As filed with the Securities and Exchange Commission on October 8, 1998
Registration No. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
CD RADIO INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-170027
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1180 AVENUE OF THE AMERICAS, 14TH FLOOR
NEW YORK, NY 10036
(212) 899-5000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
CD RADIO INC. 401(K) SAVINGS PLAN
(Full title of the Plan)
PATRICK L. DONNELLY
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CD RADIO INC.
1180 AVENUE OF THE AMERICAS
14TH FLOOR
NEW YORK, NEW YORK 10036
(212) 899-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------------
Copies to:
MITCHELL S. FISHMAN
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
---------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE REGISTERED (1) REGISTERED OFFERING PRICE PER SHARE (2) AGGREGATE OFFERING PRICE REGISTRATION FEE (2)
====================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, par value $.001...
Preferred Stock Purchase Rights
(3)............................. 50,000 $16-7/8 $843,750 $249
====================================================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416 under the Securities Act of 1933,
this registration statement also covers an undeterminate amount of
interests to be offered or sold pursuant to the employee benefit plan
described herein.
(2) The proposed maximum offering price per share and the registration fee
were calculated in accordance with Rule 457(c) and (h) based on the
closing price for shares of the registrant's common stock, par value
$.001 per share (the "Common Stock"), on October 7, 1998, as reported
by The Nasdaq Stock Market, Inc. which was $16-7/8.
(3) Each Preferred Stock Purchase Right (the "Rights") represents the right
to purchase one one-hundredth of a share of Series B Preferred Stock
for each share of Common Stock. The Rights are appurtenant to and trade
with the Common Stock. The value attributable to the Rights, if any, is
reflected in the value of the Common Stock and the registration fee for
the Rights is included in the fee for the Common Stock.
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<PAGE>
2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1997.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.
4. The Company's Current Report on Form 8-K dated June 1, 1998.
5. The Report of PricewaterhouseCoopers L.L.P., Independent
Accountants, included as Exhibit 15.1 to Amendment No. 3 to the
Company's Registration Statement on Form S-3 dated October 7, 1998
(Registration No. 333-52893).
All other 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,
as amended, subsequent to the date of this registration statement and prior to
the filing of a post-effective amendment which indicates that all securities
registered hereby have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded to
the extent that a statement contained in this registration statement or in any
other subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this registration statement.
The Company hereby undertakes to provide without charge to each
participant in the CD Radio 401(k) Savings Plan (the "Plan"), on the written or
oral request of any such person, a copy of any or all of the documents referred
to above which have been or may be incorporated in this registration statement
by reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Secretary, CD Radio Inc., 1180 Avenue of the
Americas, New York, New York 10036, telephone number: (212) 899-5000.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Patrick L. Donnelly, Esq., whose legal opinion with respect to the
securities registered hereunder is filed as Exhibit 5.1 hereto, is an employee
of the Company and may participate in the Plan and other benefit plans
established by the Company.
<PAGE>
3
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a
corporation to indemnify its directors, officers, employees and agents against
certain liabilities they may incur in such capacities, including liabilities
under the Securities Act of 1933, as amended, provided they act in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation. The Company's Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws require the Company to indemnify
its officers and directors to the full extent permitted by Delaware law,
provided that such officers or directors acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
Company and, with respect to any criminal action or proceeding, with no
reasonable cause to expect his or her action was unlawful. Also, indemnification
under the Company's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws will not be available where an officer or director
is adjudged to be liable for negligence or misconduct in the performance of his
or her duty to the Company. The Company's Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws also provide for the Company to
purchase and maintain insurance on behalf of any past or current officer or
director against any liability that may be asserted or arise from his or her
role as an officer or director.
Section 102 of the Delaware General Corporation Law authorizes a
corporation to limit or eliminate its directors' liability to the corporation or
its stockholders for monetary damages for breaches of fiduciary duties, other
than for (i) breaches of the duty of loyalty, (ii) acts or omissions involving
bad faith, intentional misconduct or knowing violations of the law, (iii)
unlawful payments of dividends, stock purchases or redemptions, or (iv)
transactions from which a director derives an improper personal benefit. The
Company's Amended and Restated Certificate of Incorporation contains provisions
limiting the liability of the directors to the Company and to its stockholders
to the full extent permitted by Delaware law.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
Exhibit
Number: Description:
- ------- ------------
4.1 Form of Certificate for shares of Common Stock (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-1 (File No. 33- 74782) (the "S-1 Registration Statement")).
4.2 Rights Agreement, dated as of October 22, 1997, between the Company
and Continental Stock Transfer & Trust Company, as Rights Agent
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A filed with the Commission on
October 30, 1997 (the "Form 8-A")).
4.3 Form of Right Certificate (incorporated by reference to Exhibit B
to Exhibit 1 to the Form 8-A).
4.4 CD Radio Inc. 401(k) Savings Plan.
5.1 Opinion of Patrick L. Donnelly, Executive Vice President, General
Counsel and Secretary of the Company, regarding the legality of the
Common Stock being registered.
23.1 Consent of Patrick L. Donnelly, Executive Vice President,
General Counsel and Secretary of the Company (included in
Exhibit 5.1).
23.2 Consent of PriceWaterhouseCoopers LLP.
<PAGE>
4
24.1 Power of Attorney (included on signature page).
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes: (i) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this registration statement to include any material information with respect
to the plan of distribution not previously disclosed in this registration
statement or any material change to such information in this registration
statement; (ii) that, for the purpose of determining any liability under the
Securities Act of 1933, as amended, 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; and (iii) to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended, that is incorporated
by reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, the
registrant's Amended and Restated Certificate of Incorporation or Amended and
Restated Bylaws, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 New York, State of New York, on October 8, 1998.
CD RADIO INC.
By: /s/ Andrew J. Greenebaum
----------------------------
Andrew J. Greenebaum
Executive Vice President and
Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints Andrew J. Greenebaum and Patrick
L. Donnelly, and each of them, his or her true and lawful agent, proxy and
attorney-in-fact, each acting alone with full power of substitution and
resubstitution, for him or her and in his or her name, place and sterad, in any
and all capacities, to (i) act on, sign and file with the Commission any and all
amendments (including post-effective amendments) to this registration statement
together with all schedules and exhibits thereto, (ii) act on, sign and file
such certificates, instruments, agreements and other documents as may be
necessary or appropriate in connection therewith, and (iii) take any and all
actions which may be necessary or appropriate in connection therewith, granting
unto such agents, proxies and attorneys-in-fact, and each of them, full power
and authority to do and perform each and every act and thing necessary or
appropriate to be done, as fully for all intents and purposes as he or she might
or could do in person, hereby approving, ratifying and confirming all that such
agents, proxies and attorneys-in-fact, any of them or any of his or her or their
substitutes may lawfully do or cause to be done by virtue thereof.
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 dates indicated:
Signatures Title Date
---------- ----- ----
/s/ David Margolese Chairman and Chief Executive October 8, 1998
- ------------------------ Officer (Principal Executive
David Margolese Officer)
/s/ Robert D. Briskman Director October 8, 1998
- ------------------------
Robert D. Briskman
<PAGE>
6
Signatures Title Date
---------- ----- ----
/s/ Lawrence F. Gilberti Director October 8, 1998
- ------------------------
Lawrence F. Gilberti
/s/ Joseph V. Vittoria Director October 8, 1998
- ------------------------
Joseph V. Vittoria
/s/ Ralph W. Whitworth Director October 8, 1998
- ------------------------
Ralph W. Whitworth
/s/Andrew J. Greenebaum Executive Vice President and October 8, 1998
- ------------------------ Chief Financial Officer
Andrew J. Greenebaum (Principal Financial Officer)
/s/ John T. McClain Vice President and Controller October 8, 1998
- ------------------------ (Principal Accounting Officer)
John T. McClain
<PAGE>
7
INDEX TO EXHIBITS
Exhibits
- --------
4.1 Form of Certificate for shares of Common Stock (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-1 (File No. 33- 74782) (the "S-1 Registration Statement")).
4.2 Rights Agreement, dated as of October 22, 1997, between the Company
and Continental Stock Transfer & Trust Company, as Rights Agent
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A filed with the Commission on
October 30, 1997 (the "Form 8-A")).
4.3 Form of Right Certificate (incorporated by reference to Exhibit B
to Exhibit 1 to the Form 8-A).
4.4 CD Radio Inc. 401(k) Savings Plan.
5.1 Opinion of Patrick L. Donnelly, Executive Vice President, General
Counsel and Secretary of the Company, regarding the legality of the
Common Stock being registered (filed herewith).
23.1 Consent of Patrick L. Donnelly, Executive Vice President,
General Counsel and Secretary of the Company (included in
Exhibit 5.1).
23.2 Consent of PriceWaterhouseCoopers LLP.
24.1 Power of Attorney (included on signature page).
CD RADIO 401(K) SAVINGS PLAN
<PAGE>
TABLE OF CONTENTS
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PAGE
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INTRODUCTION...................................................................1
ARTICLE I - DEFINITIONS........................................................2
ARTICLE II - ELIGIBILITY AND PARTICIPATION.....................................9
Section 2.1 Eligibility Requirements.9
Section 2.2 Participation.9
Section 2.3 Years of Service for Eligibility Computation.9
ARTICLE III - CONTRIBUTIONS...................................................12
Section 3.1 Employer Contributions.12
Section 3.2 Employee Elective Deferrals.12
Section 3.3 After-Tax Employee Contributions.13
Section 3.4 Rollover Contributions.13
Section 3.5 Trustee-to-Trustee Transfers.13
Section 3.6 Deduction Limitation.14
ARTICLE IV - 401(K) AND 401(M)................................................15
Section 4.1 Distribution of Excess Employee Elective Deferrals.15
Section 4.2 Actual Deferral Percentage Test.16
Section 4.3 Distribution of Excess Contributions.18
Section 4.4 Actual Contribution Percentage Test.19
Section 4.5 Distribution of Excess Aggregate Contributions.22
Section 4.6 Recharacterization.23
ARTICLE V - ALLOCATIONS, VALUATION AND VESTING................................24
Section 5.1 Allocation of Contributions.24
Section 5.2 Participants Who Will Receive an Allocation.24
Section 5.3 Allocation of Forfeitures.24
Section 5.4 Allocation Limitations.24
Section 5.5 Valuation.31
Section 5.6 Vesting and Accrual.31
ARTICLE VI - DISTRIBUTIONS....................................................35
Section 6.1 Distributions of Small Account Balances.35
Section 6.2 Distributions While In-Service.35
Section 6.3 Distributions Upon Separation From Service.36
Section 6.4 Distributions Upon Retirement.36
<PAGE>
TABLE OF CONTENTS (CONT'D)
--------------------------
PAGE
----
Section 6.5 Distributions Upon Death.37
Section 6.6 Distributions Upon Disability.37
Section 6.7 Special Beneficiary Provisions.37
Section 6.8 Consent of the Participant Required for Distributions if
Account Balances Greater Than $5,000.38
Section 6.9 Commencement of Benefits.39
Section 6.10 Required Distributions.39
Section 6.11 Annuity Contract.45
Section 6.12 Special Distribution Rules for 401(k) Contributions and
Qualified Non-Elective Contributions and Qualified
Matching Contributions.45
Section 6.13 Form of Distribution.46
Section 6.14 Trustee-to-Trustee Transfers.46
Section 6.15 Rollovers to Other Plans or IRAs.46
Section 6.16 Installment Payments.47
ARTICLE VII - LOANS AND LIFE INSURANCE........................................48
Section 7.1 Availability of Loans.48
Section 7.2 Amount of Loans.48
Section 7.3 Terms of Loans.48
Section 7.4 Purchase of Life Insurance Contracts.49
Section 7.5 Distribution of Insurance Contracts.50
ARTICLE VIII - PLAN ADMINISTRATION............................................51
Section 8.1 Duties of the Employer.51
Section 8.2 The 401(k) Committee.51
Section 8.3 Appointment of Advisor.51
Section 8.4 Powers and Duties of the 401(k) Committee.51
Section 8.5 Organization and Operation.52
Section 8.6 Claims Procedure.52
Section 8.7 Records and Reports.53
Section 8.8 Liability.54
Section 8.9 Reliance and Statements.54
Section 8.10 Remuneration and Bonding.54
Section 8.11 401(k) Committee Decisions Final.55
ARTICLE IX - TRUST AGREEMENT..................................................56
Section 9.1 Establishment of Trust.56
Section 9.2 Contributions to Trustee.56
Section 9.3 Purpose of Trust.56
Section 9.4 Distributions.56
ii
<PAGE>
TABLE OF CONTENTS (CONT'D)
--------------------------
PAGE
----
Section 9.5 Exclusive Benefit.57
Section 9.6 Expenses of the Plan and Trust.58
Section 9.7 Duties and Responsibilities of Trustee.58
Section 9.8 Specific Powers and Duties of Trustee.58
Section 9.9 Investment Manager.61
Section 9.10 Compensation of Trustee and Agents.61
Section 9.11 Reports of Trustee.61
Section 9.12 Resignation, Removal and Substitution of Trustee.61
Section 9.13 The 401(k) Committee.62
Section 9.14 Amendment and Termination.62
Section 9.15 Irrevocability.62
Section 9.16 Parties to the Trust Agreement.63
Section 9.17 Administration.63
Section 9.18 Participant-Directed Investments63
ARTICLE X - AMENDMENT, TERMINATION AND MERGER.................................65
Section 10.1 Amendment.65
Section 10.2 Termination.65
Section 10.3 Merger, Consolidation or Transfer.66
ARTICLE XI - TOP-HEAVY PROVISIONS.............................................67
Section 11.1 Applicability.67
Section 11.2 Definitions.67
Section 11.3 Minimum Allocation.69
Section 11.4 Nonforfeitability of Minimum Allocation.70
Section 11.5 Allocation Limitations.70
Section 11.6 Minimum Vesting Schedules.70
ARTICLE XII - GENERAL PROVISIONS..............................................72
Section 12.1 Governing Law.72
Section 12.2 Power to Enforce.72
Section 12.3 Alienation of Benefits.72
Section 12.4 Not an Employment Contract.72
Section 12.5 Discretionary Acts.72
Section 12.6 Interpretation.73
ARTICLE XIII - SIGNATURE PAGE.................................................74
iii
<PAGE>
INTRODUCTION
PURPOSE.
The primary purpose of the CD Radio 401(k) Savings Plan (the "Plan") is to
provide Employees of CD Radio Inc. with retirement benefits in recognition of
the contribution of the Employees to the successful operation of the Employer.
The Plan is intended to be a profit sharing plan, qualified under section 401(a)
of the Internal Revenue Code (the "Code"), which permits salary deferral
contributions as provided by section 401(k) of the Code; and its affiliated
Trust is intended to be exempt from tax under section 501(a) of the Code. In
addition, it is intended that the Plan meet the applicable requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
EFFECTIVE DATE.
The Plan and Trust are established effective September 1, 1998.
1
<PAGE>
ARTICLE I - DEFINITIONS
The following words and phrases, wherever capitalized, shall have the meanings
set forth below, unless the context in which they appear within the Plan clearly
indicates otherwise:
ACCOUNT(S) means the aggregate (or as otherwise specified) interest of a
Participant in the assets of the Trust. Each Participant's interest will be
segregated into one or more of the following Accounts, which will reflect, in
addition to contributions allocated thereto, appropriate allocations of
earnings, gains, losses and expenses of the Trust:
o Employee Deferral Account. The separate Account maintained for each
Participant to which are credited his Employee Elective Deferrals.
o Employer Regular Contribution Account. The separate Account
maintained for each Participant to which are credited any Employer
Regular Contributions allocated to him and made in accordance with
Section 3.1.
o Employer Matching Contribution Account. The separate Account
maintained for each Participant to which are credited any Employer
Matching Contributions allocated to him and made in accordance with
Section 3.1.
o Qualified Matching Contribution Account. The separate Account
maintained for each Participant to which are credited any Qualified
Matching Contributions allocated to him and made on his behalf in
accordance with Section 3.1 and any earnings thereon.
o Qualified Non-Elective Contribution Account. The separate Account
maintained for each Participant to which are credited any Qualified
Non-Elective Contributions allocated to him and made on his behalf
in accordance with Section 3.1 and any earnings thereon.
o Rollover Account. The separate Account maintained for each
applicable Participant to which contributions are made under
Section 3.4.
o Transfer Account. The separate Account maintained for each
applicable Participant to which amounts have been transferred under
Section 3.5.
The Administrator may, in its discretion, establish subaccounts within each
separate Account.
ADMINISTRATOR means the 401(k) Committee designated by the Employer to
administer the Plan.
AFFILIATE means a member of a controlled group of corporations, within the
meaning of section 414(b) of the Code, which includes the Employer; a trade or
business (whether or not incorporated) which is in common control with the
Employer as determined in accordance with section 414(c) of the Code; or any
organization which is a member of an affiliated service group, within the
meaning of section 414(m) of the Code, which includes the Employer; and any
other organization required to be aggregated with the Employer pursuant to
section 414(o) of the Code.
2
<PAGE>
AFTER-TAX EMPLOYEE CONTRIBUTIONS means contributions to the Plan made by an
Employee on an after-tax, nondeductible basis.
BENEFICIARY means the person or persons or a trust affirmatively designated by a
Participant to receive all or a portion of such Participant's benefits in the
event the Participant dies leaving benefits payable to such a Beneficiary in
accordance with the provisions of Article VI.
CHANGE IN CONTROL means:
The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of common
stock of the Company (the "outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust ) sponsored or
maintained by the Company or any corporation controlled by the Company
or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii), and (iii) of subsection (c) of
this Section 2; or
Individuals who, as of the date hereof, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
through one or more subsidiaries( in substantially the same proportions
as their ownership, immediately prior to such Business Combination of
the Outstanding company Common Stock and Outstanding company Voting
Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or
3
<PAGE>
the combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed prior
to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
CODE means the Internal Revenue Code of 1986, as amended from time to time.
401(K) COMMITTEE means the person or persons described in Section 8.2.
COMPENSATION means all of each Participant's Compensation as defined in section
415(c)(3) of the Code and Treasury Regulations Sections 1.415-2(d)(2) and (3).
Notwithstanding the above, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction agreement and which
is not includible in the gross income of the Employee under sections 125,
402(e)(3), 402(h) or 403(b) of the Code.
Compensation shall include only that Compensation which is actually paid to the
Participant during the determination period. Except as provided elsewhere in
this Plan, the determination period shall be the Plan Year.
The annual Compensation Limit shall not exceed $160,000, adjusted for calendar
years beginning after 1994 at the same time and in the same manner as under
section 415(d) of the Code, but only if and when the aggregate of such potential
adjustments totals at least $10,000, and then only in amounts of $10,000, in the
manner described in section 401(a)(17).
If Compensation for any prior determination period is taken into account in
determining an Employee's allocations or benefits for the current determination
period, the Compensation for such prior period is subject to the applicable
annual Compensation Limit in effect for that prior period. For this purpose, for
years beginning before January 1, 1990, the applicable annual Compensation Limit
is $200,000.
DEFINED BENEFIT PLAN means a pension plan maintained by the Employer which is
qualified under section 401(a) of the Code and which is not a Defined
Contribution Plan, except to the extent that it maintains separate accounts with
respect to which it is treated as a Defined Contribution Plan.
