<PAGE>
As filed with the Securities and Exchange Commission on February 25, 1997
Registration No. 333-_____
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------------------------------
COOPERATIVE BANKSHARES, INC.
---------------------------------------
(Exact name of Registrant as Specified in Its Charter)
North Carolina 56-1886527
-------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Market Street
Wilmington, North Carolina 28401
(910) 343-0181
---------------------------------------
(Address of Principal Executive Offices)
Cooperative Bank for Savings, Inc., SSB Employee Stock Ownership-401k Savings
Plan
-------------------------------------------------
(Full title of the plan)
---------------------------------------
Cynthia R. Cross, Esquire
Daniel L. Hogans, Esquire
Housley Kantarian and Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
---------------------------------------
(Name and address of agent for service)
(202) 822-9611
---------------------------------------
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================
Title of each class of Proposed Maximum Proposed Maximum Amount of
Securities to be Amount to be Offering Price Aggregate Offering Registration
registered (1) registered (2) Per Share (3) Price (4) Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$1.00 par value 16,500 $20.00 $330,000 $100.00
per share
=================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests
available pursuant to the Cooperative Bank for Savings, Inc., SSB Employee
Stock Ownership-401(k) Savings Plan (the "Plan"), as described herein.
(2) Estimates the maximum number of shares expected to be issued under the Plan
assuming that all employee contributions to the Plan are used to purchase
shares of Common Stock of Cooperative Bankshares, Inc., together with an
indeterminate number of shares which may be necessary to adjust the number
of additional shares of Common Stock reserved for issuance pursuant to the
Plan and being registered herein, as the result of a stock split, stock
dividend, reclassification, recapitalization or similar adjustment(s) of
the Common Stock of Cooperative Bankshares, Inc.
(3) Estimated solely for the purpose of calculating the registration fee and
calculated pursuant to Rule 457(c) based on the average of high and low
selling Common Stock of Cooperative Bankshares, Inc. on February 19, 1997,
of $20.00 per share.
(4) Estimated based on (2) and (3) above.
THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE AUTOMATICALLY UPON THE
DATE OF FILING, IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION*
- ------
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION*
- ------
*This Registration Statement relates to the registration of 15,000 shares
of Common Stock, $1.00 par value per share, of Cooperative Bankshares, Inc. (the
"Company") reserved for issuance and delivery under the Cooperative Bank for
Savings, Inc., SSB Employee Stock Ownership-401(k) Savings Plan (the "Plan").
Documents containing the information required by Part I of this Registration
Statement will be sent or given to participants in the Plan as specified by Rule
428(b)(1). Such documents are not filed with the Securities and Exchange
Commission (the "Commission") either as part of this Registration Statement or
as prospectuses or prospectus supplements pursuant to Rule 424, in reliance on
Rule 428.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- ------
The Company became subject to the informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") on May 20, 1994 and,
accordingly, will be filing periodic reports and other information with the
Commission. Reports, proxy statements and other information concerning the
Company filed with the Commission may be inspected and copies may be obtained
(at prescribed rates) at the Commission's Public Reference Section, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: Citicorp Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material also can be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Reports, proxy statements and other information that
have been filed electronically with the Commission may also be obtained from the
Commission's Website, the addressed of which is http://www.sec.gov.
The following document filed by the Company is incorporated in this
Registration Statement by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as filed with the Commission on March 28, 1996 (Commission
File No. 0-24626).
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, as filed with the Commission on May 13, 1996 (Commission File No. 0-
24626).
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, as filed with the Commission on August 13, 1996 (Commission File No.
0-24626).
(d) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, as filed with the Commission on November 14, 1996
(Commission File No. 0-24626).
(e) The description of the Company's securities as contained in the
Company's Registration Statement on Form S-4, as filed with the Commission on
May 20, 1994 (Commission File No. 333-79206).
ALL DOCUMENTS SUBSEQUENTLY FILED BY THE COMPANY AND THE PLAN PURSUANT TO
SECTIONS 13(A), 13(C), 14, AND 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AFTER THE DATE HEREOF AND PRIOR TO THE FILING OF A POST-EFFECTIVE
AMENDMENT WHICH INDICATES THAT ALL SECURITIES OFFERED HAVE BEEN SOLD OR WHICH
DEREGISTERS ALL SECURITIES THEN REMAINING UNSOLD SHALL BE DEEMED TO BE
INCORPORATED BY REFERENCE IN THIS REGISTRATION STATEMENT AND TO BE A PART HEREOF
FROM THE DATE OF FILING OF SUCH DOCUMENTS.
ITEM 4. DESCRIPTION OF SECURITIES
- ------
Not applicable, as the Common Stock is registered under Section 12 of the
Securities Exchange Act of 1934.
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- ------
ARTICLE 8. INDEMNIFICATION. In addition to and apart from the
indemnification provided for in the North Carolina Business Corporation Act, as
from time to time amended, the Corporation shall provide indemnification to its
directors as follows:
A. Indemnity. Any person who at any time serves or has served as a
---------
director of the Corporation shall have a right to be indemnified by the
Corporation to the full extent allowed by applicable law against liability
and litigation expense arising out of or connected with such status or
activities in such capacity. "Liability and litigation expense" shall
include costs and expenses of litigation (including reasonable attorneys
fees), judgments, fines and amounts paid in settlement which are actually
and reasonably incurred in connection with or as a consequence of any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including appeals. The
Corporation shall not indemnify any such person against any liability or
litigation expense unless such person reasonably believed (i) in the case
of conduct in his or her official capacity with the Corporation, that his
or her conduct was in the best interests of the Corporation and (ii) in all
other cases, that his or her conduct was at least not opposed to the best
interests of the Corporation.
B. Determination of Right to Indemnity. Promptly after the final
-----------------------------------
disposition or termination of any matter which involves liability or
litigation expense as described in Section A of this Article or at such
earlier time as it sees fit, the Corporation shall determine whether any
person described in Section A of this Article is entitled to
indemnification thereunder. Such determination shall be limited to the
following issues: (i) whether the persons to be indemnified are persons
described in Section A of this Article, (ii) whether the liability or
litigation expense incurred arose out of the status or activities of such
persons as described in Section A of this Article, (iii) whether the
liability was actually incurred and litigation expense was actually and
reasonably incurred, and (iv) whether the liability and litigation expense
were incurred on account of activities which were at the time taken
reasonably believed by such person (a) in the case of conduct in his or her
official capacity with the Corporation, to be in the best interests of the
Corporation or (b) in all other cases, that his or her conduct was at least
not opposed to the best interests of the Corporation. Such determination
shall be made by a majority vote of directors who were not parties to the
action, suit or proceeding (or, in connection with "threatened" actions,
suits or proceedings, who were not "threatened parties"). If at least two
such disinterested directors are not obtainable, or, even if obtainable, if
at least half of the number of disinterested directors so direct, such
determination shall be made by independent legal counsel in written
opinion.
C. Advance Expenses. (i) Subject to subsection (ii) below,
----------------
litigation expense incurred by a person described in Section A of this
Article in connection with a matter described in Section A of this Article
shall be paid by the Corporation in advance of the final disposition of the
matter, if the Corporation receives an undertaking, dated, in writing and
signed by the person to be indemnified, to repay all such sums if it is
ultimately determined as provided in Section B of this Article that such
person is not entitled to be indemnified by the Corporation. Requests for
payments in advance of final disposition or termination shall be submitted
in writing to the Corporation unless this requirement is waived by the
Corporation. Before the first such payment is made, the Corporation shall
have received the written undertaking referred to herein and notice of the
request for advance payment shall have been given to the members of the
board of directors.
(ii) Notwithstanding the foregoing subsection (i), no advance payment
shall be made as to any payment or portion of a payment for which the
determination is made that the person requesting payment will not be
entitled to indemnification. Such determination may be made only by a
majority vote of disinterested directors or by independent legal counsel as
next provided. If there are not at least two disinterested directors, then
notice of all requests for advance payment shall be delivered for review to
independent legal counsel for the Corporation. Such counsel shall have the
authority to disapprove any advance payment or portion of a payment for
which it plainly and unavoidably appears that the person requesting payment
will not be entitled to indemnification.
D. Settlements. The Corporation shall not be obligated to indemnify
-----------
persons described in Section A of this Article for any amounts paid in
settlement unless the Corporation consents in writing to the settlement.
The Corporation shall not unreasonably withhold its consent to proposed
settlements. The Corporation's consent to a proposed settlement shall not
constitute an agreement by the Corporation that any person is entitled to
indemnification hereunder; the Corporation shall waive the requirement of
this Section for its written consent as fairness and equity may require.
E. Application for Indemnity or Advances. (i) A person described in
-------------------------------------
Section A of this Article may apply to the Corporation in writing for
indemnification or to advance expenses. Such application shall be
addressed to the secretary, or,
<PAGE>
in the absence of the secretary, to any officer of the Corporation. The
Corporation shall respond in writing to such applications as follows: to a
request for indemnity under Section B of this Article, within ninety days
after receipt of the application; to a request for advance expenses under
Section C of this Article, within fifteen days after receipt of the
application.
(ii) The right to indemnification or advance expenses provided herein
shall be enforceable in any court of competent jurisdiction. A legal
action may be commenced if a claim for indemnity or advance expenses is
denied in whole or in part, or upon the expiration of the time periods
provided in the preceding subsection (i). In any such action, the claimant
shall be entitled to prevail upon establishing that he or she is entitled
to indemnification or advance expenses but the Corporation shall have the
burden of establishing, as a defense, that the liability or expense was
incurred on account of activities which were, at the time taken, known or
believed by the claimant to be clearly in conflict with the best interests
of the Corporation. In any such action, if the claimant establishes the
right to indemnification, he or she shall also have the right to be
indemnified against the litigation expense (including a reasonable
attorney's fee) of such action.
F. Incidents of Right of Indemnification. The right of
-------------------------------------
indemnification provided herein shall not be deemed exclusive of any other
rights to which any persons seeking indemnity may be entitled apart from
the provisions of this Article, except there shall be no right to
indemnification as to any liability or litigation expense for which such
person is entitled to receive payment under any insurance policy other than
a directors' and officers' liability insurance policy maintained by the
Corporation. Such right shall inure to the benefit of the heirs and legal
representatives of any persons entitled to such right. Any person who at
any time after the adoption of this Article serves or has served in any
status or capacity described in Section A of this Article, shall be deemed
to be doing or to have done so in reliance upon, and as consideration for,
the right of indemnification provided herein. Any repeal or modification
of this Article shall not affect any rights or obligations then existing.
The right provided herein shall not apply as to persons serving
corporations that are hereafter merged into or combined with the
Corporation, except after the effective date of such merger or combination
and only as to status and activities after such date.
G. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court or agency of competent jurisdiction,
then the Corporation shall nevertheless indemnify each person described in
Section A of this Article to the full extent permitted by the portion of
this Article that is not invalidated and also to the full extent (not
exceeding the benefits described herein) permitted or required by other
applicable law.
ITEM 8. EXHIBITS
- ------
For a list of all exhibits filed or included as part of this Registration
Statement, see "Index to Exhibits" at the end of this Registration Statement.
ITEM 9. UNDERTAKINGS
- ------
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement --
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement.
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1934, 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.
(c) 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.
(d) If the registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of Regulation S-X at the start of any delayed
offering or throughout a continuous offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
4. 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.
5. The Registrant will submit the Plan and any amendment thereto to the
Internal Revenue Service ("IRS") in a timely manner and will make all changes
required by the IRS in order to qualify the Plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Wilmington, State of North Carolina, on February 20,
1997.
COOPERATIVE BANKSHARES, INC.
By: /s/ Frederick Willetts, III
----------------------------------
Frederick Willetts, III, President
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of Cooperative Bankshares, Inc., hereby
severally constitute and appoint Frederick Willetts, III, with full power of
substitution, our true and lawful attorney and agent, to do any and all things
in our names in the capacities indicated below which said Frederick Willetts,
III may deem necessary or advisable to enable Cooperative Bankshares, Inc. to
comply with the Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
the registration on Form S-8 of Cooperative Bankshares, Inc. common stock that
may be purchased pursuant to the Cooperative Bankshares, Inc. Employee Stock
Ownership-401k Savings Plan, including specifically, but not limited to, power
and authority to sign for us in our names in the capacities indicated below, the
registration statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that said Frederick
Willetts, III shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURES
Signatures Title Date
- ---------- ----- ----
/s/ Frederick Willetts, III February 20, 1997
- -------------------------- President, Chief Executive
Frederick Willetts, III Officer and Director
(Principal Executive Officer)
/s/ Frederick Willetts, Jr. February 20, 1997
- -------------------------- Senior Vice President and
Frederick Willetts, Jr. Chairman of the Board
/s/ Edward E. Maready February 20, 1997
- -------------------------- Senior Vice President,
Edward E. Maready Treasurer (Principal Financial
and Accounting Officer)
/s/ James D. Hundley, M.D. February 20, 1997
- -------------------------- Director
James D. Hundley, M.D.
/s/ O. Richard Wright, Jr. February 20, 1997
- -------------------------- Director
O. Richard Wright, Jr.
/s/ Charles H. Boney February 20, 1997
- -------------------------- Director
Charles H. Boney
<PAGE>
/s/ Paul G. Burton February 20, 1997
- -------------------------- Director
Paul G. Burton
/s/ H. Thompson King, III February 20, 1997
- -------------------------- Director
H. Thompson King, III
/s/ F. Peter Fensel, Jr. February 20, 1997
- -------------------------- Director
F. Peter Fensel, Jr.
/s/ William H. Wagoner February 20, 1997
- -------------------------- Director
William H. Wagoner
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
undersigned trustees of the Cooperative Bank for Savings, Inc., SSB Employee
Stock Ownership-401(k) Savings Plan has duly caused this registration statement
to be signed in the City of Wilmington, State of North Carolina, on February 20,
1997.
/s/ Frederick Willetts, III
---------------------------
Frederick Willetts, III
Trustee
/s/ O.C. Burrell, Jr.
---------------------------
O.C. Burrell, Jr.
Trustee
/s/ Daniel W. Eller
---------------------------
Daniel W. Eller
Trustee
/s/ Edward E. Maready
---------------------------
Edward E. Maready
Trustee
/s/ Eric R. Gray
---------------------------
Eric R. Gray
Trustee
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
4.1 Cooperative Bank for Savings, Inc., SSB Employee Stock
Ownership-401(k) Savings Plan (the "Plan")
4.2 Summary Plan Description of the Plan
23.1 Consent of Independent Certified Public Accountants
<PAGE>
Exhibit 4.1
COOPERATIVE BANK FOR SAVINGS, INC., SSB
EMPLOYEE STOCK OWNERSHIP-401(K) SAVINGS PLAN
AS
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997
UNDER SECTIONS 401(a), 401(k) AND 4975(e)(7) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED
<PAGE>
ADOPTION
OF
COOPERATIVE BANK FOR SAVINGS, INC., SSB
EMPLOYEE STOCK OWNERSHIP - 401(k) SAVINGS PLAN
The Board of Directors of Cooperative Bank for Savings, Inc., SSB (the "Bank")
has, on , 1996, adopted this amended and restated Employee Stock
--------
Ownership - 401(k) Savings Plan ("Plan").
IN WITNESS WHEREOF, the Bank has caused this Plan to be amended and restated,
as hereinafter set forth in Part I and Part II of said Plan, and hereby agrees
to continue to accept the duties and responsibilities of Plan Administrator
pursuant to the Employee Retirement Income Security Act ("ERISA") this day
------
of , 1996.
--------------
COOPERATIVE BANK FOR SAVINGS, INC., SSB
By:
________________________________________
Its President
ATTEST:
By:
________________________________________
Its Secretary
<PAGE>
$$NO/FOLIO
Part I
------
Table of Contents
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
Definitions...................................... 1
Eligibility...................................... 9
Employer Contributions........................... 11
Participant's Contributions...................... 12
Allocation of Contributions...................... 21
Allocation to Participant's Accounts............. 25
Retirement and Distribution of Benefits.......... 27
In Event of Disability........................... 30
In the Event of Death............................ 30
In the Event of Termination of Employment
or Change in Status.............................. 31
Top-Heavy Definitions and Rules.................. 34
Administration of the Plan....................... 40
Management and Investment of Trust Assets........ 41
Obligations of the Company....................... 43
Miscellaneous.................................... 43
Amendments....................................... 44
Suspension, Discontinuance and Plan Termination.. 45
Inclusion of Other Companies..................... 46
</TABLE>
<PAGE>
SECTION 1
---------
Definitions
-----------
The following words and phrases used herein have the following meanings, unless
a different meaning is plainly required by the context:
The masculine pronoun wherever used shall include the feminine pronoun and
the singular shall include the plural.
1.1 "Account" means the record of the Participant's interest in the Trust
Fund, maintained by the Committee.
1.2 "Acquisition Loan" means an Exempt Loan (or other extension of credit)
used by the Trust to finance the acquisition of Qualifying Employer
Securities, which loan may constitute an extension of credit to the Trust
from a party in interest.
1.3 "Actual Deferral Percentage" or "Actual Average Deferral Percentage" shall
mean, with respect to a specified group of Employees, the average of the
ratios, calculated separately for each Employee in that group, of (a) the
amount of Salary Deferral Contributions made on the Employee's behalf for
a Plan Year to (b) the Employee's salary before any salary deferrals for
that Plan Year.
1.4 "Adjustment Factor" means the cost of living adjustment factor prescribed
by the Secretary of the Treasury under Section 415(d) of the Code for
years beginning after December 31, 1988, as applied to such items and in
such manner as the Secretary shall provide.
1.5 "Affiliate" means any employer aggregated with the Employer under Section
414(b), (c), (m), or (o) of the Code.
1.6 "Anniversary Date" means the last day of the Plan Year.
1.7 "Board of Directors" means the Board of Directors of the Company.
1.8 "Code" means the Internal Revenue Code of 1986, as amended, together with
regulations promulgated pursuant thereto.
1.9 "Committee" or "Administrative Committee" or "Administrator" means the
committee appointed to manage and administer the Plan as provided in
Section 12.
1.10 "Company" means Cooperative Bank for Savings, Inc., SSB, its successors
and assigns, and any related entity that adopts this Plan and joins in the
corresponding Trust Agreement.
1.11 "Compensation" means the sum of (i) a Participant's wages which are
subject to federal income tax withholding pursuant to Section 3401(a) of
the Code, and (ii) any amounts withheld from the Participant under a plan
qualified under Section 125 or 401(k) of the Code and sponsored by the
Employer within a Plan Year. Only the first $150,000 (or such other
amount as determined by regulations under Sections 401(a)(17), 415(d) and
416 of the Code) of a Participant's annual compensation shall be treated
as Compensation for purposes of the Plan. Company contributions for
pension, profit sharing or insurance benefits are also excluded.
1
<PAGE>
Notwithstanding the foregoing, for purposes of determining the adjusted
$150,000 Compensation limit for purposes of this Section 1.10 in defining
a Key Employee, and for the purposes of determining minimum contributions
or benefits, should the Plan be Top-Heavy as provided in Section 11,
Compensation shall be defined as a Participant's W-2 earnings from the
Company for the Plan Year.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except
in applying such rules, the term "family" shall include only the spouse of
the Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year. If, as a result of the
application of such rules, the adjusted $150,000 limitation is exceeded,
then the limitation shall be prorated among the affected individuals in
proportion to each such individual's compensation as determined under this
Section prior to the application of this limitation.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the Compensation of each
Employee taken into account under the Plan shall not exceed the Omnibus
Budget Reconciliation Act of 1993, ("OBRA '93") annual compensation limit.
The OBRA '93 annual compensation limit is $150,000, as adjusted by the
Commissioner of the Internal Revenue Service for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-
living adjustment in effect for a calendar year applies to any period, not
exceeding 12 months, over which Compensation is determined (determination
period) beginning in such calendar year. If a determination period
consists of fewer than 12 months, the OBRA '93 annual compensation limit
will be multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under section 401(a)(17) of the Code shall
mean the OBRA '93 annual compensation limit set forth in this provision.
1.12 "Early Retirement Date" means the later of the beginning of any Plan Year
(prior to the Normal Retirement Date) coinciding with or following the
date on which a Participant or Former Participant attains his 55th
birthday and has completed at least 5 Years of Service with the Employer
(Early Retirement Age). A Participant shall become fully Vested upon
satisfying the later of the above requirements if still employed at his
Early Retirement Age.
A Former Participant who terminates employment after satisfying the
service requirement for Early Retirement and who thereafter reaches the
age requirement contained herein shall be entitled to receive his benefits
under this Plan.
1.13 "Effective Date" of the Plan, as amended and restated, means January 1,
1997.
1.14 "Elective Contribution" or "Salary Deferral Contribution" means the
Employer's contributions to the Plan that are made pursuant to the
Participant's deferral election provided in Section 4.1. Elective
Contributions shall be subject to the requirements of Sections 4.1 and 4.9
and shall further be required to satisfy the discrimination requirements
of Regulation 1.401(k)-1(b)(3), the provisions of which are specifically
incorporated herein by reference.
1.15 "Employee" shall mean any person (a) who is in the employment of the
Employer, and (b) whose wages from the Employer are subject to withholding
for the purposes of federal income taxes and the Federal Insurance
Contribution Act. "Employee" shall not include any person who is paid by
an Employer as an independent contractor.
"Employee" shall mean any employee of the employer maintaining the Plan or
any other employer required to be aggregated under Section 414(b), (c),
(m) or (o) of the Code.
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<PAGE>
1.16 "Employer" means the Company, Cooperative Bank for Savings, SSB, and any
other company which, with the Company's consent, adopts the Plan and joins in
the Trust Agreement.
1.17 "Employer Contribution Accounts" shall mean either:
(a) "Basic Contribution Account" or "Performance Related Contribution
Account" which shall mean that portion of the Trust Fund which, with
respect to any Participant, is attributable to Employer
contributions made pursuant to Sections 5.1(a) and 5.1(d) and any
investment earnings and gains or losses thereon; or
(b) "Matching Contribution Account" shall mean that portion of the Trust
Fund which, with respect to any Participant, is attributable to
Employer contributions made pursuant to Section 5.1(c) and 5.1(d),
and any investment earnings and gains or losses thereon.
1.18 "Entry Date" means the Effective Date and the first day of the fourth and
tenth months of the Plan Year, for Plan Years beginning before January 1,
1994. For Plan Years beginning on or after January 1, 1994, "Entry Date"
means the first day of the first and seventh months of the Plan Year.
Additionally, the Committee may, on a uniform and nondiscriminatory basis,
at any time and from time to time, authorize a special entry date for
eligible participants, but prior to the next regularly scheduled Entry
Date.
1.19 "ESOP" means an Employee Stock Ownership Plan as defined in Section
4975(e)(7) of the Code.
