DRAFT
3/14/97
COMMUNITY FIRST BANKING COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
THIS INDENTURE is made on the _____ day of _____________, 1997, by
COMMUNITY FIRST BANKING COMPANY, a bank duly organized and existing under the
laws of the State of Georgia (hereinafter called the "Primary Sponsor").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Primary Sponsor desires to enable its employees and those of
its affiliates to share in the growth and prosperity of the Primary Sponsor and
to provide participating employees an opportunity to accumulate capital for
their retirement; and
WHEREAS, the Primary Sponsor now desires to establish an employee stock
ownership plan within the meaning of Internal Revenue Code Section 4975(e)(7);
NOW, THEREFORE, the Primary Sponsor does hereby establish the Community
First Banking Company Employee Stock Ownership Plan, effective as of the
Effective Date (as defined herein), to read as follows:
COMMUNITY FIRST BANKING COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
Page
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SECTION 1 DEFINITIONS..................................... 1
SECTION 2 ELIGIBILITY..................................... 9
SECTION 3 CONTRIBUTIONS................................... 9
SECTION 4 ALLOCATIONS..................................... 9
SECTION 5 ACQUISITION AND INVESTMENT OF TRUST ASSETS...... 13
SECTION 6 PAYMENT OF BENEFITS ON TERMINATION OF
EMPLOYMENT...................................... 15
SECTION 7 PAYMENT OF BENEFITS ON RETIREMENT............... 17
SECTION 8 DEATH BENEFITS.................................. 17
SECTION 9 GENERAL RULES ON DISTRIBUTIONS.................. 18
SECTION 10 DIVERSIFICATION OF INVESTMENTS.................. 20
SECTION 11 VOTING OF COMPANY STOCK......................... 21
SECTION 12 CONDITIONS OF DISTRIBUTION OF COMPANY STOCK..... 22
SECTION 13 ADMINISTRATION OF THE PLAN...................... 24
SECTION 14 CLAIM REVIEW PROCEDURE.......................... 26
SECTION 15 LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS.. 27
SECTION 16 PROHIBITION AGAINST DIVERSION................... 28
SECTION 17 LIMITATION OF RIGHTS............................ 28
SECTION 18 AMENDMENT TO OR TERMINATION OF THE
PLAN AND THE TRUST.............................. 29
SECTION 19 ADOPTION OF PLAN BY AFFILIATES.................. 30
SECTION 20 QUALIFICATION AND RETURN OF CONTRIBUTIONS....... 30
SECTION 21 INCORPORATION OF SPECIAL LIMITATIONS............ 31
APPENDIX A LIMITATION ON ALLOCATIONS................. A-1
APPENDIX B TOP-HEAVY PROVISIONS...................... B-1
SECTION 1
DEFINITIONS
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Wherever used herein, the masculine pronoun shall be deemed to include the
feminine, and the singular to include the plural, unless the context clearly
indicates otherwise and the following words and phrases shall, when used herein,
have the meanings set forth below:
1.1 "Account" means a Member's aggregate balance in the following accounts
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(and such subaccounts as the Plan Administrator deems necessary or appropriate
in connection with the maintenance of such accounts), as adjusted pursuant to
the Plan as of any given date:
(a) "ESOP Account" which shall reflect a Member's interest in Company
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Stock and other assets resulting from contributions made by a Plan Sponsor
under Plan Section 3.1 or from releases from the Loan Suspense Account.
(b) "Loan Suspense Account" which shall consist of Company Stock
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acquired by the Fund with the proceeds of an Acquisition Loan and any cash
dividends thereon that have not been allocated to ESOP Accounts.
(c) "Suspense Account" which shall consist of assets which must remain
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unallocated to the Accounts of Members pursuant to Section 6 of Appendix A.
1.2 "Acquisition Loan" means a loan or other extension of credit made to
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the Plan by or subject to the Guarantee of a person described in Code Section
4975(e)(2), including a direct loan of cash, a purchase-money transaction or an
assumption of a Plan obligation, used by the Trustee to finance an acquisition
of Company Stock or to repay an Acquisition Loan.
1.3 "Affiliate" means (a) any corporation which is a member of the same
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controlled group of corporations (within the meaning of Code Section 414(b)) as
is a Plan Sponsor, (b) any other trade or business (whether or not incorporated)
under common control (within the meaning of Code Section 414(c)) with a Plan
Sponsor, (c) any other corporation, partnership or other organization which is a
member of an affiliated service group (within the meaning of Code Section
414(m)) with a Plan Sponsor, and (d) any other entity required to be aggregated
with a Plan Sponsor pursuant to regulations under Code Section 414(o).
Notwithstanding the foregoing, for purposes of applying the limitations set
forth in Appendix A and for purposes of determining Annual Compensation under
Appendix A, the references to Code Sections 414(b) and (c) above shall be as
modified by Code Section 415(h).
1.4 "Annual Compensation" means the amount paid to an Employee by a Plan
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Sponsor (and Affiliates for purposes of Appendix B during a Plan Year as
compensation that would be subject to income tax withholding under Code Section
3401(a) (but 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 Code Section
3401(a)(2)), to the extent not in excess of the Annual Compensation Limit for
all purposes under the Plan except determining Highly Compensated Employees or
Key Employees. Notwithstanding the above, Annual Compensation shall be
determined as follows:
1
(a) in determining with respect to each Plan Sponsor the amount of
contributions made by or on behalf of an Employee under Plan Section 3 and
allocations under Plan Section 4, Annual Compensation shall only include
amounts received for the portion of the Plan Year during which the Employee
was a Member; and
(b) for all purposes under the Plan except Appendices A and B hereto,
Annual Compensation shall include any amount which would have been paid
during a Plan Year, but was contributed by a Plan Sponsor on behalf of an
Employee pursuant to a salary reduction agreement which is not includable
in the gross income of the Employee under Section 125, 402(e)(3), or 402(h)
of the Code.
1.5 "Annual Compensation Limit" means $160,000, which amount may be
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adjusted in subsequent Plan Years based on changes in the cost of living as
announced by the Secretary of the Treasury.
1.6 "Beneficiary" means the person or trust that a Member designated most
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recently in writing to the Plan Administrator; provided, however, that if the
Member has failed to make a designation, no person designated is alive, no trust
has been established, or no successor Beneficiary has been designated who is
alive, the term "Beneficiary" means (a) the Member's spouse or (b) if no spouse
is alive, the Member's surviving children, or (c) if no children are alive, the
Member's parent or parents, or (d) if no parent is alive, the deceased Member's
estate. Notwithstanding the preceding sentence, the spouse of a married Member
shall be his Beneficiary unless that spouse has consented in writing to the
designation by the Member of some other person or trust and the spouse's consent
acknowledges the effect of the designation and is witnessed by a notary public
or a Plan representative. A Member may change his designation at any time.
However, a Member may not change his designation without further consent of his
spouse under the terms of the preceding sentence unless the spouse's consent
permits designation of another person or trust without further spousal consent
and acknowledges that the spouse has the right to limit consent to a specific
beneficiary and that the spouse voluntarily relinquishes this right.
Notwithstanding the above, the spouse's consent shall not be required if the
Member establishes to the satisfaction of the Plan Administrator that the spouse
cannot be located, if the Member has a court order indicating that he is legally
separated or has been abandoned (within the meaning of local law) unless a
"qualified domestic relations order" (as defined in Code Section 414(p))
provides otherwise, or if there are other circumstances as the Secretary of the
Treasury prescribes. If the spouse is legally incompetent to give consent,
consent by the spouse's legal guardian shall be deemed to be consent by the
spouse. If, subsequent to the death of a Member, the Member's Beneficiary dies
while entitled to receive benefits under the Plan, the successor Beneficiary, if
any, or the Beneficiary listed under Subsection (a), (b) (c) or (d) shall be the
Beneficiary.
1.7 "Board of Directors" means the Board of Directors of the Primary
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Sponsor.
1.8 "Break in Service" means the failure of an Employee, in connection
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with a termination of employment other than by reason of death or attainment of
a Retirement Date, to complete more than 500 Hours of Service in any Plan Year.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
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2
1.10 "Company Stock" means qualifying employer securities within the
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meaning of Code Section 4978(e)(5) which are (a) shares of common stock issued
by the Primary Sponsor or a corporation which is a member of a controlled group
of corporations which includes the Primary Sponsor (within the meaning of Code
Section 1563(a), determined without regard to Code Sections 1563(a)(4) and
(e)(3)(C)), which are readily tradable on an established securities market or,
if there is no such common stock, shares of common stock issued by the Primary
Sponsor or a corporation which is a member of a controlled group of corporations
which includes the Primary Sponsor (within the meaning of Code Section 1563(a),
determined without regard to Code Sections 1563(a)(4) and (e)(3)(C)), which have
voting power and dividend rights no less favorable than the voting power and
dividend rights of any other common stock issued by the Primary Sponsor or the
other corporation, or (b) shares of noncallable preferred stock issued by the
Primary Sponsor, which are at all times immediately convertible into stock
described in (a) above at a reasonable conversion price.
1.11 "Direct Rollover" means a payment by the Plan to the Eligible
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Retirement Plan specified by the Distributee.
1.12 "Disability" means the inability to engage in any substantial gainful
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activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months. The
determination of whether or not a Disability exists shall be determined by the
Plan Administrator and shall be substantiated by competent medical evidence.
1.13 "Distributee" means an Employee or former Employee. In addition, the
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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 Code Section 414(p)), are Distributees
with regard to the interest of the spouse or former spouse.
1.14 "Effective Date" means the date on which the Plan document and Trust
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are executed.
1.15 "Eligibility Service" means a twelve-consecutive-month period during
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which the Employee completes no less than 1,000 Hours of Service beginning on
the date on which the Employee first performs an Hour of Service upon his
employment or reemployment or, in the event the Employee fails to complete 1,000
Hours of Service in that twelve-consecutive-month period, any Plan Year
thereafter during which the Employee completes no less than 1,000 Hours of
Service, including the Plan Year which includes the first anniversary of the
date the Employee first performed an Hour of Service upon his employment or
reemployment.
1.16 "Eligible Employee" means any Employee of a Plan Sponsor other than an
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Employee who is (a) covered by a collective bargaining agreement between a union
and a Plan Sponsor, provided that retirement benefits were the subject of good
faith bargaining, unless the collective bargaining agreement provides for
participation in the Plan, (b) a leased employee within the meaning of Code
Section 414(n)(2), or (c) deemed to be an Employee of a Plan Sponsor pursuant to
regulations under Code Section 414(o).
3
1.17 "Eligible Retirement Plan" means an individual retirement account
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described in Code Section 408(a), an individual retirement annuity described in
Code Section 408(b), an annuity plan described in Code Section 403(a) or a
qualified trust described in Code Section 401(a) that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an Eligible Rollover
Distribution to the surviving spouse, an Eligible Retirement Plan is an
individual retirement account or individual retirement annuity.
1.18 "Eligible Rollover Distribution" means any distribution of all or any
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portion of the Distributee's Account, 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 Code Section 401(a)(9); and the
portion of any distribution that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
1.19 "Employee" means any person who is (a) employed by a Plan Sponsor or
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an Affiliate for purposes of the Federal Insurance Contributions Act, (b) a
leased employee within the meaning of Code Section 414(n)(2) with respect to a
Plan Sponsor, or (c) deemed to be an employee of a Plan Sponsor pursuant to
regulations under Code Section 414(o).
1.20 "Entry Date" means the January 1st and July 1st of each Plan Year.
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Notwithstanding the foregoing, for the first Plan Year, Entry Date shall also
mean the Effective Date of the Plan.
1.21 "ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
1.22 "Fair Market Value" refers to the fair market value of Company Stock
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and means:
(a) if the Company Stock is Publicly Traded, the price most recently
bid or asked, as appropriate, or paid for Company Stock listed on any
exchange, quoted through a national securities exchange or association,
traded in the over-the-counter market or reported by any other commercial
service; or
(b) if the Company Stock is not Publicly Traded, the value based upon
an appraisal performed by an Independent Appraiser.