DEFINED CONTRIBUTION PLAN means a plan qualified under section 401(a) of the
Code and maintained by the Employer which provides for an account for each
individual who participates in the plan, from which account all benefits
attributable to amounts allocated to each such Participant's account (and any
income and expenses or gains or losses attributable to such accounts, both
realized and unrealized) are paid.
DISABILITY means any medically determinable physical or mental impairment which
results in an inability to engage in any substantial gainful activity by reason
thereof and which may be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12 months. The
permanence and degree of such impairment must be supported by medical evidence.
Disability will be determined to exist
4
<PAGE>
if the Participant is receiving disability benefits under the Social Security
Act or Railroad Retirement Act.
EFFECTIVE DATE means September 1, 1998.
ELAPSED TIME. For purposes of determining an Employee's initial or continued
eligibility to participate in the Plan or the nonforfeitable interest in a
Participant's Account balance derived from Employer contributions, except for
periods of service which may be disregarded on account of the rule of parity
(Years of Service of a nonvested Participant before a period of consecutive
One-Year Breaks in Service which exceeds the greater of five or the number of
Years of Service prior to such Breaks), an Employee will receive credit for the
aggregate of all time periods commencing with the Employee's first day of
employment or reemployment and ending on the date a One-Year Break in Service
begins. The first day of employment or reemployment is the first day the
Employee performs an Hour of Service. An Employee will also receive credit for
any period of severance of less than 12 consecutive months. Fractional periods
of less than a year will be expressed in terms of days.
For purposes of this Section, "Hour of Service" means each hour for which an
Employee is paid or entitled to payment for the performance of duties for the
Employer or any Affiliate.
An Employee will also receive credit for any employment with the Employer,
regardless of whether the Employee was then an eligible Employee. Hours of
Service will also be credited for any individual considered an Employee for
purposes of this Plan under section 414(n) or section 414(o) and the regulations
promulgated thereunder.
EMPLOYEE means any common law Employee of the Employer or any Affiliate. The
term Employee shall also include any Leased Employee deemed to be an Employee of
the Employer or any Affiliate as provided in section 414(n) or (o) of the Code.
EMPLOYEE ELECTIVE DEFERRALS means contributions to the Plan from an Employee's
salary, which the Employee could have received currently in Compensation.
EMPLOYER means CD Radio Inc.; any successor through merger, consolidation or
purchase of substantially all of the assets or business of the entity which is
the Employer immediately prior to such succession, which successor, within 90
days after such succession, agrees to continue this Plan; and any Affiliate
which adopts the Plan.
EMPLOYER REGULAR CONTRIBUTIONS means those contributions made by the Employer as
described under Section 3.1 which are allocated to Participants' Employer
Regular Contribution Accounts, and does not include Qualified Matching or
Qualified Non-Elective Contributions (if any).
EMPLOYER MATCHING CONTRIBUTIONS means those contributions made by the Employer
as described under Section 3.1 which are allocated to Participants' Employer
Matching Contribution Accounts, and does not include Qualified Matching or
Qualified Non-Elective Contributions (if any).
ERISA means the Employee Retirement Income Security Act of 1974, as amended from
time to time.
FORFEITURES means the nonvested portion, if any, of a Participant's Account
created as a result of termination of employment by the Participant prior to the
time he becomes 100 percent Vested in his Account. A Forfeiture occurs
immediately after the distribution of the entire Vested portion of a
Participant's Account or the last day
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of the Plan Year in which his 5th consecutive One-Year Break in Service occurs,
whichever occurs earlier.
HIGHLY COMPENSATED EMPLOYEE means and includes active Highly Compensated
Employees and former Highly Compensated Employees.
Effective for years beginning after December 31, 1996, the term Highly
Compensated Employee means any Employee who: (1) was a 5-percent owner at any
time during the year or the preceding year, or (2) for the preceding year had
Compensation from the Employer in excess of $80,000 and was in the top-paid
group for the preceding year. The $80,000 amount is adjusted at the same time
and in the same manner as under section 415(d) of the Code, except that the base
period is the calendar quarter ending September 30, 1996.
For this purpose the applicable year of the Plan for which a determination is
being made is called a determination year and the preceding 12-month period is
called a look-back year.
A former Highly Compensated Employee is based on the rules applicable to
determining Highly Compensated Employee status as in effect for that
determination year, in accordance with section 1.414(q)-1T, A-4 of the temporary
Income Tax Regulations and Notice 97-75.
In determining whether an Employee is a Highly Compensated Employee for years
beginning in 1997, the amendments to section 414(q) of the Code stated above are
treated as having been in effect for years beginning in 1996.
In determining who is a Highly Compensated Employee, the Employer makes a
top-paid group election. The effect of this election is that an Employee (who is
not a 5-percent owner at any time during the determination year or the look-back
year) with Compensation in excess of $80,000 (as adjusted) for the look-back
year is a Highly Compensated Employee only if the Employee was in the top-paid
group for the look-back year.
LATE RETIREMENT DATE means the date, occurring after Normal Retirement Age, on
which an Employee actually retires from employment with the Employer.
LEASED EMPLOYEE means any person (other than an Employee of the Employer) who,
pursuant to an agreement between the Employer and any other person (the "leasing
organization"), has performed services for the Employer (or for the Employer and
related persons determined in accordance with section 414(n)(6) of the Code) on
a substantially full time basis for a period of at least one year, and such
services are performed under primary direction or control by the recipient.
Contributions or benefits provided to a Leased Employee by the leasing
organization which are attributable to services performed for the Employer shall
be treated as provided by the Employer.
A leased employee shall not be considered an Employee of the Employer if (i)
such Employee is covered by a money purchase pension plan maintained by the
leasing organization providing: (a) a non-integrated employer contribution rate
of at least 10 percent of Compensation, as defined in section 415(c)(3) of the
Code, but including amounts contributed pursuant to a salary reduction agreement
which are excludable from the Employee's gross income under section 125, section
402(e)(3), section 402(h) or section 403(b) of the Code, (b) immediate
participation, and (c) full and immediate vesting; and (ii) Leased Employees do
not constitute more than 20 percent of the Employer's non-highly compensated
workforce.
NON-HIGHLY COMPENSATED EMPLOYEE means an Employee who is not a Highly
Compensated Employee.
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NORMAL RETIREMENT AGE means age 65.
ONE-YEAR BREAK IN SERVICE shall be determined on the basis of Elapsed Time. For
purposes of this definition, Employer includes any Affiliate. A One-Year Break
in Service determined on the basis of Elapsed Time means a period of severance
of at least 12 consecutive months.
A period of severance is a continuous period of time during which the Employee
is not employed by the Employer. Such period begins 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.
In the case of an individual who is absent from work for maternity or paternity
reasons, the 12-consecutive- month period beginning on the first anniversary of
the first day of such absence shall not constitute a One-Year Break in Service.
For purposes of this paragraph, an absence from work for maternity or paternity
reasons means an absence: (1) by reason of the pregnancy of the individual; (2)
by reason of the birth of a child of the individual; (3) by reason of the
placement of a child with the individual in connection with the adoption of such
child by such individual; or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
PARTICIPANT means an Employee of the Employer who participates in the Plan
pursuant to Article II; a former Employee who participated in the Plan under
Article II and who continues to be entitled to a Vested benefit under the Plan;
or a former Employee who participated in the Plan under Article II, and who has
not yet incurred a One-Year Break in Service. For purposes of Section 6.15,
"Participant" shall include a former Participant, as well as a former
Participant's Surviving Spouse and Participant's or former Participant's Spouse
or former Spouse who is the alternate payee under a qualified domestic relations
order as defined in section 414(p) of the Code (who shall be deemed Participants
with respect to such Spouse's interest under the Plan).
PLAN means the CD Radio 401(k) Savings Plan, as set forth herein.
PLAN YEAR means the 12-consecutive-month period which begins on January 1 and on
each anniversary thereof.
QUALIFIED NON-ELECTIVE CONTRIBUTIONS means contributions (other than Matching
Contributions or Qualified Matching Contributions) made by the Employer and
allocated to Participants' Accounts that the Participants may not elect to
receive in cash until distributed from the Plan; that are nonforfeitable when
made; and that are distributable only in accordance with the distribution
provisions that are applicable to Employee Elective Deferrals and Qualified
Matching Contributions.
REGULATIONS means the Treasury regulations pertaining to the Internal Revenue
Code of 1986, as amended from time to time.
REQUIRED DISTRIBUTIONS shall be as described in Section 6.10 of the Plan.
SPOUSE means the Spouse or Surviving Spouse of the Participant, provided that a
former Spouse shall be treated as the Spouse or Surviving Spouse to the extent
provided under a "qualified domestic relations order" as defined in section
414(p) of the Code.
TOP-HEAVY shall have the meaning and effect described in Article XI of the Plan.
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TRUST means the Trust as established under Article IX and maintained for
purposes of the Plan which is administered by the Trustee in accordance with the
provisions of the agreement of Trust between the Employer and the Trustee. If
the Trust is governed by a separate agreement entered into between the Employer
and the Trustee (which shall be incorporated by reference herein and become part
of the Plan) to the extent the terms of such Trust agreement conflict with the
Plan, the terms of such Trust agreement will control except to the extent that
it is necessary to follow the terms of the Plan in order to maintain the
qualified status of the Plan under section 401(a) of the Code.
TRUSTEE means the party or parties named under the Trust who shall have
exclusive authority and discretion to manage and control the assets of the Plan.
Notwithstanding the above, to the extent the Plan expressly provides, the
Trustee shall be subject to the direction of the 401(k) Committee and/or
Investment Manager.
TRUST FUND means all money and other property received or held by the Trustee
under the Trust, plus all income and gains and minus all losses, expenses, and
distributions chargeable to the Trust assets.
VALUATION DATE means the last day of the Plan Year, in addition to any other
date specifically designated by the 401(k) Committee, on which date the fair
market value of Trust assets shall be determined.
VESTED means nonforfeitable.
YEAR OF SERVICE shall be determined on the basis of Elapsed Time.
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ARTICLE II - ELIGIBILITY AND PARTICIPATION
SECTION 2.1 ELIGIBILITY REQUIREMENTS.
(a) Only Employees of an Employer will be eligible to participate in
the Plan.
(b) Employees become eligible to participate in the Plan and to make
Employee Elective Deferrals under the Plan upon attainment of age
21.
(c) Notwithstanding any other provision of this Plan, Employees
included within the following described classification(s) are
excluded from participation in this Plan:
o Employees in a unit of employees covered by a collective
bargaining agreement between the Employer and employee
representatives, if retirement benefits were the subject of
good faith bargaining and if two percent or less of the
Employees of the Employer who are covered pursuant to that
agreement are professionals as defined in section 1.410(b)-
9(g) of the Regulations. For this purpose, the term "employee
representatives" does not include any organization more than
half of whose members are Employees who are owners, officers,
or executives of the Employer.
o Leased Employees.
o Consultants.
SECTION 2.2 PARTICIPATION.
An Employee will begin participation in the Plan on the first day of the first
month following the date as of which the eligibility requirements set forth in
Section 2.1 above are satisfied.
For purposes of Employee Elective Deferrals, an eligible non-excluded Employee
will begin participation immediately after satisfaction of the eligibility
requirements set forth in Section 2.1 above.
SECTION 2.3 YEARS OF SERVICE FOR ELIGIBILITY COMPUTATION.
(a) For purposes of determining Years of Service and One-Year Breaks
in Service for purposes of establishing eligibility to participate
in the Plan, the initial eligibility computation period shall be
the 12-consecutive-month period beginning on the date on which the
Employee first performs an Hour of Service for the Employer or an
Affiliate ("employment commencement date").
(b) The succeeding 12-consecutive-month eligibility computation
periods shall commence with the first Plan Year which includes the
first anniversary of the Employee's employment commencement date,
regardless of whether the Employee is entitled to be credited with
1,000 Hours of Service during the initial eligibility computation
period. An Employee who is credited with service in both the
initial eligibility computation period (described above) and the
first Plan Year which commences prior to the first anniversary of
the Employee's initial eligibility computation period will be
credited with two Years of Service for purposes of eligibility to
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<PAGE>
participate.
(c) Years of Service and One-Year Breaks in Service will be measured
by the same eligibility computation period.
(d) All Years of Service with the Employer or an Affiliate will be
credited for purposes of determining eligibility except the
following:
(1) If an Employee has a One-Year Break in Service before
satisfying the eligibility requirements of the Plan, service
before such Break will not be taken into account.
(2) In the case of a Participant who has no nonforfeitable right
to any portion of an Account balance derived from Employer
Contributions, Years of Service before a period of consecutive
One-Year Breaks in Service will not be taken into account in
computing service for purposes of eligibility if the number of
such participant's consecutive One- Year Breaks in Service in
such period equals or exceeds the greater of five or the
Participant's aggregate number of Years of Service. Such
aggregate number of Years of Service will not include any
Years of Service disregarded under the preceding sentence by
reason of prior breaks in service.
If a Participant's Years of Service are disregarded pursuant
to the preceding paragraph, such Participant will be treated
as a new Employee for eligibility purposes. If a Participant's
Years of Service may not be disregarded pursuant to the
preceding paragraph, such Participant shall continue to
participate in the Plan or, if terminated, shall participate
immediately upon reemployment.
(3) In the case of any Participant who has a One-Year Break in
Service, Years of Service before such break will not be taken
into account for purposes of eligibility until the Employee
has completed a Year of Service after returning to employment.
Such Year of Service will be measured by the
12-consecutive-month period beginning on an Employee's
reemployment commencement date and, if necessary, Plan Years
beginning with the Plan Year which includes the first
anniversary of his reemployment commencement date. The
reemployment commencement date is the first day on which the
Employee is credited with an Hour of Service for the
performance of duties after the first eligibility computation
period in which the Employee incurs a One-Year Break in
Service.
(e) In the event a Participant is no longer a member of an eligible
class of Employees and becomes ineligible to participate but has
not incurred a One-Year Break in Service, such Employee will
participate immediately upon again becoming a member of an
eligible class of Employees. If such Participant incurs a One-Year
Break in Service, eligibility will be determined according to the
break in service rules of the Plan otherwise described in this
Section 2.3.
An Employee who has not been, but who becomes, a member of an
eligible class of Employees shall participate in the plan
immediately upon becoming a member of such class if such Employee
has satisfied the minimum age and service requirements necessary
to become a Participant under
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this Article II.
11
<PAGE>
ARTICLE III - CONTRIBUTIONS
SECTION 3.1 EMPLOYER CONTRIBUTIONS.
Employer Regular Contributions:
Employer Regular Contributions will be limited to profits as determined by the
401(k) Committee. For each Plan Year the Employer may make an Employer Regular
Contribution to the Trust based on the total Compensation of all Participants
eligible to receive an allocation. The amount of the Employer Regular
Contribution shall be determined for each Plan Year by the Employer.
Employer Matching Contributions:
For each Plan Year the Employer may make an Employer Matching Contribution of
100 percent of Participants' Compensation for the Plan Year (including only
Participants eligible to receive an allocation) for the first $10,000 deferred.
The amount of the Employer Matching Contributions shall be determined for each
Plan Year by the Employer.
Qualified Matching and Qualified Non-Elective Contributions:
At the discretion of the Employer, Qualified Matching Contributions or Qualified
Non-Elective Contributions may be made which may be used for purposes of
ensuring that the Plan complies with the nondiscrimination tests of sections
401(k) or 401(m) and the Regulations promulgated thereunder. Qualified Matching
Contributions may be made with respect to only those Participants who are
Non-Highly Compensated Employees in an amount deemed necessary by the Employer
to pass the applicable nondiscrimination test(s), determined as a percentage of
such Participant's Employee Elective Deferrals. Qualified Non-Elective
Contributions may be made on behalf of only those Participants who are
Non-Highly Compensated Employees starting with the lowest paid 20 percent of
Employees in an amount equivalent to up to 10 percent of Compensation, then the
next 20 percent of Employees by pay in an amount equivalent to up to 10 percent
of Compensation, with such allocations of contributions repeated until the
applicable discrimination test is met.
SECTION 3.2 EMPLOYEE ELECTIVE DEFERRALS.
Each Plan Year, each Participant may elect to defer up to 12 percent of
Compensation (Employee Elective Deferrals) which will be contributed by the
Employer to the Plan. New Participants may commence deferrals as specified in
Section 2.2. A Participant may change his election or make a new election prior
to the first day of each month. Written notification must be given to the Plan
Administrator by a Participant 10 days prior to the first day of the month
affected by a modification.
In addition, a Participant may cease to have Employee Elective Deferrals made as
of the first day of the month if notice is given to the Plan Administrator 10
days prior to such date. The Plan Administrator may reduce or completely
prohibit Employee Elective Deferrals at any time if the Administrator determines
such action is necessary to ensure compliance with section 401(k), 402(g), or
415 of the Code.
Employee Elective Deferrals under this and all other qualified plans maintained
by the Employer may not be made on behalf of any Participant during any taxable
year to the extent such would exceed the dollar limitation
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<PAGE>
of section 402(g) of the Code in effect at the beginning of the taxable year
($7,000 as adjusted for cost of living; $10,000 for 1998).
SECTION 3.3 AFTER-TAX EMPLOYEE CONTRIBUTIONS.
After-Tax Employee Contributions are not permitted under the Plan.
SECTION 3.4 ROLLOVER CONTRIBUTIONS.
(a) An Employee who is eligible to participate in the Plan under
Section 2.1, regardless of whether he has satisfied the
participation requirements of Section 2.2, may roll over into the
Plan an eligible rollover distribution (as defined in section
402(c) of the Code) from another qualified plan, or from an
individual retirement account in the manner described in section
408(d)(3)(A)(ii) of the Code. If such rollover is not a direct
transfer as described in section 401(a)(31) of the Code, it must
be received by the Plan within 60 days of the date it was received
by the Participant from the distributing qualified plan or
individual retirement account.
(b) The Trustee shall develop such procedures, and may require such
information from an Employee desiring to make such a rollover, as
he deems necessary or desirable to determine that the proposed
rollover will meet the requirements of this Section. Upon approval
by the Trustee, the amount rolled over shall be deposited in the
Trust and shall be credited to the Employee's Rollover Account.
Such Account shall share in allocations of earnings, losses and
expenses of the Trust Fund, but shall not share in allocations of
Employer contributions. The Employee's Rollover Account shall be
distributed in accordance with Article VI.
(c) In the event of a rollover contribution on behalf of an Employee
who is otherwise eligible to participate in the Plan but who has
not yet satisfied the participation requirements of Section 2.2,
such Employee's Rollover Account shall represent his sole interest
in the Plan until he becomes a Participant.
SECTION 3.5 TRUSTEE-TO-TRUSTEE TRANSFERS.
(a) An Employee not excluded from participation in the plan,
regardless of whether he has satisfied any age and service
requirements for participation, may cause assets to be transferred
directly by the trustee of another qualified plan to the Trustee
of this Plan, except that such transfers may not be made from
plans subject to the survivor annuity rules of section 417 of the
Code.
(b) A direct rollover as described in Section 6.15 shall not
constitute a trustee-to-trustee transfer for purposes of the Plan.