1.20 "Excess Aggregate Contributions" means, with respect to any Plan Year, the
excess of the aggregate amount of the Employer matching contributions made
pursuant to Section 5.1(c) and (d) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to Section
4.7(c) on behalf of Highly Compensated Participants for such Plan Year,
over the maximum amount of such contributions permitted under the
limitations of Section 4.7(a).
1.21 "Excess Contributions" means, with respect to a Plan Year, the excess of
Elective Contributions made on behalf of Highly Compensated Participants
for the Plan Year over the maximum amount of such contributions permitted
under Section 4.3.
1.22 "Excess Deferred Compensation" means, with respect to any Taxable Year of
a Participant, the excess of the aggregate amount of such Participant's
Salary Deferral Contribution and the elective deferrals pursuant to
Section 4.1 actually made on behalf of such Participant for such Taxable
Year, over the dollar limitation provided for in Code Section 402(g),
which is incorporated herein by reference.
1.23 "Exempt Loan" means a loan made to the Plan which satisfies the
requirements of Section 2550.408b-3 of the Department of Labor
Regulations, Section 54.4975-7(b) of the Treasury Regulations, and the
Trust Agreement.
1.24 "Family Member" means an Employee who is the Employee's spouse, lineal
ascendant or descendant, or spouse of such lineal ascendant or descendant,
of an Employee who is a five percent owner of the Company, or if not a
five-percent owner is a Highly Compensated Employee and is also in the
group consisting of the ten (10) Highly Compensated Employees paid the
greatest Compensation during the Year.
1.25 "Financed Shares" means shares of Qualifying Employer Securities acquired
by the Trust with the proceeds of an Acquisition Loan, whether or not
pledged as collateral to secure the repayment of such Acquisition Loan.
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<PAGE>
1.26 "Forfeiture" shall mean that portion of a Participant's Account that is
not vested, and occurs on the earlier of (1) the last day of the Plan Year
following the Plan Year in which the Participant's vested Account is
distributed, provided the Participant is not reemployed prior thereto, or
(2) the last day of the Plan Year in which the Participant incurs his
fifth consecutive Break in Service.
1.27 "Highly Compensated Employee" shall have the meaning provided in "Option
1-- Model Amendment to Use the Simplified Method of Determining Highly
Compensated Employees and a Snapshot Day for Determining Highly
Compensated Employees" as provided in Rev. Proc. 95-34, (I.R.B. 1995-29,
July 5, 1995), which provides as follows:
The group of highly compensated employees ("HCEs") includes any Employee
who is employed by the Employer on the snapshot day (as defined below in
this Section 1.20, the "Snapshot Day") and who (i) is a 5-percent owner on
the Snapshot Day, (ii) receives compensation for the Plan Year in excess
of the (S) 414(q)(1)(B) amount for the Plan Year, (iii) receives
compensation for the Plan Year in excess of the (S) 414(q)(1)(C) amount
for the Plan Year and is a member of the top paid group of employees
within the meaning of (S) 414(q)(4), or (iv) is an officer on the Snapshot
Day and receives compensation during the Plan Year that is greater than 50
percent of the dollar limitation in effect under (S) 415(b)(1)(A). If no
officer satisfies the compensation requirement of (iv) above, the highest
paid officer for such Plan Year shall be treated as a HCE.
For purposes of determining who is a HCE, compensation means compensation
within the meaning of (S) 415(c)(3) as set forth in the Plan for purposes
of determining the (S) 415 limits, except that amounts excluded pursuant
to (S)(S) 125, 402(e)(3), 402(h)(1)(B) and 403(b) are included. If
compensation used for purposes of determining the (S) 415 limits under the
Plan is not defined as total compensation as provided under (S) 415(c)(3)
and the regulations thereunder, then for purposes of determining who is a
HCE, compensation means compensation within the meaning of (S) 1.415-
2(d)(11)(i) of the Income Tax Regulations, except that amounts excluded
pursuant to (S)(S) 125, 402(e)(3), 402(h)(1)(B) and 403(b) are included.
If, as of the Snapshot Day, an Employee is a family member of either a 5-
percent owner (whether active or former) or a HCE who is one of the 10
most HCEs ranked on the basis of compensation paid by the Employer during
such year, then the family member and the 5-percent owner or top-ten HCE
shall be aggregated. In such case, the family member and 5-percent owner
or top-ten HCE shall be treated as a single Employee receiving
compensation and Plan contributions or benefits equal to the sum of the
compensation and contributions and benefits of the family member and 5-
percent owner or top-ten HCE. For purposes of this section, family member
includes the spouse, lineal ascendants and descendants of the Employee or
former Employee, and the spouses of such ascendants and descendants.
The Snapshot Day will be the last day of the Plan Year.
The group of HCEs will also include any Employee who during the Plan Year:
(i) terminated employment prior to the Snapshot Day and was a HCE in
the prior Plan Year;
(ii) terminated employment prior to the Snapshot Day and (A) was a 5-
percent owner, or (B) has compensation for the Plan Year which is
greater than or equal to the compensation of any Employee who is
treated as a HCE on the Snapshot Day (except for Employees who are
HCEs solely because they are 5-percent owners or officers), or (C)
was an officer and has compensation greater than or equal to the
compensation of any other officer who is a HCE on the Snapshot Day
solely because that person is an officer; or
4
<PAGE>
(iii) becomes employed subsequent to the Snapshot Day during the Plan
Year and (A) is a 5-percent owner, or (B) has compensation for the
Plan Year that is greater than or equal to the compensation of any
Employee who is treated as a HCE on the Snapshot Day (except for
Employees who are HCEs solely because they are 5-percent owners or
officers), or (C) is an officer and has compensation greater than
or equal to the compensation of any other officer who is a HCE on
the Snapshot Day solely because that person is an officer.
The determination of who is a HCE, including the determinations of the
number and identity of Employees in the top paid group, the number of
Employees treated as officers and the compensation that is taken into
account, will be made in accordance with (S) 414(q) and (S) 1.414(q)-1T of
the temporary Income Tax Regulations to the extent they are not
inconsistent with the method established above.
1.28 "Highly Compensated Participant" means any Highly Compensated Employee who
is eligible to participate in the Plan.
1.29 "Late Retirement Date" means the Anniversary Date coinciding with or next
following a Participant's actual Retirement Date after having reached his
Normal Retirement Date.
1.30 "Leased Employee" means any person (other than an Employee) who pursuant
to an agreement between the Employer and any other person ("Leasing
Organization") has performed services for the Employer (or for the
Employer and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full time basis for a period of
at least one year, and such services are of a type historically performed
by employees in the business field of the Employer. Contributions or
benefits provided a Leased Employee by the Leasing Organization which are
attributable to services performed for the Employer shall be treated as
provided by the Employer.
A Leased Employee shall not be considered an Employee of the Employer if:
(i) such employee is covered by a money purchase pension plan providing:
(1) a nonintegrated employer contribution rate of at least 10 percent of
compensation, as defined in Section 415(c)(3) of the Code, but including
amounts contributed pursuant to a salary reduction agreement which are
excludable from the employee's gross income under Section 125, Section
402(a)(8), Section 402(h) or Section 403(b) of the Code, (2) immediate
participation, and (3) full and immediate vesting; and (ii) leased
employees do not constitute more than 20 percent of the Employer's
nonhighly compensated workforce.
1.31 "Limitation Year" means the Plan Year.
1.32 "Loan Suspense Account" means an account in which Qualifying Employer
Securities are held and which has not been allocated to Participant's
Accounts because they were purchased with borrowed funds pursuant to the
provisions of Section 13.4 hereof or transferred to such account pursuant
to the terms hereof.
1.33 "Non Highly Compensated Employee" means an Employee who is neither a
Highly Compensated Employee nor a Family Member.
1.34 "Non-Key Employee" means an Employee who is not a Key Employee. Non-Key
Employees shall include Employees who are former Key Employees.
1.35 "Normal Retirement Age" means the date a Plan Participant, if still an
Employee, attains age 65 or the fifth anniversary he commences Plan
participation, whichever is later.
1.36 "Normal Retirement Date" means the first day of the month coincident with,
or next following, the date upon which a Participant attains his Normal
Retirement Age.
5
<PAGE>
1.37 "Other Investments Account" means the Account of a Participant which
reflects his interest in the Plan attributable to Trust assets other than
Qualifying Employer Securities.
1.38 "Participant" means an Employee or former Employee who has satisfied the
requirements of Section 2.1.
1.39 "Participant's Account" means a separate account, maintained in the
aggregate by the Committee, for each Participant with respect to his total
interest in the Plan and Trust.
1.40 "Participant's Company Stock Account" means the Participant's Account
credited with Qualifying Employer Securities.
1.41 "Plan" means this Cooperative Bank for Savings, Inc., SSB Employee Stock
Ownership-401(k) Savings Plan as set forth herein.
1.42 "Plan Year" means the 12-month period ending on March 31st of each year.
Effective April 1, 1993, Plan Year means the nine-month period beginning
April 1, 1993 and ending December 31, 1993. Thereafter, the Plan Year
shall mean the 12 consecutive month period beginning each January 1 and
ending December 31, with the first such Plan Year to begin January 1,
1994.
1.43 "Pregnancy or Child Care Leave of Absence" shall mean, with respect to a
Plan Year commencing on or after July 1, 1984, a compensated or
uncompensated leave of absence of fixed or indefinite duration granted to
an Employee by the Employer or an Affiliate pursuant to a written request
which is submitted to the Employer or Affiliate by the Employee no later
than thirty (30) days prior to the first day of the proposed leave of
absence that is sought (i) because of the pregnancy of the Employee, (ii)
because of the birth of a child of the Employee, (iii) because of the
placement of a child with the Employee in connection with the adoption of
such child by such Employee or for the purpose of enabling the Employee to
care for a child for a period beginning immediately after the birth of
such child to the Employee, (iv) because of the placement of such child
with the Employee, or (v) because of an absence of not more than two (2)
consecutive calendar years in duration which, upon his return to the
employ of an Employer or an Affiliate, the Employee demonstrates to the
satisfaction of the Employer to have been for one of the four
aforementioned purposes.
1.44 "Qualified Domestic Relations Order" means a judgment, decree or order
(including an approval of a property settlement agreement) that relates to
the provision of child support and/or alimony payments or marital property
rights to a Spouse, former Spouse, child or other dependent of a
Participant, that is made pursuant to a domestic relations law (including
a community property law) of a state, that creates or recognizes the right
of an alternative payee, or assigns to an alternative payee the right, to
receive all or a portion of the benefit payable to the Participant under
the Plan, that sets forth the specific information required by Section
414(p)(2) of the Code to be included therein and that does not alter the
amount or form of the benefit otherwise payable to the Participant.
1.45 "Qualified Election Period" means the six-Plan-Year period beginning with
the Plan Year after the Plan Year in which the Participant first becomes a
Qualified Participant.
1.46 "Qualified Participant" means a Participant who has attained age 55 and
who has completed at least 10 years of participation in the Plan.
1.47 "Qualified Non-Elective Contribution" means the Employer's contributions
to the Plan that are made pursuant to Section 4.6. Such contributions
shall be considered an Elective Contribution for the purposes of the Plan
and used to satisfy the "Actual Deferral Percentage" tests.
6
<PAGE>
In addition, the Employer's contributions to the Plan that are made
pursuant to Section 4.8(g) which are used to satisfy the "Actual
Contribution Percentage" tests shall be considered Qualified Non-Elective
Contributions and be subject to the provisions of Sections 4.1 and 4.9.
1.48 "Qualifying Employer Securities" or "Company Stock" means the shares of
common stock of the Company as described in Section 4975(e)(8) of the Code
(or of a corporation which is a member of a controlled group with the
Company) which is readily tradeable on an established securities market;
or if not readily tradeable, meets the following criteria:
(a) is a common stock issued by the Company (or by a corporation which
is a member of the same controlled group) having a combination of
voting power and dividend rights equal to or in excess of that
class of common stock having the greatest voting power, and
(b) that class of common stock having the greatest dividend rights.
Noncallable preferred stock shall be deemed to be "Qualifying Employer
Securities" if such stock is convertible at any time into stock which
constitutes "Qualifying Employer Securities" hereunder and if such
conversion is at a conversion price which (as of the date of the
acquisition by the Trust) is reasonable.
1.49 "Salary Deferral Contribution Account" means the account maintained for a
Participant to record contributions made on his behalf by the Employer
pursuant to a salary deferral agreement described in Section 4.1 and
adjustments relating thereto.
1.50 "Service" means any computation period during which an Employee was in the
employment of the Employer or an Affiliate including service before the
Effective Date of this Plan. It shall include any period during which an
Employee is on leave of absence authorized by his Employer. All leaves of
absence shall be granted in a uniform and non-discriminatory manner to all
Employees in similar circumstances.
(a) Any Participant who leaves the active Service of the Employer or an
Affiliate to enter the Armed Forces of the United States of America
during a period of national emergency or compulsory military
service of the United States of America shall be deemed to be on
leave of absence during the period of his Service in such Armed
Forces and during any period after his discharge from such Armed
Forces in which his re-employment rights are guaranteed by law.
(b) "Year of Service" shall mean any computation period during which an
Employee completes one thousand (1,000) or more Hours of Service.
A Year of Service for purposes of determining an Employee's
eligibility to participate in the Plan shall be defined as a twelve
consecutive month period during which the Employee completes 1,000
Hours of Service for the Employer. The initial eligibility
computation period is the twelve-consecutive-month period beginning
on the date the Employee first performs an Hour of Service for the
Employer. Succeeding eligibility computation periods shall
commence with the first Plan Year which commences prior to the
first anniversary of the Employee's initial eligibility computation
period regardless of whether the Employee remains in the Service of
the Employer during his initial eligibility computation period.
For vesting purposes, a Year of Service shall be any Plan Year in
which an Employee completes 1,000 Hours of Service after attainment
of age 18.
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<PAGE>
(c) "Hour of Service" means each hour for which an Employee is directly
or indirectly paid or entitled to payment by the Employer or an
Affiliate for the performance of duties. These hours shall be
credited to the Employee for the computation period or periods in
which the duties are performed.
Hours of Service are to be credited for each hour for which an
Employee is paid, or entitled to payment, by the Employer or an
Affiliate on account of a period of time during which no duties are
performed, irrespective of whether the employment relationship has
terminated due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or leave of absence.
No more than 501 Hours of Service shall be credited under this
paragraph for any single continuous period (whether or not such
period occurs in a single computation period). Hours under this
paragraph shall be calculated and credited pursuant to Section
2530.200b-2(b) and (c) of the Department of Labor Regulations which
are incorporated herein by this reference.
Hours of Service are to be credited for each hour for which back
pay, irrespective of mitigation of damage, has been either awarded
or agreed to by the Employer. These hours shall be credited to the
Employee for the computation period or periods to which the award
or agreement pertains rather than the computation period in which
the award, agreement, or payment was made.
For purposes of crediting Hours of Service for periods during which
no duties were performed, the method of determining the number of
hours to be credited and the method of crediting such hours to
computation periods shall conform to the requirements set forth in
Sections 2530.200(b) 2(b) and (c) of the Department of Labor
Regulations.
Solely for purposes of determining whether a Break in Service for
participation and vesting purposes has occurred in a computation
period, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service
which would otherwise have been credited to such individual, but
for such absence, or in any case in which such hours cannot be
determined, 8 Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (1) by reason of the pregnancy
of the individual, (2) by reason of a birth of a child of the
individual, (3) by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
The hours of Service credited under this paragraph shall be
credited (1) in the computation period in which the absence begins
if the crediting is necessary to prevent a break in Service in that
period, or (2) in all other cases, in the following computation
period.
(d) "Benefit Accrual Computation Period" means the Plan Year.
(e) "Vesting Computation Period" means the Plan Year. Notwithstanding
the foregoing an Employee will be credited with a Year of Service
for vesting purposes for the periods April 1, 1992 through March
31, 1993 and January 1, 1993 through December 31, 1993 if the
Participant completes 1,000 Hours of Service during each such
period.
(f) "Break in Service" means any computation period in which an
Employee works five hundred (500) Hours of Service or less. Except
as otherwise provided above, any year in which an Employee works
more than five hundred (500) Hours of Service, but less than one
thousand (1,000) Hours of Service, shall not be recognized as
Service, but this shall not be a Break in Service.
8
<PAGE>
(g) In the event that an Employee who incurred a Break in Service is
subsequently re-employed, his Years of Service shall be cumulative for vesting
purposes, except that if the Employee, at the time of his Break in Service, had
no vested interest and the number of consecutive one-year Breaks in Service
equals or exceeds the greater of five or the number of pre-break Years of
Service, Years of Service prior to such Breaks in Service shall be disregarded.
The same provision shall apply in the case of an Employee whose Service has been
broken because he worked less than five-hundred (500) Hours of Service in a
given Plan Year when he resumes working at least one thousand (1,000) Hours of
Service per Plan Year.
1.51 "Spouse" shall mean the lawful husband or wife of a Participant on the
date specified.
1.52 "Suspense Account" means the total forfeitable portion of all Former
Participants' Accounts which has not yet become a Forfeiture during any
Plan Year.
1.53 "Taxable Year" means, with respect to each Employer, the fiscal year
adopted by such company from time to time for federal income tax purposes.
1.54 "Total Disability" or "Disability" means a physical or mental condition of
a Participant resulting from bodily injury, disease, or mental disorder
which renders him incapable of continuing any gainful occupation and which
condition constitutes total disability under the Federal Social Security
Acts.
1.55 "Trust Agreement" means the trust agreement set forth in Part II of this
Plan.
1.56 "Trust Fund" means the fund described in Section 13, and maintained in
accordance with the terms of the Trust Agreement.
1.57 "Trustee(s)" means the person(s), or corporation(s), accepting the
appointment of Trustee(s) and acting as such, including any successor
Trustee(s), pursuant to the Trust Agreement.
1.58 "Valuation Date" means the last day of the Plan Year of the Trust Fund.
The fair market value of the assets in the Trust Fund as of any valuation
date shall be determined as the close of business on such date, or, if
such date is not a business day, as of the close of business on the next
preceding business day. On the Valuation Date the Account balances are
valued to determine if the plan is top-heavy. The Valuation Date shall
also be the Determination Date for Top-Heavy Plan calculations.
SECTION 2
---------
Eligibility
-----------
2.1 Participation. Subject to Section 2.6, each Employee shall become a
-------------
Participant, if still an Employee on the later of the Effective Date or
the Entry Date which coincides with or next follows the later of (i) his
attainment of age 21, and (ii) his completion of one (1) Year of Service
for eligibility purposes.
An Employee who terminates employment prior to meeting the Service
requirement set forth in Section 2.1 shall be treated as a new Employee on
the date of his rehire, but only if a Break in Service has occurred prior
to such date of rehire. An Employee meeting the above-stated Service
requirement, but who terminates employment prior to becoming a
Participant, shall become a Participant as of the date of rehire, if a
Break in Service has not occurred prior to such rehire. A rehired
Employee who was a former Participant, shall become a Participant upon his
date of rehire.
2.2 Annual Allocations. Except as provided in Section 5.1(c) hereof, a
------------------
Participant shall be entitled to his interest in the Company's
Contribution for any Plan Year in which (i) he completes 1,000 Hours of
9
<PAGE>
Service during the Plan Year and (ii) he is either employed on the last
day of the Plan Year, or terminated Service prior to the last day of the
Plan Year as the result of his retirement, death, or Total Disability.
2.3 Annual Employer Report to Committee. Within sixty (60) days after the
-----------------------------------
last day of the Fiscal Year, the Employer shall certify to the Committee
in writing such information from its records with respect to Employees as
the Committee may require in order to determine the identity and interests
of the Participants and otherwise to perform its duties hereunder.
Any certification by the Employer of information to the Committee pursuant
to this Plan shall, for all purposes of this Plan, be binding on all
parties in interest, provided that whenever any Employee proves to the
satisfaction of the Employer that his period of Service or his
Compensation as so certified is incorrect, the Employer shall correct such
certification. The Service of any Employee shall be determined solely by
reference to the data certified to the Committee by the Employer.
The determination of the Committee as to the identity of the respective
Participants and as to their respective interests shall be binding upon
the Employer, the Trustees, the Employees, the Participants and all
beneficiaries.
2.4 Transfers. Whenever any Participant is transferred from one Employer who
---------
is a party to the Plan to another Employer who is a party to the Plan, the
Participant may continue on as a Participant in the Plan without any
interruption as if the Participant had at all times been an Employee of
the new Employer; and in the event an affiliated company ceases to be an
Affiliate for any reason whatsoever, this event shall not affect the
continued participation in this Plan of any Participant who becomes an
Employee of the Employer or any other Affiliate under this Plan, and the
Committee shall transfer the Participant's Account from the account of the
withdrawing Affiliate to the Employer or new Affiliate.
2.5 Breaks-in-Service. A Participant who terminates employment with an
-----------------
Employer or suffers a Break-in-Service shall cease to be an active
Participant in this Plan and his Participant's Account shall be placed on
inactive status. Except as provided in Section 2.2, the inactive
Participant's Account shall continue to receive income allocations, but
the inactive Participant shall not share in the Company's contribution for
that Plan Year. Thus, he shall remain a Participant until his account
balances have been distributed to him. Termination of employment may have
resulted from voluntary or involuntary termination of employment,
unauthorized absence, or by failure to return to active employment with
the Employer by the date on which an Authorized Leave of Absence expired.
2.6 Excluded Employees. An Employee shall not participate in the Plan if he
------------------
is included in a unit of Employees covered by an agreement which the
Secretary of Labor finds to be a collective bargaining agreement between
Employee representatives and the Employer or one or more Affiliates,
including the Company, if there is evidence that retirement benefits were
the subject of good faith bargaining between such Employee representatives
and the Employer or such Affiliates. For this purpose, "Employee
Representatives" will not include any organization in which more than half
of the members are Employees who are owners, officers, or executives of
the Employer or an Affiliate.
10
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SECTION 3
---------
Employer Contributions
----------------------
3.1 Amount of Employer Contributions.
--------------------------------
(a) The amount to be contributed by an Employer shall be determined
annually by resolution of its Board of Directors, but shall not
exceed the maximum amount deductible under the applicable
provisions of Section 404 of the Code.
(b) The Committee shall maintain a separate Account for each
Participant, to which it shall credit the Participant's share of
all contributions, in accordance with Section 5, and which shall be
revalued in accordance with Section 6.
(c) The fact that the Company or another Employer may make no
contribution hereunder for any Taxable Year shall not be deemed to
terminate the Plan or the Trust created hereunder.
