<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ITT EDUCATIONAL SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 36-2061311
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5975 CASTLE CREEK PARKWAY NORTH DRIVE
P.O. BOX 50466
INDIANAPOLIS, INDIANA 46250-0466
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
ESI 401(K) PLAN
(FULL TITLE OF THE PLAN)
------------------------
CLARK D. ELWOOD
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
5975 CASTLE CREEK PARKWAY NORTH DRIVE
P.O. BOX 50466
INDIANAPOLIS, INDIANA 46250-0466
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(317) 594-9499
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPY TO:
JAMES A. ASCHLEMAN
BAKER & DANIELS
300 NORTH MERIDIAN STREET, SUITE 2700
INDIANAPOLIS, INDIANA 46204
(317) 237-0300
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value.................... 5,000,000 shares $26.4375 $132,187,500 $38,995
=======================================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933 (the
"Securities Act"), this Registration Statement also covers an indeterminate
amount of interests to be offered or sold pursuant to the employee benefit
plan described herein. Pursuant to Rule 457(h)(2) under the Securities Act,
no separate fee is required to register such interests.
(2) Estimated solely for purposes of calculating the registration fee and
computed in accordance with Rule 457(c) and (h) under the Securities Act
using the average of the high and low sale prices of the Common Stock as
reported by the NYSE on June 2, 1998, which was $26.4375 per share.
<PAGE> 2
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION*
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION*
*Information required by Part I of Form S-8 to be contained in the Section
10(a) Prospectus is omitted from this Registration Statement in accordance with
Rule 428 under the Securities Act and the Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents heretofore filed by ITT Educational Services, Inc.
(the "Registrant") with the Securities and Exchange Commission are incorporated
by reference in this Registration Statement:
(1) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(2) The Registrant's Current Report on Form 8-K dated February 23, 1998;
(3) The Registrant's Current Report on Form 8-K dated March 31, 1998;
(4) The Registrant's Current Report on Form 8-K dated April 16, 1998 and
the amendment thereto on Form 8-K/A filed on April 17, 1998;
(5) The Registrant's Quarterly Report on Form 10-Q for the three months
ended March 31, 1998; and
(6) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed with the Securities and
Exchange Commission on December 19, 1994, including any amendment or report
filed for the purpose of updating such description.
In addition, all documents subsequently filed by the Registrant or the ESI
401(k) Plan (the "Plan") pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to the
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities offered hereby then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from their respective dates of
filing.
The Registrant will promptly provide without charge to each person to whom
a prospectus is delivered a copy of any or all information that has been
incorporated herein by reference (not including exhibits to the information that
is incorporated by reference unless such exhibits are specifically incorporated
by reference into such information) upon the written or oral request of such
person directed to the Secretary of the Registrant at its principal offices,
5975 Castle Creek Parkway North Drive, P.O. Box 50466, Indianapolis, Indiana
46250-0566, telephone (317) 594-9499.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
<PAGE> 3
ITEM 6. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Reference is made to Article VI of the Company's Restated Certificate of
Incorporation, filed as Exhibit 4.1 hereto, and Article VII of the Company's
By-Laws, filed as Exhibit 4.2 hereto, which provides that the Company shall
indemnify and advance expenses to its currently acting and former directors and
officers, and may indemnify and advance expenses to its currently acting and
former employees and agents, to the fullest extent permitted by applicable law,
including the Delaware General Corporation Law, as amended from time to time
(but, in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than said law
permitted the Company to provide prior to such amendment). The Company may also
enter into one or more agreements with any person which provide for
indemnification greater or different than that provided in Article VI of the
Company's Restated Certificate of Incorporation. In addition, insurance policies
provide for the indemnification of the Company's directors and officers, as well
as for reimbursement of the Company for amounts paid by the Company above
certain limits in indemnifying its directors and officers, for liabilities under
the Securities Act of 1933, subject to applicable retentions.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
The list of Exhibits is incorporated herein by reference to the Index to
Exhibits.
The Registrant hereby undertakes that it will submit or has submitted the
Plan and any amendment thereto to the Internal Revenue Service ("IRS") in a
timely manner and has made or will make all changes required by the IRS in order
to qualify the Plan under Section 401 of the Internal Revenue Code.
ITEM 9. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) of this section do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
2
<PAGE> 4
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
3
<PAGE> 5
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Indianapolis, State of Indiana, on June 2, 1998.
ITT EDUCATIONAL SERVICES, INC.
By: /s/ RENE R. CHAMPAGNE
------------------------------------
Rene R. Champagne
Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
respective capacities and on the respective dates indicated opposite their
names. Each person whose signature appears below hereby authorizes each of Rene
R. Champagne, Gene A. Baugh and Clark D. Elwood, each with full power of
substitution, to execute in the name and on behalf of such person any
post-effective amendment to this Registration Statement and to file the same,
with exhibits thereto, and other documents in connection therewith, making such
changes in this Registration Statement as the registrant deems appropriate, and
appoints each of Rene R. Champagne, Gene A. Baugh and Clark D. Elwood, each with
full power of substitution, attorney-in-fact to sign any amendment and any
post-effective amendment to this Registration Statement and to file the same,
with exhibits thereto, and other documents in connection therewith.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RENE R. CHAMPAGNE Chairman, President, Chief Executive June 2, 1998
- --------------------------------------------------- Officer and Director (Principal
Rene R. Champagne Executive Officer)
/s/ GENE A. BAUGH Senior Vice President and Chief June 2, 1998
- --------------------------------------------------- Financial Officer (Principal
Gene A. Baugh Financial Officer and Principal
Accounting Officer)
Director
- ---------------------------------------------------
Rand V. Aroskog
/s/ TONY COEHLO Director June 2, 1998
- ---------------------------------------------------
Tony Coehlo
/s/ JOHN F. DEAN Director June 2, 1998
- ---------------------------------------------------
John F. Dean
/s/ JAMES D. FOWLER, JR. Director June 2, 1998
- ---------------------------------------------------
James D. Fowler, Jr.
/s/ ROBIN JOSEPHS Director June 2, 1998
- ---------------------------------------------------
Robin Josephs
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MERRICK R. KLEEMAN Director June 2, 1998
- ---------------------------------------------------
Merrick R. Kleeman
/s/ LESLIE LENKOWSKY Director June 2, 1998
- ---------------------------------------------------
Leslie Lenkowsky
/s/ BARRY S. STERNLICHT Director June 2, 1998
- ---------------------------------------------------
Barry S. Sternlicht
/s/ VIN WEBER Director June 2, 1998
- ---------------------------------------------------
Vin Weber
</TABLE>
5
<PAGE> 7
The Plan. Pursuant to the requirements of the Securities Act of 1933, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Indianapolis, State of
Indiana on June 2, 1998.
ESI 401(k) PLAN
By: ESI Employee Benefit Plan
Investment and Administration
Committee
/s/ GENE A. BAUGH
------------------------------------
Gene A. Baugh, Member
/s/ J. BRADFORD RAINIER
------------------------------------
J. Bradford Rainier, Member
/s/ SHARON S. MURLEY
------------------------------------
Sharon S. Murley, Member
/s/ ELAINE B. JOHNSON
------------------------------------
Elaine B. Johnson, Member
/s/ JENNIFER YONCE
------------------------------------
Jennifer Yonce, Member
6
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
4.1 Restated Certificate of Incorporation of the Registrant, as
amended to date. (The copy of this Exhibit filed as Exhibit
3.1 to the Registrant's Quarterly Report on Form 10-Q for
the period ending June 30, 1996 is incorporated herein by
reference.)
4.2 Restated By-Laws of the Registrant, as amended to date. (The
copy of this Exhibit filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-8
(Registration 333-38883) is incorporated herein by
reference.)
4.3 ESI 401(k) Plan.
23.1 Consent of Price Waterhouse LLP.
24 Powers of Attorney (included on the Signature Page of the
Registration Statement).
</TABLE>
<PAGE> 1
ESI 401(K) PLAN
<PAGE> 2
ESI 401(K) PLAN
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
ARTICLE ONE INTRODUCTION AND PURPOSE................................. 1
Purpose of the Plan............................................ 1
ARTICLE TWO DEFINITIONS.............................................. 1
ARTICLE THREE MEMBERSHIP............................................... 13
3.1 Membership............................................... 13
3.2. Rehired Member........................................... 13
3.3. Transferred Members...................................... 13
3.4. Termination of Membership................................ 14
ARTICLE FOUR MEMBER CONTRIBUTIONS..................................... 14
4.1. Member Pre-Tax Saving.................................... 14
4.2. Change in Contributions.................................. 16
4.3. Suspension and Resumption of Member Pre-Tax Savings...... 16
4.4 No After-Tax Contributions............................... 17
4.5 Vesting of Member's and Deferred Member's Contributions.. 17
4.6 Rollover Contributions................................... 17
4.7. Contributions During Period of Military Leave............ 18
ARTICLE FIVE COMPANY CONTRIBUTIONS.................................... 18
5.1. Matching Company Contributions........................... 18
5.2. Retirement Contributions................................. 19
5.3. Mode of Payment and Valuation of ESI Stock Contributed... 19
5.4 Vesting.................................................. 20
5.5. Forfeitures.............................................. 21
ARTICLE SIX LIMITATIONS ON CONTRIBUTIONS............................. 21
6.1. Actual Deferral Percentage Test.......................... 21
6.2. Actual Contribution Percentage Test...................... 23
6.3. Aggregate Contribution Limitation........................ 24
6.4. Additional Discrimination Testing Provisions............. 25
6.5 Maximum Annual Additions................................. 26
ARTICLE SEVEN INVESTMENT OF CONTRIBUTIONS.............................. 28
7.1. Investment Funds......................................... 28
7.2 Investment of Contributions.............................. 28
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<TABLE>
<S> <C> <C>
7.3 Change in Future Contribution Investment Election........ 29
7.4 Redistribution of Accounts Among the Funds............... 29
7.5 Investment Option at Age 55.............................. 29
7.6 Voting of ESI Stock...................................... 30
7.7 Limitations Imposed by Contract.......................... 31
7.8 Responsibility for Investments........................... 31
ARTICLE EIGHT CREDITS TO MEMBERS' ACCOUNTS,
VALUATION, AND ALLOCATION OF ASSETS...................... 31
8.1. Pre-Tax Savings and Rollover Contributions............... 31
8.2. Matching Company Contributions........................... 31
8.3. Retirement Contributions................................. 31
8.4. Credits to Members' Accounts............................. 31
8.5. Valuation of Assets...................................... 32
8.6. Allocation of Assets..................................... 32
8.7. Annual Statements........................................ 32
8.8. Valuation Dates.......................................... 32
ARTICLE NINE WITHDRAWALS PRIOR TO TERMINATION
OF EMPLOYMENT............................................ 32
9.1. General Conditions for Withdrawals....................... 32
9.2. Non-Hardship Withdrawal Prior to Age 59-1/2.............. 33
9.3. Hardship Withdrawal Prior to Age 59 1/2.................. 33
9.4. Withdrawals After age 59 1/2............................. 35
9.5. Ordering of Withdrawals.................................. 35
9.6. Death After Withdrawal Election.......................... 35
9.7. Direct Rollover.......................................... 36
9.8. Retirement Contribution Account.......................... 36
ARTICLE TEN LOANS.................................................... 36
10.1. General Conditions for Loans............................. 36
10.2. Amounts Available for Loans.............................. 36
10.3. Account Ordering for Loans............................... 37
10.4. Interest Rate for Loans.................................. 37
10.5. Term and Repayment of Loan............................... 37
10.6. Frequency of Loan Requests............................... 38
10.7. Prepayment of Loans...................................... 38
10.8. Outstanding Loan Balance at Termination of Employment.... 38
10.9. Loan Default During Employment........................... 38
10.10. Incorporation by Reference............................... 39
10.11. Death after Loan Application............................. 39
10.12. Military Leave........................................... 39
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE ELEVEN DISTRIBUTIONS............................................ 39
11.1. Commencement of Payments................................. 39
11.2. Forms and Methods of Distribution........................ 41
11.3. Small Benefits........................................... 42
11.4. Death of Beneficiary..................................... 43
11.5. Proof of Death and Right of Beneficiary or Other Person.. 43
11.6. Restoration of Prior Forfeiture.......................... 43
11.7. Direct Rollover of Certain Distributions................. 43
11.8. Elective Transfers From Plan............................. 44
11.9. Elective Transfer to Plan................................ 46
11.10. Waiver of Notice Period.................................. 46
ARTICLE TWELVE MANAGEMENT OF FUNDS...................................... 47
12.1. ESI Employee Benefit Plan Administration and
Investment Committee..................................... 47
12.2. Trust Fund............................................... 47
12.3. Reports to Members and Deferred Members.................. 47
12.4 Fiscal Year.............................................. 48
ARTICLE THIRTEEN ADMINISTRATION OF PLAN................................. 48
13.1. Appointment of Committee................................. 48
13.2. Powers of Committee...................................... 48
13.3. Committee Action......................................... 49
13.4. Compensation............................................. 49
13.5. Committee Liability...................................... 49
ARTICLE FOURTEEN AMENDMENT AND TERMINATION.............................. 50
14.1 Amendment................................................ 50
14.2. Termination of Plan...................................... 50
14.3. Distribution of Accounts Upon a Sale of Assets
or a Sale of a Subsidiary................................ 51
14.4. Merger or Consolidation of Plan.......................... 51
14.5 Transfer from ITT Plan................................... 52
ARTICLE FIFTEEN TENDER OFFER............................................. 52
15.1. Applicability............................................ 52
15.2. Instructions to Trustee.................................. 53
15.3. Trustee Action on Member Instructions.................... 53
15.4. Action With Respect to Members Not Instructing
the Trustee or not Issuing Valid Instructions............ 53
15.5. Investment of Plan Assets after Tender Offer............. 53
ARTICLE SIXTEEN GENERAL AND ADMINISTRATIVE PROVISIONS.................... 54
16.1. Relief from Liability.................................... 54
</TABLE>
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<TABLE>
<S> <C> <C>
16.2. Payment of Expenses...................................... 54
16.3. Source of Payment........................................ 54
16.4. Inalienability of Benefits............................... 55
16.5. Prevention of Escheat.................................... 55
16.6. Return of Contribution................................... 56
16.7. Facility of Payment...................................... 56
16.8. Information.............................................. 56
16.9. Exclusive Benefit Rule................................... 56
16.10. No Right to Employment................................... 57
16.11. Uniform Action........................................... 57
16.12. Headings................................................. 57
16.13. Construction............................................. 57
ARTICLE SEVENTEEN TOP-HEAVY PROVISIONS.................................. 57
17.1. Definitions.............................................. 57
17.2. Determination of Top-Heavy Status........................ 58
17.3. Minimum Requirements..................................... 58
</TABLE>
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<PAGE> 6
ESI 401(K) PLAN
ARTICLE ONE
INTRODUCTION AND PURPOSE
This ESI 401(k) Plan (the "Plan") is established effective as of May 16, 1998,
to benefit employees of ITT Educational Services, Inc. ("ESI"). This Plan
is adopted by ESI, and, in addition to the benefits accrued under the
Plan,shall maintain account balances transferred from the ITT 401(k) Retirement
Savings Plan (the "ITT Plan"), which had been maintained by ITT Corporation.
Participation in the Plan is available, as set forth in this Plan, to eligible
employees of ESI and of such associated companies of ESI as may become
participating companies under the Plan.
The Plan is a defined contribution plan under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and as such, is subject to the
provisions of Titles I, II, and III, but not Title IV, of ERISA. Titles I, II,
and III of ERISA include requirements for covered plans governing reporting,
disclosure, participation, vesting, fiduciary responsibility, and enforcement.
Title IV provides for plan termination insurance by the Federal government's
Pension Benefit Guaranty Corporation. This insurance does not apply to defined
contribution plans such as this Plan.
American Century is the Trustee with respect to the Plan.
PURPOSE OF THE PLAN:
The Plan is designed to:
- supplement retirement income by encouraging employees to save on a regular
and long-term basis;
- provide employees with ownership of ESI securities;
- provide additional financial resources for emergencies and financial
hardships; and
- provide employees additional incentives to continue their careers with ESI.
The Company may make contributions without regard to the existence or the
amount of current and accumulated earnings and profits. Notwithstanding the
foregoing, however, this Plan is designed to qualify as a profit sharing plan
for all purposes of the Code.
ARTICLE TWO
DEFINITIONS
2.1 "ACCOUNTS" shall mean, with respect to any Member or Deferred Member, his
or her Pre-Tax Investment Account, his or her After-Tax Investment
Account, his or her Rollover
<PAGE> 7
Account, his or her Matching Contribution Account, his or her Floor
Contribution Account, his or her ESOP Account, and his or her ITT Floor
Contribution Account.
2.2 "ACTUAL CONTRIBUTION PERCENTAGE" shall mean, with respect to a specified
group of Employees referred to in Sections 6.2 and 6.3, the average of the
ratios, calculated separately for each Employee in that group, of (a) the
Matching Company Contributions made for a Plan Year (excluding any
Matching Company Contributions forfeited under the provisions of Sections
4.1 and 6.1), to (b) the Employee's Statutory Compensation for that Plan
Year provided that, upon the direction of the Plan Committee, Statutory
Compensation for a Plan Year shall only be counted if received during the
period an Employee is, or is eligible to become, a Member. The Actual
Contribution Percentage shall be computed to the nearest one one-hundredth
of one percent.