(c) Notwithstanding the distribution options provided under Article VI
of the Plan, all distribution options allowed with respect to the
transferred amount under the transferor plan shall continue to be
allowed under this Plan with respect to the transferred amount but
only to the extent required by section 411(d)(6) of the Code. The
amount so transferred shall be deposited in the Trust and credited
to the Employee's Transfer Account. Such Account shall share in
allocations of earnings, losses and expenses of the Trust Fund,
but shall not share in allocations of Employer contributions.
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<PAGE>
(d) In the event of a transfer by an Employee who is otherwise
eligible to participate in the Plan but who has not yet satisfied
the participation requirements of Section 2.2, such Employee's
Transfer Account shall represent his sole interest in the Plan
until he becomes a Participant.
SECTION 3.6 DEDUCTION LIMITATION.
Employer contributions made with respect to any Plan Year under this Article III
are conditioned upon such contributions being deductible by the Employer for
such Plan Year under section 404 of the Code.
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<PAGE>
ARTICLE IV - 401(K) AND 401(M)
SECTION 4.1 DISTRIBUTION OF EXCESS EMPLOYEE ELECTIVE DEFERRALS.
(a) Excess Employee Elective Deferrals shall be distributed in
accordance with the provisions of this Section 4.1. Excess
Employee Elective Deferrals are those elective deferrals that are
includible in a Participant's gross income because they exceed the
dollar limitation ($7,000 as adjusted for cost of living; $10,000
for 1998) imposed under Code section 402(g). Excess Employee
Elective Deferrals shall be treated as Annual Additions under the
Plan, except to the extent they are distributed on or before the
April 15 first following the close of a Participant's tax year.
(b) A Participant may attribute to this Plan any excess Employee
Elective Deferrals made during a taxable year of the Participant
by notifying the Plan Administrator, through actual or deemed
notification, on or before March 1 following the calendar year
when the excess Employee Elective Deferrals are made of the amount
of the excess Employee Elective Deferrals to be attributed to the
Plan. A participant will be deemed to have notified the Plan
Administrator of any excess Employee Elective Deferrals which
exist when only those elective deferrals made to this Plan and any
other plan(s) maintained by the Employer are taken into account.
(c) Notwithstanding any other provision of the Plan, excess Employee
Elective Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 to any
Participant to whose Account excess Employee Elective Deferrals
were attributed for the preceding year and who claims excess
Employee Elective Deferrals for such taxable year. With respect to
any taxable year, a Participant's Employee Elective Deferrals are
the sum of all Employer contributions made on behalf of such
Participant pursuant to an election to defer under any qualified
cash or deferred arrangement as described in section 401(k), any
simplified employee pension cash or deferred arrangement as
described in section 408(k)(6), any eligible deferred compensation
plan under section 457, any plan described under section
501(c)(18), and any Employer contributions made on the behalf of a
Participant for the purchase of an annuity contract under section
403(b) pursuant to a salary reduction agreement, but shall not
include amounts distributed pursuant to the provisions of Section
5.4(a)(3) of this Plan.
(d) Excess Employee Elective Deferrals shall be adjusted for any
income or loss up to the date of distribution. The income or loss
allocable to excess Employee Elective Deferrals is the sum of: (1)
income or loss allocable to the Participant's Employee Deferral
Account for the taxable year multiplied by a fraction, the
numerator of which is such Participant's excess Employee Elective
Deferrals for the year and the denominator is the Participant's
Account balance attributable to Employee Elective Deferrals
without regard to any income or loss occurring during such taxable
year; and (2) ten percent of the amount determined under (1)
multiplied by the number of whole calendar months between the end
of the Participant's taxable year and the date of distribution,
counting the month of distribution if distribution occurs after
the 15th of such month.
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<PAGE>
SECTION 4.2 ACTUAL DEFERRAL PERCENTAGE TEST.
(a) The Employer elects to perform the Actual Deferral Percentage
(ADP) test using the Current Year Testing method.
Prior Year Testing.
For a Plan Year, the ADP for Participants who are Highly
Compensated Employees for each Plan Year and the prior year's ADP
for Participants who were Non-Highly Compensated Employees for the
prior Plan Year must satisfy either of the following tests for
nondiscrimination:
(1) The ADP for a Plan Year for Participants who are Highly
Compensated Employees for the Plan Year is not more than the
prior year's ADP for Participants who were Non- Highly
Compensated Employees for the prior Plan Year multiplied by
1.25; or
(2) The ADP for a Plan Year for Participants who are Highly
Compensated Employees for the Plan Year is not more than the
prior year's ADP for Participants who were Non- Highly
Compensated Employees for the prior Plan Year multiplied by
two, provided that the ADP for Participants who are Highly
Compensated Employees does not exceed the ADP for Participants
who were Non-Highly Compensated Employees in the prior Plan
Year by more than two percentage points.
Actual Deferral Percentage means, for a specified group of
Participants for a Plan Year, the average of the ratios
(calculated separately for each Participant in such group) of (i)
the amount of Employer contributions actually paid over to the
Trust on behalf of such Participant for the Plan Year to (ii) the
Participant's Compensation for such Plan Year. Employer
contributions on behalf of any Participant shall include: (i) any
Employee Elective Deferrals made pursuant to the Participant's
deferral election, including excess Employee Elective Deferrals of
Highly Compensated Employees, but (A) excluding Excess Employee
Elective Deferrals by Non-Highly Compensated Employees which are
attributable solely to Employee Elective Deferrals made under the
Plan or any other plan(s) of the Employer and (B) Employee
Elective Deferrals that are taken into account in the Contribution
Percentage test (provided the ADP test is satisfied both with and
without exclusion of these Employee Elective Deferrals); and (ii)
at the election of the Employer, Qualified Non-Elective
Contributions and Qualified Matching Contributions made either to
the Plan or another plan of the Employer qualified under section
401(a). For purposes of computing Actual Deferral Percentages, any
Employee who would be a Participant but for the failure to make
Employee Elective Deferrals shall be treated as a Participant on
whose behalf no Employee Elective Deferrals are made. For Plan
Years beginning before the later of January 1, 1992, or 60 days
after the publication of final Regulations, Compensation may be
limited to that which is received for the period the Employee is a
Participant.
For the first Plan Year the Plan permits any Participant to make
Elective Deferrals and this is not a successor plan, for purposes
of the foregoing tests, the prior year's Non-Highly Compensated
Employees' ADP shall be 3 percent unless the Employer has elected
to use the Plan Year's ADP for these Participants.
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<PAGE>
Current Year Testing.
The ADP tests in (1) and (2), above, will be applied by comparing
the current Plan Year's ADP for Participants who are Highly
Compensated Employees with the current Plan Year's ADP for
Participants who are Non-Highly Compensated Employees. Once made,
this election can only be undone if the Plan meets the
requirements for changing to Prior Year Testing set forth in
Notice 98-1 (or superseding guidance).
(b) A Participant is a Highly Compensated Employee for a particular
Plan Year if he or she meets the definition of a Highly
Compensated Employee in effect for that Plan Year. Similarly, a
Participant is a Non-Highly Compensated Employee for a particular
Plan Year if he or she does not meet the definition of a Highly
Compensated Employee in effect for that Plan Year.
(c) The ADP for any Participant who is a Highly Compensated Employee
for the Plan Year and who is eligible to have Employee Elective
Deferrals (and QNECs or QMACs or both, if treated as Employee
Elective Deferrals for purposes of the ADP test) allocated to his
Account under two or more cash or deferred arrangements shall be
determined by aggregating his employee elective deferrals in all
plans maintained by the Employer. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements having
different plan years, all cash or deferred arrangements ending
with or within the same calendar year shall be treated as a single
arrangement. Notwithstanding the above, any plans required to be
mandatorily segregated pursuant to Regulations promulgated under
section 401(k) of the Code shall not be aggregated for purposes of
this Section 4.2.
(d) In the event that this Plan satisfies the requirements of sections
401(k), 401(a)(4), or 410(b) of the Code only if aggregated with
one or more other plans, or if one or more other Plans satisfy the
requirements of such sections of the Code only if aggregated with
this Plan, then this Section shall be applied by determining the
ADP of Employees as if all such plans were a single plan. Any
adjustments to the Non-Highly Compensated Employee ADP for the
prior year will be made in accordance with Notice 98-1 and any
superseding guidance, unless the Employer has elected to use the
Current Year Testing method. Plans may be aggregated in order to
satisfy section 401(k) of the Code only if they have the same Plan
Year and use the same ADP testing method.
(e) In order to be considered for purposes of performing the ADP
test(s), Employee Elective Deferrals, Qualified Non-Elective
Contributions and Qualified Matching Contributions must be made
before the end of the twelve-month period immediately following
the Plan Year to which such contributions relate.
(f) The Employer shall maintain annual records sufficient to
demonstrate satisfaction of the ADP test and identify the amount
of Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(g) The determination and treatment of the amounts considered in
determining the ADP with respect to each Participant shall satisfy
such other requirements as may be prescribed by the Secretary of
the Treasury.
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SECTION 4.3 DISTRIBUTION OF EXCESS CONTRIBUTIONS.
(a) Discriminatory Employee Elective Deferrals (Excess Contributions)
are, with respect to any Plan Year, the excess of:
(1) The aggregate amount of Employer contributions actually taken
into account in computing the ADP of Highly Compensated
Employees for such Plan Year, over
(2) The maximum amount of such contributions permitted pursuant to
the ADP test described under Section 4.2(a) (determined by
reducing contributions made on behalf of Highly Compensated
Employees in order of the ADPs, beginning with the highest of
such percentages).
(b) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each
Plan Year to Participants to whose Accounts such Excess
Contributions were allocated for the preceding Plan Year. Excess
Contributions are allocated to the Highly Compensated Employees
with the largest amounts of Employer contributions taken into
account in calculating the ADP test for the year in which the
excess arose, beginning with the Highly Compensated Employee with
the largest amount of such Employer contributions and continuing
in descending order until all the Excess Contributions have been
allocated. For purposes of the preceding sentence, the "largest
amount" is determined after distribution of any Excess
Contributions. If such excess amounts are distributed more than 2
1/2 months after the last day of the Plan Year in which such
excess amounts arose, a 10-percent excise tax will be imposed on
the Employer maintaining the plan with respect to such amounts.
Excess Contributions (including any amounts recharacterized as
After- Tax Employee Contributions as permitted under Section 4.6)
shall be treated as Annual Additions under the Plan.
(c) Excess Contributions shall be adjusted for any income or loss up
to the date of distribution. The income or loss allocable to
Excess Contributions allocated to each Participant is the sum of:
(i) income or loss allocable to the Participant's Employee
Deferral Account (and, if applicable, his Qualified Non-Elective
Contribution Account or Qualified Matching Contributions Account,
or both) for the Plan Year multiplied by a fraction, the numerator
of which is such Participant's Excess Contributions for the year
and the denominator of which is the Participant's Account balance
attributable to Employee Elective Deferrals (and Qualified
Non-Elective Contributions or Qualified Matching Contributions, or
both, if any of such contributions are included in the ADP test)
without regard to any income or loss occurring during such Plan
Year; and (ii) ten percent of the amount determined under (i)
multiplied by the number of whole calendar months between the end
of the Plan Year and the date of distribution, counting the month
of distribution if distribution occurs after the 15th of such
month.
(d) Excess Contributions shall be distributed from the Participant's
Employee Deferral Account and Qualified Matching Contributions
Account (if applicable) in proportion to the Participant's
Employee Elective Deferrals and Qualified Matching Contributions
(to the extent used in the ADP test) for the Plan Year. Excess
Contributions shall be distributed from the Participant's
Qualified Non-Elective Contribution Account only to the extent
that such Excess Contributions exceed the balance of the
Participant's Employee Deferral Account and Qualified Matching
Contributions
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Account.
SECTION 4.4 ACTUAL CONTRIBUTION PERCENTAGE TEST.
(a) The Employer elects to perform the Actual Contribution Percentage
(ACP) test using the Current Year Testing method.
Prior Year Testing.
For a Plan Year, the ACP for Participants who are Highly
Compensated Employees for each Plan Year and the prior year's ACP
for Participants who were Non-Highly Compensated Employees for the
prior Plan Year must satisfy either of the following tests for
nondiscrimination:
(1) The ACP for a Plan Year for Participants who are Highly
Compensated Employees for the Plan Year is not more than the
prior year's ACP for Participants who were Non- Highly
Compensated Employees for the prior Plan Year multiplied by
1.25; or
(2) The ACP for a Plan Year for Participants who are Highly
Compensated Employees for the Plan Year is not more than the
prior year's ACP for Participants who were Non- Highly
Compensated Employees for the prior Plan Year multiplied by
two, and the ACP for Participants who are Highly Compensated
Employees does not exceed the ACP for Participants who were
Non-Highly Compensated Employees in the prior Plan Year by
more than two percentage points.
For the first Plan Year this Plan permits any Participant to make
Employee Contributions, provides for Matching Contributions or
both, and this is not a successor plan, for purposes of the
foregoing tests, the prior year's Non-Highly Compensated
Employees' ACP shall be 3 percent unless the Employer has elected
to use the Plan Year's ACP for these Participants.
Current Year Testing.
If elected by the Employer, the ACP tests in (1) and (2), above,
will be applied by comparing the current Plan Year's ACP for
Participants who are Highly Compensated Employees for each Plan
Year with the current Plan Year's ACP for Participants who are
Non-Highly Compensated Employees. Once made, this election can
only be undone if the Plan meets the requirements for changing to
Prior Year Testing set forth in Notice 98-1 (or superseding
guidance).
(b) A participant is a Highly Compensated Employee for a particular
Plan Year if he or she meets the definition of a Highly
Compensated Employee in effect for that Plan Year.
Similarly, a participant is a Non-Highly Compensated Employee for
a particular Plan Year if he or she does not meet the definition
of a Highly Compensated Employee in effect for that Plan Year.
(c) If any Highly Compensated Employees have both Employee Elective
Deferrals and Matching Contributions and/or After-Tax Employee
Contributions made on their behalf to plans maintained by the
Employer, and the sum of the ADP and ACP of such Highly
Compensated Employees
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subject to either or both tests exceeds the Aggregate Limit, then
the ACP of each such Highly Compensated Employee will be reduced
in the manner described in Section 4.3(b) of the Plan so that the
limit is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amount is reduced shall be
treated as an Excess Aggregate Contribution. The ADP and ACP of
the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests and are deemed
to be the maximum permitted under such tests for the Plan Year.
Multiple use does not occur if either the ADP or ACP of the Highly
Compensated Employees does not exceed 1.25 multiplied by the ADP
and ACP of the Non-Highly Compensated Employees.
(d) For purposes of this Section, the Actual Contribution Percentage
for any Participant who is a Highly Compensated Employee and who
is eligible to have Contribution Percentage Amounts allocated to
his or her Account under two or more plans described in section
401(a) of the Code, or arrangements described in section 401(k) of
the Code that are maintained by the Employer, shall be determined
as if the total of such Contribution Percentage Amounts was made
under each plan. If a Highly Compensated Employee participates in
two or more cash or deferred arrangements that have different plan
years, all cash or deferred arrangements ending with or within the
same calendar year shall be treated as a single arrangement.
Notwithstanding the above, to the extent mandatorily disaggregated
pursuant to Treasury Regulations promulgated under section 401(m)
of the Code, applicable plans shall continue to be treated as
separate.
(e) In the event that this Plan satisfies the requirements of sections
401(m), 401(a)(4) or 410(b) of the Code only if aggregated with
one or more other plans, or if one or more other plans satisfy the
requirements of such sections of the Code only if aggregated with
this Plan, then this Section shall be applied by determining the
Contribution Percentage of Employees as if all such plans were a
single plan. Any adjustments to the Non-Highly Compensated
Employee ACP for the prior year will be made in accordance with
Notice 98-1 and any superseding guidance, unless the Employer has
elected to use the Current Year Testing method. Plans may be
aggregated in order to satisfy section 401(m) of the Code only if
they have the same plan year and use the same ACP testing method.
(f) For purposes of determining the ACP test, Employee Contributions
are considered to have been made in the Plan Year in which
contributions were made to the Trust. Matching Contributions and
Qualified Non-Elective Contributions will be considered made for a
Plan Year if made no later than the end of the twelve-month period
beginning on the day after the close of the Plan Year.
(g) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and identify the amount of Qualified
Non-Elective Contributions or Qualified Matching Contributions, or
both, used in such test.
(h) The determination and treatment of the Contribution Percentage of
any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(i) Definitions:
"Average Contribution Percentage" means, for a specified group of
Participants for a Plan Year, the average of the Contribution
Percentages of the Eligible Participants in a group.
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"Aggregate Limit" is the sum of (i) 125 percent of the greater of
the ADP of the Non-Highly Compensated Employees for the prior Plan
Year or the ACP of Non-Highly Compensated Employees under the Plan
subject to section 401(m) of the Code for the Plan Year beginning
with or within the prior Plan Year of the cash or deferred
arrangement and (ii) the lesser of 200 percent or 2 plus the
lesser of such ADP or ACP. "Lesser" is substituted for "greater"
in "(i)", above, and "greater" is substituted for "lesser" after
"2 plus the" in "(ii)" if it would result in a larger Aggregate
Limit. If the Employer has elected to use the Current Year Testing
method, then, in calculating the Aggregate Limit for a particular
Plan Year, the Non-Highly Compensated Employees' ADP and ACP for
that Plan Year, instead of for the prior Plan Year, is used.
"Contribution Percentage" means the ratio (expressed as a
percentage) of the Participant's Contribution Percentage Amounts
to the Participant's Compensation for the Plan Year (whether or
not the Employee was a Participant for the entire Plan Year).
"Contribution Percentage Amounts" means the sum of the Employee
Contributions, Matching Contributions, and Qualified Matching
Contributions (to the extent not taken into account for purposes
of the ADP test) made under the Plan on behalf of the Participant
for the Plan Year. Such Contribution Percentage Amounts shall not
include Matching Contributions which are forfeited either in order
to correct Excess Aggregate Contributions or because the
contributions to which they relate are Excess Employee Deferrals,
Excess Contributions, or Excess Aggregate Contributions. The
Employer may include Qualified Non-Elective Contributions in the
Contribution Percentage Amounts. The Employer also may elect to
use Employee Elective Deferrals in the Contribution Percentage
Amounts so long as the ADP test is met before the Employee
Elective Deferrals are used in the ACP test and continues to be
met following the exclusion of those Employee Elective Deferrals
that are used to meet the ACP test.
"Eligible Participant" means any Employee who is eligible to make
an After-Tax Employee Contribution, or an Employee Elective
Deferral (if the Employer takes such contributions into account in
the calculation of the Contribution Percentage), or to receive a
Matching Contribution (including Forfeitures) or a Qualified
Matching Contribution.
"After-Tax Employee Contribution" means any contribution made to
the Plan by or on behalf of a Participant that is included in the
Participant's gross income in the year in which made and that is
maintained under a separate Account to which earnings and losses
are allocated.
"Matching Contribution" means an Employer contribution made to
this or any other Defined Contribution Plan on behalf of a
Participant on account of an Employee Contribution made by such
Participant, or on account of a Participant's Employee Elective
Deferral, under a plan maintained by the Employer.
SECTION 4.5 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.