1.23 "Fiduciary" means each Named Fiduciary and any other person who
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exercises or has any discretionary authority or control regarding management or
administration of the Plan, any other person who renders investment advice for a
fee or has any authority or responsibility to do so with respect to any assets
of the Plan, or any other person who exercises or has any authority or control
respecting management or disposition of assets of the Plan.
1.24 "Fund" means the amount at any given time of cash and other property
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held by the Trustee pursuant to the Plan. The Fund may consist of one or more
subfunds as the Plan Administrator may establish from time to time.
4
1.25 "Guarantee" means any guarantee of payment of an Acquisition Loan by
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a person or entity other than the Plan.
1.26 "Highly Compensated Employee" means each Employee who during the Plan
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Year immediately preceding the Plan Year in question:
(a) was at any time an owner of more than five percent (5%) of the
outstanding stock of a Plan Sponsor or Affiliate or more than five percent
(5%) of the total combined voting power of all stock of a Plan Sponsor or
Affiliate; or
(b) received Annual Compensation in excess of $80,000 (for the Plan
Year beginning in 1997) which amount shall be adjusted for changes in the
cost of living as provided in regulations issued by the Secretary of the
Treasury.
For purposes of this Section, a former Employee shall be treated as a
Highly Compensated Employee if (1) the former Employee was a Highly Compensated
Employee at the time the former Employee separated from service with the Plan
Sponsor or Affiliate or (2) the former Employee was a Highly Compensated
Employee at any time after the former Employee attained age 55.
For purposes of this Section, Employees who are nonresident aliens and who
receive no earned income from the Plan Sponsor or an Affiliate from sources
within the United States shall not be treated as Employees.
For purposes of this Section, Annual Compensation shall include amounts
paid by Affiliates and shall be determined without regard to the Annual
Compensation Limit, as adjusted.
1.27 "Hour of Service" means:
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(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for a Plan Sponsor or any Affiliate during
the applicable computation period, and such hours shall be credited to the
computation period in which the duties are performed;
(b) Each hour for which an Employee is paid, or entitled to payment,
by a Plan Sponsor or any 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;
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by a Plan Sponsor or any Affiliate,
and such hours shall be credited to the computation period or periods to
which the award or agreement for back pay pertains rather than to the
computation period in which the award, agreement or payment is made;
provided, that the crediting of Hours of Service for back pay awarded or
agreed to with respect to periods described in Subsection (b) of this
Section shall be subject to the limitations set forth in Subsection (f);
5
(d) Solely for purposes of determining whether a Break in Service has
occurred, each hour during any period that the Employee is absent from work
(1) by reason of the pregnancy of the Employee, (2) by reason of the birth
of a child of the Employee, (3) by reason of the placement of a child with
the Employee in connection with the adoption of the child by the Employee,
or (4) for purposes of caring for such child for a period immediately
following its birth or placement. The hours described in this Subsection
(d) shall be credited (A) only in the computation period in which the
absence from work begins, if the Employee would be prevented from incurring
a Break in Service in that year solely because of that credit, or (B), in
any other case, in the next following computation period;
(e) Without duplication of the Hours of Service counted pursuant to
Subsection (d) hereof and solely for such purposes as required pursuant to
the Family and Medical Leave Act of 1993 and the regulations thereunder
("FMLA"), each hour (as determined pursuant to FMLA) for which an Employee
is granted leave under FMLA (1) for the birth of a child, (2) for placement
with the Employee of a child for adoption or xxxxxx care, (3) to care for
the Employee's spouse, child or parent with a serious health condition, or
(4) for a serious health condition that makes the Employee unable to
perform the functions of the Employee's job;
(f) The Plan Administrator shall credit Hours of Service in accordance
with the provisions of Section 2530.200b-2(b) and (c) of the U.S.
Department of Labor Regulations or such other federal regulations as may
from time to time be applicable and determine Hours of Service from the
employment records of a Plan Sponsor or in any other manner consistent with
regulations promulgated by the Secretary of Labor, and shall construe any
ambiguities in favor of crediting Employees with Hours of Service.
Notwithstanding any other provision of this Section, in no event shall an
Employee be credited with more than 501 Hours of Service during any single
continuous period during which he performs no duties for the Plan Sponsor
or Affiliate; and
(g) In the event that a Plan Sponsor or an Affiliate acquires
substantially all of the assets of another corporation or entity or a
controlling interest of the stock of another corporation or merges with
another corporation or entity and is the surviving entity, then service of
an Employee who was employed by the prior corporation or entity and who is
employed by the Plan Sponsor or an Affiliate at the time of the acquisition
or merger shall be counted in the manner provided, with the consent of the
Primary Sponsor, in resolutions adopted by the Plan Sponsor authorizing the
counting of such service.
1.28 "Independent Appraiser" means an individual meeting requirements
---------------------
similar to those contained in Treasury regulations under Code Section 170(a)(1)
who holds himself out to the public as an appraiser, who is qualified to make an
appraisal of Company Stock, who understands that a false or fraudulent
overstatement of the value of Company Stock may subject him to a civil penalty
under Code Section 6701, and who is not:
(a) the seller of Company Stock;
(b) a Plan Sponsor or an Affiliate;
6
(c) any person employed by or related to (within the meaning of Code
Section 267(b)) the persons described in Subsections (a) or (b) above;
(d) a party to the transaction by which the person selling or
contributing any Company Stock to the Plan acquired the Company Stock
(unless the Company Stock is sold or contributed to the Plan within two
months of its acquisition and its appraised price does not exceed its
acquisition cost); or
(e) any person whose relationship with a person described in
Subsections (a), (b), (c) or (d) above is such that a reasonable person
would question the independence of the appraiser.
1.29 "Investment Committee" means a committee which may be established to
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direct the Trustee with respect to investments of the Fund.
1.30 "Investment Manager" means a Fiduciary, other than the Trustee, the
------------------
Plan Administrator, or a Plan Sponsor, who may be appointed by the Primary
Sponsor:
(a) who has the power to manage, acquire, or dispose of any assets of
the Fund or a portion thereof; and
(b) who (1) is registered as an investment adviser under the
Investment Advisers Act of 1940; (2) is a bank as defined in that Act; or
(3) is an insurance company qualified to perform services described in
Subsection (a) above under the laws of more than one state; and
(c) who has acknowledged in writing that he is a Fiduciary with
respect to the Plan.
1.31 "Member" means any Employee or former Employee who has become a
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participant in the Plan for so long as his vested Account has not been fully
distributed pursuant to the Plan.
1.32 "Named Fiduciary" means only the following:
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(a) The Plan Administrator;
(b) The Trustee;
(c) The Board of Directors;
(d) The Investment Committee; and
(e) The Investment Manager.
1.33 "Normal Retirement Age" means age 65.
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7
1.34 "Plan Administrator" means the organization or person designated to
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administer the Plan or, in the absence of the designation of any other
organization or person, Carrollton Federal Bank, FSB.
1.35 "Plan Sponsor" means individually the Primary Sponsor and any
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Affiliate or other entity which has adopted the Plan and Trust.
1.36 "Plan Year" means the calendar year.
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1.37 "Publicly Traded" means Company Stock that is listed on a national
---------------
securities exchange under Section 6 of the Securities Exchange Act of 1934 (15
U.S.C. Section 78f) or that is quoted on a system sponsored by a national
securities association registered under Section 15A(b) of the Securities
Exchange Act of 1934 (15 U.S.C. Section 78o).
1.38 "Retirement Date" means the date on which the Member retires on or
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after (a) attaining Normal Retirement Age or (b) becoming subject to a
Disability.
1.39 "Termination Completion Date" means the last day of the fifth
---------------------------
consecutive Break in Service computation period, determined under the Plan
Section which defines Break in Service, in which a Member completes a Break in
Service.
1.40 "Termination of Employment" means the termination of employment of an
-------------------------
Employee from all Plan Sponsors and Affiliates for any reason other than death
or attainment of a Retirement Date. Transfer from an Employee from one Plan
Sponsor to another Plan Sponsor or to an Affiliate shall not be deemed for any
purpose under the Plan to be a Termination of Employment. In addition, transfer
of an Employee to another company in connection with a corporate transaction
involving a sale of assets, merger or sale of an Affiliate, shall not be deemed
to be a Termination of Employment, for purposes of the timing of distributions
(but not vesting or eligibility) under Plan Section 6, if the company to which
such Employee is transferred agrees to accept a transfer of assets from the Plan
to its tax qualified plan in a trust-to-trust transfer meeting the requirements
of Code Section 414(l).
1.41 "Trust" means each trust established under an agreement between the
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Primary Sponsor and a Trustee to hold the Fund or any subfund thereof, or any
successor agreement.
1.42 "Trustee" means the trustee appointed to hold and invest the Fund or,
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if applicable, each trustee appointed to hold and invest each subfund of the
Fund.
1.43 "Valuation Date" means the last day of each Plan Year or any other day
--------------
which the Plan Administrator declares to be a Valuation Date.
1.44 "Vesting Service" means each Plan Year during which an Employee has
---------------
completed no less than 1,000 Hours of Service. In the case of an Employee with
any vested right in Plan Sponsor contributions at the time of a Termination of
Employment, all service prior to a Break in Service will be credited, but only
if the Employee, upon re-employment, completes a year of Vesting Service
following re-employment. Notwithstanding anything contained herein to the
contrary, Vesting Service shall not include:
8
(a) In the case of an Employee who completes five consecutive Breaks
in Service for purposes of determining the vested portion of his Account
derived from Plan Sponsor contributions which accrued before his
Termination Completion Date, all service in Plan Years after his
Termination Completion Date.
(b) In the case of an Employee who completes five consecutive Breaks
in Service and at that time does not have any vested right in Plan Sponsor
contributions, all service before those Breaks in Service commenced.
SECTION 2
ELIGIBILITY
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2.1 Each Eligible Employee shall become a Member as of the Entry Date
coinciding with or next following the later of the date the Eligible Employee
(a) completes his or her Eligibility Service or (b) attains age 21.
2.2 Each former Member of the Plan who is reemployed by a Plan Sponsor
shall become a Member of the Plan as of the date of his reemployment as an
Eligible Employee.
2.3 Each former Employee who completes his Eligibility Service but
terminates employment with a Plan Sponsor before becoming a Member of the Plan
shall become a Member of the Plan as of the latest of the date the former
Employee (a) is reemployed, (b) would have become a Member of the Plan if the
former Employee had not terminated employment, or (c) becomes an Eligible
Employee.
SECTION 3
CONTRIBUTIONS
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3.1 The Plan Sponsor may make contributions to the Fund with respect to a
Plan Year in an amount determined by resolution of the Board of Directors at its
discretion, but in an amount not less than the amount needed to pay in full any
principal and interest payments required by any outstanding Acquisition Loan.
3.2 Contributions may be made only in Company Stock, cash or other
property which is acceptable to the Trustee; provided that Plan Sponsor
contributions shall be made in cash as needed to pay any principal and interest
payments required by an Acquisition Loan, if any. In no event will the sum of
contributions under Plan Section 3.1 exceed the deductible limits under Code
Section 404.
SECTION 4
ALLOCATIONS
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4.1 As of the last day of each Plan Year, the Plan Sponsor contributions
made under Plan Section 3.1 and forfeitures from ESOP Accounts shall be
allocated among the ESOP Accounts of Members who are employed by a Plan Sponsor
on the last day of the Plan Year,
9
or whose death or Retirement Date occurred during the Plan Year, and shall be
allocated to each such Member's ESOP Account in the proportion that the Member's
Annual Compensation bears to the Annual Compensation of all Members entitled to
an allocation under this Section.
