and contributions or benefits of the Family Member and the Five-Percent Owner or
top-ten Highly Compensated Employee.
(d) The Plan Administrator will make the determination of who is a
Highly Compensated Employee, including the determination and the number and
identity of Employees in the top-paid group, the top 100 Employees, the number
of Employees treated as officers and the Compensation taken into account in
accordance with Code section 414(q) and the regulations thereunder.
(e) Unless the Employer elects otherwise, then for purposes of this
section, the determination year means the Plan Year; the look-back year means
the 12-month period immediately preceding the determination year; and the
top-paid group is the group consisting of the top 20 percent of Employees ranked
on the basis of Compensation during the applicable year. Notwithstanding the
foregoing, if the Plan Year is a calendar year, or if another qualified plan of
the Employer so provides, then the look-back year shall be the calendar year
ending with or within the Plan Year for which testing is being performed, and
the determination year (if applicable) shall be the period of time, if any,
which extends beyond the look-back year and ends on the last day of the Plan
Year for which testing is being performed. If elected by the Employer, these
periods shall be applied on a uniform and consistent basis to all plans,
entities and arrangements of the Employer.
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1.54 HIGHLY COMPENSATED EMPLOYEE GROUP. The Highly Compensated Employees
eligible to participate in the Plan.
1.55 HOUR OF SERVICE.
(a) Each hour for which an Employee (including an individual
considered an Employee under Code sections 414(n) and (o)) is directly or
indirectly paid by (or entitled to payment from) an Affiliated Employer for
performing services. The Plan Administrator must credit hours for the
computation periods in which the services are performed.
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer on Account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness incapacity (including Disability), jury duty,
military duty, layoff or leave of absence. No Hours of Service shall be credited
under this paragraph with respect to payments made under any plan maintained
solely for the purpose of complying with applicable worker's compensation,
unemployment compensation, or disability insurance laws or made solely to
reimburse the individual for medical or medically related expenses incurred by
the individual.
(c) The Plan Administrator must calculate and credit the hours (as
described in subsections (a) and (b) above) according to Department of Labor
Regulations section 2530.200b-2 which is incorporated by reference. If an
Employer finds it impractical to count the actual Hours of Service for any class
or group of Employees, each Employee in that class or group shall be credited
with the Hours of Service shown in the following table for each pay period in
which the Employee has at least one Hour of Service:
Pay Period: Hours of Service Credit
----------- -----------------------
daily 10
weekly 45
bi-weekly 90
semi-monthly 95
monthly 190
However, an Employee shall be credited only for his normal working hours
during a paid absence.
The Plan Administrator must credit no more than 501 Hours of Service to an
Employee under this subsection (b) during a single, continuous period of
service, whether or not the period occurs in a single computation period.
(d) Each hour for which back pay (whether or not damages have been
reduced) has been awarded or agreed to by the Employer or an Affiliated
Employer.
Hours must be credited for the period or periods to which the award or
agreement pertains, rather than for the computation period in which the award or
agreement is made. The same Hours of Service must not be credited under
subsections (a) and (b) above, as applicable, and under this subsection (d).
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(e) If an Employee is absent from work for the following reasons
(generally referred to in the subsection as a "parental absence"):
(1) Pregnancy of the Employee;
(2) Birth of the Employee's child;
(3) Placement of a child with the Employee related to the
child's adoption; or
(4) Care of the Employee's child following birth or adoption;
then, unless Elapsed Time rules apply, the Plan Administrator must credit the
Employee with the number of Hours of Service that would have been credited had
there been no parental absence, but not more than 501 Hours of Service.
(A) If the Plan Administrator is unable to
determine these hours, the Employee must receive credit for eight Hours of
Service for each day of the parental absence.
(B) If necessary to prevent the Participant from
incurring a one-year Break in Service for the Plan Year in which the absence
begins, the Plan Administrator must credit Hours of Service in the Plan Year in
which the parental absence begins.
In all other cases, the credit must be made in the Plan Year immediately
following the Plan Year in which the parental absence begins.
If the Employer elected in the Adoption Agreement to apply Elapsed Time
rules, then for the purpose of determining when an Employer has incurred a Break
in Service, the Employee will be considered employed for the portion of the
period of a parental absence ending on the second anniversary of the Employee's
absence from service.
No Employee shall receive credit for Hours of Service or a period of
employment in connection with a parental absence unless the Plan Administrator
is timely provided with sufficient information to establish that the absence
from work was due to a parental absence and the number of days of the parental
absence.
1.56 INSURER. Any insurance company selected by the Plan Administrator
which has issued any life insurance contracts or Annuity Contracts covering
Participants.
1.57 INTEGRATION LEVEL. The level of Participants' Compensation
elected in the Adoption Agreement at which allocations of Employer Contributions
may change.
1.58 INVESTMENT AUTHORIZATION. The provisions of the Plan Service
Agreement in which the Employer defines the investment options available to the
person or entity with investment management authority.
1.59 INVESTMENT MANAGER. Any fiduciary (other than a trustee or named
fiduciary as defined in ERISA section 402(a)(2)) who, in accordance with ERISA
section 3(38), has the power to manage, acquire or dispose of any asset of the
Plan; who is (a) registered as an investment adviser under the Investment
Advisers Act of 1940, (b) a bank or (c) an insurance company qualified to
manage, acquire or dispose of Plan assets; and (d) has acknowledged in writing
that he is a fiduciary with respect to the Plan.
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1.60 KEY EMPLOYEE. Any Employee or former Employee (and the
Beneficiaries of such Employees) who, pursuant to the rules of Code
section 416(i) and the regulations thereunder, is or was at any time during
the determination period:
(1) an officer of the Employer having an annual Compensation
greater than fifty percent (50%) of the dollar limitation under Code section
415(b)(1)(A).
(2) one of the ten (10) Employees having annual Compensation
from the Employer of more than the dollar limitation under Code section
415(c)(1)(A), and owning (or considered as owning under Code section 318) the
largest interests in the Employer.
(3) a Five-Percent Owner of the Employer.
(4) a one-percent owner of the Employer having annual
Compensation from the Employer of more than $150,000.
The determination period is the Plan Year containing the Determination Date and
the four preceding Plan Years.
1.61 LEASED EMPLOYEE. Any person, other than an Employee of an
Employer, who has performed services for the Employer (or for the Employer
and related persons, as described by Code section 414(n)(6)), if the services
were:
(a) Substantially full time for at least one year;
(b) According to an agreement between the Employer and another
person (the "leasing organization"); and
(c) The type normally performed by Employees in the Employer's field
of business.
Contributions or benefits attributable to services performed for the
Employer that the leasing organization makes on behalf of the Leased Employee
will be treated as if provided by the Employer.
A Leased Employee shall be deemed to be an Employee unless the following
conditions are satisfied:
(i) the Leased Employee is covered by a money purchase pension plan
providing:
(A) a nonintegrated employer contribution rate of at least 10%
of Compensation (as defined in Code section 415(c)(3) but including amounts
contributed pursuant to a salary reduction agreement that are excludable from
the Leased Employee's income pursuant to Code sections 125, 402(e)(3),
402(h)(1)(B), or 403(b));
(B) immediate participation; and
(C) full and immediate vesting; and
(ii) Leased Employees do not constitute more than 20% of the
Nonhighly Compensated Employees of the recipient Employer.
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1.62 LIMITED DISCRETION. The ability of a Participant to invest the
assets of a Directed Account in Authorized Funds or in one or more Managed
Accounts or a combination of both, as provided under the Investment
Authorization.
1.63 MANAGED ACCOUNT. An account established at the Broker to hold assets
of the Trust Fund which are invested at the direction of the Plan Administrator,
a duly appointed Investment Manager or (if the Participant exercises Full
Discretion) the Participant.
1.64 MATCHING CONTRIBUTIONS. Matching Contributions are contributions
made by the Employer (other than Employer Contributions, Elective Salary
Deferrals and Qualified Nonelective Contributions) to the Plan or another
defined contribution plan that are based on the Participant's Elective Salary
Deferrals or Voluntary After-Tax Contributions. The Plan Administrator will not
count a contribution and/or allocation that is used to meet the minimum
contribution or benefit requirements in a Plan Year in which the Plan is
Top-Heavy that is based on a Participant's Employee Contributions or Elective
Salary Deferrals as a Matching Contribution.
1.65 MAXIMUM DISPARITY RATE. (Applies only if Employer Contributions are
integrated with Social Security Contributions.) The Maximum Disparity Rate is
equal to the lesser of the Base Contribution Percentage or 2.7% if the
Integration Level elected in the Adoption Agreement is the Taxable Wage Base. If
not, the Maximum Disparity Rate is the lesser of (i) the Base Contribution
Percentage or (ii) the percentage determined under the following formula which
is keyed to the Integration Level elected in the Adoption Agreement:
(a) If the Integration Level is more than zero, but not more than
the greater of $10,000 or 20% of the Taxable Wage Base, 2.7%.
(b) If the Integration Level is more than the greater of (1) $10,000
or (2) 20% of the taxable wage base, but not more than 80% of the taxable wage
base, l.3%.
(c) If the Integration Level is more than 80%, but less than 100%,
of the taxable wage base, 2.4%.
1.66 NONHIGHLY COMPENSATED EMPLOYEE. An Employee who is not a Highly
Compensated Employee or a Family Member.
1.67 NONHIGHLY COMPENSATED EMPLOYEE GROUP. The Nonhighly Compensated
Employees eligible to participate in the Plan.
1.68 NON-STANDARDIZED ADOPTION AGREEMENT. Adoption Agreement, Number 001,
that establishes or amends the Plan as completed and signed by the Employer and
by CSTC.
1.69 NORMAL RETIREMENT AGE. The age elected by the Employer in the
Adoption Agreement.
1.70 OWNER-EMPLOYEE.
(a) Self-employed person who entirely owns an unincorporated
business, trade or profession; or
(b) In a partnership or limited liability company, a self-employed
person who owns more than 10 percent of the partnership's or the limited
liability company's capital or profits interest.
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1.71 PARTICIPANT. Any Eligible Employee as described in Article 2.
1.72 PARTICIPATING EMPLOYER. An Affiliated Employer (other than the
Employer) that adopts the Plan as provided in Article 13.
1.73 PERMISSIVE AGGREGATION GROUP. The Required Aggregation Group of
plans plus any other plan or plans of the Employer that, when considered as a
group with the Required Aggregation Group, would continue to satisfy the
requirements of Code sections 401(a)(4) and 410.
1.74 PLAN. The Charles Schwab 401(k) Profit Sharing Plan, Basic Plan
Document 02 (including the Trust Agreement and, if applicable, the Custody
Agreement) and either Non-Standardized Adoption Agreement Number 001 or
Standardized Adoption Agreement Number 002 with the options elected by the
Employer, and as amended from time to time.
1.75 PLAN ADMINISTRATOR. Employer, or person(s) the Employer designates
and identifies to the Recordkeeper.
1.76 PLAN SERVICE AGREEMENT. The agreement entered into by the Employer
and the Recordkeeper for the provision of various services to the Plan.
1.77 PLAN YEAR. The calendar year or such other period of twelve months
elected by the Employer in the Adoption Agreement.
1.78 QUALIFIED DOMESTIC RELATIONS ORDER. A court order in a marital
dissolution or similar proceeding that meets the requirements of Code section
414(p).
1.79 QUALIFIED ELECTION.
(a) The election by a Participant to waive a Qualified Joint and
Survivor Annuity or Qualified Preretirement Survivor Annuity. This waiver shall
not be effective unless the Participant's spouse consents in writing to the
election, the spouse's consent acknowledges the effect of the waiver, and a Plan
representative or a notary public witnesses the spouse's consent.
To make the waiver effective, the Participant also must either:
(1) Designate a specific Beneficiary (including any class of
Beneficiaries or contingent Beneficiaries) and form of benefit payment that may
only be changed with the spouse's consent; or
(2) Prove that the spouse expressly permits the Participant to
make future designations without the spouse's consent.
If the Participant establishes to the Plan representative's satisfaction
that no spouse exists or that the spouse cannot be located, the representative
will acknowledge the waiver as a Qualified Election.
(b) Any consent obtained by a spouse to an election to waive an
annuity (or any establishment that the spouse's consent cannot be obtained) will
be effective only with respect to that spouse.
A consent permitting designation by the Participant without requiring any
further consent by that spouse must
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acknowledge:
(1) The spouse's right to limit consent to a specific
Beneficiary (and a specific form of benefit where applicable); and
(2) That the spouse voluntarily elects to relinquish either or
both of those rights.
A Participant may revoke a prior waiver without the spouse's consent at
any time before benefits start. There will be no limit to the number of
revocations permitted.
(c) No consent obtained under this section will be valid unless the
Participant has received a notice within the Applicable Notice Period.
1.80 QUALIFIED JOINT AND SURVIVOR ANNUITY. Immediate annuity payable
over the life of the Participant with a survivor annuity for the life of the
Participant's spouse;
(a) The Employer must purchase the survivor annuity from an Insurer
using the entire portion of the Participant's Account, as described in Section
6.3.
(b) The survivor annuity must equal at least 50 percent, but no more
than 100 percent, of the amount payable during the joint life of Participant and
spouse. The percentage will be 50 percent unless the Employer specifies
otherwise in the Adoption Agreement.
1.81 QUALIFIED MATCHING CONTRIBUTIONS. Matching Contributions made by the
Employer that are nonforfeitable once made and are subject to the restrictions
on distributions described in sections 3.7(g) and 6.12. In lieu of distributing
Excess Contributions pursuant to Plan section 3.7 or Excess Aggregate
Contributions pursuant to Plan section 3.8, if elected by the Employer in the
Adoption Agreement, the Employer may make Qualified Matching Contributions to
the Accounts of Eligible Participants as described in the Adoption Agreement in
an amount sufficient to satisfy the Actual Deferral Percentage test and/or the
Average Contribution Percentage test, as applicable.
1.82 QUALIFIED NONELECTIVE CONTRIBUTIONS. Contributions made by the
Employer, other than Employer Contributions, Elective Salary Deferrals and
Matching Contributions, that are nonforfeitable once they are made and are
subject to the restrictions on distributions described in sections 3.7(g) and
6.12. In lieu of distributing Excess Contributions pursuant to Plan section 3.7
or Excess Aggregate Contributions pursuant to Plan section 3.8, if elected by
the Employer in the Adoption Agreement, the Employer may make Qualified
Nonelective Contributions to the Accounts of Eligible Participants as described
in the Adoption Agreement in an amount sufficient to satisfy the Actual Deferral
Percentage test, the Average Contribution Percentage test, and/or minimum
contribution requirements if the Plan is Top-Heavy, as applicable.
1.83 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Immediate annuity for the
life of the Participant's surviving spouse, purchased from an Insurer using the
Participant's entire Account, as described in Section 6.3.
Payments under this annuity must not be less than the payments that would
have been made to the survivor if:
(a) In the case of a Participant who dies after the earliest date on
which she or he could have elected to receive retirement benefits, the
Participant had retired with a Qualified Joint and Survivor Annuity on the day
before she or he dies; and
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(b) In the case of a Participant who dies on or before the earliest
date on which the Participant could have elected to receive retirement benefits,
the Participant had:
(1) Terminated employment with the Employer at the earlier of
the actual date of termination or death;
(2) Survived until the earliest date on which she or he could
have elected to receive retirement benefits;
(3) Retired at that time with a Qualified Joint and Survivor
Annuity; and
(4) Died the next day.
1.84 RECORDKEEPER. CSTC, or such affiliate or other entity as CSTC
may designate to provide various services to the Plan, as adopted by an
Employer.
1.85 REQUIRED AGGREGATION GROUP. (1) Each plan of the Employer in which a
Key Employee is a Participant or was a Participant at any time during the
determination period (regardless of whether the Plan has terminated) and (2) any
other qualified plan of the Employer that enables a plan described in (1) to
meet the requirements of Code sections 401(a)(4) or 410.
1.86 REQUIRED BEGINNING DATE. The first day of April of the calendar
year following the calendar year in which the Participant reaches age 70-1/2,
except:
(a) For a Participant who reaches age 70-1/2 before January 1, 1988
and does not qualify as a Five-Percent Owner, the Required Beginning Date will
be the first day of April of the calendar year following the calendar year in
which the Participant retires or reaches age 70-1/2, whichever is later;
(b) For a Participant who reaches age 70-1/2 before January 1, 1988,
and qualifies as a Five-Percent Owner in any year after December 31, 1979, the
Required Beginning Date will be the first day of April of the calendar year
following the calendar year in which the Participant reaches age 70-1/2 or, if
later, the calendar year in which the Participant qualifies as a Five-Percent
Owner or retires, whichever is earlier; and
(c) For a Participant who reaches age 70-1/2 during 1988, does not
qualify as a Five-Percent Owner, and has not retired by January 1, 1989, the
Required Beginning Date will be April 1, 1990.
A Participant is considered a Five-Percent Owner if she or he is a
Five-Percent Owner anytime during the Plan Year that ends during or at the end
of the calendar year in which the Participant reaches age 66-1/2, or a later
Plan Year. Once begun, distributions will continue even if the Participant is no
longer a Five-Percent Owner.
1.87 REQUIRED ANNUITIES. Qualified Joint and Survivor Annuity, Qualified
Preretirement Survivor Annuity and Straight Life Annuity for any Plan which is
(i) an amendment and restatement of a prior plan that offered such annuities as
a form of benefit required to be maintained pursuant to Code section 411(d)(6)
or (ii) a transferee plan described in section 6.6.
1.88 ROLLOVER CONTRIBUTIONS. Any amount rolled over or transferred to
the Plan from another qualified plan or conduit IRA, together with earnings
thereon.
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1.89 SALARY REDUCTION AGREEMENT. A payroll authorization form signed by a
Participant that authorizes the Employer to defer part of a Participant's
Compensation, as defined in the Adoption Agreement, for the Plan Year, and to
contribute it to the Elective Salary Deferrals account maintained for the
Participant under the Plan. A Participant may enter into, amend or revoke the
agreement by submitting the appropriate authorization to the Plan Administrator.
The authorization will take effect at the time(s) specified in the rules
established by the Plan Administrator, which will be at least once each year.
1.90 SCHWAB. Charles Schwab & Co., Inc., its successors and assigns.
1.91 SELF-EMPLOYED PERSON. Any person who:
(a) Has earned income (as described in Section 1.21(a)) during the
taxable year from the trade, business or profession for which the Employer's
Plan is established; or
(b) Would have earned income if the trade, business or profession
had net profits during the taxable year.
1.92 SHAREHOLDER-EMPLOYEE. An Employee or officer of an electing small
business (Subchapter S) corporation who owns (or is considered as owning with
the meaning of Code section 318(a)(1)) on any day during the taxable year of the
corporation more than 5 percent of the outstanding stock.
1.93 STANDARDIZED ADOPTION AGREEMENT. Adoption Agreement, Number 002, the
use of which permits an eligible adopting Employer to rely on the opinion letter
to be issued by the National Office of the Internal Revenue Service as evidence
that the Plan is qualified. No Employer which sponsors, or ever sponsored, a
qualified defined benefit plan can adopt the Standardized Adoption Agreement.
1.94 STRAIGHT LIFE ANNUITY. An annuity payable in equal installments
for the life of the Participant that terminates upon the Participant's death.
1.95 SUPER TOP-HEAVY. The status of the Plan in any Plan Year, as set
forth in section 12.5(e).
1.96 SURVIVOR ANNUITY RULES. Notice, consent, election and similar
rules imposed by Code sections 401(a)(11) and 417 to the extent the Plan
provides for payment of benefits in the form of the Required Annuities.
1.97 TAXABLE WAGE BASE. The contribution and benefit base in effect
under section 230 of the Social Security Act at the beginning of the Plan
Year.
1.98 TERMINATES SERVICE. The resignation, discharge, retirement, death,
failure to return to active employment at the end of an authorized leave of
absence (including extensions thereof) or a temporary layoff, or any other event
which under the policy of the Employer or an Affiliated Employer results in the
termination of the employment relationship. However, no Termination of Service
shall occur upon a transfer to the Employer or an Affiliated Employer if such
service is required to be recognized by this Plan pursuant to Code section
414(n).
If the employer-employee relationship is terminated because the Employee
enters the armed forces of the United States, and the Employee is subsequently
reemployed by the Employer or an Affiliated Employer under circumstances that
require reemployment rights under any applicable federal law, the Employee will
be deemed, solely for purposes of the Plan, to have been on an authorized leave
of absence during the period of military service.
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A self-employed person shall incur a Termination of Service on the date
such person ceases to be self-employed with respect to the Employer.
Notwithstanding the foregoing, a Termination of Service shall be deemed
not to have occurred for purposes of entitling a Participant to distributions of
Elective Salary Deferrals, Matching Contributions that are treated as Elective
Salary Deferrals, Qualified Nonelective Employer Contributions and Qualified
Matching Contributions if the Participant has not incurred a Disability or
"separation from service" as defined in applicable federal income tax
regulations, except as provided in section 3.7(g).
1.99 TOP-HEAVY. The status of the Plan in any Plan Year, as set forth
in section 12.2.
1.100 TRUST AGREEMENT. The agreement between the Employer and the
Trustee establishing the Trust Fund as found in Appendix 1 hereto and
incorporated herein, which forms part of the Plan.
1.101 TRUSTEE. CSTC or its successors or assigns, unless the Employer has
selected one or more natural persons in the Adoption Agreement to serve as
Trustee.
1.102 TRUST FUND. All monies, securities and other assets held under the
terms of the Plan for the benefit of Participants and their Beneficiaries,
including any such assets held by the Trustee, the Custodian (if any), and the
Broker.
1.103 UNIQUE ASSETS. Assets held by the Trustee under the Plan other than
securities that are publicly traded on a national securities exchange, shares or
units issued by an investment company registered under the Investment Act of
1940, as amended, and obligations issued by the U.S. Government, its agencies
and instrumentalities and uninvested cash awaiting investment or distribution.
1.104 VALUATION DATE. The last day of each Plan Year and any other
dates agreed to by the Employer and the Trustee or, if applicable, the
Custodian.
1.105 VESTED. Participant's ownership of the aggregate value of the
Participant's Account. A Participant is always fully vested in the portion of
the Account derived from Elective Salary Deferrals, Voluntary After-Tax
Contributions, Qualified Matching Contributions, Qualified Nonelective
Contributions, and Rollover Contributions, including the earnings attributable
to those amounts. A Participant's Employer Contributions, Matching
Contributions, and the earnings attributable to those contributions, will vest
in accordance with the vesting schedule selected by the Employer in the Adoption
Agreement. Notwithstanding the foregoing, Qualified Matching Contributions and
Matching Contributions may be forfeited if the contributions to which they
relate are Excess Deferrals, Excess Contributions, Excess Aggregate
Contributions, or Elective Salary Deferrals that were returned to satisfy Code
Section 415. An Account is fully vested upon the Participant's death, Early
Retirement Age, if elected by the Employer, Normal Retirement Age, and, if
elected by the Employer, Disability.
1.106 VOLUNTARY AFTER-TAX CONTRIBUTIONS. Employee contributions
designated as after-tax Employee contributions, and the earnings thereon.
1.107 YEAR OF SERVICE.
(a) Unless an Employer has elected in the Adoption Agreement to
apply Elapsed Time, then the following rules apply:
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(1) For eligibility purposes, the period of 12 consecutive
months during which an Employee completes at least 1,000 Hours of Service. The
initial eligibility period begins on the date an Employee first performs an Hour
of Service. Each subsequent Year of Service begins on the first day of the Plan
Year which begins prior to or coincident with the first anniversary of the date
the Employee first performed an Hour of Service, regardless of whether the
Employee completes 1,000 Hours of Service during the initial eligibility period.
(2) For vesting purposes, each Plan Year in which the Employee
completes 1,000 Hours of Service.
(b) If an Employer has elected in the Adoption Agreement to apply
Elapsed Time, then the following rules apply:
(1) For eligibility purposes, a period of 12 months of service
beginning on the Employee's first day of employment and ending on the date a
Break in Service begins.
(2) For vesting purposes, a Plan Year in which a Participant
has 365 days of service with the Employer, beginning on the Employee's first
date of hire.
(3) In general, a Participant's separate periods of service
shall be added together, with each period of service counted as the number of
days from the first date of service in that period to the first day of any
Severance Period.
However, a Year of Service for vesting purposes shall be computed on the basis
of completed years, assuming that 365 days equals one year and any remaining
balance of days less than 365 is disregarded.
(c) If an Employer maintains a plan adopted by its predecessor, an
Employee's Years of Service will include any Years of Service accrued under the
predecessor's plan.
(d) If an Employer elects to use Elapsed Time but, prior to such
election, the Plan used a computation period of 1,000 Hours of Service, then any
Employee whose service was measured on the basis of computation periods shall
receive credit for a period of service consisting of:
(1) A number of years equal to the number of years of service
credited to the Employee before the computation period during which the election
to change to Elapsed Time occurs; and
(2) The greater of (A) the period of service that would be
credited to the Employee under the Elapsed Time method for his service during
the entire computation period in which the change to an Elapsed Time method
occurs, or (B) the service taken into account under the computation periods
method as of the later of the effective date of the Adoption Agreement which
includes the Elapsed Time methodology or the date said Adoption Agreement is
adopted by the Employer.
(e) If elected by the Employer in the Adoption Agreement, the
following periods may be disregarded:
(1) For Vesting purposes, service before the Participant's
18th birthday or service before the Effective Date of the Plan, or both; and
(2) For eligibility and vesting, service with another entity
that is not an Affiliated
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Employer.
(f) For a Profit Sharing Plan requiring two years of eligibility
service, the second and each subsequent Year of Service begins on the first day
of the Plan Year which begins prior to or coincident with the first anniversary
of the date the Employee first performed an Hour of Service, regardless of
whether the Employee completed 1,000 Hours of Service during the first Year of
Service. An Employee credited with 1,000 Hours of Service in both the initial
eligibility period and the first Plan Year beginning prior to or coincident with
the first anniversary of the date the initial eligibility period began will be
credited with two (2) Years of Service for purposes of eligibility.
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ARTICLE 2 -- PARTICIPATION
2.1 ENTRY DATE. The Entry Date as of which an Eligible Employee who has
satisfied any age and service requirements elected by the Employer in the
Adoption Agreement becomes a Participant in the Plan will be as follows:
(a) If the Employer is amending an existing plan, each Eligible
Employee who was a Participant in the prior plan, or who as of the effective
date of the Adoption Agreement satisfies any age and service requirements
elected by the Employer, will continue as a Participant in the Plan.
(b) If the Employer is establishing a new Plan, an Eligible Employee
who satisfies, as of the Effective Date, the age and service requirements (if
any) elected by the Employer will become a Participant in the Plan on the
Effective Date.
(c) Any other Employee will become a Participant in the Plan on the
Entry Date selected by the Employer in the Adoption Agreement.
(d) If an Eligible Employee Terminates Service, or is no longer
eligible to participate in the Plan, after becoming a Participant or after
satisfying any age and service requirements prior to an Entry Date, the Employee
will resume participation on the date such Employee is reemployed or becomes
reeligible for participation.
(e) If an Employee transfers from a class of Employees ineligible to
participate in the Plan to a class of Employees eligible to participate in the
Plan after satisfying the age and service requirements, the Employee will begin
participation immediately. If the Employee has not yet satisfied the age and
service requirements on the date such Employee becomes eligible, the Employee
will become a Participant on the first Entry Date coinciding with, or
immediately following, the date on which the Employee satisfies such
requirements.
2.2 BREAK IN SERVICE. For purposes of computing the initial eligibility
service requirement, all Years of Service count except that if an Employee
incurs a Break in Service before completing the service requirement, the
Employee shall not receive credit for any Years of Service completed before the
Break in Service.
2.3 OWNER-EMPLOYEE. For purposes of this section 2.3, an Owner-Employee
or two or more Owner-Employees will be considered to control a trade or
business:
(a) If the Owner-Employee owns the entire interest in an
unincorporated trade or business; or
(b) If the Owner-Employee or Owner-Employees together own more than
50 percent of the capital or profits interest of a partnership.
An Owner-Employee or two or more Owner-Employees will be treated as owning
an interest in a partnership owned, directly or indirectly, by a partnership the
Owner-Employee or Owner-Employees are considered to control according to this
subsection (b).
(c) If the Plan provides Contributions for one or more
Owner-Employees who control both the business for which the Plan is established
and one or more other trades or businesses, the Employer's Plan and the plan
established for other trades or businesses must satisfy Code sections 401(a) and
(d) when viewed as a single plan for the Employees of this business and all
other trades or businesses.
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(d) If the Plan provides Contributions for one or more
Owner-Employees who control one or more other trades or businesses, the
Employees of the other trades or businesses must be included in a plan that:
(1) Meets the requirements described in Code sections 401(a)
and (d); and
(2) Provides Contributions or benefits as favorable as those
provided for Owner-Employees under the Plan.
(e) If a person is covered as an Owner-Employee under the plans of
two or more trades or businesses that are not controlled, and the person
controls another trade or business, the Employees' Contributions or benefits
under the plan of the controlled trades or businesses must be as favorable as
those provided for that person under the most favorable plan of a trade or
business that is not controlled.
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ARTICLE 3 -- CONTRIBUTIONS
3.1 EMPLOYER CONTRIBUTIONS. The Employer will make Employer
Contributions for each Plan Year as described below:
(a) Contributions on behalf of Participants. Each Plan Year, the
Employer will have sole and absolute discretion to determine the amount of
Employer Contributions, if any, to contribute to the Plan. For any Plan Year,
the Employer Contributions must not exceed the lesser of:
(1) The amount the Employer may deduct under Code
section 404; or
(2) The maximum amount that may be allocated to Participants'
Accounts, as described in Section 4.3.
(b) Time and manner of making Contributions. The Employer
Contributions must be paid to the Trustee on or before the due date (including
extensions) for filing the Employer's federal income tax return for the
Employer's taxable year which includes the Plan Year for which the Contributions
are made.
3.2 ALLOCATION OF CONTRIBUTIONS.
(a) Eligibility for Employer Contributions. Except as otherwise
elected by the Employer in the Adoption Agreement, as of the last day of the
Plan Year, or such other allocation date selected by the Employer in the
Adoption Agreement, the Plan Administrator must allocate Employer Contributions
and Forfeitures for that Plan Year or other allocation period to the Account of
each Participant employed on the last day of the Plan Year, or, if elected in
the Adoption Agreement, each Participant employed on an allocation date, each
Participant who terminated employment with the Employer during the Plan Year
because of death, Disability or retirement, and if elected by the Employer in
the Standardized Adoption Agreement each Participant who terminated employment
with the Employer during the Plan Year after completing more than 500 Hours of
Service (91 consecutive calendar days or 3 consecutive calendar months if the
Employer elected to apply Elapsed Time in the Adoption Agreement for the purpose
of allocating benefits).
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(b) Employer Contributions. The Plan Administrator must allocate any
Employer Contributions and Forfeitures to each Participant's Account according
to the following formula:
(1) If the Employer has NOT elected to integrate Employer
Contributions with Social Security contributions, in proportion to an eligible
Participant's Compensation for the Plan Year as compared with total Compensation
of all eligible Participants for that Plan Year.
(2) If the Employer has elected to integrate Employer
Contributions with Social Security contributions,
FIRST, in the ratio that each eligible Participant's total Compensation
bears to all eligible Participants' total Compensation, but only up to 3 percent
of a Participant's Compensation for the Plan Year.
SECOND, any remaining Employer Contributions and Forfeitures in the ratio
that each eligible Participant's Excess Compensation for the Plan Year bears to
the Excess Compensation of all eligible Participants, but only up to the lesser
of (i) 3 percent of a Participant's Excess Compensation or (ii) the actual
percentage used in the preceding paragraph. For purposes of this second step, in
the case of any Participant who has exceeded the "cumulative permitted disparity
limit" described in paragraph (c)(1) below, such Participant's total
Compensation for the Plan Year will be taken into account.
THIRD, any remaining Employer Contributions and Forfeitures in the ratio
that the sum of each eligible Participant's total Compensation and Excess
Compensation bears to the sum of all eligible Participants' total Compensation
and Excess Compensation, but not more than the Maximum Disparity Rate. For
purposes of this third step, in the case of any Participant who has exceeded the
"cumulative permitted disparity limit" described in paragraph (c)(2) below, two
times such Participant's total Compensation for the Plan Year will be taken into
account.
FOURTH, any REMAINING Employer Contributions and Forfeitures in the ratio
that each eligible Participant's total Compensation for the Plan Year bears to
all eligible Participants' total Compensation for that year.
(c) Overall Permitted Disparity Limits. The limits set forth in this
paragraph (c) shall apply to a Participant if the Participant's Employer
maintains one or more qualified plans other than the Plan:
(1) Annual overall permitted disparity limit. Notwithstanding
the preceding paragraph (b)(2), for any Plan Year this Plan benefits any
Participant who is Benefiting under this Plan and another qualified plan or
simplified employee pension, as defined in section 408(k) of the Code,
maintained by the Employer that provides for permitted disparity (or imputes
disparity), Employer Contributions and Forfeitures will be allocated to the
Account of each Participant who either completes more than 500 Hours of Service
during the Plan Year or who is employed on the last day of the Plan Year in the
ratio that such Participant's total Compensation bears to the total Compensation
of all Participants.