(a) "Excess Aggregate Contributions" means, with respect to any Plan
Year, the excess of:
(1) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution
Percentage actually made on behalf of Highly
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<PAGE>
Compensated Employees for such Plan Year, over
(2) The maximum Contribution Percentage Amounts permitted by the
ACP test (determined by reducing contributions made on behalf
of Highly Compensated Employees in order of such Employees'
Contribution Percentages beginning with the highest of such
percentages).
Such determination will be made after first determining Excess
Employee Elective Deferrals pursuant to Section 4.1 and then
determining Excess Contributions pursuant to Section 4.3.
(b) Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss thereto, shall
be forfeited if forfeitable or, if not forfeitable, distributed no
later than the last day of each Plan Year to Participants to whose
Accounts such Excess Aggregate Contributions were allocated for
the preceding Plan Year. Excess Aggregate Contributions are
allocated to the Highly Compensated Employees with the largest
Contribution Percentage Amounts taken into account in calculating
the ACP test for the year in which the excess arose, beginning
with the Highly Compensated Employee with the largest amount of
such Contribution Percentage Amounts and continuing in descending
order until all the Excess Aggregate Contributions have been
allocated. For purposes of the preceding sentence, the "largest
amount" is determined after distribution of any Excess Aggregate
Contributions. If such Excess Aggregate Contributions are
distributed more than 2 1/2 months after the last day of the Plan
Year in which such excess amounts arose, a 10-percent excise tax
will be imposed on the employer maintaining the plan with respect
to those amounts. Excess Aggregate Contributions shall be treated
as Annual Additions under the Plan.
(c) Excess Aggregate Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable
to Excess Aggregate Contributions allocated to each Participant is
the sum of: (1) income or loss allocable to the Participant's
Employee Contribution Account, Matching Contribution Account (if
any, and if all amounts therein are not used in the ADP test) and,
if applicable, Qualified Non-Elective Contribution Account and
Employee Elective Deferral Account for the Plan Year multiplied by
a fraction, the numerator of which is such Participant's Excess
Aggregate Contributions for the year and the denominator is the
Participant's Account balance(s) attributable to Contribution
Percentage Amounts without regard to any income or loss occurring
during such Plan Year; and (2) ten percent of the amount
determined under (i) multiplied by the number of whole calendar
months between the end of the Plan Year and the date of
distribution (including the month of distribution if distribution
occurs after the 15th of such month).
(d) Forfeitures of Excess Aggregate Contributions may either be
reallocated to the Accounts of Non- Highly Compensated Employees
or applied to reduce Employer contributions.
(e) Excess Aggregate Contributions shall be forfeited, if forfeitable,
or distributed on a pro rata basis from the Participant's
After-Tax Employee Contribution Account, Matching Contribution
Account, and Qualified Matching Contribution Account (and, if
applicable, the Participant's Qualified Non-Elective Contribution
Account or Employee Deferral Account, or both).
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SECTION 4.6 RECHARACTERIZATION.
Recharacterization is inapplicable to this Plan because there are no After-Tax
Employee Contributions.
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ARTICLE V - ALLOCATIONS, VALUATION AND VESTING
SECTION 5.1 ALLOCATION OF CONTRIBUTIONS.
As of the Valuation Date, Employee Elective Deferrals, Employer Matching
Contributions, Qualified NonElective Contributions, and Qualified Matching
Contributions will be allocated to Participants' Accounts in the amounts in
which they were contributed to the Plan by the Employer with respect to each
Participant pursuant to Article III.
As of the Valuation Date, Employer Regular Contributions made under Section 3.1,
if any, shall be allocated to the Account of each Participant described in
Section 5.2 according to the ratio that such Participant's Compensation for the
Plan Year bears to the Compensation of all Participants for such Plan Year.
Notwithstanding any provision of this Plan to the contrary, contributions,
benefits and service credit with respect to qualified military service will be
provided in accordance with section 414(u) of the Code.
SECTION 5.2 PARTICIPANTS WHO WILL RECEIVE AN ALLOCATION.
(a) An allocation of Employer Regular Contributions shall only be made
with respect to those Participants who are employed on the last
day of the Plan Year.
(b) An allocation of Employer Matching Contributions made under
Section 3.1 shall only be made with respect to those Participants
who have performed at least one Hour of Service during the Plan
Year regardless of employment status on the last day of the Plan
Year.
(c) A Participant will not be denied an allocation on the basis of his
having attained Normal Retirement Age.
SECTION 5.3 ALLOCATION OF FORFEITURES.
Forfeitures, if any, will reduce Employer Matching Contributions for the current
Plan Year.
SECTION 5.4 ALLOCATION LIMITATIONS.
(a) If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer,
or a welfare benefit fund, as defined in section 419(e) of the
Code maintained by the Employer, or an individual medical account,
as defined in section 415(l)(2) of the Code, maintained by the
Employer, which provides an Annual Addition as defined in
subsection (d)(1), the following provisions shall apply:
(1) The amount of Annual Additions which may be credited to the
Participant's Account for any Limitation Year shall not exceed
the lesser of the Maximum Permissible Amount, as defined in
subsection (d)(9), or any other limitation contained in this
Plan. If contributions that would otherwise be contributed or
allocated to the Participant's Account would cause the Annual
Additions for the Limitation Year to exceed the Maximum
Permissible Amount, the amount contributed or allocated will
be reduced
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<PAGE>
(Employee Elective Deferrals first) so that the Annual
Additions for the Limitation Year will equal the Maximum
Permissible Amount.
(2) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the
Limitation Year will be determined on the basis of the
Participant's actual Section 415 Compensation for the
Limitation Year.
(3) If there is an excess Annual Addition due to an reasonable
error in estimating a Participant's Compensation or in
determining permissible Employee Elective Deferrals, or due to
the allocation of Forfeitures (if any), or any other facts and
circumstances as determined by the 401(k) Committee and which
are found by the Commissioner of Internal Revenue to justify
the availability of the procedures for correcting the excess
as set forth in this subsection, the excess will be corrected
as follows:
(A) Any After-Tax Employee Contributions (plus attributable
earnings), to the extent their return would reduce the
excess, will be returned to the Participant;
(B) If after the application of paragraph (A) an excess amount
still exists, any Employee Elective Deferrals (plus
attributable earnings), to the extent they would reduce
the excess amount, will be distributed to the Participant;
(C) If after the application of paragraphs (A) and (B) an
excess amount still exists, and the Participant is covered
by the Plan at the end of the Limitation Year, the excess
in the Participant's Account will be used to reduce
Employer contributions (including any allocation of
Forfeitures) for such Participant for the next Limitation
Year, and each succeeding Limitation Year if necessary;
(D) If after the application of paragraphs (A) and (B) an
excess amount still exists, and the Participant is not
covered by the Plan at the end of a Limitation Year, the
excess will be held unallocated in a suspense account. The
suspense account will be applied to reduce future Employer
Contributions for all remaining Participants for the next
Limitation Year, and each succeeding Limitation Year if
necessary;
(E) If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section, it will not
receive any allocation of the investment gains and losses
of the Trust. If a suspense account is in existence at any
time during a particular Limitation Year, all amounts in
the suspense account must be allocated and reallocated to
Participants' Accounts before any Employer or any
After-Tax Employee Contributions may be made to the Plan
for that Limitation Year. The excess amount may not be
distributed to Participants or former Participants.
(b) If, in addition to this Plan, a Participant is covered under
another qualified Defined Contribution Plan maintained by the
Employer, a welfare benefit fund (as defined in section 419(e) of
the Code) maintained by the Employer, or an individual medical
account (as defined in section 415(l)(2) of the Code) maintained
by the Employer, which provides an Annual Addition as defined in
subsection (d)(1), during any Limitation Year, the following
provisions shall apply:
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(1) The Annual Additions which may be credited to a Participant's
Account under this Plan for any such Limitation Year may not
exceed the Maximum Permissible Amount reduced by the Annual
Additions credited to such Participant's account under such
other plans and/or welfare benefit funds for the same
Limitation Year. If the Annual Additions with respect to the
Participant under other Defined Contribution Plans and welfare
benefit funds maintained by the Employer are less than the
Maximum Permissible Amount and the Employer contribution that
would otherwise be contributed or allocated to the
Participant's Account under this Plan would cause such
Participant's Annual Additions for the Limitation Year to
exceed this limitation, the amount contributed or allocated
will be reduced so that the Annual Additions under all such
plans and funds for the Limitation Year will equal the Maximum
Permissible Amount. If the Annual Additions with respect to
the Participant under such other Defined Contribution Plans
and welfare benefit funds in the aggregate are equal to or
greater than the Maximum Permissible Amount, no amount will be
contributed or allocated to the Participant's Account under
this Plan for the Limitation Year.
(2) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the
Limitation Year will be determined on the basis of the
Participant's actual Section 415 Compensation for the
Limitation Year.
(3) If, as a result of a reasonable error in estimating
compensation, Employee contributions, the allocation of
Forfeitures or other facts and circumstances as determined by
the 401(k) Committee, a Participant's Annual Additions under
this Plan and such other plans would include an amount in
excess of the Maximum Permissible Amount for a Limitation
Year, the excess will be deemed to consist of the Annual
Additions last allocated, except that Annual Additions
attributable to a welfare benefit fund or individual medical
account will be deemed to have been allocated first regardless
of the actual allocation date.
(4) If an amount in excess of the Maximum Permissible Amount was
allocated to a Participant on an allocation date of this Plan
which coincides with an allocation date of another plan, the
excess attributed to this Plan will be the product of
(A) the total excess allocated as of such date and
(B) the ratio of (i) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under
this Plan to (ii) the total Annual Additions allocated to
the Participant for the Limitation Year as of such date
under this and all other qualified Defined Contribution
Plans maintained by the Employer.
(5) Any excess Annual Addition attributed to this Plan will be
disposed of in the manner described in subsection (a)(3).
(c) If the Employer maintains, or at any time maintained, a qualified
Defined Benefit Plan covering any Participant in this Plan, the
sum of a Participant's Defined Benefit Fraction and Defined
Contribution Fraction shall not exceed 1.0 in any Limitation Year.
If the sum of the fractions exceeds 1.0, the annual benefit
provided under the Defined Benefit Plan will be reduced until the
sum of the fractions equals 1.0.
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(d) Definitions:
(1) Annual Additions: The sum of the following amounts which are
credited to a Participant's Account for the Limitation Year:
(A) Employer contributions,
(B) After-Tax Employee Contributions (if any),
(C) Forfeitures,
(D) Amounts allocated, after March 31, 1984, to an individual
medical account, as defined in section 415(1)(2) of the
Code, which is part of a pension or annuity plan
maintained by the Employer, as well as amounts derived
from contributions paid or accrued after December 31,
1985, in taxable years ending after such date,
attributable to post-retirement medical benefits and
allocated to the separate account of a Key Employee, as
defined in section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in section 419(e) of the Code,
maintained by the Employer, and
(E) Allocations under a simplified employee pension.
For this purpose, any excess applied under sections (a)(3) or
(b)(5) in the Limitation Year to reduce Employer contributions
will be considered Annual Additions for such Limitation Year.
(2) Section 415 Compensation: For purposes of this Section, a
Participant's wages, salaries, and fees for professional
services and other amounts received for personal services
actually rendered in the course of employment with the
Employer maintaining the Plan to the extent that the amounts
are includible in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, and reimbursements
or expense allowances under a nonaccountable plan as described
in Treas. Regulation Section 1.62-2(c)), and excluding the
following:
(A) Employer contributions to a plan of deferred compensation
which are not includible in the Employee's gross income
for the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to
the extent such contributions are deductible by the
Employee, or any distributions from a plan of deferred
compensation;
(B) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held
by the Employee either becomes freely transferable or is
no longer subject to a substantial risk of forfeiture;
(C) Amounts realized from the sale, exchange or other
disposition of stock acquired
27
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under a qualified stock option; and
(D) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) toward the purchase of an
annuity contract described in section 403(b) of the Code
(whether or not the contributions are actually excludable
from the gross income of the Employee).
For Limitation Years beginning after December 31, 1991,
for purposes of applying the limitations of this Article,
Section 415 Compensation for a Limitation Year is the
compensation actually paid or made available during such
Limitation Year. For Limitation Years beginning after
December 31, 1997, for purposes of applying the
limitations of this article, Compensation paid or made
available during such Limitation Year shall include any
Employee Elective Deferrals, any amount which is
contributed or deferred by the Employer at the election of
the Employee and which is not includible in the gross
income of the Employee by reason of sections 125 or 457 of
the Code.
(3) Defined Benefit Fraction: A fraction, the numerator of which
is the sum of the Participant's Projected Annual Benefit under
all Defined Benefit Plans (whether or not terminated)
maintained by the Employer, and the denominator of which is
the lesser of 125 percent of the dollar limitation determined
for the Limitation Year under sections 415(b) and (d) of the
Code or 140 percent of the highest average Section 415
Compensation, including any adjustments under section 415(b)
of the Code.
Notwithstanding the above, if the Participant was a
Participant, as of the first day of the first Limitation Year
beginning after December 31, 1986, in one or more Defined
Benefit Plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction
will not be less than 125 percent of the sum of the annual
benefits under such plans which the Participant had accrued as
of the close of the last Limitation Year beginning before
January 1, 1987, disregarding any changes in the terms and
conditions of the plan(s) after May 5, 1986. The preceding
sentence applies only if the Defined Benefit Plans
individually and in the aggregate satisfied the requirements
of section 415 of the Code for all Limitation Years beginning
before January 1, 1987.
(4) Defined Contribution Dollar Limitation: $30,000, as adjusted
under section 415(d) of the Code.
(5) Defined Contribution Fraction: A fraction, the numerator of
which is the sum of the Annual Additions to the Participant's
Account under this and all other Defined Contribution Plans
(whether or not terminated) maintained by the Employer for the
current and all prior Limitation Years (including the annual
additions attributable to the Participant's nondeductible
Employee contributions to all Defined Benefit Plans, whether
or not terminated, maintained by the Employer, and the annual
additions attributable to all welfare benefit funds, as
defined in section 419(e) of the Code, and individual medical
accounts, as defined in section 415(1)(2) of the Code,
maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and
all prior Limitation Years which also constituted Years of
Service with the Employer (regardless of whether a Defined
Contribution Plan was
28
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maintained by the Employer). The maximum aggregate amount for
any Limitation Year is the lesser of (A) 125 percent of the
dollar limitation determined under sections 415(b) and (d) of
the Code in effect under section 415(c)(1)(A) of the Code or
(B) 35 percent of the Participant's Section 415 Compensation
for such year.
If the Employee was a Participant as of the end of the first
day of the first Limitation Year beginning after December 31,
1986 in one or more Defined Contribution Plans maintained by
the Employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of this
fraction and the Defined Benefit Fraction would otherwise
exceed 1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of (1) the excess of the sum of
the fractions over 1.0, multiplied by (2) the denominator of
this fraction, will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated using
the fractions as they would be computed as of the end of the
last Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the section 415
limitation applicable to the first Limitation Year beginning
on or after January 1, 1987.
The Annual Addition for any Limitation Year beginning before
January 1, 1987, shall not be recomputed to treat all Employee
contributions as Annual Additions.
In determining the Defined Contribution Fraction under section
415(e)(3)(B) of the Code and pursuant to this Section of the
Plan, "100 percent" shall be substituted for "125 percent"
unless the minimum allocation percentage under section
416(c)(2)(A) of the Code and Section 10.3(a) of the Plan is
increased from "three percent" to "four percent" and the Plan
would not be a Top-Heavy Plan if the phrase "90 percent" were
substituted for each reference to the phrase "60 percent"
10.2(b) of the Plan.
(6) Employer: For purposes of this Article, any entity that adopts
this Plan, and all members of a controlled group of
corporations (as defined in section 414(b) of the Code as
modified by section 415(h)), all commonly controlled trades or
businesses (as defined in section 414(c) as modified by
section 415(h)) or affiliated service groups (as defined in
section 414(m)) of which the adopting Employer is part, and
any other entity required to be aggregated with the Employer
pursuant to Regulations under section 414(o) of the Code.
(7) Highest Average Compensation: The average Section 415
Compensation for the three consecutive Years of Service with
the Employer which produces the highest average.
(8) Limitation Year: The Limitation Year is 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 12-consecutive-month period, the new Limitation Year
must begin on a date within the Limitation Year in which the
amendment is made.
(9) Maximum Permissible Amount: The maximum Annual Addition that
may be contributed or allocated to a Participant's Account
under the Plan for any Limitation Year shall not exceed the
lesser of:
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(A) the Defined Contribution Dollar Limitation, or
(B) 25 percent of the Participant's Section 415 Compensation
for the Limitation Year. The Section 415 Compensation
limitation referred to in (B) shall not apply to any
contribution for medical benefits (within the meaning of
section 401(h) or section 419A(f)(2) of the Code) which is
otherwise treated as an Annual Addition under sections
415(1)(1) or 419A(d)(2) of the Code.
If a short Limitation Year is created because an amendment
changes the Limitation Year to a different
12-consecutive-month period, the Maximum Permissible
Amount shall not exceed the Defined Contribution Dollar
Limitation multiplied by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
(10) Projected Annual Benefit: The annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity
if such benefit is expressed in a form other than a straight
life annuity or qualified joint and survivor annuity) to
which the Participant would be entitled under the terms of
the Plan assuming:
(A) The Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if later),
and
(B) The Participant's Section 415 Compensation for the current
Limitation Year and all other relevant factors used to
determine benefits under the Plan will remain constant for
all future Limitation Years.
SECTION 5.5 VALUATION.
The assets of the Trust will be valued on each Valuation Date at fair market
value. On such date, the earnings and losses of the Trust will be allocated to
each Participant's Account according to the ratio of such Account balance to all
Account balances, or by utilizing any other formula as is appropriate under the
circumstances.
SECTION 5.6 VESTING AND ACCRUAL.
(a) Employee Elective Deferrals, Qualified Matching Contributions, and
Qualified Non-Elective Contributions are always 100 percent
Vested.
(b) The nonforfeitable percentage of a Participant's Account
attributable to Employer Regular Contributions is determined as
follows:
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The nonforfeitable
Year(s) of Service: percentage is:
1 33 1/3
2 66 2/3
3 100
The nonforfeitable percentage of a Participant's Account
attributable to Employer Matching Contributions is determined as
follows:
The nonforfeitable
Year(s) of Service: percentage is:
1 33 1/3
2 66 2/3
3 100
(c) Notwithstanding the vesting provisions above, in the event a
Participant is terminated by the Employer for cause which could
lead to criminal prosecution, the nonforfeitable percentage of the
Participant's Account attributable to Employer contributions shall
be the minimum amount permitted by the Code and ERISA. This does
not apply to a Participant who is 100 percent Vested, if the Plan
is terminated or partially terminated, or if the Plan is
Top-Heavy.
Notwithstanding the vesting schedule(s) specified above, an
Employee's right to his Accounts will be nonforfeitable upon
attainment of Normal Retirement Age, death, or Disability.
(e) Notwithstanding the vesting schedule(s) specified above, an
Employee's right to his Accounts will be nonforfeitable upon a
change in control of the Employer as defined in Article 1 -
Definitions.