4.2 Allocations of Net Income or Loss.
---------------------------------
(a) As of each Valuation Date, the Trustee shall allocate to each
Account its share of the net income or net loss of the Fund as hereinafter
set forth:
(1) Any cash dividends paid or other cash income received with
respect to Company Stock allocated to the ESOP Account of a Member as
of the record date on which the cash dividend was declared or the date
the other cash income was accrued and any income thereon attributable
to the cash dividend or other income shall, unless used by the Trustee
at its sole discretion to repay an Acquisition Loan, be allocated to
that Member's ESOP Account. In a uniform and non-discriminatory
manner, the Plan Administrator may direct the Trustee to distribute to
Members the cash dividends allocated to Members' ESOP Accounts in
accordance with the preceding sentence within ninety (90) days after
the end of the Plan Year in which the dividends are paid to the Trust.
Any cash dividend paid or other cash income received from the sale of
Company Stock with respect to Company Stock allocated to the Loan
Suspense Account as of the record date on which such cash dividend was
declared or the date such other cash income was accrued and any income
thereon attributable to such cash dividend or other income shall,
unless used by the Trustee to repay an Acquisition Loan, be allocated
pursuant to Section 4.2(a)(3).
(2) Any additional shares of Company Stock which are issued with
respect to any Company Stock held in an ESOP Account, including, but
not limited to, stock dividends, shall be allocated to that ESOP
Account as of the Valuation Date coinciding with or next following the
date on which the additional shares of Company Stock are delivered to
the Trustee. The additional shares of Company Stock shall be
allocated to each ESOP Account based upon the number of shares of
Company Stock in each ESOP Account as of the record date.
(3) Except as otherwise provided in the Plan and Trust, the net
loss and the net income of the Fund, other than cash income received
with respect to Company Stock, shall be determined separately by the
Trustee as of each Valuation Date as follows:
(A) To the cash income, if any, since the last Valuation
Date there shall be added or subtracted, as the case may be, any
net increase or decrease in the fair market value of the assets
of the Fund, any gain or loss on the sale or exchange of assets
of the Fund, any gain or loss on the sale or exchange of assets
of the Fund since the last Valuation Date, accrued interest since
the last Valuation Date with respect to any interest-bearing
security, the amount of any dividend declared since the last
Valuation Date but not paid on shares of stock owned by the Fund
if the market quotation used in determining the value of the
shares is
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ex-dividend, and the amount of any other assets of the Fund
determined by the Trustee to be income since the last Valuation
Date.
(B) From the sum thereof there shall be deducted all
charges, expenses, and liabilities accrued since the last
Valuation Date which are proper under the provisions of the Plan
and Trust and which in the discretion of the Trustee are properly
chargeable against income of the Fund for the period; provided,
however, that interest paid on any Acquisition Loan shall be
disregarded.
The net income or net loss, so determined, of the Fund
attributable to Accounts under the Plan shall be allocated as of the
Valuation Date to each such Account in the proportion that the value
of the Account (or appropriate subaccount) as of the preceding
Valuation Date, reduced by any distributions from such Account (or
appropriate subaccount) thereafter, bears to all such Accounts (or
appropriate subaccount) of all Members as of the preceding Valuation
Date, as so reduced.
(b) If the Trustee should, by virtue of the receipt of any warrants,
options, rights to purchase or rights to subscribe become entitled to
purchase or subscribe for shares of Company Stock, the Trustee may purchase
or subscribe for the additional shares of Company Stock. Any shares of
Company Stock which the Trustee purchases shall be credited to all ESOP
Accounts pursuant to the provisions of Subsection (c) below. In the event
that the Trustee is unable to purchase or subscribe for any additional
shares of Company Stock, the Trustee shall sell (if practicable) any
warrants, options or rights beyond those which can be used as permitted,
and shall credit ESOP Accounts with the proceeds from any sale pursuant to
the provisions of Subsection (a)(3) above.
(c) Any additional shares of Company Stock which the Trustee has
purchased since the last Valuation Date with cash not constituting the
contribution of a Plan Sponsor for the Plan Year shall be credited to ESOP
Accounts as of the date of purchase in the proportion that the total amount
to be invested from each ESOP Account in Company Stock on the date of
purchase bears to the aggregate amount to be invested from all ESOP
Accounts in Company Stock on the date of purchase.
4.3 Allocations from the Loan Suspense Account.
------------------------------------------
(a) Company Stock purchased with the proceeds of an Acquisition Loan
shall be credited to the Loan Suspense Account.
(b) Any shares of Company Stock which are released from the Loan
Suspense Account by reason of the payment of principal or interest on an
Acquisition Loan attributable to assets allocated to ESOP Accounts shall be
credited to the ESOP Accounts as of the Valuation Date with respect to
which the payment of principal and interest was made, all in the proportion
that the total amount to be paid from each ESOP Account on the date of
payment bears to the aggregate amount paid from all ESOP Accounts on the
date of payment.
11
(c) Any shares of Company Stock which have been released from the Loan
Suspense Account by reason of the payment of a cash dividend on Company
Stock held in the Loan Suspense Account which is used to make a payment on
an Acquisition Loan or by reason of the repayment prior to the last day of
the Plan Year of any or all of an Acquisition Loan from a source other than
ESOP Accounts (including, but not limited to, proceeds attributable to the
sale of Company Stock held in the Loan Suspense Account but only to the
extent such proceeds are to be treated as annual additions for purposes of
Appendix A in accordance with Plan Section 4.3(f) below) shall be allocated
to ESOP Accounts in the manner set forth in Plan Section 4.1.
(d) If the proceeds on the sale of Company Stock held in the Loan
Suspense Account are used to make a payment on an Acquisition Loan (to the
extent such proceeds are to be treated as earnings in accordance with
Section 4.4(f) below), such proceeds shall be allocated to each Member's
ESOP Account in the proportion that the balance of the Member's ESOP
Account as of the immediately preceding Valuation Date bears to the total
value of all Members' ESOP Accounts as of the immediately preceding
Valuation Date.
(e) In the event cash dividends paid with respect to any shares of
Company Stock allocated to a Member's ESOP Account are used to repay an
Acquisition Loan, each affected Member's ESOP Account shall be credited as
of the Valuation Date immediately following the record date with shares of
Company Stock released from the Loan Suspense Account in the proportion
that the total amount of such cash dividends applied to the repayment of
the Acquisition Loan that would otherwise have been allocated to the
Member's ESOP Account bears to the aggregate amount of such cash dividends
that would otherwise have been allocated to all ESOP Accounts; provided,
however that such shares shall not have a Fair Market Value less than the
cash portion of the dividend which otherwise would have been allocated to
the Member's ESOP Account.
(f) If shares of Company Stock are sold from the Loan Suspense Account
and the proceeds are used to repay an Acquisition Loan in whole or in part,
the proceeds in excess of the repayment (the "Excess Proceeds") shall be
treated as consisting of two components: (1) an annual addition component
which amounts shall be treated as annual additions pursuant to Appendix A
and which shall be calculated by multiplying the Excess Proceeds by a
fraction the numerator of which is the amount the Plan paid for the shares
of Company Stock sold from the Loan Suspense Account and the denominator of
which is the total proceeds received for the shares of Company Stock sold
from the Loan Suspense Account; and (2) an earnings component.
4.4 All valuations of shares of Company Stock made with respect to
activities carried on by the Plan which shares of Company Stock are not readily
tradeable on an established securities market shall be made by an Independent
Appraiser.
4.5 No portion of the Plan assets attributable to Company Stock purchased
pursuant to a sale with respect to which Code Section 1042(a) applies shall
accrue under the Plan or any other plan maintained by a Plan Sponsor, either
directly or indirectly, for the benefit of (a) a seller or any individual who is
related to the seller (within the meaning of Code Section 267(b))
12
at any time from the date of sale until the later of (1) the date which is ten
years after the date of the sale or (2) the date of the allocation attributable
to the final payment of any Acquisition Loan incurred in connection with the
sale; or (b) any other person who owns after application of Code Section 318(a)
(but without regard to paragraph (2)(B)(i) thereof) more than twenty-five
percent (25%) of the outstanding portion of (1) any class of or (2) the total
value of any class of stock of the corporation that issued the Company Stock
acquired or of any member of the same controlled group of corporations within
the meaning of Code Section 409(1). However, Members who are lineal descendants
of the seller may receive an aggregate allocation of not more than five percent
(5%) of the Company Stock purchased by the Plan, and a Member who is described
in Subsection (b) of this Section may receive allocations of the Company Stock
purchased by the Plan if he failed to meet the criteria set forth in that
Subsection either (i) during the one-year period ending on the date of the
purchase or (ii) on the date as of which that Company Stock is allocated to
Members' ESOP Accounts.
SECTION 5
ACQUISITION AND INVESTMENT OF TRUST ASSETS
------------------------------------------
5.1 Acquisition Loans
-----------------
(a) The Plan Administrator may direct the Trustee to obtain
Acquisition Loans. An Acquisition Loan shall meet all requirements
necessary to constitute an "exempt loan" within the meaning of Treasury
Regulation Section 54.4975-7(b)(1)(iii). At the time an Acquisition Loan
is made, the interest rate for the Acquisition Loan and the price of
Company Stock to be acquired therewith may not be such that assets of the
Plan might be drained off. The terms of an Acquisition Loan must, at the
time the Acquisition Loan is made, be at least as favorable to the Plan as
the terms of a comparable loan resulting from arm's length negotiations
between independent parties. The proceeds of any Acquisition Loan shall be
used within a reasonable time after the Acquisition Loan is obtained and
may only be used to purchase Company Stock, to repay the Acquisition Loan,
or to repay any prior Acquisition Loan. An Acquisition Loan shall provide
for no more than a reasonable rate of interest. An Acquisition Loan must
be without recourse against the Plan and must be for a specific term and
not payable at the demand of any person, except in case of default. For
purposes of this Section, "default" shall mean the failure to pay any
amount due under the Acquisition Loan, or any other event specified in the
agreement memorializing the Acquisition Loan. The Acquisition Loan's
number of years to maturity must be definitely ascertainable. The only
assets of the Fund that may be given as collateral for an Acquisition Loan
are shares of Company Stock acquired with its proceeds or used as
collateral on a prior Acquisition Loan repaid with the proceeds of the
current Acquisition Loan. The Company Stock pledged shall be placed in the
Loan Suspense Account. No person entitled to payment under an Acquisition
Loan shall have recourse against the Fund other than that collateral, Plan
Sponsor contributions in cash that are made to meet obligations under the
Acquisition Loan, and earnings attributable to that collateral and
investment of Plan Sponsor contributions. In the event of a default upon
an Acquisition Loan, the value of assets of the Plan transferred in
satisfaction thereof shall not exceed the amount of default. If the lender
under an Acquisition Loan is a person described in Code Section 4975(e)(2),
the Acquisition Loan shall provide for a transfer of Plan assets upon
default only upon and
13
to the extent of the failure of the Plan to meet the payment schedule of
the Acquisition Loan. A pledge of Company Stock must provide for the
release of shares pledged, as provided in (b) below, upon the payment of
any portion of the Acquisition Loan. An amendment of a loan in order to
qualify under this Section shall not be a refinancing of the loan or the
making of another loan.
(b) For each Plan Year during the duration of the Acquisition Loan,
the number of shares of Company Stock released from any pledge and from the
Loan Suspense Account must equal the number of shares acquired with the
proceeds of the Acquisition Loan held immediately before release for the
current Plan Year multiplied by a fraction the numerator of which is the
amount of principal and interest paid for that Plan Year and the
denominator of which is the sum of the numerator plus the principal and
interest to be paid for all future Plan Years; provided, at a minimum, that
the number of shares of Company Stock to be released in any Plan Year from
any pledge and from the Loan Suspense Account shall comply with Plan
Section 4.3(e). These years are determined without taking into account any
possible extension or renewal periods. In the event the interest is
variable, the interest to be paid in future years must be computed by using
the interest rate applicable as of the end of the Plan Year. If collateral
in the Loan Suspense Account includes more than one class of Company Stock,
the number of shares of each class to be released for a Plan Year must be
determined by applying the same fraction to each class. Notwithstanding
the above, the number of shares of Company Stock released from any pledge
and from the Loan Suspense Account for each Plan Year during the duration
of an Acquisition Loan may be determined by reference to principal payments
only, if (1) the Acquisition Loan provides for payments of principal and
interest at a cumulative rate that is not less rapid at any time than level
annual payments of those amounts for ten years, (2) interest included in
any payment is disregarded only to the extent that it would be determined
to be interest under standard loan amortization tables, and (3) by reason
of a renewal, extension, or refinancing during or prior to the Plan Year,
the sum of the expired duration of the Acquisition Loan, the renewal
period, the extension period, and the duration of a new Acquisition Loan do
not exceed ten years.
