10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to

Commission File Number 000-50132

Sterling Chemicals, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	76-0502785 (I.R.S. Employer Identification No.)
333 Clay Street, Suite 3600 Houston, Texas 77002-4109 (Address of principal executive offices)	(713-650-3700) (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share
(Title of class)

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ.

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ.

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o.

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ.

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company þ

     The aggregate market value of the registrant’s common stock, par value $.01 per share, held by non-affiliates at June 30, 2008 (the last business day of the registrant’s most recently completed second fiscal quarter), based upon the value of the last sales price of these shares as reported on the OTC Electronic Bulletin Board maintained by the National Association of Securities Dealers, Inc., was $19,822,672.

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ.

     As of February 28, 2009, Sterling Chemicals, Inc. had 2,828,460 shares of common stock outstanding.

     Portions of the definitive Proxy Statement relating to the 2009 Annual Meeting of Stockholders of Sterling Chemicals, Inc. are incorporated by reference in Part III of this Form 10-K.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business		2
Item 1A.	Risk Factors		11
Item 2.	Properties		16
Item 3.	Legal Proceedings		16
Item 4.	Submission of Matters to a Vote of Security Holders		18
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		19
Item 6.	Selected Financial Data		21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		37
Item 8.	Financial Statements and Supplementary Data		38
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		74
Item 9A (T).	Controls and Procedures		74
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		76
Item 11.	Executive Compensation		76
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		76
Item 13.	Certain Relationships and Related Transactions, and Director Independence		76
Item 14.	Principal Accountant Fees and Services		76
PART IV
Item 15.	Exhibits and Consolidated Financial Statement Schedules		77

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Forward-Looking Statements

     This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the United States Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements give our current expectations or forecasts of future events. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain or be identified by the words “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” “believe,” “should,” “could,” “may,” “might,” “will,” “will be,” “will continue,” “will likely result,” “project,” “forecast,” “budget” and similar expressions. Statements in this report that contain forward-looking statements include, but are not limited to, information concerning our possible or assumed future results of operations. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report.

     In addition, our other filings with the Securities and Exchange Commission, or the SEC, include additional factors that could adversely affect our business, results of operations or financial performance. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Forward-looking statements included in this Form 10-K are made only as of the date of this Form 10-K and are not guarantees of future performance. Although we believe that the expectations reflected in these forward-looking statements are reasonable, such expectations may prove to be incorrect. All written or oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

Document Summaries

     Descriptions of documents and agreements contained in this Form 10-K are provided in summary form only, and such summaries are qualified in their entirety by reference to the actual documents and agreements filed as exhibits to this Form 10-K or other periodic reports we file with the SEC.

PART I

     Unless otherwise indicated, references to “we,” “us,” “our” and “ours” in this Form 10-K refer collectively to Sterling Chemicals, Inc. and its wholly-owned subsidiaries.

Item 1. Business

     We are a North American producer of selected petrochemicals used to manufacture a wide array of consumer goods and industrial products. Our primary products are acetic acid and plasticizers.

     Our acetic acid is used primarily to manufacture vinyl acetate monomer, which is used in a variety of products, including adhesives and surface coatings. Pursuant to our Acetic Acid Production Agreement that extends to 2031, all of our acetic acid production is sold to BP Amoco Chemicals Company, or BP Chemicals. We are BP Chemicals’ sole source of acetic acid production in the Americas. BP Chemicals markets all of the acetic acid that we produce and pays us, among other amounts, a portion of the profits derived from its sales of our acetic acid. In addition, BP Chemicals reimburses us for 100% of our fixed and variable costs of production, other than specified indirect costs. Prior to August 2006, BP Chemicals also paid us a set monthly amount. However, beginning in August 2006, the portion of the profits we receive from the sales of our acetic acid increased and BP Chemicals was no longer required to pay us the set monthly amount. This change in payment structure did not affect BP Chemicals’ obligation to reimburse us for fixed and variable costs of production. We also jointly invest with BP Chemicals in capital expenditures related to our acetic acid facility in the same percentage as the profits from the business we receive from BP Chemicals.

     We own and operate one of the lowest cost acetic acid facilities in the world. Our acetic acid facility utilizes BP Chemicals’ proprietary “Cativa” carbonylation technology, which we believe offers several advantages over competing production methods, including lower energy requirements and lower fixed and variable costs. Acetic acid production has two major raw material requirements, methanol and carbon monoxide. BP Chemicals, a producer of methanol, supplies 100% of our methanol requirements related to our production of acetic acid. All of our requirements for

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carbon monoxide are supplied by Praxair Hydrogen Supply, Inc., or Praxair, from a partial oxidation unit constructed by Praxair on land leased from us at our site in Texas City, Texas, or our Texas City facility.

     All of our plasticizers, which are used to make flexible plastics, such as shower curtains, floor coverings, automotive parts and construction materials, are sold to BASF Corporation, or BASF, pursuant to a long-term production agreement that extends until 2013, subject to some early termination rights held by BASF that begin in 2010. Under our agreement with BASF, or our Plasticizers Production Agreement, BASF provides us with most of the required raw materials, markets the plasticizers that we produce and is obligated to make certain fixed quarterly payments to us while reimbursing us monthly for our actual production costs and capital expenditures relating to our plasticizers facility. Our Plasticizers Production Agreement was amended in May 2008 after BASF nominated zero pounds of phthalic anhydride, or PA, under the prior version of the agreement due to deteriorating market conditions which ultimately resulted in the closure of our PA unit.

     On September 17, 2007, we entered into a long-term exclusive styrene supply agreement and a related railcar purchase and sale agreement with NOVA Chemicals Inc., or NOVA. After the supply agreement became effective, INEOS NOVA nominated zero pounds of styrene under the supply agreement for the balance of 2007 and, in response, we exercised our right to terminate the supply agreement and permanently shut down our styrene facility. Under the supply agreement, we are responsible for the closure costs of our styrene facility and are also restricted from reentering the styrene business until November 2012. The restricted period was initially eight years. However, on April 1, 2008, INEOS NOVA unilaterally reduced the restricted period to five years.

     We sold substantially all remaining styrene inventory during the first quarter of 2008. The decommissioning process was completed by the end of 2008 and the associated costs incurred for 2007 and 2008 were $0.7 million and $18.9 million, respectively. In July 2008, we announced a reduction in work force in order to reduce our staffing to a level appropriate for our existing operations and site development projects. As a result, we reduced our salaried work force by 19 people and our hourly work force by 15 people. In accordance with Statement of Financial Accounting Standards, or SFAS, No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” we recognized and paid $1.4 million of severance costs in 2008. Additionally, as a result of the work force reduction, we recorded a curtailment loss of $1.2 million for our benefit plans in accordance with SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” in 2008. The revenues and gross losses from our styrene operations, which are reflected in discontinued operations, are summarized below:

	Year ended December 31,
	2008			2007			2006
Revenues	$	26,591		$	681,513		$	524,664
Gross loss		(7,654	)		(3,808	)		(2,641	)

     We own the acetic acid and plasticizers manufacturing units located at our Texas City facility. We lease a portion of our Texas City facility to Praxair, who constructed a partial oxidation unit on that land. We also lease a portion of our Texas City facility to S&L Cogeneration Company, a 50/50 joint venture between us and Praxair Energy Resources, Inc., who constructed a cogeneration facility on that land. However as our strategic initiatives under consideration do not require utilization of the steam produced by the cogeneration facility, we and Praxair Energy elected to terminate the joint venture and the Joint Venture Agreement governing S&L Cogeneration Company, or the Joint Venture Agreement, was amended to extend its term until June 30, 2009 to address several matters related to the sale of the cogeneration facility, the distribution of S&L Cogeneration Company’s assets and the termination and winding-up of the joint venture. We lease space for our principal offices located in Houston, Texas. As of December 31, 2008, we operated in two segments: acetic acid and plasticizers.

Business Strategy

     Our strategic objectives include:

• operating our facilities in a safe, reliable and environmentally responsible manner;

• effectively utilizing our available capacity;

• maintaining superior expense and capital expenditure management;

• expanding our capacity through low cost investments;

• flawlessly executing our contract management and administration;

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• monetizing our unutilized assets and infrastructure;

• capturing economic merger and acquisition opportunities;

• optimizing our capital structure and use of tax credits and governmental subsidies;

• maintaining top-quality human resource management, development and utilization; and

• generating leading shareholder returns.

     Operating Our Facilities Safely, Reliably and in an Environmentally Responsible Manner. We believe in operating our facilities in a manner that earns the confidence of our employees and our community. We have created a positive and open safety culture in which employee participation is encouraged in an atmosphere of ownership and pride. We proactively protect the safety of our employees, the community and the environment through the systematic identification, reduction and management of risks.

     Expectations and accountabilities for safety have been defined for all levels of our organization, and employees have aligned their personal goals to meet these responsibilities. Management and employee variable compensation programs are partially dependent on our individual and collective accomplishments. Our Board of Directors is informed of our progress towards maintaining and improving our process safety programs through the use of metrics and quarterly presentations to the Health, Safety, and Environmental Subcommittee.

     Profitably Grow Our Business. We believe that our acetic acid facility is positioned for cost-effective future capacity expansions at lower incremental cost due to previous investments made by us and BP Chemicals, including the installation of a new reactor in 2003 that is capable of producing up to 1.7 billion pounds of acetic acid annually. Although recent slowdowns in the housing and automotive sectors have caused reduced demand for vinyl acetate monomer, and consequently acetic acid, in North America in the short-term, as demand recovers and grows, we intend to grow our acetic acid business through capacity expansions that take advantage of this positioning. Currently, we are expecting to expand our acetic acid facility during 2009, through a low-cost debottlenecking opportunity which should increase annual capacity of our acetic acid facility to approximately 1.2 billion pounds, an increase of approximately 7%.

     Our Texas City facility is strategically located on Galveston Bay and benefits from a deep-water dock capable of handling ships with up to a 40-foot draft, as well as four barge docks and direct access to Union Pacific and Burlington Northern Santa Fe railways with in-motion rail scales on site. Our Texas City facility also has truck loading racks, weigh scales, stainless and carbon steel storage tanks, three waste deepwells, 160 acres of available land zoned for heavy industrial use and additional land zoned for light industrial use and a supportive political environment for growth. In addition, we are in the heart of one of the largest petrochemical complexes on the Gulf Coast and, as a result, have on-site access to a number of raw material pipelines, as well as close proximity to a number of large refinery complexes.

     Given our under-utilized infrastructure, our management and engineering expertise, as well as ample unoccupied land, we believe that there are significant opportunities for further development of our Texas City facility. We are currently pursuing numerous initiatives to attract new manufacturing or storage related businesses to our Texas City facility, including opportunities involving petcoke gasification and terminalling. In early 2009, we initiated a detailed feasibility study for the construction of a petcoke gasification facility at our Texas City site, which necessarily involves the participation of other interested parties. Specifically, we are seeking long-term contractual business arrangements or partnerships that will provide us with an ability to realize the value of our under-utilized assets through profit sharing or other revenue generating arrangements. For development projects that may have significant capital expenditure requirements, we are considering joint ventures or other arrangements where we would contribute certain of our assets and management expertise to minimize our share of the capital costs. In any case, we expect any new facility constructed at our Texas City facility to lower the amount of overall fixed costs allocated to each of our operating units and provide us with additional profit.

     We are pursuing strategic acquisitions, focusing on manufacturing businesses and assets which would allow us to increase the size and scope of our business, while adding revenue diversification to our existing businesses. We believe that the current economic environment has increased the potential number of acquisition targets and has provided an ideal situation for us to acquire businesses on favorable terms.

Industry Overview

     Acetic Acid. The North American acetic acid industry has enjoyed a long period of sustained domestic demand growth as well as substantial export demand. This has led to North American industry utilization rates above 85% over the last six years. Although recent slowdowns in the housing and automotive sectors have caused reduced demand for vinyl acetate monomer, and consequently acetic acid, in North America in the short-term, Tecnon OrbiChem, or Tecnon, currently projects acetic acid utilization rates will increase to over 98% by 2013. The North American acetic acid industry is inherently less cyclical than many other petrochemical products due to a number of important features.

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There are only four large producers of acetic acid in North America and historically these producers have made capacity additions in a disciplined and incremental manner, primarily using small expansion projects or exploiting debottlenecking opportunities. In addition, the leading technology required to manufacture acetic acid is controlled by two global companies, which provides these companies with influence over the pace of new capacity additions through the licensing or development of such additional capacity. We believe the limited availability of this technology also creates a significant barrier to entry into the acetic acid industry by potential competitors.

     Global production capacity of acetic acid as of December 31, 2008 was approximately 24 billion pounds per year, with current North American production capacity at approximately seven billion pounds per year. The North American acetic acid market is mature and well developed and is dominated by four major producers that account for approximately 94% of the acetic acid production capacity in North America. Demand for acetic acid is linked to the demand for vinyl acetate monomer, a key intermediate in the production of a wide array of polymers. Vinyl acetate monomer is the largest derivative of acetic acid, representing over 40% of global demand. Although recent slowdowns in the housing and automotive markets are reducing global demand for vinyl acetate monomer in the short-term, annual global production of vinyl acetate monomer is expected to increase from 10.4 billion pounds in 2005 to 12.2 billion pounds in 2010. The North American acetic acid industry tends to sell most of its products through long-term sales agreements having “cost plus” pricing mechanisms, eliminating much of the volatility seen in other petrochemicals products and resulting in more stable and predictable earnings and profit margins.

     Plasticizers. Plasticizers are produced from either ethylene-based linear alpha-olefins feedstocks or propylene-based technology. Linear plasticizers have historically received a premium over competing propylene-based branched products for customers that require enhanced performance properties. Although we are not exposed to fluctuations in costs or market conditions due to the contract terms in our Plasticizers Production Agreement with BASF, the markets for competing plasticizers may be affected by the cost of the underlying raw materials, especially when the cost of one olefin rises faster than the other, or by the introduction of new products. Over the last few years, the price of linear alpha-olefins has increased sharply as supply has declined, which has caused many consumers to switch to lower cost branched products, despite the loss of some performance properties. Ultimately, we expect branched plasticizers to replace linear plasticizers for most applications. As a result, we modified our plasticizers facilities during the third quarter of 2006 to replace our linear plasticizers production with branched plasticizers production.

Product Summary

     The following table summarizes our principal products, including our capacity, the primary end uses for each product, the raw materials used to produce each product and the major competitors for each product. “Capacity” represents rated annual production capacity as of December 31, 2008, which is calculated by estimating the number of days in a typical year that a production facility is capable of operating after allowing for downtime for regular maintenance, and multiplying that number of days by an amount equal to the facility’s optimal daily output based on the design feedstock mix. As the capacity of a facility is an estimated amount, actual production may be more or less than capacity, and the following table does not reflect actual operating rates of any of our production facilities for any given period of time.

Sterling Product	Intermediate
(Capacity)	Products	Primary End Products	Raw Materials	Major Competitors
Acetic Acid (1.1 billion pounds per year)	Vinyl acetate monomer, terephthalic acid, and acetate solvents	Adhesives, PET bottles, fibers and surface coatings	Methanol and Carbon Monoxide	Celanese AG, Eastman Chemical Company and LyondellBasell Chemical Company
Plasticizers (200 million pounds per year of phthalate esters)	Flexible polyvinyl chloride, or PVC	Flexible plastics, such as shower curtains and liners, floor coverings, cable insulation, upholstery and plastic molding	Oxo-Alcohols and Phthalic Anhydride	ExxonMobil Corporation, Eastman Chemical Company and BASF Corporation

Products

     Acetic Acid. Our acetic acid is used primarily to manufacture vinyl acetate monomer, which is used in a variety of products, including adhesives and surface coatings. We have the third largest production capacity for acetic acid in North America. Our acetic acid unit has a rated annual production capacity of approximately 1.1 billion pounds, which represents approximately 17% of total North American capacity. All of our acetic acid production is sold to BP

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Chemicals, and we are BP Chemicals’ sole source of production in the Americas. We sell our acetic acid to BP Chemicals pursuant to our Acetic Acid Production Agreement that extends until 2031. For a further description of our agreement with BP Chemicals, please refer to “Acetic Acid-BP Chemicals” under “Contracts.”

     Plasticizers. Our plasticizers business involves the production of phthalate esters, commonly referred to as plasticizers, from PA and oxo-alcohols. All of our plasticizers, which are used to make flexible plastics such as shower curtains, floor coverings, automotive parts and construction materials, are sold to BASF pursuant to our Plasticizers Production Agreement that extends until 2013, subject to some limited early termination rights held by BASF beginning in 2010. Previously, our plasticizers business included the production of PA at our Texas City facility. However, in December 2007, BASF nominated zero pounds of PA under our Plasticizers Production Agreement and indicated that it did not intend to nominate any production of PA in the future. As a result, we amended our Plasticizers Production Agreement, effective April 1, 2008, to address the closure of our PA production facility and document our arrangements with BASF around that closure. This closure of our PA production facility did not have a material adverse effect on our financial condition or results of operations. For a further description of our agreement with BASF, please refer to “Plasticizers-BASF” under “Contracts.”

Sales and Marketing

     Our petrochemicals products are generally sold to customers for use in the manufacture of other chemicals and products, which in turn are used in the production of a wide array of consumer goods and industrial products throughout the world. We have long-term agreements that provide for the dedication of 100% of our production of acetic acid and plasticizers, each to one customer. Under our Acetic Acid Production Agreement, we are reimbursed for our actual fixed and variable manufacturing costs (other than specified indirect costs) and also receive an agreed share of the profits earned from this business. Under our Plasticizers Production Agreement, we are reimbursed for our manufacturing costs and also receive a quarterly “facility fee” for the production unit included in our plasticizers business, but do not share in the profits or losses from that business. These agreements are intended to:

• lower our selling, general and administrative expenses;

• reduce our working capital requirements;

• insulate the financial results from our plasticizers operations from the effects of declining markets and changes in raw materials prices; and

• in some cases, gain access to certain improvements in manufacturing process technology.

Contracts

     Our significant multi-year contracts are described below.

     Acetic Acid-BP Chemicals

     In 1986, we entered into the initial version of our Acetic Acid Production Agreement with BP Chemicals, which has since been amended several times, most recently on August 20, 2008, when we entered into an amendment and restatement of our Acetic Acid Production Agreement, or our Restated Acetic Acid Production Agreement, that was retroactive to January 1, 2008. Our Restated Acetic Acid Production Agreement amends and restates the prior version of our Acetic Acid Production Agreement, or our Old Acetic Acid Production Agreement, with BP Chemicals.

     The primary differences between the Restated Acetic Acid Production Agreement and our Old Acetic Acid Production Agreement are:

• the term of our Acetic Acid Production Agreement was extended from July 31, 2016 until December 31, 2031, subject to an early termination right that may be exercised by BP Chemicals as of December 31, 2026;

• after an adjustment period during 2008, BP Chemicals will pay us estimated profit sharing payments quarterly, rather than the set quarterly advancement provided in our Old Acetic Acid Production Agreement that resulted in large true-ups for profit sharing payments at the end of each year;

• the ability of BP Chemicals to unilaterally shut down our acetic acid plant under our Old Acetic Acid Production Agreement was removed;

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• we have the right to produce and sell acetic acid for our own account if BP Chemicals’ purchases fall below specified levels for an extended period of time for reasons other than our production issues;

• some indirect expenses for both parties have been excluded from the reimbursement and profit sharing provisions, with each party entitled to retain for its own account any cost savings realized in those areas but also solely responsible for any increases in those costs; and

• after the expiration or termination of our Acetic Acid Production Agreement:

• at our request, BP Chemicals must continue to supply us with catalyst if it is still in the catalyst supply business;

• we pay BP Chemicals for undepreciated capital only if the expiration or termination is caused by us; and

• if our acetic acid plant is permanently shut down shortly thereafter, BP Chemicals is required to pay a portion of any shut down expenses and a share of our residual fixed costs for the following five years (unless the expiration or termination is caused by us).

     Concurrently with the execution of our Restated Acetic Acid Production Agreement, we and BP Chemicals also entered into a Mutual Release and Settlement Agreement, or the Settlement Agreement, which resolved the previous dispute between us and BP Chemicals over credits for blend gas. Under the Settlement Agreement, each of the parties released all known claims against each other related to our acetic acid relationship that pertained to periods prior to January 1, 2008, BP Chemicals paid us $3.3 million in August 2008 and we retained all previous amounts received from BP Chemicals related to blend gas credits. As a result, we recognized $6.5 million of revenue during the third quarter of 2008.

     We sell all of our acetic acid production to BP Chemicals under our Acetic Acid Production Agreement and we are BP Chemicals’ sole source of acetic acid production in the Americas. BP Chemicals markets all of the acetic acid that we produce and pays us, among other amounts, a portion of the profits derived from its sales of the acetic acid we produce. In addition, BP Chemicals reimburses us for 100% of our fixed and variable costs of production (other than specified indirect costs).

     Plasticizers-BASF

     Since 1986, we have sold all of our plasticizers production exclusively to BASF pursuant to our Plasticizers Production Agreement, which has been amended several times. Under our Plasticizers Production Agreement, BASF provides us with most of the required raw materials and markets the plasticizers we produce, and is obligated to make certain fixed quarterly payments to us and to reimburse us monthly for our actual production costs and capital expenditures relating to our plasticizers facility. Effective January 1, 2006, we amended our Plasticizers Production Agreement to extend the term of the agreement until 2013, subject to some limited early termination rights held by BASF beginning in 2010, increase the quarterly payments made to us by BASF and eliminate our participation in the profits and losses realized by BASF in connection with the sale of the plasticizers we produce. Additionally, on April 28, 2006, BASF notified us that it was exercising its right under the amended production agreement to terminate its future obligations with respect to the operation of our oxo-alcohols production unit effective July 31, 2006.

     On May 27, 2008, we amended and restated our Plasticizers Production Agreement, or our Restated Plasticizers Production Agreement, with an effective date of April 1, 2008. Our Restated Plasticizers Production Agreement amended the prior version of our Plasticizers Production Agreement, or our Old Plasticizers Production Agreement. Our Restated Plasticizers Production Agreement was entered into in connection with BASF’s nomination of zero pounds of PA under our Old Plasticizers Production Agreement in response to deteriorating market conditions which ultimately resulted in the closure of our PA unit.

     Our Restated Plasticizers Production Agreement relieves BASF of most of its obligations under our Old Plasticizers Production Agreement related to our PA manufacturing unit. BASF’s obligations under our Old Plasticizers Production Agreement related to our esters manufacturing unit were not affected by our Restated Plasticizers Production Agreement and are continuing in accordance with the same terms as existed under our Old Plasticizers Production Agreement. In exchange for being relieved of its obligations related to our PA manufacturing unit, BASF paid us an aggregate amount of approximately $3.2 million. However, we are obligated to refund 75% of this amount if we restarted our PA manufacturing unit before January 1, 2009, 50% of this amount if we restart our PA manufacturing unit

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during 2009 and 25% of this amount if we restart our PA manufacturing unit during 2010. The $3.2 million payment from BASF was made in exchange for the termination of BASF’s obligations under our Old Plasticizers Production Agreement with respect to the operation of our PA manufacturing unit and, consequently, will be recognized using the straight-line method over the restricted period of April 1, 2008 through December 31, 2010 under our Restated Plasticizers Production Agreement. In addition, during the first half of 2008, BASF paid us approximately $3.7 million for reimbursement of certain direct fixed and variable costs associated with the shutdown and decontamination of our PA manufacturing unit, which amounts are not subject to refund. All direct fixed and variable costs associated with the shutdown and decontamination of our PA manufacturing unit have been incurred and expensed, and the $3.7 million in cost reimbursements were recognized as revenue in the first half of 2008.

     The quarterly fixed periodic payments under our Old Plasticizers Production Agreement with respect to the operation of our PA and esters manufacturing units were not changed under our Restated Plasticizers Production Agreement. However, these quarterly fixed periodic payments are now solely related to the operation of our esters manufacturing unit. In addition, under our Restated Plasticizers Production Agreement, (i) the methods for calculating payments required to be made by BASF for achieving reductions in direct fixed and variable costs and (ii) BASF’s right to terminate our Plasticizers Production Agreement in the event that direct fixed and variable costs exceed a specified threshold (unless we elect to cap BASF’s reimbursement obligations) were both modified to exclude costs savings and direct fixed and variable costs pertaining to our PA manufacturing unit. Finally, our Restated Plasticizers Production Agreement removed all restrictions or rights BASF formerly had with respect to our use or disposition of the PA manufacturing unit, including a limited purchase right, the right to request capacity increases and consultation rights regarding future capital expenditures with respect to our PA manufacturing unit.

     Sales to major customers constituting 10% or more of total revenues are included in Note 11 of the “Notes to Consolidated Financial Statements” included in Item 8, Part II of this Form 10-K.

Raw Materials and Energy Resources

     The aggregate cost of raw materials and energy resources used in the production of our products is far greater than the total of all other costs of production combined. As a result, an adequate supply of raw materials and energy at reasonable prices and on acceptable terms is critical to the success of our business. Although we believe that we will continue to be able to secure adequate supplies of raw materials and energy, we may be unable to do so at acceptable prices or payment terms. See “Risk Factors.” Under our production agreements with BP Chemicals and BASF, BP Chemicals is required to provide our methanol requirements to produce acetic acid and BASF is required to provide us with most of the major raw materials necessary to produce plasticizers. These sources of raw materials tend to mitigate certain risks typically associated with obtaining raw materials, as well as decrease our working capital requirements.

     Acetic Acid. Acetic acid is manufactured primarily from carbon monoxide and methanol. Praxair is our sole source for carbon monoxide and supplies us with all of the carbon monoxide we require for the production of acetic acid from its partial oxidation unit located on land leased from us at our Texas City site. Currently, our methanol requirements are supplied by BP Chemicals under our Acetic Acid Production Agreement.

     Plasticizers. The primary raw materials for plasticizers are oxo-alcohols and orthoxylene, which are supplied by BASF under our Plasticizers Production Agreement.

Technology and Licensing

     In 1986, we acquired our Texas City facility from Monsanto Company, or Monsanto. In connection with that acquisition, Monsanto granted us a non-exclusive, irrevocable and perpetual right and license to use Monsanto’s technology and other technology Monsanto acquired through third-party licenses in effect at the time of the acquisition. We use these licenses in the production of acetic acid and plasticizers and also previously used these licenses in the production of styrene.

     During 1991, BP Chemicals Ltd., or BPCL, purchased Monsanto’s acetic acid technology, subject to existing licenses. Under a technology agreement with BP Chemicals and BPCL, BPCL granted us a non-exclusive, irrevocable and perpetual right and license to use acetic acid technology owned by BPCL and some of its affiliates at our Texas City facility, including any new acetic acid technology developed by BPCL at its acetic acid facilities in England or pursuant to the research and development program provided by BPCL under the terms of such agreement.

     Although we do not engage in alternative process research, we do monitor new technology developments and, when we believe it is necessary, we typically seek to obtain licenses for process improvements.

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Competition

     There are only four large producers of acetic acid in North America and historically these producers have made capacity additions in a disciplined and incremental manner, primarily using small expansion projects or exploiting debottlenecking opportunities. In addition, the leading technology required to manufacture acetic acid is controlled by two global companies, which provides these companies with influence over the pace of new capacity additions through the licensing or development of such additional capacity. The limited availability of this technology also creates a significant barrier to entry into the acetic acid industry by potential competitors. The North American plasticizers industry is a mature market, with phthalate esters like those produced by us being subject to excess production capacity and diminishing demand due to the ability of consumers to substitute different raw materials based on relative costs at the time, as well as increasing health concerns regarding these products. You will find a list of our principal competitors in the “Product Summary” table above.

Environmental, Health and Safety Matters

     Our operations involve the handling, production, transportation, treatment and disposal of materials that are classified as hazardous or toxic and that are extensively regulated by environmental and health and safety laws, regulations and permit requirements. Environmental permits required for our operations are subject to periodic renewal and may be revoked or modified for cause or when new or revised environmental requirements are implemented. Changing and increasingly strict environmental requirements can affect the manufacturing, handling, processing, distribution and use of our chemical products and, if so affected, our business and operations may be materially and adversely affected. In addition, changes in environmental requirements may cause us to incur substantial costs in upgrading or redesigning our facilities and processes, including our waste treatment, storage, disposal and other waste handling practices and equipment.

     A business risk inherent in chemical operations is the potential for personal injury and property damage claims from employees, contractors and their employees and nearby landowners and occupants. While we believe our business operations and facilities are operated in compliance with applicable environmental and health and safety requirements in all material respects, we cannot be sure that past practices or future operations will not result in material claims or regulatory action, require material environmental expenditures or result in exposure or injury claims by employees, contractors or their employees or the public. Some risk of environmental costs and liabilities is inherent in our operations and products, as it is with other companies engaged in similar businesses.

     Our operating expenditures for environmental matters, primarily waste management and compliance, were $15.9 million, $17.8 million and $20.4 million in 2008, 2007 and 2006, respectively. We spent $1.1 million, $0.5 million and $2.0 million for environmentally-related capital projects in 2008, 2007 and 2006, respectively. In 2009, we anticipate spending approximately $2.1 million for capital projects related to waste management, incident prevention and environmental compliance. We do not expect to make any capital expenditures in 2009 related to remediation of environmental conditions.

     In light of our historical expenditures and expected future results of operations and sources of liquidity, we believe we will have adequate resources to conduct our operations in compliance with applicable environmental, health and safety requirements. Nevertheless, we may be required to make significant site and operational modifications that are not currently contemplated in order to comply with changing facility permitting requirements and regulatory standards. Additionally, we have incurred, and may continue to incur, a liability for investigation and cleanup of waste or contamination at our own facilities or at facilities operated by third parties where we have disposed of waste. We continually review all estimates of potential environmental liabilities, but we may not have identified or fully assessed all potential liabilities arising out of our past or present operations or the amount necessary to investigate and remediate any conditions that may be significant to us. Based on information available at this time and reviews undertaken to identify potential exposure, we believe any amount reserved for environmental matters is adequate to cover our potential exposure for clean-up costs.

     Air emissions from our Texas City facility are subject to certain permit requirements and self-implementing emission limitations and standards under state and federal laws. Our Texas City facility is subject to the federal government’s June 1997 National Ambient Air Quality Standards, or NAAQS, which lowered the ozone and particulate matter concentration thresholds for attainment. Our Texas City facility is located in an area that the Environmental Protection Agency, or EPA, has classified as not having achieved attainment under the NAAQS for ozone, either on a 1-hour or an 8-hour basis. Ozone is typically controlled by reduction of emissions of volatile organic compounds, or

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VOCs, and nitrogen oxide, or NOx. The Texas Commission for Environmental Quality, or TCEQ, has imposed strict requirements on regulated facilities, including our Texas City facility, to ensure that the air quality control region will achieve attainment under the NAAQS for ozone. Local authorities may also impose new ozone and particulate matter standards. Compliance with these stricter standards may substantially increase our future control costs for emissions of NOx, VOCs and particulate matter, the amount and full impact of which cannot be determined at this time.

     In 2002, the TCEQ adopted a revised State Implementation Plan, or SIP, in order to achieve compliance with the “1-hour” ozone standard under the Clean Air Act by 2007. The EPA approved this “1-hour” SIP, which required an 80% reduction of NOx emissions, and extensive monitoring of emissions of highly reactive VOCs, or HRVOCs, such as ethylene, in the Houston-Galveston-Brazoria area, or the HGB area. We are in full compliance with these regulations. However, the HGB area failed to attain compliance with the 1-hour ozone standard, and Section 185 of the Clean Air Act requires implementation of a program of emissions-based fees until the standard is attained. These “Section 185 fees” will be assessed on all NOx and VOC emissions in 2008 and beyond in the HGB area which are in excess of 80% of the baseline year. The method for calculating baseline emissions, as well as other details of the program, has not yet been developed. At the present time, we do not expect to be assessed any fees for our emissions for 2008, primarily due to the reduction in emissions from our Texas City facility following the closure of our PA and styrene facilities.

     In April 2004, the HGB area was designated a “moderate” non-attainment area with respect to the “8-hour” ozone standard of the Clean Air Act. On May 23, 2007, the TCEQ formally adopted SIP revisions to bring the HGB area from “moderate” non-attainment status into attainment by June 15, 2010. This “8-hour SIP” called for relatively modest additional controls at our Texas City facility, which would require very little expense. However, in response to a request from the Governor of Texas, the EPA has now reclassified the HGB area as a “severe” non-attainment area, effective as of October 31, 2008. As a result, the new mandated compliance date for attainment of the 8-hour ozone standard is June 15, 2019. A revised 8-hour SIP to address the HGB area’s “severe” non-attainment designation will now have to be submitted to the EPA by April 10, 2010. The content of the revised 8-hour SIP is unknown at this time making it difficult to predict our final cost of compliance with these regulations. However, given the permanent shutdown of our PA and styrene facilities, we do not anticipate incurring any further cost of compliance in connection with the revised 8-hour SIP.

     To reduce the risk of offsite consequences from unanticipated events, we acquired a greenbelt buffer zone adjacent to our Texas City site in 1991. We also participate in a regional air monitoring network to monitor ambient air quality in the Texas City community.

Employees

     As of December 31, 2008, we had 185 employees, of whom approximately 37% (all of our hourly employees at our Texas City facility) were represented by the Texas City, Texas Metal Trades Council, AFL-CIO, or the Union. On May 1, 2007, we entered into a new collective bargaining agreement with the Union which is effective through May 1, 2012. Under the new collective bargaining agreement, we and the Union agreed to the scope of work of the employees, hours of work, increases in wages, benefits, vacation time, sick leave and other customary terms. The collective bargaining agreement also specifies grievance procedures should any disputes arise between us and any of our represented employees.

Insurance

     We maintain insurance coverage at levels that we believe are reasonable and typical for our industry. A portion of our insurance coverage is provided by a captive insurance company maintained by us and six other chemical companies. However, we are not fully insured against all potential hazards incident to our business. Additionally, we may incur losses beyond the limits of, or outside the coverage of, our insurance. We maintain full replacement value insurance coverage for property damage to our facilities and business interruption insurance. Nevertheless, a significant interruption in the operation of our acetic acid facility could have a material adverse effect on our business. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage.

     We do not currently carry terrorism coverage on our Texas City facility. After the terrorist attacks of September 11, 2001, many insurance carriers (including ours) created exclusions for losses from terrorism from “all risk” property insurance policies. While separate terrorism insurance coverage is available, the premiums for such coverage are very expensive, especially for chemical facilities, and these policies are subject to very high deductibles. In addition, available terrorism coverage typically excludes coverage for losses from acts of foreign governments, as well as

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nuclear, biological and chemical attacks. Consequently, we believe that it is not economically prudent to obtain terrorism insurance on the terms currently being offered in the industry.

     On September 13, 2008, Hurricane Ike struck the Texas Gulf Coast very near our Texas City facility. Our Texas City facility was shut down and secured prior to landfall and did not sustain any significant structural damage, although we did sustain some minor damage to three of our barge docks. Our Texas City facility lost all power and ancillary utilities during the storm, including our steam boilers. The resulting production outage lasted approximately 15 days, with our Texas City facility returning to normal operating levels on September 28, 2008. The losses we incurred from Hurricane Ike during 2008 totaled $2.6 million, and we expect to incur additional expenses of $0.2 million in 2009 related to damages caused by Hurricane Ike. Our estimated total loss from Hurricane Ike of $2.8 million is expected to be less than the deductibles under our insurance policies and, as such, we do not expect to recover any of these losses under our insurance policies.

Access to Filings

     Access to our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports, filed with or furnished to the SEC pursuant to Section 13(a) of the Exchange Act, as well as reports filed electronically pursuant to Section 16(a) of the Exchange Act, may be obtained through our website (http://www.sterlingchemicals.com). Our website provides a hyperlink to a third-party website, where these reports may be viewed and printed at no cost as soon as reasonably practicable after we have electronically filed such material with the SEC. The contents of our website (or the third-party websites accessible through the various hyperlinks) are not, and shall not be deemed to be, incorporated into this Form 10-K.

Item 1A. Risk Factors

     In addition to the other information contained in this report, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition or results of operations could be materially adversely affected by any of these risks.

Risks Related to Our Business

Each of our products is sold to only one customer.

     In 2008, a single customer, BP Chemicals, accounted for 100% of our acetic acid revenues while another customer, BASF, accounted for 100% of our plasticizers revenues. The termination of one or both of these long-term contracts, or a material reduction in the amount of product purchased under our Acetic Acid Production Agreement, could materially adversely affect our overall business, financial condition, results of operations or cash flows.

Our ability to realize increases in our acetic acid production capacity that could be made possible through low-cost, incremental capacity expansions is dependent on the availability of sufficient, economic quantities of carbon monoxide.

     Carbon monoxide is one of the principal raw materials required for acetic acid production. Currently, all of the carbon monoxide we use in the production of acetic acid is supplied by Praxair from a partial oxidation unit constructed and operated by Praxair on land leased from us at our Texas City site. Although our new reactor installed in 2003 is capable of producing up to 1.7 billion pounds of acetic acid annually, Praxair’s existing partial oxidation unit is capable of supplying carbon monoxide in quantities sufficient for only 1.2 billion pounds of annual acetic acid production. The supply of additional carbon monoxide can be made available from a number of options including routing surplus syngas from another Texas City source via the construction of a new supply pipeline, the utilization of existing idled pipeline capacity, or an expansion of the Praxair partial oxidation unit, although we may not be able to implement these options on a cost effective basis.

We depend upon the continued operation of a single site for all of our production.

     All of our products are produced at our Texas City facility. Significant unscheduled downtime at our Texas City facility could have a material adverse effect on our business, financial condition, results of operations or cash flows. Unanticipated downtime can occur for a variety of reasons, including equipment breakdowns, interruptions in the supply of raw materials, power failures, sabotage, natural forces or other hazards associated with the production of petrochemicals. Although we maintain business interruption insurance, recovery of losses is subject to time element deductibles of up to 45 days and policy limits of up to $400 million.

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Our operations involve risks that may increase our operating costs, which could reduce our profitability.

     Although we take precautions to enhance the safety of our operations and minimize the risk of disruptions, our operations are subject to hazards inherent in the manufacturing of chemical products. These hazards include:

• severe weather and natural disasters;

• mechanical failures, unscheduled downtimes, labor difficulties and transportation interruptions;

• environmental remediation complications;

• chemical spills and discharges or releases of toxic or hazardous substances or gases; and

• pipeline or storage tank leaks and ruptures, explosions and fires.

     Many of these hazards can cause bodily injury or loss of life, severe damage to or destruction of property or equipment or environmental damage, and may result in suspension of operations or the imposition of civil or criminal penalties and liabilities. Furthermore, we are subject to present and future claims with respect to workplace exposure of our employees or contractors on our premises or other persons located nearby, workers’ compensation and other matters.

Volatility in asset values and liability costs related to our pension plans may reduce our profitability and adversely impact current funding levels.

     We sponsor defined benefit pension plans for our employees. Effective July 1, 2007 and January 1, 2005, we froze all accruals under these defined benefit pension plans for our hourly and salaried employees, respectively. The cash contributions made to our defined benefit pension plans are required to comply with minimum funding requirements imposed by laws governing employee benefit plans. The projected benefit obligation and assets of our defined benefit pension plans as of December 31, 2008 were $121.2 million and $77.8 million, respectively. The difference between plan obligations and assets, or the funded status of the plans, is a significant factor in determining pension expense and the ongoing funding requirements to those plans. Macroeconomic factors, as well as changes in investment returns and discount rates used to calculate pension expense and related assets and liabilities can be volatile and may have an unfavorable impact on our costs and funding requirements. A decline in the market value of the assets in our defined benefit pension plans, as was experienced in 2008, will increase the funding requirements under the plans if the actual asset returns do not recover these declines in value in the near term. Additionally, the liabilities of our defined benefit pension plans are sensitive to changes in interest rates. As interest rates decrease, the liabilities of the plans increase, potentially increasing funding requirements and pension expense. Changes in demographics, including increased numbers of retirements or changes in life expectancy assumptions may also increase the funding requirements and pension expense related to our defined benefit pension plans. Although we actively seek to control increases in these costs and funding requirements, we may not be successful in doing so. Future increases in pension expense and the contributions we are required to make to our defined benefit pension plans as a result of one or more of these factors could negatively affect our financial condition, results of operations or cash flows.

Our operations are subject to operating hazards and unforeseen interruptions for which we may not be adequately insured.

     We maintain insurance coverage at levels that we believe are reasonable and typical for our industry, portions of which are provided by a captive insurance company maintained by us and six other chemical companies. However, we are not fully insured against all potential hazards incident to our business. Accordingly, our insurance coverage may be inadequate for any given risk or liability, such as property damage suffered in hurricanes or business interruption incurred from a loss of our supply of electricity or carbon monoxide. In addition, our insurance companies may be incapable of honoring their commitments if an unusually high number of claims are concurrently made against their policies. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition, results of operations or cash flows. We can make no assurances that we can renew our existing insurance coverage at commercially reasonable rates or that such coverage will be adequate to cover future claims that may arise.

     In addition, concerns about terrorist attacks, as well as other factors, have caused significant increases in the cost of our insurance coverage. We have determined that it is not economically prudent to obtain terrorism insurance and we do not carry terrorism insurance on our property at this time. In the event of a terrorist attack impacting one or more of our production units, we could lose the production and sales from one or more of these facilities, and the facilities

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themselves, and could become liable for contamination or personal injury or property damage from exposure to hazardous materials caused by a terrorist attack. Such loss of production, sales, facilities or incurrence of liabilities could materially adversely affect our business, financial condition, results of operations or cash flows.

New regulations concerning the transportation of hazardous chemicals and the security of chemical manufacturing facilities could result in higher operating costs.

     Chemical manufacturing facilities may be at greater risk of terrorist attacks than other potential targets in the United States. As a result, the chemical industry has responded to these issues by starting new initiatives relating to the security of chemicals industry facilities and the transportation of hazardous chemicals in the United States. Simultaneously, local, state and federal governments have begun a regulatory process that could lead to new regulations impacting the security of chemical plant locations and the transportation of hazardous chemicals. Our business or our customers’ businesses could be adversely affected by the cost of complying with new security regulations.

We are subject to many environmental and safety regulations that may result in significant unanticipated costs or liabilities or cause interruptions in our operations.

     Our operations involve the handling, production, transportation, treatment and disposal of materials that are classified as hazardous or toxic and that are extensively regulated by environmental and health and safety laws, regulations and permit requirements. We may incur substantial costs, including fines, damages and criminal or civil sanctions, or experience interruptions in our operations for actual or alleged violations or compliance requirements arising under environmental laws, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows. Our operations could result in violations of environmental laws, including spills or other releases of hazardous substances into the environment. In the event of a catastrophic incident, we could incur material costs. Furthermore, we may be liable for the costs of investigating and cleaning up environmental contamination on or from our properties or at off-site locations where we disposed of or arranged for the disposal or treatment of hazardous materials. Based on available information, we believe that the costs to investigate and remediate known contamination will not have a material adverse effect on our business, financial condition, results of operations or cash flows. However, if significant previously unknown contamination is discovered, or if existing laws or their enforcement change, then the resulting expenditures could have a material adverse effect on our business, financial condition, results of operations or cash flows.

     Environmental, health and safety laws, regulations and permit requirements, and the potential for further expanded laws, regulations and permit requirements may increase our costs or reduce demand for our products and thereby negatively affect our business. Environmental permits required for our operations are subject to periodic renewal and may be revoked or modified for cause or when new or revised environmental requirements are implemented. Changing and increasingly strict environmental requirements and the potential for further expanded regulation may increase our costs and can affect the manufacturing, handling, processing, distribution and use of our products. If so affected, our business and operations may be materially and adversely affected. In addition, changes in these requirements may cause us to incur substantial costs in upgrading or redesigning our facilities and processes, including our waste treatment, storage, disposal and other waste handling practices and equipment. For these reasons, we may need to make capital expenditures beyond those currently anticipated to comply with existing or future environmental or safety laws.

Approximately 37% of our employees are covered by a collective bargaining agreement that expires on May 1, 2012. Disputes with the Union representing these employees or other labor relations issues may negatively affect our business.

     As of December 31, 2008, we had approximately 185 employees, of whom approximately 37% (all of our hourly employees at our Texas City facility) were represented by the Texas City, Texas Metal Trades Council, AFL-CIO, or the Union, and are covered by a collective bargaining agreement which expires on May 1, 2012. We view our relationship with our hourly employees as generally good. Future strikes or other labor disturbances could have a material adverse effect on our business, financial condition, results of operations or cash flows.

A failure to retain or attract key employees could adversely affect our business.

     We are dependent on the services of the members of our senior management team to remain competitive in our industry. There is a risk that we will not be able to retain these key employees or attract other key employees. Our current key employees are subject to employment conditions or arrangements that permit the employees to terminate their employment without notice. The loss of any member of our senior management team could materially adversely affect our business, financial condition, results of operations or cash flows.

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     Stock options or other equity awards offered to certain employees may not provide effective incentives to remain with us due to our common stock not being listed on any national or regional securities exchange. Quotations for shares of our common stock are listed by certain members of the National Association of Securities Dealers, Inc. on the Over-the-Counter, or OTC, Electronic Bulletin Board. In recent years, the trading volume of our common stock has been very low and the transactions that have occurred were typically effected in transactions for which reliable market quotations have not been available. An active trading market may not develop or, if developed, may not continue for our equity securities and a holder of any of these securities, including stock options or other equity awards, could find it difficult obtain a positive return.

Transactions consummated pursuant to our plan of reorganization could result in the imposition of material tax liabilities.

     Prior to our emergence from bankruptcy in 2002, we eliminated our holding company structure by merging Sterling Chemicals Holdings, Inc. with and into us. We believe that this merger qualifies as a tax-free reorganization pursuant to Section 368(a)(1)(G) of the Internal Revenue Code (commonly referred to as a “G Reorganization”) for United States federal income tax purposes. However, a judicial determination that this merger did not qualify as a G Reorganization would result in additional federal income tax liability which could materially adversely affect our business, financial condition, results of operations or cash flows.

We may not successfully develop our under-utilized infrastructure at our Texas City facility.

     We may be unable to identify or attract a long-term contractual business arrangement or partnership to our Texas City facility that will provide us with an ability to realize the value of our under-utilized assets through profit sharing or other revenue generating arrangements. For development projects that may have significant capital expenditure requirements, we are considering joint ventures or other arrangements where we would contribute certain of our assets and management expertise to minimize our share of the capital costs. Even if we do identify a long-term contractual business arrangement or partnership, we may not be able to come to agreeable terms.

We may not successfully complete acquisitions that we are pursuing or any future acquisitions may present unforeseen integration obstacles or costs, increase our leverage or negatively impact our performance.

     We may not be able to identify suitable acquisition candidates or successfully complete identified acquisitions, and the expense incurred in consummating acquisitions of related businesses, or our failure to integrate such businesses successfully into our existing businesses, could affect our growth or result in our incurring unanticipated expenses and losses. Furthermore, we may not be able to realize any anticipated benefits from acquisitions. To finance an acquisition we may need to incur debt or issue equity. However, we may not be able to obtain favorable debt or equity financing to complete an acquisition, or at all. In particular, the lack of an active trading market in our common stock, as well as the dilutive terms of the dividends payable on our outstanding Series A Convertible Preferred Stock, or our Series A Preferred Stock, may make our common stock unattractive as consideration for an acquisition. The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Some of the risks associated with our acquisition strategy, which could materially adversely affect our business, financial condition, results of operations or cash flows, include:

• potential disruption of our ongoing business and distraction of management;

• unexpected loss of key employees or customers of an acquired business;

• conforming an acquired business’ standards, processes, procedures or controls with our operations;

• coordinating new product and process development;

• hiring additional management or other critical personnel;

• encountering unknown contingent liabilities which could be material; and

• increasing the scope, geographic diversity and complexity of our operations.

Our acquisition strategy may not be favorably received by customers, and we may not realize any anticipated benefits from acquisitions.

We are unable to predict the impact of the recent downturn in the credit markets and the resulting costs or constraints in obtaining financing on our business and financial results.

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     U.S. and global credit and equity markets have recently undergone significant disruption, making it difficult for many businesses to obtain financing on acceptable terms. In addition, equity markets are continuing to experience wide fluctuations in value. If these conditions continue or worsen, our cost of borrowing may increase, and it may be more difficult to obtain financing in the future. In addition, an increasing number of financial institutions have reported significant deterioration in their financial condition. If any of the financial institutions are unable to perform their obligations under our revolving credit agreements and other contracts, and we are unable to find suitable replacements on acceptable terms, our financial condition, results of operations, liquidity and cash flows could be adversely affected. We also face challenges relating to the impact of the disruption in the global financial markets on other parties with which we do business, such as customers and suppliers. The inability of these parties to obtain financing on acceptable terms could impair their ability to perform under their agreements with us and lead to various negative affects on us, including business disruption, decreased revenues, and increases in bad debt write-offs. A sustained decline in the financial stability of these parties could have an adverse impact on our business, financial condition, results of operations and cash flows.

Risks Relating to Our Indebtedness

Our leverage and debt service obligations may adversely affect our cash flow and our ability to make payments on our indebtedness.

     As of December 31, 2008, we had total long-term debt of $150.0 million (consisting of outstanding principal on our 10¹/4% Senior Secured Notes due 2015, or our Secured Notes). The terms and conditions governing our indebtedness, including our Secured Notes and our revolving credit facility:

• require us to dedicate a substantial portion of our cash flow from operations to service our existing debt service obligations, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate expenditures;

• increase our vulnerability to adverse general economic or industry conditions and limit our flexibility in planning for, or reacting to, competition or changes in our business or our industry;

• limit our ability to obtain additional financing;

• place restrictions on our ability to make certain payments or investments, sell assets, make strategic acquisitions, engage in mergers or other fundamental changes and exploit business opportunities; and

• place us at a competitive disadvantage relative to competitors with lower levels of indebtedness in relation to their overall size or less restrictive terms governing their indebtedness.

     Our ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors. We will not be able to control many of these factors, such as economic conditions and governmental regulations. We cannot be certain that our earnings will be sufficient to allow us to pay the principal and interest on our debt, including our Secured Notes, and meet our other obligations. If we do not have enough money, we may be required to refinance all or part of our existing debt, including our Secured Notes, sell assets, borrow more money or raise equity. We may not be able to refinance our debt, sell assets, borrow more money or raise equity on terms acceptable to us, if at all. Further, failing to comply with the financial and other restrictive covenants in the agreements governing our indebtedness could result in an event of default under such indebtedness, which could materially adversely affect our business, financial condition, results of operations or cash flows.

Any failure to meet our debt obligations could harm our business, financial condition, results of operations or cash flows.

     If our cash flow and capital resources are insufficient to fund our debt obligations, we may be forced to sell assets, seek additional equity or debt capital or restructure our debt. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness on acceptable terms. Our cash flow and capital resources may be insufficient for payments of interest or principal on our debt in the future, including payments on our Secured Notes, and any such alternative measures may be unsuccessful or may not permit us to meet scheduled debt service obligations, which could cause us to default on our obligations and impair our liquidity.

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Risks Relating to the Ownership of Our Common Stock

Our common stock is thinly traded. There is no active trading market for our common stock and an active trading market may not develop.

     Our common stock is not listed on any national or regional securities exchange. Quotations for shares of our common stock are listed by certain members of the National Association of Securities Dealers, Inc. on the OTC Electronic Bulletin Board. In recent years, the trading volume of our common stock has been very low and the transactions that have occurred were typically effected in transactions for which reliable market quotations have not been available. An active trading market may not develop or, if developed, may not continue for our equity securities, and a holder of any of these securities may find it difficult to dispose of, or to obtain accurate quotations as to the market value of such securities.

We have a significant stockholder which has the ability to control our actions.

     Resurgence Asset Management, L.L.C. and its and its affiliates’ managed funds and accounts, or collectively Resurgence, beneficially own in excess of 98% of our preferred stock and over 55% of our common stock, representing ownership of 85% of the total voting power of our equity. The interests of Resurgence may differ from our other stockholders and Resurgence may vote their interests in a manner that may adversely affect our other stockholders. Through their direct and indirect interests in us, Resurgence is in a position to influence the outcome of most matters requiring a stockholder vote. This concentrated ownership makes it less likely that any other holder or group of holders of common stock would be able to influence the way we are managed or the direction of our business. These factors also may delay or prevent a change in our management or voting control.

Our Series A Preferred Stock pays a quarterly stock dividend that is dilutive to the holders of our common stock.

     Shares of our Series A Preferred Stock carry a cumulative dividend rate of 4% per quarter, payable in additional shares of our Series A Preferred Stock. Our shares of Series A Preferred Stock are convertible at the option of the holder into shares of our common stock and vote as if so converted on all matters presented to the holders of our common stock for a vote. Consequently, each dividend paid in additional shares of our Series A Preferred Stock has a dilutive effect on our shares of common stock and increases the percentage of the total voting power of equity owned by Resurgence. Series A Preferred Stock dividends were 814.069 shares (which are convertible into 814,069 shares of our common stock) during 2008, which represents 9.2% of the current total voting power of our equity securities.

Item 2. Properties

     Our petrochemicals facility is located in Texas City, Texas, approximately 45 miles south of Houston, on a 290-acre site on Galveston Bay near many other chemical manufacturing complexes and refineries. We own all of the real property which comprises our Texas City facility and we own the acetic acid and plasticizers manufacturing facilities located at the facility. We also lease a portion of our Texas City facility to Praxair, who constructed a partial oxidation unit on that land, and lease a portion of our Texas City facility to S&L Cogeneration Company, a 50/50 joint venture between us and Praxair Energy Resources, Inc., who constructed a cogeneration facility on that land. Our Texas City facility offers approximately 160 acres for future expansion by us or by other companies that could benefit from our existing infrastructure and facilities, and includes a greenbelt around the northern edge of the plant facility. We own 73 railcars and, at our Texas City facility, we have facilities to load and unload our products and raw materials in ocean-going vessels, barges, trucks and railcars. Substantially all of our Texas City facility, and the tangible properties located thereon, are subject to a lien securing our obligations under our Secured Notes. We lease the space for our principal executive offices, located at 333 Clay Street, Suite 3600 in Houston, Texas. We believe our properties and equipment are sufficient to conduct our business.

Item 3. Legal Proceedings

     On July 5, 2005, Patrick B. McCarthy, an employee of Kinder-Morgan, Inc., or Kinder-Morgan, was seriously injured at Kinder-Morgan’s facilities near Cincinnati, Ohio, while attempting to offload a railcar containing one of our plasticizers products. On October 28, 2005, Mr. McCarthy and his family filed a suit in the Court of Common Pleas, Hamilton County, Ohio (Case No. A0509 144) against us and six other defendants. Since that time, two of the defendants have been dismissed from the case. The plaintiffs are seeking in excess of $42 million in alleged compensatory and punitive damages from the defendants in the aggregate. The case is currently in trial, with jury deliberations expected to begin in April. At this time, it is impossible to determine what, if any, liability we will have for this incident and we are vigorously defending the suit. We believe that all, or substantially all, of any liability

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imposed upon us as a result of this suit and our related out-of-pocket costs and expenses will be covered by our insurance policies, subject to a $1 million deductible, which was met in January 2008. As of December 31, 2008, we have received $0.6 million from our insurance carrier for the reimbursement of amounts exceeding the deductible, and we have accrued an additional $0.3 million for the reimbursement of amounts exceeding the deductible which were incurred during the fourth quarter of 2008. We do not believe that this incident will have a material adverse effect on our business, financial condition, results of operations or cash flows, although we cannot guarantee that a material adverse effect will not occur.

     On August 17, 2006, we initiated an arbitration proceeding against BP Amoco Chemical Company, or BP Chemicals, to resolve a dispute involving the interpretation of provisions of our Acetic Acid Production Agreement with BP Chemicals related to blend gas credits. On August 20, 2008, we and BP Chemicals entered into the Settlement Agreement which resolved the dispute over the blend gas credits. Under the Settlement Agreement, each of the parties released all known claims against each other related to the acetic acid relationship that pertained to periods prior to January 1, 2008, BP Chemicals paid us $3.3 million on August 26, 2008 and we retained all previous amounts we received from BP Chemicals related to blend gas credits, which resulted in us recording $6.5 million in revenue in the third quarter of 2008. Concurrently with the entry into the Settlement Agreement, we and BP Chemicals entered into our Restated Acetic Acid Production Agreement. For a further description of our Restated Acetic Acid Production Agreement, please refer to “Item 1. Business — Acetic Acid-BP Chemicals” under “Contracts.”

     On February 21, 2007, we received a summons naming us, several benefit plans and the plan administrators for those plans as defendants in a class action suit, Case No. H-07-0625 filed in the United States District Court, Southern District of Texas, Houston Division. The plaintiffs are seeking to represent a proposed class of retired employees of Sterling Fibers, Inc., one of our former subsidiaries that we sold in connection with our emergence from bankruptcy in 2002. The plaintiffs are alleging that we were not permitted to increase their premiums for retiree medical insurance based on a provision contained in the asset purchase agreement between us and Cytec Industries Inc. and certain of its affiliates governing our purchase of our former acrylic fibers business in 1997. During our bankruptcy case, we specifically rejected this asset purchase agreement and the bankruptcy court approved that rejection. The plaintiffs are claiming that we violated the terms of the benefit plans and breached fiduciary duties governed by the Employee Retirement Income Security Act and are seeking damages, declaratory relief, punitive damages and attorneys’ fees. The plaintiffs have moved for partial summary judgment and for class certification related to their claims for denial of benefits under our retiree medical plans and the defendants are opposing that motion. We are vigorously defending this action and are unable to state at this time if a loss is probable or remote and are unable to determine the possible range of loss related to this matter, if any.

     On February 4, 2008, we filed a Petition for Declaratory Judgment in the 212^th District Court of Galveston County, Texas (Case #08CV0108) against Marathon Petroleum Company LLC, or Marathon, in connection with a dispute between Marathon and us under a Purchase Agreement for FCC Off-Gas, or the Off-Gas Purchase Agreement. Under the Off-Gas Purchase Agreement, we purchase an amount of off-gas each month from Marathon within a stated range at Marathon’s option. Following the closure of certain production units at our Texas City facility, our demand for off-gas is below the low-end of the stated range. On July 31, 2007, and again on November 19, 2007, we invoked the contract’s undue economic hardship clause and requested that Marathon enter into good faith negotiations to modify the terms of the Off-Gas Purchase Agreement. After Marathon disputed the applicability of the economic hardship provision and refused to renegotiate the terms of Off-Gas Purchase Agreement, we filed a declaratory judgment action to enforce the terms of economic hardship provision, and Marathon counter-claimed against us for breach of contract. Significant discovery occurred in connection with this matter during the fourth quarter of 2008 and first quarter of 2009. On February 3, 2009, the parties engaged in an unsuccessful mediation for this case. This matter is scheduled for trial the week of April 13, 2009. At this time, it is impossible to determine what, if any, liability we will have under Marathon’s counter-claim and we are vigorously pursuing our declaratory judgment filing and defending against Marathon’s counter-claim. We do not believe that this matter will have a material adverse impact on our business, financial condition, results of operations or cash flows, although we cannot guarantee that a material adverse effect will not occur.

     On March 4, 2008, Gulf Hydrogen and Energy, L.L.C., or Gulf Hydrogen, filed suit against us in the 212th District Court of Galveston County, Texas (Cause No. 08CV0220) to enforce the provisions of a Memorandum of Understanding, or MOU, entered into between us and Gulf Hydrogen involving the possible sale of our outstanding

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equity interests to Gulf Hydrogen for approximately $390 million. This lawsuit also named certain of our officers, a director and our primary stockholder as defendants. Gulf Hydrogen did not allege a specific amount of money damages in the lawsuit but asked the court to enforce certain MOU provisions which expired on March 1, 2008, including restrictions on our ability to engage in negotiations related to transactions that would result in a change of control or to enter into mergers, stock sales or other transactions relating to a material part of our business or operations and other insignificant restrictions customary for transactions of a similar nature. Gulf Hydrogen alleged that the defendants breached the terms of the MOU and made certain misrepresentations in connection therewith. In March 2009, the parties entered into a confidential settlement agreement and the lawsuit was dismissed with prejudice by all parties. This matter did not have a material adverse affect on our business, financial condition, results of operations or cash flows.

          We are subject to various other claims and legal actions that arise in the ordinary course of our business. We do not believe that any of these claims and actions, separately or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or cash flows, although we cannot guarantee that a material adverse effect will not occur.

     As we believe the potential for an unfavorable outcome regarding one or more of the matters described above is probable, in accordance with SFAS No. 5, “Accounting for Contingencies,” we have accrued a $1.0 million litigation reserve during 2008.

Item 4. Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of security holders during the fourth quarter of 2008.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     Our common stock, par value $0.01 per share, is currently quoted on the Over-the-Counter, or OTC, Electronic Bulletin Board maintained by the National Association of Securities Dealers, Inc. under the symbol “SCHI.” The following table contains information about the high and low sales prices per share of our common stock for the last two years. Information about OTC Electronic Bulletin Board bid quotations represents prices between dealers, does not include retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions. Quotations on the OTC Electronic Bulletin Board are sporadic, and currently there is no established public trading market for our common stock.

		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter
2008	High	$	21.00	$	17.00	$	17.25	$	17.25
	Low	$	14.95	$	13.00	$	9.00	$	8.90
2007	High	$	12.75	$	26.00	$	24.75	$	23.00
	Low	$	8.55	$	10.98	$	17.25	$	17.00

     The last reported sale price per share of our common stock as reported on the OTC Electronic Bulletin Board on February 17, 2009 was $10.00. As of March 6, 2009, there were 293 holders of record of our common stock. This number does not include stockholders for whom shares are held in a nominee or “street” name.

Dividend Policy

     We have not declared or paid any cash dividends with respect to our common stock since we emerged from bankruptcy in December 2002. We do not presently intend to pay cash dividends with respect to our common stock for the foreseeable future. In addition, the ability to pay dividends on our shares of common stock under the indenture for our Secured Notes or under our revolving credit facility is limited. The payment of cash dividends, if any, will be made only from assets legally available for that purpose, and will depend on our financial condition, results of operations, current and anticipated capital requirements, general business conditions, restrictions under our existing debt instruments and other factors deemed relevant by our Board of Directors.

Equity Compensation Plan

     Under our Amended and Restated 2002 Stock Plan, or our Existing 2002 Stock Plan, officers, key employees and consultants, as designated by our Board of Directors or our Compensation Committee, may be issued stock options, stock awards, stock appreciation rights or stock units. Our Compensation Committee or, in the event that our Compensation Committee is not comprised solely of non-employee directors (as such term is defined in Rule 16b-3(b)(3) of the Exchange Act), our Board, administers our Existing 2002 Stock Plan. Our Existing 2002 Stock Plan may be amended or modified from time to time by our Board of Directors in accordance with its terms. Our Board of Directors or Compensation Committee determines the exercise price of stock options, any applicable vesting provisions and other terms and provisions of each grant in accordance with our Existing 2002 Stock Plan. Options granted under our Existing 2002 Stock Plan become fully exercisable in the event of the optionee’s termination of employment by reason of death, disability or retirement, and may become fully exercisable in the event of a “change of control.” No option may be exercised after the tenth anniversary of the date of grant or the earlier termination of the option. We have reserved 379,747 shares of our common stock for issuance under our Existing 2002 Stock Plan (subject to adjustment). There are currently options to purchase a total of 347,500 shares of our common stock outstanding under our Existing 2002 Stock Plan, at an exercise price of $31.60, and an additional 16,414 shares of common stock available for issuance under our Existing 2002 Stock Plan.

     On December 5, 2008, our Board and the Compensation Committee of our Board adopted our Second Amended and Restated 2002 Stock Plan, or our Restated 2002 Stock Plan, subject to stockholder approval, to:

• increase the number of shares of our common stock available for issuance by 1,000,000 shares;

• increase the maximum number of shares of our common stock with respect to which benefits may be

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granted or measured to any participant by 1,000,000 shares;

• include additional business criteria on which performance based-awards granted under the plan will be based;

• provide guidance as to how such business criteria shall be applied;

• extend the duration of the plan from December 12, 2012 to December 31, 2018;

• provide that no amendment of the plan may be made without the approval of our stockholders if, among other things, such amendment will increase the aggregate number of shares of our common stock that may be delivered through stock options under the plan and approval by our stockholders is necessary to comply with any applicable tax or regulatory requirements; and

• make such other non-material changes as it deemed appropriate.

The effectiveness of our Restated 2002 Stock Plan is subject to the approval of our stockholders.

     The following table provides information regarding securities authorized for issuance under our Existing 2002 Stock Plan as of December 31, 2008:

					Number of
					securities
					remaining available
					for future issuance
					under equity
			Weighted-average		compensation plans
	Number of securities to		exercise price of		(excluding
	be issued upon exercise		outstanding		securities
	of outstanding options,		options, warrants		reflected in first
Plan Category	warrants and rights		and rights		column
Equity compensation plans approved by security holders (1)		347,500	$	31.60		16,414
Equity compensation plans not approved by security holders		—		—		—
Total		347,500	$	31.60		16,414

⁽¹⁾ Our Existing 2002 Stock Plan was authorized and established under our Plan of Reorganization, which became effective on December 19, 2002. Our Plan of Reorganization provided that, without any further act or authorization, confirmation of our Plan of Reorganization and entry of the confirmation order was deemed to satisfy all applicable federal and state law requirements and all listing standards of any securities exchange for approval by the board of directors or the stockholders of our Existing 2002 Stock Plan. No additional stockholder approval of our Existing 2002 Stock Plan has been obtained.

Performance Graph

     The following performance graph compares our cumulative total stockholder return on shares of our common stock for a five-year period with the cumulative total return of the Standard & Poor’s 500 Stock Index, or the S & P 500 Index, and the Standard & Poor’s Diversified Chemicals Index, or the S & P Chemicals Index. The graph assumes the investment of $100 on December 31, 2003 in shares of our common stock, the S & P 500 Index and the S & P Chemicals Index and the reinvestment of dividends.

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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Sterling Chemicals Inc., The S&P 500 Index
And The S&P Diversified Chemicals Index

*	$100 invested on 12/31/03 in stock & index-including reinvestment of dividends. Fiscal year ending December 31.
	Copyright © 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

Item 6. Selected Financial Data

     The following table sets forth selected financial data with respect to our consolidated financial condition and results of operations and should be read in conjunction with our historical consolidated financial statements and related notes, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Financial Statements and Supplementary Data included in Item 8 of this Form 10-K.

	Year ended			Year ended			Year ended			Year ended			Year ended
	December			December			December			December			December
	31, 2008			31, 2007			31, 2006			31, 2005			31, 2004
	(In Thousands, Except Per Share Data)
Operating Data:
Revenues	$	161,452		$	129,813		$	141,259		$	128,098		$	125,624
Gross profit		30,298			13,382			13,846			7,844			10,886
Loss from continuing operations		(102	)		(7,713	)		(2,194	)		(5,856	)		(42,212	)
Loss from discontinued operations(1) (2)		(8,262	)		(11,215	)		(103,465	)		(23,712	)		(20,432	)
Per Share Data:
Net loss from continuing operations attributable to common stockholders		(6.31	)		(8.93	)		(4.94	)		(8.08	)		(19.85	)

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	Year ended			Year ended			Year ended			Year ended			Year ended
	December			December			December			December			December
	31, 2008			31, 2007			31, 2006			31, 2005			31, 2004
	(In Thousands, Except Per Share Data)
Net loss attributable to common stockholders	$	(9.23	)	$	(12.90	)	$	(41.52	)	$	(16.46	)	$	(27.08	)
Cash dividends		—			—			—			—			—
Ratio of earnings to fixed charges(3)		—			—			—			—			—
Balance Sheet Data:
Working capital(4)	$	144,930		$	166,264		$	99,110		$	208,179		$	248,166
Total assets		261,946			306,444			245,823			386,594			473,553
Long-term debt		150,000			150,000			100,579			100,579			100,579
Redeemable preferred stock(5)		117,607			99,866			82,316			70,542			53,559
Stockholders’ equity (deficiency in assets)(6)		(141,525	)		(74,087	)		(48,575	)		58,045			107,813

(1)	During 2007 we announced that we were exiting the styrene business. During 2006, we recorded a $127.7 million impairment charge to our styrene assets and a related deferred tax benefit of $45 million. This tax benefit was offset by deferred tax expense of $28 million in connection with the recording of a valuation allowance against our deferred tax assets. During 2004, we recorded a $48.5 million goodwill impairment charge. Also during 2004, we recorded a pension curtailment gain of $13 million.
(2)	During 2005, we announced that we were exiting the acrylonitrile business and related derivatives operations. During 2004, we recorded a $22 million pre-tax impairment charge related to our acrylonitrile long-lived assets.
(3)	Additional pre-tax earnings needed to achieve a 1:1 ratio for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 were $0.2 million, $11.8 million, $2.6 million, $8.8 million and $42.3 million, respectively.
(4)	Working capital as of December 31, 2008, 2007, 2006, 2005 and 2004 includes net assets (liabilities) of discontinued operations of $(12.3) million, $60.2 million, $88.3 million, $181.6 million and $290.1 million, respectively.
(5)	Our Series A Convertible Preferred Stock is not currently redeemable or probable of redemption. If our Series A Convertible Preferred Stock had been redeemed as of December 31, 2008, the redemption amount would have been approximately $61.7 million. The liquidation value of the outstanding shares of our Series A Convertible Preferred Stock as of December 31, 2008 was $77.3 million.
(6)	The balance as of December 31, 2006 includes a change in stockholders’ equity (deficiency in assets) of $6.8 million (net of tax) due to the adoption of Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Business

     We are a North American producer of selected petrochemicals used to manufacture a wide array of consumer goods and industrial products. We currently operate in two segments: acetic acid and plasticizers. Each segment has a single customer.

     Our acetic acid is used primarily to manufacture vinyl acetate monomer, which is used in a variety of products, including adhesives and surface coatings. All of our acetic acid is produced under our Acetic Acid Production Agreement with BP Chemicals that extends to 2031, subject to an early termination right that may be exercised by BP Chemicals as of December 31, 2026. We sell all of our acetic acid production to BP Chemicals under our Acetic Acid Production Agreement and we are BP Chemicals’ sole source of acetic acid production in the Americas. BP Chemicals markets all of the acetic acid that we produce and pays us, among other amounts, a portion of the profits derived from its sales of the acetic acid we produce. In addition, BP Chemicals reimburses us for 100% of our fixed and variable costs of production (other than specified indirect costs). Prior to August 2006, BP Chemicals also paid us a set monthly amount. Pursuant to the terms of our Acetic Acid Production Agreement, beginning in August 2006, the portion of the profits we receive from the sales of acetic acid produced at our plant increased and BP Chemicals was no longer required to pay us this set monthly amount. However, this change in payment structure did not affect BP Chemicals’ obligation to reimburse us for all of our fixed and variable costs of production. We also jointly invest with BP Chemicals in capital expenditures related to our acetic acid facility in the same percentage as the profits from the business we receive from BP Chemicals. Initially, we pay for 100% of the capital expenditures related to our acetic acid business and we then invoice BP Chemicals for its portion. The net amount that is not reimbursed by BP Chemicals represents our basis in the property, plant and equipment related to our acetic acid business, which is capitalized and depreciated over its useful life.

     We own and operate one of the lowest cost acetic acid facilities in the world. Our acetic acid facility utilizes BP Chemicals’ proprietary “Cativa” carbonylation technology, which we believe offers several advantages over competing production methods, including lower energy requirements and lower fixed and variable costs. Acetic acid production has two major raw material requirements — methanol and carbon monoxide. BP Chemicals, a producer of methanol, supplies 100% of our methanol requirements related to our production of acetic acid. All of our requirements for carbon monoxide are supplied by Praxair from a partial oxidation unit constructed by Praxair on land leased from us at our Texas City facility.

     All of our plasticizers, which are used to make flexible plastics, such as shower curtains, floor coverings, automotive parts and construction materials, are sold to BASF pursuant to our Plasticizers Production Agreement. Our Plasticizers Production Agreement extends until 2013, subject to some limited early termination rights held by BASF that begin in 2010. Under our Plasticizers Production Agreement, BASF provides us with most of the required raw materials, markets all of the plasticizers that we produce, makes certain fixed quarterly payments to us while reimbursing us monthly for our actual production costs and capital expenditures relating to our plasticizers facility. Our Plasticizers Production Agreement was amended in May 2008 after BASF nominated zero pounds of PA under the prior version of the agreement due to deteriorating market conditions which ultimately resulted in the closure of our PA unit.

     Our Texas City facility is strategically located on Galveston Bay and benefits from a deep-water dock capable of handling ships with up to a 40-foot draft, as well as four barge docks and direct access to Union Pacific and Burlington Northern Santa Fe railways with in-motion rail scales on site. Our Texas City facility also has truck loading racks, weigh scales, stainless and carbon steel storage tanks, three waste deepwells, 160 acres of available land zoned for heavy industrial use and additional land zoned for light industrial use and a supportive political environment for growth. In addition, we are in the heart of one of the largest petrochemical complexes on the Gulf Coast and, as a result, have on-site access to a number of raw material pipelines, as well as close proximity to a number of large refinery complexes.

     Our rated annual production capacity is among the highest in North America for acetic acid. As of December 31, 2008, our annual production capacity was 1.1 billion pounds, which represents 17% of total North American capacity, and in terms of production capacity, makes our acetic acid facility the third largest in North America. During a maintenance turnaround scheduled for mid-2009, we and BP Chemicals intend to implement an incremental expansion of our acetic acid plant to 1.2 billion pounds per year.

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     Our petrochemicals products are generally sold to customers for use in the manufacture of other chemicals and products, which in turn are used in the production of a wide array of consumer goods and industrial products throughout the world.

     Acetic Acid. The North American acetic acid industry has enjoyed a long period of sustained domestic demand growth as well as substantial export demand. This has led to North American industry utilization rates above 85% over the last six years. Although recent slowdowns in the housing and automotive sectors have caused reduced demand for vinyl acetate monomer, and consequently acetic acid, in North America in the short-term, Tecnon currently projects acetic acid utilization rates to increase to over 98% by 2013. The North American acetic acid industry is inherently less cyclical than many other petrochemical products due to a number of important features. There are only four large producers of acetic acid in North America and historically these producers have made capacity additions in a disciplined and incremental manner, primarily using small expansion projects or exploiting debottlenecking opportunities. In addition, the leading technology required to manufacture acetic acid is controlled by two global companies, which provides these companies with influence over the pace of new capacity additions through the licensing or development of such additional capacity. We believe the limited availability of this technology also creates a significant barrier to entry into the acetic acid industry by potential competitors.

     Global production capacity of acetic acid as of December 31, 2008 was approximately 24 billion pounds per year, with current North American production capacity at approximately seven billion pounds per year. The North American acetic acid market is mature and well developed and is dominated by four major producers that account for approximately 94% of the acetic acid production capacity in North America. Demand for acetic acid is linked to the demand for vinyl acetate monomer, a key intermediate in the production of a wide array of polymers. Vinyl acetate monomer is the largest derivative of acetic acid, representing over 40% of global demand. Although the recent slowdowns in the housing and automotive markets are causing reduced demand for vinyl acetate monomer globally in the short-term, annual global production of vinyl acetate monomer is expected to increase from 10.4 billion pounds in 2005 to 12.2 billion pounds in 2010,. The North American acetic acid industry tends to sell most of its products through long-term sales agreements having “cost plus” pricing mechanisms, eliminating much of the volatility seen in other petrochemicals products and resulting in more stable and predictable earnings and profit margins.

     Several acetic acid capacity additions have occurred since 1998, including an expansion of our acetic acid unit from 800 million pounds of rated annual production capacity to 1.1 billion pounds during 2005. These capacity additions were somewhat offset by reductions of approximately 1.6 billion pounds in annual global capacity from the shutdown of various outdated acetic acid plants from 1999 through 2001. In 2006, BP Chemicals closed two of its outdated acetic acid production units in Hull, England that had a combined annual capacity of approximately 500 million pounds (which had been sold primarily in Europe and South America).

     In 1986, we entered into the initial version of our Acetic Acid Production Agreement with BP Chemicals, which has since been amended several times, most recently on August 20, 2008, when we entered into an amendment and restatement of our Acetic Acid Production, or our Restated Acetic Acid Production Agreement, that was retroactive to January 1, 2008. Our Restated Acetic Acid Production Agreement amends and restates the prior version of our Acetic Acid Production Agreement, or our Old Acetic Acid Production Agreement, with BP Chemicals.

     The primary differences between our Restated Acetic Acid Production Agreement and our Old Acetic Acid Production Agreement are:

• the term of our Acetic Acid Production Agreement was extended from July 31, 2016 until December 31, 2031, subject to an early termination right that may be exercised by BP Chemicals as of December 31, 2026;

• after an adjustment period during 2008, BP Chemicals pays us estimated profit sharing payments quarterly, rather than the set quarterly advancement provided in our Old Acetic Acid Production Agreement that resulted in large true-ups for profit sharing payments at the end of each year;

• the ability of BP Chemicals to unilaterally shut down our acetic acid plant under our Old Acetic Acid Production Agreement was removed;

• we have the right to produce and sell acetic acid for our own account if BP Chemicals’ purchases fall below specified levels for an extended period of time for reasons other than our production issues;

• some indirect expenses for both parties were excluded from the reimbursement and profit sharing

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	provisions,with each party entitled to retain for its own account any costs savings realized in those areas but also solely responsible for any increases in those costs; and
•	after the expiration or termination of our Acetic Acid Production Agreement:

— at our request, BP Chemicals must continue to supply us with catalyst if it is still in the catalyst supply business;

— we pay BP Chemicals for undepreciated capital only if the expiration or termination is caused by us; and

— if our acetic acid plant is permanently shut down shortly thereafter, BP Chemicals is required to pay a portion of any shut down expenses and a share of our residual fixed costs for the following five years (unless the expiration or termination is caused by us).

     Concurrently with the execution of our Restated Acetic Acid Production Agreement, we and BP Chemicals also entered into a Settlement Agreement which resolved the previous dispute between us and BP Chemicals over credits for blend gas. Under the Settlement Agreement, each of the parties released all known claims against each other related to our acetic acid relationship that pertained to periods prior to January 1, 2008, BP Chemicals paid us $3.3 million in August 2008 and we retained all previous amounts received from BP Chemicals related to blend gas credits. As a result, we recognized $6.5 million of revenue during the third quarter of 2008.

     Plasticizers. Historically, we produced ethylene-based linear plasticizers, which typically receive a premium over competing branched propylene-based products for customers that require enhanced performance properties. Although we are not exposed to fluctuations in costs or market conditions due to the contract terms in our Plasticizers Production Agreement with BASF, the markets for competing plasticizers can be affected by the cost of the underlying raw materials, especially when the cost of one olefin rises faster than the other, or by the introduction of new products. The raw materials for linear plasticizers are a product known as linear alpha-olefins. Over the last few years, the price of linear alpha-olefins has increased sharply as supply has declined, which has caused many consumers to switch to lower cost branched products, despite the loss of some performance properties. Ultimately, we expect branched plasticizers to replace linear plasticizers for most applications over the long-term. As a result, we modified our plasticizers facilities during the third quarter of 2006 to produce lower cost branched plasticizers products.

     Since 1986, we have sold all of our plasticizers production exclusively to BASF pursuant to our Plasticizers Production Agreement, which has been amended several times. Under our Plasticizers Production Agreement, BASF provides us with most of the required raw materials and markets the plasticizers we produce, and is obligated to make certain fixed quarterly payments to us and to reimburse us monthly for our actual production costs and capital expenditures relating to our plasticizers facility. Effective January 1, 2006, we amended our Plasticizers Production Agreement to extend the term of the agreement until 2013, subject to some limited early termination rights held by BASF beginning in 2010, increase the quarterly payments made to us by BASF and eliminate our participation in the profits and losses realized by BASF in connection with the sale of the plasticizers we produce. Additionally, on April 28, 2006, BASF notified us that it was exercising its right under the amended production agreement to terminate its future obligations with respect to the operation of our oxo-alcohols production unit effective July 31, 2006.

     On May 27, 2008, we amended and restated our Plasticizers Production Agreement, or our Restated Plasticizers Production Agreement, with an effective date of April 1, 2008. Our Restated Plasticizers Production Agreement amended the prior version of our Plasticizers Production Agreement, or our Old Plasticizers Production Agreement. Our Restated Plasticizers Production Agreement was entered into in connection with BASF’s nomination of zero pounds of PA under our Old Plasticizers Production Agreement in response to deteriorating market conditions which ultimately resulted in the closure of our PA unit.

     Our Restated Plasticizers Production Agreement relieves BASF of most of its obligations under our Old Plasticizers Production Agreement related to our PA manufacturing unit. BASF’s obligations under our Old Plasticizers Production Agreement related to our esters manufacturing unit were not affected by our Restated Plasticizers Production Agreement and are continuing in accordance with the same terms as existed under our Old Plasticizers Production Agreement. In exchange for being relieved of its obligations related to our PA manufacturing unit, BASF paid us an aggregate amount of approximately $3.2 million. However, we are obligated to refund 75% of this amount if we restarted our PA manufacturing unit before January 1, 2009, 50% of this amount if we restart our PA manufacturing unit during 2009 and 25% of this amount if we restart our PA manufacturing unit during 2010. The $3.2 million payment from BASF was made in exchange for the termination of BASF’s obligations under our Old Plasticizers Production

25

Agreement with respect to the operation of our PA manufacturing unit and, consequently, will be recognized using the straight-line method over the restricted period of April 1, 2008 through December 31, 2010 under our Restated Plasticizers Production Agreement. In addition, during the first half of 2008, BASF paid us approximately $3.7 million for reimbursement of certain direct fixed and variable costs associated with the shutdown and decontamination of our PA manufacturing unit, which amounts are not subject to refund. All direct fixed and variable costs associated with the shutdown and decontamination of our PA manufacturing unit have been incurred and expensed, and the $3.7 million in cost reimbursements were recognized as revenue in the first half of 2008.

     The quarterly fixed periodic payments under our Old Plasticizers Production Agreement with respect to the operation of our PA and esters manufacturing units were not changed under our Restated Plasticizers Production Agreement. However, these quarterly fixed periodic payments are now solely related to the operation of our esters manufacturing unit. In addition, under our Restated Plasticizers Production Agreement, (i) the methods for calculating payments required to be made by BASF for achieving reductions in direct fixed and variable costs and (ii) BASF’s right to terminate our Plasticizers Production Agreement in the event that direct fixed and variable costs exceed a specified threshold (unless we elect to cap BASF’s reimbursement obligations) were both modified to exclude costs savings and direct fixed and variable costs pertaining to our PA manufacturing unit. Finally, our Restated Plasticizers Production Agreement removed all restrictions or rights BASF formerly had with respect to our use or disposition of the PA manufacturing unit, including a limited purchase right, the right to request capacity increases and consultation rights regarding future capital expenditures with respect to our PA manufacturing unit.

     We lease a portion of our Texas City site to S&L Cogeneration Company, a 50/50 joint venture between us and Praxair Energy Resources, Inc., or Praxair Energy, which constructed a cogeneration facility on that land. The cogeneration facility was initially shut down in May 2007 due to the uncertain future of our styrene unit and has remained idle since that time in order to conduct an assessment of whether the future needs for the cogeneration facility justified incurring the major maintenance costs required to restart the facility. As our strategic initiatives under consideration do not require utilization of the steam produced by the cogeneration facility, we and Praxair Energy amended the Joint Venture Agreement governing S&L Cogeneration Company, or the Joint Venture Agreement, to extend its term until June 30, 2009 and to address several matters related to the sale of the cogeneration facility, the distribution of S&L Cogeneration Company’s assets and the termination and winding-up of the joint venture. Under the amended Joint Venture Agreement, we received distributions from S&L Cogeneration Company of $5.0 million on August 15, 2008 and one-half of the Mass Emissions Cap and Trade NOx Allowances attributed to the operation of the cogeneration facility. In October 2008, the Board of Managers of S&L Cogeneration Company accepted a bid for the cogeneration facility assets and we received a $1.0 million distribution in December 2008 from S&L Cogeneration Company for the sale of those assets. As of December 31, 2008, our investment in S&L Cogeneration Company is approximately $0.6 million and we expect to receive approximately $0.6 million from S&L Cogeneration Company upon termination of the joint venture by June 30, 2009. Therefore we do not believe our investment in S&L Cogeneration Company was impaired as of December 31, 2008.

     On September 13, 2008, Hurricane Ike struck the Texas Gulf Coast very near our Texas City facility. Our Texas City facility was shut down and secured prior to landfall and did not sustain any significant structural damage, although we did sustain some minor damage to three of our barge docks. Our Texas City facility lost all power and ancillary utilities during the storm, including our steam boilers. The resulting production outage lasted approximately 15 days, with our Texas City facility returning to normal operating levels on September 28, 2008. The losses we incurred from Hurricane Ike during 2008 totaled $2.6 million, and we expect to incur additional expenses of $0.2 million in 2009 related to damages caused by Hurricane Ike. Our estimated total loss from Hurricane Ike of $2.8 million is expected to be less than the deductibles under our insurance policies and, as such, we do not expect to recover any of these losses under our insurance policies.

Discontinued Operations

     Prior to December 3, 2007, we manufactured styrene monomer. Styrene is a commodity chemical used to produce intermediate products such as polystyrene, expandable polystyrene resins and ABS plastics, which are used in a wide variety of products such as household goods, foam cups and containers, disposable food service items, toys, packaging and other consumer and industrial products. Over the last five years, we had generated approximately $31 million of cumulative negative cash flows from our styrene operations, and we anticipated negative cash flows from our styrene operations for the foreseeable future. Due to the current and future expected market conditions for styrene, we explored several possible strategic transactions involving our styrene business and, on September 17, 2007, we entered into a long-term exclusive styrene supply agreement and a related railcar purchase and sale agreement with NOVA. After the supply agreement became effective, INEOS NOVA nominated zero pounds of styrene under the supply agreement for the balance of 2007 and, and in response, we exercised our right to terminate the supply agreement and permanently

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shut down our styrene facility. Under the supply agreement, we are responsible for the closure costs of our styrene facility and are also restricted from reentering the styrene business until November 2012. The restricted period was initially eight years. However, on April 1, 2008, INEOS NOVA unilaterally reduced the restricted period to five years.

     We sold substantially all remaining styrene inventory during the first quarter of 2008. The decommissioning process was completed by the end of 2008 and the associated costs incurred for 2007 and 2008 were $0.7 million and $18.9 million, respectively. In 2009, we expect to disconnect our styrene facility at an estimated cost of $0.7 million. There are no requirements which will force us to dismantle our styrene facility other than our own strategic plans. Therefore we believe the styrene facility will not be dismantled until 2010 or later. We believe the cost of dismantling will be minimal due to the scrap value we can receive from the equipment being dismantled. In July 2008, we announced a reduction in work force in order to reduce our staffing to a level appropriate for our existing operations and site development projects. As a result, we reduced our salaried work force by 19 people and our hourly work force by 15 people. In accordance with Statement of Financial Accounting Standards, or SFAS, No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” we recognized and paid $1.4 million of severance costs in 2008. Additionally, as a result of the work force reduction, we recorded a curtailment loss of $1.2 million for our benefit plans in accordance with SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” in 2008.

     In accordance with SFAS No. 144, “Accounting for the Impairment and Disposal of Long Lived Assets,” we have reported the operating results of these businesses as discontinued operations in our consolidated financial statements for the years ended December 31, 2008, 2007 and 2006.

Results of Operations

     The following table sets forth revenues, gross profit and loss from continuing operations for 2008, 2007, and 2006:

	Year ended December 31,
	2008			2007			2006
	(Dollars in Thousands)
Revenues	$	161,452		$	129,813		$	141,259
Gross profit		30,298			13,382			13,846
Loss from continuing operations :		(102	)		(7,713	)		(2,194	)

Comparison of 2008 to 2007

Revenues and loss from continuing operations

     Our revenues were $161.5 million in 2008, an increase of 24% over the $129.8 million in revenues we recorded in 2007. We had a net loss from continuing operations of $0.1 million in 2008, compared to a net loss from continuing operations of $7.7 million in 2007.

     Revenues from our acetic acid operations were $129.5 million in 2008, a 28% increase from the $100.8 million in revenues we recorded from these operations in 2007. This increase in acetic acid revenues for 2008 was primarily due to higher energy costs and increased fixed cost allocations to our acetic acid operating segment of $22.3 million which were reimbursed by BP Chemicals. The increased fixed cost allocations resulted from our exit from the styrene business. Revenues from our acetic acid operations also increased due to the settlement of the blend gas dispute with BP Chemicals which resulted in revenue of $6.5 million being recognized in the third quarter of 2008. Gross profit from our acetic acid operations increased $4.9 million during 2008 compared to the 2007. This increase in gross profit from our acetic acid operations was primarily due to the blend gas settlement discussed above.

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     Revenues from our plasticizers operations were $31.0 million in 2008, a 10% increase from the $28.1 million in revenues we recorded from these operations in 2007. This increase in revenues was primarily due to increased cost allocations to our plasticizers operations of $2.0 million resulting from our exit from the styrene business, which were reimbursed by BASF, and $0.9 million due to amortization of the $3.2 million early termination payment received from BASF in the second quarter of 2008 in connection with BASF’s termination of its obligations related to our PA manufacturing unit under our Old Plasticizers Production Agreement. Gross profit from our plasticizers operations increased $3.3 million in 2008. This increase in gross profit resulted primarily from reimbursement by BASF for $1.4 million of cost savings achieved during prior periods that were approved by BASF in the first quarter of 2008 and $0.9 million of amortization discussed above.

     Gross profit was also impacted by the $1.0 million litigation reserve that we recorded during 2008 in cost of goods sold.

Selling, general & administrative expenses

     Our selling, general and administrative expenses were $12.3 million in 2008, compared to $8.7 million in 2007. This increase in expense during 2008 was primarily due to increased legal fees of $2.3 million resulting from the lawsuits described in “Item 3. Legal Proceedings”, increased audit fees of $0.3 million resulting from our Form S-4 filing and increased consulting fees of $0.6 million due to strategic initiatives being considered in 2008. A portion of the legal fees incurred in 2008 were or are expected to be reimbursed by insurance proceeds described below in “Other (income) expense.”

Impairment of long-lived assets

     As a result of the entry into our Restated Plasticizers Production Agreement and the shutdown of our PA unit, our management determined that a triggering event had occurred, as defined in SFAS No. 144, and therefore, during the second quarter of 2008, we performed an asset impairment analysis on our PA manufacturing unit. We analyzed the undiscounted cash flow stream from our PA business over the remaining life of the PA manufacturing unit and compared it to the $6.6 million net book carrying value of our PA manufacturing unit. This analysis showed that the undiscounted projected cash flow stream from our PA business was less than the net book carrying value of our PA manufacturing unit. As a result, we performed a discounted cash flow analysis and subsequently concluded that our PA manufacturing unit was impaired and should be written down to zero. This write-down caused us to record an impairment of $6.6 million in the second quarter of 2008.

     In the third quarter of 2008, our management determined that a triggering event, as defined in SFAS No. 144, had occurred as a result of the decision to permanently discontinue use and to sell the turbo generator units located at our Texas City facility. This decision was based on an economic analysis of the future use of the turbo generator units. During the third quarter of 2008, we performed an asset impairment analysis on our turbo generator units and determined the best estimate of fair market value would be anticipated sales proceeds. We estimated the anticipated sales proceeds to be approximately $1.0 million. As a result, we concluded that our turbo generator units were impaired and should be written down to $1.0 million. This write-down resulted in an impairment charge of $0.8 million during the third quarter of 2008.

Other (income) expense

     Other income was $2.0 million in 2008 versus $0.8 million of expense in 2007. In 2008, we recorded $2.1 million of insurance proceeds in other income for reimbursement of legal fees incurred in excess of our deductibles under our various insurance policies. In 2007, we recorded other expense of $0.8 million for the write-down of our cost-method investment in an e-commerce commodity trading business to its then fair value of less than $0.2 million after receiving notice of a distribution pursuant to the pending sale of the business.

Interest income

     Interest income was $4.4 million in 2008 and $1.6 million in 2007. The increase during 2008 was due to higher average daily cash balances in 2008 compared to 2007, slightly offset by lower average interest rates in 2008 compared to 2007.

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Provision (benefit) for income taxes

     During 2008, our effective tax rate was 41.2% due to a refund of less than $0.1 million in alternative minimum tax. In 2007, our overall effective tax rate of 23% resulted from a decrease in our valuation allowance for other comprehensive income adjustments related to amendments to our benefit plans and a full valuation allowance recorded against our 2007 net loss. We regularly assess our deferred tax assets for recoverability based on both historical and anticipated earnings levels, and a valuation allowance is recorded when it is more likely than not that these amounts will not be recovered. As a result of our analysis at December 31, 2008, we concluded that a valuation allowance was needed against our deferred tax assets. As of December 31, 2008, our valuation allowance was $52.5 million, an increase of $16.3 million from December 31, 2007. This increase included a valuation allowance adjustment of $14.6 million for losses in other comprehensive income for adjustments to our benefits plans and resulted in an overall net deferred tax asset/liability balance of zero as of December 31, 2008.

Loss from discontinued operations, net of tax

     During 2008, net loss from discontinued operations was $8.3 million compared to a net loss of $11.2 million for 2007. Net loss in 2008 was primarily due to $18.9 million of costs incurred in connection with decommissioning our styrene facility, partially offset by $12.4 million of revenue recognized from the NOVA non-compete agreement. Net loss in 2007 was attributable to the closure of our styrene facility in late 2007.

Comparison of 2007 to 2006

Revenues and loss from continuing operations

     Our revenues were $129.8 million in 2007, a decrease of 8% from the $141.3 million in revenues we recorded in 2006. This decrease in revenues resulted primarily from a decrease in plasticizers revenues in 2007 due to the shutdown of our oxo-alcohols facility in 2006, partially offset by a slight increase in acetic acid revenues. We recorded a net loss from continuing operations of $7.7 million in 2007, compared to a net loss of $2.2 million from continuing operations in 2006. This increase in our net loss was primarily due to increased interest and debt related expenses associated with our issuance of $150 million of Secured Notes in 2007.

     Revenues from our acetic acid operations were $100.8 million in 2007, a 4% increase from the $96.7 million in revenues we recorded from these operations in 2006. This increase in acetic acid revenues in 2007 resulted from increased profit sharing revenue and an increase in cost reimbursements received from BP Chemicals. Gross profit from our acetic acid operations decreased $2.5 million during 2007 compared to 2006. This decrease was due to the impact of the blend gas dispute with BP Chemicals discussed in “Item 1. Business — Legal Proceedings” in 2007 and the receipt of a one-time $2.4 million utility cost reimbursement in 2006, partially offset by the $3.4 million favorable impact (year-over-year) of the previously discussed conversion from set payments to higher profit sharing under our Acetic Acid Production Agreement that occurred in August 2006.

     Revenues from our plasticizers operations were $28.1 million in 2007, a 37% decrease from the $44.5 million in revenues we recorded from these operations in 2006. This decrease in revenues in 2007 was primarily due to the permanent shut down of our oxo-alcohols unit in the second half of 2006. Gross profit for our plasticizers operations increased $1.7 million in 2007 primarily due to an increase in cost reimbursements received from BASF, partially offset by decreased revenues discussed above.

Selling, general & administrative expenses

     Our selling, general and administrative expenses were $8.7 million in 2007 and $7.1 million in 2006. This increase in 2007 was largely due to the incurrence of approximately $1 million for professional fees in connection with our transaction with INEOS NOVA.

Other (income) expense

     Other expense was $0.8 million in 2007, compared to other income of $0.7 million for 2006. The decrease in 2007 was due to other expense of $0.8 million for the write-down of our cost-method investment in an e-commerce commodity trading business to its fair value of less than $0.2 million, after receiving notice of a distribution pursuant to the pending sale of the business. The other income of $0.7 million recorded in 2006 represented the proceeds from an insurance claim related to damages caused by a barge incident in 2005.

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Interest and debt related expenses

     Our interest expense was $17.3 million in 2007 and $10.7 million in 2006. The increase in 2007 was associated with higher debt levels after our debt refinancing that occurred in the first quarter of 2007.

Interest income

     Our interest income was $1.6 million in 2007 and $0.6 million in 2006. The increase in 2007 was associated with higher cash balances for the latter part of 2007.

Provision (benefit) for income taxes

     During 2007, our effective tax rate was 23% compared to 12% in 2006. Income tax benefit of $5.5 million in 2007 represents a $5.9 million tax benefit offset by $0.4 million of federal alternative minimum tax and less than $0.1 million of state income taxes. Our 2007 effective rate of 23% resulted in a decrease in the valuation allowance for other comprehensive income adjustments related to amendments to our benefit plans and a full valuation allowance recorded against our 2007 net loss. In 2006, our effective rate was impacted by a $28 million increase in our valuation allowance as a result of our analysis of the recoverability of our deferred tax assets at December 31, 2006. We regularly assess our deferred tax assets for recoverability based on both historical and anticipated earnings levels, and a valuation allowance is recorded when it is more likely than not that these amounts will not be recovered. As a result of our analysis at December 31, 2007, we concluded that a valuation allowance was needed against our deferred tax assets. As of December 31, 2007, our valuation allowance was $36.2 million, an increase of $6.6 million from December 31, 2006, which resulted in an overall net deferred tax asset/liability balance of zero as of December 31, 2007.

Loss from discontinued operations, net of tax

     We recorded a net loss from discontinued operations of $11.2 million in 2007, compared to a net loss of $103.5 million from discontinued operations in 2006. The net loss in 2006 was largely attributable to the $127.7 million impairment charge we recorded against our styrene assets in the fourth quarter of 2006, partially offset by a one-time reimbursement of $15 million in 2006 from an insurance claim related to the 2005 fire in our styrene unit.

Liquidity and Capital Resources

     On March 29, 2007, we completed a private offering of $150 million aggregate principal amount of unregistered 10¹/₄% Senior Secured Notes due 2015, or our Secured Notes, pursuant to a Purchase Agreement among us, Sterling Chemicals Energy, Inc., or Sterling Energy, one of our former wholly-owned subsidiaries, and Jefferies & Company, Inc. and CIBC World Markets Corp., as initial purchasers. In connection with that offering, we entered into an indenture, dated March 29, 2007, among us, Sterling Energy, as guarantor, and U. S. Bank National Association, as trustee and collateral agent. On May 6, 2008, Sterling Energy was merged with and into us. Upon consummation of the merger, Sterling Energy no longer had independent existence and, consequently, our Secured Notes are no longer guaranteed by Sterling Energy. Pursuant to a registration rights agreement among us, Sterling Energy and the initial purchasers, we agreed to use commercially reasonable efforts to file an exchange offer registration statement to exchange our unregistered Secured Notes for a new issue of substantially identical debt securities registered under the Securities Act, to cause the registration statement to become effective by December 24, 2007 and to complete the exchange offer within 50 days of the effective date of the registration statement. On August 30, 2007, we made an initial filing of this required exchange offer registration statement. However, the registration statement was not declared effective by December 24, 2007 and, as a result, the interest rate on our Secured Notes increased by 0.25% per annum on each of December 25, 2007, March 24, 2008 and June 22, 2008. The registration statement was declared effective on August 13, 2008 and the exchange offer was closed on September 19, 2008. As a result, the interest rate on our Secured Notes has reverted back to the face amount of 10¹/₄% per annum. The additional interest incurred from December 25, 2007 through the closing of the exchange offer was approximately $0.5 million and was paid on April 1 and October 1, 2008.

     Our indenture contains affirmative and negative covenants and customary events of default, including payment defaults, breaches of covenants and certain events of bankruptcy, insolvency and reorganization. If an event of default occurs and is continuing, other than an event of default triggered upon certain bankruptcy events, the trustee under our indenture or the holders of at least 25% in principal amount of our outstanding Secured Notes may declare our Secured Notes to be due and payable immediately. Upon an event of default, the trustee may also take actions to foreclose on the collateral securing our outstanding Secured Notes, subject to the terms of an intercreditor agreement dated March 29, 2007, among us, Sterling Energy, the trustee and The CIT Group/Business Credit, Inc. Our indenture does

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not require us to maintain any financial ratios or satisfy any financial maintenance tests. We are currently in compliance with all of the covenants contained in our indenture.

     Interest is due on our outstanding Secured Notes on April 1 and October 1 of each year. Our outstanding Secured Notes, which mature on April 1, 2015, are senior secured obligations and rank equally in right of payment with all of our existing and future senior indebtedness. Subject to specified permitted liens, our outstanding Secured Notes are secured (i) on a first priority basis, by all of our fixed assets and certain related assets, including, without limitation, all property, plant and equipment and (ii) on a second priority basis, by our other assets, including, without limitation, accounts receivable, inventory, capital stock of our domestic restricted subsidiaries, intellectual property, deposit accounts and investment property.

     On December 19, 2002, we entered into a Revolving Credit Agreement, or our revolving credit facility, with The CIT Group/Business Credit, Inc., as administrative agent and a lender, and certain other lenders. Under our revolving credit facility, we and Sterling Energy were co-borrowers and were jointly and severally liable for any indebtedness thereunder. After the merger of Sterling Energy with and into us, Sterling Energy ceased to be a co-borrower under our revolving credit facility. Our revolving credit facility is secured by first priority liens on all of our accounts receivable, inventory and other specified assets. On March 29, 2007, we amended and restated our revolving credit facility to, among other things, extend the term of our revolving credit facility until March 29, 2012, reduce the maximum commitment thereunder to $50 million, make certain changes to the calculation of the borrowing base and lower the interest rates and fees charged thereunder. Borrowings under our revolving credit facility bear interest, at our option, at an annual rate of a base rate plus 0.0% to 0.50% or the LIBOR rate plus 1.50% to 2.25%, depending on our borrowing availability at the time. We are also required to pay an aggregate commitment fee of 0.375% per year (payable monthly) on any unused portion of our revolving credit facility. Available credit under our revolving credit facility is subject to a monthly borrowing base of 70% of eligible accounts receivable plus 65% of eligible inventory. As of December 31, 2007, our borrowing base exceeded the maximum commitment under our revolving credit facility, making the total credit available under our revolving credit facility $50 million. However, since that time, the monetization of accounts receivable and inventory associated with our exit from the styrene business significantly decreased the borrowing base under our revolving credit facility. In response to the expected continued lower levels of accounts receivable and inventory, as well as our lesser need for a working capital facility, on June 30, 2008, we reduced our commitment under our revolving credit facility to $25 million. On November 7, 2008, we amended our revolving credit facility to substantially reduce restrictions, subject to minimum liquidity requirements, on investments of cash and other assets, cash dividends, repurchase of debt and equity securities, modifications to preferred stock terms, affiliate transactions, asset dispositions, and certain business activities. We paid the administrative agent an amendment fee plus expenses totaling approximately $0.1 million in connection with this amendment.

     As of December 31, 2008, total credit available under our revolving credit facility was limited to $15.0 million, there were no loans outstanding and we had $3.9 million in letters of credit outstanding, resulting in borrowing availability of $11.1 million. Pursuant to Emerging Issues Task Force Issue No. 95-22, “Balance Sheet Classification of Borrowings under Revolving Credit Agreements That Include both a Subjective Acceleration Clause and a Lock-Box Arrangement,” any balances outstanding under our revolving credit facility would be classified as a current portion of long-term debt.

     Our revolving credit facility contains numerous covenants and conditions, including, but not limited to, restrictions on our ability to incur indebtedness, create liens, sell assets, make investments, make capital expenditures, engage in mergers and acquisitions and pay dividends. Our revolving credit facility also includes various circumstances and conditions that would, upon their occurrence and subject in certain cases to notice and grace periods, create an event of default thereunder. Our revolving credit facility does not require us to maintain any financial ratios or satisfy any financial maintenance tests. We are currently in compliance with all of the covenants contained in our revolving credit facility.

     Our liquidity (i.e., cash and cash equivalents plus total credit available under our revolving credit facility) was $167.2 million at December 31, 2008, an increase of $29.2 million compared to our liquidity at December 31, 2007. This increase was primarily due to the monetization of the working capital from our prior styrene business. As a result of our exit from the styrene business, we expect our future cash flows from operations to be more positive and less volatile than in previous years.

     Recent distress in the financial markets has had an adverse impact on financial market activities including, among other things, volatility in security prices, diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. We have assessed the implications of these factors on our current business and determined that there has not been a significant impact to our financial condition, results of operations or

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liquidity during 2008. Our cash is invested in highly rated money market funds, which are guaranteed by the US Department of Treasury under its Temporary Guarantee Program for Money Market Funds. We expect to have positive cash flows from continuing operations for the reasonably foreseeable future, and we believe that our cash on hand and cash generated from continuing operations, along with credit available under our revolving credit facility, will be sufficient to meet our short-term and long-term liquidity needs for the reasonably foreseeable future.

Working Capital

     Our working capital, excluding assets and liabilities from discontinued operations, was $157.2 million as of December 31, 2008, an increase of $51.2 million from December 31, 2007. This increase in working capital resulted primarily from the monetization of our styrene discontinued operations working capital.

Cash Flow

     Net cash provided by our operations was $62.4 million in 2008 and $44.3 million in 2007. Net cash used in operations was $14.2 million in 2006. The improvement in net cash flow in 2008 compared to 2007 was primarily driven by monetization of our styrene-related working capital in 2008 after we shut down the styrene facility during the fourth quarter of 2007. The improvement in net cash flow in 2007 compared to 2006 was primarily due to the $60.0 million cash payment received from INEOS NOVA in 2007.

     Net cash flow used in our investing activities was $6.4 million, $6.2 million and $7.3 million in 2008, 2007 and 2006, respectively. Cash flows from investing activities included capital expenditures of $6.4 million, $6.4 million and $11.5 million in 2008, 2007 and 2006, respectively. Additionally, in 2006, cash flows included insurance proceeds of $2.0 million and proceeds from the sale of fixed assets of $3.0 million, offset by $0.7 million of cash used for dismantling our acrylonitrile and derivatives facilities.

     Net cash flow provided by our financing activities was zero for 2008, $41.4 million in 2007 and zero for 2006. The cash flow provided in 2007 was a result of the refinancing of our $100 million in secured notes with $150 million of new Secured Notes.

Capital Expenditures

     Our capital expenditures in continuing operations were $6.6 million in 2008, $3.8 million in 2007 and $4.9 million in 2006, and for discontinued operations were zero, $2.6 million and $6.6 million in 2008, 2007 and 2006, respectively. Capital expenditures are expected to be approximately $11.3 million in 2009. We expect to incur $1.5 million during 2009 for a capital project to prevent the discharge of process wastewater during periods of heavy rain at our Texas City facility. We also expect to incur $4.7 million during 2009 related to our portion of acetic acid-related projects, including construction of an acetic acid pipeline and other replacement and debottlenecking projects. The remaining $5.1 million is primarily for routine safety, environmental replacement capital and profit improvement projects.

     Our capital expenditures for environmentally related prevention, containment and process improvements were $1.1 million in 2008, $0.5 million in 2007 and $2.0 million in 2006. We anticipate spending approximately $2.1 million on these types of expenditures during 2009.

Pensions

     Our projected benefit obligation was $121.2 million and $123.2 million as of December 31, 2008 and 2007, respectively. The decrease in the projected benefit obligation was due to an actuarial gain of $1.6 million and benefit payments of $8.5 million, offset by interest cost of $7.2 million and curtailment costs of $0.9 million.

Contractual Cash Obligations

     The following table summarizes our significant contractual obligations at December 31, 2008, and the effect such obligations are expected to have on our liquidity and cash flows in future periods:

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	Less than 1
	year(1)		1-3 years		4-5 years		More than 5 years		Total
	(Dollars in Thousands)
Secured Notes	$	—	$	—	$	—	$	150,000	$	150,000
Interest payments on debt		15,375		46,125		30,750		3,844		96,094
Operating leases(2)		8,099		24,297		16,198		12,968		61,562
Purchase obligations(3)		27,330		70,797		42,798		34,619		175,544
Pension and other postretirement benefits(4)		1,001		27,111		17,951		11,312		57,375
Total(5) (6)		51,805		168,330		107,697		212,743	$	540,575

(1)	Payment obligations under our revolving credit facility are not presented because there were no outstanding borrowings as of December 31, 2008, and interest payments fluctuate depending on the interest rate and outstanding balance under our revolving credit facility at any point in time.
(2)	We have an operating lease with Praxair through July 31, 2016, which requires minimum purchases of carbon monoxide and a fixed facility fee that total $7.8 million annually. In addition, we have an operating lease for our Houston, Texas corporate offices that expires on September 30, 2013, for approximately $0.3 million per year.
(3)	For the purposes of this table, we have considered contractual obligations for the purchase of goods or services as agreements involving more than $1 million that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. Most of the purchase obligations identified include variable pricing provisions. We have estimated the future prices of these items, utilizing forward curves where available. The pricing estimated for use in this table is subject to market risk.
(4)	Our future contributions to our pension plans according to minimum funding requirements imposed by laws governing employee benefit plans are expected to be $0.2 million in 2009, $8.3 million in 2010 and $8.2 million for each year beginning with 2011 through 2015. Our pension expense for 2009 is expected to be $4.7 million.
(5)	Our Series A Convertible Preferred Stock is excluded from our contractual cash obligations as it is not currently redeemable or probable of redemption. If our Series A Convertible Preferred Stock had been redeemable as of December 31, 2008, the redemption amount would have been approximately $61.7 million. The liquidation value of our Series A Convertible Preferred Stock as of December 31, 2008 was $77.3 million.
(6)	Unrecognized tax benefits are not included in the table due to the high degree of uncertainty associated with the realization of our net operating loss carryforward.

Critical Accounting Policies, Use of Estimates and Assumptions

     A summary of our significant accounting policies is included in Note 1 of the “Notes to Consolidated Financial Statements” included in Item 8, Part II of this Form 10-K. We believe that the consistent application of these policies enables us to provide readers of our financial statements with useful and reliable information about our operating results and financial condition. The following accounting policies are the ones we believe are the most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective or complex judgments.

Revenue Recognition

     We produce acetic acid and plasticizers and recognize revenues (and the related costs) when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed and determinable and collectibility is reasonably assured.

     Acetic Acid. Pursuant to our Acetic Acid Production Agreement, all of our acetic acid is sold to BP Chemicals, who takes delivery, title and risk of loss at the time the acetic acid is produced. BP Chemicals, in turn, markets and sells the acetic acid and pays us a portion of the profits derived from those sales. BP Chemicals reimburses us monthly for 100% of our fixed and variable costs of production (excluding some indirect expenses and direct depreciation associated with machinery and equipment used in the manufacturing of acetic acid) and the revenue associated with the reimbursement of these costs is matched against our costs as they are incurred. We recognize revenue related to the profit sharing component under our Acetic Acid Production Agreement based on quarterly estimates received from BP Chemicals. These estimates are based on the profits from sales of the acetic acid purchased from our acetic acid plant.

33

     Plasticizers. We generate revenues from our plasticizers operations through our Plasticizers Production Agreement with BASF. BASF purchases all of our plasticizers and takes delivery, title and risk of loss at the time of production. We receive fixed, level quarterly payments which are recognized on a straight-line basis. In addition, BASF reimburses us monthly for our actual fixed and variable costs of production (excluding direct depreciation associated with machinery and equipment used in the manufacturing of plasticizers), and the revenue associated with the reimbursement of these costs is matched against our costs as they are incurred.

     Deferred revenue. Deferred credits are amortized over the life of the contracts which gave rise to them. As of December 31, 2008, in continuing operations, we had a balance in deferred income of approximately $7.3 million, which represents certain payments received from our oxo-alcohol and PA operations, which previously were part of our plasticizers business. These oxo-alcohol and PA payments are being amortized using the straight-line method over the remaining lives of the relevant contracts of five years and two years, respectively. In discontinued operations, as of December 31, 2008, we had a balance in deferred income of approximately $47.8 million pertaining to the NOVA supply agreement discussed above that is being amortized using the straight-line method over the contractual non-compete period of five years, and is reflected in discontinued operations.

Inventories

     Inventories are carried at the lower-of-cost-or-market value. Cost is primarily determined on a first-in, first-out basis, except for stores and supplies, which are valued at average cost. The comparison of cost to market value involves estimation of the market value of our products. For the years ended December 31, 2008, 2007 and 2006, this comparison led to a lower-of-cost-or-market adjustment of $0.4 million, $1.4 million and zero, respectively. The adjustment in 2008, which was included in continuing operations, was due to decreasing ammonia prices in late 2008. The adjustment in 2007, which was included in discontinued operations, was due to decreasing benzene and styrene prices at the end of 2007.

Preferred stock dividends

     We record preferred stock dividends on our Series A Convertible Preferred Stock, or our Series A Preferred Stock, in our consolidated statements of operations based on the estimated fair value of dividends at each dividend accrual date. Our Series A Preferred Stock has a dividend rate of 4% per quarter of the liquidation value of the outstanding shares of our Series A Preferred Stock, and is payable in arrears in additional shares of our Series A Preferred Stock on the first business day of each calendar quarter. The liquidation value of each share of our Series A Preferred Stock is $13,793 per share, and each share of our Series A Preferred Stock is convertible into shares of our common stock (on a one to 1,000 share basis, subject to adjustment). The carrying value of our Series A Preferred Stock in our consolidated balance sheets represents the initial fair value at original issuance in 2002 plus the fair value of each of the quarterly dividends paid since issuance. The fair value of our preferred stock dividends is determined each quarter using valuation techniques that include a component representing the intrinsic value of the dividends (which represent the greater of the liquidation value of the shares of Series A Preferred Stock being issued or the fair value of the common stock into which those shares could be converted) and an option component (which is determined using a Black-Scholes Option Pricing Model). These dividends are recorded in our consolidated statements of operations, with an offset to redeemable preferred stock in our consolidated balance sheets. As we are in an accumulated deficit position, these dividends are treated as a reduction to additional paid-in capital. Assumptions utilized in the Black-Scholes model include:

	2008			2007			2006
Risk-free interest rate		1.6	%		3.5	%		4.7	%
Volatility		63.6	%		55.5	%		46.2	%
Dividend yield		—			—			—
Expected term		5.0			5.0			5.0

Long-Lived Assets

     We assess our long-lived assets for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. To analyze recoverability, we project undiscounted net future cash flows over the remaining life of the assets. If the projected cash flows from the assets are less than the carrying amount, an impairment would be recognized. Any impairment loss would be measured based upon the difference between the carrying amount

34

and the fair value of the relevant assets. For these impairment analyses, impairment is determined by comparing the estimated fair value of these assets, utilizing the present value of expected net cash flows, to the carrying value of these assets. In determining the present value of expected net cash flows, we estimate future net cash flows from these assets and the timing of those cash flows and then apply a discount rate to reflect the time value of money and the inherent uncertainty of those future cash flows. The discount rate we use is based on our estimated cost of capital. The assumptions we use in estimating future cash flows are consistent with our internal planning.

Income Taxes

     Deferred income taxes are provided for revenue and expenses which are recognized in different periods for income tax and financial statement purposes. We regularly assess deferred tax assets for recoverability based on both historical and anticipated earnings levels, and a valuation allowance is recorded when it is more likely than not that these amounts will not be recovered. As a result of our analysis at December 31, 2008, we concluded that a valuation allowance was needed against our deferred tax assets. As of December 31, 2008, our valuation allowance was $52.5 million, an increase of $16.3 million from December 31, 2007. The increase included a valuation allowance adjustment of $14.6 million due to losses in other comprehensive income for adjustments to our benefits plans and resulted in an overall net deferred tax asset/liability balance of zero as of December 31, 2008.