(f) For purposes of determining Years of Service and One-Year Breaks
in Service in computing an Employee's nonforfeitable right to his
Account balance derived from Employer contributions, the
12-consecutive-month period will commence on the date the Employee
first performs an Hour of Service and each subsequent
12-consecutive-month period will commence on the anniversary of
such date.
(g) All of an Employee's Years of Service with the Employer or any
Affiliate will be credited for vesting purposes.
(h) Years of Service before a One-Year Break in Service:
(1) In the case of a Participant who has incurred a One-Year Break
in Service, Years of Service before such break will not be
taken into account until the Participant has completed a Year
of Service after such One-Year Break in Service.
(2) In the case of a Participant who has 5 or more consecutive
One-Year Breaks in Service,
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all service after such One-Year Breaks in Service will be
disregarded for the purposes of vesting the Employer-derived
Account balance that accrued before such One-Year Breaks in
Service. Such Participant's pre-break service will count in
vesting the post- break Employer-derived Account balance only
if either:
(A) such Participant has any nonforfeitable interest in the
Account balance attributable to Employer contributions at
the time of separation from service, or
(B) upon returning to service the number of consecutive
One-Year Breaks in Service is less than the number of
Years of Service.
Separate Accounts will be maintained for the Participant's
pre-break and post-break Employer-derived Account balance.
Both Accounts will share in the earnings and losses of the
Trust Fund.
If a Participant ceases to be employed but is then
reemployed by the Employer before a One-Year Break in
Service occurs, he shall continue to participate in the
Plan in the same manner as if such termination had not
occurred.
(i) If a Participant ceases to be employed but is then reemployed by
the Employer after he has incurred a One-Year Break in Service,
and such individual had received a distribution of his entire
Vested interest (including where the Participant had no Vested
amount in his Account) prior to reemployment, his forfeited
Account shall be restored only if he repays the full amount
distributed to him before the earlier of five (5) years after the
first date on which the Participant is subsequently reemployed by
the Employer or the close of the first period of five consecutive
One- Year Breaks in Service commencing after the distribution. If
a distribution occurs for any reason other than a separation from
service, the time for repayment may not end earlier than five
years after the date of the distribution. In the event the former
Participant repays the full amount distributed to him, the
undistributed portion of the Participant's Account must be
restored in full, unadjusted by gains or losses occurring after
the Valuation Date preceding the distribution.
(j) If the Plan's vesting schedule is changed or amended, or the Plan
is amended in any way that directly or indirectly affects the
computation of the Participant's nonforfeitable percentage, each
Participant with at least three Years of Service with the Employer
may elect, within a reasonable period after the adoption of the
amendment or change, to have the nonforfeitable percentage
computed under the Plan without regard to such amendment or
change. For Participants who do not have at least one Hour of
Service in any Plan Year beginning after December 31, 1988, the
preceding sentence shall be applied by substituting "five Years of
Service" for "three Years of Service" where such language appears.
The period during which the election may be made shall commence
with the date the amendment is adopted or deemed to be made and
shall end on the latest of:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment becomes effective; or
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(3) 60 days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
Furthermore, if the vesting schedule of a Plan is amended, in the
case of an Employee who is a Participant as of the later of the
date such amendment is adopted or the date it becomes effective,
the nonforfeitable percentage (determined as of such date) of such
Employee's right to his Employer-derived accrued benefit will not
be less than the percentage computed under the Plan without regard
to such amendment.
(k) If a distribution is made at a time when a Participant has a
nonforfeitable right to less than 100 percent of the Account
balance derived from Employer contributions and the Participant
may increase his nonforfeitable percentage in the Account:
(1) A separate Account will be established for the Participant's
interest in the Plan as of the time of the distribution, and
(2) At any relevant time the Participant's nonforfeitable portion
of the separate Account will be equal to an amount ("X")
determined by the formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the above formula: P is the
nonforfeitable percentage at the relevant time, AB is the
Account balance at the relevant time, D is the amount of the
distribution, and R is the ratio of the Account balance at the
relevant time to the Account balance after distribution.
"Relevant time" means the time at which, under the plan, the
Vested percentage in the Account can not increase.
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ARTICLE VI - DISTRIBUTIONS
SECTION 6.1 DISTRIBUTIONS OF SMALL ACCOUNT BALANCES.
If a Participant terminates service, and the value of the Participant's Vested
Account balance derived from Employer and Employee contributions exceeds (or at
the time of any prior distribution exceeded) $5,000, the Participant will
receive a distribution of the value of the entire Vested portion of such Account
balance and the nonvested portion will be treated as a Forfeiture. If the value
of a Participant's Vested Account balance is zero, the Participant shall be
deemed to have received a distribution of such Vested Account balance.
SECTION 6.2 DISTRIBUTIONS WHILE IN-SERVICE.
Subject to the provisions of Section 6.12, in-service distributions shall be
made, at the written election of a Participant, in the following
circumstance(s):
o The 401(k) Committee, at the election of the Participant, shall
direct the Trustee to distribute to any Participant his Vested
Account balance after he has attained age 59 1/2.
o In-Service distributions of a Participant's Account balance other
than amounts attributable to his or her Employee Elective Deferrals
may be made to a Participant on account of hardship. In-Service
distributions of Employee Elective Deferrals (and any earnings
credited to a Participant's Account as of the later of December 31,
1988 and the end of the last Plan Year ending before July 1, 1989)
may be made to a Participant on account of hardship. A hardship
withdrawal shall be authorized only upon a showing of an immediate
and heavy financial need where the Participant lacks other
available resources.
(1) The following are the only financial needs considered, for
purposes of the Plan, to be immediate and heavy:
(a) Expenses incurred or necessary for medical care described
in Code section 213(d) for the Participant, Spouse, or any
of his dependents (as defined in Code section 152);
(b) Purchase (excluding mortgage payments) of a principal
residence for the Participant;
(c) Payment of tuition and related educational fees for the
next 12 months of post-secondary education for the
Participant, his Spouse, children, or dependents; or
(d) The need to prevent the eviction of the Participant from
his principal residence or foreclosure on the mortgage of
the Participant's principal residence.
(2) A distribution will be considered necessary to satisfy an
immediate and heavy
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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 Deferrals (and Employee Contributions)
will be suspended for twelve months after the receipt of
the hardship distribution;
(c) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts
necessary to pay any federal, state or local income taxes
or penalties reasonably anticipated to result from the
distribution); and
(d) All Plans maintained by the Employer provide that the
Employee may not make Employee Elective Deferrals for the
Employee's taxable year immediately following the taxable
year of the hardship distribution in excess of the
applicable limit under section 402(g) of the Code for such
taxable year less the amount of such Employee's Elective
Deferrals for the taxable year of the hardship
distribution.
SECTION 6.3 DISTRIBUTIONS UPON SEPARATION FROM SERVICE.
The Trustee shall distribute, as soon as administratively feasible, the value of
the Participant's Vested Account balance in one lump sum. The Trustee shall
distribute the value of the Participant's Vested Account balance immediately
following separation from service.
SECTION 6.4 DISTRIBUTIONS UPON RETIREMENT.
In the event that an applicable retirement date has been reached, all Vested
amounts credited to the Participant's Account balance shall become
distributable. The distribution will be made in one lump sum. The distribution
will be made, as soon as administratively feasible, following the applicable
retirement date which will include the attainment of Normal Retirement Age.
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<PAGE>
SECTION 6.5 DISTRIBUTIONS UPON DEATH.
(a) Upon the death of a Participant, the 401(k) Committee shall
instruct the Trustee, in accordance with this Article, to
distribute the Account of a deceased Participant to that
Participant's Beneficiary. The Participant shall not name as his
Beneficiary someone other than his Spouse unless and until the
Participant and Spouse designate, in writing on a valid waiver
form provided by the 401(k) Committee for such purpose, an
alternate Beneficiary, which designation shall be witnessed by a
notary public. In addition, the Participant may designate a
Beneficiary other than his Spouse if: (1) the Participant is
legally separated or has been abandoned and the Participant has a
court order to such effect (and there is no "qualified domestic
relations order" as defined in section 414(p) of the Code), or (2)
the Participant has no Spouse, or (3) the Spouse cannot be
located. The 401(k) Committee may require such proof of death and
such evidence of the right of other persons to be Beneficiaries as
it shall deem proper under the circumstances. The 401(k)
Committee's determination of death and of the right of any
Beneficiary to receive payments shall be conclusive.
(b) The designation of a Beneficiary shall be made on a form approved
by the 401(k) Committee. A Participant may revoke or change his
designation with the 401(k) Committee by filing a new designation
form with the 401(k) Committee. In the event that no valid
designation exists at the time of the Participant's death, and the
Participant has no Spouse, the death benefit shall be payable to
the Participant's estate.
If the Participant dies after distribution of his or her interest
has begun, where the Participant has reached age 70 1/2, the
Trustee shall distribute the remaining portion of such interest
under the method of distribution being used prior to the
Participant's death.
If the Participant dies before distribution of his interest has
begun or before age 70 1/2, his Account shall be distributed as a
lump sum within one year of the death of the Participant.
SECTION 6.6 DISTRIBUTIONS UPON DISABILITY.
In the event of a Participant's total and permanent Disability, the Trustee
shall distribute the value of the Participant's Vested Account balance. The
distribution will be made in one lump sum. The distribution will be made as soon
as administratively feasible following the determination of Disability.
SECTION 6.7 SPECIAL BENEFICIARY PROVISIONS.
(a) Lost Beneficiary. If, after five years have expired following
reasonable efforts of the 401(k) Committee to locate a Participant
or his Beneficiary, including sending a registered letter, return
receipt requested to the last known address, the 401(k) Committee
is unable to locate the Participant or Beneficiary, then the
amounts distributable to such Participant or Beneficiary shall,
pursuant to applicable state and Federal laws, be treated as a
Forfeiture under the Plan. Where a Participant or Beneficiary is
located subsequent to a Forfeiture, such benefits shall be
reinstated by the 401(k) Committee, and shall not count as an
Annual Addition under section 415 of the Code.
(b) Minor Beneficiary. The 401(k) Committee may instruct the Trustee
to distribute a sum payable
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<PAGE>
to a minor instead to his or her legal guardian, or if there is no
guardian, to a parent or other responsible adult who maintains the
residence of the minor. In the alternative such distribution could
be made to the appropriate custodian under the Uniform Gifts to
Minors Act or Gift to Minors Act if applicable under the state
laws of the state in which the minor resides. Any payment in this
format shall discharge all fiduciaries involved in the
distribution including the Trustee, Employer, and Plan from
liability in regard to the transaction.
(c) Alternate Payee. A Participant's rights and benefits shall be
subject to the rights afforded to an alternate payee under a
qualified domestic relations order. In connection with a proper
qualified domestic relations order under section 414(p) of the
Code, a distribution shall be permitted if such distribution is
authorized by the qualified domestic relations order even if the
Participant has not achieved a distributable event under the Plan.
SECTION 6.8 CONSENT OF THE PARTICIPANT REQUIRED FOR DISTRIBUTIONS IF ACCOUNT
BALANCES GREATER THAN $5,000.
If the value of a Participant's Vested Account balance derived from Employer and
Employee contributions exceeds (or at the time of any prior distribution
exceeded) $5,000, and the Account balance is immediately distributable, the
Participant (or where the Participant has died and the Surviving Spouse is the
beneficiary, the Surviving Spouse) must consent to any distribution of such
Account balance. An Account balance is immediately distributable if any part of
the Account balance could be distributed to the Participant (or Surviving
Spouse) before the Participant attains, or would have attained if not deceased,
the later of Normal Retirement Age or age 62.
The consent of the Participant shall not be required to the extent that a
distribution is required to satisfy section 401(a)(9) or section 415 of the
Code. In addition, upon termination of this Plan, if 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 section 4975(e)(7) or 409 of the Code or a simplified employee
pension plan as defined in section 408(k) of the Code), the Participant's
Account balance may, without the Participant's consent, be distributed to the
Participant. However, if any entity within the same controlled group as the
Employer maintains another Defined Contribution Plan (other than an employee
stock ownership plan as defined in section 4975(e)(7) or 409 of the Code or a
simplified employee pension plan as defined in section 408(k) of the Code) then
the Participant's Account balance will be transferred, without the Participant's
consent, to the plan if the Participant does not consent to an immediate
distribution.
SECTION 6.9 COMMENCEMENT OF BENEFITS.
Unless the Participant elects otherwise, distribution of benefits will begin no
later than the 60th day after the latest of the close of the Plan Year in which:
(1) the Participant attains age 65 (or Normal Retirement Age, if
earlier);
(2) occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan; or
(3) the Participant terminates service with the Employer.
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<PAGE>
Notwithstanding the foregoing, the failure of a Participant, Spouse or
Beneficiary to consent to a distribution while a benefit is immediately
distributable, within the meaning of Section 6.8 of the Plan, shall be deemed to
be an election to defer commencement of payment of any benefit sufficient to
satisfy this Section.
SECTION 6.10 REQUIRED DISTRIBUTIONS.
(a) The requirements of this Article shall apply to any distribution
of a Participant's interest and will take precedence over any
inconsistent provisions of this Plan. Unless otherwise specified,
the provisions of this Article apply to calendar years beginning
after December 31, 1984. All distributions shall be determined and
made in accordance with the proposed Regulations promulgated under
section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of section 1.401(a)(9)-2 of the
proposed Regulations.
(b) The entire interest of a Participant must be distributed or must
begin to be distributed no later than the Participant's Required
Beginning Date (defined below) which is generally the April 1st
following his attainment of age 70 1/2.
Distributions may not be made over a period which exceeds each of
the following (or a combination thereof):
(1) the life of the Participant,
(2) the life of the Participant and a Designated Beneficiary,
(3) a period certain not extending beyond the Life Expectancy of
the Participant, or
(4) a period certain not extending beyond the joint life and last
survivor expectancy of the Participant and a Designated
Beneficiary.
(c) If the Participant's interest is to be distributed in other than a
single sum, the following minimum distribution rules shall apply
on or after the Required Beginning Date:
(1) Distributions During the Participant's Life: If a
Participant's benefit is to be distributed over (1) a period
not extending beyond the Life Expectancy of the Participant or
the joint life and last survivor expectancy of the Participant
and the Participant's Designated Beneficiary or (2) a period
not extending beyond the Life Expectancy of the Designated
Beneficiary, then the amount required to be distributed for
each calendar year, beginning with distributions for the first
Distribution Calendar Year, must at least equal the quotient
obtained by dividing the Participant's benefit by the
Applicable Life Expectancy.
For calendar years beginning before January 1, 1989, if the
Participant's Spouse is not the Designated Beneficiary, the
method of distribution selected must assure that at least 50
percent of the present value of the amount available for
distribution is paid within the Life Expectancy of the
Participant.
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For calendar years beginning after December 31, 1988, the
amount to be distributed each year, beginning with
distributions for the first Distribution Calendar Year shall
not be less than the quotient obtained by dividing the
Participant's benefit 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 set forth in Q&A-4 of section 1.401(a)(9)-2 of the
proposed Regulations. Distributions after the death of the
Participant shall be made using the Applicable Life Expectancy
above as the relevant divisor without regard to proposed
Regulations section 1.401(a)(9)-2.
The minimum distribution required for the Participant's first
Distribution Calendar Year must 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
Employee's Required Beginning Date occurs, must be made on or
before December 31 of that Distribution Calendar Year.
If the Participant's benefit is distributed in the form of an
annuity purchased from an insurance company, distributions
thereunder shall be made in accordance with the requirements
of section 401(a)(9) of the Code and the proposed Regulations
thereunder.
(2) Distributions After the Participant's Death: If the
Participant dies after distribution of his interest has begun
and after attaining age 70 1/2, the remaining portion of such
interest, if any, will continue to be distributed at least as
rapidly as under the method of distribution being used prior
to the Participant's death.
If the Participant dies before distribution of his interest
began or prior to attaining age 70 1/2, distribution of the
Participant's entire interest shall be completed by the later
of December 31 of the calendar year containing the fifth
anniversary of the Participant's death or, if any portion of
the Participant's interest is payable to a Designated
Beneficiary, distributions may be made over the life or over a
period certain not greater than the Life Expectancy of the
Designated Beneficiary commencing on or before December 31 of
the calendar year immediately following the calendar year in
which the Participant died notwithstanding the above, however,
but if the Designated Beneficiary is the Participant's
Surviving Spouse, distributions are required to begin not
earlier than the later of (a) December 31 of the calendar year
in which the Participant died, or (b) December 31 of the
calendar year in which the Participant would have attained age
70 1/2.
If the Participant has not made an election pursuant to this
Section by the time of his or her death, the Participant's
Designated Beneficiary must elect the method of distribution
no later than the earlier of (1) December 31 of the calendar
year in which distributions would be required to begin under
this Section, or (2) December 31 of the calendar year which
contains the fifth anniversary of the date of death of the
Participant. If the Participant has no Designated Beneficiary,
or if the Designated Beneficiary does not elect a method of
distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death.
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For purposes of the above paragraphs, if the Surviving Spouse
dies after the Participant, but before payments to such Spouse
begin, the provisions above, except for the spousal exception
rule, shall be applied as if the Surviving Spouse were the
Participant.
Any amount paid to a child of the Participant will be treated
as if it has been paid to the Surviving Spouse if the amount
becomes payable to the Surviving Spouse when the child reaches
the age of majority.
Distribution of a Participant's interest is considered to
begin on the Participant's Required Beginning Date (or, if
applicable, the date distribution is required to begin to the
Surviving Spouse pursuant to the above). If distribution in
the form of an annuity irrevocably commences to the
Participant before the Required Beginning Date, the date
distribution is considered to begin is the date distribution
actually commences.
(3) Definitions:
(A) Applicable Life Expectancy: The Life Expectancy (or joint
life and last survivor expectancy) calculated using the
attained age of the Participant (or Designated
Beneficiary) as of the Participant's (or Designated
Beneficiary's) birthday in the applicable calendar year
reduced by one (1) for each calendar year which has
elapsed since the date the Life Expectancy was first
calculated. If Life Expectancy is being recalculated, the
Applicable Life Expectancy shall be the Life Expectancy as
so recalculated. The applicable calendar year shall be the
first Distribution Calendar Year and if Life Expectancy is
being recalculated, such succeeding calendar year.
(B) Designated Beneficiary: An individual affirmatively
elected by the Participant or the Participant's Surviving
Spouse. If no Beneficiary is elected, the Designated
Beneficiary shall be the Spouse of the Beneficiary under
the Plan in accordance with section 401(a)(9) of the Code
and the proposed Regulations thereunder.
(C) Distribution Calendar Year: A calendar year for which a
minimum distribution is required. For distributions
beginning before the Participant's death, the first
Distribution Calendar Year is the calendar year
immediately preceding the calendar year which contains the
Participant's Required Beginning Date. For distributions
beginning after the Participant's death, the first
Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to the above.
(D) Life Expectancy: Life Expectancy and joint life and last
survivor expectancy are computed by use of the expected
return multiples in Tables V and VI of section 1.72-9 of
the Regulations.
Unless the Participant or the Surviving Spouse elects
otherwise by the time distributions are required to begin,
life expectancies shall be recalculated annually. An
election shall be irrevocable as to the Participant or
Surviving Spouse and shall apply to all subsequent years.