(c) Payments of principal and interest on any Acquisition Loan during
a Plan Year shall be made by the Trustee, as directed by the Plan
Administrator, only from (1) Plan Sponsor contributions made to the Trust
to meet the Plan's obligation under an Acquisition Loan, earnings from Plan
Sponsor contributions, and any cash dividends attributable to Company Stock
given as collateral for an Acquisition Loan (both received during or prior
to the Plan Year) and any cash dividends attributable to Company Stock
acquired with the proceeds of an Acquisition Loan and allocated to Members'
ESOP Accounts, (2) the proceeds of a subsequent Acquisition Loan made to
repay a prior Acquisition Loan, and (3) the proceeds of the sale of shares
of Company Stock held as collateral for an Acquisition Loan. Company Stock
and earnings must be accounted for separately by the Plan until the
Acquisition Loan is repaid.
(d) In the event that the contributions are insufficient to enable the
Trust to pay principal and interest on the Acquisition Loan as it is due,
then upon the Trustee's request the Plan Sponsor shall make an Acquisition
Loan to the Trust, as described in Treasury Regulations Section 54.4975-
7(b)(4)(iii), in sufficient amounts to meet principal
14
and interest payments. The new Acquisition Loan shall also meet all
requirements of an exempt loan within the meaning of Treasury Regulations
Section 54.4975-7(b)(1)(iii). Company Stock released from the pledge of
the prior Acquisition Loan shall be pledged as collateral to secure the new
Acquisition Loan. The Company Stock will be released from this new pledge
and allocated to the ESOP Accounts of the Members in accordance with
applicable provisions of the Plan.
The provisions of this Section 5.1 shall continue to be applicable to shares of
Company Stock acquired hereunder and held in the Loan Suspense Account even if
the Plan ceases to be an employee stock ownership plan under Code Section
4975(e)(7).
5.2 Company Stock. The Fund shall be invested by the Trustee primarily in
-------------
Company Stock in accordance with directions from the Plan Administrator. All
purchases of Company Stock by the Trustee shall be made only as directed by the
Plan Administrator and only at prices which do not exceed the Fair Market Value
of Company Stock. The Plan Administrator may direct the Trustee to invest and
hold up to one hundred percent (100%) of the Fund in Company Stock.
SECTION 6
PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT
------------------------------------------------
6.1 (a) In the event of a Termination of Employment, a Member whose
vested Account exceeds $3,500 may request at any time after the Member's
Termination of Employment payment of his vested Account which shall be made
in cash or in kind at the Member's election, in a lump sum payment.
Payment will be made as soon as practicable after the last day of the Plan
Year in which the Member requests a distribution in writing. No
distribution of the Member's Account will be made without a Member's
request prior to Normal Retirement Age.
(b) In the event of a Termination of Employment, a Member whose vested
Account is $3,500 or less shall be distributed in a lump sum payment,
either in cash or in kind based upon a Member's election in writing, as
soon as practicable after the last day of the Plan Year in which the
Member's Termination of Employment occurs.
(c) If a Member who has a Termination of Employment has not previously
received a distribution of his Account under Subsections (a) or (b),
payment will be made to him in any event on or before sixty (60) days
following the end of the Plan Year in which the Member attains Normal
Retirement Age.
(d) Whole shares of Company Stock otherwise distributable to the
Member shall be distributed in kind and the value of any fractional share
or right to a fractional share shall be paid in cash to the extent cash is
available. If cash is not available, then a fractional share shall be
distributed in kind. The Trustee may exchange any fractional share or
right to a fractional share for available cash in the Accounts of all other
Members to the extent that the required amount of cash is available and
shall immediately allocate the fractional share or right to a fractional
share to such other Accounts. The
15
fractional share or right to a fractional share shall be treated as having
been purchased by the Trustee on the date of the exchange.
6.2 That portion of a Member's Account in which he is vested shall be that
part of his ESOP Account computed according to the following vesting schedule
taking into account any Vesting Service through the date of the Member's
Termination of Employment:
Full Years of Percentage
Vesting Service Vested
--------------- ----------
Less than 5 0%
5 100%
6.3 (a) If any portion of a Member's vested Account derived from Plan
Sponsor contributions is paid prior to his Termination Completion Date, a
portion of his Account equal to his total non-vested Account derived from
Plan Sponsor contributions multiplied by a fraction, the numerator of which
is the amount of the distribution attributable to Plan Sponsor
contributions and the denominator of which is the total vested Account
attributable to Plan Sponsor contributions, shall be immediately forfeited.
The amount forfeited shall not exceed the Member's nonvested Account. Upon
the Termination of Employment of a Member who is not vested in any part of
his Account, the Member shall be deemed to have received a distribution and
his Account shall be immediately forfeited.
(b) If the Member is reemployed by a Plan Sponsor or an Affiliate
prior to his Termination Completion Date and (1) if the Member's Account
was partially vested and the Member repays to the Fund no later than the
fifth anniversary of the Member's reemployment by the Plan Sponsor or an
Affiliate all of that portion of his vested Account which was paid to him
or (2) if the Member's Account was not vested upon his Termination of
Employment, then any portion of his Account which was forfeited shall be
restored effective on the Valuation Date coinciding with or next following
the repayment or the Member's reemployment, respectively. The restoration
on any Valuation Date of the forfeited portion of the Account of a Member
pursuant to the preceding sentence shall be made first from forfeitures
available for allocation on that Valuation Date, to the extent available,
and secondly from net income calculated as of that Valuation Date, if any.
Only after restorations have been made shall the remaining net income be
available for allocation under Plan Section 4.
(c) If a Member who is partially vested in his Account does not
receive, prior to his Termination Completion Date, a distribution of any
portion of his vested Account, then no forfeiture of that Member's
nonvested portion of his Account shall occur until that Member's
Termination Completion Date.
6.4 If a Plan amendment directly or indirectly changes the vesting
schedule, the vesting percentage for each Member in his Account accumulated to
the date when the amendment is adopted shall not be reduced as a result of the
amendment. In addition, any Member with at least three (3) years of Vesting
Service may irrevocably elect to remain under
16
the pre-amendment vesting schedule with respect to all of his benefits accrued
both before and after the amendment.
6.5 If a Member has a Termination of Employment and is subsequently
reemployed by a Plan Sponsor or an Affiliate prior to receiving a distribution
of his Account under the Plan, such Member shall not be entitled to a
distribution under this Section while he is an Employee.
SECTION 7
PAYMENT OF BENEFITS ON RETIREMENT
---------------------------------
7.1 (a) A retired Member whose Account exceeds $3,500 may request payment
of his vested Account at any time after the Member's Retirement Date
occurs. Based upon the election of the Member, all payments will be made
in a lump sum in either cash or in kind. Payment will be made as soon as
practicable following the last day of the Plan Year in which the Member
requests a distribution in writing. No distribution of the Member's
Account will be made without his request prior to his Normal Retirement
Age.
(b) A retired Member whose Account is $3,500 or less shall be
distributed in a lump sum payment either in cash or in kind based upon a
Member's election as soon as practicable following the end of the Plan Year
after the Member attains a Retirement Date.
(c) If a retired Member has not previously received a distribution
under Subsections (a) or (b), payment of the Account will be made on or
before sixty (60) days following the end of the Plan Year in which the
Member attains Normal Retirement Age.
(d) Whole shares of Company Stock otherwise distributable to the
Member shall be distributed in kind and the value of any fractional share
or right to a fractional share shall be paid in cash to the extent cash is
available. If cash is not available, then a fractional share shall be
distributed in kind. The Trustee may exchange any fractional share or
right to a fractional share for available cash in the Accounts of all other
Members to the extent that the required amount of cash is available and
shall immediately allocate the fractional share or right to a fractional
share to such other Accounts. The fractional share or right to a
fractional share shall be treated as having been purchased by the Trustee
on the date of the exchange.
7.2 The Account of a Member who has attained a Retirement Date or has
attained Normal Retirement Age shall be fully vested and nonforfeitable.
SECTION 8
DEATH BENEFITS
--------------
(a) If a Member dies prior to a Termination of Employment, his
Beneficiary shall receive the Member's Account in a lump sum, either in
cash or in kind at the election of the Beneficiary as soon as practicable
following last day of the Plan Year in which the Member dies. If a Member
dies following a Termination of Employment but
17
after receiving a distribution of his Account, the Member's Beneficiary
shall receive the Member's vested Account in a lump sum, either in cash or
in kind at the election of the Beneficiary as soon as practicable following
the last day of the Plan Year in which the Member dies.
(b) Whole shares of Company Stock otherwise distributable to the
Member shall be distributed in kind and the value of any fractional share
or right to a fractional share shall be paid in cash to the extent cash is
available. If cash is not available, then a fractional share shall be
distributed in kind. The Trustee may exchange any fractional share or
right to a fractional share for available cash in the Accounts of all other
Members to the extent that the required amount of cash is available and
shall immediately allocate the fractional share or right to a fractional
share to such other Accounts. The fractional share or right to a
fractional share shall be treated as having been purchased by the Trustee
on the date of the exchange.
SECTION 9
GENERAL RULES ON DISTRIBUTIONS
------------------------------
9.1 Accounts shall not be adjusted for earnings or losses incurred after
the Valuation Date coinciding with or preceding the date of distribution of the
Account.
9.2 Notwithstanding any provisions of the Plan to the contrary that would
otherwise limit a Distributee's election under this Section 9, a Distributee may
elect, at the time and in the manner prescribed by the Plan Administrator, to
have any portion of a distribution pursuant to this Section which is an Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan specified by
the Distributee in a Direct Rollover so long as all Eligible Rollover
Distributions to a Distributee for a calendar year total or are expected to
total at least $200 and, in the case of a Distributee who elects to directly
receive a portion of an Eligible Rollover Distribution and directly roll the
balance over to an Eligible Retirement Plan, the portion that is to be directly
rolled over totals at least $500. If the Eligible Rollover Distribution is one
to which Code Sections 401(a)(11) and 417 do not apply, such Eligible Rollover
Distribution may commence less than 30 days after the notice required under
Treasury Regulations Section 1.411(a)-11(c) is given, provided that:
(a) the Plan Administrator clearly informs the Distributee that the
Distributee has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(b) the Distributee, after receiving the notice, affirmatively elects
a distribution.
9.3 Notwithstanding any other provisions of the Plan,
(a) Xxxxx to the death of a Member, all retirement payments hereunder
shall --
18
(1) be distributed to the Member not later than the required
beginning date (as defined below) or,
(2) be distributed, commencing not later than the required
beginning date (as defined below)--
(A) in accordance with regulations prescribed by the
Secretary of the Treasury, over the life of the Member or over
the lives of the Member and his designated individual
Beneficiary, if any, or
(B) in accordance with regulations prescribed by the
Secretary of the Treasury, over a period not extending beyond the
life expectancy of the Member or the joint life and last survivor
expectancy of the Member and his designated individual
Beneficiary, if any.
(b) (1) If --
(A) the distribution of a Member's retirement payments have
begun in accordance with Subsection (a)(2) of this Section, and
(B) the Member dies before his entire vested Account has
been distributed to him,
then the remaining portion of his vested Account shall be distributed
at least as rapidly as under the method of distribution being used
under Subsection (a)(2) of this Section as of the date of his death.
(2) If a Member dies before the commencement of retirement
payments hereunder, the entire interest of the Member shall be
distributed within five (5) years after his death.