Employee Benefit Plans

     We sponsor domestic defined benefit pension and other postretirement plans. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected long-term rate of return on plan assets and health care cost increase projections. Assumptions are determined based on our historical data and appropriate market indicators, and are evaluated each year as of the plans’ measurement dates. A change in any of these assumptions would have an effect on net periodic pension and postretirement benefit costs reported in our financial statements. Accounting guidance applicable to pension plans does not require immediate recognition of the current year effects of a deviation between these assumptions and actual experience. We experienced significant negative pension asset returns in 2008, the result of which will materially increase pension expense for 2009. We expect 2009 pension expense, on a pre-tax basis, to increase by approximately $4.7 million, however, a significant portion will be reimbursed through existing contractual arrangements. This increase in pension expense is primarily due to lower than expected return on assets in 2008 and an increase in the discount rate compared to 2008.

     During the third quarter of 2008, as a result of our work force reduction announced in July 2008, and in accordance with SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” we recorded plan curtailment losses in discontinued operations of $0.9 million for our defined benefit pension plans and $0.3 million for our post-retirement medical plan.

     Effective July 1, 2007, we froze all accruals under our defined benefit pension plan for our hourly employees, which resulted in a plan curtailment under SFAS No. 88 “Employers’ Accounting for Settlement and Curtailments of Defined Benefit Pension Plans and for Termination Benefits.” As a result, we recorded a pre-tax curtailment gain of $0.1 million in the second quarter of 2007. During the third quarter of 2007, we approved an amendment (to be effective December 31, 2007) to our postretirement medical plan which ended Medicare-supplemental medical and prescription drug coverage for retirees who retired after 1990 and who are Medicare eligible, except for Sterling Fibers, Inc. retirees. This amendment affects the majority of participants currently enrolled in our retiree medical plan who are enrolled in Medicare because they are 65 or over, and was communicated to the participants during the third quarter of 2007. This plan amendment reduced our other postretirement benefit plan liability by $13 million, with a corresponding increase to accumulated other comprehensive income.

Plant Turnaround Costs

     As a part of normal recurring operations, each of our manufacturing units is completely shut down from time to time, for a period typically lasting two to four weeks, to replace catalysts and perform major maintenance work required to sustain long-term production. These periods are commonly referred to as “turnarounds” or “shutdowns.” Costs of turnarounds are expensed as incurred. As expenses for turnarounds can be significant, the impact of expensing turnaround costs as they are incurred can be material for financial reporting periods during which the turnarounds actually occur. Turnaround costs expensed during 2008, 2007 and 2006 that are included in continuing operations were $0.3 million, $0.1 million and $1.4 million, respectively. Turnaround costs expensed during 2008, 2007 and 2006 that are included in discontinued operations are zero, zero and $8.5 million, respectively.

35

New Accounting Standards

     In September 2006, the Financial Accounting Standards Board, or the FASB, issued SFAS No. 157, “Fair Value Measurements,” or SFAS No. 157. SFAS No. 157 establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis in financial statements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We adopted SFAS No. 157 in the first quarter of 2008 and determined it had no impact on our consolidated financial statements.

     In February 2008, the FASB issued SFAS No. 157-2, “Effective Date of FASB Statement No. 157,” which defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years, for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). An entity that has issued interim or annual financial statements reflecting the application of the measurement and disclosure provisions of SFAS No. 157 prior to February 12, 2008 must continue to apply all provisions of SFAS No. 157. We are currently evaluating the impact of our expected adoption of the deferred portion of SFAS No. 157, effective January 1, 2009, on our consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” or SFAS No. 159. SFAS No. 159, which amends SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” allows certain financial assets and liabilities to be recognized, at our election, at fair market value, with any gains or losses for the period recorded in the statement of operations. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We did not elect to recognize certain financial assets and liabilities at fair market value, therefore the implementation did not impact our consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” or SFAS No. 141R. SFAS No. 141R broadens the guidance of SFAS No. 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS No. 141R broadens the fair value measurement and recognition of assets acquired, liabilities assumed and interests transferred as a result of business combinations, and expands on required disclosures to improve the statement users’ abilities to evaluate the nature and financial effects of business combinations. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. We do not believe the implementation of SFAS No. 141R will have a material impact on our consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements; an Amendment of ARB No. 51,” or SFAS No. 160. SFAS No. 160 establishes the accounting and reporting standards for a noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary and clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests and applies prospectively to business combinations for fiscal years beginning after December 15, 2008. We do not believe the implementation of SFAS No. 160 will have a material impact on our consolidated financial statements.

     In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities,” or SFAS No. 161. SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities, with the intent to provide users of financial statements with an enhanced understanding of (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and its related interpretations and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. We do not believe the implementation of SFAS No. 161 will have a material impact on our consolidated financial statements.

     In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” or SFAS No. 162. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. SFAS No. 162 was effective on November 15, 2008 and did not have a material impact on our consolidated financial statements.

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     In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,” or FSP EITF 03-6-1, which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, “Earnings Per Share.” Under the guidance in FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and need to be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal periods beginning after December 15, 2008, and all prior-period earnings per share data presented is required to be adjusted retrospectively. We do not believe the implementation of FSP EITF 03-6-1 will have a material impact on our consolidated financial statements.

     In October 2008, the FASB issued FASB Staff Position 157-3 “Determining Fair Value of a Financial Asset in a Market That Is Not Active,” or FSP 157-3. FSP 157-3 clarifies the application of SFAS No. 157 by demonstrating how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have a material impact on our consolidated financial statements.

     In December 2008, the FASB issued FASB Staff Position (FSP) No.132 (R)-1, “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, or FSP 132R-1. FSP 132R-1 requires enhanced disclosures about the plan assets of our defined benefit pension and other postretirement plans. The enhanced disclosures required by FSP 132R-1 are intended to provide users of financial statements with a greater understanding of: how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets, the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period and significant concentrations of risk within plan assets. FSP 132R-1 is effective for the year ending December 31, 2009. We do not believe the implementation of FSP 132R-1 will have a material impact on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     The table below provides information about our market sensitive financial instruments and constitutes a “forward-looking statement.”

															Fair Value
	Expected Maturity Dates														December 31,
	2009		2010		2011		2012		2013		Thereafter		Total		2008
	(Dollars in Thousands)
Liability
Secured Notes	$	—		—		—		—		—		150,000	$	150,000	$	132,000

     The fair value of our Secured Notes is based on broker quotes for private transactions.

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     Item 8. Financial Statements and Supplementary Data

38

INDEX TO HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

Sterling Chemicals, Inc.

Audited Financial Statements
Report of Independent Registered Public Accounting Firm (successor auditor)	40
Report of Independent Registered Public Accounting Firm (predecessor auditor)	41
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006	42
Consolidated Balance Sheets as of December 31, 2008 and 2007	43
Consolidated Statements of Changes in Stockholders’ Equity (Deficiency in Assets) for the years ended December 31, 2008, 2007 and 2006	44
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006	45
Notes to Consolidated Financial Statements	46

39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Sterling Chemicals, Inc.

     We have audited the accompanying consolidated balance sheet of Sterling Chemicals, Inc. and its subsidiaries (the “Company”) as of December 31, 2008, and the related consolidated statements of operations, stockholders’ equity, changes in stockholders’ equity (deficiency in assets) and cash flows for the year ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sterling Chemicals, Inc. as of December 31, 2008, and the results of its operations and its cash flows for the year ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

     We also have audited the adjustments described in Note 2 to the financial statements that were applied to revise the December 31, 2007 and 2006 financial statements to give effect to presentation of the Company’s styrene operations as discontinued operations. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review or apply any procedures to the December 31, 2007 or 2006 financial statements of the Company other than with respect to such adjustments and, accordingly, we do not express an opinion or any other form of assurance on the December 31, 2007 or 2006 financial statements taken as a whole.

/s/ GRANT THORNTON LLP

Houston, Texas
March 16, 2009

40

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Sterling Chemicals, Inc.
Houston, Texas:

     We have audited, before the effects of the retrospective adjustments for the discontinued operations of Sterling Chemicals, Inc and subsidiaries’ (the “Company”) styrene operations discussed in Note 2 to the consolidated financial statements, the consolidated balance sheet of the Company as of December 31, 2007 and the related consolidated statements of operations, changes in stockholders’ equity (deficiency in assets), and cash flows for the years ended December 31, 2007 and 2006 (the 2007 and 2006 consolidated financial statements before the effects of the retrospective adjustments related to the Company’s styrene operations discussed in Note 2 to the consolidated financial statements are not presented herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, such 2007 and 2006 consolidated financial statements, before the effects of the retrospective adjustments for the discontinued operations of the Company’s styrene operations discussed in Note 2 to the consolidated financial statements, present fairly, in all material respects, the financial position of Sterling Chemicals, Inc. and subsidiaries as of December 31, 2007 , and the results of their operations and their cash flows for the years ended December 31, 2007 and 2006, in conformity with accounting principles generally accepted in the United States of America.

     We were not engaged to audit, review, or apply any procedures to the retrospective adjustments for the discontinued operations related to the Company’s styrene operations discussed in Note 2 to the consolidated financial statements and, accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied. Those retrospective adjustments were audited by other auditors.

     As discussed in Note 7 to the consolidated financial statements, the Company changed its method of accounting for defined benefit pension and other postretirement plans as of December 31, 2006.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas
April 10, 2008

41

STERLING CHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share Data)

	Year Ended December 31,
	2008			2007			2006
Revenues	$	161,452		$	129,813		$	141,259
Cost of goods sold		131,154			116,431			127,413
Gross profit		30,298			13,382			13,846
Selling, general and administrative expenses		12,331			8,679			7,073
Impairment of long-lived assets		7,403			—			—
Interest and debt related expenses		17,175			17,313			10,680
Interest income		(4,408	)		(1,607	)		(601	)
Other (income) expense		(2,030	)		839			(724	)
Loss from continuing operations before income tax		(173	)		(11,842	)		(2,582	)
Benefit for income taxes		(71	)		(4,129	)		(388	)
Loss from continuing operations		(102	)		(7,713	)		(2,194	)
Loss from discontinued operations, net of tax		(8,262	)		(11,215	)		(103,465	)
Net loss		(8,364	)		(18,928	)		(105,659	)
Preferred stock dividends		17,741			17,550			11,774
Net loss attributable to common stockholders	$	(26,105	)	$	(36,478	)	$	(117,433	)
Loss per share of common stock attributable to common stockholders, basic and diluted:
Loss from continuing operations	$	(6.31	)	$	(8.93	)	$	(4.94	)
Loss from discontinued operations		(2.92	)		(3.97	)		(36.58	)
Net loss per share, basic and diluted	$	(9.23	)	$	(12.90	)	$	(41.52	)
Weighted average shares outstanding:
Basic and diluted		2,828,460			2,828,460			2,828,460

The accompanying notes are an integral part of the consolidated financial statements.

42

STERLING CHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share Data)

	December 31,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	156,126		$	100,183
Accounts receivable, net of allowance of $18 and $39, respectively		22,080			29,157
Inventories, net		5,221			5,044
Prepaid expenses and other current assets		2,704			3,129
Deferred tax asset		—			5,029
Assets of discontinued operations		166			71,754
Total current assets		186,297			214,296
Property, plant and equipment, net		67,811			77,677
Other assets, net		7,838			14,471
Total assets	$	261,946		$	306,444
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY IN ASSETS
Current liabilities:
Accounts payable	$	8,915		$	13,715
Accrued liabilities		20,008			22,789
Liabilities of discontinued operations		12,444			11,528
Total current liabilities		41,367			48,032
Long-term debt		150,000			150,000
Deferred tax liability		—			5,029
Deferred credits and other liabilities		59,103			26,168
Long-term liabilities of discontinued operations		35,394			51,436
Commitments and contingencies (Note 9)
Redeemable preferred stock		117,607			99,866
Stockholders’ equity:
Common stock, $.01 par value (shares authorized 20,000,000; shares issued and outstanding 2,828,460)		28			28
Additional paid-in capital		123,740			141,174
Accumulated deficit		(240,906	)		(232,542	)
Accumulated other comprehensive (loss) income		(24,387	)		17,253
Total stockholders’ deficiency in assets		(141,525	)		(74,087	)
Total liabilities and stockholders’ deficiency in assets	$	261,946		$	306,444

The accompanying notes are an integral part of the consolidated financial statements.

43

STERLING CHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY IN ASSETS)
(Amounts in Thousands)

											Accumulated
	Common Stock				Additional						Other
					Paid-In			Accumulated			Comprehensive
	Shares		Amount		Capital			Deficit			Income (Loss)			Total
Balance, December 31, 2005		2,828	$	28	$	170,311		$	(107,955	)	$	(4,339	)	$	58,045
Comprehensive loss:
Net loss		—		—		—			(105,659	)		—
Other comprehensive loss:
Benefit adjustment, net of tax of $2,249		—		—		—			—			3,903
Comprehensive loss															(101,756	)
SFAS 158 adoption, net of tax of $3,719		—		—		—			—			6,756			6,756
Preferred stock dividends		—		—		(11,774	)		—			—			(11,774	)
Stock-based compensation		—		—		154			—			—			154
Balance, December 31, 2006		2,828	$	28	$	158,691		$	(213,614	)	$	6,320		$	(48,575	)
Comprehensive loss:
Net loss		—		—		—			(18,928	)		—
Other comprehensive loss:
Benefit adjustment, net of tax of $5,887		—		—		—			—			10,933
Comprehensive loss															(7,995	)
Preferred stock dividends		—		—		(17,550	)		—			—			(17,550	)
Stock-based compensation		—		—		33			—			—			33
Balance, December 31, 2007		2,828	$	28	$	141,174		$	(232,542	)	$	17,253		$	(74,087	)
Comprehensive loss:
Net loss		—		—		—			(8,364	)		—
Other comprehensive loss:
Benefit adjustment, net of tax of zero		—		—		—			—			(41,640	)
Comprehensive loss															(50,004	)
Preferred stock dividends		—		—		(17,741	)		—			—			(17,741	)
Stock-based compensation		—		—		307			—			—			307
Balance, December 31, 2008		2,828	$	28	$	123,740		$	(240,906	)	$	(24,387	)	$	(141,525	)

The accompanying notes are an integral part of the consolidated financial statements.

44

STERLING CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

	Year Ended December 31,
	2008			2007			2006
Cash flows from operating activities:
Net loss	$	(8,364	)	$	(18,928	)	$	(105,659	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Blend gas deferred payments		(2,653	)		—			—
Bad debt benefit		(5	)		(213	)		(571	)
Benefit plans curtailment loss		1,197			—			—
Depreciation and amortization		9,602			10,908			30,476
Interest amortization		1,347			933			400
Unearned income amortization		(13,036	)		(1,064	)		—
Impairment of long-lived assets		7,403			4,288			127,653
Lower-of-cost-or-market adjustment		351			1,363			—
Deferred tax benefit		—			—			(8,438	)
Gain on disposal of property, plant and equipment		—			(182	)		(4,917	)
Other		307			1,066			154
Change in assets/liabilities:
Accounts receivable		62,911			(21,630	)		(4,514	)
Inventories		15,181			39,933			(22,608	)
Prepaid expenses and other current assets		425			86			1,673
Other assets		4,897			(2,160	)		(2,105	)
Accounts payable		(5,083	)		(21,933	)		(4,140	)
Accrued liabilities		(1,865	)		18,106			(10,314	)
Other liabilities		(10,255	)		33,754			(11,298	)
Net cash provided by (used in) operating activities		62,360			44,327			(14,208	)
Cash flows used in investing activities:
Capital expenditures for property, plant and equipment		(6,417	)		(6,411	)		(11,547	)
Insurance proceeds relating to property, plant and equipment		—			—			1,960
Cash used for dismantling		—			—			(669	)
Net proceeds from the sale of property, plant and equipment		—			182			2,957
Net cash used in investing activities		(6,417	)		(6,229	)		(7,299	)
Cash flows provided by financing activities:
Repayment of Old Secured Notes		—			(100,579	)		—
Proceeds from the issuance of Secured Notes		—			150,000			—
Debt issuance costs		—			(8,026	)		—
Net cash provided by financing activities		—			41,395			—
Net increase (decrease) in cash and cash equivalents		55,943			79,493			(21,507	)
Cash and cash equivalents beginning of year		100,183			20,690			42,197
Cash and cash equivalents end of year	$	156,126		$	100,183		$	20,690
Supplemental disclosures of cash flow information:
Interest paid	$	15,849		$	13,045		$	11,109
Interest income received		4,408			1,607			601
Cash paid for income taxes		313			299			60

The accompanying notes are an integral part of the consolidated financial statements.

45

STERLING CHEMICALS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Summary of Significant Accounting Policies

     Unless otherwise indicated, references to “we,” “us,” “our” and “ours” refer collectively to Sterling Chemicals, Inc. and its wholly-owned subsidiaries. We own or operate facilities at our petrochemicals complex located in Texas City, Texas, approximately 45 miles south of Houston, on a 290-acre site on Galveston Bay near many other chemical manufacturing complexes and refineries. Currently, we produce acetic acid and plasticizers and prior to the shutdown of our styrene operations in December 2007, we also produced styrene. We own all of the real property which comprises our Texas City facility and we own the acetic acid, styrene and plasticizers manufacturing units located at the site. Our Texas City site offers approximately 160 acres for future expansion by us or by other companies that could benefit from our existing infrastructure and facilities, and includes a greenbelt around the northern edge of the plant site. We also lease a portion of our Texas City site to Praxair Hydrogen Supply, Inc., or Praxair, who constructed a partial oxidation unit on that land, and lease a portion of our Texas City site to S&L Cogeneration Company, a 50/50 joint venture between us and Praxair Energy Resources, Inc., who constructed a cogeneration facility on that land. We generally sell our petrochemicals products to customers for use in the manufacture of other chemicals and products, which in turn are used in the production of a wide array of consumer goods and industrial products. As of December 31, 2008, we reported our operations in two segments: acetic acid and plasticizers.

Principles of Consolidation

     The consolidated financial statements include the accounts of our wholly-owned subsidiaries, with all significant intercompany accounts and transactions having been eliminated. Our 50% equity investment in S&L Cogeneration Company is accounted for under the equity method. We recognized approximately $1.1 million of income from this investment in 2008.

Cash and Cash Equivalents

     We consider all investments having an initial maturity of three months or less to be cash equivalents. Our cash is invested in highly rated money market funds, which are guaranteed by the US Department of Treasury under its Temporary Guarantee Program for Money Market Funds.

Allowance for Doubtful Accounts

     Accounts receivable is presented net of allowance for doubtful accounts. We regularly review our accounts receivable balances and, based on estimated collectibility, adjust the allowance account accordingly. As of December 31, 2008 and 2007, the allowance for doubtful accounts for continuing operations was less than $0.1 million for both periods and zero for both periods in discontinued operations. Bad debt benefit for continuing operations was less than $0.1 million for 2008 and bad debt expense for continuing operations was less than $0.1 million for 2007 and 2006. Bad debt benefit for discontinued operations was zero, $0.3 million and $0.6 million for 2008, 2007 and 2006, respectively.

Inventories

     Inventories are stated at the lower-of-cost-or-market. Cost is primarily determined on a first-in, first-out basis, except for stores and supplies, which are valued at average cost. The comparison of cost to market value involves estimation of the market value of our products. For the years ended December 31, 2008, 2007 and 2006, a lower-of-cost-or-market adjustment was recorded in continuing operations for $0.4 million, zero and zero and in discontinued operations for zero, $1.4 million, and zero, respectively. The adjustment in 2008 for continuing operations was due to

46

decreasing ammonia prices in late 2008 and the adjustment in 2007 for discontinued operations was due to decreasing benzene and styrene prices from December to January.

Property, Plant and Equipment

     Property, plant and equipment are recorded at cost. Major renewals and improvements, which extend the useful lives of equipment, are capitalized. For certain capital projects, our customers reimburse us for a portion of the project cost. For capital expenditures reimbursed by our customers, we treat the reimbursements as a reduction of our cost basis. Disposals are removed at carrying cost less accumulated depreciation with any resulting gain or loss reflected in operations. Depreciation is provided using the straight-line method over estimated useful lives ranging from five to 25 years, with the predominant life of plant and equipment being 15 years. We capitalize interest costs, which are incurred as part of the cost of constructing major facilities and equipment. The amount of interest capitalized in continuing operations for 2008, 2007 and 2006 was $0.2 million, $0.1 million and $0.3 million, respectively, and for discontinued operations was zero, $0.1 million and $0.5 million for 2008, 2007, and 2006, respectively.

Plant Turnaround Costs

     As a part of normal recurring operations, each of our manufacturing units is completely shut down from time to time, for a period typically lasting two to four weeks, to replace catalysts and perform major maintenance work required to sustain long-term production. These periods are commonly referred to as “turnarounds” or “shutdowns.” Costs of turnarounds are expensed as incurred. As expenses for turnarounds can be significant, the impact of expensing the costs of turnarounds can be material for financial reporting periods during which the turnarounds actually occur. Turnaround costs expensed during 2008, 2007 and 2006 for continuing operations were $0.3 million, less than $0.1 million and $1.4 million, respectively and for discontinued operations were zero, zero and $8.5 million during 2008, 2007 and 2006, respectively.

Long-Lived Assets

     We assess our long-lived assets for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. An impairment is measured based upon the difference between the carrying amount and the fair value of the relevant assets. For these impairment analyses, impairment is determined by comparing the estimated fair value of these assets, utilizing the present value of expected net cash flows, to the carrying value of these assets. In determining the present value of expected net cash flows, we estimate future net cash flows from these assets and the timing of those cash flows, and then apply a discount rate to reflect the time value of money and the inherent uncertainty of those future cash flows. The discount rate we use is based on our estimated cost of capital. The assumptions we use in estimating future cash flows are consistent with our internal planning.

     During the fourth quarter of 2006, we performed an asset impairment analysis on our styrene production unit. This analysis was performed due to contemporaneous industry forecasts, forecasted negative cash flow generated by our styrene business over the succeeding few years and the uncertainty surrounding the ability of the North American styrene industry to successfully restructure. Our management determined that a triggering event, as defined in Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets,” had occurred and an asset impairment analysis was performed. We analyzed the undiscounted cash flow stream from our styrene business over the next seven years, which represented the remaining book life of our styrene assets, and compared it to the $128 million net book carrying value of our styrene unit and related assets. This analysis showed that the undiscounted projected cash flow stream from our styrene business was less than the net book carrying value of our styrene unit and related assets. As a result, we performed a discounted cash flow analysis and subsequently concluded that our styrene unit and related assets were impaired and should be written down to zero. This write-down caused us to record an impairment of $128 million in discontinued operations in December 2006.

     During the fourth quarter of 2007 in anticipation of the shutdown of our styrene unit, we wrote down all construction in progress that had been capitalized in 2007 pertaining to that unit and the catalyst which we were using in production. This write-down resulted in an impairment expense of $4.3 million which was included in discontinued operations.

     In the second quarter of 2008, as a result of the permanent shutdown of our phthalic anhydride, or PA, manufacturing unit, our management determined that a triggering event, as defined in SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” had occurred and, as a result, we performed an asset impairment analysis on our PA manufacturing unit. We analyzed the undiscounted cash flow stream from our PA business over the remaining life of the PA manufacturing unit and compared it to the $6.6 million net book carrying value of our PA manufacturing unit. This analysis showed that the undiscounted projected cash flow stream from our PA business was less than the net book carrying value of our PA manufacturing unit. As a result, we performed a discounted cash flow

47

analysis and subsequently concluded that our PA manufacturing unit was impaired and should be written down to zero. This write-down caused us to record an impairment of $6.6 million in June 2008.

     In the third quarter of 2008, our management determined that a triggering event had occurred as a result of the decision to permanently discontinue use and to sell the turbo generator units located at our Texas City facility. This decision was based on an economic analysis of the future use of the turbo generator units. During the third quarter of 2008, we performed an asset impairment analysis on our turbo generator units and determined the best estimate of fair market value would be the anticipated sales proceeds. We estimated the anticipated sales proceeds to be approximately $1.0 million. As a result, we concluded that our turbo generator units were impaired and should be written down to $1.0 million. This write-down resulted in an impairment charge of $0.8 million during the third quarter of 2008.

Other Assets

     Investee companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method, our share of earnings or losses from an investee company is not included in our consolidated balance sheet or consolidated statement of operations. However, any impairment charges related to an investee company would be recognized in our consolidated statement of operations, and if circumstances suggested that the value of that investee company had subsequently recovered, such recovery would not be recorded. At December 31, 2008, we had a cost method investment of $0.5 million included in other assets in our consolidated balance sheet.

Debt Issue Costs

     Debt issue costs relating to long-term debt are amortized over the term of the related debt instrument using the straight-line method, which is materially consistent with the effective interest method, and are included in other assets. Debt issue cost amortization, which is included in interest and debt-related expenses, was $1.3 million, $0.9 million and $0.4 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Income Taxes

     Deferred income taxes are provided for revenue and expenses which are recognized in different periods for income tax and financial statement purposes. We regularly assess our deferred tax assets for recoverability based on both historical and anticipated earnings levels, and a valuation allowance is recorded when it is more likely than not that these amounts will not be recovered. As a result of our analysis at December 31, 2008, we concluded that a valuation allowance was needed against our deferred tax assets. As of December 31, 2008, our valuation allowance was $52.5 million, an increase of $16.3 million from December 31, 2007. The increase included a valuation allowance adjustment of $14.6 million due to losses in other comprehensive income for adjustments to our benefits plans and resulted in an overall net deferred tax asset/liability balance of zero as of December 31, 2008.

Environmental Costs

     Environmental costs are expensed as incurred, unless the expenditures extend the economic useful life of the related assets. Costs that extend the economic useful life of assets are capitalized and depreciated over the remaining book life of those assets. Liabilities are recorded when environmental assessments or remedial efforts are probable and the cost can be reasonably estimated.

Revenue Recognition

     We produce acetic acid and plasticizers and recognize revenues (and the related costs) when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed and determinable, and collectibility is reasonably assured.

     Acetic Acid. Pursuant to our Acetic Acid Production Agreement, all of our acetic acid is sold to BP Chemicals, who takes delivery, title and risk of loss at the time the acetic acid is produced. BP Chemicals, in turn, markets and sells the acetic acid and pays us a portion of the profits derived from those sales. BP Chemicals reimburses us monthly for 100% of our fixed and variable costs of production (excluding some indirect expenses and direct depreciation associated with machinery and equipment used in the manufacturing of acetic acid) and the revenue associated with the reimbursement of these costs is matched against our costs as they are incurred. We recognize revenue related to the profit sharing component under our Acetic Acid Production Agreement based on quarterly estimates received from BP Chemicals. These estimates are based on the profits from sales of the acetic acid purchased from our acetic acid plant.

     Plasticizers. We generate revenues from our plasticizers operations through our Plasticizers Production Agreement with BASF. Under our Plasticizers Production Agreement, BASF purchases all of our plasticizers and takes delivery, title, and risk of loss at the time of production and we receive fixed, level quarterly payments which are recognized on a straight-line basis. In addition, BASF reimburses us monthly for our actual fixed and variable costs of production (excluding direct depreciation associated with machinery and equipment used in the manufacturing of plasticizers), and the revenue associated with the reimbursement of these costs is matched against our costs as they are incurred.

     Deferred revenue. Deferred credits are amortized over the life of the contracts which gave rise to them. As of December 31, 2008, in continuing operations, we had a balance in deferred income of approximately $7.3 million which represents certain payments received from the shutdown of our oxo-alcohol and PA operations, which previously were

48

part of our plasticizers business. These oxo-alcohol and PA payments are being amortized using the straight-line method over the remaining lives of the relevant contracts of five years and two years, respectively. In discontinued operations, as of December 31, 2008, we had a balance in deferred income of approximately $47.8 million pertaining to the NOVA supply agreement that is being amortized using the straight-line method over the contractual non-compete period of five years, and is reflected in discontinued operations.

Preferred Stock Dividends

     We record preferred stock dividends on our Series A Convertible Preferred Stock, or our Series A Preferred Stock, in our consolidated statements of operations based on the estimated fair value of dividends at each dividend accrual date. Our Series A Preferred Stock has a dividend rate of 4% per quarter of the liquidation value of the outstanding shares of our Series A Preferred Stock, and is payable in arrears in additional shares of our Series A Preferred Stock on the first business day of each calendar quarter. The liquidation value of each share of our Series A Preferred Stock is $13,793 per share, and each share of our Series A Preferred Stock is convertible into shares of our common stock (on a one to 1,000 share basis, subject to adjustment). The carrying value of our Series A Preferred Stock in our consolidated balance sheets represents the cumulative balance of the initial fair value at original issuance in 2002 plus the fair value of each of the quarterly dividends paid since issuance. The fair value of our preferred stock dividends is determined each quarter using valuation techniques that include a component representing the intrinsic value of the dividends (which represents the greater of the liquidation value of the preferred shares being issued or the fair value of the common stock into which the shares could be converted) and an option component (which is determined using a Black-Scholes Option Pricing Model). These dividends are recorded in our consolidated statements of operations, with an offset to redeemable preferred stock in our consolidated balance sheets. As we are in an accumulated deficit position, these dividends are treated as a reduction to additional paid-in capital.

Earnings (Loss) Per Share

     Basic earnings per share, or EPS, is computed using the weighted-average number of shares outstanding during the year. Diluted EPS includes common stock equivalents, which are dilutive to earnings per share. For the years ending December 31, 2008, 2007 and 2006, we had no dilutive securities outstanding due to all common stock equivalents having an anti-dilutive effect during these periods.

Disclosures about Fair Value of Financial Instruments

     In preparing disclosures about the fair value of financial instruments, we have concluded that the carrying amount approximates fair value for cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities due to the short maturities of these instruments. The fair values of long-term debt instruments are estimated based upon broker quotes for private transactions or on the current interest rates available to us for debt with similar terms and remaining maturities.

Accounting Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Significant estimates include impairment considerations, allowance for doubtful accounts, inventory valuation, pension plan assumptions, preferred stock dividend valuation, revenue recognition related to profit sharing accruals, environmental and litigation reserves and provision and valuation allowance for income taxes.

Reclassifications

     We have reclassified certain amounts on the consolidated statements of operations and consolidated statements of cash flows to present interest expense and interest income separately for the years ended December 31, 2007 and 2006. We have also reclassified certain amounts on the consolidated statements of operations for the years ended December 31, 2007 and 2006, and on the consolidated balance sheet as of December 31, 2007, to reflect our discontinued styrene operations with no impact on net loss or stockholders’ equity (deficiency in assets). See Note 2 for more information on discontinued operations.

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2. Discontinued Operations

     On September 17, 2007, we entered into a long-term exclusive styrene supply agreement and a related railcar purchase and sale agreement with NOVA Chemicals Inc., or NOVA. Under this supply agreement, NOVA had the exclusive right to purchase 100% of our styrene production (subject to existing contractual commitments), the amount of styrene supplied in any particular period being at NOVA’s option. In November 2007, this supply agreement, which was subsequently assigned by NOVA to INEOS NOVA, LLC, or INEOS NOVA, obtained clearance under the Hart-Scott-Rodino Act. This clearance caused the supply agreement and the railcar agreement to become effective and triggered a $60 million payment to us from INEOS NOVA in November 2007. After the supply agreement became effective, INEOS NOVA nominated zero pounds of styrene under the supply agreement for the balance of 2007 and, in response, we exercised our right to terminate the supply agreement and permanently shut down our styrene facility. Under the supply agreement, we are responsible for the closure costs of our styrene facility and are also restricted from reentering the styrene business until November 2012. The restricted period of time was initially eight years. However, effective April 1, 2008, INEOS NOVA unilaterally reduced the restricted period to five years.

     We operated our styrene facility through early December 2007, as we completed our production of inventory and exhausted our raw materials and purchase requirements, and sold substantially all remaining inventory during the first quarter of 2008. The decommissioning process was completed by the end of 2008 and the associated costs incurred for 2007 and 2008 were $0.7 million and $18.9 million, respectively. In July 2008, we announced a reduction in work force in order to reduce our staffing to a level appropriate for our existing operations and site development projects. As a result, we reduced our salaried work force by 19 people and our hourly work force by 15 people. In accordance with Statement of Financial Accounting Standards, or SFAS, No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” we recognized and paid $1.4 million of severance costs in 2008. Additionally, as a result of the work force reduction, we recorded a curtailment loss of $1.2 million for our benefit plans in accordance with SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” in 2008.

     In accordance with Statement of Financial Accounting Standards, or SFAS, No. 144, “Accounting for the Impairment and Disposal of Long Lived Assets,” we have reported the operating results of these businesses as discontinued operations in our consolidated financial statements. The carrying amounts of assets and liabilities related to discontinued operations as of December 31, 2008 and 2007 were as follows:

	December 31,		December 31,
	2008		2007
	(Dollars in thousands)
Assets of discontinued operations:
Accounts receivable, net	$	166	$	55,995
Inventories		—		15,709
Other assets		—		50
Total	$	166	$	71,754
Liabilities of discontinued operations:
Accounts payable	$	—	$	3,363
Accrued liabilities(1)		12,444		8,165
Deferred credits and other liabilities(1)		35,394		51,436
Total	$	47,838	$	62,964

⁽¹⁾ As of December 31, 2008, includes $47.8 million of deferred income for the NOVA supply agreement that is being amortized over the contractual non-complete period of five years using the straight-line method. Accrued liabilities include the current portion of $12.4 million and deferred credits and other liabilities include the long-term portion of $35.4 million.

     Revenues and pre-tax losses from discontinued operations for the years ended December 31, 2008, 2007 and 2006 are presented below (in thousands):

	Year Ended December 31,
	2008			2007			2006
	(Dollars in Thousands)
Revenues	$	26,591		$	681,513		$	524,922
Loss before income taxes		(8,262	)		(12,589	)		(117,703	)

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     3. Detail of Certain Balance Sheet Accounts

	December 31,
	2008			2007
	(Dollars in Thousands)
Inventories:
Raw materials	$	1,149		$	1,048
Stores and supplies (net of obsolescence reserve of $1,380 and $1,472, respectively)		4,072			3,996
	$	5,221		$	5,044
Property, plant and equipment, net:
Land	$	7,149		$	7,149
Buildings		4,824			4,809
Plant and equipment		122,563			121,900
Construction in progress		6,448			2,470
Less: accumulated depreciation		(73,173	)		(58,651	)
	$	67,811		$	77,677
Other assets, net:
Investments	$	511		$	5,483
Debt issuance costs		6,615			7,673
Other		712			1,315
	$	7,838		$	14,471
Accrued liabilities:
Employee compensation and benefits	$	4,885		$	6,425
Deferred income		2,965			3,719
Interest payable		4,368			4,036
Property taxes		2,193			3,089
Advances from customers		3,572			3,726
Other		2,025			1,794
	$	20,008		$	22,789
Deferred credits and other liabilities:
Accrued postretirement, pension and post employment benefits	$	51,319		$	16,067
Deferred income		5,165			7,653
Advances from customers		1,000			1,000
Other		1,619			1,448
	$	59,103		$	26,168

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4. Valuation and Qualifying Accounts

     Below is a summary of valuation and qualifying accounts for the years ended December 31, 2008, 2007 and 2006:

	December 31,
	2008			2007			2006
Continuing Operations
Allowance for doubtful accounts:
Balance at beginning of year	$	(39	)	$	—		$	(2	)
Add: bad debt (expense) benefit		5			(39	)		(13	)
Deduct: written-off accounts		16			—			15
Balance at end of year	$	(18	)	$	(39	)	$	—
Reserve for inventory obsolescence:
Balance at beginning of year	$	1,472		$	2,149		$	2,573
Add: obsolescence accrual		36			163			81
Deduct: disposal of inventory		(128	)		(840	)		(505	)
Balance at end of year	$	1,380		$	1,472		$	2,149
Discontinued Operations
Allowance for doubtful accounts:
Balance at beginning of year	$	—		$	(367	)	$	(951	)
Add: bad debt (expense) benefit		—			252			584
Deduct: written-off accounts		—			115			—
Balance at end of year	$	—		$	—		$	(367	)

5. Long-Term Debt

     On March 29, 2007, we completed a private offering of $150 million aggregate principal amount of unregistered 10¹/₄% Senior Secured Notes due 2015, or our Secured Notes, pursuant to a Purchase Agreement among us, Sterling Chemicals Energy, Inc., or Sterling Energy, one of our former wholly-owned subsidiaries, and Jefferies & Company, Inc. and CIBC World Markets Corp., as initial purchasers. In connection with that offering, we entered into an indenture, dated March 29, 2007, among us, Sterling Energy, as guarantor, and U. S. Bank National Association, as trustee and collateral agent. On May 6, 2008, Sterling Energy was merged with and into us. Upon consummation of the merger, Sterling Energy no longer had independent existence and, consequently, our Secured Notes are no longer guaranteed by Sterling Energy. Pursuant to a registration rights agreement among us, Sterling Energy and the initial purchasers, we agreed to use commercially reasonable efforts to file an exchange offer registration statement to exchange our unregistered Secured Notes for a new issue of substantially identical debt securities registered under the Securities Act, to cause the registration statement to become effective by December 24, 2007 and to complete the exchange offer within 50 days of the effective date of the registration statement. On August 30, 2007, we made an initial filing of this required exchange offer registration statement. However, the registration statement was not declared effective by December 24, 2007 and, as a result, the interest rate on our Secured Notes increased by 0.25% per annum on each of December 25, 2007, March 24, 2008 and June 22, 2008. The registration statement was declared effective on August 13, 2008 and the exchange offer was closed on September 19, 2008. As a result, the interest rate on our Secured Notes has reverted back to the face amount of 10¹/₄% per annum. The additional interest incurred from December 25, 2007 through the closing of the exchange offer was approximately $0.5 million and was paid on April 1 and October 1, 2008.

     Our indenture contains affirmative and negative covenants and customary events of default, including payment defaults, breaches of covenants and certain events of bankruptcy, insolvency and reorganization. If an event of default occurs and is continuing, other than an event of default triggered upon certain bankruptcy events, the trustee under our indenture or the holders of at least 25% in principal amount of our outstanding Secured Notes may declare our Secured

52

Notes to be due and payable immediately. Upon an event of default, the trustee may also take actions to foreclose on the collateral securing our outstanding Secured Notes, subject to the terms of an intercreditor agreement dated March 29, 2007, among us, Sterling Energy, the trustee and The CIT Group/Business Credit, Inc. Our indenture does not require us to maintain any financial ratios or satisfy any financial maintenance tests. We are currently in compliance with all of the covenants contained in our indenture.

     Interest is due on our outstanding Secured Notes on April 1 and October 1 of each year. Our outstanding Secured Notes, which mature on April 1, 2015, are senior secured obligations and rank equally in right of payment with all of our existing and future senior indebtedness. Subject to specified permitted liens, our outstanding Secured Notes are secured (i) on a first priority basis, by all of our fixed assets and certain related assets, including, without limitation, all property, plant and equipment and (ii) on a second priority basis, by our other assets, including, without limitation, accounts receivable, inventory, capital stock of our domestic restricted subsidiaries, intellectual property, deposit accounts and investment property.

     On December 19, 2002, we entered into a Revolving Credit Agreement, or our revolving credit facility, with The CIT Group/Business Credit, Inc., as administrative agent and a lender, and certain other lenders. Under our revolving credit facility, we and Sterling Energy were co-borrowers and were jointly and severally liable for any indebtedness thereunder. After the merger of Sterling Energy with and into us, Sterling Energy ceased to be a co-borrower under our revolving credit facility. Our revolving credit facility is secured by first priority liens on all of our accounts receivable, inventory and other specified assets. On March 29, 2007, we amended and restated our revolving credit facility to, among other things, extend the term of our revolving credit facility until March 29, 2012, reduce the maximum commitment thereunder to $50 million, make certain changes to the calculation of the borrowing base and lower the interest rates and fees charged thereunder. Borrowings under our revolving credit facility bear interest, at our option, at an annual rate of a base rate plus 0.0% to 0.50% or the LIBOR rate plus 1.50% to 2.25%, depending on our borrowing availability at the time. We are also required to pay an aggregate commitment fee of 0.375% per year (payable monthly) on any unused portion of our revolving credit facility. Available credit under our revolving credit facility is subject to a monthly borrowing base of 70% of eligible accounts receivable plus 65% of eligible inventory. As of December 31, 2007, our borrowing base exceeded the maximum commitment under our revolving credit facility, making the total credit available under our revolving credit facility $50 million. However, since that time, the monetization of accounts receivable and inventory associated with our exit from the styrene business significantly decreased the borrowing base under our revolving credit facility. In response to the expected continued lower levels of accounts receivable and inventory, as well as our lesser need for a working capital facility, on June 30, 2008, we reduced our commitment under our revolving credit facility to $25 million.

     On November 7, 2008, we amended our revolving credit facility to substantially reduce restrictions, subject to minimum liquidity requirements, on investments of cash and other assets, cash dividends, repurchase of debt and equity securities, modifications to preferred stock terms, affiliate transactions, asset dispositions and certain business activities. We paid the administrative agent an amendment fee plus expenses totaling approximately $0.1 million in conection with this amendment. As of December 31, 2008, total credit available under our revolving credit facility was limited to $15.0 million, there were no loans outstanding and we had $3.9 million in letters of credit outstanding, resulting in borrowing availability of $11.1 million. Pursuant to Emerging Issues Task Force Issue No. 95-22, “Balance Sheet Classification of Borrowings under Revolving Credit Agreements That Include both a Subjective Acceleration Clause and a Lock-Box Arrangement,” any balances outstanding under our revolving credit facility would be classified as a current portion of long-term debt.

     Our revolving credit facility contains numerous covenants and conditions, including, but not limited to, restrictions on our ability to incur indebtedness, create liens, sell assets, make investments of cash and other assets, make capital expenditures, engage in mergers and acquisitions and pay cash dividends. Our revolving credit facility also includes various circumstances and conditions that would, upon their occurrence and subject in certain cases to notice and grace periods, create an event of default thereunder. Our revolving credit facility does not require us to maintain any financial ratios or satisfy any financial maintenance tests. We are currently in compliance with all of the covenants contained in our revolving credit facility.

Debt Maturities

     Our Secured Notes, which had an aggregate principal balance of $150 million outstanding as of December 31, 2008, are due on April 1, 2015.

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6. Income Taxes

     A reconciliation of federal statutory income taxes to our effective tax benefit is as follows:

	Year Ended December 31,
	2008			2007			2006
	(Dollars in Thousands)
Benefit for income taxes at statutory rates	$	(60	)	$	(8,551	)	$	(42,100	)
Non-deductible expenses		19			23			19
State income taxes		—			13			(1,262	)
Change in valuation allowance		(24	)		3,021			27,621
Other		(6	)		(9	)		1,096
Effective tax benefit	$	(71	)	$	(5,503	)	$	(14,626	)

     The income tax benefit for continuing operations and discontinued operations is shown below:

	Year Ended December 31,
	2008			2007			2006
	(Dollars in Thousands)
Tax benefit – continuing operations	$	(71	)	$	(4,129	)	$	(388	)
Tax benefit – discontinued operations		—			(1,374	)		(14,238	)
Total tax benefit	$	(71	)	$	(5,503	)	$	(14,626	)

     The income tax benefit is composed of the following:

	Year Ended December 31,
	2008			2007			2006
	(Dollars in Thousands)
Current federal	$	(71	)	$	364		$	299
Deferred federal		—			(5,887	)		(13,685	)
Current and deferred state		—			20			(1,240	)
Total tax benefit	$	(71	)	$	(5,503	)	$	(14,626	)

     The components of our deferred income tax assets and liabilities are summarized below:

	December 31,
	2008			2007
	(Dollars in Thousands)
Deferred tax assets:
Accrued liabilities	$	1,163		$	1,496
Accrued postretirement cost		1,048			2,236
Accrued pension cost		14,096			—
Tax loss and credit carry forwards		25,691			26,846
State deferred taxes		185			98
Unearned revenue		23,194			23,656
Other		670			719
Total deferred tax assets	$	66,047		$	55,051
Deferred tax liabilities:
Property, plant and equipment	$	(13,596	)	$	(17,609	)
Accrued liabilities		—			—
Accrued pension cost		—			(1,277	)
Subtotal		(13,596	)		(18,886	)
Less: valuation allowance		(52,451	)		(36,165	)
Total deferred tax liabilities		(66,047	)		(55,051	)
Net deferred tax assets	$	—		$	—

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     As of December 31, 2008, we had an available U.S. federal income tax net operating loss, or NOL, of approximately $85.9 million, which expires during the years 2023 through 2028. The State of Texas enacted the revised Texas Franchise Tax effective January 1, 2008. Under the provisions of the Texas Franchise Tax, our existing State of Texas net operating loss carry-forwards, or State NOLs, were converted into state tax temporary credits. As of December 31, 2008, we had state tax temporary credits of $4.6 million and state carry-forward investment tax credits of $0.3 million resulting in a state valuation allowance of $2.7 million. As of December 31, 2007, we had approximately $5.0 million of state tax temporary credits and $0.8 million in carry-forward investment tax credits resulting in a state valuation allowance of approximately $4.0 million. The $1.3 million change in our state valuation allowance was due to expired or utilized state tax credits and current year activity.

     We regularly assess our deferred tax assets for recoverability based on both historical and anticipated earnings levels, and a valuation allowance is recorded when it is more likely than not that these amounts will not be recovered. As a result of our analysis at December 31, 2008, we concluded that a valuation allowance was needed against our deferred tax assets for $52.5 million, including a valuation allowance of $14.6 million for losses in other comprehensive income due to adjustments to our benefit plans, resulting in an overall net deferred tax asset/liability balance of zero as of December 31, 2008.

     At January 1, 2007, we had a $3.7 million contingent tax liability relating to certain tax deductions taken in previous tax returns. Under FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” or FIN 48, we concluded that these deductions do not meet the more likely than not recognition threshold. As such, the deferred tax asset was not recognized and the related contingent tax liability was eliminated at the date of adoption. This had no net impact on our financial statements and there was no cumulative impact on retained earnings. Our accounting policy is to recognize any accrued interest or penalties associated with unrecognized tax benefits as a component of income tax expense. Due to significant net operating losses incurred during the tax periods associated with our uncertain tax positions, no amount for penalties or interest has been recorded in our financial statements. We do not believe the total amount of unrecognized tax benefits will change significantly within the next twelve months. In addition, future changes in the unrecognized tax benefit will have no impact on the effective tax rate due to the existence of the valuation allowance. As of December 31, 2008, there were no changes to our uncertain tax positions.

     A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance, January 1, 2007	$	3,685
Additions for tax positions of the current year		—
Additions for tax positions of prior years		—
Reductions for tax positions of prior years for
Changes in judgment		—
Settlements during the period		—
Lapses of applicable statute of limitation		—
Balance, December 31, 2007	$	3,685
Balance, January 1, 2008	$	3,685
Additions for tax positions of the current year		—
Additions for tax positions of prior years		—
Reductions for tax positions of prior years for
Changes in judgment		18
Settlements during the period		—
Lapses of applicable statute of limitation		—
Balance, December 31, 2008	$	3,703

     We file income tax returns in the United States federal jurisdiction and file income and franchise tax returns in the State of Texas. We remain subject to federal examination for tax years ended December 31, 2002 and subsequent years, and we remain subject to examination by the State of Texas for tax years ended December 31, 2004 and subsequent years.

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7. Employee Benefits

     We have established the following benefit plans:

Retirement Benefit Plans

     We have non-contributory pension plans which cover our salaried and hourly wage employees who were employed by us on or before June 1, 2004. Under our hourly plan, the benefits are based primarily on years of service and an employee’s pay as of the earlier of the employee’s retirement or July 1, 2007. Under our salaried plan, the benefits are based primarily on years of service and an employee’s pay as of the earlier of the employee’s retirement or January 1, 2005. Our funding policy is consistent with the funding requirements of federal law and regulations.

     Pension plan assets are invested in a balanced portfolio managed by an outside investment manager. Our investment policy is to generate a total return that, over the long term, provides sufficient assets to fund its liabilities, reduces risk through diversification of investments within asset classes and complies with the Employee Retirement Income Security Act of 1974, or ERISA, by investing in a manner consistent with ERISA’s fiduciary standards. Within this balanced fund, assets are invested as follows:

	As of December 31,
	2008			2007
Equities		56	%		63	%
Bonds		30	%		26	%
Other		14	%		11	%
Total		100	%		100	%

     Information concerning the pension obligation, plan assets, amounts recognized in our financial statements and underlying actuarial assumptions is stated below:

	December 31,
	2008			2007
	(Dollars in Thousands)
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	123,165		$	126,135
Service cost		—			228
Interest cost		7,188			7,096
Actuarial gain		(1,575	)		(2,196	)
Curtailment loss (gain)		907			(19	)
Benefits paid		(8,518	)		(8,079	)
Benefit obligation at end of year	$	121,167		$	123,165

	December 31,
	2008			2007
	(Dollars in Thousands)
Change in plan assets:
Fair value at beginning of year	$	118,383		$	109,654
Actual return on plan assets		(35,247	)		10,695
Employer contributions		3,189			6,113
Benefits paid		(8,518	)		(8,079	)
Fair value at end of year	$	77,807		$	118,383
Funded status	$	(43,360	)	$	(4,782	)

	December 31,
	2008			2007
	(Dollars in Thousands)
Amounts recognized in the balance sheet consist of:
Current liabilities	$	(212	)	$	(163	)
Non-current liabilities		(43,148	)		(4,619	)
Net amount recognized in financial position	$	(43,360	)	$	(4,782	)

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	December 31,
	2008			2007
	(Dollars in Thousands)
Amount recognized in accumulated other comprehensive (loss) income consists of (pre-tax):
Net (loss) gain	$	(38,098	)	$	3,895
Net amount recognized in accumulated other comprehensive (loss) income(1)	$	(38,098	)	$	3,895

⁽¹⁾ $3.5 million of actuarial loss in accumulated other comprehensive loss as of December 31, 2008 is expected to be recognized as a component of net pension costs during 2009.

	December 31,
	2008			2007
Weighted-average assumptions to determine benefit obligations:
Discount Rate		6.25	%		6.00	%
Rates of increase in salary compensation level		—			—

     All plans have projected benefit obligations in excess of plan assets as of December 31, 2008. The total accumulated benefit obligation was $121.2 million and $123.2 million as of December 31, 2008 and 2007, respectively. Estimated contributions for 2009 are expected to be approximately $0.2 million. The expected pension expense for 2009 is $4.7 million.

     Effective July 1, 2007, we froze all accruals under our defined benefit pension plan for our hourly employees, which resulted in a plan curtailment under SFAS No. 88 “Employers’ Accounting for Settlement and Curtailments of Defined Benefit Pension Plans and for Termination Benefits.” As a result, we recorded a pre-tax curtailment gain of less than $0.1 million in 2007.

     During the third quarter of 2008, as a result of our work force reduction announced in July 2008, and in accordance with SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” we recorded plan curtailment losses in discontinued operations of $0.9 million for our defined benefit pension plans.

     Net periodic pension costs consist of the following components:

	Year Ended December 31,
	2008			2007			2006
	(Dollars in Thousands)
Components of net pension costs:
Service cost-benefits earned during the year	$	—		$	228		$	593
Interest on prior year’s projected benefit obligation		7,188			7,096			7,610
Expected return on plan assets		(8,352	)		(8,246	)		(7,767	)
Net amortization of actuarial loss		31			13			13
Curtailment loss (gain)		907			(19	)		—
Net pension (benefit) costs	$	(226	)	$	(928	)	$	449

	December 31,
	2008			2007
	(Dollars in Thousands)
Changes in plan assets and benefit obligations recognized in accumulated other comprehensive (loss) income (pre-tax):
Net (loss) gain	$	( 38,098	)	$	4,645
Amortization of loss		—			13
Total	$	(38,098	)	$	4,658

	December 31,
	2008			2007			2006
Weighted-average assumptions to determine net periodic benefit cost:
Discount Rate		6.00	%		5.50	%		5.75	%
Rates of increase in salary compensation level		—			—			—
Expected long-term rate of return on plan assets		7.50	%		7.50	%		7.50	%

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Postretirement Benefits Other Than Pensions

     We provide certain health care benefits and life insurance benefits for retired employees. Substantially all of our employees become eligible for these benefits at early retirement age. We accrue the cost of these benefits during the period in which the employee renders the necessary service.

     Health care benefits are currently provided to employees hired prior to June 1, 2004, who retire from us with ten or more years of credited service. Some of our employees are eligible for postretirement life insurance, depending on their hire date. Postretirement health care benefit plans are contributory. Benefit provisions for most hourly employees are subject to collective bargaining. In general, retiree health care benefits are paid as covered expenses are incurred.

     During the third quarter of 2007, we approved an amendment (effective December 31, 2007) to our postretirement medical plan which ended Medicare-supplemental medical and prescription drug coverage for retirees who are Medicare eligible. This amendment affects the majority of participants currently enrolled in our retiree medical plan who are enrolled in Medicare because they are 65 or over and was communicated to the participants during the third quarter of 2007. This plan amendment reduced our other postretirement benefit plan liability by $13 million with a corresponding change to accumulated other comprehensive (loss) income.

     During the third quarter of 2008, as result of our work force reduction announced in July 2008, and in accordance with SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” we recorded plan curtailment losses in discontinued operations of $0.3 million for our post retirement medical plan.

     On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003, or the Act, was passed. The Act introduces a prescription drug benefit under Medicare (Medicare Part D), as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. We measured the effects of the Act on our accumulated postretirement benefit obligation and determined that, based on the regulatory guidance currently available, benefits provided by our postretirement plan are at least actuarially equivalent to Medicare Part D, and accordingly, we expect to be entitled to the federal subsidy through 2010. In 2008, we received a subsidy of $0.1 million under the Act.

     Information concerning the plan obligation, the funded status, amounts recognized in our financial statements and underlying actuarial assumptions are stated below:

	December 31,
	2008			2007
	(Dollars in Thousands)
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	11,019		$	25,942
Service cost		55			119
Interest cost		575			1,198
Curtailments/plan amendments		290			(13,291	)
Actuarial gain		(2,518	)		(487	)
Benefits paid		(1,277	)		(2,462	)
Benefit obligation at end of year	$	8,144		$	11,019
Plan assets	$	—		$	—
Funded status	$	(8,144	)	$	(11,019	)

	December 31,
	2008			2007
	(Dollars in Thousands)
Amounts recognized in the balance sheet consist of:
Current liabilities	$	(789	)	$	(1,294	)
Non-current liabilities		(7,355	)		(9,725	)
Net amount recognized in financial position	$	(8,144	)	$	(11,019	)

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	December 31,
	2008		2007
	(Dollars in Thousands)
Amounts recognized in accumulated other comprehensive income (loss) consist of (pre-tax):
Net gain (loss)	$	391	$	(2,128	)
Plan amendment/prior service costs		22,686		24,852
Net amount recognized in accumulated other comprehensive income (loss)	$	23,077	$	22,724

	Year Ended December 31,
	2008			2007
Discount rate used to determine benefit obligations		6.25	%		6.00	%

     Net periodic plan costs consist of the following components:

	Year Ended December 31,
	2008			2007			2006
	(Dollars in Thousands)
Components of net plan costs:
Service cost	$	55		$	119		$	174
Interest cost		575			1,198			1,463
Net amortization:
Actuarial loss		—			1			99
Plan amendment/prior service costs		(2,165	)		(1,617	)		(1,434	)
Curtailment and special termination benefits		—			—			—
Net plan (benefit) costs	$	(1,535	)	$	(299	)	$	302
Discount rate used to determine periodic cost		6.00	%		5.75	%		5.75	%

	December 31,
	2008			2007
	(Dollars in Thousands)
Changes in benefit obligations recognized in accumulated other comprehensive (loss) income (pre-tax):
Net gain	$	2,519		$	1,567
Amortization of prior service cost		(2,165	)		(1,617	)
Plan amendment		—			12,212
Total	$	354		$	12,162

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     The weighted-average annual assumed health care trend rate is assumed to be 9% for 2009. The rate is assumed to decrease gradually to 4.5% by 2016 and remain level thereafter. Estimated contributions for 2009 are expected to be approximately $0.8 million. The expected amortization of amounts included in accumulated other comprehensive income as of December 31, 2008 to net benefit income for 2009 is $2.2 million. Based on plan changes enacted, assumed health care cost trend rates no longer have a significant effect on the amounts reported for our health care plans. A one percentage point change in assumed health care trend rates would have the following effects:

	1% Increase		1% Decrease
	(Dollars in Thousands)
Effect on total of service and interest cost components	$	22	$	(20	)
Effect on post-retirement benefit obligation		358		(321	)

     In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” or SFAS No. 158. SFAS No. 158 requires the recognition of the funded status of pension and other postretirement benefit plans on the balance sheet. The overfunded or underfunded status is recognized as an asset or liability in the balance sheet with changes occurring during the current year reflected through the comprehensive income portion of equity. SFAS No. 158 also requires the measurement date of the funded status of our defined benefit postretirement plans match the date of our fiscal year-end financial statements, eliminating the use of earlier measurement dates that were previously permissible. We recognized the funded status of our defined benefit postretirement plans in our balance sheet as of December 31, 2006. We also measured the assets and benefit obligations of our defined benefit postretirement plans as of the date of our fiscal year-end statement of financial position. The incremental effect of applying SFAS No. 158 to our employee benefit plans as of December 31, 2006 is summarized below (in thousands):

				Other
	Pension			Postretirement
	Plan			Benefits Plan
Increase (decrease) in liabilities	$	87		$	(10,562	)
Increase (decrease) in accumulated other comprehensive income		(56	)		6,812
Increase (decrease) in deferred income tax liabilities		(31	)		3,750

Estimated Future Benefits Payable

     We estimate that the future benefits payable over the next ten years under our pension and other post-retirement benefits as of December 31, 2008 are as follows (in thousands):

							Other
	Pensions-		Pensions-		Pensions-		Postretirement
	hourly		salaried		other		Benefits		Total
2009	$	3,397	$	4,784	$	212	$	789	$	9,182
2010		3,149		4,842		205		828		9,024
2011		3,071		4,937		199		816		9,023
2012		3,062		5,038		193		837		9,130
2013		3,120		5,123		187		825		9,255
2014-2018		16,545		27,022		896		3,928		48,391

Savings and Investment Plan

     Our Eighth Amended and Restated Savings and Investment Plan covers substantially all employees, including executive officers. This plan is qualified under Section 401(k) of the Internal Revenue Code. Each participant has the option to defer taxation of a portion of his or her earnings by directing us to contribute a percentage of such earnings to the plan. A participant may direct up to a maximum of 100% of eligible earnings to the plan, subject to certain limitations set forth in the Internal Revenue Code. A participant’s contributions become distributable upon the termination of his or her employment. We match 100% of employees’ contributions; to the extent such contributions do not exceed 6% of such participant’s base compensation (excluding bonuses, profit sharing and similar types of compensation). Our expense under this plan was $1.0 million, $1.0 million and $1.0 million for the years ended December 31, 2008, 2007 and 2006, respectively.

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Bonus Plan and Gain Sharing Plan

     In February 2002, our Board of Directors, upon recommendation of its Compensation Committee, approved the establishment of a Bonus Plan and a Gain Sharing Plan. The Bonus Plan, which has been amended several times since its original adoption, is designed to benefit all qualified salaried employees, while the Gain Sharing Plan is designed to benefit all qualified hourly employees. Both plans provide our qualified employees the opportunity to earn bonuses depending on, among other things, our annual financial performance. We expensed $1.2 million, $1.4 million and $1.4 million for the years ended December 31, 2008, 2007 and 2006, respectively, in connection with payments under our Bonus Plan and our Gain Sharing Plan.

Key Employee Protection Plan

     On January 26, 2000, we instituted our Key Employee Protection Plan, which has subsequently been amended several times. We established this plan to help us retain certain of our employees and motivate them to continue to exert their best efforts on our behalf during periods when we may be susceptible to a change of control, and to assure their continued dedication and objectivity during those periods. Our Compensation Committee has designated a select group of management or highly compensated employees as participants under our Key Employee Protection Plan, and has established their respective applicable multipliers and other variables for determining benefits. Our Compensation Committee is also authorized to designate additional management or highly compensated employees as participants under our Key Employee Protection Plan and set their applicable multipliers. Our Compensation Committee may also terminate any participant’s participation under the plan with 60 days prior notice if it determines that the participant is no longer one of our key employees.

     Under our Key Employee Protection Plan, any participant under the plan that terminates his or her employment for “Good Reason” or is terminated by us for any reason other than “Misconduct” or “Disability” within his or her “Protection Period” is entitled to benefits under the plan. A participant’s Protection Period commences 180 days prior to the date on which a specified change of control occurs and ends either two years or 18 months after the date of that change of control, depending on the size of the participant’s applicable multiplier. A participant may also be entitled to receive payments under this plan in the absence of a change of control if he or she terminates his or her employment for “Good Reason” or is terminated by us for any reason other than “Misconduct” or “Disability,” but in these circumstances his or her applicable multiplier is reduced by 50%. If a participant becomes entitled to benefits under our Key Employee Protection Plan, we are required to provide the participant with a lump sum cash payment that is determined by multiplying the participant’s applicable multiplier by (a) the sum of the participant’s highest annual base compensation during the last three years plus (b) the participant’s targeted bonus for the year of termination, and then deducting the sum of any other separation, severance or termination payments made by us to the participant under any other plan or agreement or pursuant to law.

     In addition to the lump sum payment, the participant is entitled to receive any accrued but unpaid compensation, compensation for unused vacation time and any unpaid vested benefits earned or accrued under any of our benefit plans (other than qualified plans). Also, for a period of 24 months (including 18 months of COBRA coverage), the participant will continue to be covered by all of our life, medical and dental insurance plans and programs (other than disability), as long as the participant makes a timely COBRA election and pays the regular employee premiums required under our plans and programs and by COBRA. In addition, our obligation to continue to provide coverage under our plans and programs to any participant ends if and when the participant becomes employed on a full-time basis by a third party which provides the participant with substantially similar benefits.

     If any payment or distribution under our Key Employee Protection Plan to any participant is subject to excise tax pursuant to Section 4999 of the Internal Revenue Code, the participant is entitled to receive a gross-up payment from us in an amount such that, after payment by the participant of all taxes on the gross-up payment, the amount of the gross-up payment remaining is equal to the excise tax imposed under Section 4999 of the Internal Revenue Code. However, the maximum amount of any gross-up payment is 25% of (a) the sum of the participant’s highest annual base compensation during the last three years plus (b) the participant’s targeted bonus for the year of payment.

     We may terminate our Key Employee Protection Plan at any time and for any reason but any termination does not become effective as to any participant until 90 days after we give the participant notice of the termination of the plan. In addition, we may amend our Key Employee Protection Plan at any time and for any reason, but any amendment that reduces, alters, suspends, impairs or prejudices the rights or benefits of any participant in any material respect does not become effective as to that participant until 90 days after we give him or her notice of the amendment of the plan. No termination of our Key Employee Protection Plan, or any of these types of amendments to the plan, can be effective with respect to any participant if the termination or amendment is related to, in anticipation of or during the pendency of

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a change of control, is for the purpose of encouraging or facilitating a change of control or is made within 180 days prior to any change of control. Finally, no termination or amendment of our Key Employee Protection Plan can affect the rights or benefits of any participant that are accrued under the plan at the time of termination or amendment or that accrue thereafter on account of a change of control that occurred prior to the termination or amendment or within 180 days after such termination or amendment. We expensed zero, $0.6 million and zero in 2008, 2007 and 2006, respectively, pursuant to this plan.

Severance Pay Plan

     On March 8, 2001, our Board of Directors approved our Severance Pay Plan, which has subsequently been amended. This plan covers all of our non-unionized employees and was established to help us retain these employees by assuring them that they will receive some compensation in the event that their employment is adversely affected in specified ways. Under our Severance Pay Plan, any participant that terminates his or her employment for “Good Reason” or is terminated by us for any reason other than “Misconduct” or “Disability” is entitled to benefits under our Severance Pay Plan. If a participant becomes entitled to benefits under our Severance Pay Plan, we are required to provide the participant with a lump sum cash payment in an amount equivalent to two weeks of such participant’s base salary for each credited year of service, with a maximum payment of one year’s base salary, however, certain salary grades are guaranteed a minimum payment of six month’s base salary without consideration of credited years of service. The amount of this lump sum payment is reduced, however, by the amount of any other separation, severance or termination payments made by us to the participant under any other plan or agreement, including our Key Employee Protection Plan, or pursuant to law.

     In addition to the lump sum payment, for a period of six months after the participant’s termination date, the COBRA premium required to be paid by such participant for coverage under our medical and dental plans may not be increased beyond that required to be paid by active employees for similar coverage under those plans, as long as the participant makes a timely COBRA election and pays the regular employee premiums required under those plans and otherwise continues to be eligible for coverage under those plans.

     We may terminate or amend our Severance Pay Plan at any time and for any reason but no termination or amendment of our Severance Pay Plan can affect the rights or benefits of any participant that are accrued under the plan at the time of termination or amendment. With respect to continuing operations, we recorded zero expense in 2008, 2007 and 2006.

Employment Agreement

     Effective as of May 27, 2008, John V. Genova was appointed as our President and Chief Executive Officer and was elected as a member of our Board of Directors. Mr. Genova’s employment as our President and Chief Executive Officer is governed by an Employment Agreement, or the Employment Agreement, dated effective as of May 27, 2008. The Employment Agreement has a term of three years with automatic one-year extensions each year unless we or he elect to stop the automatic extensions. The Employment Agreement governs Mr. Genova’s base salary, bonus, incentive plan and other employee benefits as well as severance benefits if his employment is terminated in specified ways for specified reasons. In addition, when Mr. Genova signed the Employment Agreement, we granted Mr. Genova options to acquire 120,000 shares of our common stock at an exercise price of $31.60 per share. These options, which were granted under our Existing 2002 Stock Plan, have a ten-year term and will vest and become exercisable in three equal, annual installments, with the first installment vesting and becoming exercisable on May 27, 2009 (subject to Mr. Genova’s continued employment with us on each applicable vesting date).

8. Stock-Based Compensation

     On December 19, 2002, we adopted our 2002 Stock Plan and reserved 379,747 shares of our common stock for issuance under the plan (subject to adjustment), which has since been amended, or our Existing 2002 Stock Plan. Under our Existing 2002 Stock Plan, officers and key employees, as designated by our Board of Directors, may be issued stock options, stock awards, stock appreciation rights or stock units. There are currently options to purchase a total of 347,500 shares of our common stock outstanding under our Existing 2002 Stock Plan, with a weighted average contractual term of ten years, all at an exercise price of $31.60, and an additional 16,414 shares of common stock available for issuance under our Existing 2002 Stock Plan.

     During the second quarter of 2008, we granted 125,000 stock options at a weighted-average exercise price of $31.60. The fair value of each grant was estimated to be $7.25 on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

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	2008
Expected life (years)		7.5
Expected volatility		54.3	%
Expected dividend yield		—
Risk-free interest rate		3.5	%

     On January 1, 2006, we adopted Statement of Financial Accounting Standards, or SFAS No. 123-Revised 2004, “Share-Based Payments,” or SFAS No. 123(R), using the modified prospective method. SFAS No. 123(R) is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” or SFAS No. 123, and superseded Accounting Principles Board No. 25, “Accounting for Stock Issued to Employees,” or APB No. 25. Under SFAS No. 123(R), the cost of employee services received in exchange for a stock-based award is determined based on the grant-date fair value (with exceptions). That cost is then recognized over the period during which the employee is required to provide services in exchange for the award (usually the vesting period).

     On January 1, 2006, using the modified prospective method under SFAS No. 123(R), we began recognizing expense on any unvested awards under our Existing 2002 Stock Plan that were granted prior to that time. Any awards granted under our Existing 2002 Stock Plan after December 31, 2005 are being expensed over the vesting period of the award. The impact to net income and cash flows from operations for our stock based compensation expense was $0.3 million and less than $0.1 million for the years ended December 31, 2008 and 2007, respectively.

     A summary of our stock option activity for the years ended December 31, 2008, 2007 and 2006 is presented below:

	December 31, 2008					December 31, 2007					December 31, 2006
				Weighted-Average					Weighted-Average				Weighted-Average
	Shares			Exercise Price		Shares			Exercise Price		Shares		Exercise Price
Outstanding at beginning of year		245,500		$	31.60		278,500		$	31.60		278,500	$	31.60
Forfeited		(23,000	)		31.60		(33,000	)		31.60		—		—
Exercised		—			—		—			—		—		—
Granted		125,000			31.60		—			—		—		—
Outstanding at end of year		347,500		$	31.60		245,500		$	31.60		278,500	$	31.60
Options exercisable at end of year		222,500					245,500					269,333

     On December 5, 2008, the Compensation Committee of our Board adopted our Second Amended and Restated 2002 Stock Plan. The effectiveness of our Second Amended and Restated 2002 Stock Plan is subject to the approval of our stockholders. If approved by our stockholders, an additional 1,000,000 shares of our common stock will be available for issuance under our Second Amended and Restated 2002 Stock Plan.

9. Commitments and Contingencies

Product Contracts

     We have certain long-term agreements, which provide for the dedication of 100% of our production of acetic acid and plasticizers, each to one customer. Our Acetic Acid Production Agreement provides for cost recovery plus an agreed margin or element of profit based upon market price. See Note 10 for more information.

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Environmental, Health and Safety

     Our operations involve the handling, production, transportation, treatment and disposal of materials that are classified as hazardous or toxic and that are extensively regulated by environmental and health and safety laws, regulations and permit requirements. Environmental permits required for our operations are subject to periodic renewal and may be revoked or modified for cause or when new or revised environmental requirements are implemented. Changing and increasingly strict environmental requirements can affect the manufacturing, handling, processing, distribution and use of our chemical products and, if so affected, our business and operations may be materially and adversely affected. In addition, changes in environmental requirements may cause us to incur substantial costs in upgrading or redesigning our facilities and processes, including our waste treatment, storage, disposal and other waste handling practices and equipment.

     A business risk inherent in chemical operations is the potential for personal injury and property damage claims from employees, contractors and their employees and nearby landowners and occupants. While we believe our business operations and facilities generally are operated in compliance with all applicable environmental and health and safety requirements in all material respects, we cannot be sure that past practices or future operations will not result in material claims or regulatory action, require material environmental expenditures or result in exposure or injury claims by employees, contractors or their employees or the public. Some risk of environmental costs and liabilities is inherent in our operations and products, as it is with other companies engaged in similar businesses.

     Our operating expenditures for environmental matters, primarily waste management and compliance, were $15.9 million, $17.8 million and $20.4 million in 2008, 2007 and 2006, respectively. We spent $1.1 million, $0.5 million and $2.0 million for environmentally-related capital projects in 2008, 2007 and 2006, respectively. In 2009, we anticipate spending approximately $2.1 million for capital projects related to waste management, incident prevention and environmental compliance. We do not expect to make any capital expenditures in 2009 related to remediation of environmental conditions.

     In light of our historical expenditures and expected future results of operations and sources of liquidity, we believe we will have adequate resources to conduct our operations in compliance with applicable environmental, health and safety requirements. Nevertheless, we may be required to make significant site and operational modifications that are not currently contemplated in order to comply with changing facility permitting requirements and regulatory standards. Additionally, we have incurred, and may continue to incur, a liability for investigation and cleanup of waste or contamination at our own facilities or at facilities operated by third parties where we have disposed of waste. We continually review all estimates of potential environmental liabilities, but we may not have identified or fully assessed all potential liabilities arising out of our past or present operations or the amount necessary to investigate and remediate any conditions that may be significant to us. Based on information available at this time and reviews undertaken to identify potential exposure, we believe any amount reserved for environmental matters is adequate to cover our potential exposure for clean-up costs.

     Air emissions from our manufacturing facility in Texas City, Texas, or our Texas City facility, are subject to certain permit requirements and self-implementing emission limitations and standards under state and federal laws. Our Texas City facility is subject to the federal government’s June 1997 National Ambient Air Quality Standards, or NAAQS, which lowered the ozone and particulate matter concentration thresholds for attainment. Our Texas City facility is located in an area that the Environmental Protection Agency, or EPA, has classified as not having achieved attainment under the NAAQS for ozone, either on a 1-hour or an 8-hour basis. Ozone is typically controlled by reduction of emissions of volatile organic compounds, or VOCs, and nitrogen oxide, or NOx. The Texas Commission for Environmental Quality, or TCEQ, has imposed strict requirements on regulated facilities, including our Texas City facility, to ensure that the air quality control region will achieve attainment under the NAAQS for ozone. Local authorities may also impose new ozone and particulate matter standards. Compliance with these stricter standards may substantially increase our future control costs for emissions of NOx, VOCs and particulate matter, the amount and full impact of which cannot be determined at this time.

     In 2002, the TCEQ adopted a revised State Implementation Plan, or SIP, in order to achieve compliance with the “1-hour” ozone standard under the Clean Air Act by 2007. The EPA approved this “1-hour” SIP, which required an 80% reduction of NOx emissions, and extensive monitoring of emissions of highly reactive VOCs, or HRVOCs, such as ethylene, in the Houston-Galveston-Brazoria area, or the HGB area. We are in full compliance with these regulations. However, the HGB area failed to attain compliance with the 1-hour ozone standard, and Section 185 of the Clean Air Act requires implementation of a program of emissions-based fees until the standard is attained. These “Section 185 fees” will be assessed on all NOx and VOC emissions in 2008 and beyond in the HGB area which are in excess of 80%

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of the baseline year. The method for calculating baseline emissions, as well as other details of the program, has not yet been developed. At the present time, we do not expect to be assessed any fees for our emissions for 2008, primarily due to the reduction in emissions from our Texas City facility following the closure of our styrene facility.

     In April 2004, the HGB area was designated a “moderate” non-attainment area with respect to the “8-hour” ozone standard of the Clean Air Act. On May 23, 2007, the TCEQ formally adopted SIP revisions to bring the HGB area from “moderate” non-attainment status into attainment by June 15, 2010. This “8-hour” SIP called for relatively modest additional controls at our Texas City facility, which would require very little expense on our part. However, in response to a request from the Governor of Texas, the EPA has now reclassified the HGB area as a “severe” non-attainment area, effective October 31, 2008. As a result, the new mandated compliance date for attainment of the 8-hour ozone standard is June 15, 2019. A revised 8-hour SIP to address the HGB area’s “severe” non-attainment designation will now have to be submitted to the EPA by April 10, 2010. The content of the revised 8-hour SIP is unknown at this time making it difficult to predict our final cost of compliance with these regulations. However, given the permanent shutdown of our PA and styrene facilities, we do not anticipate incurring any further cost of compliance in connection with the revised 8-hour SIP.

     To reduce the risk of offsite consequences from unanticipated events, we acquired a greenbelt buffer zone adjacent to our Texas City site in 1991. We also participate in a regional air monitoring network to monitor ambient air quality in the Texas City community.

Legal Proceedings

     On July 5, 2005, Patrick B. McCarthy, an employee of Kinder-Morgan, Inc., or Kinder-Morgan, was seriously injured at Kinder-Morgan’s facilities near Cincinnati, Ohio, while attempting to offload a railcar containing one of our plasticizers products. On October 28, 2005, Mr. McCarthy and his family filed a suit in the Court of Common Pleas, Hamilton County, Ohio (Case No. A0509 144) against us and six other defendants. Since that time, two of the defendants have been dismissed from the case. The plaintiffs are seeking in excess of $42 million in alleged compensatory and punitive damages from the defendants in the aggregate. The case is currently in trial, with jury deliberations expected to begin in April. At this time, it is impossible to determine what, if any, liability we will have for this incident and we are vigorously defending the suit. We believe that all, or substantially all, of any liability imposed upon us as a result of this suit and our related out-of-pocket costs and expenses will be covered by our insurance policies, subject to a $1 million deductible, which was met in January 2008. As of December 31, 2008, we have received $0.6 million from our insurance carrier for the reimbursement of amounts exceeding the deductible, and we have accrued an additional $0.3 million for the reimbursement of amounts exceeding the deductible which were incurred during the fourth quarter of 2008. We do not believe that this incident will have a material adverse effect on our business, financial condition, results of operations or cash flows, although we cannot guarantee that a material adverse effect will not occur.

     On August 17, 2006, we initiated an arbitration proceeding against BP Amoco Chemical Company, or BP Chemicals, to resolve a dispute involving the interpretation of provisions of our Acetic Acid Production Agreement with BP Chemicals related to blend gas credits. On August 20, 2008, we and BP Chemicals entered into a Mutual Release and Settlement Agreement, or the Settlement Agreement, which resolved the dispute over the blend gas credits. Under the Settlement Agreement, each of the parties released all known claims against each other related to the acetic acid relationship that pertained to periods prior to January 1, 2008, BP Chemicals paid us $3.3 million on August 26, 2008 and we retained all previous amounts we received from BP Chemicals related to blend gas credits, which resulted in us recording $6.5 million in revenue in the third quarter of 2008. Concurrently with the entry into the Settlement Agreement, we and BP Chemicals entered into our Restated Acetic Acid Production Agreement.

     On February 21, 2007, we received a summons naming us, several benefit plans and the plan administrators for those plans as defendants in a class action suit, Case No. H-07-0625 filed in the United States District Court, Southern District of Texas, Houston Division. The plaintiffs are seeking to represent a proposed class of retired employees of Sterling Fibers, Inc., one of our former subsidiaries that we sold in connection with our emergence from bankruptcy in 2002. The plaintiffs are alleging that we were not permitted to increase their premiums for retiree medical insurance based on a provision contained in the asset purchase agreement between us and Cytec Industries Inc. and certain of its affiliates governing our purchase of our former acrylic fibers business in 1997. During our bankruptcy case, we specifically rejected this asset purchase agreement and the bankruptcy court approved that rejection. The plaintiffs are claiming that we violated the terms of the benefit plans and breached fiduciary duties governed by the Employee Retirement Income Security Act and are seeking damages, declaratory relief, punitive damages and attorneys’ fees. The plaintiffs have moved for partial summary judgment and for class certification related to their claims for denial of benefits under our retiree medical plans and the defendants are opposing that motion. We are vigorously defending this

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action and are unable to state at this time if a loss is probable or remote and are unable to determine the possible range of loss related to this matter, if any.

     On February 4, 2008, we filed a Petition for Declaratory Judgment in the 212^th District Court of Galveston County, Texas (Case #08CV0108) against Marathon Petroleum Company LLC, or Marathon, in connection with a dispute between Marathon and us under a Purchase Agreement for FCC Off-Gas, or the Off-Gas Purchase Agreement. Under the Off-Gas Purchase Agreement, we purchase an amount of off-gas each month from Marathon within a stated range at Marathon’s option. Following the closure of certain production units at our Texas City facility our demand for off-gas is below the low-end of the stated range. On July 31, 2007, and again on November 19, 2007, we invoked the contract’s undue economic hardship clause and requested that Marathon enter into good faith negotiations to modify the terms of the Off-Gas Purchase Agreement. After Marathon disputed the applicability of the economic hardship provision and refused to renegotiate the terms of Off-Gas Purchase Agreement, we filed a declaratory judgment action to enforce the terms of economic hardship provision, and Marathon counter-claimed against us for breach of contract. Significant discovery occurred in connection with this matter during the fourth quarter of 2008 and first quarter of 2009. On February 3, 2009, the parties engaged in an unsuccessful mediation for this case. This matter is scheduled for trial the week of April 13, 2009. At this time, it is impossible to determine what, if any, liability we will have under Marathon’s counter-claim and we are vigorously pursuing our declaratory judgment filing and defending against Marathon’s counter-claim. We do not believe that this matter will have a material adverse impact on our business, financial condition, results of operations or cash flows, although we cannot guarantee that a material adverse effect will not occur.

     On March 4, 2008, Gulf Hydrogen and Energy, L.L.C., or Gulf Hydrogen, filed suit against us in the 212th District Court of Galveston County, Texas (Cause No. 08CV0220) to enforce the provisions of a Memorandum of Understanding, or MOU, entered into between us and Gulf Hydrogen involving the possible sale of our outstanding equity interests to Gulf Hydrogen for approximately $390 million. This lawsuit also named certain of our officers, a director and our primary stockholder as defendants. Gulf Hydrogen did not allege a specific amount of money damages in the lawsuit but asked the court to enforce certain MOU provisions which expired on March 1, 2008, including restrictions on our ability to engage in negotiations related to transactions that would result in a change of control or to enter into mergers, stock sales or other transactions relating to a material part of our business or operations and other insignificant restrictions customary for transactions of a similar nature. Gulf Hydrogen alleged that the defendants breached the terms of the MOU and made certain misrepresentations in connection therewith. In March 2009, the parties entered into a confidential settlement agreement and the lawsuit was dismissed with prejudice by all parties. This matter did not have a material adverse affect on our business, financial condition, results of operations or cash flows.

     We are subject to various other claims and legal actions that arise in the ordinary course of our business. We do not believe that any of these claims and actions, separately or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or cash flows, although we cannot guarantee that a material adverse effect will not occur.

     As we believe the potential for an unfavorable outcome regarding one or more of the matters described above is probable, in accordance with SFAS No. 5, “Accounting for Contingencies,” we have accrued a $1.0 million litigation reserve during 2008.

10. Leasing Arrangements

     Certain of our contractual arrangements with customers and suppliers qualify as leasing arrangements under EITF No. 01-8, “Determining Whether an Arrangement is a Lease,” and SFAS No. 13, “Accounting for Leases.” These leasing arrangements consist principally of our Acetic Acid Production Agreement with BP Chemicals, our Plasticizers Production Agreement with BASF, and a supply agreement with Praxair related to the purchase of hydrogen and carbon monoxide. These agreements are classified as operating leases in accordance with SFAS No. 13, and expire over the next eight to 23 years.

     The following schedule provides an analysis of the net book value of our plant, property and equipment under the operating leases with BP Chemicals and BASF as of December 31, 2008 (in thousands):

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Machinery and equipment	$	72,859
Other		768
Less: accumulated depreciation		(47,546	)
	$	26,081

     The following is a schedule by year of minimum future rentals on noncancelable operating leases with BP Chemicals and BASF as of December 31, 2008 (in thousands):

Year ending December 31:
2009	$	8,075
2010		8,075
2011		8,075
2012		8,075
2013		8,075
Thereafter		12,594
	$	52,969

     The following schedule shows the composition of revenue derived from the operating leases with BP Chemicals and BASF (in thousands):

	Year ended December 31,
	2008		2007		2006
Minimum rentals	$	3,200	$	3,200	$	3,200
Contingent rentals (1)		28,634		—		—
	$	31,834	$	3,200	$	3,200

⁽¹⁾ Contingent rentals are primarily based on profit sharing.

     The following is a schedule by year of future minimum rental payments required under the operating lease with Praxair that has a remaining noncancelable lease term in excess of one year as of December 31, 2008 (in thousands):

Year ending December 31:
2009	$	7,751
2010		7,751
2011		7,751
2012		7,751
2013		7,751
Thereafter		20,023
	$	58,778

     The following schedule shows the composition of total rental expense for the operating lease with Praxair (in thousands):

	Year ended
	December 31,
	2008
Minimum rentals	$	7,751
Contingent rentals (1)		216
	$	7,967

⁽¹⁾ Contingent rentals are based on carbon monoxide purchases in excess of the minimum purchase requirement.

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     We have entered into various non-cancelable long-term operating leases. Specifically, future minimum lease commitments for the lease of our corporate offices at December 31, 2008 are as follows: 2009 $0.3 million; 2010 $0.3 million; 2011 $0.3 million; 2012 $0.3 million; 2013 $0.3 million and thereafter zero. Rent expense for our corporate offices was $0.3 million for each of the years ended December 31, 2008, 2007 and 2006, respectively.

11. Operating Segment and Sales Information

     As of December 31, 2008, after considering the effects of discontinued operations, we have reported our operations through two segments: acetic acid and plasticizers. The accounting policies are the same as those described in Note 1. We use gross profit for reporting the results of our operating segments and this measure includes all operating items related to the businesses. There are no sales between segments. The revenues and gross profit (losses) for each of our reportable operating segments are as follows:

	Year Ended December 31
	2008			2007			2006
	(Dollars in Thousands)
Revenues:
Acetic acid	$	129,506		$	100,772		$	96,724
Plasticizers		30,997			28,133			44,535
Other		949			908			—
Total	$	161,452		$	129,813		$	141,259
Segment gross profit:
Acetic acid	$	28,321		$	23,441		$	25,976
Plasticizers		4,099			840			(847	)
Other(1)		(2,122	)		(10,899	)		(11,283	)
Gross profit:		30,298			13,382			13,846
Selling, general and administrative expenses		12,331			8,679			7,073
Impairment of long-lived assets		7,403			—			—
Interest and debt related expenses		17,175			17,313			10,680
Interest income		(4,408	)		(1,607	)		(601	)
Other expense (income)		(2,030	)		839			(724	)
Loss from continuing operations before income tax	$	(173	)	$	(11,842	)	$	(2,582	)
Depreciation and amortization expenses:
Acetic acid	$	6,209		$	5,319		$	6,108
Plasticizers		1,724			1,990			4,328
Other(2)		1,669			3,599			20,040
Total	$	9,602		$	10,908		$	30,476
Capital expenditures:
Acetic acid	$	3,467		$	1,220		$	771
Plasticizers		—			—			—
Other-plant infrastructure(3)		2,950			5,191			10,776
Total	$	6,417		$	6,411		$	11,547

	Year Ended December 31
	2008		2007
Total assets:
Acetic acid	$	40,050	$	53,769
Plasticizers		5,885		13,216
Other(4)		216,011		239,459
Total	$	261,946	$	306,444

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(1)	Gross profit (loss) for Other includes residual, unallocated costs from styrene operations and various unallocated corporate charges and credits.
(2)	Includes depreciation and amortization expense of $0.5 million, $2.5 million and $18.1 million for discontinued operations in 2008, 2007 and 2006, respectively.
(3)	Includes capital expenditures of zero, $2.6 million and $6.6 million for discontinued operations in 2008, 2007 and 2006, respectively.
(4)	Components of “Other” are presented in the table below:

	Year Ended December 31
	2008		2007
Total assets:
Corporate:
Cash	$	156,126	$	100,183
Other		17,989		27,998
Plant infrastructure:
Property, plant and equipment, net		41,730		39,524
Assets of discontinued operations.		166		71,754
Total	$	216,011	$	239,459

     Sales to major customers constituting 10% or more of total revenues from continuing operations were as follows:

	Year Ended December 31,
	2008		2007		2006
	(Dollars in thousands)
Major customers:
BP Chemicals	$	129,506	$	100,772	$	96,724
BASF		30,997		28,132		44,535

     There were no export sales in continuing operations.

12. Financial Instruments

Concentrations of Risk

     We sell our products primarily to two companies involved in the petrochemicals industry. We perform ongoing credit evaluations of our customers and generally do not require collateral for accounts receivable. Historically, our credit losses have been minimal.

     We maintain cash deposits with major banks, which from time to time may exceed federally insured limits. We periodically assess the financial condition of these institutions and believe that the likelihood of any possible loss is minimal.

Fair Value of Financial Instruments

     The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities approximate fair value due to the short maturities of these instruments. As of December 31, 2008 and 2007, the fair value of our Secured Notes was $132.0 million and $152.0 million, respectively, based on broker quotes for private transactions.

13. Capital Stock

     Under our Certificate of Incorporation, we are authorized to issue 20,125,000 shares of capital stock, consisting of 20,000,000 shares of common stock, par value $0.01 per share, and 125,000 shares of preferred stock, par value $0.01 per share. In December 2002, we made our initial issuance of 2,825,000 shares of common stock. Subject to applicable law and the provisions of our Certificate of Incorporation, the indenture governing our Secured Notes and our revolving credit facility, dividends may be declared on our shares of capital stock at the discretion of our Board of Directors and may be paid in cash, in property or in shares of our capital stock. Upon the effective date of our Plan of Reorganization, we also issued warrants to purchase, in the aggregate, 949,367 shares of common stock. None of these warrants were exercised prior to their expiration on December 19, 2008.

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14. Series A Convertible Preferred Stock

     Under our Certificate of Incorporation, we are authorized to issue 125,000 shares of preferred stock, par value $0.01 per share. In December 2002, we authorized 25,000 shares and made an initial issuance of 2,175 shares of our Series A Convertible Preferred Stock, or our Series A Preferred Stock. Each share of our Series A Preferred Stock is convertible at the option of the holder thereof at any time into 1,000 shares of our common stock, subject to adjustments. Our Series A Preferred Stock has a cumulative dividend rate of 4% per quarter of the liquidation value of the outstanding shares of our Series A Preferred Stock, payable in additional shares of our Series A Preferred Stock in arrears on the first business day of each calendar quarter. As shares of our Series A Preferred Stock are convertible into shares of our common stock (currently on a one to 1,000 share basis), each dividend paid in additional shares of our Series A Preferred Stock has a dilutive effect on our shares of common stock. Since the initial issuance of our Series A Preferred Stock, we have issued an additional 3,431.704 shares of our Series A Preferred Stock in dividends (convertible into 3,431,704 shares of our common stock).

     Our Series A Preferred Stock carries a liquidation preference of $13,793 per share, subject to adjustments. We may redeem all or any number of our shares of Series A Preferred Stock at any time after December 19, 2005, at a redemption price determined in accordance with the Certificate of Designations, Preferences, Rights and Limitations of our Series A Preferred Stock, provided that the current equity value of our capital stock issued in December 2002 exceeds specified levels. The holders of our Series A Preferred Stock may elect to have us redeem all or any of their shares of our Series A Preferred Stock following a specified change of control at a redemption price equal to the greater of:

• the liquidation preference for such shares (plus accrued and unpaid dividends);

• in the event of a merger or consolidation, the fair market value of the consideration that would have been received in such merger or consolidation in respect of the shares of our common stock into which such shares of our Series A Preferred Stock were convertible immediately prior to such merger or consolidation had such shares of our Series A Preferred Stock been converted prior thereto; or

• in the event of some other specified change of control, the current market value of the shares of our common stock into which such shares of our Series A Preferred Stock were convertible immediately prior to such change of control had such shares of our Series A Preferred Stock been converted prior thereto (plus accrued and unpaid dividends).

     Given that certain of the redemption features are outside of our control, our Series A Preferred Stock has been reflected in the consolidated balance sheet as temporary equity.

     Our preferred stock dividends are recorded at their fair value, at each dividend accrual date. The fair value of our preferred stock dividends is determined each quarter using valuation techniques that include a component representing the intrinsic value of the dividends (which represents the greater of the liquidation value of the shares of our Series A Preferred Stock being issued or the fair value of the common stock into which those shares could be converted) and an option component (which is determined using a Black-Scholes Option Pricing Model). These dividends are recorded in our consolidated statements of operations, with an offset to redeemable preferred stock in our consolidated balance sheets. As we are in an accumulated deficit position, these dividends are treated as a reduction to additional paid-in capital. Assumptions utilized in the Black-Scholes model include:

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	2008			2007			2006
Risk-free interest rate		1.6	%		3.5	%		4.7	%
Volatility		63.6	%		55.5	%		46.2	%
Dividend yield		—			—			—
Expected term		5.0			5.0			5.0

     Our Series A Preferred Stock is not currently redeemable or probable of redemption. If our Series A Preferred Stock had been redeemed as of December 31, 2008, the redemption amount would have been approximately $61.7 million. The liquidation value of the outstanding shares of our Series A Preferred Stock as of December 31, 2008 was $77.3 million.

15. Related Party Transactions

     Resurgence Asset Management, L.L.C., or Resurgence, has beneficial ownership of a substantial majority of the voting power of our equity securities due to its investment and disposition authority over securities owned by its and its affiliates’ managed funds and accounts. Currently, Resurgence has beneficial ownership of 98.7% of our Series A Preferred Stock and 55.5% of our common stock, representing ownership of 85% of the total voting power of our equity. Each share of our Series A Preferred Stock is convertible at the option of the holder thereof at any time into 1,000 shares of our common stock, subject to adjustments. The holders of our Series A Preferred Stock are entitled to designate a number of our directors roughly proportionate to their overall equity ownership, but in any event not less than a majority of our directors as long as they hold in the aggregate at least 35% of the total voting power of our equity. As a result, these holders have the ability to control our management, policies and financing decisions, elect a majority of our Board and control the vote on most matters presented to a vote of our stockholders. In addition, our shares of Series A Preferred Stock, almost all of which are beneficially owned by Resurgence, carry a cumulative dividend rate of 4% per quarter, payable in additional shares of our Series A Preferred Stock. Each dividend paid in additional shares of our Series A Preferred Stock has a dilutive effect on our shares of common stock and increases the percentage of the total voting power of our equity beneficially owned by Resurgence. Series A Preferred Stock dividends were 814.069 shares, 695.874 shares and 594.832 shares during 2008, 2007 and 2006, respectively. Three of our directors, Messrs. Byron Haney, Karl Schwarzfeld and Philip Sivin, are currently employed by Resurgence or its affiliates. In addition, one of our former directors, Steven L. Gidumal, was employed by Resurgence during the period he served as a director on our Board. Pursuant to established policies of Resurgence, all director compensation earned by these directors was paid to Resurgence. During 2008, 2007 and 2006, we paid Resurgence an aggregate amount equal to $201,000, $150,000 and $115,000, respectively, related to director compensation for Messrs. Gidumal, Haney, Schwarzfeld and Sivin, along with reimbursement of an immaterial amount of direct, out-of-pocket expenses incurred in connection with services as directors.

16. New Accounting Standards

     In September 2006, the Financial Accounting Standards Board, or the FASB, issued SFAS No. 157, “Fair Value Measurements,” or SFAS No. 157. SFAS No. 157 establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis in financial statements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We adopted SFAS No. 157 in the first quarter of 2008 and determined it had no impact on our consolidated financial statements.

     In February 2008, the FASB issued SFAS No. 157-2, “Effective Date of FASB Statement No. 157,” which defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years, for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). An entity that has issued interim or annual financial statements reflecting the application of the measurement and disclosure provisions of SFAS No. 157 prior to February 12, 2008 must continue to apply all provisions of SFAS No. 157. We are currently evaluating the impact of our expected adoption of the deferred portion of SFAS No. 157, effective January 1, 2009, on our consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” or SFAS No. 159. SFAS No. 159, which amends SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” allows certain financial assets and liabilities to be recognized, at our election, at fair market value, with any gains or losses for the period recorded in the statement of operations. SFAS No. 159 is effective for

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fiscal years beginning after November 15, 2007. We did not elect to recognize certain financial assets and liabilities at fair market value, therefore the implementation did not impact our consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” or SFAS No. 141R. SFAS No. 141R broadens the guidance of SFAS No. 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS No. 141R broadens the fair value measurement and recognition of assets acquired, liabilities assumed and interests transferred as a result of business combinations, and expands on required disclosures to improve the statement users’ abilities to evaluate the nature and financial effects of business combinations. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. We do not believe the implementation of SFAS No. 141R will have a material impact on our consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements; an Amendment of ARB No. 51,” or SFAS No. 160. SFAS No. 160 establishes the accounting and reporting standards for a noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary and clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests and applies prospectively to business combinations for fiscal years beginning after December 15, 2008. We do not believe the implementation of SFAS No. 160 will have a material impact on our consolidated financial statements.

     In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities,” or SFAS No. 161. SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities, with the intent to provide users of financial statements with an enhanced understanding of (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and its related interpretations and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. We do not believe the implementation of SFAS No. 161 will have a material impact on our consolidated financial statements.

     In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” or SFAS No. 162. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. SFAS No. 162 was effective on November 15, 2008 and did not have a material impact on our consolidated financial statements.

     In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,” or FSP EITF 03-6-1, which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, “Earnings Per Share.” Under the guidance in FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and need to be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal periods beginning after December 15, 2008, and all prior-period earnings per share data presented is required to be adjusted retrospectively. We do not believe the implementation of FSP EITF 03-6-1 will have a material impact on our consolidated financial statements.

     In October 2008, the FASB issued FASB Staff Position 157-3 “Determining Fair Value of a Financial Asset in a Market That Is Not Active,” or FSP 157-3. FSP 157-3 clarifies the application of SFAS No. 157 by demonstrating how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have a material impact on our consolidated financial statements.

     In December 2008, the FASB issued FASB Staff Position (FSP) No.132 (R)-1, “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, or FSP 132R-1. FSP 132R-1 requires enhanced disclosures about the plan assets of our defined benefit pension and other postretirement plans. The enhanced disclosures required by FSP 132R-1 are intended to provide users of financial statements with a greater understanding of: how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets, the

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effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period and significant concentrations of risk within plan assets. FSP 132R-1 is effective for the year ending December 31, 2009. We do not believe the implementation of FSP 132R-1 will have a material impact on our consolidated financial statements.

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STERLING CHEMICALS, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
QUARTERLY FINANCIAL DATA
(unaudited)

	Three Months Ended,
	March 31			June 30			September 30			December 31
2008
Revenues	$	38,199		$	47,795		$	42,317		$	33,141
Gross profit		4,400			9,826			9,127			6,945
Income (loss) from continuing operations		(905	)		(4,222	)		3,079			1,946
Income (loss) from discontinued operations, net of tax		(6,224	)		(1,588	)		(1,791	)		1,341
Net loss attributable to common stockholders		(11,400	)		(10,232	)		(3,632	)		(841	)
Basic and diluted net loss per share		(4.03	)		(3.62	)		(1.28	)		(0.30	)
2007
Revenues	$	32,715		$	34,133		$	32,988		$	29,977
Gross profit (loss)		5,627			2,804			5,915			(963	)
Loss from continuing operations		(56	)		(3,947	)		(30	)		(3,680	)
Income (loss) from discontinued operations, net of tax		2,725			4,474			46			(18,462	)
Net loss attributable to common stockholders		(380	)		(4,450	)		(5,118	)		(26,530	)
Basic and diluted net loss per share		(0.14	)		(1.57	)		(1.81	)		(9.38	)

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     None.

Item 9A(T). Controls and Procedures

     Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act) designed to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These include controls and procedures designed to ensure that this information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2008. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2008 at the reasonable assurance level.

     Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

     Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control-Integrated Framework. Based on this evaluation, our management, with the

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participation of the our Chief Executive Officer and our Chief Financial Officer, concluded that, as of December 31, 2008, our internal control over financial reporting was effective.

     This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

     Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended December 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

     Reference is made to the information responsive to Item 10 of this Part III contained in our definitive proxy statement for our 2009 Annual Meeting of Stockholders which is hereby incorporated herein by reference in response to this item.

Item 11. Executive Compensation

     Reference is made to the information responsive to Item 11 of this Part III contained in our definitive proxy statement for our 2009 Annual Meeting of Stockholders which is hereby incorporated herein by reference in response to this item.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     Reference is made to the information responsive to Item 12 of this Part III contained in our definitive proxy statement for our 2009 Annual Meeting of Stockholders which is hereby incorporated herein by reference in response to this item.

Item 13. Certain Relationships and Related Transactions, and Director Independence

     Reference is made to the information responsive to Item 13 of this Part III contained in our definitive proxy statement for our 2009 Annual Meeting of Stockholders which is hereby incorporated herein by reference in response to this item.

Item 14. Principal Accountant Fees and Services

     Reference is made to the information responsive to Item 14 of this Part III contained in our definitive proxy statement for our 2009 Annual Meeting of Stockholders which is hereby incorporated herein by reference in response to this item.

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PART IV

Item 15. Exhibits and Consolidated Financial Statement Schedules

     (a) Financial Statements, Financial Statement Schedules and Exhibits.

1.	Consolidated Financial Statements. See “Item 8. Financial Statements and Supplementary Data — Index to Financial Statements.”
2.	Consolidated Financial Statement Schedules. All schedules for which provision is made in Regulation S-X either are not required under the related instruction or are inapplicable and, therefore, have been omitted.
3.	Exhibits. See the Exhibit Index for a list of those exhibits filed herewith, which index also includes and identifies management contracts or compensatory plans or arrangements required to be filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of Regulation S-K.

     (b) Exhibit Index.

Exhibit
Number			Description of Exhibit
	3.1	—	Second Amended and Restated Certification of Incorporation of Sterling Chemicals, Inc. (incorporated by reference to Annex A to the Company’s definitive proxy statement on Schedule 14A filed on April 15, 2008).
	3.2	—	Restated Certificate of Designations, Preferences, Rights and Limitations of Series A Convertible Preferred Stock of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2003).
	3.3	—	Restated Bylaws of Sterling Chemicals, Inc. (conformed copy) (incorporated herein by reference from Exhibit 3.3 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	4.1	—	Tag Along Agreement dated as of December 19, 2002 by and among Sterling Chemicals, Inc., Resurgence Asset Management, L.L.C. and the Official Committee of the Unsecured Creditors (incorporated herein by reference from Exhibit 8 to our Form 8-A filed on December 19, 2002 (SEC File Number 000-50132)).
	4.2	—	Indenture dated March 29, 2007 by and among Sterling Chemicals, Inc., as Issuer, Sterling Chemicals Energy, Inc., as Guarantor, and U. S. Bank National Association, as Trustee and Collateral Agent, governing the 101/4% Senior Secured Notes due 2015 of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 4.2 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	4.3	—	Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated March 29, 2007 made by Sterling Chemicals, Inc., Trustor, to Stanley Keeton, an Individual Trustee, for the benefit of U. S. Bank National Association, as Collateral Agent, Beneficiary. (incorporated herein by reference from Exhibit 4.3 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	4.4	—	Security Agreement dated as of March 29, 2007 by and among Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc., as Assignors, U. S. Bank National Association, as Collateral Agent, and U. S. Bank National Association, as Indenture Trustee for the benefit of the holders the 101/4% Senior Secured Notes due 2015 of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 4.4 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	4.5	—	Pledge Agreement dated as of March 29, 2007 by Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc. in favor of U. S. Bank National Association, as Collateral Agent for the Secured Parties (incorporated herein by reference from Exhibit 4.5 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).

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Exhibit
Number			Description of Exhibit
	4.6	—	Registration Rights Agreement dated as of March 29, 2007 by and among Sterling Chemicals, Inc., as the Company, Sterling Chemicals Energy, Inc., as Guarantor, and Jefferies & Company, Inc. and CIBC World Markets Corp., as the Initial Purchasers of the 101/4% Senior Secured Notes due 2015 of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 4.6 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.1	—	Amended and Restated Revolving Credit Agreement dated as of March 29, 2007 by and among Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc., as Borrowers, the various financial institutions as are or may become parties thereto from time to time, as the Lenders, and The CIT Group/Business Credit, Inc., as the Administrative Agent for the Lenders, and Wachovia Bank, National Association, as Documentation Agent (incorporated herein by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.1(a)	—	First Amendment to Amended and Restated Revolving Credit Agreement dated as of November 7, 2008 among Sterling Chemicals, Inc., The CIT Group/Business Credit, Inc., as the Administrative Agent for the Lenders and the Lenders (incorporated herein by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008).
	10.2	—	Amended and Restated Security Agreement dated as of March 29, 2007 made by Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc., as Grantors, in favor of The CIT Group/Business Credit, Inc. as Administrative Agent for the Secured Parties (incorporated herein by reference from Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.3	—	Amended and Restated Pledge Agreement dated as of March 29, 2007 made by Sterling Chemicals, Inc. and Sterling chemicals Energy, Inc. as Pledgors, in favor of The CIT Group/Business Credit, Inc., as Administrative Agent for the Secured Parties (incorporated herein by reference from Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.4	—	Intercreditor Agreement dated as of March 29, 2007 among Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc., as Borrowers, The CIT Group/Business Credit, Inc., as First Lien Collateral Agent, and U. S. Bank National Association, as Second Lien Collateral Agent (incorporated herein by reference from Exhibit 10.4 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.5*	—	Sterling Chemicals, Inc. Amended and Restated 2002 Stock Plan (incorporated herein by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).
	10.6*	—	Fifth Amended and Restated Key Employee Protection Plan (incorporated herein by reference from Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).
	10.7*	—	Third Amended and Restated Severance Pay Plan (incorporated herein by reference from Exhibit 10.7 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2003).
	10.7(a)*	—	First Amendment to Third Amended and Restated Severance Pay Plan (incorporated herein by reference from Exhibit 10.7(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
	10.8*	—	Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).
	10.8(a)*	—	First Amendment to the Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.7(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2006).
	10.8(b)*	—	Second Amendment to the Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007).
	10.8(c)*	—	Third Amendment to the Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.8(c) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007).

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Exhibit
Number			Description of Exhibit
	10.8(d)*	—	Fourth Amendment to the Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.8(d) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
	**10.8(e)*	—	415 Compliance Appendix to Sterling Chemicals, Inc. Eighth Amended and Restated Salaried Employees’ Pension Plan.
	10.9*	—	Sterling Chemicals, Inc. Pension Benefit Equalization Plan (incorporated herein by reference from Exhibit 10.10 to our Registration Statement on Form S-1 (Registration No. 33-24020)).
	10.9(a)*	—	First Amendment to Sterling Chemicals, Inc. Pension Benefit Equalization Plan (incorporated herein by reference from Exhibit 10.9(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
	10.10*	—	Sterling Chemicals, Inc. Amended and Restated Supplemental Employee Retirement Plan (incorporated herein by reference from Exhibit 10.34 to our Annual Report on Form 10-K for the fiscal year ended September 30, 1989 (SEC File Number 1-10059)).
	10.10(a)*	—	First Amendment to Sterling Chemicals, Inc. Amended and Restated Supplemental Employee Retirement Plan (incorporated herein by reference from Exhibit 10.10(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
	10.11	—	Sterling Chemicals, Inc. Amended and Restated Hourly Paid Employees’ Pension Plan (Effective as of January 1, 2007) (incorporated herein by reference from Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007).
	10.11(a)	—	First Amendment to the Sterling Chemicals, Inc. Amended and Restated Hourly Paid Employees’ Pension Plan (Effective as of January 1, 2007) (incorporated herein by reference from Exhibit 10.11(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
	**10.11(b)	—	415 Compliance Appendix to Sterling Chemicals, Inc. Amended and Restated Hourly Paid Employees’ Pension Plan.
	**10.12*	—	Sterling Chemicals, Inc. Eighth Amended and Restated Savings and Investment Plan.
	10.13*	—	2009 Bonus Plan (incorporated herein by reference from Exhibit 10.1 to our Form 8-K filed January 15, 2009).
	10.13(a)*	—	2008 Bonus Plan (incorporated by reference from Exhibit 10.2 to our Current Report on Form 8-K filed on August 22, 2008).
	10.14*	—	Sterling Chemicals, Inc. Comprehensive Welfare Benefit Plan (incorporated herein by reference from Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007).
	**10.14 (a)	—	First Amendment to the Sterling Chemicals, Inc. Comprehensive Welfare Benefit Plan.
	**10.14 (b)	—	Sterling Chemicals, Inc. Flexible Spending Account Plan (amended and restated January 1, 2008)
	10.15	—	Articles of Agreement between Sterling Chemicals, Inc., its successors and assigns, and Texas City, Texas Metal Trades Council, AFL-CIO Texas City, Texas, May 1, 2007 to May 1, 2012 (incorporated herein by reference from Exhibit 10.5 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.16*	—	Form of Indemnity Agreement with each of its officers and directors (incorporated herein by reference from Exhibit 10.17 to our Annual Report on Form 10-K for the fiscal year ended September 30, 1996 (SEC File Number 333-04343-01)).
	+10.17	—	2008 Amended and Restated Production Agreement dated effective as of January 1, 2008 between BP Amoco Chemical Company and Sterling Chemicals, Inc. (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed on August 22, 2008).
	+10.18	—	Third Amended and Restated Plasticizers Production Agreement dated effective as of April 1, 2008 between BASF Corporation and Sterling Chemicals, Inc. (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed on July 25, 2008).
	10.19	—	License Agreement dated August 1, 1986 between Monsanto Company and Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 10.25 to our Registration Statement on Form S-1 (Registration No. 33-24020)).

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Exhibit
Number			Description of Exhibit
	+10.20	—	Agreement for the Exclusive Supply of Styrene by and between Sterling Chemicals, Inc. and NOVA Chemicals Inc., dated September 17, 2007 (incorporated by reference from Exhibit 10.20 to Amendment No. 1 to our Form S-4 Registration Statement (Registration No. 333-145803)).
	10.21*	—	Employment Agreement between Sterling Chemicals, Inc. and John V. Genova, dated effective as of May 27, 2008 (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed on May 27, 2008).
	**12.1	—	Computation of Ratio of Earnings (Losses) to Fixed Charges.
	14.1	—	Sterling Chemicals, Inc. Code of Ethics for the Chief Executive Officer and Senior Financial Officers (incorporated herein by reference from Exhibit 14.1 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003).
	**21.1	—	Subsidiaries of Sterling Chemicals, Inc.
	**23.1	—	Consent of Grant Thornton LLP
	**23.2	—	Consent of Deloitte & Touche LLP
	**31.1	—	Rule 13a-14(a) Certification of the Chief Executive Officer
	**31.2	—	Rule 13a-14(a) Certification of the Chief Financial Officer
	**32.1	—	Section 1350 Certification of the Chief Executive Officer
	**32.2	—	Section 1350 Certification of the Chief Financial Officer
	99.1	—	Amended and Restated Audit Committee Charter of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 99.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
	99.2	—	Amended and Restated Corporate Governance Committee Charter of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 99.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005).
	99.3	—	Compensation Committee Charter of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 99.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).

*	Management contracts or compensatory plans or arrangements.
**	Filed or furnished herewith.
+	Portions of the exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

STERLING CHEMICALS, INC. (Registrant)
By:	/s/ JOHN V. GENOVA
	John V. Genova
	President, Chief Executive Officer and Director
By:	/s/ JOHN R. BEAVER
	John R. Beaver
	Senior Vice President-Finance and Chief Financial Officer

Date: March 17, 2009

     Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
Principal Executive Officer:
/s/ JOHN V. GENOVA John V. Genova	President, Chief Executive Officer and Director	March 17, 2009
Principal Financial Officer:
/s/ JOHN R. BEAVER John R. Beaver	Senior Vice President-Finance and Chief Financial Officer	March 17, 2009
Principal Accounting Officer:
/s/ CARLA E. STUCKY Carla E. Stucky	Vice President and Corporate Controller	March 17, 2009
/s/ RICHARD K. CRUMP Richard K. Crump	Director	March 17, 2009
/s/ JOHN W. GILDEA John W. Gildea	Director	March 17, 2009
/s/ BYRON J. HANEY Byron J. Haney	Director	March 17, 2009
/s/ KARL W. SCHWARZFELD Karl W. Schwarzfeld	Director	March 17, 2009
/s/ PHILIP M. SIVIN Philip M. Sivin	Director	March 17, 2009
/s/ DR. PETER TING KAI WU Dr. Peter Ting Kai Wu	Director	March 17, 2009

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EXHIBIT INDEX

Exhibit
Number			Description of Exhibit
	3.1	—	Second Amended and Restated Certification of Incorporation of Sterling Chemicals, Inc. (incorporated by reference to Annex A to the Company’s definitive proxy statement on Schedule 14A filed on April 15, 2008).
	3.2	—	Restated Certificate of Designations, Preferences, Rights and Limitations of Series A Convertible Preferred Stock of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2003).
	3.3	—	Restated Bylaws of Sterling Chemicals, Inc. (conformed copy) (incorporated herein by reference from Exhibit 3.3 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	4.1	—	Tag Along Agreement dated as of December 19, 2002 by and among Sterling Chemicals, Inc., Resurgence Asset Management, L.L.C. and the Official Committee of the Unsecured Creditors (incorporated herein by reference from Exhibit 8 to our Form 8-A filed on December 19, 2002 (SEC File Number 000-50132)).
	4.2	—	Indenture dated March 29, 2007 by and among Sterling Chemicals, Inc., as Issuer, Sterling Chemicals Energy, Inc., as Guarantor, and U. S. Bank National Association, as Trustee and Collateral Agent, governing the 101/4% Senior Secured Notes due 2015 of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 4.2 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	4.3	—	Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated March 29, 2007 made by Sterling Chemicals, Inc., Trustor, to Stanley Keeton, an Individual Trustee, for the benefit of U. S. Bank National Association, as Collateral Agent, Beneficiary. (incorporated herein by reference from Exhibit 4.3 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	4.4	—	Security Agreement dated as of March 29, 2007 by and among Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc., as Assignors, U. S. Bank National Association, as Collateral Agent, and U. S. Bank National Association, as Indenture Trustee for the benefit of the holders the 101/4% Senior Secured Notes due 2015 of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 4.4 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	4.5	—	Pledge Agreement dated as of March 29, 2007 by Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc. in favor of U. S. Bank National Association, as Collateral Agent for the Secured Parties (incorporated herein by reference from Exhibit 4.5 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	4.6	—	Registration Rights Agreement dated as of March 29, 2007 by and among Sterling Chemicals, Inc., as the Company, Sterling Chemicals Energy, Inc., as Guarantor, and Jefferies & Company, Inc. and CIBC World Markets Corp., as the Initial Purchasers of the 101/4% Senior Secured Notes due 2015 of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 4.6 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.1	—	Amended and Restated Revolving Credit Agreement dated as of March 29, 2007 by and among Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc., as Borrowers, the various financial institutions as are or may become parties thereto from time to time, as the Lenders, and The CIT Group/Business Credit, Inc., as the Administrative Agent for the Lenders, and Wachovia Bank, National Association, as Documentation Agent (incorporated herein by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.1(a)	—	First Amendment to Amended and Restated Revolving Credit Agreement dated as of November 7, 2008 among Sterling Chemicals, Inc., The CIT Group/Business Credit, Inc., as the Administrative Agent for the Lenders and the Lenders (incorporated herein by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008).

82

Exhibit
Number			Description of Exhibit
	10.2	—	Amended and Restated Security Agreement dated as of March 29, 2007 made by Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc., as Grantors, in favor of The CIT Group/Business Credit, Inc. as Administrative Agent for the Secured Parties (incorporated herein by reference from Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.3	—	Amended and Restated Pledge Agreement dated as of March 29, 2007 made by Sterling Chemicals, Inc. and Sterling chemicals Energy, Inc. as Pledgors, in favor of The CIT Group/Business Credit, Inc., as Administrative Agent for the Secured Parties (incorporated herein by reference from Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.4	—	Intercreditor Agreement dated as of March 29, 2007 among Sterling Chemicals, Inc. and Sterling Chemicals Energy, Inc., as Borrowers, The CIT Group/Business Credit, Inc., as First Lien Collateral Agent, and U. S. Bank National Association, as Second Lien Collateral Agent (incorporated herein by reference from Exhibit 10.4 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.5*	—	Sterling Chemicals, Inc. Amended and Restated 2002 Stock Plan (incorporated herein by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).
	10.6*	—	Fifth Amended and Restated Key Employee Protection Plan (incorporated herein by reference from Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).
	10.7*	—	Third Amended and Restated Severance Pay Plan (incorporated herein by reference from Exhibit 10.7 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2003).
	10.7(a)*	—	First Amendment to Third Amended and Restated Severance Pay Plan (incorporated herein by reference from Exhibit 10.7(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
	10.8*	—	Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).
	10.8(a)*	—	First Amendment to the Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.7(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2006).
	10.8(b)*	—	Second Amendment to the Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007).
	10.8(c)*	—	Third Amendment to the Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.8(c) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
	10.8(d)*	—	Fourth Amendment to the Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan (incorporated herein by reference from Exhibit 10.8(d) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
	**10.8(e)*	—	415 Compliance Appendix to Sterling Chemicals, Inc. Eighth Amended and Restated Salaried Employees’ Pension Plan.
	10.9*	—	Sterling Chemicals, Inc. Pension Benefit Equalization Plan (incorporated herein by reference from Exhibit 10.10 to our Registration Statement on Form S-1 (Registration No. 33-24020)).
	10.9(a)*	—	First Amendment to Sterling Chemicals, Inc. Pension Benefit Equalization Plan (incorporated herein by reference from Exhibit 10.9(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
	10.10*	—	Sterling Chemicals, Inc. Amended and Restated Supplemental Employee Retirement Plan (incorporated herein by reference from Exhibit 10.34 to our Annual Report on Form 10-K for the fiscal year ended September 30, 1989 (SEC File Number 1-10059)).