2.3 "ACTUAL DEFERRAL PERCENTAGE" shall mean, with respect to a specified
group of Employees referred to in Sections 6.1 and 6.3, the average of the
ratios, calculated separately for each Employee in that group, of (a) the
sum of the Pre-Tax Savings made on the Employee's behalf for a Plan Year
(including Pre-Tax Savings returned to a Highly-Compensated Employee under
Section 4.1(c) and Pre-Tax Savings returned to any Employee pursuant to
Section 4.1(d), (b) the Employee's Statutory Compensation for that Plan
Year. Upon the direction of the Committee, Statutory Compensation for a
Plan Year shall only be counted if received during the period an Employee
is, or is eligible to become, a Member. Such Actual Deferral Percentage
shall be computed to the nearest one one-hundredth of one percent of the
Employee's Statutory Compensation.
2.4 "ADJUSTMENT FACTOR" shall mean the cost-of-living adjustment factor
prescribed by the Secretary of the Treasury under Section 415(d) of the
Code for calendar years beginning on or after January 1, 1988, and applied
to such items and in such manner as the Secretary shall provide.
2.5 "ANNUAL DOLLAR LIMIT" shall mean $150,000, as adjusted by the Secretary
of the Treasury to reflect cost of living adjustments in accordance with
Section 401(a)(17)(B) of the Code.
2.6 "ASSOCIATED COMPANY" shall mean any subsidiary or other affiliate of ESI
that is (a) a component member of a controlled group of corporations (as
defined in Section 414(b) of the Code) that includes ESI as a component
member, (ii) any trade or business under common control (as defined in
Section 414(c) of the Code) with ESI, (iii) any organization (whether or
not incorporated) that is a member of an affiliated service group (as
defined in Section 414(m) of the Code) that includes ESI, or (iv) any
other entity required to be aggregated with ESI pursuant to regulations
under Section 414(o) of the Code. Notwithstanding the foregoing, for
purposes of the preceding sentence and
-2-
<PAGE> 8
Section 6.5 of the Plan, the definitions of Section 414(b) and (c)
of the Code shall be modified as provided in Section 415(h) of the Code.
2.7 "AFTER-TAX INVESTMENT ACCOUNT" shall mean that portion of the Trust Fund
that, with respect to any Member or Deferred Member, is attributable to
(i) basic and supplemental after-tax contributions made to the ITT Plan
prior to October 1, 1996, and transferred to the Trust Fund pursuant to
Section 14.5, (ii) any amounts transferred from the ITT Plan to the Trust
Fund attributable to any after-tax contributions made by the Member or
Deferred Member to a qualified Plan and transferred to the ITT Plan
pursuant to a Prior Plan Transfer, and (iii) any investment earnings and
gains or losses on any of the aforementioned amounts.
2.8 "BASIC PRE-TAX SAVINGS" shall mean the contributions made on a Member's
behalf that are credited to his Pre-Tax Investment Account in accordance
with Section 4.1(a)(iv)(1).
2.9 "BENEFICIARY" shall mean the beneficiary or beneficiaries designated from
time to time by the Member or Deferred Member, on a form made available by
the Committee for such purpose, to receive, in the event of the Member's
or Deferred Member's death, the value of his or her Accounts at the time
of his or her death. Except as hereinafter provided, in the case of a
Member or Deferred Member who is married, the sole Beneficiary shall be
the Member's or Deferred Member's spouse unless the spouse consents in
writing on a form witnessed by a notary public to the designation of
another person as Beneficiary. In the case of a Member or Deferred Member
who incurs a divorce under applicable state law, the Member's or Deferred
Member's designation of Beneficiary shall remain valid unless otherwise
provided in a Qualified Domestic Relations Order or unless the Member or
Deferred Member changes his or her Beneficiary or is subsequently
remarried.
If no valid beneficiary designation is in effect at the time of death of
the Member, or if no person, persons, or entity so designated survives
the Member, the Member's surviving spouse, if any, shall be the
Beneficiary; otherwise the Beneficiary shall be the personal
representative of the estate of the Member.
2.10 "BOARD OF DIRECTORS" shall mean the Board of Directors of ESI or of any
successor to ESI by merger, purchase or otherwise.
2.11 "BREAK IN SERVICE" shall mean an event that shall occur as of the
Member's Severance Date, if he or she is not reemployed by the Company or
an Associated Company within one year after his or her Severance Date.
However, if an Employee is absent from work immediately following his or
her active employment, irrespective of whether the Employee's employment
is terminated, because of a Parental Leave, or a FMLA Leave, a Break in
Service shall occur only if the Member does not return to work within two
years of
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<PAGE> 9
his or her Severance Date. A Break in Service shall not occur during
an approved leave of absence or during a period of military service that
is included in the Employee's Service pursuant to Section 2.53.
Notwithstanding the foregoing, solely for purposes of determining service
for eligibility purposes, a Break in Service of one year shall occur if an
employee who is employed on a temporary or less than full time basis does
not complete more than 500 Hours of Service in the 12 month period
beginning on the date on which he or she first completes an Hour of
Service or any Plan Year beginning thereafter.
2.12 "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and interpretive regulations. References to any section of the Code
shall include any successor provision thereto.
2.13 "COMMITTEE" shall mean the committee established hereunder for the
purposes of administering the Plan as provided in Article 13.
2.14 "COMPANY" shall mean:
(a) ESI and any other entity succeeding to the business of ESI that
assumes the obligations of the Company as specified in the Plan,
with respect to its employees; and
(b) any Participating Employer with respect to its Employees.
When used herein, the term Company shall collectively include ESI and any
Participating Employer.
2.15 "COMPANY MATCHING CONTRIBUTION ACCOUNT" shall mean that portion of the
Trust Fund that, with respect to any Member or Deferred Member, is
attributable to (i) any Matching Company Contributions made on his or her
behalf under this Plan, (ii) any amounts attributable to matching
contributions made on his or her behalf and transferred to the Trust Fund
from the ITT Plan, and (iii) any investment earnings and gains or losses
on any of the aforementioned amounts.
2.16 "DEFERRED MEMBER" shall mean (i) a Member who has terminated employment
with the Company and all Associated Companies and whose Vested Share will
be deferred in accordance with Section 11.1, (ii) the spouse Beneficiary
of a deceased Member or Deferred Member, or (iii) an alternate payee
designated as such pursuant to a Qualified Domestic Relations Order.
2.17 "DISABILITY" shall mean, with respect to a Member, the total disability
of the Member that would result in the Member qualifying for benefits
under the LTD Plan had the
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Member been a participant in the LTD Plan. If a Member participates
in the LTD Plan, then he or she shall be deemed totally disabled as
determined by the insurance company that administers the LTD Plan. If a
Member does not participate in the LTD Plan, then he or she shall be
deemed to be totally disabled if he or she would have been deemed totally
disabled had he or she participated in the LTD Plan, as determined by the
Committee. For purposes of this Plan, the effective date of disability
shall be the later of the date of disability as defined in the LTD Plan or
the date on which the applicable insurance company or Committee issues its
determination of total disability.
2.18 "EFFECTIVE DATE" shall mean May 16, 1998.
2.19 "EMPLOYEE" shall mean an employee of the Company who is classified as a
U.S. salaried payroll employee of the Company, who is paid from a payroll
maintained in the continental United States, and who receives regular and
stated compensation, other than a pension or a retainer. An Employee
shall also mean a Non-U.S. Citizen Employee. However, except as the Board
of Directors or the Committee, pursuant to authority delegated to it by
the Board of Directors, may otherwise provide on a basis uniformly
applicable to all persons similarly situated, and, except as specified in
Section 2.38, no person shall be an Employee for purposes of the Plan:
(a) who is covered for current service under a non-U.S. pension or
savings plan of the Company or any Associated Company, or any other
plan specified by the Board of Directors from time to time;
(b) whose terms and conditions of employment are determined by a
collective bargaining agreement with the Company that does not make
this Plan applicable to him or her;
(c) who is a leased employee as defined in Code Section 414(n);
(d) who is a non-resident alien employed by the Company and who
does not receive earned income that constitutes income from sources
within the United States; or
(e) who is classified as an "independent contractor" or "consultant" by
the Company, regardless of his or her classification by the IRS for
tax withholding purposes.
2.20 "ENROLLMENT DATE" shall mean the first day of the first payroll period
coincident with or next following the Effective Date with respect to a
Member described in Section 3.1(a) or the first day of the first payroll
period of the first complete month following the date a Member completes
the eligibility requirements described in Section 3.1(b).
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2.21 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and interpretive regulations.
2.22 "ESI" shall mean ITT Educational Services, Inc., a Delaware corporation
2.23 "ESI STOCK" shall mean common stock of ESI.
2.24 "ESOP ACCOUNT" shall mean that portion of the Trust Fund that, with
respect to any Member or Deferred Member, is attributable to allocations
made under the employee stock ownership plan portion of the
Pre-Distribution ITT Plan.
2.25 "FMLA LEAVE" shall mean an Employee's absence from work to care for a
spouse or an immediate family member with a serious illness or for the
Employee's own illness pursuant to the Family and Medical Leave Act of
1993, as amended, and interpretive regulations.
2.26 "FUND" shall mean each separate investment fund in which contributions to
the Plan are invested in accordance with Article Seven.
2.27 "HARDSHIP" shall mean an immediate and heavy financial need that is
determined by the Committee to satisfy all of the conditions specified in
Section 9.3(c) and (d).
2.28 "HIGHLY-COMPENSATED EMPLOYEE" shall mean:
(a) With respect to a Plan Year, any employee of the Company or an
Associated Company (whether or not eligible for membership in the
Plan) who
(i) was a five percent owner for that Plan Year or the prior Plan
Year, or
(ii) for the preceding Plan Year received Statutory Compensation in
excess of $80,000 multiplied by the Adjustment Factor and,
if the Company so elects, was among the highest 20 percent of
employees for the preceding Plan Year when ranked by Statutory
Compensation paid for that year excluding, for purposes of
determining the number of such employees, such employees as the
Committee may determine on a consistent basis pursuant to Section
414(q) of the Code.
(b) Notwithstanding the foregoing, employees who are nonresident
aliens and who receive no earned income from the Company or an
Associated Company that constitutes income from sources within the
United States shall be disregarded for all purposes of this Section
2.28.
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(c) The provisions of this Section shall be further subject to such
additional requirements as described in Section 414(q) of the Code
and its applicable regulations, which shall override any aspects of
this Section inconsistent therewith.
2.29 "HOUR OF SERVICE" shall mean, with respect to any applicable computation
period,
(a) each hour for which the employee is paid or entitled to payment for
the performance of duties for the Company or an Associated Company,
(b) each hour for which an employee is paid or entitled to payment
by the Company or an Associated Company on account of a period during
which no duties are performed, whether or not the employment
relationship has terminated, due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or
leave of absence, but not more than 501 hours for any single
continuous period;
(c) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Company or an
Associated Company, excluding any hour credited under (a) or (b),
which shall be credited to the computation period or periods to which
the award, agreement, or payment pertains, rather than to the
computation period in which the award, agreement, or payment is made;
and
(d) solely for purposes of determining whether an employee has
incurred a Break in Service, each hour for which the employee would
normally be credited under paragraph (a) or (b) during a Parental
Leave or FMLA Leave. However, the number of hours credited under this
paragraph (d) during a Parental Leave shall not exceed 501 hours in
any single continuous period,
No hours shall be credited on account of any period during which
the employee performs no duties and receives payment solely for the
purpose of complying with unemployment compensation, workers'
compensation or disability insurance laws. The Hours of Service
credited shall be determined as required by Title 29 of the Code of
Federal Regulations, Section 2530.200b-2.
2.30 "ITT FLOOR CONTRIBUTION ACCOUNT" shall mean that portion of the Trust
Fund that, with respect to any Member or Deferred Member, is attributable
to (i) any employer contributions other than matching contributions made
to the ITT Plan before October 1, 1996, and transferred to the Trust Fund
pursuant to Section 14.5; (ii) any amounts transferred from the ITT Plan
to the Trust Fund attributable to certain employer contributions other
than matching contributions made on his or her behalf and transferred to
the ITT Plan pursuant to a Prior Plan Transfer; and (iii) any investment
earnings and gains or losses on any of the aforementioned amounts.
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2.31 "ITT PLAN" shall mean the ITT 401(k) Retirement Savings Plan, formerly
known as the ITT Corporation Investment and Savings Plan for Salaried
Employees.
2.32 "LTD PLAN" shall mean the ESI Long-Term Disability Plan.
2.33 "MATCHING COMPANY CONTRIBUTIONS" shall mean a contribution made pursuant
to Section 5.1.
2.34 "MEMBER" shall mean any person who has become a Member as provided in
Article Three.
2.35 "NON-HIGHLY-COMPENSATED EMPLOYEE" means for any Plan Year an employee of
the Company or an Associated Company who is not a Highly-Compensated
Employee for that Plan Year.
2.36 "NON-U.S. CITIZEN EMPLOYEE" shall mean any person who is classified as a
salaried corporate payroll Employee by the Company and who is:
(a) not a citizen of the United States,
(b) paid from a payroll maintained in the continental United States, and
(c) employed by the Company in a permanent position (as distinguished
from a temporary assignment) in the continental United States,
even though such person may be covered under a retirement plan of the
Company other than those enumerated in Section 2.19(a), provided that
upon such person's reassignment outside the continental U.S., the
participation under this Plan of such person shall cease.
2.37 "OFFERING DATE" shall mean the date of the underwritten public offering
by ESI pursuant to a registration statement on Form S-3 filed with the
Securities Exchange Commission on February 13, 1998.
2.38 "PARENTAL LEAVE" shall mean an Employee's absence from work because of
the Employee's pregnancy, the birth of the Employee's child, the placement
of a child with the Employee in connection with the adoption of that child
by the Employee, or for purposes of caring for that child for a period
beginning immediately following that birth or placement.
2.39 "PARTICIPATING EMPLOYER" shall mean, in addition to ESI, any Associated
Employer that has, by appropriate written action of the Board of Directors
or by a designated officer of ESI pursuant to authorization delegated to
him or her by the Board of Directors, has been
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designated as a Participating Employer, and the board of directors of
any such subsidiary or affiliated company shall have taken appropriate
action to adopt the Plan.
To the extent that the Board of Directors or designated officer of ESI,
as appropriate, shall have authorized and established in writing the basis
for recognition under the Plan of service with a predecessor
corporation(s), if any, reference in this Plan to service with a
Participating Employer shall include service with the predecessor
corporation(s) of the Participating Employer, provided that all or part of
the business and assets of any such corporation shall have been acquired
by ESI or by a Participating Employer.
2.40 "PLAN" shall mean the ESI 401(k) Plan, set forth herein or as amended
from time to time.
2.41 "PLAN YEAR" shall mean the calendar year.
2.42 "PRE-DISTRIBUTION ITT" shall mean ITT Corporation (a Delaware
corporation), as constituted.
2.43 "PRE-DISTRIBUTION ITT PLAN" shall mean the ITT Corporation Investment and
Savings Plan for Salaried Employees, as in effect on the date immediately
preceding the effective date of the ITT Plan.
2.44 "PRE-TAX INVESTMENT ACCOUNT" shall mean that portion of the Trust Fund
that, with respect to any Member or Deferred Member, is attributable to
(i) Basic Pre-Tax Savings, (ii) Supplemental Pre-Tax Savings, (iii) any
amounts attributable to any pre-tax contributions made on his or her
behalf to a qualified plan and transferred to the Trust Fund from the ITT
Plan pursuant to Section 14.5, and (iv) earnings and gains or losses on
any of the aforementioned amounts.
2.45 "PRE-TAX SAVINGS" shall mean those contributions made on a Member's
behalf pursuant to Section 4.1.
2.46 "PRIOR PLAN TRANSFER" shall mean that portion of the After-Tax Investment
Account, Pre-Tax Investment Account, Company Matching Contribution
Account, Company Retirement Account, ITT Floor Contribution Account, or
Rollover Account of any Member or Deferred Member that is attributable to
amounts transferred on his or her behalf to the ITT Plan from the trust of
another qualified profit sharing or other defined contribution plan.
2.47 "QUALIFIED DOMESTIC RELATIONS ORDER" shall mean a qualified domestic
relations order as defined in Code Section 414(p).
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2.48 "RETIREMENT CONTRIBUTION ACCOUNT" shall mean that portion of the Trust
Fund that, with respect to any Member or Deferred Member is attributable
to (i) any Floor Contributions (ii) any contributions and investment
earnings thereon to the extent such amounts were attributable to company
contributions other than matching contributions made on his or her behalf
on or after October 1, 1996, and transferred to the Trust Fund from the
ITT Plan pursuant to Section 14.5, and (iii) any investment earnings and
gains or losses on any of the aforementioned amounts.
2.49 "RETIREMENT CONTRIBUTIONS" shall mean a contribution made pursuant to
Section 5.2.
2.50 "ROLLOVER ACCOUNT" shall mean that portion of the Trust Fund that, with
respect to any Member or Deferred Member, is attributable to (i) Rollover
Contributions, (ii) any rollover contributions and investment earnings
thereon transferred to the Trust Fund from the ITT Plan, and (iii) any
investment earnings and gains or losses on any of the aforementioned
amounts.
2.51 "ROLLOVER CONTRIBUTIONS" shall mean those contributions made by a Member
pursuant to Section 4.6.
2.52 "SALARY" shall mean the basic cash remuneration paid to an Employee for
services rendered to the Company, determined prior to any reduction
pursuant to Section 4.1 or pursuant to a cafeteria plan under Section 125
of the Code, plus certain commissions, overtime, sick pay, vacation pay,
holiday pay, jury duty pay, and shift differentials, but excluding any
compensation deferred under a deferred compensation plan, bonuses, and all
other forms of special pay except to the extent otherwise deemed "salary"
for purposes of the Plan under such nondiscriminatory rules as are adopted
by the Committee or the Board of Directors with respect to all Members.
However, Salary shall not exceed the Annual Dollar Limit.