The Life Expectancy of a non-Spouse Beneficiary may not be
recalculated.
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(E) Participant's Benefit:
(i) The Account balance as of the last Valuation Date in
the calendar year immediately preceding the
Distribution Calendar Year (valuation calendar year)
increased by the amount of any contributions or
Forfeitures allocated to the Account balance 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.
(ii) For purposes of paragraph (a) above, if any portion
of the minimum distribution for the first
Distribution Calendar Year is made in the second
Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum
distribution made in the second Distribution
Calendar Year shall be treated as if it had been
made in the immediately preceding Distribution
Calendar Year.
(F) Required Beginning Date:
(i) The required beginning date of a Participant is the
later of the April 1 of the calendar year following
the calendar year in which the Participant attains
age 70 1/2 or retires except that benefit
distributions to a 5-percent owner must commence by
the April 1 of the calendar year following the
calendar year in which the Participant attains age
70 1/2.
(ii) 5-percent owner. A Participant is treated as a
5-percent owner for purposes of this Section if such
Participant is a 5-percent owner as defined in
section 416(i) of the Code (determined in accordance
with section 416 but without regard to whether the
Plan is Top-Heavy) at any time during the Plan Year
ending with or within the calendar year in which
such owner attains age 70 1/2.
(iii) Once distributions have begun to a 5-percent owner
under this Section, they must continue to be
distributed even if the Participant ceases to be a
5- percent owner in a subsequent year.
(d) Notwithstanding the other requirements of this Section and subject
to the joint and survivor annuity requirements, distribution on
behalf of any Employee, including a 5-percent owner, may be made
if all of the following requirements are satisfied (regardless of
when such distribution commences):
(1) The distribution by the Trust is one which would not have
disqualified the Trust under section 401(a)(9) of the Code as
in effect prior to amendment by the Deficit Reduction Act of
1984.
(2) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in the
Trust is being distributed or, if the Employee is
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deceased, by a Beneficiary of such Employee.
(3) Such designation was in writing, was signed by the Employee or
the Beneficiary, and was made before January 1, 1984.
(4) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(5) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made,
and in the case of any distribution upon the Employee's death,
the Beneficiaries of the Employee listed in order of priority.
A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the
required information described above with respect to the
distributions to be made upon the death of the Employee.
For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee or the Beneficiary
to whom such distribution is being made, will be presumed to have
designated the method of distribution under which the distribution
is being made if the method of distribution was specified in
writing and the distribution satisfied the requirements of (1) and
(5) above.
If a designation is revoked, any subsequent distribution must
satisfy the requirements of section 401(a)(9) of the Code and the
proposed Regulations thereunder. If a designation is revoked
subsequent to the date distributions are required to begin, the
Trust must distribute by the end of the calendar year following
the calendar year in which the revocation occurs the total amount
not yet distributed which would have been required to have been
distributed to satisfy section 401(a)(9) of the Code and the
proposed Regulations thereunder, but for the section 242(b)(2)
election. For calendar years beginning after December 31, 1988,
such distributions must meet the minimum distributions incidental
benefit requirements in section 1.401(a)(9)-2 of the proposed
Regulations. Any changes in the designation will be considered to
be a revocation of the designation. However, the mere substitution
or addition of another Beneficiary (one not named in the
designation) under the designation will not be considered to be a
revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to
be made under the designation, directly or indirectly (for
example, by altering the relevant measuring life). In the case in
which an amount is transferred or rolled over from the Plan to
another plan, the rules in Q&A J-2 and Q&A J-3 of the proposed
Regulations shall apply.
SECTION 6.11 ANNUITY CONTRACT.
(a) Nontransferability of annuities. Any annuity contract distributed
from the Plan must be nontransferable.
(b) Conflicts with annuity contracts. The terms of any annuity
contract purchased and distributed by the Plan to a Participant or
Spouse shall comply with the requirements of this Plan.
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SECTION 6.12 SPECIAL DISTRIBUTION RULES FOR 401(K) CONTRIBUTIONS AND QUALIFIED
NON-ELECTIVE CONTRIBUTIONS AND QUALIFIED MATCHING CONTRIBUTIONS.
Employee Elective Deferrals and Qualified Non-Elective Contributions and
Qualified Matching Contributions, and income allocable to each are not
distributable to a Participant or his or her Beneficiary or Beneficiaries, in
accordance with such Participant's or Beneficiary's or Beneficiaries' election,
earlier than upon separation from service, death, or Disability other than upon
the occurrence of one or more of the following events:
(1) Termination of the Plan without the establishment of another
Defined Contribution Plan other than an employee stock
ownership plan (as defined in section 4975(e) or 409 of the
Code), or a simplified employee pension plan (as defined in
section 408(k) of the Code), or a SIMPLE IRA plan (as defined
in section 408(p) of the Code).
(2) The transfer by the Employer, if a corporation, to an
unrelated corporation of substantially all of the assets
(within the meaning of section 409(d)(2) of the Code) used in
a trade or business of such corporation if the Employer
continues to maintain this Plan after the disposition, but
only with respect to Employees who continue employment with
the corporation acquiring such assets.
(3) The transfer by the Employer, if a corporation, to an
unrelated entity of such corporation's interest in a
subsidiary (within the meaning of section 409(d)(3) of the
Code) if the Employer continues to maintain this Plan, but
only with respect to Employees who continue employment with
such subsidiary.
(4) A distribution made pursuant to an event described in
subsection (1), (2), or (3) above shall be made in the form of
a lump sum.
(5) The attainment of age 59 1/2.
(6) The hardship of the Participant as described in Section 6.2 of
the Plan.
SECTION 6.13 FORM OF DISTRIBUTION.
Distributions shall be made in cash or in kind as elected by the Participant.
SECTION 6.14 TRUSTEE-TO-TRUSTEE TRANSFERS.
At the direction of a Participant, the Trustee of this Plan will make a transfer
of such Participant's applicable Account balance to the trustee of another plan,
designated by the Participant, and qualified under section 401(a) of the Code.
SECTION 6.15 ROLLOVERS TO OTHER PLANS OR IRAS.
Effective with respect to any distribution made on or after January 1, 1993 and
notwithstanding any provision of the Plan to the contrary that would otherwise
limit a Participant's election under this Section, a Participant may elect, at
the time and in the manner prescribed by the Administrator, to have any portion
of an eligible rollover distribution paid, in a direct rollover, to an eligible
retirement plan specified by the Participant.
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Definitions:
(1) Eligible rollover distribution. An eligible rollover distribution
is any distribution of all or any portion of the balance to the
credit of the Participant, except:
(A) any distribution that is one of a series of substantially
equal periodic payments (made not less frequently than
annually) made over the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
the Participant and the Participant's designated Beneficiary,
or over a specified period of ten years or more;
(B) any distribution to the extent such distribution is required
under section 401(a)(9) of the Code; and
(C) the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities).
(2) Eligible retirement plan. An eligible retirement plan is an
individual retirement account described in section 408(a) of the
Code, an individual retirement annuity described in section 408(b)
of the Code, an annuity plan described in section 403(a) of the
Code, or a qualified trust described in section 401(a) of the Code
that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
Surviving Spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) Direct rollover. A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the Participant.
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ARTICLE VII - LOANS AND LIFE INSURANCE
SECTION 7.1 AVAILABILITY OF LOANS.
Loans shall not be permitted under this Plan and the provisions of this Article
shall not be implemented unless and until the 401(k) Committee shall otherwise
determine in its discretion. If and when loans are permitted under the Plan, any
such loan shall be subject to such conditions and limitations as the 401(k)
Committee deems necessary for administrative convenience and to preserve the
tax-qualified status of the Plan.
SECTION 7.2 AMOUNT OF LOANS.
No loan to any Participant or Beneficiary may be made to the extent that such
loan, when added to the outstanding balance of all other loans to the
Participant or Beneficiary, would exceed the lesser of (a) $50,000 reduced by
the excess (if any) of the highest outstanding balance of loans during the
one-year period ending on the day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan is made, or (b) one-half the
present value of the nonforfeitable accrued benefit of the Participant. For the
purpose of the above limitation, all loans from all plans of the Employer and
other members of a group of employers described in sections 414(b), 414(c),
414(m), and 414(o) of the Code are aggregated. Furthermore, any loan shall by
its terms require that repayment (principal and interest) be amortized in level
payments, not less frequently than quarterly, over a period not extending beyond
five years from the date of the loan, unless such loan is used to acquire a
dwelling unit which within a reasonable time (determined at the time the loan is
made) will be used as the principal residence of the Participant. An assignment
or pledge of any portion of the Participant's interest in the Plan and a loan,
pledge, or assignment with respect to any insurance contract purchased under the
Plan, will be treated as a loan under this paragraph.
SECTION 7.3 TERMS OF LOANS.
(a) Loans shall be made available to all Participants and
Beneficiaries on a reasonably equivalent basis.
(b) Loans shall not be made available to Highly Compensated Employees
(as defined in section 414(q) of the Code) in an amount greater
than the amount made available to other Employees.
(c) Loans must be adequately secured using not more than 50 percent of
the Participant's Vested Account balance, and bear a reasonable
interest rate.
No Participant loan shall exceed the present value of the Participant's Vested
accrued benefit.
No loans will be made from the Plan in an amount less than $1,000.
The Plan allows for one loan outstanding at a time.
(g) In the event of default, foreclosure on the note and attachment of
security will not occur until a distributable event occurs in the
Plan.
(h) No loans will be made to any shareholder-employee. For purposes
of this requirement, a
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shareholder-employee means an Employee or officer of an electing
small business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of section 318(a)(1) of
the Code) on any day during the taxable year of such corporation,
more than 5 percent of the outstanding stock of the corporation.
(i) Loans granted or renewed on or after the last day of the first
Plan Year beginning after December 31, 1988 shall be made pursuant
to a written Participant loan program incorporated herein by
reference which will include the following:
(1) the basis on which loans will be approved or denied;
(2) procedures for applying for the loans;
(3) person or positions authorized to administer the Participant
loan program;
(4) limitations, if any, on the types and amounts of loans
offered;
(5) procedures under the program for determining the rates of
interest;
(6) the types of collateral which may secure a Participant loan;
and
(7) the events constituting default and the steps that will be
taken to preserve Plan assets.
SECTION 7.4 PURCHASE OF LIFE INSURANCE CONTRACTS.
(a) The Trustee shall apply for and shall be the owner of any
insurance contract(s) purchased under the terms of this Plan. The
insurance contract(s) must provide that proceeds will be payable
to the Trustee; however, the Trustee shall be required to pay over
all proceeds of the contract(s) to the Participant's designated
Beneficiary if the insurance was not purchased as a general
investment of the Plan in accordance with the distribution
provisions of this Plan. Under no circumstances shall the Trust
retain any part of the proceeds if the insurance was not purchased
as a general investment of the Plan. In the event of any conflict
between the terms of this Plan and the terms of any insurance
contract purchased hereunder, the Plan provisions shall control.
(b) Any dividends or credits earned on insurance contracts will be
applied, within the taxable year of the Employer in which received
or within the next succeeding taxable year, toward the premiums
next due before any further Employer contributions are so applied.
Any dividends or credits earned on insurance contracts will be
allocated to the Participant's Account (derived from Employer
contributions) for whose benefit the contract is held.
(c) Contributions can be used to purchase insurance on life of the
Participant subject to the following limitations:
(1) Ordinary life insurance - For purposes of this Section 7.4,
ordinary life insurance contracts are contracts with both
non-decreasing death benefits and non-increasing premiums. If
such contracts are purchased, less than 1/2 of the aggregate
Employer
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contributions allocated to any Participant may be used to pay
the premiums attributable thereto.
(2) Term or universal life insurance - No more than 1/4 of the
aggregate Employer contributions allocated to any Participant
may be used to pay premiums on term life insurance contracts,
universal life insurance contracts, and all other life
insurance contracts which are not ordinary life contracts.
(3) Both Ordinary and term or universal life insurance - The sum
of (i) 1/2 of the ordinary life insurance premiums and (ii)
all other life insurance premiums may not exceed 1/4 of the
aggregate Employer contributions allocated to any Participant.
SECTION 7.5 DISTRIBUTION OF INSURANCE CONTRACTS.
Insurance contracts on a Participant's life shall either be converted to cash or
an annuity or be distributed to the Participant upon the commencement of
distribution of benefits under this Plan.
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ARTICLE VIII - PLAN ADMINISTRATION
SECTION 8.1 DUTIES OF THE EMPLOYER.
The Employer shall have overall responsibility for the establishment, amendment,
termination, administration, and operation of the Plan. The Employer shall
discharge this responsibility by appointing a 401(k) Committee, to which shall
be delegated overall responsibility for administering and operating the Plan.
SECTION 8.2 THE 401(K) COMMITTEE.
(a) The 401(k) Committee shall be the "named fiduciary" (as defined in
section 402(a)(2) of ERISA), the "Administrator" (as defined in
section 3(16) of ERISA and section 414(g) of the Code), and an
agent for service of process of the Plan.
(b) The 401(k) Committee shall consist of officers or other Employees
of the Employer, or any other person(s) who shall be appointed by
the Employer. The members of the 401(k) Committee shall serve at
the direction of the Employer. In the absence of such appointment,
the Employer shall serve as the 401(k) Committee. Any member of
the 401(k) Committee may resign by delivering his written
resignation to the Employer and to the 401(k) Committee, which
shall become effective upon the date specified therein. In the
event of a vacancy on the 401(k) Committee, the remaining members
shall constitute the 401(k) Committee with full power to act until
the Employer appoints a new 401(k) Committee member. The Employer
may from time to time remove any 401(k) Committee member with or
without cause and appoint a successor thereto.
SECTION 8.3 APPOINTMENT OF ADVISOR.
The 401(k) Committee may employ any such person or entity as it deems necessary
to assist in the Administration of the Plan and provide services including but
not limited to tax advice, amendment, termination and operation of the Plan, and
advice concerning reports filed with the Internal Revenue Service. Any such
advisor shall not be the Administrator of the Plan (as defined in section 3(16)
of ERISA and section 414(g) of the Code).
The advisor for the purpose described above shall be Ernst & Young LLP unless
and until such time the 401(k) Committee by written statement specifies to the
contrary.
SECTION 8.4 POWERS AND DUTIES OF THE 401(K) COMMITTEE.
(a) The 401(k) Committee, on behalf of the Participants and
Beneficiaries of the Plan, shall enforce the Plan and Trust in
accordance with the terms thereof, and shall have all powers
necessary to carry out such provisions. The 401(k) Committee shall
interpret the Plan and Trust and shall determine all questions
arising in the administration and application of the Plan and
Trust. Any such interpretation or determination by the 401(k)
Committee shall be conclusive and binding on all persons.
The 401(k) Committee shall establish rules and regulations
necessary for the proper conduct and administration of the Plan,
and from time to time may change or amend these rules and
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regulations. The 401(k) Committee shall also have the power to
authorize all disbursements from the Trust by the Trustee in
accordance with the Plan's terms.
(b) At the direction of the 401(k) Committee, distributions to minors
or persons declared incompetent may be made by the Trustee
directly to such persons or to the legal guardians or conservators
of such persons. The Employer, the 401(k) Committee, and the
Trustee shall not be required to see to the proper application of
such distributions made to any of such persons, but his or their
receipt thereof shall be a full discharge of the Employer, the
401(k) Committee, and the Trustee of any obligation under the Plan
or the Trust.
SECTION 8.5 ORGANIZATION AND OPERATION.
(a) The 401(k) Committee shall act by a majority of its members then
in office, and such action may be taken either by a vote at a
meeting or by written consent without a meeting. The 401(k)
Committee may authorize any one or more of its members to execute
any document or documents on behalf of the 401(k) Committee, in
which event the 401(k) Committee shall notify the Employer, in
writing, of such authorization and the name or names of its member
or members so designated. The Employer thereafter shall accept and
rely on any documents executed by said member of the 401(k)
Committee or members as representing action by the 401(k)
Committee until the 401(k) Committee shall file with the Employer
a written revocation of such designation.
(b) The 401(k) Committee may adopt such bylaws and regulations as it
deems desirable for the conduct of its affairs and may employ and
appropriately compensate such accountants, counsel, specialists,
actuaries, and other persons as it deems necessary or desirable in
connection with the administration and maintenance of the Plan.
The 401(k) Committee shall have the authority to control and
manage the operation and administration of the Plan.
SECTION 8.6 CLAIMS PROCEDURE.
(a) A claim for benefits under the Trust shall be filed on an
application form supplied by the 401(k) Committee. Written notice
of the disposition of the claim shall be furnished to the claimant
within 90 days after an application form is received by the 401(k)
Committee, unless special circumstances (as determined by the
401(k) Committee) require an extension for processing the claim.
If such an extension is required, the 401(k) Committee shall
render a decision as soon as possible subsequent to the 90-day
period, but such decision shall not be rendered later than 180
days after the application form is received by the 401(k)
Committee. Written notice of such extension shall be furnished to
the claimant prior to the commencement of the extension indicating
the special circumstances requiring such extension and the date by
which the 401(k) Committee expects to render the decision on the
claim. In the event the claim is denied, the 401(k) Committee
shall set forth in writing the reasons for the denial and shall
cite pertinent provisions of the Plan and Trust upon which the
decision is based. In addition, the 401(k) Committee shall provide
a description of any additional material or information necessary
for the claimant to perfect the claim, an explanation of why such
information is necessary, and appropriate information as to the
steps to be taken if the Participant or Beneficiary wish to submit
such claim for review as provided in (b) below.
(b) A Participant or Beneficiary whose claim described in (a) above
has been denied in whole or in
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part shall be entitled to the following rights if exercised within
60 days after written denial of a claim is received:
(1) to request a review of the claim upon written application to
the 401(k) Committee;
(2) to review documents associated with the claim; and
(3) to submit issues and comments in writing to the 401(k)
Committee.
(c) If a Participant or a Beneficiary requests a review of the claim
under (b) above, the 401(k) Committee shall conduct a full review
(including a formal hearing if desired) of such request, and a
decision on such request shall be made within 60 days after the
401(k) Committee has received the written request for review from
the Participant or the Beneficiary. Special circumstances (such as
a need for full hearing on request) can allow the 401(k) Committee
to extend the decision on such request, but the decision shall be
rendered no later than 120 days after receipt of the request for
review. Written notice of such an extension shall be furnished to
the Participant or the Beneficiary prior to the commencement of
the extension. The decision of the 401(k) Committee on review
shall be set forth in writing and shall include specific reasons
for the decision as well as specific references to the pertinent
provisions of the Plan or Trust on which the decision is based.
SECTION 8.7 RECORDS AND REPORTS.
(a) The 401(k) Committee shall be entitled to rely upon certificates,
reports, and opinions provided by an accountant, tax or pension
advisor, actuary or legal counsel employed by the Employer or
401(k) Committee. The 401(k) Committee shall keep a record of all
its proceedings and acts, and shall keep all such books of
account, records, and other data as may be necessary for the
proper administration of the Plan. The regularly kept records of
the 401(k) Committee, the Employer, and the Trustee shall be
conclusive evidence of a Participant's service, his Compensation,
his age, his marital status, his status as an Employee, and all
other matters contained therein and relevant to this Plan;
provided, however, that a Participant may request a correction in
the record of his age at any time prior to his retirement and such
correction shall be made if within 90 days after such request he
furnishes a birth certificate, baptismal certificate, or other
documentary proof of age satisfactory to the 401(k) Committee in
support of this correction.