83

Exhibit
Number			Description of Exhibit
	10.10(a)*	—	First Amendment to Sterling Chemicals, Inc. Amended and Restated Supplemental Employee Retirement Plan (incorporated herein by reference from Exhibit 10.10(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
	10.11	—	Sterling Chemicals, Inc. Amended and Restated Hourly Paid Employees’ Pension Plan (Effective as of January 1, 2007) (incorporated herein by reference from Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007).
	10.11(a)	—	First Amendment to the Sterling Chemicals, Inc. Amended and Restated Hourly Paid Employees’ Pension Plan (Effective as of January 1, 2007) (incorporated herein by reference from Exhibit 10.11(a) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
	**10.11(b)	—	415 Compliance Appendix to Sterling Chemicals, Inc. Amended and Restated Hourly Paid Employees’ Pension Plan.
	**10.12*	—	Sterling Chemicals, Inc. Eighth Amended and Restated Savings and Investment Plan.
	10.13*	—	2009 Bonus Plan (incorporated herein by reference from Exhibit 10.1 to our Form 8-K filed January 15, 2009).
	10.13(a)*	—	2008 Bonus Plan (incorporated by reference from Exhibit 10.2 to our Current Report on Form 8-K filed on August 22, 2008).
	10.14*	—	Sterling Chemicals, Inc. Comprehensive Welfare Benefit Plan (incorporated herein by reference from Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007).
	**10.14 (a)	—	First Amendment to the Sterling Chemicals, Inc. Comprehensive Welfare Benefit Plan.
	**10.14 (b)	—	Sterling Chemicals, Inc. Flexible Spending Account Plan (amended and restated January 1, 2008)
	10.15	—	Articles of Agreement between Sterling Chemicals, Inc., its successors and assigns, and Texas City, Texas Metal Trades Council, AFL-CIO Texas City, Texas, May 1, 2007 to May 1, 2012 (incorporated herein by reference from Exhibit 10.5 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	10.16*	—	Form of Indemnity Agreement with each of its officers and directors (incorporated herein by reference from Exhibit 10.17 to our Annual Report on Form 10-K for the fiscal year ended September 30, 1996 (SEC File Number 333-04343-01)).
	+10.17	—	2008 Amended and Restated Production Agreement dated effective as of January 1, 2008 between BP Amoco Chemical Company and Sterling Chemicals, Inc. (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed on August 22, 2008).
	+10.18	—	Third Amended and Restated Plasticizers Production Agreement dated effective as of April 1, 2008 between BASF Corporation and Sterling Chemicals, Inc. (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed on July 25, 2008).
	10.19	—	License Agreement dated August 1, 1986 between Monsanto Company and Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 10.25 to our Registration Statement on Form S-1 (Registration No. 33-24020)).
	+10.20	—	Agreement for the Exclusive Supply of Styrene by and between Sterling Chemicals, Inc. and NOVA Chemicals Inc., dated September 17, 2007 (incorporated by reference from Exhibit 10.20 to Amendment No. 1 to our Form S-4 Registration Statement (Registration No. 333-145803)).
	10.21*	—	Employment Agreement between Sterling Chemicals, Inc. and John V. Genova, dated effective as of May 27, 2008 (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed on May 27, 2008).
	**12.1	—	Computation of Ratio of Earnings (Losses) to Fixed Charges.
	14.1	—	Sterling Chemicals, Inc. Code of Ethics for the Chief Executive Officer and Senior Financial Officers (incorporated herein by reference from Exhibit 14.1 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003).
	**21.1	—	Subsidiaries of Sterling Chemicals, Inc.
	**23.1	—	Consent of Grant Thornton LLP

84

Exhibit
Number			Description of Exhibit
	**23.2	—	Consent of Deloitte & Touche LLP
	**31.1	—	Rule 13a-14(a) Certification of the Chief Executive Officer
	**31.2	—	Rule 13a-14(a) Certification of the Chief Financial Officer
	**32.1	—	Section 1350 Certification of the Chief Executive Officer
	**32.2	—	Section 1350 Certification of the Chief Financial Officer
	99.1	—	Amended and Restated Audit Committee Charter of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 99.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
	99.2	—	Amended and Restated Corporate Governance Committee Charter of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 99.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005).
	99.3	—	Compensation Committee Charter of Sterling Chemicals, Inc. (incorporated herein by reference from Exhibit 99.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).

*	Management contracts or compensatory plans or arrangements.
**	Filed or furnished herewith.
+	Portions of the exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

85

EX-10.8.E

Exhibit 10.8(e)

A
415 COMPLIANCE APPENDIX
TO
STERLING CHEMICALS, INC. AMENDED AND RESTATED SALARIED
EMPLOYEES’ PENSION PLAN

This Appendix incorporates the elections made in the 415 Compliance Election Form adopted by the Sponsor for purposes of amending the Plan to comply with modifications to the Code Section 415 limits made by the Pension Funding Equity Act of 2004 (the “PFEA”), the Pension Protection Act of 2006 (“PPA”) and final regulations released on April 4, 2007 under Code Section 415 (“final 415 regulations”). This Appendix, together with the 415 Compliance Election Form, is intended as good faith compliance with the requirements of the PFEA, PPA, and final 415 regulations.

1. Effective beginning the first day of the first limitation year beginning on or after July 1, 2007, the following supersedes and replaces the provisions of Article XII of the Plan.

ARTICLE XII
MAXIMUM RETIREMENT BENEFITS

12.1 Definitions

For purposes of this Article XII, the following terms have the following meanings.

(a)	An “affiliated employer” means any corporation or business, other than an Employer, which would be aggregated with an Employer for a relevant purpose under Code Section 414 as modified by Code Section 415(h).
(b)	A Participant’s “aggregate annual retirement benefit” means the sum of his “annual retirement benefit” under the Plan and his “annual retirement benefit”, if any, under any and all other “defined benefit plans” (whether or not terminated) maintained by an Employer, any “affiliated employer”, or a “predecessor employer” that are required to be aggregated with the Plan in accordance with the provisions of Treasury Regulations Section 1.415(f)-1.
	For purposes of applying the “defined benefit compensation limitation”, a Participant’s “aggregate annual retirement benefit” shall exclude any benefits accrued by the Participant under a multiemployer plan. For purposes of applying the “defined benefit dollar limitation”, a Participant’s “aggregate annual retirement benefit” shall exclude benefits accrued by the Participant under a multiemployer plan, except to the extent such benefits are provided by the Employer (or an “affiliated employer”).

(c)

A Participant’s “annual retirement benefit” means the amount of retirement benefit attributable to Employer contributions which is payable to him annually under the Plan adjusted to the actuarially equivalent straight life annuity form using the factors prescribed in the following paragraphs if such benefit is to be paid in a manner other than to the Participant for his life only. A Participant’s “annual retirement benefit” includes Social Security supplements described in Code Section 411(a)(9) and benefits transferred from another “defined benefit plan”, other than transfers of distributable benefits pursuant to Treasury Regulations Section 1.411(d)-4, Q&A-3(c), but shall not include benefits attributable to a Participant’s “employee contributions.”

For purposes of determining a Participant’s “annual retirement benefit”, the following shall apply:

(i) If payment is to be made in a form other than to the Participant for his life only, and such form is not subject to the requirements of Code Section 417(e)(3), the actuarially equivalent straight life annuity shall be determined in accordance with the provisions of subparagraph (A) or (B) below, as applicable.

(A)

For “limitation years” beginning before July 1, 2007, the annual amount of straight life annuity commencing on the same Annuity Starting Date with the same actuarial present value as the Participant’s form of payment computed using the following factors, whichever produces the greater amount: (I) the interest rate and mortality table otherwise used under the Plan for purposes of determining Actuarial Equivalence of optional forms not subject to the requirements of Code Section 417(e)(3) or (II) the “applicable mortality table” and 5 percent.

(B)

For “limitation years” beginning on and after July 1, 2007, the greater of (I) the annual amount of straight life annuity, if any, payable to the Participant under the Plan commencing at the same Annuity Starting Date as the Participant’s form of payment or (II) the annual amount of straight life annuity commencing at the same Annuity Starting Date that has the same actuarially equivalent present value as the Participant’s form of payment computed using the “applicable mortality table” and an interest rate of 5 percent.

(ii) If payment is to be made to the Participant in a form that is subject to the requirements of Code Section 417(e)(3), the actuarially equivalent straight life annuity form shall be:

(A) For distributions with an Annuity Starting Date in the 2004 or 2005 Plan Year, the annual amount of straight life annuity commencing on the same Annuity Starting Date that has the same actuarially equivalent present value as the Participant’s form of payment determined using the following, whichever provides the greater annual amount: (I) the mortality table and interest rate otherwise used under the Plan for purposes of determining Actuarial Equivalence of such optional form or (II) the “applicable

mortality table” and an interest rate of 5.5 percent; provided, however, that for distributions with an Annuity Starting Date on or after the first day of the 2004 Plan Year and before January 1, 2005 , use of the interest rate specified in clause (II) shall not reduce the benefit payable to the Participant below the amount determined using the “applicable interest rate” in effect as of the last day of the last Plan Year beginning before January 1, 2004. For purposes of this subparagraph (A), the “applicable interest rate” means the annual rate of interest on 30-year Treasury securities for the second calendar month preceding the Plan Year in which the Annuity Starting Date occurs.

(B)

For distributions with an Annuity Starting Date after the 2005 Plan Year, the annual amount of straight life annuity commencing on the same Annuity Starting Date that has the same actuarially equivalent present value as the Participant’s form of payment determined using the following, whichever provides the greatest annual amount: (I) the mortality table and interest rate otherwise used under the Plan for purposes of determining Actuarial Equivalence of such optional form; (II) the “applicable mortality table” and an interest rate of 5.5 percent; or (III) the “applicable mortality table” and the “417(e) interest rate” determined as of the second calendar month preceding the Plan Year in which the distribution is made, divided by 1.05. For purposes of this subparagraph (B), the “417(e) interest rate” means the following: (1) prior to the Plan Year beginning in 2008, the “applicable interest rate” described in subparagraph (A) above and (2) for Plan Years beginning on and after January 1, 2008, the adjusted first, second and third segment rates applied under Code Section 430(h)(2)(C), computed without regard to a 24 month average; provided, however, that for Plan Years beginning in 2008, 2009, 2010, and 2011, such rate shall be blended with the “applicable interest rate” described in subparagraph (A) above, as provided in Code Section 417(e)(3)(D)(ii) and (iii).

(iii)

A form of payment is not subject to the requirements of Code Section 417(e)(3) if the form of payment is either (A) a nondecreasing annuity (other than a straight life annuity) payable for a period not less than the life of the Participant (or in the case of a Qualified Preretirement Survivor Annuity, the life of the Participant’s Spouse) or (B) an annuity that decreases during the life of the Participant merely because of (I) the death of the Participant’s Beneficiary under a joint and survivor annuity, but only if the reduction is not below 50 percent of the benefit payable before the death of the Beneficiary or (II) cessation or reduction of Social Security supplements or qualified disability payments, as defined in Code Section 411(a)(9).

(iv)

No actuarial adjustment shall be made hereunder for (A) survivor benefits payable to a surviving Spouse under a Qualified Joint and Survivor Annuity to the extent such benefits would not be payable if the Participant’s benefit were paid in another form, (B) benefits that are not directly related to retirement benefits (such as qualified disability benefits, preretirement incidental death benefits, and

post-retirement medical benefits), or (C) the inclusion in the form of payment of an automatic benefit increase feature, provided that (I) the form of payment is not subject to Code Section 417(e)(3) and would otherwise satisfy the limitations of this Article and (II) the Plan provides that the amount payable under the form of payment in any “limitation year” shall not exceed the limits of this Article applicable as of the Annuity Starting Date, increased in subsequent years pursuant to Code Section 415(d). For purposes of clause (C), an automatic benefit increase feature is included in a form of payment if the form of payment provides for automatic, periodic increases to benefits paid in that form.

(v)

If a Participant has or will have distributions commencing at more than one Annuity Starting Date, the “annual retirement benefit” shall be determined as of each Annuity Starting Date (and shall satisfy the limitations of this Article as of each such date), actuarially adjusting for past and future distributions of benefits commencing as of other Annuity Starting Dates. For purposes of this paragraph (v), the determination of whether a new Annuity Starting Date has occurred shall be made without regard to Treasury Regulations Section 1.401(a)-20, Q&A 10(d), but with regard to Treasury Regulations Sections 1.415(b)-1(b)(1)(iii)(B) and (C).

(d) The “applicable mortality table” means the following: (i) prior to the first day of the first Plan Year beginning on or after January 1, 2008, the table prescribed by the Secretary of the Treasury, which is the table specified in Revenue Ruling 2001-62 and (ii) on and after the first day of the first Plan Year beginning on or after January 1, 2008, the applicable Code Section 417(e)(3) mortality table.

(e) “Defined benefit plan” and “defined contribution plan” have the meanings given such terms in Code Section 415(k).

(f) “Defined benefit compensation limitation” means 100 percent of a Participant’s average “415 compensation” for his high three consecutive calendar years of service. In the case of a Participant who has fewer than 10 years of service with the employer, the “defined benefit compensation limitation” shall be multiplied by a fraction, (i) the numerator of which is the number of years (or part thereof, but not less than one) of service with the employer and (ii) the denominator of which is 10. For purposes of this subsection, a Participant is credited with a “year of service” (computed to fractional years) for each Service Computation Period for which he is credited with the number of Hours of Service required to accrue Credited Service under the terms of the Plan, taking into account service with the Employers, any “affiliated employer”, or a “predecessor employer.”

(g) “Defined benefit dollar limitation” means $160,000, as adjusted , effective January 1 of each year, under Code Section 415(d) in such manner as the Secretary of the Treasury shall prescribe, and payable in the form of a straight life annuity. A limitation adjusted under Code Section 415(d) will apply to “limitation years” ending with or within the calendar year for which the adjustment applies. A Participant’s “annual retirement benefit” shall not be adjusted to reflect increases in the “defined benefit dollar limitation” effective for “limitation years” beginning after the “limitation year” in which his termination occurred.

The “defined benefit dollar limitation” shall be adjusted as follows:

(i) If the Participant has fewer than 10 years of participation in the Plan, the “defined benefit dollar limitation” shall be multiplied by a fraction, (i) the numerator of which is the number of years (or part thereof, but not less than one) of participation in the plan and (ii) the denominator of which is 10. For purposes of this paragraph, a Participant is credited with a “year of participation” (computed to fractional years) for each Service Computation Period (as defined for purposes of crediting Credited Service) for which he is credited with a year (or fraction of a year) of Credited Service, provided that (A) he is included as a Participant under the eligibility provisions of the Plan for at least one day of such Service Computation Period and (B) the Plan is established no later than the last day of such Service Computation Period. No more than one year of participation shall be credited for a Service Computation Period.

(ii) If the benefit of a Participant begins prior to age 62, the “defined benefit dollar limitation” applicable to the Participant at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the Participant’s Annuity Starting Date that is:

(A)

For “limitation years” beginning before July 1, 2007, the actuarial equivalent of the “defined benefit dollar limitation” (adjusted under (i) above, if required) determined using the following factors, whichever produces the lesser annual amount: (I) the interest rate and mortality table (or other tabular factor) specified in Section 6.2 or 7.3, as applicable, for adjusting benefits for early commencement or (II) the “applicable mortality table” and an interest rate of 5 percent.

(B)

For “limitation years” beginning on or after July 1, 2007, the following, as applicable:

(I)

If the plan does not provide an immediately commencing straight life annuity commencing at both age 62 and the Participant’s age at his Annuity Starting Date, the actuarial equivalent of the “defined benefit dollar limitation” (adjusted under (i) above, if required) determined using the “applicable mortality table” (expressing the Participant’s age based on completed calendar months as of the Annuity Starting Date) and an interest rate of 5 percent.

(II)

If the plan does provide an immediately commencing straight life annuity commencing at both age 62 and the Participant’s age at his Annuity Starting Date, the lesser of: (a) the amount determined under (I) above or (b) the “defined benefit dollar limitation” (adjusted under (i) above, if required ) multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under the Plan at the Participant’s Annuity Starting Date to the annual amount of the immediately commencing straight life

annuity under the Plan at age 62, both determined without applying the limitations of this Article.

Any decrease in the “defined benefit dollar limitation” determined in accordance with this paragraph (ii) shall not reflect a mortality decrement if benefits are not forfeited upon the death of the Participant. If any benefits are forfeited upon death, the full mortality decrement is taken into account. For this purpose, no forfeiture is treated as occuring upon the Participant’s death if the Plan does not charge Participants for providing Qualified Preretirement Survivor Annuity coverage.

(iii) If the benefit of a Participant begins after the Participant attains age 65, the “defined benefit dollar limitation” applicable to the Participant at the later age is an annual benefit payable in the form of a straight life annuity beginning at the Annuity Starting Date that is:

(A)

For “limitation years” beginning before July 1, 2007, the actuarial equivalent of the “defined benefit dollar limitation” (adjusted under (i) above, if required) determined using the following factors, whichever provides the lesser amount: (I) the interest rate and mortality table (or other tabular factor) used under the Plan to determine Actuarial Equivalence for purposes of delayed retirement or (II) the “applicable mortality table” and an interest rate of 5 percent.

(B)

For “limitation years” beginning on or after July 1, 2007, the following, as applicable:

(I)

If the plan does not provide an immediately commencing straight life annuity commencing at both age 65 and the Participant’s age at his Annuity Starting Date, the actuarial equivalent of the “defined benefit dollar limitation” (adjusted under (i) above, if required) determined using the “applicable mortality table” (expressing the Participant’s age based on completed calendar months as of the Annuity Starting Date) and an interest rate of 5 percent.

(II)

If the plan does provide an immediately commencing straight life annuity commencing at both age 65 and the Participant’s age at his Annuity Starting Date, the lesser of: (a) the amount determined under (I) above or (b) the “defined benefit dollar limitation” (adjusted under (i) above, if required ) multiplied by the ratio of the annual amount of the adjusted immediately commencing straight life annuity under the Plan at the Participant’s Annuity Starting Date to the annual amount of the adjusted immediately commencing straight life annuity under the Plan at age 65, both determined without applying the limitations of this Article. The adjusted immediately commencing straight life annuity at the Participant’s Annuity Starting Date is the annual amount of such

annuity payable to the Participant computed disregarding accruals after age 65, but including actuarial adjustments even if those adjustments are used to offset accruals and the adjusted immediately commencing straight life annuity under the Plan at age 65 is the annual amount of such annuity that would be payable to a hypothetical Participant who is age 65 and has the same Accrued Benefit as the Participant.

Any adjustment to the “defined benefit dollar limitation” determined in accordance with this paragraph (iii) shall not reflect a mortality decrement if benefits are not forfeited upon the death of the Participant. If any benefits are forfeited upon death, the full mortality decrement is taken into account. For this purpose, no forfeiture is treated as occuring upon the Participant’s death if the Plan does not charge Participants for providing Qualified Preretirement Survivor Annuity coverage.

(h)

An “employee contribution” means any employee after-tax contribution contributed by a Participant under any qualified plan of an Employer or an “affiliated employer”, including mandatory employee contributions, as defined in Code Section 411(c)(2)(C).

(i)

A Participant’s “415 compensation” with respect to a calendar year means the following: the Participant’s remuneration for services, including (A) his wages, salaries, fees for professional service, and all other amounts received (without regard to whether such amounts are paid in cash) for personal services actually rendered in the course of employment with an Employer or an “affiliated employer” paid to him for such period, to the extent the amounts would have been received and includable in gross income, including, but not limited to, commissions paid to salesperson, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or other expense allowances under a nonaccountable plan described in Treasury Regulations Section 1.62-2(c) or (B) in case of a Participant who is an employee within the meaning of Code Section 401(c)(1), the Participant’s earned income, as described in Code Section 401(c)(2) and regulations issued thereunder, but excluding (i) contributions (other than elective contributions described in Code Section 402(e)(3), 408(k)(6), 408(p)(2)(A)(i), or 457(b)) made on behalf of the Participant by an Employer or an “affiliated employer” to a plan of deferred compensation (including a simplified employee pension described in Code Section 408(k) or a simple retirement account described in Code Section 408(p)), whether or not qualified, to the extent that, before application of the limitations of Code Section 415 to such plan, the contributions are not includable in the gross income of the Participant for the taxable year in which contributed, (ii) any distributions from a plan of deferred compensation, whether or not qualified, (except amounts received pursuant to an unfunded non-qualified plan in the year such amounts are includable in the gross income of the Participant), (iii) amounts realized from the exercise of a non-qualified option or when restricted stock or other property held by the Participant either becomes freely transferable or is no longer subject to substantial risk of forfeiture, (iv) amounts received from the sale, exchange or other disposition of stock acquired under a qualified stock option, (v) any other amounts that receive special tax benefits, such as premiums for

group term life insurance (but only to the extent that the premiums are not includable in the gross income of the Participant and are not salary reduction amounts that are described in Code Section 125), and (vi) other items that are similar to the items listed in (i) through (v) above.

“415 compensation” includes (i) any elective deferral, as defined in Code Section 402(g)(3) and (ii) any amount contributed or deferred by the Employer at the Participant’s election which is not includable in the Participant’s gross income by reason of Code Section 125, 132(f)(4), or 457.

If a Participant has a severance from employment (as defined in Treasury Regulations Section 1.415(a)-1(f)(5)) with the Employer and all “affiliated employers”, “415 compensation” does not include amounts received by the Participant following such severance from employment except amounts paid before the later of (a) the close of the “limitation year” in which the Participant’s employment terminates or (b) within 2 ¹/2 months of such severance if such amounts:

• would otherwise have been paid to the Participant in the course of his employment and are regular compensation for services during the Participant’s regular working hours, compensation for services outside the Participant’s regular working hours (such as overtime or shift differential pay), commissions, bonuses, or other similar compensation

• are payments for accrued bona fide sick, vacation or other leave, but only if the Participant would have been able to use such leave if his employment had continued and such amounts would have been includable in “415 compensation” if his employment had continued

• are received by the Participant pursuant to a non-qualified, unfunded deferred compensation plan, but only if the Participant would have received such payments at the same time if he had continued in employment and only to the extent the payments are includable in the Participant’s gross income

For purposes of this subsection, a Participant will not be considered to have incurred a severance from employment if his new employer continues to maintain the plan with respect to such Participant.

Notwithstanding the foregoing, effective for years beginning after December 31, 2008, amounts paid by an Employer or an “affiliated employer” to a Participant who is not performing services for the Employer or “affiliated employer” due to qualified military service (within the meaning of Code Section 414(u)(1)) shall be included as “415 compensation” to the extent such amounts do not exceed the amounts the Participant would have received if he had continued in employment with the Employer or “affiliated employer”.

In no event, however, shall the compensation of a Participant taken into account under the Plan for any calendar year exceed the Code Section 401(a)(17) limit in effect for such

calendar year ($225,000 for the calendar year beginning in 2007, subject to adjustment annually as provided in Code Section 401(a)(17)(B) and Code Section 415(d)). Effective for calendar years beginning on and after July 1, 2007, the limit described in this paragraph shall be applied annually to “415 compensation” earned in such calendar year and “415 compensation” for a calendar year shall not increase as a result of an increase in the Code Section 401(a)(17) limit applicable to a future calendar year.

To be included in a Participant’s “415 compensation” for a particular calendar year, an amount must have been received by the Participant (or would have been received, but for the Participant’s election under Code Section 125, 132(f)(4), 401(k), 402(h)(1)(B), 403(b), 408(p)(2)(A)(i), or 457) within such calendar year.

(j) The “limitation year” means the calendar year.

(k) A “predecessor employer” means (1) any former employer with respect to which an Employer or “affiliated employer” maintains a plan that provides benefits that the Participant accrued while performing services for such other employer or (2) a former entity that antedates an Employer or an “affiliated employer” if under the facts and circumstances the Employer or “affiliated employer” constitutes a continuation of all or a part of the trade or business of the former entity.

12.2 Maximum Limitation on Annual Benefits

The “aggregate annual retirement benefit” accrued or payable to a Participant may not at any time within any “limitation year” exceed the lesser of the “defined benefit compensation limitation” or the “defined benefit dollar limitation”; provided, however, that the “aggregate annual retirement benefit” accrued or payable to a Participant shall be deemed not to exceed such limits if:

(a) The “aggregate annual retirement benefit” payable for a “limitation year” under any available form of payment does not exceed $10,000 multiplied by a fraction, the numerator of which is the Participant’s number of years of service (as defined above with respect to the “defined benefit compensation limitation”), not to exceed 10 years of service, and the denominator of which is 10; and

(b) The Employers, all “affiliated employers”, and any “predecessor employer” have not at any time maintained a separate “defined contribution plan” in which the Participant participated.

12.3 Grandfather Prior Benefits

Notwithstanding any other provision of this Article to the contrary, in no event will application of the limits contained in this Article reduce the “aggregate annual retirement benefit” accrued or payable to a Participant below the “aggregate annual retirement benefit” accrued or payable to the Participant as of the end of the last “limitation year” beginning before July 1, 2007 under the provisions of the Plan adopted and in effect before April 5, 2007, provided that such provisions satisfied the requirements of Code Section 415 and the regulations and published guidance

issued thereunder in effect as of the end of the last “limitation year” beginning before July 1, 2007, as provided in Treasury Regulations Section 1.415(a)-1(g)(4).

12.4 Frozen Benefits

Accruals under the Plan were frozen as of the freeze date specified elsewhere in the Plan. Except as otherwise specifically provided herein, nothing in this Article is intended to increase the benefit accrued or payable to a Participant under the Plan as of such freeze date. This restriction shall not apply to an increase in the amount payable under this Article resulting from a change in the factors used to convert a Participant’s “annual retirement benefit” to a form other than an annuity payable for his life only or to adjust for payments made prior to age 62 or after age 65.

12.5 Manner of Reduction

If a Participant’s “annual retirement benefit” that would otherwise accrue or be payable for a “limitation year” would exceed the limitations specified in this Article, his “annual retirement benefit” accrued or payable for such “limitation year” shall be reduced to the extent necessary. If a Participant is also covered by another “defined benefit plan” required to be aggregated with the Plan under Treasury Regulations Section 1.415(f)-1 and his “aggregate annual retirement benefit” that would otherwise accrue or be payable for a “limitation year” would exceed the limitations of this Section, his “annual retirement benefit” accrued or payable for such “limitation year” shall be reduced by an amount equal to the amount by which his “aggregate annual retirement benefit” for such “limitation year” would exceed the limitations of this Section multiplied by a fraction, the numerator of which is his “annual retirement benefit” (determined without regard to this Section) and the denominator of which is his “aggregate annual retirement benefit” (determined without regard to the limitations of this Section or any corresponding limitation in any other “defined benefit plan” maintained by an Employer, any “affiliated employer,” or any predecessor employer”).

If the limitations contained in this Article are nevertheless exceeded with respect to a Participant for any “limitation year,” correction shall be made in accordance with the Employee Plans Compliance Resolution System, as set forth in Revenue Procedure 2006-27, or any superseding guidance.

EX-10.11.B

Exhibit 10.11(b)

415 COMPLIANCE APPENDIX
TO
STERLING CHEMICALS, INC. AMENDED AND RESTATED HOURLY PAID
EMPLOYEES’ PENSION PLAN

This Appendix incorporates the elections made in the 415 Compliance Election Form adopted by the Sponsor for purposes of amending the Plan to comply with modifications to the Code Section 415 limits made by the Pension Funding Equity Act of 2004 (the “PFEA”), the Pension Protection Act of 2006 (“PPA”) and final regulations released on April 4, 2007 under Code Section 415 (“final 415 regulations”). This Appendix, together with the 415 Compliance Election Form, is intended as good faith compliance with the requirements of the PFEA, PPA, and final 415 regulations.

1. Effective beginning the first day of the first limitation year beginning on or after July 1, 2007, the following supersedes and replaces the provisions of Article XII of the Plan.

ARTICLE XII
MAXIMUM RETIREMENT BENEFITS

12.1 Definitions

For purposes of this Article XII, the following terms have the following meanings.

(a)	An “affiliated employer” means any corporation or business, other than an Employer, which would be aggregated with an Employer for a relevant purpose under Code Section 414 as modified by Code Section 415(h).
(b)	A Participant’s “aggregate annual retirement benefit” means the sum of his “annual retirement benefit” under the Plan and his “annual retirement benefit”, if any, under any and all other “defined benefit plans” (whether or not terminated) maintained by an Employer, any “affiliated employer”, or a “predecessor employer” that are required to be aggregated with the Plan in accordance with the provisions of Treasury Regulations Section 1.415(f)-1.
	For purposes of applying the “defined benefit compensation limitation”, a Participant’s “aggregate annual retirement benefit” shall exclude any benefits accrued by the Participant under a multiemployer plan. For purposes of applying the “defined benefit dollar limitation”, a Participant’s “aggregate annual retirement benefit” shall exclude benefits accrued by the Participant under a multiemployer plan, except to the extent such benefits are provided by the Employer (or an “affiliated employer”).

(c)

A Participant’s “annual retirement benefit” means the amount of retirement benefit attributable to Employer contributions which is payable to him annually under the Plan adjusted to the actuarially equivalent straight life annuity form using the factors prescribed in the following paragraphs if such benefit is to be paid in a manner other than to the Participant for his life only. A Participant’s “annual retirement benefit” includes Social Security supplements described in Code Section 411(a)(9) and benefits transferred from another “defined benefit plan”, other than transfers of distributable benefits pursuant to Treasury Regulations Section 1.411(d)-4, Q&A-3(c), but shall not include benefits attributable to a Participant’s “employee contributions.”

For purposes of determining a Participant’s “annual retirement benefit”, the following shall apply:

(i) If payment is to be made in a form other than to the Participant for his life only, and such form is not subject to the requirements of Code Section 417(e)(3), the actuarially equivalent straight life annuity shall be determined in accordance with the provisions of subparagraph (A) or (B) below, as applicable.

(A)

For “limitation years” beginning before July 1, 2007, the annual amount of straight life annuity commencing on the same Annuity Starting Date with the same actuarial present value as the Participant’s form of payment computed using the following factors, whichever produces the greater amount: (I) the interest rate and mortality table otherwise used under the Plan for purposes of determining Actuarial Equivalence of optional forms not subject to the requirements of Code Section 417(e)(3) or (II) the “applicable mortality table” and 5 percent.

(B)

For “limitation years” beginning on and after July 1, 2007, the greater of (I) the annual amount of straight life annuity, if any, payable to the Participant under the Plan commencing at the same Annuity Starting Date as the Participant’s form of payment or (II) the annual amount of straight life annuity commencing at the same Annuity Starting Date that has the same actuarially equivalent present value as the Participant’s form of payment computed using the “applicable mortality table” and an interest rate of 5 percent.

(ii) If payment is to be made to the Participant in a form that is subject to the requirements of Code Section 417(e)(3), the actuarially equivalent straight life annuity form shall be:

(A) For distributions with an Annuity Starting Date in the 2004 or 2005 Plan Year, the annual amount of straight life annuity commencing on the same Annuity Starting Date that has the same actuarially equivalent present value as the Participant’s form of payment determined using the following, whichever provides the greater annual amount: (I) the mortality table and interest rate otherwise used under the Plan for purposes of determining Actuarial Equivalence of such optional form or (II) the “applicable

mortality table” and an interest rate of 5.5 percent; provided, however, that for distributions with an Annuity Starting Date on or after the first day of the 2004 Plan Year and before January 1, 2005 Plan Year, use of the interest rate specified in clause (II) shall not reduce the benefit payable to the Participant below the amount determined using the “applicable interest rate” in effect as of the last day of the last Plan Year beginning before January 1, 2004. For purposes of this subparagraph (A), the “applicable interest rate” means the annual rate of interest on 30-year Treasury securities for the second calendar month preceding the Plan Year in which the Annuity Starting Date occurs.

(B)

For distributions with an Annuity Starting Date after the 2005 Plan Year, the annual amount of straight life annuity commencing on the same Annuity Starting Date that has the same actuarially equivalent present value as the Participant’s form of payment determined using the following, whichever provides the greatest annual amount: (I) the mortality table and interest rate otherwise used under the Plan for purposes of determining Actuarial Equivalence of such optional form; (II) the “applicable mortality table” and an interest rate of 5.5 percent; or (III) the “applicable mortality table” and the “417(e) interest rate” determined as of the second calendar month preceding the Plan Year in which the distribution is made, divided by 1.05. For purposes of this subparagraph (B), the “417(e) interest rate” means the following: (1) prior to the Plan Year beginning in 2008, the “applicable interest rate” described in subparagraph (A) above and (2) for Plan Years beginning on and after January 1, 2008, the adjusted first, second and third segment rates applied under Code Section 430(h)(2)(C), computed without regard to a 24 month average; provided, however, that for Plan Years beginning in 2008, 2009, 2010, and 2011, such rate shall be blended with the “applicable interest rate” described in subparagraph (A) above, as provided in Code Section 417(e)(3)(D)(ii) and (iii).

(iii)

A form of payment is not subject to the requirements of Code Section 417(e)(3) if the form of payment is either (A) a nondecreasing annuity (other than a straight life annuity) payable for a period not less than the life of the Participant (or in the case of a Qualified Preretirement Survivor Annuity, the life of the Participant’s Spouse) or (B) an annuity that decreases during the life of the Participant merely because of (I) the death of the Participant’s Beneficiary under a joint and survivor annuity, but only if the reduction is not below 50 percent of the benefit payable before the death of the Beneficiary or (II) cessation or reduction of Social Security supplements or qualified disability payments, as defined in Code Section 411(a)(9).

(iv)

No actuarial adjustment shall be made hereunder for (A) survivor benefits payable to a surviving Spouse under a Qualified Joint and Survivor Annuity to the extent such benefits would not be payable if the Participant’s benefit were paid in another form, (B) benefits that are not directly related to retirement benefits (such as qualified disability benefits, preretirement incidental death benefits, and

post-retirement medical benefits), or (C) the inclusion in the form of payment of an automatic benefit increase feature, provided that (I) the form of payment is not subject to Code Section 417(e)(3) and would otherwise satisfy the limitations of this Article and (II) the Plan provides that the amount payable under the form of payment in any “limitation year” shall not exceed the limits of this Article applicable as of the Annuity Starting Date, increased in subsequent years pursuant to Code Section 415(d). For purposes of clause (C), an automatic benefit increase feature is included in a form of payment if the form of payment provides for automatic, periodic increases to benefits paid in that form.

(v)

If a Participant has or will have distributions commencing at more than one Annuity Starting Date, the “annual retirement benefit” shall be determined as of each Annuity Starting Date (and shall satisfy the limitations of this Article as of each such date), actuarially adjusting for past and future distributions of benefits commencing as of other Annuity Starting Dates. For purposes of this paragraph (v), the determination of whether a new Annuity Starting Date has occurred shall be made without regard to Treasury Regulations Section 1.401(a)-20, Q&A 10(d), but with regard to Treasury Regulations Sections 1.415(b)-1(b)(1)(iii)(B) and (C).

(d)	The “applicable mortality table” means the following: (i) prior to the first day of the first Plan Year beginning on or after January 1, 2008, the table prescribed by the Secretary of the Treasury, which is the table specified in Revenue Ruling 2001-62 and (ii) on and after the first day of the first Plan Year beginning on or after January 1, 2008, the applicable Code Section 417(e)(3) mortality table.
(e)	“Defined benefit plan” and “defined contribution plan” have the meanings given such terms in Code Section 415(k).
(f)	“Defined benefit compensation limitation” means 100 percent of a Participant’s average “415 compensation” for his high three consecutive calendar years of service. In the case of a Participant who has fewer than 10 years of service with the employer, the “defined benefit compensation limitation” shall be multiplied by a fraction, (i) the numerator of which is the number of years (or part thereof, but not less than one) of service with the employer and (ii) the denominator of which is 10. For purposes of this subsection, a Participant is credited with a “year of service” (computed to fractional years) for each Service Computation Period for which he is credited with the number of Hours of Service required to accrue Credited Service under the terms of the Plan, taking into account service with the Employers, any “affiliated employer”, or a “predecessor employer.”
(g)	“Defined benefit dollar limitation” means $160,000, as adjusted , effective January 1 of each year, under Code Section 415(d) in such manner as the Secretary of the Treasury shall prescribe, and payable in the form of a straight life annuity. A limitation adjusted under Code Section 415(d) will apply to “limitation years” ending with or within the calendar year for which the adjustment applies. A Participant’s “annual retirement benefit” shall not be adjusted to reflect increases in the “defined benefit dollar limitation” effective for “limitation years” beginning after the “limitation year” in which his termination occurred.

The “defined benefit dollar limitation” shall be adjusted as follows:

(i)

If the Participant has fewer than 10 years of participation in the Plan, the “defined benefit dollar limitation” shall be multiplied by a fraction, (i) the numerator of which is the number of years (or part thereof, but not less than one) of participation in the plan and (ii) the denominator of which is 10. For purposes of this paragraph, a Participant is credited with a “year of participation” (computed to fractional years) for each Service Computation Period (as defined for purposes of crediting Credited Service) for which he is credited with a year (or fraction of a year) of Credited Service, provided that (A) he is included as a Participant under the eligibility provisions of the Plan for at least one day of such Service Computation Period and (B) the Plan is established no later than the last day of such Service Computation Period. No more than one year of participation shall be credited for a Service Computation Period.

(ii)

If the benefit of a Participant begins prior to age 62, the “defined benefit dollar limitation” applicable to the Participant at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the Participant’s Annuity Starting Date that is:

(A)

For “limitation years” beginning before July 1, 2007, the actuarial equivalent of the “defined benefit dollar limitation” (adjusted under (i) above, if required) determined using the following factors, whichever produces the lesser annual amount: (I) the interest rate and mortality table (or other tabular factor) specified in Section 6.2 or 7.3, as applicable, for adjusting benefits for early commencement or (II) the “applicable mortality table” and an interest rate of 5 percent.

(B)

For “limitation years” beginning on or after July 1, 2007, the following, as applicable:

(I)

If the plan does not provide an immediately commencing straight life annuity commencing at both age 62 and the Participant’s age at his Annuity Starting Date, the actuarial equivalent of the “defined benefit dollar limitation” (adjusted under (i) above, if required) determined using the “applicable mortality table” (expressing the Participant’s age based on completed calendar months as of the Annuity Starting Date) and an interest rate of 5 percent.

(II)

If the plan does provide an immediately commencing straight life annuity commencing at both age 62 and the Participant’s age at his Annuity Starting Date, the lesser of: (a) the amount determined under (I) above or (b) the “defined benefit dollar limitation” (adjusted under (i) above, if required ) multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under the Plan at the Participant’s Annuity Starting Date to the annual amount of the immediately commencing straight life

annuity under the Plan at age 62, both determined without applying the limitations of this Article.

Any decrease in the “defined benefit dollar limitation” determined in accordance with this paragraph (ii) shall not reflect a mortality decrement if benefits are not forfeited upon the death of the Participant. If any benefits are forfeited upon death, the full mortality decrement is taken into account. For this purpose, no forfeiture is treated as occuring upon the Participant’s death if the Plan does not charge Participants for providing Qualified Preretirement Survivor Annuity coverage.

(iii) If the benefit of a Participant begins after the Participant attains age 65, the “defined benefit dollar limitation” applicable to the Participant at the later age is an annual benefit payable in the form of a straight life annuity beginning at the Annuity Starting Date that is:

(A)

For “limitation years” beginning before July 1, 2007, the actuarial equivalent of the “defined benefit dollar limitation” (adjusted under (i) above, if required) determined using the following factors, whichever provides the lesser amount: (I) the interest rate and mortality table (or other tabular factor) used under the Plan to determine Actuarial Equivalence for purposes of delayed retirement or (II) the “applicable mortality table” and an interest rate of 5 percent.

(B)

For “limitation years” beginning on or after July 1, 2007, the following, as applicable:

(I)

If the plan does not provide an immediately commencing straight life annuity commencing at both age 65 and the Participant’s age at his Annuity Starting Date, the actuarial equivalent of the “defined benefit dollar limitation” (adjusted under (i) above, if required) determined using the “applicable mortality table” (expressing the Participant’s age based on completed calendar months as of the Annuity Starting Date) and an interest rate of 5 percent.

(II)

If the plan does provide an immediately commencing straight life annuity commencing at both age 65 and the Participant’s age at his Annuity Starting Date, the lesser of: (a) the amount determined under (I) above or (b) the “defined benefit dollar limitation” (adjusted under (i) above, if required ) multiplied by the ratio of the annual amount of the adjusted immediately commencing straight life annuity under the Plan at the Participant’s Annuity Starting Date to the annual amount of the adjusted immediately commencing straight life annuity under the Plan at age 65, both determined without applying the limitations of this Article. The adjusted immediately commencing straight life annuity at the Participant’s Annuity Starting Date is the annual amount of such

annuity payable to the Participant computed disregarding accruals after age 65, but including actuarial adjustments even if those adjustments are used to offset accruals and the adjusted immediately commencing straight life annuity under the Plan at age 65 is the annual amount of such annuity that would be payable to a hypothetical Participant who is age 65 and has the same Accrued Benefit as the Participant.

Any adjustment to the “defined benefit dollar limitation” determined in accordance with this paragraph (iii) shall not reflect a mortality decrement if benefits are not forfeited upon the death of the Participant. If any benefits are forfeited upon death, the full mortality decrement is taken into account. For this purpose, no forfeiture is treated as occuring upon the Participant’s death if the Plan does not charge Participants for providing Qualified Preretirement Survivor Annuity coverage.

(h)

An “employee contribution” means any employee after-tax contribution contributed by a Participant under any qualified plan of an Employer or an “affiliated employer”, including mandatory employee contributions, as defined in Code Section 411(c)(2)(C).

(i)

A Participant’s “415 compensation” with respect to a calendar year means the following: the Participant’s remuneration for services, including (A) his wages, salaries, fees for professional service, and all other amounts received (without regard to whether such amounts are paid in cash) for personal services actually rendered in the course of employment with an Employer or an “affiliated employer” paid to him for such period, to the extent the amounts would have been received and includable in gross income, including, but not limited to, commissions paid to salesperson, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or other expense allowances under a nonaccountable plan described in Treasury Regulations Section 1.62-2(c) or (B) in case of a Participant who is an employee within the meaning of Code Section 401(c)(1), the Participant’s earned income, as described in Code Section 401(c)(2) and regulations issued thereunder, but excluding (i) contributions (other than elective contributions described in Code Section 402(e)(3), 408(k)(6), 408(p)(2)(A)(i), or 457(b)) made on behalf of the Participant by an Employer or an “affiliated employer” to a plan of deferred compensation (including a simplified employee pension described in Code Section 408(k) or a simple retirement account described in Code Section 408(p)), whether or not qualified, to the extent that, before application of the limitations of Code Section 415 to such plan, the contributions are not includable in the gross income of the Participant for the taxable year in which contributed, (ii) any distributions from a plan of deferred compensation, whether or not qualified, (except amounts received pursuant to an unfunded non-qualified plan in the year such amounts are includable in the gross income of the Participant), (iii) amounts realized from the exercise of a non-qualified option or when restricted stock or other property held by the Participant either becomes freely transferable or is no longer subject to substantial risk of forfeiture, (iv) amounts received from the sale, exchange or other disposition of stock acquired under a qualified stock option, (v) any other amounts that receive special tax benefits, such as premiums for

group term life insurance (but only to the extent that the premiums are not includable in the gross income of the Participant and are not salary reduction amounts that are described in Code Section 125), and (vi) other items that are similar to the items listed in (i) through (v) above.

“415 compensation” includes (i) any elective deferral, as defined in Code Section 402(g)(3) and (ii) any amount contributed or deferred by the Employer at the Participant’s election which is not includable in the Participant’s gross income by reason of Code Section 125, 132(f)(4), or 457.

If a Participant has a severance from employment (as defined in Treasury Regulations Section 1.415(a)-1(f)(5)) with the Employer and all “affiliated employers”, “415 compensation” does not include amounts received by the Participant following such severance from employment except amounts paid before the later of (a) the close of the “limitation year” in which the Participant’s employment terminates or (b) within 2 ¹/2 months of such severance if such amounts:

• would otherwise have been paid to the Participant in the course of his employment and are regular compensation for services during the Participant’s regular working hours, compensation for services outside the Participant’s regular working hours (such as overtime or shift differential pay), commissions, bonuses, or other similar compensation

• are payments for accrued bona fide sick, vacation or other leave, but only if the Participant would have been able to use such leave if his employment had continued and such amounts would have been includable in “415 compensation” if his employment had continued

• are received by the Participant pursuant to a non-qualified, unfunded deferred compensation plan, but only if the Participant would have received such payments at the same time if he had continued in employment and only to the extent the payments are includable in the Participant’s gross income

For purposes of this subsection, a Participant will not be considered to have incurred a severance from employment if his new employer continues to maintain the plan with respect to such Participant.

Notwithstanding the foregoing, effective for years beginning after December 31, 2008, amounts paid by an Employer or an “affiliated employer” to a Participant who is not performing services for the Employer or “affiliated employer” due to qualified military service (within the meaning of Code Section 414(u)(1)) shall be included as “415 compensation” to the extent such amounts do not exceed the amounts the Participant would have received if he had continued in employment with the Employer or “affiliated employer”.

In no event, however, shall the compensation of a Participant taken into account under the Plan for any calendar year exceed the Code Section 401(a)(17) limit in effect for such

calendar year ($225,000 for the calendar year beginning in 2007, subject to adjustment annually as provided in Code Section 401(a)(17)(B) and Code Section 415(d)). Effective for calendar years beginning on and after July 1, 2007, the limit described in this paragraph shall be applied annually to “415 compensation” earned in such calendar year and “415 compensation” for a calendar year shall not increase as a result of an increase in the Code Section 401(a)(17) limit applicable to a future calendar year.

To be included in a Participant’s “415 compensation” for a particular calendar year, an amount must have been received by the Participant (or would have been received, but for the Participant’s election under Code Section 125, 132(f)(4), 401(k), 402(h)(1)(B), 403(b), 408(p)(2)(A)(i), or 457) within such calendar year.

(j)

The “limitation year” means the calendar year.

(k)

A “predecessor employer” means (1) any former employer with respect to which an Employer or “affiliated employer” maintains a plan that provides benefits that the Participant accrued while performing services for such other employer or (2) a former entity that antedates an Employer or an “affiliated employer” if under the facts and circumstances the Employer or “affiliated employer” constitutes a continuation of all or a part of the trade or business of the former entity.

12.2 Maximum Limitation on Annual Benefits

The “aggregate annual retirement benefit” accrued or payable to a Participant may not at any time within any “limitation year” exceed the lesser of the “defined benefit compensation limitation” or the “defined benefit dollar limitation”; provided, however, that the “aggregate annual retirement benefit” accrued or payable to a Participant shall be deemed not to exceed such limits if:

(a)	The “aggregate annual retirement benefit” payable for a “limitation year” under any available form of payment does not exceed $10,000 multiplied by a fraction, the numerator of which is the Participant’s number of years of service (as defined above with respect to the “defined benefit compensation limitation”), not to exceed 10 years of service, and the denominator of which is 10; and
(b)	The Employers, all “affiliated employers”, and any “predecessor employer” have not at any time maintained a separate “defined contribution plan” in which the Participant participated.

12.3 Grandfather Prior Benefits

Notwithstanding any other provision of this Article to the contrary, in no event will application of the limits contained in this Article reduce the “aggregate annual retirement benefit” accrued or payable to a Participant below the “aggregate annual retirement benefit” accrued or payable to the Participant as of the end of the last “limitation year” beginning before July 1, 2007 under the provisions of the Plan adopted and in effect before April 5, 2007, provided that such provisions satisfied the requirements of Code Section 415 and the regulations and published guidance

issued thereunder in effect as of the end of the last “limitation year” beginning before July 1, 2007, as provided in Treasury Regulations Section 1.415(a)-1(g)(4).

12.4 Frozen Benefits

Accruals under the Plan were frozen as of the freeze date specified elsewhere in the Plan. Except as otherwise specifically provided herein, nothing in this Article is intended to increase the benefit accrued or payable to a Participant under the Plan as of such freeze date. This restriction shall not apply to an increase in the amount payable under this Article resulting from a change in the factors used to convert a Participant’s “annual retirement benefit” to a form other than an annuity payable for his life only or to adjust for payments made prior to age 62 or after age 65.

12.5 Manner of Reduction

If a Participant’s “annual retirement benefit” that would otherwise accrue or be payable for a “limitation year” would exceed the limitations specified in this Article, his “annual retirement benefit” accrued or payable for such “limitation year” shall be reduced to the extent necessary. If a Participant is also covered by another “defined benefit plan” required to be aggregated with the Plan under Treasury Regulations Section 1.415(f)-1 and his “aggregate annual retirement benefit” that would otherwise accrue or be payable for a “limitation year” would exceed the limitations of this Section, his “annual retirement benefit” accrued or payable for such “limitation year” shall be reduced by an amount equal to the amount by which his “aggregate annual retirement benefit” for such “limitation year” would exceed the limitations of this Section multiplied by a fraction, the numerator of which is his “annual retirement benefit” (determined without regard to this Section) and the denominator of which is his “aggregate annual retirement benefit” (determined without regard to the limitations of this Section or any corresponding limitation in any other “defined benefit plan” maintained by an Employer, any “affiliated employer,” or any predecessor employer”).

If the limitations contained in this Article are nevertheless exceeded with respect to a Participant for any “limitation year,” correction shall be made in accordance with the Employee Plans Compliance Resolution System, as set forth in Revenue Procedure 2006-27, or any superseding guidance.

EX-10.12

Exhibit 10.12

STERLING CHEMICALS, INC. EIGHTH AMENDED AND RESTATED SAVINGS AND INVESTMENT PLAN

Nonstandardized 401(k) Plan

ADOPTION AGREEMENT #005
NONSTANDARDIZED 401(k) PLAN
[Related Employers only]

     The undersigned Employer, by executing this Adoption Agreement, establishes a retirement plan and trust (collectively “Plan”) under the Prudential Retirement Prototype Plan (basic plan document #03). The Employer, subject to the Employer’s Adoption Agreement elections, adopts fully the Prototype Plan and Trust provisions. This Adoption Agreement, the basic plan document and any attached Appendices or agreements permitted or referenced therein, constitute the Employer’s entire plan and trust document. All “Election” references within this Adoption Agreement are Adoption Agreement Elections. All “Article” or “Section” references are basic plan document references. Numbers in parentheses which follow election numbers are basic plan document references. Where an Adoption Agreement election calls for the Employer to supply text, the Employer (without altering the content of any existing printed text) may lengthen any space or line, or create additional tiers. When Employer-supplied text uses terms substantially similar to existed printed options, all clarifications and caveats applicable to the printed options apply to the Employer-supplied text unless the context requires otherwise. The Employer makes the following elections granted under the corresponding provisions of the basic plan document.

ARTICLE I
DEFINITIONS

1.	EMPLOYER (1.23).
	Name: Sterling Chemicals, Inc.
	Address: 333 Clay Street, Houston, Texas 77002
	Phone number: 713 650 3700

E-mail (optional):

	Employer’s Taxable Year: ends each 12/31
	EIN: 76-0502785
2.	PLAN (1.40).
	Name: Sterling Chemicals, Inc. Eighth Amended and Restated Savings and Investment Plan
	Plan number: 003                                               (3-digit number for Form 5500 reporting)

Trust EIN (optional):

3. PLAN/LIMITATION YEAR (1.42/1.33). Plan Year and Limitation Year mean the 12 consecutive month period (except for a short Plan/Limitation Year) ending every (Complete (a) and (b)):

[Note: Complete any applicable blanks under Election 3 with a specific date, e.g., “June 30” OR “the last day of February” OR “the first Tuesday in January.” In the case of a Short Plan Year or a Short Limitation Year, include the year, e.g., “May 1, 2008.”]

(a)	Plan Year (Choose one of (1) or (2) and choose (3) if applicable):
	(1)	þ	December 31.
	(2)	[n/a]	Fiscal Plan Year: ending:                     .
	(3)	[n/a]	Short Plan Year: commencing:                      and ending:                     .
(b)	Limitation Year (Choose one of (1) or (2) and choose (3) if applicable):
	(1)	þ	Generally same as Plan Year. The Limitation Year is the same as the Plan Year except where the Plan Year is a short year in which event the Limitation Year is always a 12 month period, unless the short Plan Year (and short Limitation Year) result from a Plan amendment.
	(2)	[n/a]	Different Limitation Year: ending:                      .
	(3)	[n/a]	Short Limitation Year: commencing:                      and ending:                      .
4.	EFFECTIVE DATE (1.19). The Employer’s adoption of the Plan is a (Choose one of (a), (b), or (c). Choose (d) if applicable):
(a)	[n/a]	New Plan. The Plan’s Effective Date is:                      .
(b)	þ	Restated Plan. The Plan’s restated Effective Date is: January 1, 2009 . The Plan’s original Effective Date was: August 1, 1986 .

[Note: See Section 1.51 for the definition of Restated Plan. If this Plan is an EGTRRA restatement: (i) the EGTRRA restatement Effective Date must be the later of the beginning of the 2002 Plan Year or the Plan’s original Effective Date; and (ii) if specific Plan provisions, as reflected in this Adoption Agreement, do not date back to the EGTRRA restatement Effective Date, indicate as such in Appendix A.]

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(c)	[n/a]	Restatement of surviving and merging plans. The Plan restates two (or more) plans (Complete (1) and (2). Choose (3) as applicable):
	(1)	This (surviving) Plan. The Plan’s restated Effective Date is:                     . The Plan’s original Effective Date was:                     .

[Note: If this Plan is an EGTRRA restatement: (i) the EGTRRA restatement Effective Date must be the later of the beginning of the 2002 Plan Year or the Plan’s original Effective Date; and (ii) if specific Plan provisions, as reflected in this Adoption Agreement, do not date back to the EGTRRA restatement Effective Date, indicate as such in Appendix A.]

(2)	Merging plan. The                                          Plan was or will be merged into this surviving Plan as of:                      . The merging plan’s restated Effective Date is:                      . The merging plan’s original Effective Date was:                     .
[See the Note under Election 4(c)(1) if this document is the merging plan’s EGTRRA restatement.]
(3)	[n/a] Additional merging plans. The following additional plans were or will be merged into this surviving Plan (Complete a. and b. as applicable):

			Restated	Original
	Name of merging plan	Merger date	Effective Date	Effective Date
a.
b.

(d)	[n/a]	Special Effective Date for Elective Deferral provisions:
5.	TRUSTEE (1.65). The Trustee executing this Adoption Agreement is (Choose one of (a), (b), (c), (d), or (e). Choose (f) if applicable):
(a)	[n/a]	A discretionary Trustee. See Section 8.02(A).
(b)	[n/a]	A nondiscretionary (directed) Trustee or Custodian. See Section 8.02(B).
(c)	[n/a]	A Trustee under the Prudential Trust Company Trust Agreement, a separate trust agreement the Trustee has executed and that the IRS has approved for use with this Plan. Under this Election 5(c): (i) the Trustee is not executing the Adoption Agreement; and (ii) Article VIII of the basic plan document and any other basic plan document provisions which affect the Trustee do not apply, except as indicated otherwise in the separate trust agreement. See Section 8.11(C).
(d)	þ	A Trustee under the Prudential Bank & Trust Company, FSB Trust Agreement, a separate trust agreement the Trustee has executed and that the IRS has approved for use with this Plan. Under this Election 5(d): (i) the Trustee is not executing the Adoption Agreement; and (ii) Article VIII of the basic plan document and any other basic plan document provisions which affect the Trustee do not apply, except as indicated otherwise in the separate trust agreement. See Section 8.11(C).
(e)	[n/a]	A Trustee under the Pre-Approved Trust Agreement, a separate trust agreement the Trustee has executed and that the IRS has approved for use with this Plan. Under this Election 5(e): (i) the Trustee is not executing the Adoption Agreement; and (ii) Article VIII of the basic plan document and any other basic plan document provisions which affect the Trustee do not apply, except as indicated otherwise in the separate trust agreement. See Section 8.11(C).
(f)	[n/a]	Permitted Trust amendments apply. Under Section 8.11 the Employer in Appendix C has made certain permitted amendments to the Trust. Such amendments do not constitute a separate trust under Election 5(c), 5(d), or 5(e).
6. CONTRIBUTION TYPES (1.12). The Employer and/or Participants, in accordance with the Plan terms, make the following Contribution Types to the Plan/Trust (Choose one or more of (a) through (h) as applicable. Choose (i) if applicable):
(a)	þ	Pre-Tax Deferrals. See Section 3.02 and Elections 20-23.
(b)	[n/a]	Roth Deferrals. See Section 3.02(E) and Elections 20, 21, and 23. [Note: The Employer may not limit Elective Deferrals to Roth Deferrals only.]
(c)	þ	Matching. See Sections 1.34 and 3.03 and Elections 24-26. [Note: The Employer may make an Operational QMAC without electing 6(c). See Section 3.03(C)(2).]
(d)	[n/a]	Nonelective. See Sections 1.37 and 3.04 and Elections 27-29. [Note: The Employer may make an Operational QNEC without electing 6(d). See Section 3.04(C)(2).]
(e)	[n/a]	Safe Harbor/Additional Matching. The Plan is (or pursuant to a delayed election, may be) a safe harbor 401(k) Plan. The Employer will make (or under a delayed election, may make) Safe Harbor Contributions as it elects in Election 30. The Employer may or may not make Additional Matching Contributions as it elects in Election 30. See Election 26 as to matching Catch-Up Deferrals. See Section 3.05.
(f)	þ	Employee (after-tax). See Section 3.09 and Election 35.
(g)	[n/a]	SIMPLE 401(k). The Plan is a SIMPLE 401(k) Plan. See Section 3.10. The Employer operationally will elect for each Plan Year to make a SIMPLE Matching Contribution or a SIMPLE Nonelective Contribution as described in Section 3.10(E). The

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		Employer must notify Participants of the Employer’s SIMPLE contribution election and of the Participants’ deferral election rights and limitations within a reasonable period of time before the 60th day prior to the beginning of the Plan Year. [Note: The Employer electing 6(g) may not elect any other Contribution Types except under Elections 6(a), 6(b), and 6(h).]
(h)	[n/a]	Designated IRA. See Section 3.12 and Election 36.
(i)	[n/a]	None (frozen plan). The Plan is/was frozen effective as of:                                          . See Sections 3.01(J) and 11.04.
[Note: Elections 20 through 30 and Elections 35 through 37 do not apply to any Plan Year in which the Plan is frozen.]
7.	DISABILITY (1.15). Disability means (Choose one of (a) or (b)):
(a)	þ	Basic Plan. Disability as defined in Section 1.15(A).

(b) [n/a] Describe:

[Note: The Employer may elect an alternative definition of Disability for purposes of Plan distributions. However, the use of an alternative definition may result in loss of favorable tax treatment of the Disability distribution.]

8. EXCLUDED EMPLOYEES (1.21(D)). The following Employees are not Eligible Employees but are Excluded Employees (Choose one of (a) or (b)):

[Note: Regardless of the Employer’s elections under Election 8: (i) Employees of any Related Employers (excluding the Signatory Employer) are Excluded Employees unless the Related Employer becomes a Participating Employer; and (ii) Reclassified Employees and Leased Employees are Excluded Employees unless the Employer in Appendix B elects otherwise. See Sections 1.21(B), 1.21(D)(3) and 1.23(D).]

(a)	[n/a]	No Excluded Employees. All Employees are Eligible Employees as to all Contribution Types.
(b)	þ	Exclusions. The following Employees are Excluded Employees (either as to all Contribution Types or to the designated Contribution Type) (Choose one or more of (1) through (7) as applicable):

[Note: For this Election 8, unless described otherwise in Election 8(b)(7), Elective Deferrals includes Pre-Tax Deferrals, Roth Deferrals, Employee Contributions and Safe Harbor Contributions. Matching includes all Matching Contributions except Safe Harbor Matching Contributions. Nonelective includes all Nonelective Contributions except Safe Harbor Nonelective Contributions.]

			(1)		(2)	(3)	(4)
			All		Elective
			Contributions		Deferrals	Matching	Nonelective
(1)	[n/a]	No exclusions. No exclusions as to the designated Contribution Type.	N/A (See Election 8(a))		o	o	o
(2)	þ	Collective Bargaining (union) Employees. As described in Code §410(b)(3)(A). See Section 1.21(D)(1).	þ	OR	o	o	o
(3)	[n/a]	Non-Resident Aliens. As described in Code §410(b)(3)(C). See Section 1.21(D)(2).	o	OR	o	o	o
(4)	[n/a]	HCEs. See Section 1.21(E). See Election 30(e) as to exclusion of some or all HCEs from Safe Harbor Contributions.	o	OR	o	o	o
(5)	[n/a]	Hourly paid Employees.	o	OR	o	o	o
(6)	[n/a]	Part-Time/Temporary/Seasonal Employees.	o	OR	o	o	o
		See Section 1.21(D)(4). A Part-Time, Temporary or Seasonal Employee is an Employee whose regularly scheduled Service is less than              (specify a maximum of 1,000) Hours of Service in the relevant Eligibility Computation Period.
[Note: If the Employer under Election 8(b)(6) elects to treat Part-Time, Temporary and Seasonal Employees as Excluded Employees and any such an Employee actually completes at least 1,000 Hours of Service during the relevant Eligibility Computation Period, the Employee becomes an Eligible Employee. See Section 1.21(D)(4).]
(7)	þ	Describe exclusion category and/or Contribution Type: exclude Employees regularly scheduled to work outside of the US (e.g., Exclude Division B Employees OR Exclude salaried Employees from Discretionary Matching Contributions.)

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[Note: Any exclusion under Election 8(b)(7), except as to Part-Time/Temporary/Seasonal Employees, may not be based on age or Service or level of Compensation. See Election 14 for eligibility conditions based on age or Service.]

9. COMPENSATION (1.11(B)). The following base Compensation (as adjusted under Elections 10 and 11) applies in allocating Employer Contributions (or the designated Contribution Type) (Choose one or more of (a) through (d) as applicable):

[Note: For this Election 9 all definitions include Elective Deferrals unless excluded under Election 11. See Section 1.11(D). Unless described otherwise in Election 9(d), Elective Deferrals includes Pre-Tax Deferrals, Roth Deferrals and Employee Contributions, Matching includes all Matching Contributions and Nonelective includes all Nonelective Contributions. In applying any Plan definition which references Section 1.11 Compensation, where the Employer in this Election 9 elects more than one Compensation definition for allocation purposes, the Plan Administrator will use W-2 Wages for such other Plan definitions if the Employer has elected W-2 Wages for any Contribution Type or Participant group under Election 9. If the Employer has not elected W-2 Wages, the Plan Administrator for such other Plan definitions will use 415 Compensation.]

			(1)		(2)	(3)	(4)
			All		Elective
			Contributions		Deferrals	Matching	Nonelective
(a)	[n/a]	W-2 Wages (plus Elective Deferrals).	o	OR	o	o	o
		See Section 1.11(B)(1).
(b)	[n/a]	Code §3401 Federal Income Tax Withholding Wages (plus Elective Deferrals). See Section 1.11(B)(2).	o	OR	o	o	o
(c)	[n/a]	415 Compensation (simplified). See Section 1.11(B)(3).	o	OR	o	o	o
		[Note: The Employer may elect an alternative “general 415 Compensation” definition by electing 9(c) and by electing the alternative definition in Appendix B. See Section 1.11(B)(4).]
(d)	þ	Describe Compensation by Contribution Type or by Participant group: cash compensation paid for services rendered including elective salary reduction, but only to the extent that such cash compensation does not exceed straight time pay plus overtime plus shift differential

[Note: Under Election 9(d), the Employer may: (i) elect Compensation from the elections available under Elections 9(a), (b), or (c), or a combination thereof as to a Participant group (e.g., W-2 Wages for Matching Contributions for Division A Employees and 415 Compensation in all other cases); and/or (ii) define the Contribution Type column headings in a manner which differs from the “all-inclusive” description in the Note immediately preceding Election 9(a) (e.g., Compensation for Safe Harbor Matching Contributions means W-2 Wages and for Additional Matching Contributions means 415 Compensation).]

10. PRE-ENTRY/POST-SEVERANCE COMPENSATION (1.11(H)/(I)). Compensation under Election 9 (Complete (a). Choose (b). if applicable):

[Note: The Plan does not take into account Post-Severance Compensation unless the Employer elects otherwise in Appendix B or except as otherwise specified in a Plan amendment. For this Election 10, unless described otherwise in Election 10(b), Elective Deferrals includes Pre-Tax Deferrals, Roth Deferrals and Employee Contributions, Matching includes all Matching Contributions and Nonelective includes all Nonelective Contributions.]

				(1)		(2)	(3)	(4)
				All		Elective
				Contributions		Deferrals	Matching	Nonelective
(a)	[n/a]	Pre-Entry Compensation. Includes (Choose (1) and (2) as applicable):
	(1)	[n/a]	Plan Year. Compensation for the entire Plan Year which includes the Participant’s Entry Date.	o	OR	o	o	o
	(2)	[n/a]	Participating Compensation. Only Participating	o	OR	o	o	o
			Compensation. See Section 1.11(H)(1).

[Note: Under a Participating Compensation election, in applying any Adoption Agreement elected contribution limit or formula, the Plan Administrator will count only the Participant’s Participating Compensation. See Section 1.11(H)(1) as to plan disaggregation.]

(b) [n/a] Describe Pre-Entry Compensation by Contribution Type or by Participant group:                                      

[Note: Under Election 10(b), the Employer may: (i) elect Compensation from the elections available under Election 10(a) or a combination thereof as to a Participant group (e.g., Participating Compensation for all Contribution Types as to Division A Employees, Plan Year Compensation for all Contribution Types to Division B Employees); and/or (ii) define the Contribution Type column headings in a manner

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which differs from the “all-inclusive” description in the Note immediately preceding Election 10(a) (e.g., Compensation for Nonelective Contributions is Participating Compensation and for Safe Harbor Nonelective Contributions is Plan Year Compensation).]

11. EXCLUDED COMPENSATION (1.11(G)). Apply the following Compensation exclusions to Elections 9 and 10 (Choose one of (a) or (b)):

(a)	þ	No exclusions. Compensation as to all Contribution Types means Compensation as elected in Elections 9 and 10.
(b)	[n/a]	Exclusions. Exclude the following (Choose one or more of (1) through (9) as applicable):

[Note: In a safe harbor 401(k) plan, allocations qualifying for the ADP or ACP test safe harbors must be based on a non-discriminatory definition of Compensation. If the Plan applies permitted disparity, allocations also must be based on a non-discriminatory definition of Compensation if the Plan is to avoid more complex testing. Elections 11(b)(4) through (b)(9) may cause allocation Compensation to fail to be non-discriminatory. In a non-safe harbor 401(k) plan, Elections 11(b)(4) through (b)(9) which result in Compensation failing to be non-discriminatory may result in more complex nondiscrimination testing. For this Election 11, unless described otherwise in Election 11(b)(9), Elective Deferrals includes Pre-Tax Deferrals, Roth Deferrals and Employee Contributions, Matching includes all Matching Contributions and Nonelective includes all Nonelective Contributions.]

				(1)		(2)	(3)	(4)
				All		Elective
				Contributions		Deferrals	Matching	Nonelective
(1)	[n/a]	No exclusions-limited. No exclusions as to the designated Contribution Type(s).		N/A (See Election 11(a))		o	o	o
(2)	[n/a]	Elective Deferrals. See Section 1.20.		N/A		N/A	o	o
(3)	[n/a]	Fringe benefits. As described in Treas. Reg. §1.414(s)-1(c)(3).		o	OR	o	o	o
(4)	[n/a]	Compensation exceeding $     .		o	OR	o	o	o
		Apply this election to (Choose one of a. or b.):
	a.	[n/a]	All Participants. [Note: If the Employer elects Safe Harbor Contributions under Election 6(e), the Employer may not elect 11(b)(4)a. to limit the Safe Harbor Contribution allocation to the NHCEs.]
	b.	[n/a]	HCE Participants only.
(5)	[n/a]	Bonus.		o	OR	o	o	o
(6)	[n/a]	Commission.		o	OR	o	o	o
(7)	[n/a]	Overtime.		o	OR	o	o	o
(8)	[n/a]	Related Employers. See Section 1.23(C).
		(If there are Related Employers, choose one or both of a. and b. as applicable):
	a.	[n/a]	Non-Participating. Compensation paid to Employees by a Related Employer that is not a Participating Employer.	o	OR	o	o	o
	b.	[n/a]	Participating. As to the Employees of any Participating Employer, Compensation paid by any other Participating Employer to its Employees. See Election 28(g)(2)a.	o	OR	o	o	o

(9)  [n/a] Describe Compensation exclusion(s):  

[Note: Under Election 11(b)(9), the Employer may: (i) describe Compensation from the elections available under Elections 11(b)(1) through (8), or a combination thereof as to a Participant group (e.g., No exclusions as to Division A Employees and exclude bonus as to Division B Employees); (ii) define the Contribution Type column headings in a manner which differs from the “all-inclusive” description in the Note immediately preceding Election 11(b)(1) (e.g., Elective Deferrals means §125 cafeteria deferrals only OR No exclusions as to Safe Harbor Contributions and exclude bonus as to Nonelective Contributions); and/or (iii) describe another exclusion (e.g., Exclude shift differential pay).]

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12. HOURS OF SERVICE (1.31). The Plan credits Hours of Service for the following purposes (and to the Employees described in Elections 12(d) or (e)) as follows (Choose one or more of (a) through (e) as applicable):

			(1)		(2)	(3)	(4)
			All				Allocation
			Purposes		Eligibility	Vesting	Conditions
(a)	[n/a]	Actual Method. See Section 1.31(A)(1).	o	OR	o	o	o
(b)	þ	Equivalency Method: 95 Hours of Service for each semi monthly payroll period (e.g., daily, weekly, etc.). See Section 1.31(A)(2).	o	OR	þ	þ	o
(c)	[n/a]	Elapsed Time Method. See Section 1.31(A)(3).	o	OR	o	o	o
(d)	[n/a]	Actual (hourly) and Equivalency (salaried). Actual Method for hourly paid Employees and Equivalency Method:	o	OR	o	o	o
		(e.g., daily, weekly, etc.) for salaried Employees.

(e) [n/a] Describe method:

[Note: Under Election 12(e), the Employer may describe Hours of Service from the elections available under Elections 12(a) through (d), or a combination thereof as to a Participant group and/or Contribution Type (e.g., For all purposes, Actual Method applies to office workers and Equivalency Method applies to truck drivers).]

13. ELECTIVE SERVICE CREDITING (1.56(C)). The Plan must credit Related Employer Service under Section 1.23(C) and also must credit certain Predecessor Employer/Predecessor Plan Service under Section 1.56(B). The Plan also elects under Section 1.56(C) to credit as Service the following Predecessor Employer service (Choose one of (a) or (b)):

(a)	þ	Not applicable. No elective Predecessor Employer Service crediting applies.
(b)	[n/a]	Applies. The Plan credits the specified service with the following designated Predecessor Employers as Service for the Employer for the purposes indicated (Choose (1) and (2) as applicable. Complete (3). Choose (4) if applicable):

[Note: Any elective Service crediting under this Election 13 must be nondiscriminatory.]

(1)	[n/a]	All purposes. Credit Service for all purposes with Predecessor Employer(s):
		(insert as many names as needed).

			(1)	(2)	(3)
					Contribution
			Eligibility	Vesting	Allocation
(2)	[n/a]	Designated purposes. Credit Service with the following Predecessor Employer(s) for the designated purpose(s):
	a.	Employer:	o	o	o
	b.	Employer:	o	o	o
	c.	Employer:	o	o	o
(3)	Time period. Under Elections 13(b)(1) or (2), the Plan credits (Choose one or more of a., b., and c. as applicable):
	a.	[n/a] All. All Service under Election(s) 13(b)      , regardless of when rendered.
	b.	[n/a] Service after. All Service under Election(s) 13(b)                     , which is or was rendered after:                                          (specify date).
	c.	[n/a] Service before. All Service under Election(s) 13(b)                     , which is or was rendered before:                                           (specify date).

(4)  [n/a] Describe elective Predecessor Employer Service crediting:                                                             .

[Note: Under Election 13(b)(4), the Employer may describe service crediting from the elections available under Elections 13(b)(1) through (3), or a combination thereof as to a Participant group and/or Contribution Type (e.g., For all purposes credit service with X only on/after 1/1/05 OR Credit all service for all purposes with entities the Employer acquires after 12/31/04 OR Service crediting for X Company applies only for purposes of Nonelective Contributions and not for Matching Contributions).]

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ARTICLE II
ELIGIBILITY REQUIREMENTS

14. ELIGIBILITY (2.01). To become a Participant in the Plan, an Eligible Employee must satisfy (Choose one of (a) or (b)):

[Note: If the Employer under a safe harbor plan elects “early” eligibility for Elective Deferrals (e.g., less than one Year of Service and age 21), but does not elect early eligibility for any Safe Harbor Contributions, also see Election 30(f).]

(a)	þ	No conditions. No eligibility conditions as to all Contribution Types. Entry is on the Employment Commencement Date (if that date is also an Entry Date), or if later, upon the next following Plan Entry Date.
[Note: No eligibility conditions apply to Prevailing Wage Contributions unless the Prevailing Wage Contract provides otherwise. See Section 2.01(D).]
(b)	[n/a]	Conditions. The following eligibility conditions (either as to all Contribution Types or as to the designated Contribution Type) (Choose one or more of (1) through (8) as applicable):

[Note: For this Election 14, unless described otherwise in Election 14(b)(8)), or the context otherwise requires, Elective Deferrals includes Pre-Tax Deferrals, Roth Elective Deferrals and Employee Contributions, Matching includes all Matching Contributions (except Safe Harbor Matching Contributions under Section 3.05(E)(3) and Operational QMACs under Section 3.03(C)(2)) and Nonelective includes all Nonelective Contributions (except Safe Harbor Nonelective Contributions under Section 3.05(E)(2) and Operational QNECs under Section 3.04(C)(2)). Safe Harbor includes Safe Harbor Nonelective and Safe Harbor Matching Contributions. If the Employer elects more than one Year of Service as to Additional Matching, the Plan will not satisfy the ACP test safe harbor. See Section 3.05(F)(3).]

			(1)		(2)	(3)	(4)	(5)
			All		Elective			Safe
			Contributions		Deferrals	Matching	Nonelective	Harbor
(1)	[n/a]	None. Entry on the Employment Commencement Date (if that date is also an Entry Date) or if later, upon the next following Plan Entry Date.	N/A (See Election 14(a))		o	o	o	o
(2)	[n/a]	Age      (not to exceed age 21).	o	OR	o	o	o	o
(3)	[n/a]	One Year of Service. See Election 16(a).	o	OR	o	o	o	o
(4)	[n/a]	Two Years of Service (without an intervening Break in Service). 100% vesting is required. [Note: Two Years of Service does not apply to Elective Deferrals, Safe Harbor Contributions or SIMPLE Contributions.]	N/A		N/A	o	o	N/A
(5)	[n/a]	month(s) (not exceeding 12 months for Elective Deferrals, Safe Harbor Contributions and SIMPLE Contributions and not exceeding 24 months for other contributions). If more than 12 months, 100% vesting is required. Service need not be continuous (no minimum Hours of Service required, and is mere passage of time).	o	OR	o	o	o	o
(6)	[n/a]	month(s) with at least            Hours of Service in each month (not exceeding 12 months for Elective Deferrals, Safe Harbor Contributions and SIMPLE Contributions and not exceeding 24 months for other contributions). If more than 12 months, 100% vesting is required. If the Employee does not complete the designated Hours of Service each month during the specified monthly time period, the Employee is subject to the one Year of Service (or two Years of Service if elect more than 12 months) requirement with 1,000 Hours of Service per Year of Service. The months during which the Employee completes the specified Hours of Service (Choose one of a. or b.):	o	OR	o	o	o	o
	a.	[n/a] Consecutive. Must be consecutive.

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				(1)		(2)	(3)	(4)	(5)
				All		Elective			Safe
				Contributions		Deferrals	Matching	Nonelective	Harbor
		b.	[n/a]Not consecutive. Need not be consecutive.
(7	)	[n/a]	Hours of Service within the            time period following the Employee’s Employment Commencement Date (not exceeding 12 months for Elective Deferrals, Safe Harbor Contributions and SIMPLE Contributions and not exceeding 24 months for other contributions). If more than 12 months, 100% vesting is required. If the Employee does not complete the designated Hours of Service during the specified time period (if any), the Employee is subject to the one Year of Service (or two Years of Service if elect more than 12 months) requirement with 1,000 Hours of Service per Year of Service.	o	OR	o	o	o	o

[Note: The Employer may complete the second blank in Election 14(b)(7) with “N/A” if the Employer wishes to impose an Hour of Service requirement without specifying a time period within which an Employee must complete the required Hours of Service.]

(8)  [n/a] Describe eligibility conditions:

[Note: The Employer may use Election 14(b)(8) to describe different eligibility conditions as to different Contribution Types or Employee groups (e.g., As to all Contribution Types, no eligibility requirements for Division A Employees and one Year of Service as to Division B Employees). The Employer also may elect different ages for different Contribution Types and/or to specify different months or Hours of Service requirements under Elections 14(b)(5), (b)(6), or (b)(7) as to different Contribution Types. Any election must satisfy Code §410(a).]

15. SPECIAL ELIGIBILITY EFFECTIVE DATE (DUAL ELIGIBILITY) (2.01(E)). The eligibility conditions of Election 14 (Choose (a) or choose (b) and (c) as applicable):

(a)	þ	No exceptions. Apply to all Employees.
[Note: Elections 15(b) or (c) may trigger a coverage failure under Code §410(b).]
(b)	[n/a]	Waiver of eligibility conditions for certain Employees. For all Contribution Types, apply solely to an Eligible Employee employed or reemployed by the Employer after                      (specify date). If the Eligible Employee was employed or reemployed by the Employer by the specified date, the Employee will become a Participant on the latest of: (i) the Effective Date; (ii) the restated Effective Date; (iii) the Employee’s Employment Commencement Date or Re-Employment Commencement Date; or (iv) on the date the Employee attains age       (not exceeding age 21).

[Note: If the Employer does not wish to impose an age condition under clause (iv) as part of the requirements for the eligibility conditions waiver, leave the age blank.]

(c) [n/a] Describe special eligibility Effective Date(s):

[Note: Under Election 15(c), the Employer may describe special eligibility Effective Dates as to a Participant group and/or Contribution Type (e.g., Eligibility conditions apply only as to Nonelective Contributions and solely as to the Eligible Employees of Division B who were hired or reemployed by the Employer after January 1, 2007).]

16. YEAR OF SERVICE — ELIGIBILITY (2.02(A)). (Choose (a), (b), and (c) as applicable):

[Note: If the Employer under Election 14 elects a one or two Year(s) of Service condition (including any requirement which defaults to such conditions under Elections 14(b)(6), (7), and (8)) or elects to apply a Year of Service for eligibility under any other Adoption Agreement election, the Employer should complete Election 16. The Employer should not complete Election 16 if it elects the Elapsed Time Method for eligibility.]

(a)	þ	Year of Service. An Employee must complete 1000 Hour(s) of Service during the relevant Eligibility Computation Period to receive credit for one Year of Service under Article II. [Note: The number may not exceed 1,000. If left blank, the requirement is 1,000 Hours of Service. Under Elections 14(b)(6) and (b)(7) and under Election 14(b)(8) if it incorporates Elections 14(b)(6) or (7), the number is 1,000 and the Employer should not supply any other number in the blank.]
(b)	[n/a]	Subsequent Eligibility Computation Periods. After the Initial Eligibility Computation Period described in Section 2.02(C)(2), the Plan measures Subsequent Eligibility Computation Periods as (Choose one of (1), (2), or (3)):
	(1)	[n/a]	Plan Year. The Plan Year, beginning with the Plan Year which includes the first anniversary of the Employee’s Employment Commencement Date.
	(2)	[n/a]	Anniversary Year. The Anniversary Year, beginning with the Employee’s second Anniversary Year.
	(3)	[n/a]	Split. The Plan Year as described in Election 16(b)(1) as to:                                 (describe Contribution Type(s)) and the Anniversary Year as described in Election 16(b)(2) as to:                                 (describe Contribution Type(s)).

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[Note: To maximize delayed entry under a two Years of Service condition for Nonelective Contributions or Matching Contributions, the Employer should elect to remain on the Anniversary Year for such contributions.]

(c) [n/a] Describe:                                                                                (e.g., Anniversary Year as to Division A and Plan Year as to Division B.)

17. ENTRY DATE (2.02(D)). Entry Date means the Effective Date and (Choose one or more of (a) through (f) as applicable):

[Note: For this Election 17, unless described otherwise in Election 17(f), Elective Deferrals includes Pre-Tax Deferrals, Roth Elective Deferrals and Employee Contributions, Matching includes all Matching Contributions (except Operational QMACs under Section 3.03(C)(2)) and Nonelective includes all Nonelective Contributions (except Operational QNECs under Section 3.04(C)(2)). Entry as to Prevailing Wage Contributions is on the Employment Commencement Date unless the Prevailing Wage Contract provides otherwise. See Section 2.02(D).]

			(1)		(2)	(3)		(4)
			All		Elective
			Contributions		Deferrals	Matching	Nonelective
(a)	[n/a]	Semi-annual. The first day of the first month and of the seventh month of the Plan Year.	o	OR	o	o		o
(b)	[n/a]	First day of Plan Year	o	OR	o	o		o
(c)	[n/a]	First day of each Plan Year quarter	o	OR	o	o		o
(d)	[n/a]	The first day of each month	o	OR	o	o		o
(e)	þ	Immediate. Upon Employment Commencement Date or if later, upon satisfaction of eligibility conditions.	þ	OR	o	o		o

(f) [n/a] Describe Entry Date(s):

[Note: Under Election 17(f), the Employer may describe Entry Dates from the elections available under Elections 17(a) through (e), or a combination thereof as to a Participant group and/or Contribution Type or may elect additional Entry Dates (e.g., As to Matching Contributions excluding Additional Matching, immediate as to Division A Employees and semi-annual as to Division B Employees OR the earlier of the Plan’s semi-annual Entry Dates or the entry dates under the Employer’s medical plan).]

18. PROSPECTIVE/RETROACTIVE ENTRY DATE (2.02(D)). An Employee after satisfying the eligibility conditions in Election 14 will become a Participant (unless an Excluded Employee under Election 8) on the Entry Date (if employed on that date) (Choose one or more of (a) through (f) as applicable):

[Note: Unless otherwise excluded under Election 8, an Employee who remains employed by the Employer on the relevant date must become a Participant by the earlier of: (i) the first day of the Plan Year beginning after the date the Employee completes the age and service requirements of Code §410(a); or (ii) 6 months after the date the Employee completes those requirements. For this Election 18, unless described otherwise in Election 18(f), Elective Deferrals includes Pre-Tax Deferrals, Roth Deferrals and Employee Contributions, Matching includes all Matching Contributions (except Operational QMACs under Section 3.03(C)(2)) and Nonelective includes all Nonelective Contributions, (except Operational QNECs under Section 3.04(C)(2)).]

			(1)		(2)	(3)	(4)
			All		Elective
			Contributions		Deferrals	Matching	Nonelective
(a)	þ	Immediately following or coincident with the date the Employee completes the eligibility conditions.	þ	OR	o	o	o
(b)	[n/a]	Immediately following the date the Employee completes the eligibility conditions.	o	OR	o	o	o
(c)	[n/a]	Immediately preceding or coincident with the date the Employee completes the eligibility conditions.	N/A		N/A	o	o
(d)	[n/a]	Immediately preceding the date the Employee completes the eligibility conditions.	N/A		N/A	o	o
(e)	[n/a]	Nearest the date the Employee completes the eligibility conditions.	N/A		N/A	o	o

(f) [n/a]   Describe retroactive/prospective entry relative to Entry Date:

[Note: Under Election 18(f), the Employer may describe the timing of entry relative to an Entry Date from the elections available under Elections 18(a) through (e), or a combination thereof as to a Participant group and/or Contribution Type (e.g., As to Matching Contributions excluding Additional Matching nearest as to Division A Employees and immediately following as to Division B Employees).]

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19. BREAK IN SERVICE – PARTICIPATION (2.03). The one year hold-out rule described in Section 2.03(C) (Choose one of (a), (b), or (c)):

(a)	þ Does not apply.
(b)	[n/a] Applies. Applies to the Plan and to all Participants.
(c)	[n/a] Limited application. Applies to the Plan, but only to a Participant who has incurred a Severance from Employment.

[Note: The Plan does not apply the rule of parity under Code §410(a)(5)(D) unless the Employer in Appendix B specifies otherwise. See Section 2.03(D).]

ARTICLE III
PLAN CONTRIBUTIONS AND FORFEITURES

20. ELECTIVE DEFERRAL LIMITATIONS (3.02(A)). The following limitations apply to Elective Deferrals under Elections 6(a) and 6(b), which are in addition to those limitations imposed under the basic plan document (Choose (a) or choose (b) and (c) as applicable):

(a) [n/a] None. No additional Plan imposed limits.

[Note: The Employer under Election 20 may not impose a lower deferral limit applicable only to Catch-Up Eligible Participants and the Employer’s elections must be nondiscriminatory. The elected limits apply to Pre-Tax Deferrals and to Roth Deferrals unless described otherwise. Under a safe harbor plan: (i) NHCEs must be able to defer enough to receive the maximum Safe Harbor Matching and Additional Matching Contribution under the plan and must be permitted to defer any lesser amount; and (ii) the Employer may limit Elective Deferrals to a whole percentage of Compensation or to a whole dollar amount. See Section 1.54(C) as to administrative limitations on Elective Deferrals.]

(b)	þ	Additional Plan limit(s). (Choose (1) and (2) as applicable. Complete (3) if (1) or (2) is chosen):
	(1)	þ Maximum deferral amount. A Participant’s Elective Deferrals may not exceed:   100%   (specify dollar amount or percentage of Compensation).
	(2)	þ Minimum deferral amount. A Participant’s Elective Deferrals may not be less than:   1%   (specify dollar amount or percentage of Compensation).
	(3)	Application of limitations. The Election 20(b)(1) and (2) limitations apply based on Elective Deferral Compensation described in Elections 9 – 11. If the Employer elects Plan Year/Participation Compensation under column (1) and in Election 10 elects Participating Compensation, in the Plan Years commencing after an Employee becomes a Participant, apply the elected minimum or maximum limitations to the Plan Year. Apply the elected limitation based on such Compensation during the designated time period and only to HCEs as elected below. (Choose a. or choose b. and c. as applicable. Under each of a., b. or c. choose one of (1) or (2). Choose (3) if applicable):

			(1)
			Plan Year/Participating		(2)		(3)
			Compensation		Payroll period		HCEs only
a.	[n/a]	Both. Both limits		o		o		o
		under Elections 20(b)(1) and (2).
b.	[n/a]	Maximum limit. The maximum		o		o		o
		amount limit under Election 20(b)(1).
c.	[n/a]	Minimum limit. The minimum		o		o		o
		amount limit under Election 20(b)(2).

(c) [n/a] Describe Elective Deferral limitation(s):                                                                                                           

[Note: Under Election 20(c), the Employer: (i) may describe limitations on Elective Deferrals from the elections available under Elections 20(a) and (b) or a combination thereof as to a Participant group (e.g., No limit applies to Division A Employees. Division B Employees may not defer in excess of 10% of Plan Year Compensation); (ii) may elect a different time period to which the limitations apply; and/or (iii) may apply a different limitation to Pre-Tax Deferrals and to Roth Deferrals.]

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21. AUTOMATIC DEFERRAL (3.02(B)). The Automatic Deferral provisions of Section 3.02(B) (Choose one of (a) or (b)):

(a)	[n/a] Do not apply.
(b)	þ Apply. The Automatic Deferral Effective Date is:   9/1/2007   (specify date). (Complete (1), (2), and (3). Choose (4) as applicable):

(1)	Automatic Deferral Amount. The Employer, as to each Participant affected, will withhold as the Automatic Deferral Amount,   3  % from the Participant’s Compensation each payroll period unless the Participant makes a Contrary Election.
(2)	Participants affected. The Automatic Deferral applies to (Choose one of a., b., c., or d.):

a.	[n/a]	All Participants. All Participants, regardless of any prior Salary Reduction Agreement, unless and until they make a Contrary Election after the Automatic Deferral Effective Date.
b.	[n/a]	Election of at least Automatic Deferral amount. All Participants, except those who have in effect a Salary Reduction Agreement on the Automatic Deferral Effective Date provided that the Elective Deferral amount under the Agreement is at least equal to the Automatic Deferral Amount.
c.	þ	No existing Salary Reduction Agreement. All Participants, except those who have in effect a Salary Reduction Agreement on the Automatic Deferral Effective Date regardless of the Elective Deferral amount under the Agreement.
d.	[n/a]	New Participants. Each Employee whose Entry Date is on or following the Automatic Deferral Effective Date.

(3) Scheduled increases. The Automatic Deferral Amount will or will not increase (as a percentage of Compensation) in Plan Years following the Plan Year containing the Automatic Deferral Effective Date (or, if later, the Plan Year in which the Automatic Deferral first applies to a Participant) as follows (Choose one of a., b., or c.):

a.	[n/a] No scheduled increase. The Automatic Deferral Amount applies in all Plan Years.
b.	[n/a] Scheduled increase. The Automatic Deferral Amount will increase as follows:

Plan Year of application to a Participant	Automatic Deferral Amount
1		3	%
2		3	%
3		4	%
4		5	%
5 and thereafter		6	%

c. þ Other scheduled increase. The Automatic Deferral Amount will increase as follows:

Plan Year of application to a Participant	Automatic Deferral Amount
1		3	%
2		4	%
3		5	%
4		6	%
5		6	%
6		6	%
7		6	%

(4) [n/a] Describe Automatic Deferral:

[Note: Under Election 21(b)(4), the Employer may describe Automatic Deferral provisions from the elections available under Election 21 and/or a combination thereof as to a Participant group (e.g., Automatic Deferrals do not apply to Division A Employees. All Division B Employee/Participants are subject to an Automatic Deferral Amount equal to 3% of Compensation effective as of January 1, 2008).]

22. CODA (3.02(C)). The CODA provisions of Section 3.02(C) (Choose one of (a) or (b)):

(a)	þ	Do not apply.
(b)	[n/a]	Apply. For each Plan Year for which the Employer makes a designated CODA contribution under Section 3.02(C), a Participant may elect to receive directly in cash not more than the following portion (or, if less, the Elective Deferral Limit) of his/her proportionate share of that CODA contribution (Choose one of (1) or (2)):

(1)	[n/a] All or any portion.
(2)	[n/a]                      %

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23. CATCH-UP DEFERRALS (3.02(D)). A Catch-Up Eligible Participant (Choose one of (a) or (b)):

(a)	þ Permitted. May make Catch-Up Deferrals to the Plan.
(b)	[n/a] Not Permitted. May not make Catch-Up Deferrals to the Plan.

24. MATCHING CONTRIBUTIONS (EXCLUDING SAFE HARBOR MATCH AND ADDITIONAL MATCH UNDER SECTION 3.05) (3.03(A)). The Employer Matching Contributions under Election 6(c) are subject to the following additional elections regarding type (discretionary/fixed), rate/amount, limitations and time period (collectively, such elections are “the matching formula”) and the allocation of Matching Contributions is subject to Section 3.06 except as otherwise provided (Choose one or more of (a) through (g) as applicable; then, for the elected match, complete (1), (2), and/or (3) as applicable. If the Employer completes (2) or (3), also complete one of (4), (5), or (6)):

[Note: If the Employer wishes to make any Matching Contributions that satisfy the ADP or ACP safe harbor, the Employer should make these Elections under Election 30, and not under this Election 24.]

	(1)		(2)	(3)	(4)	(5)	(6)
			Limit on			Apply	Apply
	Match		Deferrals	Limit on	Apply	limit(s) per	limit(s) per
	Rate/Amt		Matched	Match Amount	limit(s) per	payroll	designated
	[$/% of Elective		[$/% of	[$/% of	Plan Year	period [no	time period
	Deferrals]		Compensation]	Compensation]	[“true-up”]	“true-up”]	[no “true-up”]
(a) [n/a] Discretionary – see Section 1.34(B) (The Employer may, but is not required to complete (a)(1)-(6). See the “Note” following Election 24.)					o	o	o
(b) þ Fixed – uniform rate/amount	100		6		o	þ	o
(c) [n/a] Fixed – tiered	Elective Deferral %	Matching Rate			o	o	o
	%	%
	%	%
	%	%
	%	%
(d) [n/a] Fixed – Years of Service	Years of Service	Matching Rate                        %			o	o	o
		%
		%
		%

(1) “Years of Service” under this Election 24(d) means (Choose one of a. or b.):

a.	[n/a] Eligibility. Years of Service for eligibility in Election 16.
b.	[n/a] Vesting. Years of Service for vesting in Elections 42 and 43.

(e) [n/a] Fixed – multiple formulas	Formula 1:	o	o	o
	Formula 2:	o	o	o
	Formula 3:	o	o	o

(f) [n/a] Related and Participating Employers. If any Related and Participating Employers contribute Matching Contributions to the Plan, the following apply (Complete (1) and (2)):

(1) Matching formula. The matching formula for the Participating Employer(s) (Choose one of a. or b.):

a.	[n/a] All the same. Is (are) the same as for the Signatory Employer under this Election 24.
b.	[n/a] At least one different. Is (are) as follows:                                                                                  .

(2) Allocation sharing. The Plan Administrator will allocate the Matching Contributions made by the Signatory Employer and by any Participating Employer (Choose one of a. or b.):

a. [n/a] Employer by Employer. Only to the Participants directly employed by the contributing Employer.

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b. [n/a] Across Employer lines. To all Participants regardless of which Employer directly employs them and regardless of whether their direct Employer made Matching Contributions for the Plan Year.

[Note: The Employer should not elect 24(f) unless there are Related Employers which are also Participating Employers. See Section 1.23(D).]

(g) [n/a] Describe:                                                                                                           (e.g., A Discretionary Matching Contribution applies to Division A Participants. A Fixed Matching Contribution equal to 50% of Elective Deferrals not exceeding 6% of Plan Year Compensation applies to Division B Participants.)

[Note: See Section 1.34(A) as to Fixed Matching Contributions. A Participant’s Elective Deferral percentage is equal to the Participant’s Elective Deferrals divided by his/her Compensation. The matching rate/amount is the specified rate/amount of match for the corresponding Elective Deferral amount/percentage. Any Matching Contributions apply to Pre-Tax Deferrals and to Roth Deferrals unless described otherwise in Election 24(g). Matching Contributions for nondiscrimination testing purposes are subject to the targeting limitations. See Section 4.10(D). The Employer under Election 24(a) in its discretion may determine the amount of a Discretionary Matching Contribution and the matching contribution formula. Alternatively, the Employer in Election 24(a) may specify the Discretionary Matching Contribution formula.]

25. QMAC (PLAN-DESIGNATED) (3.03(C)(1)). The following provisions apply regarding Plan-Designated QMACs (Choose one of (a) or (b)):

[Note: Regardless of its elections under this Election 25, the Employer under Section 3.03(C)(2) may elect for any Plan Year where the Plan is using Current Year Testing to make Operational QMACs which the Plan Administrator will allocate only to NHCEs for purposes of correction of an ADP or ACP test failure.]

(a)	þ Not applicable. There are no Plan-Designated QMACs.
(b)	[n/a] Applies. There are Plan-Designated QMACs to which the following provisions apply (Complete (1) and (2)):

(1) Matching Contributions affected. The following Matching Contributions (as allocated to the designated allocation group under Election 25(b)(2)) are Plan-Designated QMACs (Choose one of a. or b.):

a.	[n/a] All. All Matching Contributions.
b.	[n/a] Designated. Only the following Matching Contributions under Election 24:                               .

(2) Allocation Group. Subject to Section 3.06, allocate the Plan-Designated QMAC (Choose one of a. or b.):

a.	[n/a] NHCEs only. Only to NHCEs who make Elective Deferrals subject to the Plan-Designated QMAC.
b.	[n/a] All Participants. To all Participants who make Elective Deferrals subject to the Plan-Designated QMAC.

The Plan Administrator will allocate all other Matching Contributions as Regular Matching Contributions under Section 3.03(B), except as provided in Sections 3.03(C)(2) or 3.05.

[Note: See Section 4.10(D) as to targeting limitations applicable to QMAC nondiscrimination testing.]

26. MATCHING CATCH-UP DEFERRALS (3.03(D)). If a Participant makes a Catch-Up Deferral, the Employer (Choose one of (a) or (b)):

(a) þ Match. Will apply to the Catch-Up Deferral (Choose one of (1) or (2)):

(1)	þ All. All Matching Contributions.
(2)	[n/a] Designated. The following Matching Contributions in Election 24:                                                             .

(b) [n/a] No Match. Will not match any Catch-Up Deferrals.

[Note: Election 26 does not apply to a safe harbor 401(k) plan unless the Employer will apply the ACP test. See Elections 37(a)(2)b. and 37(a)(2)c.(ii). In this case, Election 26 applies only to Additional Matching, if any. A safe harbor 401(k) Plan will apply the Basic Match or Enhanced Match to Catch-Up Deferrals. If the Employer elects to apply the ACP test safe harbor under Election 37(a)(2)a. or 37(a)(2)c.(i), Election 26 does not apply and the Plan also will apply any Additional Match to Catch-Up Deferrals.]

27. NONELECTIVE CONTRIBUTIONS (TYPE/AMOUNT INCLUDING PREVAILING WAGE CONTRIBUTIONS) (3.04(A)). The Employer Nonelective Contributions under Election 6(d) are subject to the following additional elections as to type and amount (Choose one or more of (a) through (e) as applicable):

(a)	[n/a] Discretionary. An amount the Employer in its sole discretion may determine.
(b)	[n/a] Fixed. (Choose one or more of (1), (2), and (3) as applicable):

(1)	[n/a] Uniform %.                     % of each Participant’s Compensation, per                      (e.g., Plan Year, month).
(2)	[n/a] Fixed dollar amount. $                      , per                      (e.g., Plan Year, month, HOS, per Participant per month).
(3)	[n/a] Describe:                                                                                     (specify time period, e.g., per Plan Year quarter. If not specified, the time period is the Plan Year).

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[Note: The Employer under Election 27(b)(3) may specify any Fixed Nonelective Contribution formula not described under Elections 27(b)(1) or (2) (e.g., For each Plan Year, 2% of net profits exceeding $50,000) and/or the Employer may describe different Fixed Nonelective Contributions as applicable to different Participant groups (e.g., A Fixed Nonelective Contribution equal to 5% of Plan Year Compensation applies to Division A Participants and a Fixed Nonelective Contribution equal to $500 per Participant each Plan Year applies to Division B Participants).]

(c) [n/a] Prevailing Wage Contribution. The Prevailing Wage Contribution amount(s) specified for the Plan Year or other applicable period in the Employer’s Prevailing Wage Contract(s). The Employer will make a Prevailing Wage Contribution only to Participants covered by the Contract and only as to Compensation paid under the Contract. If the Participant accrues an allocation of Employer Contributions (including forfeitures) under the Plan or any other Employer plan in addition to the Prevailing Wage Contribution, the Plan Administrator will (Choose one of (1) or (2)):

(1)	[n/a] No offset. Not reduce the Participant’s Employer Contribution allocation by the amount of the Prevailing Wage Contribution.
(2)	[n/a] Offset. Reduce the Participant’s Employer Contribution allocation by the amount of the Prevailing Wage Contribution.

(d) [n/a] Related and Participating Employers. If any Related and Participating Employers contribute Nonelective Contributions to the Plan, the contribution formula(s) (Choose one of (1) or (2)):

(1)	[n/a] All the same. Is (are) the same as for the Signatory Employer under this Election 27.
(2)	[n/a] At least one different. Is (are) as follows:                                                              .

[Note: The Employer should not elect 27(d) unless there are Related Employers which are also Participating Employers. See Section 1.23(D). The Employer electing 27(d) also must complete Election 28(g) as to the allocation methods which apply to the Participating Employers.]

(e) [n/a] Describe:                                                                                                          

[Note: Under Election 27(e), the Employer may describe the amount and type of Nonelective Contributions from the elections available under Election 27 and/or a combination thereof as to a Participant group (e.g., A Discretionary Nonelective Contribution applies to Division A Employees. A Fixed Nonelective Contribution equal to 5% of Plan Year Compensation applies to Division B Employees).]

28. NONELECTIVE CONTRIBUTION ALLOCATION (3.04(B)). The Plan Administrator, subject to Section 3.06, will allocate to each Participant any Nonelective Contribution (excluding QNECs) under the following contribution allocation formula (Choose one or more of (a) through (h) as applicable):

(a)	[n/a] Pro rata. As a uniform percentage of Participant Compensation.
(b)	[n/a] Permitted disparity. In accordance with the permitted disparity allocation provisions of Section 3.04(B)(2), under which the following permitted disparity formula and definition of “Excess Compensation” apply (Complete (1) and (2)):

(1) Formula (Choose one of a. or b.):

a.	[n/a] Two-tiered.
b.	[n/a] Four-tiered.

(2) Excess Compensation. For purposes of Section 3.04(B)(2), “Excess Compensation” means Compensation in excess of (Choose one of a. or b.):

a.	[n/a] Percentage amount.                      % (not exceeding 100%) of the taxable wage base in effect on the first day of the Plan Year, rounded to the next highest $                     (not exceeding the taxable wage base).
b.	[n/a] Dollar amount. The following amount: $                     (not exceeding the taxable wage base in effect on the first day of the Plan Year).

(c)	[n/a] Incorporation of contribution formula. The Plan Administrator will allocate any Fixed Nonelective Contribution under Elections 27(b), 27(d) or 27(e), or any Prevailing Wage Contribution under Election 27(c), in accordance with the contribution formula the Employer adopts under those Elections.
(d)	[n/a] Classifications of Participants. In accordance with the classifications allocation provisions of Section 3.04(B)(3). The classifications are (Choose one of (1), (2), or (3)):

[Note: Typically, the Employer would elect 28(d) where it intends to satisfy nondiscrimination requirements using “cross-testing” under Treas. Reg. §1.401(a)(4)-8. However, choosing this election does not necessarily require application of cross-testing and the Plan may be able to satisfy nondiscrimination as to its classification-based allocations by testing allocation rates.]

(1)	[n/a] Each in own classification. Each Participant constitutes a separate classification.
(2)	[n/a] NHCEs/HCEs. Nonhighly Compensated Employee/Participants and Highly Compensated Employee/Participants.
(3)	[n/a] Describe the classifications:

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[Note: Any classifications under Election 28(d) must result in a definitely determinable allocation under Treas. Reg. §1.401-1(b)(1)(ii) and must constitute a reasonable classification within the meaning of Treas. Reg. §1.410(b)-4(b). The number of allocation rates is subject to the limitations in Section 3.04(B)(3)(b). Standard interest and mortality assumptions under Treas. Reg. §1.401(a)(4)-12 apply. In the case of a self-employed Participant, the requirements of Treas. Reg. §1.401(k)-1(a)(6) apply and the allocation method should not result in a cash or deferred election for the self-employed Participant. The Employer by the due date of its tax return (including extensions) must advise the Plan Administrator or Trustee in writing as to the allocation rate applicable to each Participant under Election 28(d)(1) or applicable to each classification under Elections 28(d)(2) or (3) for the allocation Plan Year. Under Election 28(d)(1), the Employer may decide from year to year the classification (allocation rate) applicable to each Participant, without the need to amend the Plan to change the classification.]

(e) [n/a] Age-based. In accordance with the age-based allocation provisions of Section 3.04(B)(5). The Plan Administrator will use the Actuarial Factors based on the following assumptions (Complete both (1) and (2)):

(1) Interest rate. (Choose one of a., b., or c.):

a. [n/a] 7.5%                     b.           [n/a] 8.0%                     c.           [n/a] 8.5%

(2) Mortality table. (Choose one of a. or b.):

a.	[n/a] UP-1984. See Appendix D.
b.	[n/a] Alternative:                                                           (Specify 1983 GAM, 1983 IAM, 1971 GAM or 1971 IAM and attach applicable tables using such mortality table and the specified interest rate as replacement Appendix D.)

(f) [n/a] Uniform points. In accordance with the uniform points allocation provisions of Section 3.04(B)(6). Under the uniform points allocation formula, a Participant receives (Choose one or both of (1) and (2). Choose (3) if applicable):

(1) [n/a] Years of Service.                                                              point(s) for each Year of Service. The maximum number of Years of Service counted for points is                                                             .

“Year of Service” under this Election 28(f) means (Choose one of a. or b.):

a.	[n/a] Eligibility. Years of Service for eligibility in Election 16.
b.	[n/a] Vesting. Years of Service for vesting in Elections 42 and 43.

[Note: A Year of Service must satisfy Treas. Reg. §1.401(a)(4)-11(d)(3) for the uniform points allocation to qualify as a safe harbor allocation under Treas. Reg. §1.401(a)(4)-2(b)(3).]

(2)	[n/a] Age.                                         point(s) for each year of age attained during the Plan Year.
(3)	[n/a] Compensation.                                          point(s) for each $                    (not to exceed $200) increment of Plan Year Compensation.

(g) [n/a] Related and Participating Employers. If any Related and Participating Employers contribute Nonelective Contributions to the Plan, the Plan Administrator will allocate the Nonelective Contributions made by the Participating Employer(s) under Election 27(d) (Complete (1) and (2)):

(1) Allocation Method. (Choose one of a. or b.):

a.	[n/a] All the same. Using the same allocation method as applies to the Signatory Employer under this Election 28.
b.	[n/a] At least one different. Under the following allocation method(s):                                                            .

(2) Allocation sharing. The Plan Administrator will allocate the Nonelective Contributions made by the Signatory Employer and by any Participating Employer (Choose one of a. or b.):

a.	[n/a] Employer by Employer. Only to the Participants directly employed by the contributing Employer.
b.	[n/a] Across Employer lines. To all Participants regardless of which Employer directly employs them and regardless of whether their direct Employer made Nonelective Contributions for the Plan Year.

[Note: The Employer should not elect 28(g) unless there are Related Employers which are also Participating Employers. See Section 1.23(D) and Election 27(d). If the Employer elects 28(g)(2)a., the Employer should also elect 11(b)(8)b., to disregard the Compensation paid by “Y” Participating Employer in determining the allocation of the “X” Participating Employer contribution to a Participant (and vice versa) who receives Compensation from both X and Y. If the Employer elects 28(g)(2)b., the Employer should not elect 11(b)(8)b. Election 28(g)(2)a. does not apply to Safe Harbor Nonelective Contributions.]

(h) [n/a] Describe:                                                                                                              (e.g., Pro rata as to Division A Participants and Permitted Disparity (two-tiered at 100% of the SSTWB) as to Division B Participants.)

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29. QNEC (PLAN-DESIGNATED) (3.04(C)(1)). The following provisions apply regarding Plan-Designated QNECs (Choose one of (a) or (b)):

[Note: Regardless of its elections under this Election 29, the Employer under Section 3.04(C)(2) may elect for any Plan Year where the Plan is using Current Year Testing to make Operational QNECs which the Plan Administrator will allocate only to NHCEs for purposes of correction of an ADP or ACP test failure.]

(a)	[n/a] Not applicable. There are no Plan-Designated QNECs.
(b)	[n/a] Applies. There are Plan-Designated QNECs to which the following provisions apply (Complete (1), (2), and (3)):

(1) Nonelective Contributions affected. The following Nonelective Contributions (as allocated to the designated allocation group under Election 29(b)(2)) are Plan-Designated QNECs (Choose one of a. or b.):

a.	[n/a] All. All Nonelective Contributions.
b.	[n/a] Designated. Only the following Nonelective Contributions under Election 27:                                        .

(2) Allocation Group. Subject to Section 3.06, allocate the Plan-Designated QNEC (Choose one of a. or b.):

a.	[n/a] NHCEs only. Only to NHCEs under the method elected in Election 29(b)(3).
b.	[n/a] All Participants. To all Participants under the method elected in Election 29(b)(3).

(3) Allocation Method. The Plan Administrator will allocate a Plan-Designated QNEC using the following method (Choose one of a., b., c., or d.):

a.	[n/a] Pro rata.
b.	[n/a] Flat dollar.
c.	[n/a] Reverse. See Section 3.04(C)(3).
d.	[n/a] Describe:

[Note: Any allocation method the Employer elects under Election 29(b)(3)d. must be definitely determinable. See Section 4.10(D) as to targeting limitations applicable to QNEC nondiscrimination testing.]

30. SAFE HARBOR 401(k) PLAN (SAFE HARBOR CONTRIBUTIONS/ADDITIONAL MATCHING CONTRIBUTIONS) (3.05). The Employer under Election 6(e) will (or in the case of the Safe Harbor Nonelective Contribution may) contribute the following Safe Harbor Contributions described in Section 3.05(E) and will or may contribute Additional Matching Contributions described in Section 3.05(F) (Choose one of (a), (b), (c), or (d) when and as applicable. Complete (e) and (h). Choose (f), (g), and (i) as applicable):

(a)

[n/a] Safe Harbor Nonelective Contribution. The Safe Harbor Nonelective Contribution equals                    % of a Participant’s Compensation [Note: The amount in the blank must be at least 3%. The Safe Harbor Nonelective Contribution applies toward (offsets) most other Employer Nonelective Contributions. See Section 3.05(E)(11).]

(b)

[n/a] Safe Harbor Nonelective Contribution/delayed year-by-year election (maybe and supplemental notices). In connection with the Employer’s provision of the maybe notice under Section 3.05(I)(1), the Employer elects into safe harbor status by giving the supplemental notice and by making this Election 30(b) to provide for a Safe Harbor Nonelective Contribution equal to                    % (specify amount at least equal to 3%) of a Participant’s Compensation. This Election 30(b) and safe harbor status applies for the Plan Year ending:                                                            (specify Plan Year end), which is the Plan Year to which the Employer’s maybe and supplemental notices apply.

[Note: If the Employer makes a delayed election into safe harbor status under Section 3.05(I)(1), the Employer must amend the Plan to provide for a Safe Harbor Nonelective Contribution equal to at least 3% of each Participant’s Compensation. The Employer may make this amendment by substitute Adoption Agreement page (electing Election 30(b)) or by another form of amendment under Section 11.02(B). An Employer using the maybe notice should not elect a Safe Harbor Nonelective Contribution under Election 30(a) unless the Employer intends to continue safe harbor status under this election in the subsequent Plan Year. By making its amendment into safe harbor status under Election 30(b), the Employer avoids the need to further amend the Plan if the Employer is not certain that it will apply the safe harbor in the subsequent Plan Year. By contrast, an Employer which gave the maybe notice and has decided to make the Safe Harbor Nonelective Contribution for that year and for future years should use Election 30(a). The Employer only elects 30(a) and should not elect 30(b) if prior to the Plan Year the Employer unequivocally decides to elect safe harbor status for the Plan Year and provides a safe harbor notice consistent with this election rather than giving the maybe notice. If the Employer gives the maybe notice and the Employer will or may make Matching Contributions, the Employer should elect Additional Matching under Election 30(h)(and should not elect Matching Contributions under Election 24) if it wishes to avoid ACP testing.]

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(c) [n/a] Basic Matching Contribution. A Matching Contribution equal to 100% of each Participant’s Elective Deferrals not exceeding 3% of the Participant’s Compensation, plus 50% of each Participant’s Elective Deferrals in excess of 3% but not in excess of 5% of the Participant’s Compensation. See Sections 1.34(E) and 3.05(E)(4). (Complete (1)):

(1) Time period. For purposes of this Election 30(c), “Compensation” and “Elective Deferrals” mean Compensation and Elective Deferrals for:                                                             ..[ Note: The Employer must complete the blank line with the applicable time period for computing the Basic Match, such as “each payroll period,” “each calendar month,” “each Plan Year quarter” or “the Plan Year.”]

(d) [n/a] Enhanced Matching Contribution. See Sections 1.34(F) and 3.05(E)(5). (Choose one of (1) or (2) and complete (3) for any election):

(1)	[n/a] Uniform percentage. A Matching Contribution equal to                     % of each Participant’s Elective Deferrals but not as to Elective Deferrals exceeding                     % of the Participant’s Compensation.
(2)	[n/a] Tiered formula. A Matching Contribution equal to the specified matching rate for the corresponding level of each Participant’s Elective Deferral percentage. A Participant’s Elective Deferral percentage is equal to the Participant’s Elective Deferrals divided by his/her Compensation.

Elective Deferral Percentage		Matching Rate
	%		%
	%		%
	%		%

(3) Time period. For purposes of this Election 30(d), “Compensation” and “Elective Deferrals” mean Compensation and Elective Deferrals for:                                                            .[Note: The Employer must complete the blank line with the applicable time period for computing the Enhanced Match, such as “each payroll period,” “each calendar month,” “each Plan Year quarter” or “the Plan Year.”]

[Note: The matching rate may not increase as the Elective Deferral percentage increases and the Enhanced Matching formula otherwise must satisfy the requirements of Code §§401(k)(12)(B)(ii) and (iii). If the Employer elects to satisfy the ACP safe harbor under Election 37(a)(2)a., the Employer also must limit Elective Deferrals taken into account for the Enhanced Matching Contribution to a maximum of 6% of Plan Year Compensation.]

(e) Participants who will receive Safe Harbor Contributions. The allocation of Safe Harbor Contributions (Choose one of (1), (2), or (3)):

(1)	[n/a] Applies to all Participants. Applies to all Participants except as may be limited under Election 30(f).
(2)	[n/a] NHCEs only. Is limited to NHCE Participants only and may be limited further under Election 30(f). No HCE will receive a Safe Harbor Contribution allocation.
(3)	[n/a] NHCEs and designated HCEs. Is limited to NHCE Participants and to the following HCE Participants and may be limited further under Election 30(f):                                                            .

[Note: Any HCE allocation group the Employer describes under Election 30(e)(3) must be definitely determinable. (e.g., Division “A” HCEs OR HCEs who own more than 5% of the Employer without regard to attribution rules).]

(f)	[n/a] Early Elective Deferrals/delay of Safe Harbor Contribution. The Employer may elect this Election 30(f) only if the Employer in Election 14 elects eligibility requirements for Elective Deferrals of less than age 21 and one Year of Service but elects age 21 and one Year of Service for Safe Harbor Matching or for Safe Harbor Nonelective Contributions. The Employer under this Election 30(f) limits the allocation of any Safe Harbor Contribution under Election 30 for a Plan Year to those Participants: (i) who have attained age 21; (ii) who have completed one Year of Service; and (iii) who the Plan Administrator in applying the OEE rule described in Section 4.06(C), treats as benefiting in the disaggregated plan covering the Includible Employees. Those Participants in the Plan Year whom the Plan Administrator treats as Otherwise Excludable Employees will not receive any Safe Harbor Contribution allocation and the Plan Administrator will apply the ADP (and, as applicable the ACP) test(s) to the disaggregated plan benefiting the Otherwise Excludable Employees. If the Employer in Election 10(a)(2) has elected “Participating Compensation” for allocating Elective Deferrals, Nonelective Contributions or Matching Contributions (as relevant to the allocation under this Election 30 based on the Contribution Type), the Plan Administrator, in allocating the Safe Harbor Contribution for the Plan Year in which the Participant crosses over to the Includible Employees group, will count Compensation and Elective Deferrals only on and following the Cross-Over Date. See Section 3.05(D).
(g)	[n/a] Another plan. The Employer will make the Safe Harbor Contribution to the following plan:                                         .
(h)	Additional Matching Contributions. See Sections 1.34(G) and 3.05(F). (Choose one of (1) or (2)):

(1) [n/a] No Additional Matching Contributions. The Employer will not make any Additional Matching Contributions to its safe harbor Plan.