(2) Cumulative permitted disparity limit. Effective for Plan
Years beginning on or after January 1, 1995, the cumulative permitted disparity
limit for a Participant is 35 total cumulative permitted disparity years. Total
cumulative permitted disparity years means the number of years credited to the
Participant for allocation or accrual purposes under this Plan, and any other
qualified plan or simplified Employee pension plan (whether or not terminated)
ever maintained by the Employer. For purposes of determining the Participant's
cumulative permitted disparity limit, all years ending in the same calendar year
are treated as the same year. If the Participant is not Benefiting under a
defined benefit or target benefit plan for any year beginning on or after
January 1, 1994, the Participant has no cumulative disparity limit.
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(d) Allocation of 401(k) and Matching Contributions. If the Employer
permits Elective Salary Deferrals under the Plan pursuant to Code section
40l(k), the Plan Administrator will allocate any Elective Salary Deferrals made
for a Participant to the Participant's Account as described in Section 3.7(a).
If the Employer also elects to make Matching Contributions, the Plan
Administrator will allocate such Matching Contributions as of the last day of
the Plan Year, or such other allocation dates selected by the Employer in the
Adoption Agreement, to the Account of each eligible Participant employed on such
allocation date, unless otherwise elected by the Employer in the Adoption
Agreement. Allocation of Matching Contributions shall be made according to the
formula elected in the Adoption Agreement. The Employer may make Qualified
Nonelective Contributions or Qualified Matching Contributions, or both, to the
Plan for a Plan Year in an amount determined by the Employer in its sole
discretion (subject to the limitations of Code sections 404 and 415) in order to
cause the Plan to meet the nondiscrimination tests under Code sections 401(k)
and 401(m). The Plan Administrator will allocate any Qualified Nonelective
Contributions made for the Plan Year to the Accounts of Participants, in such
categories as the Employer elects in the Adoption Agreement, in the proportion
that each such Participant's Compensation for the Plan Year bears to the total
Compensation of all such Participants for the Plan Year or in such other
proportion as provided in the Adoption Agreement.
(e) Participant Contributions. If the Employer permits Voluntary
After-Tax Contributions in the Adoption Agreement, then the Account of each
Participant electing to make Voluntary After-Tax Contributions shall be credited
with an amount equal to such contributions made by such Participant for the Plan
Year. Voluntary After-Tax Contributions shall be limited so as to meet the
nondiscrimination test of Code section 401(m) as described in section 3.8.
3.3 DEDUCTIBLE CONTRIBUTIONS. Deductible Contributions shall not be
accepted by the Plan. Any such Deductible Contributions made to the Plan for
taxable years prior to 1987:
(a) Will continue to be recorded in a separate subaccount maintained
for a Participant by the Plan Administrator and held by the Trustee;
(b) Will be invested and reinvested, as described in Article 5;
(c) Will be nonforfeitable at all times; and
(d) Will not be used to purchase life insurance.
3.4 VOLUNTARY AFTER-TAX CONTRIBUTIONS. If elected by the Employer in
the Adoption Agreement, Participants may contribute to the Plan on an
after-tax basis. Voluntary After-Tax Contributions to this Plan, and any
such contributions previously made to the Employer's plan:
(a) Will be recorded in a separate subaccount maintained for a
Participant by the Plan Administrator and held by the Trustee;
(b) Will be invested and reinvested, as described in Article 5;
(c) Will be nonforfeitable at all times; and
(d) Any Voluntary After-Tax Contributions together with any Matching
Contributions, must satisfy the nondiscrimination test set forth in Section 3.8
and Code section 40l(m).
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3.5 ROLLOVER CONTRIBUTIONS.
(a) If elected in the Adoption Agreement, the Trustee will be
authorized to accept assets from or on behalf of an Employee who is, or is
expected to become, a Participant if:
(1) The contribution is an eligible rollover contribution as
described in Code sections 402(a)(5), 403(a)(4), or 408(d)(3); and
(2) either (1) the Plan Administrator provides written
approval to the Trustee in advance, or (2) the Plan Administrator authorizes the
Trustee to accept a transfer of such an Employee's interest in another qualified
plan from the trustee of the other plan.
(b) If the assets transferred on behalf of a Participant make this
Plan a transferee plan with respect to the Participant under Code sections
401(a)(11) and 417, such assets shall be subject to the Survivor Annuity Rules.
The Plan Administrator must separately account for such Rollover Contributions.
(c) The assets transferred or contributed as Rollover Contributions
shall be made in cash or such other form as is acceptable to the Trustee or the
Custodian, if applicable.
3.6 RETURN OF CONTRIBUTIONS.
(a) If an Employer makes an incorrect contribution because of a
factual mistake, then the Trustee (at the direction of the Plan Administrator)
will return such incorrect contribution within one year of the contribution.
Earnings attributable to such incorrect contribution shall not be returned, but
shall instead be treated as a Forfeiture, and any losses attributable thereto
shall reduce the amount returned.
(b) If the IRS disallows all or part of the deduction of the
Contributions made by the Employer under Code section 404, then Trustee (at the
direction of the Plan Administrator) will return the disallowed amount within
one year of the date of the disallowance.
(c) If the IRS Commissioner determines that the Plan is not
initially qualified under the Code, then the Trustee (at the direction of the
Plan Administrator) will return to the Employer any contribution the Employer
made to the Plan within one year after the date the Commissioner denies the
initial qualification, but only if the application for determination is made by
the time prescribed by law for filing the Employer's return for the taxable year
in which the Plan is adopted, or a later date prescribed by the Secretary of the
Treasury.
3.7 401(k) FEATURES. This section applies only to a Plan that includes a
cash or deferred arrangement pursuant to Code section 401(k).
(a) Each Eligible Employee may enter into a Salary Reduction
Agreement authorizing the Employer to withhold part of the Employee's
Compensation and to contribute the withheld amount to an Elective Salary
Deferral account established for the Employee under the Plan. The amount
allocated to the Employee's Elective Salary Deferral account shall not be
forfeited in lieu of receiving current cash Compensation once the allocation has
been made regardless of the Employee's age and service or whether the Employee
is employed on a specific date.
(b) An Employee cannot elect to defer more than the amount permitted
pursuant to Code section 402(g), multiplied by the Adjustment Factor, and
adjusted for any prior hardship withdrawals as provided in section 6.12, in any
calendar year.
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(1) The following rules will apply if, during the same taxable
year, an Employee participates in the Plan and another plan with a qualified
cash or deferred arrangement described in Code section 401(k), any simplified
employee pension cash or deferred arrangement described in Code section
402(h)(1)(B), any eligible deferred Compensation plan under Code section 457,
any plan described under Code section 501(c)(18), and any Employer Contributions
made on behalf of the Employee pursuant to a salary reduction agreement under
Code section 403(b):
(A) If the Participant provides written notice to the
Plan Administrator by January 31 that any part of the Elective Salary Deferrals
contributed for the Employee for the prior taxable year are Excess Deferrals,
the Plan Administrator will instruct the Trustee to distribute the Excess
Deferrals plus any income (or loss) attributable to such Contributions to the
Employee. The Participant will be deemed to have notified the Plan Administrator
that the Participant has Excess Deferrals for the taxable year if the Plan
Administrator determines that the Participant has Excess Deferrals, taking into
Account any Elective Salary Deferrals made under the Plan and any other plans
maintained by the Employer. Each year, the Plan Administrator will determine
whether to calculate income or loss to the end of the taxable year or to the
date of distribution. The determination will be consistent for all corrective
distributions made to Participants for the same taxable year. The Plan
Administrator will instruct the Trustee to make the distribution by the April 15
that immediately follows the close of the Participant's taxable year.
(B) The Plan Administrator will calculate the
income (or loss) attributable to the Excess Deferrals according to the standard
accounting method used for allocating income (or loss), which will be
consistently applied for all Participants and all corrective distributions.
(2) The Plan Administrator may amend or revoke the
Participant's Salary Reduction Agreement in order to:
(A) Prevent a Participant's annual additions, as
described in section 4.3, from exceeding the limits described in Article 4;
(B) Ensure that the Average Deferral Percentage for
Highly Compensated Employees will satisfy the nondiscrimination test described
in Code section 401(k); or
(C) Prevent Contributions made by the Employer from
exceeding the deduction limits of Code section 404.
(3) The Plan Administrator will treat Excess Deferrals, other
than Excess Deferrals distributed pursuant to section 1.402(g)-1(e)(2) of the
federal income tax regulations, as annual additions as described in Section 4.3.
(c) The Plan Administrator will instruct the Trustee to return
Excess Contributions to Highly Compensated Employees as described in subsection
(d) to the extent necessary to permit the Plan to satisfy one of the
nondiscrimination tests described in paragraphs (1) or (2). The Plan
Administrator will calculate the amount of Excess Contributions, if any, after
determining Excess Deferrals. The Plan will satisfy the nondiscrimination test
that applies to Elective Salary Deferrals if:
(1) The Average Deferral Percentage of the Participants who
are Highly Compensated Employees does not exceed the product of 1.25 and the
Average Deferral Percentage for Participants who are Nonhighly Compensated
Employees; or
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(2) The Average Deferral Percentage of Participants who are
Highly Compensated Employees is not more than the lesser of:
(A) 200 percent of the Average Deferral Percentage
of Participants who are Nonhighly Compensated Employees, and
(B) The Average Deferral Percentage of Participants
who are Nonhighly Compensated Employees plus two percentage points.
The Plan Administrator will keep records to demonstrate compliance with the
nondiscrimination test and to confirm the amount, if any, of Matching
Contributions, Qualified Nonelective Contributions or Qualified Matching
Contributions taken into account consistent with section 1.27.
(d) The Plan Administrator will instruct the Trustee to distribute
Excess Contributions plus income (or loss) attributable to such Contributions to
the appropriate Highly Compensated Employees as soon as administratively
feasible after the close of the Plan Year, but in any case within 12 months
after the close of the Plan Year. The determination will be consistent for all
corrective distributions made to Participants for the same Plan Year. If the
Plan terminates completely during a Plan Year, the Plan Administrator will
instruct the Trustee to distribute any Excess Contributions as soon as
administratively feasible after the termination date, but in any case within 12
months of the termination date.
(1) The Plan Administrator will calculate the income or loss
attributable to Excess Contributions according to the standard accounting method
used for allocating income (or loss), provided the method does not violate Code
section 401(a)(4), is consistently applied for all Participants and all
corrective distributions under the Plan for the Plan Year and is used by the
Plan for allocating income to Participants' Accounts. Income or loss allocable
to the period between the end of the Plan Year in which the Excess Contributions
occur and the date of distribution shall be disregarded.
(2) The Plan Administrator will not instruct the Trustee to
distribute any Excess Contributions and income to Highly Compensated Employee if
any other Highly Compensated Employee has a higher Deferral Percentage than such
Highly Compensated Employee. Excess Contributions shall be distributed first
from Elective Salary Deferrals for which no Matching Contributions were made and
thereafter from Elective Salary Deferrals for which Matching Contributions were
made. The Participant will forfeit any Matching Contributions related to any
Excess Deferrals or Excess Contributions that are distributed. The Employer will
use such Forfeitures in the manner specified in the Adoption Agreement.
(3) The Plan Administrator will treat Excess Contributions,
including any Excess Contributions distributed to the Participant, as annual
additions as described in Section 4.3.
(4) If the Plan Administrator does not return Excess
Contributions and Excess Aggregate Contributions (to the extent such Excess
Contributions and Excess Aggregate Contributions cannot be forfeited) and income
within 2-1/2 months of the close of the Plan Year, the Employer will be required
to pay an excise tax equal to 10 percent of the sum of the Excess Contributions
and Excess Aggregate Contributions for the Plan Year that are not distributed by
that date.
(5) The Plan Administrator will allocate Excess Contributions
among the Family Members who are subject to the family aggregation rules in
proportion to the Elective Salary Deferrals (and amounts
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treated as Elective Salary Deferrals) of each Family Member that is combined to
determine the combined Deferral Percentage.
(6) The Plan Administrator will account for distributions of
Excess Contributions as follows: Excess Contributions will be distributed from
the part of the Participant's Account attributable to the Participant's Elective
Salary Deferrals and any Qualified Matching Contributions described in Section
1.81 in proportion to the Participant's Elective Salary Deferrals and Qualified
Matching Contributions for the Plan Year. Excess Contributions will be
distributed from the part of the Participant's Account attributable to Qualified
Nonelective Contributions only to the extent that the Participant's Excess
Contributions exceed amounts attributable to the Participant's Elective Salary
Deferrals and Qualified Matching Contributions.
(e) The Plan Administrator will determine the Deferral Percentage of
any Highly Compensated Employee who is eligible to participate in the Plan, and
who is also eligible to have Elective Salary Deferrals allocated to such
Participant's accounts under two or more arrangements described in Code section
401(k) maintained by the Employer, as if the Employee's Elective Salary
Deferrals were made under a single arrangement. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements that have different
Plan Years, the Plan Administrator will treat all arrangements ending with or
within the same calendar year as a single arrangement unless the Code or the
federal income tax regulations promulgated thereunder require such arrangements
to be disaggregated.
(1) If a Participant is a Five-Percent Owner or one of the 10
most highly paid Highly Compensated Employees, the Plan Administrator will
include the Elective Salary Deferrals (and any Matching Contributions and
Qualified Nonelective Contributions treated as Elective Salary Deferrals) and
Compensation of the Participant's Family Members in determining the
Participant's Deferral Percentage. Family Members of such five-percent owners
and Highly Compensated Employees shall not be taken into account as separate
Employees in determining the Average Deferral Percentage of Participants who are
Nonhighly Compensated Employees or of Participants who are Highly Compensated
Employees.
(2) The Employer must contribute Elective Salary Deferrals and
Qualified Nonelective Contributions to the Plan before the last day of the
12-month period that immediately follows the Plan Year to which the
Contributions relate.
(3) The determination and treatment of the Deferral Percentage
of any Participant must satisfy any other requirements that the Secretary of the
Treasury may prescribe.
(f) If the Plan satisfies the requirements of Code sections 401(k),
401(a)(4) or 410(b) only if aggregated with one or more other plans, or if one
or more other plans satisfies the requirements of such sections only if
aggregated with the Plan, the Plan Administrator will determine the Deferral
Percentages of the Employees as if all such plans are a single plan. Only plans
with the same Plan Year may be aggregated in order to satisfy Code section
401(k). Notwithstanding the foregoing, if the Plan is Benefiting otherwise
excludible Employees, then the Plan Administrator may treat the Plan as two
separate Plans for purposes of Code sections 401(k) and 410(b): one Plan covers
the otherwise excludible Employees; and the other Plan covers the other
Employees Benefiting under the Plan.
(g) Except for hardship withdrawals described in section 6.12, the
Trustee shall not distribute a Participant's Elective Salary Deferrals,
Qualified Nonelective Contributions Qualified Matching Contributions or Matching
Contributions that are treated as Elective Salary Deferrals, and any income on
such contributions, except as follows:
(1) Before the earliest of the following:
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(A) The date the Participant reaches age 59-1/2.
(B) The date the Participant Terminates Service.
(C) The date the Participant retires.
(D) The date the Participant dies.
(E) The date the Participant incurs a Disability.
Any distributions made following the foregoing events will be subject to
the Survivor Annuity Rules to the extent the Plan is a transferee plan as
described in Section 6.6 or the Plan contains an annuity option subject to the
annuity distribution rules of Section 6.3.
(2) The Trustee also may make distributions of a Participant's
Elective Salary Deferrals, Qualified Nonelective Contributions, Qualified
Matching Contributions or Matching Contributions that are treated as Elective
Salary Deferrals, and any income on such deferrals and contributions if:
(A) The Plan terminates and the Employer fails to
establish another defined contribution plan (other than an employee stock
ownership plan, as defined in Code sections 4975(e) or 409, or a simplified
employee pension plan, as defined in Code section 408(k)).
(B) The Employer is a corporation and sells
substantially all of the assets used in the trade or business in which the
Participant is employed to a corporation that is not an Affiliated Employer.
However, the assets may be distributed only to those Employees who continue
employment with the purchaser, and only if the Employer continues to maintain
the Plan.
(C) The Employer is a corporation and sells its
interest in a subsidiary to an entity that is not an Affiliated Employer.
However, the assets may be distributed only to those Employees who continue
employment with the subsidiary as soon as administratively feasible after the
sale and only if the Employer continues to maintain the Plan.
Any distributions made under this paragraph (2) must be made in the form
of a lump-sum distribution within the meaning of Code section 401(k)(10)(B)(ii).
3.8 MATCHING AND VOLUNTARY AFTER-TAX CONTRIBUTIONS. This section
applies only to a 401(k) plan for which the Employer authorizes either
Matching Contributions, Voluntary After-Tax Contributions or both.
(a) The Plan Administrator will instruct the Trustee to return
Excess Aggregate Contributions to Highly Compensated Employees as described in
subsection (c) to the extent necessary to permit the Plan to satisfy one of the
nondiscrimination tests described in subsection (b). The Plan Administrator will
calculate the amount of Excess Aggregate Contributions, if any, after
determining Excess Deferrals and Excess Contributions.
(b) The Plan will satisfy the nondiscrimination test of Code section
401(m) that applies to Matching Contributions and Voluntary After-Tax
Contributions if:
(1) The Average Contribution Percentage of the Participants
who are Highly
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Compensated Employees does not exceed the product of 1.25 and the Average
Contribution Percentage for Participants who are Nonhighly Compensated
Employees; or
(2) The Average Contribution Percentage of Participants who
are Highly Compensated Employees is not more than the lesser of:
(A) 200 percent of the Average Contribution
Percentage of Participants who are Nonhighly Compensated Employees, and
(B) The Average Contribution Percentage of
Participants who are Nonhighly Compensated Employees plus two percentage points.
The Plan Administrator will keep records to demonstrate compliance with
the nondiscrimination test and to confirm that the amount, if any, of Elective
Salary Deferrals, Qualified Nonelective Contributions or Qualified Matching
Contributions, taken into account is consistent with Section 1.22.
(c) The Plan Administrator will instruct the Trustee to distribute
Excess Aggregate Contributions plus income (or loss) attributable to Excess
Aggregate Contributions to the appropriate Highly Compensated Employees as soon
as administratively feasible after the close of the Plan Year, but in any case
within 12 months after the close of the Plan Year. The determination will be
consistent for all corrective distributions made to Participants for the same
Plan Year. If the Plan terminates completely during a Plan Year, the Plan
Administrator will instruct the Trustee to distribute any Excess Aggregate
Contributions as soon as administratively feasible after the termination date,
but in any case within 12 months of the termination date.
(1) The Plan Administrator will calculate the income or loss
attributable to Excess Aggregate Contributions according to the standard
accounting method used for allocating income (or loss), provided the method does
not violate Code section 401(a)(4), is consistently applied for all Participants
and all corrective distributions under the Plan for the Plan Year and is used by
the Plan for allocating income to Participant's Accounts. Income or loss
allocable to the period between the end of the Plan Year in which the Excess
Aggregate Contributions occur and the date of distribution shall be disregarded.
(2) The Trustee will distribute Excess Aggregate Contributions
adjusted for any income or loss from Participants' Voluntary After-Tax
Contributions Accounts and Matching Contributions Accounts on the basis of the
respective portion of Excess Aggregate Contributions attributable to each Highly
Compensated Employee. The Plan Administrator will not instruct the Trustee to
distribute any Excess Aggregate Contributions and income to Highly Compensated
Employee if any other Highly Compensated Employee has a higher Contribution
Percentage than such Highly Compensated Employee. Excess Aggregate Contributions
shall be distributed first from Voluntary After-Tax Contributions for which no
Matching Contributions were made, then from Voluntary After-Tax Contributions
with a corresponding forfeiture of Matching Contributions that were made on
account of such Voluntary After-Tax Contributions in the same proportion as such
Matching Contributions were allocated until all Voluntary After-Tax
Contributions and their related Matching Contributions have been distributed or
forfeited, as applicable. Finally, any Matching Contributions related to
Elective Salary Deferrals shall be forfeited. To the extent the Participant
forfeits any Matching Contributions related to Excess Aggregate Contributions,
the Employer will use such Forfeitures in the manner specified in the Adoption
Agreement.
(3) The Plan Administrator will allocate the Excess Aggregate
Contributions among the Family Members who are subject to the family aggregation
rules in proportion to the Voluntary After-Tax and Matching Contributions (and
amounts treated as Matching Contributions) of each Family Member that is
combined to
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determine the combined Contribution Percentage.
(4) The Plan Administrator will treat Excess Aggregate
Contributions, including any distributed to the Participant, as annual additions
as described in Section 4.3.
(d) The Plan Administrator will determine the Contribution
Percentage of any Highly Compensated Employee who is eligible to participate in
the Plan, and who is also eligible to have Matching Contributions or Employee
Contributions allocated to his or her Accounts under another plan maintained by
the Employer, as a single arrangement. If a Highly Compensated Employee
participates in two or more such plans that have different Plan Years, the Plan
Administrator will treat all arrangements ending with or within the same
calendar year as a single arrangement unless the Code or related regulations
require them to be disaggregated.
(1) If a Participant is a Five-Percent Owner or one of the 10
most highly paid Highly Compensated Employees, the Plan Administrator will
include the Matching Contributions, Qualified Matching Contributions, Qualified
Nonelective Contributions, and Elective Salary Deferrals treated as Matching
Contributions, Voluntary After-Tax Contributions and Compensation of Family
Members in determining the Participant's Contribution Percentage. Family Members
of such Five-Percent Owners or Highly Compensated Employees shall not be taken
into account as separate Employees in determining the Average Contribution
Percentage of Participants who are Nonhighly Compensated Employees or of
Participants who are Highly Compensated Employees.
(2) The Employer must contribute Matching Contributions,
Qualified Matching Contributions, and Qualified Nonelective Contributions to the
Plan before the last day of the 12-month period that immediately follows the
Plan Year to which the Contributions relate.
(3) The determination and treatment of the Contribution
Percentage of any Participant will satisfy any other requirements that the
Secretary of the Treasury may prescribe.
(4) MULTIPLE USE. If one or more Highly Compensated Employees
participate in a cash or deferred arrangement and a plan that is subject to the
Average Contribution Percentage test that is maintained by the Employer, and the
sum of the Average Deferral Percentage and Average Contribution Percentage of
the Highly Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, the Average Contribution Percentage of the Highly Compensated
Employees who also participate in the cash or deferred arrangement will be
reduced (beginning with the Highly Compensated Employee with the highest
Contribution Percentage) by the smallest amount that would cause the aggregate
limit not to be exceeded. The amount by which each Highly Compensated Employee's
"Contribution Percentage amount" is reduced will be treated as an Excess
Aggregate Contribution. The Average Deferral Percentage and Average Contribution
Percentage of the Highly Compensated Employees will be determined after any
corrections that are required to meet the Average Deferral Percentage and
Average Contribution Percentage tests are made. The Aggregate Limit will not be
exceeded if either the Average Deferral Percentage or Average Contribution
Percentage of the Highly Compensated Employees does not exceed 1.25 multiplied
by the Average Deferral Percentage or Average Contribution Percentage (whichever
is applicable) of the Nonhighly Compensated Employees.
(e) If the Plan satisfies the requirements of Code sections 401(m),
401(a)(4) or 410(b) only if aggregated with one or more other plans, or if one
or more other plans satisfies the requirements of such sections only if
aggregated with the Plan, the Plan Administrator will determine the Contribution
Percentages of the Employees as if all such plans are a single plan. However,
only plans with the same Plan Year may be aggregated in order to satisfy Code
section 401(m). Notwithstanding the foregoing, if the Plan is Benefiting
otherwise excludible Employees, then the Plan Administrator may treat the Plan
as two separate Plans for purposes of Code sections 401(m) and 410(b): one Plan
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covers the otherwise excludible Employees; and the other Plan covers the other
Employees Benefiting under the Plan.
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3.9 401(k) FEATURES IN PLANS COVERING COLLECTIVELY BARGAINED EMPLOYEES.
(a) MANDATORY DISAGGREGATION. Notwithstanding any provision to the
contrary herein, a Plan that includes a cash or deferred arrangement pursuant to
Code section 401(k) in which both Employees who are members of a unit of
Employees covered by a collective bargaining agreement (as described in section
1.410(b)-6(d)(2) of the federal income tax regulations) and Employees who are
not included in such collective bargaining unit are Benefiting, shall be treated
as two separate Plans for purposes of sections 3.7 and 3.8.
(b) PLANS WITH MORE THAN ONE COLLECTIVE BARGAINING UNIT. Except as
provided in section 3.9(c), if a Plan covers more than one collective bargaining
unit, the Plan is treated as comprising a separate Plan for each such collective
bargaining unit for purposes of sections 3.7 and 3.8.
(c) COMBINING COLLECTIVE BARGAINING UNITS. Notwithstanding section
3.9(b), at the election of the Employer, two or more separate collective
bargaining units can be treated as a single collective bargaining unit,
provided, however, that the combination of units is determined on a reasonable
and reasonably consistent basis from year to year.
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ARTICLE 4 -- ACCOUNTS
4.1 PLAN ACCOUNT. The Plan Administrator will credit to the separate
Account maintained for each Participant all contributions allocated on behalf of
such Participant as provided in Article 3. The Plan Administrator will
separately account for any Employer Contributions (including contributions made
because the Plan is Top-Heavy or Super Top-Heavy), Deductible Contributions,
Voluntary After-Tax Contributions, Elective Salary Deferrals, Matching
Contributions, Qualified Nonelective Contributions, Qualified Matching
Contributions and Rollover Contributions, together with earnings thereon.
4.2 VESTING.
(a) A Participant's Account will be fully Vested when the
Participant reaches Early Retirement Age (if elected by the Employer in the
Adoption Agreement), Normal Retirement Age or, if earlier, the date on which the
Participant dies or experiences a Disability, but only if the Participant is
employed by the Employer on the date the Participant attains Early or Normal
Retirement Age, dies, or the Disability commences.
(b) The Participant will be fully Vested at all times in that part
of her or his Account attributable to Deductible Contributions, Voluntary
After-Tax Contributions, Elective Salary Deferral Contributions, Qualified
Nonelective Contributions, Qualified Matching Contributions and Rollover
Contributions.
(c) If a Participant Terminates Service for any reason other than
death or Disability before reaching Early Retirement Age, if applicable, or
Normal Retirement Age, the Plan Administrator must determine the Vested
percentage of the Participant's Account attributable to Employer Contributions
(and, if applicable, Matching Contributions) according to the vesting schedule
elected by the Employer in the Adoption Agreement.
(d) The Plan Administrator must count all of an Employee's Years of
Service, excluding only those service periods that the Employer has elected in
the Adoption Agreement, to determine the extent to which a Participant is Vested
in the portion of such Participant's Account attributable to Employer
Contributions (and, if applicable, Matching Contributions), subject to the
following rules:
(1) If a Participant incurs five consecutive Break in Service
years, the Plan Administrator will disregard any Years of Service completed
after the Break in Service to determine the Vested percentage of the
Participant's Account attributable to Employer Contributions (and, if
applicable, Matching Contributions) made before the Break in Service. Years of
Service before and after the Break in Service shall, however, be counted to
determine the Vested Percentage of the Participant's Account attributable to
Employer Contributions (and, if applicable Matching Contributions) made after
the Break in Service. The Vested pre-Break in Service Account and the post-Break
in Service Account shall share in the earnings and losses of the Trust Fund in
accordance with Article 5.
(2) If a Participant returns to employment with the Employer
before incurring five consecutive Break in Service years, the Plan Administrator
will count service completed before and after the Break in Service to determine
the Vested percentage of the Participant's Account attributable to Employer
Contributions and, if applicable, Matching Contributions accrued prior to the
Break in Service.
(3) If the Participant is fully or partially Vested in the
part of her or his Account attributable to Contributions made by the Employer
before incurring five consecutive Break in Service years, the Plan Administrator
must count all Years of Service completed before and after the Break in Service
to determine the Vested percentage of the Participant's Account attributable to
Employer Contributions (and, if applicable, Matching
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Contributions) made after the Break in Service.
(4) If the Participant has no Vested interest in the part of
the Participant's Account that is attributable to Contributions made by the
Employer before the Participant incurs the greater of (A) 5 or more consecutive
Break in Service years or (B) the number of Years of Service completed before
the Break in Service, then the Plan Administrator will disregard any Years of
Service completed before the Break in Service to determine the Vested percentage
of the Participant's Account attributable to Employer Contributions (and, if
applicable, Matching Contributions) made after the Break in Service.
(5) Years of Service and Breaks in Service shall be measured
by the Plan Year.
(e) If a Participant Terminates Service before becoming fully Vested
in his or her Account, the Plan Administrator will direct the Trustee to
transfer the nonvested part of the Participant's Account to a special holding
account at the time the nonvested part is forfeited and reallocated as provided
in Section 6.2(c). The Trustee will invest the special holding account as
directed by the Plan Administrator.
(f) Regardless of the extent to which a Participant's Account is
vested, Matching Contributions shall be forfeited to the extent they relate to
Excess Deferrals, Excess Contributions, Excess Aggregate Contributions, and
refunds of excess annual additions attributable to Voluntary After-Tax
Contributions or Elective Salary Deferrals pursuant to
Code section 415.
4.3 LIMITATIONS ON ALLOCATIONS.
(a) Definitions. The definitions below apply specifically to this
section 4.3.
(1) Annual Additions.
(A) Refers to the sum of the following amounts
credited to a Participant's Account for the limitation year:
(i) Contributions the Employer makes;
(ii) Contributions the Participant makes; and
(iii) Forfeitures.
(B) Amounts allocated to an individual medical account
(as described in Code section 415(l)(2)), which is part of a pension or annuity
plan maintained by the Employer, will be treated as annual additions to a
defined contribution plan.
(C) Also, amounts derived from contributions paid
or accrued that can be attributed to post-retirement medical benefits allocated
to the separate account of a Key Employee (as described in Code section
419A(d)(3)) under a welfare benefit fund (as described in Code section 419(e))
maintained by the Employer will be treated as annual additions to a defined
contribution plan.
(D) In addition, amounts allocated under a
simplified employee pension plan maintained by the Employer and any excess
amount applied under sections 4.3(b)(3) and 4.3(c)(3) in the limitation year to
reduce Employer Contributions will be treated as annual additions to a defined
contribution plan.
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(2) Employer. The Employer and any Affiliated Employer, as
modified by Code section 415(h).
(3) Compensation (Code section 415 safe harbor).
(A) A Participant's wages, salaries and fees for
professional services, and other amounts received (whether or not paid in cash)
for personal services actually rendered during employment with the Employer
maintaining the Plan to the extent included in gross income. Under this
definition, Compensation includes, but is not limited to, commissions paid
salespersons, compensation for services based on a percentage of the profits,
commissions on insurance premiums, tips, bonuses, fringe benefits, and
reimbursements or other expense allowances under a nonaccountable plan (as
described in section 1.62-2(c) of the federal income tax regulations).
The following amounts must not be treated as Compensation:
(i) Employer contributions to a plan of
deferred compensation that are not included in the Employee's gross income for
the taxable year in which they were contributed; Employer contributions under a
simplified employee pension plan (as described by Code section 408(k)); or any
distributions from a plan of deferred compensation.
(ii) Amounts realized from the exercise of a
nonqualified stock option or from restricted stock (or property) held by the
Employee that becomes freely transferable or no longer subject to a substantial
risk of forfeiture.
(iii) Amounts realized from the sale, exchange
or other disposition of stock acquired from a qualified stock option.
(iv) Other amounts that received special tax
benefits, or Employer Contributions (whether or not from a salary reduction
agreement) toward the purchase of an annuity contract described in Code section
403(b), whether the amounts can actually be excluded from the Employee's gross
income.
(B) To apply the limitations of Section 4.3,
Compensation for a limitation year is the Compensation actually paid or made
available during that year.
(C) For any Self-Employed Person, Compensation means
earned income.
(4) Defined benefit fraction. Fraction in which:
(A) The numerator is the sum of the Participant's
projected annual benefits under all defined benefit plans (terminated or not)
maintained by the Employer; and
(B) The denominator is the lesser of 125 percent of
the dollar limit determined for the limitation year under Code sections 415(b)
and (d), or 140 percent of the Participant's highest average compensation,
including any adjustments under Code section 415(b).
However, if:
(i) The Employee was a Participant on the first
day of the first
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limitation year beginning after December 31, 1986 in one or more defined benefit
plans existing on May 6, 1986 maintained by the Employer; and
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(ii) The defined benefit plans individually
and in aggregate satisfied the requirements described in Code section 415 (in
effect for all limitation years beginning before January 1, 1987); then, the
denominator must be at least 125 percent of the sum of the annual benefits the
Participant accrued under these plans at the close of the last limitation year
beginning before January 1, 1987.
(5) Defined contribution fraction. Fraction in which:
(A) The numerator is the sum of the annual
additions for the Participant under all defined contribution plans (terminated
or not) maintained by the Employer for the current and all prior limitation
years, including annual additions attributed to the Participant's Voluntary
After-Tax Contributions to all defined benefit plans (terminated or not)
maintained by the Employer; to all welfare benefit funds (as described in Code
section 419(e)); and to individual medical accounts (as described in Code
section 415(1)(2)) and simplified employee pensions maintained by the Employer;
and
(B) The denominator is the sum of the maximum
aggregate amounts for the current and all prior limitation years with the
Employer, whether or not the Employer maintained a defined contribution plan.
The maximum aggregate amount in any limitation year is the lesser of:
(i) 125 percent of the dollar limitation
determined under Code sections 415(b) and (d), in effect under Code
section 415(c)(1)(A); or
(ii) 35 percent of the Participant's
Compensation for that year.
(C) If the Employee was a Participant at the end of
the first day of the first limitation year beginning after December 31, 1986, in
one or more defined contribution plans existing on May 6, 1986 and maintained by
the Employer, and if the sum of the defined contribution fraction and the
defined benefit fraction otherwise would exceed 1.0 under the Plan terms, the
numerator will be adjusted.