2.53 "SEVERANCE DATE" shall mean the date an Employee is considered by the
Company to have severed his or her employment with the Company and all
Associated Companies as defined pursuant to the provisions of Section
2.54.
2.54 "SERVICE" shall mean the period of elapsed time beginning on the date an
Employee commences employment with the Company or any Associated Company
or predecessor company, subsidiary, or affiliate of ESI, and ending on his
or her most recent Severance Date, which shall be the earlier of (a) the
date he or she quits, is discharged, retires, or dies or (b) the first
anniversary of the date on which he or she is first absent from service,
with or without pay, for any reason such as vacation, sickness,
disability, layoff, or leave of absence. If an Employee terminates
employment and is later reemployed within 12 months of the earlier of (i)
his or her date of termination or (ii) the first day of an absence from
service immediately preceding his or her date of termination, the period
of Service
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between his or her Severance Date and his or her reemployment date
shall be included in his or her Service. With respect to service for
purposes of the vesting schedule in Section 5.4, if an Employee terminates
and is later reemployed after incurring a Break in Service, his or her
period of Service prior to his or her Break in Service shall be included
in his or her Service.
Under the circumstances hereinafter stated and upon such conditions as
the Committee shall determine on a basis uniformly applicable to all
Employees similarly situated, the period of Service of an Employee shall
be deemed not to be interrupted by an absence of the type hereinafter
stated, and the period of such absence shall be included in determining
the length of an Employee's Service:
(i) if a leave of absence has been authorized by the Company or any
Associated Company, for the period of such authorized leave of
absence only; or
(ii) if an Employee enters service in the armed forces of the United
States and if the Employee's right to reemployment is protected
by the Selective Service Act or any similar law then in effect
and if the Employee returns to regular employment within the
period during which the right to reemployment is protected by
any such law.
Notwithstanding the foregoing, the period of an Employee's employment
rendered prior to the Effective Date that was recognized or would have
been recognized under the ITT Plan as in effect on the Effective Date as
eligibility service or vesting service shall be recognized as service
under this Plan for purposes of vesting and eligibility purposes,
whichever is applicable.
Notwithstanding the foregoing, for purposes of eligibility for membership
in the Plan provided in Article Three, an Employee whose employment with
the Company or an Associated Company is on a temporary or less than
full-time basis shall be credited with a year of Service if he or she
completes at least 1,000 Hours of Service in a twelve consecutive month
period of employment measured from the date on which the Employee's
Service commences or from the beginning of any subsequent Plan Year. After
such an Employee has become a Member of the Plan as provided in Article
Three, Service for purposes of meeting the requirements for vesting shall
be determined in accordance with the preceding paragraphs of this Section
2.54.
Notwithstanding any Plan provision to the contrary, in the case of any
person who is a leased employee, as defined in Code Section 414(n), before
or after a period of service as an Employee, the entire period during
which he or she has performed services for the Company or an Associated
Company as a leased Employee shall be counted as service as
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an employee for all purposes of the Plan except that he or she
shall not by reason of that status become a Member of the Plan.
2.55 "STATUTORY COMPENSATION" shall mean the wages, salaries, and other
amounts paid in respect of an employee for services actually rendered to
the Company or an Associated Company, including by way of example,
overtime, bonuses, and commissions, but excluding deferred compensation,
stock options, and other distributions that receive special tax benefits
under the Code. For purposes of determining Highly-Compensated Employees
under Section 2.25 and key employees under Section 17.1, Statutory
Compensation shall include Pre-Tax Savings and amounts contributed on a
Member's behalf on a salary reduction basis that are not includible in the
gross income of the employee under Section 125, 402(h), or 403(b) of the
Code. For all other purposes, Statutory Compensation shall also include
the amounts referred to in the preceding sentence, unless the Committee
directs otherwise for a particular Plan Year. Statutory Compensation
shall not exceed the Annual Dollar Limit, provided that the Annual Dollar
Limit shall not be applied in determining Highly-Compensated Employees
under Section 2.28.
2.56 "SUPPLEMENTAL PRE-TAX SAVINGS" shall mean the contributions made on a
Member's behalf that are credited to his or her Pre-Tax Investment Account
in accordance with Section 4.1(a)(iv)(2).
2.57 "TERMINATION OF EMPLOYMENT" shall mean separation from employment with
the Company and all Associated Companies, as determined by the Company,
for any reason, including, but not limited to, retirement, death,
Disability, resignation, or dismissal; provided, however, that a transfer
in employment between the Company and any Associated Company shall not be
deemed to be Termination of Employment. With respect to any leave of
absence and any period of service in the armed forces of the United
States, Section 2.54 shall govern.
2.58 "TRUST FUND" shall mean the aggregate funds held by the Trustee under the
trust agreement or agreements established for the purposes of this Plan
and consisting of the Funds as described in Article Seven.
2.59 "TRUSTEE" shall mean the Trustee or Trustees at any time acting as such
under the trust agreement or agreements established for the purposes of
this Plan.
2.60 "VALUATION DATE" shall mean the date or dates in each calendar month on
which any valuation is made, as determined under Committee procedures
established pursuant to Section 8.8.
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2.61 "VESTED SHARE" shall mean, with respect to a Member or Deferred Member,
that portion of his or her Accounts vested in accordance with the terms of
Sections 4.5 and 5.4.
ARTICLE THREE
MEMBERSHIP
3.1 MEMBERSHIP.
(a) Each Employee who is a member or deferred member under the ITT Plan
on the Effective Date shall become a Member or Deferred Member,
whichever is applicable, under the Plan on the Effective Date.
(b) Every other Employee shall become a Member as of the first
Enrollment Date following the date in which he or she has completed
a year of Service, provided he or she is then an Employee.
3.2. REHIRED MEMBER. Any rehired Employee who at the time of his or her
Termination of Employment was a Member of this Plan will again become
a Member as soon as practicable after the Employee's reemployment date but
no later than the first day of the first payroll period of the first
complete month following the date of the Employee's rehire (his or her
"reenrollment date").
Such a rehired Employee shall once again become a Member hereunder
entitled to Floor Contributions under Section 5.2 as of his or her
reenrollment date and shall be eligible to have Pre-Tax Savings made on
his or her behalf pursuant to the provisions of Section 4.1 as soon as
administratively practicable following his or her reenrollment date.
3.3. TRANSFERRED MEMBERS.
(a) Notwithstanding any Plan provision to the contrary, a Member
who remains in the employ of the Company or an Associated Company
but ceases to be an Employee shall continue to be a Member of the Plan
but shall not be eligible to receive allocations of Pre-Tax Savings,
Matching Contributions, or Retirement Contributions while his
employment status is other than as an Employee.
(b) An individual who transfers from the status of an employee ineligible
for Plan membership to an Employee eligible for membership
shall become a Member on the later of (i) on the first Enrollment Date
following the month in which he or she completes the requirements set
forth in Section 3.1(b), or (ii) as soon as practicable after the date
the individual becomes an Employee, but no later than
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the first day of the first payroll period of the first complete
month following the date he or she becomes an Employee (his or her
"reenrollment date").
3.4. TERMINATION OF MEMBERSHIP. A Member's membership shall terminate on his
or her Severance Date. A Deferred Member's membership shall terminate
when all benefits to which he or she is entitled under the Plan are
distributed to him or her.
ARTICLE FOUR
MEMBER CONTRIBUTIONS
4.1 MEMBER PRE-TAX SAVINGS
(a) (i) Except as otherwise provided in Section 3.3, each Member shall
have his or her Salary reduced by 2%, and that amount
shall be contributed on his or her behalf to the Plan by the
Company as Pre-Tax Savings until and unless the Member elects
in accordance with the procedures and within the time period
prescribed by the Committee, to receive that Salary directly
from the Company in cash. This reduction in Salary shall
commence as soon as administratively practicable following (1)
the Member's Enrollment Date or (2) the Member's reenrollment
date, as defined in Article Three, and shall be applied to
Salary that could have been subsequently received by the
Member. The Member may elect, subject to the provisions of
paragraphs (b) through (d) below, to increase the reduction of
his or her subsequent Salary, in increments of 1%, up to a
total of 16%, and have that amount contributed on his or her
behalf to the Plan by the Company as Pre-Tax Savings. That
election shall be effective with the first payroll period on or
after the date as of which the election is to apply or as soon
as administratively practicable thereafter.
(ii) A Member who elects to receive the 2% of Salary described in
the above paragraph (i) directly from the Company in
cash, may elect at a later date, subject to the provisions of
paragraphs (b) and (d) below, to have his or her subsequent
Salary reduced by at least 2%, but no more than 16%, in
increments of 1%, and have that amount contributed to the Plan
by the Company that employs the Member. The election shall be
effective with the first payroll period on or after the date as
of which the election is to apply or as soon as
administratively practicable thereafter.
(iii) From time to time and in order to comply with Section
401(k)(3) of the Code, the Committee may impose a limitation
on the extent to which a
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Member who is a Highly-Compensated Employee may reduce his
or her Salary in accordance with this Section, based on the
Committee's reasonable projection of savings rates of Members
who are not Highly-Compensated Employees.
(iv) A Member's Pre-Tax Savings shall consist of the following.
(1) Basic Pre-Tax Savings - Contributions under this Section
that are not in excess of 5% of the Member's Salary
for the payroll processing period for which the
contributions are made shall be known as Basic Pre-Tax
Savings and shall be credited to his or her Pre-Tax
Investment Account; and
(2) Supplemental Pre-Tax Savings - Contributions under this
Section, that are in excess of the maximum allowed
under the preceding subparagraph (1) shall be known as
Supplemental Pre-Tax Savings and shall be credited to a
Member's Pre-Tax Investment Account. Supplemental Pre-Tax
Savings may also include amounts credited on a Member's
behalf under the ITT Plan and transferred to this Plan
pursuant to Section 14.5.
Any Pre-Tax Savings shall be paid to the Trustee as soon as practicable
but no later than the 15th business day of the month following the month
in which the amounts would otherwise have been payable to the Member in
cash.
(b) In no event shall the Member's Pre-Tax Savings and similar
contributions made on his or her behalf by the Company or an
Associated Company to all plans, contracts, or arrangements subject to
the provisions of Section 401(a)(30) of the Code in any calendar year
exceed $7,000 multiplied by the Adjustment Factor. If a Member's
Pre-Tax Savings in a calendar year reach that dollar limitation, his
or her election of Pre-Tax Savings for the remainder of the calendar
year will be canceled. As of the first payroll period of the calendar
year following that cancellation, the Member's election of Pre-Tax
Savings shall again become effective in accordance with his or her
previous election.
(c) In the event that the sum of the Pre-Tax Savings and similar
contributions to any other qualified defined contribution plan
maintained by the Company or an Associated Company exceeds the dollar
limitation in Section 4.1(b) for any calendar year, the Member shall
be deemed to have elected a return of Pre-Tax Savings in excess of
that limit ("excess deferrals") from this Plan. The excess deferrals,
together with investment income, shall be returned to the Member no
later than the April 15 following the end of the calendar year in
which the excess
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deferrals were made. The amount of excess deferrals to be returned
for any calendar year shall be reduced by any Pre-Tax Savings
previously returned to the Member under Section 6.1 for that calendar
year. In the event any Pre-Tax Savings returned under this paragraph
(c) were matched by Matching Company Contributions under Section 5.1,
those Matching Company Contributions, together with investment income,
shall be forfeited and used to reduce Company contributions.
(d) If a Member makes tax-deferred contributions under another qualified
defined contribution plan maintained by an employer other than
the Company or an Associated Company for any calendar year and those
contributions when added to his or her Pre-Tax Savings exceed the
dollar limitation under Section 4.1(b) for that calendar year, the
Member may allocate all or a portion of those excess deferrals to this
Plan. In that event, the excess deferrals, together with investment
income, shall be returned to the Member no later than the April 15
following the end of the calendar year in which the excess deferrals
were made. However, the Plan shall not be required to return excess
deferrals unless the Member notifies the Plan Committee, in writing,
by March 1 of that following calendar year, of the amount of the
excess deferrals allocated to this Plan. The amount of any such
excess deferrals to be returned for any calendar year shall be reduced
by any Pre-Tax Savings previously returned to the Member under Section
6.1 for that calendar year. In the event any Pre-Tax Savings returned
under this paragraph (d) were matched by Matching Company
Contributions under Section 5.1, those Matching Company Contributions,
together with investment income, shall be forfeited and used to reduce
Company contributions.
4.2. CHANGE IN CONTRIBUTIONS. The percentage of Salary designated under
Section 4.1 shall automatically apply to increases and decreases in a
Member's Salary. A Member may elect to change the rate of his or her
Salary reduction in accordance with the administrative procedures and
within the time period prescribed by the Committee. The change shall be
effective as of the first payroll period of the month following the
expiration of the notice period or as soon as administratively practicable
thereafter.
4.3. SUSPENSION AND RESUMPTION OF MEMBER PRE-TAX SAVINGS.
(a) A Member may suspend his or her deferrals under Section 4.1 at any
time in accordance with the administrative procedures and within
the time period prescribed by the Committee. The suspension will
become effective as of the later of the immediately succeeding payroll
period or as soon as administratively practicable following the date
notice is received by the Committee.
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(b) A Member who suspends his or her savings in accordance with
paragraph (a) may resume his or her deferrals under Section 4.1, in
accordance with the administrative procedures and within the time
period prescribed by the Committee, as of the first payroll period
following the expiration of the notice period or as soon as
administratively practicable thereafter.
4.4. NO AFTER-TAX CONTRIBUTIONS. No after-tax contributions shall be required
or permitted under the Plan. After-tax contributions made or held
under the ITT Plan and transferred to this Plan pursuant to Section 14.5
shall be held in the Member's or Deferred Member's After-Tax Investment
Account.
4.5. VESTING OF MEMBER'S AND DEFERRED MEMBER'S CONTRIBUTIONS. Each Member's
and Deferred Member's Pre-Tax Investment Account and After-Tax Investment
Account shall at all times be fully vested.
4.6. ROLLOVER CONTRIBUTIONS.
(a) (i) With the permission of the Committee and without regard to any
limitations on contributions set forth in this Article Four,
the Plan may receive from a Member, or an Employee who has not
yet met the eligibility requirements for membership, in cash,
any amount previously received (or deemed to be received) by
him or her from another qualified plan.
(ii) If a Member terminates employment and is subsequently rehired
by the Company, with the permission of the Committee, the Plan
may receive from the Member any amount previously received (or
deem to be received) by him or her from this Plan as a result
of his or her termination of employment.
(iii) The Plan may receive such amounts either directly from the
Member or Employee or from an individual retirement
account or a qualified plan in the form of a direct rollover.
(b) Notwithstanding the foregoing, the Plan shall not accept any
amount unless the amount is eligible to be rolled over to a
qualified trust in accordance with applicable law, and the Member or
Employee provides evidence satisfactory to the Committee that the
amount qualifies for rollover treatment. Unless received by the Plan
in the form of a direct rollover, the Rollover Contribution must be
paid to the Trustee on or before the 60th day after the day it was
received by the Member or Employee.
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<PAGE> 23
(c) A Member's, Deferred Member's, and Employee's Rollover Account shall
at all times be fully vested.
4.7. CONTRIBUTIONS DURING PERIOD OF MILITARY LEAVE.
(a) Notwithstanding any provision of this Plan to the contrary,
contributions and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.
(b) Without regard to any limitations on contributions set forth in this
Plan, a Member who is credited with Service because of a period
of service in the uniformed services of the United States may elect to
contribute to the Plan the Pre-Tax Savings that could have been
contributed to the Plan in accordance with the provisions of the Plan
had he or she remained continuously employed by the Company throughout
that period of absence ("make-up contributions"). The amount of
make-up contributions shall be determined on the basis of the Member's
Salary in effect immediately prior to the period of absence and the
terms of the Plan at that time. Any Pre-Tax Savings so determined
shall be limited as provided in Sections 4.1 and 5.1 with respect to
the Plan Year or Plan Years to which the contributions relate rather
than the Plan Year or Plan Years in which payment is made. Any
payment to the Plan described in this paragraph shall be made during
the period, beginning with the date of reemployment, the duration of
which is the lesser of three times the period of absence or five (5)
years. Earnings (or losses) on make-up contributions shall be
credited commencing with the date the make-up contribution is made in
accordance with the provisions of Articles 3 and 4.
(c) All contributions under this Section 4.7 are considered "annual
additions," as defined in Section 415(c)(2) of the Code and shall
be limited in accordance with the provisions of Section 6.5 with
respect to the Plan Year or Plan Years to which the contributions
relate rather than the Plan Year in which payment is made.
ARTICLE FIVE
COMPANY CONTRIBUTIONS
5.1. MATCHING COMPANY CONTRIBUTIONS. The Company shall contribute to the
Plan on behalf of each of its Members who elects to make Basic
Pre-Tax Savings, a Matching Company Contribution in an amount equal to 50
percent of the first 5 percent of the Member's Salary contributed to the
Plan as Basic Pre-Tax Savings on behalf of the Member during each payroll
processing period. In no event, however, shall the Matching Company
Contributions pursuant to this Section exceed 2.5% of the Member's Salary
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<PAGE> 24
while a Member with respect to any Plan Year. The Matching Company
Contributions with respect to a Member shall be paid into the Trust Fund
and credited to the Member's Company Matching Contribution Account as soon
as practicable. No Matching Company Contributions shall be made with
respect to a Member's Supplemental Pre-Tax Savings. Notwithstanding the
foregoing, Matching Company Contributions shall not be made in respect of
a Member's Basic Pre-Tax Savings that are made during a suspension period
following a withdrawal prior to Termination of Employment as provided in
Sections 9.2 or 9.3. Matching Company Contributions are made expressly
conditional on the Plan satisfying the provisions of Section 4.1, 6.1,
6.2, and 6.3. If any portion of the Basic Pre-Tax Savings to which the
Matching Company Contribution relates is returned to the Member under
Section 4.1, 6.1, or 6.3, the corresponding Matching Company Contribution
shall be forfeited, and if the amount of the Matching Company Contribution
is deemed an excess aggregate contribution under Section 6.2 or 6.3, the
amount shall be forfeited in accordance with that Section.