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(2) [n/a] Additional Matching Contributions. The Employer will or may make the following Additional Matching Contributions to its safe harbor Plan. (Choose a. and b. as applicable):

a. [n/a] Fixed Additional Matching Contribution. The following Fixed Additional Matching Contribution (Choose (i) and (ii) as applicable and complete (iii) for any election):

(i)	[n/a] Uniform percentage. A Matching Contribution equal to                     % of each Participant’s Elective Deferrals but not as to Elective Deferrals exceeding                     % of the Participant’s Compensation.
(ii)	[n/a] Tiered formula. A Matching Contribution equal to the specified matching rate for the corresponding level of each Participant’s Elective Deferral percentage. A Participant’s Elective Deferral percentage is equal to the Participant’s Elective Deferrals divided by his/her Compensation.

Elective Deferral Percentage		Matching Rate
	%		%
	%		%
	%		%

(iii) Time period. For purposes of this Election 30(h)(2)a., “Compensation” and “Elective Deferrals” mean Compensation and Elective Deferrals for:                                                                                 . [Note: The Employer must complete the blank line with the applicable time period for computing the Additional Match, e.g., “each payroll period,” “each calendar month,” “each Plan Year quarter” OR “the Plan Year.” If the Employer elects a match under both (i) and (ii) and will apply a different time period to each match, the Employer may indicate as such in the blank line.]

b. [n/a] Discretionary Additional Matching Contribution. The Employer may make a Discretionary Additional Matching Contribution. If the Employer makes a Discretionary Matching Contribution, the Discretionary Matching Contribution will not apply as to Elective Deferrals exceeding                     % of the Participant’s Compensation (complete the blank if applicable or leave blank).

[Note: If the Employer elects to satisfy the ACP safe harbor under Election 37(a)(2)a. or 37(a)(2)c.(i), then as to any and all Matching Contributions, including Fixed Additional Matching Contributions and Discretionary Additional Matching Contributions: (i) the matching rate may not increase as the Elective Deferral percentage increases; (ii) no HCE may be entitled to a greater rate of match than any NHCE; (iii) the Employer must limit Elective Deferrals taken into account for the Additional Matching Contributions to a maximum of 6% of Plan Year Compensation; (iv) the Plan must apply all Matching Contributions to Catch-Up Deferrals; and (v) in the case of a Discretionary Additional Matching Contribution, the contribution amount may not exceed 4% of the Participant’s Plan Year Compensation.]

(i) [n/a] Multiple Safe Harbor Contributions in disaggregated Plan. The Employer elects to make different Safe Harbor Contributions and/or Additional Matching Contributions to disaggregated parts of its Plan under Treas. Reg. §1.401(k)-1(b)(4) as follows:                                                                                                                                           (Specify contributions for disaggregated plans, e.g., as to Collectively Bargained Employees a 3% Nonelective Safe Harbor Contribution applies and as to non-Collectively Bargained Employees, the Basic Matching Contribution applies).

31. ALLOCATION CONDITIONS (3.06(B)/(C)). The Plan does not apply any allocation conditions to: (i) Elective Deferrals; (ii) Safe Harbor Contributions; (iii) commencing as of the Final 401(k) Regulations Effective Date, Additional Matching Contributions which will satisfy the ACP test safe harbor; (iv) Employee Contributions; (v) Rollover Contributions; (vi) Designated IRA Contributions; (vii) SIMPLE Contributions; or (viii) Prevailing Wage Contributions, except as may be required by the Prevailing Wage Contract. To receive an allocation of Matching Contributions, Nonelective Contributions or Participant forfeitures, a Participant must satisfy the following allocation condition(s) (Choose one of (a) or (b). Choose (c) if applicable):

(a)	þ No conditions. No allocation conditions apply to Matching Contributions, to Nonelective Contributions or to forfeitures.
(b)	[n/a] Conditions. The following allocation conditions apply to the designated Contribution Type and/or forfeitures (Choose one or more of (1) through (7) as applicable):

[Note: For this Election 31, except as the Employer describes otherwise in Election 31(b)(7) or as provided in Sections 3.03(C)(2) and 3.04(C)(2) regarding Operational QMACs and Operational QNECs, Matching includes all Matching Contributions and Nonelective includes all Nonelective Contributions to which allocation conditions may apply. The Employer under Election 31(b)(7) may not impose an Hour of Service condition exceeding 1,000 Hours of Service in a Plan Year.]

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				(1)		(2)	(3)	(4)
				Matching,
				Nonelective
				and Forfeitures		Matching	Nonelective	Forfeitures
(1	)	[n/a]	None.	N/A		o	o	o
				(See Election
				31(a))
(2	)	[n/a]	501 HOS/terminees (91 consecutive days if	o	OR	o	o	o
			Elapsed Time). See Section 3.06(B)(1)(b).
(3	)	[n/a]	Last day of the Plan Year.	o	OR	o	o	o
(4	)	[n/a]	Last day of the Election 31(c) time period.	o	OR	o	o	o
(5	)	[n/a]	1,000 HOS in the Plan Year (182 consecutive	o	OR	o	o	o
			days in Plan Year if Elapsed Time).
(6	)	[n/a]	(specify) HOS within the Election	o	OR	o	o	o
			31(c) time period, (but not exceeding 1,000 HOS
			in a Plan Year).

     (7) [n/a] Describe conditions:                                                                                                                          (e.g., Last day of the Plan Year as to Nonelective Contributions for Participating Employer “A” Participants. No allocation conditions for Participating Employer “B” Participants).

(c) [n/a] Time period. Under Section 3.06(C), apply Elections 31(b)(4), (b)(6) or (b)(7) to the specified contributions/forfeitures based on each (Choose one of (1) through (5)):

(1	)	[n/a]	Plan Year	o	OR	o	o	o
(2	)	[n/a]	Plan Year quarter	o	OR	o	o	o
(3	)	[n/a]	Calendar month	o	OR	o	o	o
(4	)	[n/a]	Payroll period	o	OR	o	o	o

(5) [n/a] Describe time period:                                                                                                                          

[Note: If the Employer elects 31(b)(4) or (b)(6), the Employer must choose (c). If the Employer elects 31(b)(7), choose (c) if applicable.]

32. ALLOCATION CONDITIONS — APPLICATION/WAIVER/SUSPENSION (3.06(D)/(F)). Under Section 3.06(D), in the event of Severance from Employment as described below, apply or do not apply Election 31(b) allocation conditions to the specified contributions/forfeitures as follows (If the Employer elects 31(b), the Employer must complete Election 32. Choose one of (a) or (b). Complete (c)):

[Note: For this Election 32, except as the Employer describes otherwise in Election 31(b)(7) or as provided in Sections 3.03(C)(2) and 3.04(C)(2) regarding Operational QMACs and Operational QNECs, Matching includes all Matching Contributions and Nonelective includes all Nonelective Contributions to which allocation conditions may apply.]

(a) [n/a] Total waiver or application. If a Participant incurs a Severance from Employment on account of or following death, Disability, attainment of Normal Retirement Age, or attainment of Early Retirement Age as specified (Choose one of (1) or (2)):

(1)	[n/a] Do not apply. Do not apply elected allocation conditions to Matching Contributions, to Nonelective Contributions or to forfeitures.
(2)	[n/a] Apply. Apply elected allocation conditions to Matching Contributions, to Nonelective Contributions and to forfeitures.

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			(1)		(2)	(3)	(4)
			Matching,
			Nonelective
			and Forfeitures		Matching	Nonelective	Forfeitures
(b)	[n/a]	Application/waiver as to Contribution Types events. If a Participant incurs a Severance from Employment, apply allocation conditions except such conditions are waived if Severance is on account of or following death, Disability, attainment of Normal Retirement Age, or attainment of Early Retirement Age as specified, and as applied to the specified Contribution Types/forfeitures (Choose (1), (2), (3) and (4) as applicable):
	(1)	[n/a] Death	o	OR	o	o	o
	(2)	[n/a] Disability	o	OR	o	o	o
	(3)	[n/a] Normal Retirement Age	o	OR	o	o	o
	(4)	[n/a] Early Retirement Age	o	OR	o	o	o

(c) Suspension. The suspension of allocation conditions of Section 3.06(F) (Choose one of (1) or (2)):

(1) [n/a] Applies. Applies as follows (Choose one of a., b., or c.):

a.	[n/a]      Both. Applies both to Nonelective Contributions and to Matching Contributions.
b.	[n/a]      Nonelective. Applies only to Nonelective Contributions.
c.	[n/a]      Match. Applies only to Matching Contributions.

(2) [n/a]      Does not apply.

33. FORFEITURE ALLOCATION METHOD (3.07). The Plan Administrator will allocate a Participant forfeiture attributable to all Contribution Types or attributable to all Nonelective Contributions or to all Matching Contributions as follows (Choose one or more of (a) through (g) as applicable. Choose (e) only in conjunction with at least one other election):

[Note: Even if the Employer elects immediate vesting, the Employer should complete Election 33. See Section 7.07.]

			(1)		(2)	(3)
			All		Nonelective	Matching
			Forfeitures		Forfeitures	Forfeitures
(a)	[n/a]	Additional Nonelective. Allocate as additional Discretionary Nonelective Contribution.	o	OR	o	o
(b)	[n/a]	Additional Match. Allocate as additional Discretionary Matching Contribution.	o	OR	o	o
(c)	[n/a]	Reduce Nonelective. Apply to Nonelective Contribution.	o	OR	o	o
(d)	[n/a]	Reduce Match. Apply to Matching Contribution.	o	OR	o	o
(e)	[n/a]	Plan expenses. Pay reasonable Plan expenses first (See Section 7.04(C)), then allocate in the manner described above.	o	OR	o	o
(f)	[n/a]	Safe harbor/top-heavy exempt. Apply all forfeitures to Safe Harbor Contributions and Plan expenses in accordance with Section 3.07(A)(4).
(g)	þ	Describe: forfeitures first used to reinstate forfeited account balances of former participants. Remaining forfeitures applied to reduce the matching contributions (e.g., Forfeitures attributable to transferred balances from Plan X are allocated only to former Plan X participants.)

34. FORFEITURE ALLOCATION TIMING (3.07(B)). See Sections 3.07, 5.07 and 7.07 as to when a forfeiture occurs. Once a forfeiture occurs, this Election 34 determines the timing of the forfeiture allocation. The Plan Administrator will allocate a Participant’s forfeiture (Choose one or both of (a) and (b) as applicable):

			(1)		(2)	(3)
			All		Nonelective	Matching
			Forfeitures		Forfeitures	Forfeitures
(a)	þ	Same Plan Year. In the same Plan Year in which the designated forfeiture occurs.	þ	OR	o	o

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			(1)		(2)	(3)
			All		Nonelective	Matching
			Forfeitures		Forfeitures	Forfeitures
(b)	[n/a]	Next Plan Year. In the Plan Year following the Plan Year in which the designated forfeiture occurs.	o	OR	o	o

[Note: The elected forfeiture allocation timing applies irrespective of when the Employer makes its contribution(s), if any, for a Plan Year. Even if the Employer elects immediate vesting, the Employer should complete Election 34. See Sections 3.07 and 7.07.]

35. EMPLOYEE (AFTER-TAX) CONTRIBUTIONS (3.09). The following additional elections apply to Employee Contributions under Election 6(f). (Complete (a) and (b)):

(a) Limitations. The Plan permits Employee Contributions subject to the following limitations, if any, in addition to those already imposed under the Plan (Choose one of (1) or (2)):

(1)	[n/a] None. No additional limitations.
(2)	þ Additional limitations. The following additional limitations: 1% — 100% of compensation .
[Note: Any designated limitation(s) must be the same for all Participants and must be definitely determinable.]

(b) Matching Contributions. (Choose one of (1) or (2)):

(1)	[n/a] None. The Employer will not make any Matching Contributions based on Employee Contributions.
(2)	þ Applies. For each Plan Year, the Employer’s Matching Contribution made as to Employee Contributions is:
	identical to the match on the elective deferral contribution 100% for each $1.00 deferred up to 6% of Compensation .

36. DESIGNATED IRA CONTRIBUTIONS (3.12). Under Election 6(h), a Participant may make Designated IRA Contributions effective for Plan Years beginning after                      (date specified must be no earlier than December 31, 2002). (Complete (a) and (b)):

(a) Type of IRA contribution. A Participant’s Designated IRA Contributions will be (Choose one of (1), (2), or (3)):

(1)	[n/a] Traditional.
(2)	[n/a] Roth.
(3)	[n/a] Traditional/Roth. As the Participant elects at the time of contribution.

(b) Type of Account. A Participant’s Designated IRA Contributions will be held in the following form of Account(s) (Choose one of (1), (2), or (3)):

(1)	[n/a] IRA.
(2)	[n/a] Individual Retirement Annuity.
(3)	[n/a] IRA/Individual Retirement Annuity. As the Participant elects at the time of contribution.

ARTICLE IV
LIMITATIONS AND TESTING

[Note: The Employer, in the “Effective as of execution” column under Election 37, must elect those testing elections which are: (i) in effect as of date of the Employer’s execution of this Adoption Agreement; and (ii) if the Adoption Agreement restates the Plan, also are retroactive to the later of the Plan’s original Effective Date or EGTRRA restated Effective Date, except as indicated in Appendix A. If the Employer wishes to change any testing election after it executes this Adoption Agreement, the Employer must elect the changes in the “Changes post-execution” column under Election 37, and the Employer must specify the Plan Year Effective Date(s) of any changed election. The Employer may complete the Effective Date blanks specifying the changed election applies to a single Plan Year (e.g., “2011 only”), or a range of Plan Years (e.g., “2011-2015”) or may specify the change as becoming effective in a specified Plan Year (e.g., “commencing 2010”). If the Employer specifies a single Plan Year only or specifies a range of Plan Years, the Plan becomes subject to the election in the “Effective as of execution” column in the Plan Years commencing after the specified Year(s), unless the Employer subsequently changes the election. If the Employer specifies the change as commencing in a Plan Year, the election applies in the specified Plan Year and in all following Plan Years unless the Employer subsequently changes the election.]

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37. ANNUAL TESTING ELECTIONS (4.06(B)). The Employer makes the following Plan specific annual testing elections under Section 4.06(B). (Complete (a) and (b)):

(1)	(2)
Effective as of execution	Changes post-execution
(and retroactively	(specify Plan Year
if restatement)	Effective Date(s))

(a) Nondiscrimination testing. (Choose one or more of (1), (2), or (3)):

          (1) þ Traditional 401(k) Plan/ADP/ACP test.
The following testing method(s) apply
(Choose a. and b. as applicable):

[Note: The Plan may “split test” for Plan Years commencing in 2005.]

a.	[n/a]	Current Year Testing. See Section 4.11(E). Current Year Testing applies to the ADP/ACP tests as elected below (Choose one or both of (i) and (ii)):
	(i)	[n/a] ADP test.	o	o	Effective Date(s):
	(ii)	[n/a] ACP test.	o	o	Effective Date(s):

[Note: The Employer may leave (ii) blank if the Plan does not permit Matching Contributions or Employee Contributions and the Plan Administrator will not recharacterize Elective Deferrals as Employee Contributions for testing.]

b.	þ	Prior Year Testing. See Section 4.11(I). Prior Year Testing applies to the ADP/ACP tests as elected below. See Sections 4.10(B)(4)(f)(iv) and 4.10(C)(5)(e)(iv) as to the first Plan Year. (Choose one or both of (i) and (ii)):
	(i)	þ ADP test.	þ	þ	Effective Date(s):
					1/1/09
	(ii)	þ ACP test.	þ	o	Effective Date(s):

[Note: The Employer may leave (ii) blank if the Plan does not permit Matching Contributions or Employee Contributions and the Plan Administrator will not recharacterize Elective Deferrals as Employee Contributions for testing.]

(2)	[n/a]		Safe Harbor Plan/No testing or ACP test only. (Choose one of a., b., or c.):
	a.	[n/a]	No testing.	o	o	Effective Date(s):
			ADP test safe harbor applies and if applicable,
			ACP test safe harbor applies.
	b.	[n/a]	ACP test only.
			ADP test safe harbor applies, but Plan will perform
			ACP test as follows (Choose one of (i) or (ii)):
		(i)	[n/a] Current Year Testing.	o	o	Effective Date(s):
		(ii)	[n/a] Prior Year Testing.	o	o	Effective Date(s):

[Note: The Employer may elect Prior Year Testing under Election 37(a)(2)b.(ii) only for Plan Years after the Final 401(k) Regulations Effective Date.]

c.	[n/a]	Possible delayed election.	o	o	Effective Date(s):
		(maybe notice/supplemental notice)

The Employer under Section 3.05(I)(1) may treat the Plan as a Traditional 401(k) Plan or may make a delayed election to treat the Plan as a Safe Harbor 401(k) Plan. If the Employer gives the maybe and supplemental notices and amends the Plan to provide for the Safe Harbor Nonelective Contribution, the Plan is an ADP test safe harbor plan for the Plan Year to which the maybe and supplemental notices and the amendment apply. If the Employer does not give the supplemental notice, the Plan is a Traditional 401(k) Plan, subject to ADP Current Year Testing and, if applicable, to ACP Current Year Testing. If the Employer gives the supplemental notice and amends the Plan to provide for the Safe Harbor Nonelective Contribution, and the Employer has elected Additional Matching Contributions under Election 30(h) (Choose one of (i) or (ii)):
(i)	[n/a]	No testing. ADP and ACP test safe harbors apply. The Employer’s elections under 30(h) as to Additional Matching Contributions satisfy the ACP safe harbor requirements and the Employer elects to apply the Election 30(h) stated ACP test safe harbor conditions (see the Note following Election 30(h)) as to all Additional Matching Contributions.
(ii)	[n/a]	ACP test only. ADP safe harbor applies, but the Plan will perform the ACP test as to all Additional Matching Contributions using Current Year Testing.

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[Note: Even if the Employer does not elect 37(a)(2)c., the Employer still may make a delayed election into safe harbor status under Section 3.05(I)(1) using the maybe and supplemental notices and by amending the plan to provide for the Safe Harbor Nonelective Contribution. However, in this case, the Employer also must amend the Plan to make its testing elections under this Election 37 consistent with its delayed election into safe harbor status. The Employer then may elect any election under 37(a)(2), including 37(a)(2)c. An Employer’s election of 37(a)(2)c. permits the Plan to remain in perpetual possible delayed safe harbor election status, while minimizing the number of Plan amendments required to do so.]

	(3	)	[n/a] SIMPLE 401(k) Plan/No testing.	o	o	Effective Date(s):
(b)		HCE determination. (Complete both (1) and (2)):
	(1	)	Top-paid group election. (Choose one of a. or b.):
			a. [n/a] Does not apply.	o	o	Effective Date(s):
			b. þ Applies.	o	o	Effective Date(s):
	(2	)	Calendar year data election (fiscal year Plan only). (Choose one of a. or b.):
			a. [n/a] Does not apply.	o	o	Effective Date(s):
			b. [n/a] Applies.	o	o	Effective Date(s):

ARTICLE V
VESTING REQUIREMENTS

38. NORMAL RETIREMENT AGE (5.01). A Participant attains Normal Retirement Age under the Plan on the following date (Choose one of (a) or (b)):

(a)	[n/a]	Specific age. The date the Participant attains age                                        . [Note: The age may not exceed age 65.]
(b)	þ	Age/participation. The later of the date the Participant attains age      65      or the      5th      anniversary of the first day of the Plan Year in which the Participant commenced participation in the Plan. [Note: The age may not exceed age 65 and the anniversary may not exceed the 5th.]

39. EARLY RETIREMENT AGE (5.01). (Choose one of (a) or (b)):

(a)	þ	Not applicable. The Plan does not provide for an Early Retirement Age.
(b)	[n/a]	Early Retirement Age. Early Retirement Age is the later of: (i) the date a Participant attains age                     ; (ii) the date a Participant reaches his/her                     anniversary of the first day of the Plan Year in which the Participant commenced participation in the Plan; or (iii) the date a Participant completes                     Years of Service.

[Note: The Employer should leave blank any of clauses (i), (ii), and (iii) which are not applicable.]

“Years of Service” under this Election 39 means (Choose one of (1) or (2) as applicable):

(1	)	[n/a] Eligibility. Years of Service for eligibility in Election 16.
(2	)	[n/a] Vesting. Years of Service for vesting in Elections 42 and 43.

[Note: Election of an Early Retirement Age does not affect the time at which a Participant may receive a Plan distribution. However, a Participant becomes 100% vested at Early Retirement Age.]

40. ACCELERATION ON DEATH OR DISABILITY (5.02). Under Section 5.02, if a Participant incurs a Severance from Employment as a result of death or Disability (Choose one of (a), (b), or (c)):

(a)	þ	Applies. Apply 100% vesting.
(b)	[n/a]	Not applicable. Do not apply 100% vesting. The Participant’s vesting is in accordance with the applicable Plan vesting schedule.
(c)	[n/a]	Limited application. Apply 100% vesting, but only if a Participant incurs a Severance from Employment as a result of (Choose one of (1) or (2)):
	(1)	[n/a] Death.
	(2)	[n/a] Disability.

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41. VESTING SCHEDULE (5.03). A Participant has a 100% Vested interest at all times in his/her Accounts attributable to: (i) Elective Deferrals; (ii) Employee Contributions; (iii) QNECs; (iv) QMACs; (v) Safe Harbor Contributions; (vi) SIMPLE Contributions; (vii) Rollover Contributions; (viii) Prevailing Wage Contributions unless the Prevailing Wage Contract provides otherwise; (ix) DECs; and (x) Designated IRA Contributions. The following vesting schedule applies to Regular Matching Contributions, to Additional Matching Contributions (irrespective of ACP testing status) and to Nonelective Contributions (other than Prevailing Wage Contributions) (Choose (a) or choose one or both of (b) and (d) as applicable. Choose (c) if elect a non-top-heavy schedule under (b) or (d)):

(a)      [n/a]      Immediate vesting. 100% Vested at all times in all Accounts.

[Note: Unless all Contribution Types are 100% Vested, the Employer should not elect 41(a). If the Employer elects immediate vesting under 41(a), the Employer should not complete the balance of Election 41 or Elections 42 and 43 (except as noted therein). The Employer must elect 41(a) if the eligibility Service condition under Election 14 as to all Contribution Types (except Elective Deferrals and Safe Harbor Contributions) exceeds one Year of Service or more than 12 months. The Employer must elect 41(b)(1) as to any Contribution Type where the eligibility service condition exceeds one Year of Service or more than 12 months. The Employer should elect 41(b) if any Contribution Type is subject to a vesting schedule.]

(b)      þ      Vesting schedules: Apply the following vesting schedules (Choose one or more of (1) through (7) as applicable):

				(1)		(2)	(3)	(4)
								Additional
				All			Regular	Matching(See
				Contributions		Nonelective	Matching	Section 3.05(F))
(1	)	[n/a]	Immediate vesting	N/A (See Election 42(a))		o	o	o
(2	)	[n/a]	Top-heavy: 6-year graded	o	OR	o	o	o
(3	)	[n/a]	Top-heavy: 3-year cliff	o	OR	o	o	o
(4	)	þ	Modified top-heavy:	o	OR	o	þ	o

Years of Service	Vested %
Less than 1		a.	0	%
1		b.	20	%
2		c.	40	%
3		d.	60	%
4		e.	80	%
5		f.	100	%
6 or more			100	%

(5	)	[n/a]	Non-top-heavy: 7-year graded	N/A	o	N/A	N/A
(6	)	[n/a]	Non-top-heavy: 5-year cliff	N/A	o	N/A	N/A
(7	)	[n/a]	Modified non-top-heavy:	N/A	o	N/A	N/A

Years of Service	Vested %
Less than 1		a.
1		b.
2		c.
3		d.
4		e.
5		f.
6		g.
7 or more			100	%

[Note: If the Employer does not elect 41(a), the Employer under 41(b) must elect immediate vesting or must elect a top-heavy or modified top-heavy vesting schedule. The modified top-heavy schedule of Election 41(b)(4) must satisfy Code §416. A top-heavy schedule must apply to Regular Matching Contributions and to Additional Matching Contributions. See Section 5.03(A)(1). The Employer as to Nonelective Contributions only may elect one of Elections 41(b)(5), (6), or (7) in addition to electing a top-heavy schedule. The Employer must complete Election 41(c) if it elects any non-top-heavy schedule. If the Employer does not elect a non-top-heavy schedule, the elected top-heavy schedule(s) applies to all Plan Years. If the Employer elects 41(b)(7), the modified non-top-heavy schedule must satisfy Code §411(a)(2). If the Employer elects Additional Matching under Election 30(h), the Employer should elect vesting under the Additional Matching column in this Election 41(b). That election applies to the Additional Matching even if the Employer has given the maybe notice but does not give the supplemental notice for any Plan Year and as to such Plan Years, the Plan is not a safe harbor plan and the Matching Contributions are not Additional Matching Contributions. If the Plan’s Effective Date is after December 31, 2006, do not complete Elections 41(b)(5), (b)(6), or (b)(7).]

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(c) [n/a] Nonelective Contributions: application of top-heavy schedule (Choose one of (1) or (2)):

(1)	[n/a] Apply in all Plan Years once top-heavy. Apply the top-heavy vesting schedule under Election 41(b) for the first Plan Year in which the Plan is top-heavy and then in all subsequent Plan Years.
(2)	[n/a] Apply only in top-heavy Plan Years. Apply the non-top-heavy schedule under Election 41(b) in all Plan Years in which the Plan is not a top-heavy plan.

(d) [n/a] Special vesting provisions: .

[Note: The Employer under Election 41(d) may describe special vesting provisions from the elections available under Election 41 and/or a combination thereof as to a: (i) Participant group (e.g., Full vesting applies to Division A Employees OR to Employees hired on/before “x” date. 6-year graded vesting applies to Division B Employees OR to Employees hired after “x” date.); and/or (ii) Contribution Type (e.g., Full vesting applies as to Discretionary Nonelective Contributions. 6-year graded vesting applies to Fixed Nonelective Contributions). Any special vesting provision must satisfy Code §411(a) and must be nondiscriminatory.]

42. YEAR OF SERVICE — VESTING (5.05). (Complete both (a) and (b)):

[Note: If the Employer elects the Elapsed Time Method for vesting the Employer should not complete this Election 42. If the Employer elects immediate vesting, the Employer should not complete Election 42 or Election 43 unless it elects to apply a Year of Service for vesting under any other Adoption Agreement election.]

(a)	Year of Service. An Employee must complete at least 1000 Hours of Service during a Vesting Computation Period to receive credit for a Year of Service under Article V. [Note: The number may not exceed 1,000. If left blank, the requirement is 1,000.]
(b)	Vesting Computation Period. The Plan measures a Year of Service based on the following 12-consecutive month period (Choose one of (1) or (2)):

(1)	þ Plan Year.
(2)	[n/a] Anniversary Year.

43. EXCLUDED YEARS OF SERVICE — VESTING (5.05(C)). The Plan excludes the following Years of Service for purposes of vesting (Choose (a) or choose one or more of (b) through (e) as applicable):

(a)	þ None. None other than as specified in Section 5.05(C)(1).
(b)	[n/a] Age 18. Any Year of Service before the Vesting Computation Period during which the Participant attained the age of 18.
(c)	[n/a] Prior to Plan establishment. Any Year of Service during the period the Employer did not maintain this Plan or a predecessor plan.
(d)	[n/a] Rule of Parity. Any Year of Service excluded under the rule of parity. See Plan Section 5.06(C).
(e)	[n/a] Additional exclusions. The following Years of Service:                                        .

[Note: The Employer under Election 43(e) may describe vesting service exclusions provisions available under Election 43 and/or a combination thereof as to a: (i) Participant group (e.g., No exclusions apply to Division A Employees OR to Employees hired on/before “x” date. The age 18 exclusion applies to Division B Employees OR to Employees hired after “x” date.); or (ii) Contribution Type (e.g., No exclusions apply as to Discretionary Nonelective Contributions. The age 18 exclusion applies to Fixed Nonelective Contributions). Any exclusion specified under Election 43(e) must comply with Code §411(a)(4). Any exclusion must be nondiscriminatory.]

ARTICLE VI
DISTRIBUTION OF ACCOUNT BALANCE

44. MANDATORY DISTRIBUTION (6.01(A)(1)/6.08(D)). The Plan provides or does not provide for Mandatory Distribution of a Participant’s Vested Account Balance following Severance from Employment, as follows (Choose one of (a) or (b)):

(a)	[n/a] No Mandatory Distribution. The Plan will not make a Mandatory Distribution following Severance from Employment.
(b)	þ Mandatory Distribution. The Plan will make a Mandatory Distribution following Severance from Employment. (Complete (1) and (2). Choose (3) unless the Employer elects to limit Mandatory Distributions to $1,000 including Rollover Contributions under Elections 44(b)(1)b. and 44(b)(2)b.):

(1) Amount limit. As to a Participant who incurs a Severance from Employment and who will receive distribution before attaining the later of age 62 or Normal Retirement Age, the Mandatory Distribution maximum amount is equal to (Choose one of a., b., or c.):

a.	[n/a] $5,000.
b.	þ $1,000.
c.	[n/a] Specify amount: $                      (may not exceed $5,000).

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(2) Application of Rollovers to amount limit. In determining whether a Participant’s Vested Account Balance exceeds the Mandatory Distribution dollar limit in Election 44(b)(1), the Plan (Choose one of a. or b.):

a.	[n/a] Disregards Rollover Contribution Account.
b.	þ Includes Rollover Contribution Account.

(3) [n/a] Amount of Mandatory Distribution subject to Automatic Rollover. A Mandatory Distribution to a Participant before attaining the later of age 62 or Normal Retirement Age is subject to Automatic Rollover under Section 6.08(D) (Choose one of a. or b.):

a.	[n/a] Only if exceeds $1,000. Only if the amount of the Mandatory Distribution exceeds $1,000, which for this purpose must include any Rollover Contributions Account.
b.	[n/a] Specify lesser amount. Only if the amount of the Mandatory Distribution is at least: $                     (specify $1,000 or less).

45. SEVERANCE DISTRIBUTION TIMING (6.01). Subject to the timing limitations of Section 6.01(A)(1) in the case of a Mandatory Distribution, or in the case of any Distribution Requiring Consent under Section 6.01(A)(2), for which consent is received, the Plan Administrator will instruct the Trustee to distribute a Participant’s Vested Account Balance as soon as is administratively practical following the time specified below (Choose one or more of (a) through (k) as applicable):

[Note: If a Participant dies after Severance from Employment but before receiving distribution of all of his/her Account, the elections under this Election 45 no longer apply. See Section 6.01(B) and Election 49.]

				(1)	(2)
				Mandatory	Distribution
				Distribution	Requiring Consent
(a)	þ		Immediate. Immediately following Severance from Employment.	þ	þ
(b)	[n/a]		Next Valuation Date. After the next Valuation Date following Severance from Employment.	o	o
(c)	[n/a]		Plan Year. In the     Plan Year following Severance from Employment (e.g., next or fifth).	o	o
(d)	[n/a]		Plan Year quarter. In the     Plan Year quarter following Severance from Employment (e.g., next or fifth).	o	o
(e)	[n/a]		Contribution Type Accounts.                     as to the Participant’s                    Account(s) and                     as to the Participant’s                     Account(s) (e.g., As soon as is practical following Severance from Employment as to the Participant’s Elective Deferral Account and as soon as is practical in the next Plan Year following Severance from Employment as to the Participant’s Nonelective and Matching Accounts).	o	o
(f)	[n/a]		Vesting controlled timing. If the Participant’s total Vested Account Balance exceeds $     , distribute                     (specify timing) and if the Participant’s total Vested Account Balance does not exceed $      , distribute      (specify timing).	o	o
(g)	[n/a]		Distribute at Normal Retirement Age. As to a Mandatory Distribution, distribute not later than 60 days after the beginning of the Plan Year following the Plan Year in which the previously severed Participant attains the earlier of Normal Retirement Age or age 65. [Note: An election under column (2) only will have effect if the Plan’s NRA is less than age 62.]	o	o
(h)	[n/a]		Acceleration. Notwithstanding any later specified distribution date in Election 45, a Participant may elect an earlier distribution following Severance from Employment (Choose (1) and (2) as applicable):	o	o
	(1	)	[n/a]Disability. If Severance from Employment is on account of Disability or if the Participant incurs a Disability following Severance from Employment.
	(2	)	[n/a]Hardship. If the Participant incurs a hardship under Section 6.07 following Severance from Employment.

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			(1)	(2)
			Mandatory	Distribution
			Distribution	Requiring Consent
(i)	[n/a]	Required distribution at Normal Retirement Age. A severed Participant may not elect to delay distribution beyond the later of age 62 or Normal Retirement Age.	N/A	o
(j)	[n/a]	No buy-back/vesting controlled timing.	o	o
		Distribute as soon as is practical following Severance from Employment if the Participant is fully Vested. Distribute as soon as is practical following a Forfeiture Break in Service if the Participant is not fully Vested.

(k)     [n/a] Describe Severance from Employment distribution timing:                                         

[Note: The Employer under Election 45(k) may describe Severance from Employment distribution timing provisions from the elections available under Election 45 and/or a combination thereof as to any: (i) Participant group (e.g., Immediate distribution after Severance of Employment applies to Division A Employees OR to Employees hired on/before “x” date. Distribution after the next Valuation Date following Severance from Employment applies to Division B Employees OR to Employees hired after “x” date.); (ii) Contribution Type (e.g., As to Division A Employees, immediate distribution after Severance of Employment applies as to Elective Deferral Accounts and distribution after the next Valuation Date following Severance from Employment applies to Nonelective Contribution Accounts); and/or (iii) merged plan account now held in the Plan (e.g., The accounts from the X plan merged into this Plan continue to be distributable in accordance with the X plan terms [supply terms] and not in accordance with the terms of this Plan). An Employer’s election under Election 45(k) must: (i) be objectively determinable; (ii) not be subject to Employer discretion; (iii) comply with Code §401(a)(14) timing requirements; (iv) be nondiscriminatory and (v) preserve Protected Benefits as required.]

46. IN-SERVICE DISTRIBUTIONS/EVENTS (6.01(C)). A Participant may elect an In-Service Distribution of the designated Contribution Type Accounts based on any of the following events in accordance with Section 6.01(C) (Choose one of (a) or (b)):

[Note: If the Employer elects any In-Service Distribution option, a Participant may elect to receive as many In-Service Distributions per Plan Year (with a minimum of one per Plan Year) as the Plan Administrator’s In-Service Distribution form or policy may permit. If the form or policy is silent, the number of In-Service Distributions is not limited. Prevailing Wage Contributions are treated as Nonelective Contributions unless the Prevailing Wage Contract provides otherwise. See Section 6.01(C)(4)(d) if the Employer elects to use Prevailing Wage Contributions to offset other contributions.]

(a)	[n/a]	None. The Plan does not permit any In-Service Distributions except as to any of the following (if applicable): (i) RMDs under Section 6.02; (ii) Protected Benefits; and (iii) under Section 6.01(C)(4) as to Employee Contributions, Rollover Contributions, DECs, Transfers, and Designated IRA Contributions.
(b)	þ	Permitted. In-Service Distributions are permitted as follows from the designated Contribution Type Accounts (Choose one or more of (1) through (9)):

[Note: Unless the Employer elects otherwise in Election 46(b)(9), Elective Deferrals under Election 46(b) includes Pre-Tax and Roth Deferrals and Matching Contributions includes Additional Matching Contributions, irrespective of the Plan’s ACP testing status.]

			(1)		(2)	(3)	(4)	(5)	(6)	(7)
			All		Elective	Safe Harbor			Matching	Nonelective/
			Contributions		Deferrals	Contributions	QNECs	QMACs	Contrib.	SIMPLE
(1)	[n/a]	None. Except for Election 46(a)exceptions.	N/A (See Election 46(a))		o	o	o	o	o	o
(2)	þ	Age 59 1/2 (must be at least 59 1/2).	þ	OR	o	o	o	o	o	o
(3)	þ	Age under age 59 1/2 (less than 59 1/2).	N/A		N/A	N/A	N/A	N/A	þ	o
(4)	þ	Hardship (safe harbor). See Section 6.07(A).	N/A		þ	N/A	N/A	N/A	o	o
(5)	[n/a]	Hardship (non- safe harbor). See Section 6.07(B).	N/A		N/A	N/A	N/A	N/A	o	o
(6)	[n/a]	Disability.	o	OR	o	o	o	o	o	o
(7)	[n/a]	year contributions. (specify minimum of two years) See Section 6.01(C)(4)(a)(i).	N/A		N/A	N/A	N/A	N/A	o	o

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Nonstandardized 401 (k) Plan

			(1)	(2)	(3)	(4)	(5)	(6)	(7)
			All	Elective	Safe Harbor			Matching	Nonelective/
			Contributions	Deferrals	Contributions	QNECs	QMACs	Contrib.	SIMPLE
(8)	[n/a]	months of participation. (specify minimum of 60 months) See Section 6.01(C)(4)(a)(ii).	N/A	N/A	N/A	N/A	N/A	o	o

(9) þ Describe: withdrawal of Matching Contributions allowed under the age of 59 1/2 if the Matching Contributions have been in the Plan for 24 months

[Note: The Employer under Election 46(b)(9) may describe In-Service Distribution provisions from the elections available under Election 46 and/or a combination thereof as to any: (i) Participant group (e.g., Division A Employee Accounts are distributable at age 59 1/2 OR Accounts of Employees hired on/before “x” date are distributable at age 59 1/2). No In-Service Distributions apply to Division B Employees OR to Employees hired after “x” date.); (ii) Contribution Type (e.g., Discretionary Nonelective Contribution Accounts are distributable on Disability. Fixed Nonelective Contribution Accounts are distributable on Disability or Hardship (non-safe harbor)); and/or (iii) merged plan account now held in the Plan (e.g., The accounts from the X plan merged into this Plan continue to be distributable in accordance with the X plan terms [supply terms] and not in accordance with the terms of this Plan). An Employer’s election under Election 46(b)(9) must: (i) be objectively determinable; (ii) not be subject to Employer discretion; (iii) preserve Protected Benefits as required; (iv) be nondiscriminatory; and (v) not permit an “early” distribution of any Restricted 401(k) Accounts or Restricted Pension Accounts. See Section 6.01(C)(4).]

In-Service Distribution of other Accounts. See Section 6.01(C)(4) as to In-Service Distribution of Employee Contributions, Rollover Contributions, DECs, Transfers, and Designated IRA Contributions.

47. IN-SERVICE DISTRIBUTIONS/ADDITIONAL CONDITIONS (6.01(C)). The following additional conditions apply to In-Service Distributions under Election 46(b) (Choose one of (a) or (b)):

[Note: The Employer should complete Election 47 if the Employer elects any In-Service Distributions under Election 46(b).]

(a) þ Additional conditions. (Complete (1). Choose (2) and (3) as applicable):

(1) Vesting. A Participant may receive an In-Service Distribution under Election 46(b) based on vesting in the distributing Account as follows (Choose one of a., b., or c.):

a.	[n/a] 100% vesting required. A Participant may not receive any In-Service Distribution unless the Participant is 100% Vested in the distributing Account.
b.	[n/a] 100% vesting required except hardship. A Participant may not receive any In-Service Distribution unless the Participant is 100% Vested in the distributing Account, unless the distribution is based on hardship.
c.	[n/a] Not required. A Participant may receive an In-Service Distribution even from a partially-Vested Account, but the amount distributed may not exceed the Vested amount in the distributing partially-Vested Account.

(2)	þ Minimum amount. A Participant may not receive an In-Service Distribution in an amount which is less than: $ $500 minimum withdrawal amount (specify amount not exceeding $1,000).
(3)	þ Describe other conditions: withdrawal of all contributions except rollover contributions limited to 3 times in a calendar year

[Note: An Employer’s election under Election 47(a)(3) must: (i) be objectively determinable; (ii) not be subject to Employer discretion; (iii) preserve Protected Benefits as required; (iv) be nondiscriminatory; and (v) not permit an “early” distribution of any Restricted 401(k) Accounts or Restricted Pension Accounts. See Section 6.01(C)(4).]

(b) [n/a] No other conditions. A Participant may elect to receive an In-Service Distribution upon any Election 46(b) event without further condition, provided that the amount distributed may not exceed the Vested amount in the distributing Account.

48. POST-SEVERANCE AND LIFETIME RMD DISTRIBUTION METHODS (6.03). A Participant whose Vested Account Balance exceeds $5,000 (or any lesser amount elected in Appendix B, Election 54(g)(7)): (i) who has incurred a Severance from Employment and will receive a distribution; or (ii) who remains employed but who must receive lifetime RMDs, may elect distribution under one of the following method(s) of distribution described in Section 6.03 and subject to any Section 6.03 limitations. (Choose one or more of (a) through (f) as applicable):

[Note: If a Participant dies after Severance from Employment but before receiving distribution of all of his/her Account, the elections under this Election 48 no longer apply. See Section 6.01(B) and Election 49.]

(a)	þ Lump-Sum. See Section 6.03(A)(3).
(b)	þ Installments only if Participant subject to lifetime RMDs. A Participant who is required to receive lifetime RMDs may receive installments payable in monthly, quarterly or annual installments equal to or exceeding the annual RMD amount. See Sections 6.02(A) and 6.03(A)(4)(a).
(c)	þ Installments. See Section 6.03(A)(4).
(d)	[n/a] Alternative Annuity:                                         . See Section 6.03(A)(5).

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[Note: Under a Plan which is subject to the joint and survivor annuity distribution requirements of Section 6.04 (Election 50(b)), the Employer may elect under 48(d) to offer one or more additional annuities (Alternative Annuity) to the Plan’s QJSA or QPSA. If the Employer elects under Election 50(a) to exempt Exempt Participants from the joint and survivor annuity requirements, the Employer should not elect to provide an Alternative Annuity under 48(d).]

(e) [n/a] Ad-Hoc distributions. See Section 6.03(A)(6).

[Note: If an Employer elects to permit Ad-Hoc distributions: (i) the option must be available to all Participants; and (ii) the option is a Protected Benefit.]

(f) [n/a] Describe distribution method(s):                                         

[Note: The Employer under Election 48(f) may describe Severance from Employment distribution methods from the elections available under Election 48 and/or a combination thereof as to any: (i) Participant group (e.g., Division A Employee Accounts are distributable in a Lump-Sum OR Accounts of Employees hired after “x” date are distributable in a Lump-Sum. Division B Employee Accounts are distributable in a Lump-Sum or in Installments OR Accounts of Employees hired on/before “x” date are distributable in a Lump-Sum or in Installments.); (ii) Contribution Type (e.g., Discretionary Nonelective Contribution Accounts are distributable in a Lump-Sum. Fixed Nonelective Contribution Accounts are distributable in a Lump-Sum or in Installments); and/or (iii) merged plan account now held in the Plan (e.g., The accounts from the X plan merged into this Plan continue to be distributable in accordance with the X plan terms [supply terms] and not in accordance with the terms of this Plan). An Employer’s election under Election 48(f) must: (i) be objectively determinable; (ii) not be subject to Employer, Plan Administrator or Trustee discretion; (iii) be nondiscriminatory; and (iv) preserve Protected Benefits as required.]

49. BENEFICIARY DISTRIBUTION ELECTIONS (6.01(B)/6.02(B)/6.03). Subject to the Participant’s elections under Section 6.01(B)(1) as to the timing and method of distribution of the Participant’s Account to the Participant’s Beneficiary (which Participant elections must be consistent with the Plan and this Election 49), in the case of a Participant’s death, the Beneficiary will receive distribution of the Participant’s Account (or of the Beneficiary’s share thereof) as follows (Complete (a), (b), and (c)):

[Note: For purposes of this Election 49, unless otherwise noted, a “Beneficiary” includes, but is not limited to a “Designated Beneficiary” under Section 6.02(E)(1).]

						(1)	(2)
						Spouse Beneficiary	Other Beneficiary
(a)	Timing. The Plan will distribute to the Beneficiary as soon as is practical at (or not later than) the following time or date (Choose one of (1) though (4). Choose (5) if applicable):
		(1	)	[n/a]	Immediate. Immediately following the Participant’s death.	o	o
		(2	)	[n/a]	Next Calendar Year. In the calendar year which next follows the calendar year of the Participant’s death, but not later than December 31 of such following calendar year.	o	o
		(3	)	þ	As Beneficiary elects. At such time as the Beneficiary may elect, provided that distribution pursuant to such election (or in the absence of any Beneficiary election) must commence no later than the Section 6.02 required date.	þ	þ
		(4	)	[n/a]	Describe:	o	o

[Note: The Employer under Election 49(a)(4) may describe an alternative distribution timing or afford the Beneficiary an election which is narrower than that permitted under election 49(a)(3). However, any election under Election 49(a)(4) must require distribution to commence no later than the Section 6.02 required date.]

(5 ) [n/a] Death before DCD; spousal election to delay. If the Participant dies before his/her Distribution Commencement Date and the Participant’s sole Designated Beneficiary is his/her spouse, the spouse may elect to delay distribution until the end of the calendar year in which the Participant would have attained age 70 1/2, if that date is later than the date upon which distribution would be required to commence to a non-spouse Beneficiary. o N/A

(b) Method. The Plan will distribute to the Beneficiary under the following distribution method(s). If more than one method is elected, the Beneficiary may choose the method of distribution.

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(Choose one or more of (1) through (4) but do not elect (4) only):
(1)	[n/a]	Lump-Sum. See Section 6.03(A)(3).	o	o
(2)	þ	Installments sufficient to satisfy RMD.	þ	o
		See Section 6.03(A)(4)(a). An Installment in each Distribution Calendar Year must at least equal the RMD amount.
(3)	[n/a]	Ad-Hoc sufficient to satisfy RMD. See Section 6.03(A)(6).The Beneficiary must elect an Ad-Hoc distribution for each Distribution Calendar Year at least equal to the RMD amount.	o	o

[Note: If an Employer elects to permit Ad-Hoc distributions: (i) the option must be available to all Beneficiaries; and (ii) the option is a Protected Benefit.]

(4) þ QPSA. See Section 6.04(B). þ N/A

[Note: If the Employer elects 50(b), the Employer should elect 49(b)(4). If the Employer elects 50(a), the Employer should not elect 49(b)(4). A surviving spouse may elect to waive the QPSA in favor of another method.]

(c) Death before the DCD. If a Participant dies before the Distribution Commencement Date, the distribution to the Beneficiary will be made in accordance with the following rule(s) (Choose one of (1), (2), or (3)):

(1	)	[n/a]	Beneficiary election. See Section 6.02(B)(1)(e). This election applies only if the Beneficiary is a Designated Beneficiary under Treas. Reg. §1.401(a)(9)-4. If not, the 5-year rule applies. In the absence of the Designated Beneficiary’s election, the Life Expectancy rule applies. The Employer in Appendix B may elect to change the default (no Designated Beneficiary election) to the 5-year rule.	o	o
(2	)	[n/a]	Life Expectancy rule. See Section 6.02(B)(1)(d). This election applies only if the Beneficiary is a Designated Beneficiary under Treas. Reg. §1.401(a)(9)-4. If not, the 5-year rule applies.	o	o
(3	)	[n/a]	5-year rule. See Section 6.02(B)(1)(c). This election applies regardless of whether the Beneficiary is a Designated Beneficiary under Treas. Reg. §1.401(a)(9)-4.	o	o

50. JOINT AND SURVIVOR ANNUITY REQUIREMENTS (6.04). The joint and survivor annuity distribution requirements of Section 6.04 (Choose one of (a) or (b)):

(a) [n/a] Profit sharing exception. Do not apply to an Exempt Participant, as described in Section 6.04(G)(1), but apply to any other
     Participants (or to a portion of their Account as described in Section 6.04(G)) (Complete (1)):

(1) One-year marriage rule. Under Section 7.05(A)(3) relating to an Exempt Participant’s Beneficiary designation under the profit sharing exception (Choose one of a. or b.):

a.	[n/a] Applies. The one-year marriage rule applies.
b.	[n/a] Does not apply. The one-year marriage rule does not apply.

(b) [n/a] Joint and survivor annuity applicable. Section 6.04 applies to all Participants (Complete (1)):

(1) One-year marriage rule. Under Section 6.04(B) relating to the QPSA (Choose one of a. or b.):

a.	[n/a] Applies. The one-year marriage rule applies.
b.	[n/a] Does not apply. The one-year marriage rule does not apply.

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ARTICLE VII
ADMINISTRATIVE PROVISIONS

51. ALLOCATION OF EARNINGS (7.04(B)). For each Contribution Type provided under the Plan, the Plan allocates Earnings using the following method (Choose one or more of (a) through (f) as applicable):

[Note: Elective Deferrals/Employee Contributions also includes Rollover Contributions, Transfers, DECs and Designated IRA Contributions, Matching Contributions includes all Matching Contributions and Nonelective Contributions includes all Nonelective Contributions unless described otherwise in Election 51(f).]

			(1)		(2)	(3)	(4)
					Elective Deferrals/
			All		Employee	Matching	Nonelective
			Contributions		Contributions	Contributions	Contributions
(a)	þ	Daily. See Section 7.04(B)(4)(a).	þ	OR	þ	þ	o
(b)	[n/a]	Balance forward.	o	OR	o	o	o
		See Section 7.04(B)(4)(b).
(c)	[n/a]	Balance forward with adjustment.	o	OR	o	o	o
		See Section 7.04(B)(4)(c). Allocate pursuant to the balance forward method, except treat as part of the relevant Account at the beginning of the Valuation Period                     % of the contributions made during the following Valuation Period:                                         .
(d)	[n/a]	Weighted average. See Section 7.04(B)(4)(d). If not a monthly weighting period, the weighting period is:                                        .	o	OR	o	o	o
(e)	[n/a]	Participant-Directed Account.	o	OR	o	o	o
		See Section 7.04(B)(4)(e).
(f)	[n/a]	Describe Earnings allocation method:

[Note: The Employer under Election 51(f) may describe Earnings allocation methods from the elections available under Election 51 and/or a combination thereof as to any: (i) Participant group (e.g., Daily applies to Division A Employees OR to Employees hired after “x” date. Balance forward applies to Division B Employees OR to Employees hired on/before “x” date.); (ii) Contribution Type (e.g., Daily applies as to Discretionary Nonelective Contribution Accounts. Participant-Directed Account applies to Fixed Nonelective Contribution Accounts); (iii) investment type, investment vendor or Account type (e.g., Balance forward applies to investments placed with vendor A and Participant-Directed Account applies to investments placed with vendor B OR Daily applies to Participant-Directed Accounts and balance forward applies to pooled Accounts); and/or (iv) merged plan account now held in the Plan (e.g., The accounts from the X plan merged into this Plan continue to be subject to Earnings allocation in accordance with the X plan terms [supply terms] and not in accordance with the terms of this Plan). An Employer’s election under Election 51(f) must: (i) be objectively determinable; (ii) not be subject to Employer discretion; and (iii) be nondiscriminatory.]

ARTICLE VIII
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES

52. VALUATION OF TRUST (8.02(C)(4)). In addition to the last day of the Plan Year, the Trustee (or Named Fiduciary as applicable) must value the Trust Fund on the following Valuation Date(s) (Choose one or more of (a) through (d) as applicable):

[Note: Elective Deferrals/Employee Contributions also include Rollover Contributions, Transfers, DECs and Designated IRA Contributions, Matching Contributions includes all Matching Contributions and Nonelective Contributions includes all Nonelective Contributions unless described otherwise in Election 52(d).]

			(1)		(2)	(3)	(4)
					Elective Deferrals/
			All		Employee	Matching	Nonelective
			Contributions		Contributions	Contributions	Contributions
(a)	[n/a]	No additional Valuation Dates.	o	OR	o	o	o

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			(1)		(2)	(3)	(4)
					Elective Deferrals/
			All		Employee	Matching	Nonelective
			Contributions		Contributions	Contributions	Contributions
(b)	þ	Daily Valuation Dates. Each business	þ	OR	o	o	o
		day of the Plan Year on which Plan
		assets for which there is an
		established market are valued and
		the Trustee is conducting business.
(c)	[n/a]	Last day of a specified period. The	o	OR	o	o	o
		last day of each of the Plan Year.
(d)	[n/a]	Specified Valuation Dates:					.

[Note: The Employer under Election 52(d) may describe Valuation Dates from the elections available under Election 52 and/or a combination thereof as to any: (i) Participant group (e.g., No additional Valuation Dates apply to Division A Employees OR to Employees hired after “x” date. Daily Valuation Dates apply to Division B Employees OR to Employees hired on/before “x” date.); (ii) Contribution Type (e.g., No additional Valuation Dates apply as to Discretionary Nonelective Contribution Accounts. The last day of each Plan Year quarter applies to Fixed Nonelective Contribution Accounts); (iii) investment type, investment vendor or Account type (e.g., No additional Valuation Dates apply to investments placed with vendor A and Daily Valuation Dates apply to investments placed with vendor B OR Daily Valuation Dates apply to Participant-Directed Accounts and no additional Valuation Dates apply to pooled Accounts); and/or (iv) merged plan account now held in the Plan (e.g., The accounts from the X plan merged into this Plan continue to be subject to Trust valuation in accordance with the X plan terms [supply terms] and not in accordance with the terms of this Plan). An Employer’s election under Election 52(d) must: (i) be objectively determinable; (ii) not be subject to Employer discretion; and (iii) be nondiscriminatory.]

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EXECUTION PAGE

The Employer, by executing this Adoption Agreement, hereby agrees to the provisions of this Plan and Trust.

Employer: Sterling Chemicals, Inc.
Date:
Signed:
	[print name/title]

The Trustee, by executing this Adoption Agreement, hereby accepts its position and agrees to all of the obligations, responsibilities and duties imposed upon the Trustee under the Prototype Plan and Trust. If the Employer under Election 5(c), 5(d), or 5(e) will use a separate Trust, the Trustee need not execute this Adoption Agreement.

Discretionary Trustee(s):
Date:
Signed:
	[print name/title]
Nondiscretionary Trustee(s):
Date:
Signed:
	[print name/title]
Prototype Plan Sponsor: Prudential Insurance Company of America (PICA)
Date:
Signed:
	[print name/title]

Use of Adoption Agreement. Failure to complete properly the elections in this Adoption Agreement may result in disqualification of the Employer’s Plan. The Employer only may use this Adoption Agreement only in conjunction with the basic plan document referenced by its document number on Adoption Agreement page one.

Execution for Page Substitution Amendment Only. If this paragraph is completed, this Execution Page documents an amendment to Adoption Agreement Election(s)                     effective      , by substitute Adoption Agreement page number(s)                                        . The Employer should retain all Adoption Agreement Execution Pages and amended pages. [Note: The Effective Date may be retroactive or may be prospective as permitted under Applicable Law.]

Prototype Plan Sponsor. The Prototype Plan Sponsor identified on the first page of the basic plan document will notify all adopting Employers of any amendment to this Prototype Plan or of any abandonment or discontinuance by the Prototype Plan Sponsor of its maintenance of this Prototype Plan. For inquiries regarding the adoption of the Prototype Plan, the Prototype Plan Sponsor’s intended meaning of any Plan provisions or the effect of the Opinion Letter issued to the Prototype Plan Sponsor, please contact the Prototype Plan Sponsor at the following address and telephone number:   751 Broad Street, Newark, NJ 07102-3777 1-800-848-4015 .

Reliance on Sponsor Opinion Letter. The Prototype Plan Sponsor has obtained from the IRS an Opinion Letter specifying the form of this Adoption Agreement and the basic plan document satisfy, as of the date of the Opinion Letter, Code §401. An adopting Employer may rely on the Prototype Sponsor’s IRS Opinion Letter only to the extent provided in Rev. Proc. 2005-16. The Employer may not rely on the Opinion Letter in certain other circumstances or with respect to certain qualification requirements, which are specified in the Opinion Letter and in Rev. Proc. 2005-16, Sections 19.02 and 19.03. In order to have reliance in such circumstances or with respect to such qualification requirements, the Employer must apply for a determination letter to Employee Plans Determinations of the IRS.

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APPENDIX A
EGTRRA RESTATED PLANS — SPECIAL EFFECTIVE DATES
[Covering period from restated Effective Date in Election 4(b) until Employer executes EGTRRA restatement]

53. SPECIAL EFFECTIVE DATES (1.19). The Employer elects or does not elect Appendix A special Effective Date(s) as follows. (Choose (a) or one or more of (b) through (r) as applicable):

[Note: If the Employer elects 53(a), do not complete the balance of this Election 53.]

(a) [n/a] Not applicable. The Employer does not elect any Appendix A special Effective Dates.

[Note: The Employer should use this Appendix A where it is restating its Plan for EGTRRA with a retroactive Effective Date, but where one or more Adoption Agreement elections under the restated Plan became effective after the Plan’s general restatement Effective Date under Election 4(b). For periods prior to the below-specified special Effective Date(s), the Plan terms in effect prior to its restatement under this Adoption Agreement control for purposes of the designated provisions. Any special Effective Date the Employer elects must comply with Applicable Law.]

(b)	[n/a]	Contribution Types (1.12). The Contribution Types under Election(s) 6                      are effective:                    .
		[Note: The Plan may not permit Roth Deferrals before January 1, 2006.]
(c)	[n/a]	Excluded Employees (1.21(D)). The Excluded Employee provisions under Election(s) 8                      are effective: .
(d)	[n/a]	Compensation (1.11). The Compensation definition under Election(s)                      (specify 9-11 as applicable) are effective:                    .
(e)	[n/a]	Eligibility (2.01-2.03). The eligibility provisions under Election(s)                      (specify 14-19 as applicable) are effective:                    .
(f)	[n/a]	Elective Deferrals (3.02(A)-(C)). The Elective Deferral provisions under Election(s)                      (specify 20-22 as applicable) are effective:                      .
(g)	[n/a]	Catch-Up Deferrals (3.02(D)). The Catch-Up Deferral provisions under Election 23                      are effective:                      .
(h)	[n/a]	Matching Contributions (3.03). The Matching Contribution provisions under Election(s)                      (specify 24-26 as applicable) are effective:                    .
(i)	[n/a]	Nonelective Contributions (3.04). The Nonelective Contribution provisions under Election(s)                      (specify 27-29 as applicable) are effective:                    .
(j)	[n/a]	401(k) safe harbor (3.05). The 401(k) safe harbor provisions under Election(s) 30                      are effective:                    .
(k)	[n/a]	Allocation conditions (3.06). The allocation conditions under Election(s)                      (specify 31-32 as applicable) are effective:                    .
(l)	[n/a]	Forfeitures (3.07). The forfeiture allocation provisions under Election(s)                      (specify 33-34 as applicable) are effective:                    .
(m)	[n/a]	Employee Contributions (3.09). The Employee Contribution provisions under Election(s) 35                      are effective:                    .
(n)	[n/a]	Testing elections (4.06(B)). The testing elections under Election(s) 37                      under the “Effective as of execution (and retroactively if restatement)” column are effective:                    .
(o)	[n/a]	Vesting (5.03). The vesting provisions under Election(s)                      (specify 38-43 as applicable) are effective:                    .
(p)	[n/a]	Distributions (6.01 and 6.03). The distribution elections under Election(s)                      (specify 44-50 as applicable) are effective:                    .
(q)	[n/a]	Earnings/Trust valuation (7.04(B)/8.02(C)(4)). The Earnings allocation and Trust valuation provisions under Election(s)                      (specify 51-52 as applicable) are effective:                    .
(r)	[X]	Special Effective Date(s) for other elections (specify elections and dates): expenses are to be paid from plan assets as provided in the base plan document effective January 1, 2008

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APPENDIX B
BASIC PLAN DOCUMENT OVERRIDE ELECTIONS

54. BASIC PLAN OVERRIDES. The Employer elects or does not elect to override various basic plan provisions as follows (Choose (a) or choose one or more of (b) through (i) as applicable):

[Note: If the Employer elects 54(a), do not complete the balance of this Election 54.]

(a) [n/a] Not applicable. The Employer does not elect to override any basic plan provisions.

[Note: The Employer at the time of restating its Plan with this Adoption Agreement may make an election on Appendix A (Election 53(r)) to specify a special Effective Date for any override provision the Employer elects in this Election 54. If the Employer, after it has executed this Adoption Agreement, later amends its Plan to change any election on this Appendix B, the Employer should document the Effective Date of the Appendix B amendment on the Execution Page or otherwise in the amendment.]

(b)	þ		Definition (Article I) overrides. (Choose one or more of (1) through (9) as applicable):
	(1	)	[n/a]	W-2 Compensation exclusion of paid/reimbursed moving expenses (1.11(B)(1)). W-2 Compensation excludes amounts paid or reimbursed by the Employer for moving expenses incurred by an Employee, but only to the extent that, at the time of payment, it is reasonable to believe that the Employee may deduct these amounts under Code §217.
	(2	)	[n/a]	Alternative (general) 415 Compensation (1.11(B)(4)). The Employer elects to apply the alternative (general) 415 definition of Compensation in lieu of simplified 415 Compensation. As to amounts received from an unfunded nonqualified deferred compensation plan which is includible in gross income in the taxable year of receipt (Choose one of a. or b.):
			a.	[n/a]	Include. Include the nonqualified deferred compensation.
			b.	[n/a]	Do not include. Do not include the nonqualified deferred compensation.
	(3	)	þ	Inclusion of Deemed 125 Compensation (1.11(C)). Compensation under Section 1.11 includes Deemed 125 Compensation.
	(4	)	[n/a]	Inclusion of Post-Severance Compensation (1.11(I) and 4.05(C)(1)). The Plan includes Post-Severance Compensation within the meaning of Prop. Treas. Reg. §1.415(c)-2(e) as described in Sections 1.11(I) and 4.05(C)(1) as follows (Choose one or both of a. and b.):
			a.	[n/a]	Include for 415 testing. Include for 415 testing and for other testing which uses 415 Compensation. This provision applies effective as of                      (specify a date which is no earlier than January 1, 2005).
			b.	[n/a]	Include for allocations. Include for allocations as follows (specify affected Contribution Type(s) and any adjustments to Post-Severance Compensation used for allocation):                                         . This provision applies effective as of                      (specify a date which is no earlier than January 1, 2002).
	(5	)	[n/a]	Inclusion of Deemed Disability Compensation (1.11(K)). Include Deemed Disability Compensation. (Choose one of a. or b.):
			a.	[n/a]	NHCEs only. Apply only to disabled NHCEs.
			b.	[n/a]	All Participants. Apply to all disabled Participants. The Employer will make Employer Contributions for such disabled Participants for:                                         (specify a fixed or determinable period).
	(6	)	[n/a]	Early application of final 401(k) regulations (1.28). The Employer (consistent with the Plan Administrator’s operation of the Plan) elects to apply the final 401(k) regulations before the beginning of the 2006 Plan Year. The Employer elects to apply the regulations effective as of:                                         (specify Plan Year ending after December 29, 2004, e.g., Plan Year ending December 31, 2004 OR Plan Year beginning January 1, 2005).
	(7	)	[n/a]	Leased Employees (1.21(B)). The Employer for purposes of the following Contribution Types, does not exclude Leased Employees:                                         (specify Contribution Types).
	(8	)	[n/a]	Offset if contributions to leasing organization plan (1.21(B)(2)). The Employer will reduce allocations to this Plan for any Leased Employee to the extent that the leasing organization contributes to or provides benefits under a leasing organization plan to or for the Leased Employee and which are attributable to the Leased Employee’s services for the Employer. The amount of the offset is as follows:                                         .

[Note: The election of an offset under this Election 54(b)(8) requires that the Employer aggregate its plan with the leasing organization’s plan for coverage and nondiscrimination testing.]

(9 ) [n/a] Reclassified Employees (1.21(D)(3)). The Employer for purposes of the following Contribution Types, does not exclude Reclassified Employees (or the following categories of Reclassified Employees):                                         (specify Contribution Types and/or categories of Reclassified Employees).

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(c)	[n/a]		Rule of parity — participation (Article II) override (2.03(D)). For purposes of Plan participation, the Plan applies the “rule of parity” under Code §410(a)(5)(D).
(d)	[n/a]		Contribution/allocation (Article III) overrides. (Choose one or more of (1) through (7) as applicable):
	(1	)	[n/a]	Treatment of Automatic Deferrals as Roth Deferrals (3.02(B)(7)). The Employer elects to treat Automatic Deferrals as Roth Deferrals in lieu of treating Automatic Deferrals as Pre-Tax Deferrals.
	(2	)	[n/a]	Application of Safe Harbor Contributions to other allocations (3.05(E)(11)). Any Safe Harbor Nonelective Contributions allocated to a Participant’s account will not be applied toward (offset) any allocation to the Participant of a non-Safe Harbor Nonelective Contribution.
	(3	)	[n/a]	Short Plan Year or allocation period (3.06(B)(1)(c)). The Plan Administrator (Choose one of a. or b.):
			a.	[n/a]	No pro-ration. Will not pro-rate Hours of Service in any short allocation period.
			b.	[n/a]	Pro-ration based on months. Will pro-rate any Hour of Service requirement based on the number of months in the short allocation period.
	(4	)	[n/a]	Limited waiver of allocation conditions for re-hired Participants (3.06(G)). The allocation conditions the Employer has elected in the Adoption Agreement do not apply to re-hired Participants in the Plan Year they resume participation, as described in Section 3.06(G).
	(5	)	[n/a]	Associated Match forfeiture timing (3.07(A)(1)(c)). Forfeiture of associated matching contributions occurs in the Testing Year.
	(6	)	[n/a]	Safe Harbor top-heavy exempt fail-safe (3.07(A)(4)). In lieu of ordering forfeitures as (a), (b), (c), and (d) under Section 3.07(A)(4), the Employer establishes the following forfeiture ordering rules (Specify the ordering rules, for example, (d), (a), (b), and (c)):                    .
	(7	)	[n/a]	Suspension (3.06(F)(3)). The Plan Administrator in applying Section 3.06(F) will (Choose one or more of a., b., and c. as applicable):
			a.	[n/a]	Re-order tiers. Apply the suspension tiers in Section 3.06(F)(2) in the following order:                                        (specify order).
			b.	[n/a]	Hours of Service tie-breaker. Apply the greatest Hours of Service as the tie-breaker within a suspension tier in lieu of applying the lowest Compensation.
			c.	[n/a]	Additional/other tiers. Apply the following additional or other tiers:                                         (specify suspension tiers and ordering).
(e)	[n/a]		Testing (Article IV) overrides. (Choose one or both of (1) and (2) as applicable):
	(1	)	[n/a]	Early application of Gap Period income to Excess Deferrals (4.11(C)(1)). The Plan Administrator will distribute Gap Period income allocated on Excess Deferrals as to Excess Deferrals occurring in the                      Taxable Year and in later Taxable Years (Specify a Taxable Year before 2008).
	(2	)	[n/a]	Early application of Gap Period income to Excess Contributions/Aggregates (4.11(C)(2)). The Plan Administrator will distribute Gap Period income allocated on Excess Contributions and Excess Aggregate Contributions occurring in the                      Plan Year and in later Plan Years (Specify a Plan Year before the Final 401(k) Regulations Effective Date).
(f)	[n/a]		Vesting (Article V) overrides. (Choose one or more of (1) through (6) as applicable):
	(1	)	[n/a]	Application of top-heavy vesting to Matching (5.03(A)(1)). The Employer makes the following elections regarding the application of top-heavy vesting to its Regular Matching and Additional Matching Contributions (Choose one or both of a. and b.):
			a.	[n/a]	Post-EGTRRA Matching only. Apply top-heavy vesting only to such post-2001 Plan Year Matching Contributions.
			b.	[n/a]	Waiver of Hour of Service requirement. Apply top-heavy vesting as under the basic plan or as modified by Election 54(f)(1)a. to all Participants even if they did not have an Hour of Service in any post-2001 Plan Year.
	(2	)	[n/a]	Alternative “grossed-up” vesting formula (5.03(C)(2)). The Employer elects the alternative vesting formula described in Section 5.03(C)(2).
	(3	)	[n/a]	a. Source of Cash-Out forfeiture restoration (5.04(B)(5)). To restore a Participant’s Account Balance as described in Section 5.04(B)(5), the Plan Administrator, to the extent necessary, will allocate from the following source(s) and in the following order (Specify, in order, one or more of the following: Forfeitures, Earnings, and/or Employer Contribution):                                         .

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			[n/a]	b. Forfeiture Restoration and Conditions for Restoration (5.04(B). The Plan Administrator will restore a re-employed Participant’s Account Balance under this Section 5.04(B) without requiring repayment by the Participant of the entire amount of the Cash-Out Distribution to the Trust.
	(4	)	[n/a]	Deemed Cash-Out of 0% Vested Participant (5.04(C)). The deemed cash-out rule of Section 5.04(C) does not apply to the Plan.
	(5	)	[n/a]	Accounting for Cash-Out repayment; Contribution Type (5.04(D)(2)). In lieu of the accounting described in Section 5.04(D)(2), the Plan Administrator will account for a Participant’s Account Balance attributable to a Cash-Out repayment: (Choose one of a. or b.):
			a.	[n/a]	Nonelective rule. Under the nonelective rule.
			b.	[n/a]	Rollover rule. Under the rollover rule.
	(6	)	[n/a]	One-year hold-out rule — vesting (5.06(D)). The one-year hold-out Break in Service rule under Code §411(a)(6)(B) applies.
(g)	[n/a]		Distribution (Article VI) overrides. (Choose one or more of (1) through (7) as applicable):
	(1	)	[n/a]	Election of 5-year rule (6.02(B)(1)(e)). Under Section 6.02(B)(1)(e) relating to death before the RBD, if a Designated Beneficiary does not make a timely election, the 5-year rule applies in lieu of the Life Expectancy rule.
	(2	)	[n/a]	2002 only special Effective Date for Section 6.02 (6.02(D)(4)). For the 2002 DCY only, the Plan Administrator will apply the RMD rules in effect under (Choose one of a. or b.):
			a.	[n/a]	1987 proposed regulations. The 1987 proposed Treasury regulations under Code §401(a)(9).
			b.	[n/a]	2001 proposed regulations. The 2001 proposed Treasury regulations under Code §401(a)(9).
	(3	)	[n/a]	RBD definition (6.02(E)(7)(c)). In lieu of the RBD definition in Section 6.02(E)(7)(a) and (b), the Plan Administrator (Choose one of a. or b.):
			a.	[n/a]	SBJPA definition indefinitely. Indefinitely will apply the pre-SBJPA RBD definition.
			b.	[n/a]	SBJPA definition to specified date. Will apply the pre-SBJPA definition until                      (the stated date may not be earlier than January 1, 1997), and thereafter will apply the RBD definition in Section 6.02(E)(7)(a) and (b).
	(4	)	[n/a]	Modification of QJSA (6.04(A)(3)). The Survivor Annuity percentage will be                     %. (Specify a percentage between 50% and 100%.)
	(5	)	[n/a]	Modification of QPSA (6.04(B)(2)). The QPSA percentage will be                      %. (Specify a percentage between 50% and 100%.)
	(6	)	[n/a]	Restriction on hardship source; grandfathering (6.07(E)). The hardship distribution limit includes grandfathered amounts.
	(7	)	[n/a]	Replacement of $5,000 amount (6.09). All Plan references (except in Sections 3.02(D), 3.10 and 3.12(C)(2)) to “$5,000” will be $                    . (Specify an amount less than $5,000.)
(h)	[n/a]		Administrative, Trust and insurance overrides (Articles VII, VIII and IX). (Choose one or more of (1) through (9) as applicable):
	(1	)	[n/a]	Contributions prior to accrual or precise determination (7.04(B)(5)(b)). The Plan Administrator will allocate Earnings described in Section 7.04(B)(5)(b) as follows (Choose one of a., b., or c.):
			a.	[n/a]	Treat as contribution. Treat the Earnings as an Employer Matching or Nonelective Contribution and allocate accordingly.
			b.	[n/a]	Balance forward. Allocate the Earnings using the balance forward method described in Section 7.04(B)(4)(b).
			c.	[n/a]	Weighted average. Allocate the Earnings on Matching Contributions using the weighted average method in a manner similar to the method described in Section 7.04(B)(4)(d).
	(2	)	[n/a]	Automatic revocation of spousal designation (7.05(A)(1)). The automatic revocation of a spousal Beneficiary designation in the case of divorce or legal separation does not apply.
	(3	)	[n/a]	Limitation on frequency of Beneficiary designation changes (7.05(A)(4)). Except in the case of a Participant incurring a major life event, a period of at least                      must elapse between Beneficiary designation changes. (Specify a period of time, e.g., 90 days OR 12 months.)
	(4	)	[n/a]	Definition of “spouse” (7.05(A)(5)). The following definition of “spouse” applies:                                         . (Specify a definition consistent with Applicable Law.)

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	(5	)	[n/a]	Administration of default provision; default Beneficiaries (7.05(C)). The following list of default Beneficiaries will apply:                                         . (Specify, in order, one or more Beneficiaries who will receive the interest of a deceased Participant.)
	(6	)	[n/a]	Subsequent restoration of forfeiture-sources and ordering (7.07(A)(3)). Restoration of forfeitures will come from the following sources, in the following order                                         . (Specify, in order, one or more of the following: Forfeitures, Employer Contribution, Trust Fund Earnings.)
	(7	)	[n/a]	State law (7.10(H)). The law of the following state will apply:                                         . (Specify one of the 50 states or the District of Columbia, or other appropriate legal jurisdiction, such as a territory of the United States or an Indian tribal government.)
	(8	)	[n/a]	Employer securities/real property in Profit Sharing Plans/401(k) Plans (8.02(A)(13)(a)). The Plan limit on investment in qualifying Employer securities/real property is                                         %. (Specify a percentage which is less than 100%.)
	(9	)	[n/a]	Provisions relating to insurance and insurance company (9.08). The following provisions apply:                                          (Specify such language as necessary to accommodate life insurance Contracts the Plan holds.)
[Note: The provisions in this Election 54(h)(9) may override provisions in Article IX of the Plan, but must be consistent with all other provisions of the Plan and Applicable Law.]
(i)	[n/a]		Code Sections 415/416 (Article XI) override (11.02(A)(1)). Because of the required aggregation of multiple plans, to satisfy Code §§415 and/or 416, the following overriding provisions apply: . (Specify such language as necessary to satisfy §§415 and 416.)

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APPENDIX C

LIST OF GROUP TRUST FUNDS/PERMISSIBLE TRUST AMENDMENTS

55. [n/a] INVESTMENT IN GROUP TRUST FUND (8.09). The nondiscretionary Trustee, as directed or the discretionary Trustee acting without direction (and in addition to the discretionary Trustee’s authority to invest in its own funds under Section 8.02(A)(3)), may invest in any of the following group trust funds: . (Specify the names of one or more group trust funds in which the Plan can invest).

[Note: A discretionary or nondiscretionary Trustee also may invest in any group trust fund authorized by an independent Named Fiduciary.]

56. [n/a] PERMISSIBLE TRUST AMENDMENTS (8.11). The Employer makes the following amendments to the Trust as permitted under Rev. Proc. 2005-16, Section 5.09 (Choose one or more of (a) through (c) as applicable):

[Note: Any amendment under this Election 56 must not: (i) conflict with any Plan provision unrelated to the Trust or Trustee; or (ii) cause the Plan to violate Code §401(a). The amendment may override, add to, delete or otherwise modify the Trust provisions. Do not use this Election 56 to substitute another pre-approved trust for the Trust. See Election 5(c), 5(d), and 5(e) as to a substitute trust.]

(a)	[n/a]	Investments. The Employer amends the Trust provisions relating to Trust investments as follows:
(b)	[n/a]	Duties. The Employer amends the Trust provisions relating to Trustee (or Custodian) duties as follows:
(c)	[n/a]	Other administrative provisions. The Employer amends the other administrative provisions of the Trust as follows:

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APPENDIX D
TABLE I: ACTUARIAL FACTORS
UP-1984
Without Setback

Number of years
from attained age
at the end of Plan Year until
Normal Retirement Age	7.50%		8.00%		8.50%
0		8.458		8.196		7.949
1		7.868		7.589		7.326
2		7.319		7.027		6.752
3		6.808		6.506		6.223
4		6.333		6.024		5.736
5		5.891		5.578		5.286
6		5.480		5.165		4.872
7		5.098		4.782		4.491
8		4.742		4.428		4.139
9		4.412		4.100		3.815
10		4.104		3.796		3.516
11		3.817		3.515		3.240
12		3.551		3.255		2.986
13		3.303		3.014		2.752
14		3.073		2.790		2.537
15		2.859		2.584		2.338
16		2.659		2.392		2.155
17		2.474		2.215		1.986
18		2.301		2.051		1.831
19		2.140		1.899		1.687
20		1.991		1.758		1.555
21		1.852		1.628		1.433
22		1.723		1.508		1.321
23		1.603		1.396		1.217
24		1.491		1.293		1.122
25		1.387		1.197		1.034
26		1.290		1.108		0.953
27		1.200		1.026		0.878
28		1.116		0.950		0.810
29		1.039		0.880		0.746
30		0.966		0.814		0.688
31		0.899		0.754		0.634
32		0.836		0.698		0.584
33		0.778		0.647		0.538
34		0.723		0.599		0.496
35		0.673		0.554		0.457
36		0.626		0.513		0.422
37		0.582		0.475		0.389
38		0.542		0.440		0.358
39		0.504		0.407		0.330
40		0.469		0.377		0.304
41		0.436		0.349		0.280
42		0.406		0.323		0.258
43		0.377		0.299		0.238
44		0.351		0.277		0.219
45		0.327		0.257		0.202

Note: A Participant’s Actuarial Factor under Table I is the factor corresponding to the number of years until the Participant reaches his/her Normal Retirement Age under the Plan. A Participant’s age as of the end of the current Plan Year is his/her age on his/her last birthday. For any Plan Year beginning on or after the Participant’s attainment of Normal Retirement Age, the factor for “zero” years applies.

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APPENDIX D
TABLE II: ADJUSTMENT TO ACTUARIAL FACTORS FOR NORMAL RETIREMENT AGE
OTHER THAN 65
UP-1984
Without Setback

Normal Retirement
Age	7.50%		8.00%		8.50%
55		1.2242		1.2147		1.2058
56		1.2043		1.1959		1.1879
57		1.1838		1.1764		1.1694
58		1.1627		1.1563		1.1503
59		1.1411		1.1357		1.1305
60		1.1188		1.1144		1.1101
61		1.0960		1.0925		1.0891
62		1.0726		1.0700		1.0676
63		1.0488		1.0471		1.0455
64		1.0246		1.0237		1.0229
65		1.0000		1.0000		1.0000
66		0.9752		0.9760		0.9767
67		0.9502		0.9518		0.9533
68		0.9251		0.9274		0.9296
69		0.8998		0.9027		0.9055
70		0.8740		0.8776		0.8810
71		0.8478		0.8520		0.8561
72		0.8214		0.8261		0.8307
73		0.7946		0.7999		0.8049
74		0.7678		0.7735		0.7790
75		0.7409		0.7470		0.7529
76		0.7140		0.7205		0.7268
77		0.6874		0.6942		0.7008
78		0.6611		0.6682		0.6751
79		0.6349		0.6423		0.6494
80		0.6090		0.6165		0.6238

Note: Use Table II only if the Normal Retirement Age for any Participant is not 65. If a Participant’s Normal Retirement Age is not 65, adjust Table I by multiplying all factors applicable to that Participant in Table I by the appropriate Table II factor.

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AMENDMENT FOR THE FINAL 415 REGULATIONS

ARTICLE I
PREAMBLE

1.1	Effective date of Amendment. This Amendment is effective for limitation years and plan years beginning on or after July 1, 2007, except as otherwise provided herein.
1.2	Superseding of inconsistent provisions. This Amendment supersedes the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Amendment.
1.3	Employer’s election. The Employer adopts all Articles of this Amendment, except those Articles that the Employer specifically elects not to adopt.
1.4	Construction. Except as otherwise provided in this Amendment, any reference to “Section” in this Amendment refers only to sections within this Amendment, and is not a reference to the Plan. The Article and Section numbering in this Amendment is solely for purposes of this Amendment, and does not relate to any Plan article, section or other numbering designations.
1.5	Effect of restatement of Plan. If the Employer restates the Plan, then this Amendment shall remain in effect after such restatement unless the provisions in this Amendment are restated or otherwise become obsolete (e.g., if the Plan is restated onto a plan document which incorporates the final Code §415 Regulation provisions).
1.6	Adoption by prototype sponsor. Except as otherwise provided herein, pursuant to the provisions of the Plan and Section 5.01 of Revenue Procedure 2005-16, the sponsor hereby adopts this Amendment on behalf of all adopting employers.

ARTICLE II
EMPLOYER ELECTIONS

The Employer only needs to complete the questions in Section 2.2 in order to override the default provisions set forth below. If the Plan will use all of the default provisions, then these questions should be skipped and the Employer does not need to execute this amendment.

2.1 Default Provisions. Unless the Employer elects otherwise in Section 2.2, the following defaults will apply:

a.	The provisions of the Plan setting forth the definition of compensation for purposes of Code §415 (hereinafter referred to as “415 Compensation”), as well as compensation for purposes of determining highly compensated employees pursuant to Code §414(q) and for top-heavy purposes under Code §416 (including the determination of key employees), shall be modified by (1) including payments for unused sick, vacation or other leave and payments from nonqualified unfunded deferred compensation plans (Amendment Section 3.2(b)), (2) excluding salary continuation payments for participants on military service (Amendment Section 3.2(c)), and (3) excluding salary continuation payments for disabled participants (Amendment Section 3.2(d)).
b.	The “first few weeks rule” does not apply for purposes of 415 Compensation (Amendment Section 3.3).
c.	The provision of the Plan setting forth the definition of compensation for allocation purposes (hereinafter referred to as “Plan Compensation”) shall be modified to provide for the same adjustments to Plan Compensation (for all contribution types) that are made to 415 Compensation pursuant to this Amendment.

2.2 In lieu of default provisions. In lieu of the default provisions above, the following apply: (select all that apply; if no selections are made, then the defaults apply)

415 Compensation. (select all that apply):

a.	o	Exclude leave cashouts and deferred compensation (Section 3.2(b))
b.	o	Include military continuation payments (Section 3.2(c))
c.	þ	Include disability continuation payments (Section 3.2(d)):
		1. o For Nonhighly Compensated Employees only
		2. þ For all participants and the salary continuation will continue for the following fixed or determinable period:
d.	o	Apply the administrative delay (“first few weeks”) rule (Section 3.3)

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Plan Compensation. (select all that apply):

NOTE: Elective Deferrals includes Pre-Tax Deferrals, Roth Deferrals and Employee Contributions, Matching includes all Matching Contributions and Nonelective includes all Nonelective Contributions. For all Plans other than 401(k) plans, only use column 1. or column 4. in the table below.

NOTE: Under the GUST PPD document, the plan excludes all post-severance compensation unless the Employer had elected otherwise in its adoption agreement.

						Elective
				All		Deferrals	Matching	Nonelective
e.	o	Default provisions apply		1. N/A	OR	2. o	3. o	4. o
f.	o	No change from existing Plan provisions		1.o	OR	2. o	3. o	4. o
g.	þ	Exclude all post-severance compensation		1.þ	OR	2. o	3. o	4. o
h.	o	Exclude post-severance regular pay		1.o	OR	2. o	3. o	4. o
i.	o	Exclude leave cashouts and deferred compensation		1.o	OR	2. o	3. o	4. o
j.	o	Include post-severance military continuation payments		1.o	OR	2. o	3. o	4. o
k.	o	Include post-severance disability continuation payments:		1.o	OR	2. o	3. o	4. o
	a.	o	For Nonhighly Compensated Employees only
	b.	o	For all participants and the salary continuation will continue for the following fixed or determinable period:
l.	o	Other                                                                                       (describe)

Plan Compensation Special Effective Date. The definition of Plan Compensation is modified as set forth herein effective as of the same date as the 415 Compensation change is effective unless otherwise specified:
m.                                                                                                           (enter the effective date)

ARTICLE III

FINAL SECTION 415 REGULATIONS

3.1

Effective date. The provisions of this Article III shall apply to limitation years beginning on and after July 1, 2007.

3.2

415 Compensation paid after severance from employment. 415 Compensation shall be adjusted, as set forth herein and as otherwise elected in Article II, for the following types of compensation paid after a Participant’s severance from employment with the Employer maintaining the Plan (or any other entity that is treated as the Employer pursuant to Code §414(b), (c), (m) or (o)). However, amounts described in subsections (a) and (b) below may only be included in 415 Compensation to the extent such amounts are paid by the later of 2 1/2 months after severance from employment or by the end of the limitation year that includes the date of such severance from employment. Any other payment of compensation paid after severance of employment that is not described in the following types of compensation is not considered 415 Compensation within the meaning of Code §415(c)(3), even if payment is made within the time period specified above.

(a) Regular pay. 415 Compensation shall include regular pay after severance of employment if:

(1)	The payment is regular compensation for services during the participant’s regular working hours, or compensation for services outside the participant’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and
(2)	The payment would have been paid to the participant prior to a severance from employment if the participant had continued in employment with the Employer.

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(b)	Leave cashouts and deferred compensation. Leave cashouts shall be included in 415 Compensation, unless otherwise elected in Section 2.2 of this Amendment, if those amounts would have been included in the definition of 415 Compensation if they were paid prior to the participant’s severance from employment, and the amounts are payment for unused accrued bona fide sick, vacation, or other leave, but only if the participant would have been able to use the leave if employment had continued. In addition, deferred compensation shall be included in 415 Compensation, unless otherwise elected in Section 2.2 of this Amendment, if the compensation would have been included in the definition of 415 Compensation if it had been paid prior to the participant’s severance from employment, and the compensation is received pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid at the same time if the participant had continued in employment with the Employer and only to the extent that the payment is includible in the participant’s gross income.
(c)	Salary continuation payments for military service participants. 415 Compensation does not include, unless otherwise elected in Section 2.2 of this Amendment, payments to an individual who does not currently perform services for the Employer by reason of qualified military service (as that term is used in Code §414(u)(1)) to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Employer rather than entering qualified military service.
(d)	Salary continuation payments for disabled Participants. Unless otherwise elected in Section 2.2 of this Amendment, 415 Compensation does not include compensation paid to a participant who is permanently and totally disabled (as defined in Code §22(e)(3)). If elected, this provision shall apply to either just non-highly compensated participants or to all participants for the period specified in Section 2.2 of this Amendment.

3.3	Administrative delay (“the first few weeks”) rule. 415 Compensation for a limitation year shall not include, unless otherwise elected in Section 2.2 of this Amendment, amounts earned but not paid during the limitation year solely because of the timing of pay periods and pay dates. However, if elected in Section 2.2 of this Amendment, 415 Compensation for a limitation year shall include amounts earned but not paid during the limitation year solely because of the timing of pay periods and pay dates, provided the amounts are paid during the first few weeks of the next limitation year, the amounts are included on a uniform and consistent basis with respect to all similarly situated participants, and no compensation is included in more than one limitation year.
3.4	Inclusion of certain nonqualified deferred compensation amounts. If the Plan’s definition of Compensation for purposes of Code §415 is the definition in Regulation Section 1.415(c)-2(b) (Regulation Section 1.415-2(d)(2) under the Regulations in effect for limitation years beginning prior to July 1, 2007) and the simplified compensation definition of Regulation 1.415(c)-2(d)(2) (Regulation Section 1.415-2(d)(10) under the Regulations in effect for limitation years prior to July 1, 2007) is not used, then 415 Compensation shall include amounts that are includible in the gross income of a Participant under the rules of Code §409A or Code §457(f)(1)(A) or because the amounts are constructively received by the Participant. [Note if the Plan’s definition of Compensation is W-2 wages or wages for withholding purposes, then these amounts are already included in Compensation.]
3.5	Definition of annual additions. The Plan’s definition of “annual additions” is modified as follows:

(a)	Restorative payments. Annual additions for purposes of Code §415 shall not include restorative payments. A restorative payment is a payment made to restore losses to a Plan resulting from actions by a fiduciary for which there is reasonable risk of liability for breach of a fiduciary duty under ERISA or under other applicable federal or state law, where participants who are similarly situated are treated similarly with respect to the payments. Generally, payments are restorative payments only if the payments are made in order to restore some or all of the plan’s losses due to an action (or a failure to act) that creates a reasonable risk of liability for such a breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). This includes payments to a plan made pursuant to a Department of Labor order, the Department of Labor’s Voluntary Fiduciary Correction Program, or a court-approved settlement, to restore losses to a qualified defined contribution plan on account of the breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). Payments made to the Plan to make up for losses due merely to market fluctuations and other payments that are not made on account of a reasonable risk of liability for breach of a fiduciary duty under ERISA are not restorative payments and generally constitute contributions that are considered annual additions.
(b)	Other Amounts. Annual additions for purposes of Code §415 shall not include: (1) The direct transfer of a benefit or employee contributions from a qualified plan to this Plan; (2) Rollover contributions (as described in Code §§401(a)(31), 402(c)(1), 403(a)(4), 403(b)(8), 408(d)(3), and 457(e)(16)); (3) Repayments of loans made to a participant from the Plan; and (4) Repayments of amounts described in Code §411(a)(7)(B) (in accordance with Code §411(a)(7)(C)) and Code §411(a)(3)(D) or repayment of contributions to a governmental plan (as defined in Code §414(d)) as described in Code §415(k)(3), as well as Employer restorations of benefits that are required pursuant to such repayments.
(c)	Date of tax-exempt Employer contributions. Notwithstanding anything in the Plan to the contrary, in the case of an Employer that is exempt from Federal income tax (including a governmental employer), Employer contributions are treated as credited to a participant’s account for a particular limitation year only if the contributions are actually made to the plan no later than the 15th day of the tenth calendar month following the end of the calendar year or fiscal year (as applicable, depending on the basis on which the employer keeps its books) with or within which the particular limitation year ends.

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3.6	Change of limitation year. The limitation year may only be changed by a Plan amendment. Furthermore, if the Plan is terminated effective as of a date other than the last day of the Plan’s limitation year, then the Plan is treated as if the Plan had been amended to change its limitation year.
3.7	Excess Annual Additions. Notwithstanding any provision of the Plan to the contrary, if the annual additions (within the meaning of Code §415) are exceeded for any participant, then the Plan may only correct such excess in accordance with the Employee Plans Compliance Resolution System (EPCRS) as set forth in Revenue Procedure 2006-27 or any superseding guidance, including, but not limited to, the preamble of the final §415 regulations.
3.8	Aggregation and Disaggregation of Plans.

(a) For purposes of applying the limitations of Code §415, all defined contribution plans (without regard to whether a plan has been terminated) ever maintained by the Employer (or a “predecessor employer”) under which the participant receives annual additions are treated as one defined contribution plan. The “Employer” means the Employer that adopts this Plan and all members of a controlled group or an affiliated service group that includes the Employer (within the meaning of Code §§414(b), (c), (m) or (o)), except that for purposes of this Section, the determination shall be made by applying Code §415(h), and shall take into account tax-exempt organizations under Regulation Section 1.414(c)-5, as modified by Regulation Section 1.415(a)-1(f)(1). For purposes of this Section:

(1)

A former Employer is a “predecessor employer” with respect to a participant in a plan maintained by an Employer if the Employer maintains a plan under which the participant had accrued a benefit while performing services for the former Employer, but only if that benefit is provided under the plan maintained by the Employer. For this purpose, the formerly affiliated plan rules in Regulation Section 1.415(f)-1(b)(2) apply as if the Employer and predecessor Employer constituted a single employer under the rules described in Regulation Section 1.415(a)-1(f)(1) and (2) immediately prior to the cessation of affiliation (and as if they constituted two, unrelated employers under the rules described in Regulation Section 1.415(a)-1(f)(1) and (2) immediately after the cessation of affiliation) and cessation of affiliation was the event that gives rise to the predecessor employer relationship, such as a transfer of benefits or plan sponsorship.

(2)

With respect to an Employer of a participant, a former entity that antedates the Employer is a “predecessor employer” with respect to the participant if, under the facts and circumstances, the Employer constitutes a continuation of all or a portion of the trade or business of the former entity.

(b)

Break-up of an affiliate employer or an affiliated service group. For purposes of aggregating plans for Code §415, a “formerly affiliated plan” of an employer is taken into account for purposes of applying the Code §415 limitations to the employer, but the formerly affiliated plan is treated as if it had terminated immediately prior to the “cessation of affiliation.” For purposes of this paragraph, a “formerly affiliated plan” of an employer is a plan that, immediately prior to the cessation of affiliation, was actually maintained by one or more of the entities that constitute the employer (as determined under the employer affiliation rules described in Regulation Section 1.415(a)-1(f)(1) and (2)), and immediately after the cessation of affiliation, is not actually maintained by any of the entities that constitute the employer (as determined under the employer affiliation rules described in Regulation Section 1.415(a)-1(f)(1) and (2)). For purposes of this paragraph, a “cessation of affiliation” means the event that causes an entity to no longer be aggregated with one or more other entities as a single employer under the employer affiliation rules described in Regulation Section 1.415(a)-1(f)(1) and (2) (such as the sale of a subsidiary outside a controlled group), or that causes a plan to not actually be maintained by any of the entities that constitute the employer under the employer affiliation rules of Regulation Section 1.415(a)-1(f)(1) and (2) (such as a transfer of plan sponsorship outside of a controlled group).

(c)

Midyear Aggregation. Two or more defined contribution plans that are not required to be aggregated pursuant to Code §415(f) and the Regulations thereunder as of the first day of a limitation year do not fail to satisfy the requirements of Code §415 with respect to a participant for the limitation year merely because they are aggregated later in that limitation year, provided that no annual additions are credited to the participant’s account after the date on which the plans are required to be aggregated.

ARTICLE IV
PLAN COMPENSATION

4.1

Compensation limit. Notwithstanding Amendment Section 4.2 or any election in Amendment Section 2.2., if the Plan is a 401(k) plan, then participants may not make elective deferrals with respect to amounts that are not 415 Compensation. However, for this purpose, 415 Compensation is not limited to the annual compensation limit of Code §401(a)(17).

4.2

Compensation paid after severance from employment. Compensation for purposes of allocations (hereinafter referred to as Plan Compensation) shall be adjusted, unless otherwise elected in Amendment Section 2.2, in the same manner as 415 Compensation pursuant to Article III of this Amendment if those amounts would have been included in Compensation if they were paid prior to the Participant’s severance from employment, except in applying Article III, the term “limitation year” shall be replaced with the term “plan year” and the term “415 Compensation” shall be replaced with the term “Plan Compensation.”

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4.3 Option to apply Plan Compensation provisions early. The provisions of this Article shall apply for Plan Years beginning on and after July 1, 2007, unless another effective date is specified in Section 2.2. of this Amendment.

Except with respect to any election made by the employer in Section 2.2, this amendment is hereby adopted by the prototype sponsor on behalf of all adopting employers on:

(signature and date) 

NOTE: The Employer only needs to execute this Amendment if an election has been made in Section 2.2 of this Amendment.

This amendment has been executed this                                          day of                                                                 ,                      .

Name of Plan: Sterling Chemicals, Inc. Eighth Amended and Restated Savings and Investment Plan

Name of Employer: Sterling Chemicals, Inc.

By:
	EMPLOYER

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ADOPTION AGREEMENT
ADMINISTRATIVE CHECKLIST
                     [date]

This Administrative Checklist (“AC”) is not part of the Adoption Agreement or Plan but is for the use of the Plan Administrator in administering the Plan. Relius software also uses the AC and the following Supporting Forms Checklist (“SFC”) in preparing the Plan’s SPD and some administrative forms, such as the Loan Policy, if applicable.

The plan document preparer need not complete the AC but may find it useful to do so. The preparer may modify the AC, including adding items, without affecting reliance on the Plan’s opinion or advisory letter since the AC is not part of the approved Plan. Any change to this AC is not a Plan amendment and is not subject to any Plan provision or to Applicable Law regarding the timing or form of Plan amendments. However, the Plan Administrator’s administration of any AC item must be in accordance with applicable Plan terms and with Applicable Law.

The AC reflects the Plan policies and operation as of the date set forth above and may also reflect Plan policies and operation pre-dating the specified date.

AC1. PLAN LOANS (7.06). The Plan permits or does not permit Participant Loans as follows (Choose one of (a) or (b)):

(a)	o	Does not permit.
(b)	þ	Permitted pursuant to the Loan Policy. See SFC Election 69 to complete Loan Policy.

AC2. PARTICIPANT DIRECTION OF INVESTMENT (7.03(B)). The Plan permits Participant direction of investment or does not permit Participant direction of investment as to some or all Accounts as follows (Choose one of (a) or (b)):

(a)	o	Does not permit. The Plan does not permit Participant direction of investment of any Account.
(b)	þ	Permitted as follows. The Plan permits Participant direction of investment. (Complete (1) through (4)):
			(1	)	Accounts affected. (Choose a. or choose one or more of b. through f.):
					a.	þ	All Accounts.
					b.	þ	Elective Deferral Accounts (Pre-tax and Roth) and Employee Contributions.
					c.	o	All Nonelective Contribution Accounts.
					d.	þ	All Matching Contribution Accounts.
					e.	þ	All Rollover Contribution and Transfer Accounts.
					f.	o	Specify Accounts:
			(2	)	Restrictions on Participant direction (Choose one of a. or b.):
					a.	þ	None. Provided the investment does not result in a prohibited transaction, give rise to UBTI, create administrative problems or violate the Plan terms or Applicable Law.
					b.	o	Restrictions:
			(3	)	ERISA §404(c). (Choose one of a. or b.):
					a.	o	Applies.
					b.	o	Does not apply.
			(4	)	QDIA (Qualified Default Investment Alternative). (Choose one of a. or b.):
					a.	þ	Applies. See SFC Election 112 for details.
					b.	o	Does not apply.

AC3. ROLLOVER CONTRIBUTIONS (3.08). The Plan permits or does not permit Rollover Contributions as follows (Choose one of (a) or (b)):

(a)	o	Does not permit.
(b)	þ	Permits. Subject to approval by the Plan Administrator and as further described below (Complete (1) and (2)):
			(1	)	Who may roll over. (Choose one of a. or b.):
					a.	o	Participants only.
					b.	þ	Eligible Employees or Participants.
			(2	)	Sources/Types. The Plan will accept a Rollover Contribution (Choose one of a. or b.):
					a.	þ	All. From any Eligible Retirement Plan and as to all Contribution Types eligible to be rolled into this Plan.
					b.	o	Limited. Only from the following types of Eligible Retirement Plans and/or as to the following Contribution Types:                                                                                      .

AC4. PLAN EXPENSES (7.04(C)). The Employer will pay or the Plan will be charged with non-settlor Plan expenses as follows (Choose one of (a) or (b)):

(a)	o	Employer pays all expenses except those intrinsic to Trust assets which the Plan will pay (e.g., brokerage commissions).
(b)	þ	Plan pays some or all non-settlor expenses. See SFC Election 126 for details.

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AC5. RELATED AND PARTICIPATING EMPLOYERS (1.23(C)/(D)). There are or are not Related Employers and Participating Employers as follows (Complete (a) through (c)):

(a)	Related Employers. (Choose one of (1) or (2)):
		(1	)	þ	None.
		(2	)	o	Name(s) of Related Employers:
(b)	Participating (Related) Employers. (Choose one of (1) or (2)):
		(1	)	þ	None.
		(2	)	o	Name(s) of Participating Employers:                                                              See SFC Election 71 for details.
(c)	Former Participating Employers. (Choose one of (1) or (2)):
		(1	)	þ	None.
		(2	)	o	Applies.

Name(s) Date of cessation

AC6. TOP-HEAVY MINIMUM-MULTIPLE PLANS (10.03). If the Employer maintains another plan, this Plan provides that the Plan Administrator operationally will determine in which plan the Employer will satisfy the Top-Heavy Minimum Contribution (or benefit) requirement as to Non-Key Employees who participate in such plans and who are entitled to a Top-Heavy Minimum Contribution (or benefit). This Election documents the Plan Administrator’s operational election. (Choose (a) or choose one of (b) or (c)):

(a)		þ		Does not apply.
(b)	o			If only another Defined Contribution Plan. Make the Top-Heavy Minimum Allocation (Choose one of (1) or (2)):
		(1	)	o	To this Plan.
		(2	)	o	To another Defined Contribution Plan:                                                              (plan name)
(c)	o			If one or more Defined Benefit Plans. Make the Top-Heavy Minimum Allocation or provide the top-heavy minimum benefit (Choose one of (1), (2), or (3)):
		(1	)	o	To this Plan. Increase the Top-Heavy Minimum Allocation to 5%.
		(2	)	o	To another Defined Contribution Plan. Increase the Top-Heavy Minimum Allocation to 5% and provide under the:                                                              (name of other Defined Contribution Plan).
		(3	)	o	To a Defined Benefit Plan. Provide the 2% top-heavy minimum benefit under the:                      (name of Defined Benefit Plan) and applying the following interest rate and mortality assumptions:                      .

AC7. SELF-EMPLOYED PARTICIPANTS (1.21(A)). One or more self-employed Participants with Earned Income benefits in the Plan as follows (Choose one of (a) or (b)):

(a)	þ	None.
(b)	o	Applies.

     AC8. PROTECTED BENEFITS (11.02(C)). The following Protected Benefits no longer apply to all Participants or do not apply to designated amounts/Participants as indicated, having been eliminated by a Plan amendment (Choose one of (a) or (b)):

(a)	þ	Does not apply. No Protected Benefits have been eliminated.
(b)	o	Applies. Protected Benefits have been eliminated as follows (Choose one or more of rows (1) through (4) as applicable. Choose one of columns (1), (2), or (3), and complete column (4)):

			(1)	(2)	(3)	(4)
			All	Post-E.D.	Post-E.D.	Effective
			Participants/	Contribution	Participants	Date
			Accounts	Accounts only	only	(E.D.)
(1)	o	QJSA/QPSA distributions	o	o	o
(2)	o	Installment distributions	o	o	o
(3)	o	In-kind distributions	o	o	o
(4)	o	Specify:

AC9. LIFE INSURANCE (9.01). The Trust invests or does not invest in life insurance Contracts as follows (Choose one of (a) or (b)):

(a)	þ	Does not apply.
(b)	o	Applies. Subject to the limitations and other provisions in Article IX and/or Appendix B.

AC10. DISTRIBUTION OF CASH OR PROPERTY (8.04). The Plan provides for distribution in the form of (Choose one of (a) or (b)):

(a)	þ	Cash only. Except where property distribution is required or permitted under Section 8.04.
(b)	o	Cash or property. At the distributee’s election and consistent with any Plan Administrator policy under Section 8.04.

AC11. EMPLOYER SECURITIES/EMPLOYER REAL PROPERTY (8.02(A)(13)). The Trust invests or does not invest in qualifying Employer securities and/or qualifying Employer real property as follows (Choose one of (a) or (b)):

(a)	þ	Does not apply.
(b)	o	Applies. Such investments are subject to the limitations of Section 8.02(A)(13) and/or Appendix B.

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PRUDENTIAL RETIREMENT
DEFINED CONTRIBUTION PROTOTYPE AND VOLUME SUBMITTER PLAN AND TRUST AGREEMENT
BASIC PLAN DOCUMENT # 03

Prudential Retirement , in its capacity as Prototype Plan Sponsor or as Volume Submitter Practitioner, establishes this Prototype Plan or this Volume Submitter Plan intended to conform to and qualify under §401 and §501 of the Internal Revenue Code of 1986, as amended. An Employer establishes a Plan and Trust under this Prototype Plan or this Volume Submitter Plan by executing an Adoption Agreement.

ARTICLE I
DEFINITIONS

     1.01 Account. Account means the separate Account(s) which the Plan Administrator or the Trustee maintains under the Plan for a Participant.

     1.02 Account Balance or Accrued Benefit. Account Balance or Accrued Benefit means the amount of a Participant’s Account(s) as of any relevant date derived from Plan contributions and from Earnings.

     1.03 Accounting Date. Accounting Date means the last day of the Plan Year. The Plan Administrator will allocate Employer Contributions and forfeitures for a particular Plan Year as of the Accounting Date of that Plan Year, and on such other dates, if any, as the Plan Administrator determines, consistent with the Plan’s allocation conditions and other provisions.

     1.04 Adoption Agreement. Adoption Agreement means the document executed by each Employer adopting this Plan. References to Adoption Agreement within this basic plan document are to the Adoption Agreement as completed and executed by a particular Employer unless the context clearly indicates otherwise. An adopting Employer‘s Adoption Agreement and this basic plan document together constitute a single Plan and Trust of the Employer. Each elective provision of the Adoption Agreement corresponds (by its parenthetical section reference) to the section of the Plan which grants the election. All “Section” references within an Adoption Agreement are to the basic plan document. All “Election” references within an Adoption Agreement are Adoption Agreement references. The Employer or Plan Administrator to facilitate Plan administration or to generate written policies or forms for use with the Plan may maintain one or more administrative checklists as an attachment to the Adoption Agreement or otherwise. Any such checklists are not part of the Plan.

(A) Prototype/Standardized Plan or Nonstandardized Plan. Each Adoption Agreement offered under this Prototype Plan is either a Nonstandardized Plan or a Standardized Plan, as identified in that Adoption Agreement, under Rev. Proc 2005-16 §§4.10 and 4.11. The provisions of this Plan apply in the same manner to Nonstandardized Plans and to Standardized Plans unless otherwise specified. If the Employer maintains its Plan pursuant to a Nonstandardized Adoption Agreement or a Standardized Adoption Agreement, the Plan is a Prototype Plan and all provisions in this basic plan which expressly or by their context refer to a “Volume Submitter Plan” are not applicable.

(B) Volume Submitter Adoption Agreement. A Volume Submitter Adoption Agreement for purposes of this Volume Submitter Plan is subject to the same provisions as apply to a Nonstandardized Plan, except as the Plan or Volume Submitter Adoption Agreement otherwise indicates. If the Employer maintains its Plan pursuant to a Volume Submitter Adoption Agreement, the Plan is a Volume Submitter Plan and all provisions in this basic plan which expressly or by their context refer to a “Prototype Plan” are not applicable.

(C) Participation Agreement. Participation Agreement, in the case of a Prototype Plan means the Adoption Agreement page or pages executed by one or more Related Employers to become a Participating Employer. In the case of a Volume Submitter Plan, Participation Agreement means the Adoption Agreement page or pages executed by one or more Related Employers or in the case of a Multiple Employer Plan, by one or more Employers which are not Related Employers (see Section 12.02(C)) to become a Participating Employer.

     1.05 Advisory Letter. Advisory Letter means an IRS issued letter as to the acceptability in form of a Volume Submitter Plan as defined in Section 13.03 of Rev. Proc. 2005-16.

     1.06 Annuity Contract. Annuity Contract means an annuity contract that the Trustee purchases with the Participant’s Vested Account Balance. An Annuity Contract includes a QJSA, a QPSA and an Alternative Annuity. If the Plan Administrator elects or is required to provide an Annuity Contract, such annuity must be a Nontransferable Annuity and otherwise must comply with the Plan terms.

(A) Annuity Starting Date. A Participant’s Annuity Starting Date means the first day of the first period for which the Plan pays an amount as an annuity or in any other form.

(B) Alternative Annuity. See Section 6.03(A)(5).

(C) Nontransferable Annuity. Nontransferable Annuity means an Annuity Contract which by its terms provides that it may not be sold, assigned, discounted, pledged as collateral for a loan or security for the performance of an obligation or for any purpose to any person other than the insurance company. If the Plan distributes an Annuity Contract, the Annuity Contract must be a Nontransferable Annuity.

(D) QJSA. See Sections 6.04(A)(1) and (2).

(E) QPSA. See Section 6.04(B)(1).

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     1.07 Appendix. Appendix means one of the Appendices to an Adoption Agreement designated as “A”, “B,” “C” or “D” which are expressly authorized by the Plan and as part of the Plan, are covered by the Advisory Letter or Opinion Letter.

     1.08 Applicable Law. Applicable Law means the Code, ERISA, USERRA, Treasury, IRS and DOL regulations, rulings, notices, and other written guidance, case law and any other applicable federal, state or local law affecting the Plan and which is binding upon the Plan or upon which the Employer, the Plan Administrator, the Trustee and other Plan fiduciaries may rely in the operation, administration and management of the Plan and Trust. If Applicable Law supersedes or modifies any authority the Plan specifically references, the reference includes such Applicable Law.

     1.09 Beneficiary. Beneficiary means a person designated by a Participant, a Beneficiary or by the Plan who is or may become entitled to a benefit under the Plan. A Beneficiary who becomes entitled to a benefit under the Plan remains a Beneficiary under the Plan until the Trustee has fully distributed to the Beneficiary his/her Plan benefit. A Beneficiary‘s right to (and the Plan Administrator’s or a Trustee‘s duty to provide to the Beneficiary) information or data concerning the Plan does not arise until the Beneficiary first becomes entitled to receive a benefit under the Plan.

     1.10 Code. Code means the Internal Revenue Code of 1986, as amended and includes applicable Treasury regulations.

     1.11 Compensation.

(A) Uses and Context. Any reference in the Plan to Compensation is a reference to the definition in this Section 1.11, unless the Plan reference, or the Employer in its Adoption Agreement, modifies this definition. Except as the Plan otherwise specifically provides, the Plan Administrator will take into account only Compensation actually paid during (or as permitted under the Code, paid for) the relevant period. A Compensation payment includes Compensation paid by the Employer through another person under the common paymaster provisions in Code §§3121 and 3306. In the case of a Self-Employed Individual, Compensation means Earned Income as defined in Section 1.11(J). However, if the Plan must use an equivalent alternative compensation amount (pursuant to Treas. Reg. §1.414(s)-1(g)(1)(i) or other Applicable Law) in performing nondiscrimination testing relating to Matching Contributions, Nonelective Contributions and other Employer Contributions (excluding Elective Deferrals), the Compensation of such Self-Employed Individual will be limited to such equivalent alternative compensation amount.

(B) Base Definitions and Modifications. The Employer in its Adoption Agreement must elect one of the following base definitions of Compensation: W-2 Wages, Code §3401(a) Wages, or 415 Compensation. The Employer may elect a different base definition as to different Contribution Types. The Employer in its Adoption Agreement may specify any modifications thereto, for purposes of contribution allocations under Article III. If the Employer fails to elect one of the above-referenced definitions, the Employer is deemed to have elected the W-2 Wages definition.

     (1) W-2 Wages. W-2 Wages means wages for federal income tax withholding purposes, as defined under Code §3401(a), plus all other payments to an Employee in the course of the Employer’s trade or business, for which the Employer must furnish the Employee a written statement under Code §§6041, 6051 and 6052, but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or services performed (such as the exception for agricultural labor in Code §3401(a)(2)). The Employer in Appendix B may elect to exclude from W-2 Compensation certain Employer paid or reimbursed moving expenses as described therein.

     (2) Code §3401(a) Wages (income tax wage withholding). Code §3401(a) Wages means wages within the meaning of Code §3401(a) for the purposes of income tax withholding at the source, but determined without regard to any rules that limit the remuneration included in wages based on the nature or the location of the employment or the services performed (such as the exception for agricultural labor in Code
§3401(a)(2)).

     (3) Code §415 Compensation (current income definition/ simplified compensation under Treas. Reg. §1.415-2(d)(10) and Prop. Treas. Reg. §1.415(c)-2(d)(2)). Code §415 Compensation means the Employee’s wages, salaries, fees for professional service and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer maintaining the Plan to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salespersons, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits and reimbursements or other expense allowances under a nonaccountable plan as described in Treas. Reg. §1.62-2(c)).

Code §415 Compensation does not include:

          (a) Deferred compensation/ SEP/ SIMPLE. Employer contributions (other than Elective Deferrals) to a plan of deferred compensation (including a simplified employee pension plan under Code §408(k) or to a simple retirement account under Code §408(p)) to the extent the contributions are not included in the gross income of the Employee for the Taxable Year in which contributed, and any distributions from a plan of deferred compensation (whether or not qualified), regardless of whether such amounts are includible in the gross income of the Employee when distributed.

          (b) Option exercise. Amounts realized from the exercise of a non-qualified stock option (an option other than a statutory option under Treas. Reg. §1.421-1(b)), or when restricted stock or other property held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture under Code §83.

          (c) Sale of option stock. Amounts realized from the sale, exchange or other disposition of stock acquired under a statutory stock option as defined under Treas. Reg. §1.421-1(b).

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          (d) Other amounts that receive special tax benefits. Other amounts that receive special tax benefits, such as premiums for group term life insurance (but only to the extent that the premiums are not includible in the gross income of the Employee and are not salary reduction amounts under Code §125).

          (e) Other similar items. Other items of remuneration which are similar to any of the items in Sections 1.11(B)(3)(a) through (d).

     (4) Alternative (general) 415 Compensation. The Employer in Appendix B may elect to apply the 415 definition of Compensation in Treas. Reg. §1.415-2(d)(1) and Prop. Treas. Reg. §1.415(c)-2(a). Under this definition, Compensation means as defined in Section 1.11(B)(3) but with the addition of: (a) amounts described in Code §§104(a)(3), 105(a) or 105(h) but only to the extent that these amounts are includible in Employee’s gross income; (b) amounts paid or reimbursed by the Employer for moving expenses incurred by the Employee, but only to the extent that at the time of payment it is reasonable to believe these amounts are not deductible by the Employee under Code §217; (c) the value of a nonstatutory option (an option other than a statutory option under Treas. Reg. §1.421-1(b)) granted by the Employer to the an Employee, but only to the extent that the value of the option is includible in the Employee’s gross income for the Taxable Year of the grant; and (d) the amount includible in the Employee’s gross income upon the Employee’s making of an election under Code §83(b). The Employer in Appendix B also must elect whether to include as Compensation amounts received from a nonqualified unfunded deferred compensation plan in the Taxable Year received but only to extent includible in gross income.

(C) Deemed 125 Compensation. Deemed 125 Compensation means, in the case of any definition of Compensation which includes a reference to Code §125, amounts under a Code §125 plan of the Employer that are not available to a Participant in cash in lieu of group health coverage, because the Participant is unable to certify that he/she has other health coverage. Compensation under this Section 1.11 does not include Deemed 125 Compensation, unless the Employer in Appendix B elects to include Deemed 125 Compensation under this Section 1.11.

(D) Elective Deferrals. Compensation under Section 1.11 includes Elective Deferrals unless the Employer in its Adoption Agreement elects to exclude Elective Deferrals.

(E) Compensation Dollar Limitation. For any Plan Year, the Plan Administrator in allocating contributions under Article III or in testing the Plan for nondiscrimination, cannot take into account more than $200,000 (or such larger or smaller amount as the Commissioner of Internal Revenue may prescribe pursuant to an adjustment made in the same manner as under Code §415(d)) of any Participant‘s Compensation. Notwithstanding the foregoing, an Employee under a 401(k) Plan may make Elective Deferrals with respect to Compensation which exceeds the Plan Year Compensation limitation, provided such Elective Deferrals otherwise satisfy the Elective Deferral Limit and other applicable Plan limitations. In applying any Plan limitation on the amount of Matching Contributions or any Plan limit on Elective Deferrals which are subject to Matching Contributions, where such limits are expressed as a percentage of Compensation, the Plan Administrator may apply the Compensation limit under this Section 1.11(E) annually, even if the Matching Contribution formula is applied on a per pay period basis or is applied over any other time interval which is less than the full Plan Year or the Plan Administrator may pro rate the Compensation limit.