(d) Matching Employer Contributions: For each Plan Year, the Employer
-------------------------------
may declare and contribute a Matching Employer contribution in an
amount to be determined annually prior to the beginning of a Plan
Year. Such determination shall be at the sole discretion of the
Board of Directors of the Company and may be equal to some
percentage, if any, of the total amount, or portion thereof, of
Salary Deferral Contributions agreed to be made pursuant to salary
deferral agreements under Section 4.1 entered into between the
Employer and Participants for such Plan Year. Matching Employer
contributions made for a given Plan Year shall be deposited in the
Trust Fund no later than the earlier of (a) 30 days following the
end of the Plan Year or (b) the date the Employer files its federal
income tax form for its Taxable Year.
(e) Performance-Related Contributions: In addition, for each Plan
---------------------------------
Year, the Employer shall contribute such additional amount as its
Board of Directors shall determine pursuant to subparagraph (a).
Such additional contribution shall be deemed made on account of a
Plan Year if either (a) the Board of Directors determines the
amount of such contribution by appropriate action and announces the
amount in writing to its Employees before the close of such Plan
Year, or (b) the Employer designates such amount in writing to the
Trustee as payment on account of such Plan Year, or (c) the
Employer claims such amount as a deduc tion on his federal tax
return for the Taxable Year. All additional contributions of the
Employer shall be paid to the Trustee and payment shall be made not
later than the time prescribed by law for filing the federal income
tax return of the Employer, including any extensions which have
been granted for the filing of such tax return.
3.2 Payment of Employer Contributions.
---------------------------------
(a) The Employer's contributions for each Taxable Year shall be paid
directly to the Trustees. As soon as practicable after the time of
each such payment, the Employer shall notify the Committee of the
amount of such contribution. The amount of each such contribution
shall be certified to be true and correct and in accordance with
the terms of the Plan by the Employer or by the independent
accounting firm regularly employed by the Employer, and such
certification shall be final and conclusive upon all persons
interested in the Plan. No adjustment affecting the Employer's net
profit for any Taxable Year, made subsequent to the payment of the
Employer's contribution to the Trustees and resulting from audit of
the Employer's federal income tax return or otherwise, shall change
the amount of such
11
<PAGE>
contributions. The Employer's contribution for any Plan Year shall
be paid in full during the Plan Year, or as soon as practicable
after the close of such year, but not later than the time
prescribed by law for filing the Employer's federal income tax
return for such year (including extensions thereof).
(b) Employer contributions will be paid in cash, Qualifying Employer
Securities, or other property as the Employer's Board of Directors
may from time to time determine. Shares of Qualifying Employer
Securities and other property will be valued at their then fair
market value. However, to the extent that the Trust has current
obligations, including amounts necessary to provide sufficient cash
to pay any currently maturing obligations under an Acquisition
Loan, the Employer contributions will be paid to the Trust in cash
subject to the discretion of the Employer's Board of Directors.
The Employer contribution will be paid to the Trust on or before
the date required to make such contribution qualify as a deduction
on the Employer's federal income tax return for the year.
(c) The Employer may make contributions to the Plan in whole or in part
in the form of Qualifying Employer Securities, provided the
Employer uses the fair market value of the securities as of the
date such contribution is made, as determined by an independent
appraiser, if required under Section 401(a)(28)(C) of the Code,
engaged by the Committee. Such stock may be obtained from its own
reserve or treasury stock, or it may be obtained from open market
purchases.
3.3 Payment of Administrative Expenses. The Employer intends to provide all
----------------------------------
funds required for the administrative expenses of the Plan. Funds not so
provided by the Employer may be paid first from any other Employer, next
from the Trust's earnings, and then from its principal.
3.4 Mistake in Fact. If, due to a mistake in fact, the Employer contributions
---------------
to the Trust for any Plan Year exceeds the amount to be contributed by it,
notwithstanding any provision to the contrary, the Committee shall direct
the Trustee, as soon as such a mistake in fact is discovered, to either
segregate such amount and return such amount to the Employer within one
year after the payment of the contribution or apply it towards the
contribution of the Employer for the next Plan Year(s).
SECTION 4
---------
Participant's Contributions
---------------------------
4.1 Participant Salary Deferral: Each Year, a Participant may elect to enter
into a written salary deferral agreement with the Employer which will be
applicable to all payroll periods within such Plan Year. The terms of any
such salary deferral agreement shall provide that the Participant agrees
to accept a deferral in salary from the Employer equal to any whole
percentage, equal to at least 1% but not more than 15% of his Compensation
per payroll period, not to exceed $7,000 in a calendar year as indexed
under Section 402(g)(5) of the Code (for 1996, such amount is indexed at
$9,500). In consideration of such agreement, the Employer will make a
salary deferral contribution to the Participant's Salary Deferral
Contribution Account on behalf of the Participant for such Plan Year in an
amount equal to the total amount by which the Participant's Compensation
from the Employer was deferred during the Plan Year pursuant to the salary
deferral agreement. For purposes of this Section 4.1, the term
"Compensation" is defined in Section 1.11.
Further, salary deferral agreements shall be governed by the following:
12
<PAGE>
(a) A salary deferral agreement shall apply to each payroll period
during which an effective salary deferral agreement is on file with
the Employer.
(b) A salary deferral agreement may be amended by a Participant at any
time during the Plan Year if the purpose of the amendment is to
cease all such Participant's Salary Deferral Contributions. Such
election to cease such contributions will be effective as of the
next payroll period following the Employer's receipt of such
election form, or as soon as administratively feasible. A
Participant may resume salary deferral contributions at the next
Entry Date following timely submission of a new election form.
(c) A salary deferral agreement may be amended by a Participant at any
time during the Plan Year if the purpose of the amendment is to
increase or decrease the amount of such Participant's Compensation
which is subject to salary deferral to be effective the following
January 1, April 1, July 1 or October 1.
(d) The Employer may amend or revoke its salary deferral agreement with
any Participant at any time, if the Employer determines that such
revocation or amendment is necessary to insure that a Participant's
contributions or annual additions for any Plan Year will not exceed
the limitations of Sections 4.1 or 5.2 or to insure that the
discrimination tests of Section 401(k) of the Code are met for such
Plan Year as provided in Section 4.3 below.
(e) Except as provided above, a salary deferral agreement applicable to
any given Plan Year, once made, may not be revoked or amended by
the Participant.
No amounts may be withdrawn by a Participant from his Salary Deferral
Contribution Account prior to termination of employment with the Employer.
4.2 The Trustee shall not accept "Rollover Contributions" from any
Participant.
4.3 Limitations: The Employer may limit, revoke or amend its agreement to
make salary deferred contributions under Section 5.1(b) on behalf of any
Participant at any time, but only if it determines that such limitation,
revocation, or amendment is necessary under one of the following
circumstances:
(a) in the case of the Participant's Salary Deferral Contributions, to
insure that the discrimination tests of Section 401(k) of the Code
governing permissible levels of salary deferred contributions are
met for such Plan Year, or to insure that one of the following
tests is met for such Plan Year:
(1) The Actual Average Deferral Percentage of the salary-deferred
contributions of the Highly-Compensated Employees eligible to
participate is not more than 1.25 times the Actual Average
Deferral Percentage of the salary-deferred contributions for
all other Employees eligible to participate; or
(2) the Actual Average Deferral Percentage of the salary-deferred
contributions for the Highly-Compensated Employees eligible to
participate: (i) is not more than 2.0 times the Actual Average
Deferral Percentage of the salary-deferred contributions for
all other Employees eligible to participate and the Actual
Average Deferral Percentage of the salary deferred
contributions for the Highly-Compensated Employees eligible to
participate; and (ii) does not exceed the Actual Average
Deferral Percentage of the salary deferred contributions for
all other Employees eligible to participate by more than two
(2) percentage points. The provisions of Code Section
401(k)(3) and Regulation 1.401(k)-1(b) are incorporated herein
by reference.
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However, for Plan Years beginning after December 31, 1988, in
order to prevent the multiple use of the alternative method
described in (2) above and in Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make Salary Deferral
Contributions pursuant to Section 4.1 and to receive Employer
matching contributions under this Plan or under any other plan
maintained by the Employer or an Affiliated Employer shall have
his actual contribution ratio reduced pursuant to Regulation
1.401(m)-2, the provisions of which are incorporated herein by
reference; or
(b) to insure that a Participant's additions for any Plan Year will not
exceed the limitations of Sections 4.1 or 5.2; or
(c) to insure deductibility of the Employer's entire contribution to
the Plan for federal income tax purposes.
If a limitation or amendment becomes necessary pursuant to paragraph (a)
or (c) above, such limitation or amendment will be first applied to the
Participant who is the Highly-Compensated Employee electing the highest
percentage of salary deferred contributions pursuant to Section 4.1 until
the tests of (a) or (c) are met or until such Participant's election
pursuant to Section 5.1(b) is reduced to the same percentage level as the
Participant who is the Highly-Compensated Employee electing the second
highest percentage of tax-deferred savings contributions pursuant to
Section 4.1. If further limitations are required, then both such
Participants' percentage elections shall be reduced until the tests of (a)
or (c) are met or until the two Participants' elections pursuant to
Section 5.1(b) are reduced to the same percentage level as the Participant
who is the Highly-Compensated Employee electing the third highest
percentage of salary deferred contributions pursuant to Section 5.1(b),
and such limitations or amendments shall continue to be made in a similar
manner from the Participants who are Highly-Compensated Employees making
the highest percentage elections to the lowest until the tests of (a) or
(c) are satisfied. The Employer shall have the right to include the
salary-deferred contributions for purposes of meeting the limitation under
this Section 4.3
If a Participant is prevented from making a portion of his salary deferral
contributions due to a permissible limitation, revocation, or amendment by
the Employer, such portion shall be considered taxable income to the
Participant in the tax year for which the contribution was made, and after
appropriate taxes have been withheld, shall be returned to the Participant
prior to its contribution to the Trust Fund. Such contributions,
including any income and minus any loss allocable thereto, shall be
distributed no later than the last day of the Plan Year to the
Participants whose accounts such contributions were allocated. If such
amounts are distributed more than 2 1/2 months after the last day of the
Plan Year in which such excess amounts arose, a ten (10) percent excise
tax will be imposed on the Company with respect to such amounts.
For purposes of this Section 4.3, the following meanings shall attach.
The "Actual Average Deferral Percentage" for a specified group of
Employees for a Plan Year shall be the average of the ratios (calculated
separately for each Employee in such group) of the amount of Employer
contributions actually paid over to the Trust on behalf of each such
Employee for each Plan Year to the Employee's Compensation for such Plan
Year. The term "Compensation" shall be defined as is contained in Section
1.11 of the Plan
The actual deferral ratio for each Participant and the Actual Deferral
Percentage for each group shall be calculated to the nearest one-hundredth
of one percent for Plan Years beginning after December 31, 1988. Elective
Contributions allocated to each Non-Highly Compensated Participant's
Elective Account shall be reduced by Excess Deferred Compensation to the
extent such excess amounts are made under this Plan or any other plan
maintained by the Employer.
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<PAGE>
For the purpose of determining the actual deferral ratio of a Highly
Compensated Employee who is subject to the Family Member aggregation rules
of Code Section 414(q)(6) because such Participant is either a "five
percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest Compensation during the Plan Year, the
following shall apply:
(1) The combined actual deferral ratio for the family group (which
shall be treated as one Highly Compensated Participant) shall
be the greater of (i) the ratio determined by aggregating
Elective Contributions and Compensation of all eligible Family
Members who are Highly Compensated Participants without regard
to family aggregation; and (ii) the ratio determined by
aggregating Elective Contributions and Compensation of all
eligible Family Members (including Highly Compensated
Participants). However, in applying the $150,000 limit to
Compensation, for Plan Years beginning after December 31, 1988,
Family Members shall include only the affected Employee's
spouse and lineal descendants who have not attained age 19
before the close of the Plan Year.
(2) The Elective Contributions and Compensation of all Family
Members shall be disregarded for purposes of determining the
Actual Deferral Percentage of the Non-Highly Compensated
Participant group except to the extent taken into account in
paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one family group in accordance with paragraphs
(1) and (2) above.
For the purposes of Section 4.3 and 4.6, a Highly Compensated Participant
and a Non-Highly Compensated Participant shall include any Employee
eligible to make a deferral election pursuant to Section 4.1, whether or
not such deferral election was made or suspended pursuant to Section 4.1.
For the purposes of this Section, if two or more plans (other than an
employee stock ownership plan as defined in Code Section 4975(e)(7) for
Plan Years beginning after December 31, 1988) which include cash or
deferred arrangements are considered one plan for the purposes of Code
Section 401(a)(4) or 410(b), the cash or deferred arrangements included in
such plans shall be treated as one arrangement.
For the purposes of this Section, if a Highly Compensated Participant is a
Participant under two (2) or more cash or deferred arrangements of the
Employer or an Affiliated Employer, all such cash or deferred arrangements
shall be treated as one (1) cash or deferred arrangement for the purpose
for determining the deferral percentage with respect to such Highly
Compensated Participant. However, with respect to Plan Years beginning
after December 31, 1988, if the cash or deferred arrangements have
different Plan Years, this paragraph shall be applied by treating all cash
or deferred arrangements ending with or within the same calendar year as a
single arrangement.
4.4 A percentage of a Participant's Salary Deferral Contributions, as may be
determined by the Board of Directors of the Company is eligible for
Employer matching contributions as determined by the Salary Deferral
Election Form, pursuant to Sections 5.1(c) and 5.2(b).
4.5 The Salary Deferral Contribution Account shall be invested in a Money
Market Savings Account maintained at the Company or other appropriate
insured institution earning interest at the rate paid to such accounts, or
in such other manner as may be permitted and directed by the Trustee.
15
<PAGE>
4.6 Adjustment to Actual Deferral Percentage Tests: In the event that the
initial allocations of the Elective Contributions made pursuant to Section
4.1 do not satisfy one of the tests set forth in Section 4.3 for Plan
Years, the Administrator shall adjust Excess Contributions pursuant to the
options set forth below:
(a) On or before the fifteenth day of the third month following the end
of each Plan Year, the Highly Compensated Participant having the
highest actual deferral ratio shall have his portion of Excess
Contributions distributed to him or her until one of the tests set
forth in Section 4.3 is satisfied, or until his actual deferral
ratio equals the actual deferral ratio of the Highly Compensated
Participant having the second highest actual deferral ratio. This
process shall continue until one of the tests set forth in Section
4.3 is satisfied. For each Highly Compensated Participant, the
amount of Excess Contributions is equal to the Elective
Contributions on behalf of such Highly Compensated Participant
(determined prior to the application of this paragraph) minus the
amount determined by multiplying the Highly Compensated
Participant's actual deferral ratio (determined after application
of this paragraph) by his Compensation. However, in determining
the amount of Excess Contributions to be distributed with respect
to an affected Highly Compensated Participant as determined herein,
such amount shall be reduced by any Excess Deferred Compensation
previously distributed to such affected Highly Compensated
Participant for his taxable year ending with or within such Plan
Year.
(1) With respect to the distribution of Excess Contributions
pursuant to (a) above, such distribution:
(i) may be postponed but no later than the close of the
succeeding Plan Year;
(ii) shall be made first from unmatched Deferred Compensation
and, thereafter, simultaneously from Deferred Compensation
which is matched and matching contributions which relate
to such Deferred Compensation. However, any such matching
contributions which are not vested shall be forfeited in
lieu of being distributed;
(iii) shall be adjusted for earnings; and
(iv) shall be designated by the Employer as a distribution of
Excess Contributions (and earnings).
(2) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution of
Excess Contributions and earnings.
(b) The determination and correction of Excess Contributions of a
Highly Compensated Participant whose actual deferral ratio is
determined under the family aggregation rules shall be
accomplished as follows:
(1) If the actual deferral ratio for the Highly Compensated
Participant is determined in accordance with Section
4.5(c)(1)(ii), then the actual deferral ratio shall be reduced
as required herein and the Excess Contributions for the family
unit shall be allocated among the Family Members in proportion
to the Elective Contributions of each Family Member that were
combined to determine the group actual deferral ratio.
(2) If the actual deferral ratio for the Highly Compensated
Participant is determined under Section 4.3 under the Family
Aggregation rules, then the actual deferral ratio shall first
be reduced as required herein, but not below the actual
deferral ratio of the group
16
<PAGE>
of Family Members who are not Highly Compensated Participants
without regard to family aggregation. The Excess Contributions
resulting from this initial reduction shall be allocated (in
proportion to Elective Contributions) among the Highly
Compensated Participants whose Elective Contributions were
combined to determine the actual deferral ratio. If further
reduction is still required, then Excess Contributions
resulting from this further reduction shall be determined by
taking into account the contributions of all Family Members and
shall be allocated among them in proportion to their respective
Elective Contributions.
(c) Within twelve (12) months after the end of the Plan Year, the
Employer shall make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated Participants
in an amount sufficient to satisfy one of the tests set forth
in Section 4.3. Such contribution shall be allocated to the
Participant's Elective Account of each Non-Highly Compensated
Participant in the same proportion that each Non-Highly
Compensated Participant's Compensation for the Plan Year bears
to the total Compensation of all Non-Highly Compensated
Participants.
4.7 Actual Contribution Percentage Tests
------------------------------------
(a) The "Actual Contribution Percentage" for Plan Years for the
Highly Compensated Participant group shall not exceed the
greater of:
(1) 125 percent of such percentage for the Non-Highly Compensated
Participant Group; or
(2) the lesser of 200 percent of such percentage for the Non-Highly
Compensated Participant group, or such percentage for the Non-
Highly Compensated Participant plus 2 percentage points.
However, for Plan Years beginning after December 31, 1988, to
prevent the multiple use of the alternative method described in
this paragraph and Code Section 401(m)(9)(A), any Highly
Compensated Participant eligible to make elective deferrals
pursuant to Section 4.1 or any other cash or deferred
arrangement maintained by the Employer or an Affiliated
Employer and to make Employee contributions or to receive
matching contributions under this Plan or under any other plan
maintained by the Employer or an Affiliated Employer shall have
his actual contribution ratio reduced pursuant to Regulation
1.401(m)-2. The provisions of Code Section 401(m) and
Regulations 1.401(m)-1(b) and 1.401(m)-2 are incorporated
herein by reference.
(b) For the purposes of this Section and Section 4.8, "Actual
Contribution Percentage" for a Plan Year means, with respect to
the Highly Compensated Participant group and Non-Highly
Compensated Participant group, the average of the ratios
(calculated separately for each Participant in each group) of:
(1) the sum of Employer matching contributions made pursuant to
Section 5.1 on behalf of each such Participant for such Plan
Year; to
(2) the Participant's "Compensation" for such Plan Year as defined
at Section 4.3.
(c) For purposes of determining the "Actual Contribution
Percentage" and the amount of Excess Aggregate Contributions
pursuant to Section 4.8(d), only Employer matching
contributions contributed to the Plan prior to the end of the
succeeding Plan Year shall be considered. In addition, the
Administrator may elect to take into account, with
17
<PAGE>
respect to Employees eligible to have Employer matching
contributions pursuant to Section 5.1 allocated to their
accounts, elective deferrals (as defined in Code Section
401(m)(4)(C)) contributed to any plan maintained by the
Employer. Such elective deferrals and qualified non-elective
contributions shall be treated as Employer matching
contributions subject to Regulation 1.401(m)-1(b)(2) which is
incorporated herein by reference. However, for Plan Years
beginning after December 31, 1988, the Plan Year must be the
same as the plan year of the plan to which the elective
deferrals and the qualified non-elective contributions are
made.
(d) For the purpose of determining the actual contribution ratio of
a Highly Compensated Employee who is subject to the Family
Member aggregation rules of Code Section 414(q)(6) because such
Employee is either a "five percent owner" of the Employer or
one of the ten (10) Highly Compensated Employees paid the
greatest "Compensation" during the year, the following shall
apply:
(1) The combined actual contribution ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be the greater of: (i) the ratio determined by
aggregating Employer matching contributions made pursuant to
Section 5.1 and "Compensation" as defined at Section 4.3 of all
eligible Family Members who are Highly Compensated Participants
without regard to family aggregation; and (ii) the ratio
determined by aggregating Employer matching contributions made
pursuant to Section 5.1 and "Compensation" as defined at
Section 4.3 of all eligible Family Members (including Highly
Compensated Participants). However, in applying the $200,000
limit to Compensation for Plan Years beginning after December
31, 1988, Family Members shall include only the affected
Employee's spouse and any lineal descendants who have not
attained age 19 before the close of the Plan Year.
(2) The Employer matching contributions made pursuant to Section
5.1 and Compensation of all Family Members shall be disregarded
for purposes of determining the "Actual Contribution
Percentage" of the Non-Highly Compensated Participant group
except to the extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one family group in accordance with paragraphs
(1) and (2) above.
(e) For purposes of this Section, if two or more plans of the
Employer to which matching contributions, Employee
contributions, or elective deferrals are made are treated as
one plan for purposes of Code Sections 401(a)(4) or 410(b)
(other than the average benefits test under Code Section
410(b)(2)(A)(ii)), such plans shall be treated as one plan for
purposes of this Section 4.7. In addition, two or more plans
of the Employer to which matching contributions, Employee
contributions, or elective deferrals are made may be considered
as a single plan for purposes of this Section. In such a case,
the aggregated plans must satisfy Code Sections 401(a)(4) and
410(b) as though such aggregated plans were a single plan.
(f) If a Highly Compensated Participant participates in two or more
plans which are maintained by the Employer or an Affiliated
Employer to which matching contributions, Employee
contributions, or elective deferrals are made, all such
contributions on behalf of such Highly Compensated Participant
shall be aggregated for purposes of this Section 4.7.
18
<PAGE>
(g) For purposes of Sections 4.7(a) and 4.8, a Highly Compensated
Participant and Non-Highly Compensated Participant shall
include any Employee eligible to have Employer matching
contributions pursuant to Section 5.1 (whether or not a
deferral election was made or suspended pursuant to Section
4.1) allocated to his Account for the Plan Year.
4.8 Adjustment to Actual Contribution Percentage Tests
--------------------------------------------------
(a) In the event that, for a given Plan Year, the "Actual Contribution
Percentage" for the Highly Compensated Participant group exceeds
the "Actual Contribution Percentage" for the Non-Highly Compensated
Participant group pursuant to Section 4.7(a), the Administrator (on
or before the fifteenth day of the third month following the end of
the Plan Year, but in no event later than the close of the
following Plan Year) shall direct the Trustee to distribute to the
Highly Compensated Participant having the highest actual
contribution ratio his vested portion of Excess Aggregate
Contributions (and earnings allocable to such contributions) or, if
forfeitable, forfeit such non-vested Excess Aggregate Contributions
(and earnings allocable to such Forfeitures) until either one of
the tests set forth in Section 4.7(a) is satisfied, or until his
actual contribution ratio equals the actual contribution ratio of
the Highly Compensated Participant having the second highest actual
contribution ratio. This process shall continue until one of the
tests set forth in Section 4.7(a) is satisfied. The distribution
and/or Forfeiture of Excess Aggregate Contributions shall be made
in the following order:
(1) Employer matching contributions distributed and/or forfeited
pursuant to Section 4.6(a)(1);
(2) Remaining Employer matching contributions.