(b) Each Participant and each Participant's designated Beneficiary
must notify the 401(k) Committee from in writing of his mailing
address and each change thereof. Any communication, statement or
notice addressed to a Participant or Beneficiary at the last
mailing address filed with the 401(k) Committee, or if no address
is filed with the 401(k) Committee, the last mailing address as
shown on the Employer's records, will be binding on the
Participant and his Beneficiary for all purposes of the Plan.
Neither the 401(k) Committee nor the Trustee shall be required to
search for or locate a Participant or a Beneficiary.
SECTION 8.8 LIABILITY.
(a) A member of the 401(k) Committee shall not be liable for any act,
or failure to act, of any other member of the 401(k) Committee,
except to the extent that such member:
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(1) Knowingly participates in, or undertakes to conceal, an act or
omission of another 401(k) Committee member, knowing that such
act or omission is a breach of fiduciary duty to the Plan;
(2) Fails to comply with the specific responsibilities given him
as a member of the 401(k) Committee, and such failure enables
another member of the 401(k) Committee to commit a breach of
fiduciary duty to the Plan; or
(3) Has knowledge of a breach of fiduciary duty to the Plan by
another member of the 401(k) Committee, unless such member
makes reasonable effort under the circumstances to remedy such
breach.
(b) Each member of the 401(k) Committee shall be liable with respect
to his own acts of willful misconduct or gross negligence
concerning the Plan. The Employer may indemnify the 401(k)
Committee or each of its members for part or all expenses, costs,
or liabilities arising out of the performance of duties required
by the terms of the Plan or Trust, except for those expenses,
costs, or liabilities arising out of a member's willful misconduct
or gross negligence.
SECTION 8.9 RELIANCE AND STATEMENTS.
The 401(k) Committee, in any of its dealings with Participants hereunder, may
conclusively rely on any written statement, representation, or documents made or
provided by such Participants.
SECTION 8.10 REMUNERATION AND BONDING.
(a) Unless otherwise determined by the 401(k) Committee, the members
of the 401(k) Committee shall serve without remuneration for
services to the Plan and Trust. However, all expenses of the
401(k) Committee shall be paid by the Trust except to the extent
paid by the Employer. Such expenses shall include any expenses
incidental to the functioning of the 401(k) Committee, including
but not limited to fees of accountants, legal counsel, and other
specialists, or any other costs entailed in administering the
Plan.
(b) Title I of ERISA requires certain persons with discretion over
Plan assets to be bonded. Except as required by ERISA or other
federal law, the members of the 401(k) Committee shall serve
without bond.
SECTION 8.11 401(K) COMMITTEE DECISIONS FINAL.
Any decision of the 401(k) Committee with respect to matters within its
jurisdiction shall be final, binding, and conclusive upon the Employer and the
Trustee and upon each Employee, Participant, former Participant, Beneficiary,
and every other person or party interested or concerned.
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ARTICLE IX - TRUST AGREEMENT
SECTION 9.1 ESTABLISHMENT OF TRUST.
The Employer and the Trustee hereby enter into a trust agreement which, except
to the extent such trust agreement is set forth in a valid separate and distinct
document, is incorporated herein and which establishes a Trust consisting of
such sums of money and other property as may from time to time be contributed or
transferred to the Trustee under the terms of the Plan, along with any property
to which the Trust Fund may from time to time be converted, and which provides
for the investment of Plan assets and the operation of the Trust. This trust
agreement, as amended from time to time, shall be deemed part of the Plan, and
all rights and benefits provided to persons under the Plan shall be subject to
the terms of the trust agreement. In the event the Employer has entered into a
separate and distinct trust agreement which is not incorporated in the terms of
this Plan, and such trust agreement, subsequent to its establishment, becomes
void or ceases to operate, the terms of this Article IX shall become effective
with respect to the Employer.
SECTION 9.2 CONTRIBUTIONS TO TRUSTEE.
The Trustee shall accept any cash, and may accept any other property tendered to
it as contributions hereunder, but shall not be under any duty nor have any
right to require the Employer or any other person to contribute to the Trust
Fund or to determine whether the amount of any contribution has been correctly
computed under the terms of the Plan.
SECTION 9.3 PURPOSE OF TRUST.
The purpose of the Trust is to invest in and hold property for the exclusive
benefit of Participants and their Beneficiaries. At no time shall the Trust be
operated or construed in a manner contrary to this purpose. The Trust shall be a
separate entity from the Employer and its assets. In no event shall the Trust
Fund ever be subject to the rights or claims of any creditor of the Employer. It
is expressly understood that the duties and obligations of the Trustee shall be
only those expressly stated in this Article IX.
SECTION 9.4 DISTRIBUTIONS.
The Trustee shall from time to time make distributions from the Trust Fund to
such persons, in such amounts, and in such manner as the 401(k) Committee may
direct in writing. Instructions to the Trustee from the 401(k) Committee need
not specify the purpose of the distributions so ordered, and the Trustee shall
not be responsible in any way for the propriety of such distributions or for the
administration of the Plan. Any such instructions shall constitute a
certification that each distribution directed is one which the 401(k) Committee
is authorized to direct. The Trustee shall not be responsible for the adequacy
of the Trust Fund to meet and discharge any liabilities under the Plan. If a
dispute arises regarding who is entitled to or should receive any distribution
from the Trust Fund, the Trustee may withhold, or cause the withholding of, such
distribution until the dispute has been resolved.
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SECTION 9.5 EXCLUSIVE BENEFIT.
(a) Except to the extent the 401(k) Committee shall authorize the
Trustee to return contributions to the Employer pursuant to the
terms of the Plan, and except as provided under Section 9.5(c), no
part of the Trust Fund shall be used for or diverted to purposes
other than the exclusive benefit of Participants and their
Beneficiaries and for defraying expenses of the Plan and Trust.
(b) The Employer shall have no beneficial interest in the assets of
the Trust, and no part of the Trust shall ever revert to or be
repaid to the Employer, directly or indirectly, except that upon
written request, the Employer shall have a right to recover:
(1) a contribution to the Plan made by mistake of fact if such
contribution (to the extent made by mistake of fact) is
returned to the Employer within one year after payment of such
contribution;
(2) any contributions to the Plan conditioned upon initial
qualification of the Plan under section 401(a) of the Code if
the Plan does not so qualify and such contributions are
returned to the Employer within one year after the denial of
qualification of the Plan and only if a determination letter
request is filed by the time prescribed by law for filing the
Employer's tax return for the taxable year in which the Plan
is adopted;
(3) a contribution to the Plan which is disallowed as a deduction
under section 404 of the Code if such contribution (to the
extent disallowed) is returned to the Employer within one year
after the deduction is disallowed; and
(4) any residual assets due to a section 415 excess contribution
upon termination of the Plan if all liabilities of the Plan to
Participants and their Beneficiaries have been satisfied and
the reversion does not contravene any provision of law.
(c) The previous paragraph shall not apply to a "qualified domestic
relations order," as defined in section 414(p) of the Code, and
any other domestic relations orders permitted to be so treated by
the Trustee under the provisions of the Retirement Equity Act of
1984. The 401(k) Committee shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under any domestic relations orders it
determines to be qualified. To the extent provided under a
"qualified domestic relations order," a former Spouse of a
Participant shall be treated as the Participant's Spouse or
Surviving Spouses for all purposes under the Plan.
SECTION 9.6 EXPENSES OF THE PLAN AND TRUST.
All legal, administrative, taxes, and other expenses of the Plan and Trust, as
well as the Trustee's fees (if any) shall be paid from the Trust Fund except to
the extent paid by the Employer.
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SECTION 9.7 DUTIES AND RESPONSIBILITIES OF TRUSTEE.
It shall be the duty of the Trustee to hold in Trust the funds from time to time
received by it, and the Trustee shall have authority to manage and control the
assets of the Plan pursuant to the terms of the Plan, the Trust agreement, and
the funding policy and method determined by the Employer, except as otherwise
provided in Section 9.5. The Trustee shall discharge such powers and duties for
the exclusive purpose of providing benefits to the Participants and
Beneficiaries and defraying reasonable expenses of administering the Plan, and
shall act with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a like character and
with like aims. The Trustee shall diversify the investments of the Plan so as to
minimize the risk of large losses unless, under the circumstances, it is clearly
prudent not to do so. However, the Trustee may hold, acquire, or invest in
qualifying Employer securities as defined in section 407(d)(5) of ERISA or
qualifying Employer real property as defined in section 407(d)(4) of ERISA (or
both) to the extent that the aggregate fair market value of such securities and
property does not exceed the limitations set forth in section 407. The Trustee
shall not engage in any prohibited transactions as defined in the Code or ERISA.
The Trustee shall not be liable for acquiring, retaining or selling any
investment or reinvestment made in accordance with a direction of the 401(k)
Committee as provided herein, nor for any loss or diminution of the Trust Fund
resulting from the Trustee's action or inaction pursuant to a direction of the
401(k) Committee; nor shall the Trustee be liable for any loss or diminution of
the Trust Fund resulting from the Trustee's inaction hereunder in the absence of
proper directions from the 401(k) Committee unless it shall have been judicially
determined that any such loss was due to the willful misconduct of the Trustee
or its failure to act in good faith in accordance with the provisions of this
agreement.
SECTION 9.8 SPECIFIC POWERS AND DUTIES OF TRUSTEE.
In addition to the powers and duties conferred upon it by other provisions of
the Plan and except to the extent inconsistent with applicable law or with
provisions of the Plan and Trust, the Trustee shall have the following powers
regarding the Trust and Trust Fund:
(1) To sell at public or private sale, exchange, convey, transfer,
lease, or otherwise dispose of, and also to grant options with
respect to all or any part of any property at any time held in the
Trust Fund, for such considerations, in cash or in credit, and
upon such terms and conditions, as it shall deem advisable. In
connection with the purchase of securities, margin accounts may be
opened and maintained. If put or call options are traded, they
must be traded on and purchased through a national securities
exchange registered under the Securities Act of 1934, as amended,
or if the options are not traded on the national securities
exchange, they must be guaranteed by a member firm of the New York
Stock Exchange.
(2) To compromise or settle any claim in respect of any debt or other
obligation due to it as Trustee hereunder, to institute and
prosecute any and all legal proceedings (including foreclosure
proceedings) on behalf of the Plan, or to take any other action
for the purpose of enforcing any such claim, and to change the
rate of interest or extend the maturity date of any such debt or
obligation.
(3) To compromise or settle any claim with respect to any debt or
other obligation due to third persons from it as Trustee
hereunder; to define any and all legal proceedings in respect of
any such claim;
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and to change the rate of interest on, extend the maturity date
of, or otherwise modify the terms of any such debt or obligation.
(4) To join in and become a party to, or to oppose any reorganization
(including any consolidation, merger, or other capital changes) of
any corporate securities which may at any time be held in the
Trust Fund, or any plan or agreement for the protection of the
interests of the holders of any such securities; to participate in
any such protective plan or agreement or any such reorganization
to the same extent and as fully as though it was the absolute and
individual owner of such securities; to deposit with any 401(k)
Committee or depositories pursuant to any such protective plan or
agreement or any such reorganization any securities held in the
Trust Fund; to make payments from the Trust Fund of and charges or
assessments imposed by the terms of any such protective plan or
agreement on any such reorganization; and to receive and continue
to hold in the Trust Fund any property allotted to the Trust Fund
by reason of the Trustee's participation therein.
(5) To vote, in person or by general or limited proxy, on any
securities at any time held in the Trust Fund, at any meeting of
security holders, with respect to any business which may come
before the meeting; to execute general or limited proxies to one
or more nominees; as holder of said securities, to consent to,
approve and authorize any corporate act or proceeding, including
any merger on consolidation, lease, mortgage or sale of corporate
property, or dissolution or liquidation, whether or not proposed
at any such meeting; to execute such instruments as may be
necessary or appropriate therefore; and generally to exercise the
powers of an owner with respect to stocks, bonds, securities, or
other property.
(6) To exercise any conversion or subscription rights appurtenant to
any securities at any time held in the Trust Fund or to sell any
such rights.
(7) To execute, acknowledge and deliver any and all deeds, leases,
assignments and other instruments that it may deem necessary or
proper in the exercise of any of its powers under this agreement.
(8) To cause any property at any time held in the Trust Fund to be
registered in the name of a nominee of the Trustee, without
disclosure of the Trust, or to hold in bearer form any securities
at any time held in the Trust Fund so that they will pass by
delivery, but any such registration or holding by the Trustee
shall not release it from its responsibility for the safe custody
and disposition of the Trust Fund, in accordance with the terms
and provisions of this agreement.
(9)
To improve, develop, repair, maintain, preserve and operate any
property held in the Trust Fund, or to invest and retain
qualifying Employer real property and lease such property to the
Employer as permitted under the appropriate sections of ERISA and
regulations promulgated thereunder.
(10) To borrow from time to time money from persons or others (but not
from a party in interest) for the purposes of the Trust created
hereby on such terms and conditions as the Trustee may deem
advisable.
(11) To employ suitable agents and counsel, and to pay their reasonable
expenses and compensation.
(12) To hold part or all of the Trust Fund uninvested in its own
banking department, if any, and the Trustee is further authorized
to deposit, at interest, such funds of the Plans as it may from
time to
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time deem appropriate in time deposits or savings accounts bearing
a reasonable interest rate, including, specifically, deposits in
the commercial banking departments in a Trustee bank.
(13) To invest and reinvest in bonds, notes, debentures, stocks,
options, mutual funds, life insurance policies, mortgages,
vendors' interest in contracts for sale of real property or other
property, real, personal or mixed, in such manner and to such
extent as is prudent under the circumstances.
(14) To transfer monies and assets of the Trust into common trust funds
established for the Plan, including common trust funds held by a
corporate Trustee (provided the Trustee is a national banking
association).
(15) To do all acts, whether or not expressly authorized herein, which
it may deem necessary and proper for the protection of the
property held hereunder, and to carry out the purposes of the
Plan.
(16) To hold up to 100 percent of the fair market value of Plan assets
in qualifying employer securities as defined in section 407(d)(5)
of ERISA or qualifying employer real property as defined in
section 407(d)(4) of ERISA.
If there is more than one Trustee designated and acting under this Trust, all
actions by the Trustee must be adopted by a majority of the Trustees.
SECTION 9.9 INVESTMENT MANAGER.
Upon written notice to the Trustee and the 401(k) Committee, the Employer may
appoint one or more investment managers as described in ERISA section 3(38),
which shall have the power to manage, acquire, or dispose of all or part of the
Trust assets in accordance with the provisions of the Plan and Trust agreement.
The 401(k) Committee and each such investment manager shall execute a written
agreement specifying the Trust assets to be managed and investment manager's
duties and responsibilities with respect to such assets, and in such agreement
the investment manager shall acknowledge that it is a fiduciary with respect to
the Plan and Trust. The 401(k) Committee may authorize each investment manager
to give written instructions to the Trustee with respect to acquiring, managing,
and disposing of assets managed by such investment manager, and the Trustee
shall follow such instructions and shall be under no duty to make an independent
determination regarding whether the instruction is proper. The fees and expenses
of an investment manager shall be paid by the Trust except to the extent paid by
the Employer.
SECTION 9.10 COMPENSATION OF TRUSTEE AND AGENTS.
(a) The Trustee shall be entitled to reasonable compensation for its
services. Compensation shall be comparable to charges for similar
services made from time to time by other Trustees in the
geographic area in which the Trustee has its principal business.
(b) Any Trustee shall be entitled to reimbursement for expenses
properly and actually incurred in the administration of the Trust.
It may employ such agents, attorneys, accountants, or assistants
as it may from time to time deem necessary or advisable and fix
the compensation to be paid to them. Such counsel or other agents
may be counsel or other agents consulted or employed by the
Employer. The expenses of the Trustee and the compensation of the
persons so employed shall be paid by the Trust Fund or the
Employer, as the 401(k) Committee shall determine, on at least
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an annual basis.
(c) An individual serving as Trustee who already receives full-time
compensation from the Employer shall not receive compensation from
the Plan.
SECTION 9.11 REPORTS OF TRUSTEE.
The Trustee shall maintain records of receipts and disbursements and shall
render reports on at least an annual basis to the 401(k) Committee and to
Participants in such form and containing such information as it deems necessary,
provided that such information shall satisfy all applicable requirements imposed
by ERISA. The records and accounts of the Trustee may be audited annually by an
independent firm of certified public accountants selected by the 401(k)
Committee.
SECTION 9.12 RESIGNATION, REMOVAL AND SUBSTITUTION OF TRUSTEE.
(a) A Trustee may resign at any time upon 30 days notice to the
Employer. A Trustee may be removed at any time by the Employer
upon five days written notice to the Trustee, with or without
cause. Upon resignation or removal of the Trustee, the 401(k)
Committee shall appoint a successor Trustee which shall have the
same powers and duties as are conferred upon the Trustee
hereunder. Upon the delivery by a predecessor Trustee to the
successor Trustee of all property of the Trust Fund, less such
reasonable amount as it shall deem necessary to provide for its
expenses, compensation, and any taxes or advances chargeable or
payable out of the Trust Fund, the successor Trustee thereupon
shall have the same powers and duties as were conferred upon the
predecessor Trustee. No successor Trustee shall have any
obligation or liability with respect to the acts or omissions of
its predecessors.
(b) In the event that a corporate Trustee merges or consolidates with
another corporation or sells or transfers substantially all of its
assets and business to another corporation, or is in any manner
reorganized or reincorporated, then the resulting or acquiring
corporation shall thereupon become the corporate Trustee hereunder
without the execution of any instrument and without the need for
any action by the 401(k) Committee, any Participant or
Beneficiary, or any other person having or claiming to have an
interest in the Trust Fund or the Plan.
(c) The Trustee shall be appointed by the 401(k) Committee. The
appointment of a Trustee shall become effective as of the date the
401(k) Committee receives the Trust's written acceptance of the
appointment. The Trustee(s) signature on the Plan constitutes
acceptance of the appointment. The 401(k) Committee shall appoint
a new Trustee if a Trustee fails to accept its appointment in
writing.
SECTION 9.13 THE 401(K) COMMITTEE.
The Employer shall certify to the Trustee from time to time the names of the
persons constituting the 401(k) Committee. All directions to the Trustee by the
401(k) Committee shall be in writing, properly certified by a 401(k) Committee
member. The Trustee shall be entitled to rely without further inquiry upon all
such written directions received from the 401(k) Committee.
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SECTION 9.14 AMENDMENT AND TERMINATION.
The Employer shall have the right at any time, by an instrument in writing, duly
executed and acknowledged and delivered to the Trustee, to modify, alter or
amend this agreement, in whole or in part, and to terminate the Trust, in
accordance with the express provisions of the Plan. In no event, however, shall
the duties, powers or liabilities of the Trustee hereunder be changed without
the prior written consent of the Trustee.
SECTION 9.15 IRREVOCABILITY.