Under this adjustment, an amount equal to the product of the excess of the
sum of the defined benefit and defined contribution fractions over 1.0 and the
defined contribution denominator will be permanently subtracted from the
numerator. The adjustment will be calculated using the fractions as if:
(i) They were computed at the end of the last
limitation year beginning before January 1, 1987; and
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(ii) There were no changes in the Plan terms
and conditions made after May 5, 1986;
However, the calculation will be subject to the Code section 415
limitation that applies to the first limitation year beginning on or after
January 1, 1987.
(D) The annual additions for any limitation year
beginning before January 1, 1987 shall not be recomputed to treat as annual
additions all Employee Contributions to the Plan and any other plan maintained
by the Employer.
(6) Excess amount. Annual additions made for and/or by a
Participant exceeding the maximum permissible amount for a limitation year.
(7) Highest average compensation. Average Compensation for the
three consecutive Years of Service with the Employer that produce the highest
average. For this purpose, a Year of Service means the calendar year.
(8) Limitation year. Unless otherwise specified in a
resolution of the board of directors or other appropriate written authorization
adopted by the Employer, the limitation year shall be the Plan Year. All
qualified plans maintained by the Employer must use the same limitation year.
If the limitation year is amended to a different period of 12 consecutive
months, the new limitation year will begin on a date within the limitation year
in which the amendment is made.
(9) Master or prototype plan. The Plan and any other plan that
is the subject of a favorable opinion letter from the IRS concerning the form of
the plan.
(10) Maximum permissible amount. Maximum amount of annual
additions that the Employer may contribute or allocate to a Participant's
Account for any limitation year shall not exceed the lesser of:
(A) $30,000 or if greater, one-fourth of the defined
benefit dollar limitation under Code section 415(b)(1) as in effect for the
limitation year; or
(B) 25 percent of the Participant's Compensation
for the limitation year. This limitation will not apply to any contribution for
medical benefits (as described in Code sections 401(h) or 419A(f)(2) usually
treated as an annual addition under Code sections 415(1)(1) or 419A(d)(2).
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If a short limitation year is created by an amendment changing the
limitation year to a different period of 12 consecutive months, the maximum
permissible amount shall not exceed the following formula: Multiply the defined
contribution dollar limitation (as determined under Code section 415(c)(1)(A))
by the number of months in the short limitation year and divide by 12.
(11) Projected annual benefit. Annual retirement benefit
(adjusted to an actuarially equivalent Straight Life Annuity if that benefit is
expressed in a form other than a Straight Life Annuity or a Qualified Joint and
Survivor Annuity) to which a Participant would be entitled under the terms of
the Plan, assuming:
(A) The Participant continues employment until Normal
Retirement Age under the Plan (or current age, if later); and
(B) The Participant's Compensation for the current
limitation year and all other relevant factors used to determine the Plan
benefits will remain constant for all future limitation years.
(b) Purpose. The allocations made to each Participant's Account will
be subject to the limitations imposed by Code section 415, considering
allocations made to, and benefits projected under, other plans maintained by the
Employer, if any.
These limitations supersede any other Plan provisions that otherwise might
provide for an allocation causing the Code section 415 limitations to be
exceeded.
(1) Annual additions. If the Participant does not participate
and has never participated in another qualified defined contribution plan or
welfare benefit fund (as described in Code section 419(e)) maintained by the
Employer, or in an individual medical account (as described in Code section
415(l)(2)) or simplified employee pension plan, as defined in Code section
408(k) maintained by the Employer, that provides an annual addition, the annual
additions for the Participant for any limitation year must not exceed the lesser
of:
(A) The maximum permissible amount based on the
Participant's Compensation up to the allocation date, reduced by the sum of any
annual additions allocated to the Participant under the Plan as of any preceding
allocation date within the limitation year; or
(B) Any other limitation contained in the Plan.
If the Employer Contributions that otherwise would be contributed or
allocated to a Participant's Account would cause the annual additions for the
limitation year to exceed the maximum permissible amount, the Plan Administrator
must reduce allocations or Contributions so that annual additions equal the
maximum permissible amount.
(2) Compensation. Before determining the Participant's actual
Compensation for the limitation year, the Plan Administrator may determine the
maximum permissible amount for a Participant based on a reasonable estimate of
the Participant's Compensation for the limitation year, uniformly determined for
all Participants in similar situations.
However, as soon as administratively feasible after the limitation year
ends, the Plan Administrator must determine the maximum permissible amount based
on the Participant's actual Compensation for the limitation year.
(3) Excess amount. If, pursuant to Section 4.3(b)(2), there is
an excess amount, this
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excess amount will be disposed of in the following order:
(A) If the Participant made Voluntary After-Tax
Contributions, the excess amount must be returned to the Participant.
(B) If the Participant is covered by the Plan at
the end of the limitation year, the excess amount must be used to reduce
Employer Contributions (including allocations of any Forfeitures) that otherwise
would be made for the Participant in the next limitation year (and in each
succeeding limitation year, if necessary).
(C) If the Participant is not covered by the Plan
at the end of the limitation year, the Plan Administrator must hold the excess
amount unallocated in a suspense account. This account must be applied to reduce
future Employer Contributions (including allocations of any Forfeitures) for all
remaining Participants in the next limitation year (and in each succeeding
limitation year, if necessary).
(i) The Plan Administrator must not allocate
investment gains and losses to the suspense account. If a suspense account
exists at any time during a particular limitation year, all amounts in the
account must be allocated and reallocated to the Participants' Accounts before
any Employer Contributions are made to the Plan for that limitation year.
(ii) Excess amounts must not be distributed to
Participants or former Participants.
(D) Special Rule for Excess Annual Additions: If
the Participant made Elective Salary Deferrals, then to the extent necessary to
reduce an excess amount in a Participant's Account, the Plan Administrator may
distribute the Participant's Elective Salary Deferrals and any gains
attributable to such Elective Salary Deferrals to the Participant. The Plan
Administrator shall not take any returned Elective Salary Deferral Contributions
into account in calculating (i) the Participant's Deferral Percentage or
Contribution Percentage for the Plan Year, (ii) whether the Participant has
Excess Deferrals or (iii) whether the Participant has exceeded the limit in Code
section 402(g), as adjusted.
(c) Coverage under master or prototype plan.
(1) Application. This paragraph applies if, in addition to the
Plan, the Participant is covered under another qualified master or prototype
plan that is a defined contribution plan or welfare benefit fund (as described
in Code section 419(e)), or an individual medical account (as described in Code
section 415(1)(2)) that is maintained by the Employer or a simplified employee
pension maintained by the Employer, that provides annual additions during any
limitation year.
(A) The annual additions for a limitation year for
any Participant must not exceed the maximum permissible amount reduced by the
annual additions for the Participant under the other qualified master and
prototype defined contribution plans, welfare benefit funds, individual medical
accounts and simplified employee pensions for that limitation year.
(B) If the annual additions for the Participant
under other qualified master and prototype defined contribution plans, welfare
benefit funds, individual medical accounts and simplified employee pensions
maintained by the Employer are less than the maximum permissible amounts, and
the Employer Contributions that otherwise would be contributed or allocated to a
Participant's Account under this Plan would cause the annual
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additions for the limitation year to exceed this limitation, the amount
contributed or allocated must be reduced so the annual additions under all such
plans and funds for the limitation year will equal the maximum permissible
amount.
(C) If the annual additions for the Participant
under all other qualified master and prototype defined contribution plans,
welfare benefit funds, individual medical accounts and simplified employee
pensions when aggregated are equal to or greater than the maximum permissible
amount, no allocations or contributions shall be made to a Participant's Account
under this Plan for that limitation year.
(2) Determination. Before determining the Participant's actual
Compensation for the limitation year, the Plan Administrator may determine the
maximum permissible amount for a Participant, as described in Plan section
4.3(b)(2) above. As soon as administratively feasible after the limitation year
ends, the Plan Administrator must determine the maximum permissible amount for
the limitation year based on the Participant's actual Compensation for the
limitation year.
(3) Excess Amount. If a Participant's annual additions under
the Plan and all other plans described in paragraph (1) above would result in an
excess amount for a limitation year, the excess amount will consist of the
annual additions last allocated. However, any annual additions attributable to a
simplified employee pension will be deemed to have been allocated first,
followed by annual additions to a welfare benefit fund or an individual medical
account, regardless of the actual allocation date.
Please note: If an excess amount is allocated for a Participant when an
allocation date of the Plan coincides with an allocation date of another plan,
the excess amount attributed to the Plan will be the product of the total excess
amount allocated for the Participant as of that date, multiplied by the ratio of
(A) the annual additions allocated for the Participant for the limitation year
as of that date under the plan to (B) the total annual additions allocated to a
Participant for the limitation year as of that date under this and all other
qualified master or prototype plans that are defined contribution plans.
Any excess amount attributed to the Plan must be disposed of in the manner
described in section 4.3(b).
(d) Coverage under other qualified plans.
(1) If the Participant is covered under another
qualified defined contribution plan maintained by the Employer that is not a
master or prototype plan, annual additions for the Participant under the Plan
for any limitation year will be limited according to subsection (c) above as if
the other plan were a master or prototype plan, unless the Employer describes in
the Non-Standardized Adoption Agreement the method used by the plans:
(A) To limit total annual additions to the maximum
permissible amount, and
(B) To properly reduce any excess amounts in a
manner that precludes Employer discretion.
(2) If the Employer maintains, or has at any time
maintained, a qualified defined benefit plan covering any Participant in the
Plan, the sum of the Participant's defined benefit plan fraction and defined
contribution plan fraction must not exceed 1.0 in any limitation year.
(A) If the Employer Contributions during that
limitation year would
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cause the 1.0 limit to be exceeded, the allocation must be reduced so that the
sum equals 1.0.
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(B) The annual additions that may be credited
to the Participant's Account under the Plan for any limitation year must be
limited as specified in the Non-Standardized Adoption Agreement.
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ARTICLE 5 -- INVESTMENTS
5.1 INVESTMENT AUTHORITY.
(a) Directing Party. The person designated in the Plan Service
Agreement as having investment authority will direct the investment of all
assets in the Trust Fund according to procedures agreed to by the Plan
Administrator and the Trustee except to the extent that:
(1) The Participant exercises Limited Discretion, in which
case the Participant shall provide the Plan Administrator with written
instructions as to the investment of the Participant's Account among:
(A) the Authorized Funds designated by the Employer,
(B) the Managed Accounts maintained at CSTC or the
Broker that are invested and reinvested at the direction of the Plan
Administrator or a duly appointed Investment Manager,
(C) a combination of the investment options described
in subparagraphs (A) and (B), or
(D) the options provided in subparagraphs (A) or (C)
plus any investment company registered under the Investment Company Act of 1940,
as amended, which previously was an Authorized Fund designated by the Employer
as an investment option, but which is no longer offered as an Authorized Fund.
(2) The Employer authorizes Participants to exercise Full
Discretion, in which case the Participant shall instruct the Broker as to the
investment of assets held by CSTC or the Broker in the Participant's Account in
securities that are publicly traded on a national securities exchange, shares or
units issued by an investment company registered under the Investment Company
Act of 1940, as amended, and obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities.
(3) The Plan Administrator or duly appointed Investment
Manager shall direct the investment and reinvestment of any part of the Trust
Fund not subject to the Limited Discretion or Full Discretion of the
Participants.
(4) The Plan Administrator has delegated responsibility for
managing all or part of the assets of the Trust Fund for the benefit of all
Participants to a duly appointed Investment Manager, in which case the
Investment Manager shall direct the investment and reinvestment of such
designated portion of the Trust Fund. The Plan Administrator shall direct the
investment and reinvestment of any part of the Trust Fund for which
responsibility has not been delegated to an Investment Manager or as provided in
paragraphs (1) through (3).
(b) Limitation of Liability if the Participant exercises Limited
Discretion or Full Discretion. If and to the extent the Participant exercises
Limited Discretion or Full Discretion as provided in paragraphs (a)(1) and
(a)(2) above, such Participant's investment directions shall be complied with
according to the following rules:
Consistent with ERISA section 404(c), if the Participant exercises
investment discretion, each Participant shall have full authority and
responsibility to direct the investment and reinvestment of the Participant's
Account among the available investment options. Except as otherwise provided by
ERISA:
(1) the Participant shall not be deemed a fiduciary of the
Plan or the Trust Fund solely
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because the Participant exercises control over the assets of the Participant's
Account (except with respect to voting of proxies and tendering of shares); and
(2) neither the Employer, the Plan Administrator, the Broker,
the Custodian, nor the Trustee shall be liable for any loss, or for any breach,
that results from a Participant's exercising control over such Participant's
Account.
(c) Assets in Trustee's Custody. The Plan Administrator shall direct
the Trustee as to the management and disposition of any Unique Assets and assets
that are temporarily awaiting investment or distribution.
(d) Directions to Trustee. The Plan Administrator shall transmit the
investment directions of the Participants exercising Limited Discretion to the
Recordkeeper. The Recordkeeper shall instruct the Trustee to invest and reinvest
assets held under the Trust by the Trustee based on such directions.
(e) Form of Investment Direction. It is contemplated that all
investment directions, instructions or notices will be in writing or, if
permitted by the Plan Administrator and acceptable to the Trustee, by facsimile,
telex, telegram, telephone or any form of electronic communication.
5.2 PERMITTED INVESTMENTS.
(a) General Rule. Subject to the limitations set forth in paragraph
(b) below and imposed by the Investment Authorization, and any restrictions
imposed by the Employer, authorized investments will include, but shall not be
limited to:
(1) Publicly traded securities, including Employer Securities;
(2) Listed covered options;
(3) Mutual funds;
(4) Money market instruments;
(5) Bank and savings and loan accounts;
(6) Certificates of deposit;
(7) A loan to a Participant;
(8) Common or collective investment funds; and
(9) Other investments the Trustee makes available through its
regular course of business.
(b) Limitations. Without direction by the person described in
section 5.1(a) above, the Trustee shall have no discretionary investment
authority. The Trustee shall not cause a transaction to be executed on the
Participant's behalf unless the Participant's Account holds enough assets to pay
the purchase price.
All transactions directed by the person with investment authority will be
subject to:
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(1) Applicable rules, regulations, customs, and usages of the
exchange, market, or clearinghouse where the transaction will be executed;
(2) Applicable federal and state laws and regulations;
(3) The internal policies of CSTC, Schwab or, if the Plan
Administrator specifically directs use of another Broker, the policies of such
other Broker; and
(4) Any rules established by the Plan Administrator from time
to time including, by way of example, limitations on the frequency of
transactions or diversification requirements.
5.3 PLAN LOANS. A Participant may obtain a loan from the Plan if the
Employer elects the authorizing language in the Adoption Agreement and the
loan program satisfies the following conditions:
(a) A Participant must request a loan on a form filed with the
Plan Administrator or the Recordkeeper. The Plan Administrator will decide
whether to grant the request based on objective written criteria furnished to
Participants. The Plan Administrator will forward an approved request to the
Recordkeeper, who will instruct the Trustee to comply with the terms as soon as
administratively possible.
(b) The Participant must execute a promissory note. The note
will be secured by the Vested part of the Participant's Account, excluding the
portion of the Account attributable to Deductible Contributions, if any, but not
more than 50% of that amount (determined as of the last day of the month before
the Trustee makes the loan) may be used to secure the outstanding balance of all
loans to the Participant under any plan maintained by the Employer or any
Affiliated Employer. Payment must be amortized in level payments of principal
and interest, made not less frequently than quarterly, over a period not
extending over five years. However, if elected in the Adoption Agreement, the
repayment period for a loan used to purchase the Participant's primary residence
can be up to thirty years. The term of a loan may be extended only in accordance
with section 5.3(j).
(c) Unless otherwise elected in the Adoption Agreement, the
Participant must repay the loan through periodic payroll deductions or by check
if the Participant is on a leave of absence or is transferred to an Affiliated
Employer that does not sponsor the Plan. If elected in the Adoption Agreement,
the Employer may authorize any repayment program, including one that is done
through payroll deductions. The Trustee will invest principal and interest
payments on the loan in accordance with the investment directions provided with
respect to the investment of such payments.
(d) The Participant's spouse must consent to a loan to the
extent it is funded or secured with assets that are subject to the Survivor
Annuity Rules. The spouse's consent must be obtained within the 90-day period
ending on the date the loan is made. The procedures for obtaining the consent
must be similar to those required for a Qualified Election. The spouse must
furnish a new consent if the Participant's Account is used to renegotiate,
extend, renew or otherwise revise the loan. The spouse's consent will be binding
on the consenting spouse and any subsequent spouse with respect to the loan.
(e) The Plan Administrator must make loans available to all
Participants on a reasonably equivalent basis (what basis may take into account
the different security risks presented by particular loan requests), and must
not make loans more available or in a greater amount to Highly Compensated
Employees than to other Employees.
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(f) Unless the Employer elects otherwise in the Adoption
Agreement, the Plan Administrator will not approve a request for a loan that is
for less than $l,000.
(g) The Plan Administrator must deny a request for a loan
amount that, when added to the outstanding balance of all other loans to the
Participant, will total more than the lesser of (1) or (2):
(1) $50,000 reduced by the excess (if any) of the
highest outstanding balance of loans to the Participant from the Plan during the
one-year period ending the day before the new loan request would be made, if
approved, over the outstanding balance of loans to the Participant on the date
the loan would be made, if approved.
(2) 50 percent of the Vested part of the Participant's
Account excluding the part of the Account attributable to Deductible
Contributions, if any.
The Plan Administrator will aggregate all loans to the Participant from
all plans of any Affiliated Employer to determine the limits.
If elected in the Adoption Agreement, the maximum loan amount may be less
than the dollar amount set forth in (1) above and the percentage amount
expressed in (2) above.
(h) The loan must bear interest at an effective annual
percentage equivalent to the prevailing rate then being charged by institutional
lenders for similar loans at the time the loan is made.
(i) The assets or contribution sources available for a loan
will be specified by the Employer in the Adoption Agreement. The Plan
Administrator will treat the loan as an earmarked investment of the
Participant's Account for recordkeeping purposes.
(j) The Trustee will treat a loan as in default only if
instructed by the Plan Administrator that a scheduled payment has not been made
when due. However, the Plan Administrator may allow a grace period not extending
beyond the period described in federal income tax regulations promulgated under
Code section 72(p). In addition, the Plan Administrator may approve an extension
of the term of any loan for a period not to exceed 12 months for a Participant
on a qualifying leave of absence as described in federal income tax regulations
promulgated under Code section 72(p); provided, however, that the extension
shall not cause the term of the loan to exceed the five year period described in
paragraph (b). In the event a loan is in default, foreclosure on the note and
attachment of the security will not occur until a distributable event occurs
pursuant to the Plan. The Participant will have a continuing obligation to make
payments required under the terms of the promissory note, notwithstanding any
action taken by the Plan Administrator or the Trustee.
(k) If the Plan Administrator obtains a valid spousal consent
to the loan, the part of the Participant's Account used as security for the loan
will not be taken into account to determine the amount payable at the time of
death or distribution if the loan is paid by offsetting the outstanding balance
at such time.
(l) The Plan Administrator will not approve a loan request
made by a Shareholder-Employee or an Owner-Employee or a family member of such
employee as described in Code section 267(c)(4).
(m) If elected in the Adoption Agreement, the Plan
Administrator will charge costs and expenses incurred in setting up and
administering the loan to a Participant to the Participant's Account or directly
to the Participant.
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No loans to a Participant may exceed the present value of the Participant's
Vested Account balance determined after excluding the part of the Account
attributable to Deductible Contributions, if any.
5.4 UNINVESTED CASH. The Trustee will hold all cash not currently
invested (as described in Section 5.1 above) and cash held pending
distribution in a non-interest bearing account.
5.5 EARNINGS. If the Employer has authorized Directed Accounts, the Plan
Administrator will credit each Participant's Account with the earnings, gains
and losses attributable to the assets in the Participant's Account. If the
Employer has not authorized Directed Accounts, the Plan Administrator will
allocate earnings to the Account of each Participant as of each Valuation Date
based on the Participant's Account balance as of the immediately preceding
Valuation Date relative to the Account balances of all Participants as of the
immediately preceding Valuation Date.
5.6 USE OF AFFILIATES. The Trustee may contract or make other
arrangements with The Charles Schwab Corporation, the Broker, their affiliates
and subsidiaries, successors and assigns and any other organizations affiliated
with or subsidiaries of the Trustee or related entities, for the provision of
services to the Plan, except where such arrangements are prohibited by law or
regulation. The Trustee may place securities orders, settle securities trades,
hold securities in custody and perform related activities on behalf of the Trust
Fund or any Account through or by the Broker/Dealer unless the Plan
Administrator specifically instructs otherwise in a writing filed with the
Trustee. Trades and related activities effected by the Broker are subject to
fees and commissions established by the Broker, which may be paid from the Trust
Fund or netted from the proceeds of trades. Trades will not be executed through
the Broker or any services performed by any affiliate of the Trustee unless the
Plan Administrator has received appropriate disclosure concerning the
relationship of the affiliate to the Trustee, and the fees and commissions which
may be paid to the Trustee or any affiliate or subsidiary as a result of using
the affiliate to execute trades or to perform other services.
5.7 SPECIAL HOLDING ACCOUNT. If the Participant is authorized to direct
investment of his or her Account, the Plan Administrator must direct the Trustee
as to the investment of any special holding account established to record assets
previously allocated to the Account of a Participant who terminated employment
before becoming fully Vested as provided in Section 4.2(e). The Trustee will
invest the assets in a special holding account as directed by the Plan
Administrator.
5.8 VALUATION.
(a) Date. Assets of the Trust Fund shall be valued as of each
Valuation Date at their fair market value.
(b) Participant Accounts. The Plan Administrator (or its delegate)
shall maintain a separate and distinct record of all income and losses of the
Trust Fund attributable to each Participant's Account and any subaccounts that
are maintained within such Account. For purposes of this section, the income or
loss of the Trust Fund shall include any unrealized increase or decrease in the
fair market value of the assets of the Trust Fund as determined by the Trustee
under the terms of the Trust.
(1) If the Employer has not authorized Directed Accounts, as
of each Valuation Date the Plan Administrator (or its delegate) shall allocate
the net income or net loss to each Account in the ratio that the balance of each
such Account determined as of the previous Valuation Date bears to all such
Accounts determined as of the previous Valuation Date after adjusting for
withdrawals, distributions and additions.
(2) If the Employer has authorized Directed Accounts, each
Participant's Account
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shall be credited with the gains or losses attributable to the investments made
in such Account over the relevant period as of each Valuation Date.
5.9 ACCOUNTINGS. The Trustee and the Custodian, if any, shall maintain
adequate records with respect to any assets of the Trust Fund in their custody.
As soon as practicable after the end of each calendar month and within sixty
(60) days following the effective date of the Trustee's or the Custodian's
resignation or removal or the termination of the Plan, the Trustee or the
Custodian, or both shall file with the Plan Administrator a written report
reflecting transactions with respect to assets in the Trustee's and the
Custodian's custody, as applicable, during the period covered by the report and
the fair market value of such assets. Unless the Plan Administrator files a
written statement of exceptions or objections to the report with the Trustee or
the Custodian within sixty (60) days after the Trustee or the Custodian, if any,
mails the report, the Plan Administrator shall be deemed to have approved such
report and the Trustee, or the Custodian, or both, shall be released from all
liability to anyone (including any Participant, Beneficiary or alternate payee)
with respect to matters set forth in the report.
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ARTICLE 6 -- DISTRIBUTIONS
6.1 DETERMINATION OF SPOUSE. As used to identify "spouse" or "surviving
spouse" in Article 6, the Participant's former spouse rather than the present
spouse will be treated as the spouse or surviving spouse according to the terms
of a Qualified Domestic Relations Order.
6.2 LIFETIME BENEFITS. The Vested part of a Participant's Account
will be available for distribution to the Participant when the Participant
retires at Normal (or Early) Retirement Age, dies, and, if elected in the
Adoption Agreement, attains age 59-1/2 or Terminates Service.
(a) Automatic Cash-Out. If the value of the Vested part of the
Participant's Account (excluding Deductible Contributions within the meaning of
Code section 72(o)(5)(B)) does not exceed $3,500, then, if elected by the
Employer in the Adoption Agreement, as soon as practicable after the Participant
Terminates Service, the Plan Administrator will direct the Trustee to pay the
Participant a single distribution that equals the value of the entire Vested
Account balance.
(1) The Plan Administrator must direct the Trustee to apply
the nonvested part that is forfeited by the Participant in accordance with the
Employer's election in the Adoption Agreement.
If the value of the Vested part of the Participant's Account is zero when
the Participant Terminates Service, the Participant will be deemed to have
received a distribution of the Vested part of her or his Account.
(2) A distribution pursuant to paragraph 6.2(a) may be made as
soon as administratively feasible after the Participant Terminates Service. This
distribution shall not require the Participant's or the spouse's consent.
The provisions of this paragraph (a) will apply to a Participant who is
Vested at the time of death or distribution in amounts attributable to
Contributions made by the Employer or the Employee or both.
(b) Voluntary Distributions. If the value of the Vested part of the
Participant's Account (excluding Deductible Contributions within the meaning of
Code section 72(o)(5)(B)) exceeds $3,500 (or at the time of any other
distribution, exceeded $3,500), then distribution after the Participant
Terminates Service will require the consent of the Participant.
If payment in the form of a Qualified Joint and Survivor Annuity is
required with respect to the Participant as described in Section 6.3, then the
consent of the Participant and the Participant's spouse (or the survivor of
either) must be obtained before any distribution if:
(1) The Participant Terminates Service before attaining the
later of Normal Retirement Age or age 62; or
(2) The Plan is terminated at a time the Plan is subject to
the Survivor Annuity Rules and the Participant has not attained age 65.
(A) The foregoing consent must be obtained within
the applicable Election Period and following receipt by the Participant and the
Participant's spouse, if any, of a written notice of the Participant's right to
defer payment of benefits until the Participant's Account is no longer
immediately distributable, an explanation of the relative values of the optional
forms of benefits available and the material features of the different
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benefit forms.
(B) The Plan Administrator will provide the notice
within the Applicable Notice Period.
(C) Only the Participant must consent to a
distribution in the form of a Qualified Joint and Survivor Annuity while the
Account balance is immediately distributable.
Neither the consent of the Participant nor the Participant's spouse will
be required if a distribution must be made to satisfy Code sections 401(a)(9) or
415 or if the Participant has reached age 65 and receives the Required Annuity.
(c) Distribution After Termination. The Plan Administrator must
promptly notify the Trustee when a Participant Terminates Service.
(1) If the Participant requests a distribution, as required in
subsection (b) above, or receives an automatic cash-out, as described in
subsection (a) above, the Plan Administrator must direct the Trustee to pay the
Vested part of the Participant's Account, according to the rules on form and
timing described in Article 6.
(A) If the Participant's Account is not fully Vested at
the time the Participant receives a distribution, the nonvested part of the
Participant's Account shall be treated as a Forfeiture.
(B) The Trustee will hold Forfeitures and earnings
in a special holding account pending allocation to the remaining Participants.
As soon as practicable after the Forfeiture occurs, the Plan Administrator must
direct the Trustee to apply the Forfeiture, adjusted for earnings, in accordance
with the Employer's election in the Adoption Agreement. Reallocation of the
forfeited amounts must occur by the end of the Plan Year in which the
distribution occurs.
(C) If the Employee elects to have less than the
entire Vested part of the Account derived from Employer Contributions
distributed, the part of the nonvested portion that will be treated as a
Forfeiture is the total nonvested part multiplied by a fraction in which:
(i) The numerator is the amount of the
distribution attributable to Contributions made by the Employer; and
(ii) The denominator is the total value of the
Vested part of the Participant's Account attributable to Contributions made by
the Employer.
(2) If the Participant Terminates Service before becoming
fully Vested in her or his Account but does not request a distribution, the
nonvested part of the Participant's Account shall be treated as a Forfeiture as
of the last day of the Plan Year in which the Participant incurs five
consecutive Breaks in Service (five Break in Service periods if the Employer has
elected Elapsed Time for vesting purposes in the Adoption Agreement) or, if
earlier, the date the Participant receives a distribution of the Vested balance
of the Account. The Forfeiture shall be applied in accordance with the
Employer's election in the Adoption Agreement.
(3) If a Participant who has received a distribution under
subsection (a) or subsection (c)(1) above is reemployed by the Employer as an
Employee, the forfeited amount shall be restored to the Employee's Account if
the Employee repays the full amount of the distribution attributable to
Contributions made by
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the Employer before:
(A) Five years after the Participant is reemployed
by the Employer; or
(B) By the date on which the Participant has five
consecutive breaks in service after the distribution, whichever is earlier.
The Plan Administrator must direct the Trustee to restore the forfeited
amount from assets attributable to Forfeitures in the special holding account,
or, if these assets are insufficient to restore the required Forfeitures, then
from an additional contribution made by the Employer. The special holding
account cannot hold Forfeitures beyond the end of the Plan Year. Forfeited
amounts must then be applied in accordance with the Employer's election in the
Adoption Agreement.
(d) Timing. Subject to the consent requirements stated in subsection
(b) above, unless the Participant elects otherwise, the Plan Administrator must
direct the Trustee to begin distribution of the Participant's Account no more
than 60 days after the close of the Plan Year in which the later of the
following events occurs:
(1) The Participant reaches the earlier of age 65 or Normal
Retirement Age;
(2) The 10th anniversary of the Plan Year in which the
Participant commenced participation in the Plan; or
(3) The Participant Terminates Service.
However, the Plan Administrator must direct the Trustee to begin
distribution no later than the Participant's Required Beginning Date.
Notwithstanding any other provision in Article 6, the Plan Administrator will
treat any Participant (and Participant's spouse, to the extent required) who
fails to request a distribution at a time when the Participant's benefits could
be distributed as having made a decision to defer commencement of payment of his
or her benefits.
(e) Periodic Distributions. If the Participant's Account is
distributed as an Annuity Contract, the Plan Administrator must direct the
Trustee to purchase a contract that complies with the requirements of the Plan,
including the minimum distribution requirements determined under subsection (f)
below.
If the Participant's Account is distributed in installment payments, the
Plan Administrator must direct the Trustee as to when to make each distribution
and the amount of each distribution taking into Account the rules in subsection
(f) below.
(f) Minimum distribution. Subject to section 6.3 below, this section
6.2(f) shall apply to any distributions to Participants, and takes precedence
over any inconsistent Plan provisions. All distributions required under Article
6 will be determined and made in accordance with the proposed regulations under
Code section 401(a)(9), including the minimum distribution incidental benefit
requirement of proposed federal income tax regulation section 1.401(a)(9)-2.
If a Participant's benefit is distributed over a period not exceeding:
(1) The Participant's life expectancy;
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(2) The joint life and last survivor expectancy of the
Participant and her or his designated Beneficiary; or
(3) The life expectancy of the Participant's designated
Beneficiary, the amount required to be distributed for each year, starting with
the Participant's first Distribution Calendar Year, shall not be less than the
quotient obtained by dividing the Participant's Account by the Applicable Life
Expectancy. If elected by the Employer in the Adoption Agreement, the amount to
be distributed each year shall be equal to the Participant's Vested Account
balance in the Plan, determined as of the last Valuation Date in the Plan Year
preceding the calendar year in which the Participant attained age 70-1/2.
The amount required to be distributed for each year, starting with the
first Distribution Calendar Year, shall not be less than the quotient obtained
by dividing the Participant's Vested Account by the lesser of:
(1) The applicable life expectancy; or
(2) If the Participant's spouse is not the designated
Beneficiary, the applicable divisor determined from the table in Q&A-4 of
proposed federal income tax regulation section 1.401(a)(9)-2.
Distributions after the Participant's death will be calculated using the
applicable life expectancy as the divisor, without regard to proposed federal
income tax regulation section 1.401(a)(9)-2.
(1) The minimum distribution required for the Participant's
first Distribution Calendar Year will be made on or before the Participant's
Required Beginning Date.
The minimum distribution for other calendar years, including the minimum
distribution for the Distribution Calendar Year in which the Participant's
Required Beginning Date occurs, will be made on or before December 31 of that
Distribution Calendar Year.
(2) Distributions under an Annuity Contract must be made as
required by Code section 401(a)(9) and proposed Treasury Regulations, as
applicable, and the terms of the Plan.
(g) Account value. The Plan Administrator will determine the value
of a Participant's Account as of the Valuation Date immediately preceding or
coinciding with a distribution increased by the amount of any Contributions or
Forfeitures allocated to the Account as of dates in the valuation calendar year
after the Valuation Date, and decreased by distributions made in the valuation
calendar year after the Valuation Date. However, if any portion of the minimum
distribution for the Participant's first Distribution Calendar Year is made in
the second Distribution Calendar Year on or before the Participant's Required
Beginning Date, the amount of such initial minimum distribution shall be treated
as if it had been made in the immediately preceding Distribution Calendar Year.
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(h) Distribution Before Termination. No Forfeiture will occur solely
as a result of a Participant's withdrawal of employee Contributions (whether
Voluntary After-Tax Contributions or Deductible Contributions).
6.3 DISTRIBUTIONS SUBJECT TO SURVIVOR ANNUITY RULES.
(a) This Section 6.3 applies to each Employee credited with at least
one Hour of Service with the Employer on or after August 24, 1984, if:
(1) The Plan as adopted by the Employer is an amendment of a
plan the assets of which are subject to the Survivor Annuity Rules; or
(2) The Plan is a transferee plan with respect to the assets
being distributed as described in Section 6.6.