(b) Any distribution and/or Forfeiture of less than the entire amount
of Excess Aggregate Contributions (and earnings) shall be treated
as a pro rata distribution and/or Forfeiture of Excess Aggregate
Contributions and earnings. Distribution of Excess Aggregate
Contributions shall be designated by the Employer as a distribution
of Excess Aggregate Contributions (and earnings). Forfeitures of
Excess Aggregate Contributions shall be treated in accordance with
Section 5.1.
(c) Excess Aggregate Contributions, including forfeited matching
contributions, shall be treated as Employer contributions for
purposes of Code Sections 404 and 415 even if distributed from the
Plan.
(d) For each Highly Compensated Participant, the amount of Excess
Aggregate Contributions is equal to the total Employer matching
contributions made pursuant to Section 5.1 and any qualified non-
elective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) on behalf of the Highly Compensated
Participant (determined prior to the application of this paragraph)
minus the amount determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined after
application of this paragraph) by his "Compensation" as defined at
Section 4.3. The actual contribution ratio must be rounded to the
nearest one-hundredth of one percent for Plan Years beginning after
December 31, 1988. In no case shall the amount of Excess Aggregate
Contribution with respect to any Highly Compensated Participant
exceed the amount of Employer matching contributions made pursuant
to Section 5.1 and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.7(c) on
behalf of such Highly Compensated Participant for such Plan Year.
19
<PAGE>
(e) The determination of the amount of Excess Aggregate Contributions
with respect to any Plan Year shall be made after first determining
the Excess Contributions, if any, to be treated as voluntary
Employee contributions due to recharacterization for the plan year
of any other qualified cash or deferred arrangement (as defined in
Code Section 401(k)) maintained by the Employer that ends with or
within the Plan Year.
(f) The determination and correction of Excess Aggregate Contributions
of a Highly Compensated Participant whose actual contribution ratio
is determined under the family aggregation rules shall be
accomplished as follows:
(1) If the actual contribution ratio for the Highly Compensated
Participant is determined in accordance with Section
4.7(d)(1)(ii), then the actual contribution ratio shall be
reduced and the Excess Aggregate Contributions for the family
unit shall be allocated among the Family Members in proportion
to the sum of Employer matching contributions or elective
deferrals taken into account pursuant to Section 4.7(c) of each
Family Member that were combined to determine the group actual
contribution ratio.
(2) If the actual contribution ratio for the Highly Compensated
Participant is determined under Section 4.7(d)(1)(i), then the
actual contribution ratio shall first be reduced, as required
herein, but not below the actual contribution ratio of the
group of Family Members who are not Highly Compensated
Participants without regard to family aggregation. The Excess
Aggregate Contributions resulting from this initial reduction
shall be allocated among the Highly Compensated Participants
whose Employer matching contributions made pursuant to Section
5.1 and any qualified non-elective contributions or elective
deferrals taken into account pursuant to Section 4.7(c) were
combined to determine the actual contribution ratio. If
further reduction is still required, then Excess Aggregate
Contributions resulting from this further reduction shall be
determined by taking into account the contributions of all
Family Members and shall be allocated among them in proportion
to their respective Employer matching contributions made
pursuant to Section 5.1 and any qualified non-elective
contributions or elective deferrals taken into account pursuant
to Section 4.7(c).
(g) Notwithstanding the above, within twelve (12) months after the end
of the Plan Year, the Employer may make a special Qualified Non-
Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of the tests
set forth in Section 4.7(a). Such contribution shall be allocated
to the Participant's Elective Account of each Non-Highly
Compensated Participant in the same proportion that each Non-Highly
Compensated Participant's Compensation for the year bears to the
total Compensation of all Non-Highly Compensated Participants. A
separate accounting shall be maintained for the purpose of
excluding such contributions from the "Actual Deferral Percentage"
tests pursuant to Section 4.5(a).
4.9 Aggregate Limit Test. Notwithstanding any other provision of the Plan,
--------------------
the sum of the Actual Deferral Percentage and the Actual Contribution
Percentage, determined in accordance with this Section 4, of those
Employees who are Highly Compensated Employees may not exceed the
aggregate limit as determined below. For purposes of this Section 4, the
"aggregate limit" for a Plan Year is the greater of:
1. The sum of:
(a) 1.25 times the greater of the relevant Actual Deferral Percentage
or the relevant Actual Contribution Percentage, and
20
<PAGE>
(b) Two percentage points plus the lesser of the relevant Actual
Deferral Percentage or the relevant Actual Contribution Percentage.
In no event, however, shall this amount exceed twice the lesser of
the relevant Actual Deferral Percentage or the relevant Actual
Contribution Percentage; or
2. The sum of:
(a) 1.25 times the lesser of the relevant Actual Deferral Percentage or
the relevant Actual Contribution Percentage, and
(b) Two percentage points plus the greater of the relevant Actual
Deferral Percentage or the relevant Actual contribution Percentage.
In no event, however, shall this amount exceed twice the greater of
the relevant Actual Deferral Percentage or the relevant Actual
Contribution Percentage; provided, however, that if a less
restrictive limitation is prescribed by the IRS, such limitation
shall be used in lieu of the foregoing. The relevant Actual
Deferral Percentage and relevant Actual Contribution Percentage are
defined in accordance with the code and the IRS Regulations.
The Administrator shall determine as of the end of the Plan Year whether
the aggregate limit has been exceeded. This determination shall be made after
first determining the treatment of Excess Contributions as described in Section
4.6 above, then determining the treatment of Excess Aggregate Contributions
under Section 4.8 hereof. In the event that the aggregate limit is exceeded,
the Actual Contribution Percentage of those Employees who are highly Compensated
Employees shall be reduced in the same manner as described in Section 4.8 hereof
until the aggregate limit is no longer exceeded, unless the Administrator
designates, in lieu of the reduction of the Actual Contribution Percentage a
reduction the Actual Deferral Percentage of those Employees who are highly
Compensated Employees, which reduction shall occur in the same manner as
described in Section 4.8 hereof until the aggregate limit is no longer exceeded.
SECTION 5
---------
Allocation of Contributions
---------------------------
5.1 Allocations Generally. The Company contribution, as increased by
---------------------
Forfeitures as provided in Section 10, for each Plan Year as determined
under Section 3.1 shall be allocated by the Committee, as of the close of
such Plan Year, to the Accounts of all Participants as follows:
(a) Basic Employer Contributions: The basic Employer contribution,
increased by any forfeitures (available after allocation under
Section 5.1(c)) shall be allocated to each such Participant's
Account who was in the active employ of the Employer on the last
day of the Plan Year, or who terminated employment for reasons of
death, disability or retirement, in proportion to the ratio which
his Compensation for the Plan Year bears to the total Compensation
of all such Participants eligible to share in Employer
contributions for the Plan Year; provided that with respect to
Participants who are Highly Compensated Employees and entitled
under Section 2.2 hereof to share in an allocation for the Plan
Year, their Compensation for purposes of this Section shall be
reduced pro rata to the extent necessary to ensure that their
aggregate Compensation for the Plan Year does not exceed one third
of the aggregate Compensation of all Participants who are entitled
under Section 2.2 to share in an allocation for the Plan Year.
(b) Participant's Salary Deferral Contributions: The Employer
contribution for a Plan Year pursuant to a Participant's Salary
Deferral Agreement entered into with a Participant under
21
<PAGE>
Section 4.1 for such Plan Year shall be allocated to the
Participant's Salary Deferral Contribution Account no later than 30
days from the end of such Plan Year. Notwithstanding any provision
of this Plan to the contrary, Participants' Salary Deferral
Contributions shall not be used by the Trustee to make payments on
an Acquisition Loan.
(c) Employer Matching Contributions: With respect to Participant
Salary Deferral Contributions made to the Trust, the Company
intends to contribute Employer matching contributions associated
with such Participant Contributions for allocation to such
Participant Accounts on the last day of the Plan Year, provided
that each Participant's Account shall receive such allocations
irrespective of whether the Participant has satisfied the
allocation eligibility requirements of Section 2.2 hereof. Such
Employer matching contributions shall be allocated according to the
percentage match approved by the Board of Directors of the Company
for that Plan Year. Such Company contributions for this purpose
shall be increased by available Forfeitures which shall be
allocated as Employer matching contributions. Notwithstanding the
foregoing, the Trustee shall reduce on a pro rata basis, each
Participant's share of Employer matching contributions and utilize
the resulting funds to pay any amounts currently due under an
outstanding Acquisition Loan. Qualifying Employer Securities
released from the Loan Suspense Account, as described in Section
6.1(a) hereof, as a result of such payments shall be allocated in
direct proportion to the Employer matching contributions to which
each Participant would otherwise have been entitled under this
Section 5.1(c).
(d) Performance-Related Contribution: Each year the Company may make
additional contributions to the Trust Fund solely at the discretion
of the Board of Directors on a nondiscriminatory basis, either as
an additional contribution to the Basic Company Contribution under
Section 3.1(a) or as an increase in the Employer matching
contributions under Section 3.1(d).
5.2 Maximum Limitations on Allocations of Contributions.
---------------------------------------------------
(a) The maximum annual additions that may be contributed or allocated
to a Participant's Account for any Limitation Year shall not exceed
the lesser of the "defined contribution dollar limitation" (as
defined in Section 5.2(b) hereof), and 25 percent of the
Participant's "compensation" (as defined in Section 5.2(c) hereof).
Annual additions to a Participant's Account include the sum of:
(i) Employer contributions,
(ii) Forfeitures,
(iii) Employee contributions,
(iv) amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Code Section 415(l)(2), that is
part of a pension or annuity plan maintained by the Employer,
(v) amounts derived from contributions paid or accrued after
December 31, 1985, in Taxable Years ending after such date,
that are attributable to post-retirement medical benefits
allocated to the separate account of a Key Employee, as defined
in Section 11.7.7 hereof, under a welfare benefit fund, as
defined in Code Section 419(e), maintained by the Employer, and
22
<PAGE>
(vi) allocations under a simplified employee pension.
(b) The defined contribution dollar limitation shall be $30,000 or if
greater, 25% of the defined benefit dollar limitation set forth in
Code Section 415(b)(1) as in effect for the Plan Year. In
determining the above limitations, all defined contribution plans
of the Employer shall be considered as one plan.
(c) Compensation for purposes of this Section shall mean an Employee's
wages which are subject to federal income tax withholding pursuant
to Section 3401(a) of the Code, but determined without regard to
any rules that limit the remuneration included in wages based on
the nature or location of the employment or the services performed
(such as the exception for agricultural labor in section 3401(a)(2)
of the Code).
Notwithstanding the foregoing, for purposes of this Section 5.2
only, compensation for a Participant who is Totally Disabled is the
compensation such Participant would have received for the Plan Year
if the Participant had been paid at the rate of compensation paid
immediately before becoming Totally Disabled; such imputed
compensation for the disabled Participant may be taken into account
only if the Participant is not a Highly Compensated Employee and
contributions made on behalf of such Participant are nonforfeitable
when made.
(d) If a short Plan Year is created because of an amendment changing
the Plan Year to a different 12-consecutive-month period, the
maximum permissible annual additions will not exceed the defined
contribution dollar limitation multiplied by the following
fraction:
Number of months in the short Plan Year
---------------------------------------
12
(e) Should not more than one-third of the Employer contributions for a
year which are deductible be allocated to Highly Compensated
Employees, the above annual addition limits shall not include
Forfeitures of Qualifying Employer Securities if such securities
were acquired with the proceeds of an Acquisition Loan or acquired
with deductible Employer contributions used to pay interest on such
Acquisition Loan and charged to such Participant's Account.
(f) If there should be an excessive annual addition for any
Participant's Account as a result of the allocation of Forfeitures,
a reasonable error in estimating a Participant's annual
compensation, a reasonable error in determining the amount of
"elective deferrals" within the meaning of Code Section 402(g)(3)
that may be made with respect to any individual under the limits of
Code Section 415, or under other limited facts and circumstances
which the Commissioner of the Internal Revenue Service finds
justifiable, the excess shall be disposed of as follows:
(i) Any Salary Deferral Contributions, to the extent they would
reduce the excessive annual addition, will be returned to the
Participant;
(ii) If after the application of paragraph (i) an excessive annual
addition still exists, and the Participant is covered by the
Plan at the end of the Limitation Year, the excess in the
Participant's Account will be used to reduce Employer
contributions (including any allocation of Forfeitures) to
such Account in the next Limitation Year, and each succeeding
Limitation Year if necessary; provided that the Committee
shall have the discretion, to be exercised on a uniform and
nondiscriminatory basis, to allocate said excess to the
Participant's Account together with the amount otherwise
allocable under Section 5.1 hereof, but only to the extent
permissible under Code Section 401(a)(4).
23
<PAGE>
(iii) If after the application of paragraphs (i) and (ii) an
excessive annual addition still exists, and the Participant is
not covered by the Plan at the end of the Limitation Year, the
excessive annual addition will be held unallocated in a
Suspense Account. The Suspense Account will be applied to
reduce future Employer contributions (including allocation of
any Forfeitures) for all remaining Participants in the next
Limitation Year, and each succeeding Limitation Year if
necessary.
(iv) If a Suspense Account is in existence at any time during the
Limitation Year pursuant to this section, it will not
participate in the allocation of the trust's investment gains
and losses. If a Suspense Account is in existence at any time
during a particular Limitation Year, all amounts in the
Suspense Account must be allocated and reallocated to
Participants' Accounts before any Employer or Employee
contributions may be made to the Plan for that Limitation
Year. Excess amounts may not be distributed directly to
Participants or former Participants.
5.3 Multiple Plan Reduction: If an Employee is a Participant in one or more
-----------------------
defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan fraction
and the defined contribution plan fraction for any year may not exceed
1.0. The defined benefit plan fraction for any year is a fraction (a) the
numerator of which is the projected "annual benefit" of the Participant
under the Plan (determined as of the close of the Plan Year), and (b) the
denominator of which is the lesser of: (1) the product of 1.25 multiplied
by the maximum dollar limitation in effect under Section 415(b)(1)(A) of
the Code for such year, or (2) the product of 1.4 multiplied by the amount
which may be taken into account under Section 415(b)(1)(B) of the Code for
such year.
The defined contribution plan fraction for any year is a fraction (a) the
numerator of which is the sum of the "annual additions" to the
Participant's Account as of the close of the Plan Year and (b) the
denominator of which is the sum of the lesser of the following amounts
determined for such year and each prior year of service with the Employer:
(1) the product of 1.25 multiplied by the dollar limitation in effect
under Section 415(c)(1)(A) of the Code for such year (determined without
regard to Section 415(c)(6) of the Code), or (2) the product of 1.4
multiplied by the amount which may be taken into account under Section
415(c)(1)(B) of the Code for such year.
(a) Top-Heavy Plans. Notwithstanding the foregoing, for any Top-Heavy
---------------
Plan Year, 1.0 shall be substituted for 1.25 unless the extra
minimum allocation pursuant to Section 11.5 is being made.
However, for any Plan Year in which this Plan is a Super Top-Heavy
Plan, 1.0 shall be substituted for 1.25 in any event.
(i) Special Rule for Defined contribution Fraction: At the
election of the Administrator, in applying the provisions of
Section 5.3 with respect to the defined contribution plan
fraction for any Plan Year ending after December 31, 1982, the
amount taken into account for the denominator for each
Participant for all Plan Years ending before January 1, 1983
shall be an amount equal to the product of (a) the amount of
the denominator determined under Section 5.3 for Plan Years
ending before January 1, 1982, multiplied by (b) the
"transition fraction".
For purposes of the preceding paragraph, the term "transition
fraction" means a fraction (a) the numerator of which is the
lesser of (1) $51,875 or (2) 1.4 multiplied by twenty-five
percent (25%) of the Participant's compensation for the Plan
Year ending in 1981, and (b) the denominator of which is the
lesser of (1) $41,500 or (2) twenty-five percent (25%) of the
Participant's compensation for the Plan Year ending in 1981.
24
<PAGE>
(ii) Excessive Benefit: If the sum of the defined benefit plan
fraction and the defined contribution plan fraction exceeds
1.0 in any year for any Participant in this Plan, the
Employer shall adjust the numerator of the defined
contribution plan fraction so that the sum of both fractions
shall not exceed 1.0 in any year for such Participant.
(iii) Limitation Year: For purposes of determining "annual
additions", the limitation year shall be the Plan Year.
(iv) In the case of a group of Employers which constitutes either
a controlled group of corporations, trades or businesses
under a common control (as defined in Section 1563(a) or
Section 414(b) or (c) as modified by Section 415(h) of the
Code), or an affiliated service group (as defined by Section
414(m) of the Code), all such Employers shall be considered
as a single Employer for purposes of applying the limitation
of Section 415 of the Code.
(v) Notwithstanding the foregoing or Section 5.3, the annual
addition for any Limitation Year beginning before January 1,
1988 shall not be recomputed to treat all Employee
contributions as an Annual Addition.
(b) Coordination of Plans. If the Employer maintains one or more
---------------------
defined contribution plans in addition to this Plan, and there is
an excessive annual addition to any Participant's Account, said
excess shall be addressed in the first instance under the other
defined contribution plans. To the extent an excess remains after
exhaustion of the procedures set forth under such other defined
contribution plans, the excess shall be eliminated pursuant to
Section 5.2(f) of this Plan.
SECTION 6
---------
Allocation To Participant's Accounts
------------------------------------
6.1 General Rules.
-------------
(a) The Company Stock Account maintained for each Participant will be
credited annually with his allocable share of Qualifying Employer
Securities (including fractional shares) purchased and paid for by
the Trust or contributed in kind to the Trust.
Financed Shares shall initially be credited to a "Loan Suspense
Account" and shall be allocated to the Company Stock Accounts of
Participants only as payments on the Acquisition Loan are made by
the Trustee. The number of Financed Shares to be released from the
Loan Suspense Account for allocation to Participant's Company Stock
Accounts for each Plan Year shall be determined by the Plan
Committee in the Exempt Loan documents under either method (1) or
(2) below, as follows:
(1) General Method - The number of Financed Shares held in the Loan
--------------
Suspense Account immediately before the release for the current
Plan Year shall be multiplied by a fraction. The numerator of
the fraction shall be the amount of principal and interest paid
on the Acquisition Loan for that Plan Year. The denominator of
the fraction shall be the sum of the numerator plus the total
payments of principal and interest on that Acquisition Loan
projected to be paid for all future Plan Years. For this
purpose, the interest to be paid in future years is to be
computed by using the interest rate in effect as of the current
allocation date.
25
<PAGE>
(2) Alternative Method - The Plan Committee may elect at the time
------------------
an Acquisition Loan is incurred (or the provisions of the
Acquisition Loan may provide) for the release of Financed
Shares from the Loan Suspense Account based solely on the ratio
that the payments of principal for each Plan Year bear to the
total principal amount of the Acquisition Loan. This method
may be used only to the extent that: (a) the Acquisi tion Loan
provides for annual payments of principal and interest at a
cumulative rate that is not less rapid at any time than level
annual payments of such amounts for ten years; (b) interest
included in any payment on the Acquisition Loan is disregarded
only to the extent that it would be determined to be interest
under standard loan amortization tables; and (c) the entire
duration of the Acquisition Loan repayment period does not
exceed ten years, even in the event of a renewal, extension or
refi nancing of the Acquisition Loan.
The Other Investments Account maintained for each Participant
will be credited (or debited) annually with his share of any
net income (or loss) of the Trust, and with his share of
Employer contributions in cash. It will be debited for its
proportionate share of any cash payments made by the Trust for
the purchase of Qualifying Employer Securities or the repayment
of principal and interest on any Acquisition Loan.
(b) The Trustee shall, as of each Valuation Date, adjust each
Participant's Company Stock Account and Other Investments Account
for transactions since the date of the preceding adjustment.
Separate adjustments shall be made for each Participant's Account
as follows:
(i) The number of shares of Qualifying Employer Securities in each
Participant's Company Stock Account shall be the number of
shares as of the date of the preceding adjustment, but
increased by (A) Qualifying Employer Securities allocated to it
pursuant to Section 5.1, (B) stock dividends on Qualifying
Employer Securities previously allocated to said Account, and
(C) Qualifying Employer Securities acquired with funds from the
corresponding Other Investments Account, and shall be decreased
by distributions from said Account.
(ii) The fair market value of each Other Investments Account shall
be the fair market value of assets in such Account as of the
date of the preceding adjustment, but increased by (A) money
allocated to it pursuant to Section 5.1, (B) dividends on
Qualifying Employer Securities previously allocated to the
corresponding Participant's Company Stock Account, and (C)
investment gains, including gains attributable to the discharge
of an Acquisition Loan or Loans; and shall be decreased by (1)
distributions from said Account, (2) amounts used to acquire
Qualifying Employer Securities for the corresponding
Participant's Company Stock Account, and (3) investment losses.
(iii) For the purposes of subsection (b)(ii) hereof, the
investment gain or loss in each Other Investments Account since
the last adjustment shall be its pro rata share of the
investment gain or loss of all assets in the Other Investments
Account based on the change in fair market value of assets
therein since the last adjustment and computed in accordance
with uniform valuation procedures established by the Trustee.
(iv) Shares of Qualifying Employer Securities held in the Loan
Suspense Account and dividends paid thereon, funds borrowed for
the purchase of Qualifying Employer Securities, and interest
and all other costs attributable to the Loan Suspense Account
shall be excluded for all purposes under this Section, except
to the limited extent provided in Section 13.7(b).
26
<PAGE>
(v) Adjustments made pursuant to subsections (i)(B), (i)(C),
(ii)(B), and (ii)(C) shall not be considered "annual additions"
within the meaning of Section 5.3.
6.2 Reports to Participants. As soon as practicable after each annual
-----------------------
Valuation Date, the Committee shall advise each Participant of the amount
then credited to his Account.
6.3 Diversification -- Elections. Each Qualified Participant shall be
----------------------------
permitted to direct the Plan as to the investment of twenty-five percent
(25%) of the value of the Participant's Account balance attributable to
Qualifying Employer Securities. Such direction shall be made within the
Qualified Election Period and shall be made no later than 90 days after
the close of each Plan Year which occurs within the Qualified Election
Period. In the case of the last Plan Year in which such direction may be
made, the amount of permitted investment shall be increased to fifty
percent (50%) of the Participant's Account.
6.4 Diversification of Participant Accounts--Distributions. The following
------------------------------------------------------
shall relate to that portion of Participant's Account assets which are
subject to the requirements for Diversification of Investments, pursuant
to Section 401(a)(28)(B) of the Code related to an Employee Stock
Ownership Plan, except as may be limited by Section 401(k) of the Code and
related regulations with respect to withdrawals from such Section 401(k)
Plans.