(F) Nondiscrimination. For purposes of determining whether the Plan discriminates in favor of HCEs, Compensation means as the Plan Administrator operationally determines provided that any such nondiscrimination testing definition which the Plan Administrator applies must satisfy Code §414(s) and the regulations thereunder. For this purpose the Plan Administrator may, but is not required, to apply for nondiscrimination testing purposes the Plan’s allocation definition of Compensation under this Section 1.11 or Annual Additions Limit definition of Compensation under Section 4.05(C). The Employer’s election in its Adoption Agreement relating to Pre-Entry Compensation (to limit Compensation to Participating Compensation or to include Plan Year Compensation) is nondiscriminatory.

(G) Excluded Compensation Excluded Compensation means such Compensation as the Employer in its Adoption Agreement elects to exclude for purposes of this Section 1.11.

(H) Pre-Entry Compensation. The Employer in its Adoption Agreement for allocation purposes must elect Participating Compensation or Plan Year Compensation as to some or all Contribution Types.

     (1) Participating Compensation. Participating Compensation for purposes of this Section 1.11 means Compensation only for the period during the Plan Year in which the Participant is a Participant in the overall Plan, or under the plan resulting from disaggregation under the OEE or EP rules under Section 4.06(C)(1), or as to a Contribution Type as applicable. If the Employer in its Adoption Agreement elects Participating Compensation, the Employer will elect whether to apply the election to all Contribution Types or only to particular Contribution Type(s).

     (2) Plan Year Compensation. Plan Year Compensation for purposes of this Section 1.11 means Compensation for a Plan Year, including Compensation for any period prior to the Participant’s Entry Date in the overall Plan or as to a Contribution Type as applicable. If the Employer in its Adoption Agreement elects Plan Year Compensation, the Employer will elect whether to apply the election to all Contribution Types or only to particular Contribution Type(s).

(I) Post-Severance Compensation. The Plan excludes Post-Severance Compensation unless the Employer in Appendix B elects to include Post–Severance Compensation as described in this Section 1.11(I). If the Employer elects to include Post-Severance Compensation, the Employer in Appendix B will specify the Effective Date thereof which for purposes of 415 testing (or other testing requiring use of 415 Compensation) cannot be earlier than January 1, 2005.

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     (1) Post-Severance Compensation under Proposed 415 Regulations.

          (a) Payment timing. Post–Severance Compensation includes certain payments described below made after Severance from Employment, and within 2¹/2 months following Severance from Employment (whether paid in the same Plan or Limitation Year or paid in the Plan or Limitation Year following the Severance from Employment). The Employer in Appendix B also may elect (for allocation purposes only) to include amounts which would be Post-Severance Compensation but for being paid after the time limit described herein (except as to Elective Deferrals) or may elect to limit Post- Severance Compensation to any lesser period of time.

          (b) Limitation as to type. Post-Severance Compensation means: (i) Payments that, absent a Severance from Employment, would have been paid to the Employee while the Employee continued in employment with the Employer and which consist of regular compensation for services during the Employee’s regular working hours or for services outside the Employee’s regular working hours (such as overtime or shift differential), commissions, bonuses and other similar compensation; and (ii) payments for bona fide sick, vacation or other leave, but only if the Employee would have been able to use the leave if employment had continued. The Employer in Appendix B may elect (for allocation purposes only) to exclude certain of the above amounts which would be Post-Severance Compensation.

          (c) Exclusions. Post-Severance Compensation under Section 1.11(I)(1) does not include any payment not described in Section 1.11(I)(1)(b) even if paid within the time period described in Section 1.11(I)(1)(a), including severance pay, unfunded non-qualified deferred compensation or parachute payments under Code §280G(b)(2).

     (2) Qualified Military Service. Post-Severance Compensation includes (without regard to the timing requirement of Section 1.11(I)(1)(a), including for Elective Deferrals) amounts paid to individuals not currently performing Service for the Employer by reason of Qualified Military Service, to the extent that those payments do not exceed what the Employer would have paid to the Employee had the Employee not entered Qualified Military Service. The Employer in Appendix B may elect (for allocation purposes only) to exclude the above amounts from Post-Severance Compensation.

(J) Earned Income. Earned Income means net earnings from self-employment in the trade or business with respect to which the Employer has established the Plan, provided personal services of the Self-Employed Individual are a material income-producing factor. Earned Income also includes gains and earnings (other than capital gain) from the sale or licensing of property (other than goodwill) by the individual who created that property, even if those gains would not ordinarily be considered net earnings from self-employment. The Plan Administrator will determine net earnings without regard to items excluded from gross income and the deductions allocable to those items. The Plan Administrator will determine net earnings after the deduction allowed to the Self-Employed Individual for all contributions made by the Employer to a qualified plan and after the deduction allowed to the Self-Employed Individual under Code §164(f) for self-employment taxes.

(K) Deemed Disability Compensation. The Plan does not include Deemed Disability Compensation under Code §415(c)(3)(C) unless the Employer in Appendix B elects to include Deemed Disability Compensation under this Section 1.11(K). Deemed Disability Compensation is the Compensation the Participant would have received for the year if the Participant were paid at the same rate as applied immediately prior to Disability if such deemed compensation is greater than actual Compensation as determined without regard to this Section 1.11(K). This Section 1.11(K) applies only if the affected Participant is an NHCE immediately prior to becoming disabled (or the Appendix B election provides for the continuation of contributions on behalf of all such disabled participants for a fixed or determinable period) and all contributions made with respect to Compensation under this Section 1.11(K) are immediately Vested.

     1.12 Contribution Types. Contribution Types means the contribution types required or permitted under the Plan as the Employer elects in its Adoption Agreement.

     1.13 Defined Contribution Plan. Defined Contribution Plan means a retirement plan which provides for an individual account for each Participant and for benefits based solely on the amount contributed to the Participant’s Account, and on any Earnings, expenses, and forfeitures which the Plan Administrator may allocate to such Participant’s Account.

     1.14 Defined Benefit Plan. Defined Benefit Plan means a retirement plan which does not provide for individual accounts for Employer contributions and which provides for payment of determinable benefits in accordance with the plan’s formula.

     1.15 Disability. Disability means, as the Employer elects in its Adoption Agreement, the basic plan definition or an alternative definition. A Participant who incurs a Disability is “disabled.”

(A) Basic Plan Definition. Disability means the inability to engage in any substantial gainful 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 months. The permanence and degree of such impairment must be supported by medical evidence.

(B) Alternative Definition. The Employer in its Adoption Agreement may specify any alternative definition of Disability which is not inconsistent with Applicable Law.

(C) Administration. For purposes of this Plan, a Participant is disabled on the date the Plan Administrator determines the Participant satisfies the definition of Disability. The Plan Administrator may require a Participant to submit to a physical examination in order to confirm the Participant’s Disability. The Plan Administrator will apply the provisions of this Section 1.15 in a nondiscriminatory, consistent and uniform manner.

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     1.16 Designated IRA Contribution. Designated IRA Contribution means a Participant’s IRA contribution to the Plan made in accordance with the Adoption Agreement.

     1.17 DOL. DOL means the U.S. Department of Labor.

     1.18 Earnings. Earnings means the net income, gain or loss earned by a particular Account, by the Trust, or with respect to a contribution or to a distribution, as the context requires.

     1.19 Effective Date. The Effective Date of this Plan is the date the Employer elects in its Adoption Agreement, but not earlier that January 1, 2002. However, as to a particular provision or action taken by any party pursuant to the Plan (such as a Plan amendment or termination, or the giving of any notice), a different Effective Date may apply such as the basic plan document may provide, as the Employer may elect in its Adoption Agreement, in a Participation Agreement or in an Appendix, or as indicated in any other document which evidences the action taken.

     1.20 Elective Deferrals. Elective Deferrals means a Participant’s Pre-Tax Deferrals, Roth Deferrals, Automatic Deferrals and, as the context requires, Catch-Up Deferrals under the Plan, and which the Employer contributes to the Plan at the Participant’s election (or automatically) in lieu of cash compensation. As to other plans, elective deferrals means amounts excludible from the Employee’s gross income under Code §§125, 132(f)(4), 402(e)(3), 402(h)(1)(B), 403(b), 408(p) or 457(b), and includes amounts included in the Employee’s gross income under Code §402A, and contributed by the Employer, at the Employee’s election, to a cafeteria plan, a qualified transportation fringe benefit plan, a 401(k) plan, a SARSEP, a tax-sheltered annuity, a SIMPLE plan or a Code §457(b) plan.

(A) Pre-Tax Deferral. Pre-Tax Deferral means an Elective Deferral (including a Catch-Up Deferral or an Automatic Deferral) which is not subject to income tax when made.

(B) Roth Deferral. Roth Deferral means an Elective Deferral (including a Catch-Up Deferral or an Automatic Deferral) which a Participant irrevocably designates as a Roth Deferral under Code §402A at the time of deferral and which is subject to income tax when made to the Plan. In the case of an Automatic Deferral, see Section 3.02(B)(7).

(C) Automatic Deferral. See Section 3.02(B)(1).

(D) Catch-Up Deferral. See Section 3.02(D)(2).

     1.21 Employee. Employee means any common law employee, Self-Employed Individual, Leased Employee or other person the Code treats as an employee of the Employer for purposes of the Employer’s qualified plan. An Employee is either an Eligible Employee or an Excluded Employee. An Employee is either an HCE or an NHCE.

(A) Self-Employed Individual. Self-Employed Individual means an individual who has Earned Income (or who would have had Earned Income but for the fact that the trade or business did not have net profits) for the Taxable Year from the trade or business for which the Plan is established.

(B) Leased Employee. Leased Employee means an individual (who otherwise is not an Employee of the Employer) who, pursuant to an agreement between the Employer and any other person (the “leasing organization”), has performed services for the Employer (or for the Employer and any persons related to the Employer within the meaning of Code §144(a)(3)) on a substantially full-time basis for at least one year and who performs such services under primary direction or control of the Employer within the meaning of Code §414(n)(2). Except as described in Section 1.21(B)(1), a Leased Employee is an Employee for purposes of the Plan. However, under a Nonstandardized Plan or under a Volume Submitter Plan, a Leased Employee is an Excluded Employee unless the Employer in Appendix B elects not to treat Leased Employees as Excluded Employees as to any or all Contribution Types. “Compensation” in the case of an out-sourced worker who is an Employee or a Leased Employee includes Compensation from the leasing organization which is attributable to services performed for the Employer.

     (1) Safe Harbor Plan Exception. A Leased Employee is not an Employee for Plan purposes if the leasing organization covers the employee in a safe harbor plan and, prior to application of this safe harbor plan exception, 20% or fewer of the NHCEs, excluding those NHCEs who do not satisfy the “substantially full-time” standard of Code §414(n)(2)(B), are Leased Employees. A safe harbor plan is a Money Purchase Pension Plan providing immediate participation, full and immediate vesting, and a nonintegrated contribution formula equal to at least 10% of the employee‘s compensation, without regard to employment by the leasing organization on a specified date. The safe harbor plan must determine the 10% contribution on the basis of compensation as defined in Code §415(c)(3) including Elective Deferrals.

     (2) Other Requirements. The Plan Administrator must apply this Section 1.21 in a manner consistent with Code §§414(n) and 414(o) and the regulations issued under those Code sections. The Plan Administrator for 415 testing under Article IV, for satisfaction of the Top-Heavy Minimum Allocation under Article X and otherwise as required under Applicable Law will treat contributions or benefits provided to a Leased Employee under a plan of the leasing organization, and which are attributable to services performed by the Leased Employee for the Employer, as provided by the Employer. However, the Employer will not offset (reduce) contributions to this Plan by such contributions or benefits provided to the Leased Employee under the leasing organization’s plan unless the Employer in Appendix B elects to do so.

(C) Eligible Employee. Eligible Employee means an Employee other than an Excluded Employee.

(D) Excluded Employee. Excluded Employee means, as the Plan provides or as the Employer elects in its Adoption Agreement, any Employee, or class or group of Employees, not eligible to participate in the Plan, or as to any Contribution Type, as the context requires.

     (1) Collective Bargaining Employees. If the Employer elects in its Adoption Agreement to exclude Collective Bargaining Employees from eligibility to participate, the exclusion applies to any Employee included in a unit of Employees covered by an agreement which the

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Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers if: (a) retirement benefits were the subject of good faith bargaining; and (b) two percent or fewer of the employees covered by the agreement are “professional employees” as defined in Treas. Reg. §1.410(b)-9, unless the collective bargaining agreement requires the Employee to be included within the Plan. The term “employee representatives” does not include any organization more than half the members of which are owners, officers, or executives of the Employer.

     (2) Nonresident Aliens. If the Employer elects in its Adoption Agreement to exclude Nonresident Aliens from eligibility to participate, the exclusion applies to any Nonresident Alien Employee who does not receive any earned income, as defined in Code §911(d)(2), from the Employer which constitutes United States source income, as defined in Code §861(a)(3).

     (3) Reclassified Employees. A Reclassified Employee under a Nonstandardized Plan or a Volume Submitter Plan is an Excluded Employee unless the Employer in Appendix B elects: (a) to include all Reclassified Employees as Eligible Employees; (b) to include one or more categories of Reclassified Employees as Eligible Employees; or (c) to include Reclassified Employees (or one or more groups of Reclassified Employees) as Eligible Employees as to one or more Contribution Types. A Reclassified Employee is any person the Employer does not treat as a common law employee or as a self-employed individual (including, but not limited to, independent contractors, persons the Employer pays outside of its payroll system and out-sourced workers) for federal income tax withholding purposes under Code §3401(a), irrespective of whether there is a binding determination that the individual is an Employee or a Leased Employee of the Employer. Self-Employed Individuals are not Reclassified Employees.

     (4) Part-Time/Temporary/Seasonal Employees. The Employer in its Adoption Agreement may elect to exclude any Employees who it defines in the Adoption Agreement as “part-time,” “temporary” or “seasonal” based on their regularly scheduled Service being less than a specified number of Hours of Service during a relevant Eligibility Computation Period. Notwithstanding any such exclusion, if the Part-Time, Temporary or Seasonal Excluded Employee actually completes at least 1,000 Hours of Service in the relevant Eligibility Computation Period, the affected Excluded Employee is no longer an Excluded Employee and will enter the Plan on the next Entry Date following completion of the Eligibility Computation Period in which he/she completed 1,000 Hours of Service, provided the Employee is employed by the Employer on that Entry Date.

(E) HCE. HCE means a highly compensated Employee, defined under Code §414(q) as an Employee who satisfies one of Sections 1.21(E)(1) or (2) below.

     (1) More than 5% owner. During the Plan Year or during the preceding Plan Year, the Employee is a more than 5% owner of the Employer (applying the constructive ownership rules of Code §318 as modified by Code §416(i)(1)(B)(iii)(I), and applying the principles of Code §318 as modified by Code §416(i)(1)(B)(iii)(I), for an unincorporated entity).

     (2) Compensation Threshold. During the preceding Plan Year (or in the case of a short Plan Year, the immediately preceding 12 month period) the Employee had Compensation in excess of $80,000 (as adjusted for the relevant year by the Commissioner of Internal Revenue at the same time and in the same manner as under Code §415(d), except that the base period is the calendar quarter ending September 30, 1996) and, if the Employer under its Adoption Agreement makes the top-paid group election, was part of the top-paid 20% group of Employees (based on Compensation for the preceding Plan Year).

     (3) Compensation Definition. For purposes of this Section 1.21(E), “Compensation” means Compensation as defined in Section 4.05(C).

     (4) Top-paid Group and Calendar Year Data. The Plan Administrator must make the determination of who is an HCE, including the determinations of the number and identity of the top-paid 20% group, consistent with Code §414(q) and regulations issued under that Code section. The Employer in its Adoption Agreement may make a calendar year data election to determine the HCEs for the Plan Year, as prescribed by Treasury regulations or by other guidance published in the Internal Revenue Bulletin. A calendar year data election must apply to all plans of the Employer which reference the HCE definition in Code §414(q). For purposes of this Section 1.21(E), if the current Plan Year is the first year of the Plan, then the term “preceding Plan Year” means the 12-consecutive month period immediately preceding the current Plan Year.

     (5) Highly compensated former employee. The determination of highly compensated former employee status and the rules applicable thereto are determined in accordance with Temporary Reg. §1.414(q)-1T, A-4 and Notice 97-45.

(F) NHCE. NHCE means a nonhighly compensated employee, which is any Employee who is not an HCE.

     1.22 Employee Contribution and DECs. Employee Contribution means a Participant’s after-tax contribution to the Trust and which the Participant designates as an Employee Contribution at the time of contribution. An Elective Deferral (Pre-Tax or Roth) is not an Employee Contribution. A deductible employee contribution (DEC) means certain pre-1987 contributions described in Section 3.13.

     1.23 Employer. Employer means each Signatory Employer, Lead Employer, Related Employer and Participating Employer as the Plan indicates or as the context requires.

(A) Signatory Employer. The Signatory Employer is the Employer who establishes a Plan under this Prototype Plan or under this Volume Submitter Plan by executing an Adoption Agreement. The Employer for purposes of acting as Plan Administrator, making Plan amendments, restating the Plan, terminating the Plan or performing other ERISA settlor functions, means the Signatory Employer and does not include any Related Employer or Participating Employer.

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The Signatory Employer also may terminate the participation in the Plan of any Participating Employer upon written notice. The Signatory Employer will provide such notice not less than 30 days prior to the date of termination unless the Signatory Employer determines that the interest of Plan Participants requires earlier termination. See Article XII if the Plan is a Volume Submitter Plan and is a Multiple Employer Plan.

(B) Lead Employer. Lead Employer means the Signatory Employer under a Volume Submitter Plan which is a Multiple Employer Plan. See Section 12.02(B).

(C) Related Group/Related Employer. A Related Group is a controlled group of corporations (as defined in Code §414(b)), trades or businesses (whether or not incorporated) which are under common control (as defined in Code §414(c)), an affiliated service group (as defined in Code §414(m)) or an arrangement otherwise described in Code §414(o). Each Employer/member of the Related Group is a Related Employer. The term “Employer” includes every Related Employer for purposes of crediting Service and Hours of Service, determining Years of Service and Breaks in Service under Articles II and V, determining Separation from Service, applying the coverage test under Code Section 410(b), applying the Annual Additions Limit and nondiscrimination testing in Article IV, applying the top-heavy rules and the minimum allocation requirements of Article X, applying the definitions of Employee, HCE, Compensation (except as the Employer may elect in its Adoption Agreement relating to allocations) and Leased Employee, applying the safe harbor 401(k) provisions of Article III, applying the SIMPLE 401(k) provisions of Article III and for any other purpose the Code or the Plan require.

     (D) Participating Employer. Participating Employer means a Related Employer (to the Signatory Employer or another Related Employer) which signs the Execution Page of the Adoption Agreement or a Participation Agreement to the Adoption Agreement. Only a Participating Employer (or Employees thereof) may contribute to the Plan. A Participating Employer is an Employer for all purposes of the Plan except as provided in Sections 1.23(A) or (B).

     (1) Standardized/Nonstandardized Plan. If the Employer‘s Plan is a Standardized Plan, all Employees of the Employer or of any Related Employer, are Eligible Employees, irrespective of whether the Related Employer directly employing the Employee is a Participating Employer. Notwithstanding the immediately preceding sentence, individuals who become Employees of a Related Employer as a result of a transaction described in Code §410(b)(6)(C) are Excluded Employees during the Plan Year in which such transaction occurs nor in the following Plan Year, unless: (a) the Related Employer which employs such Employees becomes during such period a Participating Employer by executing a Participation Agreement to the Adoption Agreement; or (b) as described under Applicable Law, the Plan benefits or coverage change significantly during the transition period resulting in the termination of the transition period. If the Plan is a Nonstandardized Plan, the Employees of a Related Employer are Excluded Employees unless the Related Employer is a Participating Employer.

     (2) Volume Submitter/Multiple Employer Plan. If Article XII applies, a Participating Employer includes an unrelated Employer who executes a Participation Agreement. See Section 12.02(C).

     1.24 Employer Contribution. Employer Contribution means a Nonelective Contribution, a Matching Contribution, an Elective Deferral, a Prevailing Wage Contribution, a Money Purchase Pension Contribution or a Target Benefit Contribution, as the context may require.

     1.25 Entry Date. Entry Date means the date(s) the Employer elects in its Adoption Agreement upon which an Eligible Employee who has satisfied the Plan’s eligibility conditions and who remains employed by the Employer on the Entry Date, commences participation in the Plan or in a part of the Plan.

     1.26 EPCRS. EPCRS means the IRS’ Employee Plans Compliance Resolution System for resolving plan defects, or any successor program.

     1.27 ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as amended, and includes applicable DOL regulations.

     1.28 Final 401(k) Regulations Effective Date. Final 401(k) Regulations Effective Date means the Plan Year beginning in 2006 (or such earlier Plan Year ending after December 29, 2004 as the Plan Administrator operationally applied and as the Employer elects in Appendix B). A reference to the Final 401(k) Regulations Effective Date also includes the final 401(m) regulations as the context requires.

     1.29 401(k) Plan. 401(k) Plan means the 401(k) Plan the Employer establishes under a 401(k) Plan Adoption Agreement. The Plan as the Employer elects under its 401(k) Adoption Agreement may be a Traditional 401(k) Plan, a Safe Harbor 401(k) Plan or a SIMPLE 401(k) Plan. A 401(k) Plan is also a Profit Sharing Plan for purposes of applying the Plan terms, except as to Elective Deferrals, Matching Contributions or otherwise where the Plan specifies provisions which apply either to such Contributions Types or to the overall Plan on account of its status as a 401(k) Plan.

(A) Traditional 401(k) Plan. A Traditional 401(k) Plan is a 401(k) Plan under which Elective Deferrals are subject to nondiscrimination testing under the ADP test and any Matching Contributions and Employee Contributions also are subject to nondiscrimination testing under the ACP test.

(B) Safe Harbor 401(k) Plan. A Safe Harbor 401(k) Plan is a 401(k) Plan under which Elective Deferrals are not subject to nondiscrimination testing under the ADP test because the Plan satisfies the ADP test safe harbor. Any Matching Contributions are subject to the ACP test unless the Plan also satisfies the ACP test safe harbor. Any Employee Contributions are subject to the ACP test.

(C) SIMPLE 401(k) Plan. A SIMPLE 401(k) Plan is a 401(k) Plan which satisfies the contribution and other requirements in Section 3.10 and which is not subject to nondiscrimination testing or certain other requirements as provided in Section 3.10.

     1.30 401(m) Plan. 401(m) Plan means the 401(m) plan, if any, the Employer establishes under its Adoption Agreement. The definitions under Sections 1.29(A), (B) and (C) also apply as to a 401(m) Plan.

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     1.31 Hour of Service. Hour of Service means:

          (i) Paid and duties. Each Hour of Service for which the Employer, either directly or indirectly, pays an Employee, or for which the Employee is entitled to payment, for the performance of duties. The Plan Administrator credits Hours of Service under this Paragraph (i) to the Employee for the computation period in which the Employee performs the duties, irrespective of when paid;

          (ii) Back pay. Each Hour of Service for back pay, irrespective of mitigation of damages, to which the Employer has agreed or for which the Employee has received an award. The Plan Administrator credits Hours of Service under this Paragraph (ii) to the Employee for the computation period(s) to which the award or the agreement pertains rather than for the computation period in which the award, agreement or payment is made; and

          (iii) Payment but no duties. Each Hour of Service for which the Employer, either directly or indirectly, pays an Employee, or for which the Employee is entitled to payment (irrespective of whether the employment relationship is terminated), for reasons other than for the performance of duties during a computation period, such as leave of absence, vacation, holiday, sick leave, illness, incapacity (including disability), layoff, jury duty or military duty. The Plan Administrator will credit no more than 501 Hours of Service under this Paragraph (iii) to an Employee on account of any single continuous period during which the Employee does not perform any duties (whether or not such period occurs during a single computation period). The Plan Administrator credits Hours of Service under this Paragraph (iii) in accordance with the rules of paragraphs (b) and (c) of Labor Reg. §2530.200b-2, which the Plan, by this reference, specifically incorporates in full within this Paragraph (iii).

          (iv) Crediting and computation. The Plan Administrator will not credit an Hour of Service under more than one of the above Paragraphs (i), (ii) or (iii). A computation period for purposes of this Section 1.31 is the Plan Year, Year of Service period, Break in Service period or other period, as determined under the Plan provision for which the Plan Administrator is measuring an Employee‘s Hours of Service. The Plan Administrator will resolve any ambiguity with respect to the crediting of an Hour of Service in favor of the Employee.

(A) Method of Crediting Hours of Service. The Employer must elect in its Adoption Agreement the method the Plan Administrator will use in crediting an Employee with Hours of Service and the purpose for which the elected method will apply.

     (1) Actual Method. Under the Actual Method as determined from records, an Employee receives credit for Hours of Service for hours worked and hours for which the Employer makes payment or for which payment is due from the Employer.

     (2) Equivalency Method. Under an Equivalency Method, for each equivalency period for which the Plan Administrator would credit the Employee with at least one Hour of Service, the Plan Administrator will credit the Employee with: (a) 10 Hours of Service for a daily equivalency; (b) 45 Hours of Service for a weekly equivalency; (c) 95 Hours of Service for a semimonthly payroll period equivalency; and (d) 190 Hours of Service for a monthly equivalency.

     (3) Elapsed Time Method. Under the Elapsed Time Method, an Employee receives credit for Service for the aggregate of all time periods (regardless of the Employee’s actual Hours of Service) commencing with the Employee’s Employment Commencement Date, or with his/her Re-Employment Commencement Date, and ending on the date a Break in Service begins. See Section 2.02(C)(4). In applying the Elapsed Time Method, the Plan Administrator will credit an Employee’s Service for any Period of Severance of less than 12-consecutive months and will express fractional periods of Service in days.

          (i) Elapsed Time – Break in Service. Under the Elapsed Time Method, a Break in Service is a Period of Severance of at least 12 consecutive months. In the case of an Employee who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first date the Employee is otherwise absent from Service does not constitute a Break in Service.

          (ii) Elapsed Time – Period of Severance. A Period of Severance is a continuous period of time during which the Employee is not employed by the Employer. The continuous period begins on the date the Employee retires, quits, is discharged, or dies or if earlier, the first 12-month anniversary of the date on which the Employee otherwise is absent from Service for any other reason (including disability, vacation, leave of absence, layoff, etc.).

(B) Maternity/Paternity Leave/Family and Medical Leave Act. Solely for purposes of determining whether an Employee incurs a Break in Service under any provision of this Plan, the Plan Administrator must credit Hours of Service during the Employee’s unpaid absence period: (1) due to maternity or paternity leave; or (2) as required under the Family and Medical Leave Act. An Employee is on maternity or paternity leave if the Employee’s absence is due to the Employee’s pregnancy, the birth of the Employee‘s child, the placement with the Employee of an adopted child, or the care of the Employee’s child immediately following the child’s birth or placement. The Plan Administrator credits Hours of Service under this Section 1.31(B) on the basis of the number of Hours of Service for which the Employee normally would receive credit or, if the Plan Administrator cannot determine the number of Hours of Service the Employee would receive credit for, on the basis of 8 hours per day during the absence period. The Plan Administrator will credit only the number (not exceeding 501) of Hours of Service necessary to prevent an Employee‘s Break in Service. The Plan Administrator credits all Hours of Service described in this Section 1.31(B) to the computation period in which the absence period begins or, if the Employee does not need these Hours of Service to prevent a Break in Service in the computation period in which his/her absence period begins,

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the Plan Administrator credits these Hours of Service to the immediately following computation period.

(C) Qualified Military Service. Hour of Service also includes any Service the Plan must credit for contributions and benefits in order to satisfy the crediting of Service requirements of Code §414(u).

     1.32 IRS. IRS means the Internal Revenue Service.

     1.33 Limitation Year. Limitation Year means the consecutive month period the Employer specifies in its Adoption Agreement as applicable to allocations under Article IV. If the Employer elects the same Plan Year and Limitation Year, the Limitation Year is always a 12-consecutive month period even if the Plan Year is a short period, unless the short Plan Year results from an amendment, in which case, the Limitation Year also is a short year. If the Employer amends the Limitation Year to a different 12-consecutive month period, the new Limitation Year must begin on a date within the Limitation Year for which the Employer makes the amendment, creating a short Limitation Year.

     1.34 Matching Contribution. Matching Contribution means a fixed or discretionary contribution the Employer makes on account of Elective Deferrals under a 401(k) Plan or on account of Employee Contributions. Matching contributions also include Participant forfeitures allocated on account of such Elective Deferrals or Employee Contributions.

(A) Fixed Matching Contribution. Fixed Matching Contribution means a Matching Contribution which the Employer, subject to satisfaction of allocation conditions, if any, must make pursuant to a formula in the Adoption Agreement. Under the formula, the Employer contributes a specified percentage or dollar amount on behalf of a Participant based on that Participant’s Elective Deferrals or Employee Contributions eligible for a match.

(B) Discretionary Matching Contribution. Discretionary Matching Contribution means a Matching Contribution which the Employer in its sole discretion elects to make to the Plan. The Employer retains discretion over the Discretionary Matching Contribution rate or amount, the limit(s) on Elective Deferrals or Employee Contributions subject to match, the per Participant match allocation limit(s), the Participants who will receive the allocation, and the time period applicable to any matching formula(s)(collectively, the “matching formula”), except as the Employer otherwise elects in its Adoption Agreement.

(C) QMAC. QMAC means a qualified matching contribution which is 100% Vested at all times and which is subject to the distribution restrictions described in Section 6.01(C)(4)(b). Matching Contributions are not 100% Vested at all times if the Employee has a 100% Vested interest solely because of his/her Years of Service taken into account under a vesting schedule. Any Matching Contributions allocated to a Participant’s QMAC Account under the Plan automatically satisfy and are subject to the QMAC definition.

(D) Regular Matching Contribution. A Regular Matching Contribution is a Matching Contribution which is not a QMAC a Safe Harbor Matching Contribution or an Additional Matching Contribution.

(E) Basic Matching Contribution. See Section 3.05(E)(4).

(F) Enhanced Matching Contribution. See Section 3.05(E)(5).

(G) Additional Matching Contribution. See Section 3.05(F)(1).

(H) SIMPLE Matching Contribution. See Section 3.10(E)(1).

(I) Safe Harbor Matching Contribution. See Section 3.05(E)(3).

     1.35 Money Purchase Pension Plan/Money Purchase Pension Contribution. Money Purchase Pension Plan means the Money Purchase Pension Plan the Employer establishes under a Money Purchase Pension Plan Adoption Agreement. The Employer Contribution to its Money Purchase Pension Plan is a Money Purchase Pension Contribution. The Employer will make its Money Purchase Pension Contribution as the Employer elects in its Adoption Agreement.

     1.36 Named Fiduciary. The Named Fiduciary is the Employer. The Employer in writing also may designate the Plan Administrator (if the Plan Administrator is not the Employer) and other persons as additional Named Fiduciaries. See Section 8.03. If the Plan is a restated Plan and under the prior plan document a different Named Fiduciary is in place, this Section 1.36 becomes effective on the date the Employer executes this restated Plan unless the Employer designates otherwise in writing.

     1.37 Nonelective Contribution. Nonelective Contribution means a fixed or discretionary Employer Contribution which is not a Matching Contribution, a Money Purchase Pension Contribution or a Target Benefit Contribution.

(A) Fixed Nonelective Contribution. Fixed Nonelective Contribution means a Nonelective Contribution which the Employer subject to satisfaction of allocation conditions, if any, must make pursuant to a formula (based on Compensation of Participants who will receive an allocation of the contributions or otherwise) in the Adoption Agreement. See 3.04(A)(2).

(B) Discretionary Nonelective Contribution. Discretionary Nonelective Contribution means a Nonelective Contribution which the Employer in its sole discretion elects to make to the Plan. See 3.04(A)(1).

(C) QNEC. QNEC means a qualified nonelective contribution which is 100% Vested at all times and which is subject to the distribution restrictions described in Section 6.01(C)(4)(b). Nonelective Contributions are not 100% Vested at all times if the Employee has a 100% Vested interest solely because of his/her Years of Service taken into account under a vesting schedule. Any Nonelective Contributions allocated to a Participant’s QNEC Account under the Plan automatically satisfy and are subject to the QNEC definition.

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(D) SIMPLE Nonelective Contribution. See Section 3.10(E)(1).

(E) Safe Harbor Nonelective Contribution. See Section 3.05(E)(2).

     1.38 Opinion Letter. Opinion Letter means an IRS issued letter as to the acceptability of the form of a Prototype Plan as defined in Section 4.06 of Rev. Proc. 2005-16.

     1.39 Participant. Participant means an Eligible Employee who becomes a Participant in the Plan or as to any Contribution Type as the context requires, in accordance with the provisions of Section 2.01.

     1.40 Plan. Plan means the retirement plan established or continued by the Employer in the form of this Prototype Plan or Volume Submitter Plan, including the Adoption Agreement under which the Employer has elected to establish this Plan. The Employer must designate the name of the Plan in its Adoption Agreement. An Employer may execute more than one Adoption Agreement offered under this Plan, each of which will constitute a separate Plan and Trust established or continued by that Employer. All section references within this basic plan document are Plan section references unless the context clearly indicates otherwise. The Plan includes any Appendix permitted by the basic plan document or by the Employer’s Adoption Agreement and which the Employer attaches to its Adoption Agreement.

(A) Multiple Employer Plan (Article XII). Multiple Employer Plan means a Plan in which at least one Employer which is not a Related Employer participates. This Plan may be a Multiple Employer Plan only if maintained on a Volume Submitter Adoption Agreement. Article XII of the Plan applies to a Multiple Employer Plan, but otherwise does not apply to the Plan.

(B) Frozen Plan. See Section 3.01(J).

     1.41 Plan Administrator. Plan Administrator means the Employer unless the Employer designates another person or persons to hold the position of Plan Administrator. Any person(s) the Employer appoints as Plan Administrator may or may not be Participants in the Plan. In addition to its other duties, the Plan Administrator has full responsibility for the Plan’s compliance with the reporting and disclosure rules under ERISA. If the Employer is the Plan Administrator, any requirement under the Plan for communication between the Employer and the Plan Administrator automatically is deemed satisfied, and the Employer has discretion to determine the manner of documenting any decision deemed to be communicated under this provision.

     1.42 Plan Year. Plan Year means the consecutive month period the Employer specifies in its Adoption Agreement.

     1.43 Practitioner. Practitioner means the sponsor as to its Employer clients of the Volume Submitter Plan and as defined in Section 13.04 of Rev. Proc. 2005-16.

     1.44 Predecessor Employer/Predecessor Plan.

(A) Predecessor Employer. A Predecessor Employer is an employer that previously employed one or more of the Employees.

(B) Predecessor Plan. A Predecessor Plan is a Code §401(a) or §403(a) qualified plan the Employer terminated within the five-year period beginning before or after the Employer establishes this Plan, as described in Treas. Reg. §1.411(a)-5(b)(3)(v)(B).

     1.45 Prevailing Wage Contract/Contribution. Prevailing Wage Contract means a contract under which Employees are performing services subject to the Davis-Bacon Act, the McNamara-O’Hara Contract Service Act or any other federal, state or municipal prevailing wage law. A Prevailing Wage Contribution is a contribution the Employer makes to the Plan in accordance with a Prevailing Wage Contract. A Prevailing Wage Contribution is trated as a Nonelective Contribution or other Employer Contribution except as the Plan otherwise provides.

     1.46 Profit Sharing Plan. Profit Sharing Plan means the Profit Sharing Plan the Employer establishes under a Profit Sharing Plan Adoption Agreement.

     1.47 Protected Benefit. Protected Benefit means any accrued benefit described in Treas. Reg. §1.411(d)-4, including any optional form of benefit provided under the Plan which may not (except in accordance with such Regulations) be reduced, eliminated or made subject to Employer discretion.

     1.48 Prototype Plan/Master Plan (M&P Plan). Prototype Plan means as described in Section 4.02 of Rev. Proc. 2005-16 or in any successor thereto under which each adopting Employer establishes a separate Trust. This Plan is not a Master Plan as described in Section 4.01 of Rev. Proc. 2005-16 under which unrelated adopting employers participate in a single funding medium (trust or custodial account). However, the Plan could be a Master Trust under DOL Reg. §2525.103-2(e). A Prototype Plan or a Master Plan must have an Opinion Letter as described in Section 4.06 of Rev. Proc. 2005-16.

     1.49 QDRO. QDRO means a qualified domestic relations order under Code §414(p).

     1.50 Qualified Military Service. Qualified Military Service means qualified military service as defined in Code §414(u)(5). Notwithstanding any provision in the Plan to the contrary, as to Qualified Military Service, the Plan will credit Service under Section 1.31(C), the Employer will make contributions to the Plan and the Plan will provide benefits in accordance with Code §414(u).

     1.51 Restated Plan. A Restated Plan means a plan the Employer adopts in substitution for, and in amendment of, an existing plan, as the Employer elects in its Adoption Agreement. If a Participant incurs a Separation from Service or Severance from Employment before the Employer executes the Adoption Agreement as a Restated Plan, the provisions of the Restated Plan do not apply to the Participant unless he/she has an Account Balance as of the execution date or unless the Employer re-hires the Participant.

     1.52 Rollover Contribution. A Rollover Contribution means an amount of cash or property (including a participant loan from another plan) which the Code permits an Eligible Employee or Participant to transfer directly or indirectly to this Plan from another Eligible Retirement Plan (or vice versa) within the meaning of Code §402(c)(8)(B) and Section 6.08(F)(2). A Rollover Contribution will be made to the Plan and not to a Designated IRA within the Plan under Section 3.12, if any.

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     1.53 Safe Harbor Contribution. Safe Harbor Contribution means a Safe Harbor Nonelective Contribution or a Safe Harbor Matching Contribution as the Employer elects in its Adoption Agreement. See Sections 3.05(E)(2) and (3).

     1.54 Salary Reduction Agreement. A Salary Reduction Agreement means a Participant’s written election to make Elective Deferrals to the Plan (including a Contrary Election under Section 3.02(B)(4)), made on the form the Plan Administrator provides for this purpose.

(A) Effective Date. A Salary Reduction Agreement may not be effective earlier than the following date which occurs last: (1) under Article II, the Participant’s Entry Date or, in the case of a re-hired Employee, his/her re-participation date; (2) the execution date of the Salary Reduction Agreement; (3) the date the Employer adopts the 401(k) Plan; or (4) the Effective Date of the 401(k) Plan (or Elective Deferral provision within the Plan).

(B) Compensation. A Salary Reduction Agreement must specify the dollar amount of Compensation or the percentage of Compensation the Participant wishes to defer. The Salary Reduction Agreement: (1) applies only to Compensation for Elective Deferral allocation as the Employer elects in its Adoption Agreement and which becomes currently available after the effective date of the Salary Reduction Agreement; and (2) applies to all or to such Elective Deferral Compensation as the Salary Reduction Agreement indicates, including any Participant elections made in the Salary Reduction Agreement,

(C) Additional Rules. The Plan Administrator in the Plan’s Salary Reduction Agreement form, or in a Salary Reduction Agreement policy will specify additional rules and restrictions applicable to a Participant’s Salary Reduction Agreement, including but not limited to those rules regarding changing or revoking a Salary Reduction Agreement. Any such rules and restrictions must be consistent with the Plan and with Applicable Law.

     1.55 Separation from Service/Severance from Employment. Separation from Service means an event after which the Employee no longer has an employment relationship with the Employer maintaining this Plan or with a Related Employer. The Plan applies Separation from Service for all purposes except as otherwise provided. For purposes of distribution of Restricted 401(k) Accounts, the application of Post-Severance Compensation and top-heavy look-back period distributions, the plan will apply the definition of Severance from Employment under EGTRRA §646 (as modified for Code §415 purposes in applying the parent-subsidiary controlled group rules).

     1.56 Service. Service means any period of time the Employee is in the employ of the Employer, including any period the Employee is on an unpaid leave of absence authorized by the Employer under a uniform, nondiscriminatory policy applicable to all Employees.

(A) Related Employer Service. See Section 1.23(C).

(B) Predecessor Employer/Plan Service. See Section 1.44. If the Employer maintains (by adoption, plan merger or Transfer) the plan of a Predecessor Employer, service of the Employee with the Predecessor Employer is Service with the Employer. If the Employer maintained a Predecessor Plan, for purposes of vesting Service, the Plan Administrator must count service credited to any Employee covered under the Predecessor Plan. If the Employer in its Adoption Agreement elects to disregard vesting Service prior to the time that the Employer maintained the Plan, the Plan Administrator will treat a Predecessor Plan as the Plan for purposes of such election.

(C) Elective Service Crediting. If the Employer does not maintain the plan of a Predecessor Employer, the Plan does not credit Service with the Predecessor Employer, unless the Employer in its Adoption Agreement (or in a Participation Agreement, if applicable) elects to credit designated Predecessor Employer Service and specifies the purposes for which the Plan will credit service with that Predecessor Employer. Unless the Employer under its Adoption Agreement provides for this purpose specific Entry Dates, an Employee who satisfies the Plan’s eligibility condition(s) by reason of the crediting of predecessor service will enter the Plan in accordance with the provisions of Article II as if the Employee were a re-employed Employee on the first day the Plan credits predecessor service.

(D) Standardized Plan. If the Employer’s Plan is a Standardized Plan, the Plan limits the elective crediting of past Predecessor Employer Service to the period which does not exceed 5 years immediately preceding the year in which an amendment crediting such service becomes effective, such credit must be granted to all Employees on a reasonably uniform basis, and the crediting must otherwise comply with Treas. Reg. §1.401(a)(4)-5(a)(3).

     1.57 SIMPLE Contribution. SIMPLE Contribution means a SIMPLE Nonelective Contribution or a SIMPLE Matching Contribution. See Section 3.10(E).

     1.58 Sponsor. Sponsor means the sponsor of this Prototype Plan as to the Sponsor’s adopting Employer clients and as defined in Section 4.07 of Rev. Proc. 2005-16.

     1.59 Successor Plan. Successor Plan means a plan in which at least 50% of the Eligible Employees for the first Plan Year were eligible under a cash or deferred arrangement maintained by the Employer in the prior year, as described in Treas. Reg. §1.401k-2(c)(2)(iii).

     1.60 Target Benefit Plan./Target Benefit Contribution Target Benefit Plan means the Target Benefit Plan the Employer establishes under the Target Benefit Plan Adoption Agreement. The Employer Contribution to its Target Benefit Plan is a Target Benefit Contribution. The Employer will make its Target Benefit Contribution as the Employer elects in its Adoption Agreement.

     1.61 Taxable Year. Taxable Year means the taxable year of a Participant or of the Employer as the context requires.

     1.62 Transfer. Transfer means the Trustee’s movement of Plan assets from the Plan to another plan (or vice versa) directly as between the trustees and not by means of a distribution. A Transfer may be an Elective Transfer or a Nonelective Transfer. See Section 11.06. A Direct Rollover under Section 6.08(F)(1) is not a Transfer.

     1.63 Trust. Trust means the separate Trust created under the Plan.

     1.64 Trust Fund. Trust Fund means all property of every kind acquired by the Plan and held by the Trust, other than incidental benefit insurance contracts.

     1.65 Trustee/Custodian. Trustee or Custodian means the person or persons who as Trustee or Custodian execute the Adoption Agreement, or any successor in office who in writing accepts the position of Trustee or Custodian. The

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Employer must designate in its Adoption Agreement whether the Trustee will administer the Trust as a discretionary Trustee or as a nondiscretionary Trustee. See Article VIII. If the Sponsor or Practitioner is a bank, savings and loan association, credit union, mutual fund, insurance company, or other institution qualified to serve as Trustee, a person other than the Sponsor or Practitioner (or its affiliate) may not serve as Trustee or as Custodian of the Plan without the written consent of the Sponsor or Practitioner.

     1.66 Valuation Date. Valuation Date means the Accounting Date, such additional dates as the Employer in its Adoption Agreement may elect and any other date that the Plan Administrator designates for the valuation of the Trust Fund.

     1.67 Vested. Vested means a Participant or a Beneficiary has an unconditional claim, legally enforceable against the Plan, to the Participant’s Account Balance or Accrued Benefit or to a portion thereof if not 100% Vested. Vesting means the degree to which a Participant is Vested in one or more Accounts.

     1.68 USERRA. USERRA means the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended.

     1.69 Volume Submitter Plan. Volume Submitter Plan means as described in Section 13.01 of Rev. Proc. 2005-16 or in any successor thereto. A Volume Submitter Plan must have an Advisory Letter as described in Section 13.03 of Rev. Proc. 2005-16.

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ARTICLE II
ELIGIBILITY AND PARTICIPATION

     2.01 ELIGIBILITY. Each Eligible Employee becomes a Participant in the Plan in accordance with the eligibility conditions the Employer elects in its Adoption Agreement. The Employer may elect different age and service conditions for different Contribution Types under the Plan.

(A) Maximum Age and Years of Service. For purposes of an Eligible Employee’s participation in the Plan, the Plan may not impose an age condition exceeding age 21 and may not require completion of more than one Year of Service, except under Section 2.02(E).

(B) New Plan. Any Eligible Employee who has satisfied the Plan’s eligibility conditions and who has reached his/her Entry Date as of the Effective Date is eligible to participate as of the Effective Date, assuming the Employer continues to employ the Employee on that date. Any other Eligible Employee becomes eligible to participate: (1) upon satisfaction of the eligibility conditions and reaching his/her Entry Date; or (2) upon reaching his/her Entry Date if such Employee had already satisfied the eligibility conditions prior to the Effective Date.

(C) Restated Plan. If this Plan is a Restated Plan, each Employee who was a Participant in the Plan on the day before the restated Effective Date continues as a Participant in the Restated Plan, irrespective of whether he/she satisfies the eligibility conditions of the Restated Plan, unless the Employer provides otherwise in its Adoption Agreement.

(D) Prevailing Wage Contribution. If the Employer makes Prevailing Wage Contributions to the Plan, except as the Prevailing Wage Contract otherwise provides, no minimum age or service conditions apply to an Eligible Employee’s eligibility to receive Prevailing Wage Contributions under the Plan. The Employer’s Adoption Agreement elections imposing age and service eligibility conditions apply to such an Employee as to non-Prevailing Wage Contributions under the Plan.

(E) Special Eligibility Effective Date (Dual Eligibility). The Employer in its Adoption Agreement may elect to provide a special Effective Date for the Plan’s eligibility conditions, with the effect that such conditions may apply only to Employees who are employed by the Employer after a specified date.

     2.02 APPLICATION OF SERVICE CONDITIONS. The Plan Administrator will apply this Section 2.02 in administering the Plan’s eligibility service condition(s), if any.

(A) Definition of Year of Service. A Year of Service for purposes of an Employee’s participation in the Plan, means the applicable Eligibility Computation Period under Section 2.02(C), during which the Employee completes the number of Hours of Service (not exceeding 1,000) the Employer specifies in its Adoption Agreement, without regard to whether the Employer continues to employ the Employee during the entire Eligibility Computation Period.

(B) Counting Years of Service. For purposes of an Employee’s participation in the Plan, the Plan counts all of an Employee’s Years of Service, except as provided in Section 2.03.

(C) Initial and Subsequent Eligibility Computation Periods. If the Plan requires one Year of Service for eligibility and an Employee does not complete one Year of Service during the Initial Eligibility Computation Period, the Plan measures Subsequent Eligibility Computation Periods in accordance with the Employer’s election in its Adoption Agreement. If the Plan measures Subsequent Eligibility Computation Periods on a Plan Year basis, an Employee who receives credit for the required number of Hours of Service during the Initial Eligibility Computation Period and also during the first applicable Plan Year receives credit for two Years of Service under Article II.

     (1) Definition of Eligibility Computation Period. An Eligibility Computation Period is a 12-consecutive month period.

     (2) Definition of Initial Eligibility Computation Period. The Initial Eligibility Computation Period is the Employee’s Anniversary Year which begins on the Employee’s Employment Commencement Date.

     (3) Definition of Anniversary Year. An Employee’s Anniversary Year is the 12-consecutive month period beginning on the Employee’s Employment Commencement Date or beginning on anniversaries thereof.

     (4) Definitions of Employment Commencement Date/Re-Employment Commencement Date. An Employee’s Employment Commencement Date is the date on which the Employee first performs an Hour of Service for the Employer. An Employee’s Re-Employment Commencement Date is the date on which the Employee first performs an Hour of Service for the Employer after the Employer re-employs the Employee.

     (5) Definition of Subsequent Eligibility Computation Period. A Subsequent Eligibility Computation Period is any Eligibility Computation Period after the Initial Eligibility Computation Period, as the Employer elects in its Adoption Agreement.

(D) Entry Date. The Employer in its Adoption Agreement elects the Entry Date(s) and elects whether such Entry Date(s) are retroactive, coincident with or next following an Employee’s satisfaction of the Plan’s eligibility conditions. The Employer may elect to apply different Entry Dates to different Contribution Types. If the Employer makes Prevailing Wage Contributions to the Plan, except as the Prevailing Wage Contract otherwise provides, an eligible Employee’s Entry Date with regard to such contributions is the Employee’s Employment Commencement Date. The Employer’s Adoption Agreement elections regarding Entry Dates apply to such an Employee as to non-Prevailing Wage Contributions under the Plan.

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     (1) Definition of Entry Date. See Section 1.25.

     (2) Maximum delay in participation. An Entry Date may not result in an Eligible Employee who has satisfied the Plan’s eligibility conditions being held out of Plan participation longer than six months, or if earlier, the first day of the next Plan Year, following completion of the Code §410(a) maximum eligibility requirements.

(E) Alternative Service Conditions. The Employer in its Adoption Agreement may elect to impose for eligibility a condition of less than one Year of Service or of more than one Year of Service, but not exceeding two Years of Service. If the Employer elects an alternative Service condition to one Year of Service or two Years of Service, the Employer must elect in its Adoption Agreement the Hour of Service and other requirement(s), if any, after the Employee completes one Hour of Service. Under any alternative Service condition election, the Plan may not require an Employee to complete more than one Year of Service (1,000 Hours of Service in 12-consecutive months) or two Years of Service if applicable.

     (1) Vesting requirement. If the Employer elects to impose more than a one Year of Service eligibility condition, the Plan Administrator must apply 100% vesting on any Employer Contributions (and the resulting Accounts) subject to that eligibility condition.

     (2) One Year of Service maximum for specified Contributions. The Plan may not require more than one Year of Service for eligibility for an Eligible Employee to make Elective Deferrals, to receive Safe Harbor Contributions or to receive SIMPLE Contributions.

(F) Equivalency or Elapsed Time. If the Employer in its Adoption Agreement elects to apply the Equivalency Method or the Elapsed Time Method in applying the Plan’s eligibility Service condition, the Plan Administrator will credit Service in accordance with Sections 1.31(A)(2) and (3).

     2.03 BREAK IN SERVICE – PARTICIPATION. The Plan Administrator will apply this Section 2.03 if any Break in Service rule applies under the Plan.

(A) Definition of Break in Service. For purposes of this Article II, an Employee incurs a Break in Service if during any applicable Eligibility Computation Period he/she does not complete more than 500 Hours of Service with the Employer. The Eligibility Computation Period under this Section 2.03(A) is the same as the Eligibility Computation Period the Plan uses to measure a Year of Service under Section 2.02. If the Plan applies the Elapsed Time Method of crediting Service under Section 1.31(A)(3), a Participant incurs a Break in Service if the Participant has a Period of Severance of at least 12 consecutive months.

(B) Two Year Eligibility. If the Employer under the Adoption Agreement elects a two Years of Service eligibility condition, an Employee who incurs a one year Break in Service prior to completing two Years of Service: (1) is a new Employee on the date he/she first performs an Hour of Service for the Employer after the Break in Service; (2) the Plan disregards the Employee’s Service prior to the Break in Service; and (3) the Employee establishes a new Employment Commencement Date for purposes of the Initial Eligibility Computation Period under Section 2.02(C).

(C) One Year Hold-Out Rule-Participation. The Employer in its Adoption Agreement must elect whether to apply the “one year hold-out” rule under Code §410(a)(5)(C). Under this rule, a Participant will incur a suspension of participation in the Plan after incurring a one year Break in Service and the Plan disregards a Participant’s Service completed prior to a Break in Service until the Participant completes one Year of Service following the Break in Service. The Plan suspends the Participant’s participation in the Plan as of the first day of the Plan Year following the Plan Year in which the Participant incurs the Break in Service.

     (1) Completion of one Year of Service. If a Participant completes one Year of Service following his/her Break in Service, the Plan restores the Participant’s pre-break Service and the Participant resumes active participation in the Plan retroactively to the first day of the Eligibility Computation Period in which the Participant first completes one Year of Service following his/her Break in Service.

     (2) Eligibility Computation Period. The Plan Administrator measures the Initial Eligibility Computation period under this Section 2.03(C) from the date the Participant first receives credit for an Hour of Service following the one year Break in Service. The Plan Administrator measures any Subsequent Eligibility Computation Periods, if necessary, in a manner consistent with the Employer’s Eligibility Computation Period election in its Adoption Agreement, using the Re-Employment Commencement Date in determining the Anniversary Year if applicable.

     (3) Election to limit application to separated Employees. If the Employer elects to apply the one year hold-out rule, the Employer also may elect in its Adoption Agreement to limit application of the rule only to a Participant who has incurred a Separation from Service.

     (4) Application to Employee who did not enter. The Plan Administrator also will apply the one year hold-out rule, if applicable, to an Employee who satisfies the Plan’s eligibility conditions, but who incurs a Separation from Service and a one year Break in Service prior to becoming a Participant.

     (5) No effect on vesting or Earnings. This Section 2.03(C) does not affect a Participant’s vesting credit under Article V and, during a suspension period, the Participant’s Account continues to share fully in Earnings under Article VII.

     (6) No restoration under two year break rule. The Plan Administrator in applying this Section 2.03(C) does not restore any Service disregarded under the Break in Service rule of Section 2.03(B).

     (7) No application to Elective Deferrals in 401(k) Plan. If the Plan is a 401(k) Plan and the Employer in its Adoption Agreement elects to apply the Section 2.03(C) one year hold-out rule, the Plan Administrator will not apply such provisions to the Elective Deferral portion of the Plan.

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     (8) USERRA. An Employee who has completed Qualified Military Service and who the Employer has rehired under USERRA, does not incur a Break in Service under the Plan by reason of the period of such Qualified Military Service.

(D) Rule of Parity – Participation. For purposes of Plan participation, the Plan does not apply the “rule of parity” under Code §410(a)(5)(D), unless the Employer in Appendix B elects to apply the rule of parity.

     2.04 PARTICIPATION UPON RE-EMPLOYMENT.

(A) Rehired Participant/ Immediate Re-Entry. A Participant who incurs a Separation from Service will re-enter the Plan as a Participant on his/her Re-Employment Commencement Date (provided he/she is not an Excluded Employee), subject to any Break in Service rule, if applicable, under Section 2.03.

(B) Rehired Eligible Employee Who Had Satisfied Eligibility. An Eligible Employee who satisfies the Plan’s eligibility conditions, but who incurs a Separation from Service prior to becoming a Participant, subject to any Break in Service rule, if applicable, under Section 2.03, will become a Participant on the later of: (1) the Entry Date on which he/she would have entered the Plan had he/she not incurred a Separation from Service; or (2) his/her Re-Employment Commencement Date.

(C) Rehired Eligible Employee Who Had Not Satisfied Eligibility. An Eligible Employee who incurs a Separation from Service prior to satisfying the Plan’s eligibility conditions becomes a Participant in accordance with the Employer’s Adoption Agreement elections. The Plan Administrator, for purposes of applying any shift in the Eligibility Computation Period, takes into account the Employee’s prior Service and the Employee is not treated as a new hire.

     2.05 CHANGE IN EMPLOYMENT STATUS. The Plan Administrator will apply this Section 2.05 if the Employer in its Adoption Agreement elected to exclude any Employees as Excluded Employees.

(A) Participant Becomes an Excluded Employee. If a Participant has not incurred a Separation from Service but becomes an Excluded Employee (as to any or all Contribution Types), during the period of exclusion the Excluded Employee: (i) will not share in the allocation of the applicable Employer Contributions (including a Top-Heavy Minimum Allocation under Section 10.02 if the Employee is excluded as to all Contribution Types) or Participant forfeitures, based on Compensation paid to the Excluded Employee during the period of exclusion; (ii) may not make Employee Contributions, Rollover Contributions or Designated IRA Contributions; and (iii) if the Plan is a 401(k) Plan and the Participant is an Excluded Employee as to Elective Deferrals, may not make Elective Deferrals as to Compensation paid to the Excluded Employee during the period of exclusion.

     (1) Vesting, accrual, Break in Service and Earnings. A Participant who becomes an Excluded Employee under this Section 2.05(A) continues: (a) to receive Service credit for vesting under Article V for each included vesting Year of Service; (b) to receive Service credit for applying any allocation conditions under Section 3.06 as to Employer Contributions accruing for any non-excluded period and as to Contribution Types for which the Participant is not an Excluded Employee; (c) to receive Service credit in applying the Break in Service rules; and (d) to share fully in Earnings under Article VII.

     (2) Resumption of Eligible Employee status. If a Participant who becomes an Excluded Employee subsequently resumes status as an Eligible Employee, the Participant will participate in the Plan immediately upon resuming eligible status, subject to the Break in Service rules, if applicable, under Section 2.03.

(B) Excluded Employee Becomes Eligible. If an Excluded Employee who is not a Participant becomes an Eligible Employee, he/she will participate immediately in the Plan if he/she has satisfied the Plan’s eligibility conditions and would have been a Participant had he/she not been an Excluded Employee during his/her period of Service. An Excluded Employee receives Service credit for eligibility, for allocation conditions under Section 3.06 (but the Plan disregards Compensation paid while excluded) and for vesting under Article V for each included vesting Year of Service, notwithstanding the Employee’s Excluded Employee status.

     2.06 PARTICIPATION OPT-OUT.

(A) Volume Submitter Plan. If the Plan is a Volume Submitter Plan, the Plan Administrator may elect to permit an Eligible Employee to elect irrevocably to not participate in the Plan (to “opt-out”). The Eligible Employee prior to his/her Entry Date and prior to first becoming eligible under any plan of the Employer as described in Code §219(g)(5)(A), including terminated plans, must file an opt-out election in writing with the Plan Administrator on a form the Plan Administrator provides for this purpose. An Employee’s election not to participate, pursuant to this Section 2.06(A), includes his/her right to make Elective Deferrals, Employee Contributions, Rollover Contributions or Designated IRA Contributions, unless the Plan Administrator’s opt-out form permits an Eligible Employee to opt-out of specified Contribution Types prior to becoming eligible to participate in such Contribution Type. A Participant’s mere failure to make Elective Deferrals or Employee Contributions is not an opt-out under this Section 2.06(A).

(B) Prototype Plan. If the Plan is a Prototype Plan, the Plan does not permit an otherwise Eligible Employee or any Participant to elect to opt-out. However, if the Plan is a Nonstandardized Plan, an Eligible Employee may opt-out in accordance with Section 2.06(A) provided: (1) the Plan terms as in effect prior to restatement under this Plan permitted the opt-out; and (2) the Employee executes the opt-out prior to the date of the Employer’s execution of this Plan as a Restated Plan.

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ARTICLE III
PLAN CONTRIBUTIONS AND FORFEITURES

     3.01 CONTRIBUTION TYPES. The Employer in its Adoption Agreement will elect the Contribution Type(s) and any formulas, allocation methods, conditions and limitations applicable thereto, except where the Plan expressly reserves discretion to the Employer or to the Plan Administrator.

(A) Application of Limits. The Employer’s contribution to the Trust for any Plan Year is subject to Article IV limits and other Plan limits.

(B) Compensation for Allocations/Limit. The Plan Administrator will allocate all Employer Contributions and Elective Deferrals based on the definition of Compensation under Section 1.11 the Employer elects in its Adoption Agreement for a particular Contribution Type. The Plan Administrator in allocating such contributions must limit each Participant’s Compensation to the amount described in Section 1.11(E).

(C) Allocation Conditions. The Plan Administrator will allocate Employer Contributions only to those Participants who satisfy the Plan’s allocation conditions under Section 3.06, if any, for the Contribution Type being allocated.

(D) Top-Heavy. If the Plan is top-heavy, the Employer will satisfy the Top-Heavy Minimum Allocation requirements in accordance with Article X.

(E) Net Profit Not Required. The Employer need not have net profits to make a contribution under the Plan, unless the Employer in its Adoption Agreement specifies a fixed formula based on net profits.

(F) Form of Contribution. Subject to the consent of the Trustee under Article VIII, the Employer may make Employer Contributions to a Profit Sharing Plan, to a 401(k) Plan or to a 401(m) Plan (excluding Elective Deferrals or Employee Contributions) in the form of property instead of cash, provided the contribution of property is not a prohibited transaction under Applicable Law. The Employer may not make contributions in the form of property to its Money Purchase Pension Plan or to its Target Benefit Plan.

(G) Time of Payment of Contribution. The Employer may pay to the Trust its Employer Contributions for any Plan Year in one or more installments, without interest. Unless otherwise required by applicable contract or Applicable Law, the Employer may make an Employer Contribution to the Plan for a particular Plan Year at such time(s) as the Employer in its sole discretion determines. If the Employer makes a contribution for a particular Plan Year after the close of that Plan Year, the Employer will designate to the Plan Administrator and to the Trustee the Plan Year for which the Employer is making the Employer Contribution. The Plan Administrator will allocate the contribution accordingly.

(H) Return of Employer Contribution. The Employer contributes to the Plan on the condition its contribution is not due to a mistake of fact and the IRS will not disallow the deduction of the Employer Contribution.

     (1) Request for contribution return/timing. The Trustee, upon written request from the Employer, must return to the Employer the amount of the Employer Contribution made by the Employer by mistake of fact or the amount of the Employer Contribution disallowed as a deduction under Code §404. The Trustee will not return any portion of the Employer Contribution under the provisions of this Section 3.01(H) more than one year after: (a) the Employer made the contribution by mistake of fact; or (b) the IRS’s disallowance of the contribution as a deduction, and then, only to the extent of the disallowance.

     (2) Earnings. The Trustee will not increase the amount of the Employer Contribution returnable under this Section 3.01(H) for any Earnings increases attributable to the contribution, but the Trustee will decrease the Employer Contribution returnable for any Earnings losses attributable thereto.

     (3) Evidence. The Trustee may require the Employer to furnish the Trustee whatever evidence the Trustee deems necessary to enable the Trustee to confirm the amount the Employer has requested be returned is properly returnable under Applicable Law.

(I) Money Purchase Pension and Defined Benefit Plans. If the Employer’s Plan is a Money Purchase Pension Plan and the Employer also maintains a defined benefit pension plan, notwithstanding the Money Purchase Pension Contribution formula in the Employer’s Adoption Agreement, the Employer’s required contribution to its Money Purchase Pension Plan for a Plan Year is limited to the amount which the Employer may deduct under Code §404(a)(7). If the Employer under Code §404(a)(7) must reduce its Money Purchase Pension Plan contribution, the Plan Administrator will allocate the reduced contribution amount in accordance with the Plan’s allocation formula.

(J) Frozen Plan. The Employer in its Adoption Agreement may elect to treat the Plan as a Frozen Plan. Under a Frozen Plan, the Employer and the Participants will not make any contributions to the Plan. A Frozen Plan remains subject to all qualification and reporting requirements except as Applicable Law otherwise provides and the Plan provisions (other than those relating to ongoing permitted or required contributions) continue in effect until the Employer terminates the Plan. An Eligible Employee will not become a Participant in a Frozen Plan.

     3.02 ELECTIVE DEFERRALS. If the Plan is a 401(k) Plan and the Employer in its Adoption Agreement elects to permit Elective Deferrals, the Plan Administrator will apply the provisions of this Section 3.02. A Participant’s Elective Deferrals will be made pursuant to a Salary Reduction Agreement unless the Employer elects in its Adoption Agreement to apply the Automatic Deferral provision under Section 3.02(B) or the CODA provision under Section 3.02(C).

(A) Limitations. Except as described below regarding Catch-Up Deferrals, the Employer in its Adoption Agreement must elect the Plan limitations, if any, which apply to

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Elective Deferrals (or separately to Pre-Tax Deferrals or to Roth Deferrals, if applicable). Such Plan limitations are in addition to those mandatory limitations imposed under Article IV and under Applicable Law. In applying any such additional Plan limitation, the Plan Administrator will take into account the Compensation for Elective Deferral purposes the Employer elects in the Adoption Agreement. The Plan Administrator in the Salary Reduction Agreement form or in a Salary Reduction Agreement policy (see Section 1.54(C)) may specify additional rules and restrictions applicable to Salary Reduction Agreements. The Employer in a SIMPLE 401(k) Plan may not impose any Plan limit on Elective Deferrals except as provided under Code §408(p). See Section 3.05(C)(2) regarding limits on Elective Deferrals under a safe harbor plan. The Employer may elect a Plan limit in its Adoption Agreement, but if the Employer does not so elect, the Plan Administrator may establish or change a Plan limit on Elective Deferrals from time to time by providing notice to the Participants as is consistent with Applicable Law. Any such limit change made during a Plan Year applies only prospectively.

(B) Automatic Deferrals. The Employer in its Adoption Agreement will elect whether to apply or not apply the Automatic Deferral provisions of this Section 3.02(B).

     (1) Definition of Automatic Deferral. An Automatic Deferral is an Elective Deferral that results from the operation of this Section 3.02(B). Under the Automatic Deferral, the Employer automatically will reduce by the Automatic Deferral Amount the Compensation of each Participant affected by the Automatic Deferral under Section 3.02(B)(3), except those Participants who timely make a Contrary Election under Section 3.02(B)(4).

     (2) Definition of Automatic Deferral Amount/Increases. The Automatic Deferral Amount is the amount of Automatic Deferral which the Employer elects in its Adoption Agreement. The Employer in its Adoption Agreement may elect to apply a scheduled increase to the Automatic Deferral Amount. If a Participant subject to the Automatic Deferral elected, before the Effective Date of the Automatic Deferral, to defer an amount which is less than the Automatic Deferral Amount the Employer has elected in its Adoption Agreement, the Automatic Deferral Amount under this Section 3.02(B) includes only the incremental amount necessary to increase the Participant’s Elective Deferral to equal the Automatic Deferral Amount, including any scheduled increases thereto.

     (3) Employees or Participants subject to Automatic Deferral. If the Employer elects to apply the Automatic Deferral, the Employer in its Adoption Agreement will elect which Participants or Employees are affected by the Automatic Deferral on the Effective Date thereof and which Participants, if any, are not subject to the Automatic Deferral.

     (4) Definition of Contrary Election. A Contrary Election is a Participant’s election made after the Effective Date of the Automatic Deferral not to defer any Compensation or to defer an amount which is more or less than the Automatic Deferral Amount.

     (5) Effective Date of Contrary Election. A Participant’s Contrary Election generally is effective as of the first payroll period which follows the Participant’s Contrary Election. However, a Participant may make a Contrary Election which is effective: (a) for the first payroll period in which he/she becomes a Participant if the Participant makes a Contrary Election within a reasonable period following the Participant’s Entry Date and before the Compensation to which the Election applies becomes currently available; or (b) for the first payroll period following the Effective Date of the Automatic Deferral, if the Participant makes a Contrary Election not later than the Effective Date of the Automatic Deferral. A Participant who makes a Contrary Election is not thereafter subject to the Automatic Deferral or to any scheduled increases thereto, even if the Participant later revokes or modifies the Contrary Election. A Participant’s Contrary Election continues in effect until the Participant subsequently changes his/her Salary Reduction Agreement.

     (6) Automatic Deferral election notice. If the Employer in its Adoption Agreement elects the Automatic Deferral, the Plan Administrator must provide a notice (consistent with Applicable Law) to each Eligible Employee which explains the effect of the Automatic Deferral and a Participant’s right to make a Contrary Election, including the procedure and timing applicable to the Contrary Election. The Plan Administrator must provide the notice to an Eligible Employee a reasonable period prior to that Employee’s commencement of participation in the Plan subject to the Automatic Deferral. The Plan Administrator also must provide Participants with the effective opportunity to make a Contrary Election at least once during each Plan Year.

     (7) Treatment of Automatic Deferrals/Roth or Pre-Tax. The Plan Administrator will treat Automatic Deferrals as Elective Deferrals for all purposes under the Plan, including application of limitations, nondiscrimination testing and distributions. If the Employer in its Adoption Agreement has elected to permit Roth Deferrals, Automatic Deferrals are Pre-Tax Deferrals unless the Employer in Appendix B elects otherwise.

(C) Cash or Deferred Arrangement (CODA). The Employer in its Adoption Agreement may elect to apply the CODA provisions of this Section 3.02(C). Under a CODA, a Participant may elect to receive in cash his/her proportionate share of the Employer’s cash or deferred contribution, in accordance with the Employer’s Adoption Agreement election. A Participant’s proportionate share of the Employer’s cash or deferred contribution is the percentage of the total cash or deferred contribution which bears the same ratio that the Participant’s Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. For purposes of determining each Participant’s proportionate share of the cash or deferred contribution, a Participant’s Compensation is his/her Compensation for Nonelective Contribution allocations (unless the Employer elects otherwise in its Adoption Agreement) as determined under Section 1.11, excluding any effect the proportionate share may have on the Participant’s Compensation for the Plan Year. The Plan Administrator will determine the proportionate share prior to the Employer’s actual contribution to the Trust, to provide the Participants with the opportunity to file cash elections. The Employer will pay directly to the Participant the portion of his/her proportionate share the Participant has elected to receive in cash.

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(D) Catch-Up Deferrals. The Employer in its Adoption Agreement will elect whether or not to permit Catch-Up Eligible Participants to make Catch-Up Deferrals to the Plan under this Section 3.02(D).

     (1) Definition of Catch-Up Eligible Participant. A Catch-Up Eligible Participant is a Participant who is eligible to make Elective Deferrals and who has attained at least age 50 or who will attain age 50 before the end of the Taxable Year in which he/she will make a Catch-Up Deferral. A Participant who dies or who incurs a Separation from Service before actually attaining age 50 in such Taxable Year is a Catch-Up Eligible Participant.

     (2) Definition of Catch-Up Deferral. A Catch-Up Deferral is an Elective Deferral by a Catch-up Eligible Participant and which exceeds: (a) a Plan limit on Elective Deferrals under Section 3.02(A); (b) the Annual Additions Limit under Section 4.05(B); (c) the Elective Deferral Limit under Section 4.10(A); or (d) the ADP Limit under Section 4.10(B).

     (3) Limit on Catch-Up Deferrals. A Participant’s Catch-Up Deferrals for a Taxable Year may not exceed the lesser of: (a) 100% of the Participant’s Compensation for the Taxable Year when added to the Participant’s other Elective Deferrals; or (b) the Catch-Up Deferral dollar limit in effect for the Taxable Year as set forth below:

Year	Non-SIMPLE Plan		SIMPLE Plan
2002	$	1,000	$	500
2003	$	2,000	$	1,000
2004	$	3,000	$	1,500
2005	$	4,000	$	2,000
2006	$	5,000	$	2,500

     (4) Adjustment after 2006. After the 2006 Taxable Year, the Secretary of the Treasury will adjust the Catch-Up Deferral dollar limit in multiples of $500 under Code §414(v)(2)(C).

     (5) Treatment of Catch-Up Deferrals. Catch-Up Deferrals are not: (a) subject to the Annual Additions Limit under Section 4.05(B); (b) subject to the Elective Deferral Limit under Section 4.10(A); (c) included in a Participant’s ADR in calculating the Plan’s ADP under Section 4.10(B); or (d) taken into account in determining the Highest Contribution Rate under Section 10.06(E). Catch-Up Deferrals are taken into account in determining the Plan’s Top-Heavy Ratio under Section 10.06(K). Otherwise, Catch-Up Deferrals are treated as other Elective Deferrals.

     (6) Universal availability. If the Employer permits Catch-Up Deferrals to its Plan, the right of all Catch-Up Eligible Participants to make Catch-Up Deferrals must satisfy the universal availability requirement of Treas. Reg. §1.414(v)-1(e). If the Employer maintains more than one applicable plan within the meaning of Treas. Reg. §1.414(v)-1(g)(1), and any of the applicable plans permit Catch-Up Deferrals, then any Catch-up Eligible Participant in any such plans must be permitted to have the same effective opportunity to make the same dollar amount of Catch-Up Deferrals. Any Plan-imposed limit on total Elective Deferrals including Catch-Up Deferrals may not be less than 75% of a Participant’s gross Compensation.

(E) Roth Deferrals. Effective for Taxable Years beginning in 2006, the Employer in its 401(k) Plan Adoption Agreement may elect to permit Roth Deferrals. The Employer must also elect to permit Pre-Tax Deferrals if the Employer elects to permit Roth Deferrals. The Plan Administrator will administer Roth Deferrals in accordance with this Section 3.02(E).

     (1) Treatment of Roth Deferrals. The Plan Administrator will treat Roth Deferrals as Elective Deferrals for all purposes of the Plan, except where the Plan or Applicable Law indicate otherwise.

     (2) Separate accounting. The Plan Administrator will establish a Roth Deferral Account for each Participant who makes any Roth Deferrals and Earnings thereon in accordance with Section 7.04(A)(1). The Plan Administrator will establish a Pre-Tax Account and Earnings thereon for each Participant who makes any Pre-Tax Deferrals in accordance with Section 7.04(A)(1). The Plan Administrator will credit only Roth Deferrals and Earnings thereon (allocated on a reasonable and consistent basis) to a Participant’s Roth Deferral Account.

     (3) No re-classification. An Elective Deferral contributed to the Plan either as a Pre-Tax Deferral or as a Roth Deferral may not be re-classified as the other type of Elective Deferral.

(F) Elective Deferrals as Employer Contributions. Where the context requires under the Plan, Elective Deferrals are Employer Contributions except: (1) under Section 3.04 relating to allocation of Employer Contributions; (2) under Section 3.06 relating to allocation conditions; (3) under Section 5.03 relating to vesting; and (4) where the Code prohibits the use of Elective Deferrals to satisfy qualified plan requirements.

     3.03 MATCHING CONTRIBUTIONS. If the Employer elects in its Adoption Agreement to provide for Matching Contributions (or if Section 3.03(C)(2) applies), the Plan Administrator will apply the provisions of this Section 3.03.

(A) Matching Formula: Type, Rate/Amount, Limitations and Time Period. The Employer in its Adoption Agreement must elect the type(s) of Matching Contributions (Fixed or Discretionary Matching Contributions), and as applicable, the Matching Contribution rate(s)/amount(s), the limit(s) on Elective Deferrals or Employee Contributions subject to match, the limit(s) on the amount of Matching Contributions, and the time period the Plan Administrator will apply in the computation of any Matching Contributions. If the Employer in its Adoption Agreement elects to apply any limit on Matching Contributions based on pay periods or on any other time period which is less than the Plan Year, the Plan Administrator will determine the limits in accordance with the time period specified and will not take into account any other Compensation or Elective Deferrals not within the applicable time period, even in the case of a Participant who becomes eligible for the match mid-Plan Year and regardless of the Employer’s election as to Pre-Entry Compensation.

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     (1) Fixed Match. The Employer in its Adoption Agreement may elect to make a Fixed Matching Contribution to the Plan under one or more formulas.

          (a) Allocation. The Employer may contribute on a Participant’s behalf under a Fixed Matching Contribution formula only to the extent that the Participant makes Elective Deferrals or Employee Contributions which are subject to the formula and if the Participant satisfies the allocation conditions for Fixed Matching Contributions, if any, the Employer elects in its Adoption Agreement.

     (2) Discretionary Match. The Employer in its Adoption Agreement may elect to make a Discretionary Matching Contribution to the Plan.

          (a) Allocation. To the extent the Employer makes Discretionary Matching Contributions, the Plan Administrator will allocate the Discretionary Matching Contributions to the Account of each Participant entitled to the match under the Employer’s discretionary matching allocation formula and who satisfies the allocation conditions for Discretionary Matching Contributions, if any, the Employer elects in its Adoption Agreement. The Employer under a Discretionary Matching Contribution retains discretion over the amount of its Matching Contributions, and, except as the Employer otherwise elects in its Adoption Agreement, the Employer also retains discretion over the matching formula. See Section 1.34(B).

     (3) Roth Deferrals. Unless the Employer elects otherwise in its Adoption Agreement, the Employer’s Matching Contributions apply in the same manner to Roth Deferrals as they apply to Pre-Tax Deferrals.

     (4) Contribution timing. Except as described in Section 3.05 regarding a Safe Harbor 401(k) Plan, the time period that the Employer elects for computing its Matching Contributions does not require that the Employer actually contribute the Matching Contribution at any particular time. As to Matching Contribution timing and the ACP test, see Section 4.10(C)(5)(e)(iii).

     (5) Participating Employers. If any Participating Employers contribute Matching Contributions to the Plan, the Employer in its Adoption Agreement must elect: (a) whether each Participating Employer will be subject to the same or different Matching Contribution formulas than the Signatory Employer; and (b) whether the Plan Administrator will allocate Matching Contributions only to Participants directly employed by the contributing Employer or to all Participants regardless of which Employer contributes or how much any Employer contributes. The allocation of Matching Contributions under this Section 3.03(A)(5) also applies to the allocation of any forfeiture attributable to Matching Contributions and which the Plan allocates to Participants.

(B) Regular Matching Contributions. If the Employer in its Adoption Agreement elects to make Matching Contributions, such contributions are Regular Matching Contributions unless: (i) the Employer in its Adoption Agreement elects to treat some or all Matching Contributions as a Plan-Designated QMAC under Section 3.03(C)(1); or (ii) the Employer makes an Operational QMAC under Section 3.03(C)(2).

     (1) Separate Account. The Plan Administrator will establish a separate Regular Matching Contribution Account for each Participant who receives an allocation of Regular Matching Contributions in accordance with Section 7.04(A)(1).

(C) QMAC. The provisions of this Section 3.03(C) apply to QMAC contributions.

     (1) Plan –Designated QMAC. The Employer in its 401(k) Plan Adoption Agreement will elect whether or not to treat some or all Matching Contributions as a QMAC (“Plan-Designated QMAC”). If The Employer elects any Plan-Designated QMAC, the Employer in its Adoption Agreement will elect whether to allocate the QMAC to all Participants or only to NHCE Participants. The Plan Administrator will allocate a Plan-Designated QMAC only to those Participants who have satisfied eligibility conditions under Article II to receive Matching Contributions (or if applicable, to receive QMACs) and who have satisfied any allocation conditions under Section 3.06 the Employer has elected in the Adoption Agreement as applicable to QMACs.

     (2) Operational QMAC. The Employer, to facilitate the Plan Administrator’s correction of test failures under Section 4.10, (or to lessen the degree of such failures), but only if the Plan is using Current Year Testing, also may make Discretionary Matching Contributions as QMACs to the Plan (“Operational QMAC”), irrespective of whether the Employer in its Adoption Agreement has elected to provide for any Matching Contributions or Plan-Designated QMACs. The Plan Administrator, in its discretion, will allocate the Operational QMAC, but will limit the allocation of any Operational QMAC only to some or all NHCEs who are ADP Participants or ACP Participants under Sections 4.11(A) and (B). The Plan Administrator may allocate an Operational QMAC to any such NHCE Participants who are eligible to make (and who actually make) Elective Deferrals or Employee Contributions even if such Participants have not satisfied any eligibility conditions under Article II applicable to Matching Contributions (including QMACs) or have not satisfied any allocation conditions under Section 3.06 applicable to Matching Contributions (or to QMACs). Where the Plan Administrator disaggregates the Plan for coverage and for nondiscrimination testing under the “otherwise excludible employees” rule described in Section 4.06(C), the Plan Administrator also may limit the QMAC allocation to those NHCEs in any disaggregated plan which actually is subject to ADP and ACP testing (because there are HCEs in that disaggregated plan).

     (3) Separate Account. The Plan Administrator will establish a separate QMAC Account for each Participant who receives an allocation of QMACs in accordance with Section 7.04(A)(1).

(D) Matching Catch-Up Deferrals. The Employer in its 401(k) Plan Adoption Agreement must elect whether or not to match any Catch-Up Deferrals if the Plan permits Catch-Up Deferrals. The Employer’s election to match Catch-Up Deferrals will apply to all Matching Contributions or will specify the Fixed Matching Contributions or Discretionary Matching Contributions which apply to the Catch-Up Deferrals. Regardless of the Employer’s Adoption Agreement

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election, in a Safe Harbor 401(k) Plan, the Plan will apply the Basic Matching Contribution or Enhanced Matching Contribution to Catch-Up Deferrals and if the Plan will satisfy the ACP test safe harbor under Section 3.05(G), the Employer will apply, any Additional Matching Contribution to Catch-Up Deferrals.

(E) Targeting Limitations. Matching Contributions, for nondiscrimination testing purposes, are subject to the targeting limitations in Section 4.10(D). The Employer will not make an Operational QMAC in an amount which exceeds the targeting limitations.

     3.04 NONELECTIVE/ EMPLOYER CONTRIBU-TIONS. If the Employer elects to provide for Nonelective Contributions to a Profit Sharing Plan or 401(k) Plan (or if Section 3.04(C)(2) applies), or the Plan is a Money Purchase Pension Plan or a Target Benefit Plan, the Plan Administrator will apply the provisions of this Section 3.04.

(A) Amount and Type. The Employer in its Adoption Agreement must elect the type and amount of Nonelective Contributions or other Employer Contributions.

     (1) Discretionary Nonelective Contribution. The Employer in its Adoption Agreement may elect to make Discretionary Nonelective Contributions.

     (2) Fixed Nonelective or other Employer Contributions. The Employer in its Adoption Agreement may elect to make Fixed Nonelective Contributions or Money Purchase Pension Plan or Target Benefit Plan Contributions. The Employer must specify the time period to which any fixed contribution formula will apply (which is deemed to be the Plan Year if the Employer does not so specify) and must elect the allocation method which may be the same as the contribution formula or may be a different allocation method under Section 3.04(B).

     (3) Prevailing Wage Contribution. The Employer in its Nonstandardized Plan or Volume Submitter Plan may elect to make fixed Employer Contributions pursuant to a Prevailing Wage Contract. In such event, the Employer’s Prevailing Wage Contributions will be made in accordance with the Prevailing Wage Contract, based on hourly rate, employment category, employment classification and such other factors as such contract specifies. The Employer in its Adoption Agreement must elect whether to offset the Employer Contributions (which are not Prevailing Wage Contributions) to this Plan or to another Employer plan, by the amount of the Participant’s Prevailing Wage Contributions. To offset any Employer Contribution, the Prevailing Wage Contribution must comply with any distribution restriction under Section 6.01(C)(4) otherwise applicable to the Employer Contribution being offset and the Plan Administrator must account for the Prevailing Wage Contribution accordingly. See Section 5.03(E) regarding vesting of Prevailing Wage Contributions.

     (4) Participating Employers. If any Participating Employers contribute Nonelective Contributions or other Employer Contributions to the Plan, the Employer in its Adoption Agreement must elect: (a) whether each Participating Employer will be subject to the same or different Nonelective/Employer Contribution formulas under Section 3.04(A) and allocation methods under Section 3.04(B) than the Signatory Employer; and (b) whether, under Section 3.04(B), the Plan Administrator will allocate Nonelective/Employer Contributions only to Participants directly employed by the contributing Employer or to all Participants regardless of which Employer contributes or how much any Employer contributes. The allocation of Nonelective/Employer Contributions under this Section 3.04(A)(4) also applies to the allocation of any forfeiture attributable to Nonelective/Employer Contributions and which the Plan allocates to Participants.

(B) Method of Allocation. The Employer in its Adoption Agreement must specify the method of allocating Nonelective Contributions or other Employer Contributions to the Trust. The Plan Administrator will apply this Section 3.04(B) by including in the allocation only those Participants who have satisfied the Plan’s allocation conditions under Section 3.06, if any, applicable to the contribution. The Plan Administrator, in allocating a contribution under any allocation formula which is based in whole or in part on Compensation, will take into account Compensation under Section 1.11 as the Employer elects in its Adoption Agreement and only will take into account the Compensation of the Participants entitled to an allocation. In addition, if the Employer has elected in its Adoption Agreement to define allocation Compensation over a time period which is less than a full Plan Year, the Plan Administrator will apply the allocation methods in this Section 3.04(B) based on Participant Compensation within the relevant time period.

     (1) Pro rata allocation formula. The Employer in its Adoption Agreement may elect a pro rata allocation formula. Under a pro rata allocation formula, the Plan Administrator will allocate the Employer Contributions for a Plan Year in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year.

     (2) Permitted disparity allocation formula. The Employer in its Adoption Agreement may elect a two-tiered or a four-tiered permitted disparity formula, providing allocations described in (a) or (b) below, respectively.

          (a) Two-tiered.

               (i) Tier one. Under the first tier, the Plan Administrator will allocate the Employer Contributions for a Plan Year in the same ratio that each Participant’s Compensation plus Excess Compensation (as the Employer defines that term in its Adoption Agreement) for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this first tier, as a percentage of each Participant’s Compensation plus Excess Compensation, must not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under Section 3.04(B)(2)(c).

               (ii) Tier two. Under the second tier, the Plan Administrator will allocate any remaining Employer Contributions for a Plan Year in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year.

          (b) Four-tiered.

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               (i) Tier one. Under the first tier, the Plan Administrator will allocate the Employer Contributions for a Plan Year in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant’s Compensation. Solely for purposes of this first tier allocation, a “Participant” means, in addition to any Participant who satisfies the allocation conditions of Section 3.06 for the Plan Year, any other Participant entitled to a Top-Heavy Minimum Allocation.

               (ii) Tier two. Under the second tier, the Plan Administrator will allocate the Employer Contributions for a Plan Year in the same ratio that each Participant’s Excess Compensation (as the Employer defines that term in its Adoption Agreement) for the Plan Year bears to the total Excess Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant’s Excess Compensation.

               (iii) Tier three. Under the third tier, the Plan Administrator will allocate the Employer Contributions for a Plan Year in the same ratio that each Participant’s Compensation plus Excess Compensation for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this third tier, as a percentage of each Participant’s Compensation plus Excess Compensation, must not exceed the applicable percentage (2.7%, 2.4% or 1.3%) listed under Section 3.04(B)(2)(c).

               (iv) Tier four. Under the fourth tier, the Plan Administrator will allocate any remaining Employer Contributions for a Plan Year in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year.

          (c) Maximum disparity table. For purposes of the permitted disparity allocation formulas under this Section 3.04(B)(2), the applicable percentage is:

Integration level %	Applicable % for			Applicable % for
of taxable wage base	2-tiered formula			4-tiered formula
100%		5.7	%		2.7	%
More than 80% but less than 100%		5.4	%		2.4	%
More than 20% (but not less than $10,001) and not more than 80%		4.3	%		1.3	%
20% (or $10,000, if greater) or less		5.7	%		2.7	%

          (d) Overall permitted disparity limits.

               (i) Annual overall permitted disparity limit. Notwithstanding Sections 3.04(B)(2)(a) and (b), for any Plan Year the Plan benefits any Participant who benefits under another qualified plan or under a simplified employee pension plan (as defined in Code §408(k)) maintained by the Employer that provides for permitted disparity (or imputes disparity), the Plan Administrator will allocate Employer Contributions to the Account of each Participant in the same ratio that each Participant’s Compensation bears to the total Compensation of all Participants for the Plan Year.

               (ii) Cumulative permitted disparity limit. Effective for Plan Years beginning after December 31, 1994, the cumulative permitted disparity limit for a Participant is 35 total cumulative permitted disparity years. “Total cumulative permitted disparity years” means the number of years credited to the Participant for allocation or accrual purposes under the Plan, any other qualified plan or simplified employee pension plan (whether or not terminated) ever maintained by the Employer. For purposes of determining the Participant’s cumulative permitted disparity limit, the Plan Administrator will treat all years ending in the same calendar year as the same year. If the Participant has not benefited under a Defined Benefit Plan or under a Target Benefit Plan of the Employer for any year beginning after December 31, 1993, the Participant does not have a cumulative permitted disparity limit.

     For purposes of this Section 3.04(B)(2)(d), a Participant “benefits” under a plan for any Plan Year during which the Participant receives, or is deemed to receive, a contribution allocation in accordance with Treas. Reg. §1.410(b)-3(a).

          (e) Pro-ration of integration level. In the event that the Plan Year is less than 12 months and the Plan Administrator will allocate the Employer Contribution based on Compensation for the short Plan Year, the Plan Administrator will pro rate the integration level based on the number of months in the short Plan Year. The Plan Administrator will not pro rate the integration level in the case of: (i) a Participant who participates in the Plan for less than the entire 12 month Plan Year and whose allocation is based on Participating Compensation; (ii) a new Plan established mid-Plan Year, but with an Effective Date which is as of the beginning of the Plan Year; or (iii) a terminating Plan which bases allocations on Compensation through the effective date of the termination, but where the Plan Year continues for the balance of the full 12 month Plan Year.

     (3) Classifications allocation formula. The Employer in its Nonstandardized Plan or Volume Submitter Plan may elect to specify classifications of Participants to whom the Plan Administrator will allocate any Employer Contribution.

          (a) Volume Submitter. The Employer in its Volume Submitter Plan may elect to specify any number of classifications and a classification may consist of any number of Participants. The Employer also may elect to put each Participant in his/her own classification. The Plan Administrator will apportion the Employer Contribution for a Plan Year to the classifications as the Employer designates at the time that the Employer makes the contribution. If there is more than one Participant in a classification, the Plan Administrator will allocate the Employer Contribution for the Plan Year within each classification as the Employer elects in its Adoption Agreement which may be: (i) in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Plan Year Compensation for all Participants within the same classification (pro rata); or (ii) the same dollar amount to each Participant within a classification. If a

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Participant during a Plan Year shifts from one classification to another, the Plan Administrator will apportion the Participant’s allocation during that Plan Year pro rata based on the Participant’s Compensation while a member of each classification, unless the Employer in Appendix B: (i) specifies apportionment based on the number of months or days a Participant spends in a classification; or (ii) elects that the Employer in a nondiscriminatory manner will direct the Plan Administrator as to which classification the Participant will participate in during that entire Plan Year.

          (b) Nonstandardized Plan. The Employer in its Nonstandardized Plan may elect to specify any number of classifications and a classification may consist of any number of Participants. The Employer also may elect to put each Participant in his/her own classification. Notwithstanding the foregoing, each NHCE classification must be reasonable as described in Treas. Reg. §1.410(b)-4(b) and the maximum number of HCE and NHCE allocation rates is restricted as described below. The Plan Administrator will apportion the Employer Contribution for a Plan Year to the classifications as the Employer designates at the time that the Employer makes the contribution. If there is more than one Participant in a classification, the Plan Administrator will allocate the Employer Contribution for the Plan Year within each classification in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Plan Year Compensation for all Participants within the same classification (pro rata). The maximum number of allocation rates that the Plan may have during a Plan Year: (i) in the case of HCEs, is the number of eligible HCEs with a limit of 25 allocation rates; and (ii) in the case of the NHCEs, is as follows:

Number of eligible NHCEs	Allocation rates
2 or less		1
3-8		2
9-11		3
12-19		4
20-29		5
30 or more	see below

If there are 30 or more eligible NHCEs, the maximum number of allocation rates is equal to the number of eligible NHCEs, divided by the number 5 (rounded to the next lowest whole number if the result is not a whole number), with a maximum of 25 allocation rates. For this purpose, an “allocation rate” is the Participant’s allocation under this Section 3.04(B)(3)(b), divided by Compensation for nondiscrimination testing under Section 1.11(F). If, in any Plan Year, the number of classifications the Employer has elected in the Adoption Agreement exceeds the maximum number of allocation rates, the Employer will direct the Plan Administrator to allocate the Employer Contribution in a manner that results in more than one classification receiving the same allocation rate, and as is sufficient to bring the number of allocation rates within limits. If a Participant during a Plan Year shifts from one classification to another, the Employer in a nondiscriminatory manner will direct the Plan Administrator as to which classification the Participant will participate in during that entire Plan Year; a Participant may not participate in more than one classification during a Plan Year. The limitations of this Section 3.04(B)(3)(b) apply if the Employer’s adoption of this Plan is a new Plan and in the case of a Restated Plan, these limitations apply for Plan Years which begin after the date the Employer executes the Restated Plan, For Plan Years up to and including the Plan year in which the Employer adopts the Plan as a Restated Plan, the Employer will apply the Plan terms as in effect under the prior Plan.

     (4) Super-integrated allocation formula. The Employer in its Volume Submitter Plan may elect a super-integrated allocation formula. The Plan Administrator will allocate the Employer Contribution for the Plan Year in accordance with the tiers of priority that the Employer elects in its Adoption Agreement. The Plan Administrator will not allocate to the tier with the next lower priority until the Employer has contributed an amount sufficient to maximize the allocation under the immediately preceding tier.

     (5) Age-based allocation formula. The Employer in its Nonstandardized Plan or Volume Submitter Plan may elect an age-based allocation formula. The Plan Administrator will allocate the Employer Contribution for the Plan Year in the same ratio that each Participant’s Benefit Factor for the Plan Year bears to the sum of the Benefit Factors of all Participants for the Plan Year.

          (a) Definition of Benefit Factor. A Participant’s Benefit Factor is his/her Compensation for the Plan Year multiplied by the Participant’s Actuarial Factor.

          (b) Definition of Actuarial Factor. A Participant’s Actuarial Factor is the factor that the Plan Administrator establishes based on the interest rate and mortality table the Employer elects in its Adoption Agreement. If the Employer elects to use the UP-1984 table, a Participant’s Actuarial Factor is the factor in Table I of Appendix D to the Adoption Agreement or is the product of the factors in Tables I and II of Appendix D to the Adoption Agreement if the Plan’s Normal Retirement Age is not age 65. If the Employer in its Adoption Agreement elects to use a table other than the UP-1984 table, the Plan Administrator will determine a Participant’s Actuarial Factor in accordance with the designated table (which the Employer will attach to the Adoption Agreement as a substituted Appendix D) and the Adoption Agreement elected interest rate.

     (6) Uniform points allocation formula. The Employer in its Nonstandardized Plan or Volume Submitter Plan may elect a uniform points allocation formula. The Plan Administrator will allocate any Employer Contribution for a Plan Year in the same ratio that each Participant’s points bear to the total points of all Participants for the Plan Year. The Plan Administrator determines a Participant’s points in accordance with the Employer’s Adoption Agreement elections under which the Employer will elect to define points based on Years of Service, Compensation and/or age.

     (7) Incorporation of fixed or Prevailing Wage Contribution formula. The Employer in its Adoption Agreement may elect to allocate Employer Contributions in accordance with the Plan’s fixed Employer Contribution formula. In such event, the Plan Administrator will allocate the Employer Contributions for a Plan Year in accordance with the Fixed Nonelective or other Employer Contribution formula or in accordance with the Prevailing Wage

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Contribution formula the Employer has elected under Sections 3.04(A)(2) or (3).

     (8) Target Benefit/Money Purchase allocation formula. The Plan Administrator will allocate the Employer Contributions for a Plan Year to its Money Purchase Pension Plan or to its Target Benefit Plan as provided in the Employer’s Adoption Agreement.

(C) QNEC. The provisions of this Section 3.04(C) apply to QNEC contributions.

     (1) Plan –Designated QNEC. The Employer in its 401(k) Plan Adoption Agreement will elect whether or not to treat some or all Nonelective Contributions as a QNEC (“Plan-Designated QNEC”). If The Employer elects any Plan-Designated QNECs, the Employer in its Adoption Agreement will elect whether to allocate a Plan-Designated QNEC to all Participants or only to NHCE Participants and the Employer in its Adoption Agreement also must elect a QNEC allocation method as follows: (a) pro rata in relation to Compensation; (b) in the same dollar amount without regard to Compensation (flat dollar); (c) under the reverse allocation method; or (d) under any other method subject to the testing limitations of Section 3.04(C)(5). The Plan Administrator will allocate an QNEC under this Section 3.04(C)(1) only to those Participants who have satisfied eligibility conditions under Article II to receive Nonelective Contributions (or if applicable, to QNECs) and who have satisfied any allocation conditions under Section 3.06 the Employer has elected in the Adoption Agreement as applicable to QNECs.

     (2) Operational QNEC. The Employer, to facilitate the Plan Administrator’s correction of test failures under Section 4.10, (or to lessen the degree of such failures), but only if the Plan is using Current Year Testing, also may make Discretionary Nonelective Contributions as QNECs to the Plan (“Operational QNEC”), irrespective of whether the Employer in its Adoption Agreement has elected to provide for any Nonelective Contributions or Plan-Designated QNECs. The Plan Administrator, in its discretion, will allocate the Operational QNEC, but will limit the allocation of any Operational QNEC only to some or all NHCE Participants who are ADP Participants or ACP Participants) under Sections 4.11(A) and (B). The Plan Administrator operationally must elect whether to allocate an Operational QNEC to NHCE ADP Participants: (a) pro rata in relation to Compensation; (b) in the same dollar amount without regard to Compensation (flat dollar); (c) under the reverse allocation method; or (d) under any other method; provided, that any QNEC allocation is subject to the limitations of Section 3.04(C)(5). The Plan Administrator may allocate an Operational QNEC to any NHCE ADP or ACP Participants even if such Participants have not satisfied any eligibility conditions under Article II applicable to Nonelective Contributions (including QNECs) or have not satisfied any allocation conditions under Section 3.06 applicable to Nonelective Contributions (or to QNECs). Where the Plan Administrator disaggregates the Plan for coverage and for nondiscrimination testing under the “otherwise excludible employees” rule described in Section 4.06(C), the Plan Administrator also may limit the QNEC allocation to those NHCEs in any disaggregated “plan” which actually is subject to ADP and ACP testing (because there are HCEs in that disaggregated plan), The Employer may designate all or any part of its Prevailing Wage Contribution as a QNEC, provided that the Prevailing Wage Contribution qualifies as a QNEC and that QNEC treatment is not inconsistent with the Prevailing Wage Contract.

     (3) Reverse QNEC allocation. Under the reverse QNEC allocation method, the Plan Administrator (subject to Section 3.06 if applicable), will allocate a QNEC first to the NHCE Participant(s) with the lowest Compensation for the Plan Year in an amount not exceeding the Annual Additions Limit for each Participant, with any remaining amounts allocated to the next highest paid NHCE Participant(s) not exceeding his/her Annual Additions Limit and continuing in this manner until the Plan Administrator has fully allocated the QNEC.

     (4) Separate Account. The Plan Administrator will establish a separate QNEC Account for each Participant who receives an allocation of QNECs in accordance with Section 7.04(A)(1).

     (5) Anti-conditioning and targeting. The Employer in its Adoption Agreement and the Plan Administrator in operation may not condition the allocation of any QNEC under this Section 3.04(C), on whether a Participant has made Elective Deferrals. The nondiscrimination testing of QNECs also is subject to the targeting limitations of Section 4.10(D). The Employer will not make an Operational QNEC in an amount which exceeds the targeting limitations.

     (6) Standardized Plan limitation. The Employer in its Standardized Plan may not elect a reverse QNEC allocation method or any similar QNEC allocation method even if such allocation would comply with Section 3.04(C)(5).

(D) Qualified Replacement Plan. The Employer may establish or maintain this Plan as a qualified replacement plan as described in Code §4980 under which the Plan may receive a Transfer from a terminating qualified plan the Employer also maintains. The Plan Administrator will credit the transferred amounts to a suspense account under the Plan and thereafter the Plan Administrator will allocate the transferred amounts under this Section 3.04(D) in the same manner as the Plan Administrator allocates Employer Nonelective Contributions.

     3.05 SAFE HARBOR 401(k) CONTRIBUTIONS. The Employer in its 401(k) Plan Adoption Agreement may elect to apply to its Plan the safe harbor provisions of this Section 3.05.

(A) Prior Election and Notice/12 Month Plan Year. Except as otherwise provided in this Plan or in accordance with Applicable Law, an Employer: (i) prior to beginning of the Plan Year to which the safe harbor provisions apply, must elect the safe harbor plan provisions of this Section 3.05; (ii) prior to the beginning of the Plan Year to which the safe harbor provisions apply, must satisfy the applicable notice requirements; and (iii) must apply the safe harbor provisions for the entire 12 month safe harbor Plan Year.

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     (1) Short Plan Year. An Employer’s Plan may be a Safe Harbor 401(k) Plan in a short Plan Year: (a) as provided in Sections 3.05(I)(3) or (4), relating to the initial safe harbor Plan Year; (b) after the Final 401(k) Regulations Effective Date if the Employer creates a short Plan Year by changing its Plan Year, provided that the Employer maintains the Plan as a Safe Harbor 401(k) Plan in the Plan Years both before and after the short Plan Year as described in Treas. Reg. §1.401(k)-3(e)(3); or (c) after the Final 401(k) Regulations Effective Date if the short Plan Year is the result of the Employer’s termination of the Plan under Section 3.05(I)(5).

(B) Effect/Remaining Terms/Testing Status. The provisions of this Section 3.05 apply to an electing Employer notwithstanding any contrary provision of the Plan and all other remaining Plan terms continue to apply to the Employer’s Safe Harbor 401(k) Plan. An Employer which elects and operationally satisfies the safe harbor provisions of this Section 3.05 is not subject to the nondiscrimination provisions of Section 4.10(B) (ADP test). An electing Employer which provides for an Enhanced Matching Contribution under Section 3.05(E)(5) or for Additional Matching Contributions under Section 3.05(F) is subject to the nondiscrimination provisions of Section 4.10(C) (ACP test), unless the Employer elects in its Adoption Agreement to apply the ACP test safe harbor described in Section 3.05(G) If the Plan is a Safe Harbor 401(k) Plan, for purposes of testing in future (non-safe harbor) Plan Years, the Plan in the safe harbor Plan Year is deemed to be using Current Year Testing as to the ADP test and is deemed to be using Current Year Testing for the ACP test if the Plan in the safe harbor Plan Year satisfies the ACP test safe harbor. If a Safe Harbor 401(k) Plan is subject to Sections 3.05(I)(1) or (2), the Plan in such Plan Year is deemed to be using Current Year Testing for both the ADP and ACP tests..

(C) Compensation for Allocation. In allocating Safe Harbor Contributions and Additional Matching Contributions that satisfy the ACP test safe harbor under Section 3.05(G) and for Elective Deferral allocation under this Section 3.05, the following provisions apply:

     (1) Safe Harbor and Additional Matching allocation. For purposes of allocating the Employer’s Safe Harbor Contributions and ACP test safe harbor Additional Matching Contributions, if any, Compensation is limited as described in Section 1.11(E) and Employer must elect under its Adoption Agreement a nondiscriminatory definition of Compensation as described in Section 1.11(F). The Employer in its Adoption Agreement may not elect to limit NHCE Compensation to a specified dollar amount, except as required under Section 1.11(E).

     (2) Deferral allocation. An Employer in its Adoption Agreement may elect to limit the type of Compensation from which a Participant may make an Elective Deferral to any reasonable definition. The Employer in its Adoption Agreement also may elect to limit the amount of a Participant’s Elective Deferrals to a whole percentage of Compensation or to a whole dollar amount, provided each Eligible NHCE Participant may make Elective Deferrals in an amount sufficient to receive the maximum Matching Contribution, if any, available under the Plan and may defer any lesser amount. However, a Participant may not make Elective Deferrals in the event that the Participant is suspended from doing so under Section 6.07(A)(2), relating to hardship distributions or to the extent that the allocation would exceed a Participant’s Annual Additions Limit in Section 4.05(B) or the maximum Deferral Limit in Section 4.10(A). If the Plan permits Roth Deferrals in addition to Pre-Tax Deferrals, Elective Deferrals for purposes of Section 3.05 includes both Roth Deferrals and Pre-Tax Deferrals.

(D) “Early” Elective Deferrals/Delay of Safe Harbor Contribution. If the Employer in its Adoption Agreement elects any age and service eligibility requirements for Elective Deferrals that are less than age 21 and one Year of Service (with one Year of Service being defined as completion of 1,000 Hours of Service during the relevant Eligibility Computation Period), the Employer in its Adoption Agreement may elect to limit Safe Harbor Contributions to the Participants who have attained age 21 and who have satisfied the foregoing one Year of Service requirement. The Plan Administrator under this Adoption Agreement election will apply the OEE rule under Section 4.06(C) and will perform the ADP (and ACP) tests as necessary for the Participants who are in the disaggregated plan which benefits the “Otherwise Excludible Employees.” The disaggregated plan which benefits the “Includible Employees” is a Safe Harbor 401(k) Plan under this Section 3.05. However, nothing in this Section 3.05(D) affects the obligation of the Employer under Article X in the event that the Plan is top-heavy, to provide a Top-Heavy Minimum Allocation for Non-Key Employee Participants in the Elective Deferral component of the Plan who have not satisfied the age and service requirements applicable to the Safe Harbor Contributions. Under this Section 3.05(D), eligibility for Additional Matching Contributions and for Nonelective Contributions which are not Safe Harbor Nonelective Contributions is controlled by the Employer’s Adoption Agreement elections and is not necessarily limited to age 21 and one Year of Service as is the case for Safe Harbor Contributions. However, as to ACP test safe harbor treatment for Additional Matching Contributions, see Section 3.05(F)(3).

(E) Safe Harbor Contributions/ADP Test Safe Harbor. An Employer which elects under this Section 3.05(E) to apply the safe harbor provisions, must satisfy the ADP test safe harbor contribution requirement under Code §401(k)(12) by making a Safe Harbor Contribution to the Plan. Except as otherwise provided in this Section 3.05, the Employer must make its Safe Harbor Contributions (and any Additional Matching Contributions which will satisfy the ACP test safe harbor), no later than twelve months after the end of the Plan Year to which such contributions are allocated. If the Employer satisfies this Section 3.05(E) and the remaining applicable provisions of Section 3.05, Elective Deferrals are not subject to nondiscrimination testing under Section 4.10(B) (ADP test). The Employer in its Adoption Agreement may elect to apply forfeitures toward satisfaction of the Employer’s required Safe Harbor Contribution.

     (1) Definition of Safe Harbor Contribution. A Safe Harbor Contribution is a Safe Harbor Nonelective Contribution or a Safe Harbor Matching Contribution as the Employer elects in its Adoption Agreement.

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     (2) Definition of Safe Harbor Nonelective Contribution. A Safe Harbor Nonelective Contribution is a Fixed Nonelective Contribution in an amount the Employer elects in its Adoption Agreement, which must equal at least 3% of each Participant’s Compensation unless the Employer elects to limit Safe Harbor Nonelective Contributions to NHCEs under Section 3.05(E)(8) or unless Section 3.05(D) applies. A Safe Harbor Nonelective Contribution is a QNEC.

     (3) Definition of Safe Harbor Matching Contribution. A Safe Harbor Matching Contribution is a Basic Matching Contribution or an Enhanced Matching Contribution. Under a Safe Harbor Matching Contribution an HCE may not receive a greater rate of match at any level of Elective Deferrals than any NHCE. A Safe Harbor Matching Contribution is a QMAC.

     (4) Definition of Basic Matching Contribution. A Basic Matching Contribution is a Fixed Matching Contribution equal to 100% of a Participant’s Elective Deferrals which do not exceed 3% of Compensation, plus 50% of Elective Deferrals which exceed 3%, but do not exceed 5% of Compensation.

     (5) Definition of Enhanced Matching Contribution. An Enhanced Matching Contribution is a Fixed Matching Contribution made in accordance with any formula the Employer elects in its Adoption Agreement under which: (a) at any rate of Elective Deferrals, a Participant receives a Matching Contribution which is at least equal to the match the Participant would receive under the Basic Matching Contribution formula; and (b) the rate of match does not increase as the rate of Elective Deferrals increases.

     (6) Time period for computing/contributing Safe Harbor Matching Contribution.

          (a) Computation. The Employer in its Adoption Agreement must elect the applicable time period for computing the Employer’s Safe Harbor Matching Contributions. If the Employer fails to so elect, the Employer is deemed to have elected to compute its Safe Harbor Matching Contribution based on the Plan Year.

          (b) Contribution deadline. If the Employer elects to compute its Safe Harbor Matching Contribution based on a time period which is less than the Plan Year, the Employer must contribute the Safe Harbor Matching Contributions to the Plan no later than the end of the Plan Year quarter which follows the quarter in which the Elective Deferral that gave rise to the Safe Harbor Matching Contribution was made. If the Employer fails to contribute by the foregoing deadline, the Employer will correct the operational failure by contributing the Safe Harbor Matching Contribution as soon as is possible and will also contribute Earnings on the Contribution. See Section 7.08. If the time period for computing the Safe Harbor Matching Contribution is the Plan Year, the Employer must contribute the Safe Harbor Matching Contribution to the Plan no later than twelve months after the end of the Plan Year to which the Safe Harbor Contribution is allocated.

     (7) No allocation conditions. The Plan Administrator must allocate the Employer’s Safe Harbor Contribution without regard to the Section 3.06 allocation conditions, if any, the Employer has elected as to non-Safe Harbor Contributions.

     (8) NHCEs must receive allocation; further election of allocation group. Subject to Section 3.05(D), the Plan Administrator must allocate the Safe Harbor Contribution to NHCE Participants which for purposes of Section 3.05 means NHCEs who are eligible to make Elective Deferrals. The Employer in its Adoption Agreement, must elect whether to allocate Safe Harbor Contributions: (a) to all Participants; (b) only to NHCE Participants; or (c) to NHCE Participants and to designated HCE Participants.

     (9) 100% vesting/distribution restrictions. A Participant’s Account Balance attributable to Safe Harbor Contributions at all times is 100% Vested and is subject to the distribution restrictions described in Section 6.01(C)(4)(b).

     (10) Possible application of ACP test. If the Plan’s sole Matching Contribution is a Basic Matching Contribution, the Basic Matching Contribution is not subject to nondiscrimination testing under Section 4.10(C) (ACP test). The Employer in its Adoption Agreement must elect whether to satisfy the ACP test safe harbor amount limitation under Section 3.05(G) with respect to the Employer’s Enhanced Matching Contributions or to test its Enhanced Matching Contributions under Section 4.10(C) (ACP test). As of the Final 401(k) Regulations Effective Date, the Employer in its Adoption Agreement may elect to test Enhanced Matching Contributions using Current Year Testing or Prior Year Testing. Prior to the Final 401(k) Regulations Effective Date, the Employer was limited to Current Year Testing under Notice 98-52.

     (11) Application to other allocations/testing. Except as the Employer otherwise elects in Appendix B and as described below as to permitted disparity, any Safe Harbor Nonelective Contributions will be applied toward (offset) any other allocation to a Participant of a non-Safe Harbor Nonelective Contribution. An Employer electing to apply the general nondiscrimination test under Section 4.06(C), may include Safe Harbor Nonelective Contributions in applying the general test. An Employer which has elected in its Adoption Agreement to apply permitted disparity in allocating the Employer’s Nonelective Contributions made in addition to Safe Harbor Nonelective Contributions may not include within the permitted disparity formula allocation any of the Employer’s Safe Harbor Nonelective Contributions.

     (12) Contribution to another plan. An Employer in its Adoption Agreement may elect to make the Safe Harbor Contribution to another Defined Contribution Plan the Employer maintains provided: (a) this Plan and the other plan have the same Plan Years; (b) each Participant eligible for Safe Harbor Contributions under this Plan is eligible to participate in the other plan; and (c) the other plan provides that 100% vesting and the distribution restrictions under Section 6.01(C)(4)(b) apply to the Safe Harbor Contribution Account maintained within the other plan. An Employer cannot apply any Safe Harbor Contributions to satisfy the 401(k) safe harbor requirements in more than one plan.

(F) Additional Matching Contributions. The Employer in its Adoption Agreement may elect to make Additional

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Matching Contributions to its safe harbor Plan under this Section 3.05(F).

     (1) Definition of Additional Matching Contributions. Additional Matching Contributions are Fixed or Discretionary Matching Contributions (“Fixed Additional Matching Contributions” or “Discretionary Additional Matching Contributions”) the Employer makes to its Safe Harbor 401(k) Plan (including a Safe Harbor 401(k) Plan the Employer elected into during the Plan Year under Section 3.05(I)(1)) and are not Safe Harbor Matching Contributions. Additional Matching Contributions are in addition to whatever type of Safe Harbor Contributions the Employer makes to satisfy the ADP test safe harbor under Section 3.05(E). If the Employer under Section 3.05(I)(1) does not elect into the safe harbor as of a Plan Year, any Matching Contributions for that Plan Year are not Additional Matching Contributions and as such cannot qualify for the ACP test safe harbor.

     (2) Safe harbor or testing. The Employer in its Adoption Agreement must elect whether to subject the Additional Matching Contributions to the ACP test safe harbor requirements of Section 3.05(G), or for the Plan Administrator to test the Additional Matching Contributions (and any Safe Harbor Matching Contribution) for nondiscrimination under Section 4.10(C) (ACP test). If the Employer under section 3.05(I)(1) elects during the Plan Year to become a Safe Harbor 401(k) Plan, any Additional Matching which satisfies the ACP test safe harbor requirements is not subject to the ACP test. As of the Final 401(k) Regulations Effective Date, the Employer in its Adoption Agreement may elect to test Additional Matching Contributions (and any Safe Harbor Matching Contribution) using Current Year Testing or Prior Year Testing. Prior to such Final 401(k) Regulations Effective Date, the Employer was limited to Current Year Testing under Notice 98-52.

     (3) Eligibility, vesting, allocation conditions and distributions. The Employer must elect in its Adoption Agreement the eligibility conditions, vesting schedule, allocation conditions and distribution provisions applicable to the Employer’s Additional Matching Contributions. To satisfy the ACP safe harbor under Section 3.05(G), effective as of the Final 401(k) Regulations Effective Date, any allocation conditions the Employer otherwise elects in its Adoption Agreement do not apply to Additional Matching Contributions. However, regardless of whether the Employer elects to treat the Additional Matching Contributions as being subject to the ACP test safe harbor, the Employer may elect: (a) to apply a vesting schedule to the Additional Matching Contributions; and (b) to treat the Additional Matching Contributions Account as not subject to the distribution restrictions under Section 6.01(C)(4)(b). If the Employer wishes to apply the ACP test safe harbor to Additional Matching Contributions, the Employer must not elect eligibility conditions applicable to the Additional Matching Contribution which exceed age 21 and one Year of Service and the Employer must elect eligibility conditions which are the same as it elects for the Safe Harbor Contribution.

     (4) Time period for computing/contributing Additional Matching Contributions.

          (a) Computation. The Employer in its Adoption Agreement must elect the applicable time period for computing the Employer’s Additional Matching Contributions. If the Employer fails to so elect, the Employer is deemed to have elected to compute its Additional Matching Contribution based on the Plan Year.

          (b) Contribution deadline. This Section 3.05(F)(4)(b) applies if the Employer in its Adoption Agreement elects to apply the ACP test safe harbor under Section 3.05(G) to its Additional Matching Contributions. If the Employer elects to compute its Additional Matching Contribution based on a time period which is less than the Plan Year, the Employer must contribute the Additional Matching Contributions to the Plan no later than the end of the Plan Year quarter which follows the quarter in which the Elective Deferral that gave rise to the Additional Matching Contribution was made. If the Employer fails to contribute by the foregoing deadline, the Employer will correct the operational failure by contributing the Additional Matching Contribution as soon as is possible and will also contribute Earnings on the Contribution. See Section 7.08. If the Employer elects to apply the ACP test safe harbor and elects the Plan Year as the time period for computing the Additional Matching Contribution, the Employer must contribute the Additional Matching Contribution to the Plan no later than twelve months after the end of the Plan Year to which the Additional Matching Contribution is allocated.