Subject to the provisions of the Plan, the Trust shall be irrevocable, and
except as otherwise provided in Section 9.5, no part of the Trust Fund shall
revert to or be recoverable by the Employer or be used for or diverted to any
purposes other than for the exclusive benefit of Participants and Beneficiaries.
SECTION 9.16 PARTIES TO THE TRUST AGREEMENT.
(a) Any company which adopts the Plan shall become a party to this
agreement, upon signing the Plan or upon delivering a certified
copy of a resolution to the effect that it agrees to adopt the
Plan, to become a party to this agreement, and to be bound by all
terms and conditions of the Plan and this agreement, as then in
effect and as may thereafter be amended. The 401(k) Committee
shall have the sole authority to enforce such agreement. Except to
the extent that the Trust allows self- directed accounts and
individual Participants (or their Beneficiaries) to direct the
investment of their Accounts, the Trustee shall in all respects
invest and administer the Trust Fund as a single fund for
investment and accounting purposes, without identification as to
individual Participants, Beneficiaries, or Employers.
(b) Any corporation or other participating entity shall cease to be a
party to this agreement upon delivering to the Trustee a certified
copy of a resolution terminating its participation in the Plan. In
such event, or in the event of the merger, consolidation, sale of
property or stock, separation, reorganization or liquidation of
any corporation that is a party to this agreement, the Trustee,
until directed otherwise by the 401(k) Committee shall continue to
hold, in accordance with the provisions of this agreement, that
portion of the Trust Fund which, pursuant to the determination of
the 401(k) Committee, is attributable to the participation in the
Plan of the Employees and their Beneficiaries affected by such
termination or by such transaction.
SECTION 9.17 ADMINISTRATION.
The Trustees, in the event that more than one Trustee is appointed, shall act by
majority vote of their number. Such action may be taken at a meeting or in
writing without a meeting. The Trustees may authorize one or more specific
Trustee(s) to sign on their behalf.
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SECTION 9.18 PARTICIPANT-DIRECTED INVESTMENTS
(a) A Participant or Beneficiary may elect in writing to have the
401(k) Committee direct the Trustee to invest and reinvest on his
behalf only amounts in his Employee Deferral Account and Rollover
Account. Such direction will be with respect to any investment(s)
or investment fund(s) permitted under the Trust agreement and
selected by the 401(k) Committee in any combination, specifying
the percentage of each as permitted by the 401(k) Committee. This
election shall become effective, and the Participant or
Beneficiary may thereafter change or revoke such election, at such
times as the 401(k) Committee determines, under non-discriminatory
rules.
(b) The Trustee and the 401(k) Committee shall not be liable or
responsible for any loss resulting to the Participant's Accounts
because of any sale or investment directed by the Participant
under this Section 9.18 or because of the failure to take any
action regarding an investment acquired pursuant to such elective
investment. The Trustee and the 401(k) Committee shall be
indemnified by the Participant from and against any personal
liability to which the Trustee and the 401(k) Committee may be
subjected due to carrying out an elective investment directed by
the Participant or for failure to act in the absence of
instructions from the Participant.
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ARTICLE X - AMENDMENT, TERMINATION AND MERGER
SECTION 10.1 AMENDMENT.
(a) The Employer shall have the right to amend the Plan and Trust at
any time and from time to time, by resolution of its Board of
Directors or other permitted action by the Employer, to the extent
permitted under the Code and ERISA.
(b) No amendment affecting the rights or duties of the Trustee shall
be effective without the written consent of the Trustees.
(c) No amendment to the Plan shall be effective to the extent that it
has the effect of decreasing a Participant's accrued benefit.
Notwithstanding the preceding sentence, a Participant's Account
balance may be reduced to the extent permitted under section
412(c)(8) of the Code. For purposes of this paragraph, a Plan
amendment which has the effect of decreasing a Participant's
Account balance or eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment,
shall be treated as reducing an accrued benefit.
SECTION 10.2 TERMINATION.
(a) The Employer intends to continue the Plan indefinitely and to fund
the Plan as required by law and its terms. However, the Employer
shall have the right to terminate the Plan at any time.
(b) If the Plan is totally or partially terminated, or in the event of
a complete discontinuation of contributions under the Plan, a
Participant whose participation in the Plan is terminated as a
result of such total or partial termination or who is affected by
the complete discontinuation of contributions to the Plan shall be
100 percent Vested with respect to his Accounts, determined as of
the date of such total or partial termination.
(c) Upon termination of the Plan, the Employer shall allocate the
assets of the Plan, after the payment of or set aside for the
payment of all expenses, among the Participants and their
Beneficiaries in accordance with the Code and ERISA.
(d) Upon termination of the Plan, and after all liabilities of the
Plan to Participants and Beneficiaries have been satisfied, any
residual assets of the Plan which are attributable to a
contribution in excess of section 415 limits shall be distributed
to the Employer, provided such distribution does not contravene
any provision of the law or the Plan.
(e) The allocation of benefits under this Article shall be
accomplished either through the continuance of the Trust, the
creation of a new Trust, the payment of the benefits to be
provided to the Participants or Beneficiaries, or the purchase of
annuity contracts, as determined by the Employer.
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SECTION 10.3 MERGER, CONSOLIDATION OR TRANSFER.
The Employer shall have the right at any time to merge or consolidate the Plan
with any other plan, or transfer the assets or liabilities of the Trust to any
other plan provided each Participant would (if the Plan were then terminated)
receive a benefit immediately after such merger, consolidation or transfer which
would equal or exceed the benefit the Participant would have been entitled to
immediately before such merger, consolidation or transfer (if the Plan were then
terminated).
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ARTICLE XI - TOP-HEAVY PROVISIONS
SECTION 11.1 APPLICABILITY.
The provisions of this Article shall not apply to the Plan with respect to any
Plan Year in which the Plan is not Top-Heavy. If the Plan is or becomes
Top-Heavy in any Plan Year, the provisions of this Article will supersede any
conflicting provisions in the Plan.
SECTION 11.2 DEFINITIONS.
(a) Key Employee: Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the
"Determination Period" was (1) an officer of the Employer if such
individual's Annual Compensation exceeds 50 percent of the dollar
limitation under section 415(b)(1)(A) of the Code, (2) an owner
(or considered an owner under section 318 of the Code) of one of
the ten largest interests in the Employer if such individual's
Annual Compensation exceeds 100 percent of the dollar limitation
under section 415(c)(1)(A) of the Code, (3) a more- than-5-percent
owner of the Employer, or (4) a more-than-1-percent owner of the
Employer who has annual Compensation of more than $150,000. Annual
Compensation means compensation as defined in section 415(c)(3) of
the Code, but including amounts contributed by the Employer
pursuant to a salary reduction agreement which are excludable from
the Employee's gross income under section 125, section 402(e)(3),
section 402(h) or section 403(b) of the Code. The "Determination
Period" is the Plan Year containing the Determination Date and the
four (4) preceding Plan Years.
The determination of who is a Key Employee will be made in
accordance with section 416(i)(1) of the Code and the Regulations
thereunder.
(b) Top-Heavy Plan: For any Plan Year beginning after December 31,
1983, this Plan is Top-Heavy if any of the following conditions
exists:
(1) If the Top-Heavy Ratio for this Plan exceeds 60 percent and
this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group of plans.
(2) If this Plan is a part of a Required Aggregation Group of
plans, but not part of a Permissive Aggregation Group of plans
and the Top-Heavy Ratio for the Group exceeds 60 percent.
(3) If this 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
60 percent.
(c) Super-Top-Heavy Plan: A plan is Super-Top-Heavy if such a plan
would be Top-Heavy if "90 percent" were substituted for "60
percent" each place it appears in (b) above.
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(d) Top-Heavy Ratio:
(1) If the Employer maintains one or more Defined Contribution
Plans (including any simplified employee pension plan) and the
Employer has not maintained any Defined Benefit Plan which
during the 5-year period ending on the Determination Date(s)
has or has had accrued benefits, the Top-Heavy Ratio for this
Plan alone or for the required 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
Determination Date(s) (including any part of any Account
balance distributed in the 5-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 5-year period ending on the
Determination Date(s)), both computed in accordance with
section 416 of the Code and the Regulations thereunder. Both
the numerator and denominator of the Top-Heavy Ratio are
increased to reflect any contribution not actually made as of
the Determination Date, but which is required to be taken into
account on that date under section 416 of the Code and the
Regulations thereunder.
(2) If the Employer maintains one or more Defined Contribution
Plans (including any simplified employee pension plan) and the
Employer maintains or has maintained one or more Defined
Benefit Plans which during the 5-year period ending on the
Determination Date(s) 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 (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(s), 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 (1) above, and the
Present Value of accrued benefits under the Defined Benefit
Plan or Plans for all Participants as of the Determination
Date(s), are determined in accordance with section 416 of the
Code and the Regulations thereunder. The accrued benefits
under a Defined Benefit Plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for any
distribution of an accrued benefit made in the five-year
period ending on the Determination Date.
(3) For purposes of (1) and (2) above, the value of account
balances and the Present Value of accrued benefits will be
determined as of the most recent Valuation Date that falls
within or ends with the 12-month period ending on the
Determination Date, except as provided in section 416 of the
Code and the 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 Hour of Service
with any Employer maintaining the Plan at any time during the
5-year period ending on the Determination Date will be
disregarded. The calculation of the Top-Heavy Ratio, and the
extent to which distributions, rollovers and transfers are
taken into account will be made in accordance with section 416
of the Code and the Regulations thereunder. Employee
contributions previously deductible under section 219 of the
Code will not be
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taken into account for purposes of computing the Top-Heavy
Ratio. When aggregating plans, the value of account balances
and accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee
shall be determined under either (a) the method, if any, that
uniformly applies for accrual purposes under all Defined
Benefit Plans maintained by the Employer, or (b) if there is
no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional
rule of section 411(b)(1)(C) of the Code.
(e) Permissive Aggregation Group: The Required Aggregation Group of
plans plus any other plan or plans of the Employer which, when
considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of sections 401(a)(4) and 410
of the Code.
(f) Required Aggregation Group: (1) Each qualified plan of the
Employer in which at least one Key Employee participates or
participated at any time during the Determination Period
(regardless of whether the plan has terminated), and (2) any other
qualified plan of the Employer which enables a plan described in
(1) to meet the requirements of sections 401(a)(4) or 410 of the
Code.
(g) Determination Date: For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that year.
(h) Valuation Date: The date as defined in Article I of the Plan as of
which Account balances or accrued benefits are valued for purposes
of calculating the Top-Heavy Ratio.
(i) Present Value: Present Value shall be determined using the
interest and mortality rates specified in the applicable plans.
Notwithstanding the foregoing, all determinations shall be made in
accordance with section 416 of the Code and the Regulations
promulgated thereunder.
SECTION 11.3 MINIMUM ALLOCATION.
(a) Except as otherwise provided in (c) and (d) below, Employer
contributions and Forfeitures, not including Employee Elective
Deferrals, allocated on behalf of any Participant who is not a Key
Employee shall not be less than the lesser of three percent (four
percent if the Plan is super-Top- Heavy) of such Participant's
Compensation or, in the case where the Employer has no Defined
Benefit Plan which designates this Plan to satisfy section 401 of
the Code, the largest percentage of Employer contributions and
Forfeitures, as a percentage of the first $200,000 of the Key
Employee's Compensation, allocated on behalf of any Key Employee
for that year. The minimum allocation is determined without regard
to any Social Security contribution. This minimum allocation shall
be made even though, under the Plan provisions, the Participant
would not otherwise be entitled to receive an allocation, or would
have received a lesser allocation for the year because of (1) the
Participant's failure to complete 1,000 hours of service (or any
equivalent provided in the Plan), or (2) the Participant's failure
to make mandatory Employee contributions to the Plan or (3)
Compensation less than a stated amount.
(b) For purposes of computing the minimum allocation, Compensation
means Compensation as defined in Article I of the Plan.
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(c) The provision in (a) above shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
(d) The provision in (a) above shall not apply to any Participant to
the extent the Participant is covered under any other plan or
plans of the Employer and the minimum allocation or benefit
requirement applicable to Top-Heavy Plans will be met in the other
plan or plans.
SECTION 11.4 NONFORFEITABILITY OF MINIMUM ALLOCATION.
The minimum allocation required (to the extent required to be nonforfeitable
under section 416(b) of the Code) may not be forfeited under section
411(a)(3)(D) of the Code.
SECTION 11.5 ALLOCATION LIMITATIONS.
In determining the Defined Contribution Fraction under section 415(e)(3)(B) of
the Code and pursuant to Section 5.4 of the Plan "100 percent" shall be
substituted for "125 percent" unless the minimum allocation percentage under
section 416(c)(2)(A) of the Code and Section 11.3(a) of the Plan is increased
from "three percent" to "four percent" and the Plan would not be a Top-Heavy
Plan if "90 percent" were substituted for "60 percent" each place it appears in
Section 11.2(b) of the Plan.
SECTION 11.6 MINIMUM VESTING SCHEDULES.
(a) For any Plan Year during which the Plan is Top-Heavy, the vesting
schedule below will automatically apply to all benefits within the
meaning of section 411(a)(7) of the Code except those attributable
to Employee contributions, including benefits accrued before the
effective date of section 416 and benefits accrued before the Plan
became Top-Heavy. Further, no decrease in a Participant's
nonforfeitable percentage may occur in the event the Plan's status
as Top-Heavy changes for any Plan Year. However, this Section does
not apply to the Account balance(s) of any Employee who does not
have an Hour of Service after the Plan has initially become
Top-Heavy. Such Employee's Account balance attributable to
Employer contributions and Forfeitures will be determined without
regard to this Section.
(b) The nonforfeitable interest of each Employee in his or her Account
balance attributable to Employer contributions shall be as
follows:
The nonforfeitable
Year(s) of Service: percentage is:
1 33 1/3
2 66 2/3
3 100
(c) If the vesting schedule under the Plan becomes subject to or is no
longer subject to the above schedule for any Plan Year because of
the Plan's Top-Heavy status, such shift is an amendment to the
vesting schedule and the election provided in Section 5.6(i) of
the Plan shall be available.
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ARTICLE XII - GENERAL PROVISIONS
SECTION 12.1 GOVERNING LAW.
(a) The Plan and Trust are established under, and their validity,
construction and effect shall be governed by, the laws of the
State of New York.
(b) The parties to the Trust intend that the Trust be exempt from
taxation under section 501(a) of the Code, and any ambiguities in
its construction shall be resolved in favor of an interpretation
which will effect such intention.
SECTION 12.2 POWER TO ENFORCE.
The 401(k) Committee shall have authority to enforce the Plan on behalf of any
and all persons having or claiming any interest in the Trust or Plan.
SECTION 12.3 ALIENATION OF BENEFITS.
Benefits under the Plan shall not be subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the
same shall be void, nor shall any such benefits be in any way liable for or
subject to the debts, contracts, liabilities, engagements or torts of any person
entitled to such benefits. This Section shall also apply to the creation,
assignment or recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such order is
determined to be a qualified domestic relations order as defined in section
414(p) of the Code, or any domestic relations order entered before January 1,
1985.
SECTION 12.4 NOT AN EMPLOYMENT CONTRACT.
The Plan is not and shall not be deemed to constitute a contract between the
Employer and any Employee, or to be a consideration for, or an inducement to, or
a condition of, the employment of any Employee. Nothing contained in the Plan
shall give or be deemed to give an Employee the right to remain in the
employment of the Employer or to interfere with the right to be retained in the
employ of the Employer, any legal or equitable right against the Employer, or to
interfere with the right of the Employer to discharge or retire any Employee at
any time.
SECTION 12.5 DISCRETIONARY ACTS.
Any discretionary acts to be undertaken under the Plan with respect to the
classification of Employees, contributions, or benefits shall be
nondiscriminatory and uniform in nature and applicable to all persons similarly
situated.
SECTION 12.6 INTERPRETATION.
(a) Savings Clause. If any provision or provisions of the Plan shall
for any reason be invalid or unenforceable, the remaining
provisions of the Plan shall be carried into effect, unless the
effect thereof would be to materially alter or defeat the purposes
of the Plan.
66
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(b) Gender. Wherever appropriate, pronouns of either gender shall be
deemed synonymous as shall singular and plural pronouns.
(c) Headings. Headings and titles of sections and subsections within
the Plan document are inserted solely for convenience of
reference. They constitute no part of the Plan itself and shall
not be considered in the construction of the Plan.
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ARTICLE XIII - SIGNATURE PAGE
IN WITNESS WHEREOF, this Plan has been executed the day and year written below.
Signed, sealed, and delivered on this ____ day of _______________, 199__, in the
presence of:
CD RADIO INC.
By
EMPLOYER
EMPLOYER (PRINT NAME)
WITNESS AS TO EMPLOYER(S)
TRUSTEE
TRUSTEE (PRINT NAME)
(SEAL)
WITNESS AS TO TRUSTEE(S) TRUSTEE
EXHIBIT 5.1
CD Radio Inc.
1180 Avenue of the Americas
New York, NY 10036
October 7, 1998
CD Radio Inc.
1180 Avenue of the Americas
New York, NY 10036
Dear Sirs:
I am familiar with the CD Radio 401(k) Savings Plan (the "Plan") under
which 50,000 shares of common stock, par value $.001 per share, of CD Radio
Inc., a Delaware corporation (the "Company"), have been authorized initially for
issuance (the "Shares"). I have acted as counsel to the Company in connection
with the preparation and filing with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"), of a Registration
Statement on Form S-8 (the "Registration Statement") with respect to the
registration under the Act of the Shares and 50,000 Preferred Stock Purchase
Rights (the "Rights"), which are appurtenant to, and trade with, the Shares. In
this connection, I have examined such records, documents and proceedings, as I
have deemed relevant and necessary as a basis for the opinion expressed herein.
Based upon the foregoing, I am of the opinion that Shares have been
duly authorized for issuance under the Plan by all proper corporate action and,
when such Shares have been issued pursuant to the provisions of the Plan as set
forth in the Registration Statement, and any conditions or restrictions relating
thereto shall have been satisfied, such Shares will be legally issued, fully
paid and non-assessable. When the Rights are issued in accordance with the terms
of the Plan and the Rights Agreement between the Company and Continental Stock
Transfer & Trust Company, as Rights Agent, the Rights will be duly and validly
issued.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement.
Very truly yours,
/s/ Patrick L. Donnelly
-----------------------
Patrick L. Donnelly
Executive Vice President,
General Counsel and Secretary
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
CD Radio Inc. and Subsidiary (the "Company") on Form S-8, relating to the CD
Radio Inc. 401(k) Savings Plan, of our report dated March 3, 1998, except as to
the third paragraph therein related to certain subsequent uncertainties for
which the date is October 7, 1998, on our audits of consolidated financial
statements of the Company as of December 31, 1997 and 1996, for each of the
three years in the period ended December 31, 1997, and for the period May 17,
1990 (date of inception) to December 31, 1997, which report is included in
the Company's Registration Statement on Amendment No. 3 to the Form S-3 (File
no. 333-52893).
Such report contains a paragraph which emphasizes certain uncertainties
(unaudited) arising subsequent to the date of our original report, that
indicated that at October 7, 1998, the Company may be unable to continue as a
going concern through 1999.
New York, New York
October 7, 1998