(b) Distributions to married Participants.
(1) If a Participant:
(A) Dies prior to her or his Annuity Starting Date;
(B) Is survived by a spouse; and
(C) Does not make a Qualified Election within the
Election Period, the Plan Administrator must direct the Trustee to purchase a
nontransferable Annuity Contract providing for payments as a Qualified
Preretirement Survivor Annuity with the assets in the Participant's Account.
(2) If the Participant is alive on the Participant's Annuity
Starting Date and does not make a Qualified Election within the Election Period,
the Plan Administrator must direct the Trustee to purchase a nontransferable
Annuity Contract providing for payments as a Qualified Joint and Survivor
Annuity with the assets in the Participant's Account.
The Participant must designate on the form provided by the Plan
Administrator the amount of the survivor annuity, expressed as a percentage of
the amount payable during the joint life of the Participant and her or his
spouse.
The Participant may elect to have the annuity distributed as of the
earliest date on which the Participant could elect to receive retirement
benefits.
(3) If the Plan Administrator determines that the Participant
made a Qualified Election, the Plan Administrator must direct the Trustee to
distribute the Participant's Account according to the Participant's election, as
described in subsection (e) below.
(c) Unmarried Participants. If the Participant is unmarried on the
Participant's Annuity Starting Date (or certifies that her or his spouse cannot
be located) and does not make a Qualified Election within the Election Period,
the Plan Administrator must direct the Trustee to purchase a nontransferable
Annuity Contract providing payments over the Participant's life with the assets
in the Participant's Account.
If the Plan Administrator determines that the Participant made a Qualified
Election within the Election Period
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(or dies prior to the Participant's Annuity Starting Date), the Plan
Administrator must direct the Trustee to distribute the Participant's Account
according to the Participant's election, as described in subsection (e) below.
(d) Explanation. Within the Applicable Notice Period, the Plan
Administrator must provide each Participant with a written explanation of the
terms, conditions, and requirements concerning:
(1) The applicable Required Annuities;
(2) The Participant's right to elect to waive the Required
Annuities, and the effects of such election;
(3) The spousal consent requirement for a waiver of the
Required Annuities; and
(4) The right to revoke a waiver of Required Annuities, and
the effects of such revocation.
(e) Optional form of benefits. If the Participant makes a Qualified
Election within the Election Period, the Plan Administrator will direct the
Trustee to distribute the Participant's Account to the Participant in one of the
following optional forms, if selected by the Employer in the Adoption Agreement:
(1) A single sum; or
(2) In installments over a specified period that satisfies the
requirements of subsection (f) below.
(f) Payment term. Any distribution other than a single sum will be
made over one of the following periods:
(1) The life of the Participant;
(2) The life of the Participant and the Participant's
designated Beneficiary;
(3) A specified period that does not exceed the life
expectancy of the Participant; or
(4) A specified period that does not exceed the joint life and
last survivor expectancy of the Participant and the Participant's designated
Beneficiary.
6.4 DISTRIBUTIONS EXEMPT FROM SURVIVOR ANNUITY RULES. This section
applies to distributions of assets made under the Plan if:
(a) The Plan is adopted without offering an annuity form of benefit;
(b) The Plan is not an amendment or restatement of any plan the
assets of which are subject to the Survivor Annuity Rules;
(c) The Plan is not holding the assets as a transferee plan as
described in Section 6.6; and
(d) At the Participant's death, the entire Vested amount in the
Participant's Account must be
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paid to the Participant's spouse unless:
(1) There is no surviving spouse; or
(2) The spouse has consented in a manner that would meet the
requirements for a Qualified Election for a Qualified Preretirement Survivor
Annuity to a different Beneficiary designation. A Participant can revoke the
designation at any time, but the designation of the new Beneficiary, and waiver
of the spousal death benefit, shall not be effective unless the spouse consents.
If these requirements are met, distributions under this section will be
made in one of the alternative forms described in Section 6.3(e) selected by the
Employer in the Adoption Agreement, as elected by the Participant.
6.5 BENEFIT DISTRIBUTION AFTER DEATH.
(a) Timing. If a Participant dies before the Participant's Account
is distributed, the Plan Administrator must direct the Trustee to distribute the
entire remaining benefit to the Participant's Beneficiary as follows:
(1) If the Participant dies after distribution is required to
begin, the remainder of the Participant's benefits will continue to be
distributed at least as rapidly as under the method being used before the
Participant's death. The Beneficiary may elect a faster distribution rate.
(2) If the Participant dies before distribution is required to
begin, the Participant's entire Account must be distributed by December 31 of
the calendar year containing the fifth anniversary of the Participant's death,
unless a designated Beneficiary makes an election to receive distributions as
specified in subsections (A) or (B) below.
(A) If any part of the Participant's benefits are
payable to a designated Beneficiary, and the Beneficiary elects to have
distributions begin on or before December 31 of the calendar year immediately
following the calendar year in which the Participant dies, then, if elected by
the Employer in the Adoption Agreement, distributions may be made over the life,
or a specified period not exceeding the life expectancy, of the designated
Beneficiary.
(B) If the designated Beneficiary is the
Participant's surviving spouse, distributions may be made as described in
subsection (A), but need not begin before the later of:
(i) December 31 of the calendar year immediately
following the calendar year in which the Participant dies; or
(ii) December 31 of the calendar year in which
the Participant would have reached age 70-1/2.
(C) The Participant's designated Beneficiary must
elect a distribution method no later than:
(i) December 31 of the calendar year in which
distributions would be required to begin, according to paragraph (2); or
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(ii) December 31 of the calendar year containing
the fifth anniversary of the Participant's death, whichever is earlier.
If the Participant does not have a designated Beneficiary, or if the
designated Beneficiary does not elect a distribution method, the Plan
Administrator must direct the Trustee to distribute the Participant's entire
benefit no later than the date described in subsection (ii) above.
(3) If the surviving spouse dies after the Participant but
before payments to the spouse begin, the provisions of paragraph (2), excluding
subparagraphs (B) and (C) apply as if the surviving spouse were the Participant.
(4) An amount paid to a Participant's child is treated as if
paid to the surviving spouse, if that amount becomes payable to the surviving
spouse when the child reaches the age of majority.
(b) Beginning date. For Section 6.5, distribution of a Participant's
benefits will be considered to begin on the Participant's Required Beginning
Date (or, if subsection (a)(3) applies, on the date required for beginning
distributions to the surviving spouse), as described in paragraph (1) above.
If distribution to a Participant in the form of an annuity irrevocably
begins before the Required Beginning Date, distribution will be considered to
begin on the date distribution actually starts.
6.6 TRANSFER OF ASSETS FROM ANOTHER PLAN. If a Participant's Account
holds assets transferred to the Plan from another plan qualified under Code
section 401(a), and under the terms of the other plan such assets were subject
to the Survivor Annuity Rules, the distribution of such assets will be subject
to the Survivor Annuity Rules, as described in Section 6.3 above.
6.7 MISSING PERSONS. If the Plan Administrator is unable to locate a
terminated Participant or the Participant's Beneficiary after making a
reasonable effort, the Plan Administrator must direct the Trustee to liquidate
the assets in the Participant's Account and hold them in the special holding
Account described in Plan section 6.2(c)(1)(B). After 5 Break in Service years
(or 5 Break in Service periods if the Employer elected to apply Elapsed Time for
vesting purposes in the Adoption Agreement), the Participant's Account in the
Plan will be deemed to have been forfeited. Such Forfeiture will be applied in
accordance with the Employer's election in the Adoption Agreement.
If the Participant or Participant's Beneficiary subsequently makes a valid
claim for benefits after the Forfeiture, the Plan Administrator must direct the
Trustee to reinstate the benefit from Forfeitures that occur during the Plan
Year in which the claim is made or from additional Employer Contributions to the
Plan.
6.8 DISPUTED PAYMENTS. The Trustee shall not be required to inquire
to determine the identity or mailing address of any persons entitled to
benefits under the Plan. The Trustee may refrain from making payments until
the Plan Administrator certifies a Participant's identity and mailing address.
If there is a dispute over the identity or the rights of persons entitled
to benefits under the Plan, the Trustee may withhold distribution of benefits
until the dispute is resolved by a court of competent jurisdiction or a written
stipulation from all interested parties.
6.9 DISTRIBUTION TO MINORS AND LEGALLY INCOMPETENT PERSONS. If the
Participant or Beneficiary is a minor or legally incompetent, after determining
the payment method in the best interest of the Participant or Beneficiary, the
Plan Administrator may instruct the Trustee to make payments to:
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(a) The Participant or Beneficiary.
(b) The legal representative of the Participant or Beneficiary.
6.10 DISTRIBUTION TO ALTERNATE PAYEES. The Plan Administrator may direct
the Trustee to make payments to an alternate payee (as described in Code section
414(p)(8)), according to the terms of a Qualified Domestic Relations Order.
Amounts payable to an alternate payee who cannot be located will be
treated as Forfeitures and then applied in accordance with the Employer's
election in the Adoption Agreement. The Plan Administrator must direct the
Trustee to pay any amounts forfeited to an alternate payee who subsequently
presents a valid benefit claim.
6.11 PRE-RETIREMENT DISTRIBUTIONS. If elected by the Employer in the
Adoption Agreement then (with the spouse's written consent to the extent the
Account is subject to the Survivor Annuity Rules):
(a) Any Participant who has made Voluntary After-Tax Contributions
or Deductible Contributions may withdraw at any time all or any part of such
contributions, plus earnings;
(b) Any Participant who has attained age 59 1/2 may withdraw at any
time all or any part of the Participant's nonforfeitable Account;
(c) The Participant must provide the Plan Administrator with a
written request and the Plan Administrator will instruct the Trustee to make the
distribution. However, a Participant is limited to one pre-retirement
distribution request in any Plan Year; and
(d) When the Trustee receives instructions from the Plan
Administrator (which may include instructions to liquidate securities), the
Trustee will distribute the requested amount to the Participant as soon as
administratively feasible.
6.12 HARDSHIP WITHDRAWALS.
(a) In accordance with the Employer's election to provide hardship
withdrawals in the Adoption Agreement, a Participant may request a withdrawal of
all or part of the contributions allocated to such Participant's account
attributable to Elective Salary Deferrals, exclusive of any earnings ("Elective
Salary Deferral Amounts"), subject to the restrictions described in section
6.12(b).
(b) The Plan Administrator will consent to the withdrawal only if
the request, in the Plan Administrator's sole discretion, is necessary in light
of the immediate and heavy financial need of the Participant, the withdrawal
request does not exceed the Participant's need and the Participant cannot obtain
the funds from any other reasonably available resource. The Plan Administrator
will make the determination according to written procedures applied in a uniform
and nondiscriminatory manner.
(1) The Plan Administrator will deem a request as made to meet
an immediate and heavy financial need of the Participant if the funds withdrawn
will be used for expenses incurred or necessary for:
(A) Medical care, as described in Code section 213(d),
for the Employee, the Employee's spouse, children or dependents;
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(B) The purchase (excluding mortgage payments) of a
principal residence for the Employee;
(C) Payment of tuition and related educational fees
for the next 12 months of post-secondary education for the Employee, the
Employee's spouse, children or dependents; or
(D) The need to prevent eviction of the Employee
from, or a foreclosure on the mortgage of, the Employee's principal residence.
(2) The Plan Administrator will treat a distribution as
necessary to satisfy an immediate and heavy financial need of the Employee only
if:
(A) The Employee has obtained all distributions, other
than hardship distributions, and all nontaxable loans under all plans maintained
by the Employer;
(B) All plans maintained by the Employer provide
that the Employee's Elective Salary Deferrals (and Voluntary After-Tax
Contributions) will be suspended for 12 months after the receipt of the hardship
distribution;
(C) The distribution does not exceed the amount of
the immediate and heavy financial need (including amounts necessary to pay
federal, state and local income taxes or penalties that the Employee reasonably
anticipates will result from the distribution); and
(D) All plans maintained by the Employer limit the
amount of Elective Salary Deferrals that the Employee may make for the calendar
year that immediately follows the year in which the Employee obtains a hardship
distribution. The preceding limit is equal to the applicable limit under Code
section 402(g) for such calendar year, less the amount of the Employee's
Elective Salary Deferrals for the calendar year in which the hardship
distribution is made.
(3) The person designated to direct investment will determine
which assets must be liquidated in order to fund a withdrawal.
(4) Hardship withdrawals are subject to the spousal consent
requirements in Code sections 401(a)(11) and 417.
6.13 DIRECT ROLLOVERS. The following provisions apply to all
distributions.
(a) A Participant may elect, on a form acceptable to the Plan
Administrator, to have all or part of an eligible rollover distribution paid
directly to an eligible retirement plan named by the Participant in a direct
rollover, subject to the following rules:
(1) The Participant may elect to take part of distribution in
cash and request the Plan Administrator to roll over the remaining, Vested
balance of the Participant's Account to an eligible retirement plan if the
amount of the eligible rollover distribution is not less than $500.
(2) The Participant may not elect to make a direct rollover if
the amount of the direct rollovers made from the Participant's Account,
aggregated for the Plan Year, are less than $200.
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(3) The Participant may not elect to make a direct rollover of
an eligible rollover distribution to more than one eligible retirement plan.
(4) Failure to elect a direct rollover within the Applicable
Notice Period required for the Code section 402(f) explanation will be deemed an
election not to make a direct rollover.
(b) A Participant's spouse or former spouse who is an alternate
payee under a Qualified Domestic Relations Order, and the surviving spouse of a
deceased Participant also may elect to have all or part of an eligible rollover
distribution paid to an eligible retirement plan in a direct rollover, subject
to the restrictions applicable to a Participant as described in subsection (a).
(c) The terms as used in this section have the following meaning:
(1) Eligible rollover distribution. Any distribution of all or
any part of the balance to the credit of the Participant or other distributee
except (A) any distribution that is one of a series of substantially equal
periodic payments (made not less frequently than annually) for the life (or life
expectancy) of the Participant or other distributee, or the joint lives (or
joint life expectancies) of the Participant and the Participant's designated
Beneficiary, or for a specified period of at least ten years; (B) any
distribution required under Code section 40l(a)(9); and (C) any part of a
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to Employer
Securities).
(2) Eligible retirement plan. An individual retirement account
within the meaning of Code section 408(a), an individual retirement annuity
within the meaning of Code section 408(b), an annuity plan within the meaning of
Code section 403(a) or a qualified trust described in Code section 40l(a) that
accepts an eligible rollover distribution. If, however, the person receiving the
distribution is the surviving spouse of the Participant, an eligible retirement
plan is limited to an individual retirement account or individual retirement
annuity.
(3) Direct rollover. Payment by the plan to the eligible
retirement plan named by the Participant or other distributee.
6.14 TEFRA TRANSITIONAL RULE.
(a) Notwithstanding other requirements in Article 6, the Plan
Administrator may direct the Trustee to make distributions on behalf of any
Employee, including a Five-Percent Owner, subject to the following provisions,
regardless of when the distributions commence, if:
(1) The distribution would not have disqualified the trust
under Code section 401(a)(9) as in effect prior to amendment by the Deficit
Reduction Act of 1984.
(2) The distribution is consistent with a method elected by
the Employee whose Account is being distributed or, if the Employee is deceased,
by a Beneficiary of the Employee.
(3) The election was made in writing before January 1, 1984
and signed by the Employee or Beneficiary.
(4) The Employee had accrued a benefit under the plan as of
December 31, 1983.
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(5) The distribution method elected by the Employee or
Beneficiary specifies a commencement date, the distribution period and, in the
case of any distribution at the Employee's death, the Beneficiaries of the
Employee listed in order of priority.
(b) A distribution at death will not be covered by this transitional
rule unless the distribution election contains the required information for
distributions to be made when the Employee dies.
(c) For any distribution that commenced before January 1, 1984, and
continues after December 31, 1983, the Employee or Beneficiary to whom the
distribution is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method was
specified in writing and the distribution satisfied the requirements in
subsection (a)(1) and (5).
(d) If a Participant or Beneficiary revokes an election, any
subsequent distribution must satisfy the requirements of Code section 401(a)(9)
and the proposed regulations thereunder. If a Participant or Beneficiary revokes
a designation after the date distributions are required to begin, the Plan
Administrator must direct the Trustee to distribute by the end of the calendar
year following the calendar year in which the revocation occurs the total amount
not yet distributed that would have been required to have been distributed in
order to satisfy Code section 401(a)(9) and the proposed regulations thereunder
but for the election authorized under Code section 242(b)(2). For calendar years
beginning after December 31, 1988, such distributions also must meet the minimum
distribution incidental benefit requirements in section 1.40l(a)(9)-2 of the
proposed federal income tax regulations.
The Plan Administrator will treat any changes in an election as a
revocation of the election. The Plan Administrator will not treat the mere
substitution or addition of a Beneficiary as a revocation of the elections if
the substitution or addition does not alter the period over which distributions
are to be made, either directly or indirectly. If an amount is transferred or
rolled over from one plan to another, the rules in Q&A J-1 and Q&A J-3 will
apply.
6.15 SPOUSE OR SURVIVING SPOUSE. For purposes of this Article 6, the
spouse or surviving spouse of a Participant includes the current spouse or
surviving spouse except that a former spouse shall be treated as the spouse or
surviving spouse and a current spouse shall not be treated as the spouse or
surviving spouse to the extent provided under a Qualified Domestic Relations
Order.
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ARTICLE 7 -- DEATH BENEFITS AND INSURANCE
7.1 RETENTION OF LIFE INSURANCE. If elected by the Employer in the
Adoption Agreement, the Trustee will retain one or more life insurance contracts
held in the Trust Fund at the time this Plan was adopted by the Employer, which
cover the lives of Participants in the Plan. Under no circumstances, however,
may the Trustee purchase any other life insurance contract.
7.2 RIGHTS OF TRUSTEE.
(a) Trustee Owns Contracts and is Beneficiary. The Trustee is the
owner of each life insurance contract, with full power to exercise all rights,
privileges, options and elections (including the right to borrow against the
cash surrender value of the contracts) granted by the Insurer. The Trustee shall
be designated the beneficiary of any death benefits payable under the life
insurance contracts. The insurance contracts must provide that the proceeds will
be payable to the Trustee, and the Trustee must be required to pay over all
proceeds of the contracts to the Participant's designated Beneficiary in
accordance with Section 6.5 of this Plan. A married Participant's spouse will be
the Beneficiary of the proceeds unless a Qualified Election has been made in
accordance with Section 6.3. Under no circumstances shall the Trust Fund retain
any part of such proceeds.
(b) Conflict Between Plan and Contract. In the event of any conflict
between the terms of the Plan and the terms of any insurance contract retained
by the Trustee or the Custodian, the Plan provisions shall control.
7.3 PREMIUM PAYMENTS. The Trustee is limited in paying premiums on
life insurance contracts under the following rules:
(a) Ordinary Life -- For purposes of these limitations, ordinary
life insurance contracts have both nondecreasing death benefits and
nonincreasing premiums. If ordinary life contracts are retained, not more than
one-half (1/2) of the Vested portion of the aggregate Employer Contributions
(including Forfeitures, if applicable) allocated to any Participant's Account
for a Plan Year can be used to pay premiums for those contracts; and
(b) Term and Universal Life -- Not more than one quarter (1/4) of
the Vested portion of the aggregate Employer Contributions (including
Forfeitures, if applicable) allocated to any Participant's Account for a Plan
Year may be used to pay premiums for those contracts.
(c) Combination -- The sum of one-half (1/2) of the ordinary life
insurance premiums and all other life insurance premiums will not exceed
one-quarter (1/4 ) of the Vested portion of the aggregate Employer Contributions
(including Forfeitures, if applicable) allocated to any Participant.
(d) Limitations. If the annual premium on any life insurance
contract exceeds the foregoing limitations and the Participant is unable or
declines to contribute to the Plan the amount necessary to enable the Plan to
pay the required annual premium, then the Plan Administrator shall determine in
its sole discretion and must then instruct the Trustee whether to pay the excess
premiums by automatic premium loan, or to convert one or more contracts to
reduced, paid up insurance, or to surrender one or more contracts for cash, or
to take any combination of the foregoing actions in order to comply with the
limitations.
(e) Dividends. Any dividends or credits earned on any life insurance
contracts will be applied in accordance with the provisions of such insurance
contracts to benefit the Participant for whom any such contract is held
including, by way of example, reducing the premium for such contract, purchasing
additional amounts of insurance, or allocating the dividends or credits to the
Account of the Participant for whose benefit the contract is held.
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7.4 DISTRIBUTION ON DEATH AND TERMINATION. If a Participant's employment
is terminated by death, or the Participant dies after termination of employment
but before a distribution of the Participant's Account, the net proceeds payable
under any life insurance contracts on such Participant's life shall be paid,
subject to Section 6.3, to the designated Beneficiary. Subject to Section 6.3,
if the Participant's employment is terminated for any reason, then the insurance
contract on the Participant's life will be converted to cash, or if elected by
the Employer in the Adoption Agreement, converted to a nontransferable annuity,
or distributed to the Participant.
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ARTICLE 8 -- DUTIES OF THE TRUSTEE AND THE CUSTODIAN
8.1 TRUSTEE. The Trustee will have the powers and duties set forth in
the Trust Agreement in Appendix 1, which Trust Agreement is an integral part of
the Plan.
8.2 CUSTODIAN. The Custodian, if any, will have the powers and duties
set forth in the Custody Agreement in Appendix 2, which Custody Agreement is an
integral part of the Plan. So long as CSTC serves as the Trustee, then the
Custody Agreement shall be of no force and effect. If, however, CSTC shall not
be appointed as Trustee by the Employer, then CSTC shall act as Custodian of any
assets in its possession and the Custody Agreement shall apply. If CSTC shall be
appointed as Trustee and thereafter ceases to serve as Trustee, CSTC shall act
as Custodian of any assets remaining in its possession and the Custody Agreement
shall apply.
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ARTICLE 9 -- ADMINISTRATION
9.1 PLAN ADMINISTRATOR.
(a) Role as fiduciary. The Plan Administrator will have the full
power and authority to administer and operate the Plan in all its details and
will be the "named fiduciary" under ERISA section 402(a).
The Plan Administrator may be a Committee established by the Employer. Any
such Committee may act formally or informally, but must keep written records of
its action.
The Employer may remove a Committee member or any member may resign by
written notice to the Employer and all other Committee members. The Employer
must promptly appoint a successor to fill any vacancy.
(b) Power to construe. The Plan Administrator shall have the
exclusive power to construe, interpret and apply the provisions of the Plan,
except to the extent such power is specifically allocated to the Employer under
the Plan and Trust Agreement or allocated to other parties by operation of law.
The Plan Administrator shall have the power to determine any questions of fact
arising under the Plan.
(c) Identification on file. The Plan Administrator must file a list
of current Committee members (and any succeeding members) and a sample of all
members' signatures with the Trustee.
The Trustee may act on any document signed by the Plan Administrator, the
Committee, if any, or by any person authorized in writing to act on its behalf,
until a copy of any written revocation of such authority is delivered to the
Trustee.
9.2 ADMINISTRATIVE POWERS AND RESPONSIBILITIES. The Plan Administrator
will have all necessary powers to execute the Plan provisions including, but not
limited to:
(a) To establish policies, rules, and regulations to execute the
Plan provisions. These policies, rules, and regulations, which may be changed
from time to time, must be uniformly and nondiscriminatorily applied;
(b) To determine at its discretion the Employees eligible to
participate in the Plan; the Employees eligible to receive benefits under the
Plan; and the meaning of Plan provisions;
(c) To collect and pay over Contributions to the Plan; to instruct
the Trustee regarding the allocation of Contributions to Participants' Accounts;
and to instruct the Trustee to make distributions to Participants or
Beneficiaries;
(d) To comply with all reporting, disclosure, and bonding
requirements of ERISA and to furnish Participants with all information and
reports required by the Plan or ERISA and to comply with all applicable
registration, qualification, disclosure and other requirements of applicable
federal law and state securities laws and regulations;
(e) To maintain all necessary accounts and other records and to
review all accounts prepared by the Trustee;
(f) to direct the Trustee to pay benefits to Participants and
Beneficiaries;
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(g) to approve loan requests from Participants and (to the extent
applicable) other eligible borrowers;
(h) to maintain all necessary accounts and other records and to
review all accounts prepared by the Broker and by the Recordkeeper to which any
such duties have been delegated;
(i) to review and render decisions, in its absolute discretion, on
claims for benefits;
(j) to prepare and complete all administrative and governmental
forms necessary or appropriate for the operation of the Plan (including the
application to the Internal Revenue Service for a determination as to the Plan's
tax-qualified status, if appropriate); and
(k) to vote and respond to tender offers with respect to any assets
of the Trust Fund, other than any assets over which the Participant exercises
Full Discretion.
9.3 FUNDING POLICY. The Plan Administrator must establish and execute a
funding policy consistent with the objectives of the Plan and the
requirements of ERISA Title I.
9.4 REVIEW PROCEDURE FOR DENIED BENEFITS.
(a) The Plan Administrator must send a notice to any person who
receives a partial or full denial of that person's claim for benefits under the
Plan that:
(1) Specifies the reasons for the denial;
(2) Provides specific references to the Plan provisions on
which the denial was based; and
(3) Explains the review procedure.
(b) To request a review, the "claimant" (the person who was denied
or an authorized representative) must send a written request for review to the
Plan Administrator within 60 days after receiving the denial.
(1) In the request, the claimant must fully explain all the
reasons for the request and provide any supporting documentation that is
appropriate. The Plan Administrator must give the claimant an opportunity to
review pertinent documents for preparing the request.
(2) If necessary or advisable, the Plan Administrator may
require the claimant to submit additional facts, documents or other material
before reviewing the claim.
(c) Within 60 days after receiving a review request, the Plan
Administrator must notify the claimant in writing of the decision.
If the Plan Administrator's decision confirms the denial, the notice must
explain the reasons for the decision and give specific references to the Plan
provisions on which the decision was based.
9.5 STANDARD OF CONDUCT. In exercising its powers and duties, the Plan
Administrator must act solely in
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the interests of the Plan Participants and Beneficiaries, uniformly and
nondiscriminatorily, with the care, skill, prudence, and diligence under the
prevailing circumstances that a prudent person, acting in a similar capacity and
familiar with such matters, would use in similar circumstances.
All actions taken by the Plan Administrator in good faith within the scope
of its authority will be conclusive and binding on everyone to the fullest
extent permitted by law.
9.6 DELEGATION. The Plan Administrator may delegate to any person or
persons or organization all, or part of, the responsibility for the operation
and administration of the Plan. No person or organization shall have
discretionary responsibility for the management, operation or administration of
the Plan other than those duties specifically delegated by the Plan
Administrator. The Plan Administrator shall not be liable for any breach of
fiduciary duty by a delegate that is not proximately caused by the Plan
Administrator's failure to select or supervise properly the delegate, and in
which the Plan Administrator does not participate.
9.7 EXPENSES. The reasonable expenses of Plan administration shall be
paid from the assets of the Trust Fund; provided that the Employer may, in its
discretion, pay such expenses on behalf of the Trust Fund. If the Employer fails
to pay the expenses within 60 days after receipt of a copy of any billings, the
Plan Administrator will be deemed to have instructed the Trustee to charge the
expenses against the Trust Fund.
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ARTICLE 10 -- POWER, DUTIES AND OBLIGATIONS OF BROKER
10.1 DUTIES. The Broker shall invest and reinvest any assets held under
the Trust only as directed by the Plan Administrator, an Investment Manager or
the Participant, as applicable.
10.2 NOMINEE. The Broker may hold any securities acquired hereunder in
its name without qualification or description or in the name of any nominee.
10.3 SCOPE OF DUTIES. The Broker shall have only those duties that are
specifically set forth in the Plan and Trust. The Broker shall have no duty to
ascertain whether Contributions, allocations or distributions comply with the
Plan or the Code, and shall be under no duty to question any instructions or
directions of the Plan Administrator, Investment Manager or Participant, as
applicable, with respect to the administration of the Plan. The Broker shall not
make any investments or dispose of any investment held under the Trust or take
any other action with respect to assets of the Trust Fund except at the
direction of the Plan Administrator, Investment Manager or Participant, as
applicable.
10.4 SCOPE OF LIABILITY. The Broker shall not be liable for any loss of
any kind which may result from an action taken by it in accordance with the
directions of the Plan Administrator, Investment Manager or Participant, as
applicable, or from any failure to act because of the absence of any such
directions. The Broker shall be fully protected in acting upon any instrument,
certificate or form believed by it to be genuine and to be signed or presented
by the proper person or persons, and the Broker need not investigate or inquire
as to any statement contained in any such document, but may accept such
statement as true and accurate. The Broker shall be entitled to assume in good
faith that all directions submitted by the Plan Administrator or its delegate
are genuine. The Employer at all times shall indemnify and hold harmless the
Broker from all claims, causes of action, damages and liabilities (including
costs and attorneys' fees) which may arise under the Plan except those arising
from the gross negligence or willful misconduct of the Broker.
10.5 RESIGNATION OR REMOVAL. The Broker shall have the right to resign,
and the Employer shall have the right to remove the Broker, as provided in the
Plan Service Agreement.
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ARTICLE 11 -- AMENDMENT, TERMINATION, AND TRANSFER
11.1 AMENDMENT OR TERMINATION BY CSTC. CSTC may amend the Plan at any
time, consistent with the provisions of applicable law, without obtaining the
consent of the Employer, the Plan Administrator, the committee, or any
Participant or Beneficiary.
(a) No Plan amendment may decrease a Participant's Account except to
the extent permitted under Code section 412(c)(8).
(b) No Plan amendment may eliminate an optional form of distribution
for benefits already accrued.
(c) If the schedule for vesting is amended, in the case of an
Employee who is a Participant on the date the amendment is adopted or takes
effect (whichever is later), the nonforfeitable percentage of the Participant's
Employer-derived accrued benefit under the Plan, as determined on that date,
shall not be less than the percentage computed under the Plan as if the
amendment did not exist.
(1) If the Plan is amended in any way that directly or
indirectly affects the computation of the Participant's nonforfeitable
percentage, each Participant with three years of service may elect, within a
reasonable period, as set forth in subsection (2) below, after the amendment is
adopted, to have the nonforfeitable percentage computed as if the amendment did
not exist.
(2) The "reasonable period" referred to in subsection (1)
above begins on the date the Employer adopts the amendment or the amendment is
considered to have been made and ends on the later of:
(A) 60 days after the amendment is adopted;
(B) 60 days after the amendment takes effect; or
(C) 60 days after the Plan Administrator issues
written notice about the amendment to the Participant.
11.2 AMENDMENT OR TERMINATION BY EMPLOYER.
(a) Amendment. The Employer may amend the Employer's choice of
options in the Adoption Agreement, but must not amend any other Plan terms,
except by adding overriding language to the Non-Standardized Adoption Agreement
where necessary to satisfy Code sections 415 or 416, which requires multiple
plans to be aggregated.
(1) The Employer also may add certain model amendments
published by the IRS if these amendments specifically provide that their
adoption will not cause the Plan to be treated as an individually designed plan.
(2) If the Employer amends the Plan terms in any other way,
including the waiver of minimum funding, the Plan will be considered, with
respect to the Employer, to be an individually designed Plan rather than a
prototype Plan.
(b) Termination. By signing the Adoption Agreement, the Employer
represents that it intends
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the Plan to be permanent. However, the Employer may, at its discretion,
terminate the Plan at any time.
If the Plan is fully or partially terminated or Contributions to the Plan
are completely discontinued, each affected Participant's Account will be
nonforfeitable.
11.3 DISTRIBUTION AFTER TERMINATION. If the Plan is terminated for any
reason, the Plan Administrator must direct the Trustee as to the distribution of
the Trust Fund. If at the time the Plan terminates, the Plan does not offer an
annuity option (purchased from a commercial provider) and if the Employer or any
entity within the same controlled group as the Employer does not maintain
another defined contribution plan other than an employee stock ownership plan as
defined in Code section 4975(e)(7)) (an "ESOP"), the Plan Administrator will
direct the Trustee to distribute each Participant's Account to the Participant
without the Participant's consent. If, however, any entity within the same
controlled group as the Employer maintains another defined contribution plan
other than an ESOP, the Plan Administrator will direct the Trustee to transfer
each Participant's Account without the Participant's consent to the other plan
if the Participant does not consent to an immediate distribution.
11.4 MERGER, CONSOLIDATION, OR TRANSFER. Except as otherwise stated in
applicable Treasury Regulations, the Plan Administrator shall not merge or
consolidate the Plan with any other plan, or transfer any assets or liabilities
from the Plan to any other plan, unless immediately after such merger,
consolidation, or transfer (if the Plan is then terminated) each Participant is
entitled to receive a benefit equal to or greater than the benefit such
Participant would have been entitled to receive if the Plan had been terminated
immediately before the merger, consolidation, or transfer.
11.5 MAINTENANCE OF QUALIFIED STATUS. If the Plan as adopted by the
Employer fails to attain or retain its qualified status, the Plan will be
considered an individually designed Plan rather than a prototype Plan.
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ARTICLE 12 -- DETERMINATION OF TOP-HEAVY STATUS
12.1 APPLICATION. If the Plan is or becomes Top-Heavy, the provisions of
this Article 12 will supersede any conflicting provisions in the Plan or the
Adoption Agreement. The special vesting requirement of Code section 416(b), as
elected by the Employer in the Adoption Agreement, shall apply. The special
minimum allocations of Code section 416(c) pursuant to section 12.5 shall apply.