5.2. RETIREMENT CONTRIBUTIONS. Except as otherwise provided in Section 3.3,
each payroll processing period, the Company shall contribute to the
Trust Fund, with respect to each Member, a Retirement Contribution in an
amount equal to 1% of the Member's Salary for the corresponding payroll
processing period. Retirement Contributions shall be credited to the
Member's Retirement Contribution Account and paid to the Trustee as soon
as practicable.
5.3. MODE OF PAYMENT AND VALUATION OF ESI STOCK CONTRIBUTED.
(a) Company contributions under Sections 5.1 and 5.2 shall be made as the
Company shall determine, in cash or in ESI Stock, including
treasury shares or newly issued shares of ESI Stock previously
authorized but unissued.
(b) Company contributions made in cash shall be used to acquire ESI Stock.
However, the Trustee in its discretion, may hold such amounts in cash
consistent with its obligations as Trustee, as it deems advisable in
accordance with the provisions of the trust agreement. In the case of
Company contributions made in cash, the Trustee may purchase ESI Stock
from the Company or any other source, and the stock may be treasury
shares or newly issued shares of ESI Stock previously authorized but
unissued; provided, however, that in no event shall a commission be
charged with respect to a purchase of ESI Stock from the Company.
(c) For the purpose of determining the value of ESI Stock under the Plan,
in the event the stock is traded on a national securities
exchange, the stock shall be valued at the average of the highest and
lowest quoted selling price of ESI Stock on the New York Stock
Exchange composite tape on the day the stock is delivered to the
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<PAGE> 25
Trustee, provided that at least one sale of the stock took place on
the exchange on that date, but if there was no sale on that date, then
on the basis of the average of the highest and lowest quoted price on
the nearest day before the delivery date upon which at least one sale
of the stock took place on the exchange. In the event that ESI Stock
is not traded on a national securities exchange, the shares shall be
valued in good faith by an independent appraiser selected by the
Trustee and meeting requirements similar to those in the regulations
prescribed under Section 170(a)(1) of the Code.
5.4. VESTING. A Member shall be vested in, and have a nonforfeitable right to,
his or her Company Matching Contribution Account in accordance with the
following schedule:
<TABLE>
<CAPTION>
NONFORFEITABLE
YEARS OF SERVICE PERCENTAGE
-------------------------------------------------------
<S> <C>
Less than 1 year 0%
1 but less than 2 years 20%
2 but less than 3 years 40%
3 but less than 4 years 60%
4 but less than 5 years 80%
5 or more years 100%
</TABLE>
Notwithstanding the foregoing schedule, a Member shall immediately be
fully vested in his or her Company Matching Contribution Account if, while
employed by the Company or an Associated Company, the Member dies, incurs
a Disability, or attains age 65, or in the event of Plan termination or
complete discontinuance of Company contributions.
A Member who shall have performed services for Pre-Distribution ITT at
any time between June 30, 1995 and December 19, 1995, shall be fully
vested in the balance (determined at the later date), of his or her ESOP
Account and his or her Company Matching Contribution Account, except with
respect to the portion of his or her Company Matching Contribution Account
that is attributable to matching contributions made for periods after the
date immediately preceding December 19, 1995.
In the case of a Member or Deferred Member who shall not have performed
services for Pre-Distribution ITT between June 30, 1995 and December 19,
1995, balances in his or her ESOP Account and Company Matching
Contribution Account that were forfeited under Section 5.5(a) of the
Pre-Distribution ITT Plan shall remain forfeited, except to the
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extent restored pursuant to Section 11.6 of this Plan on account of
subsequent employment with the Company or an Associated Company. Each
Member and Deferred Member shall, at all times, be fully vested in his or
her Retirement Contribution Account and his or her ITT Floor Contribution
Account.
5.5. FORFEITURES.
(a) In the event of Termination of Employment of a Member, the portion of
the Member's Company Matching Contribution Account in which he or she
is not vested in accordance with Section 5.4 shall not be forfeited
until the Member has a Break in Service of five years or receives a
distribution of the entire Vested Share of his or her Accounts, if
earlier. However, if he or she is reemployed by the Company or
Associated Company prior to the expiration of a period of Break in
Service of five years, the provisions of Section 11.6 shall apply. If
the amount of the Vested Share of a Member's Company Matching
Contribution Account at the time of his or her Termination of
Employment is zero, the Member shall be deemed to have received a
distribution of that zero vested benefit.
(b) As soon as practicable after an event giving rise to a forfeiture has
occurred, the amount of any forfeiture under the foregoing
subdivision of this Section 5.5, reduced by any forfeited amounts
restored to a Member's Accounts, shall be applied to reduce future
Company contributions under the Plan and/or to pay Plan expenses
pursuant to the provisions of Section 16.2.
(c) In the event of the termination of the Plan, any forfeitures
not previously applied in accordance with the foregoing provisions
of this Section shall be credited proportionately to the Accounts of
all Members as provided in Section 14.2(b).
ARTICLE SIX
LIMITATIONS ON CONTRIBUTIONS
6.1. ACTUAL DEFERRAL PERCENTAGE TEST.
(a) With respect to each Plan Year, the Actual Deferral Percentage for
that Plan Year for Highly-Compensated Employees who are Members for
that Plan Year shall not exceed the Actual Deferral Percentage for the
preceding Plan Year for all Non-Highly-Compensated Employees who are
Members for the preceding Plan Year multiplied by 1.25. If the Actual
Deferral Percentage for those Highly-Compensated Employees does not
meet the foregoing test, the Actual Deferral Percentage for such
Highly-Compensated Employees for that Plan Year may not
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<PAGE> 27
exceed the Actual Deferral Percentage for the preceding Plan Year
for all Non-Highly-Compensated Employees who are Members for the
preceding Plan Year by more than two percentage points, and the Actual
Deferral Percentage for those Highly-Compensated Employees for the
Plan Year may not be more than 2.0 times the Actual Deferral
Percentage for the preceding Plan Year for all Non-Highly-Compensated
Employees who are Members for the preceding Plan Year (or such lesser
amount as the Committee shall determine to satisfy the provisions of
Section 6.3). Notwithstanding the foregoing, the Committee may elect
to use the Actual Deferral Percentage for Non-Highly-Compensated
Employees for the Plan Year being tested rather than the preceding
Plan Year, provided that the election with respect to a Plan Year once
made may not be changed, except as provided by the Secretary of the
Treasury.
If the Committee determines that the foregoing limitation has been
exceeded in any Plan Year, the following provisions shall apply:
The actual deferral ratio of the Highly-Compensated Employee with
the highest actual deferral ratio shall be reduced to the extent
necessary to meet the Actual Deferral Percentage test or to cause that
ratio to equal the actual deferral ratio of the Highly-Compensated
Employee with the next highest ratio. This process will be repeated
until the Actual Deferral Percentage test is passed. Each ratio shall
be rounded to the nearest one one-hundredth of 1% of the Member's
Statutory Compensation. The amount of Pre-Tax Savings Contributions
made by each Highly-Compensated Employee in excess of the amount
permitted under his or her revised deferral ratio shall be added
together. This total dollar amount of excess contributions ("excess
contributions") shall then be allocated to some or all
Highly-Compensated Employees by reducing the Pre-Tax Savings of the
Highly-Compensated Employee with the highest dollar amount of Pre-Tax
Savings by the lesser of (i) the amount required to cause that
Employee's Pre-Tax Savings to equal the dollar amount of the Pre-Tax
Savings of the Highly-Compensated Employee with the next highest
dollar amount, or (ii) an amount equal to the total excess
contributions. This procedure is repeated until all excess
contributions are allocated. The amount of excess contributions
allocated to a Highly-Compensated Employee (adjusted to reflect
earnings or losses attributable thereto) shall be distributed to him
or her in accordance with the provisions of paragraph (c).
(b) The Committee may implement rules limiting the Pre-Tax Savings that
may be made on behalf of some or all Highly-Compensated Employees so
that the limitation under this Section 6.1 is satisfied.
(c) Pre-Tax Savings subject to reduction under this Section, together
with investment income thereon, ("excess contributions") shall be paid
to the Member before the
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<PAGE> 28
close of the Plan Year following the Plan Year in which the excess
contributions were made and, to the extent practicable, within 2 1/2
months of the close of the Plan Year in which the excess contributions
were made. However, any excess contributions for any Plan Year shall
be reduced by any Pre-Tax Savings previously returned to the Member
under Section 4.1 for that Plan Year. In the event any Pre-Tax Savings
returned under this Section 6.1 were matched by Matching Company
Contributions, the corresponding Matching Company Contributions, with
investment income thereon, shall be forfeited and used to reduce
Company contributions.
6.2. ACTUAL CONTRIBUTION PERCENTAGE TEST.
(a) With respect to each Plan Year, the Actual Contribution Percentage
for that Plan Year for Highly-Compensated Employees who are
Members for that Plan Year shall not exceed the Actual Contribution
Percentage for the preceding Plan Year for all Non-Highly-Compensated
Employees who were Members for the preceding Plan Year multiplied by
1.25. If the Actual Contribution Percentage for a Plan Year for those
Highly-Compensated Employees does not meet the foregoing test, the
Actual Contribution Percentage for the Highly-Compensated Employees
for the Plan Year may not exceed the Actual Contribution Percentage
for the preceding Plan Year for all Non-Highly-Compensated Employees
who were Members for the preceding Plan Year by more than two
percentage points, and the Contribution Percentage for those
Highly-Compensated Employees for the Plan Year may not be more than
2.0 times the Actual Contribution Percentage for the preceding Plan
Year for all Non-Highly-Compensated Employees who were Members for the
preceding Plan Year (or such lesser amount as the Committee shall
determine to satisfy the provisions of Section 6.3). Notwithstanding
the foregoing, the Plan Committee may elect to use the Actual
Contribution Percentage for Non-Highly-Compensated Employees for the
Plan Year being tested rather than the preceding Plan Year, provided
that the election once made with respect to a Plan Year may not be
changed, except as provided by the Secretary of the Treasury.
If the Committee determines that the limitation under this Section 6.2
has been exceeded in any Plan Year, the following provisions shall
apply:
(i) The actual contribution ratio of the Highly-Compensated Employee
with the highest actual contribution ratio shall be reduced to
the extent necessary to meet the Actual Contribution Percentage
test or to cause that ratio to equal the actual contribution
ratio of the Highly-Compensated Employee with the next highest
actual contribution ratio. This process will be repeated until
the Actual Contribution Percentage test is passed.
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<PAGE> 29
Each ratio shall be rounded to the nearest one one-hundredth
of 1% of a Member's Statutory Compensation. The amount of
Matching Company Contributions made by or on behalf of each
Highly-Compensated Employee in excess of the amount permitted
under his revised actual contribution ratio shall be added
together. This total dollar amount of excess contributions
("excess aggregate contributions") shall then be allocated to
some or all Highly-Compensated Employees in accordance with the
provisions of subparagraph (ii) of this paragraph (a).
(ii) The Matching Company Contributions of the Highly-Compensated
Employee with the highest dollar amount of those contributions
shall be reduced by the lesser of (i) the amount required to
cause that Employee's Matching Company Contributions to equal the
dollar amount of those contributions of the Highly-Compensated
Employee with the next highest dollar amount of those
contributions, or (ii) an amount equal to the total excess
aggregate contributions. This procedure is repeated until all
excess aggregate contributions are allocated. The amount of
excess aggregate contributions allocated to each
Highly-Compensated Employee, (adjusted to reflect earnings or
losses attributable thereto), shall be distributed or forfeited
in accordance with the provisions of paragraph (b) below.
(b) To the extent contributions must be paid or returned to a Member
under paragraph (a) above, so much of the Matching Company
Contributions, together with investment income thereon, as shall be
necessary to equal the balance of the excess aggregate contributions
shall be reduced with the vested Matching Company Contributions being
paid to the Member and the Matching Company Contributions that are
forfeitable under the Plan being forfeited and applied to reduce
Company contributions.
(c) Any repayment or forfeiture of excess aggregate contributions shall
be made before the close of the Plan Year following the Plan Year
for which the excess aggregate contributions were made and, to the
extent practicable, any repayment or forfeiture shall be made within
2 1/2 months of the close of the Plan Year in which the excess
aggregate contributions were made.
6.3. AGGREGATE CONTRIBUTION LIMITATION. Notwithstanding the provisions of
Sections 6.1 and 6.2, in no event shall the sum of the Actual
Deferral Percentage of the group of eligible Highly-Compensated Employees
and the Actual Contribution Percentage of that group, after applying the
provisions of Sections 6.1 and 6.2, exceed the "aggregate limit" as
provided in Section 401(m)(9) of the Code and the regulations issued
thereunder. In the event the aggregate limit is exceeded for any Plan
Year, the Actual Contribution Percentages of the Highly-Compensated
Employees shall be reduced to the extent
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<PAGE> 30
necessary to satisfy the aggregate limit in accordance with the procedure
set forth in Section 6.2.
6.4. ADDITIONAL DISCRIMINATION TESTING PROVISIONS.
(a) If any Highly-Compensated Employee is a member of another qualified
plan of the Company or an Associated Company, other than an
employee stock ownership plan described in Section 4975(e)(7) of the
Code or any other qualified plan that must be mandatorily
disaggregated under Section 410(b) of the Code, under which pre-tax
contributions or matching contributions are made on behalf of the
Highly-Compensated Employee, the Committee shall implement rules,
which shall be uniformly applicable to all employees similarly
situated, to take into account all such contributions for the
Highly-Compensated Employee under all such plans in applying the
limitations of Sections 6.1, 6.2, and 6.3. If any other such
qualified plan has a plan year other than the Plan Year, the
contributions to be taken into account in applying the limitations of
Sections 6.1, 6.2, and 6.3 will be those made in the plan years ending
with or within the same calendar year.
(b) In the event that this Plan is aggregated with one or more other
plans to satisfy the requirements of Sections 401(a)(4) and 410(b)
of the Code (other than for purposes of the average benefit percentage
test) or if one or more other plans is aggregated with this Plan to
satisfy the requirements of Sections 401(a)(4) and 410(b) of the Code,
then the provisions of Sections 6.1, 6.2, and 6.3 shall be applied by
determining the Actual Deferral Percentage and Actual Contribution
Percentage of employees as if all such plans were a single plan. If
this Plan is permissively aggregated with any other plan or plans for
purposes of satisfying the provisions of Section 401(k)(3) of the
Code, the aggregated plans must also satisfy the provisions of
Sections 401(a)(4) and 410(b) of the Code as though they were a single
plan. Plans may be aggregated under this paragraph (c) only if they
have the same plan year.
(d) The Committee may elect to use Pre-Tax Savings or Retirement
Contributions to satisfy the tests described in Sections 6.2 and
6.3, provided that the test described in Section 6.1 is met prior to
that election, and continues to be met following the Company's
election to shift the application of those Pre-Tax Savings or
Retirement Contributions from Section 6.1 to Section 6.2.
(e) The Company may authorize that special "qualified nonelective
contributions" shall be made for a Plan Year, which shall be
allocated in such amounts and to such Members, who are not Highly
Compensated Employees, as the Committee shall determine. The
Committee shall establish such separate accounts as may be
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<PAGE> 31
necessary. Qualified nonelective contributions shall be 100%
nonforfeitable when made, and any earnings credited on any qualified
nonelective contributions shall not be available for withdrawal prior
to a Member's Termination of Employment. Qualified nonelective
contributions made for the Plan Year may be used to satisfy the tests
described in Sections 6.1, 6.2 and 6.3, where necessary.
6.5 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding any other provision of the Plan, except as
otherwise provided in this Section 6.5(a), the annual addition to a
Member's Accounts for any Plan Year, which shall be considered the
limitation year for purposes of Section 415 of the Code, when added to
the Member's annual addition for that Plan Year under any other
qualified defined contribution plan of the Company or Associated
Company, shall not exceed an amount that is equal to the lesser of (i)
25% of his or her aggregate remuneration for the year or (ii) $30,000.
(b) For purposes of this Section 6.5, the "annual addition" to a Member's
Accounts under this Plan for any Plan Year shall be the sum of (i)
the total contributions, including Pre-Tax Savings, made on the
Member's behalf by the Company and all Associated Companies for the
Plan Year, (ii) all Member contributions (exclusive of any Rollover
Contributions) for the Plan Year, and (iii) the amount of any
forfeiture that is credited to the Member's Account for the Plan Year
pursuant to Section 5.5(c).
(c) If the annual additions to a Member's Accounts for any Plan Year,
prior to the application of the limitations set forth in paragraph (a)
above, exceeds that limitation due to a reasonable error in
estimating a Member's annual compensation or in determining the amount
of Pre-Tax Savings that may be made with respect to a Member under
Section 415 of the Code, or as the result of the allocation of
forfeitures, the amount of contributions credited to the Member's
Accounts in that Plan Year shall be adjusted to the extent necessary
to satisfy that limitation, in accordance with the following order of
priority:
(i) The Member's Supplemental Pre-Tax Savings under Section 3.1
shall be reduced to the extent necessary. The amount of the
reduction shall be returned to the Member, together with
earnings on the contributions to be returned.