(G) ACP test safe harbor. The Employer in its Adoption Agreement will elect whether (i) to apply the amount limitations under this Section 3.05(G) in order to comply with the ACP test safe harbor as described in this Section 3.05(G); or (ii) the Plan Administrator must test all Matching Contributions unless the Plan’s only Matching Contribution is a Basic Matching Contribution. If the Employer elects to test, the Employer will elect whether to perform the ACP test using Current Year or Prior Year Testing. Prior to the Final 401(k) Regulations Effective Date, the Employer was limited to Current Year Testing under Notice 98-52.

     (1) Amount limitations. Under the ACP test safe harbor: (a) the Employer may not make Matching Contributions as to a Participant’s Elective Deferrals which exceed 6% of the Participant’s Plan Year Compensation; (b) the amount of any Discretionary Additional Matching Contribution allocated to any Participant may not exceed 4% of the Participant’s Plan Year Compensation; (c) the rate of Matching Contributions may not increase as the rate of Elective Deferrals increases; and (d) an HCE may not receive a rate of match greater than any NHCE (taking into account HCE aggregation under Section 4.10(C)(6). Requirement (d) does not apply prior to the Final 401(k) Regulations Effective Date, where such requirement is failed due to the application of Section 3.06 allocation conditions.

     (2) No partial ACP test safe harbor. If the Employer’s Plan has more than one Matching Contribution formula, each Matching Contribution formula must satisfy the ACP test safe harbor or the Plan Administrator must test all of the Employer’s Matching Contributions together under Section 4.10(C) (ACP test).

     (3) Employee Contributions. If the Employer in its Adoption Agreement has elected to permit Employee Contributions under the Plan: (a) any Employee Contributions do not satisfy the ACP test safe harbor and the

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Plan Administrator must test the Employee Contributions under Section 4.10(C) (ACP test) using Current Year Testing or prior Year Testing as the Employer elects in its Adoption Agreement; and (b) if the Employer in its Adoption Agreement elects to match the Employee Contributions, the Plan Administrator in applying the 6% amount limit in Section 3.05(G)(1) must aggregate a Participant’s Elective Deferrals and Employee Contributions which are subject to the 6% limit. Prior to the Final 401(k) Regulations Effective Date, the Employer was limited to Current Year Testing under Notice 98-52.

(H) Safe Harbor Notice. The Plan Administrator must provide a safe harbor notice to each Participant a reasonable period prior to each Plan Year for which the Employer in its Adoption Agreement has elected to apply the safe harbor provisions.

     (1) Deemed reasonable notice. The Plan Administrator is deemed to provide timely notice if the Plan Administrator provides the safe harbor notice at least 30 days and not more than 90 days prior to the beginning of the safe harbor Plan Year.

     (2) Mid-year notice/new Participant or Plan. If: (a) an Employee becomes eligible to participate in the Plan during a safe harbor Plan Year, but after the Plan Administrator has provided the annual safe harbor notice for that Plan Year; (b) the Employer adopts mid-year a new Safe Harbor 401(k) Plan; or (c) the Employer amends mid-year its existing Profit Sharing Plan to add a 401(k) feature and also elects safe harbor status, the Plan Administrator must provide the safe harbor notice a reasonable period (with 90 days being deemed reasonable) prior to and no later than the Employee’s Entry Date.

     (3) Content. The safe harbor notice must provide comprehensive information regarding the Participants’ rights and obligations under the Plan and must be written in a manner calculated to be understood by the average Participant. The Plan Administrator’s notice must satisfy the content requirements of Treas. Reg. §1.401(k)-3(d).

     (4) Election following notice. A Participant may make or modify a Salary Reduction Agreement under the Employer’s Safe Harbor 401(k) Plan for 30 days following receipt of the safe harbor notice, or if greater, for the period the Plan Administrator specifies in the Salary Reduction Agreement.

     (5) Notice failure. If the Plan Administrator for any Plan Year fails to give a timely safe harbor notice or gives a notice which does not satisfy the safe harbor notice content requirements, the Plan is not a Safe Harbor 401(k) Plan for that Plan Year and the Plan Administrator will test the Plan Year Elective Deferrals and Matching Contributions, if any, under Sections 4.10(B) and (C). In such event, notwithstanding the Plan’s failure to attain safe harbor status, any Adoption Agreement elections related to the Safe Harbor Contributions continue to apply unless and until the Employer amends the Plan. Notwithstanding the foregoing, if the Employer corrects the safe harbor notice failure under Section 7.08, the Plan is a Safe Harbor 401(k) Plan for the applicable Plan Year.

(I) Mid-Year Changes in Safe Harbor Status.

     (1) Contingent (“maybe”) notice and supplemental notice-delayed election of Safe Harbor Nonelective Contributions. The Employer during any Plan Year may elect for its Plan to become a Safe Harbor 401(k) Plan under this Section 3.05(I)(1) for that Plan Year, provided: (i) the Plan is using Current Year Testing; (ii) the Employer amends the Plan to add the safe harbor provisions not later than 30 days prior to the end of the Plan Year and to apply the safe harbor provisions for the entire Plan Year; (iii) the Employer elects to satisfy the Safe Harbor Contribution requirement using the Safe Harbor Nonelective Contribution; and (iv) the Plan Administrator provides a notice (“maybe notice”) to Participants prior to the beginning of the Plan Year for which the safe harbor amendment may become effective, that the Employer later may elect to become a Safe Harbor 401(k) Plan for that Plan Year using the Safe Harbor Nonelective Contribution and that if the Employer does so, the Plan Administrator will provide a supplemental notice to Participants at least 30 days prior to the end of that Plan Year informing Participants of the Employer’s election to provide the Safe Harbor Nonelective Contribution for that Plan Year. The Employer elects into the safe harbor by timely giving the supplemental notice and by amending the Plan as described above. Except as otherwise specified, the Participant notices described in this Section 3.05(I)(1) also must satisfy the requirements applicable to safe harbor notices under
Section 3.05(H).

          (a) Effect on Additional Matching Contributions. If the Employer gives a maybe notice under this Section 3.05(I)(1), and then gives the supplemental notice electing into the ADP test safe harbor for the Plan Year, any Additional Matching Contribution the Employer elects in its Adoption Agreement will be subject to the ACP test safe harbor or will be subject to testing under Section 4.10(C) (ACP test) using Current Year Testing, based on the Employer’s Adoption Agreement elections relating to the Additional Matching Contributions. If the Employer does not give a supplemental notice, any Matching Contributions are not Additional Matching Contributions in that Plan Year and the Plan Administrator will test all such Matching Contributions under Section 4.10(C) (ACP test) using Current Year Testing.

     (2) Exiting safe harbor matching. The Employer may amend its Safe Harbor 401(k) Plan during a Plan Year to reduce or eliminate prospectively, any or all Safe Harbor Matching Contributions or Additional Matching Contributions, provided: (a) the Plan Administrator provides a notice to the Participants which explains the effect of the amendment, specifies the amendment’s Effective Date and informs Participants they will have a reasonable opportunity to modify their Salary Reduction Agreements, and if applicable, Employee Contributions; (b) Participants have a reasonable opportunity and period prior to the Effective Date of the amendment to modify their Salary Reduction Agreements, and if applicable, Employee Contributions; and (c) the amendment is not effective earlier than the later of: (i) 30 days after the Plan Administrator gives notice of the amendment; or (ii) the date the Employer adopts the amendment. An Employer which amends its Safe Harbor 401(k) Plan to eliminate or reduce the any Matching Contribution under this Section 3.05(I)(2), effective during

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the Plan Year, must continue to apply all of the safe harbor requirements of this Section 3.05 until the amendment becomes effective and also must apply for the entire Plan Year, using Current Year Testing, the nondiscrimination test under Section 4.10(B) (ADP test) and the nondiscrimination test under Section 4.10(C) (ACP test). However, any Employer which eliminates only an Additional Matching Contribution does not need to test under the ADP test provided that the Plan still satisfies the ADP test safe harbor.

     (3) Amendment of non-401(k) Plan into safe harbor status. An Employer maintaining a Profit Sharing Plan or pre-ERISA Money Purchase Pension Plan, during a Plan Year, may amend prospectively its Plan to become a Safe Harbor 401(k) Plan provided: (a) the Employer’s Plan is not a Successor Plan; (b) the Participants may make Elective Deferrals for at least 3 months during the Plan Year; (c) the Plan Administrator provides the safe harbor notice described in Section 3.05(H) a reasonable time prior to and not later than the Effective Date of the 401(k) arrangement; and (d) the Plan commencing on the Effective Date of the amendment (or such earlier date as the Employer will specify in its Adoption Agreement), satisfies all of the safe harbor requirements of this Section 3.05.

     (4) New Plan/new Employer. An Employer (including a new Employer) may establish a new Safe Harbor 401(k) Plan which is not a Successor Plan, provided; (a) the Plan Year is at least 3 months long; (b) the Plan Administrator provides the safe harbor notice described in Section 3.05(H) a reasonable time prior to and not later than the Effective Date of the Plan; and (c) the Plan commencing on the Effective Date of the Plan satisfies all of the safe harbor requirements of this Section 3.05. If the Employer is new, the Plan Year may be less than 3 months provided the Plan is in effect as soon after the Employer is established as it is administratively feasible for the Employer to establish the Plan.

     (5) Plan termination. An Employer may terminate its Safe Harbor 401(k) Plan mid-Plan Year in accordance with Article XI and this Section 3.05(I)(5).

          (a) Acquisition/disposition or substantial business hardship. If the Employer terminates its Safe Harbor 401(k) Plan resulting in a short Plan Year, and the termination is on account of an acquisition or disposition transaction described in Code §410(b)(6)(C), or if termination is on account the Employer’s substantial business hardship, within the meaning of Code §412(d), the Plan remains a Safe Harbor 401(k) Plan for the short Plan Year provided that the Employer satisfies this Section 3.05 through the Effective Date of the Plan termination.

          (b) Other termination. If the Employer terminates its Safe Harbor 401(k) Plan for any reason other than as described in Section 3.05(I)(5)(a), and the termination results in a short Plan Year, the Employer must conduct the termination under the provisions of Section 3.05(I)(2), except that the Employer need not provide Participants with the right to change their Salary Reduction Agreements.

     3.06 ALLOCATION CONDITIONS. The Employer in its Adoption Agreement will elect the allocation conditions, if any, which the Plan Administrator will apply in allocating Employer Contributions (except for those contributions described below) and in allocating forfeitures allocated as an Employer Contribution under the Plan.

(A) Contributions Not Subject to Allocation Conditions. The Employer may not elect to impose any allocation conditions on: (1) Elective Deferrals; (2) Safe Harbor Contributions; (3) commencing as of the Final 2004 401(k) Regulations Effective Date, Additional Matching Contributions to which the Employer elects to apply the ACP test safe harbor; (4) Employee Contributions; (5) Rollover Contributions; (6) Designated IRA Contributions; (7) SIMPLE Contributions; or (8) Prevailing Wage Contributions, except as may be required by the Prevailing Wage Contract. The Plan Administrator also may elect under Sections 3.03(C)(2) and 3.04(C)(2), not to apply to any Operational QMAC or Operational QNEC any allocation conditions otherwise applicable to Matching Contributions (including QMACs) or to Nonelective Contributions (including QNECs).

(B) Conditions. The Employer in its Adoption Agreement may elect to impose allocation conditions based on Hours of Service or employment at a specified time (or both), in accordance with this Section 3.06(B). The Employer may elect to impose different allocation conditions to different Employer Contribution Types under the Plan. A Participant does not accrue an Employer Contribution or forfeiture allocated as an Employer Contribution with respect to a Plan Year or other applicable period, until the Participant satisfies the allocation conditions for that Employer Contribution Type.

     (1) Hours of Service requirement. Except as required to satisfy the Top-Heavy Minimum Allocation, the Plan Administrator will not allocate any portion of an Employer Contribution for a Plan Year to any Participant’s Account if the Participant does not complete the applicable minimum Hours of Service (or consecutive calendar days of employment under the Elapsed Time Method) requirement the Employer specifies in its Adoption Agreement for the relevant period.

          (a) 1,000 HOS in Plan Year/other HOS requirement. The Employer in its Nonstandardized Plan or Volume Submitter Plan may elect to require a Participant to complete: (i) 1,000 Hours of Service during the Plan Year (or to be employed for at least 182 consecutive calendar days under the Elapsed Time Method); (ii) a specified number of Hours of Service during the Plan Year which is less than 1,000 Hours of Service; or (iii) a specified number of Hours of Service within the time period the Employer elects in its Adoption Agreement, but not exceeding 1,000 Hours of Service in a Plan Year.

          (b) 501 HOS/terminees. The Employer in its Adoption Agreement may elect to require a Participant to complete during a Plan Year 501 Hours of Service (or to be employed for at least 91 consecutive calendar days under the Elapsed Time Method) to share in the allocation of Employer Contributions for that Plan Year where the Participant is not employed by the Employer on the last day of that Plan Year, including the Plan Year in which the Employer terminates the Plan.

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          (c) Short Plan Year or allocation period. This Section 3.06(B)(1)(c) applies to any Plan Year or to any other allocation time period under the Adoption Agreement which is less than 12 months, where in either case, the Employer creates a short allocation period on account of a Plan amendment, the termination of the Plan or the adoption of the Plan with an initial short Plan Year. In the case of any short allocation period, the Plan Administrator will prorate any Hour of Service requirement based on the number of days in the short allocation period divided by the number of days in the normal allocation period, using 365 days in the case of Plan Year allocation period. The Employer in Appendix B may elect not to pro-rate Hours of Service in any short allocation period or to apply a monthly pro-ration method.

     (2) Last day requirement.

          (a) Standardized Plan. If the Plan is a Standardized Plan, a Participant who is employed by the Employer on the last day of a Plan Year will share in the allocation of Employer Contributions for that Plan Year without regard to the Participant’s Hours of Service completed during that Plan Year.

          (b) Nonstandardized or Volume Submitter Plan. The Employer in its Nonstandardized or Volume Submitter Plan may elect to require a Participant to be employed by the Employer on the last day of the Plan Year or other specified period or on a specified date. If the Plan is a Nonstandardized or Volume Submitter Money Purchase Pension Plan or Target Benefit Plan, the Plan expressly conditions Employer Contribution allocations on a Participant’s employment with the Employer on the last day of the Plan Year for the Plan Year in which the Employer terminates or freezes the Plan, even if the Employer in its Adoption Agreement did not elect the “last day of the Plan Year” allocation condition.

(C) Time Period. The Employer in its Adoption Agreement will elect the time period to which the Plan Administrator will apply any allocation condition. The Employer may elect to apply the same time period to all Contribution Types or to elect a different time period based on Contribution Type.

(D) Death, Disability or Normal Retirement Age. The Employer in its Adoption Agreement will elect whether any elected allocation condition applies or is waived for a Plan Year if a Participant incurs a Separation from Service during the Plan Year on account of the Participant’s death, Disability or attainment of Normal Retirement Age in the current Plan Year or on account of the Participant’s Disability or attainment of Normal Retirement Age in a prior Plan Year. The Employer’s election may be based on Contribution Type or may apply to all Contribution Types.

(E) No Other Conditions. In allocating Employer Contributions under the Plan, the Plan Administrator will not apply any other allocation conditions except those the Employer elects in its Adoption Agreement or otherwise as the Plan may require.

(F) Suspension of Allocation Conditions in a Nonstandardized or Volume Submitter Plan. The Employer in its Nonstandardized Plan or Volume Submitter Plan will elect whether to apply the suspension provisions of this Section 3.06(F). If: (i) Section 3.06(F) applies ; (ii) the Plan (or any component part of the Plan) in any Plan Year must perform coverage testing; and (iii) the Plan (or component part of the Plan) fails to satisfy coverage under the ratio percentage test under Treas. Reg. §1.410(b)-2(b)(2), the Plan suspends for that Plan Year any Plan (or component part of the Plan) allocation conditions in accordance with this Section 3.06(F). If the Plan Administrator must perform coverage testing, the Administrator will apply testing separately as required to each component part of the Plan after applying the aggregation and disaggregation rules under Treas. Reg. §§1.410(b)-6 and -7.

     (1) No average benefit test. If the Employer elects to apply this Section 3.06(F), the Plan Administrator may not apply the average benefit test under Treas. Reg. §1.410(b)-2(b)(3), to determine satisfaction of coverage or to correct a coverage failure, as to the Plan or to the component part of the Plan to which this Section 3.06(F) applies, unless the Plan or component still fails coverage after application of this Section 3.06(F). The restriction in this Section 3.06(F)(1) does not apply as to application of the average benefit test in performing nondiscrimination testing.

     (2) Methodology. If this Section 3.06(F) applies for a Plan Year, the Plan Administrator, in the manner described herein, will suspend the allocation conditions for the NHCEs who are included in the coverage test and who are Participants in the Plan (or component part of the Plan) but who are not benefiting thereunder (within the meaning of Treas. Reg. §1.410(b)-3), such that enough additional NHCEs are benefiting under the Plan (or component part of the Plan) to pass coverage under the ratio percentage test. The ordering of suspension of allocation conditions is in the following priority tiers and if more than one NHCE in any priority tier satisfies the conditions for suspension (but all are not needed to benefit to pass coverage), the Plan Administrator will apply the suspension beginning first with the NHCE(s) in that suspension tier with the lowest Compensation during the Plan Year:

          (a) Last day. Those NHCE(s) employed by the Employer on the last day of the Plan Year, without regard to the number of Hours of Service in the Plan Year. If necessary to pass coverage, the Plan Administrator then will apply Section 3.06(F)(2)(b).

          (b) Latest Separation. Those NHCE(s) who have the latest Separation from Service date during the Plan Year, without regard to the number of Hours of Service in the Plan Year. If necessary to pass coverage, the Plan Administrator then will apply Section 3.06(F)(2)(c).

          (c) Most Hours of Service (more than 500). Those NHCE(s) with the greatest number of Hours of Service during the Plan Year but who have more than 500 Hours of Service.

     (3) Appendix B. The Employer in Appendix B may elect a different order of the suspension tiers, may elect to use Hours of Service (in lieu of Compensation) as a tiebreaker within any tier or may elect additional or other suspension tiers which are objective and not subject to Employer discretion.

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     (4) Separate Application to Nonelective and Matching. If applicable under the Plan, the Employer in its Adoption Agreement will elect whether to apply this Section 3.06(F): (a) to both Nonelective Contributions and to Matching Contributions if both components fail the ratio percentage test; (b) only to Nonelective Contributions if this component fails the ratio percentage test; or (c) only to Matching Contributions if this component fails the ratio percentage test.

(G) Conditions Apply to Re-Hired Employees. If a Participant incurs a Separation from Service and subsequently is re-hired and resumes participation in the same Plan Year as the Separation from Service or in any subsequent Plan Year, the allocation conditions under this Section 3.06, if any, continue to apply to the re-hired Employee/Participant in the Plan Year in which he/she is re-hired, unless the Employer elects otherwise in Appendix B.

     3.07 FORFEITURE ALLOCATION. The amount of a Participant’s Account forfeited under the Plan is a Participant forfeiture. The Plan Administrator, subject to Section 3.06 as applicable, will allocate Participant forfeitures at the time and in the manner the Employer specifies in its Adoption Agreement.

(A) Allocation Method. The Employer in its Adoption Agreement must specify the method the Plan Administrator will apply to allocate forfeitures.

     (1) 401(k) forfeiture source. If the Plan is a 401(k) Plan, the Employer in its Adoption Agreement may elect a different allocation method based on the forfeiture source (from Nonelective Contributions or from Matching Contributions) or may elect to apply the same allocation method to all forfeitures.

          (a) Attributable to Matching. A Participant’s forfeiture is attributable to Matching Contributions if the forfeiture is: (i) from the non-Vested portion of a Matching Contribution Account forfeited in accordance with Section 5.07 or, if applicable, Section 7.07; (ii) a non-Vested Excess Aggregate Contribution (including Allocable Income) forfeited in correcting for nondiscrimination failures under Section 4.10(C); or (iii) an Associated Matching Contribution.

          (b) Definition of Associated Matching Contribution. An Associated Matching Contribution includes any Vested or non-Vested Matching Contribution (including Allocable Income) made as to Elective Deferrals or Employee Contributions the Plan Administrator distributes under Section 4.01(E) (Excess Amount), Section 4.10(A) (Excess Deferrals), Section 4.10(B) (ADP test), Section 4.10(C) (ACP test) or Section 7.08 relating to Plan correction.

          (c) Forfeiture or distribution of Associated Match. An Employee forfeits an Associated Matching Contribution unless the Matching Contribution is a Vested Excess Aggregate Contribution distributed in accordance with Section 4.10(C) (ACP test). A forfeiture under this Section 3.07(A)(1)(c) occurs in the Plan Year following the Testing Year (unless the Employer in Appendix B elects that the forfeiture occurs in the Testing Year) and the forfeiture is allocated in the Plan Year described in Section 3.07(B). See Section 3.07(B)(1) as to nondiscrimination testing of allocated forfeitures. In the event of correction under Section 7.08 resulting in forfeiture of Associated Matching Contributions, the forfeiture occurs in the Plan Year of correction.

     (2) Application of “reduce” option/excess forfeitures. If the Employer elects to allocate forfeitures to reduce Nonelective or Matching Contributions and the allocable forfeitures for the forfeiture allocation Plan Year described in Section 3.07(B) exceed the amount of the applicable contribution for that Plan Year to which the Plan Administrator would apply the forfeitures (or there are no applicable contributions under the Plan), the Plan Administrator will allocate the remaining forfeitures in the forfeiture allocation Plan Year. In such event, the Plan Administrator will allocate the remaining forfeitures as an additional Discretionary Nonelective Contribution or as a Discretionary Matching Contribution, as the Plan Administrator determines.

     (3) Plan expenses. If the Employer in its Adoption Agreement elects to apply forfeitures to the payment of Plan expenses under Section 7.04(C), which for this purpose may also include any Earnings on the forfeitures, the Employer must elect a secondary allocation method so that if the forfeitures exceed the Plan’s expenses, the Plan Administrator will apply any remaining forfeitures under the secondary method the Employer has elected in its Adoption Agreement.

     (4) Safe harbor-top-heavy exempt fail-safe. If the Employer has a Safe Harbor 401(k) Plan which otherwise qualifies for exemption from the top-heavy requirements of Article X, the Employer in its Adoption Agreement may elect to limit the allocation of all Plan forfeitures in such a manner as to avoid inadvertent application of the top-heavy requirements on account of a forfeiture allocation. If the Employer in its Adoption Agreement elects this “fail-safe” provision, the Plan Administrator will allocate forfeitures in the following order of priority: (a) first to reduce Safe Harbor Contributions; (b) then to reduce Fixed Additional Matching Contributions if any, which satisfy the ACP test safe harbor under Section 3.05(G); (c) then as Discretionary Additional Matching Contributions which satisfy the ACP safe harbor (without regard to whether the Employer in its Adoption Agreement has elected Discretionary Additional Matching Contributions); and (d) then to pay Plan expenses. If the Employer elects to allocate forfeitures under this Section 3.07(A)(4), the Plan Administrator will apply this Section 3.07(A)(4) regardless of whether the Employer in any Plan Year actually satisfies all conditions necessary for the Plan to be top-heavy exempt. The Employer in Appendix B may elect to alter the forfeiture allocation ordering rules of this Section 3.07(A)(4).

     (5) No allocation to Elective Deferral Accounts. The Plan Administrator will not allocate forfeitures to any Participant’s Elective Deferral Account, including his/her Roth Deferral Account.

     (6) Allocation under classifications. If the Employer in its Adoption Agreement has elected to allocate its Nonelective Contributions based on classifications of

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Participants, the Plan Administrator will allocate any forfeitures which under the Plan are allocated as additional Nonelective Contributions: (a) first to each classification pro rata in relation to the Employer’s Nonelective Contribution to that classification for the forfeiture allocation Plan Year described in Section 3.07(B); and (b) second, the total amount of forfeitures allocated to each classification under (a) are allocated in the same manner as are the Nonelective Contributions to be allocated to that classification.

(B) Timing (forfeiture allocation Plan Year). The Employer in its Adoption Agreement must elect as to forfeitures occurring in a Plan Year, whether the Plan Administrator will allocate the forfeitures in the same Plan Year in which the forfeitures occur or will allocate the forfeitures in the Plan Year which next follows the Plan Year in which the forfeitures occur. See Sections 3.07(A)(1)(c), 5.07 and 7.07 as to when a forfeiture occurs.

     (1) 401(k) Plans/allocation timing and re-testing. If the Plan is a 401(k) Plan, the Employer may elect different allocation timing based on the forfeiture source (from Nonelective Contributions or from Matching Contributions) or may elect to apply the same allocation timing to all forfeitures. If the 401(k) Plan is subject to the ACP test and allocates any forfeiture as a Matching Contribution, the following re-testing rules apply. If, under the Plan, the Plan Administrator will allocate the forfeiture in the same Plan Year in which the forfeiture occurs, the Plan Administrator will not re-run the ACP test. If the Plan Administrator allocates the forfeiture in the Plan Year which follows the Plan Year in which the forfeiture occurs, the Plan Administrator will include the allocated forfeiture in the ACP test for the forfeiture allocation Plan Year. If the Plan allocates any forfeiture as a Nonelective Contribution, the allocation, in the forfeiture allocation Plan Year, is subject to any nondiscrimination testing which applies to Nonelective Contributions for that Plan Year.

     (2) Contribution amount and timing not relevant. The forfeiture allocation timing rules in this Section 3.07(B) apply irrespective of when the Employer makes its Employer Contribution for the forfeiture allocation Plan Year, and irrespective of whether the Employer makes an Employer Contribution for that Plan Year.

(C) Administration of Account Pending/Incurring Forfeiture. The Plan Administrator will continue to hold the undistributed, non-Vested portion of the Account of a Participant who has incurred a Separation from Service solely for his/her benefit until a forfeiture occurs at the time specified in Section 5.07 or if applicable, until the time specified in Section 7.07.

(D) Participant Does Not Share in Own Forfeiture. A Participant will not share in the allocation of a forfeiture of any portion of his/her Account, even if the Participant otherwise is entitled to an allocation of Employer Contributions and forfeitures in the forfeiture allocation Plan Year described in Section 3.07(B). If the forfeiting Participant is entitled to an allocation of Employer Contributions and forfeitures in the forfeiture allocation Plan Year, the Plan Administrator only will allocate to the Participant a share of the allocable forfeitures attributable to other forfeiting Participants.

(E) Plan Merger. In the event that the Employer merges another plan into this Plan, and does not fully vest upon merger the participant accounts in the merging plan, the Plan Administrator will allocate any post-merger forfeitures attributable to the merging plan in accordance with the Employer’s elections in its Adoption Agreement. The Employer may elect to limit any such forfeiture allocation only to those Participants who were also participants in the merged plan, but in the absence of such an election, all Participants who have satisfied any applicable allocation conditions under Section 3.06 will share in the forfeiture allocation.

     3.08 ROLLOVER CONTRIBUTIONS. The Plan Administrator will apply this Section 3.08 in administering Rollover Contributions to the Plan, if any.

(A) Policy Regarding Rollover Acceptance. The Plan Administrator, operationally and on a nondiscriminatory basis, may elect to permit or not to permit Rollover Contributions to this Plan or may elect to limit an Eligible Employee’s right or a Participant’s right to make a Rollover Contribution. The Plan Administrator also may adopt, amend or terminate any policy regarding the Plan’s acceptance of Rollover Contributions.

     (1) Rollover documentation. If the Plan Administrator permits Rollover Contributions, any Participant (or as applicable, any Eligible Employee), with the Plan Administrator’s written consent and after filing with the Plan Administrator the form prescribed by the Plan Administrator, may make a Rollover Contribution to the Trust. Before accepting a Rollover Contribution, the Plan Administrator may require a Participant (or Eligible Employee) to furnish satisfactory evidence the proposed transfer is in fact a “rollover contribution” which the Code permits an employee to make to a qualified plan.

     (2) Declination/related expense. The Plan Administrator, in its sole discretion, may decline to accept a Rollover Contribution of property which could: (a) generate unrelated business taxable income; (b) create difficulty or undue expense in storage, safekeeping or valuation; or (c) create other practical problems for the Plan or Trust. The Plan Administrator also may accept the Rollover Contribution on condition that the Participant’s or Employee’s Account is charged with all expenses associated therewith.

(B) Limited Testing. A Rollover Contribution is not an Annual Addition under Section 4.05(A) and is not subject to nondiscrimination testing except as a “right or feature” within the meaning of Treas. Reg. §1.401(a)(4)-4.

(C) Pre-Participation Rollovers. If an Eligible Employee makes a Rollover Contribution to the Trust prior to satisfying the Plan’s eligibility conditions or prior to reaching his/her Entry Date, the Plan Administrator and Trustee must treat the Employee as a limited Participant (as described in Rev. Rul. 96-48 or in any Applicable Law). A limited Participant does not share in the Plan’s allocation of Employer Contributions nor Participant forfeitures and may not make Elective Deferrals if the Plan is a 401(k) Plan, until he/she actually becomes a Participant in the Plan. If a limited Participant has a Separation from Service prior to becoming a Participant in

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the Plan, the Trustee will distribute his/her Rollover Contributions Account to him/her in accordance with Section 6.01(A).

(D) May Include Employee Contributions and Roth Deferrals. A Rollover Contribution may include Employee Contributions and Roth Deferrals made to another plan, as adjusted for Earnings. In the case of Employee Contributions: (1) such amounts must be directly rolled over into this Plan from another plan which is qualified under Code §401(a); and (2) the Plan must account separately for the Rollover Contribution, including the Employee Contribution and the Earnings thereon. In the case of Roth Deferrals: (1) such amounts must be directly rolled over into this Plan from another plan which is qualified under Code §401(a) or from a 403(b) plan; (2) the Plan must account separately for the Rollover Contribution, including the Roth Deferrals and the Earnings thereon; and (3) as to rollovers which occur on or after April 30, 2007, this Plan must be a 401(k) Plan which permits Roth Deferrals.

     3.09 EMPLOYEE CONTRIBUTIONS. An Employer must elect in its Adoption Agreement whether to permit Employee Contributions. If the Employer elects to permit Employee Contributions, the Employer also must specify in its Adoption Agreement any limitations which apply to Employee Contributions. If the Employer permits Employee Contributions, the Plan Administrator operationally will determine if a Participant will make Employee Contributions through payroll deduction or by other means.

(A) Testing. Employee Contributions must satisfy the nondiscrimination requirements of Section 4.10(C) (ACP test).

(B) Matching. The Employer in its Adoption Agreement must elect whether the Employer will make Matching Contributions as to any Employee Contributions and, as applicable, the matching formula. Any Matching Contribution must satisfy the nondiscrimination requirements of Section 4.10(C) (ACP test), unless the Matching Contributions satisfy the ACP test safe harbor under a Safe Harbor 401(k) Plan.

     3.10 SIMPLE 401(k) CONTRIBUTIONS. The Employer in its Adoption Agreement may elect to apply to its Plan the SIMPLE 401(k) provisions of this Section 3.10 if the Employer is eligible under Section 3.10(B). The provisions of this Section 3.10 apply to an electing Employer notwithstanding any contrary provision in the Plan.

(A) Plan Year. An Employer electing to apply this Section 3.10 must have a 12 month calendar year Plan Year except that in the case of an Employer adopting a new SIMPLE 401(k) Plan, the Employer must adopt the Plan no later than October 1 with a calendar year Plan Year of at least 3 months.

(B) Eligible Employer. An Employer may elect to apply this Section 3.10 if: (i) the Plan Year is the calendar year; (ii) the Employer (including Related Employers under Section 1.23(C)) has no more than 100 Employees who received Compensation of at least $5,000 in the immediately preceding calendar year; and (iii) the Employer (including Related Employers under Section 1.23(C)) does not maintain any other plan as described in Code §219(g)(5), to which contributions were made or under which benefits were accrued for Service by an Eligible Employee in the Plan Year to which the SIMPLE 401(k) provisions apply.

     (1) Loss of eligible employer status. If an electing Employer fails for any subsequent calendar year to satisfy all of the Section 3.10(B) requirements, including where the Employer is involved in an acquisition, disposition or similar transaction under which the Employer satisfies Code §410(b)(6)(C)(i), the Employer remains eligible to maintain the SIMPLE 401(k) Plan for two additional calendar years following the last year in which the Employer satisfied the requirements.

(C) Compensation. For purposes of this Section 3.10, Compensation is limited as described in Section 1.11(E) and: (1) in the case of an Employee, means Code §3401(a) Wages but increased by the Employee’s Elective Deferrals under this Plan or any other 401(k) arrangement, SIMPLE IRA, SARSEP, 403(b) annuity or 457 plan of the Employer; and (2) in the case of a Self-Employed Individual, means Earned Income determined by disregarding contributions made to this Plan.

(D) Participant Elective Deferrals. Each Participant may enter into a Salary Reduction Agreement to make Elective Deferrals in each calendar year to the SIMPLE 401(k) Plan in accordance with this Section 3.10(D).

     (1) Amount Table. A Participant’s annual Elective Deferrals may not exceed the amount in the table below, and, commencing in 2006, such other amount as in effect under Code §408(p)(2)(E) under which Treasury adjusts the limit in $500 increments.

Year	Amount
2002	$	7,000
2003	$	8,000
2004	$	9,000
2005	$	10,000

     (2) Catch-Ups. If the Employer in its Adoption Agreement elects to permit Catch-Up Deferrals, a Catch-Up Eligible Participant also may make Catch-Up Deferrals to the SIMPLE 401(k) Plan in accordance with Section 3.02(D).

     (3) Election timing. A Participant may elect to make Elective Deferrals or to modify a Salary Reduction Agreement at any time in accordance with the Plan Administrator’s SIMPLE 401(k) Plan Salary Reduction Agreement form, but the form must be provided at least 60 days prior to the beginning of each SIMPLE Plan Year or at least 60 days prior to commencement of participation for the Participant to make or modify his/her Salary Reduction Agreement. A Participant also may at any time terminate prospectively his/her Salary Reduction Agreement applicable to the Employer’s SIMPLE 401(k) Plan.

(E) Employer SIMPLE 401(k) contributions. An Employer which elects to apply this Section 3.10 must make an annual SIMPLE Contribution to the Plan as described in this Section 3.10(E). The Employer operationally must elect for each SIMPLE Plan Year which type of SIMPLE Contribution the Employer will make.

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     (1) Definition of SIMPLE Contribution. A SIMPLE Contribution is one of the following Employer Contribution types: (a) a SIMPLE Matching Contribution equal to 100% of each Participant’s Elective Deferrals but not exceeding 3% of Plan Year Compensation or such lower percentage as the Employer may elect under Code §408(p)(2)(C)(ii)(II); or (b) a SIMPLE Nonelective Contribution equal to 2% of Plan Year Compensation for each Participant whose Compensation is at least $5,000.

(F) SIMPLE 401(k) notice. The Plan Administrator must provide notice to each Participant a reasonable period of time before the 60th day prior to the beginning of each SIMPLE 401(k) Plan Year, describing the Participant’s Elective Deferral rights and the Employer’s SIMPLE Contributions which the Employer will make for the Plan Year described in the notice.

(G) Application of remaining Plan provisions.

     (1) Annual Additions. All contributions to the SIMPLE 401(k) Plan are Annual Additions under Section 4.05(A) and subject to the Annual Additions Limit.

     (2) No allocation conditions. The Employer in its Adoption Agreement may not elect to apply any Section 3.06 allocation conditions to the Plan Administrator’s allocation of SIMPLE Contributions.

     (3) No other contributions. No contributions other than those described in this Section 3.10 or Rollover Contributions described in Section 3.08 may be made to the SIMPLE 401(k) Plan.

     (4) Vesting. All SIMPLE Contributions and Accounts attributable thereto are 100% Vested at all times and in the event of a conversion of a non-SIMPLE 401(k) Plan into a SIMPLE 401(k) Plan, all Account Balances in existence on the first day of the Plan Year to which the SIMPLE 401(k) provisions apply, become 100% Vested.

     (5) No nondiscrimination testing. A SIMPLE 401(k) Plan is not subject to nondiscrimination testing under Section 4.10(B) (ADP test) or Section 4.10(C) (ACP test) of the Plan.

     (6) No top-heavy. A SIMPLE 401(k) Plan is not subject to the top-heavy provisions of Article X.

     (7) Remaining Plan terms. Except as otherwise described in this Section 3.10, if an Employer has elected in its Adoption Agreement to apply the SIMPLE 401(k) provisions of this Section 3.10, the Plan Administrator will apply the remaining Plan provisions to the Employer’s Plan.

     3.11 USERRA CONTRIBUTIONS.

(A) Application. This Section 3.11 applies to an Employee who: (1) has completed Qualified Military Service under USERRA; (2) the Employer has rehired under USERRA; and (3) is a Participant entitled to make-up contributions under Code §414(u).

(B) Employer Contributions. The Employer will make up any Employer Contribution the Employer would have made and which the Plan Administrator would have allocated to the Participant’s Account had the Participant remained employed by the Employer during the period of Qualified Military Service.

(C) Compensation. For purposes of this Section 3.11, the Plan Administrator will determine an effected Participant’s Compensation as follows. A Participant during his/her period of Qualified Military Service is deemed to receive Compensation equal to that which the Participant would have received had he/she remained employed by the Employer, based on the Participant’s rate of pay that would have been in effect for the Participant during the period of Qualified Military Service. If the Compensation during such period would have been uncertain, the Plan Administrator will use the Participant’s actual average Compensation for the 12 month period immediately preceding the period of Qualified Military Service, or if less, for the period of employment.

(D) Elective Deferrals/Employee Contributions. If the Plan provided for Elective Deferrals or for Employee Contributions during a Participant’s period of Qualified Military Service, the Plan Administrator must allow a Participant under this Section 3.11 to make up such Elective Deferrals or Employee Contributions to his/her Account. The Participant may make up the maximum amount of Elective Deferrals or Employee Contributions which he/she under the Plan terms would have been able to contribute during the period of Qualified Military Service (less any such amounts the Participant actually contributed during such period) and the Participant must be permitted to contribute any lesser amount as the Plan would have permitted. The Participant must make up any contribution under this Section 3.11(D) commencing on his/her Re-Employment Commencement Date and not later than 5 years following reemployment (or if less, a period equal to 3 times the length of the Participant’s Qualified Military Service triggering such make-up contribution).

(E) Matching Contributions. The Employer will make up any Matching Contribution that the Employer would have made and which the Plan Administrator would have allocated to the Participant’s Account during the period of Qualified Military Service, but based on any make–up Elective Deferrals or make-up Employee Contributions that the Participant makes under Section 3.11(D).

(F) Limitations/Testing. Any contribution made under this Section 3.11 does not cause the Plan to violate and is not subject to testing under: (1) nondiscrimination requirements including under Code §401(a)(4), the ADP test, the ACP test, the safe harbor 401(k) rules or the SIMPLE 401(k) rules; (2) top-heavy requirements under Article X; or (3) coverage under Code §410(b). Contributions under this Section 3.11 are Annual Additions and are tested under Section 4.10(A) (Elective Deferral Limit) in the year to which such contributions are allocated, but not in the year in which such contributions are made.

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(G) No Earnings. A Participant receiving any make-up contribution under this Section 3.11 is not entitled to an allocation of any Earnings on any such contribution prior to the time that the Employer actually makes the contribution (or timely deposits the Participant’s own make-up Elective Deferrals or Employee Contributions) to the Trust.

(H) No Forfeitures. A Participant receiving any make-up allocation under this Section 3.11 is not entitled to an allocation of any forfeitures allocated during the Participant’s period of Qualified Military Service.

(I) Allocation Conditions. For purposes of applying any Plan allocation conditions under Section 3.06, the Plan Administrator will treat any period of Qualified Military Service as Service.

(J) Other Rules. The Plan Administrator in applying this Section 3.11 will apply DOL Reg. §1002.259-267, and any other Applicable Law addressing the application of USERRA to the Plan.

     3.12 DESIGNATED IRA CONTRIBUTIONS. The Employer in its Adoption Agreement may elect to permit Participants to make Designated IRA Contributions to its Plan. Designated IRA Contributions are subject to the provisions of this Section 3.12.

(A) Effective Date. The Employer may elect in its Adoption Agreement to apply the Designated IRA Contribution provisions to any Plan Years beginning after December 31, 2002. For Plan Years commencing after 2003, the Employer may accept Designated IRA Contributions during such Plan Year only if the Employer elects to apply the provisions of this Section 3.12 (or otherwise adopted a good faith amendment under Code §408(q)), prior to the Plan Year for which the Designated IRA Contribution provisions will apply.

(B) Traditional or Roth IRA. The Employer in its Adoption Agreement may elect to treat Designated IRA Contributions as traditional IRA contributions, as Roth IRA contributions or as consisting of either type, at the Participant’s election.

(C) Account or Annuity. The Employer in its Adoption Agreement may elect to establish Accounts to receive Designated IRA Contributions either as individual retirement accounts, as individual retirement annuities or as consisting of either type, at the Participant’s election.

     (1) Trustee or Custodian. A trustee or custodian satisfying the requirements of Code §408(a)(2) must hold Designated IRA Contributions Accounts. If the Trustee holding the Designated IRA Contribution assets is a non-bank trustee, the Trustee, upon receipt of notice from the Commissioner of Internal Revenue that substitution is required because the Trustee has failed to comply with the requirements of Treas. Reg. §1.408-2(e), will substitute another trustee in its place.

     (2) Additional IRA requirements. All Designated IRA Contributions: (a) must be made in cash; (b) are subject to the IRA contribution limits under Code §408(a)(1) set forth below, including cost-of living adjustments after 2008 in $500 increments under Code §219(b)(5)(C) and as to Catch-Up Eligible Participants to the IRA Catch-Up limits set forth below; and (c) must be 100% Vested.

Taxable Year	IRA contribution limit
2003	$	3,000
2004	$	3,000
2005	$	4,000
2006	$	4,000
2007	$	4,000
2008 and beyond	$	5,000

Taxable year	IRA Catch-Up limit
2003	$	500
2004	$	500
2005	$	500
2006 and beyond	$	1,000

     (3) Not for deposit of SEP or SIMPLE IRA amounts/no Rollover Contributions. An Employer which maintains a SEP or a SIMPLE IRA may not deposit contributions under these arrangements to the Designated IRA Contribution Accounts under this Section 3.12. A Participant may not make a Rollover Contribution to his/her Designated IRA Contribution Account.

     (4) Designated Roth IRA Contributions.

          (a) Contribution Limit. A Participant’s contribution to the Designated Roth IRA and to all other Roth IRAs for a Taxable Year may not exceed the lesser of the amount described in Section 3.12(C)(2) or the Participant’s Compensation under Section 3.12(C)(4)(c). However, if (i) and/or (ii) below apply, the maximum (non-rollover) contribution that can be made to all the Participant’s Roth IRAs (including to this Designated Roth IRA which must be a non-Rollover Contribution) for a Taxable Year is the smaller amount determined under (i) or (ii).

               (i) General. The maximum contribution is phased out ratably between certain levels of modified adjusted gross income (“modified AGI,” defined in Section 3.12(C)(4)(b)) as follows:

Filing	Full		Phase-out	No
Status	Contribution		Range	Contribution
Single/Head of Household	$95,000 or less		$95,000-$110,000	$110,000 or more
Joint/Qualifying Widow(er)	$150,000 or less		$150,000-$160,000	$160,000 or more
Married-Separate	$	0	$0-$10,000	$10,000 or more

If the Participant’s modified AGI for a Taxable Year is in the phase-out range, the maximum contribution determined above for that Taxable Year is rounded up to the next multiple of $10 and is not reduced below $200.

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               (ii) Roth and non-Roth IRA contributions. If the Participant makes (non-rollover) contributions to both Roth and non-Roth IRAs for a Taxable Year, the maximum contribution that can be made to all of the Participant’s Roth IRAs for that Taxable Year is reduced by the contributions made to the Participant’s non-Roth IRAs for the Taxable Year.

               (iii) Conversion. A Participant may convert a Designated non-Roth IRA Contributions Account to a Designated Roth IRA Contributions Account in accordance with Treas. Reg. §1.408A-4 unless: (A) the Participant is married and files a separate return, (B) the Participant is not married and has modified AGI in excess of $100,000 or ( C) the Participant is married and together the Participant and the Participant’s spouse have modified AGI in excess of $100,000. For purposes of the preceding sentence, spouses are not treated as married for a taxable year if they have lived apart at all times during that Taxable Year and file separate returns for the Taxable Year. A Participant may not effect a conversion by means of contributing a Rollover Contribution to his/her Designated IRA under this Plan.

          (b) Modified AGI. For purposes of Section 3.12(C)(4)(a), a Participant’s modified AGI for a Taxable Year is defined in Code §408A(c)(3)(C)(i) and does not include any amount included in adjusted gross income as a result of a non-Roth IRA conversion.

          (c) Compensation. For purposes of Section 3.12(C)(4)(a), Compensation is defined as wages, salaries, professional fees, or other amounts derived from or received for personal services actually rendered (including, but not limited to commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, and bonuses) and includes earned income, as defined in Code §401(c)(2) (reduced by the deduction the Self-Employed Individual takes for contributions made to a self-employed retirement plan). For purposes of this definition, Code §401(c)(2) shall be applied as if the term “trade or business” for purposes of Code §1402 included service described in subsection (c)(6). Compensation does not include amounts derived from or received as earnings or profits from property (including but not limited to interest and dividends) or amounts not includible in gross income. Compensation also does not include any amount received as a pension or annuity or as deferred compensation. Compensation includes any amount includible in the Participant’s gross income under Code §71 with respect to a divorce or separation instrument described in Code §71(b)(2)(A). In the case of a married Participant filing a joint return, the greater compensation of his or her spouse is treated as the Participant’s Compensation, but only to the extent that such spouse’s compensation is not being used for purposes of the spouse making a contribution to a Roth IRA or a deductible contribution to a non-Roth IRA.

(D) Accounting and Investments. The Plan Administrator may cause Designated IRA Contributions to be held and invested: (1) in a separate trust for each Participant; (2) as a single trust holding all Participant Designated IRA Contributions; or (3) as part of a single trust holding all of the assets of the Plan. If the Plan Administrator establishes a single trust under clause (2) or (3), the Plan Administrator must account separately for each Participant’s Designated IRA Contributions and for the Earnings attributable thereto. If the Designated IRA Contributions are invested in an individual retirement annuity, the Plan Administrator may establish separate annuity contracts for each Participant’s Designated IRA Contributions or may establish a single annuity contract for all Participants, with separate accounting for each Participant. If the Plan Administrator establishes a single annuity contract, such contract must be separate from any other annuity contract under the Plan. The Plan Administrator also may invest Designated IRA Contributions in any common or collective fund under Sections 8.02 or 8.09. The Trust provisions of Article VIII otherwise apply to the investment of Designated IRA Contributions except that no part of such contributions may be invested in life insurance contracts and a Participant may not borrow from a Designated IRA Contributions Account or take such amounts into account in determining the maximum amount available for a loan from the Participant’s other Plan assets. The Plan Administrator or Trustee/Custodian may not cause Designated IRA Contribution Accounts to be commingled with any non-Plan assets. Any Designated IRA Contribution Account is established for the exclusive benefit of the affected Participant and his/her Beneficiaries. No part of the Trust attributable to Designated IRA Contributions may be invested in collectibles as described in Code §408(m), except as may be permitted under Code §408(m)(3).

(E) Participant Contribution and Designation. A Participant may make Designated IRA Contributions directly or through payroll withholding as the Plan Administrator may permit. At the time of the Participant’s contribution (or when the Designated IRA Contribution is withheld from payroll), the Participant must designate the contribution as a Designated IRA Contribution and if applicable, also must designate whether the contribution is traditional or Roth and whether the account is an individual retirement account or an individual retirement annuity.

(F) Treatment as IRA. For all purposes of the Code except as otherwise provided in this Section 3.12, Designated IRA Contributions are subject to the IRA rules under Code §§408 and 408A as applicable. Designated IRA Contributions are not Annual Additions under Section 4.05(A) and are not subject to any testing under Article IV.

(G) Reporting. The Designated IRA Contribution Trustee or Custodian must comply with all Code §408(i) reporting requirements, including providing required information regarding RMDs.

(H) Distribution/RMDs. Designated IRA Contribution Accounts are distributable under Section 6.01(C)(4)(g) and are subject to the RMD requirements of Section 6.02 (and to the Adoption Agreement elections described therein) except that: (1) the Participant’s RBD (only as it relates to the Designated IRA Contribution Account) is determined under Section 6.02(E)(7)(a) referencing age 70 ¹/2 and without regard to 5% owner or continuing employment status; (2) if the Designated IRA Contribution Account is a Roth Account, there are no lifetime RMDs; and (3) to the extent that the provisions of Section 6.02 differ, RMDs from Designated IRA Contribution Accounts otherwise are subject to the required minimum distribution rules applicable to IRAs under Code §§408(a)(6) or 408A(c)(5) as applicable, and

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under the corresponding Treasury Regulations, which are incorporated by reference herein.

     3.13 DEDUCTIBLE EMPLOYEE CONTRIBU-TIONS (DECs). A DEC is a Deductible Employee Contribution made to the Plan for a Taxable Year commencing prior to 1987. If a Participant has made DECs to the Plan, the Plan Administrator must maintain a separate Account for the Participant’s DECs as adjusted for Earnings, including DECs which are part of a Rollover Contribution described in Section 3.08. The DECs Account is part of the Participant’s Account for all purposes of the Plan, except for purposes of determining the Top-Heavy Ratio under Section 10.01. The Plan Administrator may not use a Participant’s DECs Account to purchase life insurance on the Participant’s behalf. DECs are distributable under Section 6.01(C)(4)(e).

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ARTICLE IV
LIMITATIONS AND TESTING

     4.01 ANNUAL ADDITIONS LIMIT – NO OTHER PLANS.

(A) Application of this Section. This Section 4.01 applies only to Participants in this Plan who do not participate, and who have never participated, in another qualified plan, individual medical account (as defined in Code §415(l)(2)), simplified employee pension plan (as defined in Code §408(k)) or welfare benefit fund (as defined in Code §419(e)) maintained by the Employer, which provides an Annual Addition.

(B) Limitation. The amount of Annual Additions which the Plan Administrator may allocate under this Plan to a Participant’s Account for a Limitation Year may not exceed the Annual Additions Limit.

(C) Actions to Prevent Excess Annual Additions. If the Annual Additions the Plan Administrator otherwise would allocate under the Plan to a Participant’s Account for the Limitation Year would exceed the Annual Additions Limit, the Plan Administrator will not allocate the Excess Amount, but instead will take any reasonable, uniform and nondiscriminatory action the Plan Administrator determines necessary to avoid allocation of an Excess Amount. Such actions include, but are not limited to, those described in this Section 4.01(C). If the Plan is a 401(k) Plan, the Plan Administrator may apply this Section 4.01 in a manner which maximizes the allocation to a Participant of Employer Contributions (exclusive of the Participant’s Elective Deferrals). Notwithstanding any contrary Plan provision, the Plan Administrator, for the Limitation Year, may: (1) suspend or limit a Participant’s additional Employee Contributions or Elective Deferrals; (2) notify the Employer to reduce the Employer’s future Plan contribution(s) as necessary to avoid allocation to a Participant of an Excess Amount; or (3) suspend or limit the allocation to a Participant of any Employer Contribution previously made to the Plan (exclusive of Elective Deferrals) or of any Participant forfeiture. If an allocation of Employer Contributions previously made (excluding a Participant’s Elective Deferrals) or of Participant forfeitures would result in an Excess Amount to a Participant’s Account, the Plan Administrator will allocate the Excess Amount to the remaining Participants who are eligible for an allocation of Employer contributions for the Plan Year in which the Limitation Year ends. The Plan Administrator will make this allocation in accordance with the Plan’s allocation method as if the Participant whose Account otherwise would receive the Excess Amount is not eligible for an allocation of Employer Contributions. If the Plan Administrator allocates to a Participant an Excess Amount, Plan Administrator must dispose of the Excess Amount in accordance with Section 4.01(E).

(D) Estimated and Actual Compensation. Prior to the determination of the Participant’s actual Compensation for a Limitation Year, the Plan Administrator may determine the Annual Additions Limit on the basis of the Participant’s estimated annual Compensation for such Limitation Year. The Plan Administrator must make this determination on a reasonable and uniform basis for all Participants similarly situated. The Plan Administrator must reduce the allocation of any Employer Contributions (including any allocation of forfeitures) based on estimated annual Compensation by any Excess Amounts carried over from prior Limitation Years. As soon as is administratively feasible after the end of the Limitation Year, the Plan Administrator will determine the Annual Additions Limit for the Limitation Year on the basis of the Participant’s actual Compensation for such Limitation Year.

(E) Disposition of Allocated Excess Amount. If a Participant receives an allocation of an Excess Amount for a Limitation Year, the Plan Administrator will dispose of such Excess Amount in accordance with this Section 4.01(E).

     (1) Employee Contributions. The Plan Administrator first will return to the Participant any Employee Contributions (adjusted for Earnings) and will forfeit any Associated Matching Contributions, to the extent necessary to reduce or eliminate the Excess Amount.

     (2) Elective Deferrals. The Plan Administrator next will distribute to the Participant any Elective Deferrals (adjusted for Earnings) and will forfeit any Associated Matching Contributions, to the extent necessary to reduce or eliminate the Excess Amount. If a Participant who will receive a distribution of an Excess Amount has, in the Plan Year for which the corrective distribution is made, contributed both Pre-Tax Deferrals and Roth Deferrals, the Plan Administrator operationally will determine the source(s) from which it will direct the Trustee to make the corrective distribution. The Plan Administrator also may permit the affected Participants to elect the source(s) from which the corrective distribution will be made. However, the amount of a corrective distribution of an Excess Amount to any Participant from the Pre-Tax Deferral or Roth Deferral sources under this Section 4.01(E)(2) may not exceed the amount of the Participant’s Pre-Tax Deferrals or Roth Deferrals for the correction year.

     (3) Excess Amount remains/ Participant still covered. If, after the application of Sections 4.01(E)(1) and (2), an Excess Amount still exists and the Plan covers the Participant at the end of the Limitation Year, the Plan Administrator then will use the Excess Amount(s) to reduce future Employer Contributions (including any allocation of forfeitures) under the Plan for the next Limitation Year and for each succeeding Limitation Year, as is necessary, for the Participant. If the Employer’s Plan is a Profit Sharing Plan, a Participant who is an HCE may elect to limit his/her Compensation for allocation purposes to the extent necessary to reduce his/her allocation for the Limitation Year to the Annual Additions Limit and to eliminate the Excess Amount. The Plan Administrator under this Section 4.01(E)(3) will not distribute any Excess Amount(s) to Participants or to former Participants.

     (4) Excess Amount remains/ Participant not covered/suspense account. If, after the application of Sections 4.01(E)(1) and (2), an Excess Amount still exists and the Plan does not cover the Participant at the end of the Limitation Year, the Plan Administrator then will hold the

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Excess Amount unallocated in a suspense account. The Plan Administrator will apply the suspense account to reduce Employer Contributions (including the allocation of forfeitures) for all remaining Participants in the next Limitation Year, and in each succeeding Limitation Year if necessary. Neither the Employer nor any Employee may contribute to the Plan for any Limitation Year in which the Plan is unable to allocate fully a suspense account maintained pursuant to this Section 4.01(E)(4). Amounts held unallocated in a suspense account will not share in any allocation of Earnings. The Plan Administrator under this Section 4.01(E)(4) will not distribute any Excess Amount(s) to Participants or to former Participants.

     (5) Applicable Law. In addition to any other method described in this Section 4.01(E), the Plan Administrator may dispose of any allocated Excess Amount in accordance with Applicable Law.

     4.02 ANNUAL ADDITIONS LIMIT — OTHER 415 AGGREGATED PLANS.

(A) Application of this Section. This Section 4.02 applies only to Participants who, in addition to this Plan, participate in one or more Code §415 Aggregated Plans.

     (1) Definition of Code §415 Aggregated Plans. Code §415 Aggregated Plans means M&P Defined Contribution Plans, welfare benefit funds (as defined in Code §419(e)), individual medical accounts (as defined in Code §415(l)(2)), or simplified employee pension plans (as defined in Code §408(k)) maintained by the Employer and which provide an Annual Addition during the Limitation Year.

(B) Combined Plans Limitation. The amount of Annual Additions which the Plan Administrator may allocate under this Plan to a Participant’s Account for a Limitation Year may not exceed the Combined Plans Limitation.

     (1) Definition of Combined Plans Limitation. The Combined Plans Limitation is the Annual Additions Limit, reduced by the sum of any Annual Additions allocated to the Participant’s accounts for the same Limitation Year under the Code §415 Aggregated Plans.

     (2) Prevention. If the amount the Employer otherwise would allocate to the Participant’s Account under this Plan would cause the Annual Additions for the Limitation Year to exceed this Section 4.02(B) Combined Plans Limitation, the Employer will reduce the amount of its allocation to that Participant’s Account in the manner described in Section 4.01(C), so the Annual Additions under all of the Code §415 Aggregated Plans for the Limitation Year will equal the Annual Additions Limit.

     (3) Correction. If the Plan Administrator allocates to a Participant an amount attributed to this Plan under Section 4.02(D) which exceeds the Combined Plans Limitation, the Plan Administrator must dispose of the Excess Amount in accordance with Section 4.02(E).

(C) Estimated and Actual Compensation. Prior to the determination of the Participant’s actual Compensation for the Limitation Year, the Plan Administrator may determine the Combined Plans Limitation on the basis of the Participant’s estimated annual Compensation for such Limitation Year. The Plan Administrator will make this determination on a reasonable and uniform basis for all Participants similarly situated. The Plan Administrator must reduce the allocation of any Employer Contribution (including the allocation of Participant forfeitures) based on estimated annual Compensation by any Excess Amounts carried over from prior years. As soon as is administratively feasible after the end of the Limitation Year, the Plan Administrator will determine the Combined Plans Limitation on the basis of the Participant’s actual Compensation for such Limitation Year.

(D) Ordering Rules. If a Participant’s Annual Additions under this Plan and the Code §415 Aggregated Plans result in an Excess Amount, such Excess Amount will consist of the Amounts last allocated. The Plan Administrator will determine the Amounts last allocated by treating the Annual Additions attributable to a simplified employee pension as allocated first, followed by allocation to a welfare benefit fund or individual medical account, irrespective of the actual allocation date. If the Plan Administrator allocates an Excess Amount to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the Excess Amount attributed to this Plan will equal the product of:

(1) the total Excess Amount allocated as of such date, multiplied by

(2) the ratio of (a) the Annual Additions allocated to the Participant as of such date for the Limitation Year under the Plan to (b) the total Annual Additions allocated to the Participant as of such date for the Limitation Year under this Plan and the Code §415 Aggregated Plans.

(E) Disposition of Allocated Excess Amount Attributable to Plan. The Plan Administrator will dispose of any allocated Excess Amounts described in and attributed to this Plan under Section 4.02(D) as provided in Section 4.01(E).

     4.03 OTHER DEFINED CONTRIBUTION PLANS LIMITATION.

(A) Application of this Section. This Section 4.03 applies only to Participants who, in addition to this Plan, participate in one or more qualified Defined Contribution Plans maintained by the Employer during the Limitation Year, but which are not M&P plans described in Section 4.02.

(B) Limitation. If a Participant is a participant in another Defined Contribution Plan maintained by the Employer, but which plan is not an M&P plan described in Section 4.02, the Plan Administrator must limit the allocation to the Participant of Annual Additions under this Plan as provided in Section 4.02, as though the other Defined Contribution Plan were an M&P plan.

     4.04 NO COMBINED DCP/DBP LIMITATION. If the Employer maintains a Defined Benefit Plan, or has ever maintained a Defined Benefit Plan which the Employer has terminated, this Plan does not calculate a combined 415 limit based on the Defined Benefit Plan and this Plan.

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     4.05 DEFINITIONS: SECTIONS 4.01-4.04. For purposes of Sections 4.01 through 4.04:

(A) Annual Additions. Annual Additions means the sum of the following amounts allocated to a Participant’s Account for a Limitation Year: (1) Employer Contributions (including Elective Deferrals); (2) forfeitures; (3) Employee Contributions; (4) Excess Amounts reapplied to reduce Employer Contributions under Section 4.01(E) or Section 4.02(E); (5) amounts allocated after March 31, 1984, to an individual medical account (as defined in Code §415(l)(2)) included as part of a pension or annuity plan maintained by the Employer; (6) contributions paid or accrued after December 31, 1985, for taxable years ending after December 31, 1985, attributable to post-retirement medical benefits allocated to the separate account of a key-employee (as defined in Code §419A(d)(3)) under a welfare benefit fund (as defined in Code §419(e)) maintained by the Employer; (7) amounts allocated under a Simplified Employee Pension Plan; and (8) corrected (distributed) Excess Contributions and corrected (distributed) Excess Aggregate Contributions. Excess Deferrals which the Plan Administrator corrects by distribution by April 15 of the following calendar year, are not Annual Additions. Catch-up Contributions and Designated IRA Contributions are not Annual Additions.

(B) Annual Additions Limit. Annual Additions Limit means the lesser of: (i) $40,000 (or, if greater, the $40,000 amount as adjusted under Code §415(d)), or (ii) 100% of the Participant’s Compensation paid or accrued for the Limitation Year. If there is a short Limitation Year because of a change in Limitation Year (other than as a result of the termination of the Plan), the Plan Administrator will multiply the $40,000 (as adjusted) limitation by the following fraction:

Number of months (or fractional parts thereof) in the short Limitation Year
12

The 100% Compensation limitation in clause (ii) above does not apply to any contribution for medical benefits within the meaning of Code §401(h) or Code §419A(f)(2) which otherwise is an Annual Addition.

     (1) Single plan treatment of Defined Contribution Plans. For purposes of applying the Annual Additions Limit, the Plan Administrator must treat all Defined Contribution Plans (whether or not terminated) maintained by the Employer as a single plan. Solely for purposes of Sections 4.01 through 4.04, employee contributions made to a Defined Benefit Plan maintained by the Employer is a separate Defined Contribution Plan. The Plan Administrator also will treat as a Defined Contribution Plan an individual medical account (as defined in Code §415(l)(2)) included as part of a Defined Benefit Plan maintained by the Employer and a welfare benefit fund under Code §419(e) maintained by the Employer to the extent there are post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code §419A(d)(3)).

     (2) Single plan treatment of Defined Benefit Plans. For purposes of applying the Annual Additions Limit, the Plan Administrator will treat all Defined Benefit Plans (whether or not terminated) maintained by the Employer as a single plan.

(C) Compensation. Compensation for purposes of Code §415 testing means Compensation as defined in Section 1.11(B)(1), (2), (3) or (4), except: (i) Compensation includes Elective Deferrals under Section 1.11(D), irrespective of whether the Employer has elected in its Adoption Agreement to include Elective Deferrals in Compensation for allocation purposes; (ii) Compensation for the entire Limitation Year is taken into account even if the Employer in its Adoption Agreement has elected to include only Participating Compensation for allocation purposes; (iii) Compensation excludes Post-Severance Compensation as defined in Section 1.11(I) unless the Employer in Appendix B elects to include it for purposes of this Section 4.05(C) (and regardless of the Employer’s possible Post-Severance Compensation elections in Appendix B as they relate to allocations); and (iv) any other Compensation adjustment or exclusion the Employer has elected in its Adoption Agreement for allocation purposes does not apply.

     (1) Effective Date 415 Post-Severance Compensation. The Post-Severance Compensation provisions described in clause (iii) of Section 4.05(C) apply effective as of the date the Employer elects in Appendix B, but may not be effective earlier than January 1, 2005.

     (2) “First few weeks rule.” The Plan Administrator operationally, but on a uniform and consistent basis as to similarly situated Participants, may elect to include in Compensation for Code §415 purposes Compensation earned in such Limitation Year but which, solely because of payroll timing, is paid in the first few weeks of the next following Limitation Year as described in Treas. Reg. §1.415-2(d)(5)(i) and in Prop. Treas. Reg. §1.415(c)-2(e)(2). This Section 4.05(C)(2) applies to Code §415 testing Compensation but does not affect Compensation for allocation purposes.

(D) Employer. Employer means the Employer and any Related Employer. Solely for purposes of applying the Annual Additions Limit, the Plan Administrator will determine Related Employer status by modifying Code §§414(b) and (c) in accordance with Code §415(h).

(E) Excess Amount. Excess Amount means the excess of the Participant’s Annual Additions for the Limitation Year over the Annual Additions Limit.

(F) Limitation Year. See Section 1.33.

(G) M&P Plan. M&P Plan means a Prototype Plan or a Master Plan. See Section 1.48.

     4.06 ANNUAL TESTING ELECTIONS. The Plan Administrator may elect to test for coverage and nondiscrimination by applying, as applicable, annual testing elections under this Section 4.06.

(A) Changes and Uniformity. In applying any testing election, the Plan Administrator may elect to apply or not to apply such election in any Testing Year, consistent with this Section 4.06. However, the Plan Administrator will apply the testing elections in effect within a Testing Year uniformly to all similarly situated Participants.

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(B) Plan Specific Elections. The Employer in its Adoption Agreement must elect for the Plan Administrator to apply the following annual testing elections: (1) nondiscrimination testing under the ADP and ACP tests as a Traditional 401(k) Plan; (2) no nondiscrimination testing as a Safe Harbor 401(k) Plan or nondiscrimination testing under the ACP test as an ADP only Safe Harbor 401(k) Plan; (3) no nondiscrimination testing as a SIMPLE 401(k) Plan; (4) the top-paid group election under Code §414(q)(1)(B)(ii); (5) the calendar year data election under Notice 97-45 or other Applicable Law; (6) Current or Prior Year Testing as a Traditional 401(k) Plan or as an ADP only Safe Harbor 401(k) Plan under Treas. Reg. §§1.401(k)-2(a)(2)(ii) and 1.401(m)-2(a)(2)(ii) and under Notice 98-1 as applicable; and (7) any other testing election which the IRS in the future specifies in written guidance as being subject to a requirement of the Employer making a Plan (versus an operational) election.

(C) Operational Elections. The Plan Administrator operationally may apply any testing election available under Applicable Law, other than those plan specific elections described in 4.06(B), including but not limited to: (i) the “otherwise excludible employees rule” (“OEE rule”) under Code §410(b)(4)(B); (ii) the “early participation rule” (“EP rule”) under Code §§401(k)(3)(F) and 401(m)(5)(C); (iii) except as Section 4.07 may limit, the application of any Code §414(s) nondiscriminatory definition of compensation for nondiscrimination testing, regardless of the Plan’s definitions of Compensation for any other purpose; (iv) application of the general nondiscrimination test under Treas. Reg. §1.401(a)(4)-2(c); (v) application of the “compensation ratio test” under Treas. Reg. §1.414(s)-1(d)(3); (vi) application of imputed permitted disparity under Treas. Reg. §1.401(a)(4)-7; (vii) application of restructuring under Treas. Reg. §1.401(a)(4)-9; (viii) application of the average benefit test under Code §410(b)(2), except as limited under Section 3.06(F); (ix) application of permissive aggregation under Code §410(b)(6)(B); (x) application of the “qualified separate line of business rules” under Code §410(b)(5); (xi) shifting Elective Deferrals from the ADP test to the ACP test; (xii) shifting QMACs from the ACP test to the ADP test; or (xiii) application of the “2¹/2 month rule” in the ADP test under Treas. Reg. §1.401(k)-2(a)(4)(i)(B)(2).

     (1) Application of otherwise excludible employees and early participation rules. In applying the OEE and EP rules in clauses (i) and (ii) of Section 4.06(C) above, the Plan Administrator will apply the following provisions.

          (a) Definitions of Otherwise Excludible Employees and Includible Employees. For purposes of this Section 4.06(C), an Otherwise Excludible Employee means a Participant who has not reached the Cross-Over Date. For purposes of this Section 4.06(C), an Includible Employee means a Participant who has reached the Cross-Over Date.

          (b) Satisfaction of coverage. To apply the OEE or EP rules for nondiscrimination testing, the Plan must satisfy coverage as to the disaggregated plans under Code §410(b)(4)(B).

          (c) Definition of Cross-Over Date. The Cross-Over Date under the OEE rule means when an Employee changes status from the disaggregated plan benefiting the Otherwise Excludible Employees to the disaggregated “plan” benefiting the Includible Employees. The Cross-Over Date has the same meaning under the EP rule except it is limited only to NHCEs. Under the EP rule, all HCE Participants remain subject to nondiscrimination testing.

          (d) Determination of Cross-Over Date. The Plan Administrator may elect to determine the Cross-Over Date for an Employee by applying any date which is not later than the maximum permissible entry date under Code §410(a)(4).

          (e) Amounts in testing in Cross-Over Plan Year. For purposes of the OEE rule, the Plan Administrator will count the total Plan Year Elective Deferrals, Matching Contributions, Employer Contributions and Compensation in the Includible Employees plan test for the Employees who become Includible Employees during such Plan Year. For purposes of applying the EP rule, the Plan Administrator will count the Elective Deferrals, Matching Contributions, Employer Contributions and Compensation in the single test for the Includible Employees, but only such of these items as are attributable to the period on and following the Cross-Over Date.

          (f) Application of other conventions. Notwithstanding Sections 4.06(C)(1)(c), (d) and (e): (i) the Plan Administrator operationally may apply Applicable Law; (ii) the Plan Administrator under a Restated Plan operationally may apply the Plan terms commencing in the Plan Year beginning after the Employer executes the Restated Plan in lieu of applying the Plan terms retroactive to the Plan’s restated Effective Date; and (iii) the Plan Administrator operationally may apply any other reasonable conventions, uniformly applied within a Plan Year, provided that any such convention is not inconsistent with Applicable Law.

          (g) Allocations not effected by testing. The Plan Administrator’s election to apply the OEE or EP rules for testing does not control the Plan allocations, or the Compensation or Elective Deferrals taken into account for Plan allocations. The Plan Administrator will determine Plan allocations, and Compensation and Elective Deferrals for Plan allocations, based on the Employer’s Adoption Agreement elections including elections relating to Participating Compensation or Plan Year Compensation. For this purpose, an election of Participating Compensation means Compensation and Elective Deferrals on and following the Cross-Over Date as to the allocations for the disaggregated plan benefiting the Includible Employees..

(D) Election Timing. Except where the Plan or Applicable Law specifies another deadline for making a Plan specific annual testing election under Section 4.06(B), the Plan Administrator may make any such testing election, and the Employer must amend the Plan as necessary to reflect the election, by the end of the Testing Year. As to any Plan Year ending before the issuance of Rev. Proc. 2005-66, the Plan Administrator may make any Plan specific testing election under Section 4.06(B) and the Employer may make an amendment reflecting such election, as provided under Applicable Law. The Plan Administrator may make operational testing elections under Section 4.06(C) as provided under Applicable Law. If the Employer is correcting

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an operational Plan failure under EPCRS, the Employer may make an annual testing election for any Testing Year at the time the Employer makes the correction.

(E) Coverage Transition Rule. The Plan Administrator in determining the Plan’s compliance with the coverage requirements of Code §410(b), in the case of certain acquisitions or dispositions described in Code §410(b)(6)(C) and in the regulations thereunder, will apply the “coverage transition rule” described therein.

     4.07 TESTING BASED ON BENEFITS. In applying the general nondiscrimination test under Section 4.06(C) to any non-uniform Plan allocation, the Plan Administrator may elect to test using allocation rates or using equivalent accrual (benefit) rates (“EBRs”) as defined in Treas. Reg. §1.401(a)(4)-(8)(b)(2). In the event that the Plan Administrator elects to test using EBRs, the Plan must comply with this Section 4.07.

(A) Gateway Contribution. Except as provided in Section 4.07(A)(2), if the Employer in its Nonstandardized Plan or Volume Submitter Plan elects an allocation of its Nonelective Contribution which is: (i) based on classifications under Section 3.04(B)(3); (ii) super integrated under Section 3.04(B)(4); or (iii) age-based under Section 3.04(B)(5), and the Plan Administrator will perform nondiscrimination testing using EBRs, the Employer must make a Gateway Contribution. Except as provided in Section 4.07(A)(2), the Employer also must make a Gateway Contribution where the Employer in its Adoption Agreement has elected a non-uniform allocation and the Plan Administrator performs nondiscrimination testing using EBRs.

     (1) Definition of Gateway Contribution. A Gateway Contribution is an additional Employer Contribution or Nonelective Contribution in an amount necessary to satisfy the minimum allocation gateway requirement described in Treas. Reg. §1.401(a)(4)-8(b)(1)(vi).

     (2) Exception to Gateway Contribution requirement. An Employer is not required to make any Gateway Contribution in the event that the Employer’s elected allocation under Section 4.07(A) satisfies; (a) the “broadly available allocation rate” requirements; (b) the “age-based allocation with a gradual age or service schedule” requirements; or (c) the uniform target benefit allocation requirements each as described in Treas. Reg. §1.401(a)(4)-8(b)(1)(B).

(B) Eligibility for Gateway Contribution. The Plan Administrator will allocate any Gateway Contribution for a Plan Year to each NHCE Participant who receives an allocation of any Employer Contribution or Nonelective Contribution for such Plan Year. The Plan Administrator will allocate the Gateway Contribution without regard to any allocation conditions under Section 3.06 otherwise applicable to Employer Contributions or Nonelective Contributions under the Plan. However, if the Plan Administrator disaggregates the Plan for testing pursuant to the OEE rule under Section 4.06(C), the Otherwise Excludible Employees will not receive an allocation of any Gateway Contribution unless such an allocation is necessary to satisfy Code §401(a)(4).

(C) Amount of Gateway Contribution. The Plan Administrator will allocate any Gateway Contribution pro rata based on the Compensation of each Participant who receives a Gateway Contribution allocation for the Plan Year, but in no event will an allocation of the Gateway Contribution to any Participant exceed the lesser of: (1) 5% of Compensation; or (2) one-third (1/3) of the Highest Allocation Rate for the Plan Year. The Plan Administrator will reduce (offset) the Gateway Contribution allocation for a Participant under either the 5% or the 1/3 Gateway Contribution alternative, by the amount of any other Employer Contributions or Nonelective Contributions the Plan Administrator allocates (including forfeitures allocated as an Employer Contribution or Nonelective Contribution and Safe Harbor Nonelective Contributions, but excluding other QNECs, as defined under Section 1.37(C)) for the same Plan Year to such Participant; provided that if an NHCE is receiving only a QNEC and the QNEC amount equals or exceeds the Gateway Contribution, the QNEC satisfies the Gateway Contribution requirement as to that NHCE. Notwithstanding the foregoing, the Employer may increase the Gateway Contribution to satisfy the provisions of Treas. Reg. §1.401(a)(4)-9(b)(2)(v)(D) if the Plan consists (for nondiscrimination testing purposes) of one or more Defined Contribution Plans and one or more Defined Benefit Plans.

(D) Compensation for 5% Gateway Contribution. For allocation purposes under the 5% Gateway Contribution alternative, “Compensation” means as the Employer elects in the Adoption Agreement, except that the Plan Administrator: (1) will include Elective Deferrals; (2) will limit Compensation to Participating Compensation; and (3) will disregard any other modifications to Compensation the Employer elects in its Adoption Agreement.

(E) Compensation for Determination of Highest Rate and 1/3 Gateway Contribution. The Plan Administrator under the 1/3 Gateway Contribution alternative: (i) will determine the Highest Allocation Rate and the resulting Gateway Contribution rate for the NHCE Participants entitled to the Gateway Contribution; and (ii) will allocate the Gateway Contribution, based on Compensation the Employer elects in its Adoption Agreement, provided that such definition satisfies Code §414(s) and if it does not, the Plan Administrator will allocate the Gateway Contribution based on a Code §414(s) definition which the Plan Administrator operationally selects.

     (1) Definition of Highest Allocation Rate. The Highest Allocation Rate means the greatest allocation rate of any HCE Participant and is equal to the Participant’s total Employer Contribution or Nonelective Contribution allocation (including any QNECs, Safe Harbor Nonelective Contributions and forfeitures allocated as a Nonelective Contribution or forfeitures allocated as a Money Purchase Pension Contribution) divided by his/her Compensation, as described in this Section 4.07(E).

(F) Employer Contribution Excludes Match. For purposes of this Section 4.07, an Employer Contribution excludes Matching Contributions.

     4.08 AMENDMENT TO PASS TESTING. In the event that the Plan fails to satisfy Code §§410 or 401(a)(4) in any Plan Year, the Employer may elect to amend the Plan

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consistent with Treas. Reg. §1.401(a)(4)-11(g) to correct the failure. The Employer may make such an amendment in any form or manner as the Employer deems reasonable, but otherwise consistent with Section 11.02. Any amendment under this Section 4.08 will not affect reliance on the Plan’s Opinion Letter or Advisory Letter.

     4.09 APPLICATION OF COMPENSATION LIMIT. The Plan Administrator in performing any nondiscrimination testing under this Article IV will limit each Participant’s Compensation to the amount described in Section 1.11(E).

     4.10 401(k) TESTING. The Plan Administrator will test Elective Deferrals, Matching Contributions and Employee Contributions under the Employer’s 401(k) Plan or other Plan as applicable, in accordance with this Section 4.10. The Plan Administrator, in applying this Section 4.10 will apply the Final 401(k) Regulations Effective Date.

(A) Annual Elective Deferral Limitation. A Participant’s Elective Deferrals for a Taxable Year may not exceed the Elective Deferral Limit.

     (1) Definition of Elective Deferral Limit. The Elective Deferral Limit is the Code §402(g) limitation on each Participant’s Elective Deferrals for each Taxable Year. If the Participant’s Taxable Year is not a calendar year, the Plan Administrator must apply the Code §402(g) limitation in effect for the calendar year in which the Participant’s Taxable Year begins.

     (2) Definition of Excess Deferral. A Participant’s Excess Deferral is the amount of Elective Deferrals for a Taxable Year which exceeds the Elective Deferral Limit.

     (3) Elective Deferral Limit amount. The Elective Deferral Limit is the following amount for each Taxable Year:

Year	Amount
2002	$	11,000
2003	$	12,000
2004	$	13,000
2005	$	14,000
2006	$	15,000

     (4) COLA after 2006. After the 2006 Taxable Year, the Elective Deferral Limit is subject to adjustment in multiples of $500 under Code §402(g)(4).

     (5) Suspension after reaching limit. If, pursuant to a Salary Reduction Agreement or pursuant to a CODA election, the Employer determines a Participant’s Elective Deferrals to the Plan for a Taxable Year would exceed the Elective Deferral Limit, the Employer will suspend the Participant’s Salary Reduction Agreement, if any, until the following January 1 and will pay to the Participant in cash the portion of the Elective Deferrals which would result in the Participant’s Elective Deferrals for the Taxable Year exceeding the Elective Deferral Limit.

     (6) Correction. If the Plan Administrator determines a Participant’s Elective Deferrals already contributed to the Plan for a Taxable Year exceed the Elective Deferral Limit, the Plan Administrator will distribute the Excess Deferrals as adjusted for Allocable Income, no later than April 15 of the following Taxable Year (or if later, the date permitted under Code §§7503 or 7508A). See Section 4.11(C)(1) as to Gap Period income.

     (7) 415 interaction. If the Plan Administrator distributes the Excess Deferrals by the April 15 deadline under Section 4.10(A)(6), the Excess Deferrals are not an Annual Addition under Section 4.05, and the Plan Administrator may make the distribution irrespective of any other provision under this Plan or under the Code. Elective Deferrals distributed to a Participant as an Excess Amount in accordance with Sections 4.01 through 4.03 are not taken into account in determining the Participant’s Elective Deferral Limit.

     (8) ADP interaction. The Plan Administrator will reduce the amount of Excess Deferrals for a Taxable Year distributable to a Participant by the amount of Excess Contributions (as determined in Section 4.10(B)), if any, previously distributed to the Participant for the Plan Year beginning in that Taxable Year.

     (9) More than one plan. If a Participant participates in another plan subject to the Code §402(g) limitation under which he/she makes elective deferrals pursuant to a 401(k) Plan, elective deferrals under a SARSEP, elective contributions under a SIMPLE IRA or salary reduction contributions to a tax-sheltered annuity (irrespective of whether the Employer maintains the other plan), the Participant may provide to the Plan Administrator a written claim for Excess Deferrals made to the Plan for a Taxable Year. The Participant must submit the claim no later than the March 1 following the close of the particular Taxable Year and the claim must specify the amount of the Participant’s Elective Deferrals under this Plan which are Excess Deferrals. The Plan Administrator may require the Participant to provide reasonable evidence of the existence of and the amount of the Participant’s Excess Deferrals. If the Plan Administrator receives a timely claim which it approves, the Plan Administrator will distribute the Excess Deferrals (as adjusted for Allocable Income under Section 4.11(C)(1)) the Participant has assigned to this Plan, in accordance with this Section 4.10(A). If a Participant has Excess Deferrals because of making Elective Deferrals to this Plan and other plans of the Employer (but where the Elective Deferral Limit is not exceeded based on Deferrals to any single plan), the Participant for purposes of this Section 4.10(A)(9) is deemed to have notified the Plan Administrator of this Plan of the Excess Deferrals.

     (10) Roth and Pre-Tax Deferrals. If a Participant who will receive a distribution of Excess Deferrals, in the Taxable Year for which the corrective distribution is made, has contributed both Pre-Tax Deferrals and Roth Deferrals, the Plan Administrator operationally will determine the Elective Deferral Account source(s) from which it will direct the Trustee to make the corrective distribution. The Plan Administrator also may permit the affected Participant to elect the source(s) from which the Trustee will make the corrective distribution. However, the amount of a corrective distribution of Excess Deferrals to any Participant from the Pre-Tax Deferral or Roth Deferral sources under this Section 4.10(A)(10) may not exceed the amount of the Participant’s

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Pre-Tax Deferrals or Roth Deferrals for the Taxable Year of the correction.

(B) Actual Deferral Percentage (ADP) Test. If the Employer in its Adoption Agreement has elected to test its 401(k) Plan as a Traditional 401(k) Plan, a Participant’s Elective Deferrals for a Plan Year may not exceed the ADP Limit.

     (1) Definition of ADP Limit. The ADP Limit is the maximum dollar amount of Elective Deferrals each HCE Participant may defer under the Plan such that the Plan passes the ADP test for that Plan Year.

     (2) Definition of Excess Contributions. Excess Contributions are the amount of Elective Deferrals made by the HCEs which exceed the ADP Limit and which may not be recharacterized as Catch-Up Contributions.

     (3) ADP test. For each Plan Year, Elective Deferrals satisfy the ADP test if they satisfy either of the following tests:

          (a) 1.25 test. The ADP for the HCE Group does not exceed 1.25 times the ADP of the NHCE Group; or

          (b) 2 percent test. The ADP for the HCE Group does not exceed the ADP for the NHCE Group by more than two percentage points and the ADP for the HCE Group is not more than twice the ADP for the NHCE Group.

     (4) Calculation of ADP. The ADP for either group is the average of the separate ADRs calculated to the nearest one-hundredth of one percent for each ADP Participant who is a member of that group. The Plan Administrator will include in the ADP test as a zero an ADP Participant who elects not to make Elective Deferrals to the Plan for the Testing Year.

          (a) Definition of ADR (actual deferral ratio). An ADP Participant’s ADR for a Plan Year is the ratio of the ADP Participant’s Elective Deferrals, but excluding Catch-Up Contributions, for the Plan Year to the ADP Participant’s Compensation for the Plan Year.

          (b) Definitions of HCE and NHCE Groups. See Sections 4.11 (B), (G) and (H).

          (c) Excess Deferrals interaction. In determining the ADP, the Plan Administrator must include any HCE’s Excess Deferrals (whether or not corrected), as described in Section 4.10(A), to this Plan or to any other Plan of the Employer and the Plan Administrator will disregard any NHCE’s Excess Deferrals.

          (d) QNECs and QMACs. The Plan Administrator operationally may include in the ADP test QNECs and QMACs the Plan Administrator does not use in the ACP test, provided that the Plan passes the ACP test before and after the shifting of any amount from the ACP test to the ADP test. The Plan Administrator may use QNECs or QMACs in the ADP test provided such amounts are not impermissibly targeted under Section 4.10(D).

          (e) Shifting Elective Deferrals to ACP. The Plan Administrator will not count in the ADP test any Elective Deferrals the Plan Administrator operationally elects to shift to the ACP test; provided that the Plan must pass the ADP test both taking into account and disregarding the Elective Deferrals the Plan Administrator shifts to the ACP test.

          (f) Current/Prior Year Testing.

               (i) Election. In determining whether the Plan’s 401(k) arrangement satisfies the ADP test, the Plan Administrator will use Current Year Testing or Prior Year Testing as the Employer elects in its Adoption Agreement. Any such election applies for such Testing Years as the Employer elects (and retroactively as the Employer elects in the case of a Restated Plan).

               (ii) Permissible changes. The Employer may amend its Adoption Agreement to change from Prior Year Testing to Current Year Testing at any time, subject to Section 4.06(D). The Employer under Section 4.06(D) may amend its Adoption Agreement to change from Current Year Testing to Prior Year Testing only: (A) if the Plan has used Current Year Testing in at least the 5 immediately preceding Plan Years (or if the Plan has not been in existence for 5 Plan Years, the number of Plan Years the Plan has been in existence); (B) the Plan is the result of aggregation of 2 or more plans and each of the aggregated plans used Current Year Testing for the period described in clause (A); or (C) a transaction occurs to which the coverage transition rule under Code §410(b)(6)(C) applies and as a result, the Employer maintains a plan using Prior Year Testing and a plan using Current Year Testing. Under clause (C), the Employer may make an amendment to change to Prior Year Testing at any time during the coverage transition period.

               (iii) Deferrals and QNEC/QMAC deadline/ limitation under Prior Year Testing. The Plan Administrator may include Elective Deferrals, QNECs or QMACs in determining the HCE or NHCE ADP only if the Employer makes such contribution to the Plan within 12 months following the end of the Plan Year to which the Elective Deferral relates or to which the Plan Administrator will allocate the QNEC or QMAC. Under Prior Year Testing, to count the QNEC or QMAC in the ADP test, the Employer must contribute a QNEC or QMAC by the end of the Testing Year. If the Employer’s adoption of this Plan is a new Plan (and in the case of a Restated Plan for Testing Years which begin after the date the Employer executes the Restated Plan), the Employer may not make an Operational QNEC or QMAC if the Plan uses Prior Year Testing.

               (iv) First Plan Year under Prior Year Testing. For the first Plan Year the Plan permits Elective Deferrals, if the Plan is not a Successor Plan and is using Prior Year Testing, the prior year ADP for the NHCE Group is equal to the greater of 3% or the actual ADP for the NHCE Group in the first Plan Year. If the Plan continues to use Prior Year Testing in the second Plan Year, the Plan Administrator must use the actual first Plan Year ADP for the NHCE Group in the ADP test for the second Plan Year.

               (v) Plan coverage changes under Prior Year Testing. If the Employer’s Plan is using Prior Year Testing and the Plan experiences a plan coverage change

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under Treas. Reg. §1.401(k)-2(c)(4), the Plan Administrator will make any adjustments such regulations may require to the NHCEs’ ADP for the prior year.

               (vi) Shifting contributions and switching from Current Year to Prior Year. If the Plan Administrator is using Current Year Testing and shifts an Elective Deferral to the ACP test or shifts a QMAC to the ADP test, then, in the subsequent Testing Year for which the Plan Administrator switched to Prior Year Testing, the Plan Administrator in applying Prior Year Testing must disregard the shifted amount. As of the Final 401(k) Regulations Effective Date, the Plan Administrator in applying Prior Year Testing in such subsequent Testing Year will restore the ADP and ACP to their original amounts, leaving the shifted amount in the original test without regard to the shift in the previous Testing Year.

     (5) Special aggregation rule for HCEs. To determine the ADR of any HCE, the Plan Administrator must take into account any Elective Deferrals made by the HCE (and if used in the ADP test, any QNECs and QMACs allocated to the HCE) under any other 401(k) Plan maintained by the Employer, unless the Elective Deferrals are to an ESOP before the Final 401(k) Regulations Effective Date. If the 401(k) Plans have different Plan Years, the Plan Administrator will determine the combined Elective Deferrals on the basis of the Plan Years ending in the same calendar year. For Plan Years beginning on or after the Final 401(k) Regulations Effective Date, if the 401(k) Plans have different Plan Years, all Elective Deferrals made during the Plan Year will be aggregated. Notwithstanding the foregoing, the Plan Administrator will not apply the aggregation rule of this Section 4.10(B)(5) to plans which may not be aggregated under Treas. Reg. §1.401(k)-2(a)(3)(ii)(B).

     (6) Aggregation of certain 401(k) plans. If the Employer treats two or more plans as a single plan for coverage or nondiscrimination purposes, the Employer must combine the 401(k) Plans to determine whether the plans satisfy the ADP test. This aggregation rule applies to the ADR determination for all ADP Participants (and ADP participants under the other plans), irrespective of whether an ADP Participant is an HCE or an NHCE. An Employer may not aggregate: (a) plans with different Plan Years; (b) a Safe Harbor 401(k) Plan with a non-Safe Harbor 401(k) Plan; (c) plans which use different testing methods (Current Year Testing versus Prior Year Testing); or (d) any other plans which must be disaggregated under Treas. Reg. §1.401(k)-1(b)(4)(iv). For Plan Years prior to the Final 401(k) Regulations Effective Date, the Employer may not aggregate an ESOP (or the ESOP portion of a plan) with a non-ESOP plan (or non-ESOP portion of a plan). If the Employer aggregating 401(k) Plans under this Section 4.10(B)(6) is using Prior Year Testing, the Plan Administrator must adjust the NHCE Group ADP for the prior year as provided in Section 4.10(B)(4)(f)(v).

     (7) Characterization of Excess Contributions. If, pursuant to Section 4.10(B)(4)(d), the Plan Administrator has elected to include QMACs in the ADP test, any Excess Contributions are attributable proportionately to Elective Deferrals and to QMACs in the ADP test allocated on the basis of those Elective Deferrals. The Plan Administrator will reduce the amount of Excess Contributions for a Plan Year distributable to an HCE by the amount of Excess Deferrals (as determined in Section 4.10(A)), if any, previously distributed to that Employee for the Employee’s Taxable Year ending in that Plan Year.

     (8) Distribution of Excess Contributions. If the Plan Administrator determines the Plan fails to satisfy the ADP test for a Plan Year, the Trustee, as directed by the Plan Administrator, by the end of the Plan Year which follows the Testing Year (or any later date determined under Code §7508A), must distribute the Excess Contributions, as adjusted for Allocable Income under Section 4.11(C)(2).

          (a) Calculation of total Excess Contributions. The Plan Administrator will determine the total amount of the Excess Contributions to the Plan by starting with the HCE(s) who has the greatest ADR, reducing his/her ADR (but not below the next highest ADR), then, if necessary, reducing the ADR of the HCE(s) at the next highest ADR, including the ADR of the HCE(s) whose ADR the Plan Administrator already has reduced (but not below the next highest ADR), and continuing in this manner until the ADP for the HCE Group is equal to the ADP Limit. All reductions under this Section 4.10(B)(8)(a) are to the ADR only and do not result in any actual distributions.

          (b) Apportionment and distribution of Excess Contributions. After the Plan Administrator has determined the total Excess Contribution amount, the Trustee, as directed by the Plan Administrator, then will distribute to each HCE his/her respective share of the Excess Contributions. The Plan Administrator will determine each HCE’s share of Excess Contributions by starting with the HCE(s) who has the highest dollar amount of Elective Deferrals, reducing his/her Elective Deferrals (but not below the next highest dollar amount of Elective Deferrals), then, if necessary, reducing the Elective Deferrals of the HCE(s) at the next highest dollar amount of Elective Deferrals including the Elective Deferrals of the HCE(s) whose Elective Deferrals the Plan Administrator already has reduced (but not below the next highest dollar amount of Elective Deferrals), and continuing in this manner until the Trustee has distributed all Excess Contributions.

          (c) Roth and Pre-Tax Deferrals. If an HCE who will receive a distribution of Excess Contributions, in the Plan Year for which the corrective distribution is made, has contributed both Pre-Tax Deferrals and Roth Deferrals, the Plan Administrator operationally will determine the Elective Deferral Account source(s) from which it will direct the Trustee to make the corrective distribution. The Plan Administrator also may permit the affected Participant to elect the source(s) from which the Trustee will make the corrective distribution. However, the amount of a corrective distribution of Excess Contributions to any Participant from the Pre-Tax Deferral or Roth Deferral sources under this Section 4.10(B)(8)(c) may not exceed the amount of the Participant’s Pre-Tax Deferrals or Roth Deferrals for the Testing Year.

          (d) Catch-Up Deferrals re-characterized. If the Plan permits Catch-Up Contributions and a Catch-Up Eligible Participant exceeds his/her ADP Limit and the Plan Administrator otherwise would distribute the Participant’s Excess Contributions, the Plan Administrator instead will

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re-characterize as a Catch-Up Deferral the portion of such Excess Contributions as is equal to the Participant’s unused Catch-Up Deferral Limit applicable to the Testing Year. Any such re-characterized Excess Contribution, plus Allocable Income, will remain in the Participant’s Account and the Plan Administrator, for purposes of determining ADP test correction, will treat the re-characterized amount, including Allocable Income, as having been distributed. If the Employer in its Adoption Agreement has elected to match Catch-Up Deferrals, the Plan Administrator will retain in the affected Participant’s Account any Matching Contributions made with respect to any Excess Contributions which the Plan Administrator re-characterizes under this Section 4.10(B)(8)(d).

     (9) Allocable Income/ Testing Year and Gap Period A corrective distribution under Section 4.10(B)(8) must include Allocable Income. See Section 4.11(C)(2).

     (10) Treatment as Annual Additions. Distributed Excess Contributions are Annual Additions under Sections 4.01 through 4.05 in the Limitation Year in which such amounts were allocated.

     (11) Re-characterization as Employee Contributions. In addition to the other correction methods under this Section 4.10(B), the Plan Administrator operationally may elect to correct an ADP test failure by re-characterizing the Elective Deferrals in excess of the ADP Limit as Employee Contributions in accordance with Treas. Reg. §1.401(k)-2(b)(3).

(C) Actual Contribution Percentage (ACP) Test. If: (i) the Employer in its Adoption Agreement has elected to test its Plan as a traditional 401(k) Plan; (ii) the Employer under its 401(k) Plan has elected only ADP safe harbor plan status and the Employer makes Matching Contributions; or (iii) under any Plan there are Employee Contributions or Matching Contributions (not exempted from ACP testing), a Participant’s Aggregate Contributions may not exceed the ACP Limit.

     (1) Definition of ACP Limit. The ACP Limit is the maximum dollar amount of Aggregate Contributions that each HCE may receive or may make under the Plan such that the Plan passes the ACP test.

     (2) Definition of Aggregate Contributions. Aggregate Contributions are Matching Contributions and Employee Contributions. Aggregate Contributions also include any QMACs, QNECs and Elective Deferrals the Plan Administrator includes in the ACP test.

     (3) Definition of Excess Aggregate Contributions. Excess Aggregate Contributions are the amount of Aggregate Contributions allocated on behalf of the HCEs which cause the Plan to fail the ACP test.

     (4) ACP test. For each Plan Year, Aggregate Contributions satisfy the ACP test if they satisfy either of the following tests:

          (a) 1.25 test. The ACP for the HCE Group does not exceed 1.25 times the ACP of the NHCE Group; or

          (b) 2 percent test. The ACP for the HCE Group does not exceed the ACP for the NHCE Group by more than two percentage points and the ACP for the HCE Group is not more than twice the ACP for the NHCE Group.

     (5) Calculation of ACP. The ACP for either group is the average of the separate ACRs calculated to the nearest one-hundredth of one percent for each ACP Participant who is a member of that group. The Plan Administrator will include in the ACP test as a zero an ACP Participant who for the Testing Year: (i) is eligible to make Employee Contributions but who does not do so; or (ii) is eligible to make Elective Deferrals and to receive an allocation of any Matching Contributions based on Elective Deferrals but who does not make any Elective Deferrals. An Employee who fails to satisfy an allocation condition applicable to Matching Contributions is excluded from the ACP test unless the Employee is eligible to make Employee Contributions or the Plan Administrator re-characterizes any of the Employee’s Elective Deferrals as Employee Contributions.

          (a) Definition of ACR (actual contribution ratio). An ACP Participant’s ACR for a Plan Year is the ratio of the ACP Participant’s Aggregate Contributions for the Plan Year to the ACP Participant’s Compensation for the Plan Year.

          (b) Definitions of ACP Participant and HCE and NHCE Groups. See Section 4.11(A), (G) and (H).

          (c) QNECs and Elective Deferrals. The Plan Administrator operationally may include in the ACP test QNECs and Elective Deferrals the Plan Administrator does not use in the ADP test, provided that the Plan passes the ADP test before and after the shifting of any amount from the ADP test to the ACP test. The Plan Administrator may use QNECs in the ACP test provided such amounts are not impermissibly targeted under Section 4.10(D).

          (d) Shifting QMACs to ADP. The Plan Administrator will not count in the ACP test any QMACs the Plan Administrator operationally elects to shift to the ADP test; provided that the Plan must pass the ACP test both taking into account and disregarding the QMACs the Plan Administrator shifts to the ADP test.

          (e) Current/Prior Year Testing.

               (i) Election. In determining whether the Plan’s 401(k) arrangement satisfies the ACP test, the Plan Administrator will use Current Year Testing or Prior Year Testing as the Employer elects in its Adoption Agreement. Any such election applies for such Testing Years as the Employer elects (and retroactively as the Employer elects in the case of a Restated Plan).

               (ii) Permissible changes. The Employer may amend its Adoption Agreement to change from Prior Year Testing to Current Year Testing at any time, subject to Section 4.06(D). The Employer, under Section 4.06(D) may amend its Adoption Agreement to change from Current Year Testing to Prior Year Testing only: (A) if the Plan has used Current Year Testing in at least the 5 immediately preceding Plan Years (or if the Plan has not been in existence for 5 Plan Years, the number of Plan Years the Plan has been in

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existence); (B) the Plan is the result of aggregation of 2 or more plans and each of the aggregated plans used Current Year Testing for the period described in clause (A); or (C) a transaction occurs to which the coverage transition rule under Code §410(b)(6)(C) applies and as a result, the Employer maintains a plan using Prior Year Testing and a plan using Current Year Testing. Under clause (C), the Employer may make an amendment to change to Prior Year Testing at any time during the coverage transition period.

          (iii) Employee Contribution, Matching and QNEC deadline/ limitation under Prior Year Testing. The Plan Administrator includes Employee Contributions in the ACP test in the Testing Year in which the Employer withholds the Employee Contributions from the Participant’s pay, provided such contributions are contributed to the Trust within a reasonable period thereafter. The Plan Administrator may include Matching Contributions and QNECs in determining the HCE or NHCE ACP only if the Employer makes such contribution to the Plan within 12 months following the end of the Plan Year to which the Plan Administrator will allocate the Matching Contribution, or QNEC Under Prior Year Testing, to count the QNEC in the ACP test, the Employer must contribute a QNEC by the end of the Testing Year. If the Employer’s adoption of this Plan is a new Plan (and in the case of a restated Plan effective for Testing Years which begin after the date the Employer executes the restated Plan), the Employer may not make an Operational QNEC if the Plan uses Prior Year Testing.

          (iv) First Plan Year under Prior Year Testing. For the first Plan Year the Plan permits Matching Contributions or Employee Contributions, if the Plan is not a Successor Plan and is using Prior Year Testing, the prior year ACP for the NHCE Group is equal to the greater of 3% or the actual ACP for the NHCE Group in the first Plan Year. If the Plan continues to use Prior Year Testing in the second Plan Year, the Plan Administrator must use the actual first Plan Year ACP for the NHCE Group in the ACP test for the second Plan Year.

          (v) Plan coverage changes under Prior Year Testing. If the Employer’s Plan is using Prior Year Testing and the Plan experiences a plan coverage change under Treas. Reg. §1.401(m)-2(c)(4), the Plan Administrator will make any adjustments such regulations may require to the NHCEs’ ACP for the prior year.

          (vi) Shifting contributions and switching from Current Year to Prior Year. If the Plan Administrator is using Current Year Testing and shifts an Elective Deferral to the ACP test or shifts a QMAC to the ADP test, then, in the subsequent Testing Year for which the Plan Administrator switched to Prior Year Testing, the Plan Administrator in applying Prior Year Testing must disregard the shifted amount. As of the Final 401(k) Regulations Effective Date, the Plan Administrator in applying Prior Year Testing in such subsequent Testing Year will restore the ADP and ACP to their original amounts, leaving the shifted amount in the original test without regard to the shift in the previous Testing Year.

     (6) Special aggregation rule for HCEs. To determine the ACR of any HCE, the Plan Administrator must take into account any Aggregate Contributions allocated to the HCE under any other 401(m) Plan maintained by the Employer, unless the Aggregate Contributions are to an ESOP before the Final 401(k) Regulations Effective Date. If the 401(m) Plans have different Plan Years, the Plan Administrator will determine the combined Aggregate Contributions on the basis of the Plan Years ending in the same calendar year. For Plan Years beginning on or after the Final 401(k) Regulations Effective Date, if the 401(m) Plans have different Plan Years, all Aggregate Contributions made during the Plan Year will be aggregated. Notwithstanding the foregoing, the Plan Administrator will not apply the aggregation rule of this Section 4.10(C)(6) to plans which may not be aggregated under Treas. Reg. §1.401(m)-2(a)(3)(ii)(B).

     (7) Aggregation of certain 401(m) plans. If the Employer treats two or more plans as a single plan for coverage or nondiscrimination purposes, the Employer must combine the 401(m) Plans under such plans to determine whether the plans satisfy the ACP test. This aggregation rule applies to the ACR determination for all ACP Participants (and ACP participants under the other plans), irrespective of whether an ACP Participant is an HCE or an NHCE. An Employer may not aggregate: (a) plans with different Plan Years; (b) a Safe Harbor 401(k) Plan with a non-Safe Harbor 401(k) Plan; (c) plans which use different testing methods (Current Year Testing versus Prior Year Testing); or (d) any other plans which must be disaggregated under Treas. Reg. §1.401(k)-1(b)(4)(iv). For Plan Years prior to the Final 401(k) Regulations Effective Date, the Employer may not aggregate an ESOP (or the ESOP portion of a plan) with a non-ESOP plan (or non-ESOP portion of a plan). If the Employer aggregating 401(m) Plans under this Section 4.10(C)(7) is using Prior Year Testing, the Plan Administrator must adjust the NHCE Group ACP for the prior year as provided in Section 4.10(C)(5)(e)(v).

     (8) Distribution of Excess Aggregate Contributions. If the Plan Administrator determines the Plan fails to satisfy the ACP test for a Plan Year, the Trustee, as directed by the Plan Administrator, by the end of the Plan Year which follows the Testing Year (or any later date determined under Code §7508A), must distribute the Vested Excess Aggregate Contributions, as adjusted for Allocable Income under Section 4.11(C)(2).

          (a) Calculation of total Excess Aggregate Contributions. The Plan Administrator will determine the total amount of the Excess Aggregate Contributions by starting with the HCE(s) who has the greatest ACR, reducing his/her ACR (but not below the next highest ACR), then, if necessary, reducing the ACR of the HCE(s) at the next highest ACR level, including the ACR of the HCE(s) whose ACR the Plan Administrator already has reduced (but not below the next highest ACR), and continuing in this manner until the ACP for the HCE Group satisfies the ACP test. All reductions under this Section 4.10(C)(8)(a) are to the ACR only and do not result in any actual distributions.

          (b) Apportionment and distribution of Excess Aggregate Contributions. After the Plan Administrator has determined the total Excess Aggregate Contribution amount, the Trustee, as directed by the Plan Administrator, then will distribute (to the extent Vested) to each HCE his/her respective share of the Excess Aggregate Contributions. The Plan Administrator will determine each

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HCE’s share of Excess Aggregate Contributions by starting with the HCE(s) who has the highest dollar amount of Aggregate Contributions, reducing the amount of his/her Aggregate Contributions (but not below the next highest dollar amount of the Aggregate Contributions), then, if necessary, reducing the amount of Aggregate Contributions of the HCE(s) at the next highest dollar amount of Aggregate Contributions, including the Aggregate Contributions of the HCE(s) whose Aggregate Contributions the Plan Administrator already has reduced (but not below the next highest dollar amount of Aggregate Contributions), and continuing in this manner until the Trustee has distributed all Excess Aggregate Contributions.

     (9) Allocable Income/Testing Year and Gap Period. The Plan Administrator will calculate and will distribute Excess Aggregate Contribution Allocable Income in the same manner as described in Section 4.10(B)(9) for Excess Contributions.

     (10) Testing and correction ordering. If the Plan Administrator must perform both the ADP and ACP tests in a given Plan Year, the Plan Administrator may perform the tests and undertake correction of a failed test in any order that the Plan Administrator determines and which is not inconsistent with Applicable Law, with a view toward preserving Plan benefits, maximizing Employer Contributions in the Plan versus Employee Contributions or Elective Deferrals, and minimizing forfeitures. Toward this end, the Plan Administrator may treat an HCE’s allocable share of Excess Aggregate Contributions in the following priority: (a) first as attributable to his/her Employee Contributions and Matching Contaributions thereon, if any; (b) then as attributable to Matching Contributions allocable as to Excess Contributions determined under the ADP test such that the Plan Administrator distributes any Vested Excess Aggregate Contribution to reduce the amount of Associated Matching Contribution subject to forfeiture (irrespective of vesting). See Section 3.07(B)(1) as to testing or re-testing related to forfeiture allocations. To the extent that distributed Excess Aggregate Contributions include Elective Deferrals, and the Participant in that Testing Year made both Pre-Tax Deferrals and Roth Deferrals, the ordering rules under Sections 4.10(A)(10) and 4.10(B)(8)(c) apply.

     (11) Vesting/forfeiture of non-Vested Excess Aggregates. To the extent an HCE’s Excess Aggregate Contributions are attributable to Matching Contributions, and he/she is not 100% Vested in his/her Matching Contribution Account, the Plan Administrator will distribute only the Vested portion and will forfeit the non-Vested portion. The Vested portion of the HCE’s Excess Aggregate Contributions attributable to Employer Matching Contributions is the total amount of such Excess Aggregate Contributions (as adjusted for allocable income) multiplied by his/her Vested percentage (determined as of the last day of the Plan Year for which the Employer made the Matching Contribution).

     (12) Treatment as Annual Addition. Distributed Excess Aggregate Contributions are Annual Additions under Sections 4.01 through 4.05 in the Limitation Year in which such amounts were allocated.

(D) QNEC, Matching and QMAC Targeting Restrictions. The Plan Administrator in performing the ADP or ACP tests may not include in the tests any impermissibly targeted QNEC or Matching Contribution as described in this Section 4.10(D). These targeting restrictions apply as of the Final 401(k) Regulations Effective Date to Matching Contributions, to Plan-Designated and Operational QNECs and to Plan-Designated and Operational QMACs. The Employer will not contribute Operational QNECs or QMACs which would violate the targeting restrictions.

     (1) QNEC targeting rules. The Plan Administrator may include in the ADP test or in the ACP test only such amounts of any QNEC as are not impermissibly targeted. A QNEC is impermissibly targeted if the QNEC amount allocated to any NHCE exceeds the greater of: (a) 5% of Compensation; or (b) 2 times the Plan’s Representative Contribution Rate.

          (a) Definition of Representative Contribution Rate.

               (i) ADP. The Plan’s ADP Representative Contribution Rate is the lowest ADP Applicable Contribution Rate of any ADP Participants who are NHCEs in a group consisting of: (A) any one-half of the ADP Participants who are NHCEs for the Plan Year; or (B) if it would result in a greater Representative Contribution Rate than under clause (A), all of the ADP Participants who are NHCEs and who are employed by the Employer on the last day of the Plan Year.

               (ii) ACP. The Plan’s ACP Representative Contribution Rate is the lowest ACP Applicable Contribution Rate of any ACP Participants who are NHCEs in a group consisting of: (A) any one-half of the ACP Participants who are NHCEs for the Plan Year; or (B) if it would result in a greater Representative Contribution Rate than under clause (A), all of the ACP Participants who are NHCEs and who are employed by the Employer on the last day of the Plan Year.

          (b) Definition of Applicable Contribution Rate.

               (i) ADP. The Applicable Contribution Rate of an ADP Participant who is an NHCE for the ADP test is the sum of the NHCE’s QNECs and QMACs used in the ADP test, divided by the NHCE’s Compensation.

               (ii) ACP. The Applicable Contribution Rate of an ACP Participant who is an NHCE for the ACP test is the sum of the NHCE’s Matching Contributions and QNECs used in the ACP test, divided by the NHCE’s Compensation.

          (c) QNEC in ACP test. The Plan Administrator may not use in the ADP test or take into account in determining the Plan’s Representative Contribution Rate, any QNEC the Plan Administrator applies to the ACP test.

          (d) Prevailing Wage Contribution. Notwithstanding Section 4.10(D)(1), the Plan Administrator may count in the ADP test QNECs which are Prevailing Wage Contributions to the extent that such QNECs do not exceed 10% of Compensation. The Plan Administrator also may count in the ACP test a QNEC which is a Prevailing Wage Contribution up to an additional 10% of Compensation, such that the combined QNEC amount does

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not exceed 20% of Compensation and not more than 10% in either test.

     (2) Matching Contribution targeting rules. The Plan Administrator may include in the ACP test only such Matching Contribution amounts (including QMACs) as are not impermissibly targeted. A Matching Contribution is impermissibly targeted if the Matching Contribution amount allocated to any NHCE exceeds the greatest of: (i) 5% of Compensation; (ii) the amount of the NHCE’s Elective Deferrals; or (iii) the product of 2 times the Plan’s Representative Matching Rate and the NHCE’s Elective Deferrals for the Plan Year.

          (a) Definition of Representative Matching Rate. The Plan’s Representative Matching Rate is the lowest Matching Rate for any ACP Participants who are NHCEs in a group consisting of: (i) any one-half of the ACP Participant NHCEs who make Elective Deferrals for the Plan Year; or if it would result in a greater Representative Matching Rate, (ii) all of the ACP Participant NHCEs who make Elective Deferrals for the Plan Year and who are employed by the Employer on the last day of the Plan Year.

          (b) Definition of Matching Rate. The Matching Rate for an NHCE is the NHCE’s Matching Contributions divided by his/her Elective Deferrals; provided that if the Matching Rate is not the same for all levels of Elective Deferrals, the Plan Administrator will determine each NHCE’s Matching Rate by assuming an Elective Deferral equal to 6% of Compensation.

          (c) Employee Contributions. If the Plan permits Employee Contributions, the Plan Administrator will apply this Section 4.10(D)(2) by adding together an NHCE’s Employee Contributions and Elective Deferrals. If the Plan provides a Matching Contribution only as to Employee Contributions, the Plan Administrator will apply this Section 4.10(D)(2) by substituting the Employee Contributions for Elective Deferrals.

     (3) Accrued fixed contributions. The Employer must contribute any accrued fixed contribution, even if any or all of such contribution is impermissibly targeted under this Section 4.10(D).

     4.11 DEFINITIONS: SECTIONS 4.06-4.10. For purposes of Sections 4.06 through 4.10:

(A) ACP Participant. ACP Participant means an Eligible Employee who has satisfied the eligibility requirements under Article II and the allocation conditions under Section 3.06 applicable to Matching Contributions such that the Participant would be entitled to a Matching Contribution allocable to the Testing Year if he/she makes an Elective Deferral. An ACP Participant also includes an Eligible Employee who has satisfied the eligibility requirements under Article II applicable to Employee Contributions and who has the right at any time during the Testing Year to make Employee Contributions. Any Employee with zero Compensation for the Testing Year is not an ACP Participant.

(B) ADP Participant. ADP Participant means an Eligible Employee who has satisfied the eligibility requirements under Article II applicable to any Elective Deferrals and who has the right at any time during the Testing Year to make Elective Deferrals. Any Employee with zero Compensation for the Testing Year is not an ADP Participant. A Participant is an ADP Participant even if he/she may not make Elective Deferrals for all or any part of the Testing Year because of the Annual Additions Limit or suspension based on a hardship distribution under Section 6.07.

(C) Allocable Income. Allocable Income means as follows:

     (1) Excess Deferrals. For purposes of making a distribution of Excess Deferrals pursuant to Section 4.10(A), Allocable Income means Earnings allocable to the Excess Deferrals for the Taxable Year in which the Participant made the Excess Deferral. The Plan Administrator also will distribute Gap Period income with respect to Excess Deferrals in Taxable Years which began on or after January 1, 2007, if the Plan Administrator in accordance with the Plan terms otherwise would allocate the Gap Period Allocable Income to the Participant’s Account. The Plan Administrator will not distribute Gap Period income with respect to Excess Deferrals occurring before the above date unless the Employer elects otherwise in Appendix B.

          (a) Reasonable or alternative (pro rata) method. To calculate such Allocable Income for the Taxable Year, the Plan Administrator will use: (i) a uniform and nondiscriminatory method which reasonably reflects the manner used by the Plan Administrator to allocate Earnings to Participants’ Accounts; or (ii) the “alternative method” under Treas. Reg. §1.402(g)-1(e)(5)(iii). See Section 4.11(C)(2)(a) as to the alternative method except the Plan Administrator will apply such modifications as are necessary to determine Taxable Year Allocable Income with respect to the Excess Deferrals.

          (b) Gap Period. To calculate Gap Period Allocable Income, the Plan Administrator may use either of the Section 4.11(C)(1)(a) methods, or may apply the “safe harbor method” under Treas. Reg. §1.402(g)-1(e)(5)(iv). See Section 4.11(C)(2)(b) as to the safe harbor method except the Plan Administrator will apply such modifications as are necessary to determine Gap Period Allocable Income with respect to the Excess Deferrals. Under a reasonable method described in Section 4.11(C)(1)(a), clause (i), the Plan Administrator may determine the Allocable Income as of a date which is no more than 7 days prior to the date of the corrective distribution.

     (2) Excess Contributions/Aggregates. For purposes of making a distribution of Excess Contributions under Section 4.10(B) and Excess Aggregate Contributions under Section 4.10(C), Allocable Income means Earnings allocable to such amounts. For Plan Years beginning on or after the Final 401(k) Regulations Effective Date, the Plan Administrator must calculate Allocable Income for the Testing Year and also for the Gap Period; provided that the Plan Administrator will calculate and distribute the Gap Period Allocable Income only if the Plan Administrator in accordance with the Plan terms otherwise would allocate the Gap Period Allocable Income to the Participant’s Account. For Plan Years beginning prior to the Final 401(k) Regulations Effective Date, the Plan Administrator will not distribute Gap Period income with respect to Excess Contributions or Excess Aggregate Contributions occurring

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before the above date unless the Employer elects otherwise in Appendix B.