12.2 CRITERIA. The Plan shall be Top-Heavy for any Plan Year if any of
the following conditions exist:
(a) the Top-Heavy Ratio for the Plan exceeds sixty percent (60%) and
this Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group of plans.
(b) the Plan is part of a Required Aggregation Group of plans, but
not part of a Permissive Aggregation Group, and the Top-Heavy Ratio for the
group of plans exceeds sixty percent (60%).
(c) the Plan is a part of a Required Aggregation Group and part of a
Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive
Aggregation Group exceeds sixty percent (60%).
12.3 TOP-HEAVY RATIO.
(a) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension) and the Employer has not maintained
any defined benefit plan which, during the five-year period ending on the
Determination Date(s) has or has had accrued benefits, the Top-Heavy Ratio for
the Plan alone or for the Required Aggregation Group or Permissive Aggregation
Group, as appropriate, is a fraction, the numerator of which is the sum of the
Account balances of all Key Employees as of the Determination Date(s) (including
any part of any Account balance distributed in the five-year period ending on
the Determination Date(s)), and the denominator of which is the sum of all
Account balances (including any part of any Account balance distributed in the
five-year period ending on the Determination Date(s)), both computed in
accordance with Code section 416 and regulations thereunder. Both the numerator
and denominator of the Top-Heavy Ratio shall be increased to reflect any
Contributions not actually made as of the Determination Date, but which are to
be taken into account on that date under Code section 416 and regulations
thereunder.
(b) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension) and the Employer maintains or has
maintained one or more defined benefit plans that during the five-year period
ending on the Determination Date has or has had any accrued benefits, the
Top-Heavy Ratio for any Required or Permissive Aggregation Group, as
appropriate, is a fraction, the numerator of which is the sum of Account
balances under the aggregated defined contribution plan or plans for all Key
Employees determined in accordance with paragraph (1) above and the present
value of accrued benefits under the aggregated defined benefit plan or plans for
all Key Employees as of the Determination Date, and the denominator of which is
the sum of the Account balances under the aggregated defined contribution plan
or plans for all Participants determined in accordance with paragraph (1) above,
and the present value of accrued benefits under the defined benefit plan or
plans for all Participants as of the Determination Date, all determined in
accordance with Code section 416 and the regulations thereunder. The accrued
benefits under a defined benefit plan in both the numerator and denominator of
the Top-Heavy Ratio shall be increased for any distribution of an accrued
benefit made in the five-year period ending on the Determination Date. Solely
for the purpose of determining if the Plan, or any other plan included in a
Required Aggregation Group is Top-Heavy (within the meaning of Code section
416(g)), the accrued benefit of an Employee other than a Key Employee shall be
determined under (A) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Employer and any
Affiliated Employers or (B) if there is no such method, as if such benefit
accrued
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no more rapidly than the slowest accrual rate permitted under the fractional
accrual rate of Code section 411(b)(1)(C).
(c) For purposes of paragraphs (a) and (b) above, the value of
Account balances and the present value of accrued benefits shall be determined
as of the most recent Valuation Date that falls within or ends with the
twelve-month period ending on the Determination Date, except as provided in Code
section 416 and regulations thereunder for the first and second Plan Years of a
defined benefit plan. The Account balances and accrued benefits of a Participant
(A) who is not a Key Employee, but who was a Key Employee in a prior year or (B)
who has not been credited with at least one (1) Hour of Service with any
Employer maintaining the Plan at any time during the five-year period ending on
the Determination Date shall be disregarded. The calculation of the Top-Heavy
Ratio, and the extent to which distributions, rollovers and transfers are taken
into account, shall be made in accordance with Code section 416 and regulations
thereunder. Deductible Contributions shall not be taken into account in
computing the Top-Heavy Ratio. When aggregating plans, the value of Account
balances and accrued benefits shall be calculated with reference to the
Determination Dates that fall within the same calendar year.
(d) For purposes of establishing the present value in order to
compute the Top-Heavy Ratio, the computation must be based only on the interest
and mortality rates that would be used by the Pension Benefit Guaranty
Corporation to determine the present value of a lump sum distribution on plan
termination unless otherwise specified by the Employer in the Adoption
Agreement.
12.4 ADJUSTMENT TO FRACTIONS. In any Plan Year in which the Plan is
Top-Heavy, the denominator of the Defined Benefit Fraction, as defined in
Section 4.3, shall be computed using 100% of the dollar limitation instead of
125%, and the maximum aggregate amount used with respect to the denominator of
the Defined Contribution Fraction, as defined in Section 4.3 shall be computed
by using 100% of the dollar limitation instead of 125%.
12.5 TOP-HEAVY MINIMUM CONTRIBUTIONS.
(a) Except as otherwise provided in paragraphs (b) through (e)
below, the Employer Contributions made on behalf of any Participant who is not a
Key Employee shall not be less than the lesser of 3 percent of such
Participant's Compensation or, in the case of any Employer for which this Plan
is not in a Required Aggregation Group which enables a defined benefit plan
maintained by the Employer to meet the requirements of Code sections 401(a)(4)
or 410, the largest percentage of Employer Contributions and Elective Salary
Deferrals as a percentage of the Key Employee's Compensation, made on behalf of
any Key Employee for the Top-Heavy year. Neither Elective Salary Deferrals nor
Matching Contributions may be taken into account for the purpose of satisfying
the Top-Heavy minimum contribution under this section 12.5. The minimum
contribution is to be determined without regard to any social security
contribution. Further, the minimum contribution under this section shall be made
even though the Participant would not otherwise be entitled to receive an
allocation or would have received a smaller allocation for the year, because (1)
the Participant failed to complete 1,000 Hours of Service or any other Year of
Service requirement elected in the Adoption Agreement or (2) the Participant's
Compensation was less than a stated amount.
(b) The provisions of paragraph (a) shall not apply to any
Participant who was not employed by the Employer on the last day of the Plan
Year.
(c) Employer Contributions for the Plan year for the benefit of each
Participant who is not a Key Employee and who is a participant in a defined
benefit plan maintained by the Employer shall not be less than 5% of such
Participant's Compensation, unless the Employer elected in the Non-Standardized
Adoption Agreement that the minimum contribution will be met in the other plan
or plans of the Employer.
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(d) If the Employer maintains a defined benefit plan in addition to
this Plan and if the Employer elects to provide the additional minimum benefit
under the Non-Standardized Adoption Agreement, when the plans are Top-Heavy but
not Super Top-Heavy, the Employer will provide each Employee who is not a Key
Employee and who is a participant in the defined benefit plan a minimum
non-integrated contribution of seven and one-half percent (7 1/2%) of
Compensation. A minimum non-integrated contribution of four percent (4%) of
Compensation will be provided to any Employee who is not a Key Employee
otherwise entitled to receive Top-Heavy contributions from this Plan who is not
entitled to receive a minimum benefit from the defined benefit plan.
(e) In any Plan Year in which the Top-Heavy Ratio exceeds ninety
percent (90%) (i.e., the Plan becomes Super Top-Heavy) or in which the Plan is
Top-Heavy and where the Employer does not elect to provide the additional
minimum benefit described in Plan section 12.5(d) in the Non-Standardized
Adoption Agreement, the denominators of the defined benefit fraction as defined
in Plan section 4.3(a)(4), and the defined contribution fraction as defined in
Plan section 4.3(a)(5) shall be computed using 100 percent (100%) of the dollar
limitation instead of 125 percent (125%).
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ARTICLE 13 -- ADOPTION OF PLAN BY AFFILIATED EMPLOYERS
13.1 ADOPTION PROCEDURE. Any Affiliated Employer may become a
Participating Employer under the Plan provided that:
(a) The Employer adopts a resolution of its board of directors or
another appropriate written authorization approving the adoption of the Plan by
the Affiliated Employer and designating such Affiliated Employer as a
Participating Employer; and
(b) The Affiliated Employer adopts a resolution of its board of
directors or another appropriate written authorization adopting the Plan.
13.2 EFFECT OF ADOPTION BY AFFILIATED EMPLOYER. An Affiliated Employer
that adopts the Plan shall be deemed to be a Participating Employer for all
purposes under the Plan, unless otherwise specified in the resolutions of the
Employer designating the Affiliated Employer as a Participating Employer. In
addition, the Employer may provide, in its discretion, by appropriate
resolutions that the Employees of the Affiliated Employer shall receive credit
for their employment with the Affiliated Employer prior to the date it became an
Affiliated Employer for purposes of determining the eligibility of such
Employees to participate in the Plan and/or the Vested and nonforfeitable
interest of such Employees as Participants, if such credit shall be applied in a
uniform and nondiscriminatory manner with respect to all such Employees.
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ARTICLE 14 -- OTHER INFORMATION
14.1 EMPLOYMENT RELATIONSHIP. The adoption of the Plan shall not change
the terms of employment or service of any Employee.
14.2 PROHIBITED TRANSACTIONS. A Participant's Account, or any part of the
Account, must not be used by a Participant or Beneficiary as security for a loan
(except a loan described in section 5.3).
Neither the Trustee, the Custodian, the Broker nor any other person or
institution may engage in any prohibited transaction (as described in ERISA
sections 406 through 408 and Code section 4975) related to any Participant's
Account.
14.3 PROHIBITED ASSIGNMENT OF BENEFITS. No funds held in an Account on
behalf of a Participant, spouse, or Beneficiary will be subject to the claims of
any creditor of the Participant, spouse, or Beneficiary.
The Participant, spouse, or Beneficiary also will have no right to
anticipate, sell, pledge, encumber, or assign any of the benefits, payments, or
proceeds to which she or he may be entitled under the Plan.
However, if a Qualified Domestic Relations Order, or any domestic relations
order entered before January 1, 1985 requires payment of all or a part of a
benefit to someone other than a Participant or Beneficiary, the Plan
Administrator must direct the Trustee to comply with this order. To the extent
permitted by applicable law and regulations, the Plan Administrator may require,
or permit, immediate distribution of benefits to an alternate payee at any time
after the Plan Administrator determines that an order is a Qualified Domestic
Relations Order. If an alternate payee dies before receiving benefits owed to
him or her, the Plan Administrator will instruct the Trustee to distribute the
benefits to the alternate payee's estate as soon as practicable after the date
the benefits would have been paid to the alternate payee.
14.4 TAX QUALIFICATION AND GOVERNING LAW. The Plan is intended to qualify
as a qualified retirement plan under Code section 401(a). The Trust is intended
to be a tax exempt entity within the meaning of Code section 501(a). The Plan
and Trust are intended to be construed together for purposes of the
qualification requirements of the Code.
The Plan shall be governed by and interpreted according to federal law,
and to the extent such laws do not apply, according to California law. The Trust
shall be administered in the State of California, and its validity, construction
and all rights thereunder shall be governed by ERISA and, to the extent not
preempted by federal law, by the laws of California.
14.5 APPROVAL BY INTERNAL REVENUE SERVICE. This Plan is subject to
obtaining initial approval by the Internal Revenue Service to establish its
qualification under section 401(a) of the Code and its tax exemption under
section 501(a) of the Code. CSTC reserves the right to amend the Plan to the
extent necessary to initially qualify or maintain qualification of the Plan. If
the Internal Revenue Service fails to approve the qualification of the Plan,
then the Plan will be treated as an individually designed plan by each Employer.
14.6 SEVERABILITY. If any provision of the Plan is found to be invalid
or unenforceable, all other provisions will remain in full force.
14.7 SOURCE OF BENEFITS. The assets in each Participant's Account will
comprise the only source for payment of benefits to which the Participant, or
Participant's Beneficiary, is entitled.
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14.8 COMMINGLING. The Trustee shall not commingle the assets of the
Trust Fund with other property except in a common Trust Fund or common
investment funds.
14.9 LIQUIDATION OF ASSETS. If the Trustee must liquidate assets to make
distributions, transfer assets, or pay fees, expenses, or taxes assessed against
all or part of the Trust Fund, the Plan Administrator shall instruct the Trustee
upon request regarding the method of liquidation.
14.10 EXCLUSIVE BENEFIT LIMITATION. The Plan and the Trust are
established and maintained for the exclusive purpose of providing benefits to
Participants and their Beneficiaries and for defraying the reasonable
administrative expenses of the Plan. All contributions and earnings derived from
the Plan and held in the Trust will be for the exclusive benefit of Participants
and Beneficiaries.
The Employer shall not receive any part of the contributions and earnings
derived from the Plan, except as provided in Plan section 3.6.
14.11 BONDING AND INSURANCE.
(a) Bonding. To the extent required by law, each fiduciary of the
Plan must be bonded. The Plan Administrator must ensure that each fiduciary
complies with the applicable bonding requirement.
(b) Insurance. An Employer may, but need not, pay the cost of one
or more insurance policies insuring the Trustee, Plan Administrator (or
delegates), members of its board of directors, and any Employee with any
fiduciary responsible for the Plan, against any and all costs, expenses, and
liabilities, including attorneys' fees, incurred by such persons, resulting from
any act or failure to act in connection with their responsibilities under the
Plan and applicable law.
14.12 RULES OF CONSTRUCTION. Any use of the singular shall be interpreted
to include the plural and the plural the singular. Any use of the masculine,
feminine or neuter shall be interpreted to include the masculine, feminine or
neuter, as the context shall require.
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THE CHARLES SCHWAB
401(K) PROFIT SHARING PLAN TRUST AGREEMENT
APPENDIX 1
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THE CHARLES SCHWAB
401(K) PROFIT SHARING PLAN TRUST AGREEMENT
This Trust Agreement establishes a Trust ("Trust" or "Trust Fund") as an
integral part of the Employer's Charles Schwab 401(k) Profit Sharing Plan, Basic
Document 02 (the "Plan"). Accordingly, this Trust Agreement is governed by the
Plan and subject to the following additional terms and conditions.
ARTICLE 1 -- ESTABLISHMENT AND GENERAL PROVISIONS
1.1 ESTABLISHMENT OF TRUST RELATIONSHIP. The Plan provides that, from time to
time, cash, Employer Securities and other assets may be paid to the Trustee by
the Employer to be held and administered as a trust for the uses and purposes of
the Plan. The Trustee agrees that it shall hold in the Trust and invest such
assets received pursuant to this Agreement as set forth in the terms and
conditions stated below.
1.2 EXCLUSIVE PURPOSE AND BENEFIT. No part of the Trust Fund will be used for
or diverted to any purpose that is not for the exclusive benefit of Participants
and Beneficiaries within the meaning of Code section 401(a)(2) except as
provided in Plan section 3.6.
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ARTICLE 2 -- TRUST FUND
2.1 ASSETS. All contributions or transfers shall be received by the Trustee in
cash, Employer Securities, policies of life insurance if elected by the Employer
in the Adoption Agreement and acceptable to the Trustee, or such other assets
that are acceptable to the Trustee. The Trust Fund consists of the contributions
and transfers received by the Trustee, together with the income and earnings
from them and any increments to them, less any investment losses and any
payments and distributions that at the time of reference have been made by the
Trustee in accordance with the Employer's Plan. The Trustee shall have no duty
to (i) compute any amount required to be transferred or paid to it by the
Employer, (ii) collect any contributions or transfers to the Trust Fund, or
(iii) determine whether any contribution or transfer complies with the terms of
the Plan.
2.2 TRANSFERS AND ROLLOVER CONTRIBUTIONS. The Trustee shall accept a transfer
of cash or other property acceptable to the Trustee on behalf of a Participant
directly from the trustee of another employer's employee benefit plan qualified
under Code section 401(a) only at the direction of the Plan Administrator. The
Trustee likewise shall accept a contribution of cash that has been distributed
to a Participant from another employer's employee benefit plan qualified under
Code section 401(a), or from an individual retirement account or annuity
described in Code section 408, only at the direction of the Plan Administrator.
The Plan Administrator is solely responsible for determining that such assets
represent an eligible rollover contribution within the meaning of Code section
402(a)(4) or 408(d)(3).
2.3 ADDITIONAL ASSETS. If the Employer or an Affiliated Employer creates or
maintains one or more employee benefit plans qualified under Code section 401(a)
in addition to the Plan, the Employer may request the Trustee to hold the assets
of such additional plan or plans in the Trust Fund. The Plan Administrator shall
keep records showing the interest of the Plan and each additional plan in the
Trust Fund unless the Trustee enters into an agreement with the Employer to keep
separate accounts for each such plan. The Employer and the Plan Administrator
shall not permit or cause the assets of one plan to be used to pay benefits or
the administrative expenses of any other plan with the assets in the Trust Fund.
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ARTICLE 3 -- INVESTMENT AND MANAGEMENT OF PLAN ASSETS
3.1 PERSONS AUTHORIZED TO ACT. The Employer's president or other duly
authorized official shall certify in writing to the Trustee the names and
specimen signatures of all persons authorized to act as or on behalf of the
Plan's named fiduciary, including the Plan Administrator and these names and
specimen signatures shall be updated as necessary by the president or other duly
authorized official.
3.2 PERSONS AUTHORIZED TO DIRECT INVESTMENT. The Employer shall designate the
person or persons who direct investment of all or part of the Trust Fund
("Authorized Person") by making the appropriate election in the Adoption
Agreement. The Authorized Person, or such person's duly appointed delegate, who
may be the Broker or the Recordkeeper (also referred to as "Authorized Person"),
shall direct the Trustee as to investment of assets of the applicable part of
the Trust Fund according to procedures agreed to by the Plan Administrator and
the Trustee.
(a) Participant. If and to the extent the Participant is the Authorized
Person, the Trustee shall comply with such Participant's investment directions
according to the following rules:
Consistent with ERISA section 404(c), if the Participant
exercises investment discretion, each Participant shall have full authority and
responsibility to direct the investment and reinvestment of the Participant's
Account among the investment options described in Plan section 5.2. Except as
otherwise provided by ERISA:
(i) the Participant shall not be deemed a fiduciary of the Plan or
the Trust Fund solely because the Participant exercises control over the assets
of the Participant's Account (except with respect to voting of proxies and
tendering of shares); and
(ii) neither the Employer, the Plan Administrator, the Broker, the
Recordkeeper, nor the Trustee shall be liable for any loss, or for any breach,
which results from a Participant's exercising control over such Participant's
Account.
(b) Plan Administrator. If and to the extent the Employer designates the
Plan Administrator as the Authorized Person, the Plan Administrator shall notify
the Trustee in writing of the identity of the person(s) authorized to act for
the Plan Administrator. The Plan Administrator shall have the power to manage,
acquire and dispose of the assets of the Trust Fund over which the Plan
Administrator exercises control. The Trustee shall not be liable for any acts or
omissions of the Plan Administrator or have an obligation to invest or otherwise
manage any asset of the Trust Fund subject to the Plan Administrator's control.
(c) Investment Manager. If and to the extent the Employer designates an
Investment Manager as the Authorized Person, the Investment Manager shall have
the power to manage, acquire and dispose of assets of the Trust Fund over which
the Investment Manager exercises control. The Employer must notify the Trustee
in writing of the appointment of each Investment Manager, and the assets over
which each Investment Manager shall exercise control. The Employer also shall
cause the Investment Manager to acknowledge to the Trustee in writing that the
Investment Manager is a fiduciary to the Plan with respect to the assets under
its control. If the Employer appoints more than one Investment Manager, the
Employer shall be responsible for establishing a diversification policy and
monitoring compliance among the Investment Managers. The Employer shall have
sole responsibility for ensuring that the appointment of an Investment Manager
complies with ERISA section 3(38).
The Trustee shall not be liable for any acts or omissions of the
Investment Manager or have an obligation to invest or otherwise manage any asset
of the Trust Fund subject to the Investment Manager's control. If the Employer
revokes the appointment of an Investment Manager, the investment responsibility
that had been delegated to the
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Investment Manager shall revert to the Employer unless the Employer appoints a
successor Investment Manager.
3.3 DIRECTED TRUSTEE. The Trustee does not have any of the investment
responsibilities normally or statutorily incident to the office of Trustee.
Rather, the Trustee acts solely as custodian of the Trust Fund and has only
those powers and responsibilities that are necessary to enable it to perform its
custodial functions.
Except as otherwise provided by ERISA, the Trustee:
(a) Shall not be liable for losses or unfavorable results that may
occur because the Trustee complies with the investment directions of the
Authorized Person; and
(b) Shall have no duty to question any direction issued by the
Authorized Person, to review any asset over which the Authorized Person has
investment responsibility or to make any suggestions to the Authorized Person
regarding investments.
3.4 PRINCIPAL AND INCOME. The Trustee shall manage and administer the Trust
Fund without distinction between principal and income.
3.5 RESPONSIBILITY FOR DIVERSIFICATION, FUNDING POLICY, AND STATUTORY LIMITS
RELATING TO EMPLOYER SECURITIES. The Employer or the person to whom such
responsibility has been properly delegated under the requirements of ERISA shall
be responsible for diversification of assets held in the Trust for the Plan, for
the funding policy, and for compliance by the Trust Fund with statutory
limitations on the amount of investment in Employer Securities.
3.6 UNINVESTED CASH. The Trustee shall hold all uninvested cash as described
in Plan section 5.4. The Trustee is authorized to maintain reasonable balances
of uninvested cash to facilitate the orderly administration of the Trust Fund
without liability for interest.
3.7 RIGHTS INCIDENT TO SECURITIES OWNERSHIP. The Trustee shall have no
obligation to determine the existence of any conversion, redemption, exchange,
subscription or other right relating to any securities that an Authorized Person
directs the Trustee to purchase for the Account for which notice was given prior
to purchase. The Trustee has no obligation to exercise any such right unless the
Authorized Person informs the Trustee of the existence of the right and
instructs the Trustee to exercise such right, in writing within a reasonable
time before the right expires.
3.8 SECURITIES ISSUED BY FOREIGN ENTITIES. If the Authorized Person directs
the Trustee to purchase, retain or sell securities issued by any foreign
government or business entity, the Authorized Person shall be responsible for
advising the Trustee in writing of any laws or regulations of any foreign
countries or any U.S. territories or possession that apply to such securities
including, without limitation, laws and regulations affecting dividends or
interest on such securities.
3.9 VOTING OF EMPLOYER SECURITIES. With respect to Employer Securities that are
allocated to Participants' Accounts, each Participant shall be entitled to
direct the Trustee as to the manner in which such allocated Employer Securities
shall be voted. Solely for purposes of this Section 3.9, the term "Participant"
shall also include Beneficiaries of deceased Participants and alternate payees
with an interest in Employer Securities. Each such Participant with voting and
other rights in Employer Securities shall be a named fiduciary within the
meaning of Section 403(a)(1) of ERISA. Such directions may be achieved through
the use of proxy or similar statements delivered to the Participants with
respect to the Employer Securities allocated to their Accounts. The Plan
Administrator shall provide any information requested by the Trustee that is
necessary or convenient in connection with obtaining and preserving the
confidentiality of the Participants' directions. Any allocated Employer
Securities with respect to which Participants are entitled to
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issue directions pursuant to the foregoing and for which such directions are not
received by the Trustee and all unallocated Employer Securities shall be voted
by the Trustee at the direction of the Plan Administrator; provided, however,
that subject to the requirements of ERISA, the Plan Administrator shall direct
the Trustee to vote all such Employer Securities in the same proportion as the
shares of Employer Securities for which Participant voting instructions have
been received.
3.10 DELEGATION TO BROKER. The Trustee delegates to the Broker the duty to hold
and account for assets of the Trust Fund which are securities that are publicly
traded on a national securities exchange, Employer Securities, shares or units
issued by an investment company registered under the Investment Company Act of
1940, as amended, certificates of deposit and obligations issued by the U.S.
Government, its agencies and instrumentalities. The Broker shall keep records
and accounts of all investments, receipts, disbursements and other transactions
that affect the value or identity of Trust Fund assets in the Broker's
possession. The Trustee's delegation shall be deemed to be made upon the
Trustee's acceptance of the Employer's Plan.
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ARTICLE 4 -- INVESTMENTS
4.1 GENERAL INVESTMENTS. Subject to any general or specific investment
guidelines formulated by the Employer or the Plan Administrator, the Authorized
Person may cause the Trust Fund to be invested and reinvested in every kind of
investment including, without limitation, publicly traded equity and debt
interests of all kinds issued by domestic or foreign governments, business
organizations, limited partnerships, investment companies and trusts or other
entities, convertible securities of all kinds, interest-bearing deposits in any
depository institution (including The Charles Schwab Trust Company ("CSTC") or
any affiliate of CSTC), Employer Securities, money market securities of all
kinds, collective investments, as described in Section 4.2 below and insurance
contracts as described in Section 4.3 below.
4.2 COLLECTIVE INVESTMENTS. Subject to the following provisions, the assets of
the Trust Fund may be invested and reinvested, in whole or in part, in any
common or collective investment fund (referred to as the "fund") maintained by
CSTC or an Investment Manager in which the Trust Fund is eligible to
participate. Notwithstanding any other provision of this Trust Agreement, to the
extent Trust Fund assets are invested in any such fund, the terms of the fund's
governing instrument shall govern the investment responsibilities and powers of
the entity responsible for management of the fund (referred to as "fund
manager"), and the terms of such governing instrument shall be incorporated into
the Trust Agreement. The value of any interest in a fund held by the Trust Fund
shall be the fair market value of the interest as determined by the fund manager
in accordance with the fund's governing instrument. For purposes of valuation of
the Trust Fund assets, the Trustee shall be entitled to rely conclusively on the
value reported by the fund manager.
The Trust Fund may be invested in a pooled investment vehicle funded by
contracts issued by an insurance company qualified to do business in a state
(within the meaning of ERISA section 3(10)) including, without limitation, group
annuity and guaranteed investment contracts. Any such contract may provide for
the allocation of amounts received by the insurance company to its general
account, one or more of its separate accounts (including pooled separate
accounts), or both. To the extent Trust Fund assets are allocated to a separate
account of an insurance company, the Employer shall appoint the insurance
company as an Investment Manager as provided above. Notwithstanding any other
provision of the Trust Agreement, the terms of the contract(s) governing the
separate account(s) in which the Trust Fund is invested shall govern the
investment responsibilities and powers of the insurance company and, to the
extent required by law, the terms of such contract(s) shall be incorporated into
the Trust Agreement.
4.3 INSURANCE CONTRACTS. To the extent permitted by the Plan, the Authorized
Person may direct the Trustee to apply for and purchase annuity contracts and
retain life insurance contracts (referred to as "contracts") from an Insurer,
subject to the following provisions:
(a) The Authorized Person shall be responsible for ensuring that the
purchases conform with the requirements of the Plan and any rules and policies
established by the Plan Administrator regarding the form, value, optional
settlement methods and other provisions of the contracts. The Trustee shall not
be responsible for the validity or proper execution of any contract delivered to
it, or any act of any person which renders the contract void or voidable. The
Trustee shall have no duty to inform Participants of the terms and conditions of
any such contract.
(b) The Plan Administrator shall instruct the Insurer to notify the Plan
Administrator of all premiums becoming due under the contracts. The Plan
Administrator shall deliver all premium notices to the Trustee, together with a
direction to the Trustee to pay the premiums out of the Trust Fund. The Trustee
shall have no responsibility for paying the premium unless sufficient assets of
the Trust Fund are available for that purpose.
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(c) The Plan Administrator shall cause the Trustee to be designated as
the sole owner of any such contract, with sole power to exercise all rights,
privileges, options and other incidents of ownership at the Plan Administrator's
direction. The Plan Administrator from time to time shall direct the Trustee
regarding the designation of a Beneficiary of the death benefit payable under
any such contract in accordance with the applicable provisions of the Plan.
4.4 EMPLOYER SECURITIES. To the extent permitted by the Plan and ERISA and
subject to the applicable federal and state securities laws, the Authorized
Person may direct the Trustee to invest in Employer Securities. The Plan
Administrator shall have full responsibility for determining that any such
investment, and the voting rights attributable to such investment, comply with
applicable law. The Plan Administrator shall also specify what restrictive
legend on transfer, if any, is required to be set forth on the certificates for
the securities and the procedure to be followed by the Trustee to effectuate a
resale of such securities.
The Employer hereby represents and warrants that it will take all
responsibility (and hereby assumes all liability for the failure) to notify
Participants of any limitations on investment directions necessary or
appropriate to comply with federal securities laws (including the Exchange Act
and the 1933 Act), including, but not limited to the frequency of investment
changes by certain officers and shareholder-employees pursuant to Section 16(a)
and the volume of trading in shares of Employer Securities pursuant to Rule
10b-6. Consequently the Trustee shall have no liability to any Participant, any
Beneficiary, any Authorized Person, or the Employer for carrying out
instructions relating to the acquisition or disposition of Employer Securities
regardless of whether those instructions subject such person or the Employer to
any liability.
The Employer represents and warrants that the percentage of the issued and
outstanding class of equity security registered under section 12 of the Exchange
Act which is an Employer Security owned by the Plan (the "Plan Percentage") is
less than 4.5%, or that the Plan and its prior trust (if any) have complied with
all notice and filing requirements imposed by federal securities laws with
regard to Employer Securities.
The Employer covenants that it will (a) notify the Trustee in writing
within 5 business days following any date as of which the Plan Percentage equals
or exceeds 4.5%, (b) monitor the Plan Percentage on a daily basis so long as the
Plan Percentage is at least 4.5%, (c) notify the Trustee in writing within 5
business days following any date as of which the Plan Percentage equals or
exceeds 5% and, if applicable, 10%, and (d) provide monthly written reports to
the Trustee disclosing the Plan Percentage for each month during which the Plan
Percentage equals or exceeds 4.5% at any time. The foregoing monitoring and
notification requirements shall cease during any month when the Plan Percentage
is below 4.5% for each day of the month.
The Trustee shall have no authority to acquire additional shares if
Employer Securities cease to be "readily tradable." The Employer hereby
represents that all shares of Employer Securities are "readily tradable", and
agrees to notify the Trustee promptly upon receipt of any information that would
cause the Employer Securities to fail to qualify as "readily tradable." Upon
notice from the Employer or, if earlier, upon actual notice that the Employer
Securities are no longer "readily tradable", the Trustee shall stop acquiring
shares, whether by cash purchase or by contribution from the Employer. The
Trustee shall have no liability to any Participant, the Employer or Authorized
Person for its failure to acquire Employer Securities.
The provisions of this Section 4.4 shall survive the termination of this
Trust Agreement.
4.5 PARTICIPANT LOANS. If the Employer authorizes Participant loans by making
the appropriate election in the Adoption Agreement, the Plan Administrator may
direct the Trustee to make loans from the Trust Fund in accordance with the
procedures in the Plan. The Participant shall execute the promissory note to
evidence the terms of the loan as
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an asset of the Employer's Plan.
4.6 PROHIBITED INVESTMENTS. A Participant may not direct the investment of
assets in the Participant's Account in a loan to any Participant, including
herself or himself; provided, however, that this prohibition shall not preclude
the Plan Administrator from approving a Participant's request for a Plan loan
pursuant to Plan section 5.3. An Authorized Person may not direct the investment
of assets of the Trust Fund in additional life insurance contracts,
"collectibles" as defined by Code section 408(m)(2) (e.g., works of art, rugs or
antiques, metal or gems, stamps or coins, or alcoholic beverages) or other
assets that are not acceptable to the Trustee.
4.7 PROHIBITED TRANSACTIONS. Neither the Trustee, the Authorized Person nor
the Employer will engage in, or cause the Plan to engage in, a transaction that
the Trustee, Authorized Person or Employer knows, or should know, is a
prohibited transaction under ERISA section 406 or Code section 4975(c) except if
the transaction is exempted under the law or by an administrative exemption
under ERISA.