(ii) The Member's Basic Pre-Tax Savings and corresponding Matching
Company Contributions shall be reduced to the extent
necessary. The amount of the reduction attributable to the
Member's Basic Pre-Tax Savings shall be returned to the Member,
together with any earnings on
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<PAGE> 32
those contributions to be returned, and the amount
attributable to Matching Company Contributions shall be
forfeited and used to reduce subsequent contributions payable by
the Company.
(iii) The Member's Retirement Contributions under Section 5.2 to the
extent necessary shall be held unallocated in a suspense
account and shall be used to reduce future Company contributions
for all remaining Members in the next limitation year. If a
suspense account is in existence at any time during a limitation
year, it will not participate in the allocation of the
investment gains and losses of the Trust Fund and all assets in
the suspense account must be allocated to Members before any
contributions may be made for that Plan Year.
Any Pre-Tax Savings returned to a Member under this subparagraph (c)
shall be disregarded in applying the dollar limitation on Pre-Tax Savings
under Section 4.1 and in performing the Actual Deferral Percentage test
under Section 6.1.
(d) In the event that any Member of this Plan is a participant in any
other defined contribution plan (whether or not terminated)
maintained by the Company or any Associated Company, the total amount
of annual additions to the Member's Accounts under all such defined
contribution plans shall not exceed the limitations set forth in this
Section 6.5. If it is determined that as a result of the limitations
set forth in this subparagraph (d), the annual additions to the
Member's Accounts must be reduced:
(i) first, the annual additions to the Member's Accounts under the
other defined contribution plans shall be reduced to the extent
necessary and to the extent permitted by law so that the
limitations described in Section 6.5(a) are not exceeded; and
(ii) second, if after application of clause (i) the annual additions
to the Member's Accounts are still in excess of the
permissible amount, the annual additions to the Member's Accounts
under this Plan shall be reduced.
With respect to Plan Years commencing prior to January 1, 2000, in the
event that any Member of the Plan is also a participant in any defined
benefit plan maintained by the Company or any Associated Company, it is
intended that the benefits under the defined benefit plan shall be reduced
prior to the application of the limitations contained in Section 6.5(a) to
the annual additions to the Member's Accounts under this Plan, to the
extent necessary to satisfy the requirements of Section 415(e) of the
Code.
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<PAGE> 33
(e) For purposes of this Section, the term "remuneration" with respect
to any Member shall mean the wages, salaries, and other amounts
paid in respect of the Member by the Company or an Associated Company
for personal services actually rendered, and shall include amounts
contributed by the Company or an Associated Company pursuant to a
salary reduction agreement that are not includible in gross income of
the employee under Sections 125, 402(g)(3), or 457 of the Code, but
shall exclude deferred compensation.
ARTICLE SEVEN
INVESTMENT OF CONTRIBUTIONS
7.1. INVESTMENTS FUNDS.
(a) Contributions to the Plan and amounts transferred to the Plan from
the ITT Plan shall be invested in one or more Funds, as
authorized by the Committee, which from time to time may include such
guaranteed investment contract funds, bond funds, balanced funds,
equity index funds, growth equity funds, international stock funds,
company stock funds (including an ESI Stock Fund), and other funds as
the Committee elects to offer. A Fund selected by the Committee shall
be communicated to Members and Deferred Members in a timely fashion.
(b) In any Fund, the Trustee in its sole discretion temporarily may hold
cash or make short-term investments in obligations of the United
States Government, commercial paper, or an interim investment fund for
tax-qualified employee benefit plans established by the Trustee,
unless otherwise provided by applicable law, or other investments of a
short-term nature.
(c) Dividends, interest, and other distributions received on the assets
held by the Trustee in respect to each of the Funds shall be
reinvested in the respective Fund.
7.2. INVESTMENT OF CONTRIBUTIONS. Contributions under the Plan shall be
invested by the Trustee as follows:
(a) Matching Company Contributions and Retirement Contributions shall be
invested entirely in the ESI Stock Fund, except when a Member who
has attained age 55 elects otherwise pursuant to Section 7.5.
(b) Matching Company Contributions made before the Effective Date under
the ITT Plan (or a predecessor to the ITT Plan) shall be invested
entirely in the ESI Stock Fund.
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<PAGE> 34
(c) A Member's or Deferred Member's or Employee's Pre-Tax Savings
Account, After-Tax Savings Account, and Rollover Account shall be
invested, in multiples of 1%, in any one or more of the Funds as
designated by the Member or Deferred Member pursuant to rules and
procedures established by the Committee.
(d) A Member's or Deferred Member's ITT Floor Contribution Account and
amounts transferred from the ITT Plan and credited to a Member's or
Deferred Member's Retirement Contribution Account shall be invested
in the ESI Stock Fund, except to the extent a Member who has attained
age 55 elects otherwise pursuant to Section 7.5.
7.3. CHANGE IN FUTURE CONTRIBUTION INVESTMENT ELECTION. A Member (or an
Employee who made a Rollover Contribution prior to meeting the eligibility
requirements for membership, with respect to future Rollover
Contributions) may change his or her investment election with respect to
future contributions made by or on his or her behalf at any time within
the limitations set forth in Section 7.2. Such a change shall be made in
1% multiples, in accordance with the administrative procedures and within
the time period prescribed by the Committee and shall be effective as soon
as practicable thereafter.
7.4. REDISTRIBUTION OF ACCOUNTS AMONG THE FUNDS.
(a) A Member or Deferred Member (or Beneficiary in the event of the death
of a Member or Deferred Member) may elect at any time to
reallocate on any Valuation Date all or part, in multiples of 1%, of
his or her Pre-Tax Investment Account and, if applicable, his or her
After-Tax Investment Account and Rollover Account among the Funds. An
Employee who has made a Rollover Contribution prior to meeting the
eligibility requirements for membership may elect at any time to
reallocate on any Valuation Date all or part, in multiples of 1%, of
his or her Rollover Account among the Funds. Reallocations shall be
made in accordance with the administrative procedures and within the
time period prescribed by the Committee and shall be effective as soon
as practicable thereafter.
7.5. INVESTMENT OPTION AT AGE 55. In accordance with the administrative
procedures prescribed by the Committee, and except as otherwise provided in
Section 7.2 above, any Member or Deferred Member who has attained age 55
(or Beneficiary in the event of the death of a Member or Deferred Member
who had or would have attained age 55 at the time of the election) shall
have the option to elect the following:
(a) to reallocate on any Valuation Date to any one or more of the Funds,
in multiples of 1%, all or part of his or her previously credited
Company Matching Contribution Account, Retirement Contribution
Account, or ESOP Account; and
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<PAGE> 35
(b) to have any future Matching Company Contributions and Retirement
Contributions invested in any one or more of the Funds other than the
ITT Corporation Stock Fund or the ITT Destinations Stock Fund, in
multiples of 1%.
If a Member is age 55 or older when he or she joins the Plan or becomes a
Member, he or she may have all or part of the Matching Company
Contributions and Retirement Contributions made pursuant to Sections 5.1
and 5.2 on his or her behalf invested in any one or more of the Funds in
multiples of 1%.
Such changes shall be made in accordance with the administrative
procedures and within the time period prescribed by the Committee and
shall be effective as soon as practicable thereafter and shall be separate
from the elections made pursuant to Section 7.2(c) or 7.4.
7.6. VOTING OF ESI STOCK. Each Member and Employee is, for the purposes of
this Section 7.6, hereby designated a named fiduciary within the meaning
of Section 402(a)(2) of ERISA with respect to the shares of ESI Stock
allocated to his or her Accounts. Each Member, Deferred Member, and
Employee (or Beneficiary in the event of the death of the Member, Deferred
Member or Employee) may direct the Trustee as to the manner in which the
ESI Stock allocated to his or her Accounts is to be voted. Before each
annual or special meeting of shareholders of ESI, there shall be sent to
each Member, Deferred Member, Beneficiary, and Employee who has made a
Rollover Contribution a copy of the proxy solicitation material for the
meeting, together with a form requesting instructions to the Trustee on
how to vote the ESI Stock allocated to the Member's, Deferred Member's,
Employee's, or Beneficiary's Accounts. Upon receipt of the instructions,
the Trustee shall vote the shares as instructed. In lieu of voting
fractional shares as instructed by Members, Deferred Members, Employees,
or Beneficiaries, the Trustee may vote the combined fractional shares of
ESI Stock to the extent possible to reflect the directions of Members,
Deferred Members, Employees, or Beneficiaries with allocated fractional
shares of each class of stock. Except as otherwise provided in Article
Seventeen, the Trustee shall vote, or abstain from voting, shares of ESI
Stock allocated to Accounts under the Plan but for which the Trustee
received no valid voting instructions in the manner determined by the
Trustee, in its discretion. Instructions to the Trustee shall be in the
form and pursuant to the procedures prescribed by the Committee.
Any instructions received by the Trustee from Members, Deferred Members,
Employees, and Beneficiaries regarding the voting of ESI Stock shall be
confidential and shall not be divulged by the Trustee to the Company or to
any director, officer, employee, or agent of the Company, it being the
intent of this provision of Section 7.6 to ensure that the Company (and
its directors, officers, employees, and agents) cannot determine the
voting instructions given by any Member, Deferred Member, Employee, or
Beneficiary.
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7.7. LIMITATIONS IMPOSED BY CONTRACT. Notwithstanding anything in this
Article to the contrary, any contributions invested in a fund of
guaranteed investment contracts shall be subject to any and all terms of
those contracts, including any limitations placed on the exercise of any
rights otherwise granted to a Member under any other provisions of this
Plan with respect to those contributions.
7.8. RESPONSIBILITY FOR INVESTMENTS. Each Member, Deferred Member, or
Employee (or Beneficiary in the event of the death of a Member,
Deferred Member, or Employee) is solely responsible for selection of his
or her investment options made pursuant to Section 7.3, 7.4, or 7.5. The
Trustee, the Committee, the Company, and the officers, supervisors, and
other employees of the Company are not empowered to advise a Member or
Deferred Member as to the manner in which his or her Accounts shall be
invested. The fact that a Fund is available to Members or Deferred
Members (or Employees who have made a Rollover Contribution prior to
meeting the eligibility requirements for membership) for investment under
the Plan shall not be construed as a recommendation for investment in the
Fund.
ARTICLE EIGHT
CREDITS TO MEMBERS' ACCOUNTS, VALUATION, AND
ALLOCATION OF ASSETS
8.1. PRE-TAX SAVINGS AND ROLLOVER CONTRIBUTIONS. Pre-Tax Savings made on
behalf of a Member, and Rollover Contributions contributed by a Member
or an Employee, shall be allocated to the Pre-Tax Investment Account or
Rollover Account of that Member or Employee as appropriate, as soon as
practicable after those contributions are transferred to the Trust Fund.
8.2. MATCHING COMPANY CONTRIBUTIONS. Matching Company Contributions made on
behalf of a Member shall be allocated to the Company Matching
Contribution Account of the Member, as soon as practicable after those
contributions are made to the Trust Fund.
8.3. RETIREMENT CONTRIBUTIONS. Retirement Contributions made for a Member
shall be allocated to the Retirement Contribution Account of the Member,
as soon as practicable after those contributions are made to the Trust
Fund.
8.4. CREDITS TO MEMBERS' ACCOUNTS. At each Valuation Date on which the Plan is
in effect and operation, the amount of each Member's credit in each
of the Funds shall be expressed and credited in dollars of contributions
by the Member and Company contributions and ESI Stock allocated to a
Member's Accounts for that payroll processing period. For the purposes of
Section 7.6 and Article Fifteen, a Member's interest in the ESI Stock Fund
shall be converted into shares of ESI Stock at any time of determination
by dividing the value of all
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shares of ESI Stock in the ESI Stock Fund by the value of that
Member's interest in the ESI Stock Fund at the time. The resulting number
of shares of ESI Stock shall be deemed allocated to the Member.
8.5. VALUATION OF ASSETS. On each Valuation Date, the Trustee shall determine
the total fair market value of all assets then held by it in each Fund.
8.6. ALLOCATION OF ASSETS. On each Valuation Date when the value of all assets
in each Fund has been determined pursuant to Section 8.5, the Trustee
shall determine the gain or loss in the value of the assets in each of the
Funds. The gain or loss shall be allocated pro rata by Fund to the
balances credited to the Accounts of all Members and Deferred Members
immediately prior to the Valuation Date, not including new contributions
to that Fund on the Valuation Date for that Valuation Date.
8.7. ANNUAL STATEMENTS. At least once a year, each Member and Deferred Member
shall be furnished with a statement setting forth the value of his or her
Accounts and the vested portion of his or her Accounts.
8.8. VALUATION DATES. The Committee shall establish procedures for determining
the Valuation Dates that shall apply for withdrawals, distributions,
or other relevant purposes. Valuation Dates need not be the same for all
purposes. The Funds shall be revalued on each business day.
ARTICLE NINE
WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT
9.1. GENERAL CONDITIONS FOR WITHDRAWALS. Subject to the restrictions
set forth below, at any time before Termination of Employment, a Member may
request a withdrawal from his or her Accounts in accordance with the
administrative procedures and within the time period prescribed by the
Committee. Any such withdrawal shall be payable only in cash and shall be in
accordance with the conditions of Section 9.2, 9.3, or 9.4. All withdrawals
(other than hardship withdrawals) shall be a minimum of $500. No more than two
withdrawal requests of any kind, including hardship, shall be permitted each
calendar year. For purposes of this Article Nine, a Member's Accounts shall be
valued as of the applicable Valuation Date. Amounts to be withdrawn and
distributed to Members will not participate in the investment experience of the
Plan after that Valuation Date. Withdrawn amounts generally shall be paid as
soon as practicable following the Valuation Date. If a Member has Accounts in
more than one Fund, the amount withdrawn shall be prorated among the Funds
based on their respective values.
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9.2. NON-HARDSHIP WITHDRAWAL PRIOR TO AGE 59-1/2. A Member who has not yet
reached age 59 1/2 as of the date of his or her withdrawal request may
elect, subject to Section 9.1, to withdraw from his or her Accounts in
the following order:
(a) all or part of his or her After-Tax Investment Account;
(b) all or part of his or her Rollover Account:
(c) all or part of his or her ESOP Account;
(d) all or part of his or her ITT Floor Contributions Account;
(e) all or part of his or her Company Matching Contribution Account
attributable to vested amounts contributed to (1) the
Pre-Distribution ITT Plan before 1990 or (2) the ITT Plan prior to
October 1, 1996.
9.3. HARDSHIP WITHDRAWAL PRIOR TO AGE 59 1/2.
(a) A Member who has withdrawn the total amount available for withdrawal
under Section 9.2 may, subject to Section 9.1, elect to
withdraw all or part of his or her Pre-Tax Savings made on his or her
behalf under this Plan or under the ITT Plan and transferred to his or
her Pre-Tax Investment Account, and earnings credited on that Account
prior to January 1, 1989 under the Pre-Distribution ITT Plan, upon
furnishing proof of Hardship satisfactory to the Committee.
(b) A Member shall be considered to have incurred a Hardship if, and only
if, he or she meets the requirements of paragraphs (c) and (d) below.
(c) As a condition for Hardship, the Member must have an immediate and
heavy need to draw upon his or her Pre-Tax Investment Account. The
Committee shall presume the existence of an immediate and heavy need
if the requested withdrawal is on account of any of the following:
(A) expenses for medical care described in Section 213(d) of the
Code previously incurred by the Member, his or her spouse or
any of his or her dependents (as defined in Section 152 of the
Code) or necessary for those persons to obtain that medical care,
to the extent those expenses are not paid or reimbursed by
insurance;
(B) costs directly related to the purchase of a principal residence
of the Member (excluding mortgage payments);
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(C) payment of tuition and related educational fees, including room
and board expenses, for the next 12 months of post-secondary
education of the Member, or his or her spouse or dependents;
(D) payment of amounts necessary to prevent eviction of the Member
from his or her principal residence or to avoid foreclosure on
the mortgage of his or her principal residence; or
(E) the inability of the Member to meet such other expenses, debts,
or other obligations recognized by the Internal Revenue Service
as giving rise to immediate and heavy financial need for purposes
of Section 401(k) of the Code.
The amount of withdrawal may not exceed the amount of the immediate and
heavy financial need of the Member, including any amounts necessary to pay
any federal, state, or local income taxes on the amount withdrawn and any
amounts necessary to pay any penalties reasonably anticipated to result
from the distribution.
In evaluating the relevant facts and circumstances, the Committee and any
delegate thereof shall act in a nondiscriminatory fashion and shall treat
uniformly those Members who are similarly situated. The Member shall
furnish to the Committee or its delegate such supporting documents as the
Committee or its delegate may request in accordance with uniform and
nondiscriminatory rules prescribed by the Committee.
(d) As a condition for Hardship, the Member must demonstrate that the
requested withdrawal is necessary to satisfy the financial need
described in paragraph (c). The Committee shall deem the Member to
have demonstrated such necessity, provided all of the following
requirements are met: (A) the Member has obtained all distributions,
other than distributions available only on account of hardship, and
all nontaxable loans currently available under the Plan and all other
plans of the Company and Associated Companies; (B) the Member is
prohibited from making Pre-Tax Savings to the Plan and all other plans
of the Company and Associated Companies under the terms of those plans
or by means of an otherwise legally enforceable agreement for at least
12 months after receipt of the distribution; and (C) the limitation
described in Section 4.1(b) under all plans of the Company and
Associated Companies for the calendar year following the year in which
the withdrawal is made must be reduced by the Member's elective
deferrals made in the calendar year of the distribution for Hardship.
For purposes of clause (B), "all other plans of the Company and
Associated Companies" shall include stock option plans, stock purchase
plans, qualified and non-qualified deferred compensation plans, and
such other plans as may be designated under regulations issued under
Section 401(k)
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of the Code, but shall not include health and welfare benefit plans
or the mandatory employee contribution portion of a defined benefit
plan.