          (a) Reasonable or alternative (pro rata) method. To calculate such Allocable Income for the Testing Year, the Plan Administrator will use: (i) a uniform and nondiscriminatory method which reasonably reflects the manner used by the Plan Administrator to allocate Earnings to Participants’ Accounts; or (ii) the “alternative method” under Treas. Reg. §§1.401(k)-2(b)(2)(iv)(C) and 1.401(m)-2(b)(2)(iv)(C). Under the alternative method, the Plan Administrator will determine the Allocable Income for the Testing Year by multiplying the Testing Year income with respect to Participant’s Excess Contributions (or Excess Aggregate Contributions) by a fraction, the numerator of which is the Participant’s Excess Contributions (or Excess Aggregate Contributions) and the denominator of which is the Participant’s end of the Testing Year Account Balance attributable to Elective Deferrals (or Matching Contributions and Employee Contributions) and any other amounts included in the ADP test (or ACP test), but disregarding Earnings on such amounts for the Testing Year.

          (b) Gap Period. To calculate Gap Period Allocable Income, the Plan Administrator may use either of the Section 4.11(C)(2)(a) “reasonable method” or “alternative method” (but as modified to include the Gap Period), or may apply the “safe harbor method” under Treas. Reg. §§1.401(k)-2(b)(2)(iv)(D) and 1.401(m)-2(b)(2)(iv)(D). Under the safe harbor method, the Gap Period Allocable Income is equal to 10% of the Testing Year income determined under alternative method, multiplied by the number of calendar months in the Gap Period. If a corrective distribution is made on or before the 15th day of a month, that month is disregarded in determining the number of months in the Gap Period. If the corrective distribution is made after the 15th day of the month, that month is included in such calculation. Under a reasonable method described in Section 4.11(C)(2)(a), clause (i), the Plan Administrator may determine the Allocable Income as of a date which is no more than 7 days prior to the date of the corrective distribution.

(D) Compensation. Compensation means, except as otherwise provided in this Article IV, Compensation as defined for nondiscrimination purposes in Section 1.11(F).

(E) Current Year Testing. Current Year Testing means for purposes of the ADP test described in Section 4.10(B) and the ACP test described in Section 4.10(C), the use of data from the Testing Year in determining the ADP or ACP for the NHCE Group.

(F) Gap Period. Gap Period means the period commencing on the first day of the next Plan Year following the Testing Year and ending on the date the Plan Administrator distributes Excess Contributions or Excess Aggregate Contributions for the Testing Year. As to Excess Deferrals, Gap Period means the period commencing on the first day of the next Taxable Year following the Taxable Year in which the Participant made the Excess Deferrals and ending on the date the Plan Administrator distributes the Excess Deferrals.

(G) HCE Group. HCE Group means the group of ADP Participants or ACP Participants (as the context requires) who are HCEs for the Testing Year.

(H) NHCE Group. NHCE Group means the group of ADP Participants or ACP Participants (as the context requires) who are NHCEs for the Testing Year, or for the immediately prior Plan Year under Prior Year Testing, except as the Testing Year may apply in the first Plan Year.

(I) Prior Year Testing. Prior Year Testing means for purposes of the ADP test described in Section 4.10(B) and the ACP test described in Section 4.10(C), the use of data from the Plan Year immediately prior to the Testing Year in determining the ADP or ACP for the NHCE Group.

(J) Testing Year. Testing Year means the Plan Year for which the Plan Administrator is performing coverage or nondiscrimination testing including the ADP test or the ACP test.

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ARTICLE V
VESTING

     5.01 NORMAL/EARLY RETIREMENT AGE. The Employer in its Adoption Agreement must specify the Plan’s Normal Retirement Age. If the Employer fails to specify the Plan’s Normal Retirement Age in its Adoption Agreement, the Employer is deemed to have elected age 65 as the Plan’s Normal Retirement Age. The Employer in its Adoption Agreement may specify an Early Retirement Age. A Participant’s Account Balance derived from Employer contributions is 100% Vested upon and after his/her attaining Normal Retirement Age (or if applicable, Early Retirement Age) if the Participant is employed by the Employer on or after that date and regardless of the Participant’s Years of Service for vesting or the Employer’s Adoption Agreement elected vesting schedules.

     5.02 PARTICIPANT DEATH OR DISABILITY. The Employer must elect in its Adoption Agreement whether a Participant’s Account Balance derived from Employer Contributions is 100% Vested if the Participant’s Separation from Service is a result of his/her death or Disability.

     5.03 VESTING SCHEDULE.

(A) General. Except as provided in Sections 5.01 and 5.02, or unless the Employer in its Adoption Agreement elects immediate vesting, for each Year of Service as described in Section 5.05, a Participant’s Vested percentage of his/her Account Balance derived from Nonelective Contributions, Regular Matching Contributions, Additional Matching Contributions, Money Purchase Pension Contributions or Target Benefit equals the percentage under the appropriate vesting schedule the Employer has elected in its Adoption Agreement.

     (1) Matching/ top-heavy schedule. The Employer must elect to apply a top-heavy (or modified top-heavy) vesting schedule to the Regular Matching Contributions and to the Additional Matching Contributions. The top-heavy vesting schedule applies to all Regular Matching Contributions Accounts and Additional Matching Contributions Accounts of all Participants who have at least one Hour of Service in a Plan Year beginning after December 31, 2001, regardless of when the Matching Contributions were made. However, the Employer in Appendix B: (a) may elect to apply the top-heavy vesting schedule only to Regular Matching Contributions and Additional Matching Contributions made in Plan Years beginning after December 31, 2001 and to the associated Earnings; and (b) may elect to apply top-heavy vesting to the affected Matching Contributions for all Participants even if they do not have one Hour of Service in a Plan Year beginning after December 31, 2001. If the Employer elects in its Adoption Agreement to apply a non-top-heavy schedule to Employer Contributions other than Matching Contributions, the Employer must also elect in its Adoption Agreement, that in the event that the Plan becomes top-heavy and then later becomes non-top-heavy, whether to return to the elected non-top-heavy schedule commencing in the non-top-heavy Plan Year. If the Employer elects a non-compliant top-heavy schedule, the Plan Administrator will apply a top-heavy schedule under the Plan which most closely approximates the Employer’s elected schedule (graded or cliff).

     (2) Election of different schedules. Subject to Section 5.03(A)(1), the Employer in its Adoption Agreement must elect whether the Plan will apply the same vesting schedule or a different vesting schedule to Employer Contributions (other than Matching Contributions), Regular Matching Contributions and Additional Matching Contributions.

(B) Vesting Schedules. For purposes of the Employer’s elections under its Adoption Agreement, “6-year graded,” “3-year cliff,” “7-year graded” or “5-year cliff” means an Employee’s Vested percentage, based on each included Year of Service, under the following applicable schedule:

6-year graded	7-year graded
0-1 year / 0%	0-2 years / 0%
2 years / 20%	3 years / 20%
3 years / 40%	4 years / 40%
4 years / 60%	5 years / 60%
5 years / 80%	6 years / 80%
6 years / 100%	7 years / 100%
3-year cliff	5-year cliff
0-2 years / 0%	0-4 years / 0%
3 years / 100%	5 years / 100%

(C) ”Grossed-Up” Vesting Formula. If the Trustee makes a distribution (other than a Cash-Out Distribution described in Section 5.04) to a Participant from an Account which is not fully Vested, and the Participant has not incurred a Forfeiture Break in Service, the provisions of this Section 5.03(C) apply to the Participant’s Account Balance.

     (1) Separate Account/formula. The Plan Administrator will establish a separate account for the Participant’s Account Balance at the time of the distribution. At any relevant time following the distribution, the Plan Administrator will determine the Participant’s Vested Account Balance in such separate account derived from Employer Contributions in accordance with the following formula: P(AB + D) — D. To apply this formula, “P” is the Participant’s current vesting percentage at the relevant time, “AB” is the Participant’s Employer-derived Account Balance at the relevant time and “D” is the amount of the earlier distribution. If, under a Restated Plan, the Plan has made distribution to a partially-Vested Participant prior to its restated Effective Date and is unable to apply the cash-out provisions of Section 5.04 to that prior distribution, this special vesting formula also applies to that Participant’s remaining Account Balance.

     (2) Alternative formula. The Employer, in Appendix B, may elect to modify this formula to read as follows: P(AB + (R x D)) — (R x D). For purposes of this alternative formula, “R” is the ratio of “AB” to the Participant’s Employer-derived Account Balance immediately following the earlier distribution.

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     (3) Application to Contribution Type. If a Participant will receive a distribution from a particular Contribution Type, the Plan Administrator in applying this Section 5.03(C) will determine the Participant’s Vested Account Balance for the Participant’s Contribution Type separately.

(D) Special Vesting Elections. The Employer in its Adoption Agreement may elect other specified vesting provisions which are consistent with Code §411 and Applicable Law.

(E) Fully Vested Amounts. A Participant has a 100% Vested interest at all times in his/her Accounts attributable to Elective Deferrals, Employee Contributions, QNECs, QMACs, Safe Harbor Contributions, SIMPLE Contributions, Rollover Contributions, DECs and Designated IRA Contributions. A Participant has a 100% Vested interest at all times in his/her Account attributable to Prevailing Wage Contributions unless the Prevailing Wage Contract does not provide for 100% vesting in which event vesting is in accordance with the Prevailing Wage Contract. However, a Participant has a 100% Vested interest at all times in his/her Account attributable to Prevailing Wage Contributions which are used as QNECs or which are used to offset QNECs, QMACs, Safe Harbor Contributions, or SIMPLE Contributions.

(F) Mergers/Transfers. A merger or Transfer of assets from another Defined Contribution Plan to this Plan does not result, solely by reason of the merger or Transfer, in 100% vesting of the merged or transferred assets. The Plan Administrator operationally and on a uniform and nondiscriminatory basis will determine in the case of a merger or other Transfer to the Plan whether: (1) to vest immediately all transferred assets; (2) to vest the transferred assets in accordance with the Plan’s vesting schedule applicable to the Contribution Type being transferred but subject to the requirements of Section 5.08; or (3) to vest the transferred assets in accordance with the transferor plan’s vesting schedule(s) applicable to the Contribution Types being transferred, as such schedules existed on the date of the Transfer. The Employer may elect to record such information in its Adoption Agreement as a special vesting election.

     5.04 CASH-OUT DISTRIBUTION/ POSSIBLE RESTORATION.

(A) Effect of Cash-Out Distribution. If, pursuant to Article VI, a partially-Vested Participant receives a Cash-Out Distribution before he/she incurs a Forfeiture Break in Service the Participant will incur an immediate forfeiture of the non-Vested portion of his/her Account Balance.

     (1) Definition of Cash-Out Distribution. A Cash-Out Distribution is a distribution to the Participant or a Direct Rollover for the Participant (whether a Mandatory Distribution or a Distribution Requiring Consent as described in Article VI), of his/her entire Vested Account Balance (including Elective Deferrals and Employee Contributions if any) due to the Participant’s Separation from Service or Severance from Employment.

     (2) Allocation in Cash-Out Year. If a partially-Vested Participant’s Account is entitled to an allocation of Employer Contributions or Participant forfeitures for the Plan Year in which he/she otherwise would incur a forfeiture by reason of a Cash-Out Distribution, the Plan Administrator will make the additional allocation of Employer Contributions and forfeitures without regard to whether the Participant previously received a Cash-Out Distribution; provided, that the Plan Administrator, in accordance with Section 3.07(D), will not allocate to such Participant any of his/her own forfeiture resulting from the Cash-Out Distribution. A partially-Vested Participant is a Participant whose Vested percentage determined under Section 5.03 is more than 0% but is less than 100%.

(B) Forfeiture Restoration and Conditions for Restoration. A partially-Vested Participant re-employed by the Employer after receiving a Cash-Out Distribution of the Vested percentage of his/her Account Balance may repay to the Trust the entire amount of the Cash-Out Distribution (including Elective Deferrals and Employee Contributions if any) without any adjustment for Earnings, unless the Participant no longer has a right to restoration under this Section 5.04(B).

     (1) Restoration. If a re-employed Participant repays his/her Cash-Out Distribution, the Plan Administrator, subject to the conditions of this Section 5.04(B), must restore the Participant’s Account Balance to the same dollar amount as the dollar amount of his/her Account Balance on the Accounting Date, or other Valuation Date, immediately preceding the date of the Cash-Out Distribution, unadjusted for any Earnings occurring subsequent to that Accounting Date (and prior to the Participant’s repayment or the Employer’s restoration) or other Valuation Date.

     (2) Source of repayment. A re-employed Participant may make repayment from any source, including an IRA Rollover Contribution, permissible under Applicable Law.

     (3) No restoration. The Plan Administrator will not restore a re-employed Participant’s Account Balance under this Section 5.04 (B) if:

          (a) 5 Years. 5 years have elapsed since the Participant’s first re-employment date with the Employer following the Cash-Out Distribution;

          (b) Not employed. The Employer does not employ the Participant on the date the Participant repays his/her Cash-Out Distribution; or

          (c) Forfeiture Break. The Participant has incurred a Forfeiture Break in Service. This condition also applies if the Participant makes repayment within the Plan Year in which he/she incurs the Forfeiture Break in Service and that Forfeiture Break in Service would result in a complete forfeiture of the amount the Plan Administrator otherwise would restore.

     (4) Restoration timing. If none of the conditions in Section 5.04(B)(3) preventing restoration of the Participant’s Account Balance apply, the Plan Administrator will restore the Participant’s Account Balance as of the Plan Year Accounting Date coincident with or immediately following the repayment.

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     (5) Source of restoration. To restore the Participant’s Account Balance, the Plan Administrator, to the extent necessary, will allocate to the Participant’s Account:

          (a) Forfeitures. First, from the amount, if any, of Participant forfeitures the Plan Administrator otherwise would allocate in that Plan Year under Section 3.07;

          (b) Earnings. Second, from the amount, if any, of the Earnings for the Plan Year, except to the extent Earnings are allocable to specific Participant-Directed Accounts under Section 7.04(A)(2)(b) ; and

          (c) Employer Contribution. Third, from the amount of a discretionary Employer Contribution for the Plan Year.

     The Employer in Appendix B may eliminate as a source of restoration any of the amounts described in clauses (a), (b) and (c) or may change the order of priority of these amounts.

     (6) Multiple restorations. If, for a particular Plan Year, the Plan Administrator must restore the Account Balance of more than one re-employed Participant, the Plan Administrator will make the restoration allocations from the amounts described in Section 5.04(B)(5), clauses (a), (b) and (c) to each such Participant’s Account in the same proportion that a Participant’s restored amount for the Plan Year bears to the restored amount for the Plan Year of all re-employed Participants.

     (7) Employer must make-up shortfall. To the extent the amounts described in Section 5.04(B)(5) are insufficient to enable the Plan Administrator to make the required restoration, the Employer must contribute, without regard to any requirement or condition of Article III, the additional amount necessary to enable the Plan Administrator to make the required restoration.

     (8) Not an Annual Addition. A cash-out restoration allocation is not an Annual Addition under Article IV.

(C) Deemed Cash-Out of 0% Vested Participant. Except as the Employer may elect in Appendix B, the “deemed cash-out rule” of this Section 5.04(C) applies to any 0% Vested Participant. Under a deemed cash-out, a Participant does not receive an actual Plan distribution but the Plan Administrator treats the Participant as having received an actual Cash-Out Distribution. A Participant is not 0% Vested if, at the time that the Plan Administrator applies the deemed cash-out rule; (i) the Participant has nay existing Account Balance attributable to Elective Deferrals, Employee Contributions, Safe Harbor Contributions, Prevailing Wage Contributions (unless the Prevailing Wage Contributions are not immediately Vested), QNECs, QMACs or DECs; or (ii) the Participant has any vesting in accordance with the vesting schedule applicable to any other Contribution Type, even if the Participant has a zero balance in that Account. A Participant is 0% Vested if the Participant is eligible to make or to receive any of the contributions described in clause (i) above, but has not made or received such contributions and if the Participant has no vesting as to Contribution Types described in clause (ii) above.

     (1) If not entitled to allocation. If a 0% Vested Participant’s Account is not entitled to an allocation of Employer Contributions for the Plan Year in which the Participant has a Severance from Employment, the Plan Administrator will apply the deemed cash-out rule as if the 0% Vested Participant received a Cash-Out Distribution on the date of the Participant’s Severance from Employment.

     (2) If entitled to allocation. If a 0% Vested Participant’s Account is entitled to an allocation of Employer contributions or Participant forfeitures for the Plan Year in which the Participant has a Severance from Employment, the Plan Administrator will apply the deemed cash-out rule as if the 0% Vested Participant received a Cash-Out Distribution on the first day of the first Plan Year beginning after his/her Severance from Employment.

     (3) Timing of “deemed repayment.” For purposes of applying the restoration provisions of this Section 5.04, the Plan Administrator will treat a re-employed 0% Vested Participant as repaying his/her cash-out “distribution” on the date of the Participant’s re-employment with the Employer.

     (4) Pension plans. If the Plan is a Money Purchase Pension Plan or a Target Benefit Plan, all references in this Section 5.04(C) to “Severance from Employment” mean “Separation from Service.”

(D) Accounting for Cash-Out Repayment.

     (1) Pending restoration. As soon as is administratively practicable, the Plan Administrator will credit to the Participant’s Account the Cash-Out Distribution amount a Participant has repaid to the Plan. Pending the restoration of the Participant’s Account Balance, the Plan Administrator under Section 7.04(A)(2)(c) may direct the Trustee to place the Participant’s Cash-Out Distribution repayment in a Segregated Account.

     (2) Accounting by contribution source. The Plan Administrator will account for a Participant’s restored balance by treating the Account as consisting of the same Contribution Types and amounts as existed on the date of the Cash-Out Distribution. The Employer in Appendix B may elect an alternative accounting for a restored Account, either under the “nonelective rule” or under the “rollover rule.” Under the nonelective rule, the Plan Administrator will treat the portion of the Participant’s restored balance attributable to the Participant’s cash-out repayment as a Nonelective Contribution (or other Employer Contributions as applicable) for purposes of any subsequent distribution. Under the rollover rule, the Plan Administrator will treat the portion of the Participant’s restored balance attributable to the Participant’s cash-out repayment as a Rollover Contribution for purposes of any subsequent distribution; provided however that if the cash-out repayment does not qualify as a Rollover Contribution or if the Plan does not permit Rollover Contributions, the Plan Administrator will apply the nonelective rule. Under either the nonelective rule or the rollover rule. the portion of the Participant’s restored balance attributable to the Plan Administrator’s restoration under Section 5.04(B)(1), consists of the same Contribution Types and amounts as existed as of the date of the Cash-out Distribution.

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     (3) Return if failed repayment. Unless the cash-out repayment qualifies as a Participant Rollover Contribution, the Plan Administrator will direct the Trustee to repay to the Participant as soon as is administratively practicable, the full amount of the Participant’s Cash-Out Distribution repayment if the Plan Administrator determines any of the conditions of Section 5.04(B)(3) prevents restoration as of the applicable Accounting Date, notwithstanding the Participant’s repayment.

     5.05 YEAR OF SERVICE – VESTING.

(A) Definition of Year of Service. A Year of Service, for purposes of determining a Participant’s vesting under Section 5.03, means the Vesting Computation Period during which an Employee completes the number of Hours of Service (not exceeding 1,000) the Employer specifies in its Adoption Agreement, without regard to whether the Employer continues to employ the Employee during the entire Vesting Computation Period.

(B) Definition of Vesting Computation Period. A Vesting Computation Period is a 12-consecutive month period the Employer elects in its Adoption Agreement.

(C) Counting Years of Service. For purposes of a Participant’s vesting in the Plan, the Plan counts all of an Employee’s Years of Service except:

     (1) Forfeiture Break in Service; Cash-Out. For the sole purpose of determining a Participant’s Vested percentage of his/her Account Balance derived from Employer Contributions which accrued for his/her benefit prior to a Forfeiture Break in Service or receipt of a Cash-Out Distribution, the Plan disregards any Year of Service after the Participant first incurs a Forfeiture Break in Service or receives a Cash-Out Distribution (except where the Plan Administrator restores the Participant’s Account under Section 5.04(B)).

     (2) Rule of parity and one-year hold-out rule. If the rule of parity under Section 5.06(C) or the one-year hold-out rule under Section 5.06(D) applies, the Plan disregards pre-break Service as described therein.

     (3) Other exclusions. Consistent with Code §411(a)(4), any Year of Service the Employer elects to exclude under its Adoption Agreement, including Service during any period for which the Employer did not maintain the Plan or a Predecessor Plan. See Section 1.44(B).

(D) Elapsed Time. If the Employer in its Adoption Agreement elects to apply the Elapsed Time Method in applying the Plan’s vesting schedule, the Plan Administrator will credit Service in accordance with Section 1.31(A)(3).

     5.06 BREAK IN SERVICE AND FORFEITURE BREAK IN SERVICE – VESTING.

(A) Definition of Break in Service. For purposes of this Article V, a Participant incurs a Break in Service if during any Vesting Computation Period he/she does not complete more than 500 Hours of Service. If the Plan applies the Elapsed Time Method of crediting Service, a Participant incurs a Break in Service if the Participant has a Period of Severance of at least 12 consecutive months. If, pursuant to Section 5.05(A), the Plan does not require more than 500 Hours of Service to receive credit for a Year of Service, a Participant incurs a Break in Service in a Vesting Computation Period in which he/she fails to complete a Year of Service.

(B) Definition of Forfeiture Break in Service. A Participant incurs a Forfeiture Break in Service when he/she incurs 5 consecutive Breaks in Service.

(C) Rule of Parity-Vesting. The Employer in its Adoption Agreement may elect to apply the “rule of parity” under Code §411(a)(6)(D) for purposes of determining vesting Years of Service. Under the rule of parity, the Plan Administrator excludes a Participant’s Years of Service before a Break in Service if: (1) the number of the Participant’s consecutive Breaks in Service equals or exceeds 5; and (2) the Participant is 0% Vested in his/her Account Balance at the time he/she has the Breaks in Service. A Participant is not 0% Vested if at the time that the Plan Administrator applies the rule of parity the Participant is not 0% vested as described in Section 5.04(C).

(D) One-Year Hold-out Rule-Vesting. The “one-year hold-out rule” under Code §411(a)(6)(B) will not apply to this Article V unless the Employer elects otherwise. in Appendix B. If the one-year hold-out rule applies, an Employee who has a one-year Break in Service will not be credited for vesting purposes with any Years of Service earned before such one-year Break in Service, until the Employee has completed a Year of Service after the one-year Break in Service.

     5.07 FORFEITURE OCCURS.

(A) Timing. A Participant’s forfeiture of his/her non-Vested Account Balance derived from Employer Contributions occurs under the Plan on the earlier of:

     (1) Forfeiture Break. The last day of the Vesting Computation Period in which the Participant first incurs a Forfeiture Break in Service; or

     (2) Cash-Out. The date the Participant receives a Cash-Out Distribution.

(B) Vesting Schedule/Plan Correction/Lost Participants. The Plan Administrator determines the percentage of a Participant’s Account Balance forfeiture, if any, under this Section 5.07 solely by reference to the vesting schedule the Employer elected in its Adoption Agreement. A Participant does not forfeit any portion of his/her Account Balance for any other reason or cause except as expressly provided by this Section 5.07 or as provided under Sections 3.07 or 7.07.

     5.08 AMENDMENT TO VESTING SCHEDULE. The Employer under Section 11.02 may amend the Plan’s vesting schedule(s) under Section 5.03 at any time, subject to this Section 5.08. For purposes of this Section 5.08, an amendment to the vesting schedule includes any Plan amendment which directly or indirectly affects the computation of the Vested percentage of a Participant’s Account Balance. In addition, any shift in the Plan’s vesting schedule under Article X, due to a change in the Plan’s

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top-heavy status, is an amendment to the vesting schedule for purposes of this Section 5.08.

(A) No Reduction. The Plan Administrator will not apply the amended vesting schedule to reduce any Participant’s existing Vested percentage (determined on the later of the date the Employer adopts the amendment, or the date the amendment becomes effective) in the Participant’s existing and future Account Balance attributable to Employer Contributions, to a percentage less than the Vested percentage computed under the Plan without regard to the amendment.

(B) Hour of Service Required. Except as the Plan otherwise expressly provides, an amended vesting schedule will apply to a Participant only if the Participant receives credit for at least one Hour of Service after the new vesting schedule becomes effective.

(C) Election. If the Employer amends the Plan’s vesting schedule, each Participant having completed at least 3 Years of Service (as described in Section 5.05) with the Employer prior to the expiration of the election period described below, may elect irrevocably to have the Plan Administrator determine the Vested percentage of his/her Account Balance without regard to the amendment.

     (1) Notice of amendment. The Plan Administrator will forward an appropriate notice of any amendment to the vesting schedule to each affected Participant, together with the appropriate form upon which the Participant may make an election to remain under the pre-amendment vesting schedule and notice of the time within which the Participant must make an election to remain under the pre-amendment vesting schedule.

     (2) Election timing. The Participant must file his/her election with the Plan Administrator within 60 days of the latest of: (a) the Employer’s adoption of the amendment; (b) the effective date of the amendment; or (c) the Participant’s receipt of a notice of the amendment.

     (3) No election if no adverse effect. The election described in this Section 5.08(C) does not apply to a Participant if the amended vesting schedule provides for vesting at least as rapid at any time as the vesting schedule in effect prior to the amendment.

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ARTICLE VI
DISTRIBUTIONS

     6.01 TIMING OF DISTRIBUTION. The Plan Administrator will direct the Trustee to commence distribution of a Participant’s Vested Account Balance in accordance with this Section 6.01 upon the Participant’s Separation from Service (or Severance from Employment) for any reason, upon the Participant’s death, or if the Participant exercises an In-Service Distribution right under the Plan. The Trustee may make Plan distributions on any administratively practical date during the Plan Year, consistent with the Employer’s elections in its Adoption Agreement. For purposes of this Article VI, the Plan applies Severance from Employment in place of Separation from Service where distribution is of Restricted 401(k) Accounts. Section 6.01(A) is controlling as to distribution of all Accounts upon Separation from Service or Severance from Employment. Section 6.01(B) is controlling as to distribution of all Accounts upon death (whether death occurs before or after Separation from Service or Severance from Employment). Section 6.01(C) applies only while a Participant remains employed by the Employer and only to such Accounts described in the Plan and as the Employer elects in its Adoption Agreement.

(A) Distribution upon Separation from Service/ Severance from Employment (other than death).

     (1) Mandatory Distributions. The Employer in its Adoption Agreement will elect whether the Plan will make Mandatory Distributions and will elect the timing of the mandatory Distribution. If the Employer elects no Mandatory Distributions, then all distributions require consent under Section 6.01(A)(2). The timing of any Mandatory Distribution must comply with Code §401(a)(14).

          (a) Definition of Mandatory Distribution. A Mandatory Distribution is a Plan required distribution without the Participant’s consent upon the Participant’s Separation from Service. A Mandatory Distribution does not include a distribution based on the Participant’s death or on account of Plan termination.

               (i) Distribution after 62/NRA; unlimited amount. A Mandatory Distribution in the case of a Participant who will receive the distribution after the Participant attains the later of age 62 or Normal Retirement Age includes a distribution of any amount.

               (ii) Distribution before 62/NRA; amount limit and Rollovers. A Mandatory Distribution in the case of a Participant who will receive the distribution before the Participant attains the later of age 62 or Normal Retirement Age may not exceed the amount (not exceeding $5,000) the Employer elects in its Adoption Agreement. In applying the elected Mandatory Distribution amount, the Plan Administrator will include or exclude a Participant’s Rollover Contributions Account as the Employer elects in its Adoption Agreement. The Plan Administrator will disregard accumulated DECs.

               (iii) Remaining Installments. A Mandatory Distribution does not include the remaining balance of any Installment distribution (originally subject to Participant consent), but where the remaining Account Balance presently is less than the Mandatory Distribution amount.

          (b) Distribution of Mandatory Distribution before 62/NRA; method and timing. If a Participant will receive a Mandatory Distribution before attaining the later of age 62 or Normal Retirement Age, the Plan Administrator will direct the Trustee to distribute the Mandatory Distribution to the Participant in a Lump-Sum (without regard to Section 6.04) consisting of the Participant’s entire Vested Account Balance (including any Rollover Contribution Account even if the Plan disregards a Rollover Contribution Account in determining Mandatory Distribution status). The Plan Administrator will direct the Trustee to make a Mandatory Distribution at the time the Employer elects in its Adoption Agreement, but in no event later than the 60th day following the close of the Plan Year in which the Participant attains Normal Retirement Age or age 65 if earlier. See Section 6.08(D) regarding potential Automatic Rollover of Mandatory Distributions. The Plan Administrator, in accordance with Section 6.08(B) will give a rollover notice to a Participant who will receive a Mandatory Distribution. The notice will explain the Automatic Rollover under Section 6.08(D) as applicable in the case of the Participant’s failure to respond timely to the rollover notice.

          (c) Distribution of Mandatory Distribution if 62/NRA; method and timing.

               (i) Balance not exceeding $5,000. If a Participant will receive a Mandatory Distribution after attaining the later of age 62 or Normal Retirement Age, and the Participant’s Vested Account Balance (including any Rollover Contributions Account) does not exceed $5,000 (or such lesser amount the Employer elects in Appendix B), the Plan Administrator will direct the Trustee to distribute a Mandatory Distribution to the Participant in a Lump-Sum (without regard to Section 6.04) consisting of the Participant’s entire Vested Account Balance. The Plan Administrator will direct the Trustee to make a Mandatory Distribution at the time the Employer elects in its Adoption Agreement, but not later than the 60th day following the close of the Plan Year in which the Participant incurs a Separation from Service.

               (ii) Balance exceeds $5,000. If a Participant will receive a Mandatory Distribution after attaining the later of age 62 or Normal Retirement Age, and the Participant’s Vested Account Balance (including any Rollover Contributions Account) exceeds $5,000 (or such lesser amount the Employer elects in Appendix B), the Participant may elect any method or form of distribution available under the Plan and the Plan Administrator in accordance with Section 6.01(A)(2)(c) will provide the Participant with a distribution notice. If under Section 6.01(A)(2)(f) the Plan permits a Participant receiving a Distribution Requiring Consent to postpone distribution to any specified date (not beyond the Participant’s DCD as described in Section 6.02), a Participant receiving a Mandatory Distribution under this Section 6.01(A)(1)(c)(ii) also may elect to postpone distribution. If a Participant may not elect to postpone

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distribution or fails to elect to postpone distribution, the Plan Administrator will direct the Trustee to distribute the Participant’s Account at the time the Employer elects in its Adoption Agreement, but not later than the 60th day following the close of the Plan Year in which the Participant incurs a Separation from Service.

               (iii) Rollover notice but no Automatic Rollover. The Plan Administrator, in accordance with Section 6.08(B) will give a rollover notice to a Participant who will receive a Mandatory Distribution under this Section 6.01(A)(1)(c). However, the Automatic Rollover under Section 6.08(D), in the case of the Participant’s failure to respond timely to the rollover notice, does not apply under this Section 6.01(A)(1)(c).

     (2) Distributions Requiring Consent.

          (a) Definition of Distribution Requiring Consent. A Distribution Requiring Consent is a distribution upon the Participant’s Separation from Service other than on account of death and which is not a Mandatory Distribution,

          (b) Distribution of Distribution Requiring Consent. The Plan Administrator, subject to this Section 6.01(A)(2) regarding Participant elections or the absence thereof, will direct the Trustee to commence or make a Distribution Requiring Consent, at the time or times and in the form the Adoption Agreement specifies.

          (c) Distribution notice. At least 30 days and not more than 90 days prior to the Participant’s Annuity Starting Date, the Plan Administrator must provide a written distribution notice (or a summary notice as permitted under Treasury regulations) to a Participant who is eligible to receive a Distribution Requiring Consent. The distribution notice must explain the optional forms of benefit in the Plan, including the material features and relative values of those options, and the Participant’s right to postpone distribution until the applicable date described in Section 6.01(A)(2)(f). Also see Section 6.08(B) for provisions relating to a rollover notice.

          (d) Consent requirements. A Participant must consent, in writing, following receipt of the distribution notice, to any Distribution Requiring Consent, The Participant’s spouse also must consent, in writing, to any distribution, for which Section 6.04 requires the spouse’s consent. The consent requirements of this Section 6.01(A)(2)(d) do not apply to defaulted loans described in Section 7.06(B), to RMDs under Section 6.02 or to corrective distributions under Article IV. See Section 11.05(D) as to consent requirements related to distributions following Plan termination.

          (e) Distribution election/reconsideration. A Participant eligible to receive a Distribution Requiring Consent, consistent with the Adoption Agreement and subject to Sections 6.02, 6.03 and 6.04, may elect the time and method of distribution of his/her Account (or portion thereof) following receipt of the distribution notice. Unless the Plan Administrator in a distribution form, notice, or other Plan disclosure indicates otherwise, a Participant may reconsider his/her distribution election at any time prior to the Annuity Starting Date and may elect to commence distribution as of any other distribution date permitted under the Plan or under the Adoption Agreement. A Participant may elect to receive a distribution at any administratively practical time which is earlier than 30 days following the Participant’s receipt of the distribution notice, by waiving in writing the balance of the 30 days. However, if the requirements of Section 6.04 apply, the Participant may not elect to commence distribution during the 7 days immediately following the date of the Participant’s receipt of the distribution notice.

          (f) Election to postpone. A Participant eligible to receive a Distribution Requiring Consent prior to his/her Annuity Starting Date, may elect to postpone distribution beyond the time the Employer has elected in its Adoption Agreement, to any specified date including, but not beyond the Participant’s RBD as described in Section 6.02, unless the Employer, in its Adoption Agreement, specifically limits a Participant’s right to postpone distribution of his/her Account Balance only to the later of the date the Participant attains age 62 or Normal Retirement Age. The Plan Administrator will reapply the notice and consent requirements of Section 6.01(A)(2) to any distribution a Participant postpones under this Section 6.01(A)(2)(f).

          (g) No election /deemed elected distribution date. In the absence of a Participant’s consent and distribution election (as described in Sections 6.01(A)(2)(d) and (e)) or in the absence of the Participant’s election under Section 6.01(A)(2)(f) made prior to his/her Annuity Starting Date, to postpone distribution, the Plan Administrator, consistent with the Employer’s elections in its Adoption Agreement, will treat the Participant as having elected (in accordance with the Treasury Regulations under Code §§411 and 401(a)(14)) to postpone his/her distribution until the later of the date the Participant attains age 62 or Normal Retirement Age. At the applicable date, the Plan Administrator then will direct the Trustee to distribute the Participant’s Vested Account Balance in a Lump-Sum (or, if applicable, the annuity form of distribution required under Section 6.04). The provisions Section 6.01(A)(2)(e) regarding reconsideration of distribution elections apply to any election or deemed election in this Section 6.01(A)(2)(g).

          (h) Definition of Annuity Starting Date. See Section 1.06(A).

     (3) Disability. If the Participant’s Separation from Service is because of his/her Disability, except to the extent the Employer elects in its Adoption Agreement to accelerate distribution, the Plan Administrator will direct the Trustee to distribute the Participant’s Vested Account Balance at the same time and in the same form as if the Participant had incurred a Separation from Service without Disability.

     (4) Determination of Vested Account Balance. For purposes of the consent requirements under this Article VI and of determining whether a distribution is a Mandatory Distribution, the Plan Administrator determines a Participant’s Vested Account Balance as of the most recent Valuation Date immediately prior to the distribution date, and takes into account the Participant’s entire Account Balance, including Elective Deferrals, but including or excluding the Participant’s Rollover Contributions Account as the Employer elects in its Adoption Agreement. The Plan Administrator in determining the Participant’s Vested

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Account Balance at the relevant time, will disregard a Participant’s Vested Account Balance existing on any prior date, except as related to Installment distributions under Section 6.01(A)(1).

     (5) Consent to cash-out/forfeiture. If a Participant is partially Vested in his/her Account Balance, a Participant’s election under Section 6.01(A)(2) to receive distribution prior to the Participant’s incurring a Forfeiture Break in Service, must be in the form of a Cash-Out Distribution.

     (6) Return to employment. A Participant may not receive a distribution based on Separation from Service, or continue any Installment distribution based on a prior Separation from Service, if, prior to the time the Trustee actually makes the distribution, the Participant returns to employment with the Employer.

(B) Distribution upon Death. In the event of the Participant’s death (whether death occurs before or after Separation from Service or Severance from Employment), the Plan Administrator will direct the Trustee, in accordance with this Section 6.01(B) to distribute to the Participant’s Beneficiary the Participant’s Vested Account Balance remaining in the Trust at the time of the Participant’s death.

     (1) Timing of commencement. The Plan Administrator must direct the Trustee to distribute or commence distribution of the deceased Participant’s Vested Account Balance following the date on which the Plan Administrator receives notification of, or otherwise confirms, the Participant’s death. The actual timing of distribution will be in accordance with: (a) the Employer’s Adoption Agreement elections; (b) any Participant or Beneficiary permitted and timely made election under Section 6.03(B); and (c) the Plan terms including Section 6.02.

     (2) Distribution method. The Plan Administrator must direct the Trustee to distribute or commence distribution of the deceased Participant’s Vested Account Balance under a method which is in accordance with: (a) the Employer’s Adoption Agreement elections; (b) any Participant or Beneficiary permitted and timely made election under Section 6.03(B); and (c) the Plan terms including Section 6.04.

(C) In-Service Distribution. The Employer in its Adoption Agreement must elect the Participants’ In-Service Distribution rights, if any. If the Employer elects to permit any In-Service Distributions, the Employer will elect the eligible Contribution Type or Contribution Type Accounts and the age or other events which entitle a Participant to an In-Service Distribution. The Employer’s elections under this Section 6.01(C) are subject to the restrictions of Section 6.01(C)(4) and any other restrictions under Applicable Law.

     (1) Definition of In-Service Distribution. An In-Service distribution means distribution of a Participant’s Account or any portion thereof prior to his/her Separation from Service.

     (2) Conditions.

          (a) Vesting. The Employer must elect in its Adoption Agreement whether a partially-Vested Participant may receive an In-Service Distribution. If a Participant receives an In-Service Distribution as to a partially-Vested Account, and the Participant has not incurred a Forfeiture Break in Service, the Plan Administrator will apply the vesting provisions of Section 5.03(C).

          (b) Other Conditions. The Employer in its Adoption Agreement may elect other conditions applicable to In-Service Distributions as are not inconsistent with Applicable Law.

     (3) Administration.

          (a) Participant election. A Participant must make any permitted In-Service Distribution election under this Section 6.01(C) in writing and on a form prescribed by the Plan Administrator which specifies the percentage or dollar amount of the distribution and the Participant’s Contribution Type or Account to which the election applies.

          (b) Frequency, timing and method. If the Plan permits In-Service Distributions: (i) the Plan Administrator may adopt a policy imposing frequency limitations or other reasonable administrative conditions; and (ii) a Participant may elect as many In-Service Distributions per Plan Year as the election form prescribed by the Plan Administrator allows, or as any In-Service Distribution policy permits, with a minimum of one In-Service Distribution permitted each Plan Year. If the Plan Administrator’s form or policy does not specify the permitted number of Plan Year In-Service Distributions, the number is not limited. The Trustee, as directed by the Plan Administrator and subject to Section 6.04, will distribute the amount(s) a Participant elects in a single distribution, as soon as administratively practical after the Participant files his/her properly completed In-Service Distribution election with the Plan Administrator. The Trustee will distribute the Participant’s remaining Account Balance in accordance with the other provisions of this Article VI.

     (4) Account restrictions.

          (a) Nonelective, Regular Matching, Additional Matching and SIMPLE Contribution distribution events. The Employer in its Adoption Agreement may elect to permit an In-Service Distribution of the Nonelective, Regular Matching, Additional Matching and SIMPLE Contribution Accounts upon a Participant’s attainment of a stated age, based on a fixed number of years or based upon some other specified event, such as hardship under Section 6.07. Such Adoption Agreement elections include, but are not limited to, the following:

               (i) Two year “seasoned” contributions. The contributions which the Plan Administrator will distribute were made at least 2 years (or such other greater period as the Employer elects in its Adoption Agreement) prior to the date on which the distribution will occur. Such distributions may include Earnings on the “seasoned” contributions.

               (ii) 60 months of participation. The Participant has been a Participant for at least 60 months (or for such other greater period as the Employer elects in its Adoption Agreement) prior to the date on which the Plan Administrator will make the distribution. This election

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applies to all applicable contributions, regardless of when made.

          (b) 401(k) Plans.

               (i) Limitation. A Participant may not receive a distribution of the Participant’s Restricted 401(k) Accounts except in the event of the Participant’s death, Disability, Severance from Employment, attainment of age 59¹/2, hardship in accordance with Section 6.07 or Plan termination (as limited under Section 11.05(F)).

               (ii) Definition of Restricted 401(k) Accounts. A Participant’s Restricted 401(k) Accounts are the Participant’s Elective Deferral Account, QNEC Account, QMAC Account and Safe Harbor Contributions Account.

          (c) Money Purchase Pension/Target Benefit Plans.

               (i) Limitation. A Participant may not receive an In-Service Distribution of a Participant’s Restricted Pension Accounts except in the event of the Participant’s attainment of Normal Retirement Age (or any later age), the Participant’s Disability or Plan termination under Section 11.05.

               (ii) Definition of Restricted Pension Accounts. A Participant’s Restricted Pension Accounts are the Participant’s Money Purchase Pension Plan or Target Benefit Plan Accounts.

          (d) Prevailing Wage Contributions. For purposes of In-Service Distributions, a Participant’s Prevailing Wage Contribution Account is treated as a Nonelective or other Employer Contribution Account as applicable, unless the Prevailing Wage Contract provides for other In-Service Distribution rights. However, if the Employer in its Adoption Agreement elects to offset other Contribution Types with the Prevailing Wage Contribution, for purposes of In-Service Distributions, the Plan Administrator will treat that portion of the Prevailing Wage Contribution Account which offsets another Contribution Type, as the other Contribution Type.

          (e) Rollover Contributions, Employee Contributions and DECs. A Participant may elect to receive an In-Service Distribution of his/her Accounts attributable to Rollover Contributions, Employee Contributions and DECs at any time subject to Section 6.01(C)(3). Distribution of a Rollover Contribution is subject to Section 6.04 if Section 6.04 otherwise applies to the Participant.

          (f) Transferred amounts/distribution restrictions and Protected Benefits

               (i) Distribution restrictions: transfers from pension plans to non-pension plans. Except in the case of certain Elective Transfers, if this Plan is a Profit Sharing Plan or a 401(k) Plan, the Plan, except in accordance with Section 6.01(C)(4)(c), may not make any In-Service Distribution to the Participant of his/her Restricted Pension Accounts (including post-transfer Earnings on those Accounts) previously transferred, within the meaning of Code §414(l), to this Plan from a Money Purchase Pension Plan or from a Target Benefit Plan. This limitation applies only to such transferred balances consisting of Restricted Pension Accounts.

               (ii) Distribution restrictions: transfers from 401(k) Plans to other plans. Except in the case of certain Elective Transfers, if this Plan is a Profit Sharing Plan, Money Purchase Pension Plan or a Target Benefit Plan, the Plan, except in accordance with Section 6.01(C)(4)(b), may not make any In-Service Distribution to the Participant of his/her Restricted 401(k) Accounts (including post-transfer Earnings on those Accounts) previously transferred, within the meaning of Code §414(l), to this Plan from a 401(k) Plan. This limitation applies only to such transferred balances consisting of Restricted 401(k) Accounts.

               (iii) Protected Benefit/ Separate Accounting. See Section 11.06 regarding preservation of Protected Benefits with regard to transferred amounts. The Plan Administrator must apply proper separate accounting of transferred amounts to comply with this Section 6.01(C)(4)(f).

          (g) Designated IRA. A Participant may request and receive distribution of his/her Designated IRA Account at any time, subject the requirements of Code §401(a)(9) and the regulations thereunder as applicable to IRAs. Section 6.04 does not apply to Designated IRA Contributions.

     (5) Hardship. See Section 6.07 regarding requirements for In-Service Distributions and for post-Separation from Service or Severance from Employment distribution accelerations, based on hardship.

     6.02 REQUIRED MINIMUM DISTRIBUTIONS.

(A) Lifetime RMDs.

     (1) RBD. The Plan Administrator will direct the Trustee to distribute or to commence distribution to the Participant of the Participant’s entire Vested Account Balance no later than the Participant’s RBD.

     (2) Amount of RMD for each DCY. During the Participant’s lifetime, the RMD that will be distributed for each DCY is the lesser of:

          (a) ULT amount. The quotient obtained by dividing the Participant’s RMD Account Balance by the distribution period in the ULT, using the Participant’s age as of the Participant’s birthday in the DCY; or

          (b) SLT/younger spouse. If the Participant’s sole Designated Beneficiary for the DCY is the Participant’s spouse who is more than 10 years younger than the Participant, the quotient obtained by dividing the Participant’s RMD Account Balance by the distribution period in the JLT using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the DCY.

     (3) Lifetime RMDs continue through year of Participant’s death. RMDs will be determined under this Section 6.02(A) beginning with the first DCY and up to and including the DCY that includes the Participant’s date of

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death or until the Participant’s Vested Account Balance is completely distributed.

(B) Death RMDs.

     (1) Death of Participant before DCD. If the Participant dies before the DCD, the Plan Administrator will direct the Trustee to distribute or commence distribution to the Participant of the Participant’s Vested Accrued Benefit no later than as follows:

          (a) Spouse sole Designated Beneficiary. Except as otherwise provided in Section 6.02(B)(1)(e), if the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, then distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70¹/2, if later.

               (i) Death of spouse. If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse are required to begin, then this Section 6.02(B)(1) (other than Section 6.02(B)(1)(a)) will apply as if the surviving spouse were the Participant.

          (b) Other Designated Beneficiary. Except as otherwise provided in Section 6.02(B)(1)(e), if the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, then distributions to the Designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

          (c) No Designated Beneficiary/“5-year rule.” If there is no Designated Beneficiary as of September 30 of the year following the calendar year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

          (d) Participant survived by Designated Beneficiary/ “Life Expectancy rule.” If there is a Designated Beneficiary, the RMD for each DCY after the year of the Participant’s death is the quotient obtained by dividing the Participant’s RMD Account Balance by the remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as provided in Section 6.02(B)(2)(a).

          (e) 5-year or Life Expectancy rule; possible election. The Employer in its Adoption Agreement will elect whether distribution of the Participant’s Account in the case of death before the DCD will be made in accordance with the Life Expectancy rule under Section 6.02(B)(1)(d) or the 5-year rule under Section 6.02(B)(1)(c). The Employer’s election may permit a Designated Beneficiary to elect which of these rules will apply or may specify which rule applies. However, the Life Expectancy rule (whether subject to election or not) applies only in the case of a Designated Beneficiary. The 5-year rule applies as to any Beneficiary who is not a Designated Beneficiary. A permitted election under this Section 6.02(B)(1)(e) must be made no later than the earlier of September 30 of the calendar year in which distribution would be required to begin under Section 6.02(B)(1), or by September 30 of the calendar year which contains the fifth anniversary of the Participant’s (or, if applicable, surviving spouse’s) death. In the absence of a timely election, the Life Expectancy rule applies unless the Employer in Appendix B elects to apply the 5-year rule.

     (2) Death on or after DCD. This Section 6.02(B)(2) applies if the Participant dies on or after his/her DCD.

          (a) Participant survived by Designated Beneficiary. If there is a Designated Beneficiary, the RMD for each DCY after the year of the Participant’s death is the quotient obtained by dividing the Participant’s RMD Account Balance by the longer of the Participant’s remaining Life Expectancy or the Designated Beneficiary’s remaining Life Expectancy, determined as follows:

               (i) Participant’s life expectancy. The Participant’s remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

               (ii) Spouse as sole Designated Beneficiary. If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, the remaining Life Expectancy of the surviving spouse is calculated for each DCY after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For DCYs after the year of the surviving spouse’s death, the remaining Life Expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

               (iii) Non-Spouse Designated Beneficiary. If the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, the Designated Beneficiary’s remaining Life Expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

          (b) No Designated Beneficiary. If there is no Designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the RMD for each DCY after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the Participant’s remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(C) Distribution Methods. Nothing in this Section 6.02 gives any Participant or any Beneficiary the right to receive a distribution of the Participant’s Account under any method or at a time which the Plan does not permit. Unless the Participant’s Vested Account Balance is distributed in the form of an annuity purchased from an insurance company or in a Lump Sum on or before the RBD, as of the first DCY, distributions will be made in accordance with Section 6.02(A) and (B), but subject to the Employer’s Adoption Agreement elections regarding the method of distribution. If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code §401(a)(9) and the applicable Treasury regulations. If

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the Adoption Agreement limits distributions to a Lump Sum, the Plan will distribute the Participant’s entire Vested Account Balance in the form of a Lump Sum on or before the Participant’s RBD, or if applicable, at the time determined in Section 6.02(B), but subject to the Employer’s Adoption Agreement elections regarding timing of the distribution. See Section 6.03(B) regarding Participant and Beneficiary elections.

(D) Operating Rules

     (1) Precedence. The requirements of this Section 6.02 will take precedence over any inconsistent provisions of the Plan.

     (2) Requirements of Treasury regulations incorporated. All distributions required under this Section 6.02 will be determined and made in accordance with the Treasury regulations under Code §401(a)(9) and the minimum distribution incidental benefit requirement of Code §401(a)(9)(G).

     (3) TEFRA Section 242(b)(2) elections. Notwithstanding the other provisions of this Section 6.02, distributions may be made under Section 6.10.

     (4) 2002 DCY election. This Section 6.02 applies to RMDs for the 2002 DCY unless the Employer in Appendix B elects that 2002 RMDs are to be determined in accordance with the RMD rules in effect under the 1987 or 2001 proposed Treasury regulations under Code §401(a)(9), in lieu of this Section 6.02. Any such election applies to the 2002 DCY only and the provisions of this Section 6.02 apply for DCYs beginning after 2002.

(E) Definitions. The following definitions apply to this Section 6.02.

     (1) Designated Beneficiary. A “Designated Beneficiary” means an individual who is a Beneficiary under Section 7.05 and who is a designated beneficiary under Code §401(a)(9) of the Internal Revenue Code and Treas. Reg. §1.401(a)(9)-4, Q&As-4 and -5.

     (2) DCY. A DCY is a distribution calendar year for which an RMD is required. For RMDs beginning before the Participant’s death, the first DCY is the calendar year immediately preceding the calendar year which contains the Participant’s RBD. For RMDs beginning after the Participant’s death, the first DCY is the calendar year in which distributions are required to begin under Section 6.02(B). The RMD for the Participant’s first DCY will be made on or before the Participant’s RBD. The RMD for other DCYs, including the RMD for the DCY in which the Participant’s RBD occurs, will be made on or before December 31 of that DCY.

     (3) DCD. A DCD is a distribution commencement date and generally means the Participant’s RBD. However, if Section 6.02(B)(1)(a)(i) applies, the DCD is the date distributions are required to begin to the surviving spouse under Section 6.02(B)(1)(a). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the otherwise applicable DCD, then the DCD is the date distributions actually commence.

     (4) JLT. The JLT is the Joint and Last Survivor Table set forth in Treas. Reg. §1.401(a)(9)-9, Q/A-3.

     (5) Life Expectancy. Life Expectancy refers to life expectancy as computed under the SLT.

     (6) Participant’s RMD Account Balance. A Participant’s RMD Account Balance is the account balance as of the last Valuation Date in the VCY increased by the amount of any contributions made and allocated or forfeitures allocated to the Account Balance as of dates in the VCY after the Valuation Date and decreased by distributions made in the VCY after the Valuation Date. The Account Balance for the VCY includes any amounts rolled over or transferred to the Plan either in the VCY or in the DCY if distributed or transferred in the VCY.

     (7) RBD. A Participant’s RBD is his/her required beginning date determined as follows:

          (a) More than 5% owner. A Participant’s RBD is the April 1 of the calendar year following the close of the calendar year in which the Participant attains age 70¹/2 if the Participant is a more than 5% owner (as defined in Code §416(i)(B)) as to the Plan Year ending in that calendar year. If a Participant is a more than 5% owner at the close of the relevant calendar year, the Participant may not discontinue RMDs notwithstanding the Participant’s subsequent change in ownership status.

          (b) Other Participants. If the Participant is not a more than 5% owner, his/her RBD is the April 1 of the calendar year following the close of the calendar year in which the Participant incurs a Separation from Service or, if later, the April 1 following the close of the calendar year in which the Participant attains age 70¹/2.

          (c) Election as to RBD. The Employer in Appendix B may elect that the Plan Administrator continue to apply (indefinitely or to a specified date) the RBD definition in effect prior to 1997 (“pre-SBJPA RBD”). A Participant’s pre-SBJPA RBD (if applicable) is April 1 following the close of the calendar year in which the Participant attains age 70¹/2.

     (8) RMD. An RMD is the required minimum distribution the Plan must make to a Participant or Beneficiary for a DCY. The Plan Administrator determines an RMD without regard to vesting, but in accordance with Treas. Reg. §1.401(a)(9)-5, the Plan only will distribute an RMD to the extent that the amount distributed is Vested.

     (9) SLT. The SLT is the Single Life Table set forth in Treas. Reg. §1.401(a)(9)-9, Q/A-1.

     (10) ULT. The ULT is the Uniform Lifetime Table set forth in Treas. Reg. §1.401(a)(9)-9, Q/A-2.

     (11) VCY. A VCY is a valuation calendar year, which is the calendar year immediately preceding a DCY.

     6.03 POST-SEPARATION (SEVERANCE), LIFETIME RMD AND BENEFICIARY DISTRIBUTION METHODS. Distribution of a Participant’s Account: (i) after

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Separation from Service (or Severance from Employment); (ii) during employment but where the lifetime RMD requirements under Section 6.02(A) apply; and (iii) to a Beneficiary after the Participant’s death, are subject to the distribution methods in this Section 6.03.

(A) Plan Available Methods.

     (1) Participant methods. The Employer in its Adoption Agreement will elect one or more of the following distribution methods applicable to a Participant: (i) Lump-Sum; (ii) Installments; (iii) Installments but only if the Participant is required to receive RMDs under Section 6.02; (iv) Alternative Annuity; (v) Ad-Hoc; or (vi) any other method the Employer describes in its Adoption Agreement which is not inconsistent with Applicable Law. If Section 6.04 applies, the distribution must be a QJSA unless waived. In the event of a QJSA waiver, the distribution will be made under the alternative method the Participant elects, in accordance with this Section 6.03.

     (2) Beneficiary Methods. The Employer in its Adoption Agreement will elect one or more of the following distribution methods applicable to a Beneficiary: (i) Lump-Sum; (ii) Installments, provided any Installment is in an amount at least equal to the RMD for a DCY; (iii) Ad-Hoc, provided the Beneficiary must receive a distribution in an amount at least equal to the RMD for a DCY; or (iv) QPSA if the Plan is subject to Section 6.04. Under a Plan subject to Section 6.04, a surviving spouse Beneficiary may elect to waive the QPSA in favor of another Beneficiary distribution method the Plan permits. See Section 6.04(B)(5). See Sections 6.02(B)(1)(e) and 6.02(C) as to distribution timing elections and elections relating to death of the Participant before the DCD.

     (3) Definition of Lump–Sum. A Lump-Sum means a single payment and includes, but is not limited to, a “lump-sum distribution” under Code §402(d)(4). If the Employer in its Adoption Agreement elects to limit distributions to a Lump-Sum, all Plan distributions must be made in this form, including all RMDs under Section 6.02.

     (4) Definition of Installments. Installments means payment in monthly, quarterly, semi-annual, annual or other installments over a fixed reasonable period of time, not exceeding the Life Expectancy of the Participant, or the joint life and last survivor expectancy of the Participant and his/her designated Beneficiary. To facilitate an Installment distribution the Plan Administrator under Section 7.04(A)(2)(c) may direct the Trustee to place all or any part of the Participant’s Account Balance in a Segregated Account.

          (a) Installments only for Lifetime RMDs. If the Employer in its Adoption Agreement elects Installments only if a Participant is subject to lifetime RMDs under Section 6.02(A), and does not elect Installments generally, only the affected Participants are entitled to an Installment distribution under the Plan. Any such Installment must satisfy Section 6.02(A).

          (b) Installment acceleration. A Participant or Beneficiary receiving an Installment distribution may, at any time, elect to accelerate the payment of all, or any portion, of the Participant’s unpaid Vested Account Balance.

     (5) Definition of Alternative Annuity. An Alternative Annuity means distribution of an Annuity Contract which is not a QJSA or a QPSA. The Alternative Annuity must be based on the life of the Participant or upon the joint lives of the Participant and a Designated Beneficiary. The Employer in its Adoption Agreement will describe the material characteristics of any Alternative Annuity available under the Plan. If Section 6.04 does not apply to the overall Plan, the Employer will not elect an Alternative Annuity.

     (6) Definition of Ad-Hoc. Ad-Hoc means the Participant or Beneficiary may at any time after Separation from Service (or Severance from Employment) elect distribution of all or any part of his/her Account or of specified Accounts under the Plan. The Plan Administrator may adopt a policy regarding Ad-Hoc distributions imposing a reasonable minimum distribution amount, frequency limitations or other reasonable administrative conditions.

(B) Participant and Beneficiary Elections. Subject to any contrary requirements imposed by Sections 6.01, 6.02, this Section 6.03 or 6.04, and also subject to Section 8.04 as to the form of distribution (cash or property), a Participant or Beneficiary may elect any method or timing of distribution the Plan permits.

     (1) Participant election as to Beneficiary. The Participant, on a form prescribed by the Plan Administrator, may elect the distribution method which will apply to any Beneficiary, including his/her surviving spouse. The Participant’s election may limit any Beneficiary’s right to increase or to reduce the frequency or the amount of any payments.

     (2) If no election. If a Participant or Beneficiary does not make a timely election as to the distribution method and timing as the Plan may permit, the Plan Administrator will direct the Trustee to distribute a Lump-Sum as soon as is practical and at the earliest date the Plan permits distribution but not later than the date the Plan requires distribution. If the Plan does not permit a Lump-Sum distribution, the Plan Administrator will direct distribution under any other method the Plan permits. If the Plan permits an election as to cash or property, in the absence of an election, the Plan Administrator will direct the Trustee to distribute cash, subject to Section 8.04.

     (3) Combination of methods. If the Employer in its Adoption Agreement elects to permit more than one distribution method under this Section 6.03, a Participant or Beneficiary may elect any combination of the available methods either as to different Accounts or as to specified amounts subject to distribution.

     (4) No third party discretion. No third party, including the Employer, the Plan Administrator and the Trustee, may exercise discretion over any Participant or Beneficiary election of the method of distribution, provided the election is made in accordance with the Plan.

     (5) Lump-Sum only if Account does not exceed $5,000. Any distribution elections permitted under this Section 6.03 are available only if the Participant’s Vested Account Balance, as determined under Section 6.01(A)(4),

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exceeds $5,000, unless the Employer elects to apply any lesser amount in Appendix B. If the Participant’s Vested Account Balance does not exceed $5,000 (or such lesser amount the Employer elects in Appendix B), the Trustee will distribute the balance in a Lump-Sum (which will be a Cash-Out Distribution if the Participant’s Account Balance is not 100% Vested) without regard to Section 6.04.

     (6) Sourcing election. If a Participant or Beneficiary who will receive a partial (non-corrective) distribution of his/her Plan Account has both a Roth Deferral Account (or some other Account with tax basis) and one or more pre-tax Accounts including a Pre-Tax Deferral Account, the Participant or Beneficiary may elect the Account source(s) and composition (contributions or Earnings) of the distribution unless such elections are contrary to Applicable Law. This Section 6.03(B)(6) as to election of Account sources from among multiple sources does not apply to the extent that a Participant or Beneficiary is eligible under the Plan terms to receive a distribution only from one specific Account source. In the absence of a Participant or Beneficiary election, the Plan Administrator operationally will determine the Account source(s) from which the Trustee will make the distribution and will determine whether such amounts distributed consist of the Account contributions or of Account Earnings or both, unless such Plan Administrator determinations are contrary to Applicable Law.

     (7) Application to alternate payees. This Section 6.03 applies to an alternate payee in the same manner as if the alternate payee were the Participant. See Section 6.05 as to the right of a QDRO alternate payee to elect the distribution method applicable to the alternate payee’s distribution.

(C) Modification. The Employer in its Adoption Agreement may elect to modify the methods of payment available under the Plan, consistent with this Section 6.03. If the Employer’s Plan is a Restated Plan, the Employer in its Adoption Agreement and in accordance with Treas. Reg. §1.411(d)-4, may elect to eliminate from the prior Plan certain Protected Benefits.

     6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND TO SURVIVING SPOUSES.

(A) Qualified Joint and Survivor Annuity (QJSA). The Plan Administrator must direct the Trustee to distribute a married or unmarried Participant’s Vested Account Balance in the form of a QJSA, unless the Participant, and spouse if the Participant is married, waive the QJSA in accordance with this Section 6.04(A) or unless Section 6.04(H) applies.

     (1) Definition of QJSA if married. If, as of the Annuity Starting Date, the Participant is married (even if the Participant has not been married throughout the one year period ending on the Annuity Starting Date), a QJSA is an immediate Annuity Contract which is purchasable with the Participant’s Vested Account Balance and which provides a Life Annuity for the Participant and a Survivor Annuity payable for the remaining life of the Participant’s surviving spouse equal to 50% of the amount of the annuity payable during the life of the Participant.

     (2) Definition of QJSA if not married. If, as of the Annuity Starting Date, the Participant is not married, a QJSA is an immediate Life Annuity Contract for the Participant which is purchasable with the Participant’s Vested Account Balance.

     (3) Modification of QJSA benefit. The Employer in Appendix B may elect a different percentage (more than 50% but not exceeding 100%) for the Survivor Annuity.

     (4) Definitions of Life/Survivor Annuity. A Life Annuity means an Annuity Contract payable to the Participant in equal installments for the life of the Participant that terminates upon the Participant’s death. A Survivor Annuity means an Annuity Contract payable to the Participant’s surviving spouse in equal installments for the life of the surviving spouse that terminates upon the death of the surviving spouse.

     (5) QJSA notice/timing. A Participant may elect distribution of the QJSA at the earliest retirement age under the Plan, which is the earliest date on which the Participant could elect to receive retirement benefits. At least 30 days and not more than 90 days before the Participant’s Annuity Starting Date, the Plan Administrator must provide the Participant a written explanation of the terms and conditions of the QJSA, the Participant’s right to make, and the effect of, an election to waive the QJSA benefit, the rights of the Participant’s spouse regarding the waiver election and the Participant’s right to make, and the effect of, a revocation of a waiver election.

     (6) Waiver frequency and timing. The Plan does not limit the number of times the Participant may revoke a waiver of the QJSA or make a new waiver during the election period. The Participant (and his/her spouse, if the Participant is married), may revoke an election to receive a particular form of benefit at any time until the Annuity Starting Date.

     (7) Married Participant waiver. A married Participant’s QJSA waiver election is not valid unless: (i) the Participant’s spouse (to whom the Survivor Annuity is payable under the QJSA), after the Participant has received the QJSA notice, has consented in writing to the waiver election, the spouse’s consent acknowledges the effect of the election, and a notary public or the Plan Administrator (or his/her representative) witnesses the spouse’s consent; (ii) the spouse consents to the alternative method of payment designated by the Participant or to any change in that designated method of payment; and (iii) unless the spouse is the Participant’s sole primary Beneficiary, the spouse consents to the Participant’s Beneficiary designation or to any change in the Participant’s Beneficiary designation.

          (a) Effect of spousal consent/blanket waiver. The spouse’s consent to a waiver of the QJSA is irrevocable, unless the Participant revokes the waiver election. The spouse may execute a blanket consent to the Participant’s future payment form election or Beneficiary designation, if the spouse acknowledges the right to limit his/her consent to a specific designation but, in writing, waives that right.

          (b) Spousal consent not required. The Plan Administrator will accept as valid a waiver election which does not satisfy the spousal consent requirements if the Plan Administrator establishes: (i) the Participant does not have a spouse; (ii) the spouse cannot be located; (iii) the Participant

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is legally separated or has been abandoned (within the meaning of applicable state law) and the Participant has a court order to that effect; or (iv) other circumstances exist under which Applicable Law excuses the spousal consent requirement. If the Participant’s spouse is legally incompetent to give consent, the spouse’s legal guardian (even if the guardian is the Participant) may give consent.

(B) Qualified Preretirement Survivor Annuity (QPSA). If a married Participant dies prior to his/her Annuity Starting Date, the Plan Administrator will direct the Trustee to distribute a portion of the Participant’s Vested Account Balance to the Participant’s surviving spouse in the form of a QPSA, unless the Participant has a valid waiver election in effect. The Employer in its Adoption Agreement will elect whether to apply the “one-year marriage rule.” If the Employer elects to apply the one-year marriage rule, the QPSA benefit does not apply unless the Participant and his/her spouse were married throughout the one year period ending on the date of the Participant’s death.

     (1) Definition of QPSA. A QPSA is an Annuity Contract which is purchasable with 50% of the Participant’s Vested Account Balance (determined as of the date of the Participant’s death) and which is payable for the life of the Participant’s surviving spouse.

     (2) Modification of QPSA. The Employer in Appendix B may elect a different percentage (more than 50% but not exceeding 100%) for the QPSA.

     (3) Ordering rule. The value of the QPSA is attributable to Employer Contributions, to Pre-Tax Deferrals, to Roth Deferrals, and to Employee Contributions in the same proportion as the Participant’s Vested Account Balance is attributable to those contributions.

     (4) Disposition of remaining balance. The portion of the Participant’s Vested Account Balance not payable as a QPSA is payable to the Participant’s Beneficiary, in accordance with the remaining provisions of this Article VI.

     (5) Surviving spouse elections. If the Participant’s Vested Account Balance which the Trustee would apply to purchase the QPSA exceeds $5,000, the Participant’s surviving spouse may elect to have the Trustee commence payment of the QPSA at any time following the date of the Participant’s death, but not later than Section 6.02 requires, and may elect any of the methods of payment described in Section 6.03, in lieu of the QPSA. In the absence of an election by the surviving spouse, the Plan Administrator must direct the Trustee to distribute the QPSA on the earliest administratively practicable date following the close of the Plan Year in which the latest of the following events occurs: (a) the Participant’s death; (b) the date the Plan Administrator receives notification of or otherwise confirms the Participant’s death; (c) the date the Participant would have attained Normal Retirement Age; or (d) the date the Participant would have attained age 62.

     (6) QPSA notice/timing. The Plan Administrator must provide a written explanation of the QPSA to each married Participant within the following period which ends last: (a) the period beginning on the first day of the Plan Year in which the Participant attains age 32 and ending on the last day of the Plan Year in which the Participant attains age 34; (b) a reasonable period after an Employee becomes a Participant; or (c) a reasonable period after Section 6.04 of the Plan becomes applicable to the Participant. A “reasonable period” described in clauses (b) and (c) is the period beginning one year before and ending one year after the applicable event. If the Participant inclurs a Separation from Service before attaining age 35, clauses (a), (b), and (c) do not apply and the Plan Administrator must provide the QPSA notice within the period beginning one year before and ending one year after the Separation from Service. If the Participant thereafter returns to employment with the Employer, the Plan Administrator will redetermine the applicable period. The QPSA notice must describe, in a manner consistent with Treasury regulations, the terms and conditions of the QPSA and of the waiver of the QPSA, comparable to the QJSA notice required under Section 6.04(A)(5).

     (7) Waiver frequency and timing. The Plan does not limit the number of times the Participant may revoke a waiver of the QPSA or make a new waiver during the election period. The election period for waiver of the QPSA ends on the date of the Participant’s death. A Participant’s QPSA waiver election is not valid unless the Participant makes the waiver election after the Participant has received the QPSA notice and no earlier than the first day of the Plan Year in which he/she attains age 35. However, if the Participant incurs a Separation from Service prior to the first day of the Plan Year in which he/she attains age 35, the Plan Administrator will accept a waiver election as to the Participant’s Account Balance attributable to his/her Service prior to his/her Separation from Service. In addition, if a Participant who has not incurred a Separation from Service makes a valid waiver election, except for the age 35 Plan Year timing requirement above, the Plan Administrator will accept that election as valid, but only until the first day of the Plan Year in which the Participant attains age 35.

     (8) Spousal consent to waiver. A Participant’s QPSA waiver is not valid unless the Participant’s spouse (to whom the QPSA is payable) satisfies or is excused from the consent requirements as described in Section 6.04(A)(7), except the spouse need not consent to the form of benefit payable to the designated Beneficiary. The spouse’s consent to the waiver of the QPSA is irrevocable, unless the Participant revokes the waiver election. The spouse also may execute a blanket consent as described in Section 6.04(A)(7)(a).

(C) Effect of Waiver. If the Participant has in effect a valid waiver election regarding the QJSA or the QPSA, the Plan Administrator must direct the Trustee to distribute the Participant’s Vested Account Balance in accordance with Sections 6.01, 6.02 and 6.03.

(D) Loan Offset. The Plan Administrator will reduce the Participant’s Vested Account Balance by any security interest (pursuant to any offset rights authorized by Section 6.06) held by the Plan by reason of a Participant loan, to determine the value of the Participant’s Vested Account Balance distributable in the form of a QJSA or QPSA, provided the loan satisfied the spousal consent requirement described in
Section 7.06(D).

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(E) Effect of QDRO. For purposes of applying this Article VI, a former spouse (in lieu of the Participant’s current spouse) is the Participant’s spouse or surviving spouse to the extent provided under a QDRO described in Section 6.05. The provisions of this Section 6.04 apply separately to the portion of the Participant’s Vested Account Balance subject to a QDRO and to the portion of the Participant’s Vested Account Balance not subject to the QDRO.

(F) Vested Account Balance Not Exceeding $5,000. The Trustee must distribute in a Lump-Sum a Participant’s Vested Account Balance which the Trustee otherwise under Section 6.04 would apply to provide a QJSA or QPSA benefit, where the Participant’s Vested Account Balance determined under Section 6.01(A)(4) does not exceed $5,000, unless the Employer elects to apply any lesser amount in Appendix B.

(G) Profit Sharing Plan Exception. If this Plan is a Profit Sharing Plan, the Employer in its Adoption Agreement must elect whether the preceding provisions of Section 6.04 apply to all Participants or only to Participants who are not Exempt Participants.

     (1) Definition of Exempt Participants. All Participants are Exempt Participants except the following Participants to whom Section 6.04 must be applied: (a) a Participant as respects whom the Plan is a direct or indirect transferee from a plan subject to the Code §417 requirements and the Plan received the Transfer after December 31, 1984, unless the Transfer is an Elective Transfer described in Section 11.06(E); (b) a Participant who elects a Life Annuity distribution (if Section 11.02(C)(3) of the Plan requires the Plan to provide a Life Annuity distribution option); or (c) a Participant whose benefits under a Defined Benefit Plan maintained by the Employer are offset by benefits provided under this Plan.

     (2) Transfers. If a Participant receives a Transfer under Section 6.04(G)(1), clause (a) above, the Plan Administrator may elect to apply Section 6.04 only to the Participant’s transferred balance and not to the Participant’s remaining Account Balance provided that the Plan Administrator accounts properly for such balances.

     (3) Distribution to Exempt Participant. The Plan Administrator must direct the Trustee to distribute the Exempt Participant’s Vested Account Balance in accordance with Sections 6.01, 6.02 and 6.03.

     (4) Exempt Participant Beneficiary designation. See Section 7.05(A)(3) as to requirements relating to a married Exempt Participant’s Beneficiary designation.

     6.05 QDRO DISTRIBUTIONS. Notwithstanding any other provision of this Plan, the Trustee, in accordance with the direction of the Plan Administrator, must comply with the provisions of a QDRO, as defined in Code §414(p)(1)(A), which is issued with respect to the Plan.

(A) Distribution at Any Time. This Plan specifically permits distribution to an alternate payee under a QDRO at any time, irrespective of whether the Participant has attained his/her earliest retirement age (as defined under Code §414(p)(4)(B)) under the Plan. However, a distribution to an alternate payee prior to the Participant’s attainment of earliest retirement age is available only if: (1) the QDRO specifies distribution at that time or permits an agreement between the Plan and the alternate payee to authorize an earlier distribution; and (2) if the present value of the alternate payee’s benefits under the Plan exceeds $5,000, and the QDRO requires the alternate payee’s consent to any distribution occurring prior to the Participant’s attainment of earliest retirement age, the alternate payee gives such consent.

(B) Plan Terms Otherwise Apply. Except as to timing of distribution commencement under Section 6.05(A), nothing in this Section 6.05 gives a Participant or an alternate payee a right to receive a type or method of distribution, to receive any option, or to increase benefits in a manner that the Plan does not permit.

(C) QDRO Procedures. The Plan Administrator must establish reasonable procedures to determine the qualified status of a domestic relations order (as defined under Code §414(p)(1)(B).

     (1) Notices and order status. Upon receiving a domestic relations order, the Plan Administrator promptly will notify the Participant and any alternate payee named in the order, in writing, of the receipt of the order and the Plan’s procedures for determining the qualified status of the order. Within a reasonable period of time after receiving the domestic relations order, the Plan Administrator must determine the qualified status of the order and must notify the Participant and each alternate payee, in writing, of the Plan Administrator’s determination. The Plan Administrator must provide notice under this Section 6.05(C)(1) by mailing to the individual’s address specified in the domestic relations order, or in a manner consistent with DOL regulations.

     (2) Interim amounts payable. If any portion of the Participant’s Vested Account Balance is payable under the domestic relations order during the period the Plan Administrator is making its determination of the qualified status of the domestic relations order, the Plan Administrator must maintain a separate accounting of the amounts payable. If the Plan Administrator determines the order is a QDRO within 18 months of the date amounts first are payable following receipt of the domestic relations order, the Plan Administrator will direct the Trustee to distribute the payable amounts in accordance with the QDRO. If the Plan Administrator does not make its determination of the qualified status of the order within the 18-month determination period, the Plan Administrator will direct the Trustee to distribute the payable amounts in the manner the Plan would distribute if the order did not exist and will apply the order prospectively if the Plan Administrator later determines the order is a QDRO.

     (3) Segregated Account. To the extent it is not inconsistent with the provisions of the QDRO, the Plan Administrator under Section 7.04(A)(2)(c) may direct the Trustee to segregate the QDRO amount in a Segregated Account. The Trustee will make any payments or distributions required under this Section 6.05 by separate benefit checks or other separate distribution to the alternate payee(s).

     6.06 DEFAULTED LOAN – TIMING OF OFFSET. If a Participant or a Beneficiary defaults on a Plan loan, the Plan

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Administrator will determine the timing of the reduction (offset) of the Participant’s Vested Account Balance in accordance with this Section 6.06 and the Plan Administrator’s loan policy.

(A) Offset if Distributable Event. If, under the loan policy a loan default also is a distributable event under the Plan, the Trustee, at the time of the loan default, will offset the Participant’s Vested Account Balance by the lesser of the amount in default (including accrued interest) or the Plan’s security interest in that Vested Account Balance.

(B) Restricted Accounts. If the loan is from a Restricted Pension Account and the loan default is a distributable event under the loan policy, the Trustee will offset the Participant’s Account Balance in the manner described in Section 6.06(A) only if the Participant has incurred a Separation from Service or has attained Normal Retirement Age. If a 401(k) Plan makes the loan, to the extent the loan is attributable to the Participant’s Restricted 401(k) Accounts, the Trustee will not offset the Participant’s Vested Account Balance prior to the earlier of the date the Participant incurs a Severance from Employment or the date the Participant attains age 59¹/2. Consistent with its loan policy, the Plan Administrator also may offset a Participant’s defaulted loan upon Plan termination, provided the Participant’s Account Balance is distributable upon Plan termination.

     6.07 HARDSHIP DISTRIBUTIONS. The Employer in its Adoption Agreement may elect to permit a hardship distribution to an electing Participant. If the Employer elects to permit hardship distributions, the Employer, consistent with the Adoption Agreement and Applicable Law, will elect: (i) which Accounts are available for a hardship distribution; (ii) whether the Plan Administrator will administer the hardship distributions in accordance with the safe harbor provisions of Section 6.07(A) or, as may be permitted by Applicable Law, under the non-safe harbor provisions of Section 6.07(B); and (iii) whether the hardship distribution is an In-Service Distribution, an acceleration of a distribution occurring after Severance from Employment/Separation from Service, or both. The Employer in its Profit Sharing Plan Adoption Agreement may elect to apply the safe harbor rules.

(A) Safe Harbor Need/Necessity.

     (1) Deemed immediate and heavy need. For purposes of this Plan, a safe harbor hardship distribution is a distribution on account of one or more of the following immediate and heavy financial needs: (a) expenses for (or necessary to obtain) medical care for the Participant, for the Participant’s spouse, or for any of the Participant’s dependents that would be deductible under Code §213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income); (b) costs directly related to the purchase (excluding mortgage payments) of a principal residence of the Participant; (c) payment of post-secondary education tuition and related educational fees (including room and board), for the next 12-month period, for the Participant, for the Participant’s spouse, for the Participant’s children, or for any of the Participant’s dependents; (d) payments necessary to prevent the eviction of the Participant from his/her principal residence or the foreclosure of the mortgage on the Participant’s principal residence; (e) payments for the funeral or burial expenses for the Participant’s deceased parent, spouse, child, or dependent; or (f) expenses to repair damage to the Participant’s principal residence that would qualify for a casualty loss deduction under Code §165 (determined without regard to whether the loss exceeds 10% of adjusted gross income). Clauses (e) and (f) only apply as of the Final 401(k) Regulations Effective Date. As used in this Section 6.07(A)(1), the term “dependent” means a dependent as defined in Code §152 but for Taxable Years beginning after 2004 as applied to clause (e), means without regard to Code §152(d)(1)(B) and, for purposes of clause (c), means as applied without regard to Code §§152(b)(1) or (2) and 152(d)(1)(B). Notwithstanding the immediately preceding sentence, the Plan Administrator in applying this Section 6.07 may elect to limit the term “dependent” to those persons whom the Participant may claim as a dependent on IRS Form 1040. The administrative forms related to hardship distributions will reflect which of these definitions of “dependent” the Plan Administrator has elected to apply.

     (2) Deemed necessity. The following restrictions apply to a Participant who receives a safe harbor hardship distribution: (a) the Participant may not make Elective Deferrals or Employee Contributions to the Plan and other plans (described below) maintained by the Employer for the 6-month period (or any longer period the Plan Administrator may specify in a hardship distribution policy) following the date of his/her hardship distribution; (b) the distribution may not exceed the amount of the Participant’s immediate and heavy financial need (including any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution); and (c) the Participant must have obtained all distributions (including distribution of Code §404(k) ESOP dividends), other than hardship distributions, and all nontaxable loans (determined at the time of the loan) currently available under the Plan and all other plans (described below) maintained by the Employer. “Other plans” for purposes of clauses (a) and (c) means all other qualified plans and all nonqualified plans of deferred compensation maintained by the Employer including a cash or deferred arrangement that is part of a cafeteria plan under Code §125 (but excluding the mandatory employee contribution portion of a Defined Benefit Plan or a health or welfare benefit plan, including one that is part of a cafeteria plan). For purposes of clause (a), “other plans” also includes stock option, stock purchase and other similar plans maintained by the Employer.

(B) Non-safe Harbor Need/Necessity. For purposes of this Plan, a non-safe harbor hardship distribution is a distribution on account of an immediate and heavy financial need. The distribution cannot exceed the amount necessary to satisfy the need (including any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution). The Plan will not make a non-safe harbor hardship distribution if the Participant may relieve the need from other resources that are reasonably available to the Participant. The Plan Administrator will administer a hardship distribution under this Section 6.07(B) in accordance with Treas. Reg. §1.401(k)-1(d)(3)(iv), but excluding paragraph (E) thereof.

(C) Policy/Reliance. The Plan Administrator may adopt a uniform and nondiscriminatory policy regarding hardship distributions including objective standards for determining

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whether a Participant has an immediate and heavy financial need and for substantiating the extent of the Participant’s need. The Plan Administrator, absent actual contrary knowledge, may rely on a Participant’s written representation that the distribution is on account of hardship (as defined in Section 6.07(A)(1)), that the distribution satisfies Section 6.07(B) and/or that the distribution satisfies clause (b) under 6.07(A)(2).

(D) No Counterproductive Actions. A Participant, to establish necessity under either Sections 6.07(A)(2) or 6.07(B) need not take counterproductive actions as would increase the financial need. Such actions include, but are not limited to, being required to first take a Participant loan to purchase a principal residence where such a loan would result in the Participant’s disqualification from obtaining other necessary financing.

(E) Restrictions on Amount; Grandfathered Amounts. The maximum amount distributable from Elective Deferrals as a hardship distribution may not exceed the amount equal to the Participant’s total Elective Deferrals as of the hardship distribution date, reduced by the amount of any Elective Deferrals previously distributed to the Participant based on hardship or otherwise. QMACs and QNECs, and any Earnings on such contributions, and Earnings on the Participant’s Elective Deferrals, credited as of December 31, 1988 (collectively, “grandfathered amounts”), increase the amount of the maximum available hardship distribution only if the Employer in Appendix B elects to include such amounts. The restrictions of this Section 6.07(E) do not apply to hardship distributions from Nonelective Contributions Regular Matching Contributions or Additional Matching Contributions and such distributions also may include Earnings on such Accounts. No hardship distribution is available from Safe harbor Contribution Accounts.

(F) Ordering. If the Plan permits a hardship distribution from more than one Account type, the Participant or the Plan Administrator in accordance with Section 6.03(B)(6) will determine the ordering of a Participant’s hardship distribution from the hardship distribution eligible Accounts, including ordering as between the Participant’s Pre-Tax Deferral Account and Roth Deferral Account, if any, provided that any ordering is consistent with any restriction on hardship distributions under this Section 6.07.

(G) Prototype and Volume Submitter Plans. A Participant’s hardship distribution made from Elective Deferrals under a Prototype Plan must comply with the safe harbor rules of Section 6.07(A). A Participant’s hardship distribution made from the Nonelective Contribution, Regular Matching Contribution or Additional Matching Contribution Accounts under a Prototype Plan, as the Employer elects in its Adoption Agreement, may comply with the safe harbor rules of Section 6.07(A) or the non-safe harbor rules of Section 6.07(B). A Volume Submitter Plan, as the Employer elects in its Adoption Agreement, may provide hardship distributions under the safe harbor rules of Section 6.07(A) or under the non-safe harbor hardship distribution rules of Section 6.07(B).

     6.08 DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS.

(A) Participant Election. A Participant (including for this purpose, a former Employee) may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of his/her Eligible Rollover Distribution from the Plan paid directly to an Eligible Retirement Plan specified by the Participant in a Direct Rollover. For purposes of this Section 6.08, a Participant includes as to their respective interests, a Participant’s surviving spouse and the Participant’s spouse or former spouse who is an alternate payee under a QDRO.

(B) Rollover and Withholding Notice. At least 30 days but not more than 90 days prior to the Trustee’s distribution of an Eligible Rollover Distribution, the Plan Administrator must provide a written notice (including a summary notice as permitted under applicable Treasury regulations) explaining to the distributee the rollover option, the applicability of mandatory 20% federal withholding to any amount not directly rolled over, and the recipient’s right to roll over the distribution within 60 days after the date of receipt of the distribution (“rollover notice”). If applicable, the rollover notice also must explain the availability of income averaging and the exclusion of net unrealized appreciation. A recipient of an Eligible Rollover Distribution (whether he/she elects a Direct Rollover or elects to receive the distribution), also may elect to receive distribution at any administratively practicable time which is earlier than 30 days (but more than 7 days if Section 6.04 applies) following receipt of the rollover notice.

(C) Default Rollover. The Plan Administrator, in the case of a Participant who does not respond timely to the rollover notice, may make a Direct Rollover of the Participant’s Account (as described in Revenue Ruling 2000-36 or in any successor guidance, or in any DOL guidance) in lieu of distributing the Participant’s Account.

(D) Automatic Rollover. If the Employer elects in its Adoption Agreement to provide for Mandatory Distributions described in Section 6.01(A), the Plan Administrator will apply this Section 6.08(D) to all Mandatory Distributions made before the Participant attains the later of age 62 or Normal Retirement Age. The Employer in its Adoption Agreement will elect whether the Plan Administrator will apply this Section 6.08(D) regardless of amount or will apply this Section only to such Mandatory Distributions which exceed $1,000. In the event of any Mandatory Distribution subject to this Section 6.08(D) and made on or after March 28, 2005, if the Participant does not elect to have such distribution paid directly to an Eligible Retirement Plan the Participant specifies in a Direct Rollover or to receive the distribution directly in accordance with Section 6.01(A), then the Plan Administrator will pay the distribution in a Direct Rollover to an Individual Retirement Plan the Plan Administrator designates (“Automatic Rollover”). In the case of a Restated Plan with a restated Effective Date before March 29, 2005, as to any Mandatory Distribution which otherwise would be subject to this Section 6.08(D) except that the distribution occurred before March 29, 2005, the terms of the prior plan document control as to the disposition of the Account.

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     (1) Determination of Mandatory Distribution amount.

          (a) Rollovers count. The Plan Administrator, in determining whether a Mandatory Distribution is greater than $1,000 for purposes of this Section 6.08(D), will include the portion of the Participant’s distribution attributable to any Rollover Contribution, regardless of the Employer’s Adoption Agreement election to include or exclude Rollover Contributions in determining a Mandatory Distribution.

          (b) Roth and Pre-Tax Deferrals. In determining the Mandatory Distribution amount under this Section 6.08(D), the Plan Administrator will aggregate a Participant’s Roth Deferral and Pre-Tax Deferral Accounts if each Account Balance exceeds $200. If either the Roth Deferral Account or the Pre-Tax Deferral Account is less than $200, the Plan Administrator will apply this Section 6.08(D) only to the other Account and will not aggregate the Account Balance under $200 with the other Account Balance.

     (2) Beneficiaries, alternate payees and termination. The Automatic Rollover provisions of this Section 6.08(D) do not apply to spousal Beneficiaries, to alternate payees under a QDRO or to distributions upon Plan termination.

(E) Limitation on Employee Contribution and Roth Rollovers.

     (1) Employee Contributions. A Participant’s Employee Contribution Account only may be transferred by means of a Direct Rollover to a qualified Defined Contribution Plan described in Code §§401(a) or 403(a) that agrees to account separately for amounts so transferred, including accounting separately for the portion of such distribution which is includible in gross income and the portion of such distribution which is not includible in gross income. A Participant’s Employee Contributions also may be transferred by a Direct Rollover or by a 60-day rollover to an Individual Retirement Plan. For purposes of a rollover of a distribution which includes both Employee Contributions and pre-tax amounts, the Plan Administrator will treat the first amounts rolled over as attributable to the pre-tax amounts.

     (2) Roth Deferrals. A Participant’s Roth Deferral Account only may be transferred by means of a Direct Rollover to a qualified Defined Contribution Plan described in Code §401(k), or to a Code §403(b) plan that permits Roth deferrals. A Participant also may transfer the taxable portion of his/her Roth Deferral Account by a 60-day rollover to a qualified Defined Contribution Plan under Code §401(k) or to a Code §403(b) plan. A Participant’s Roth Deferral Account Contributions also may be transferred by a Direct Rollover or by a 60-day rollover to a Roth Individual Retirement Plan.

(F) Definitions. The following definitions apply to this Section 6.08:

     (1) Direct Rollover. A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan the distributee specifies in his/her Direct Rollover election or in the case of an Automatic Rollover, to the Individual Retirement Plan that the Plan Administrator designates.

     (2) Eligible Retirement Plan. An Eligible Retirement Plan is an individual retirement account described in Code §408(a), an individual retirement annuity described in Code §408(b), an annuity plan described in Code §403(a), a qualified trust described in Code §401(a), an arrangement described in Code §403(b), or an eligible deferred compensation plan described in Code §457(b) sponsored by a governmental employer which accepts the Participant’s or alternate payee’s Eligible Rollover Distribution. However, with regard to a Participant’s Roth Deferral Account, an Eligible Retirement Plan is a Roth IRA described in Code §408A, a Roth account in another 401(k) plan which permits Roth deferrals or a Roth account in a 403(b) plan which permits Roth deferrals.

     (3) Eligible Rollover Distribution. An Eligible Rollover Distribution is any distribution of all or any portion of the Participant’s Vested Account Balance, except: (a) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Participant or the joint lives (or joint life expectancies) of the Participant and the Participant’s Designated Beneficiary, or for a specified period of ten years or more; (b) any RMD under Section 6.02; (c) the portion of any distribution which is not includible in gross income (except for Roth Deferral Accounts, Employee Contributions and determined without regard to the exclusion of net unrealized appreciation with respect to employer securities); (d) any hardship distribution; (e) a corrective distribution made under Article IV; (f) a deemed distribution resulting from a defaulted Participant loan which is not also an offset distribution; (g) any other distributions described in Treas. Reg. §1.402(c)-2; and (h) as to a Direct Rollover, any distribution which otherwise would be an Eligible Rollover Distribution, but where the total distributions to the Participant during that calendar year are reasonably expected to be less than $200. For purposes of clause (h), a Participant’s Roth Deferral Account is deemed to constitute a separate plan that is subject to a separate $200 limit. The Plan Administrator, in a form on which a Participant may elect a Direct Rollover, may restrict a Participant from directly rolling over only a part of an Eligible Rollover Distribution where the distribution amount does not exceed $500. In the case of such distribution exceeding $500, the Plan Administrator’s form may require that any amount the Participant elects to directly roll over be equal to $500 or a lesser specified amount.

     (4) Individual Retirement Plan. An Individual Retirement Plan is an individual retirement account described in Code §408(a) or an individual retirement annuity described in Code §408(b).

     6.09 REPLACEMENT OF $5,000 AMOUNT. If the Employer in its Adoption Agreement under Section 6.01(A)(1) elects no Mandatory Distributions or elects a Mandatory Distribution amount which is less than $5,000, all other Plan references to “$5,000” remain unchanged unless the Employer in Appendix B elects to apply any lesser amount. However, any such override election does not apply to Sections 3.02(D) (relating to Catch-Up Deferrals, 3.10 (relating to SIMPLE Plans) and 3.12(C)(2) (relating to Designated IRAs) and references therein remain at $5,000. If this Plan is a Restated Plan, any Employer election under this Section 6.09 must be consistent with the Plan

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Administrator’s operation of the Plan prior to the Employer’s execution of its Restated Plan.

     6.10 TEFRA ELECTIONS.

(A) Application of Election in Lieu of Other Provisions. Notwithstanding the provisions of Sections 6.01, 6.02 and 6.03, if the Participant (or Beneficiary) signed a written distribution designation prior to January 1, 1984 (“TEFRA election”), the Plan Administrator must direct the Trustee to distribute the Participant’s Vested Account Balance in accordance with that election, subject however, to the Survivor Annuity requirements, if applicable, of Section 6.04.

(B) Non-application. This Section 6.10 does not apply to a TEFRA election, and the Plan Administrator will not comply with that election, if any of the following applies: (1) the elected method of distribution would have disqualified the Plan under Code §401(a)(9) as in effect on December 31, 1983; (2) the Participant did not have an Account Balance as of December 31, 1983; (3) the election does not specify the timing and form of the distribution and the death Beneficiaries (in order of priority); (4) the substitution of a Beneficiary modifies the distribution payment period; or, (5) the Participant (or Beneficiary) modifies or revokes the election. In the event of a revocation, the Trustee must distribute, no later than December 31 of the calendar year following the year of revocation, the amount which the Participant would have received under Section 6.02 if the distribution designation had not been in effect or, if the Beneficiary revokes the distribution designation, the amount which the Beneficiary would have received under Section 6.02 if the distribution designation had not been in effect. The Plan Administrator will apply this Section 6.10 to rollovers and Transfers in accordance with Treasury Reg. §1.401(a)(9)-8.

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ARTICLE VII
ADMINISTRATIVE PROVISIONS

     7.01 EMPLOYER ADMINISTRATIVE PROVISIONS

(A) Information to Plan Administrator. The Employer must supply current information to the Plan Administrator, including the name, date of birth, date of employment, Compensation, leaves of absence, Years of Service and date of Separation from Service of each Employee who is, or who will be eligible to become, a Participant under the Plan, together with any other information which the Plan Administrator considers necessary to administer the Plan. The Employer’s records as to the information the Employer furnishes to the Plan Administrator are conclusive as to all persons.

(B) Plan Contributions. The Employer is solely responsible to determine the proper amount of any Employer Contribution it makes to the Plan and for the timely deposit to the Trust of the Employer Contributions.

(C) Employer Action. The Employer must take any action under the Plan in accordance with applicable Plan provisions and with proper authority such that the action is valid under Applicable Law and is binding upon the Employer.

(D) No Responsibility for Others. Except as required under ERISA, the Employer has no responsibility or obligation under the Plan to Employees, Participants or Beneficiaries for any act required of the Plan Administrator, the Trustee, the Custodian, or any other service provider to the Plan (unless the Employer also serves in such capacities).

(E) Indemnity of Certain Fiduciaries. The Employer will indemnify, defend and hold harmless the Plan Administrator from and against any and all loss, damages or liability to which the Plan Administrator may be subjected by reason of any act or omission (except willful misconduct or gross negligence) in its official capacities in the administration of this Plan or Trust or both, including attorneys’ fees and all other expenses reasonably incurred in the Plan Administrator’s defense, in case the Employer fails to provide such defense. The indemnification provisions of this Section 7.01(E) do not relieve the Plan Administrator from any liability the Plan Administrator may have under ERISA for breach of a fiduciary duty. The Plan Administrator and the Employer may execute a written agreement further delineating the indemnification agreement of this Section 7.01(E), provided the agreement does not violate ERISA or other Applicable Law. The indemnification provisions of this Section 7.01(E) do not extend to any Trustee, third party administrator, Custodian or other Plan service provider unless so provided in a written agreement executed by such persons and the Employer.

(F) Settlor Expenses. The Employer will pay all reasonable Plan expenses that the Plan Administrator under Section 7.04(C) determines are “settlor expenses” under ERISA.

     7.02 PLAN ADMINISTRATOR.

(A) Compensation and Expenses. The Plan Administrator (and any individuals serving as Plan Administrator) will serve without compensation for services as such (unless the Plan Administrator is not the Employer or an Employee), but the Employer or the Plan will pay all reasonable expenses of the Plan Administrator, in accordance with Section 7.04(C)(2).

(B) Resignation and Removal. If the Employer, under Section 1.41, appoints one or more persons to serve as Plan Administrator, such person(s) shall serve until they resign by written notice to the Employer or until the Employer removes them by written notice. In case of a vacancy in the position of Plan Administrator, the Employer will exercise any and all of the powers, authority, duties and discretion conferred upon the Plan Administrator pending the filling of the vacancy.

(C) General Powers and Duties. The Plan Administrator has the following general powers and duties which are in addition to those the Plan otherwise accords to the Plan Administrator:

     (1) Eligibility/benefit determination. To determine the rights of eligibility of an Employee to participate in the Plan, all factual questions that arise in the course of administering the Plan, the value of a Participant’s Account Balance (based on the value of the Trust assets, as determined by the Trustee, the Custodian or the Named Fiduciary) and the Vested percentage of each Participant’s Account Balance.

     (2) Rules/policies. To adopt rules of procedure and regulations or policies the Plan Administrator considers reasonable or necessary for the proper and efficient administration of the Plan, provided the rules are not inconsistent with the terms of the Plan, the Code, ERISA or other Applicable Law. The Plan Administrator may, but is not required to reduce such rules, regulations or policies to writing, unless otherwise required under Applicable Law. The Plan Administrator at any time may amend or terminate prospectively any Plan policy without the requirement of a formal Plan amendment. The Employer or Plan Administrator also may create and modify from time to time one or more administrative checklists which are not part of the Plan, but which are for the purpose of tracking certain plan operational features to generate written policies and plan forms, and to facilitate proper administration of the Plan.

     (3) Construction/enforcement. To construe and enforce the terms of the Plan and the rules, regulations and policies the Plan Administrator adopts, including discretion to interpret the basic plan document, the Adoption Agreement and any document related to the Plan’s operation.

     (4) Distribution/valuation. To direct the Trustee regarding the crediting and distribution of the Trust Fund, to establish additional Valuation Dates, and to direct the Trustee to conduct interim valuations on such Valuation Dates under Section 8.02(C)(4).

     (5) Claims. To review and render decisions regarding a claim for (or denial of a claim for) a benefit under the Plan.

     (6) Information to Employer. To furnish the Employer with information which the Employer may require for tax or other purposes.

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     (7) Service providers. To engage the service of agents whom the Plan Administrator may deem advisable to assist it with the performance of its duties.

     (8) Investment Manager. If the Plan Administrator is the Named Fiduciary (or the Named Fiduciary otherwise designates the Plan Administrator to do so), to engage the services of an Investment Manager or Managers (as defined in ERISA §3(38)), each of whom will have full power and authority to manage, acquire or dispose (or direct the Trustee with respect to acquisition or disposition) of any Plan asset under such Investment Manager’s control.

     (9) Funding. As the Code or ERISA may require, to establish and maintain a funding policy and a funding standard account and to make credits and charges to that account. The Plan Administrator will review, not less often than annually, all pertinent Employee information and Plan data in order to establish the funding policy of the Plan and to determine the appropriate methods of carrying out the Plan’s objectives. The Plan Administrator must communicate periodically, as it deems appropriate, to the Trustee and to any Plan Investment Manager the Plan’s short-term and long-term financial needs for the coordination of the Plan’s investment policy with Plan financial requirements.

     (10) Records. To maintain Plan records and records of the Plan Administrator’s activities, as necessary or appropriate for the proper administration of the Plan.

     (11) Tax returns and other filings. To file with DOL or IRS as may be required, the Plan’s informational tax return, and to make such other filings as the Plan Administrator deems necessary or appropriate.

     (12) Notices and disclosures. To give and to make to Participants and to other parties, all Plan related notices and disclosures required by Applicable Law.

     (13) Overpayment. To seek return from a Participant or Beneficiary of any distributed amount which exceeds the distributable Vested Account Balance (or exceeds the amount which otherwise should have been distributed) and to allocate any recovered overpayment in accordance with the Plan terms.

     (14) Catch-all. To make any other determinations and undertake any other actions the Plan Administrator in its discretion believes are necessary or appropriate for the administration of the Plan (except to the extent that the Employer provides express contrary direction) and to otherwise administer the Plan in accordance with the Plan terms and Applicable Law.

(D) 401(k) Plan Elective Deferrals. If the Plan is a 401(k) Plan, the Plan Administrator may adopt such policies regarding Elective Deferrals as it deems necessary or appropriate to administer the Plan. The Plan Administrator also will prescribe a Salary Reduction Agreement form for use by Participants. See Section 1.54.

(E) Limitations on Plan Administrator Responsibility.

     (1) Acts of others. Except as required under ERISA, the Plan Administrator has no responsibility or obligation under the Plan to Participants or Beneficiaries for any act required of the Employer, the Trustee, the Custodian or any other service provider to the Plan (unless the Plan Administrator also serves in such capacities).

     (2) Plan contributions. The Plan Administrator is not responsible for collecting any required Plan contribution or to determine the correctness or deductibility of any Employer Contribution.

     (3) Reliance on information. The Plan Administrator in administering the Plan is entitled to, but is not required to rely upon, information which a Participant, Beneficiary, Trustee, Custodian, the Employer, a Plan service provider or representatives thereof provide to the Plan Administrator.

     7.03 DIRECTION OF INVESTMENT.

(A) Employer Direction of Investment. The Employer has the right to direct the discretionary Trustee with respect to the investment and re-investment of assets comprising the Trust Fund only if and to the extent the discretionary Trustee consents in writing to permit such direction. The Employer will direct a nondiscretionary Trustee as to the Trust Fund investments in accordance with Article VIII unless an Investment Manager, the Participants or the Named Fiduciary are directing the nondiscretionary Trustee as to such investments.

(B) Participant Direction of Investment. The Plan Administrator may adopt a policy to permit Participants to direct the investment of one or more of their Plan Accounts, subject to the provisions of this Section 7.03(B). The Plan Administrator may impose reasonable and nondiscriminatory administrative conditions on the Participants’ ability to direct their Account investments. For purposes of this Section 7.03(B), a Participant includes a Beneficiary where the Beneficiary has succeeded to the Participant’s Account and where the Plan Administrator’s policy affords the Beneficiary self-direction rights. However, under the Plan Administrator’s policy a Beneficiary may or may not have the same direction of investment rights as a Participant.

     (1) Trustee authorization and procedures. Under any Plan Administrator policy permitting Participant direction of investment, the Trustee must consent in writing to permit such direction. If the Employer, in its Adoption Agreement, designates the Trustee as a nondiscretionary Trustee, the Employer may direct the Trustee to consent to Participant direction of investment. If the Trustee consents to Participant direction of investment, the Trustee only will accept direction from each Participant (or from the Participant’s properly appointed independent investment adviser, financial planner or legal representative) on a written direction of investment form the Plan Administrator or Trustee provides or otherwise approves for this purpose. The Trustee may establish written procedures relating to Participant direction of investment under this Section 7.03(B) as are not inconsistent with the Plan Administrator’s policy regarding Participant direction, including procedures or conditions for electronic transfers or for changes in investments by Participants or by their properly appointed independent investment advisers, financial planners or legal representatives. The Plan Administrator will maintain, or direct the Trustee to maintain, an appropriate Account designated in the name of the Plan or Trust and for the benefit

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of the Participant, to the extent a Participant’s Account is subject to Participant self-direction. Such an Account is a Participant—Directed Account under Section 7.04(A)(2)(b).

     (2) ERISA §404(c). No Plan fiduciary (including the Employer and Trustee) is liable for any loss or for any breach resulting from a Participant’s or Beneficiary’s direction of the investment of any part of his/her directed Account to the extent the Participant’s or Beneficiary’s exercise of his/her right to direct the investment of his/her Account satisfies the requirements of ERISA §404(c).

     (3) Participant loans. As part of any loan policy the Plan Administrator establishes under Section 7.06, the Plan Administrator under Section 7.06(E) may treat a Plan loan made to a Participant as a Participant direction of investment, even if the Plan Administrator has not adopted a policy permitting Participants to direct their own Account investments.

     (4) Investment services programs. The Plan Administrator, as part of its Participant direction policy under this Section 7.03(B), may permit Participants to appoint an Investment Manager or Managers, which may be the Trustee, Custodian or an affiliate thereof, to render investment allocation services, investment advice or management services (collectively, an “investment services program”) to the appointing Participants, provided that any such appointment and the operation of any such investment services program are not in violation of Applicable Law.

(C) Direction Consistent with Plan and ERISA. To constitute a proper direction, any direction of investment given to the Trustee or Custodian under the Plan must be in accordance with the Plan terms and must not be contrary to Applicable Law.

     7.04 ACCOUNT ADMINISTRATION, VALUATION AND EXPENSES.

(A) Individual Accounts. The Plan Administrator, as necessary for the proper administration of the Plan, will maintain, or direct the Trustee to maintain, a separate Account, or multiple Accounts, in the name of each Participant to reflect the Participant’s Account Balance under the Plan. The Plan Administrator will make its allocations of Employer Contributions and of Earnings, or will request the Trustee to make such allocations, to the Accounts of the Participants as necessary to maintain proper Plan records and in accordance with the applicable: (i) Contribution Types under Section 7.04(A)(1); (ii) allocation conditions under Section 3.06; (iii) investment account types under Section 7.04(A)(2); and (iv) Earnings allocation methods under Section 7.04(B).

     (1) By Contribution Type. The Plan Administrator, will establish Plan Accounts for each Participant to reflect his/her Accounts attributable to the following Contribution Types and the Earnings attributable thereto: Pre-Tax Deferrals, Roth Deferrals, Regular Matching Contributions, Nonelective and other Employer Contributions, QNECs, QMACs, Safe Harbor Contributions, Additional Matching Contributions, Rollover Contributions (including Roth versus pre-tax amounts), Transfers, SIMPLE Contributions, Prevailing Wage Contributions, Employee Contributions, DECs and Designated IRA Contributions.

     (2) By investment account type. The Plan Administrator will establish separate Accounts for each Participant to reflect his/her investment account types as described below:

          (a) Pooled Accounts. A Pooled Account is an Account which for investment purposes is not a Segregated Account or a Participant-Directed Account. If any or all Plan investment Accounts are Pooled Accounts, each Participant’s Account has an undivided interest in the assets comprising the Pooled Account. In a Pooled Account, the value of each Participant’s Account Balance consists of that proportion of the net worth (at fair market value) of the Trust Fund which the net credit balance in his/her Account (exclusive of the cash value of incidental benefit insurance contracts) bears to the total net credit balance in the Accounts (exclusive of the cash value of the incidental benefit insurance contracts) of all Participants plus the cash surrender value of any incidental benefit insurance contracts held by the Trustee on the Participant’s life.

          (b) Participant-Directed Accounts. A Participant-Directed Account is an Account that the Plan Administrator establishes and maintains or directs the Trustee to establish and maintain for a Participant to invest in one or more assets that are not pooled assets held by the Trust, such as assets in a brokerage account or other property in which other Participants do not have any interest. As the Plan Administrator determines, a Participant-Directed Account may provide for a limited number and type of investment options or funds, or may be open-ended and subject only to any limitations imposed by ERISA or other Applicable Law. A Participant may have one or more Participant-Directed Accounts in addition to Pooled or Segregated Accounts. A Participant-Directed Account is credited and charged with the Earnings under Section 7.04(B)(4)(e). As of each Valuation Date, the Plan Administrator must reduce a Participant-Directed Account for any forfeiture arising from Section 5.07 after the Plan Administrator has made all other allocations, changes or adjustments to the Account for the valuation period.

          (c) Segregated Accounts. A Segregated Account is an Account the Plan Administrator establishes and maintains or directs the Trustee to establish and maintain for a Participant: (i) as the result of a cash-out repayment under Section 5.04; (ii) to facilitate installment payments under Section 6.03; (iii) to hold a QDRO amount under Section 6.05; (iv) to prevent a distortion of Plan Earnings allocations; or (v) for such other purposes as the Plan Administrator may direct. A Segregated Account receives all income it earns and bears all expense or loss it incurs. The Trustee will invest the assets of a Segregated Account consistent with the purpose for which the Plan Administrator or Trustee established the Account. As of each Valuation Date, the Plan Administrator must reduce a Segregated Account for any forfeiture arising under Section 5.07 after the Plan Administrator has made all other allocations, changes or adjustments to the Account for the Valuation Period.

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     (3) Value of Account/distributions. The value of a Participant’s Account is equal to the sum of all contributions, Earnings and other additions credited to the Account, less all distributions (including distributions to Beneficiaries and to alternate payees and also including disbursement of Plan loan proceeds), expenses and other charges against the Account as of a Valuation Date or other relevant date. For purposes of a distribution under the Plan, the value of a Participant’s Account Balance is its value as of the Valuation Date immediately preceding the date of the distribution. If any or all Plan investment Accounts are Participant-Directed Accounts, the directing Participant’s Account Balance consists of the assets held within the Participant-Directed Account and the value of the Account is the fair market value of such assets.

     (4) Account statements. As soon as practicable after the Accounting Date of each Plan Year and any other date that ERISA requires, the Plan Administrator will deliver within any time prescribed by ERISA, to each Participant (and to each Beneficiary) a statement reflecting the amount of his/her Account Balance in the Trust as of the statement date or most recent Valuation Date. The statement will also include any and all other information as of that date that ERISA may require. No Participant, except the Plan Administrator/Participant or Trustee/Participant, has the right to inspect the records reflecting the Account of any other Participant.

(B) Allocation of Earnings. This Section 7.04(B) applies solely to the allocation of Earnings of the Trust Fund. The Plan Administrator will allocate Employer Contributions and Participant forfeitures, if any, in accordance with Article III.

     (1) Allocate as of Valuation Date. As of each Valuation Date, the Plan Administrator must adjust Accounts to reflect Earnings for the Valuation Period since the last Valuation Date.

     (2) Definition of Valuation Date. A Valuation Date under this Plan is each: (a) Accounting Date; (b) Valuation Date the Employer elects in its Adoption Agreement; or (c) Valuation Date the Plan Administrator establishes under Section 7.02(C)(4). The Employer in its Adoption Agreement or the Plan Administrator may elect alternative Valuation Dates for the different Contribution Types which the Plan Administrator maintains under the Plan.

     (3) Definition of Valuation Period. The Valuation Period is the period beginning on the day after the last Valuation Date and ending on the current Valuation Date.

     (4) Allocation methods. The Plan Administrator will allocate Earnings to the Participant Accounts in accordance with the daily valuation method, balance forward method, balance forward with adjustment method, weighted average method, Participant-directed Account method, or other method the Employer elects under its Adoption Agreement. The Employer in its Adoption Agreement may elect alternative methods under which the Plan Administrator will allocate the Earnings to the Accounts reflecting different Contribution Types or investment Account types which the Plan Administrator maintains under the Plan. The Plan Administrator first will adjust the Participant Accounts, as those Accounts stood at the beginning of the current Valuation Period, by reducing the Accounts for any forfeitures arising under the Plan, for amounts charged during the Valuation Period to the Accounts in accordance with Section 7.04(C)(2)(b) (relating to distributions and to loan disbursement payments) and Section 9.01 (relating to insurance premiums), and for the cash value of incidental benefit insurance contracts. The Plan Administrator then, subject to the restoration allocation requirements of the Plan, will allocate Earnings under the applicable valuation method.

          (a) Daily valuation method. If the Employer in its Adoption Agreement elects to apply the daily valuation method, the Plan Administrator will allocate Earnings on each day of the Plan Year for which Plan assets are valued on an established market and the Trustee is conducting business.

          (b) Balance forward method. If the Employer in its Adoption Agreement elects to apply the balance forward method, the Plan Administrator will allocate Earnings pro rata to the adjusted Participant Accounts, since the last Valuation Date.

          (c) Balance forward with adjustment method. If the Employer in its Adoption Agreement elects to apply the balance forward with adjustment method, the Plan Administrator will allocate pursuant to the balance forward method, except it will treat as part of the relevant Account at the beginning of the Valuation Period the percentage of the contributions made as the Employer elects in its Adoption Agreement, during the Valuation Period the Employer elects in its Adoption Agreement.

          (d) Weighted average method. If the Employer in its Adoption Agreement elects to apply a weighted average allocation method, the Plan Administrator will allocate pursuant to the balance forward method, except it will treat a weighted portion of the applicable contributions as if includible in the Participant’s Account as of the beginning of the Valuation Period. The weighted portion is a fraction, the numerator of which is the number of months in the Valuation Period, excluding each month in the Valuation Period which begins prior to the contribution date of the applicable contributions, and the denominator of which is the number of months in the Valuation Period. The Employer in its Adoption Agreement may elect to substitute a weighting period other than months for purposes of this weighted average allocation.

          (e) Participant-Directed Account method. The Employer in its Adoption Agreement must elect to apply the Participant-Directed Account method to any Participant-Directed Account under the Plan. See Sections 7.03(B) and 7.04(A)(2)(b). Under the Participant-Directed Account method: (i) each Participant-directed Account is credited and charged with the Earnings such Account generates; (ii) the Employer’s election, if any, in its Adoption Agreement of another method for the allocation of Earnings will not apply to any Participant-Directed Account; and (iii) the Participant-Directed Account will be valued at least annually.

     (5) Special Earnings allocation rules.

          (a) Code §415 Excess Amounts. An Excess Amount or suspense account described in Article IV does not share in the allocation of Earnings described in this Section 7.04(B).

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          (b) Contributions prior to accrual or precise determination. If the Employer in its Adoption Agreement elects to impose one or more allocation conditions under Section 3.06 and the Employer contributes to the Plan amounts which at the time of the contribution have not accrued under the Plan terms (“pre-accrual contributions”), the Trustee may hold the pre-accrual contributions in the Trust and may invest such contributions as the Trustee determines, pending accrual and allocation to Participant Accounts. When the Plan Administrator allocates to Participants who have satisfied the Plan’s allocation conditions the Employer’s pre-accrual contributions, the Plan Administrator also will allocate the Earnings thereon pro rata in relation to each Participant’s share of the pre-accrual contribution. The Plan Administrator also may elect to apply this Section 7.04(B)(5)(b) to any other situation in which the Plan Administrator cannot determine precisely the amount a Participant’s allocation as of the date that the Employer makes an Employer Contribution (excluding Elective Deferrals) to the Trust. The Employer in Appendix B may elect an alternative nondiscriminatory method to allocate the Earnings attributable to contributions described in this Section 7.04(B)(5)(b).

          (c) Forfeitures prior to accrual. The Plan Administrator may maintain, or may direct the Trustee to maintain, a separate temporary forfeiture Account in the name of the Plan to account for Participant forfeitures which occur during the Plan Year. The Trustee will direct the investment of any separate temporary forfeiture Account. As of each Accounting Date, or interim Valuation Date, if applicable, the Plan Administrator will allocate the Earnings from the temporary forfeiture Account, if any, to the Accounts of the Participants in accordance with the provisions of Section 7.04(B)(4) or will allocate such Earnings in the same manner as Earnings on pre-accrual contributions under Section 7.04(B)(5)(b).

          (d) Accounting after Forfeiture Break in Service. If a Participant re-enters the Plan subsequent to his/her having a Forfeiture Break in Service (as defined in Section 5.06(B)), the Plan Administrator, or the Trustee, must maintain a separate Account for the Participant’s pre-Forfeiture Break in Service Account Balance and a separate Account for his post-Forfeiture Break in Service Account Balance, unless the Participant’s entire Account Balance under the Plan is 100% Vested.

          (e) Coordination of allocation and valuation elections. If the Plan is a 401(k) Plan that provides for Elective Deferrals, if the Plan permits Employee Contributions, or if the Plan allocates Nonelective or Matching Contributions as of any date other than the last day of the Plan Year, the Employer in its Adoption Agreement must elect the method the Plan Administrator will apply to allocate Earnings to such contributions made during the Plan Year and must elect any alternative Valuation Dates for the different Account types which the Plan Administrator maintains under the Plan.

(C) Plan Expenses. The Plan Administrator consistent with ERISA and Applicable Law must determine whether a particular Plan expense is a settlor expense which the Employer must pay.

     (1) Employer election as to non-settlor expenses. The Employer will direct the Plan Administrator as to whether the Employer will pay any or all non-settlor reasonable Plan expenses or whether the Plan must bear the expense.

     (2) Allocation of Plan expense. As to any and all non-settlor reasonable Plan expenses, including Trustee fees, which the Employer determines that the Plan will pay, the Plan Administrator has discretion: (i) to determine which of such expenses will charged to the Plan as a whole and the method of allocating such Plan expenses under Section 7.04(C)(2)(a); (ii) to determine which of such expenses the Plan will charge to an individual Participant’s Account under Section 7.04(C)(2)(b); and (iii) to adopt an expense policy regarding the foregoing. The Plan Administrator must exercise its discretion under this Section 7.04(C)(2) in a reasonable, uniform and nondiscriminatory manner. The Plan Administrator will direct the Trustee to pay from the Trust and to charge to the overall Plan or to particular Participant Accounts the expenses under this Section 7.04(C)(2) in accordance with the Plan Administrator’s election of expense charging method or policy.

          (a) Charge to overall Plan (pro rata or per capita). If the Plan Administrator charges a Plan expense to the Accounts of all Participants, the Plan Administrator may allocate the Plan expense either pro rata in relation to the total balance in each Account on the date the expense is allocated (using the balance determined as of the most recent Valuation Date) or per capita (an equal amount) to each Participant’s Account.