4.8 TRUSTEE POWERS. In its administration of the Trust Fund, the Trustee shall
have and exercise whatever powers are necessary to discharge its obligations and
exercise its rights under the Trust Agreement. Subject to the direction of the
Authorized Person, the Trustee shall have full power and authority with respect
to property held in the Trust Fund to do all such acts, take all proceedings,
and exercise all such rights and privileges, whether specifically referred to or
not in this document, as could be done, taken, or exercised by the absolute
owner, including, without limitation, the following:
(a) To collect income generated by the Trust Fund investments and
proceeds realized on the sale or disposition of assets and to hold the same
pending reinvestment or distribution in accordance with this Trust Agreement;
(b) To register Trust Fund property in the Trustee's own name, in the
name of a nominee or in bearer form, provided the Trustee's records and accounts
show that such property is an asset of the Trust Fund;
(c) To deposit securities in a security depository and permit the
securities so deposited to be held in the name of the depository's nominee, and
to deposit securities issued or guaranteed by the U.S. government or any agency
or instrumentality thereof, including securities evidenced by book entry rather
than by certificate, with the U.S. Department of the Treasury, a Federal Reserve
Bank or other appropriate custodial entity, in the same account as the Trustee's
own property, provided the Trustee's records and accounts show that such
securities are assets of the Trust Fund;
(d) To hold securities issued by a foreign government or business entity
at a foreign office of the Trustee or any of its affiliates, or to deposit such
securities with a foreign securities depository or bank regulated by a
government agency or regulatory authority in the foreign jurisdiction, and to
permit the securities so deposited to be held in the nominee name of the
depository or bank, provided that the Trustee's records and accounts show that
such securities belong to the Trust Fund;
(e) To retain the property in the Trust;
(f) To sell Trust assets, at either public or private sale, at such time
or times and on such terms and conditions as it may deem appropriate;
(g) To consent to or participate in any plan for the reorganization,
consolidation, or merger of any business unit, any security of which is held in
the Trust Fund, to pay calls and assessments imposed upon the owners of
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such securities as condition of their participating therein, and to consent to
any contract, lease, mortgage, purchase or sale of property, by or between such
business unit and any other party;
(h) To exercise or dispose of any right it may have as the holder of any
security, to convert the same into another security, to acquire any additional
security or securities, to make any payments, to exchange any security, or to do
any other act with reference thereto;
(h) To renew or extend the time of payment of any obligation due or
becoming due;
(j) To grant options to purchase property held in the Trust;
(k) To compromise, arbitrate, or otherwise adjust or settle claims in
favor of or against the Trust and to deliver or accept consideration in either
total or partial satisfaction of any indebtedness or other obligation, and to
continue to hold property so received for the period of time that the Trustee
deems appropriate;
(l) To exchange any property for other property upon such terms and
conditions as the Trustee may deem proper and to give or receive money to effect
equality in price;
(m) To foreclose any obligation by judicial proceeding or otherwise;
(n) To sue or defend in connection with any and all securities or
property at any time received or held in the Trust Fund and to charge against
the Trust Fund all reasonable expenses and attorney's fees in connection
therewith;
(o) To borrow money from any person, unless otherwise prohibited, with
or without giving security;
(p) To deposit any security with any protective or reorganization
committee, and to delegate to that committee such power and authority as the
Trustee may deem proper, and to agree to pay out of the Trust Fund that portion
of the expenses and compensation of that committee as the Trustee may deem
proper;
(q) To deliver to the Plan Administrator, or the person or persons
identified by the Plan Administrator, proxies and powers of attorney and related
informational material, for any securities, including Employer Securities, or
other property held in the Trust. The Authorized Person shall instruct the
Trustee as to the voting of stock and tendering of shares over which such
Authorized Person exercises control according to procedures developed by the
Plan Administrator and Trustee, provided that such voting and other rights in
any security, including Employer Securities, which is held in an Account under
the Plan over which a Participant has control, shall be exercised in accordance
with the provisions of Section 3.9. Each such Participant with voting and other
rights in any security shall be a named fiduciary within the meaning of Section
403(a)(1) of ERISA. In no event shall the Trustee be responsible for voting
shares of securities held in the Trust or for ascertaining or monitoring
whether, or how, proxies are voted or whether the proper number of proxies is
received;
(r) To appoint agents as necessary or desirable, including legal counsel
who may be counsel for the Employer;
(s) To hold that portion of the Trust Fund as the Trustee may deem
necessary for ordinary administration and for the disbursement of funds in cash,
without liability for interest, by depositing the same in any bank (including
deposits which bear a reasonable rate of interest in a bank or similar financial
institution supervised by the United States or a State, even where a bank or
financial institution is the Trustee, or otherwise is a fiduciary of the
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Plan, including CSTC), subject to the rules and regulations governing such
deposits, and without regard to the amount of any such deposit;
(t) To retain group or individual insurance contracts of all kinds
authorized under the Plan;
(u) If directed by the Authorized Person, to acquire, hold, and
administer limited partnership interests, or interests in other specialized
investment vehicles, provided that the Authorized Person signs any agreement or
other necessary documents requested by the Trustee prior to entering into the
transaction;
(v) To write covered call options on securities where appropriate for
the Trust, provided that any such transaction is in conformity with the Plan and
all applicable rules, regulations and laws governing the Trustee, the Plan, and
this Trust;
(w) To the extent permitted under applicable laws, to invest in
deposits, long and short term debt instruments, stocks, and other securities,
including those of CSTC, The Charles Schwab Corporation (the "Public Company"),
Charles Schwab & Co., Inc. (the "Broker/Dealer"), their affiliates and
subsidiaries;
(x) To combine certificates representing securities with certificates of
the same issue held by the Trustee for other fiduciary accounts; and
(y) If directed by the Authorized Person, to pool all or any portion of
the Trust Fund with assets belonging to any other qualified employee pension
benefit trust created by the Employer or any Affiliated Employer, and to
commingle such assets and make joint or common investments and carry joint
accounts on behalf of this Plan and such other trust or trusts, allocating
undivided shares or interests in such investments or accounts or any pooled
assets of the two or more trusts in accordance with their respective interests.
4.9 USE OF AFFILIATES. If CSTC is the Trustee:
(a) CSTC is authorized to contract or make other arrangements with the
Public Company, the Broker/Dealer, their affiliates and subsidiaries, successors
and assigns and any other organizations affiliated with or subsidiaries of CSTC
or related entities, for the provision of services to the Trust or Plan, except
where such arrangements are prohibited by law or regulation.
(b) CSTC is authorized to place securities orders, settle securities
trades, hold securities in custody, and other related activities on behalf of
the Trust through or by the Broker/Dealer whenever possible, unless the
Authorized Person specifically instructs the use of another broker/dealer.
Trades (and related activities) conducted through the Broker/Dealer shall be
subject to fees and commissions established by the Broker/Dealer, which may be
paid from the Trust or netted from the proceeds of trades. Trades shall not be
executed through the Broker/Dealer, however, unless the Plan Administrator and
the Authorized Person have received disclosure concerning the relationship of
the Broker/Dealer to CSTC, and fees and commissions which may be paid to the
Public Company, Broker/Dealer, CSTC and/or their affiliates or subsidiaries as a
result of using the Broker/Dealer's execution or other services.
(c) CSTC is authorized to disclose such information as is necessary to
the operation and administration of the Trust to the Public Company or any of
its affiliates, and to such other persons or organizations that CSTC determines
have a legitimate business purpose for obtaining such information.
(d) At the direction of the Authorized Person, CSTC may purchase shares
of regulated investment
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companies (or other investment vehicles) advised by the Public Company,
Broker/Dealer or CSTC or any affiliate of any of them ("Schwab Funds") except to
the extent that such investment is prohibited by law or regulation. Schwab Fund
shares may not be purchased or held by the Trust, however, unless the Authorized
Person has received disclosure concerning the Public Company's, Broker/Dealer's,
CSTC's, and/or their affiliate's or subsidiary's relationship to the Funds, and
any fees which may be paid to the Public Company, Broker/Dealer, CSTC and/or
their affiliates or subsidiaries.
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ARTICLE 5 -- DISBURSEMENTS
5.1 DIRECTIONS OF PLAN ADMINISTRATOR. The Trustee shall make distributions,
deliveries or transfers of money or property (including shares of Employer
Securities, if authorized by the Plan) from the Trust Fund as specified in
written directions from the Plan Administrator. The Trustee shall have no
liability for making any distribution, delivery or transfer pursuant to the
direction of the Plan Administrator and shall be under no duty to make inquiry
whether any distribution, delivery or transfer directed by the Plan
Administrator is made pursuant to the provisions of the Plan or pursuant to a
domestic relations order which the Plan Administrator has determined to be
qualified within the meaning of section 414(p) of the Code, nor shall the
Trustee be responsible for the adequacy of the Trust Fund to discharge any and
all payments and liabilities under the Plan. If the Plan Administrator instructs
the Trustee to make payments subject to certain conditions, the Plan
Administrator will have sole responsibility for confirming whether the
conditions exist and for notifying the Trustee if they do not. Unless the Plan
Administrator notifies the Trustee differently, the Trustee will be entitled to
assume that any contingencies that apply to a distribution have been satisfied.
5.2 WITHHOLDING TAXES. The Trustee is authorized, to the extent required under
applicable law, to withhold from distributions to any payee an amount that the
Trustee determines is necessary to cover federal and state taxes, and the
Trustee is required to withhold such amounts if so directed by the Plan
Administrator. The Plan Administrator shall furnish to the Trustee all
information necessary to carry out such withholding, or, if such information is
not provided to the Trustee, then the Plan Administrator and the Employer shall
hold the Trustee harmless from and indemnify it for any liability and related
expenses that arise in connection with improper withholding or failure to
withhold.
5.3 PERSONS TO WHOM DISTRIBUTIONS ARE MADE. Distributions or transfers by the
Trustee shall be transmitted to the Plan Administrator or its designee for
delivery to the proper payees or to payee addresses supplied by the Plan
Administrator or its designee, and the Trustee's obligation to make such
payments shall be satisfied upon such transmittal. The Trustee shall have no
obligation to determine the identity of persons entitled to disbursements under
the Plan or their addresses. The Trustee shall not be required to make any
disbursement in excess of the liquidated value of the Trust Fund at the time of
the disbursement.
5.4 DISPUTE REGARDING BENEFIT PAYMENTS. If a dispute arises over the identity
of any person who has a right to benefit payments under the Employer's Plan, or
the extent of the person's interest, the Trustee may withhold the payment or
delivery until the dispute is resolved by arbitration, adjudicated by a court of
competent jurisdiction or settled by written agreement among the parties who are
affected. Until the dispute is resolved, the Trustee will hold the disputed
assets and invest them in a Schwab money market fund selected by the Employer
unless the Plan Administrator provides contrary investment instructions.
5.5 INQUIRIES REGARDING BENEFIT PAYMENTS. The Trustee will refer all inquiries
and correspondence pertaining to any benefit payment, and all legal process
served on the Trustee that is related to any benefit payments or an Account, to
the Plan Administrator. The Employer must respond to the inquiries,
correspondence or legal process.
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ARTICLE 6 -- SETTLEMENT OF ACCOUNTS
6.1 RECORDS. The Trustee shall maintain accurate records and detailed accounts
of all investments, receipts, disbursements, and other transactions related to
the Trust, and those records shall be available at all reasonable times to the
Recordkeeper, Plan Administrator, the Employer, or their authorized
representatives. The Trustee, at the direction of the Plan Administrator, shall
submit to the Plan Administrator and any other person that the Plan
Administrator designates those valuations, reports, or other information as the
Plan Administrator may reasonably require.
6.2 ANNUAL ACCOUNTING.
(a) Within 60 days following the close of each Plan Year, the Trustee
shall file with the Plan Administrator a written account setting forth a
description of all securities and other property purchased and sold, all
receipts, disbursements, and other transactions effected by it during the Plan
Year and listing the securities and other property held by the Trustee at the
end of such Plan Year, together with their then fair market values.
(b) If the Plan Administrator wishes to question the report, the Plan
Administrator must file a written statement with the Trustee within sixty (60)
days from the date the Trustee mails the report. Otherwise, the Plan
Administrator shall be considered to have approved the report, and the Trustee
shall be released from all liability concerning all information contained in the
report to anyone, including any Participant, Participant's spouse or
Beneficiary. Only the Plan Administrator may require an accounting.
(c) If the account is not settled as provided above, the Trustee, the
Employer or the Plan Administrator shall have the right to apply to a court of
competent jurisdiction at the expense of the Trust Fund for a judicial
settlement of the accounting. Any judgment or decree entered in such proceedings
shall be conclusive on all persons interested in the Trust Fund.
6.3 VALUATION PROCEDURES. The Trust Fund shall be valued as of each Valuation
Date as specified under the Plan, but in any event not less than annually at
fair market value. Except as specified below, in the absence of fraud or bad
faith, the Trustee's valuation of the Trust Fund shall be conclusive. The
reasonable costs incurred in establishing values of the Trust Fund, including
the cost of obtaining an independent appraisal of Employer Securities shall be
charged against the Trust Fund, unless paid by the Employer.
6.4 VALUATION OF EMPLOYER SECURITIES. The market value of any Employer
Security shall be determined as follows:
(a) If any Employer Security consists of securities listed on a national
securities exchange, the fair market value of such Employer Security shall be
considered to be equal to the closing price of such Employer Security (as
reported in the consolidated transaction reporting system, or if not so
reported, as reported on the principal exchange market for such Employer
Securities by such exchange or on any system sponsored by such exchange) on the
trading day immediately preceding the day of the applicable Valuation Date.
(b) If any Employer Security consists of securities traded on a regular
basis, as determined by the Employer, in the over-the-counter market, the fair
market value of such Employer Security shall be considered to be equal to the
closing price quoted by the automatic quotation system of a securities
association registered under the federal securities laws on the trading day
immediately preceding the applicable valuation date.
(c) If any Employer Security is no longer "readily tradable" and is
unable to be valued pursuant to
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paragraphs (a) and (b) above, then the Plan Administrator shall engage the
services of an independent appraiser who satisfies the requirements of Code
section 170(a)(1). The independent appraiser shall value shares of Employer
Securities for the next following Valuation Date and such independent valuation
of Employer Securities shall occur at least once each Plan Year.
When the Trustee is unable to arrive at a value based upon information
from independent sources, it may rely upon information from the Employer, Plan
Administrator, Authorized Person, appraisers, or other sources, and shall not
incur any liability for inaccurate valuation based in good faith upon such
information.
6.5 VALUATION WHEN FAIR MARKET VALUE OF SECURITIES (OTHER THAN EMPLOYER
SECURITIES) IS NOT AVAILABLE. Notwithstanding any other provision of this
Article 6 (other than Section 6.4 relating to Employer Securities), if the
Trustee determines that the Trust Fund consists in whole or in part of property
not traded freely on a recognized market, or that information necessary to
ascertain the fair market value is not readily available, the Trustee may
request instructions from the Plan Administrator concerning the value of such
property for all purposes under the Plan and this Trust Agreement, and the Plan
Administrator shall comply with that request. The Trustee shall be entitled to
rely upon the value placed upon such property by the Plan Administrator. At the
Trustee's option, it may request that the Plan Administrator hire an independent
appraiser that meets the requirements of Code section 170(a)(1) to value the
property. Alternatively, if the Trustee chooses, or if the Plan Administrator
shall fail or refuse to instruct the Trustee on the value of such property
within thirty (30) days after receipt of the Trustee's request, the Trustee at
its sole discretion may engage an independent appraiser to determine the fair
market value of such property. Any expenses with respect to such appraisal shall
be paid by the Trustee out of the Trust Fund or, at the option of the Employer,
by the Employer.
6.5 FORM OF COMMUNICATIONS. All directions, notices and other communications
required or permitted by the Trust Agreement shall be in writing and delivered
by mail or hand delivery. The Trustee in its absolute discretion may accept
directions or notices given by facsimile, telex, telegram, telephone or any form
of electronic communication that the Trustee reasonably believes in good faith
to be genuine unless and until the Plan Administrator notifies the Trustee in
writing that such alternative forms of communication are not authorized. If the
Trustee chooses to accept one or more alternative methods of communication, the
Plan Administrator or the Authorized Person will be required to follow
reasonable procedures adopted by the Trustee for written confirmation. In
addition, oral instructions may be recorded by the Trustee. If the Plan
Administrator or the Authorized Person fails or refuses to comply with the
Trustee's confirmation procedures, the Trustee will be entitled to refuse to
comply with such directions without incurring any liability. All directions,
notices and other communications given under the terms of the Trust Agreement
will be deemed effective on receipt.
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ARTICLE 7 -- INDEMNIFICATION
In addition to any specific indemnification given the Trustee under other
provisions of the Trust Agreement, the Employer hereby indemnifies the Trustee
and its officers, directors, employees, agents and affiliates ("Indemnitees")
against, and shall hold the Indemnitees harmless from, any and all losses,
claims, liabilities, and expenses (including reasonable attorney's fees and
costs of defense) imposed upon or incurred by the Indemnitees as a result of any
acts taken, or any failure to act, in accordance with directions from a
Participant or Beneficiary, the Plan Administrator, Authorized Person,
Investment Manager or any other person specified in this Trust Agreement, or any
designee of any such person, or by reason of the Indemnitees' good faith
execution of their duties with respect to the Trust, including, but not limited
to, holding of the assets of the Trust, holding of Employer Securities, failure
to acquire Employer Securities which are not "readily tradable", valuation of
Employer Securities, or any actions taken in connection with voting and
tendering securities, including Employer Securities, except to the extent an
Indemnitee's act or omission is the direct consequence of such Indemnitee's
negligence or willful misconduct. Subject to ERISA, any expenses incurred by an
Indemnitee which the Trustee believes to be subject to indemnification under the
Trust Agreement may be charged against the Trust Fund if not paid by the
Employer at the Trustee's request, provided that the Employer may delay payment
of any amount in dispute until such dispute is resolved according to the
provisions of the Trust Agreement. Such resolution may include the award of
interest on unpaid amounts.
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ARTICLE 8 -- TAXES, EXPENSES AND COMPENSATION OF TRUSTEE
8.1 TAXES LEVIED ON TRUST FUND. The Trustee shall notify the Plan
Administrator of any tax levied upon or assessed against the Trust Fund of which
the Trustee has knowledge. If the Trustee receives no instructions from the Plan
Administrator, the Trustee may pay the tax from the Trust Fund. If the Plan
Administrator wishes to contest the tax assessment, it shall give appropriate
written instructions to the Trustee within ten (10) business days of notice from
the Trustee. The Trustee shall not be required to bring any legal actions or
proceedings to contest the validity of any tax assessments unless the Trustee
has been indemnified to its satisfaction against loss or expense related to such
actions or proceedings, including reasonable attorney's fees.
8.2 PAYMENT OF FEES AND EXPENSES OF THE TRUSTEE. The Employer shall pay the
Trustee quarterly its expenses in administering the Trust Fund and reasonable
compensation for its services as Trustee at a rate set forth in the Plan Service
Agreement, as that may be amended from time to time. The Trustee reserves the
right to alter this rate of compensation at any time by providing the Employer
with notice of such change at least sixty (60) days prior to its effective date.
Reasonable compensation shall include compensation for any extraordinary
services or computations required, such as determination of the value of assets
when current market values are not published, expenses for the service of an
independent appraiser in connection with Employer Securities (if any) which
cease to be "readily tradable", and the covering of overdrafts. If the Employer
fails to pay such expenses within thirty (30) days of being billed, the Trustee
shall charge such fees and expenses against the Trust Fund. The Trustee shall
have a lien against the Trust Fund for its compensation and for any reasonable
expenses that are not paid by the Employer, including, without limitation, any
counsel or appraisal fees which may be withdrawn from the Trust Fund, to the
extent permitted by law.
8.3 PAYMENT OF FEES AND EXPENSES INCURRED BY THE PLAN ADMINISTRATOR. At the
direction of the Plan Administrator, the Trustee shall pay from the Trust any
fees and expenses payable to parties other than the Trustee that are incurred by
the Plan Administrator in administering the Employer's Plan.
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ARTICLE 9 -- THE TRUSTEE
9.1 RESIGNATION AND REMOVAL. The Trustee may resign as Trustee hereunder or
may be removed by the Employer. This resignation or removal may be accomplished
at any time upon the giving of sixty (60) days written notice to the Trustee or
Employer, as applicable (or less if the other party agrees to waive notice).
9.2 TRANSFER TO SUCCESSOR TRUSTEE. Upon resignation or removal of the Trustee,
the Employer shall appoint a successor Trustee who shall then succeed to all the
powers and duties given to the Trustee by this Trust Agreement. The terminating
Trustee shall transfer all property of the Trust Fund then held by it to such
successor Trustee. The terminating Trustee may require as a condition of making
such transfer that the successor Trustee present evidence that any bonding
requirement under ERISA section 412 has been met and/or may require that the
Employer provide a writing indemnifying the Trustee against any losses arising
from the replacement of the Trustee. If either party has given notice of
termination as provided under this Trust Agreement, and upon the expiration of
the advance notice period no other successor Trustee has been appointed and has
accepted such appointment, this provision shall serve as (i) notice of
appointment of the chief executive officer of the Employer as Trustee and (ii)
as acceptance by that person of that appointment. The Trustee is authorized to
reserve such sum of money as it may deem advisable for payment of its fees and
expenses in connection with the settlement of its accounts or other proper Trust
expenses, and any balance of such reserve remaining after the payment of such
fees and expenses shall be paid to the successor Trustee.
Upon completion of the transfer, the Trustee will be discharged from all
further liability and accountability for all matters relating to the Trust Fund.
If any property of the Trust Fund in the Trustee's custody is not deemed
suitable for transfer, the Employer will direct the successor Trustee to appoint
the resigning or removed Trustee as custodian to retain possession of such
property on behalf of the successor Trustee until the transfer may be made.
9.3 FINAL ACCOUNTING. Within 60 days of the transfer to the successor Trustee,
the terminating Trustee shall provide the Employer with an accounting in the
form and manner prescribed for the annual accounting by Article 6. Unless the
Employer files with the Trustee written objections within sixty (60) days after
such accounting has been mailed or otherwise delivered, the accounting shall be
deemed to have been approved.
9.4 REQUEST FOR INSTRUCTIONS. In the event the Trustee requests instructions
from the Plan Administrator, the Trustee may await such instructions without
incurring liability for the failure to take action in the absence of such
instructions. Notwithstanding the foregoing, if the Plan Administrator fails to
provide instructions, the Trustee may take any action appropriate to carry out
the purposes of the Trust Agreement without incurring liability for such
actions.
9.5 DISCLOSURE. The Trustee is authorized to disclose such information that it
considers necessary or proper in the administration of the Trust Fund
(including, but not limited to, the existence, nature, terms, and conditions of
the Trust Fund and/or the Trust Agreement) to such other persons or
organizations that the Trustee determines have a legitimate business purpose for
obtaining such information.
9.6 USE OF INFORMATION. The parties acknowledge that the Trustee, in the
course of its business, may obtain nonpublic information concerning corporations
and other business entities including the Employer (referred to as "issuers")
which may be relevant to an investment decision involving the issuers'
securities. However, the Trustee will have no responsibility for failing to use
such information in the exercise of its duties under the Trust Agreement or for
the benefit of any other person having investment responsibility.
9.7 STATUS OF TRUSTEE. The Trustee shall not be a named fiduciary under
the Plan and shall not have the authority to interpret or construe the Plan.
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9.8 TRUSTEE RELIANCE ON INSTRUCTION. The Trustee shall bear no liability for
acting upon any instruction or document believed by it to be genuine and to be
presented or signed by a party duly authorized to do so, and the Trustee shall
be under no duty to make any investigation or inquiry about the correctness of
such instruction or document.
9.9 COUNSEL OF TRUSTEE. The Trustee may consult with legal counsel of its
choice, including counsel for the Employer, upon any question or matter arising
hereunder and the opinion of such counsel when relied upon by the Trustee shall
be evidence the Trustee was acting in good faith.
9.10 PERSONS DEALING WITH TRUSTEE. No person dealing with the Trustee shall be
obligated to ensure the proper application of any money paid or property
delivered to the Trustee, nor shall any such person be required to recognize any
limitations or restrictions in the provisions of the agreement, question the
authority of the Trustee to receive and receipt any money becoming due and
payable to the Trustee or inquire whether the Trustee has obtained the direction
or approval of the Employer, the Plan Administrator, or the Authorized Person to
a proposed action. Any person dealing with the Trustee may accept the
certification of the Trustee as conclusive evidence of any matter or question
relating to the Trust Agreement or the administration of the Trust Fund.
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ARTICLE 10 -- PROCEDURES IN EVENT EMPLOYER SECURITIES
ARE NO LONGER READILY TRADABLE
10.1 NO ADDITIONAL ACQUISITIONS. Pursuant to Article 4, the Trustee shall
ignore any investment direction to acquire Employer Securities as soon as
practicable after receipt of notice or, if earlier, actual knowledge that
Employer Securities are no longer "readily tradable."
10.2 DEFAULT INVESTMENT. Unless and until directed by the Employer to transfer,
convert or otherwise exchange Employer Securities that are no longer readily
tradable for another investment authorized pursuant to the Trust, the Trustee
shall ignore investment directions to acquire Employer Securities pursuant to
section 10.1 and shall, instead, invest any cash directed to the Employer
Securities Account (including cash dividends paid on shares of Employer
Securities and cash contributions) as described in the Plan section 5.3.
10.3 DISTRIBUTIONS IN STOCK. If so directed by the Plan Administrator,
distributions in shares of Employer Securities can be made to a Participant
or Beneficiary by the Trustee. The Employer shall provide the Participant or
Beneficiary with an explanation of the "put option" (as described in Section
10.4) prior to the distribution election.
10.4 PUT OPTION. If any shares of Employer Securities are distributed to a
Participant or Beneficiary after ceasing to be "readily tradable," the Employer
shall issue a put option to each Participant or Beneficiary of a deceased
Participant entitled to receive a distribution of such Employer Securities. The
put option shall permit the Participant or Beneficiary to sell such Employer
Securities to the Employer, at any time during two put option periods (described
below) at the then fair market value, such fair market value to be determined at
least annually as of the respective Valuation Date by an independent appraiser
selected by the Plan Administrator. The first put option period is a period of
at least sixty (60) days beginning on the date of distribution of Employer
Securities to the Participant or the Beneficiary. The second put option period
is a period of at least sixty (60) days beginning after the new determination of
the fair market value of Employer Securities is made by an independent appraiser
(and notification is given to the Participant or the Beneficiary in the next
following Plan Year). If the Employer purchases Employer Securities tendered
under a put option and the Employer Securities were distributed to the
Participant (or the Beneficiary) in the form of a lump sum, the payment, at the
election of the Employer, may be made (a) in five substantially equal annual
installments commencing not later than thirty (30) days after the exercise of
the put option; provided, however, that the Employer provides adequate security
and reasonable interest (as determined by the Plan Administrator) on unpaid
installments, or (b) in a lump sum. If the Employer purchases Employer
Securities tendered under a put option and the Employer Securities were
distributed as part of an installment distribution, the payment, in the form of
a lump sum, must be made not later than thirty (30) days after the exercise of
the put option. The Trustee shall have no authority to offer to purchase any
shares of Employer Securities (whether or not distributed subject to a put
option) from any former Participant or Beneficiary at any time.
10.5 DISTRIBUTIONS OR TRANSFERS IN CASH. Any distribution or intra-fund
transfer in cash shall be made by selling shares of Employer Securities to the
Employer at a price which represents "adequate consideration" as defined in
Section 3(18) of ERISA. No commission shall be charged to the Plan in connection
with any such sale. The Employer represents and warrants that it shall maintain
sufficient cash to meet its obligation to repurchase shares of Employer
Securities for "adequate consideration" in order to permit such cash
distributions and intra-fund transfers directed by Participants and
Beneficiaries.
A-20
<PAGE>
ARTICLE 11 -- AMENDMENT AND TERMINATION
11.1 AMENDMENT. The Employer may not amend the Trust Agreement except by
withdrawing its participation in the Plan and Trust Agreement by an amendment
consisting of a restated qualified plan and trust. The Trust Agreement may be
amended at any time by CSTC in order to provide for contingencies which may
require or make advisable the clarification or modification of the Trust
Agreement. CSTC reserves the right to amend the Trust Agreement at any time from
time to time, in whole or in part, consistent with applicable law. No amendment,
however, shall cause any part of the Trust Fund to revert to or be recoverable
by the Employer or be used for or diverted to purposes other than the exclusive
benefit of Participants, former Participants and Beneficiaries or to deprive any
Participant, former Participant or Beneficiary of any benefit, except to the
extent that an amendment is necessary to permit the Plan or the Trust Fund to
qualify under Code sections 401(a) and 501(a).
11.2 TERMINATION. If the Employer terminates its Plan, the Employer shall
direct the Trustee regarding the disposition of the Trust Fund. The Trustee may
condition the transfer or distribution of any assets of the Trust Fund upon
receipt of a favorable determination letter from the Internal Revenue Service
stating that the termination of the Employer's Plan does not affect adversely
the tax-exempt status of the Trust Fund. If any property of the Trust Fund is
deemed not suitable for transfer, the Employer shall direct the Trustee to
retain possession of the property as custodian until the transfer may be made.
11.3 MERGER, CONSOLIDATION OF EMPLOYER. If the Employer merges, consolidates or
liquidates, or if the Employer sells or transfers all or substantially all of
its operating assets, the resulting successor or purchaser corporation shall
automatically be substituted for the Employer under the Trust Agreement unless
the successor, by resolution of its board of directors, elects not to continue
to sponsor the Plan. If, within ninety (90) days from the effective date of such
merger, consolidation, liquidation, sale or other transfer of assets, the
successor or purchaser corporation adopts such a resolution electing not to
become the successor employer under this Trust Agreement, the Employer's Plan
automatically shall terminate, and the Trustee shall dispose of the Trust Fund
as provided in Section 11.2 above.
A-21
<PAGE>
ARTICLE 12 -- MISCELLANEOUS
12.1 GOVERNING LAW. The Trust shall be administered in the State of California,
and its validity, construction, and all rights hereunder shall be governed by
ERISA and, to the extent not preempted, by the laws of California.
12.2 HEADINGS. The headings in this instrument have been inserted for
convenience of reference only, and are to be ignored in any construction of the
provisions of this Trust Agreement.
12.3 ANTI-ALIENATION. No person entitled to any benefit under this Trust and
the Plan shall have any right to assign, alienate, hypothecate, or encumber such
person's interest in any benefits under this Trust Agreement (except as to any
loans to a Participant under the Plan meeting the requirements of Code section
72(p)) and those benefits shall not in any way be subject to claim of such
person's creditors or liable to attachment, execution, or other process of law
except to the extent required under a Qualified Domestic Relations Order (within
the meaning of section 414(p) of the Code).
12.4 DISQUALIFICATION OF PLAN. It is intended that this Trust shall be tax
exempt under section 501 of the Code and that the Plan referred to herein shall
qualify under section 401(a) of the Code. However, notwithstanding any other
provisions of the Trust, if the Internal Revenue Service is requested to issue
to the Employer a favorable written determination or ruling with respect to the
initial qualification of the Plan and exemption of the Trust from tax and such
request is denied, the Trustee shall, after receiving a written direction from
the Plan Administrator, pay to each Participant that portion of the Trust Fund
applicable to said Participant's voluntary contributions, if any, and provided
the Plan so states, pay to the Employer any part of the Trust Fund attributable
to Employer contributions then remaining in the Trustee's possession. As a
condition to such repayment, the Employer must execute, acknowledge, and deliver
to the Trustee its written undertaking, in form satisfactory to the Trustee, to
indemnify, defend, and hold the Trustee harmless from all claims, actions,
demands, or liabilities arising in connection with such repayment, and provided
further that such repayment shall occur within one year after the date the
request for qualification is denied.
12.5 ARBITRATION. Except as otherwise specifically provided herein, any dispute
under this Trust Agreement shall be resolved by submission of the issue to a
member of the American Arbitration Association who is chosen by the Employer and
the Trustee. If the Employer and the Trustee cannot agree on such a choice, each
shall nominate a member of the American Arbitration Association, and the two
nominees shall then select an arbitrator. Expenses of the arbitration shall be
paid as decided by the arbitrator.
12.6 RECORDING CONVERSATIONS. The Trustee is authorized to tape record
conversations between the Trustee and persons acting on behalf of the Plan or a
Participant in the Plan to verify data on transactions.
12.7 INVALID PROVISIONS. If any paragraph, section, sentence, clause or phrase
contained in the Trust Agreement becomes illegal, null, or void or against
public policy, for any reason, or is held by any court of competent jurisdiction
to be incapable of being construed or limited in a manner to make it
enforceable, or is otherwise held by such court to be illegal, null or void or
against public policy, the remaining provisions of the Trust Agreement shall not
be affected.
12.8 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Trust
Agreement, the Trust Agreement shall inure to the benefit of, and be binding
upon, the parties to the Trust Agreement and their successors and assigns.
12.9 COUNSEL OF EMPLOYER. The Employer represents that it has consulted with
and been advised by its professional advisors and/or counsel concerning the
legality and propriety of the Trust Agreement.
A-22
<PAGE>
12.10 SEPARATE TRUSTS. If as provided in the Plan, other trustees of separate
trusts under the Plan may be appointed, the Trustee under this Trust Agreement
shall have no duties or responsibilities for Plan assets not held in the Trust
by the Trustee, except as required by applicable law.
A-23
<PAGE>
THE CHARLES SCHWAB
401(K) PROFIT SHARING PLAN CUSTODY AGREEMENT
APPENDIX 2
B-1
<PAGE>
THE CHARLES SCHWAB 401(K)
PROFIT SHARING PLAN
CUSTODY AGREEMENT
TERMS AND CONDITIONS
1. ESTABLISHMENT OF CUSTODY ACCOUNT. The Employer named in the Adoption
Agreement and The Charles Schwab Trust Company ("CSTC") enter into this Custody
Agreement to establish a custody account ("Custody Account") to hold property
under the following terms and conditions. This Custody Agreement is effective on
the date it is accepted by CSTC. This Custody Agreement is an integral part of
The Charles Schwab 401(k) Profit Sharing Plan, Basic Document 02 (the "Plan").
2. THE PARTIES. The Employer agrees to contribute property to the Custody
Account to be held by CSTC.
CSTC agrees to hold the property and cash contributed to the Custody
Account, but reserves the right to refuse to accept any property into the
Custody Account. CSTC acts only at the direction of the Trustee, its designee,
or any other person designated by this Custody Agreement. CSTC has no authority
to take any discretionary action of any kind.
3. APPOINTMENT AS AGENT. The Employer appoints CSTC as its agent to act as
custodian of the cash, marketable securities, life insurance contracts and any
other property acceptable to CSTC which may be contributed by the Trustee from
time to time (collectively, the "Property"). CSTC agrees to act as the agent
according to the terms and conditions of the Custody Agreement. CSTC shall have
no duties or responsibilities with respect to any Property other than cash,
marketable securities or life insurance contracts acceptable to CSTC.
4. INVESTMENT OF PROPERTY.
4.1 Investment Authority. The Trustee shall be responsible for the
investment, review and management of all Property. CSTC shall settle all
purchases, sales, exchanges, investments and reinvestments of the Property only
upon receipt of, and pursuant to, the instructions of the Recordkeeper;
provided, however, that in the event the Participant exercises Full Discretion,
CSTC shall follow instructions received from the Broker. All instructions shall
be given to CSTC in a form acceptable to CSTC. CSTC shall have no duty or
obligation to review, or make recommendations for, the investment and
reinvestment of any Property held in the Custody Account, including, without
limitation, any uninvested cash. However, CSTC may refuse to settle any
investment, purchase, exchange or reinvestment for which CSTC cannot provide
adequate administrative facilities or which, in CSTC's sole judgment, involves
unacceptable business risk to CSTC or for which the Custody Account has
insufficient assets to cover the transaction on settlement date. The right of
CSTC to refuse to accept any particular Property or execute any transaction on
behalf of the Custody Account shall in no way be construed to grant
discretionary authority over the Custody Account to CSTC.