The Qualified Participant may elect with respect to directing the
investment of a portion of the Account:
(a) The Qualified Participant may direct the Plan Administrator to
invest such portion of the account that is covered by the election
in any one (or all) of not less than three investment options
available under this Plan (other than Qualifying Employer
Securities and not inconsistent with regulations prescribed by the
Secretary); or if such investment options are not available
pursuant to this Plan then pursuant to subparagraph (b) of this
Section.
(b) If such directed investment as provided in subparagraph (a) is not
available within this Plan, the Qualified Participant may direct
the Plan to transfer the amount subject to such election to another
qualified plan of the Employer which accepts such transfers,
permits such employee-directed investments and does not invest in
Qualifying Employer Securities to a substantial degree. Such
transfer shall be made no later than 90 days after the last period
during which the election can be made.
(c) If such option as contained in subparagraph (a) or (b) are
unavailable to the Qualified Participant, then the Plan shall
distribute (without regard to the Distribution Limitations of
Section 409(d) of the Code) the portion of that Account that is
covered by the election under this Section within 90 days after the
last day of the period during which the election may be made.
6.5 Diversification -- Required Consents. Notwithstanding the foregoing, any
------------------------------------
election under this Section by a Qualified Participant which results in a
distribution to such Participant shall be subject to the consent
provisions of Section 9.4 and 10.5 of the Plan. If the consent is not
secured, then amounts otherwise distributable under this Section will
remain in the Plan.
SECTION 7
---------
Retirement and Distribution of Benefits
---------------------------------------
7.1 Vesting. At Normal Retirement Age, the Participant shall have a 100%
-------
nonforfeitable interest in his account. If a Participant defers his
retirement beyond his Normal Retirement Date, he shall continue as a
Participant until his actual retirement, but no distributions shall be
made from his Account until his
27
<PAGE>
actual retirement (other than distributions required under Section 7.6),
unless the Participant elects to withdraw all or part of his Participant's
Account pursuant to this Section.
A Participant may elect to retire from Service at anytime on or after his
Early Retirement Age, provided his Account is fully vested at that time.
If he is not fully vested at the time of termination of Service, then only
his vested portion of the Employer Contributions Account shall be
available pursuant to Section 10.3.
7.2 Distribution -- Timing. If a Participant's Service terminates by reason
----------------------
of his retirement pursuant to Section 7.1, the Participant shall receive
the vested balance of his Account (including his Other Investments
Account), as soon as practicable after the last Valuation Date that occurs
in the Plan Year in which his Service terminates.
Notwithstanding the foregoing, but only with respect to a Participant who
terminates Service after December 31, 1993, a Participant may elect to
have the vested balance of his Participant's Account be distributed as
soon as practicable after the Participant's Service terminates. In such
event, the Participant shall be entitled to receive the vested balance in
his Participant's Account (including his Other Investments Account), with
such vested balance being determined as of the Valuation Date that
immediately precedes the Participant's retirement from Service. If the
Participant's Account thereafter receives an allocation, pursuant to
Section 5.1, with respect to the Plan Year in which the Participant's
Service terminates, the Participant will be entitled to receive, as soon
as practicable after the Valuation Date that coincides with or next
follows the date of such allocation, a distribution of the entire vested
balance in his Participant's Account (determined as of said Valuation
Date).
7.3 Distribution -- Method. At such time that distributions are permissible
----------------------
under the Plan, the Participant's Company Stock Account and Other
Investment Account shall be distributed in a lump sum.
Unless otherwise elected by a Participant, the distribution of his account
attributable to Qualifying Employer Securities as well as other
(diversified) investment shall commence not later than sixty (60) days
after the Anniversary Date coinciding with or next following his Normal
Retirement Age (or his termination of Service, if later). However, if the
amount of a Participant's Account attributable to both Qualifying Employer
Securities as well as other (diversified) investments cannot be
ascertained by the Committee by the date on which such distribution should
commence, or if the Participant cannot be located, distribution of his
account shall commence within sixty (60) days after the date on which his
Company Stock Account Value can be determined or after the date on which
the Committee locates the Participant.
7.4 Distribution -- Form. Distribution of a Participant's Company Stock
--------------------
Account will be made as the Participant elects (i) in cash, (ii) in whole
shares of Qualifying Employer Securities, with cash being paid in lieu of
fractional shares, or (iii) a combination of (i) and (ii) hereof.
Notwithstanding the foregoing, the portion of a Participant's Company
Stock Account which accrues (either from Employer contributions or stock
dividends) on or after January 1, 1996, will be distributed in whole
shares of Qualifying Employer Securities, with cash being paid in lieu of
fractional shares. Any balance in a Participant's Other Investments
Account will be paid in cash. If Qualifying Employer Securities are not
available for purchase by the Trustee, then the Trustee shall hold such
balance until Qualifying Employer Securities are acquired and then make
such distribution. If the Trustee is unable to purchase Qualifying
Employer Securities required for distribution, he shall make distribution
in cash within one year after the date the distribution was to be made;
except in the case of a retirement, distribution shall be made within
sixty (60) days after the close of the Plan Year in which a Participant's
retirement occurs.
Notwithstanding the foregoing, in the case of a Plan established and
maintained by a company, as described in Section 409(h)(2) of the Code,
which is prohibited by law or the company's charter or bylaws from
redeeming or purchasing its own securities, Qualifying Employer Securities
will not be required to be distributed if the Participant is permitted to
receive a distribution in cash.
28
<PAGE>
7.5 (a) Right of First Refusal
----------------------
Shares of the Qualifying Employer Securities distributed by the
Trustee shall be subject to a "right of first refusal". The right
of first refusal shall provide that, prior to any subsequent
transfer, such Qualifying Employer Securities must first be offered
in writing to the Employer, and then, if refused by the Employer,
to the Trust, at the then fair market value. The Employer and the
Committee (on behalf of the Trust) shall have a total of fourteen
(14) days (from the date the Participant or Beneficiary gives
written notice to the Employer) to exercise the right of first
refusal. The selling price and other terms under the right of
first refusal must not be less favorable to Participant (or
Beneficiary) than the greater of the value of the Qualifying
Employer Securities determined pursuant to Treasury Regulation
54.4975-11(d)(5), or the purchase price and other terms offered by
a third-party buyer making a good-faith offer to purchase such
securities. A Participant (or Beneficiary) entitled to a
distribution of Qualifying Employer Securities may be required to
execute an appropriate stock transfer agreement (evidencing the
right of first refusal) prior to receiving a certificate for such
Securities.
Notwithstanding the foregoing, a "right of first refusal" shall not
be permitted in the case of Qualifying Employer Securities which
are publicly traded on an established securities market.
(b) Put Option
----------
In the case of a distribution of Qualifying Employer Securities
which are not readily tradeable on an established securities
market, the Plan shall provide the Participant with a put option
that complies with the requirements of Section 409(h) of the Code.
The Employer shall issue such a "put option" to each Participant
receiving a distribution of Qualifying Employer Securities from the
Trust subject to the availability of retained earnings in such
amount that complying with the "put option" shall not be
ultravires. The put option shall permit the Participant to sell
such Qualifying Employer Securities to the Employer, at any time
during two option periods, at the then fair market value as
determined as of the most recent valuation date (prior to the
exercise of such right) by an independent appraiser meeting
requirements similar to the requirements of the regulations
prescribed under Sections 170(a)(1) and 401(a)(28)(C) of the Code
engaged by the Committee. The first put option period shall be a
period of sixty (60) days beginning on the date of distribution of
Qualifying Employer Securities to the Participant. The second put
option period shall be a period of sixty (60) days beginning after
the new determination of the fair market value of such Qualifying
Employer Securities by the Committee in the next following Plan
Year provided that if such determination is made before the 13-
month anniversary date of distribution of Qualifying Employer
Securities to the Participant, then the second put option period
shall be a period of sixty (60) days beginning after the new
determination of the fair market value of such Qualifying Employer
Securities by the Committee in the next following Plan Year.
The Trust shall have the option to assume the rights and
obligations of the Employer at the time the Participant requires
the purchase by the Employer. The Committee may be permitted by
the Employer to direct the Trustee to purchase Qualifying Employer
Securities tendered to the Employer under a put option.
Such put option shall provide that if an Employee exercises the put
option, the Employer (or the Plan if the Trustee so elects), shall
repurchase the Qualifying Employer Securities by paying the fair
market value of a Participant's Account balance in cash, in up to
five substantially equal annual payments. The first installment
shall be paid no later than 30 days
29
<PAGE>
after the Participant exercises the put option. The payor under
the put option will pay a reasonable rate of interest and provide
adequate security on amounts not paid after 30 days. If the entire
balance of the Participant's Account is not distributed, the payor
will pay the Participant an amount equal to the fair market value
of the Qualifying Employer Securities repurchased no later than 30
days after the Participant exercises the put option.
(c) Placement of Restrictions on Stock Certificates
-----------------------------------------------
Shares of Qualifying Employer Securities held or distributed by the
Trustee may include such legend restrictions on transferability as
the Company may reasonably require in order to assure compliance
with applicable federal and state securities law and with the
provisions of this paragraph. Except as otherwise provided in the
Section, no shares of Qualifying Employer Securities held or
distributed by the Trustee may be subject to a put, call or other
option or buy-sell, or similar arrangement. The provisions of this
Section shall continue to be applicable to shares of such
Qualifying Employer Securities, even if the Plan ceases to be an
employee stock ownership plan under Section 4975(e)(7) of the Code.
7.6 Distribution -- Age 70 1/2 Rule. Notwithstanding anything to the
-------------------------------
contrary, payment of a Participant's benefit will commence not later than
April 1 of the calendar year following the calendar year in which the
Participant attains age 70-1/2. Each Participant may thereupon elect to
receive his or her benefits in either a lump sum or in annual installment
payments over a term not exceeding the life expectancy of the Employee or
the joint life expectancy of the Employee and his or her beneficiary. A
determination of life expectancy will be made in either case not later
than the date the Participant reaches age 70 by use of the expected return
multiples in Section 1.72-9 of the Treasury Regulations, and such multiple
may be recomputed each succeeding year.
If a Participant's retirement benefit is to be distributed to him and his
beneficiaries over a period in excess of the Participant's then life
expectancy, the then present value of the payments to be made over the
period of the Participant's then life expectancy must be more than fifty
percent (50%) of the then present value of the total payments to be made
to the Participant and his beneficiaries.
SECTION 8
---------
In Event of Disability
----------------------
8.1 Vesting; Timing. In the event a Participant suffers a Total Disability,
---------------
the total balance of his Participant Account, as of the Valuation Date
which coincides with or next follows the determination of disability,
shall become 100% vested and distributed to him as soon as
administratively practicable on or after the next Valuation Date. All
such distributions shall be made in accordance with Sections 7.3, 7.4 and
7.5, except as specifically noted to the contrary herein.
8.2 Subsequent Evidence of Disability. Once each year the Committee may
---------------------------------
require any disabled Participant receiving a disability retirement benefit
who has not reached his Normal Retirement date to submit evidence that he
is still disabled.
SECTION 9
---------
In the Event of Death
---------------------
9.1 Vesting; Timing. In the event of the death of a Participant prior to the
---------------
distribution of the total balance of his Participant Account, the total
balance of his Accounts, as of the Valuation Date which coincides with or
next follows the date of his death, shall be immediately 100% vested and
distributed in installment or in one lump sum to his primary beneficiary
or, if the primary beneficiary does not survive the Participant, then to
his secondary beneficiary, or if no beneficiary has been designated or
survives,
30
<PAGE>
then to the Participant's estate. All such distributions shall be made in
accordance with Sections 7.3, 7.4, and 7.5, except as specifically noted
to the contrary herein.
9.2 Beneficiary. At any time during his life, a Participant shall be entitled
-----------
to designate a beneficiary (including a secondary beneficiary, if the
Participant so desires), to whom in the event of death the distribution
provided herein shall be paid, by signing and filing with the Committee a
written designation of beneficiary in such form as shall be required by
the Committee. Any beneficiary so designated may be changed by the
Participant at any time or from time to time during his life, by signing
and filing with the Committee a written notification of change of
beneficiary in such form as shall be required by the Committee. If the
Participant is married, the designated beneficiary shall be the
Participant's spouse unless an election was made under Section 9.4.
9.3 Beneficiary of Married Participants. In the event a married Participant
-----------------------------------
dies while still employed by the Employer or before the Participant's
Account is paid to the Participant, the Participant's Account must be paid
to the Participant's surviving spouse in a lump sum within five years. If
a Participant dies before distributions have commenced and is not survived
by a spouse, the Participant's entire remaining interest must be
distributed within five years after the Participant's death to the
Participant's beneficiary or beneficiaries (or, in the absence of a
properly appointed beneficiary or beneficiaries, pursuant to Section 9.5).
9.4 Designation of Beneficiary. The designated beneficiary of all benefits
--------------------------
payable under this Plan shall be the spouse of such Participant on the
date of death, unless a waiver to such designation has been completed and
received by the Committee in the form acceptable to the Committee. The
waiver must be in writing and must be consented to by the Participant's
spouse with such waiver specifically acknowledging the non-spouse
beneficiary or any subsequent change in a non-spouse beneficiary. The
spouse's consent to a waiver must be witnessed by a plan representative or
notary public. Notwithstanding this consent requirement, if the
Participant establishes to the satisfaction of a plan representative that
such written consent may not be obtained because there is no spouse or the
spouse cannot be located, a waiver will be deemed a qualified election.
Any consent necessary under this provision will be valid only with respect
to the spouse who signs the consent. Additionally, a revocation of a
prior waiver may be made by a Participant without the consent of the
spouse at any time before the commencement of benefits. The number of
revocations shall not be limited.
9.5 Absence of Beneficiary Designation. If a Participant files no designation
----------------------------------
of beneficiary or revokes a designation previously filed without filing a
new designation of beneficiary, or if all persons so designated as
beneficiary shall predecease the Participant or die prior to complete
distribution to them, the Trustee, pursuant to Employer instructions,
shall distribute such death benefit or balance thereof to the following
who shall be deemed beneficiaries: to such Participant's surviving
spouse, or if none, to such Participant's surviving issue per stirpes and
not per capita, or if none, to the Participant's estate.
SECTION 10
----------
In the Event of Termination of Employment
-----------------------------------------
or Change in Status
-------------------
10.1 General Rule. Subject to the provisions of Section 7.6 "Late Retirement",
------------
there shall be no distributions made to a Participant except on account of
termination of employment, death, disability as provided for in Section 8,
or termination of the Plan. All such distributions shall be made in
accordance with Sections 7.3, 7.4, and 7.5, except as specifically noted
to the contrary herein.
10.2 Distribution -- Timing. Subject to Section 10.5, if a Participant's
----------------------
employment terminates otherwise than by his death, retirement, or Total
Disability, the vested balance in his Participant's Account shall be
distributed. Notwithstanding the foregoing, amounts attributable to
Salary Deferred Contributions may not be distributed to Participants
earlier than upon one of the following events:
31
<PAGE>
1. The employee's retirement, death, disability or separation from
service;
2. The termination of the Plan without establishment or maintenance of
another defined contribution plan (other than an ESOP);
3. In the case of a profit-sharing or stock bonus plan, the employee's
attainment of age 59 1/2 or, for plan year beginning before 1989,
the employee's proven financial hardship;
4. The sale or other disposition by the Company to an unrelated
corporation of substantially all of the assets used in a trade or
business, but only with respect to employees who continue
employment with the acquiring corporation; and
5. The sale or other disposition by a corporation of its interest in a
subsidiary to an unrelated entity but only with respect to
employees who continue employment with the subsidiary.
Paragraphs 2, 4, and 5, above, apply only if the distribution is in
the form of a lump sum. Paragraphs 4 and 5, above, apply only if
the Company continues to maintain the Plan.
10.3 Vesting. Amounts credited to a Participant's Salary Deferral Contribution
-------
Account shall be 100% vested and non-forfeitable at all times. The non-
forfeitable portion of the Account balance of a Participant's Account
including Employer contributions, Employer matching contributions, and
earnings thereon, shall be a percentage of such Account based upon the
number of Years of Service that such Participant has credited from his
date of employment after attainment of age 18 according to the following
schedule:
Years of Service Percent Vested
---------------- --------------
Less than 5 years 0%
5 or more years 100%
10.4 Forfeitures. As of each Anniversary Date, any amounts which became
-----------
Forfeitures since the last Anniversary Date shall first be made available
to reinstate previously forfeited account balances of Former Participants,
if any, in accordance with Section 10.5. The remaining Forfeitures, if
any, shall be added to the Employer's contribution made pursuant to
Section 5 and allocated among the Participant's Accounts in the same
manner as the Employer's contribution for the current year. In the event
the allocation of Forfeitures provided herein shall cause the "annual
addition" (as defined in Section 5) to any Participant's Account to exceed
the amount allowable by the Code, the excess shall be reallocated in
accordance with Section 5. However, a Participant who performs less than
a Year of Service during any Plan Year shall not share in Forfeitures for
that year, unless required pursuant to Section 11.3. If a portion of a
Participant's Account is forfeited, Company Stock allocated to the
Participant's Company Stock Account must be forfeited only after the
Participant's Other Investments Account has depleted. If interest in more
than one class of Company Stock has been allocated to a Participant's
Account, the Participant must be treated as forfeiting the same proportion
of each such class.
10.5 Restoration of a Participant's Account Upon Reemployment. If a former
--------------------------------------------------------
Participant is reemployed by the Employer before incurring five (5)
consecutive one-year Breaks-in-Service, and such Participant had received
a distribution of his entire vested interest in his Account pursuant to
Section 10.1 prior to being reemployed, the full amount in such
Participant's Employer contribution Account on the date of the prior
distribution will be restored if:
(a) The Participant repays to the Plan the full amount of the prior
distribution before the Participant incurs five (5) consecutive
one-year Breaks-in-Service commencing after such withdrawal;
and
32
<PAGE>
(b) The Participant was not fully vested in the portion his
Participant's Account attributed to Employer contributions at
the time of the distribution.
10.6 Voluntary and Involuntary Cash-outs. If the vested portion of a
-----------------------------------
Participant's Account does not exceed $3,500 in value as of any Valuation
Date preceding a Participant's termination of employment with the
Employer, the Participant shall be paid the vested portion, as of the
Valuation Date immediately following his termination of employment, in
cash (unless the Participant elects to receive such payment in shares of
Qualifying Employer Securities) without regard to the Participant's
election related to the timing of such payments. If the Participant, upon
termination of Service for any reason other than retirement, death, or
Total Disability, does not consent to the payment of the vested portion of
the Participant's Account, and if the value of such Account exceeds $3,500
on the Valuation Date immediately following the Employee's termination of
Service (or as of any prior Valuation Date), the Committee shall direct
the Trustee to place the then value of such Account in one (1) or more
investment accounts permitted under the Plan in trust for the named
Employee for distribution commencing on the Valuation Date immediately
following his attainment of age 65 (or death, if earlier). The Account
and all accumulated interest shall be paid to the Employee at the time he
attains his Normal Retirement Age. In the event the Employee dies before
reaching retirement age, the Account balance shall be paid to any
beneficiary the Employee has named in a written designation filed with the
Committee or, in the absence of such designation, to the Employee's estate
subject to the terms of Section 9 of the Plan. The Trustee shall have no
other responsibilities with respect to such accounts except that, if the
balance of any such account shall approach the amount of federal
insurance, the Trustee shall split the account into two (2) or more
accounts.
10.7 Changes in Address. It shall be the responsibility of the terminating
------------------
Participant to keep the Committee informed as to his address, and the
Trustee and the Committee shall not be required to do anything further
than sending all papers, notices, payments, or the like to the last
address given them by such Participant unless they can be shown to have
acted in bad faith, having had knowledge of the Participant's actual
whereabouts.
10.8 Latest Time for Distribution. Except as limited by Sections 7, 8, 9 and
----------------------------
10, whenever the Trustee is to make a distribution or to commence a series
of payments on or before an Anniversary Date, the distribu tion or series
of payments may be made or begun on such date or as soon thereafter as is
practicable, but in no event later than 180 days after the Anniversary
Date. Except, however, unless a Former Participant elects in writing to
defer the receipt of benefits (such election may not result in a death
benefit that is more than incidental), the payment of benefits shall begin
not later than the 60th day after the close of the Plan Year in which the
latest of the following events occurs:
(a) the date on which the Participant attains the earlier of age 65
or the Normal Retirement Date specified herein,
(b) the 5th anniversary of the year in which the Participant
commenced participation in the Plan, or
(c) the date the Participant terminates his service with the
Employer.
10.9 Age 70 1/2 Rule. Notwithstanding any provisions of the Plan, in no event
---------------
shall a distribution schedule or form of distribution pursuant to Articles
7, 8, 9, or 10 exceed the period permitted under Section 401(a)(9) of the
Code or Treasury Regulations Section 1.401(a)(9)-1 or Section 1.401(a)(9)-
2.
10.10 Deemed Cash-outs if 0% Vesting. Notwithstanding anything to the contrary,
------------------------------
if the value of a Participant's vested portion of the Participant's
Account is zero on the date of termination of employment, then the
Participant shall be deemed to have received a total distribution of the
vested portion of such Participant's Account on such date.
33
<PAGE>
10.11 Eligible Rollover Distributions. This Section applies to distributions
-------------------------------
made from the Plan to Distributees on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Section, a Distributee
may elect at the time and in the manner prescribed by the Plan
Administrator to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee
in a Direct Rollover. For purposes of this Section --
"Distributee" means the Employee or former Employee, the Employee's or
former Employee's surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under a Qualified
Domestic Relations Order, as defined in Section 414(p) of the Code, are
Distributees with regard to the interest of the spouse or former spouse.
"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 trust described in Section
401(a) of the Code that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution
to the surviving spouse of a Participant, an Eligible Retirement Plan is
an individual retirement account or individual retirement annuity.
"Direct Rollover" means a payment by the Plan to the Eligible Retirement
Plan specified by the Distributee.
"Eligible Rollover Distribution" means any distribution of all or any
portion of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated Beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
10.12 Distributions Before April 1, 1993. In the case of each Participant who
----------------------------------
terminated Service before April 1, 1993, the Participant's Account first
became distributable on the last day of the first Plan Year in which the
Participant incurred his first Break in Service.
SECTION 11
----------
Top-Heavy Definitions and Rules
-------------------------------
11.1 Effective Date of Top-Heavy Provisions. If the Plan is or becomes Top-
--------------------------------------
Heavy in any Plan Year beginning after December 31, 1983, the provisions
of Sections 11 will supersede any conflicting provision in the Plan.