(3) If --
(A) any portion of a Member's vested Account is payable to
or for the benefit of the Member's designated individual
Beneficiary, if any,
(B) that portion is to be distributed, in accordance with
regulations prescribed by the Secretary of the Treasury, over the
life of the designated individual Beneficiary or over a period
not extending beyond the life expectancy of the designated
individual Beneficiary, and
(C) the distributions begin not later than one (1) year
after the date of the Member's death or such later date as the
Secretary of the Treasury may by regulations prescribe,
then, for purposes of Paragraph (2) of this Subsection (b), the
portion referred to in Subparagraph (A) of this Paragraph (3) shall be
treated as distributed on the date on which the distributions to the
designated individual Beneficiary begin.
19
(4) If the designated individual Beneficiary referred to in
Paragraph (3)(A) of this Subsection (b) is the surviving spouse of the
Member, then --
(A) the date on which the distributions are required to
begin under Paragraph (3)(C) of this Subsection (b) shall not be
earlier than the date on which the Member would have attained age
70-1/2, and
(B) if the surviving spouse dies before the distributions
to such spouse begin, this Subsection (b) shall be applied as if
the surviving spouse were the Member.
(c) For purposes of this Section, the term "required beginning date"
means April 1 of the calendar year following the later of the calendar year
in which the Member attains age 70-1/2 or the calendar year in which the
retirees or Member terminates employment; except that with respect to a
Member who is a five percent (5%) owner (as described in Code Section
416(i)(1)(B)(i)) for the Plan Year ending with the calendar year in which
the Member attains age 70-1/2, a distribution shall commence no later than
April 1st of the calendar year following the calendar year in which the
Member attains age 70-1/2.
(d) Distributions will be made in accordance with the regulations
under Code Section 401(a)(9), including the minimum distribution incidental
benefit requirement of Treas. Reg. Section 1.401(a)(9)-2.
SECTION 10
DIVERSIFICATION OF INVESTMENTS
------------------------------
10.1 Each Member who is an Employee and who has both completed ten years of
membership in the Plan and attained age 55 may elect within ninety (90) days
after the close of each Plan Year in the election period described in Plan
Section 10.4 to direct the Plan to diversify a number of shares of Company Stock
equal to (a) 25% of the Company Stock that has been allocated to the Member's
ESOP Account valued as of the Valuation Date preceding the date of
diversification (b) reduced by the number of shares of Company Stock previously
distributed pursuant to this Section. The resulting number of shares of Company
Stock may be rounded to the nearest whole integer. For the last year in which a
Member may make an election, this Section shall be applied by substituting for
25% percent.
10.2 (a) The Plan Administrator shall distribute the appropriate number
of shares of Company Stock to each Member making an election.
(b) In lieu of a distribution under Subsection (a), the Plan
Administrator, on a uniform and nondiscriminatory basis, may allow Members
who have the right to receive a distribution under Subsection (a) to direct
the Plan to transfer the portion of each such Member's ESOP Account that is
covered by the election to another qualified plan of the Plan Sponsor which
accepts such transfers, provided that such plan permits employee-directed
investment among at least three (3) diversified investment funds, none of
which invests in Company Stock to a substantial degree.
20
10.3 Company Stock subject to elections made under Plan Section 10.1 shall
be diversified no later than ninety (90) days after the period during which the
election may be made.
10.4 As used in Plan Section 10.1, election period shall mean the six Plan
Year period beginning with the Plan Year in which the Member has attained age 55
and completed ten years of membership in the Plan.
10.5 Notwithstanding the preceding provisions of this Section, if the Fair
Market Value of Company Stock allocated to a Member's ESOP Account is five
hundred dollars ($500) or less on the Valuation Date immediately preceding the
first day on which a Member is eligible to make an election described in Plan
Section 10.1, then that Member shall not be eligible to make a diversification
election.
SECTION 11
VOTING OF COMPANY STOCK
-----------------------
11.1 Except as provided in this Section, the Trustee shall vote shares of
Company Stock held in the Fund. However, as to any corporate matter which
involves the voting of shares of Company Stock with respect to the approval or
disapproval of any merger or consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all of the assets or any similar
transaction as provided in regulations issued by the Secretary of the Treasury
or, if Company Stock is required to be registered under Section 12 of the
Securities Exchange Act of 1934, or would be required to be so registered except
for the exemption from registration provided in Subsection (g)(2)(H) of that
Section 12, the Trustee shall vote shares of Company Stock as follows:
(a) Whole shares of Company Stock held in ESOP Accounts for which it
has received instructions from Member shall be voted in accordance with
those instructions. In the absence of voting instructions by a Member,
whole shares of Company Stock held in a Member's ESOP Account shall be
voted by the Trustee unless the fiduciary requirements of ERISA require
otherwise.
(b) The combined fractional shares and fractional rights to shares of
Company Stock held in ESOP Accounts shall be voted to the extent possible
in the same proportion as whole shares of Company Stock held in such
Accounts are directed to be voted by Members unless the fiduciary
requirements of ERISA require otherwise.
(c) Shares of Company Stock held in the Suspense Account and Loan
Suspense Account shall be voted by the Trustee.
(d) The Primary Sponsor shall furnish the Trustee, Members and
Beneficiaries with notices and information statements when voting or other
rights as to Company Stock are to be exercised.
11.2 All decisions affecting Company Stock held under the Fund which do not
involve voting of such Company Stock, including, without limitation, decisions
to reject or consent to
21
tender or exchange offers and similar decisions, shall be determined by the
Trustee in the same manner as voting decisions as described in Section 11.1
above.
SECTION 12
CONDITIONS OF DISTRIBUTION OF COMPANY STOCK
-------------------------------------------
12.1 To the extent necessary to comply with federal or state securities
laws, each certificate for Company Stock distributed pursuant to the Plan shall
be marked "RESTRICTED" on its face and, to the extent appropriate at the time,
shall bear on its reverse side legends to the following effect:
(a) That the securities evidenced by the certificate were issued and
distributed without registration under the federal Securities Act of 1933
(the "1933 Act") or under the applicable laws of any state or states
(collectively referred to as the "State Acts"), in reliance upon certain
exemptive provisions of the 1933 Act or any applicable State Acts;
(b) That the securities cannot be sold or transferred unless, in the
opinion of counsel reasonably acceptable to the Primary Sponsor, the sale
or transfer would be:
(A) pursuant to an effective registration statement under the
1933 Act or pursuant to an exemption from registration; and
(B) a transaction which is exempt under any applicable State
Acts or pursuant to an effective registration statement under or in a
transaction which is otherwise in compliance with the State Acts; and
(c) That the securities evidenced by the certificate were issued and
distributed in accordance with the provisions of the Plan and Trust
Agreement, are subject to the provisions thereof, and may not be sold or
transferred except in compliance with said provisions.
12.2 If necessary to comply with the 1933 Act or any applicable State Acts,
shares of Company Stock distributable under the Plan must be acquired for
investment and not with a view to the public distribution thereof. In
furtherance thereof, as a condition of receiving Company Stock under the Plan,
the distributee may be required to execute an investment letter and any other
documents that in the opinion of counsel reasonably acceptable to the Primary
Sponsor, as issuer, are necessary to comply with the 1933 Act or any applicable
State Acts or any other applicable laws regulating the issuance or transfer of
securities.
12.3 (a) Each share of Company Stock distributed from the ESOP Accounts
shall be subject to Put Rights. The Put Rights grant to the distributee
(or his heirs or legatees) the right to require the Primary Sponsor or its
designee to purchase any shares of Company Stock which have been
distributed from the Plan provided that the Company Stock is not Publicly
Traded at the time (the "Put"). The Put shall be exercisable by giving
written notice to the Primary Sponsor during a period of 60 days beginning
on the date of distribution or a period of 60 days following the
determination of the Company Stock's Fair Market Value for the Plan Year
following the date of distribution. In the
22
case of Company Stock which is Publicly Traded without restriction when
distributed but ceases to be so traded during the Put period, the Primary
Sponsor must give notice to each distributee (or his heirs or legatees) in
writing on or before the tenth day after the date the Company Stock ceases
to be so traded informing each distributee (or his heirs or legatees) that
for the remainder of the period the Company Stock is subject to the Put and
setting forth the terms of the Put. The number of days between the tenth
day and the date on which notice is actually given, if later, must be added
to the duration of the Put. The period during which the Put is exercisable
does not include the time when a distributee (or his heirs or legatees) is
unable to exercise it because the Primary Sponsor is prohibited from
honoring it by applicable federal or state law, and the Primary Sponsor
shall not be in breach of the Put if it is prohibited from honoring it by
applicable federal or state law. Company Stock purchased pursuant to the
Put shall, to the extent permitted by state law, be purchased in cash at
Fair Market Value in substantially equal payments made over a period not in
excess of five years commencing within 30 days after the exercise of the
Put. If a Member exercises his Put Rights following the last day of a Plan
Year but prior to the preparation of the valuation report to be issued by
the Independent Appraiser for that Plan Year, the determination of Fair
Market Value shall be based upon the valuation report prepared by the
Independent Appraiser for the immediately preceding Plan Year. The Primary
Sponsor shall provide adequate security and pay reasonable interest on any
unpaid amounts. Payment under the Put may not be restricted by the
provisions of any loan or any other arrangement, including the terms of the
Primary Sponsor's articles of incorporation, unless required by applicable
state law.
(b) Each share of Company Stock distributed from any of the Accounts
shall be subject to First Refusal Rights. The First Refusal Rights provide
that prior to any sale of Company Stock which is not Publicly Traded at
that time, the distributee (or his heirs or legatees) must first offer the
Company Stock which he wishes to sell to the Primary Sponsor or its
designee at the greater of (1) Fair Market Value, or (2) the same purchase
price and on the same terms as a bona fide offer made by a third party
within the preceding 14 days to whom the distributee (or his heirs or
legatees) desires to sell the Company Stock, and that if the Primary
Sponsor or its designee is not willing or able to purchase the Company
Stock within 14 days after receipt by the Primary Sponsor of written
notification by the distributee of the purchase price and payment terms,
then the distributee (or his heirs or legatees) may proceed to sell the
Company Stock to the third party in accordance with the offer within 28
days after receipt by the distributee of the bona fide offer. In no event
may the Company Stock be sold or transferred for value, nor shall the
Primary Sponsor recognize any purchaser or transferee as the owner of the
Company Stock, unless the terms of the First Refusal Rights, as specified
above, have been followed.
Except as provided in Subsections (a) and (b) above, no Company Stock
acquired with the proceeds of an Acquisition Loan may be subject to a put, call,
option, buy-sell or similar arrangement while held by or when distributed from
the Plan.
The provisions of this Section 12.3 shall continue to be applicable to
shares of Company Stock acquired with the proceeds of an Acquisition Loan even
if the Plan ceases to be an employee stock ownership plan under Code Section
4975(e)(7).
23
Each share of Company Stock distributed from the Plan shall contain legends
indicating the rights contained in this Section 12.
SECTION 13
ADMINISTRATION OF THE PLAN
--------------------------
13.1 Trust Agreement. The Primary Sponsor shall establish a Trust with
---------------
the Trustee designated by the Board of Directors for the management of the Fund,
which Trust shall form a part of the Plan and is incorporated herein by
reference.
13.2 Operation of the Plan Administrator. The Primary Sponsor shall
-----------------------------------
appoint a Plan Administrator or may itself serve as the Plan Administrator. If
an organization is appointed to serve as the Plan Administrator, then the Plan
Administrator may designate in writing a person who may act on behalf of the
Plan Administrator. The Primary Sponsor shall have the right to remove the Plan
Administrator at any time by notice in writing. The Plan Administrator may
resign at any time by written notice of resignation to the Trustee and the
Primary Sponsor. Upon removal or resignation, or in the event of the
dissolution of the Plan Administrator, the Primary Sponsor shall appoint a
successor.