4.2 Corporate Actions. CSTC shall notify the Authorized Person of the
receipt of notices of redemptions, conversions, exchanges, subscription rights
or any other events requiring the exercise of discretion ("Voluntary Corporate
Actions"). CSTC shall report the results of all calls, puts and other events
that do not require the exercise of discretion ("Mandatory Corporate Actions")
on Custody Account statements and by an advice sent to the party(ies) designated
in the Custody Account Application. In any event, CSTC shall not be under any
duty to notify the Authorized Person of Mandatory Corporate Actions prior to
their execution. CSTC shall not be obligated to take any action in connection
with Corporate Actions except as provided above. The Authorized Person shall
have full responsibility for monitoring notices and other matters related to
Corporate Actions.
B-2
<PAGE>
5. POWERS OF CSTC. CSTC shall have the following powers:
1. To hold Property in the name of its nominee.
2. To invest and reinvest assets of the Custody Account at the
direction of the Authorized Person.
3. To deposit in a securities depository any securities in accordance
with applicable law.
4. To settle securities transactions through an institutional delivery
system.
5. To execute any declarations, endorsements, assignments, stock or
bond powers, affidavits, certificates of ownership or other documents required
(1) to effect the sale, transfer, or other disposition of Property, (2) to
obtain payment with respect to Property, (3) to take any other action required
with respect to Property, and in CSTC's own name to guarantee as the Authorized
Person's signature any signature so affixed.
6. SERVICES BY AND BROKERAGE TRANSACTED THROUGH THE AFFILIATED ORGANIZATIONS.
6.1 Services by the Affiliated Organizations. CSTC may contract or make
other arrangements for the provision of services to the Custody Account with any
organizations affiliated with or subsidiaries of CSTC, including The Charles
Schwab Corporation (the "Public Company") and Charles Schwab & Co., Inc. (the
"Broker/Dealer"), their respective affiliates and subsidiaries, successors and
assigns, except where such arrangements are prohibited by law or regulations.
6.2 Brokerage. CSTC is authorized to place securities orders, settle
securities trades, hold securities in custody, and perform related activities on
behalf of the Custody Account through or by the Broker/Dealer whenever possible
unless the Authorized Person specifically directs CSTC to settle a trade
directly with another broker/dealer. Trades and related activities effected
through the Broker/Dealer are subject to fees and commissions established by the
Broker/Dealer, which may be paid from the Custody Account or netted from the
proceeds of trades. Transactions effected by the Broker/Dealer are subject to
the Broker/Dealer's account agreement, trading rules and policies as modified or
amended from time to time, together with the applicable rules, regulations,
customs and usage of any exchange, market, clearing house or self-regulatory
organization and applicable federal and state laws, rules and regulations.
Trades may not be executed through the Broker/Dealer unless the Plan
Administrator, the Trustee and any other Authorized Person have received
disclosure concerning the relationship of the Broker/Dealer to CSTC, and the
fees and commissions which may be paid to the Public Company, Broker/Dealer,
CSTC and/or their affiliates or subsidiaries as a result of using the
Broker/Dealer's execution or other services.
6.3 Mutual Funds and Uninvested Cash. The Authorized Person may direct
purchases of shares of regulated investment companies (or other investment
vehicles) advised by affiliates of the Public Company, Broker/Dealer ("Schwab
Funds") or CSTC unless such investment is forbidden by law or regulation.
Uninvested cash will be held as provided in Plan section 5.4.
6.4 Disclosure of Information to the Affiliated Organizations. CSTC is
authorized to disclose information which is necessary to the operation and
administration of the Custody Account to the affiliated organizations described
in section 6.1 herein, and to other persons and organizations that CSTC
determines to have a legitimate business purpose for obtaining such information.
7. INCOME AND PRINCIPAL; ADDITIONS AND WITHDRAWALS.
B-3
<PAGE>
7.1 Collection of Income and Principal. CSTC shall collect the income
when paid on Property and principal of Property when paid on maturity,
redemption, sale or otherwise and invest it in accordance with Section 4. CSTC
shall make reasonable efforts to diligently collect income and principal of
which CSTC has received actual notice in accordance with normal industry
practices. CSTC shall be under no duty to take any action to effect collection
of any amounts with respect to which payment is in default or if payment is
refused after due demand. CSTC shall notify the Authorized Person of any default
or refusal to pay.
7.2 Additions and Withdrawals. CSTC may accept additions of Property to
the Custody Account upon receipt of and pursuant to written directions from the
Trustee or its delegate, provided the property is of a type described in Article
4 of the Trust Agreement. CSTC shall make distributions or transfers from the
Custody Account upon and pursuant to the written directions of the Plan
Administrator, the Trustee, or the Recordkeeper.
8. PROXIES; CORPORATE LITERATURE; SHAREHOLDER INFORMATION.
8.1 Proxies. CSTC shall forward all proxies and accompanying material
issued by any company the securities of which are held in the Custody Account to
the Trustee. CSTC shall be under no duty to determine how, or if, proxies are
voted.
8.2 Corporate Literature. CSTC shall be under no obligation to forward
or retain any other corporate material received by the Custody Account except to
the extent required by law.
8.3 Shareholder Information. Unless otherwise elected by the Trustee,
CSTC is authorized to disclose upon request to companies whose securities are
held in the Custody Account: (1) the Employer's name and address and (2) the
holdings in the Custody Account of securities issued by the requesting company.
9. STATEMENTS.
9.1 Statements. CSTC shall send to the Trustee a statement showing all
income and principal transactions and cash positions, and a list of assets and
the fair market value of each asset in the Custody Account, at the end of each
period. The Trustee may dispute in writing any statement within sixty (60) days
of mailing. If no written objections are received by CSTC within the sixty (60)
days, the statement shall be deemed accepted by all parties.
9.2 Alternative Valuation. Notwithstanding the above, if the fair market
value of any asset is not readily available in the ordinary course of business
to CSTC, CSTC will value the asset at its cost of acquisition, if known to CSTC.
Alternatively, CSTC may request instructions from the Trustee concerning the
value of such asset, and the Trustee shall comply with that request. CSTC shall
be entitled to rely upon the value placed upon such asset by the Trustee.
9.3 Advices. A separate notice for every security transaction will be
sent to the Trustee. The Trustee may waive any and all rights to receipt of such
notices.
10. INSTRUCTIONS. All instructions, notices and other communications required
or permitted by the Custody Agreement shall be in writing and delivered by mail
or hand delivery. CSTC may, in its absolute discretion, accept instructions or
notices given by facsimile, telex, telegram, telephone or electronic
communication that CSTC reasonably believes in good faith to be genuine, unless
and until the Trustee notifies CSTC in writing that such alternative forms of
communication are not authorized. If CSTC chooses to accept one or more
alternative methods of communication, the Trustee, its designee, the
Recordkeeper, the Broker or any other person providing instructions or notices
to CSTC will be required to follow reasonable procedures adopted by CSTC for
written confirmation. In
B-4
<PAGE>
addition, oral instructions may be recorded by CSTC. If any person providing
instructions or notices to CSTC fails or refuses to comply with CSTC's
confirmation procedures, CSTC will be entitled to refuse to comply with such
instructions or notices without incurring any liability for such refusal. All
directions, notices and other communications given under the terms of the
Custody Agreement will be deemed effective upon receipt.
11. COMPENSATION, EXPENSES AND OTHER CHARGES. To the extent the Employer fails
to pay expenses and compensation of CSTC, CSTC may debit the Custody Account
quarterly to pay CSTC for its expenses in administering the Custody Account and
reasonable compensation for its services at a rate set forth in the Plan Service
Agreement, as amended from time to time. CSTC has the right to alter its rate of
compensation at any time by providing the Trustee with notice at least sixty
(60) days prior to its effective date of the change. Reasonable compensation
includes compensation for any extraordinary services or computations required,
such as determination of the value of assets when current market values are not
published. CSTC shall have a lien on the Custody Account for its compensation
and for any reasonable expenses that are not paid by the Employer, including,
without limitation, counsel or appraisal fees which may be withdrawn from the
Custody Account, to the extent permitted by law.
CSTC shall pay from the Custody Account any fees and expenses incurred in
administering the Employer's Plan to the extent such payment is authorized by
the Employer in the Adoption Agreement until such time as the Trustee furnishes
CSTC a written notice to revoke such authorization at any time.
12. INDEMNIFICATION; DISPUTES.
12.1 Losses. CSTC will not be liable for any loss that may occur from
depreciation in value of the Property except for any losses attributable to
CSTC's own gross negligence or willful misconduct in carrying out the
instructions of an Authorized Person.
12.2 Acts of Others. CSTC will not be liable or responsible for the acts,
omissions or defaults of any agent or other person to whom duties may be
property delegated by CSTC under the Custody Agreement if such agent or person
was appointed with due care. CSTC will not be liable or responsible for any act
within the sole power of another, nor shall CSTC be liable or responsible for
any act or omission by the Authorized Person.
12.3 Indemnification. To the extent permitted by law, the Employer, the
Trustee and the Trust shall indemnify and hold harmless CSTC, its officers,
directors, employees, agents and affiliates ("Indemnitees") against and shall
hold the Indemnitees harmless from any and all liabilities, losses, expenses,
and claims (including reasonable attorney's fees and costs of defense) imposed
upon or incurred by the Indemnitees as a result of (1) acts or omissions to act
with respect to the Custody Account by persons unrelated to the Indemnitees
("unrelated persons"), including the Employer and any Authorized Person, (2) the
Indemnitee's action or inaction with respect to the Custody Account resulting
from reliance on the action or inaction of unrelated persons, including
directions to invest or otherwise deal with the Property, or (3) any violation
by any unrelated person of the provisions of applicable law, except to the
extent any such liability or loss results directly from a breach of an
Indemnitee's duties by reason of its negligence or willful misconduct. Subject
to ERISA, expenses incurred by an Indemnitee which CSTC believes to be subject
to indemnification under the Custody Agreement may be charged against the
Custody Account if not paid by the Employer at CSTC's request, provided that the
Employer may delay payment of any amount in dispute until such dispute is
resolved according to the provisions of this Custody Agreement. Such resolution
may include the award of interest on unpaid amounts.
12.4 Disputes. Any dispute under the Custody Agreement shall be resolved
by submission to a member of the American Arbitration Association who is chosen
by the Trustee and CSTC. If the Trustee and CSTC cannot agree on such a choice,
each shall nominate a member of the American Arbitration Association, and the
two nominees
B-5
<PAGE>
will then select an arbitrator. Expenses of the arbitration shall be paid as
decided by the arbitrator.
13. AMENDMENT AND TERMINATION.
13.1 Amendment. The Custody Agreement may be amended only by a written
agreement executed by CSTC and the Employer.
13.2 Termination. The Custody Agreement may be terminated upon thirty
(30) days written notice by either CSTC or the Employer. Such termination will
be effective at the end of the notice period, except that the parties may agree
to an earlier termination. CSTC's fees and costs related to termination,
including costs for registering securities and other Property, generating
reports and a final accounting shall be charged to the Employer and, if not paid
promptly, shall be charged to the Custody Account.
13.3 Failure to Provide Replacement. If either party has given notice of
termination, and upon expiration of the advance notice period no successor
custodian has been appointed and has accepted such appointment, CSTC shall
re-register and deliver all the Property to the Trustee.
14. REMOVAL AND APPOINTMENT OF AN AUTHORIZED PERSON. An Authorized Person may
be removed or appointed at any time if the Trustee gives notice to CSTC in the
appropriate manner. Removal shall be effective as of the day notice is received
by CSTC, unless a later date is specified. Appointment shall be effective upon
receipt by CSTC of notice of acceptance of such appointment in a form acceptable
to CSTC, unless a later date is specified in the notice of appointment or
acceptance. CSTC may continue to follow the directions of an Authorized Person
with respect to assets under such Authorized Person's control until actual
receipt of written notice of removal and shall not be liable for acting on the
direction of a duly appointed Authorized Person in the absence of actual receipt
of a written notice of removal.
15. MISCELLANEOUS.
15.1 Severability. If any provision of the Custody Agreement is
unenforceable or invalid for any reason, the remainder of the Custody Agreement
will remain in effect.
15.2 Governing Law. The Custody Account will be administered by CSTC in
the State of California, and all questions as to its validity will be determined
in accordance with the laws of the State of California to the extent not
preempted by ERISA.
15.3 Headings. The headings throughout the Custody Agreement have been
inserted for administrative convenience only.
15.4 Bond. CSTC will not be required to qualify before, be appointed by,
or account to any court or obtain the order or approval of any court in the
exercise of any power or discretion. CSTC will not be required to furnish bond
or other security in any jurisdiction except to the extent required by law.
15.5 Entire Agreement. The Custody Agreement constitutes the entire
agreement among the parties. All previous agreements and instructions (written
or oral) between the Employer and CSTC with respect to the Custody Account and
the Property are hereby superseded.
15.6 Tax Reporting. The Employer is responsible for filing any and all
tax or information returns and for paying, or directing the payment from the
Trust, any taxes on all the Property and income of the Custody Account.
B-6
<PAGE>
15.7 Notices; Change of Address. All notices, requests, demands and other
communications shall be in writing, except as otherwise permitted herein, and
shall be deemed to have been duly given on the date of receipt. Any party may
change the address at which notice may be served by providing ten days prior
notice of such change to the other party.
15.8 Extraordinary Events. CSTC is not responsible for losses caused
directly or indirectly by conditions beyond its control, including, but not
limited to, war, natural disasters, government restrictions, exchange or market
rulings, strikes, interruptions of communications or data processing services,
or disruptions in orderly trading on any exchange or market.
B-7
THE SCHWABPLAN
NON-STANDARDIZED
ADOPTION AGREEMENT FOR
THE CHARLES SCHWAB 401(k) PROFIT SHARING
PLAN AND TRUST
(ADOPTION AGREEMENT #001)
(BASIC PLAN DOCUMENT 02)
(C) CHARLES SCHWAB & CO., INC. MEMBER SIPC/NYSE. ALL RIGHTS RESERVED.
<PAGE>
THE SCHWABPLAN
NON-STANDARDIZED
ADOPTION AGREEMENT FOR
THE CHARLES SCHWAB 401(k) PROFIT SHARING
PLAN AND TRUST
(ADOPTION AGREEMENT #001)
The undersigned Employer adopts The Charles Schwab 401(k) Profit Sharing Plan
and Trust (Basic Plan 02) (The SchwabPlan(TM)) for those Employees who shall
qualify Participants hereunder, to be known as the:
HS RESOURCES, INC. 401(k) & PROFIT SHARING PLAN
-------------------------------------------------------------
(Enter Plan Name)
The Plan shall be effective as of the date specified in Item B(1) below. The
Employer hereby selects the following Plan provisions:
==============================================================================
ITEM A: EMPLOYER INFORMATION
==============================================================================
A(1) NAME OF EMPLOYER: HS RESOURCES, INC.
(Principal Office) ------------------------------------------
------------------------------------------
Address: ONE MARITIME PLAZA, 15TH FLOOR
------------------------------------------
Street / P.O. Box
SAN FRANCISCO
------------------------------------------
City
CALIFORNIA 94111
------------------------------------------
State/Commonwealth Zip Code
Telephone: (415) 433 - 5795
--- --- ----
Fax: (415) 433 - 5811
--- --- ----
A(2) EMPLOYER IDENTIFICATION NUMBER: 94 - 3036864
-- -------
A(3) EMPLOYER FISCAL YEAR: The 12 consecutive month period ending:
12 / 31 .
----------
month day
A(4) DATE BUSINESS COMMENCED: / / or Year: 1987
----- ----
<TABLE>
<CAPTION>
A(5) TYPE OF BUSINESS ENTITY:
<S> <C> <C>
a. |X| Corporation e. |_| Sole Proprietorship
b. |_| S Corporation f. |_| Partnership
c. |_| Professional Service Corporation g. |_| Non-profit Corporation
d. |_| Limited Liability Company h. |_| Other:________________
</TABLE>
2
<PAGE>
A(6) CONTROLLED GROUP
Is the Employer a member of a controlled group of corporations or
trades or businesses under common control within the meaning of IRC
Sections 414(b), (c), and 1563(a)? |X| YES |_| NO (proceed
to Item A(7))
IF YES, indicate the number of Affiliated Employers: NONE OF THE
SUBSIDIARIES HAVE EMPLOYEES.
Describe each member of the controlled group in Appendix A. Make
additional copies of Appendix A if there are more than two
Affiliated Employers.
A(7) AFFILIATED SERVICE GROUP
Is the Employer a member of an affiliated service group or
management organization within the meaning of IRC Section 414(m)?
|_| YES |X| NO (proceed to Item A(8))
IF YES, describe each member of the affiliated service group or
management organization in Appendix A. Make additional copies of
Appendix A if necessary.
A(8) NAME(S) OF TRUSTEE(S)
a. |X| The Charles Schwab Trust Company.
b. |_| Individual(s): ____________________________________________
____________________________________________
____________________________________________
NOTE: If an individual is named as Trustee, The Charles Schwab
Trust Company will serve as Custodian.
A(9) ADDRESS OF TRUSTEE(S)
a. |X| The Charles Schwab Trust Company
One Montgomery Street, 7th Floor
San Francisco, CA 94104
b. |_| Use Employer Address
c. |_| ___________________________________________________________
Street / P.O. Box
___________________________________________________________
City State Zip
A(10) PLAN ADMINISTRATOR (PLAN SECTIONS 1.75 AND 9.1)
a. |X| Employer (Use Employer's Address)
b. |_| Other: ____________________________________________________
____________________________________________________
____________________________________________________
3
<PAGE>
==============================================================================
ITEM B: PLAN INFORMATION
==============================================================================
B(1) EFFECTIVE DATE
This Adoption Agreement of The Charles Schwab 401(k) Profit Sharing
Plan and Trust shall do the following:
a. |_| Establish a new Plan and Trust effective as of / /
(hereinafter called the "Effective Date"). ----
b. |X| Constitute an amendment and restatement in its entirety
of a previously established qualified Plan and Trust of the
Employer which was effective 06/30/89 and 07/01/90
(hereinafter called the ----------------------
"Effective Date"). Except as specifically provided
in the Plan, the effective date of this amendment and
restatement is 08/01/98.
--------
B(2) PLAN YEAR (PLAN SECTION 1.77)
a. Plan Year shall mean:
1. |X| The calendar year.
2. |_| The 12 consecutive month period ending: / .
----
month day
b. Is there a short Plan Year?
1. |X| No
2. |_| Yes, commencing // and ending //.
--- ---
B(3) THREE DIGIT PLAN NUMBER assigned by the Employer: 0 0 1 (001,
- - -
002, 003, etc.)
B(4) COLLECTIVE BARGAINING AGREEMENTS
a. |X| Not applicable.
b. |_| Identify any collective bargaining agreements that provide
for plan participation. (Identify additional agreements in
an attachment.)
______________________________________________________________
AGREEMENT BETWEEN:
_______________________________________________________
Employer
_______________________________________________________
Union
_______________________________________________________
Local
_______________________________________________________
Effective date of plan participation: //
---
__________________________________________________________
AGREEMENT BETWEEN:
_______________________________________________________
Employer
_______________________________________________________
Union
________________________________________________________
Local
Effective date of plan participation: //
---
______________________________________________________________
4
<PAGE>
B(5) PREDECESSOR EMPLOYER SERVICE (PLAN SECTION 1.107)
a. |_| Not applicable. The Plan has not been maintained by a
predecessor Employer.
b. |X| Years of Service with the following predecessor Employer(s)
shall be recognized under this Plan: ELK EXPLORATION, INC.
___________________________________________________________
and such service shall be recognized for the following
purposes: (check all that apply)
1. |X| All Plan purposes
2. |_| Eligibility to participate
3. |_| Vesting
B(6) NORMAL RETIREMENT AGE (PLAN SECTION 1.69)
Normal Retirement Age shall mean the date on which a Participant:
a. |X| Attains his/her 65TH birthday (not to exceed 65th).
b. |_| The later of the date a Participant attains his/her _______
birthday (not to exceed 65th), or the ______ (not to exceed
5th) anniversary of the first day of the Plan Year in which
the Participant commenced participation in the Plan.
B(7) EARLY RETIREMENT AGE (PLAN SECTION 1.32)
Early Retirement Age shall mean the date on which a Participant:
a. |_| Attains his/her _____ birthday, and has completed at least
_____ Years of Service.
b. |X| No Early Retirement provisions are provided under this Plan.
B(8) COMPENSATION (PLAN SECTION 1.21) (SELECT I. OR II.)
I. |X| STANDARD DEFINITION OF COMPENSATION (Meets IRS Safe Harbor)
If this option is selected, proceed to Item C.
a. COMPENSATION DEFINED.
For all Plan purposes, except as otherwise required by
law, Compensation shall mean wages, tips, overtime pay,
bonuses, commissions, and other Compensation reported on
Form W-2.
b. COMPENSATION INCLUSIONS.
Compensation shall INCLUDE any amount contributed by the
Employer pursuant to a salary reduction agreement that
is not currently includible in the Participant's gross
income by reason of the application of Code Sections
125, 402(e)(3), 402(h)(1)(B), 403(b), 414(h)(2), or
457(b).
c. COMPENSATION EXCLUSIONS.
Compensation shall EXCLUDE the sum of all of the
following items, even if otherwise includible in gross
income: (i) reimbursements or other expense allowances;
(ii) cash and noncash fringe benefits; (iii) moving
expenses; (iv) deferred compensation; and (v) welfare
benefits.
d. ENTRY DATE COMPENSATION.
For an Employee's first year of Participation,
Compensation shall be recognized as of the Participant's
Entry Date.
5
<PAGE>
II.|_| ALTERNATIVE DEFINITION OF COMPENSATION (May need to be
tested for Non-Discrimination. Do not use if Item B(8)I was
selected)
a. The following definition of Compensation shall apply for
all Plan purposes unless otherwise provided by law or
under the terms of the Plan.
1. |_| Wages, tips, overtime pay, bonuses, commissions,
and other compensation on Form W-2.
2. |_| Wages within the meaning of Code Section
3401(a), but without regard to any rules that
limit the remuneration included in the wages
based on the nature or location of the employment
or the services performed (such as the exception
for agricultural labor in Code section
3401(a)(2)).
3. |_| Code Section 415 safe-harbor compensation, as
described in Treasury Regulation Section
1.415-2(d)(10).
b. Compensation, as defined under Item IIa., above shall
exclude (select all that apply):
1. |_| Overtime Pay
2. |_| Bonuses
3. |_| Commissions
4. |_| Other:______________________________________________
5. |_| None of the above.
c. Compensation, as defined under Item IIa., above:
1. |_| Shall exclude
2. |_| Shall include
Any amount contributed by the Employer pursuant to a
salary reduction agreement which is not includible in
the gross income of the Employee under Code Sections
125, 402(e)(3), 402(h)(1)(B), 403(b), 414(h)(2), or
457(b).
d. Compensation, as defined under Item IIa., above:
1. |_| Shall exclude
2. |_| Shall include
The following items, even if otherwise includible in
gross income:
The sum of all (i) reimbursements or other expense
allowances, (ii) cash and noncash fringe benefits, (iii)
moving expenses, (iv) deferred compensation, and (v)
welfare benefits.
e. For an Employee's first year of Participation,
Compensation shall be recognized as of:
1. |_| The Participant's Entry Date.
2. |_| The first day of the Plan Year.
6
<PAGE>
==============================================================================
ITEM C: ELIGIBILITY, SERVICE AND VESTING
==============================================================================
C(1) ELIGIBLE EMPLOYEE (PLAN SECTION 1.37)
Eligible Employee shall mean:
a. |_| Any Employee who has satisfied the eligibility requirements
in Item C(2).
b. |X| Any Employee who has satisfied the eligibility requirements
in Item C(2) EXCEPT an Employee in one or more of the
following categories:
1. |X| Collective Bargaining Employees (i.e., Employees whose
employment is governed by a collective bargaining
agreement between the Employer and Employee
representatives under which retirement benefits were the
subject of good faith collective bargaining).
2. |X| Non-resident aliens receiving no income from U.S.
sources.
3. |_| Highly Compensated Employees.
4. |_| Non-union hourly-paid Employees.
5. |_| Salaried Employees.
6. |_| Employees paid by commissions only.
7. |X| Leased Employees.
8. |X| Other: SEASON PART-TIME EMPLOYEES
OR TEMPORARY EMPLOYEES HIRED FOR SPECIFIC PERIODS OF
TIME OR FOR THE COMPLETION OF A PROJECT THE DURATION OF
WHICH IS NOT EXPECTED TO EXCEED 6 MONTHS.
C(2) ELIGIBILITY REQUIREMENTS (PLAN SECTION 2.1)
An Eligible Employee will be eligible to participate in the Plan if
such Eligible Employee has satisfied the service and age
requirements, if any, specified below:
________________________________________________________________________
I. ELIGIBILITY FOR ALL PLAN PURPOSES
(Complete Items a. and b. Complete Item c. only if
eligibility requirements vary by contribution source. If
Item c. does not apply, proceed to Item C(3).)
a. SERVICE REQUIREMENT (If the Plan has 401(k)
features, no more than one Year of Service may be
required for participation. If more than one Year of
Service is selected, all contributions must become
fully and immediately vested.)
1. |_| None
2. |_| One (1) Year of Service
3. |_| Other (not to exceed two (2) Years of
Service): _______________
b. AGE REQUIREMENT (may not exceed 21)
1. |_| N/A - No Age Requirement.
2. |_| 21
3. |_| Other: ______________________________________
c. |X| NOT APPLICABLE. Eligibility requirements
vary by Contribution source. (Complete Items
II, III and IV below.)
________________________________________________________________________
7
<PAGE>
________________________________________________________________________
II . APPLICABLE TO THE 401(k) ELECTIVE DEFERRALS
(Do not complete if Item C(2)I has been selected.)
a. SERVICE REQUIREMENT (No more than one Year of Service
may be required for participation.)
1. |X| None
2. |_| One (1) Year of Service
3. |_| Other (not to exceed one (1) Year of
Service):________________
b. AGE REQUIREMENT (may not exceed 21)
1. |X| N/A - No Age Requirement.
2. |_| 21
3. |_| Other: ________________________________________
c. |_| NOT APPLICABLE.
________________________________________________________________________
________________________________________________________________________
III. APPLICABLE TO EMPLOYER MATCHING AND PROFIT SHARING
CONTRIBUTIONS
(Do not complete if Item C(2)I has been selected.)
a. SERVICE REQUIREMENT (No more than two Years of
Service may be required for participation. If more
than one Year of Service is selected, all
contributions must become fully and immediately
vested.)
1. |_| None
2. |X| One (1) Year of Service
3. |_| Other (not to exceed two (2) Years of
Service): _______________
b. AGE REQUIREMENT (may not exceed 21)
1. |X| N/A - No Age Requirement.
2. |_| 21
3. |_| Other: ________________________________________
c. |_| NOT APPLICABLE.
________________________________________________________________________
________________________________________________________________________
IV. APPLICABLE TO VOLUNTARY AFTER-TAX CONTRIBUTIONS
(Do not complete if Item C(2)I has been selected.)
a. SERVICE REQUIREMENT (No more than two Years of
Service may be required for participation.)
1. |X| None
2. |_| One (1) Year of Service
3. |_| Other (not to exceed two (2) Years of
Service): _______________
b. AGE REQUIREMENT (may not exceed 21)
1. |X| N/A - No Age Requirement.
2. |_| 21
3. |_| Other: ________________________________________
c. |_| NOT APPLICABLE.
________________________________________________________________________
8
<PAGE>
C(3) YEARS OF SERVICE (PLAN SECTION 1.107)
Indicate the method of crediting service for each plan feature:
_________________________________________________________________
Eligibility Contributions Vesting
----------- ------------- -------
Elapsed Time Method |X| |X| |X|
1,000 Hours Method |_| * |_| |_|
*May not be selected if eligibility requirement is less than 12
months.
_________________________________________________________________
C(4) ENTRY DATES (PLAN SECTIONS 1.43, 2.1)
An Eligible Employee shall become a Participant as of:
a. |_| The quarterly entry date immediately following the date the
Employee meets the Plan's eligibility requirements.
SPECIFY ENTRY DATES: ___, ___
___, _____
b. |_| The earlier of the first day of the Plan Year or the
first day of the seventh month of the Plan Year coinciding
with or next following the date on which the Employee meets
the eligibility requirements, such as January 1 and July 1
for calendar year plans.
SPECIFY ENTRY DATES: ___, _____
c. |_| The first day of the month coinciding with or next following
the date on which the Employee meets the eligibility
requirements.
d. |X| The date on which the Employee meets the eligibility
requirements.
e. |_| Other:_____________________________________________________
9
<PAGE>
C(5) REGULAR VESTING SCHEDULE (PLAN SECTION 4.2)
I. VESTING OF EMPLOYER NONELECTIVE (PROFIT SHARING)
CONTRIBUTIONS
a. The Plan's vesting schedule, based on number of Years of
Service and applicable only to Profit Sharing Contributions,
shall be as follows: (fill in vesting percentage where
appropriate)
<TABLE>
<CAPTION>
_____________________________________________________________________
Vesting
Schedule Years of Service:
Number 1 2 3 4 5 6 7
------ ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. |_| 100% (Full and immediate upon entering Plan.)
2. |_| 0% 0% 100%
3. |_| 0% 0% 0% 0% 100%
4. |_| 0% 20% 40% 60% 80% 100%
5. |_| 0% 0% 20% 40% 60% 80% 100%
6. |X| 0% 20% 40% 66-2/3% 100% 100% 100%
- -- -- ------
_____________________________________________________________________
</TABLE>
b. |_| Not applicable. The Plan does not provide for
Nonelective (Profit Sharing) Contributions.
II. VESTING OF MATCHING CONTRIBUTIONS:
a. The Plan's vesting schedule, based on number of Years of
Service and applicable only to Matching Contributions, shall
be as follows:
1. |_| The same vesting schedule as set forth in
Item C(5)I.a. above.
2. |X| Matching Contributions are subject to the following
vesting schedule:
VESTING SCHEDULE NUMBER: 6
-
If Vesting Schedule #6 is selected, describe:
100% VESTED AFTER ONE YEAR OF SERVICE.
____________________________________________________
b. |_| Not applicable. The Plan does not provide for Matching
Contributions.
10
<PAGE>
C(6) TOP-HEAVY VESTING (PLAN SECTION 12.1)
If this Plan becomes a Top-Heavy Plan, the following vesting
schedule shall apply for such Plan Year and each succeeding Plan
Year, whether or not the Plan remains Top-Heavy, and shall be
treated as a Plan amendment pursuant to this Plan. Once effective,
this schedule shall apply to all Contributions made to the Plan,
including Contributions made prior to the date the Plan became
Top-Heavy.
a. |X| Not applicable. The vesting schedule in effect under
Item C(5) is at least as favorable to the Participant as
one of the schedules described below.
b. |_| The following Top-Heavy vesting schedule shall apply:
_______________________________________________________________
Top-Heavy
Vesting Years Of Service:
Schedule ----------------
Number 1 2 3 4 5 6
------ ----- ----- ----- ----- ----- -----
1. |_| 100% (Full and immediate upon entering Plan.)
2. |_| 0% 0% 100%
3. |_| 0% 20% 40% 60% 80% 100%
_______________________________________________________________
c. |_| Not applicable. The Plan exclusively covers collectively
bargained Employees.
C(7) VESTING SERVICE EXCLUSIONS (PLAN SECTION 4.2)
All Years of Service with the Employer shall be included for vesting
purposes, except as provided below:
a. |X| Not applicable. All Years of Service are included.
b. |_| Service prior to the Effective Date of the Plan shall be
excluded.
c. |_| Service prior to the time an Employee attained age 18 shall
be excluded.
C(8) SIMPLIFIED DEFINITION OF HIGHLY COMPENSATED EMPLOYEE
The simplified definition of Highly Compensated Employee (i.e.,
limited to anyone earning over $50,000, as indexed, and only
available if the Employer maintains significant business activity
and has employees in at least two significantly separate geographic
areas):
a. |X| Shall not apply.
b. |_| Shall apply.
11
<PAGE>
==============================================================================
ITEM D: CONTRIBUTIONS
==============================================================================
D(1) SECTION 401(k) ELECTIVE DEFERRALS (PLAN SECTION 1.89)
Each Employee may elect to defer his/her Compensation as follows
(select item a., b. or c. AND item d):
a. |X| A maximum Contribution of up to 15% of Compensation
(from 1%, expressed in whole percentages) may be made.
b. |_| Any percentage or amount may be made, up to the maximum
annual amount permitted by statute ($9,500 for 1997).
c. |_| Not applicable. Elective deferrals shall not be made.
Proceed to Item D(2).
d. A Participant may modify (i.e., reduce or increase) the amount
of 401(k) elective deferrals as of:
1. |_| Any time, effective as of the following calendar
quarter.
2. |X| Any time, effective as soon as administratively
possible.
-----------------------------------------------
ENTER DATE(S) OR PERIOD(S)).