11.2 Top-Heavy Vesting Schedule. If the Plan is determined to be Top-Heavy for
--------------------------
any Plan Year, a Participant's vested percentage interest in his
Participant's Account shall be determined in accordance with the Top-Heavy
Vesting Schedule set forth in Section 11.2(d) of this Plan, subject to the
following additional requirements:
(a) Years of Service for purposes of vesting under a Top-Heavy
Vesting Schedule shall include Years of Service when the Plan
was not Top-Heavy;
34
<PAGE>
(b) If any Participant in the Plan is not credited with an Hour of
Service after the Plan becomes Top-Heavy, that Participant
shall not be subject to the Top-Heavy Vesting Schedule, but
shall remain subject to the vesting schedule set forth in
Section 10.2 and the rules in effect prior to the date the Plan
becomes Top-Heavy; and
(c) If the Plan ceases to be Top-Heavy, an Employee's vested
percentage interest in the contributions allocated to his
Participant's Account for Plan Years after the Plan Year in
which the Plan ceases to be Top-Heavy shall be determined in
accordance with the vesting schedule set forth in Section 10.2
of the Plan, unless otherwise set forth in Section 11.2 of this
Plan.
(d) If the Plan is a Top-Heavy Plan in a Plan Year, a Participant
who is credited with an Hour of Service in such Plan Year shall
have the non-forfeitable interest in his Accrued Benefit for
such Plan Year determined in accordance with the following
schedule:
Non-forfeitable
(Vested)
Years of Service Percentage
---------------- ----------
Less than 3 0%
3 years or more 100%
(e) Notwithstanding any provision to the contrary, the vested
benefit derived from Employer contributions of a Participant
may not be reduced below what it was before the Plan ceased to
be Top-Heavy and the vesting schedule was changed. In
addition, each Participant with three (3) or more Years of
Service shall be given the option of remaining under the Top-
Heavy Vesting Schedule within the same period as set forth in
Section 16.3.
11.3 Minimum Contributions. Notwithstanding Section 11.7.5, for purposes of
---------------------
this Section 11.3, "Compensation" shall have the meaning set forth in
Section 5.2(c). If this Plan is Top-Heavy during any Plan Year, the
Employer must make a Minimum Contribution consisting of Employer
contributions and forfeitures on behalf of each Plan Participant who is a
Non-Key Employee equal to an amount which is not less than three (3%)
percent of such Participant's Compensation. A Minimum Contribution shall
be made on behalf of such Participant even though, under other Plan
provisions, the Participant would not otherwise be entitled to receive an
allocation, or would have received a lesser allocation for the Plan Year
due to (i) the Participant's failure to complete one thousand (1000) Hours
of Service, or (ii) the Participant's failure to make mandatory
contributions to the Plan, if required; or (iii) the Participant's
Compensation is less than a stated amount.
Notwithstanding the preceding paragraph, if the Employer's Minimum
Contribution on behalf of each Plan Participant who is a Key Employee
equals an amount which is less than three (3%) percent of such
Participant's Compensation, then the Minimum Contribution required to be
made for each Non-Key Employee is limited to not more than the highest
contribution rate under the Plan for each Key Employee. Therefore, if no
Employer contribution is made on behalf of a Key Employee, then no Minimum
Contribution is required to be made on behalf of each Non-Key Employee.
However, if the Plan is included in a Required Aggregation Group and it
enables a defined benefit plan of the Employer to meet the requirements of
Sections 401(a)(4) or 410 of the Internal Revenue Code, then the Minimum
Contribution for Non-Key Employees cannot be less than three (3%) percent,
regardless of the contribution rate for Key Employees. For purposes of
this subparagraph, all defined contribution plans included in a Required
Aggregation Group shall be treated as one Plan.
35
<PAGE>
A Minimum Contribution shall not be made on behalf of any Participant
who is not employed by the Employer on the last day of the Plan Year.
For purposes of computing the Minimum Contribution for any Plan
Participant, amounts paid by the Employer to Social Security shall be
disregarded. Also, for all Plan years, except those beginning before
January 1, 1985, any Employer contribution attributable on behalf of any
Key Employee to a salary reduction or similar plan shall be taken into
account.
11.4 Minimum Contributions or Minimum Benefits in Two or More Plans. If the
--------------------------------------------------------------
Employer maintains both a defined benefit plan and a defined
contribution plan and either of the plans is Top-Heavy then the Minimum
Benefit will be provided to the Participant under the defined benefit
plan. If the Employer maintains a defined contribution plan in addition
to this Plan, and either of the plans is Top-Heavy, then the Minimum
Benefit will be provided to the Participant not under this Plan but
under the other defined contribution plan.
11.5 Aggregate Limit on Contributions and Benefits for Key Employees. If any
---------------------------------------------------------------
Participant is a Key Employee and is, or was, covered under both a
defined benefit plan and a defined contribution plan which are both
included in a Top-Heavy Group of the Employer, then for any Plan Year in
which the Plans are Top-Heavy, the number "1.0" shall be substituted for
"1.25" in each place where it appears in Section 5.4, unless the
Additional Minimum Contribution is being made pursuant to this Section
11.5.
Notwithstanding the above paragraph, if the Plan is Top-Heavy, but is
not Super Top-Heavy, Section 5.3 without modification shall continue to
govern the overall limitations on contributions and benefits for Key
Employees if an Additional Minimum Benefit or an Additional Minimum
Contribution equal to seven and one-half (7-1/2%) percent is received by
each Participant who is a Non-Key Employee in any one qualified plan
maintained by the Employer. However, for any Plan Year in which this
Plan is a Super Top-Heavy Plan, 1.0 shall be substituted for 1.25 in any
event where it appears in Section 5.3.
11.6 Miscellaneous Compensation Provisions. For any Plan Year in which a
-------------------------------------
Plan is Top-Heavy, the annual Compensation of each Participant which may
be taken into account for the purpose of determining Employer
contributions or benefits under the Plan, including the computation of
the contribution rate for Key Employees in Section 11.3, shall not
exceed $200,000, or such other amount as may be determined by the
Secretary of the Treasury in accordance with Section 415(d) of the
Internal Revenue Code and the regulations promulgated thereunder, for
Plan Years ending on or after January 1, 1988. Notwithstanding this
limitation, benefits attributable to annual Compensation while the Plan
was not Top-Heavy shall not be reduced.
11.7 Top-Heavy Definitions
---------------------
11.7.1 "Additional Minimum Benefit" means the Minimum Benefit described in
Section 11.4; however, in determining the applicable percentage in
Section 11.4, "three (3%) percent" shall be substituted for "two (2%)
percent" and "twenty (20%) percent" shall be increased by 1 percentage
point for each year for which the Plan is Top-Heavy, up to a maximum of
thirty (30%) percent.
11.7.2 "Additional Minimum Contribution" means the Minimum Contribution
described in Section 11.3; however, in determining the Minimum
Contribution, "four (4%) percent" shall be substituted for "three ("3%)
percent" wherever it appears throughout Section 11.3.
11.7.3 "Aggregation Group" means one of the following:
(a) Required Aggregation Group:
"Required Aggregation Group" means each Plan of the Employer
or an Affiliate, including terminated plans, in which a Key
Employee is a Participant and each other Plan of the Employer
which enables any Plan in which a Key Employee is a
36
<PAGE>
Participant to meet the requirements of Sections 410 or
401(a)(4) of the Code. Collectively bargained plans that
include a Key Employee of an Employer shall be included in
the Required Aggregation Group of the Employer; or
(b) Permissive Aggregation Group:
"Permissive Aggregation Group" means each Plan in the
Required Aggregation Group and any Plan the Employer elects
to place into the Aggregation Group, if this expanded group
continues to satisfy the requirements of Sections 401(a)(4)
and 410 of the Internal Revenue Code.
11.7.4 "Annual Retirement Benefit" means a benefit payable annually in the form
of a single life annuity with no ancillary benefits and beginning at the
Normal Retirement Age under the Plan.
11.7.5 "Compensation" under Section 11 shall be determined under Section 5.3 of
the Plan, without regard to Sections 125, 402(a)(8), and 402(h)(1)(B) of
the Code, and in the case of employer contributions made pursuant to a
salary reduction agreement, without regard to Section 403(b) of the
Code.
11.7.6 "Determination Date" for any Plan Year means either (i) the last day of
the preceding Plan Year, or (ii) in the case of the first Plan Year of
any Plan, the last day of such Plan Year.
11.7.7 "Key Employee" means any Employee, former Employee, or the Beneficiary
of such Employee, who at any time during the current Plan Year or during
any of the four preceding Plan Years, is described in one or more of the
following three categories:
(a) An Officer of the Employer who receives from such Employer an
annual Compensation which exceeds fifty percent (50%) of the
maximum dollar limitation under Section 415(b)(1)(A) of the Code,
as in effect for the calendar year in which the Determination
Date falls. The maximum number of Employees required to be
treated as Key Employees for the Plan Year by reason of being
Officers is the greater of 3 Employees or ten (10%) percent of
the number of Employees of the Employer, but such number shall
not exceed 50 Employees. If the number of Employees who are
Officers of the Employer exceed the maximum number required to be
counted as Key Employees, the Officers to be considered as Key
Employees are those with the highest annual Compensation from the
Employer.
(b) One of the Employees owning or considered as owning within the
meaning of Section 318 of the Internal Revenue Code, as modified
by Section 416(i)(1)(B)(iii) of the Code, the largest interests
in the Company, unless such Employee receives Compensation from
the Employer which is less than $30,000 per year, or the maximum
dollar limitation under Section 415(c)(1)(A) of the Code, as in
effect for the calendar year in which the Determination Date
falls. An Employee who has some ownership interest in the Company
is considered to be one of the top ten owners unless at least ten
(10) other Employees own a greater interest than such Employee.
If more than one Employee has the same interest in the Company,
the Employee having the greater annual Compensation from the
Employer shall be treated as having a larger interest in the
Company.
(c) A Percentage Owner of the Company. A "percentage owner" means any
person who owns, or is considered as owning within the meaning of
Section 318, as modified by Section 416(i)(1)(B)(iii) of the
Internal Revenue Code, either
(1) more than five (5%) percent of the outstanding stock of the
Company or stock possessing more than five (5%) percent of
the total combined voting power of all stock of the Company;
or
37
<PAGE>
(2) more than one (1%) percent of the outstanding stock of the
Company or stock possessing more than one (1%) percent of
the total combined voting power of all stock of the Company,
if such person has an annual compensation from the Employer
of more than $150,000.
If a person is considered during a Plan Year to be a Key Employee
under two or more categories, due to his status other than as a
Beneficiary, the present value of his accrued benefit or the sum
of his account balance is counted only once during the Plan Year
in testing whether the Plan is Top-Heavy. If a person is
considered during the Plan Year to be a Key Employee because the
person is both a Beneficiary and owner of the Company, then the
present value of the person's inherited account balance and the
present value of the person's accrued benefit or the sum of his
account balance as an Employee or owner will be counted as the
total accrued benefit or account balance of the individual as a
Key Employee in determining whether the Plan is Top-Heavy. The
determination of an individual's status as a Key Employee is
based on the Plan Year containing the Determination Date.
11.7.8 "Minimum Benefit" means the benefit described in Section 11.4.
11.7.9 "Minimum Contribution" means the contribution described in Section
11.3.
11.7.10 "Non-Key Employee" means an Employee who is not a Key Employee or is
the Beneficiary of such Employee.
11.7.11 "Rollover Contributions and Similar Transfers" means the following:
(a) Related rollover contributions or similar transfers are those
(i) not initiated by the Employee;
(ii) made on or before December 31, 1983; or
(iii) made to a plan maintained by the same Employer, such as in a
merger or consolidation of two or more plans or the division
of a single plan into two or more plans.
(b) Unrelated rollover contributions or similar transfers are those
which are both
(i) initiated by the Employee; and
(ii) made after December 31, 1983; and
(iii) made from a plan maintained by one Employer to a plan
maintained by another Employer.
11.7.12 "Super Top-Heavy" means a Plan which would be Top-Heavy if "ninety
(90%) percent" were substituted for "sixty (60%) percent" in each
place it appears in Section 11.7.16.
11.7.13 "Top-Heavy" means a qualified Plan which is a Top-Heavy Plan pursuant
to the provisions of Section 11.7.16.
11.7.14 "Top-Heavy Group" means an Aggregation Group in which, as of the
Determination Date, the sum of the present value of the accumulated
accrued benefits for Participants who are Key Employees under all
defined benefit plans included in such Aggregation Group and the sum
of the account balances for Participants who are Key Employees under
all defined contribution plans included in such Aggregation
38
<PAGE>
Group exceeds sixty (60%) percent of a similar sum determined for all
Employees, including their Beneficiaries, who are participating under
all Plans included in the Aggregation Group.
11.7.15 "Top-Heavy Vesting Schedule" means the vesting schedule set forth in
Section 11.2(d).
11.7.16 "Top-Heavy Plan" means a Plan for a Plan Year in which, as of the
Determination Date:
(a) The sum of the account balances of Participants in the Plan who
are Key Employees for the Plan Year exceeds sixty (60%) percent
of the sum of the account balances under the Plan for all
Employees, including their Beneficiaries participating under the
Plan, and this Plan is not part of any Aggregation Group; or
(b) The Plan is part of a Top-Heavy Group and is included in the
Required Aggregation Group. Notwithstanding the preceding
sentence, collectively bargained plans are not subject to the
rules of Section 11. December 31, 1983 shall not be taken into
account under the Plan for purposes of computing the Top-Heavy
status of the Plan or group of Plans, except to the extent
provided in regulations.
11.7.17 Determination of Top-Heavy Status. In making the determination of
the Top-Heavy status of a Plan or group of Plans, the accrued benefits
or account balances derived from Employer and Employee contributions
are taken into account, but accumulated deductible Employee
contributions are disregarded. Also, the determination of the present
value of the accumulated accrued benefits and the account balances of
a Key Employee or Non-Key Employee participating in the plans includes
such amounts distributed to the Employee or to the Beneficiary of such
Employee during the Plan Year that includes the Determination Date and
the preceding four Plan Years, even if such distribution occurred
before the effective date of Section 416 of the Code. The preceding
amount also includes distributions under a plan which has been
terminated which, if it had not been terminated, would have been
included in a Required Aggregation Group. An Unrelated rollover
contribution or similar transfer accepted by the Plan after December
31, 1983 shall not be taken into account under the Plan for purposes
of computing the Top-Heavy status of the Plan or group of Plans,
except to the extent provided in regulations. If any individual ceases
to be a Key Employee with respect to any Plan for any Plan Year, but
such individual was a Key Employee with respect to such Plan for any
prior Plan Year, any accrued benefit or account balance of such
Employee shall not be taken into account in determining whether the
Plan or group of Plans is Top-Heavy for any Plan Year following the
last Plan Year in which such Employee was treated as a Key Employee.
For Plan Years beginning after December 31, 1984, if any individual
has not performed any service during the Plan Year that includes the
Determination Date and the preceding four Plan Years for the Employer,
other than benefits under this Plan, then any accrued benefit or
account balance of such individual shall not be taken into account in
determining whether the Plan or group of Plans is Top-Heavy for the
Plan Year. When aggregating two or more Plans in accordance with
Section 416(g)(2) of the Code, or as it may be amended, the present
value of the accrued benefits or account balances will be determined
separately for each plan as of such Plan's Determination Date. These
Plans will then be aggregated by adding together the results for each
Plan as of the Determination Dates that fall within the same calendar
year. The present value of the account balance of any Plan Participant
as of the Determination Date is the sum of (a) the Participant's
account balance as of the most recent valuation date occurring within
a 12-month period ending on the Determination Date, and (b) an
adjustment for the amount of any Employer contribution actually made
on behalf of the Participant after the valuation date, but on or
before the Determination Date. Notwithstanding the above, in the first
Plan Year, the adjustment set forth in paragraph (b) shall include the
amount of any Employer contribution made after the Determination Date
if such contributions are allocated to a Participant's Employer
contribution Account during the first Plan Year .
39
<PAGE>
SECTION 12
----------
Administration of the Plan
--------------------------
12.1 Administrative Committee. The Plan shall be administered by the Committee
------------------------
which shall be responsible for carrying out the provisions of the Plan,
and which shall be the Plan Administrator and Named Fiduciary as these
terms are defined under ERISA. The Committee shall consist of at least two
(2) members who shall be appointed from time to time by the Board of
Directors. Vacancies on the Committee shall be filled in the same manner
as appointment. The Employer shall act as the Committee at any time
during which no committee is appointed or duly constituted hereunder.
Each person appointed a member of the Committee shall signify his
acceptance by filing a written acceptance with the Board of Directors.
Any member of the Committee may be removed by his own accord by delivering
his written resignation to the Board of Directors and to the Secretary of
the Committee.
12.2 Chairman; Subcommittees. The members of the Committee shall elect from
-----------------------
their number a Chairman and shall appoint a Secretary, who need not be a
member of the Committee. They may appoint from their number such
subcommittees with such power as they shall determine, may authorize one
or more of their number or any agent to execute or deliver any instrument
or make any payment in their behalf, and may employ such clerks, counsel,
accounts and actuaries as may be required in carrying out the provisions
of the Plan.
12.3 Meetings. The Committee shall hold meetings upon such notice, at such
--------
time, and at such place as it may determine.
12.4 Action. A majority of the members of the Committee at the time in office
------
shall constitute a quorum for the transaction of business. All
resolutions or other actions taken by the Committee shall be by vote of a
majority of those present at a meeting, but not less than two, or in
writing by all the members at the time in office, if they act without a
meeting.
12.5 Compensation. No member of the Committee, who is also an Employee, shall
------------
receive any compensation for his service as such, but the Employer may
reimburse any member for reasonable and necessary expenses incurred.
12.6 Administrative Rulemaking. The Committee shall from time to time
-------------------------
establish rules for the administration of the Plan and the transaction of
its business. Except as herein otherwise expressly provided, the
Committee shall have the exclusive right to interpret the Plan and to
decide any matters arising thereunder in connection with the
administration of the Plan. It shall endeavor to act by general rules so
as not to discriminate in favor of any person. Its decision and the
records of the Committee shall be conclusive and binding upon the
Employer, Participants, and all other persons having any interest under
the Plan.
12.7 Plan Records. The Committee shall maintain accounts showing the fiscal
------------
transactions of the Plan, and in connection therewith shall require the
Trustees to submit any necessary reports, and shall keep in convenient
form such data as may be necessary for the determination of the assets and
liabilities of the Plan. The Committee shall prepare, annually, a report
showing in reasonable detail the assets and liabilities of the Plan and
giving a brief account of the operation of the Plan for the past year.
Such report shall be submitted to the Board of Directors and shall be
filed in the Office of the Secretary of the Committee where it shall be
open to inspection by any Participant of the Plan.
12.8 Reliance on Advice From Professionals. The members of the Committee and
-------------------------------------
the officers and directors of the Employer shall be entitled to rely upon
all certificates and reports made by any duly appointed legal counsel.
The members of the Committee and the officers and directors of the
Employer shall be
40
<PAGE>
fully protected against any action taken in good faith in reliance upon
any such certificates, reports or opinions. All actions so taken shall be
conclusive upon each of them and upon all persons having any interest
under the Plan. Each member of the Committee shall be indemnified by the
Employer against any and all claims, loss, damages, expense and liability
to which he may be a party by reason of his membership in the Committee,
except in relation to matters as to which he shall be adjudged in such
action to be liable for gross negligence or willful misconduct in the
performance of his duty as such member. The foregoing right of
indemnification shall be in addition to any other rights to which any such
member may be entitled as a matter of law.
12.9 Claims. Claims for benefits under the Plan shall be filed, on the forms
------
supplied by the Committee. Written notice of the disposition of a claim
shall be furnished the claimant within thirty (30) days after the
application therefor is filed. In the event the claim is denied, the
reasons for the denial shall be cited and, where appropriate, an
explanation as to how the claimant can perfect the claim will be provided.
12.10 Appeals. Any Employee, former Employee, or beneficiary of either, who has
-------
been denied a benefit, or feels aggrieved by any other action of the
Employer, Committee or the Trustee, shall be entitled, upon request to the
Committee and if he has not already done so, to receive a written notice
of such action, together with a full and clear statement of the reasons
for the action. If the claimant wishes further consideration of his
position, he may obtain a form from the Committee on which to request a
hearing. Such form, together with a written statement of the claimant's
position, shall be filed with the Committee no later than ninety (90) days
after receipt of the written notification provided for above or in Section
12.10. The Committee shall schedule an opportunity for a full and fair
hearing of the issue within the next thirty (30) days. The decision
following such hearing shall be made within thirty (30) days and shall be
communicated in writing to the claimant.
SECTION 13
----------
Management and Investment of Trust Assets
-----------------------------------------
13.1 Exclusive Benefit Rule. All assets for providing the benefits of the Plan
----------------------
shall be held as a trust for the exclusive benefit of Participants and
beneficiaries under the Plan, and no part of the corpus or income shall be
used for, or diverted to, purposes other than for the exclusive benefit of
Participants and beneficiaries under the Plan. No Participant or
beneficiary under the Plan, nor any other person, shall have any interest
in or right to any part of the earnings of the Trust, or any rights in, to
or under the Trust or any part of its assets, except to the extent
expressly provided in the Plan.
13.2 Investment Control. All contributions to the Plan by either the
------------------
Participants or the Employer shall be committed in trust to the Trustees.
The Trustees shall be appointed from time to time by the Board of
Directors by appropriate instrument, with such powers in the Trustees as
to investment, re-investment control and disbursement of the funds as the
Board of Directors shall approve and as shall be in accordance with the
Plan. The Board of Directors may remove any Trustee at any time, upon
reasonable notice, and upon such removal or upon the resignation of any
Trustee, the Board of Directors shall designate a successor Trustee.
13.3 Investment in Qualifying Employer Securities. Trust Assets under the Plan
--------------------------------------------
will be invested primarily in Qualifying Employer Securities, as provided
in the Trust Agreement. Trust Assets may be used to purchase shares of
Qualifying Employer Securities from Company shareholders or from the
Company. The Trustee may also invest Trust Assets in savings accounts,
certificates of deposit, high-grade short-term securities, equity stocks,
bonds, or other investments, or Trust Assets may be held in cash. All
investments of Trust Assets shall be made by the Trustee only upon the
direction of the Committee, and all purchases of Qualifying Employer
Securities by the Trustee shall be made at prices which do not exceed the
fair market value of such shares, as determined in good faith by the
Committee. The Committee may direct the Trustee to invest and hold up to
100% of the Trust Assets in Qualifying Employer Securities.
Notwithstanding anything in the Plan to the contrary, all determinations
as to the
41
<PAGE>
fair market value of Qualifying Employer Securities shall be made (i) in
accordance with Treasury Regulation (S)54.4975-11(d)(5), (ii) by an
independent appraiser, pursuant to Section 401(a)(28) of the Code, in the
event such Qualifying Employer Securities are not readily tradeable on an
established securities market, and (iii) as of the most recent Valuation
Date, provided that transactions involving Participants who are
"disqualified persons" within the meaning of Section 4975 of the Code
shall be valued as of the transaction date.