13.3 Fiduciary Responsibility.
------------------------
(a) The Plan Administrator, as a Named Fiduciary, may allocate its
fiduciary responsibilities among Fiduciaries other than the Trustee,
designated in writing by the Plan Administrator and may designate in
writing persons other than the Trustee to carry out its fiduciary
responsibilities under the Plan. The Plan Administrator may remove any
person designated to carry out its fiduciary responsibilities under the
Plan by notice in writing to such person.
(b) The Plan Administrator and each other Fiduciary may employ persons
to perform services and to render advice with regard to any of the
Fiduciary's responsibilities under the Plan.
(c) Each Plan Sponsor shall indemnify and hold harmless each person
constituting the Plan Administrator or the Investment Committee, if any,
from and against any and all claims, losses, costs, expenses (including,
without limitation, attorney's fees and court costs), damages, actions or
causes of action arising from, on account of or in connection with the
performance by such person of his duties in such capacity, other than such
of the foregoing arising from, on account of or in connection with the
willful neglect or willful misconduct of such person.
13.4 Duties of the Plan Administrator.
--------------------------------
(a) The Plan Administrator shall advise the Trustee with respect to
all payments under the terms of the Plan and shall direct the Trustee in
writing to make such payments from the Fund; provided, however, in no event
shall the Trustee be required to make such payments if the Trustee has
actual knowledge that such payments are contrary to the terms of the Plan
and the Trust.
24
(b) The Plan Administrator shall from time to time establish rules,
not contrary to the provisions of the Plan and the Trust, for the
administration of the Plan and the transaction of its business. All
elections and designations under the Plan by a Member or Beneficiary shall
be made on forms prescribed by the Plan Administrator. The Plan
Administrator shall have discretionary authority to construe the terms of
the Plan and shall determine all questions arising in the administration,
interpretation and application of the Plan, including, but not limited to,
those concerning eligibility for benefits and it shall not act so as to
discriminate in favor of any person. All determinations of the Plan
Administrator shall be conclusive and binding on all Employees, Members,
Beneficiaries and Fiduciaries, subject to the provisions of the Plan and
the Trust and subject to applicable law.
(c) The Plan Administrator shall furnish Members and Beneficiaries
with all disclosures now or hereafter required by ERISA or the Code. The
Plan Administrator shall file, as required, the various reports and
disclosures concerning the Plan and its operations as required by ERISA and
by the Code, and shall be solely responsible for establishing and
maintaining all records of the Plan and the Trust.
(d) The Fair Market Value of shares of Company Stock shall be
determined as of each Valuation Date. In the case of a transaction between
the Plan and a disqualified person within the meaning of Code Section 4975,
the Fair Market Value of shares of Company Stock must be determined as of
the date of the transaction.
(e) The statement of specific duties for a Plan Administrator in this
Section is not in derogation of any other duties which a Plan Administrator
has under the provisions of the Plan or the Trust or under applicable law.
13.5 Investment Manager. The Primary Sponsor may, by action in writing
------------------
certified by notice to the Trustee, appoint an Investment Manager. Any
Investment Manager may be removed in the same manner in which appointed, and in
the event of any removal, the Investment Manager shall, as soon as possible, but
in no event more than thirty (30) days after notice of removal, turn over all
assets managed by it to the Trustee or to any successor Investment Manager
appointed, and shall make a full accounting to the Primary Sponsor with respect
to all assets managed by it since its appointment as an Investment Manager.
13.6 Investment Committee. The Primary Sponsor may, by action in writing
--------------------
certified by notice to the Trustee, appoint an Investment Committee. The
Primary Sponsor shall have the right to remove any person on the Investment
Committee at any time by notice in writing to such person. A person on the
Investment Committee may resign at any time by written notice of resignation to
the Primary Sponsor. Upon such removal or resignation, or in the event of the
death of a person on the Investment Committee, the Primary Sponsor may appoint a
successor. Until a successor has been appointed, the remaining persons on the
Investment Committee may continue to act as the Investment Committee.
13.7 Action by a Plan Sponsor. Any action to be taken by a Plan Sponsor
------------------------
shall be taken by resolution or written direction duly adopted by its board of
directors or appropriate governing body, as the case may be; provided, however,
that by such resolution or written direction, the board of directors or
appropriate governing body, as the case may be, may
25
delegate to any officer or other appropriate person of a Plan Sponsor the
authority to take any such actions as may be specified in such resolution or
written direction, other than the power to amend, modify or terminate the Plan
or the Trust or to determine the basis of any Plan Sponsor contributions.
13.8 Expenses of the Plan and Trust. All expenses of administering the
------------------------------
Plan and Trust shall be charged to and paid out of the Trust assets to the
extent permissible under ERISA. The Primary Sponsor in its discretion may pay
all or any portion of such expenses, and payment of expenses by the Primary
Sponsor shall not be deemed to be employer contributions.
SECTION 14
CLAIM REVIEW PROCEDURE
----------------------
14.1 If a Member or Beneficiary is denied a claim for benefits under a
Plan, the Plan Administrator shall provide to the claimant written notice of the
denial within 90 days after the Plan Administrator receives the claim, unless
special circumstances require an extension of time for processing the claim. If
such an extension of time for processing is required, written notice of the
extension shall be furnished to the claimant prior to the termination of the
initial 90-day period. In no event shall the extension exceed a period of 90
days from the end of such initial period. The extension notice shall indicate
the special circumstances requiring an extension of time and the date by which
the Plan Administrator expects to render the final decision.
14.2 If the claimant is denied a claim for benefits, the Plan
Administrator shall provide, within the time frame set forth in Plan Section
13.1, written notice of the denial which shall set forth:
(a) the specific reasons for the denial;
(b) specific references to the pertinent provisions of the Plan on
which the denial is based;
(c) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why the
material or information is necessary; and
(d) an explanation of the Plan's claim review procedure.
14.3 After receiving written notice of the denial of a claim, a claimant
or his representative may:
(a) request a full and fair review of the denial by written
application to the Plan Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Plan Administrator.
26
14.4 If the claimant wishes a review of the decision denying his claim to
benefits under the Plan, he must submit the written application to the Plan
Administrator within sixty (60) days after receiving written notice of the
denial.
14.5 Upon receiving the written application for review, the Plan
Administrator may schedule a hearing for purposes of reviewing the claimant's
claim, which hearing shall take place not more than thirty (30) days from the
date on which the Plan Administrator received the written application for
review.
14.6 At least ten (10) days prior to the scheduled hearing, the claimant
and his representative designated in writing by him, if any, shall receive
written notice of the date, time, and place of the scheduled hearing. The
claimant or his representative may request that the hearing be rescheduled for
his convenience on another reasonable date or at another reasonable time or
place.
14.7 All claimants requesting a review of the decision denying their claim
for benefits may employ counsel for purposes of the hearing.
14.8 No later than sixty (60) days following the receipt of the written
application for review, the Plan Administrator shall submit its decision on the
review in writing to the claimant involved and to his representative, if any;
provided, however, a decision on the written application for review may be
extended, in the event special circumstances such as the need to hold a hearing
require an extension of time, to a day no later than one hundred twenty (120)
days after the date of receipt of the written application for review. The
decision shall include specific reasons for the decision and specific references
to the pertinent provisions of the Plan on which the decision is based.
SECTION 15
LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
---------------------------------------------
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS
----------------------------------------------
15.1 No benefit which shall be payable under the Plan to any person shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge the same shall be
void; and no such benefit shall in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements or torts of any person, nor shall it
be subject to attachment or legal process for, or against, such person, and the
same shall not be recognized under the Plan, except to such extent as may be
required by law. Notwithstanding the above, this Section shall not apply to a
"qualified domestic relations order" (as defined in Code Section 414(p)), and
benefits may be paid pursuant to the provisions of such an order. The Plan
Administrator shall develop procedures (in accordance with applicable federal
regulations) to determine whether a domestic relations order is qualified, and,
if so, the method and the procedures for complying therewith. In addition, a
distribution to an "alternate payee" (as defined in Code Section 414(p)) shall
be permitted if such distribution is authorized by a qualified domestic
relations order, even if the affected Member has not yet separated from service
and has not yet reached the "earliest retirement age" (as defined in Code
Section 414(p)).
27
15.2 If any person who shall be entitled to any benefit under the Plan
shall become bankrupt or shall attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge such benefit under the Plan, then the payment
of any such benefit in the event a Member or Beneficiary is entitled to payment
shall, in the discretion of the Plan Administrator, cease and terminate and in
that event the Trustee shall hold or apply the same for the benefit of such
person, his spouse, children, other dependents or any of them in such manner and
in such proportion as the Plan Administrator shall determine.
15.3 Whenever any benefit which shall be payable under the Plan is to be
paid to or for the benefit of any person who is then a minor or determined to be
incompetent by qualified medical advice, the Plan Administrator need not require
the appointment of a guardian or custodian, but shall be authorized to cause the
same to be paid over to the person having custody of such minor or incompetent,
or to cause the same to be paid to such minor or incompetent without the
intervention of a guardian or custodian, or to cause the same to be paid to a
legal guardian or custodian of such minor or incompetent if one has been
appointed or to cause the same to be used for the benefit of such minor or
incompetent.
15.4 If the Plan Administrator cannot ascertain the whereabouts of any
Member to whom a payment is due under the Plan, the Plan Administrator may
direct that the payment and all remaining payments otherwise due to the Member
be cancelled on the records of the Plan and the amount thereof applied as a
forfeiture in accordance with Plan Section 4.1(a), as applicable, except that,
in the event the Member later notifies the Plan Administrator of his whereabouts
and requests the payments due to him under the Plan, the Plan Sponsor shall
contribute to the Plan an amount equal to the payment to be paid to him as soon
as administratively feasible.
SECTION 16
PROHIBITION AGAINST DIVERSION
-----------------------------
At no time shall any part of the Fund be used for or diverted to purposes
other than the exclusive benefit of the Members or their Beneficiaries, subject,
however, to the payment of all taxes and administrative expenses and subject to
the provisions of the Plan with respect to returns of contributions.
SECTION 17
LIMITATION OF RIGHTS
--------------------
Membership in the Plan shall not give any Employee any right or claim
except to the extent that such right is specifically fixed under the terms of
the Plan. The adoption of the Plan and the Trust by any Plan Sponsor shall not
be construed to give any Employee a right to be continued in the employ of a
Plan Sponsor or as interfering with the right of a Plan Sponsor to terminate the
employment of any Employee at any time.
28
SECTION 18
AMENDMENT TO OR TERMINATION OF THE
----------------------------------
PLAN AND THE TRUST
------------------
18.1 The Primary Sponsor reserves the right at any time to modify or amend
or terminate the Plan or the Trust in whole or in part; provided, however, that
the Primary Sponsor shall have no power to modify or amend the Plan in such
manner as would cause or permit any portion of the funds held under a Plan to be
used for, or diverted to, purposes other than for the exclusive benefit of
Members or their Beneficiaries, or as would cause or permit any portion of a
fund held under the Plan to become the property of a Plan Sponsor; and provided
further, that the duties or liabilities of the Trustee shall not be increased
without its written consent. No such modifications or amendments shall have the
effect of retroactively changing or depriving Members or Beneficiaries of rights
already accrued under the Plan. No Plan Sponsor other than the Primary Sponsor
shall have the right to so modify, amend or terminate the Plan or the Trust.
Notwithstanding the foregoing, each Plan Sponsor may terminate its own
participation in the Plan and Trust pursuant to the Plan.
18.2 Each Plan Sponsor other than the Primary Sponsor shall have the right
to terminate its participation in the Plan and Trust by resolution of its board
of directors or other appropriate governing body and notice in writing to the
Primary Sponsor and the Trustee unless such termination would result in the
disqualification of the Plan or the Trust or would adversely affect the exempt
status of the Plan or the Trust as to any other Plan Sponsor. If contributions
by or on behalf of a Plan Sponsor are completely terminated, the Plan and Trust
shall be deemed terminated as to such Plan Sponsor. Any termination by a Plan
Sponsor, shall not be a termination as to any other Plan Sponsor.