9.4. WITHDRAWALS AFTER AGE 59 1/2. A Member who has reached age 59 1/2 as of
the date of his or her withdrawal request may elect, subject to
Section 9.1, to withdraw from his or her Accounts in the following order:
(a) the total amount available for withdrawal under Section 9.2,
(b) all or part of his or her Company Matching Contribution
Account, and
(c) all or part of his or her Pre-Tax Investment Account.
9.5. ORDERING OF WITHDRAWALS. For purposes of processing a withdrawal, basic
after-tax savings made by a Member under the ITT Plan, and
investment earnings and gains thereon, and supplemental after-tax savings
made by a Member under the ITT Plan, and investment earnings and gains
thereon, shall constitute a separate contract (Contract II), and all
remaining amounts in the Plan with respect to a Member shall constitute
another contract (Contract I), for purposes of Section 72(e) of the Code.
The Committee shall maintain records of withdrawals, contributions,
earnings, and other additions and subtractions attributable to each
separate contract and shall credit or charge the appropriate contract, and
adjust the non-taxable basis of each contract, for transactions properly
allocable to that contract.
For purposes of processing a withdrawal under Section 9.2(a)(i), the
withdrawals will be deducted from the Member's Accounts in Contract I and
Contract II in the following order: (i) the value of the Member's
After-Tax Investment Account in Contract I attributable to supplemental
after-tax savings, (ii) the value of the Member's After-Tax Investment
Account in Contract II attributable to supplemental after-tax savings,
(iii) the value of the Member's After-Tax Investment Account in Contract I
attributable to basic after-tax savings and (iv) the value of the Member's
After-Tax Investment Account in Contract II attributable to basic
after-tax savings.
9.6. DEATH AFTER WITHDRAWAL ELECTION. If a Member elects a withdrawal and
dies after the issuance of the check(s) comprising the withdrawal but
prior to negotiation of the check(s), then any unpaid portion of the
withdrawal as represented by the non-negotiated check(s) shall be paid to
his or her estate. If more than one check comprises a withdrawal and the
Member negotiates the first check but dies prior to the issuance of the
subsequent check, then the subsequent check shall be paid to his or her
estate. If a Member elects a withdrawal and dies prior to the issuance of
any check(s) comprising the withdrawal, then the withdrawal
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election shall be voided. For purposes of this Section 9.6, the
issuance of a check shall occur on the earlier of the date of issuance
shown on the check or the withdrawal Valuation Date.
9.7. DIRECT ROLLOVER. Certain withdrawals or portions thereof paid pursuant
to this Article Nine may be "eligible rollover distributions" as defined
and discussed in Section 11.7 and are governed thereby.
9.8. RETIREMENT CONTRIBUTION ACCOUNT. A Member's Retirement Contribution
Account is not available for distribution or withdrawal prior to a
Member's Termination of Employment.
ARTICLE TEN
LOANS
10.1. GENERAL CONDITIONS FOR LOANS. Subject to the restrictions set forth in
the following provisions of this Article Ten, at any time before
Termination of Employment, a Member who is an employee of the Company or
an Associated Company may request a loan from his or her Accounts in
accordance with the administrative procedures and within the time period
prescribed by the Committee. By filing the loan request forms, the
Member:
(a) specifies the amount and the term of the loan,
(b) agrees to the annual percentage rate of interest,
(c) agrees to the finance charge,
(d) promises to repay the loan, and
(e) authorizes the Company to make regular payroll deductions to
repay the loan.
The amount of the loan is to be transferred from the Funds in which the
Member's Accounts are invested to a special "Loan Fund" for the Member
under the Plan. The Loan Fund consists solely of the amount transferred
to the Loan Fund and is invested solely in the loan made to the Member.
The amount transferred to the Loan Fund shall be pledged as security for
the loan. Payments of principal on the loan will reduce the amount held
in the Member's Loan Fund. Those payments, together with the attendant
interest payment, will be reinvested in the Funds in accordance with the
Member's then effective investment election.
10.2. AMOUNTS AVAILABLE FOR LOANS. An eligible Member may request a loan in
any specified whole dollar amount that, when added to the outstanding
balance of any other loans to the Member from this Plan or any other
qualified plan of the Company or an Associated Company, may not exceed
the lesser of (a) 50% of the Member's Vested Share, or (b)
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$50,000 reduced by the excess, if any of (i) the highest outstanding
balance of loans during the one year period ending on the day before the
loan is made over (ii) the outstanding balance of loans to the Member
from such plans on the date on which the loan is made. For purposes of
determining amounts available for loans, as described in the foregoing
provisions of this Section 10.2, a Member's Vested Share shall be
determined based on the latest information available to the Committee at
the time he or she files his or her loan request with the Committee.
10.3. ACCOUNT ORDERING FOR LOANS. For purposes of processing a loan, the
amount of the loan will be deducted from the Member's Accounts in the
following order:
(a) Retirement Contribution Account
(b) Pre-Tax Investment Account;
(c) Company Matching Contribution Account;
(d) ITT Floor Contribution Account
(e) ESOP Account;
(f) Rollover Account;
(g) After-Tax Account.
A loan is deducted from a Member's Accounts as of the applicable
Valuation Date. Amounts so deducted and distributed to a Member as a
Plan loan will not participate in the investment experience of the Plan
except as those amounts are repaid to the Member's Accounts.
10.4. INTEREST RATE FOR LOANS. The Committee shall establish and communicate
to Members a reasonable rate of interest for loans commensurate with
the interest rates charged by persons in the business of lending money
for loans that would be made under similar circumstances, as determined
by the Committee, which interest rate shall remain in effect for the term
of the loan.
10.5. TERM AND REPAYMENT OF LOAN. In addition to such rules and regulations
as the Committee may adopt, all loans shall comply with the following
terms and conditions:
(i) An application for a loan by a Member shall be made in
writing to the Committee in the manner prescribed by the
Committee, whose action in approving or disapproving the
application shall be final;
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(ii) Each loan shall be evidenced by a promissory note payable to
the Plan;
(iii) The period of repayment for any loan shall be arrived
at by mutual agreement between the Committee and the Member,
but that period shall not exceed five years unless the loan
is to be used in conjunction with the purchase of the
principal residence of the Member.
(iv) Payments of principal and interest will be made by
payroll deductions, or in a manner agreed to by the Member
and the Committee, in substantially level amounts, but no less
frequently than quarterly, in an amount sufficient to amortize
the loan over the repayment period;
(v) Repayment of the loan is made to the Member's Accounts
from which the loan amount was deducted in inverse order to
the Account ordering described in Section 10.3. Repayments
are invested in the Member's Accounts in accordance with his
or her current investment election.
10.6. FREQUENCY OF LOAN REQUESTS. A Member may have only one loan
outstanding at any time. Unless the Committee determines otherwise
on a basis uniformly applicable to all persons similarly situated, a
Member who fully repays a loan may not apply for another loan until one
month following the effective date of the final repayment.
10.7. PREPAYMENT OF LOANS. A Member may prepay the entire outstanding balance
of a loan, with interest to date of repayment, in the manner and under
the procedures established by the Committee. No partial prepayments
shall be permitted.
10.8. OUTSTANDING LOAN BALANCE AT TERMINATION OF EMPLOYMENT. In addition to
such rules and regulations as the Committee shall adopt, upon the
Member's Termination of Employment, the outstanding balance of any loan
shall become due and payable. If the Member does not elect to prepay
within the time period prescribed by the Committee, the outstanding loan
balance and any accrued interest shall be treated as a taxable
distribution.
10.9. LOAN DEFAULT DURING EMPLOYMENT. Under certain circumstances, including,
but not limited to, the Member's failure to make repayment or the
bankruptcy of the Member, the Committee may declare a Member's loan to be
in default. In the event default is declared for a Member who has not
reached age 59 1/2, the outstanding balance shall become due and payable,
and the outstanding loan balance and any accrued interest shall be deemed
a taxable distribution. In the event default is declared for a Member
who has reached age 59 1/2, the outstanding loan balance and any accrued
interest shall be treated as a withdrawal prior to Termination of
Employment subject to the provisions of Article Nine. A Member who has
defaulted on a loan shall be prohibited from applying for any future
loans.
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10.10. INCORPORATION BY REFERENCE. Any additional rules or restrictions as
may be necessary to implement and administer Plan loans shall be
established by the Committee in written guidelines and shall be
communicated to Members who apply for loans. The written guidelines are
hereby incorporated into the Plan by reference, and pursuant to Section
13.2(b), the Committee is hereby authorized to make such revisions to
these guidelines as it deems necessary or appropriate on the advice of
counsel.
10.11. DEATH AFTER LOAN APPLICATION. If a Member applies for a loan and dies
after a check for the loan amount has been issued but prior to
negotiation of the check, then the loan shall be paid to his or her
estate. If a Member applies for a loan and dies before the check for
the loan amount is issued, then the loan application shall be voided.
For purposes of this Section 10.11, the check will be deemed to have
been issued on the earlier of the date of issuance shown on the check or
the loan Valuation Date.
10.12. MILITARY LEAVE. Notwithstanding any Plan provisions to the contrary,
in the event a Member enters the uniformed services of the United
States and retains reemployment rights under the law, repayment of a
loan shall be suspended during the period of leave, and the period of
repayments shall be extended by the number of months of the period of
service in the uniformed services; provided, however, if the Member
incurs a Termination of Employment and requests a distribution pursuant
to Article Eleven, the loan shall be canceled, and the outstanding loan
balance shall be distributed pursuant to Article Eleven.
ARTICLE ELEVEN
DISTRIBUTIONS
11.1. COMMENCEMENT OF PAYMENTS.
(a) Except as otherwise provided in this Article, distribution of
the Vested Share of a Member's Accounts shall commence as soon as
administratively practicable following the later of (i) the Member's
Termination of Employment or (ii) the date the Member attains age 70
1/2, but not later than 60 days after the close of the Plan Year in
which the later of (i) or (ii) occurs.
(b) In lieu of a distribution as described in paragraph (a)
above, a Member or Deferred Member whose Vested Share exceeds
$5,000, may, in accordance with procedures prescribed by the
Committee, elect to have the distribution of his or her Vested Share
commence as of any Valuation Date coincident with or following his
or her Termination of Employment that is before the date described
in paragraph (a) above.
(c) In the case of the death of a Member or Deferred Member
before payment of his or her Accounts commences, the Vested Share of
his or her Accounts shall be
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distributed to his or her Beneficiary as soon as
administratively practicable following the Member's or Deferred
Member's date of death. Notwithstanding the foregoing, the
Beneficiary of a Member or Deferred Member whose Vested Share of his
or her Accounts, as of the Valuation Date coincident with or next
following the Member's or Deferred Member's date of death, exceeds
$5,000 may elect to defer receipt of the Member's or Deferred
Member's Vested Share for a period not to exceed 12 months from the
Member's or Deferred Member's date of death.
(d) A Member who attained age 70 1/2 before January 1, 1997 must
commence distribution of his or her Vested Share by no later than
the April 1 following the year in which he or she attained age 70
1/2. If a Member attains age 70-1/2 after January 1, 1997, but
before January 1, 1999, distribution of the Vested Share of his
Accounts shall begin by April of the calendar year following the
calendar year in which the Member attains age 70-1/2 unless the
Member elects to defer commencement of his Plan benefits until a
date no later than April of the calendar year following the calendar
year in which the Member's Termination of Employment occurs. A
Member described in this paragraph (d) may elect that his or her
Vested Share be paid under the payment method described in Section
11.2(b)(i) below, if permissible under the terms of that payment
method, or in an immediate lump sum. Payment of the Vested Share of
a Member who has attained age 70 1/2 pursuant to this paragraph (d)
shall be made no less frequently than annually, and once payment has
commenced, the Member may not elect an alternate method for payment
of his or her Vested Share while the Member is still an Employee.
(e) A Deferred Member or a Member who is a "5-percent owner" as
defined in Code Section 414(q)(1) must commence distribution of his
or her Vested Share by no later than the April 1 following the year
in which he or she attains age 70 1/2. Notwithstanding the
foregoing, a Member who attains 70 1/2 on or after January 1, 1996,
and who is not a "5-percent owner" may elect to receive payments
while in Service. In either case, the Member may elect that his or
her Vested Share be paid in accordance with options (i) or (ii)
below:
(i) one lump sum payment on or before the April 1 of the calendar
year following the calendar year in which he or she
attains age 70 1/2 equal to his or her entire Vested Share
and annual lump sum payments thereafter of amounts accrued
during each calendar year; or
(ii) payments in annual installments over a period designated by
the Member not to exceed 20 years. In the event that
the Member dies before all installments have been paid, the
remaining balance of his or her Vested Share shall be paid in
an immediate cash lump sum to his or her Beneficiary.
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Once payment has commenced, the Member may not elect an alternate method
for payment, except as otherwise provided in Section 11.2.
11.2. FORMS AND METHODS OF DISTRIBUTION.
(a) After Termination of Employment occurs, and as soon as
practicable following application by the Member, Deferred Member, or
Beneficiary, distribution under the Plan shall be made in a lump
sum, unless an election is made by a Member or Deferred member
pursuant to paragraph (b) below.
(b) A Member or Deferred Member whose Vested Share, as of the
Valuation Date corresponding to his or her application for
distribution, exceeds $5,000 may elect, in accordance with the
administrative procedures and within the time period prescribed by
the Committee, to receive his or her Vested Share in one of the
following optional forms:
(i) payments in approximately equal monthly or annual cash
installments over a period, designated by the Member or
Deferred Member, not to exceed 20 years, or
(ii) the purchase of a nonforfeitable fixed annuity, provided that
if the Member or Deferred Member is married, the benefit
shall be in the form of a qualified joint and survivor
annuity. For these purposes, a qualified joint and survivor
annuity is a monthly annuity for the life of the Member, with
monthly payments continuing after the Member's death to the
Member's surviving spouse in a monthly amount equal to 50% of
the monthly amount the Member received during his or her
lifetime. The Member or Deferred Member may elect, during the
90-day period preceding his or her annuity starting date, not
to take the qualified joint and survivor annuity and to take
instead another form of annuity, provided that he or she
obtains his or her spouse's written, notarized consent.
Elections under clause (ii) shall be subject to receipt by the
Committee of the Member's or Deferred Member's written spousal
consent to that election. The spousal consent must be
witnessed by a notary public and must acknowledge the effect
on the spouse of the Member's or Deferred Member's election.
The Committee shall furnish each Member or Deferred Member no
less than 30 days nor more than 90 days before the benefit
commencement date a written explanation of the qualified joint
and survivor annuity in accordance with applicable law. A
Member or Deferred Member may revoke his or her election and
make a new election from time to time and at any time during
the aforesaid election period. If the annuity form selected
is not a qualified joint and survivor annuity with the
Member's or Deferred Member's spouse as the Beneficiary,
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the annuity payable to the Member or Deferred Member and
thereafter to his Beneficiary shall be subject to the
incidental death benefit rule as described in Section
401(a)(9)(G) of the Code and its applicable regulations.
In the event that the Member or Deferred Member elects installments and
dies before all installments have been paid, the remaining balance of his
or her Vested Share shall be paid in an immediate cash lump sum to his or
her Beneficiary; provided, however the Beneficiary may elect in
accordance with the administrative procedures and within such time period
as the Committee shall prescribe to continue payment of the deceased
Member's or Deferred Member's Account pursuant to the same method of
distribution elected by the Member or the Deferred Member.
Any Member or Deferred Member who elects annual or monthly installment
payments may, at any time thereafter, elect by filing a request with the
Committee to receive in a lump sum the remaining value of any unpaid
installments.
(c) Alternative methods of distribution may apply to that portion
of a Member's or a Deferred Member's Accounts attributable to a
Prior Plan Transfer.
(d) If a Member or a Deferred Member dies before his or her
benefits commence, the Vested Share of his or her Accounts shall be
paid to his or her Beneficiary in a lump sum. However, if a Member
or a Deferred Member who has elected an annuity under Section
11.2(a)(ii) dies before his or her benefit commences, and his or her
spouse is his or her Beneficiary, payment shall be made to the
spouse in the form of a life annuity unless the spouse elects a lump
sum.
(e) All distributions shall be made in cash; provided, however,
that a Member, Deferred Member, or Beneficiary may elect to receive
a distribution from the ESI Stock Fund in ESI Stock, with any
fractional interest in a share of ESI Stock paid in cash.
(f) Notwithstanding any other provision of this Article Eleven,
all distributions from the Plan shall conform to the regulations
issued under Section 401(a)(9) of the Code, including the incidental
death benefit provisions of Section 401(a)(9)(G) of the Code.
Further, those regulations shall override any Plan provision that is
inconsistent with Section 401(a)(9) of the Code.
11.3. SMALL BENEFITS. Notwithstanding any provision of the Plan to the
contrary, a lump sum payment shall be made in lieu of all vested
benefits if the value of the Vested Share of the Member's Accounts as of
his or her Termination of Employment (or at the time of any prior
distribution) amounts to $5,000 or less. The lump sum payment shall
automatically be made as soon as administratively practicable following
the Member's Termination of Employment.
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11.4. DEATH OF BENEFICIARY. Upon the death of a Beneficiary with Accounts
remaining in the Plan, the remaining value of all such Accounts
shall be paid in a lump sum distribution as soon as practicable to the
Beneficiary, if any, selected by the deceased Beneficiary, or if no
Beneficiary has been named by the deceased Beneficiary, the remaining
value of all such Accounts shall be paid in a lump sum distribution as
soon as practicable to the estate of the deceased Beneficiary.