D(2) EMPLOYER'S MATCHING CONTRIBUTIONS (PLAN SECTIONS 1.64, 3.8)
I. BASED ON 401(k) ELECTIVE DEFERRALS
(complete items a., b., c., or d., AND e., f., and g.)
a. |_| N/A. The Employer shall not match 401(k) elective
deferrals (or the Plan does not provide for
elective deferrals).
b. |_| The Employer shall make Matching Contributions equal
to _____% (e.g. 50%) of the Participant's 401(k)
elective deferrals; however, only a Participant's
401(k) elective deferrals up to _____% of
Compensation will be matched.
c. |_| The Employer may make Matching Contributions equal
to a discretionary percentage or amount, to be
determined annually by the Employer, of the
Participant's 401(k) elective deferrals.
d. |X| Other: THE EMPLOYER MAY MAKE MATCHING CONTRIBUTIONS
EQUAL TO A DISCRETIONARY PERCENTAGE OR AMOUNT, TO BE
DETERMINED ANNUALLY BY THE EMPLOYER, OF THE
PARTICIPANT'S 401(k) ELECTIVE DEFERRALS. THE EMPLOYER
AT ITS SOLE DISCRETION MAY MATCH ANY COMBINATION, ONE,
OR NONE OF THE COMPENSATION ELEMENTS OF QUALIFIED
PARTICIPANTS.
e. The Matching Contribution made on behalf of a Participant
for any Plan Year shall not exceed:
1. |_| $____.
2. |X| N/A. No dollar limit shall apply.
12
<PAGE>
f. Matching Contributions shall be made on behalf of
1. |X| All Eligible Participants.
2. |_| Only Non-Highly Compensated Eligible Participants.
3. |_| All Eligible Participants except for Employees
classified as follows (e.g., Employees of a
division or department of the Employer):
________________________________________________
________________________________________________
4. |_| A multi-tiered matching contribution arrangement
for the following categories of Eligible
Participants:
________________________________________________
________________________________________________
5. |_| N/A
g. If, during the Plan Year, a Participant's 401(k)
deferral rate changes to an amount above or below any
threshold at which such contributions are matched
(select one):
1. |_| Employer Matching Contributions will change
prospectively with the change in a Participant's
401(k) elective deferral percentage.
2. |X| Employer Matching Contributions will be adjusted
at the end of each Plan Year to match the
annualized 401(k) elective deferral percentage
and/or annualized compensation, as applicable.
II. BASED ON VOLUNTARY AFTER-TAX CONTRIBUTIONS
(complete items a., b., c., d., or e. AND f.)
a. |X| N/A. The Employer shall not match Voluntary After-Tax
Contributions (or the Plan does not provide for
Voluntary After-Tax Contributions).
b. |_| The Employer may make Matching Contributions equal to
a discretionary percentage, to be determined annually
by the Employer, of the Participant's Voluntary
After-Tax Contributions.
c. |_| The Employer shall make Matching Contributions equal
to _____% (e.g. 50%) of the Participant's Voluntary
After-Tax Contributions; however, only a Participant's
Voluntary After-Tax Contributions up to _____% of
Compensation will be matched.
d. |_| Other: _____________________________________________
____________________________________________________
e. |_| The Matching Contribution made on behalf of a
Participant for any Plan Year shall not exceed
1. |_| $__.
2. |_| N/A. No dollar limit shall apply.
f. Matching Contributions of Voluntary After-Tax
Contributions shall be made on behalf of:
1. |_| All Eligible Participants.
2. |_| Only Non-Highly Compensated Eligible Participants.
3. |_| All Eligible Participants except for Employees
classified as follows (e.g., Employees of a
division or department of the Employer, Employees
of related Employers, etc.):____________________
4. |_| Other: _________________________________________
_________________________________________
5. |X| N/A
13
<PAGE>
D(3) DISCRETIONARY NONELECTIVE EMPLOYER (PROFIT SHARING) CONTRIBUTIONS
(PLAN SECTION 3.1)
a. |X| The Employer may make discretionary Nonelective (Profit
Sharing) Contributions:
b. |_| Nonelective (Profit Sharing) Contributions shall not be made.
Proceed to Item D(4).
If Item D(3)a. is selected, the Employer's discretionary
Nonelective Contribution shall be allocated as follows (select c.
or d.):
c. |_| FOR A NON-INTEGRATED PLAN
The Employer discretionary Nonelective Contribution for
the Plan Year shall be allocated in the same ratio as
each Participant's Compensation bears to the total
Compensation of all Participants for that Plan Year.
d. |X| FOR AN INTEGRATED PLAN
(SEE NOTE ON GUIDELINE PAGE)
The Employer discretionary Nonelective Contribution for the
Plan Year shall be allocated in accordance with Plan Section
3.2 based on a Participant's Compensation exceeding:
1. |X| The Taxable Wage Base.
2. |_| 20% of the Taxable Wage Base.
3. |_| ___% of the Taxable Wage Base.
4. |_| Other: $___.(May not exceed Taxable Wage Base)
14
<PAGE>
D(4) QUALIFIED NONELECTIVE CONTRIBUTIONS (QNECS) (PLAN SECTION 1.82)
a. |X| The Employer may make Qualified Nonelective Contributions
(QNECs) in an amount or percentage of Compensation necessary
to satisfy the ADP and/or ACP test or the Top-Heavy minimum
contributions. QNECs will be made on behalf of:
1. |X| Non-Highly Compensated Eligible Participants, who:
A. |_| Are employed on the last day of the Plan Year.
B. |_| Were employed at any time during the Plan Year.
C. |X| Complete a Year of Service and are on the last day of
the Plan Year.
2. |_| Non-Highly Compensated Eligible Participants and Non-Key
Employees only, who:
A. |_| Are employed on the last day of the Plan Year.
B. |_| Were employed at any time during the Plan Year.
C. |_| Complete a Year of Service and are on the last day of
the Plan Year.
b. |_| Not applicable. QNECs shall not be made.
D(5) QUALIFIED MATCHING CONTRIBUTIONS (QMACS) (PLAN SECTION 1.81)
a. |X| The Employer may make Qualified Matching Contributions
(QMACs) in an amount or percentage of compensation necessary
to satisfy the ADP and/or ACP test, and will allocate QMACs
only to Non-Highly Compensated Eligible Participants who
made 401(k) elective deferrals or Voluntary After-Tax
Contributions during the Plan Year and:
1. |_| Are employed on the last day of the Plan Year.
2. |_| Were employed at any time during the Plan Year.
3. |X| Complete a Year of Service and are on the last day of
the Plan Year.
b. |_| Not applicable. QMACs shall not be made.
15
<PAGE>
D(6) ALLOCATIONS TO ACTIVE PARTICIPANTS (PLAN SECTION 3.2)
(SEE NOTE ON GUIDELINE PAGE)
<TABLE>
<CAPTION>
a. Allocations of Employer Contributions will be made as follows:
_________________________________________________________________________________
N/A Annual* Quarterly Semi-Annual Other**
--- ------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
1. Employer Matching |_| |X| |_| |_| |_|
2. Nonelective (Profit |_| |X| |_| |_| |_|
Sharing)
*Complete Item D(6)b. **Please Explain:_________________________________
_________________________________________________________________________________
</TABLE>
b. If an annual allocation is specified in Item D(6)a., shall a
Participant employed on the last day of the allocation period
be required to have a Year of Service in order to receive an
allocation?
__________________________________________________________
No Yes N/A
-- --- ---
1. Employer Matching |_| |X| |_|
2. Nonelective (Profit |X| |_| |_|
Sharing)
__________________________________________________________
NOTE: IF YOU SELECTED ITEM D(3)(D) SO THAT THE PLAN IS INTEGRATED WITH
SOCIAL SECURITY, THEN YOU MUST PLACE AN "X" IN NO FOR ITEM 2.
--
16
<PAGE>
D(7) ALLOCATIONS TO TERMINATED PARTICIPANTS (PLAN SECTION 3.2)
Any Participant who terminated employment during the Plan Year for
reasons other than death, Disability or retirement and was not
actively employed on an allocation date shall share in allocations
of Employer Contributions as follows:
a. With respect to Employer Nonelective (Profit Sharing)
Contributions and allocations of any Forfeitures, a
Participant who terminated employment during the allocation
period:
1. |_| Shall not share in such allocations, regardless of
Hours of Service.
2. |_| Shall share in such allocations provided such
Participant completed a Year of Service*.
3. |X| Shall share in such allocations provided such
Participant completed more than 500 Hours of Service
(91 days or 3 consecutive calendar months if Elapsed
Time is elected).
4. |_| Shall share in such allocations, regardless of
service.
5. |_| N/A. The Plan does not provide for such Contributions.
*May not be selected if contributions are allocated
more frequently than annually.
NOTE: YOU MUST CHOOSE ITEM 3 OR 4 IF THE PLAN IS INTEGRATED
WITH SOCIAL SECURITY (ITEM D(3)(D)).
b. With respect to the allocation of Employer Matching
Contributions, a Participant who terminated employment during
the allocation period:
1. |_| Shall share in such allocations, regardless of Hours
of Service.
2. |_| Shall share in such allocations provided such
Participant completed a Year of Service*.
3. |X| Shall not share in such allocations, regardless of
service.
4. |_| N/A. The Plan does not provide for such
Contributions.
*May not be selected if contributions are allocated
more frequently than annually.
D(8) LIMITATIONS ON ALLOCATIONS (PLAN SECTION 4.3)
a. If any Participant is or was covered under another qualified
defined Contribution plan maintained by the Employer, or if
the Employer maintains a welfare benefit fund, as defined in
Code Section 419(e), or an individual medical account, as
defined in Code Section 415(1)(2), under which amounts are
treated as Annual Additions with respect to any Participant
in this Plan:
1. |_| N/A. The Employer does not maintain another defined
Contribution plan or a welfare benefit fund or
individual medical account under which amounts are
treated as Annual Additions.
2. |X| The provisions of Section 4.3 of the Plan shall apply.
3. |_| Provide the method under which the Plans will limit
total Annual Additions to the Maximum Permissible
Amount, and will properly reduce any Excess Amounts,
in a manner that precludes Employer discretion:
____________________________________________________
____________________________________________________
b. If any Participant is or ever has been a Participant in a
defined benefit plan maintained by the Employer:
1. |_| N/A. The Employer does not maintain, and has never
maintained, a defined benefit plan under which any
Participant has participated.
2. |X| The provisions of Section 4.3 of the Plan shall apply.
3. |_| Provide the method under which the Plans involved will
satisfy the 1.0 limitation in a manner that precludes
Employer discretion:
____________________________________________________
____________________________________________________
17
<PAGE>
D(9) VOLUNTARY AFTER-TAX EMPLOYEE CONTRIBUTIONS (PLAN SECTION 3.8)
Voluntary After-Tax Employee Contribution provisions are as
follows (select a. or b. and c.):
a. |_| Voluntary After-Tax Contributions shall not be permitted.
b. |X| Voluntary After-Tax Contributions are permitted up to 5% of
Compensation. -
c. |_| In-service withdrawals of Voluntary After-Tax Contributions
and related earnings prior to age 59-1/2:
1. |X| Shall be permitted.
2. |_| Shall not be permitted.
3. |_| Not applicable.
D(10) FORFEITURES (PLAN SECTIONS 1.51, 6.2(C))
a. FORFEITURES OF MATCHING CONTRIBUTIONS SHALL BE:
1. |_| Used to reduce the Employer's Matching Contribution.
2. |_| Used to pay reasonable Plan expenses, and any excess
shall be used to reduce the Employer's Matching
Contribution.
3. |X| Not applicable (select one):
A. |_| Because the Plan does not provide for Matching
Contributions.
B. |X| Because Matching Contributions are fully vested
when made.
b. FORFEITURES OF PROFIT SHARING CONTRIBUTIONS SHALL BE:
1. |_| Not applicable (select one):
A. |_| Because the Plan does not provide for Profit
Sharing Contributions.
B. |_| Because Profit Sharing Contributions are fully
vested when made.
2. |_| Used to pay reasonable Plan expenses, and any excess
shall be used to reduce the Employer's Matching
Contributions or, if no Matching Contributions are
made, added to the Employer's Nonelective (Profit
Sharing) Contributions.
3. |_| Used to reduce the Employer's Matching Contributions
and, if no Matching Contributions are made, added to
the Employer's Nonelective (Profit Sharing)
Contributions.
4. |X| Added to the Employer's Nonelective (Profit Sharing)
Contribution and allocated in the same manner or, if
no Profit Sharing Contribution is made, allocated
among all eligible Participants as if such forfeiture
were a Profit Sharing Contribution.
18
<PAGE>
==============================================================================
ITEM E: DISTRIBUTIONS AND LOANS
==============================================================================
E(1) FORMS OF DISTRIBUTION (PLAN SECTIONS 6.2)
a. Distributions under the Plan may be made as follows
(check ALL that apply):
1. |X| Automatic cash out of vested account balance if
$3,500 or less.
2. |X| Single lump sum.
3. |X| Installments over a period not to exceed 25 years
--
(payable monthly, quarterly, semi-annually or
annually).
4. |X| Combination of lump sum and installments.
5. |_| Automatic distribution of entire account at
age 70-1/2.
b. If this is an amendment and restatement of an existing plan,
was the existing plan subject to the joint and survivor
rules?
1. |X| No.
2. |_| Yes. Section 6.3 of The SchwabPlan(TM) shall provide
forms of distribution that comply with the joint and
survivor rules.
E(2) TIMING OF DISTRIBUTIONS (PLAN SECTION 6.2)
Distributions upon termination of employment shall be made as
follows:
a. |X| An immediate distribution can be made at the Participant's
election.
b. |_| Following ____ one-year Breaks in Service (not to exceed 5).
c. |_| Other: __________________________________________________.
E(3) HARDSHIP DISTRIBUTIONS (PLAN SECTION 6.12)
Hardship Distribution provisions are as follows:
a. |_| Hardship distributions are not permitted.
b. |X| Hardship distributions are available from the Participant's
401(k) elective deferral account, excluding earnings on such
deferrals.
19
<PAGE>
E(4) PRE-RETIREMENT DISTRIBUTIONS (PLAN SECTION 6.11)
Pre-Retirement Distribution provisions are as follows:
a. |X| Ifa Participant has reached age 59-1/2, distributions may be
made, at the Participant's election, from any of the
accounts specified below, without requiring the Participant
to terminate employment. The age 59-1/2 requirement,
however, shall not apply to item a. 3. This election shall
apply to the following account balances: (check all that
apply)
1. |X| All Plan balances (BUT ONLY WITH RESPECT TO ACCOUNTS
THAT PROVIDE FOR 100% FULL AND IMMEDIATE VESTING).
Subject to Section G(4).
2. |_| 401(k) Elective Deferrals
3. |_| Voluntary After-Tax Contributions and Deductible
Contributions, if any
4. |_| Qualified Nonelective Contributions and/or Qualified
Matching Contributions
5. |_| Rollover Contributions
6. |_| Profit Sharing Contributions (SELECT ONLY if Profit
Sharing Contributions are 100% vested immediately).
7. |_| Matching Contributions (SELECT ONLY if Matching
Contributions are 100% vested immediately).
b. |_| No pre-retirement distributions may be made.
E(5) PARTICIPANT LOANS (PLAN SECTION 5.3) (Select I, II, or III below)
I. |_| STANDARDIZED LOAN PROGRAM
Plan loans are available according to the following terms:
a. Loans are available to active Employees only, and
may be made from all vested account balances.
b. The maximum loan amount shall be $50,000, not to
exceed 50% of a Participant's vested interest,
further reduced in accordance with Plan Section
5.3(g).
c. The minimum loan amount shall be $1,000.
d. No more than one (1) outstanding loan shall be
permitted per Participant.
e. The Plan Administrator may charge reasonable
expenses associated with the establishment and
administration of a loan to the individual account
of the Participant requesting the loan.
f. The loan repayment period shall not exceed five
(5) years.
g. All plan loans will be repaid through direct
payroll deduction while a Participant is actively
employed, or by check while the Participant is on
leave of absence or is transferred to an
Affiliated Employer that does not sponsor the
Plan.
h. A Participant shall not be required to demonstrate
hardship or financial necessity to secure a loan.
i. Partial pre-payments of plan loans shall
not be permitted.
20
<PAGE>
II.|X| CUSTOMIZED LOAN PROGRAM
(Do not complete if Item E(5)I. was selected)
Plan loans are available according to the following terms:
a. Loans are available from vested account balances
attributable to the following sources (check all
that apply):
1. |X| All Plan accounts.
2. |_| 401(k) Elective Deferrals
3. |_| Rollovers
4. |_| Voluntary After-Tax Contributions
5. |_| Matching Contributions
6. |_| Qualified Nonelective and/or Qualified Matching
Contributions
7. |_| Profit Sharing Contributions
b. Loans shall be available to the following categories
of Plan Participants:
1. |X| Active Employees only.
2. |_| All Plan Participants, including former
Employees who maintain vested account balances
under the Plan.
c. The following maximum limitations on the amount of a
loan shall apply, subject to further reduction in
accordance with plan terms.
1. |X| The maximum loan amount shall not exceed
$50,000, or if less, 50% of a Participant's
vested interest.
2. |_| The maximum loan amount shall be $_____ (an
amount less than $50,000), and shall not exceed
____% (50% maximum) of a Participant's vested
interest.
d. The following minimum loan limitations shall apply:
1. |X| The minimum loan amount shall be $1,000.
2. |_| The minimum loan amount shall be $_____ (not to
exceed $1,000).
e. The number of outstanding loans per Participant shall
not exceed: 2 (TWO)
f. Reasonable expenses associated with the establishment
and administration of a loan may be chargeable to the
Participant's Account. Any fees not charged to the
Participant's Account shall be billed to the Plan
Sponsor. The following loan fees are chargeable to the
Participant's Account:
1. |X| Any reasonable expenses.
2. |X| Initial set-up fee only.
3. |X| Annual fee for loan administration only.
21
<PAGE>
g. The repayment period for a plan loan taken for the
purchase of a primary residence
1. |_| Shall not exceed five (5)
years.
2. |X| Can be extended beyond five (5) years, but in
no event beyond fifteen (15) years (not to
exceed 30).
h. Plan loans shall be repaid as follows:
1. |X| Through direct payroll deduction while a
Participant is actively employed, or by check
while the Participant is on leave of absence or
is transferred to an Affiliated Employer that
does not sponsor the Plan.
2. |_| Through any Employer-authorized repayment
program, including one that is administered
through payroll deduction.
i. A Participant may borrow from the Plan for the
following purposes:
1. |X| The Plan shall impose no restrictions.
2. |_| Hardship or financial necessity, defined as
follows: (select one or more)
A. |_| In accordance with the Section 401(k)
safe harbors.
B. |_| For one or more of the following
reasons: (select one or more)
i. |_| Automobile purchase.
ii. |_| Loan/debt consolidation.
iii. |_| Funeral expenses.
iv. |_| Any educational expenses (i.e.,
not limited to the 401(k) safe
harbors).
v. |_| Other: ______________________
_____________________________
III. |_| PARTICIPANT LOANS ARE NOT AVAILABLE UNDER
THE SCHWABPLAN(TM).
22
<PAGE>
==============================================================================
ITEM F: TOP-HEAVY REQUIREMENTS
==============================================================================
F(1) TOP-HEAVY DUPLICATIONS (PLAN SECTION 12.3)
I. ANOTHER DEFINED CONTRIBUTION PLAN
When a Non-Key Employee is a Participant in this Plan and
another Defined Contribution Plan maintained by the Employer,
indicate which method shall be utilized to avoid the
duplication of Top-Heavy minimum benefits:
a. |X| N/A. The Employer does not maintain another Defined
Contribution Plan.
b. |_| A minimum, non-integrated Employer Contribution of 3%
of each Non-Key Employee's total Compensation shall be
provided in this Plan unless the other Defined
Contribution Plan is a plan subject to Internal
Revenue Code Section 412 that provides for at least a
3% contribution on behalf of Non-Key Employees.
c. |_| Specify the method under which the plans will
provide Top-Heavy minimum benefits for Non-Key
Employees that will preclude Employer discretion
and avoid inadvertent omissions, including any
adjustments required under Internal Revenue Code
Section 415(e).
____________________________________________________
____________________________________________________
II. A DEFINED BENEFIT PLAN
When a Non-Key Employee is a Participant in this Plan and a
Defined Benefit Plan maintained by the Employer, indicate
which method shall be utilized to avoid duplication of
Top-Heavy minimum benefits.
a. |X| N/A. The Employer does not maintain a Defined Benefit
Plan.
b. |_| A minimum, non-integrated Employer Contribution
of 5% of each Non-Key Employee's total Compensation
shall be provided in this Plan, as specified in
Section 12.5. (The Defined Benefit and Defined
Contribution Fractions will be computed using 100%
if this choice is selected.)
c. |_| A minimum, non-integrated Employer Contribution of
7-1/2% of each Non-Key Employee'S total Compensation
shall be provided in this Plan, as specified in
Section 12.5. (If this choice is selected, the Defined
Benefit and Defined Contribution Fractions will be
computed using 125% for all Plan Years in which the
Plan is Top-Heavy, but not Super Top-Heavy.)
d. |_| Specify the method under which the plans will provide
Top-Heavy minimum benefits for Non-Key Employees that
will preclude Employer discretion and avoid
inadvertent omissions, including any adjustments
required under Internal Revenue Code Section 415(e).
____________________________________________________
____________________________________________________
23
<PAGE>
==============================================================================
ITEM G: MISCELLANEOUS
==============================================================================
G(1) DIRECTED INVESTMENT ACCOUNTS (PLAN SECTION 1.29)
a. Are Participants permitted to direct the investment of their
plan interest?
1. |X| Yes, with respect to a Participant's entire account
balance.
2. |_| Yes, but only with respect to account balances
attributable to the following Contribution sources:
A. |_| Profit Sharing Contributions
B. |_| 401(k) Elective Deferrals
C. |_| Voluntary After-Tax Contributions
D. |_| Matching Contributions
E. |_| Qualified Nonelective and/or Qualified Matching
Contributions
F. |_| Rollovers
G. |_| Deductible Employee Contributions pre-1987)
3. |_| Participant-directed investments are NOT permitted.
b. A Participant may change investment directions for both
future contributions and existing account balances:
1. |X| At any time, effective immediately.
2. |_| ____________________________________________________
(ENTER DATE(S) OR PERIOD(S)).
3. |_| Not applicable.
G(2) ROLLOVERS (PLAN SECTION 3.5)
a. |X| Rollovers and transfers from qualified plans are permitted.
b. |_| Rollovers and transfers from qualified plans are NOT
permitted.
G(3) LIFE INSURANCE (PLAN SECTION 7.1)
May the Plan hold life insurance policies on the lives of
Participants?
a. |X| No.
b. |_| Yes. Cash values of any life insurance policies will be
100% vested regardless of any vesting schedule otherwise
selected in The SchwabPlan(TM).
24
<PAGE>
G(4) PROTECTED BENEFITS
a. |_| Not applicable. This is a new plan.
b. |X| If this is an amendment and restatement of an existing plan,
identify any Internal Revenue Code Section 411(d)(6)
protected benefits that must continue to be provided under
The SchwabPlanf(TM). DISTRIBUTIONS MAY BE MADE, AT THE
PARTICIPANT'S ELECTION, FROM SUCH PORTION OF HIS PROFIT
SHARING CONTRIBUTIONS AND MATCHING CONTRIBUTIONS ACCOUNT
WHICH HAS BECOME VESTED AND EXCEEDS THAT PORTION OF SUCH
ACCOUNTS ATTRIBUTABLE TO EMPLOYER MATCHING AND PROFIT
SHARING CONTRIBUTIONS MADE ON HIS BEHALF FOR THE CURRENT AND
TWO PRECEDING PLAN YEARS. A PARTICIPANT MAY NOT MAKE MORE
THAN ONE SUCH WITHDRAWAL IN A TWELVE-MONTH PERIOD.
(Use an additional page or pages if necessary)
The Plan Sponsor has applied to the National Office of the Internal Revenue
Service for an Opinion Letter on the status of the Plan as a national prototype
plan, and shall substitute the IRS-approved prototype document for the document
submitted to the IRS following receipt of the Opinion Letter. By signing this
Adoption Agreement, the Employer hereby approves the substitution of the
IRS-approved prototype document for the prototype document submitted to the IRS
by Plan Sponsor, absent notice to the contrary to the Plan Sponsor within thirty
(30) days of being provided a copy of such IRS-approved prototype document.
The adopting Employer may not rely on the Opinion Letter issued by the IRS to
the Plan as evidence that the plan is qualified under Internal Revenue Code
Section 401. To obtain reliance with respect to plan qualification, the Employer
must apply to the appropriate Key District Office of the IRS for a determination
letter.
This Non-Standardized Adoption Agreement #001 and the Basic Plan Document 02,
incorporating a trust agreement and custodial agreement, shall together be known
as The Charles Schwab 401(k) Profit Sharing Plan and Trust. This
Non-Standardized Adoption Agreement may be used only with The Charles Schwab
401(k) Profit Sharing Plan and Trust.
THE ADOPTION OF THIS PLAN, ITS QUALIFICATION BY THE IRS, AND THE RELATED TAX
CONSEQUENCES ARE THE RESPONSIBILITY OF THE EMPLOYER AND ITS INDEPENDENT TAX AND
LEGAL ADVISORS. FAILURE TO PROPERLY COMPLETE THIS NON-STANDARDIZED ADOPTION
AGREEMENT MAY RESULT IN THE DISQUALIFICATION OF THE EMPLOYER'S PLAN. THE
EMPLOYER HEREBY ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY THE CHARLES SCHWAB
TRUST COMPANY TO SEEK THE ADVICE OF ITS LEGAL AND TAX ADVISORS TO EXAMINE THE
LEGAL AND TAX ASPECTS OF THE PLAN AND TO DETERMINE WHETHER THE PLAN DOCUMENTS
ARE SUITABLE FOR ADOPTION BY THE EMPLOYER AND HAVE BEEN PROPERLY COMPLETED AND
ADOPTED.
The Charles Schwab Trust Company will notify the Employer of any amendments made
to the Plan or of the discontinuance or abandonment of the Plan, provided this
Plan has been acknowledged by The Charles Schwab Trust Company or its authorized
representative. Furthermore, in order to be eligible to receive such
notification, the Employer agrees to notify The Charles Schwab Trust Company of
any change in address.
25
<PAGE>
IN WITNESS WHEREOF, the Employer and Trustee and, if applicable, the Custodian,
hereby cause this Plan to be executed on this 29 day of JUNE 1998. Furthermore,
this Plan may not be used unless acknowledged by The Charles Schwab Trust
Company or its authorized representative.
ACKNOWLEDGMENT AND ACCEPTANCE
Employer:
HS RESOURCES, INC.
- -------------------------------------
(enter name)
By: /s/ Annette Montoya
----------------------------------
Annette Montoya
Its: VICE PRESIDENT - HUMAN RESOURCES
---------------------------------
The SchwabPlan(TM) may not be used, and shall not be deemed to be a master and
prototype plan, unless an authorized representative of The Charles Schwab Trust
Company has acknowledged the use of the Plan. Such acknowledgment shall
acknowledge that the Employer is using the Plan, but shall not represent that
this Plan, including the choices selected on the Non-Standardized Adoption
Agreement, has been reviewed by a representative of the sponsor or constitutes a
qualified retirement plan.
PLAN SPONSOR:
The Charles Schwab Trust Company
One Montgomery Street, 7th Floor
San Francisco, CA 94104
(415) 403-5999
By: /s/ illegible
----------------------------------
COMPLETE THE FOLLOWING ONLY IF CSTC SHALL SERVE BOTH AS TRUSTEE AND CUSTODIAN:
----
PLAN TRUSTEE AND CUSTODIAN:
The Charles Schwab Trust Company
One Montgomery Street, 7th Floor
San Francisco, CA 94104
(415) 403-5999
By:________________________________
COMPLETE THE FOLLOWING ONLY IF CSTC SHALL NOT SERVE AS TRUSTEE
----
TRUSTEE(S): PLAN CUSTODIAN:
___________________________________ The Charles Schwab Trust Company
One Montgomery Street, 7th Floor
___________________________________ San Francisco, CA 94104
___________________________________ (415) 403-5999
By:_________________________________
26
<PAGE>
APPENDIX A
AFFILIATED EMPLOYERS
Identify each Affiliated Employer and indicate whether the Employer is a member
of a controlled group or affiliated service group. Attach a written board
resolution or comparable authorization for each Affiliated Employer that will
participate in this Plan.
_______________________________________________________________________________
EMPLOYER: ______________________________________________________________
|_| Controlled Group Member |_| Affiliated Service Group Member
Will this Employer be a Participating Employer in this Plan?
|_| Yes |_| No Employer Identification Number:_____-________
Address:________________________________________________________________
Street / P.O. Box
________________________________________________________________
City State/Commonwealth Zip Code
Telephone: (_____) _____-_______
Type of Business Entity:
|_| Corporation |_| Sole Proprietorship
|_| S Corporation |_| Partnership
|_| Professional Service Corporation |_| Nonprofit Corporation
|_| Limited Liability Company |_| Other ______________
Relationship to the Employer: __________________________________________
________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
EMPLOYER: ______________________________________________________________
|_| Controlled Group Member |_| Affiliated Service Group Member
Will this Employer be a Participating Employer in this Plan?
|_| Yes |_| No Employer Identification Number:_____-________
Address:________________________________________________________________
Street / P.O. Box
________________________________________________________________
City State/Commonwealth Zip Code
Telephone: (_____) _____-_______
Type of Business Entity:
|_| Corporation |_| Sole Proprietorship
|_| S Corporation |_| Partnership
|_| Professional Service Corporation |_| Nonprofit Corporation
|_| Limited Liability Company |_| Other ______________
Relationship to the Employer: __________________________________________
________________________________________________________________________
_______________________________________________________________________________
27
[DG&S LETTERHEAD]
June 21, 1999
HS Resources, Inc.
One Maritime Plaza, 15th Floor
San Francisco, California 94111
Re: Sale of Shares of Common Stock Pursuant to
Registration Statement On Form S-8
------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to HS Resources, Inc. (the "Company") in
connection with the preparation of a Registration Statement on Form S-8 (the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission. The Registration Statement relates to the registration under the
Securities Act of 1933, as amended (the "1933 Act), of 500,000 shares of the
Company's common stock, $.001 par value per share (the "Shares"). Terms used
herein but not defined have the meanings attributed to those terms in the
Registration Statement.
This opinion is delivered pursuant to the requirements of Item 601(b)(5)
of Regulation S-K under the 1933 Act.
In rendering the following opinion, we have examined and relied only upon
the documents specifically described below. In our examination, we have assumed
the genuineness of all signatures, the authenticity, accuracy and completeness
of the documents submitted to us as originals, and the conformity with the
original documents of all documents submitted to us as copies. Our examination
was limited to the following documents and no others:
1. Certificate of Incorporation of the Company, as amended to date;
2. Bylaws of the Company, as amended to date;
3. Resolutions adopted by the Board of Directors of the Company
authorizing the HS Resources, Inc. Employee Investment 401(k) and
Profit Sharing Plan; and
4. The Registration Statement, exhibits filed in connection therewith
and incorporated by reference including all documents incorporated
therein by reference.
II-7
<PAGE>
HS Resources, Inc.
June 21, 1999
Page 2
We have not undertaken, nor do we intend to undertake, any independent
investigation beyond such documents and records, or to verify the adequacy or
accuracy of such documents and records.
The following opinions are limited solely to the applicable provisions of
the General Corporation Law of the State of Delaware. While we are not licensed
to practice in the State of Delaware, we have reviewed applicable provisions of
the General Corporation Law of Delaware as we have deemed appropriate in
connection with the provisions expressed herein. Except as described, we have
neither examined nor do we express any opinion with respect to Delaware law.
Based upon and subject to the foregoing, we are of the opinion that the
Shares are duly and validly authorized and when issued and sold as contemplated
by the Registration Statement and subject to the proper execution and delivery
of stock certificates evidencing the Shares, will be legally and validly issued,
fully paid and non-assessable shares of capital stock of the Company.
We hereby consent to the filing of this opinion as an Exhibit to the
aforesaid Registration Statement. In giving this consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the rules of the Securities and
Exchange Commission.
Very truly yours,
/s/ Davis, Graham & Stubbs LLP
DAVIS, GRAHAM & STUBBS LLP
II-8
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement.
/s/ Arthur Andersen LLP
Denver, Colorado
June 21, 1999
II-9
CONSENT OF INDEPENDENT ENGINEERS
Williamson Petroleum Consultants, Inc. (Williamson), hereby consents to the
incorporation by references to Williamson and our review entitled "Review of Oil
and Gas Reserves and Associated Net Revenues to the Interests of HS Resources,
Inc. in Certain Major-Value Properties in the Rocky Mountain and Gulf Coast
Areas as Prepared by HS Resources, Inc., Effective December 31, 1997, Constant
Pricing Economics, Williamson Project 7.8551" in the HS Resources, Inc.
Registration Statement on Form S-8 to be filed with the Securities and Exchange
Commission on or about June 21, 1999.
/s/ Williamson Petroleum Consultants, Inc.
Williamson Petroleum Consultants, Inc.
Houston, Texas
June 21, 1999
II-10
EXHIBIT 23.4
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of HS Resources, Inc. ("HSR") and the incorporation by
reference into the foregoing of all references to our firm included in the
Annual Report on Form 10-K of HSR for the year ended December 31, 1998.
Netherland, Sewell & Associates, Inc.
By: /s/ Clarence M. Netherland
-----------------------------------------
Clarence M. Netherland
Chairman
Dallas, Texas
June 21, 1999
II-11