18.3 (a) If the Plan is terminated by the Primary Sponsor or if
contributions to the Trust should be permanently discontinued, it shall
terminate as to all Plan Sponsors and the Fund shall be used, subject to
the payment of expenses and taxes, for the benefit of Members and
Beneficiaries, and for no other purposes, and the Account of each affected
Member shall be fully vested and nonforfeitable, notwithstanding the
provisions of the Section of the Plan which sets forth the vesting
schedule.
(b) In the event of the partial termination of the Plan, each
affected Member's Account shall be fully vested and nonforfeitable,
notwithstanding the provisions of the Section of the Plan which sets forth
the vesting schedule.
18.4 In the event of the termination of the Plan or the Trust with respect
to a Plan Sponsor, the Accounts of the Members with respect to the Plan as
adopted by such Plan Sponsor shall be held subject to the instructions of the
Plan Administrator.
18.5 In the case of any merger or consolidation of the Plan with, or any
transfer of the assets or liabilities of the Plan to, any other plan qualified
under Code Section 401, the terms of the merger, consolidation or transfer shall
be such that each Member would receive (in the event of termination of the Plan
or its successor immediately thereafter) a benefit which is no less than the
benefit which the Member would have received in the event of termination of the
Plan immediately before the merger, consolidation or transfer.
29
18.6 Notwithstanding any other provision of the Plan, an amendment to the
Plan --
(a) which eliminates or reduces an early retirement benefit, if any,
or which eliminates or reduces a retirement-type subsidy (as defined in
regulations issued by the Department of the Treasury), if any, or
(b) which eliminates an optional form of benefit
shall not be effective with respect to benefits attributable to service before
the amendment is adopted. In the case of a retirement-type subsidy described in
Subsection (a) above, this Section shall be applicable only to a Member who
satisfies, either before or after the amendment, the preamendment conditions for
the subsidy.
SECTION 19
ADOPTION OF PLAN BY AFFILIATES
------------------------------
Any corporation or other business entity related to the Primary Sponsor by
function or operation and any Affiliate, if the corporation, business entity or
Affiliate is authorized to do so by written direction adopted by the Board of
Directors, may adopt the Plan and the related Trust by action of the board of
directors or other appropriate governing body of such corporation, business
entity or Affiliate. Any adoption shall be evidenced by certified copies of the
resolutions of the foregoing board of directors or governing body indicating the
adoption and by the execution of the Trust by the adopting corporation, or
business entity or Affiliate. The resolution shall state and define the
effective date of the adoption of the Plan by the Plan Sponsor and, for the
purpose of Code Section 415, the "limitation year" as to such Plan Sponsor.
Notwithstanding the foregoing, however, if the Plan and Trust as adopted by an
Affiliate or other corporation or business entity under the foregoing provisions
shall fail to receive the initial approval of the Internal Revenue Service as a
qualified Plan and Trust under Code Sections 401(a) and 501(a), any
contributions by the Affiliate or other corporation or business entity after
payment of all expenses will be returned to such Plan Sponsor free of any trust,
and the Plan and Trust shall terminate, as to the adopting Affiliate or other
corporation or business entity.
SECTION 20
QUALIFICATION AND RETURN OF CONTRIBUTIONS
-----------------------------------------
20.1 If the Plan and the related Trust fail to receive the initial
approval of the Internal Revenue Service as a qualified plan and trust within
one (1) year after the date of denial of qualification (a) the contribution of a
Plan Sponsor after payment of all expenses will be returned to a Plan Sponsor
free of the Plan and Trust, (b) contributions made by a Member shall be returned
to the Member who made the contributions, and (c) the Plan and Trust shall
thereupon terminate.
20.2 All Plan Sponsor contributions to the Plan are contingent upon
deductibility. To the extent permitted by the Code and other applicable laws
and regulations thereunder, upon a Plan Sponsor's request, a contribution which
was made by reason of a mistake of fact or which
30
was nondeductible under Code Section 404, shall be returned to a Plan Sponsor
within one (1) year after the payment of the contribution, or the disallowance
of the deduction (to the extent disallowed), whichever is applicable.
In the event of a contribution which was made by reason of a mistake of
fact or which was nondeductible, the amount to be returned to the Plan Sponsor
shall be the excess of the contribution above the amount that would have been
contributed had the mistake of fact or the mistake in determining the deduction
not occurred, less any net loss attributable to the excess. Any net income
attributable to the excess shall not be returned to the Plan Sponsor. No return
of any portion of the excess shall be made to the Plan Sponsor if the return
would cause the balance in a Member's Account to be less than the balance would
have been had the mistaken contribution not been made.
SECTION 21
INCORPORATION OF SPECIAL LIMITATIONS
------------------------------------
Appendices A and B to the Plan, attached hereto, are incorporated by
reference and the provisions of the same shall apply notwithstanding anything to
the contrary contained herein.
WHEREOF, the Primary Sponsor has caused this indenture to be executed as of
the date first above written.
COMMUNITY FIRST BANKING COMPANY
By:_________________________________
Title:______________________________
ATTEST:
_______________________________
Title: ________________________
[CORPORATE SEAL]
31
APPENDIX A
LIMITATION ON ALLOCATIONS
-------------------------
SECTION 1
The "annual addition" for any Member for any one limitation year may not
exceed the lesser of:
(a) $30,000 (as adjusted for changes in the cost of living as provided
in regulations issued by the Secretary of the Treasury); or
(b) 25% of the Member's Annual Compensation.
Notwithstanding the foregoing, if no more than one-third (1/3) of the Plan
Sponsor contributions to the Plan for the limitation year are allocated to
Highly Compensated Employees, the annual addition shall not include forfeitures
of Company Stock acquired with the proceeds of an Acquisition Loan or Plan
Sponsor contributions applied to the payment of interest on an Acquisition Loan.
SECTION 2
For the purposes of this Appendix A, the term "annual addition" for any
Member means for any limitation year, the sum of certain Plan Sponsor,
Affiliate, and Member contributions, forfeitures, and other amounts as
determined in Code Section 415(c)(2) in effect for that limitation year.
SECTION 3
In the event that a Plan Sponsor or an Affiliate maintains a defined
benefit plan under which a Member also participates, the sum of the defined
benefit plan fraction and the defined contribution plan fraction for any
limitation year for any Member may not exceed 1.0.
(a) The defined benefit plan fraction for any limitation year is a
fraction:
(1) the numerator of which is the projected annual benefit of
the Member under the defined benefit plan (determined as of the close
of such year); and
(2) the denominator of which is the lesser of
(A) the product of 1.25, multiplied by the maximum annual
benefit allowable under Code Section 415(b)(1)(A), or
(B) the product of
A-1
(i) 1.4, multiplied by
(ii) the maximum amount which may be taken into
account under Section 415(b)(1)(B) of the Code with respect
to the Member under the defined benefit plan for the
limitation year (determined as of the close of the
limitation year).
(b) The defined contribution plan fraction for any limitation year is
a fraction:
(1) the numerator of which is the sum of a Member's annual
additions as of the close of the year; and
(2) the denominator of which is the sum of the lesser of the
following amounts determined for the year and for all prior limitation
years during which the Member was employed by a Plan Sponsor or an
Affiliate:
(A) the product of 1.25, multiplied by the dollar
limitation in effect under Code Section 415(c)(1)(A) for the
limitation year (determined without regard to Section 415(c)(6)
of the Code); or
(B) the product of
(i) 1.4, multiplied by
(ii) the amount which may be taken into account
under Code Section 415(c)(1)(B) (or Code Section 415(c)(7),
if applicable) with respect to the Member for the limitation
year.
SECTION 4
For purposes of this Appendix A, the term "limitation year" shall mean a
Plan Year unless a Plan Sponsor elects, by adoption of a written resolution, to
use any other twelve-month period adopted in accordance with regulations issued
by the Secretary of the Treasury.
SECTION 5
For purposes of applying the limitations of this Appendix A, all defined
contribution plans maintained or deemed to be maintained by a Plan Sponsor shall
be treated as one defined contribution plan, and all defined benefit plans now
or previously maintained or deemed to be maintained by a Plan Sponsor shall be
treated as one defined benefit plan. In the event any of the actions to be
taken pursuant to Section 6 of this Appendix A or pursuant to any language of
similar import in another defined contribution plan are required to be taken as
a result of the annual additions of a Member exceeding the limitations set forth
in Section 1 of this Appendix A, because of the Member's participation in more
than one defined contribution plan, the actions shall be taken first with regard
to such other defined contribution plan.
A-2
SECTION 6
In the event that as a result of either the allocation of forfeitures to
the Account of a Member or a reasonable error in estimating the Member's Annual
Compensation, the annual addition allocated to the Account of a Member exceeds
the limitations set forth in Section 1 of this Appendix A or in the event that
the aggregate contributions made on behalf of a Member under both a defined
benefit plan and a defined contribution plan, subject to the reduction of
allocations in other defined contribution plans required by Section 5 of this
Appendix A, cause the aggregate limitation fraction set forth in Section 3 of
this Appendix A to be exceeded, the Plan Administrator shall, in writing, direct
the Trustee to take such of the following actions as the Plan Administrator
shall deem appropriate, specifying in each case the amount or amounts of
contributions involved:
(a) Contributions made by the Plan Sponsor on behalf of the Member
pursuant to Plan Section 3.1 shall be reduced by the excess amount. The
amount of the reduction shall be reallocated to the Accounts of Members who
are not affected by the limitations in the same proportion as the
contribution of the Plan Sponsor for the year is allocated under Plan
Section 4.1 to the Accounts of such Members; and
(b) If further reduction is necessary, forfeitures allocated to the
Member's ESOP Account shall be reduced by the amount of the remaining
excess. The amount of the reduction shall be reallocated to the ESOP
Accounts of Members who are not affected by the limitations in the same
manner as the contributions of the Plan Sponsor for the year are allocated
to the ESOP Accounts of such Members pursuant to Plan Section 4.1.
(c) If the contribution of the Plan Sponsor and forfeitures would
cause the annual addition to exceed the limitations set forth herein with
respect to all Members under the Plan, the portion of such contribution in
excess of the limitations shall be segregated in a suspense account. While
the suspense account is maintained, (1) no Plan Sponsor contributions under
the Plan shall be made which would be precluded by this Appendix A, (2)
income, gains and losses of the Fund shall not be allocated to such
suspense account and (3) amounts in the suspense account shall be allocated
in the same manner as Plan Sponsor contributions and forfeitures under the
Plan as of each Valuation Date on which Plan Sponsor contributions may be
allocated until the suspense account is exhausted. In the event of the
termination of the Plan, the amounts in the suspense account shall be
returned to the Plan Sponsor to the extent that such amounts may not then
be allocated to the Members' Accounts.
A-3
APPENDIX B
TOP-HEAVY PROVISIONS
--------------------
SECTION 1
As used in this Appendix B, the following words shall have the following
meanings:
(a) "Determination Date" means, with respect to any Plan Year, the
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last day of the preceding Plan Year, or, in the case of the first Plan
Year, means the last day of the first Plan Year.
(b) "Key Employee" means an Employee or former Employee (including a
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Beneficiary of a Key Employee or former Key Employee) who at any time
during the Plan Year containing the Determination Date or any of the four
(4) preceding Plan Years is:
(1) An officer of the Plan Sponsor or any Affiliate whose Annual
Compensation was greater than fifty percent (50%) of the amount in
effect under Code Section 415(b)(1)(A) for the calendar year in which
the Plan Year ends, where the term `officer' means an administrative
executive in regular and continual service to the Plan Sponsor or
Affiliate; provided, however, that in no event shall the number of
officers exceed the lesser of Clause (A) or (B) of this Subparagraph
(1), where:
(A) equals fifty (50) Employees; and
(B) equals the greater of (i) three (3) Employees or (ii)
ten percent (10%) of the number of Employees during the Plan
Year, with any non-integer being increased to the next higher
integer.