13.4 Acquisition Loans. The Committee may direct the Trustee to incur
-----------------
Acquisition Loans from time to time to finance the acquisition of
Qualifying Employer Securities (Financed Shares) for the Trust or to repay
a prior Acquisition Loan. An installment obligation incurred in
connection with the purchase of Qualifying Employer Securities shall
constitute an Acquisition Loan. An Acquisition Loan shall be for a
specific term, shall bear a reasonable rate of interest and shall not be
payable on demand except in the event of default. An Acquisition Loan may
be secured by a collateral pledge of the Financed Shares so acquired. No
other Trust Assets may be pledged as collateral for an Acquisition Loan,
and no lender shall have recourse against Trust Assets other than any
Financed Shares remaining subject to pledge. Any pledge of Financed
Shares must provide for the release of shares so pledged on pro-rata basis
as principal and interest on the Acquisition Loan are repaid by the
Trustee and such Financed Shares are allocated to Participants' Company
Stock Accounts (as provided in Section 6). Repayments of principal and
interest on any Acquisition Loan shall be made by the Trustee (as directed
by the Committee) only from Employer contributions paid in cash to enable
the Trustee to repay such Loan, forfeitures from Participant accounts,
from earnings attributable to such Employer contributions and from cash
dividends received by the trust. The payments made with respect to an
Acquisition Loan by the Trust during a Plan Year shall not exceed an
amount equal to the sum of such contributions and earnings received during
or prior to the Plan Year less such payments in prior years. Such
contributions and earnings must be accounted for separately in the books
of accounts of the Trust until the Acquisition Loan is repaid. The
proceeds of an Acquisition Loan shall be used within a reasonable time
after receipt by the Trust to purchase common stock. Further, all income
earned with respect to Unallocated Company Stock shall be used at the
discretion of the Committee to repay the Acquisition Loan used to purchase
such Company Stock. Any income not so used shall be allocated as income
of the Plan.
Should the Employer contributions, earnings attributable to such Employer
contributions, and cash dividends received by the Trust on Financed Shares
be insufficient to meet the obligations created by the Acquisition Loan,
then the Trustee shall so advise the Committee. The Committee may
recommend certain actions including but not limited to, refinancing the
original Loan, amendment of the original Loan Agreement, or the entering
into of an additional Acquisition Loan to repay a prior Acquisition Loan.
13.5 Disbursements. The Committee shall determine the manner in which the
-------------
funds of the Plan shall be disbursed in accordance with the Plan and
provisions of the trust instrument, including the form of voucher or
warrant to be used in making disbursements and the qualifications of
persons authorized to approve and sign the same and any other matters
incident to the disbursements of such funds.
13.6 Voting of Company Stock. Pursuant to Section 409(e) of the Code, all
-----------------------
"Registration-Type" Company Stock allocated to a Participant Account shall
be voted by the Trustee in accordance with the instructions of the
Participant.
If the Company Stock is not a registration-type class of securities
pursuant to Section 409(e) of the Code, then Participants are entitled to
direct the Trustee concerning voting allocated stock with respect to any
corporate matter which involves the approval or disapproval of any
corporate merger, consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets or similar
transaction. The Committee shall direct the voting of such stock in all
other matters.
42
<PAGE>
Company Stock which has not yet been allocated and allocated stock for
which no voting discretion has been received by Participants in a timely
manner shall be voted by the Trustee as directed by the Committee.
13.7 Dividends. Dividends paid with respect to Qualifying Employer Securities
---------
held by the Trust shall be applied as follows:
(a) The dividends paid with respect to shares which are both purchased
with the proceeds of an Acquisition Loan and allocated to the
accounts of Participants at the direction of the Plan Committee
shall be either (1) paid in cash directly to such Participants or
their Beneficiaries, or (2) if paid into the plan, distributed in
cash to Participants or their Beneficiaries not later than 90 days
after the close of Plan Year in which paid, or (3) if permitted by
Section 404(k) of the Code, paid into the Plan and used to repay the
Acquisition Loan, with shares released thereby allocated to such
Participants in an amount proportional to such dividends for the
year for which such dividends would have been allocated to such
Participants; provided however that the fair market value of said
shares is not less than the amount of such dividend that the
Participant would have otherwise received; and
(b) The dividends paid with respect to unallocated shares shall be used
to repay the Acquisition Loan. Further, to the extent that Section
1042 of the Code applies to the purchase of Qualifying Employer
Securities under the Plan, the dividends earned with respect to such
purchase may not accrue, during the nonallocation period, for the
benefit of (i) any taxpayer who makes an election under section 1042
with respect to Qualifying Employer Securities, (ii) any individual
related to the taxpayer, or (iii) any person who owns more than
twenty-five percent of any class of outstanding stock of the Company
or the total value of any class of outstanding stock of the Company.
To the extent so applied in either (a) or (b) above, the dividends
so paid shall be deductible to the Employer (as permitted under
Section 404(k) of the Code) in the Taxable Year of the Employer in
which the dividend is paid or distributed to Participants, or
applied to repay the Acquisition Loan.
SECTION 14
----------
Obligations of the Employer
---------------------------
14.1 Limited Liability. The Employer shall have no liability in respect to
-----------------
payments or benefits or otherwise under the Plan, and the Employer shall
have no liability in respect to the administration of the Trust or of the
funds, securities or other assets paid over to the Trustees, and each
Participant, each contingent Participant, and each beneficiary shall look
solely to such Trust Fund for any payments or benefits under the Plan.
SECTION 15
----------
Miscellaneous
-------------
15.1 No Assignment, etc. No benefit payable under the Plan shall be subject in
-------------------
any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge and any action by way of anticipating,
alienating, selling, transferring, assigning, pledging, encumbering, or
charging the same shall be void and of no effect; nor shall any benefit be
in any manner liable for or subject to the debts, contracts, liabilities,
engagements, or torts of the person entitled to such benefit, except as
specifically provided in the Plan.
15.2 Non-alienation. No benefits under this Plan shall be in any manner
--------------
anticipated, alienated, sold, transferred, assigned, pledged, encumbered
or charged, and any attempt to so anticipate, alienate, sell,
43
<PAGE>
transfer, assign, pledge, encumber or charge the same shall be void; nor
shall any such benefits in any manner be liable for or subject to the
debts, contracts, liabilities or engagements of the person entitled to
such benefits as herein provided for him. The preceding sentence shall
also apply to the creation, assignment or recognition of right to any
benefit payable with respect to a Participant pursuant to a Domestic
Relations Order, unless such order is determined, by the Committee in its
sole and absolute discretion, to be a Qualified Domestic Relations Order.
15.3 No Employment Rights. The establishment of the Plan shall not be
--------------------
construed as conferring any rights upon any Employee or any person for a
continuation of employment, and shall not be construed as limiting in any
way the right of the Employer to discharge any Employee or to treat him
without regard to the effect which such treatment might have upon him as a
Participant in the Plan.
15.4 Incompetence of Beneficiary. If any person entitled to receive any
---------------------------
benefits from the Trust Fund is, in the judgment of the Committee,
legally, physically, or mentally incapable of personally receiving and
receipting for any distribution, the Committee may instruct the Trustees
to make distribution to such other person, persons or institutions as, in
the judgment of the Committee are then maintaining or have custody of such
distributee.
15.5 Conclusiveness of Committee Decisions. The determination of the Committee
-------------------------------------
as to the identity of the proper payee of any benefit under the Plan and
the amount of such benefit properly payable shall be conclusive, and
payment in accordance with such determination shall constitute a complete
discharge of all obligations on account of such benefit.
15.6 Inability to Locate Beneficiary. In the event an amount is payable from
-------------------------------
the Trust Fund to a beneficiary or the executor or administrator of any
deceased Participant and if, after written notice from the Trustees mailed
to such person's last known address as certified to the Trustees by the
Committee, such person or such executor or administrator shall not have
presented himself to the Trustees within six (6) years after the mailing
of such notice, the Trustees shall notify the Committee and the Committee
shall instruct the Trustees to distribute such amount due to such
beneficiary or such executor or administrator among one or more of the
spouse and blood relatives of such deceased person, designated by the
Committee.
15.7 Mergers, etc. In the case of any merger, consolidation with or transfer
-------------
of assets or liabilities to any other plan, each Participant in the Plan
shall, (if the plan is terminated), receive a benefit under this Plan
immediately after the merger, consolidation or transfer, which is equal to
or greater than the benefit under this Plan he would have been entitled to
receive immediately before the merger, consolidation or transfer if the
plan had been terminated.
SECTION 16
----------
Amendments
----------
16.1 Amendments. The Company reserves the right at any time, and from time to
----------
time, by action of its Board of Directors, to modify or amend in whole or
in part any or all of the provisions of the Plan. This right of the
Company is subject to the conditions:
(a) that no modification or amendment may be made which will adversely
affect the existing account balances or optional forms of benefits
of any Participant or beneficiary; and
(b) that no part of the assets of the Plan shall, by reason of any
modification or amendment, be used for or diverted to, purposes
other than for the exclusive benefit of Participants and
beneficiaries under the Plan.
44
<PAGE>
16.2 ESOP Status. If the Company amends this Plan to no longer primarily
-----------
invest in Qualifying Employer Securities, thus ceasing to be an ESOP,
Section 17.2 will apply.
16.3 Vesting Rule. In the event that the vesting schedule of this Plan is
------------
amended, any Participant who has completed at least three (3) Years of
Service may elect to have his vested interest determined without regard to
such amendment by notifying the Plan Administrator in writing during the
election period as hereinafter defined. The election period shall begin
on the date such amendment is adopted and shall end no earlier than the
latest of following dates:
(a) The date which is sixty (60) days after the day the amendment is
adopted;
(b) The date which is sixty (60) days after the day the amendment
becomes effective; or
(c) The date which is sixty (60) days after the day the Participant is
issued written notice of the amendment by the Employer or Plan
Administrator.
Such election shall be available only to an individual who is a
Participant at the time such election is made and such election shall be
irrevocable.
If the Plan is amended pursuant to this Section and an Employee is a
Participant as of the later of the date the amendment is adopted or the
date the amendment becomes effective, then the nonforfeitable percentage
of the Participant's Account shall not be less than such percentage when
determined under the Plan without regard to the amendment.
SECTION 17
----------
Suspension, Discontinuance and Plan Termination
-----------------------------------------------
17.1 Permanence. The Company and each employer intend this Plan to be
----------
permanent and to qualify under Section 401 of the Code, as that statute
may from time to time be amended or supplemented. However, the Plan may
be discontinued by the Board of Directors, but only upon condition that
such action is taken under the Trust Agreement established under the Plan
and as such shall render it impossible for any part of the corpus of the
Trust or income thereon to be at any time used for, or diverted to,
purposes other than for the exclusive benefit of Participants and
beneficiaries. Upon termination, partial termination, or upon complete
discontinuance of contributions all affected Participant's Accounts shall
be considered as fully vested and non-forfeitable and all unallocated
assets of the Trust, including but not limited to Employer contributions
and unallocated Trust assets and earnings thereon, shall be allocated to
the accounts of all Participants as of the next Valuation Date (or if the
Plan is being terminated immediately, then on the date of such Plan
termination as if it were the next Valuation Date) in accordance with the
provisions of the Plan hereof; and shall be applied for the benefit of
each such Participant either by a lump-sum distribution, or by the
continuance of the Trust and the payments of benefits thereunder in the
manner provided in the Plan. After initial qualification by the Internal
Revenue Service, there will be no reversion of assets to the Employer
under any circumstances. All Participants shall be treated in a uniform
and nondiscriminatory manner.
17.2 Cessation of ESOP Status. If this Plan ceases to be an ESOP, the proceeds
------------------------
of an Acquisition Loan will be used within a reasonable time after receipt
by the Plan either to acquire Qualifying Employer Securities or to repay
the loan or a prior Acquisition Loan. Even if the Plan ceases as an ESOP,
any Qualifying Employer Security acquired with the proceeds of an
Acquisition Loan will be subject to a put option if the Company Stock is
not publicly traded when distributed, or if the Company Stock is subject
to a trading limitation when distributed. The put option must be
exercisable at least during a 15-month period which begins on the date the
Company Stock is subject to the put option is distributed
45
<PAGE>
by the Plan. The price at which the put option will be exercisable will
be the value of the Company Stock as of the date of exercise or as of the
most recent Valuation Date. If the transaction takes place between the
Plan and a disqualified person, value will be determined as of the date of
the transaction.
17.3 Merger or Sale of the Company. Notwithstanding anything herein to the
-----------------------------
contrary, in the event that the Company or all of the Company's
outstanding Company Stock shall be acquired, through merger or sale, by an
unrelated third party, then the Plan shall automatically be terminated
without further action or notice effective on the date of such sale or
merger; all Participant Accounts shall be considered fully vested and non-
forfeitable as of such date of termination; all Employer contributions,
dividends on Company Stock and earnings on Participant Account assets paid
to the Trust or earned by the Trust since the most recent Valuation Date
shall be allocated to the accounts of all Participants as of the date of
termination of the Plan as if it were the next Valuation Date in
accordance with the provisions of the Plan; and all funds realized by the
Trust with respect to any Financed Shares remaining as collateral on any
Acquisition Loans which shall be exchanged for cash in such merger or sale
after repayment of all Acquisition Loans shall have been made shall be
allocated to the accounts of all Participants pro rata based on the total
value of assets allocated to each Participant's Account as a percentage of
the total value of assets allocated to all Participant Accounts and held
in the Trust as of the date of termination of the Plan. Upon such
termination of the Plan and completion of the final accounting and
allocation of the Trust assets, all such Participant Accounts which shall
account for all Trust assets shall be distributed in a lump-sum to each
Participant as soon as administratively feasible.
SECTION 18
----------
Inclusion Of Other Companies
----------------------------
18.1 Joinder Generally. Any company which is or becomes a subsidiary,
-----------------
Affiliate or associated company of the Employer, may, with the approval of
the Board of Directors of the Employer, adopt this Plan with respect to
its Employees.
18.2 Joinder -- Terms and Conditions. With respect to the Employees of any
-------------------------------
such subsidiary, Affiliate or associated companies which may become
included in the Plan, the Board of Directors of the Employer shall
determine the extent, if any, to which the period of prior employment
therewith or with any predecessors thereof shall be recognized as service
for the purposes of this Plan.
46
<PAGE>
Exhibit 4.2
COOPERATIVE BANK FOR SAVINGS, INC., SSB
EMPLOYEE STOCK OWNERSHIP-401(K) SAVINGS PLAN
(Effective Date of Plan: April 1, 1991)
-----------------------------------------
SUMMARY PLAN DESCRIPTION
-----------------------------------------
* * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * *
<PAGE>
COOPERATIVE BANK FOR SAVINGS, INC., SSB
EMPLOYEE STOCK OWNERSHIP-401(k) SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TITLE Page
- ----- ----
<S> <C>
GENERAL INFORMATION............................. 1
PLAN PARTICIPATION.............................. 3
PLAN CONTRIBUTIONS.............................. 3
INVESTMENT OF PLAN CONTRIBUTIONS................ 5
VOTING OF COMMON STOCK.......................... 7
WITHDRAWALS AND LOANS........................... 8
PAYMENT OF BENEFITS............................. 8
REEMPLOYMENT.................................... 9
TAX CONSIDERATIONS.............................. 10
CLAIMS PROCEDURES............................... 11
ADDITIONAL INFORMATION.......................... 11
</TABLE>
<PAGE>
COOPERATIVE BANK FOR SAVINGS, INC., SSB
EMPLOYEE STOCK OWNERSHIP-401(K) SAVINGS PLAN
INTRODUCTION
Cooperative Bank for Savings, Inc., SSB (the "Bank") originally adopted the
Cooperative Bank for Savings, Inc., SSB Employee Stock Ownership Plan (the
"Plan"), effective April 1, 1991, in order to give its employees a stockholder's
interest in the Bank's success, and thereby to encourage each employee to take a
more active role in keeping the Bank productive and profitable. Effective
January 1, 1997, the Bank amended and restated the Plan to permit both voluntary
- -- 401(k) -- contributions by participants ("Participant Contributions") and
-------------------------
Bank contributions matching Participant Contributions.
This booklet is the "Summary Plan Description" required under the Employee
Retirement Income Security Act of 1974 as amended ("ERISA") and it supersedes
-----
any prior summary plan description previously provided by the Bank. It
highlights the most important provisions of the Plan and is written in a
question and answer format in order to simplify the presentation of the
material. Please read it carefully because the more you know about the Plan,
the better you can take advantage of its benefits. If you then have any
questions, please don't hesitate to get in touch with the Plan Administrator.
Terms in this booklet that begin with capital letters have specially
defined meanings under the Plan, which are underlined and explained where they
are first used in the booklet. In the event of any conflict between this
summary and the Plan, the provisions of the Plan will control. A copy of the
Plan is available for inspection at our Personnel Office.
GENERAL INFORMATION
1. WHAT IS THE NAME OF THE PLAN?
The Plan's full name is the Cooperative Bank for Savings, Inc., SSB
Employee Stock Ownership-401(k) Savings Plan. In this document, it will
commonly be referred to as the Plan.
----
2. WHAT KIND OF PLAN IS THE PLAN?
The Plan is an "employee stock ownership plan" as defined in ERISA, which
also includes provisions permitting Participant Contributions and employer
matching contributions.
3. HOW DOES THE PLAN WORK?
Under the Plan, a Plan participant may elect to defer between 1% and 15% of
his or her annual W-2 earnings, not to exceed $9,500 annually (as indexed
for inflation under the Internal Revenue Code) to his or her Participant
Contribution account which amounts will
<PAGE>
be contributed to the Plan trust by the Bank on the participant's behalf.
Cooperative Bankshares, Inc. (the "Company") may also contribute cash or
shares of its common stock ("Common Stock") to the Plan trust in the form
of employer discretionary contributions or Matching Contributions, which
----------------------
match all or a portion of Participant Contributions according to a formula
established by the Bank. (See Q&A-13, below) The Plan trust is a separate
trust fund maintained for the benefit of those employees who have become
participants in the Plan. Participants will have any Participant
Contributions plus their share of employer contributions allocated to their
personal "Plan Accounts" over the years. A Plan Account is an account
---- -------
created in the records of the Plan to keep track of each participant's
interest in contributions allocated to his or her account. Upon leaving
employment, participants will be entitled to receive their Plan Accounts,
to the extent "vested."
4. WHAT PLAN NUMBER IDENTIFIES THE PLAN FOR PURPOSES OF FILING REPORTS WITH
THE INTERNAL REVENUE SERVICE?
002
5. WHO IS THE PLAN SPONSOR?
Cooperative Bank for Savings, Inc., SSB (also referred to as the Bank or as
----
the Employer).
--------
Address: 201 Market Street
Wilmington, North Carolina 28401
Telephone: (910) 343-0181
E.I.N.: 56-0188330
6. WHO IS THE PLAN ADMINISTRATOR AND "NAMED FIDUCIARY?"
The Bank at the address and telephone number stated in Answer 5 above.
7. WHO ARE THE TRUSTEES OF THE PLAN?
Frederick Willetts, III, O.C. Burrell, Jr., Daniel W. Eller, Edward E.
Maready, and Eric R. Gray, acting by majority. You may contact the
Trustees at the address and telephone number stated in Answer 5 above.
8. WHO IS THE AGENT FOR SERVICE OF LEGAL PROCESS?
The Bank, by its President, or the Trustees, at the address stated above.
- 2 -
<PAGE>
PLAN PARTICIPATION
9. WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
All employees of the Bank or the Company, with certain exceptions not
applicable to anyone at this time.
10. WHEN WILL I BECOME A PARTICIPANT IN THE PLAN?
-----------
You become a Participant on the later of (i) the January 1st or July 1st
-----
that coincides with or next follows your satisfaction of both of the
eligibility requirements described in Answer 11 below, or (ii) April 1,
1991.
11. WHAT ARE THE REQUIREMENTS FOR PARTICIPATION IN THE PLAN?
You must attain age 21 and complete 1,000 Hours of Service (as defined in
Q&A-12) either during the 12-month period following the date your
------
employment commences, or during any Plan Year beginning after the date your
--
employment commences. The Plan Year is the 12-month period that ends
---------
annually on December 31.
12. WHAT IS AN HOUR OF SERVICE?
Generally, you will receive credit for an Hour of Service for each hour for
---------------
which you are entitled to be paid by the Bank or the Company, including
working hours and paid nonworking hours as provided under the Plan. You
cannot be credited with more than 501 Hours of Service during any single
period of absence from work, whether paid or non-paid.
PLAN CONTRIBUTIONS
13. AM I PERMITTED TO MAKE CONTRIBUTIONS TO THIS PLAN?
As often as once each calendar quarter, you may execute a written agreement
authorizing the Bank to withhold from 2% to 16% of your compensation
otherwise payable from the Bank, not to exceed $9,500 (per Plan Year) as
indexed for inflation under the Code. In consideration of such agreement,
the Bank will remit Participant Contributions to the Plan trust in cash, as
soon as is practicable following the pay period to which they relate.
You may not make rollover contributions to the Plan. (A rollover
contribution is a contribution of assets paid from another retirement
plan.)
- 3 -
<PAGE>
14. IS THE BANK REQUIRED TO MAKE ANNUAL CONTRIBUTIONS TO THE PLAN?
The Bank's Board of Directors generally has discretion over the amount it
will contribute to the Plan for each Plan Year; however, the Bank intends
to contribute amounts sufficient to repay any loans used to acquire Common
Stock held by the Plan. If no contribution is made for any year, the Bank
will inform the Plan Administrator and the Trustees.
In addition to any discretionary contribution for each Plan Year, the Bank
may declare and contribute a Matching Contribution in an amount to be
determined annually prior to the beginning of a Plan Year. Such
determination will be at the sole discretion of the Board of Directors of
the Bank and may be equal to some percentage, if any, of the total amount,
or portion thereof, of Participant Contributions agreed to be made pursuant
to salary deferral agreements entered into between the Bank and
Participants for such Plan Year. In addition, for each Plan Year, the Bank
will contribute such additional amount as its Board of Directors will
determine.
The Bank may also contribute an additional amount determined in its sole
judgement. This additional contribution, if any, will be allocated to
Participants who are not considered "highly-compensated" for federal tax
purposes and will be allocated based on the proportion of each eligible
Participant's compensation to that of all eligible Participants. These
contributions will be nonforfeitable and subject to certain withdrawal
restrictions./1/
Employer contributions may be made in the form of Common Stock, cash, or
other securities, and will be made before or shortly after the end of the
Plan Year to which they relate.
15. WHO SHARES IN THE BANK'S CONTRIBUTIONS TO THE PLAN?
Matching Contributions. Participants will be eligible to receive
allocations of Matching Contributions irrespective of their hours of
service during the Plan Year or their employment status on the last day of
the Plan Year.