11.5. PROOF OF DEATH AND RIGHT OF BENEFICIARY OR OTHER PERSON. The Committee
may require and rely on such proof of death and such evidence of the
right of any Beneficiary or other person to receive the undistributed
value of the Accounts of a deceased Member, Deferred Member, or
Beneficiary as the Committee deems proper, and the Committee's
determination of death and of the right of a Beneficiary or other person
to receive payment shall be conclusive. Payment to any Beneficiary shall
be final and fully satisfy and discharge the obligation of the Plan with
respect to any and all Accounts of a deceased Member or deceased Deferred
Member. In the event of a dispute regarding the account of a deceased
Member or Deferred Member, the Committee may make a final determination
or initiate or participate in any action or proceeding as may be
necessary or appropriate to determine any Beneficiary under the Plan.
During the pendency of any action or proceeding, the Committee may
deposit an amount equal to the disputed payment with the court, and such
deposit shall relieve the Plan of all of its obligation with respect to
any such disputed Accounts.
11.6. RESTORATION OF PRIOR FORFEITURE. If a Member's employment is terminated
otherwise than by retirement or Disability, and as a result of the
termination an amount to his or her credit is forfeited in accordance
with the provisions of Section 5.5, that amount shall be subsequently
restored to his or her Accounts, provided he or she is reemployed by the
Company or an Associated Company prior to the expiration of a Break in
Service of five years, and, after giving any prior written notice
required by the Committee, he or she repays to the Trust Fund an amount
in cash equal to the full amounts of his or her Pre-Tax Investment
Account attributable to Basic Pre-Tax contributions, his or her vested
Company Matching Contribution Account, Retirement Contribution Account,
ITT Floor Contribution Account, and his or her ESOP Account distributed
to him or her from the Trust Fund on account of his or her Termination of
Employment. (At his or her option, the Member may repay the amount of
his or her Pre-Tax Investment Account attributable to Supplemental
Pre-Tax Savings and Rollover Account.) The repayment must be made within
five years of the date he or she is reemployed by the Company or an
Associated Company and shall be made in one lump sum. Repaid amounts
shall be invested in the Funds in accordance with Member's then current
investment election.
11.7. DIRECT ROLLOVER OF CERTAIN DISTRIBUTIONS. Notwithstanding any other
provision of this Plan, with respect to any withdrawal or
distribution from this Plan pursuant to Article Nine or this Article
Eleven that is determined by the Committee to be an "eligible rollover
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distribution," the distributee may elect, at the time and in a manner
prescribed by the Committee for that purpose, to have the Plan make a
"direct rollover" of all or part of the withdrawal or distribution to an
"eligible retirement plan" that accepts such rollovers. The following
definitions apply to the terms used in this Section 11.7:
(a) "Distributee" means a Member or Deferred Member. In addition, the
Member's or Deferred Member's spouse Beneficiary and the Member's or
Deferred Member's spouse or former spouse who is the alternate payee
under a Qualified Domestic Relations Order, are distributees with
regard to the interest of the spouse or former spouse.
(b) "Eligible rollover distribution" is any withdrawal or distribution
of all or any portion of a Member's or Deferred Member's Vested
Share owing to the credit of a distributee, except that the
following distributions shall not be eligible rollover
distributions: (i) any distribution that is one of a series of
substantially equal periodic payments made for the life or life
expectancy of the distributee, or for a specified period of ten
years or more, (ii) any distribution required under Section
401(a)(9) of the Code, (iii) the portion of a distribution not
includible in gross income, and (iv) any other distribution that is
not an eligible rollover distribution under the Code or regulations
thereunder.
(c) "Eligible retirement plan" means 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
plan described in Section 401(a) of the Code that accepts the
eligible rollover distribution. However, in the case of an eligible
rollover distribution to the spouse Beneficiary of the Member or
Deferred Member, an eligible retirement plan is an individual
retirement account or individual retirement annuity only.
(d) "Direct rollover" means a payment by the Plan directly to the
eligible retirement plan specified by the distributee.
In the event that the provisions of this Section 11.7 or any part thereof
cease to be required by law as a result of subsequent legislation or
otherwise, this Section 11.7 or applicable part thereof shall be of no
further force or effect without necessity of further amendment of the
Plan.
11.8. ELECTIVE TRANSFERS FROM PLAN. Notwithstanding any other provision of
this Plan, a distribution from this Plan pursuant to Article Nine or
this Article Eleven that is payable proximate to, and solely on account
of, either a disposition of assets or a subsidiary, as described in Code
Section 401(k)(10), shall be eligible for an elective transfer to a
transferee employee plan as set forth herein.
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(a) Elective Transfer. An elective transfer of a Member's benefits
between this Plan and another qualified plan maintained by a
transferee shall be available only if the transfer meets the
requirements of Code Section 414(1) and each of the following
requirements have been met:
(i) Voluntary Election
(A) Member Election. The transfer must have been
conditioned upon a voluntary, fully informed election
by the Member to transfer that Member's Accounts to the
transferee plan.
(B) Benefit Retention Alternative. In making the voluntary
election provided for in this Section, the Member shall
have had the option of retaining the Member's Account
benefits (including all optional forms of benefit)
under this Plan.
(C) Spousal Election. If Code Sections 401(a)(11) and 417
otherwise apply to the Account, the spousal consent
requirements of that section must have been met with
respect to the transfer of benefits.
(D) Notice Requirement. The notice requirement under
Code Section 417, if applicable, must have been met
with respect to the Member and spousal transfer election.
(ii) Distributability of Benefits. The Member whose Account is
transferred must have been eligible, under the terms of
Article Ten and this Article Eleven, to receive an immediate
distribution from the Plan.
(iii) Amount of Benefit Transferred. The amount of the benefit
transferred must have equaled the entire nonforfeitable
Account balance under the Plan of the Member whose benefit is
being transferred.
(iv) Benefit Under the Transferee Plan. The Member must have been
fully vested in the transferred benefit in the transferee
plan.
(b) Status of Elective Transfer as Distribution. The transfer of
benefits pursuant to the elective transfer rules of this Section
11.8 generally is to be treated as a distribution of a Member's
accrued benefit under the Plan. However, the transfer is not to be
treated as a distribution for purposes of the minimum distribution
requirements of Section 401(a)(9).
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11.9. ELECTIVE TRANSFER TO PLAN. With the permission of the Committee, the
Plan shall accept elective transfers from plans qualified under
Code Section 401(a) that result from an acquisition of assets or a
subsidiary by the Company, within the meaning of Code Section
401(k)(10), provided that the elective transfer meets the requirements
of Code Section 414(1) and Treasury Regulation 1.411(d)(4), Q&A-3(b).
11.10. WAIVER OF NOTICE PERIOD. Except as provided in the following sentence,
if the value of the Vested Share of a Member's Accounts exceeds
$5,000, an election by the Member or Deferred Member to receive a
distribution shall not be valid unless the written election is made (a)
after the Member has received the notice required under Section
1.411(a)-11(c) of the Income Tax Regulations and (b) within a reasonable
time before the effective date of the commencement of the distribution
as prescribed by those regulations. If a distribution is one to which
Sections 401(a)(11) and 417 of the Code do not apply, the distribution
may commence less than 30 days after the notice required under Section
1.411(a)-11(c) of the Income Tax Regulations is given, provided that:
(i) the Committee clearly informs the Member or Deferred Member
that he or she has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether
or not to elect a distribution (and, if applicable, a
particular distribution option), and
(ii) the Member or Deferred Member, after receiving the notice
under Sections 411 and 417, affirmatively elects a
distribution.
If the distribution is one to which Sections 401(a)(11) and 417 of the
Code do apply, a Member may, after receiving the notice required under
Sections 411 and 417 of the Code, affirmatively elect to have his or her
benefit commence sooner than 30 days following his or her receipt of the
required notice, provided all of the following requirements are met:
(i) the Committee clearly informs the Member that he or she
has a period of at least 30 days after receiving the notice
to decide when to have distribution of his or her benefit
begin, and if applicable, to choose a particular optional
form of payment;
(ii) the Member or Deferred Member affirmatively elects a
date for benefits to begin, and, if applicable, an optional
form of payment, after receiving the notice;
(iii) the Member or Deferred Member is permitted to revoke
his or her election until the later of his or her annuity
starting date or seven days following the day he or she
received the notice;
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(iv) the Member's or Deferred Member's annuity starting date is
after the date the notice is provided; and
(v) payment does not commence less than seven days following
the day after the notice is received by the Member or
Deferred Member.
ARTICLE TWELVE
MANAGEMENT OF FUNDS
12.1. ESI EMPLOYEE BENEFIT PLAN ADMINISTRATION AND INVESTMENT COMMITTEE. The
ESI Employee Benefit Plan Administration and Investment Committee, as
appointed pursuant to Section 13.1, shall be responsible, except as
otherwise herein expressly provided, for the management of the assets of
the Plan.
The Committee is designated a named fiduciary of the Plan within the
meaning of Section 402(a) of ERISA and shall have the authority, powers,
and responsibilities delegated and allocated to it from time to time by
resolutions of the Board of Directors, including, but not by way of
limitation, the authority to establish one or more trusts for the Plan
pursuant to trust instrument(s) approved or authorized by the Committee
and subject to the provisions of the trust instrument(s) to:
(a) provide, consistent with the provisions of the Plan, direction to
the Trustee thereunder, which may involve but need not be limited to
direction of investment of Plan assets and the establishment of
investment criteria, and
(b) appoint and provide for use of investment advisors and
investment managers (within the meaning of Section 3(38)) of ERISA.
In discharging its responsibility, the Committee shall evaluate and
monitor the investment performances of the Trustee and investment
managers, if any.
12.2. TRUST FUND. All the funds of the Plan shall be held by a Trustee
appointed from time to time by the Committee in one or more trusts under
a trust instrument or instruments approved or authorized by the
Committee for use in providing the benefits of the Plan; provided that
no part of the corpus or income of the Trust Fund shall be used for, or
diverted to, purposes other than for the exclusive benefit of Members,
Deferred Members, and Beneficiaries.
12.3. REPORTS TO MEMBERS AND DEFERRED MEMBERS. Each quarter, at a time to be
determined by the Committee, each Member and Deferred Member shall be
furnished a written statement setting forth the value of each of his or
her Accounts, together with a statement of the
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amounts contributed to each such Account by himself or herself and by
the Company on his or her behalf and the vested amount of the Company
Matching Contribution Account or the earliest time a portion of the
Company Matching Contribution Account will become vested.
12.4. FISCAL YEAR. The fiscal year of the Plan and the Trust shall end on
December 31 of each year or at such other date as may be designated by
the Committee.
ARTICLE THIRTEEN
ADMINISTRATION OF PLAN
13.1. APPOINTMENT OF COMMITTEE. From time to time, the Board of Directors or
an officer of ESI to whom authority has been delegated by the Board of
Directors shall appoint not less than five persons to serve as the ESI
Employee Benefit Plan Administration and Investment Committee during the
pleasure of the appointing Board of Directors or officer and shall
designate a chairman of the Committee from among the members and a
secretary who may be, but need not be, one of the members of the
Committee. Any person so appointed may resign at any time by delivering
his or her written resignation to the secretary of ESI and the chairman
or secretary of the Committee. Notwithstanding any vacancies, the
Committee may act so long as there are at least three members of the
Committee.
13.2. POWERS OF COMMITTEE.
(a) The Committee is designated a named fiduciary within the meaning of
Section 402(a) of the ERISA, and shall have authority and
responsibility for general supervision of the administration of the
Plan. For purposes of the regulations under Section 404(c) of ERISA,
the Committee shall be the designated fiduciary responsible for
safeguarding the confidentiality of all information relating to the
purchase, sale and holding of employer securities and the exercise of
shareholder rights appurtenant thereto. In addition, for purposes of
avoiding any situation for undue employer influence in the exercise
of any shareholder rights, the Committee shall appoint an independent
fiduciary, who shall not be affiliated with any sponsor of the Plan,
to ensure the maintenance of confidentiality pursuant to the
regulations under Section 404(c) of ERISA.
(b) The Committee shall establish such policies, rules, and regulations
as it may deem necessary to carry out the provisions of the Plan and
transactions of its business, including, without limitation, such
rules and regulations that may become necessary with respect to loans
and any defaults thereof.
(c) Except as to matters that are required by law to be determined or
performed by the Board of Directors, or that from time to time the
Board may reserve to itself
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or allocate or delegate to officers of ESI or to another
committee, the Committee shall determine with discretionary
authority any question arising in the administration,
interpretation, and application of the Plan, including the right to
remedy possible ambiguities, inconsistencies, or commissions. Such
determinations shall be final, conclusive, and binding on all
parties affected thereby.
(d) The Committee shall have the right to exercise powers reserved to the
Board of Directors hereunder to the extent that the right to exercise
those powers may from time to time be allocated or delegated to the
Committee by the Board of Directors and to such further extent that,
in the judgment of the Committee, the exercise of such powers does
not involve any material cost to the Company.
(e) The Committee may retain counsel, employ agents, and provide for such
clerical, accounting, and other services as it may require in
carrying out the provisions of the Plan.
(f) The Committee may appoint from its number such committees with such
powers as it shall determine and may authorize one or more of its
number or any agent to execute or deliver any instrument or make any
payment on its behalf.
(g) The Committee may delegate to an administrator the responsibility of
administering and operating the details of the Plan in accordance
with the provisions of the Plan and any policies that, from time to
time, may be established by the Committee.
13.3. COMMITTEE ACTION. Action by the Committee may be taken by majority vote
at a meeting upon such notice, or upon waiver of notice, and at such time
and place as it may determine from time to time; or action may be taken
by written consent of a majority of the members without a meeting with
the same effect for all purposes as if assented to at a meeting.
13.4. COMPENSATION. No member of the Committee shall receive any compensation
for his or her services as such and, except as required by law, no
bond or other security shall be required of him or her in such capacity
in any jurisdiction.
13.5. COMMITTEE LIABILITY. The members of the Committee shall use that degree
of care, skill, prudence, and diligence in carrying out their duties
that a prudent man, acting in a like capacity and familiar with such
matters, would use in his or her conduct of a similar situation. A
member of the Committee shall not be liable for the breach of fiduciary
responsibility of another fiduciary unless:
(a) he or she participates knowingly in, or knowingly undertakes
to conceal, an act or omission of the fiduciary, knowing that the
act or omission is a breach; or
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(b) by his or her failure to discharge his or her duties solely
in the interest of the Members and other persons entitled to
benefits under the Plan, for the exclusive purpose of providing
benefits and defraying reasonable expenses of administering the Plan
not met by the Company, he or she has enabled the other fiduciary to
commit a breach; or
(c) he or she has knowledge of a breach by the other fiduciary
and does not make reasonable efforts to remedy the breach; or
(d) the Committee improperly allocates responsibilities among its
members or to others and he or she fails prudently to review such
allocation.
ARTICLE FOURTEEN
AMENDMENT AND TERMINATION
14.1. AMENDMENT. The Board of Directors or its delegate reserves the right at
any time and from time to time, and retroactively if deemed
necessary or appropriate to conform with governmental regulations or
other policies, to modify or amend in whole or in part any or all of the
provisions of the Plan; provided that no such modification or amendment
(i) shall make it possible for any part of the funds of the Plan to be
used for, or diverted to, purposes other than for the exclusive benefit
of Members, Deferred Members, and Beneficiaries; or (ii) shall increase
the duties of the Trustee without its consent thereto in writing. Except
as may be required to conform with governmental regulations, no such
amendment shall adversely affect the rights of any Member or Deferred
Member with respect to contributions made on his or her behalf prior to
the date of the amendment.
14.2. TERMINATION OF PLAN.
(a) The Plan is entirely voluntary on the part of the Company.
The Board of Directors reserves the right at any time to terminate
the Plan, the trust agreement, and the trust hereunder, or to
suspend, reduce, or partially or completely discontinue
contributions to the Plan. In the event of a termination or partial
termination of the Plan or complete discontinuance of contributions,
the interests of Members and Deferred Members shall automatically
become nonforfeitable.
(b) In the event of a termination or partial termination or
complete discontinuance, any forfeitures not previously applied in
accordance with Section 5.5 shall be credited ratably to the
Accounts of all Members and Deferred Members in proportion to the
amounts of Matching Company Contributions made pursuant to Section
5.1 credited during the current calendar year or, if no Matching
Company Contributions have been made during the current calendar
year, then in proportion to the Matching
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Company Contributions during the last previous calendar year during
which Matching Company Contributions were made.
(c) Upon termination of the Plan, Pre-Tax Savings, with earnings
thereon, shall be distributed to Members only if (i) neither the
Company nor an Associated Company establishes or maintains a
successor defined contribution plan, and (ii) payment is made to the
Members in the form of a lump sum distribution (as defined in
Section 402(d)(4) of the Code, without regard to clauses (i) through
(iv) of subparagraph (A), subparagraph (B), or subparagraph (F)
thereof). For purposes of this paragraph, a "successor defined
contribution plan" is a defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of
the Code ("ESOP") or a simplified employee pension as defined in
Section 408(k) of the Code ("SEP")) that exists at the time the Plan
is terminated or within the 12 month period beginning on the date
all assets are distributed. However, in no event shall a defined
contribution plan be deemed a successor plan if fewer than 2% of the
employees who are eligible to participate in the Plan at the time of
its termination are or were eligible to participate under another
defined contribution plan of the Company or an Associated Company
(other than an ESOP or a SEP) at any time during the period
beginning 12 months before and ending 12 months after the date of
the Plan's termination.