If for any Plan Year no officer of the Plan Sponsor meets the
requirements of this Subparagraph (1), the highest paid officer of the
Plan Sponsor for the Plan Year shall be considered an officer for
purposes of this Subparagraph.
(2) One of the ten (10) Employees owning both (A) more than one-
half percent (1/2%) of the outstanding stock of the Plan Sponsor or an
Affiliate, more than one-half percent (1/2%) of the total combined
voting power of all stock of the Plan Sponsor or an Affiliate, or more
than one-half percent (1/2%) of the capital or profits interest in the
Plan Sponsor or an Affiliate, and (B) the largest percentage ownership
interests in the Plan Sponsor or any of its Affiliates, and whose
Annual Compensation is equal to or greater than the amount in effect
under Section 1(a) of Appendix A to the Plan for the calendar year in
which the Determination Date falls; or
(3) An owner of more than five percent (5%) of the outstanding
stock of the Plan Sponsor or an Affiliate or more than five percent
(5%) of the total combined voting power of all stock of the Plan
Sponsor or an Affiliate; or
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(4) An owner of more than one percent (1%) of the outstanding
stock of the Plan Sponsor or an Affiliate or more than one percent
(1%) of the total combined voting power of all stock of the Plan
Sponsor or an Affiliate, and who in such Plan Year had Annual
Compensation from the Plan Sponsor and all of its Affiliates of more
than $150,000.
Employees other than Key Employees are sometimes referred to in this
Appendix B, as "non-key employees."
(c) "Required Aggregation Group" means:
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(1) each plan of the Plan Sponsor and its Affiliates which
qualifies under Code Section 401(a) in which a Key Employee is a
participant, and
(2) each other plan of the Plan Sponsor and its Affiliates which
qualifies under Code Section 401 (a) and which enables any plan
described in Subsection (a) of this Section to meet the requirements
of Section 401(a)(4) or 410 of the Code.
(d) (1) "Top-Heavy" means:
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(A) if the Plan is not included in a Required Aggregation
Group, the Plan's condition in a Plan Year for which, as of the
Determination Date:
(i) the present value of the cumulative Accounts
under the Plan for all Key Employees exceeds 60 percent of
the present value of the cumulative Accounts under the Plan
for all Members; and
(ii) the Plan, when included in every potential
combination, if any, with any or all of:
(I) any Required Aggregation Group, and
(II) any plan of the Plan Sponsor which
is not part of any Required Aggregation Group and which
qualifies under Code Section 401 (a)
is part of a Top-Heavy Group (as defined in Paragraph (2) of
this Subsection); and
(B) if the Plan is included in a Required Aggregation
Group, the Plan's condition in a Plan Year for which, as of the
Determination Date:
(i) the Required Aggregation Group is a Top-Heavy
Group (as defined in Paragraph (2) of this Subsection); and
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(ii) the Required Aggregation Group, when included
in every potential combination, if any, with any or all of
the plans of the Plan Sponsor and its Affiliates which are
not part of the Required Aggregation Group and which qualify
under Code Section 401(a), is part of a Top-Heavy Group (as
defined in Paragraph (2) of this Subsection).
(C) For purposes of Subparagraphs (A)(ii) and (B)(ii) of
this Paragraph (1), any combination of plans must satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.
(2) A group shall be deemed to be a Top-Heavy Group if:
(A) the sum, as of the Determination Date, of the present
value of the cumulative accrued benefits for all Key Employees
under all plans included in such group exceeds
(B) 60 percent of a similar sum determined for all
participants in such plans.
(3) (A) For purposes of this Section, the present value of the
accrued benefit for any participant in a defined contribution
plan as of any Determination Date or last day of a plan year
shall be the sum of:
(i) as to any defined contribution plan other than a
simplified employee pension, the account balance as of the
most recent valuation date occurring within the plan year
ending on the Determination Date or last day of a plan year,
and
(ii) as to any simplified employee pension, the
aggregate employer contributions, and
(iii) an adjustment for contributions due as of the
Determination Date or last day of a plan year.
In the case of a plan that is not subject to the minimum funding
requirements of Code Section 412, the adjustment in Clause (iii)
of this Subparagraph (A) shall be the amount of any contributions
actually made after the valuation date but on or before the
Determination Date or last day of the plan year to the extent not
included under Clause (i) or (ii) of this Subparagraph (A);
provided, however, that in the first plan year of the plan, the
adjustment in Clause (iii) of this Subparagraph (A) shall also
reflect the amount of any contributions made thereafter that are
allocated as of a date in such first plan year. In the case of a
plan that is subject to the minimum funding requirements, the
account balance in Clause (i) and the aggregate contributions in
Clause (ii) of this Subparagraph (A) shall include contributions
that would be allocated as of a date not later than the
Determination Date or last day of a plan year, even though those
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amounts are not yet required to be contributed, and the
adjustment in Clause (iii) of this Subparagraph (A) shall be the
amount of any contribution actually made (or due to be made)
after the valuation date but before the expiration of the
extended payment period in Code Section 412(c)(10) to the extent
not included under Clause (i) or (ii) of this Subparagraph (A).
(B) For purposes of this Subsection, the present value of
the accrued benefit for any participant in a defined benefit plan
as of any Determination Date or last day of a plan year must be
determined as of the most recent valuation date which is within a
12-month period ending on the Determination Date or last day of a
plan year as if such participant terminated as of such valuation
date; provided, however, that in the first plan year of a plan,
the present value of the accrued benefit for a current
participant must be determined either (i) as if the participant
terminated service as of the Determination Date or last day of a
plan year or (ii) as if the participant terminated service as of
such valuation date, but taking into account the estimated
accrued benefit as of the Determination Date or last day of a
plan year. For purposes of this Subparagraph (B), the valuation
date must be the same valuation date used for computing plan
costs for minimum funding, regardless of whether a valuation is
performed that year. The actuarial assumptions utilized in
calculating the present value of the accrued benefit for any
participant in a defined benefit plan for purposes of this
Subparagraph (B) shall be established by the Plan Administrator
after consultation with the actuary for the plan, and shall be
reasonable in the aggregate and shall comport with the
requirements set forth by the Internal Revenue Service in Q&A T-
26 and T-27 of Regulation Section 1.416-1.
(C) For purposes of determining the present value of the
cumulative accrued benefit under a plan for any participant in
accordance with this Subsection, the present value shall be
increased by the aggregate distributions made with respect to the
participant (including distributions paid on account of death to
the extent they do not exceed the present value of the cumulative
accrued benefit existing immediately prior to death) under each
plan being considered, and under any terminated plan which if it
had not been terminated would have been in a Required Aggregation
Group with the Plan, during the 5-year period ending on the
Determination Date or last day of the plan year that falls within
the calendar year in which the Determination Date falls.
(D) For purposes of this Paragraph (3), participant
contributions which are deductible as "qualified retirement
contributions" within the meaning of Code Section 219 or any
successor, as adjusted to reflect income, gains, losses, and
other credits or charges attributable thereto, shall not be
considered to be part of the accrued benefits under any plan.
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(E) For purposes of this Paragraph (3), if any employee is
not a Key Employee with respect to any plan for any plan year,
but such employee was a Key Employee with respect to such plan
for any prior plan year, any accrued benefit for such employee
shall not be taken into account.
(F) For purposes of this Paragraph (3), if any employee has
not performed any service for any Plan Sponsor or Affiliate
maintaining the plan during the five-year period ending on the
Determination Date, any accrued benefit for that employee shall
not be taken into account.
(G) (i) In the case of an "unrelated rollover" (as defined
below) between plans which qualify under Code Section
401(a), (a) the plan providing the distribution shall count
the distribution as a distribution under Subparagraph (C) of
this Paragraph (3), and (b) the plan accepting the
distribution shall not consider the distribution part of the
accrued benefit under this Section; and
(ii) in the case of a "related rollover" (as defined
below) between plans which qualify under Code Section
401(a), (a) the plan providing the distribution shall not
count the distribution as a distribution under Subparagraph
(C) of this Paragraph (3), and (b) the plan accepting the
distribution shall consider the distribution part of the
accrued benefit under this Section.
For purposes of this Subparagraph (G), an "unrelated rollover" is a rollover as
defined in Code Section 402(c)(4) or 408(d)(3) or a plan-to-plan transfer which
is both initiated by the participant and made from a plan maintained by one
employer to a plan maintained by another employer where the employers are not
Affiliates. For purposes of this Subparagraph (G), a "related rollover" is a
rollover as defined in Code Section 402(c)(4) or 408(d)(3) or a plan-to-plan
transfer which is either not initiated by the participant or made to a plan
maintained by the employer or an Affiliate.
SECTION 2
(a) Notwithstanding anything contained in the Plan to the contrary,
except as otherwise provided in Subsection (b) of this Section, in any Plan
Year during which the Plan is Top-Heavy, allocations of Plan Sponsor
contributions and forfeitures for the Plan Year for the Account of each
Member who is not a Key Employee and who has not separated from service
with the Plan Sponsor prior to the end of the Plan Year shall not be less
than 3 percent of the Member's Annual Compensation. In the event either
this Plan or any other defined contribution plan is Top-Heavy, the minimum
allocation contemplated by this Section 2 shall be provided under this
Plan, unless the provisions of any other defined contribution plan
expressly provide otherwise. For purposes of this Subsection, an
allocation to a Member's Account resulting from any Plan Sponsor
contribution attributable to a salary reduction or similar arrangement
shall not be taken into account.
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(b) (1) The percentage referred to in Subsection (a) of this Section
for any Plan Year shall not exceed the percentage at which allocations
are made or required to be made under the Plan for the Plan Year for
the Key Employee for whom the percentage is highest for the Plan Year.
For purposes of this Paragraph, an allocation to the Account of a Key
Employee resulting from any Plan Sponsor contribution attributable to
a salary reduction or similar agreement shall be taken into account.
(2) For purposes of this Subsection (b), all defined
contribution plans which are members of a Required Aggregation Group
shall be treated as part of the Plan.
(3) This Subsection (b) shall not apply to any plan which is a
member of a Required Aggregation Group if the plan enables a defined
benefit plan which is a member of the Required Aggregation Group to
meet the requirements of Code Section 401(a)(4) or 410.
(4) If the Plan Sponsor maintains a defined benefit plan which
is qualified under Code Section 401(a) and which would be Top-Heavy
within the meaning of the Plan for its plan year ending within or
coincident with the Plan Year, no allocation shall be made pursuant to
Subsection (a) of this Section on behalf of any Member who
participates in the defined benefit plan and acquires a year of
service within the meaning of paragraphs (4), (5) and (6) of Code
Section 411(a) under the defined benefit plan for the plan year, if
the defined benefit plan provides generally that the accrued benefit
of the Member when expressed as an annual retirement benefit shall
not, when expressed as a percentage of the Member's Annual
Compensation, be less than the lesser of (A) 2 percent multiplied by
the number of such years of service in plan years during which such
plan was Top-Heavy, or (B) 20 percent.
SECTION 3
In any limitation year (as defined in Section 4 of Appendix A to the Plan)
which contains any portion of a Plan Year in which the Plan is Top-Heavy, the
number "1.0" shall be substituted for the number "1.25" in Section 3 of Appendix
A to the Plan.
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SECTION 4
Notwithstanding anything contained in the Plan to the contrary, in any Plan
Year during which the Plan is Top-Heavy, a Member's interest in his Account
shall not vest at any rate which is slower than the following schedule,
effective as of the first day of that Plan Year:
Full Years of Percentage
Vesting Service Vested
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Less than 3 0%
3 or more 100%
The Schedule set forth above in this Section 4 shall be inapplicable to a Member
who has failed to perform an Hour of Service after the Determination Date on
which the Plan has become Top-Heavy. When the Plan ceases to be Top-Heavy, the
Schedule set forth above in this Section 4 shall cease to apply; provided
however, that the provisions of the Plan Section dealing with changes in the
vesting schedule shall apply.
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