Other Bank Contributions. To share in a Plan contribution by the Bank
(other than a Matching Contribution) for a particular Plan Year, you must
be (i) a Participant in the Plan on the last day of the Plan Year (unless
you terminated service during the Plan Year due to death, total disability
or retirement), and (ii) complete at least 1,000 Hours of Service during
the Plan Year.
- ------------------
/1/ For plan years beginning after December 31, 1996, you will be considered
"highly compensated" only if you (1) are a 5% owner of the Bank or the
Company, or (2) had compensation in excess of $80,000 and were in top 20%
of employees (ranked by compensation) for the preceding Plan year.
- 4 -
<PAGE>
16. HOW WILL MY SHARE OF THE BANK'S CONTRIBUTIONS TO THE PLAN BE DETERMINED?
The Bank's discretionary (non-matching) contributions will be allocated in
proportion to the ratio of your compensation/2/ to the total compensation
of all eligible Participants for the Plan Year. For example, if your
compensation is $10,000 and the total compensation of all eligible
Participants for the Plan Year ending December 31, 1996 is $100,000, your
Plan Account would be credited with 10% of our discretionary contribution
for the Plan Year. Thus, your share of a $15,000 contribution would be
$1,500 (10% of $15,000).
Matching Contributions will be allocated based on your Participant
Contributions for the Plan Year, according to the formula established by
the Bank.
In accordance with various federal tax laws, the Plan limits the maximum
amount that can be allocated to a Participant in a year. It is not likely
that this limit will be reached by any employee participating in the Plan,
but you will be notified if it applies to you.
INVESTMENT OF PLAN CONTRIBUTIONS
17. WHAT HAPPENS TO PLAN CONTRIBUTIONS?
Contributions go into a Trust Fund held by the Trustees, who maintain the
----------
trust for the exclusive benefit of Plan Participants. The Trust Fund is
not taxed on its earnings or income, and you are not taxed on the value of
your Plan Account until it is actually paid to you.
18A. HOW ARE BANK CONTRIBUTIONS INVESTED?
The Trustees invest Bank contributions primarily in shares of Common Stock.
If at any time the Bank contributions (and earnings thereon) are not
invested entirely in Common Stock, then your account will also contain its
pro rata share of any other investment assets (for example, bonds or
certificates of deposit).
18B. HOW ARE PARTICIPANT CONTRIBUTIONS INVESTED?
The Plan permits Participants to direct the investment of their Participant
Contributions between alternative investment funds provided under the Plan.
The choices available to you, as well as the procedures for making
investment elections are detailed in a separate Prospectus that you should
obtain from the Plan Administrator. You may change
- ---------------------
/2/ Your compensation is the sum of your total taxable compensation plus your
salary reduction contributions for the Plan Year. The Internal Revenue
Code requires that the Plan disregard compensation in excess of certain
maximum limitations ($150,000 for 1996). You will be notified in the
unlikely event that this limitation affects you.
- 5 -
<PAGE>
investment selections between available alternatives in accordance with
rules established by the Plan Administrator.
19. HOW ARE TRUST FUND INCOME, GAINS AND LOSSES ALLOCATED?
For bookkeeping purposes, there are three parts to your Plan Account. One
part reflects your allocation of Bank discretionary contributions, the
second part reflects your allocation of Matching Contributions, and the
third represents your Participant Contributions. Your account will be
valued on a daily basis, based on the market value of the assets, and the
earnings thereon, attributable to each part of your account.
You should be aware that although the Trust Fund is a stockholder of
Cooperative Bankshares, Inc., you personally are not a stockholder until
shares of stock are distributed to you, as discussed below. Nevertheless,
you are entitled to direct the Trustees as to how to vote the shares in
your Plan Account with respect to any matter presented for a vote of the
Company's stockholders.
Certain individuals who have sold shares of Common Stock to the Trust Fund
or who own 25% or more of the Common Stock (and their close relatives) are
ineligible to participate in some allocations of the Trust Fund. You will
be notified if this provision applies to you.
20. AS I NEAR RETIREMENT, MAY I DIRECT THAT MY PLAN ACCOUNT NO LONGER BE
INVESTED PRIMARILY IN SHARES OF COMMON STOCK?
During each of the five Plan Years which begin with the Plan Year in which
you attain age 55 (or, if later, after you have completed your 10th year of
participation in the Plan), you may elect to direct the Trustees as to the
investment of 25% of the Common Stock which is credited to your Plan
Account and is attributable to Bank, rather than Participant,
contributions. In the sixth Plan Year, you may direct the investment of
50% of such Common Stock. Investment elections may be made between not
less than three investment alternatives provided under the Plan.
No investment changes will be made unless you file an election. This must
be done no later than 90 days after the last day of the Plan Year for which
you are eligible to make such an election.
- 6 -
<PAGE>
21. HOW OFTEN WILL I BE INFORMED ABOUT THE STATUS OF MY PLAN ACCOUNT?
Each calendar quarter, you will receive a statement showing the value of
your Plan Account, the number of shares of Common Stock credited to your
Account, and their value.
VOTING OF COMMON STOCK
22. WHO VOTES COMMON STOCK HELD IN THE TRUST FUND?
You may direct the Trustee as to the voting of shares of Common Stock
allocated to your Plan Account. The Bank has the authority to direct how
the Trustee votes shares which are either unallocated or not voted by
Participants.
23. WHAT DOES IT MEAN TO BE "VESTED" IN YOUR PLAN ACCOUNT?
To be vested means that your interest in the Plan will not be forfeited
when you leave employment for any reason.
24. WHEN WILL I BECOME 100% VESTED IN MY PLAN ACCOUNT?
At all times, you are 100% vested in the portion of your Plan Account that
is attributable to Participant Contributions.
Bank contributions (and earnings thereon) credited to your Plan Account
become fully vested and nonforfeitable upon any one of the following
events:
* your Retirement. You may retire at age 65 or any time thereafter, or
----------
after age 55 if you have at least 5 Years of Vesting Service.
* your Total Disability. The Plan defines Total Disability as a
----------------
physical or mental condition resulting from a bodily injury, disease,
or mental disorder which renders you incapable of continuing any
gainful occupation and which condition constitutes a total disability
under the Federal Social Security Acts.
* your death.
* your termination of employment with the Bank after earning five or
more Years of Vesting Service.
* termination of the Plan by the Bank, its successors or assigns.
You receive credit for a Year of Vesting Service for any Plan Year in which
-----------------------
you both complete at least 1,000 Hours of Service during the particular
----
Plan Year or calendar year, and prior thereto had attained age 18.
---
- 7 -
<PAGE>
25. WHAT IF I TERMINATE EMPLOYMENT AND AM NOT 100% VESTED IN MY PLAN ACCOUNT?
If you terminate employment with the Bank for a reason other than
retirement, disability, or death, the following schedule will determine
your vested interest in the portion of your Plan Account that is
attributable to Bank contributions:
Years of Vesting Service % Vested
------------------------ --------
Less than 5 years 0%
5 or more years 100%
To the extent not vested, your Plan Account will be forfeited on the date
your employment terminates, and will be reallocated among the accounts of
other Plan Participants (as though the forfeiture were an additional
contribution by the Bank).
26. MAY I ASSIGN OR PLEDGE MY INTEREST IN THE PLAN?
No. However, your interest in the Plan may be subject to claims under a
"qualified domestic relations order" issued by a court granting another
person a right to receive all or part of your Plan Account in connection
with your support, alimony, or property division obligations to your
spouse, former spouse, children or other dependents.
WITHDRAWALS AND LOANS
27. WHILE IN THE ACTIVE EMPLOY OF THE BANK, MAY I BORROW AGAINST OR MAKE
WITHDRAWALS FROM MY PLAN ACCOUNT?
No.
PAYMENT OF BENEFITS
28. WHEN AM I ENTITLED TO RECEIVE A DISTRIBUTION?
Your Plan Account becomes payable to you (or your beneficiary) as soon as
practicable after the end of the Plan Year in which you terminate
employment for any reason. Certain special options as to your distribution
alternatives will be detailed for you when you leave employment, or sooner
at your request.
29. ONCE I BECOME ENTITLED TO A DISTRIBUTION, WHEN WILL PLAN BENEFITS BECOME
PAYABLE?
Benefit distributions will be made as soon as practicable after the end of
the Plan Year in which your distribution becomes payable (See Q&A 28).
You may elect to defer commencement of your benefit payment(s) until you
reach age 65, but only if the value of your Plan Account has at some time
exceeded $3,500.
- 8 -
<PAGE>
30. HOW WILL DISTRIBUTIONS FROM THE PLAN BE MADE?
In a lump sum.
31. IN WHAT FORM WILL DISTRIBUTIONS BE MADE FROM THE PLAN?
To the extent invested in Common Stock when you terminate employment, your
Plan Account will be paid in whole shares of Common Stock (with cash being
paid in lieu of fractional shares). Any other amounts credited to your
Plan Account will be paid in cash.
Notwithstanding the foregoing, a Participant may elect to receive cash in
lieu of Common Stock with respect to amounts attributable to Common Stock
accrued for his or her Plan Account prior to January 1, 1996.
32. HOW MAY I SELL SHARES OF COMMON STOCK DISTRIBUTED FROM MY PLAN ACCOUNT?
For so long as the Common Stock is listed on the Nasdaq-National Market,
any shares of Common Stock that you may receive from the Plan will be
freely transferable, meaning that you may sell them on the open market,
------ ------------
(through a broker if you so desire). In the unlikely event that the Common
Stock is not listed on Nasdaq-National Market (or some other exchange) at
the time you receive a distribution, you will receive a "put option" with
the Common Stock, and the shares you receive will be subject to a right of
first refusal. These matters will be explained in detail when you leave
our employment. If you desire more information now, please contact our
Personnel Office.
33. WHO IS ENTITLED TO RECEIVE MY PLAN ACCOUNT IF I DIE BEFORE DISTRIBUTIONS
COMMENCE?
If you are married at the time of your death, your Plan Account will be
distributed to your surviving spouse, unless your spouse has previously
consented in writing before a Plan representative or notary public to
payment of the death benefit to another beneficiary you have named. If you
are unmarried at the time of your death, the death benefit will be
distributed to your named beneficiary.
If you do not have a spouse or named beneficiary living at the time of your
death, the death benefit will be distributed to the executor or
administrator of your estate.
REEMPLOYMENT
34. WHAT HAPPENS IF I TERMINATE SERVICE WITH THE BANK, INCUR A BREAK-IN-SERVICE
AND THEN AM REEMPLOYED?
If you terminate employment prior to satisfying the service requirement for
participation in the Plan (see Q.11) and incur a Break in Service, you will
be treated as a new employee or your date of rehire. If you satisfy such
Service requirement prior to
- 9 -
<PAGE>
termination of employment and do not incur a Break in Service, you will
---
become a Participant as of your date of rehire. On the other hand, if you
were a Participant in the Plan during your prior period of employment and
you will become a Participant immediately upon returning to eligible
employment. How reemployment affects restoration of your Account
(including forfeitures) and your vested interest will be explained when you
are reemployed, or earlier, at your request.
35. HOW WILL A LEAVE OF ABSENCE AFFECT MY RIGHTS IF I AM REEMPLOYED?
You may at some time find it necessary to take an extended leave from your
job. Absences due to the following causes will not count toward a Break-
in-Service:
* a temporary absence due to holiday, incapacity, sickness, disability,
jury duty, or authorized vacation,
* an approved leave of absence as granted in a nondiscriminatory manner
by the Plan Administrator, in writing,
* a maternity or paternity absence, and
* active service in the armed forces, as well as any period during which
your reemployment rights are guaranteed by law.
If you are absent for one of the above-described reasons, you will receive
credit for up to 501 Hours of Service for purposes of determining whether a
Break-in-Service has occurred. Hours are credited in the Plan Year in
which the leave begins if needed to avoid a break in that Plan Year.
Otherwise, the hours are credited in the following year. These special
rules for certain absences protect you only against having a Break-in-
Service. You should be aware that an absence may prevent you from earning
enough Hours of Service to increase your Years of Vesting Service, or being
eligible for a share of the Employer's contribution for a Plan Year.
TAX CONSIDERATIONS
36. WHEN WILL I BE TAXED ON MY PLAN BENEFITS?
This Plan has been designed to meet certain Internal Revenue Code
requirements so you can enjoy special tax advantages when you participate.
Here's a brief summary.
MONEY IN. When made, Bank discretionary or matching contributions to the
Plan are not currently includible in your taxable income. As long as that
---
money stays in the Plan, it will not be taxed by the federal government or
by the State of North Carolina. Participant Contributions are likewise
excluded from taxable income until paid to you
- 10 -
<PAGE>
from the Plan, however, such amounts are subject to federal payroll taxes
(social security, medicare, etc.) in the year of deferral.
MONEY OUT. All Plan money is fully taxable as ordinary income when you
receive it. This includes the money originally contributed to the Plan as
well as earnings on that money. There are many detailed and complex
provisions of the Internal Revenue Code governing exactly how you are taxed
on distributions. As a general rule, if at the time of your resignation or
termination, you have not reached the age 55, the payment you receive will
be subject to an additional tax of 10% unless the amount is rolled over
into an IRA or other tax-qualified plan. Also, the Bank is required to
withhold 20% of any Plan distribution that is not transferred, at your
---
direction, directly to an IRA or other tax-qualified plan. If you request
that the distribution check be payable to you, you cannot elect out of this
tax withholding, even if you intend to "roll over" the distribution.
Neither the Company, the Bank, nor any employee is authorized or qualified
to give you tax advice. Before you make a decision that could cost you
large amounts of taxes that you could legally and properly avoid, we
strongly urge that you consult with your personal tax advisor or attorney.
CLAIMS PROCEDURES
37. HOW MAY I FILE A CLAIM FOR BENEFITS?
To file a written claim for benefits under the Plan, the Plan Administrator
normally requires that you complete certain forms and furnish information
(such as proof of age, for example). Written notice of the disposition of
a claim will be furnished to you within 30 days after you file the claim.
If you believe that you are entitled to a benefit that you have not
received, you (or your beneficiary) should request a hearing before the
Plan Administrator in writing within 90 days of receipt of the Plan
Administrator's decision. You will then be allowed to review documents
pertinent to your claim and submit comments to the Plan Administrator.
Within 30 days of the receipt of your request, the Plan Administrator will
schedule and hold a full hearing on your claim, and within 30 days after
such hearing will issue a written decision giving specific reasons for the
decision and references to Plan provisions on which the decision was based.
ADDITIONAL INFORMATION
38. MAY AMENDMENTS BE MADE TO THE PLAN?
The Bank intends to continue the Plan indefinitely, but has reserved the
right to amend or even to terminate the Plan if it becomes necessary or
desirable to do so. In the event the Plan is changed, your vested benefit
accrued to the effective date of such change may not be reduced. Upon
termination or partial termination of the Plan, your benefits will become
nonforfeitable.
- 11 -
<PAGE>
39. ARE THERE OTHER LIMITATIONS ON MY RIGHTS UNDER THE PLAN?
The Plan does not give any person the right to be retained as an employee
of the Employer. It creates only those rights specifically provided in the
Plan.
40. ARE MY BENEFITS GUARANTEED BY THE PENSION BENEFIT GUARANTY CORPORATION
(PBGC)?
No, because this Plan is a defined contribution plan and the Pension
Benefit Guaranty Corporation does not insure such plans. The retirement
benefit you receive will depend on the investment performance of your Plan
Account.
41. AS A PARTICIPANT IN THE PLAN, DO I HAVE ANY SPECIAL RIGHTS UNDER ERISA?
As a Participant in the Plan, you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974
(ERISA). ERISA provides that all Plan Participants are entitled to:
* Examine, without charge, at the Plan Administrator's Office, all Plan
documents, including insurance contracts and copies of all documents
filed by the Plan with the U.S. Department of Labor, such as detailed
annual reports and plan descriptions.
* Obtain copies of all Plan documents and other Plan information upon
written request to the Plan Administrator. The Plan Administrator may
make a reasonable charge for the copies.
* Receive a summary of the Plan's annual financial report. The Plan
Administrator is required under ERISA to furnish each participant with
a copy of this summary annual report.
* Obtain a statement telling you whether you have a right to receive a
benefit at age 65 and if so, what your benefits would be at such date
if you stopped working under the Plan now. If you do not have a right
to a benefit, the statement will tell you how many more years you have
to work to get such a right. This statement must be requested in
writing and is not required to be given more than once a year. The
Plan must provide the statement free of charge.
In addition to creating rights for Plan Participants, ERISA imposes duties
upon the individuals who are responsible for the operation of the Plan.
These individuals, called "fiduciaries" of the Plan, have a duty to act
prudently in your interest and that of the other Plan Participants and
beneficiaries. No one, including your Employer, may terminate you or
otherwise discriminate against you in any way to prevent you from obtaining
a benefit or exercising your rights under ERISA. If your claim for a
benefit is denied, in whole or in part, you must receive a written
explanation of the reason for
- 12 -
<PAGE>
the denial. You have the right to have the Plan Administrator review and
reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. The
following examples will show action that you may take:
* First, if you request materials from the Plan and do not receive them
within 30 days, you may file suit in a federal court. In such a case,
the court may require the Plan Administrator to provide the materials
and pay up to $100 a day until you receive the materials, unless the
materials were not sent because of reasons beyond control of the Plan
Administrator.
* Second, if you have a claim for benefits which is denied or ignored,
in whole or in part, you may file suit in a state or federal court.
* Third, if it should happen that Plan fiduciaries misuse the Plan's
money, or if you are discriminated against for asserting your rights,
you may seek assistance from the U.S. Department of Labor or you may
file suit in a federal court. The court will decide who should pay
court and legal fees. If you are successful, the court may order the
person you have sued to pay these costs and fees. If you lose, the
court may order you to pay these costs and fees, for example, if it
finds your claim is frivolous.
If you have any questions about your Plan, you should contact the Plan
Administrator. If you have any questions about your rights under ERISA,
you should contact the nearest Area Office of the U.S. Labor Management
Services Administration Department of Labor.
- 13 -
<PAGE>
Exhibit "A"
COOPERATIVE BANK FOR SAVINGS, INC., SSB
EMPLOYEE STOCK OWNERSHIP-401(K) SAVINGS PLAN
- --------------------------------------------------------------------------------
Participant's Designation of Beneficiary
- --------------------------------------------------------------------------------
TO: The Plan Administrator for the Cooperative Bank for Savings, Inc., SSB
Employee Stock Ownership-401(k) Savings Plan (the "Plan")
FROM: The undersigned Participant in the Plan
================================================================================
I understand that the Plan permits me to make a beneficiary designation
through execution of this form, and that in the absence of a valid designation
-------------------------------------
below or a valid prior designation, any benefits that may become payable from
- ----- -------------------------
the Plan as a result of my death will be paid to my surviving spouse if I am
then legally married, and otherwise to my estate.
I hereby mark the alternative applicable to my situation, and make the
beneficiary designation set forth below. NOTE: YOU ARE NOT REQUIRED TO
DESIGNATE A BENEFICIARY.
[__] UNMARRIED PARTICIPANT (including participants who are divorced or legally
separated)
I hereby designate the person(s) named below to be my beneficiary for
purposes of the Plan:
============================================================================
Name of Primary Mailing Address Percentage of
Beneficiary Death Benefit
- ----------------------------------------------------------------------------
____%
- ----------------------------------------------------------------------------
____%
============================================================================
In the event that the beneficiary or beneficiaries named above are not
living at the time of my death, I hereby designate the following person(s)
to be my contingent beneficiary:
<PAGE>
Plan Beneficiary Designation
Page 2
Name: (1) (2)
---------------------- -----------------------
Address:
---------------------- -----------------------
---------------------- -----------------------
% of Death Benefit: % %
---- ----
IF I BECOME LEGALLY MARRIED: (i) I agree to notify the Plan Administrative
Committee, and (ii) I understand that my marriage would automatically
revoke the above designations.
[__] MARRIED PARTICIPANT (including participants who are not legally separated)
I hereby choose to designate the person(s) named below to be my beneficiary
for purposes of the Plan, and recognize that the designation of a
beneficiary other than my spouse is contingent on my spouse's written
consent:
===============================================================================
Name of Primary Mailing Address Percentage of
Beneficiary Death Benefit
- -------------------------------------------------------------------------------
------------------- %
Spouse? ----
Yes No
--- ---
- -------------------------------------------------------------------------------
------------------ %
Spouse? ----
Yes No
--- ---
================================================================================
In the event that the beneficiary or beneficiaries named above are not
living at the time of my death, I hereby designate the following person(s)
to be my contingent beneficiary:
Name: (1) (2)
--------------------- -----------------------
Address:
--------------------- -----------------------
--------------------- -----------------------
% of Death Benefit: % %
---- ----
* * * * *
<PAGE>
Plan Beneficiary Designation
Page 3
I understand that this Designation of Beneficiary both revokes any prior
----
designation that I may have made and may be revoked at any time through my
---
execution of a successor Designation of Beneficiary on this form.
EXECUTED this day of , 19 .
---- ------------------------- --
-------------------------------
Participant's Signature
WITNESSED by: , Plan Representative
-------------------------------
<PAGE>
Plan Beneficiary Designation
Page 4
SPOUSAL CONSENT TO
PARTICIPANT'S DESIGNATION OF BENEFICIARY
With respect to any benefits that would otherwise be payable to me from the
Cooperative Bank for Savings, Inc. SSB Employee Stock Ownership-401(k) Savings
Plan ("Plan"), I hereby consent to the beneficiary designation made by my spouse
on the prior page. I hereby recognize and understand that --
(1) I am under no legal obligation to provide this consent;
(2) I am making this consent voluntarily and of my own free will;
(3) the effect of my consent is to cause a beneficiary other than myself
to receive any death benefits that may become payable from the Plan as
a result of my spouse's death;
(4) the beneficiary designation made by my spouse will not become
---
effective unless I execute this consent; and
(5) my consent is irrevocable unless my spouse revokes the beneficiary
designation made above.
EXECUTED this day of , 19 .
--- ------------- --
____________________________
Participant's Spouse
Witnessed by:
- --------------------------------
Plan Representative or
Notary Public
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Cooperative Bankshares, Inc. on Form S-8 for the Cooperative Bank for Savings,
Inc., SSB Employee Stock Ownership-401k Savings Plan of our report dated January
26, 1996, on our audits of the consolidated financial statements of Cooperative
Bankshares, Inc. as of December 31, 1995 and 1994, and for the year ended
December 31, 1995 and the nine months ended December 31, 1994, appearing in the
1995 Annual Report on Form 10-K of Cooperative Bankshares, Inc. filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1934. We
also consent to the reference to our Firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Raleigh, North Carolina
February 21, 1997