14.3. DISTRIBUTION OF ACCOUNTS UPON A SALE OF ASSETS OR A SALE OF A SUBSIDIARY.
Upon the disposition by the Company of at least 85% of the assets (within
the meaning of Section 409(d)(2) of the Code) used by the Company
in a trade or business or upon the disposition by the Company of its
interest in a subsidiary (within the meaning of Section 409(d)(3) of the
Code), Pre-Tax Savings, with earnings thereon, may be distributed to
those Members who continue in employment with the employer acquiring such
assets or with the sold subsidiary, provided that (a) the Company
maintains the Plan after the disposition, (b) the buyer does not adopt
the Plan or otherwise become a participating employer in the Plan and
does not accept any transfer of assets or liabilities from the Plan to a
plan it maintains in a transaction subject to Section 414(l)(1) of the
Code, and (c) payment is made to the Member in the form of a lump sum
distribution (as defined in Section 402(d)(4) of the Code, without regard
to clauses (i) through (iv) of subparagraph (A), subparagraph (B), or
subparagraph (F) thereof).
14.4. MERGER OR CONSOLIDATION OF PLAN. The Plan may not be merged or
consolidated with, nor may its assets or liabilities be transferred to,
any other plan unless each Member, Deferred Member, or Beneficiary under
the Plan would, if the resulting plan were then terminated, receive a
benefit immediately after the merger, consolidation, or transfer that is
equal to or greater than the benefit he or she would have been entitled
to receive immediately before the merger, consolidation, or transfer if
the Plan had then terminated.
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14.5. TRANSFER FROM ITT PLAN. On the Offering Date, the Trustee shall accept
from the trustee of the ITT Plan a transfer of the assets of the ITT
Plan attributable to the accounts in that plan of individuals who are
Employees as of the Effective Date. Amounts received with respect to a
Member or Deferred Member from the ITT Plan shall be credited under the
Plan as follows:
(a) Amounts credited to a Member's or Deferred Member's pre-tax
investment account in the ITT Plan shall be credited to his or her
Pre-Tax Investment Account.
(b) Amounts credited to a Member's or Deferred Member's after-tax
investment account in the ITT Plan shall be credited to his or her
ITT After-Tax Investment Account.
(c) Amounts credited to a Member's or Deferred Member's ITT Floor
Contribution Account in the ITT Plan shall be credited to his or
her ITT Floor Contribution Account.
(d) Amounts credited to a Member's or Deferred Member's rollover
account in the ITT Plan shall be credited to his or her Rollover
Account.
(e) Amounts credited to a Member's or Deferred Member's ESOP
account in the ITT Plan shall be credited to his or her ESOP
Account.
(f) Amounts credited to a Member's or Deferred Member's company
retirement contribution account in the ITT Plan shall be credited
to his or her Retirement Contribution Account.
(g) Amounts credited to a Member's or Deferred Member's company
matching contribution account in the ITT Plan shall be credited to
his or her Company Matching Contribution Account.
ARTICLE FIFTEEN
TENDER OFFER
15.1. APPLICABILITY. Notwithstanding any other Plan provision to the
contrary, the provisions of this Article Fifteen shall apply in the
event any person, either alone or in conjunction with others, makes a
tender offer, or exchange offer or otherwise offers to purchase or
solicits an offer to sell to that person 10% or more of the outstanding
shares of a class of ESI Stock held by a Trustee (herein jointly and
severally referred to as a "tender offer"). As to any tender offer, each
Member and Deferred Member (or Beneficiary in the event of the death of
the Member or Deferred Member) shall have the right to determine
confidentially whether shares held subject to the Plan will be tendered.
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15.2. INSTRUCTIONS TO TRUSTEE. In the event a tender offer for ESI Stock is
commenced, the Committee, promptly after receiving notice of the
commencement of the tender offer, shall transfer certain of its
recordkeeping functions to an independent recordkeeper. The functions so
transferred shall be those necessary to preserve the confidentiality of
any directions given by the Members and Deferred Members (or Beneficiary
in the event of the death of the Member or Deferred Member) in connection
with the tender offer. A Trustee may not take any action in response to
a tender offer except as otherwise provided in this Article Fifteen.
Each Member is, for all purposes of this Article Fifteen, hereby
designated a named fiduciary within the meaning of Section 402(a)(2) of
ERISA, with respect to the shares of ESI Stock allocated to his or her
Accounts. Each Member and Deferred Member (or Beneficiary in the event
of the death of the Member or Deferred Member) may direct the Trustee to
sell, offer to sell, exchange, or otherwise dispose of the ESI Stock
allocated to any such individual's Accounts in accordance with the
provisions, conditions, and terms of the tender offer and the provisions
of this Article Fifteen, provided, however, that such directions shall be
confidential and shall not be divulged by the Trustee or independent
recordkeeper to the Company or to any director, officer, employee, or
agent of the Company, it being the intent of this provision of Section
15.2 to ensure that the Company (and its directors, officers, employees,
and agents) cannot determine the direction given by any Member, Deferred
Member, or Beneficiary. The instructions shall be in the form and shall
be filed in the manner and at the time prescribed by the Trustee.
15.3. TRUSTEE ACTION ON MEMBER INSTRUCTIONS. The Trustee shall sell, offer to
sell, exchange, or otherwise dispose of the ESI Stock allocated to a
Member's, Deferred Member's, or Beneficiary's Accounts with respect to
which it has received directions to do so under this Article Fifteen.
The proceeds of a disposition directed by a Member, Deferred Member, or
Beneficiary from his or her Accounts under this Article Fifteen shall be
allocated to the individual's Accounts and be governed by the provisions
of Section 15.5 or other applicable provisions of the Plan and the trust
agreements established under the Plan.
15.4. ACTION WITH RESPECT TO MEMBERS NOT INSTRUCTING THE TRUSTEE OR NOT ISSUING
VALID INSTRUCTIONS. To the extent that Members, Deferred Members,
and Beneficiaries do not issue valid directions to the Trustee to sell,
offer to sell, exchange, or otherwise dispose of the ESI Stock allocated
to their Accounts, those individuals shall be deemed to have directed the
Trustee that such shares remain invested in ESI Stock subject to all
provisions of the Plan, including Section 15.5.
15.5. INVESTMENT OF PLAN ASSETS AFTER TENDER OFFER. To the extent possible,
the proceeds of a disposition of ESI Stock in an individual's Accounts
shall be reinvested in ESI Stock by the Trustee as expeditiously as
possible in the exercise of the Trustee's fiduciary responsibility and
shall otherwise be held by the Trustee subject to the provisions of the
trust agreement and the Plan. In the event that ESI Stock is no longer
available to be acquired following
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a tender offer, the Company may direct the substitution of new
employer securities for the ESI Stock or for the proceeds of any
disposition of ESI Stock. Pending the substitution of new employer
securities or the termination of the Plan and trust, the Trust Fund shall
be invested in such securities as the Trustee shall determine; provided,
however, that, pending such investment, the Trustee shall invest the cash
proceeds in short-term securities issued by the United States of America
or any agency or instrumentality thereof or any other investments of a
short-term nature, including corporate obligations or participations
therein and interim collective or common investment funds.
ARTICLE SIXTEEN
GENERAL AND ADMINISTRATIVE PROVISIONS
16.1. RELIEF FROM LIABILITY. Except with respect to amounts invested in the ESI
Stock Fund, the Plan is intended to constitute a Plan as described in
Section 404(c) of ERISA and Title 29 of the Code of Federal Regulations
Section 2550.404c-1. The Plan fiduciaries are relieved of any liability
for any losses that are the direct and necessary result of investment
instructions given by any Member, Deferred Member, or Beneficiary.
16.2. PAYMENT OF EXPENSES.
(a) Direct charges and expenses arising out of the purchase or
sale of securities and taxes levied on or measured by such
transactions, and any investment management fees, with respect to
any Fund, may be paid in whole or in part by the Company. Any such
charges, expenses, taxes and fees not paid by the Company shall be
paid from the Fund with respect to which they are incurred.
(b) Expenses incurred in conjunction with Plan administration,
including, but not limited to, investment management, Trustee,
recordkeeping, and audit fees shall be paid from the assets held by
the Trust Fund to the extent such expenses are not paid directly by
the Company.
16.3. SOURCE OF PAYMENT. Benefits under the Plan shall be payable only out of
the Trust Fund, and the Company shall not have any legal obligation,
responsibility, or liability to make any direct payment of benefits under
the Plan. Neither the Company nor the Trustee guarantees the Trust Fund
against any loss or depreciation or guarantees the payment of any benefit
under the Plan. No person shall have any rights under the Plan with
respect to the Trust Fund, or against the Company, except as specifically
provided for the Plan.
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16.4. INALIENABILITY OF BENEFITS.
(a) Except as specifically provided in the Plan or as applicable
law may otherwise require or as may be required under the terms of a
Qualified Domestic Relations Order, no benefit under the Plan shall
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any
attempts to do so shall be void, and no Plan benefit shall be in any
manner liable for or subject to debts, contracts, liabilities,
engagements, or torts of the person entitled to the benefit. In the
event that the Committee finds that any Member, Deferred Member, or
Beneficiary who is or may become entitled to benefits hereunder has
become bankrupt or that any attempt has been made to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or charge any of
his or her benefits under the Plan, except as specifically provided
in the Plan or as otherwise required by applicable law, then the
benefit shall cease and terminate, and in that event the Committee
shall hold or apply the same to or for the benefit of the Member,
Deferred Member, or Beneficiary who is or may become entitled to
benefits hereunder, his or her spouse, children, parents or other
relatives, or any of them.
(b) Notwithstanding the foregoing, payment shall be made in
accordance with the provisions of a Qualified Domestic Relations
Order.
Notwithstanding anything herein to the contrary, if the amount payable to
an alternate payee under a Qualified Domestic Relations Order is $5,000
or less, the amount shall be paid in one lump sum as soon as practicable
following the qualification of the order. If the amount exceeds $5,000,
it may be paid as soon as practicable following the qualification of the
order if the Qualified Domestic Relations Order so provides and the
alternate payee consents thereto; otherwise it may not be payable before
the earliest of (i) the Member's Termination of Employment, (ii) the time
the amount could be withdrawn under Article Ten, or (iii) the Member's
attainment of age 50.
16.5. PREVENTION OF ESCHEAT. If the Committee cannot ascertain the whereabouts
of any person to whom a payment is due under the Plan, the Committee
may, no earlier than three years from the date the payment is due, mail a
notice of the due and owing payment to the last known address of the
person, as shown on the records of the Committee or the Company. If the
person has not made written claim for the benefit within three months of
the date of the mailing, the Committee may, if it so elects and upon
receiving advice from counsel to the Plan, direct that the payment and
all remaining payments otherwise due such person be canceled on the
records of the Plan and the amount thereof applied to reduce the
contributions to the Company. Upon the cancellation, the Plan and the
Trust shall have no further liability therefor except that, in the event
the person or his beneficiary later notifies the Committee of his or her
whereabouts and requests the payment or payments due to him
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under the Plan, the amount so applied shall be paid to him or her in
accordance with the provisions of the Plan.
16.6. RETURN OF CONTRIBUTIONS.
(a) If all or part of the Company's deductions for contributions
to the Plan are disallowed by the Internal Revenue Service, the
portion of the contributions to which that disallowance applies
shall be returned to the Company without interest but reduced by any
investment loss attributable to those contributions, provided that
the contribution is returned within one year after the disallowance
of deduction. For this purpose, all contributions made by the
Employer are expressly declared to be conditioned upon their
deductibility under Section 404 of the Code.
(b) The Company may recover without interest the amount of its
contributions to the Plan made on account of a mistake of fact,
reduced by any investment loss attributable to those contributions,
if recovery is made within one year after the date of those
contributions.
(c) In the event that Pre-Tax Savings made under Section 4.1 are
returned to the Company in accordance with the provisions of this
Section 16.6, the elections to reduce Salary that were made by
Members on whose behalf those contributions were made shall be void
retroactively to the beginning of the period for which those
contributions were made. The Pre-Tax Savings so returned shall be
distributed in cash to those Members for whom those contributions
were made.
16.7. FACILITY OF PAYMENT. If the Committee shall find that a Member or other
person entitled to a benefit is unable to care for his or her affairs
because of illness or accident or is a minor, the Committee may direct
that any benefit due him or her, unless claim shall have been made for the
benefit by a duly appointed legal representative, be paid to his or her
spouse, a child, a parent or other relative, or to a person with whom he
or she resides. Any payment so made shall be a complete discharge of the
liabilities of the Plan for that benefit.
16.8. INFORMATION. Each Member, Deferred Member, Beneficiary, or other person
entitled to a benefit, before any benefit shall be payable to him or
her or on his or her account under the Plan, shall file with the
Committee the information that it shall require to establish his or her
rights and benefits under the Plan.
16.9. EXCLUSIVE BENEFIT RULE. Except as otherwise provided in the Plan, no
part of the corpus or income of the funds of the Plan shall be used
for, or diverted to, purposes other than for the exclusive benefit of
Members and other persons entitled to benefits under the Plan and paying
the expenses of the Plan not paid directly by the Company. No person
shall have any interest in, or right to, any part of the earnings of the
funds of the Plan, or any right in, or to,
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any part of the assets held under the Plan, except as and to the extent
expressly provided in the Plan.
16.10. NO RIGHT TO EMPLOYMENT. Nothing herein contained nor any action taken
under the provisions hereof shall be construed as giving any Employee
or Member the right to be retained in the employ of the Company.
16.11. UNIFORM ACTION. Action by the Committee shall be uniform in nature as
applied to all persons similarly situated, and no such action shall be
taken that will discriminate in favor of any Members who are
Highly-Compensated Employees.
16.12. HEADINGS. The headings of the sections in this Plan are placed herein
for convenience of reference and in the case of any conflict, the text
of the Plan rather than the headings, shall control.
16.13. CONSTRUCTION. The Plan shall be construed, regulated and administered
in accordance with the internal laws of the state of Indiana, subject
to the provisions of applicable federal laws.
ARTICLE SEVENTEEN
TOP-HEAVY PROVISIONS
17.1. DEFINITIONS. The following definitions apply to the terms used in this
Section:
(a) "applicable determination date" means the last day of the
later of the first Plan Year or the preceding Plan Year;
(b) "top-heavy ratio" means the ratio of (A) the value of the
aggregate of the Accounts under the Plan for key employees to (B)
the value of the aggregate of the Accounts under the Plan for all
key employees and non-key employees;
(c) "key employee" means an employee who is in a category of
employees determined in accordance with the provisions of Sections
416(i)(1) and (5) of the Code and any regulations thereunder, and
where applicable, on the basis of the Employee's Statutory
Compensation from the Company or an Associated Company;
(d) "non-key employee" means any Employee who is not a key employee;
(e) "applicable Valuation Date" means the Valuation Date coincident with
or immediately preceding the last day of the first Plan Year or the
preceding Plan Year, whichever is applicable;
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(f) "required aggregation group" means any other qualified plan(s) of the
Company or an Associated Company in which there are members who are
key employees or that enable(s) the Plan to meet the requirements of
Section 401(a)(4) or 410 of the Code; and
(g) "permissive aggregation group" means each plan in the required
aggregation group and any other qualified plan(s) of the Company or
an Associated Company in which all members are non-key employees, if
the resulting aggregation group continues to meet the requirements of
Sections 401(a)(4) and 410 of the Code.
17.2. DETERMINATION OF TOP-HEAVY STATUS. For purposes of this Section, the
Plan shall be "top-heavy" with respect to any Plan Year if as of the
applicable determination date the top-heavy ratio exceeds 60 percent.
The top-heavy ratio shall be determined as of the applicable Valuation
Date in accordance with Sections 416(g)(3) and (4) of the Code and
Article Eight of this Plan, and shall take into account any contributions
made after the applicable Valuation Date but before the last day of the
Plan Year in which the applicable Valuation Date occurs. For purposes of
determining whether the Plan is top-heavy, the account balances under the
Plan will be combined with the account balances or the present value of
accrued benefits under each other plan in the required aggregation group
and, in the Company's discretion, may be combined with the account
balances or the present value of accrued benefits under any other
qualified plan in the permissive aggregation group. Distributions made
with respect to a Member under the Plan during the five-year period
ending on the applicable determination date shall be taken into account
for purposes of determining the top-heavy ratio; distributions under
plans that terminated within that five-year period shall also be taken
into account, if any such plan contained key employees and therefore
would have been part of the required aggregation group.
17.3. MINIMUM REQUIREMENTS. For any Plan Year with respect to which the Plan
is top-heavy, an additional Company contribution shall be allocated on
behalf of each Member (or each Employee eligible to become a Member) who
is not a "key employee," and who has not separated from service as of the
last day of the Plan Year, to the extent that the amounts allocated to
his or her Accounts as a result of contributions made on his or her
behalf under Sections 5.1 and 5.2 for the Plan Year would otherwise be
less than 3 percent of his or her remuneration (as reported on Form W-2
for that Plan Year). However, if the greatest percentage of remuneration
(as reported on Form W-2 for that Plan Year and limited to a dollar
amount that is indexed annually in accordance with Section 401(a)(17) of
the Code) contributed on behalf of a "key employee" under Section 4.1 or
allocated to his or her Accounts as a result of contributions made
pursuant to Section 5.1 for the Plan Year would be less than 3%, that
lesser percentage shall be substituted for "3%" in the preceding
sentence. Notwithstanding the foregoing provisions of this Section 17.3,
no minimum contribution shall be made with respect to a Member if the
required minimum benefit under Section 416(c)(1) of the Code is provided
by the ESI Pension Plan.
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This ESI 401(k) Plan is executed on behalf of ITT Educational Services,
Inc. by its duly authorized officer as of the 22nd day of May, 1998.
ITT EDUCATIONAL SERVICES, INC.
By /s/ Clark D. Elwood
----------------------------------------
Signature
Clark D. Elwood
----------------------------------------
Printed Name
Senior Vice President, General Counsel
and Secretary
----------------------------------------
Office
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 10, 1998, appearing on page
F-1 of ITT Educational Services, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1997.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Indianapolis, Indiana
June 2, 1998