          (b) Charge to individual Participant Accounts. The Plan Administrator, except as prohibited by Applicable Law, may charge a Participant’s Account for any reasonable Plan expenses directly related to that Account, including, but not limited to the following categories of fees or expenses: distribution, loan, acceptance of rollover, QDRO, “lost Participant” search, account maintenance, brokerage accounts, investment management and benefit calculations. The Plan Administrator may charge a Participant’s Account for the reasonable expenses incurred in connection with the maintenance of or a distribution from that Account even if the charging of such expenses would result in the elimination of the Participant’s Account or in the Participant’s not receiving an actual distribution. However, if the actual Account expenses exceed the Participant’s Account Balance, the Plan Administrator will not charge the Participant outside of the Plan for such excess expenses.

          (c) Participant’s direct payment of investment expenses. The Plan Administrator may permit Participants to pay directly to the service provider, outside the Plan, Plan expenses such as investment management fees, provided such expenses: (i) would be properly payable either by the Employer or the Plan and are not “settlor” expenses payable exclusively by the Employer; (ii) are not paid by the Employer or by the Plan; and (iii) are not intrinsic to the value of the Plan assets as described in Rev. Rul. 86-142 or in any successor ruling. This Section 7.04(C)(2)(c) does not permit a Participant to reimburse the Plan for expenses the Plan previously has paid. To the extent a Participant does not pay an expense the Participant may pay according to this Section 7.04(C)(2)(c), the Plan Administrator will charge the expense

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under Sections 7.04(C)(2)(a) or 7.04(C)(2)(b) in accordance with the Plan Administrator’s expense policy.

          (d) Charges to former Employee-Participants. The Plan Administrator may charge reasonable Plan expenses to the Accounts of former Employee- Participants, even if the Plan Administrator does not charge Plan expenses to the Accounts of current Employee-Participants. The Plan Administrator may charge the Accounts of former Employee-Participants by applying one of the Section 7.04(C)(2)(a) or (b) methods.

          (e) ERISA compliance. This Section 7.04(C) does not authorize the Plan to charge a Participant for information that ERISA requires the Plan to furnish free of charge upon the Participant’s request. In addition, the Plan Administrator as ERISA or other Applicable Law may require, must disclose the nature of any Plan expenses and the manner of charging of any Plan expenses to the Plan or to particular Participant Accounts and must apply its expense policy in a manner which is consistent with ERISA and other Applicable Law.

     7.05 PARTICIPANT ADMINISTRATIVE PROVISIONS.

(A) Beneficiary Designation. A Participant from time to time may designate, in writing, any person(s) (including a trust or other entity), contingently or successively, to whom the Trustee will pay all or any portion of the Participant’s Vested Account Balance (including any life insurance proceeds payable to the Participant’s Account) in the event of death. A Participant under Section 6.03(B)(1) also may designate the method of distribution of his/her Account to the Beneficiary. The Plan Administrator will prescribe the form for the Participant’s written designation of Beneficiary and, upon the Participant’s proper completion and filing of the form with the Plan Administrator the form effectively revokes all designations filed prior to that date by the same Participant. This Section 7.05(A) also applies to the interest of a deceased Beneficiary or a deceased alternate payee where the Beneficiary or alternate payee has designated a Beneficiary.

     (1) Automatic revocation of spousal designation. A divorce decree, or a decree of legal separation, revokes the Participant’s prior designation, if any, of his/her spouse or former spouse as his/her Beneficiary under the Plan unless: (a) a QDRO provides otherwise; or (b) the Employer in Appendix B elects otherwise. This Section 7.05(A)(1) applies solely to a Participant whose divorce or legal separation becomes effective on or after the date the Employer executes this Plan unless: (i) the Plan is a Restated Plan and the prior Plan contained a provision to the same effect; or (ii) regardless of the application of (i), the Employer in Appendix A provides for a special Effective Date for this Section 7.05(A)(1).

     (2) Coordination with QJSA/QPSA requirements. If Section 6.04 applies to the Participant, this Section 7.05 does not impose any special spousal consent requirements on the Participant’s Beneficiary designation unless the Participant waives the QJSA or QPSA benefit. If the Participant waives the QJSA or QPSA benefit without spousal consent to the Participant’s Beneficiary designation: (a) any waiver of the QJSA or of the QPSA is not valid; and (b) if the Participant dies prior to his/her Annuity Starting Date, the Participant’s Beneficiary designation will apply only to the portion of the death benefit which is not payable as a QPSA. Regarding clause (b), if the Participant’s surviving spouse is a primary Beneficiary under the Participant’s Beneficiary designation, the Trustee will satisfy the spouse’s interest in the Participant’s death benefit first from the portion which is payable as a QPSA.

     (3) Profit Sharing Plan exception. If the Plan is a Profit Sharing Plan which the Employer under Section 6.04(G) has elected in its Adoption Agreement to exempt all Exempt Participants from the QJSA and QPSA requirements of Section 6.04, the Beneficiary designation of a married Exempt Participant, as described in Section 6.04(G), is not valid unless the Participant’s spouse consents (in a manner described in Section 6.04(A)(7)) to the Beneficiary designation. The spousal consent requirement in this Section 7.05(A)(3) does not apply if the Participant’s spouse is the Participant’s sole primary Beneficiary. The Employer in its Adoption Agreement will elect whether to apply the “one-year marriage rule,” If the Employer elects to apply the one-year marriage rule, the spousal consent requirement of this Section 7.05(A)(3) does not apply unless the Exempt Participant and his/her spouse were married throughout the one year period ending on the date of the Participant’s death. If the Employer elects to apply the one-year marriage rule under this Section 7.05(A)(3), but the Participant is not an Exempt Participant (such that the QJSA and QPSA requirements apply to the Participant), the one-year marriage rule under Section 6.04(B) applies to the QPSA.

     (4) Limitation on frequency of Designated Beneficiary changes. A Participant may change his/her Designated Beneficiary in accordance with this Section 7.05(A) as often as the Participant wishes, unless the Employer in Appendix B elects to impose a minimum time interval between changes, but with an exception for certain major life events, such as death of a Beneficiary, divorce and other such events as the Plan Administrator reasonably may determine.

     (5) Definition of spouse. The Employer in Appendix B may define the term “spouse” for all Plan purposes provided such definition is consistent with Applicable Law. In the absence of such an Appendix B definition, the Plan Administrator will interpret and apply the term “spouse” in a manner which is consistent with Applicable Law.

(B) Default Beneficiary. If: (i) a Participant fails to name a Beneficiary in accordance with Section 7.05(A); or (ii) the Beneficiary (and all contingent or successive Beneficiaries) whom the Participant designates predecease the Participant, are invalid for any reason, or disclaim the Participant’s Vested Account Balance and the Plan Administrator has accepted the disclaimers as valid under Applicable Law, then the Trustee (subject to any contrary provision in Appendix B under Section 7.05(C)) will distribute the Participant’s Vested Account Balance in accordance with Section 6.03 in the following order of priority to:

     (1) Spouse. The Participant’s surviving spouse (without regard to the one-year marriage rule of Sections 6.04(B) and 7.05(A)(3)); and if no surviving spouse to

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     (2) Descendants. The Participant’s children (including adopted children), in equal shares by right of representation (one share for each surviving child and one share for each child who predeceases the Participant with living descendents); and if none to

     (3) Parents. The Participant’s surviving parents, in equal shares; and if none to

     (4) Estate. The Participant’s estate.

(C) Administration of Default Provision. The Employer in Appendix B may specify a different list or ordering of the list of default beneficiaries than under Section 7.05(B); provided however, that if the Plan is a Profit Sharing Plan, and the Plan includes Exempt Participants, as to such Exempt Participants, the Employer may not specify a different default Beneficiary list or order unless the Participant’s surviving spouse will be the sole primary Beneficiary. The Plan Administrator will direct the Trustee as to the distribution method and to whom the Trustee will make the distribution under Section 7.05(B).

(D) Death of Beneficiary. If the Beneficiary survives the Participant, but dies prior to distribution of the Participant’s entire Vested Account Balance, the Trustee will distribute the remaining Vested Account Balance in the same manner as described in Section 7.05(B) and (C) (applied as though the Beneficiary were the Participant) unless: (1) the Participant’s Beneficiary designation provides otherwise; or (2) the Beneficiary has properly designated a beneficiary. A Beneficiary only may designate a beneficiary for the Participant’s Account Balance remaining at the Beneficiary’s death if the Participant has not previously designated a successive contingent beneficiary and the Beneficiary’s designation otherwise complies with the Plan terms.

(E) Simultaneous Death of Participant and Beneficiary. If a Participant and his/her Beneficiary should die simultaneously, or under circumstances that render it difficult or impossible to determine who predeceased the other, then unless the Participant’s Beneficiary designation otherwise specifies, the Plan Administrator will presume conclusively that the Beneficiary predeceased the Participant.

(F) Incapacitated Participant or Beneficiary. If, in the opinion of the Plan Administrator, a Participant or Beneficiary entitled to a Plan distribution is not able to care for his/her affairs because of a mental condition, a physical condition, or by reason of age, at the direction of the Plan Administrator, the Trustee will make the distribution to the Participant’s or Beneficiary’s guardian, conservator, trustee, custodian (including under a Uniform Transfers or Gifts to Minors Act) or to his/her attorney-in-fact or to other legal representative, upon furnishing evidence of such status satisfactory to the Plan Administrator and to the Trustee. The Plan Administrator and the Trustee do not have any liability with respect to payments so made and neither the Plan Administrator nor the Trustee has any duty to make inquiry as to the competence of any person entitled to receive payments under the Plan.

(G) Assignment or Alienation. Except as provided in Code §414(p) relating to QDROs (or a domestic relations order entered into before January 1, 1985) and in Code §401(a)(13) relating to certain voluntary, revocable assignments, judgments and settlements, neither a Participant nor a Beneficiary may anticipate, assign or alienate (either at law or in equity) any benefit provided under the Plan, and the Trustee will not recognize any such anticipation, assignment or alienation. Except as provided by Code §401(a)(13) or other Applicable Law, a benefit under the Plan is not subject to attachment, garnishment, levy, execution or other legal or equitable process.

(H) Information Available. Any Participant or Beneficiary without charge may examine the Plan description, copy of the latest annual report, any bargaining agreement, this Plan and Trust, and any contract or any other instrument which relates to the establishment or administration of the Plan or Trust. The Plan Administrator will maintain all of the items listed in this Section 7.05(H) in its office, or in such other place or places as it may designate from time to time in order to comply with ERISA, for examination during reasonable business hours. Upon the written request of a Participant or a Beneficiary, the Plan Administrator must furnish the Participant or Beneficiary with a copy of any item listed in this Section 7.05(H). The Plan Administrator may impose a reasonable copying charge upon the requesting person.

(I) Claims Procedure for Denial of Benefits. A Participant or a Beneficiary may file with the Plan Administrator a written claim for benefits, if the Participant or the Beneficiary disputes the Plan Administrator’s determination regarding the Participant’s or Beneficiary’s Plan benefit. However, the Plan will distribute only such Plan benefits to Participants or Beneficiaries as the Plan Administrator in its discretion determines a Participant or Beneficiary is entitled to receive. The Plan Administrator will maintain a separate written document as part of (or which accompanies) the Plan’s summary plan description explaining the Plan’s claims procedure. This Section 7.05(I) specifically incorporates the written claims procedure as from time to time published by the Plan Administrator as a part of the Plan. If the Plan Administrator pursuant to the Plan’s written claims procedure makes a final written determination denying a Participant’s or Beneficiary’s benefit claim, the Participant or Beneficiary to preserve the claim must file an action with respect to the denied claim not later than 180 days following the date of the Plan Administrator’s final determination.

(J) Inability to Determine Beneficiary. In the event that the Plan Administrator is unable to determine the identity of a Participant’s Beneficiary under circumstances of competing claims or otherwise, the Plan Administrator may file an interpleader action seeking an order of the court as to the determination of the Beneficiary. The Plan Administrator, the Trustee and other Plan fiduciaries may act in reliance upon any proper order issued under this Section 7.05(J) in maintaining, distributing or otherwise disposing of a Participant’s Account under the Plan terms, to any Beneficiary specified in the court’s order.

     7.06 PLAN LOANS.

(A) Loan Policy. The Plan Administrator, at any time and in its sole discretion, may establish, amend or terminate a policy which the Trustee must observe in making Plan loans, if any, to Participants and to Beneficiaries. If the Plan Administrator adopts a loan policy, the loan policy must be nondiscriminatory and must be in writing. The policy must

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include: (1) the identity of the person or positions authorized to administer the Participant loan program; (2) the procedure for applying for a loan; (3) the criteria for approving or denying a loan; (4) the limitations, if any, on the types and amounts of loans available; (5) the procedure for determining a reasonable rate of interest; (6) the types of collateral which may secure the loan; and (7) the events constituting default and the steps the Plan will take to preserve Plan assets in the event of default. A loan policy the Plan Administrator adopts under this Section 7.06(A) is part of the Plan, except that the Plan Administrator may amend or terminate the policy without regard to Section 11.02.

(B) Requirements for Plan Loans. The Trustee, as directed by the Plan Administrator will make a Plan loan to a Participant or to a Beneficiary in accordance with the loan policy, under Section 7.06(A), provided: (1) loans are available to all Participants and Beneficiaries on a reasonably equivalent basis and are not available in a greater amount for HCEs than for NHCEs; (2) any loan is adequately secured and bears a reasonable rate of interest; (3) the loan provides for repayment within a specified time (except that the loan policy may suspend loan payments pursuant to Code §414(u)(4) or otherwise in accordance with Applicable Law); (4) the default provisions of the note permit offset of the Participant’s Vested Account Balance only at the time when the Participant has a distributable event under the Plan, but without regard to whether the Participant consents to distribution as otherwise may be required under Section 6.01(A)(2); (5) the amount of the loan does not exceed (at the time the Plan extends the loan) the present value of the Participant’s Vested Account Balance; and (6) the loan otherwise conforms to the exemption provided by Code §4975(d)(1).

(C) Default as Distributable Event. The loan policy may provide a Participant’s loan default is a distributable event with respect to the defaulted amount, irrespective of whether the Participant otherwise has incurred a distributable event at the time of default, except as to Restricted 401(k) Accounts or Restricted Pension Accounts under Section 6.01(C)(4) which the Participant used to secure his/her loan and which are not then distributable at the time of default. See Section 6.06.

(D) QJSA/QPSA Requirements. If the QJSA/QPSA requirements of Section 6.04 apply to the Participant, the Participant may not pledge any portion of his/her Account Balance that is subject to such requirements as security for a loan unless, within the 90 day period ending on the date the pledge becomes effective, the Participant’s spouse, if any, consents (in a manner described in Section 6.04 other than the requirement relating to the consent of a subsequent spouse) to the security or, by separate consent, to an increase in the amount of security. See Section 6.04(D) regarding the affect of an outstanding loan pledge on the QJSA or QPSA benefit.

(E) Treatment of Loan as Participant-Directed. The Plan Administrator, to the extent provided in a written loan policy and consistent with Section 7.03(B)(3), will treat a Plan loan made to a Participant as a Participant-directed investment, even if the Plan otherwise does not permit a Participant to direct his/her Account investments. Where a loan is treated as a directed investment, the borrowing Participant’s Account alone shares in any interest paid on the loan, and the Account alone bears any expense or loss it incurs in connection with the loan. The Trustee may retain any principal or interest paid on the borrowing Participant’s loan in a Segregated Account (as described in Section 7.04(A)(2)(c)) on behalf of the borrowing Participant until the Trustee (or the Named Fiduciary, in the case of a nondiscretionary Trustee) deems it appropriate to add the loan payments to the Participant’s Account under the Plan.

     7.07 LOST PARTICIPANTS. If the Plan Administrator is unable to locate any Participant or Beneficiary whose Account becomes distributable under the Plan or if the Plan has made a distribution, but the Participant for any reason does not cash the distribution check (a “lost Participant”), the Plan Administrator will apply the provisions of this Section 7.07. The provisions of this Section 7.07 no longer apply if the Plan Administrator, prior to taking action to dispose of the lost Participant’s Account under Section 7.07(A)(2) or 7.07(B)(2), is able to complete the distribution.

(A) Ongoing Plan. The provisions of this Section 7.07(A) apply if the Plan is ongoing.

     (1) Attempt to Locate. The Plan Administrator must conduct a reasonable and diligent search for the Participant, using one or more of the search methods described in Section 7.07(C).

     (2) Failure to locate/disposition of Account. If a lost Participant remains unlocated after 6 months following the date the Plan Administrator first attempts to locate the lost Participant using any of the search methods described in Section 7.07(C), the Plan Administrator may forfeit the lost Participant’s Account, provided the Account is not subject to the Automatic Rollover rules of Section 6.08(D), unless forfeiture is contrary to Applicable Law. If the Plan Administrator forfeits the lost Participant’s Account, the forfeiture occurs at the end of the above-described 6-month period and the Plan Administrator will allocate the forfeiture in accordance with Section 3.07. The Plan Administrator under this Section 7.07(A)(2) will forfeit the entire Account of the lost Participant, including Elective Deferrals and Employee Contributions.

     (3) Subsequent restoration of forfeiture. If a lost Participant whose Account was forfeited thereafter at any time but before the Plan has been terminated makes a claim for his/her forfeited Account, the Plan Administrator will restore the forfeited Account to the same dollar amount as the amount forfeited, unadjusted for Earnings occurring subsequent to the forfeiture. The Plan Administrator will make the restoration in the Plan Year in which the lost Participant makes the claim, first from the amount, if any, of Participant forfeitures the Plan Administrator otherwise would allocate for the Plan Year, and then from the amount or additional amount the Employer contributes to the Plan for the Plan Year. The Employer in Appendix B may provide that the Plan Administrator will use Trust Fund Earnings for the Plan Year, if any, as a source of the restoration, or may modify the order of priority of the sources of restoration described in the previous sentence. The Plan Administrator will distribute the restored Account to the lost Participant not later than 60 days after the close of the Plan Year in which the Plan Administrator restores the forfeited Account.

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(B) Terminating plan. The provisions of this Section 7.07(B) apply if the Plan is terminating.

     (1) Attempt to locate. The Plan Administrator, to attempt to locate a lost Participant when the plan is terminating, must conduct a reasonable and diligent search for the Participant, using all four search methods described in clauses (1) through (4) of Section 7.07(C). In addition, the Plan Administrator may use a search method described in clause (5) of Section 7.07(C).

     (2) Failure to locate/disposition of Account. If a lost Participant remains unlocated after a reasonable period the Plan Administrator will distribute the Participant’s Account under Sections 7.07(B)(2)(a), (b) or (c) as applicable.

          (a) No Annuity Contract/no other Defined Contribution Plan. If the terminating Plan does not provide for an Annuity Contract as a method of distribution and the Employer does not maintain another Defined Contribution Plan, the Plan Administrator will distribute the lost Participant’s Account in an Automatic Rollover to an individual retirement plan under Section 6.08(D), unless the Plan Administrator determines it is impractical to complete an Automatic Rollover or is unable to locate an individual retirement plan provider willing to accept the rollover distribution. In such event, the Plan Administrator may: (i) distribute the Participant’s Account to an interest-bearing insured bank account the Plan Administrator establishes in the Participant’s name; or (ii) distribute the Participant’s Account to the unclaimed property fund of the state of the Participant’s last known address.

          (b) Plan provides Annuity Contract/no other Defined Contribution Plan. If the terminating Plan provides for an Annuity Contract as a method of distribution and the Employer does not maintain another Defined Contribution Plan, the Plan Administrator will purchase an Annuity Contract payable to the lost Participant for delivery to the Participant’s last known address reflected in the Plan’s records.

          (c) Employer maintains another Defined Contribution Plan. If the Employer maintains another Defined Contribution Plan, the Plan Administrator may, in lieu of taking the actions described in Sections 7.07(B)(2)(a) or (b), transfer the lost Participant’s Account to the other Defined Contribution Plan.

(C) Search methods. The search methods described in this Section 7.07 are: (1) provide a distribution notice to the lost Participant at the Participant’s last known address by certified or registered mail; (2) check with other employee benefit plans of the Employer that may have more up-to-date information regarding the Participant’s whereabouts; (3) identify and contact the Participant’s designated Beneficiary under Section 7.05; (4) use the IRS letter forwarding program under Rev. Proc. 94-22 or the Social Security Administration search program; and (5) use a commercial locator service, credit reporting agencies, the internet or other search method. Regarding search methods (2) and (3) above, if the Plan Administrator encounters privacy concerns, the Plan Administrator may request that the Employer or other plan fiduciary (under (2)), or the designated Beneficiary (under (3)), contact the Participant or forward a letter requesting that the Participant contact the Plan Administrator.

(D) Uniformity. The Plan Administrator will apply Section 7.07 in a reasonable, uniform and nondiscriminatory manner, but in determining a specific course of action as to a particular Account, reasonably may take into account differing circumstances such as the amount of a lost Participant’s Account, the expense in attempting to locate a lost Participant, the Plan Administrator’s ability to establish and the expense of establishing a rollover IRA, and other factors.

(E) Expenses of search. The Plan Administrator, in accordance with Section 7.04(C)(2)(b), may charge to the Account of a Participant the reasonable expenses incurred under this Section 7.07 and which are associated with the Participant’s Account, without regard to whether or when the Plan Administrator actually locates or makes a distribution to the Participant.

(F) Alternative Disposition. The Plan Administrator under Sections 7.07(A) or (B) operationally may dispose of a lost Participant’s Account in any reasonable manner which is not inconsistent with Applicable Law. The Plan Administrator may adopt a policy under this Section 7.07 as it deems reasonable or appropriate to administer the Accounts of lost Participants, provided that: (1) the terms of any such policy must be uniform and nondiscriminatory; (2) the Plan Administrator must administer the policy in a uniform and nondiscriminatory manner; and (3) the policy must not be inconsistent with Applicable Law. The Plan Administrator also may administer lost Participant Accounts consistent with Applicable Law which is contrary to any provision of Section 7.07, unless such Applicable Law requires a Plan amendment, in which case the Employer within any required deadline will amend the Plan to comply.

     7.08 PLAN CORRECTION. The Plan Administrator, in conjunction with the Employer and Trustee, as applicable, may undertake such correction of Plan failures as the Plan Administrator deems necessary, including correction to preserve tax qualification of the Plan under Code §401(a), to correct a fiduciary breach under ERISA or to unwind (correct) a prohibited transaction under the Code or ERISA. Without limiting the Plan Administrator’s authority under the prior sentence, the Plan Administrator, as it determines to be reasonable and appropriate, may undertake or assist the Employer in undertaking correction of Plan document, operational, demographic and employer eligibility failures under a method described in the Plan or under the Employee Plans Compliance Resolution System (“EPCRS”) or any successor program to EPCRS. The Plan Administrator, as it determines to be reasonable and appropriate, also may undertake or assist the Employer, the Trustee of other appropriate Plan fiduciary or Plan official in undertaking correction of a fiduciary breach, including correction under the Voluntary Fiduciary Correction Program (“VFCP”) or any successor program to VFCP. If the Plan is a 401(k) Plan, the Plan Administrator to correct an operational failure other than a failure of Code §415 or Code §402(g) limitations or a failure of the ADP or ACP tests (or to correct such listed failures beyond the time permitted under regulations), may require the Trustee to distribute from the Plan Elective Deferrals, including Earnings thereon, and the Plan Administrator will treat any Matching Contributions and

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Earnings thereon relating to the distributed Elective Deferrals, as an Associated Matching Contribution under Section 3.07(A)(1).

     7.09 PROTOTYPE/VOLUME SUBMITTER PLAN STATUS. If the Plan fails initially to qualify or to maintain qualification or if the Employer makes any amendment or modification to a provision of the Plan (other than a proper completion of an elective provision under the Adoption Agreement or an Appendix), the Employer no longer may participate under this Prototype or Volume Submitter Plan. The Employer also may not participate (or continue to participate) in this Prototype or Volume Submitter Plan if the Trustee or Custodian is not the Sponsor or Practitioner and does not have the written consent of the Sponsor or Practitioner required under Section 1.65, if any, to serve in the capacity of Trustee or Custodian. If the Employer is not entitled to participate under this Prototype or Volume Submitter Plan, the Plan is an individually-designed plan and the reliance procedures specified in the applicable Adoption Agreement no longer apply.

     7.10 PLAN COMMUNICATIONS, INTERPRETA-TION AND CONSTRUCTION.

(A) Plan Administrator’s Discretion/ Nondiscriminatory Administration. The Plan Administrator has total and complete discretion to interpret and construe the Plan and to determine all questions arising in the administration, interpretation and application of the Plan. Any determination the Plan Administrator makes under the Plan is final and binding upon any affected person. The Plan Administrator must exercise all of its Plan powers and discretion, and perform all of its duties in a uniform and nondiscriminatory manner.

(B) Written Communications. All Plan-related communications by any party must be in writing (which subject to Section 7.10(C) may include an electronic communication). All Participant or Beneficiary notices, designations, elections, consents or waivers must be made in a form the Plan Administrator (or, as applicable, the Trustee) specifies or otherwise approves. Any person entitled to notice under the Plan may waive the notice or shorten the notice period unless such actions are contrary to Applicable Law.

(C) Use of Electronic Media The Plan Administrator using any electronic medium may give or receive any Plan notice, communicate any Plan policy, conduct any written Plan communication, satisfy any Plan filing or other compliance requirement and conduct any other Plan transaction to the extent permissible under Applicable Law. A Participant or a Participant’s spouse, to the extent authorized by the Plan Administrator, may use any electronic medium to provide any Beneficiary designation, election, notice, consent or waiver under the Plan, to the extent permissible under Applicable Law. Any reference in this Plan to a “form,” a “notice,” an “election,” a “consent,” a “waiver,” a “designation,” a “policy” or to any other Plan-related communication includes an electronic version thereof as permitted under Applicable Law.

(D) Evidence. Anyone, including the Employer, required to give data, statements or other information relevant under the terms of the Plan (“evidence”) may do so by certificate, affidavit, document or other form which the person to act in reliance may consider pertinent, reliable and genuine, and to have been signed, made or presented by the proper party or parties. The Plan Administrator and the Trustee are protected fully in acting and relying upon any evidence described under the immediately preceding sentence.

(E) Plan Terms Binding. The Plan is binding upon the Employer, Trustee, Plan Administrator, Custodian (and all other service providers to the Plan), upon Participants, Beneficiaries and all other persons entitled to benefits, and upon the successors and assigns of the foregoing persons. See Section 8.11(C) as to the Trust where the Employer in its Adoption Agreement elects to use a separate trust agreement.

(F) Employment Not Guaranteed. Nothing contained in this Plan, or with respect to the establishment of the Trust, or any modification or any amendment to the Plan or Trust, or in the creation of any Account, or with respect to the payment of any benefit, gives any Employee, Participant or any Beneficiary any right to employment or to continued employment by the Employer, or any legal or equitable right against the Employer, the Trustee, the Plan Administrator or any employee or agent thereof, except as expressly provided by the Plan, the Trust, or Applicable Law.

(G) Word Usage. Words used in the masculine also apply to the feminine where applicable, and wherever the context of the Plan dictates, the plural includes the singular and the singular includes the plural. Titles of Plan and Adoption Agreement sections are for reference only.

(H) State Law. The law of the state of the Employer’s principal place of business will determine all questions arising with respect to the provisions of the Plan and Trust, except to the extent superseded by Applicable Law. The Employer in Appendix B and subject to Applicable Law, may elect to apply the law of another state or appropriate legal jurisdiction.

(I) Parties to Litigation. Except as otherwise provided by Applicable Law, a Participant or a Beneficiary is not a necessary party or required to receive notice of process in any court proceeding involving the Plan, the Trust Fund or any fiduciary of the Plan. Any final judgment (not subject to further appeal) entered in any such proceeding will be binding upon the Employer, the Plan Administrator, the Trustee, Custodian, Participants and Beneficiaries and upon their successors and assigns.

(J) Fiduciaries Not Insurers. The Trustee, the Plan Administrator and the Employer in no way guarantee the Trust Fund from loss or depreciation. The Employer does not guarantee the payment of any money which may be or becomes due to any person from the Trust Fund. The liability of the Employer, the Plan Administrator and the Trustee to make any distribution from the Trust Fund at any time and all times is limited to the then available assets of the Trust.

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(K) Construction/Severability. The Plan, the Adoption Agreement, the Trust and all other documents to which they refer, will be interpreted consistent with and to preserve tax qualification of the Plan under Code §401(a) and tax exemption of the Trust under Code §501(a) and also consistent with ERISA and other Applicable Law. To the extent permissible under Applicable Law, any provision which a court (or other entity with binding authority to interpret the Plan) determines to be inconsistent with such construction and interpretation, is deemed severed and is of no force or effect, and the remaining Plan terms will remain in full force and effect.

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ARTICLE VIII
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES

     8.01 ACCEPTANCE. By its signature on the Adoption Agreement, the Trustee or Custodian accepts the Trust created under the Plan and agrees to perform the obligations the Plan imposes on the Trustee or Custodian.

     8.02 INVESTMENT POWERS AND DUTIES.

(A) Discretionary Trustee Powers. If the Employer in its Adoption Agreement designates the Trustee as a discretionary Trustee, then the Trustee has full discretion and authority with regard to the investment of the Trust Fund, except as to a Plan asset: (i) properly under the control or the direction of an Investment Manager, ancillary trustee or other Plan fiduciary; (ii) subject to proper Employer or Named Fiduciary direction of investment; or (iii) subject to proper Participant direction of investment. The Trustee is authorized and empowered, but not by way of limitation, with the following powers:

     (1) General powers. To invest consistent with and subject to Applicable Law any part or all of the Trust Fund in any common or preferred stocks, open-end or closed-end mutual funds (including proprietary funds), put and call options traded on a national exchange, United States retirement plan bonds, corporate bonds, debentures, convertible debentures, commercial paper, U.S. Treasury bills, U.S. Treasury notes and other direct or indirect obligations of the United States Government or its agencies, improved or unimproved real estate situated in the United States, limited partnerships, insurance contracts of any type, mortgages, notes or other property of any kind, real or personal, to buy or sell options on common stock on a nationally recognized exchange with or without holding the underlying common stock, to open and to maintain margin accounts, to engage in short sales, to buy and sell commodities, commodity options and contracts for the future delivery of commodities, and to make any other investments the Trustee deems appropriate.

     (2) Cash/liquidity. To retain in cash so much of the Trust Fund as it may deem advisable to satisfy liquidity needs of the Plan and to deposit any cash held in the Trust Fund in a bank account at reasonable interest or without interest if the Trustee determines that such deposits are reasonable or necessary to facilitate a Plan transaction or for other purposes, but consistent with the Trustee’s duties under Section 8.02(C).

     (3) Trustee’s common/collective funds. To invest, if the Trustee is a bank or similar financial institution supervised by the United States or by a state, in any type of deposit of the Trustee (or of a bank related to the Trustee within the meaning of Code §414(b)) at a reasonable rate of interest or in a common trust fund, as described in Code §584, or in a collective investment fund, the provisions of which govern the investment of such assets and which the Plan incorporates by this reference, which the Trustee (or its affiliate, as defined in Code §1504) maintains exclusively for the collective investment of money contributed by the bank (or the affiliate) in its capacity as Trustee and which conforms to the rules of the Comptroller of the Currency.

     (4) Transact in real/personal property. To manage, sell, contract to sell, grant options to purchase, convey, exchange, transfer, abandon, improve, repair, insure, lease for any term even though commencing in the future or extending beyond the term of the Trust, and otherwise deal with all property, real or personal, in such manner, for such considerations and on such terms and conditions as the Trustee decides.

     (5) Borrowing. To borrow money, to assume indebtedness, extend mortgages and encumber by mortgage or pledge.

     (6) Claims. To compromise, contest, arbitrate or abandon claims and demands affecting the investment of Trust assets, in the Trustee’s discretion. However, nothing in this Section 8.02(A)(6) requires a Participant or Beneficiary to arbitrate any claim under the Plan.

     (7) Voting/tender/exercise. To have with respect to the Trust all of the rights of an individual owner, including the power to exercise any and all voting rights associated with Trust assets, to give proxies, to participate in any voting trusts, mergers, consolidations or liquidations, to tender shares and to exercise or sell stock subscriptions or conversion rights.

     (8) Mineral rights. To lease for oil, gas and other mineral purposes and to create mineral severances by grant or reservation; to pool or unitize interests in oil, gas and other minerals; and to enter into operating agreements and to execute division and transfer orders.

     (9) Title. To hold any securities or other property in the name of the Trustee or its nominee, with depositories or agent depositories or in another form as it may deem best, with or without disclosing the trust relationship. However, any securities held in a nominee or street name must be held on behalf of the Plan by: (a) a bank or trust company that is subject to supervision by the United States or a State or a nominee of such bank or trust company; (b) a broker or dealer registered under the Securities Exchange Act of 1934 or a nominee of such broker or dealer; or (c) a clearing agency as defined in Securities Exchange Act of 1934, Section 3(a)(23), or its nominee.

     (10) Hold pending dispute resolution. To retain any funds or property subject to any dispute without liability for the payment of interest, and to decline to make payment or delivery of the funds or property until a court of competent jurisdiction makes final adjudication.

     (11) Litigation. To begin, maintain or defend any litigation necessary in connection with the administration of the Plan, except the Trustee is not obliged nor required to do so unless indemnified to its satisfaction.

     (12) Agents/reliance. The Trustee may employ and pay from the Trust Fund reasonable compensation to agents, attorneys, accountants and other persons to advise the Trustee

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as in its opinion may be necessary. The Trustee reasonably may delegate to any agent, attorney, accountant or other person selected by it any non-Trustee power or duty vested in it by the Plan, and the Trustee may act reasonably or refrain from acting on the advice or opinion of any agent, attorney, accountant or other person so selected.

     (13) Employer stock/real property. The Trustee (or as applicable, Investment Manager, Employer or Participant) may invest in qualifying Employer securities or in qualifying Employer real property, as defined in and as limited by ERISA.

          (a) Profit Sharing Plans/401(k) Plans. If the Employer’s Plan is a Profit Sharing Plan or a 401(k) Plan, the aggregate investments in (acquisitions and holdings of)qualifying Employer securities and in qualifying Employer real property may comprise up to 100% of the value of Plan assets, unless the Employer in Appendix B elects to restrict such investments to 10% of the value of Plan assets determined immediately after the acquisition (or to some other percentage of value which is less than 100%). Notwithstanding the foregoing, except where permitted under ERISA §407(b)(2), if the Plan includes a 401(k) arrangement, a Participant’s Elective Deferral Account accumulated in Plan Years beginning after December 31, 1998, including earnings thereon, may not be invested more than 10% by value in qualifying employer securities and qualifying employer real property, unless such investments are directed by the Participant or the Participant’s Beneficiary.

          (b) Voting/distribution. If the Plan invests in qualifying Employer securities, the Plan Administrator may adopt a uniform and nondiscriminatory policy providing for the exercise of voting rights, distribution restrictions, repurchase, put, call or right of first refusal rules, or other rights and restrictions affecting the qualifying Employer securities. Any such policy may not be contrary to Applicable Law.

     (14) Orphaned plan. If the Trustee in accordance with Applicable Law determines that the Employer has abandoned the Plan, the Trustee (if qualified to so act) may appoint itself as a Qualified Termination Administrator (“QTA”) under Section 11.05(B) for purposes of terminating the Plan and distributing all Plan Accounts. As a QTA, the Trustee may undertake all acts authorized under Applicable Law to wind-up the Plan, including causing the Trust to pay from Trust assets to the QTA and to other service providers a reasonable fee for services rendered.

     (15) Catch-all. To perform any and all other acts which in the Trustee’s judgment are necessary or appropriate for the proper and advantageous management, investment and distribution of the Trust and which are not contrary to Applicable Law.

(B) Nondiscretionary (directed) Trustee/Custodian Powers. The Employer in its Adoption Agreement may designate the Trustee as a nondiscretionary Trustee. The Employer in its Adoption Agreement in addition to designating a discretionary or nondiscretionary Trustee, may appoint a Custodian to hold all or any portion of the Trust Assets. Except as otherwise provided herein: (i) a Custodian has all of the same powers and duties as a nondiscretionary Trustee; (ii) the nondiscretionary Trustee or Custodian has all of the same powers as a discretionary Trustee in Section 8.02(A) except that the nondiscretionary Trustee or Custodian only may exercise such powers pursuant to a proper written direction; and (iii) the nondiscretionary Trustee or Custodian has all the same duties as a discretionary Trustee under Section 8.02(C). A “proper written direction” means the written direction of a Plan fiduciary or of a Participant with authority over the Trust asset which is the subject of the direction and which is consistent with the Plan terms and Applicable Law.

     (1) Modification of powers/duties. The Employer and the nondiscretionary Trustee (or the Custodian) in a Nonstandardized Plan or Volume Submitter Adoption Agreement, on Appendix C may limit the powers or duties of the Custodian or the nondiscretionary Trustee to any combination of powers under Section 8.02(A) and to any combination of duties under Section 8.02(C) or otherwise may amend the Trust as described in Section 8.11.

     (2) Limited responsibility. If there is a Custodian or a nondiscretionary Trustee under the Plan, then the Employer, in adopting this Plan, acknowledges and agrees:

          (a) No discretion over Trust assets. The nondiscretionary Trustee or Custodian does not have any discretion as to the investment or the re-investment of the Trust Fund and the nondiscretionary Trustee or Custodian is acting solely as a directed fiduciary as to the assets comprising the Trust Fund.

          (b) No review or recommendations. The nondiscretionary Trustee or the Custodian does not have any duty to review or to make recommendations regarding investments made pursuant to a proper written direction, except in accordance with Applicable Law.

          (c) No action unless direction. The nondiscretionary Trustee or the Custodian must retain any investment obtained upon a proper written direction until receipt of another proper written direction to dispose of such investment, except as may be contrary to Applicable Law.

          (d) No liability for following orders. The nondiscretionary Trustee or the Custodian is not liable in any manner or for any reason for making, retaining or disposing of any investment pursuant to any proper written direction.

          (e) Indemnity. The Employer will indemnify, defend and hold the nondiscretionary Trustee or the Custodian harmless from any damages, costs or expenses, including reasonable attorneys’ fees, which the nondiscretionary Trustee or the Custodian may incur as a result of any claim asserted against the nondiscretionary Trustee, the Custodian or the Trust arising out of the nondiscretionary Trustee’s or Custodian’s full and timely compliance with any proper written direction.

     (3) Limitation of powers of certain Custodians. If a Custodian is a bank which, under its governing state law, does not possess trust powers, then Sections 8.02(A)(1), (3) as it relates to common trust funds or collective investment funds, Sections 8.02(A)(4), (5), (7) and (8), Section 8.09 and Article IX do not apply and the Custodian only has the power

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and the authority to exercise the remaining powers under Section 8.02(A) and to perform the duties under Section 8.02(C).

     (4) QTA. Notwithstanding any other provision of this Section 8.02(B), a nondiscretionary Trustee or a Custodian, in accordance with Applicable Law, may serve as a QTA under Section 8.02(A)(14) without regard to receipt of any proper written direction.

     (5) Trustee references. Except as the Plan or the context otherwise require, “Trustee” includes nondiscretionary Trustee and Custodian.

(C) Duties. The Trustee or Custodian has the following duties:

     (1) ERISA. If ERISA applies to the Plan and to the extent that ERISA so requires, to act: (a) solely in the interest of Participants and Beneficiaries for the exclusive purposes of providing benefits under the Plan and defraying the reasonable expenses of Plan administration; (b) with the care, skill, prudence and diligence under the circumstances then prevailing as would a prudent person acting in a like capacity and familiar with such matters; (c) by diversifying Trust investments so as to minimize the risk of large losses unless not prudent under the circumstances to do so; and (d) in accordance with the Plan to the extent that the Plan is consistent with ERISA.

     (2) Investment policy. To coordinate its investment policy with Plan financial needs as communicated to it by the Plan Administrator.

     (3) Trust accounting. To furnish to the Employer and to the Plan Administrator an annual (or more frequently as required by Applicable Law) statement of account showing the condition of the Trust Fund and all investments, receipts, disbursements and other transactions effected by the Trustee during the Plan Year covered by the statement and also stating the assets of the Trust held at the end of the Plan Year, which accounts are conclusive on all persons, including the Employer and the Plan Administrator, except as to any act or transaction concerning which the Employer or the Plan Administrator files with the Trustee written exceptions or objections within 90 days after the receipt of the accounts or for which ERISA authorizes a longer period within which to object. The Trustee also may agree with the Employer or Plan Administrator to provide the information described in this Section 8.02(C) more frequently than annually.

     (4) Trust valuation. If the Trustee is a discretionary Trustee, to value the Trust Fund as of each Accounting Date to determine the fair market value of each Participant’s Account Balance in the Trust. The Trustee also must value the Trust Fund on such other Valuation Dates as directed in writing by the Plan Administrator or as the Adoption Agreement or Applicable Law may require. If the Trustee is a nondiscretionary Trustee (or in the case of Trust assets held by a Custodian) the Named Fiduciary will value the assets and will provide the valuation to the Trustee (Custodian) unless the Trustee (Custodian) and the Named Fiduciary agree that the Trustee (Custodian) will conduct the valuation. The Trustee (Custodian) may reasonably rely on any valuation the Named Fiduciary conducts and provides.

     (5) Distributions. To credit and distribute the Trust Fund as the Plan Administrator directs. The Trustee is not obliged to inquire as to whether any payee or distributee is entitled to any payment or whether the distribution is proper or within the terms of the Plan, or as to the manner of making any payment or distribution. The Trustee is accountable only to the Plan Administrator for any payment or distribution made by it in good faith on the order or direction of the Plan Administrator. The Trustee must promptly notify the Plan Administrator of any unclaimed Plan payment or distribution and then dispose of the distribution in accordance with the Plan Administrator’s subsequent direction.

     (6) Fees/expenses. To pay from the Trust Fund all reasonable Plan fees and expenses, and to allocate the fees and expenses to Plan Accounts, both as the Plan Administrator directs under Section 7.04(C)(2). Any fee or expense that the Employer pays, directly or indirectly, is not an Employer contribution to the Plan, provided the fee or the expense relates to the ordinary and necessary administration of the Trust Fund.

     (7) Loans. To make loans to a Participant or to a Beneficiary in accordance with the Plan Administrator’s direction under Section 7.06.

     (8) Records/statements. To keep the Trustee’s Plan records open to the inspection of the Plan Administrator and the Employer at all reasonable times and to permit the review or audit of such records from time to time by any person or persons as the Employer or Plan Administrator may specify in writing. The Trustee must furnish the Plan Administrator with whatever information relating to the Trust Fund the Plan Administrator considers necessary to perform its duties as Plan Administrator.

     (9) Tax returns. To file all information and tax returns required of the Trustee under Applicable Law.

     (10) Incapacity. To follow the direction of the Plan Administrator with regard to distributions in the latter’s determination of any Participant or Beneficiary incapacity under Section 7.05(F). The Trustee also will provide any reasonable information and take any reasonable action that the Plan Administrator requests relating to a determination of incapacity or otherwise pertaining to the administration of the Account of any incapacitated person.

     (11) Bond. The Trustee must provide a bond for the faithful performance of its duties under the Trust to the extent required by Applicable Law.

(D) Limitations Applicable to all Trustees.

     (1) Receipt of contributions. The Trustee is accountable to the Employer for the Plan contributions made by the Employer, but the Trustee does not have any duty to ensure that the contributions received comply with the provisions of the Plan. Except as may be required by Applicable Law, the Trustee is not obliged to collect any contributions from the Employer, nor is the Trustee obliged to ensure that funds deposited with it are deposited according to the provisions of the Plan.

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     (2) Co-fiduciary liability. Each fiduciary under the Plan is responsible solely for his/her or its own acts or omissions. A fiduciary does not have any liability for another fiduciary’s breach of fiduciary responsibility with respect to the Plan and the Trust unless the fiduciary: (a) participates knowingly in or undertakes to conceal the breach; (b) has actual knowledge of the breach and fails to take reasonable remedial action to remedy the breach; or (c) through negligence in performing his/her or its own specific fiduciary responsibilities that give rise to fiduciary status, the fiduciary has enabled the other fiduciary to commit a breach of the latter’s fiduciary responsibility.

     (3) Limitation of Trustee liability.

          (a) Apportionment of duties. The Named Fiduciary, the Trustee(s) and any properly appointed Investment Manager may execute a written agreement as a part of this Plan delineating the duties, responsibilities and liabilities of the Investment Manager or Trustee(s) with respect to any part of the Trust Fund under the control of the Investment Manager or the Trustee(s).

          (b) If Investment Manager. The Trustee is not liable for the acts or omissions of any Investment Manager the Named Fiduciary may appoint, nor is the Trustee under any obligation to invest or otherwise to manage any asset of the Trust Fund which is subject to the management of a properly appointed Investment Manager.

          (c) If other appointed fiduciaries. The Trustee is not liable for the acts or omissions of any ancillary trustee or independent fiduciary properly appointed under Section 8.07. However, if a discretionary Trustee, pursuant to the delegation described in Section 8.07, appoints an ancillary trustee, the discretionary Trustee is responsible for the periodic review of the ancillary trustee’s actions and must exercise its delegated authority in accordance with the terms of the Plan and in a manner consistent with ERISA.

          (d) Indemnity. The Employer and any Trustee may execute a written agreement as a part of this Plan and which is not contrary to Applicable Law, delineating any indemnification agreement among the parties.

(E) Multiple Trustees.

     (1) Majority decisions. If more than two persons act as Trustee, a decision of the majority of such persons controls with respect to any decision regarding the administration or the investment of the Trust Fund or of any portion of the Trust Fund with respect to which such persons act as Trustee. If there is more than one Trustee, the Trustees jointly will manage and control the assets of the Trust Fund (or those Trust assets as to which they act as Trustee).

     (2) Allocation. Multiple Trustees may allocate among themselves specific responsibilities or obligations or may authorize one or more of them, either individually or in concert, to exercise any or all of the powers granted to the Trustee, or to perform any or all of the duties assigned to the Trustee under Article VIII.

     (3) Signature. The signature of only one Trustee is necessary to effect any transaction on behalf of the Trust (or as to those Trust assets as to which the signatory acts as Trustee).

     8.03 NAMED FIDUCIARY.

(A) Definition of Named Fiduciary. See Section 1.36.

(B) Duty of Named Fiduciary. The Named Fiduciary under the Plan has the sole responsibility to control and to manage the operation and administration of the Plan. If the Named Fiduciary is also the Trustee, the Named Fiduciary is solely responsible for the management and the control of the Trust Fund, except Trust assets properly: (1) under the control or the direction of an Investment Manager, ancillary trustee or other Plan fiduciary; or (2) subject to Employer or Participant direction of investment.

(C) Appointment of Investment Manager. The Named Fiduciary may appoint an Investment Manager.

     8.04 DISTRIBUTION OF CASH OR PROPERTY. The Trustee will make Plan distributions in the form of cash except where: (1) the required form of distribution is a QJSA or QPSA which has not been waived; (2) the Plan is a Restated Plan and under the prior Plan, distribution in the form of property (“in-kind distribution”) is a Protected Benefit which the Employer has not eliminated by a Plan amendment under Section 11.02(C); (3) the Plan Administrator adopts a written policy which provides for in-kind distribution; or (4) the Employer is terminating the Plan, and in the reasonable judgment of the Trustee, some or all Plan assets, within a reasonable time for making final distribution of Plan assets, may not be liquidated to cash or may not be so liquidated without undue loss in value. The Plan Administrator’s policy under clause (3) may restrict in-kind distributions to certain types of Trust investments or specify any other reasonable and nondiscriminatory condition or restriction applicable to in-kind distributions. Under clause (4), the Trustee will make Plan termination distributions to Participants and Beneficiaries in cash, in-kind or in a combination of these forms, in a reasonable and nondiscriminatory manner which may take into account the preferences of the distributees. All in-kind distributions will be made based on the current fair market value of the property, as determined by the Trustee, Custodian or Named Fiduciary.

     8.05 TRUSTEE/ CUSTODIAN FEES AND EXPENSES. A Trustee or a Custodian will receive reasonable compensation and reimbursement for reasonable Trust expenses actually incurred as Trustee or Custodian, as may be agreed upon from time to time by the Employer and the Trustee or the Custodian. No person who is receiving full pay from the Employer may receive compensation (except for reimbursement of Plan expenses) for services as Trustee or as Custodian. As the Plan Administrator directs following direction from the Employer under Section 7.04(C), such fees and expenses will be paid by the Employer, or the Trustee or Custodian will charge the Trust for the fees or expenses. If, within a reasonable time after a Plan related fee or expense is incurred (or if within the time specified in any agreement between the Plan and the Trustee regarding payment of a fee or expense) the Plan Administrator does not communicate the Employer’s decision regarding payment or if the Employer does not pay the fee or expense, the Trustee or Custodian

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may charge the Trust for such reasonable fees and expenses as are not settler expenses.

     8.06 THIRD PARTY RELIANCE. A person dealing with the Trustee is not obligated to see to the proper application of any money paid or property delivered to the Trustee, or to inquire whether the Trustee has acted pursuant to any of the terms of the Plan. Each person dealing with the Trustee may act upon any notice, request or representation in writing by the Trustee, or by the Trustee’s duly authorized agent, and is not liable to any person in so acting. The certificate of the Trustee that it is acting in accordance with the Plan is conclusive in favor of any person relying on the certificate.

     8.07 APPOINTMENT OF ANCILLARY TRUSTEE OR INDEPENDENT FIDUCIARY.

(A) Appointment. The Employer, in writing, may appoint any qualified person in any state to act as ancillary trustee with respect to a designated portion of the Trust Fund, subject to any consent required under Section 1.65. An ancillary trustee must acknowledge in a writing separate from the Employer’s Adoption Agreement its acceptance of the terms and conditions of its appointment as ancillary trustee and its fiduciary status under ERISA.

(B) Powers. The ancillary trustee has the rights, powers, duties and discretion as the Employer may delegate, subject to any limitations or directions specified in the agreement appointing the ancillary trustee and to the terms of the Plan or of ERISA. The Employer may delegate its responsibilities under this Section 8.07 to a discretionary Trustee under the Plan (subject to the acceptance by such discretionary Trustee of that delegation), but the Employer may not delegate its responsibilities to a nondiscretionary Trustee or to a Custodian. The investment powers delegated to the ancillary trustee may include any investment powers available under Section 8.02. The delegated investment powers may include the right to invest any portion of the assets of the Trust Fund in a common trust fund, as described in Code §584, or in any collective investment fund, the provisions of which govern the investment of such assets and which the Plan incorporates by this reference, but only if the ancillary trustee is a bank or similar financial institution supervised by the United States or by a state and the ancillary trustee (or its affiliate, as defined in Code §1504) maintains the common trust fund or collective investment fund exclusively for the collective investment of money contributed by the ancillary trustee (or its affiliate) in a trustee capacity and which conforms to the rules of the Comptroller of the Currency. The Employer also may appoint as an ancillary trustee, the trustee of any group trust fund designated for investment pursuant to the provisions of Section 8.09.

(C) Resignation/Removal. The ancillary trustee may resign its position and the Employer may remove an ancillary trustee as provided in Section 8.08 regarding resignation and removal of the Trustee or Custodian. In the event of such resignation or removal, the Employer may appoint another ancillary trustee or may return the assets to the control and management of the Trustee.

(D) Independent Fiduciary. If the DOL requires engagement of an independent fiduciary to have control or management of all or a portion of the Trust Fund, the Employer will appoint such independent fiduciary, as directed by the DOL. The independent fiduciary will have the duties, responsibilities and powers prescribed by the DOL and will exercise those duties, responsibilities and powers in accordance with the terms, restrictions and conditions established by the DOL and, to the extent not inconsistent with ERISA, the terms of the Plan. The independent fiduciary must accept its appointment in writing and must acknowledge its status as a fiduciary of the Plan.

     8.08 RESIGNATION AND REMOVAL.

(A) Resignation. The Trustee or the Custodian may resign its position by giving written notice to the Employer and to the Plan Administrator. The Trustee’s notice must specify the effective date of the Trustee’s resignation, which date must be at least 30 days following the date of the Trustee’s notice, unless the Employer consents in writing to shorter notice.

(B) Removal. The Employer may remove a Trustee or a Custodian by giving written notice to the affected party. The Employer’s notice must specify the effective date of removal which date must be at least 30 days following the date of the Employer’s notice, except where the Employer reasonably determines a shorter notice period or immediate removal is necessary to protect Plan assets.

(C) Successor Appointment. In the event of the resignation or the removal of a Trustee, where no other Trustee continues to serve, the Employer must appoint a successor Trustee if it intends to continue the Plan. If two or more persons hold the position of Trustee, in the event of the removal of one such person, during any period the selection of a replacement is pending, or during any period such person is unable to serve for any reason, the remaining person or persons will act as the Trustee.

     (1) Default Successor Trustee. If the Employer fails to appoint a successor Trustee as of the effective date of the Trustee resignation or removal and no other Trustee remains, the Trustee will treat the Employer as having appointed itself as Trustee and as having filed the Employer’s acceptance of appointment as successor Trustee with the former Trustee. If state law prohibits the Employer from serving as successor Trustee, the appointed successor Trustee is the president of a corporate Employer, the managing partner of a partnership Employer, the managing member of a limited liability company Employer, the sole proprietor of a proprietorship Employer, or in the case of any other entity type, such other person with title and responsibilities similar to the foregoing.

     (2) Default Successor Custodian. If the Employer removes and does not replace a Custodian, the Trustee will assume possession of Plan assets held by the former Custodian.

(D) Acceptance. Each successor Trustee succeeds its predecessor Trustee by accepting in writing its appointment as successor Trustee and by filing the acceptance with the former Trustee and the Plan Administrator without the signing or filing of any further statement.

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(E) Outgoing Trustee. The resigning or removed Trustee, upon receipt of acceptance in writing of the Trust by the successor Trustee, must execute all documents and must perform all acts necessary to vest the title to Plan assets of record in any successor Trustee. In addition, to the extent reasonably necessary for the ongoing administration of the Plan, at the request of the Plan Administrator and the successor Trustee, the resigning or removed Trustee must transfer records, provide information and otherwise cooperate in effecting the change of Trustees.

(F) Successor Powers. Each successor Trustee has and enjoys all of the powers, both discretionary and ministerial, conferred under the Plan upon its predecessor.

(G) No Liability for Predecessor. A successor Trustee is not personally liable for any act or failure to act of any predecessor Trustee, except as required under ERISA. With the approval of the Employer and the Plan Administrator, a successor Trustee, with respect to the Plan, may accept the account rendered and the property delivered to it by a predecessor Trustee without liability.

     8.09 INVESTMENT IN GROUP TRUST FUND. The Employer, by adopting this Plan, specifically authorizes the Trustee to invest all or any portion of the assets comprising the Trust Fund in any group trust fund which at the time of the investment provides for the pooling of the assets of plans qualified under Code §401(a), including a group trust fund that also permits the pooling of qualified plan assets with assets of an individual retirement account that is exempt from taxation under Code §408(e) or assets of an eligible governmental plan under Code §457(b) that is exempt from taxation under Code §457(g). This authorization applies solely to a group trust fund exempt from taxation under Code §501(a) and the trust agreement of which satisfies the requirements of Revenue Ruling 81-100 (as modified and clarified by Revenue Ruling 2004-67), or any successor thereto. The provisions of the group trust fund agreement, as amended from time to time, are by this reference incorporated within this Plan and Trust. The provisions of the group trust fund will govern any investment of Plan assets in that fund. To comply with Code §4975(d)(8) as to any group trust fund maintained by a disqualified person, including the Trustee, the following provisions apply: (A) a discretionary Trustee or a nondiscretionary Trustee may invest in any such fund at the direction of the Named Fiduciary who is independent of the Trustee and the Trustee’s affiliates; (B) a discretionary Trustee or a nondiscretionary Trustee (the latter as directed) may invest in any such fund which the Employer specifies in Appendix C; and (C) notwithstanding (A) and (B) a discretionary Trustee may invest in its own funds as described in Section 8.02(A)(3).

     8.10 COMBINING TRUSTS OF EMPLOYER’S PLANS. At the Employer’s direction, the Trustee, for collective investment purposes, may combine into one trust fund the Trust created under this Plan with the trust created under any other qualified retirement plan the Employer maintains. However, the Trustee must maintain separate records of account for the assets of each Trust in order to reflect properly each Participant’s Account Balance under the qualified plans in which he/she is a participant.

8.11 AMENDMENT/SUBSTITUTION OF TRUST.

(A) Amendment/Standardized Plan. The Employer in its Standardized Plan may not amend any provision of Article VIII (or any other provision of the Plan related to the Trust) except the Employer in Appendix C (or in its Adoption Agreement as applicable) may specify the Trust year, the names of the Plan, the Employer, the Trustee, the Custodian, the Plan Administrator, other fiduciaries or the name of any pooled trust in which the Trust will participate.

(B) Amendment/Nonstandardized or Volume Submitter Plan. The Employer in its Nonstandardized or Volume Submitter Plan, in Appendix C (or in its Adoption Agreement as applicable): (1) may amend the Plan or Trust as described in Section 8.11(A); or (2) may amend or override the administrative provisions of Article VIII (or any other provision of the Plan related to the Trust), including provisions relating to Trust investment and Trustee powers or duties.

     (1) Limitation. Any Trust amendment under clause (2) of Section 8.11(B): (a) must not conflict with any other provisions of the Plan (except as expressly are intended to override an existing Trust provision); (b) must not cause the Plan to violate Code §401(a); and (c) must be made in accordance with Rev. Proc. 2005-16 or any successor thereto.

(C) Substitution of Approved Trust. The Employer subject to the conditions under Section 8.11(B)(1), may elect to substitute in place of Article VIII and the remaining trust provisions of the basic plan document, any other trust or custodial account agreement that the IRS has approved for use with this Plan. If the Employer elects to substitute an approved trust, the Trustee will not execute the Adoption Agreement but will instead execute the substituted trust. The Trustee of the substituted trust agrees to be bound by all remaining Plan terms, other than those terms which the substituted trust governs.

(D) Formalities. All Section 8.11 Trust amendments or substitutions are subject to Section 11.02 and require the written consent or signature of the Trustee.

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ARTICLE IX
PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY

     9.01 INSURANCE BENEFIT.

(A) General. The Employer may elect to provide incidental life insurance benefits for Insurable Participants who consent to life insurance benefits by executing the appropriate insurance company application form. The Trustee will not purchase any incidental life insurance benefit for any Participant prior to a contribution allocation to the Participant’s Account. At an insured Participant’s written direction, the Trustee will use all or any portion of the Participant’s Employee Contributions, if any, to pay insurance premiums covering the Participant’s life.

(B) Insurance on Others. Unless the Plan is a Money Purchase Pension Plan, the Trustee may purchase life insurance for the benefit of the Participant on the life of a family member of the Participant.

(C) Amount and Type of Coverage. The Employer will direct the Trustee as to the insurance company and insurance agent through which the Trustee is to purchase the Contracts, the amount of the coverage and the applicable Dividend plan.

(D) Ownership. Each application for a Contract, and the Contracts themselves, must designate the Trustee as sole owner, with the right reserved to the Trustee to exercise any right or option contained in the Contracts, subject to the terms and provisions of this Plan. The Trustee must be the Contract named beneficiary for the Account of the insured Participant. The Trustee will hold all Contracts issued under the Plan as Trust assets.

(E) Distribution. Proceeds of Contracts paid to the Participant’s Account under this Article IX are subject to the distribution requirements of Article VI. The Trustee will not retain any such proceeds for the benefit of the Trust.

(F) Premiums/Directed Investment. The Trustee will charge the premiums on any Contract covering the life of a Participant against the Account of that Participant and will treat the Contract as a directed investment of the Participant’s Account, even if the Plan otherwise does not permit a Participant to direct the investment of his/her own Account.

(G) Uniformity. The Trustee must arrange, where possible, for all Contracts issued on the lives of Participants under the Plan to have the same premium due date and all ordinary life insurance Contracts to contain guaranteed cash values with as uniform basic options as are possible to obtain.

(H) Custodians. The provisions of this Article IX are not applicable, and the Plan may not invest in Contracts, if a Custodian signatory to the Adoption Agreement is a bank which does not have trust powers from its governing state banking authority.

     9.02 LIMITATIONS ON COVERAGE.

(A) Incidental Insurance Benefits. The aggregate of life insurance premiums paid for the benefit of a Participant, at all times, may not exceed the following percentages of the aggregate of the Employer Contributions (including Elective Deferrals and forfeitures) allocated to any Participant’s Account: (1) 49% in the case of the purchase of ordinary life insurance Contracts; or (2) 25% in the case of the purchase of term life insurance or universal life insurance Contracts. If the Trustee purchases a combination of ordinary life insurance Contract(s) and term life insurance or universal life insurance Contract(s), then the sum of one-half of the premiums paid for the ordinary life insurance Contract(s) and the premiums paid for the term life insurance or universal life insurance Contract(s) may not exceed 25% of the Employer Contributions allocated to any Participant’s Account.

(B) Exception for Certain Profit Sharing Plans. If the Plan is a Profit Sharing Plan or a 401(k) Plan, the incidental insurance benefits requirement of Section 9.02(A) does not apply to the Plan if the Plan purchases life insurance benefits only from Employer Contributions accumulated in the Participant’s Account for at least two years, measured from the allocation date.

(C) Exception for Other Amounts. The incidental insurance benefit requirement of Section 9.02(A) does not apply to Contracts purchased: (1) with Employee Contributions; (2) with Rollover Contributions; or (3) with Earnings on Employer Contributions.

     9.03 DISPOSITION OF LIFE INSURANCE PROTECTION.

(A) Timing. The Trustee will not continue any life insurance protection beyond the later of the Participant’s: (1) Annuity Starting Date under Section 6.01(A)(2)(h), or (2) Separation from Service. The Trustee, at the direction of the Plan Administrator, will make any transfer of Contract(s) as soon as administratively practicable after the date specified under this Section 9.03(A).

(B) Method. The Trustee may not transfer any Contract under this Section 9.03 which contains a method of payment not specifically authorized by Article VI or which fails to comply with the QJSA requirements, if applicable, of Section 6.04. In this regard, the Trustee either must convert such a Contract to cash and distribute the cash instead of the Contract, or before making the transfer, must require the Issuing Company to delete the unauthorized method of payment option from the Contract.

     9.04 DIVIDENDS. Dividends are applied to the Participant’s Account on whose life the Issuing Company has issued the Contract. Dividends are applied to premium reduction unless the Plan Administrator directs the Trustee to purchase insurance benefits or additional insurance benefits for the Participant.

     9.05 LIMITATIONS ON INSURANCE COMPANY DUTIES.

(A) Not a Party to Plan. An insurance company, solely in its capacity as an Issuing Company: (1) is not a party to the Plan; and (2) is not responsible for the Plan’s validity.

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(B) No Responsibility for Others. Except as required by Applicable Law, an Issuing Company has no responsibility or obligation under the Plan to Participants or Beneficiaries for any act required of the Employer, the Plan Administrator, the Trustee, the Custodian or any other service provider to the Plan (unless the Issuing Company also serves in such capacities).

(C) Plan Terms. No insurance company, solely in its capacity as an Issuing Company, need examine the terms of this Plan.

(D) Reliance/Discharge. For the purpose of making application to an Issuing Company and in the exercise of any right or option contained in any Contract, the Issuing Company may rely upon the signature of the Trustee and is held harmless and completely discharged in acting at the direction and authorization of the Trustee. An Issuing Company is discharged from all liability for any amount paid to the Trustee or paid in accordance with the direction of the Trustee, and is not obliged to see to the distribution or further application of any amounts the Issuing Company so pays.

     9.06 RECORDS/INFORMATION. An Issuing Company must keep such records and supply to the Plan Administrator or Trustee such information regarding its Contracts as may be reasonably necessary for the proper administration of the Plan.

     9.07 CONFLICT WITH PLAN. In the event of any conflict between the provisions of this Plan and the terms of any Contract issued in accordance with this Article IX, the provisions of the Plan control.

     9.08 APPENDIX B OVERRIDE. The Employer in Appendix B may amend the provisions of this Article IX in any manner except as would be inconsistent with any other Plan provision or with Applicable Law.

     9.09 DEFINITIONS. For purposes of this Article IX:

(A) Contract(s). Contract or Contracts means an ordinary life, term life or universal life insurance contract issued by an Issuing Company on the life of a Participant or other person as authorized under this Article IX.

(B) Dividends. Dividends means Contract dividends, refunds of premiums and other credits.

(C) Insurable Participant. Insurable Participant means a Participant to whom an insurance company, upon an application being submitted in accordance with the Plan, will issue insurance coverage, either as a standard risk or as a risk in an extra mortality classification.

(D) Issuing Company. Issuing Company is any life insurance company which has issued a policy upon application by the Trustee under the terms of this Plan.

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ARTICLE X
TOP-HEAVY PROVISIONS

     10.01 DETERMINATION OF TOP-HEAVY STATUS.

(A) Only Employer Plan. If this Plan is the only qualified plan maintained by the Employer, the Plan is top-heavy for a Plan Year if the Top-Heavy Ratio as of the Determination Date exceeds 60%.

(B) If Other Plans. If the Employer maintains other qualified plans (including a simplified employee pension plan), or maintained another such plan now terminated, this Plan is top-heavy only if it is part of the Required Aggregation Group, and the Top-Heavy Ratio for the Required Aggregation Group and for the Permissive Aggregation Group, if any, each exceeds 60%.

     (1) Count all aggregated plans. The Plan Administrator will calculate the Top-Heavy Ratio in the same manner as required by Section 10.06(K) taking into account all plans within the Aggregation Group. The Plan Administrator will calculate the Top-Heavy Ratio with reference to the Determination Dates that fall within the same calendar year. If an aggregated plan does not have a Valuation Date coinciding with the Determination Date, the Plan Administrator must value the Account Balance in the aggregated plan as of the most recent Valuation Date falling within the twelve-month period ending on the Determination Date, except as Code §416 and applicable Treasury regulations require for the first and for the second plan year of a Defined Benefit Plan.

     (2) Terminated plans. To the extent the Plan Administrator must take into account distributions to a Participant, the Plan Administrator must include distributions from a terminated plan which would have been part of the Required Aggregation Group if it were in existence on the Determination Date.

     (3) Defined Benefit Plans/SEPs. The Plan Administrator will calculate the present value of accrued benefits under Defined Benefit Plans or the account balances under simplified employee pension plans included within the Aggregation Group in accordance with the terms of those plans and Code §416 and the applicable Treasury regulations.

(C) Defined Benefit Plans.

     (1) Use of uniform accrual. If a Participant in a Defined Benefit Plan is a Non-Key Employee, the Plan Administrator will determine his/her accrued benefit under the accrual method, if any, which is applicable uniformly to all Defined Benefit Plans maintained by the Employer or, if there is no uniform method, in accordance with the slowest accrual rate permitted under the fractional rule accrual method described in Code §411(b)(1)(C).

     (2) Actuarial assumptions. If the Employer maintains a Defined Benefit Plan, the Plan Administrator will use the actuarial assumptions (interest and mortality only) stated in that plan to calculate the present value of benefits from the Defined Benefit Plan.

(D) Application of Top-Heavy Rules. The top-heavy provisions of the Plan apply only for Plan Years in which Code §416 requires application of the top-heavy rules. If applicable, the provisions of this Article X supersede any conflicting Plan or Adoption Agreement provisions, except as the context may otherwise require.

     10.02 TOP-HEAVY MINIMUM ALLOCATION. The Top-Heavy Minimum Allocation requirement applies to the Plan only in a Plan Year for which the Plan is top-heavy.

(A) Allocation to Non-Keys. If the Plan is top-heavy in any Plan Year each Non-Key Employee who is a Participant (as described in Section 10.06(H)) and employed by the Employer on the last day of the Plan Year will receive a Top-Heavy Minimum Allocation for that Plan Year.

(B) Additional Contribution/Allocation as Required. The Plan Administrator first will allocate the Employer Contributions (and Participant forfeitures, if any) for the Plan Year in accordance with the provisions of its Adoption Agreement. The Employer then will contribute an additional amount for the Account of any Participant entitled under Section 10.02(A) to a Top-Heavy Minimum Allocation and whose contribution rate for the Plan Year is less than the Top-Heavy Minimum Allocation. The additional amount is the amount necessary to increase the Participant’s allocation rate to the Top-Heavy Minimum Allocation. The Plan Administrator will allocate the additional contribution to the Account of the Participant on whose behalf the Employer makes the contribution.

(C) No Plan Allocations. If, for a Plan Year, there are no allocations of Employer Contributions or of forfeitures for any Key Employee, the Plan does not require any Top-Heavy Minimum Allocation for the Plan Year, unless a Top-Heavy Minimum Allocation applies because of the maintenance by the Employer of more than one plan.

     10.03 PLAN WHICH WILL SATISFY TOP-HEAVY.

If the Plan is top-heavy, the Plan Administrator will determine if the Plan satisfies the Top-Heavy Minimum Allocation requirement under this Section 10.03.

(A) Aggregation of Plans to Satisfy. The Plan Administrator will aggregate all qualified plans the Employer maintains to determine if the Plan satisfies the Top-Heavy Minimum Allocation requirement.

(B) More Than One Defined Contribution Plan. If the Employer maintains more than one Defined Contribution Plan in which a Non-Key Employee participates and the Non-Key Employee receives less than the Top-Heavy Minimum Allocation for a Plan Year in which the Plan is top-heavy, the Plan Administrator operationally will determine to which plan the Employer will make the necessary additional contribution. If the Plan Administrator elects for the Employer to make the additional contribution to this Plan, the Plan Administrator will allocate the contribution in accordance with Section 10.02(B). If the Plan Administrator elects for the Employer to make the additional

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contribution to another plan, the Plan Administrator must determine that the additional contribution is sufficient to satisfy the Top-Heavy Minimum Allocation.

(C) Defined Benefit Plan(s). If the Employer maintains one or more Defined Benefit Plans in addition to this Plan and a Non-Key Employee participates in both types of plans, the Plan Administrator operationally will determine if the Employer will make the necessary additional contribution to the Plan to satisfy the top-heavy Minimum Allocation Rate or if the Employer will provide a required top-heavy minimum benefit in the Defined Benefit Plan. If the Plan Administrator elects for the Employer to make the additional contribution to this Plan, the Top-Heavy Minimum Allocation is 5%, irrespective of the Highest Contribution Rate, and the Plan Administrator will allocate the contribution in accordance with Section 10.02(B). If the Plan Administrator elects for the Employer to satisfy the top-heavy minimum benefit in a Defined Benefit Plan, the Plan Administrator must determine that such top-heavy minimum benefit is sufficient to satisfy the top-heavy requirements in the Plan.

     10.04 TOP-HEAVY VESTING. If the Employer in its Adoption Agreement does not elect immediate vesting, the Employer must elect a top-heavy (or modified top-heavy) vesting schedule. The specified top-heavy vesting schedule applies to all Accounts and Contribution Types not already subject to greater vesting and applies to the Plan’s first top-heavy Plan Year and to all subsequent Plan Years, except as the Employer in its Adoption Agreement otherwise elects. If the Employer elects in its Adoption Agreement to apply the specified top-heavy vesting schedule only in Plan Years in which the Plan is top-heavy, any change in the Plan’s vesting schedule resulting from this election is subject to Section 5.08, relating to vesting schedule amendments. As such, a Participant’s vested percentage may not decrease as a result of a change in the Plan’s top-heavy status in a subsequent Plan Year. When applicable, the relevant top-heavy vesting schedule applies to a Participant’s entire Account Balance except as to those amounts which are already 100% Vested, and applies to such amounts accrued before the Plan became top-heavy.

     10.05 SAFE HARBOR/SIMPLE PLAN EXEMPTION.

(A) Safe Harbor 401(k) Plan. If in any Plan Year: (1) the Plan Administrator allocates only Safe Harbor Contributions, Additional Matching Contributions and Elective Deferrals to the Plan; and (2) there are no forfeitures to allocate for the Plan Year or the Plan Administrator allocates forfeitures in the manner Section 3.07(A)(4) describes, the Plan will not be subject to the top-heavy requirements of this Article X for that Plan Year. In accordance with Section 3.07(A)(4), the Employer in its Adoption Agreement may elect to apply forfeitures in such a manner so as to preserve the top-heavy exemption under this Section 10.05(A). This Section 10.05(A) does not apply if the Employer in its Adoption Agreement elects eligibility for Elective Deferrals which is earlier than the one Year of Service and age 21 eligibility requirements the Employer elects to apply for the Safe Harbor Contributions, using the OEE rule under Section 4.06(C).

(B) SIMPLE 401(k) Plan. A SIMPLE 401(k) Plan under Section 3.10 is not subject to the provisions of this Article X.

     10.06 DEFINITIONS. For purposes of applying the top-heavy provisions of the Plan:

(A) Compensation. Compensation means Compensation as determined under Section 4.05(C) for Code §415 purposes and includes Compensation for the entire Plan Year.

(B) Determination Date. Determination Date means for any Plan Year, the Accounting Date of the preceding Plan Year or, in the case of the first Plan Year of the Plan, the Accounting Date of the first Plan Year.

(C) Determination (look-back) Period. Determination Period means the 1-year period ending on the Determination Date. In the case of distributions made for a reason other than Severance from Employment, death or Disability, the determination period means the 5-year period ending on the Determination Date.

(D) Employer. Employer means the Employer that adopts this Plan and any Related Employer.

(E) Highest Contribution Rate. Highest Contribution Rate means for any Key Employee, all Employer Contributions (including Elective Deferrals, but not including Employer contributions to Social Security and not including Catch-Up Deferrals) and forfeitures allocated to the Participant’s Account for the Plan Year, divided by his/her Compensation for the entire Plan Year. To determine a Key Employee’s contribution rate, the Plan Administrator must treat all qualified top-heavy Defined Contribution Plans maintained by the Employer (or by any Related Employer) as a single plan.

(F) Key Employee. Key Employee means, as of any Determination Date, any Employee or former Employee (including a deceased former Employee) who, at any time during the Determination Period: (i) has annual Compensation exceeding $130,000 (as adjusted under Code §416(i)(1)(A)) and is an officer of the Employer; (ii) is a more than 5% owner of the Employer; or (iii) is a more than 1% owner of the Employer and has annual Compensation exceeding $150,000.

     (1) Attribution. The constructive ownership rules of Code §318 as modified by Code §416(i)(1)(B)(i) (or the principles of that Code section, in the case of an unincorporated Employer) will apply to determine ownership in the Employer.

     (2) Maximum Officers. The number of officers taken into account under Section 10.06(F) clause (i) will not exceed the greater of 3 or 10% of the total number (after application of the Code §414(q) exclusions) of Employees, and in no event will exceed 50 officers.

     (3) Applicable Law. The Plan Administrator will make the determination of who is a Key Employee in accordance with Code §416(i)(1), the applicable Treasury regulations and other Applicable Law.

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(G) Non-Key Employee. Non-Key Employee means an Employee who is not a Key Employee.

(H) Participant. Participant means any Employee otherwise eligible to participate in the Plan, even if the Participant would not be entitled to other Plan allocations or would receive a lesser allocation under the Plan terms.

(I) Permissive Aggregation Group. Permissive Aggregation Group means the Required Aggregation Group plus any other qualified plans maintained by the Employer, but only if such group would satisfy in the aggregate the nondiscrimination requirements of Code §401(a)(4) and the coverage requirements of Code §410. The Plan Administrator will determine the Permissive Aggregation Group.

(J) Required Aggregation Group. Required Aggregation Group means: (1) each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the Determination Period (including terminated plans); and (2) any other qualified plan of the Employer which enables a plan described in clause (1) to meet the requirements of Code §401(a)(4) or of Code §410.

(K) Top-Heavy Ratio. Top-Heavy Ratio means a fraction, the numerator of which is the sum of the Account Balances of all Key Employees as of the Determination Date and the denominator of which is the sum of the Account Balances for all Employees as of the Determination Date. The Plan Administrator will include Catch-Up Deferrals and will disregard DECs in determining the Top-Heavy Ratio.

     (1) Amounts included. The Plan Administrator must include in the Top-Heavy Ratio, as part of the Account Balances, any contribution not made as of the Determination Date but includible under Code §416 and the applicable Treasury regulations, and distributions made within the Determination Period.

     (2) Former Key Employees. The Plan Administrator must calculate the Top-Heavy Ratio by disregarding the Account Balance (and distributions, if any, of the Account Balance) of any Non-Key Employee who was formerly a Key Employee.

     (3) No Service during 1-year look-back. The Plan Administrator must calculate the Top-Heavy Ratio by disregarding the Account Balance (including distributions, if any, of the Account Balance) of an individual who has not received credit for at least one Hour of Service with the Employer during the Determination Period, which for purposes of this Section 10.06(K)(3), means the 1-year period described in Section 10.06(C).

     (4) Distributions, Rollover Contributions and Transfers. The Plan Administrator must calculate the Top-Heavy Ratio, including the extent to which it must take into account distributions, Rollover Contributions and Transfers, in accordance with Code §416 and the applicable Treasury regulations.

(L) Top-Heavy Minimum Allocation. Top-Heavy Minimum Allocation means an allocation equal to the lesser of 3% of the Non-Key Employee’s Compensation for the Plan Year or the highest contribution rate for the Plan Year made on behalf of any Key Employee multiplied by the Non-Key Employee’s Plan Year Compensation. For purposes of satisfying the Employer’s Top-Heavy Minimum Allocation requirement, the Plan Administrator disregards the Elective Deferrals allocated to a Non-Key Employee’s Account in determining the Non-Key Employee’s allocation rate. To determine a Non-Key Employee’s allocation rate, the Plan Administrator must treat all qualified top-heavy Defined Contribution Plans maintained by the Employer (or by any Related Employer) as a single plan. If a Defined Benefit Plan maintained by the Employer which benefits a Key Employee depends on this Plan to satisfy the nondiscrimination rules of Code §401(a)(4) or the coverage rules of Code §410 (or another plan benefiting the Key Employee so depends on such Defined Benefit Plan), the top-heavy minimum allocation is 3% of the Non-Key Employee’s Compensation regardless of the contribution rate for the Key Employees.

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ARTICLE XI
EXCLUSIVE BENEFIT, AMENDMENT AND TERMINATION

     11.01 EXCLUSIVE BENEFIT.

(A) No Reversion/Diversion. Except as provided under Section 3.01(H), the Employer does not have any beneficial interest in any asset of the Trust Fund and no part of any asset in the Trust Fund may ever revert to or be repaid to the Employer, either directly or indirectly; nor, prior to the satisfaction of all liabilities with respect to the Participants and their Beneficiaries under the Plan, may any part of the corpus or income of the Trust Fund, or any asset of the Trust Fund, be (at any time) used for, or diverted to, purposes other than the exclusive benefit of the Participants or their Beneficiaries and for defraying reasonable expenses of administering the Plan.

(B) Initial Qualification. If the IRS, upon the Employer’s application for initial approval of this Plan, determines the Trust created under the Plan is not a qualified trust exempt from Federal income tax, the Trustee, upon written notice from the Employer, will return the Employer Contributions and the Earnings thereon to the Employer. This Section 11.01(B) applies only if the Employer makes the application for the determination by the time prescribed by law for filing the Employer’s tax return for the Taxable Year in which the Employer adopted the Plan, or by such later date as the Secretary of the Treasury may prescribe. The Trustee must make the return of the Employer contribution under this Section 11.01(B) within one year of a final disposition of the Employer’s request for initial approval of the Plan. The Employer’s Plan and Trust will terminate upon the Trustee’s return of the Employer Contributions.

     11.02 AMENDMENT BY EMPLOYER.

(A) Permitted Amendments. The Employer, consistent with this Section 11.02 and other applicable Plan provisions, has the right, at any time to amend or to restate the Plan including the Trust.

     (1) Adoption Agreement/Appendix B overrides. The Employer may: (a) restate its Adoption Agreement (including converting the Plan to another type of plan using a different Adoption Agreement approved for use with the Prototype or Volume Submitter Plan and as not inconsistent with Applicable Law); (b) amend the elective provisions of the Adoption Agreement (changing an existing election or making a new election) in any manner the Employer deems necessary or advisable and as not inconsistent with Applicable Law; and (c) elect in Appendix B any or all of the basic plan overrides specified therein, including adding language to satisfy Code §§415 or 416 because of the required aggregation of multiple plans.

     (2) Model amendments. The Employer may adopt model amendments published by the IRS (the adoption of which the IRS provides will not cause the Plan to be individually designed).

     (3) Interim amendments. The Employer may make such good faith amendments as the Employer considers necessary to maintain the Plan’s tax-qualified status or to otherwise keep the Plan in compliance with Applicable Law.

     (4) Corrections. The Employer may amend the Plan to correct typographical errors and cross-references, provided that these corrections do not change the original intended meaning or impact any qualification requirements.

(B) Amendment Formalities.

     (1) Writing. The Employer must make all Plan amendments in writing. Each amendment must specify the amendment execution date and, if different from its execution date, must specify the amendment’s retroactive, current or prospective Effective Date.

     (2) Restatement. An Employer may amend its Plan by means of a complete restatement of its Adoption Agreement. To restate its Plan, the Employer must complete, and the Employer and Trustee or Custodian must execute, a new Adoption Agreement. See Section 8.11(C) if the Employer elects in its Adoption Agreement to adopt a separate approved trust agreement.

     (3) Amendment (without restatement). An Employer may amend its Plan without completion of a new Adoption Agreement by either: (a) completion and substitution of one or more Adoption Agreement pages including a new Adoption Agreement Execution Page executed by the Employer and if applicable, executed by the Trustee or Custodian; or (b) other written instrument amending the Adoption Agreement executed by the Employer and if applicable, executed by the Trustee or Custodian. Except under Sections 4.08 or 8.11, to preserve the Plan’s pre-approved status under Section 7.09, the substantive language of any amendment under Section 11.02(B)(3), clause (b) (amendment other than by substituted Adoption Agreement page) must reproduce without alteration, the relevant portion(s) of the Adoption Agreement text and elections which the Employer is amending or must have the substantive effect of doing so such as incorporating by reference the Adoption Agreement text into the amendment.

     (4) Effect of certain alterations. Any restatement or amendment which is not permitted under this Section 11.02 or elsewhere in the Plan may result in the IRS treating the Plan as an individually designed plan. See Section 7.09 for the effect of certain amendments adopted by the Employer which will result in the Employer’s Plan losing Prototype Plan or Volume Submitter Plan status.

     (5) Operational discretion and policy not an amendment. A Plan amendment does not include the Plan Administrator’s exercise of any operational discretion the Plan accords to the Administrator, including but not limited to, the Plan Administrator’s adoption, modification or termination of any policy, rule or regulation in accordance with the Plan or any change to any Adoption Agreement Administrative checklist.

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     (6) Trustee/Custodian signature to amendment. The Trustee or Custodian must execute any Adoption Agreement for a Restated Plan and also must execute any Plan amendment which alters the Trust provisions of Article VIII or which otherwise affects the Trustee’s or Custodian’s duties under the Plan.

     (7) Signatory Employer authority. If the Plan has Participating Employers, only the Signatory Employer need execute any Plan amendment under this Section 11.02. See Section 1.23(A).

(C) Impermissible Amendment/Protected Benefits

     (1) Exclusive benefit/no reversion. The Employer may not amend the Plan to permit any of the Trust Fund (other than as required to pay any Trust taxes and reasonable Plan administrative expenses) to be used for or diverted to purposes other than for the exclusive benefit of the Participants and Beneficiaries. An amendment may not cause any portion of the Trust Fund to revert to the Employer or to become the Employer’s property.

     (2) Alteration of Plan Administrator or Trustee/Custodian duties. The Employer may not amend the Plan in any manner which affects the powers, duties or responsibilities of the Plan Administrator, the Trustee or the Custodian without the written consent of the affected party. See Section 11.02(B)(6).

     (3) No cut-backs. An amendment (including the adoption of this Plan as a restatement of an existing plan) may not decrease a Participant’s Account Balance, except to the extent permitted under Code §412(c)(8), and except as provided under Applicable Law, may not reduce or eliminate Protected Benefits determined immediately prior to the adoption date (or, if later, the Effective Date) of the amendment. An amendment reduces or eliminates Protected Benefits if the amendment has the effect of either: (a) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in Treasury regulations); or (b) except as provided under Applicable Law, eliminating an optional form of benefit. An amendment does not impermissibly eliminate a Protected Benefit relating to the method of distribution if after the amendment a Participant may receive a single sum payment at the same time or times as the method of distribution eliminated by the amendment and such payment is based on the same or a greater portion of the Participant’s Account as the eliminated method of distribution. This Section 11.02(C)(3) applies to Transfers under 11.06 except as to certain Elective Transfers under 11.06(E).

     (4) Disregard of amendment/Tracking Protected Benefits. The Plan Administrator must disregard an amendment to the extent application of the amendment would fail to satisfy this Section 11.02(C). The Plan Administrator, in an Adoption Agreement Administrative checklist, may maintain a list of Protected Benefits it must retain.

     11.03 AMENDMENT BY PROTOTYPE SPONSOR/ VOLUME SUBMITTER PRACTITIONER.

(A) General. The Sponsor (or the M&P Mass Submitter under Section 4.08 of Rev. Proc. 2005-16) or the Practitioner, without the Employer’s consent, may amend the Plan and Trust, from time to time: (1) to conform the Plan and Trust to any changes to the Code, regulations, revenue rulings, other statements published by the IRS (including adoption of model, sample or other required good faith amendments that specifically provide that their adoption will not cause such plan to be individually designed); or (2) to make corrections to the approved Plan.

(B) Notice to Employers. The Sponsor or Practitioner must make reasonable and diligent efforts to ensure adopting Employers have actually received and are aware of all Sponsor or Practitioner generated Plan amendments and that such Employers complete and sign new Adoption Agreements when necessary.

(C) Prohibited Amendments. Except under Section 11.03(A), the Sponsor or Practitioner may not amend the Plan in any manner which would modify any adopting Employer’s Plan existing Adoption Agreement election without the Employer’s written consent. In addition, the Sponsor or Practitioner may not amend the Plan in any manner which would violate Section 11.02(C).

(D) Volume Submitter Practitioner limitations. A Practitioner may no longer amend the Plan as to any adopting Employer which has amended its Plan in a manner as would result in the type of plan not permitted under the Volume Submitter program or which would render the Plan an individually designed plan not entitled to the Volume Submitter remedial amendment period cycle. If an Employer, because of a modification to the Plan is required to obtain a favorable determination letter to have reliance, the Practitioner may not amend the Plan on behalf of the adopting Employer unless the Employer obtains such a letter. If the Employer adopts this Plan as a restated Plan, the provisions of this Section 11.03 permitting a Practitioner to amend the Plan apply on and after the date the Employer executes the restated Plan; provided that such provisions may have applied on an earlier date (but not before February 17, 2005) if the prior Plan document provided for such Practitioner amendments.

(E) Mass Submitter Amendment. If the Sponsor does not adopt the amendments made by the Mass Submitter, the Sponsor will no longer be the sponsor of an identical or minor modifier Prototype Plan of the Mass Submitter.

     11.04 FROZEN PLAN.

(A) Employer Action to Freeze. The Employer subject to Section 11.02(C) and by proper Employer action has the right, at any time, to suspend or discontinue all contributions under the Plan and thereafter to continue to maintain the Plan as a Frozen Plan (subject to such suspension or discontinuance) until the Employer terminates the Plan. During any period while the Plan is frozen, the Plan Administrator will continue to: (1) allocate forfeitures, if any, in accordance with Section 3.07, irrespective of when the forfeitures occur and (2) operate

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the Plan in accordance with its terms other than those related to the making and allocation of additional (new) contributions. If the Employer under a Profit Sharing Plan or a 401(k) Plan completely discontinues contributions (including Elective Deferrals), the Plan Administrator will treat the Plan as a Frozen Plan.

(B) Vesting. Upon the Employer’s freezing under Section 11.04(A) of the Plan which is a Profit Sharing Plan or 401(k) Plan, an affected Participant’s right to his/her Account Balance is 100% Vested, irrespective of the Vested percentage which otherwise would apply under Article V.

(C) Not a Termination. A resolution or an amendment to discontinue all future contributions, but otherwise to continue maintenance of this Plan, is not a Plan termination for purposes of Section 11.05.

     11.05 PLAN TERMINATION.

(A) Employer Action to Terminate. The Employer subject to Section 11.02(C) and by proper Employer action has the right, at any time, to terminate this Plan and the Trust created and maintained under the Plan. Any termination of the Plan under this Section 11.05(A) is not effective until compliance with applicable notice requirements under ERISA, if any. The Plan will terminate upon the first to occur of the following:

     (1) Specified date. The Effective Date of termination specified by proper Employer action; or

     (2) Employer no longer exists. The Effective Date of dissolution or merger of the Employer, unless a successor makes provision to continue the Plan, in which event the successor must substitute itself as the Employer under this Plan.

(B) QTA Action to Terminate Abandoned Plan.

     (1) Definition of Qualified Termination Administrator (QTA). A QTA is an entity which: (a) is eligible to serve as trustee or issuer of an individual retirement account or of an individual retirement annuity; and (b) holds the assets of the abandoned Plan.

     (2) QTA procedure. A QTA, after making reasonable efforts to contact the Employer, may make a determination that the Employer has abandoned the Plan and give notice thereof to the DOL. The QTA then may: (i) update Plan records; (ii) calculate benefits; (iii) allocate assets and expenses; (iv) report to DOL any delinquent contributions; (v) engage service providers and pay reasonable Plan expenses; (vi) provide required notice to Participants and Beneficiaries regarding the Plan termination; (vii) distribute Plan benefits; (viii) file the Form 5500 terminal report and give notice to DOL of completion of the termination ; and (ix) take all other reasonable and necessary actions to wind-up and terminate the Plan. A QTA will undertake all actions under this Section 11.05(B) in accordance with Applicable Law, including Prohibited Transaction Class Exemption 2006-06, relating to the QTA’s services and compensation for services.

(C) Vesting. Upon either full or partial termination of the Plan, an affected Participant’s right to his/her Account Balance is 100% Vested, irrespective of the Vested percentage which otherwise would apply under Article V.

(D) General Procedure upon Termination. Upon termination of the Plan, the distribution provisions of Article VI remain operative, with the following exceptions:

     (1) If no consent required. If the Participant’s Vested Account Balance does not exceed $5,000 (or exceeds $5,000 but the Participant has attained the later of age 62 or Normal Retirement Age), the Plan Administrator will direct the Trustee to distribute in cash (subject to Section 8.04) the Participant’s Vested Account Balance to him/her in a Lump-Sum as soon as administratively practicable after the Plan terminates.

     (2) If consent required. If Participant’s Vested Account Balance exceeds $5,000 and the Participant has not attained the later of age 62 or Normal Retirement Age, the Participant or the Beneficiary may elect to have the Trustee commence distribution in cash (subject to Section 8.04) of his/her Vested Account Balance in a Lump-Sum as soon as administratively practicable after the Plan terminates. If a Participant with consent rights under this Section 11.05(D)(2) does not elect an immediate Lump-Sum distribution with spousal consent if required, to liquidate the Trust, the Plan Administrator will instruct the Trustee or Custodian to purchase a deferred Annuity Contract for the Participant which protects the Participant’s distribution rights under the Plan.

     (3) Lower dollar amount. As provided in Section 6.09, the Employer in Appendix B may provide for a lower dollar threshold than $5,000 under this Section 11.05(D).

(E) Profit Sharing Plan. If the Plan is a Profit Sharing Plan, in lieu of applying Section 11.05(D) and the distribution provisions of Article VI, the Plan Administrator will direct the Trustee to distribute in cash (subject to Section 8.04) each Participant’s Vested Account Balance, in a Lump-Sum, as soon as administratively practicable after the termination of the Plan, irrespective of the amount of the Participant’s Vested Account Balance, the Participant’s age and whether the Participant consents to the distribution.

     (1) Limitations. This Section 11.05(E) does not apply if: (a) the Plan at termination provides for distribution of an Annuity Contract which is a Protected Benefit and which the Employer may not (or does not) eliminate by Plan amendment; or (b) as of the period between the Plan termination date and the final distribution of assets, the Employer maintains any other Defined Contribution Plan (other than an ESOP). If clause (b) applies, the Plan Administrator to facilitate Plan termination may direct the Trustee to transfer the Account of any non-consenting Participant to the other Defined Contribution Plan.

(F) 401(k) Plan Distribution Restrictions. If the Plan is a 401(k) Plan or if the Plan as the result of a Transfer holds Restricted 401(k) Accounts under Section 6.01(C)(4)(b), a

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Participant’s Restricted 401(k) Accounts are distributable on account of Plan termination, as described in this Section 11.05, only if: (i) the Employer (including any Related Employer, determined as of the Effective Date of Plan termination) does not maintain an Alternative Defined Contribution Plan and the Plan Administrator distributes the Participant’s entire Vested Account Balance in a Lump- Sum; or (ii) the Participant otherwise is entitled under the Plan to a distribution of his/her Vested Account Balance.

     (1) Definition of Alternative Defined Contribution Plan. An Alternative Defined Contribution Plan is a Defined Contribution Plan (other than an ESOP, simplified employee pension plan, 403(b) plan, SIMPLE IRA or 457 plan) the Employer (or a Related Employer) maintains beginning at the Plan termination Effective Date of the Plan and ending twelve months after the final distribution of assets. However, a plan is not an Alternative Defined Contribution Plan if less than 2% of the Employees eligible to participate in the terminating Plan are eligible to participate (beginning 12 months prior to and ending 12 months after the Plan’s termination Effective Date) in the potential Alternative Defined Contribution Plan.

(G) Continuing Trust Provisions. The Trust will continue until the Trustee in accordance with the direction of the Plan Administrator has distributed all of the benefits under the Plan. On each Valuation Date, the Plan Administrator will credit any part of a Participant’s Account Balance retained in the Trust with its share of Earnings. Upon termination of the Plan, any suspense account under Section 4.01 will revert to the Employer, subject to the conditions of the Treasury regulations permitting such a reversion.

(H) Lost Participants. The Trustee will distribute the Accounts of lost Participants in a terminating Plan in accordance with the Plan Administrator’s direction under Section 7.07(B).

     11.06 MERGER/DIRECT TRANSFER.

(A) Authority. The Trustee, at the direction of the Plan Administrator, possesses the specific authority to enter into merger agreements or direct transfer of assets agreements with the trustees of other retirement plans described in Code §401(a), and to accept the direct transfer of plan assets to the Trust, or to transfer Plan assets, as a party to any such agreement. This authority includes Nonelective Transfers described in Section 11.06(D) and Elective Transfers described in Section 11.06(E).

(B) Code §414(l) Requirements. The Trustee may not consent to, or be a party to, any merger or consolidation with another plan, or to a transfer of assets or liabilities to another plan (or from the other plan to this Plan), unless immediately after the merger, consolidation or transfer, the surviving plan provides each Participant a benefit equal to or greater in amount than the benefit each Participant would have received had the transferring plan terminated immediately before the merger or the consolidation or the transfer; provided that 100% immediate vesting is not required upon merger, consolidation or transfer, except if an Elective Transfer is made under Section 11.06(E)(3).

(C) Administration of Transferred Amount. The Trustee will hold, administer and distribute the transferred assets as a part of the Trust Fund and the Trustee must maintain a separate Employer Contribution Account for the benefit of the Employee on whose behalf the Trustee accepted the Transfer in order to reflect the value of the transferred assets and as necessary to preserve Protected Benefits.

(D) Nonelective Transfers. The Trustee may enter into an agreement with the trustee of any other plan described in Section 11.06(A) to transfer as a Nonelective Transfer all or a portion of the Account(s) of one or more Participants to the other plan, or to receive Nonelective Transfers into the Plan. A Nonelective Transfer is a transfer without the consent or election of the affected Participant(s). In the event of a Nonelective Transfer, the trustee of the transferee plan must preserve all Protected Benefits under the transferor plan, unless the trustee or other appropriate party takes proper action to eliminate any of such Protected Benefits as Applicable Law may permit.

(E) Elective Transfers. The Trustee may enter into an agreement with the trustee of any other plan described in Section 11.06(A) to transfer as an Elective Transfer all or a portion of the Account of a Participant or if applicable a Beneficiary who elects to transfer his/her Account or a portion thereof to the other plan or to receive Elective Transfers into the Plan. The specific requirements for an Elective Transfer depend upon the type of Elective Transfer that the Trustee will utilize to effect the Transfer, as described herein.

     (1) Code §411(d)(6)(D) Transfer. A Code §411(d)(6)(D) Transfer means a Transfer under Code §411(d)(6)(D) between Defined Contribution Plans, and which a Participant or Beneficiary elects following required statutory notice. Under this Section 11.06(E)(1), the Account need not be distributable at the time of Transfer and Protected Benefits specifically relating to distribution methods do not carry over to the transferee plan, except under Section 6.04 if applicable.

     (2) Acquisition or employment change Transfer. An acquisition or employment change Transfer means a Transfer under Treas. Reg. §1.411(d)-4 Q/A-3(b), between such Defined Contribution Plans as described therein, and which a Participant elects. Under this Section 11.06(E)(2), the Account need not be distributable at the time of Transfer and Protected Benefits do not carry over to the transferee plan, except under Section 6.04 if applicable.

     (3) Distributable event Transfer. A distributable event Transfer means a Transfer under Treas. Reg. §1.411(d)-4 Q/A-3(c), between Code §401(a) plans, and which a Participant elects. Under this Section 11.06(E)(3), the Account must be distributable at the time of Transfer, but not entirely as a Lump-Sum which is an Eligible Rollover Distribution. Protected Benefits do not carry over to the transferee plan.

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(F) Pre-Participation Transfers. The Trustee under this Section 11.06 may accept a Transfer of plan assets on behalf of an Employee prior to the date the Employee satisfies the Plan’s eligibility conditions or prior to reaching the Entry Date. If the Trustee accepts such a direct Transfer of plan assets, the Plan Administrator and the Trustee must treat the Employee as a limited Participant as described in Section 3.08 (C).

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ARTICLE XII
MULTIPLE EMPLOYER PLAN
[VOLUME SUBMITTER ONLY]

     12.01 ELECTION/OVERRIDING EFFECT. This Article XII does not apply unless the Employer establishes the Plan as a Multiple Employer Plan described in Code §413(c) under a Volume Submitter Adoption Agreement. Article XII does not apply if the Plan is a Prototype Plan. If the Employer elects in its Adoption Agreement that the Plan is a Multiple Employer Plan, then the provisions of this Article XII will apply as of the Effective Date the Employer elects in its Adoption Agreement to apply this Article XII. The provisions of Article XII, if in effect, supersede any contrary provisions in the Plan or the Employer’s Adoption Agreement.

     12.02 DEFINITIONS. The following definitions apply to this Article XII and supersede any conflicting definition in the Plan.

(A) Employee. Employee means any common law employee, Self-Employed Individual, Leased Employee or other person the Code treats as an employee of a Participating Employer for purposes of the Participating Employer’s qualified plan. The Employer in its Adoption Agreement or in a Participation Agreement may designate any Employee, or class or group of Employees, as an Excluded Employee under Section 1.21(D).

(B) Lead Employer. The Lead Employer means the Signatory Employer to the Adoption Agreement Execution Page, and does not include any Related Employer or Participating Employer except as described in the next sentence. The Lead Employer will be a Participating Employer only if the Lead Employer executes a Participation Agreement to the Adoption Agreement. The Lead Employer has the same meaning as the Signatory Employer for purposes of making Plan amendments and other purposes as described in Section 1.23(A) regardless of whether the Lead Employer is also a Participating Employer under this Article XII. As to the right of a Lead Employer to terminate the participation of a Participating Employer, see Section 12.12.

(C) Participating Employer. A “Participating Employer” is a trade or business which, with the consent of the Lead Employer, executes a Participation Agreement to the Adoption Agreement. A Participating Employer is an Employer for all purposes of the Plan except as provided in Section 1.23. A Participating Employer may, but need not be a Related Employer.

(D) Professional Employer Organization (PEO). A Professional Employer Organization (PEO) means an organization described in Rev. Proc. 2002-21. Plan references to Rev. Proc. 2002-21 also include any successor thereto. The Employer in its Adoption Agreement will specify whether the Lead Employer is a PEO, and in such event, the term PEO is synonymous with the Lead Employer. If the Lead Employer is a PEO, then:

     (1) Client Organization (“CO”). Each Participating Employer (other than the PEO) is a Client Organization as that term is used in Rev. Proc. 2002-21.

     (2) Worksite Employee. A Worksite Employee means a person on the PEO’s payroll who receives amounts from the PEO for providing services to a CO pursuant to a service agreement between the PEO and the CO. For all purposes of this Plan, a Worksite Employee will be deemed to be the Employee of the CO for whom the Worksite Employee performs services, and not an Employee of the PEO.

     12.03 PARTICIPATING EMPLOYER ELECTIONS. In its Adoption Agreement, the Lead Employer will specify: (A) whether a Participating Employer may modify any of the Adoption Agreement elections; (B) which elections the Participating Employer may modify; and (C) any restrictions on the modifications. Any such modification will apply only to the Employees of that Participating Employer. The Participating Employer will make any such modification by election on its Participation Agreement to the Lead Employer’s Adoption Agreement. To the extent that the Adoption Agreement does not permit modification of an election, any attempt by a Participating Employer to modify the election has no effect on the Plan and the Participating Employer is bound by the Adoption Agreement terms as completed by the Lead Employer.

     12.04 HCE STATUS. The Plan Administrator will determine HCE status under Section 1.21(E) separately with respect to each Participating Employer.

     12.05 TESTING.

(A) Separate Status. The Plan Administrator will perform the tests listed in this Section 12.05(A) separately for each Participating Employer, with respect to the Employees of that Participating Employer. For this purpose, the Employees of a Participating Employer, and their allocations and Accounts, will be treated as though they were in separate plan. Any Plan correction under Section 7.08 will only affect the Employees of the Participating Employer. The tests subject to this separate treatment are:

     (1) ADP. The ADP test in Section 4.10(B).

     (2) ACP. The ACP test in Section 4.10(C).

     (3) Nondiscrimination. Nondiscrimination testing as described in Code §401(a)(4), the applicable Treasury regulations, and Sections 4.06 and 4.07.

     (4) Coverage. Coverage testing as described in Code §410(b), the applicable Treasury regulations, and Sections 3.06(F) and 4.06.

(B) Joint Status. The Plan Administrator will perform the following tests for the Plan as whole, without regard to an Employee’s employment by a particular Participating Employer:

     (1) Annual Additions Limit. Applying the Annual Additions Limit in Section 4.05(B).

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     (2) Elective Deferral Limit. Applying the Elective Deferral Limit in Section 4.10(A).

     (3) Catch-Up Limit. Applying the limit on Catch-Up Deferrals in Section 3.02(D).

     12.06 TOP-HEAVY. The Plan will apply the provisions of Article X separately to each Participating Employer. The Plan will be considered separate plans for each Participating Employer and its Employees for purposes of determining whether such a separate plan is top-heavy or is entitled to the exemption described in Section 10.05. For purposes of applying Article X to a Participating Employer, the Participating Employer and any business which is a Related Employer to that Participating Employer are the “Employer.” For purposes of Article X, the terms “Key Employee” and “Non-Key Employee” will refer only to the Employees of that Participating Employer and/or its Related Employers. If such a Participating Employer’s separate Plan is top-heavy, then:

(A) Highest Contribution Rate. The Plan Administrator will determine the Highest Contribution Rate under Section 10.06(E) by reference to the Key Employees and their allocations in the separate plan of that Participating Employer;

(B) Top-Heavy Minimum Allocation. The Plan Administrator will determine the amount of any required Top-Heavy Minimum Allocation under Section 10.06(L) separately for that separate plan; and

(C) Plan Which Will Satisfy. The Participating Employer will make any additional contributions Section 10.03 requires.

     12.07 COMPENSATION.

(A) Separate Determination. For the following purposes, described in this Section 12.07(A), the Plan Administrator will determine separately a Participant’s Compensation for each Participating Employer. Under this determination, except as provided below, Compensation from a Participation Employer includes Compensation paid by a Related Employer of that Participating Employer.

     (1) Nondiscrimination and coverage. All of the separate tests listed in Section 12.05(A).

     (2) Top-Heavy. Application of the top-heavy rules in Article X.

     (3) Allocations. Application of allocations under Article III. However, the Employer’s Adoption Agreement elections control the extent to which Compensation for this purpose includes Compensation of Related Employers.

     (4) HCE determination. The determination of an Employee’s status as an HCE.

(B) Joint Status. For all Plan purposes other than those described in Section 12.07(A), including but not limited to determining the Annual Additions Limit in Section 4.05(B), Compensation includes all Compensation paid by or for any Participating Employer or Related Employer.

     12.08 SERVICE. An Employee’s Service includes all Hours of Service and Years of Service with any and all Participating Employers and their Related Employers. An Employee who terminates employment with one Participating Employer and immediately commences employment with another Participating Employer has not incurred a Separation from Service or a Severance from Employment.

     12.09 REQUIRED MINIMUM DISTRIBUTIONS. If a Participant is a more than 5% Owner (under Code §416(i) and Section 6.02(E)(7)(a)) of any Participating Employer for which the Participant is an Employee in the Plan Year the Participant attains age 70¹/2, then the Participant’s RBD under Section 6.02(E)(7) will be the April 1 following the close of the calendar year in which the Participant attains
age 70¹/2.

     12.10 COOPERATION AND INDEMNIFICATION.

(A) Cooperation. Each Participating Employer agrees to timely provide to the Plan Administrator upon request all information the Plan Administrator deems necessary to ensure the Plan is operated in accordance with Applicable Law. Each Participating Employer will cooperate fully with the Plan Administrator, the Lead Employer, and with Plan fiduciaries and other proper Plan representatives in maintaining the qualified status of the Plan. Such cooperation will include payment of such amounts into the Plan, to be allocated to Employees of the Participating Employer, which are reasonably required to maintain the tax-qualified status of the Plan.

(B) Indemnity. Each Participating Employer will indemnify and hold harmless the Plan Administrator, the Lead Employer, the Plan, the Trustee, other Plan fiduciaries, other Participating Employers, Participants and Beneficiaries, and as applicable, their subsidiaries, officers, directors, shareholders, employees, and agents, and their respective successors and assigns, against any cause of action, loss, liability, damage, cost, or expense of any nature whatsoever (including, but not limited to, attorney’s fees and costs, whether or not suit is brought), as well as all IRS or DOL Plan disqualification, fiduciary breach or other sanctions, compliance fees or penalties) arising out of or relating to: (1) the Participating Employer’s noncompliance with any of the Plan’s terms or requirements; or (2) the Participating Employer’s intentional or negligent act or omission with regard to the Plan.

     12.11 PEO TRANSITION RULES. If the Lead Employer is a PEO, and the Article XII Effective Date is after the later of the Plan’s Effective Date or Restated Effective Date, then the following transition rules will apply to the Transition Year:

(A) Definition of Transition Year. The Transition Year is the Plan Year which includes the Article XII Effective Date.

(B) Definition of Look-Back Year. The Look-Back Year is the Plan Year immediately prior to the Transition Year.

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(C) Employee Status. Unless the PEO designates otherwise in Appendix B, for Plan Years ending prior to the Transition Year the Worksite Employees will be deemed to be Employees of the PEO, except as otherwise specified in this Article XII.

(D) Distribution. The limitations of Section 6.01(C)(4) will not prohibit making any distribution required by Rev. Proc. 2002-21.

(E) Top-heavy. The Determination Date under Section 10.06(B) for the Transition Year is the last day of the Transition Year. In its Adoption Agreement, the PEO will specify whether Employer Contributions for Worksite Employees for Plan Years prior to the Transition Year will be treated as contributions by the PEO, or as contributions by the CO. If the contributions are treated as PEO contributions, then the Plan Administrator will disregard Account Balances relating to those contributions (i.e., Employer Contribution Account Balances prior to the Transition Year and Earnings thereon) in determining whether the separate plan of a Participating Employer is top-heavy for the Transition Year and later Plan Years under Section 12.06.

(F) ADP/ACP Testing. The Plan Administrator will treat the Transition Year as the first Plan Year of the Plan for purposes of ADP and ACP testing of a CO’s separate plan under Section 12.05.

(G) HCE Determination. If the Worksite Employee performed services for the CO during the Look-Back Year, then only for purposes of determining HCE status, the Worksite Employee will be deemed to be an Employee of the CO for the Transition Year and the CO will be deemed to have paid to the Worksite Employee any Compensation the PEO paid to the Worksite Employee during the Transition Year.

(H) Required Minimum Distributions. The following rules apply with regard to each Worksite Employee who, prior to January 1, 2004: (i) attained age 70¹/2 (ii) was still on the payroll of the PEO, and (iii) had not commenced receiving RMDs under Section 6.02.

     (1) Determination of 5% owner status. The Plan Administrator will determine whether such a Worksite Employee is a more than 5% owner under Section 6.02(E)(7)(a) based on whether the Worksite Employee is a more than 5% owner on the first day of the Transition Year. Alternatively, in Appendix B, the PEO may specify that the determination is made with reference to the Plan Year ending in the calendar year the Worksite Employee attained age 70¹/2.

     (2) Required Beginning Date. The Required Beginning Date under Section 6.02(E)(7) of a more than 5% owner under Section 12.11(H)(1) will be April 1, 2005.

     12.12 INVOLUNTARY TERMINATION. Unless the Lead Employer provides otherwise in Appendix B, the Lead Employer may terminate the participation of any Participating Employer (hereafter, “Terminated Employer”) in this Plan. If the Lead Employer acts under this Section 12.12, the following will occur:

(A) Notice. The Lead Employer will give the Terminated Employer a notice of the Lead Employer’s intent to terminate the Terminated Employer’s status as a Participating Employer of the Plan. The Lead Employer will provide such notice not less than 30 days prior to the Effective Date of termination unless the Lead Employer determines that the interests of Plan Participants requires earlier termination.

(B) Spin-off. The Lead Employer will establish a new Defined Contribution Plan, using the provisions of this Plan with any modifications contained in the Terminated Employer’s Participation Agreement, as a guide to establish a new Defined Contribution Plan (the “Spin-off Plan”). The Lead Employer will direct the Trustee to transfer (in accordance with the rules of Code §414(l) and the provisions of Section 11.06) the Accounts of the Employees of the Terminated Employer to the Spin-off Plan. The Terminated Employer will be the Employer, Plan Administrator, and Sponsor of the Spin-off Plan. The Trustee of the Spin-off Plan will be the person or entity designated by the Terminated Employer, or, in the absence of any such designation, the Terminated Employer itself. If state law prohibits the Terminated Employer from serving as Trustee, the Trustee is the president of a corporate Terminated Employer, the managing partner of a partnership Terminated Employer, the managing member of a limited liability company Terminated Employer, the sole proprietor of a proprietorship Terminated Employer, or in the case of any other entity type, such other person with title and responsibilities similar to the foregoing. Notwithstanding the preceding sentence, the Lead Employer may designate a financial institution as Trustee if the Lead Employer, in its sole discretion, deems it necessary to protect the interests of the Participants. The Lead Employer may charge the Terminated Employer or the Accounts of the Employees of the Terminated Employer with the reasonable expenses of establishing the Spin-off Plan.

(C) Alternatives. The Terminated Employer, in lieu of the Lead Employer’s creation of the Spin-off Plan under Section 12.12(B), may elect one of the two other alternatives under Sections 12.12(C)(1) or (2) to effect the termination of its status as a Participating Employer. To elect an alternative, the Terminated Employer must give notice to the Lead Employer of its choice, and must supply any documentation which the Lead Employer reasonably may require as soon as is practical and before the Effective Date of termination. If the Lead Employer has not received such notice and any required documentation within 5 days prior to the Effective Date of termination, the Lead Employer may proceed with the Spin-off Plan under Section 12.12(B).

     (1) Distribution. The Lead Employer will direct the Trustee to distribute the Account Balances of the Employees of the Terminated Employer as soon as practical after termination. However, if such an Employee also is employed by another Participating Employer, the Trustee will not distribute, but will continue to hold that Employee’s Account Balance pursuant to the terms of the Plan. All Account Balances distributed under this Section 12.12(C)(1) will be 100% Vested. However, no such distribution may violate the restrictions of Sections 6.01(C)(4)(b) and (c). If this Plan includes Restricted 401(k) Accounts under Section 6.01(C)(4)(b), the termination of the Participating Employer’s sponsorship of this Plan will be deemed to be a

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termination of the Plan and the Plan Year as to the Employees receiving distributions under this Section 12.12(C)(1); however, the Terminated Employer must deliver to the Lead Employer such documentation or other assurances that the Plan Administrator reasonably requires to affirm that the Terminated Employer has neither established nor will establish a Alternative Defined Contribution Plan in violation of
Section 11.05(F).

     (2) Transfer. The Lead Employer will direct the Trustee to transfer (in accordance with the rules of Code §414(l) and the provisions of Section 11.06) the Accounts of the Employees of the Terminated Employer to a qualified plan the Terminated Employer maintains. Under this Section 12.12(C)(2), the Terminated Employer must deliver to the Lead Employer in writing such identifying and other relevant information regarding the transferee plan and must provide such assurances as the Lead Employer may reasonably require that the transferee plan is a qualified plan.

(D) Participants. The Employees of the Terminated Employer will cease to be eligible to accrue additional benefits under the Plan with respect to Compensation paid by the Terminated Employer, as of the Effective Date of the termination. To the extent that these Employees have accrued but unpaid contributions as of such Effective Date, the Terminated Employer will pay such amounts to the Plan or to the Spin-off Plan no later than 30 days after the Effective Date of termination, unless the Terminated Employer has elected the transfer alternative under Section 12.12(C)(2).

(E) Consent. By its execution of the Participation Agreement, the Terminated Employer specifically consents to the provisions of this Article XII, and in particular, this Section 12.12 and agrees to perform its responsibilities with regard to the Spin-off Plan, if necessary.

     12.13 VOLUNTARY TERMINATION. A Participating Employer (hereafter “Withdrawing Employer”) may voluntarily withdraw from participation in the Plan at any time. If and when a Withdrawing Employer wishes to withdraw, the following will occur:

(A) Notice. The Withdrawing Employer will inform the Lead Employer and the Plan Administrator of its intention to withdraw from the Plan. The Withdrawing Employer must give the notice not less than 30 days prior to the Effective Date of its withdrawal.

(B) Procedure. The Withdrawing Employer and the Lead Employer will agree upon procedures for the orderly withdrawal of the Withdrawing Employer from the Plan. Such procedures, as they relate to the Accounts of the Employees of the Withdrawing Employer, may include any alternative described in Sections 12.12(B) and (C).

(C) Costs. The Withdrawing Employer will bear all reasonable costs associated with withdrawal and transfer under this Section 12.13.

(D) Participants. The Employees of the Withdrawing Employer will cease to be eligible to accrue additional benefits under the Plan as to Compensation paid by the Withdrawing Employer, as of the Effective Date of withdrawal. To the extent that such Employees have accrued but unpaid contributions as of such Effective Date, the Withdrawing Employer will contribute such amounts to the Plan or the Spin-off Plan promptly after the Effective Date of withdrawal, unless the Accounts are transferred to a qualified plan the Withdrawing Employer maintains.

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EX-10.14.A

Exhibit 10.14(a)

FIRST AMENDMENT TO THE
STERLING CHEMICALS, INC. COMPREHENSIVE WELFARE
BENEFIT PLAN

          Whereas, Sterling Chemicals, Inc. (the “Corporation”) currently maintains a Comprehensive Welfare Benefit Plan (the “Plan”);

          Whereas, pursuant to Section 10.02 of the Plan, the Sterling Chemicals, Inc. Employee Benefits Plans Committee ( the “Committee”) has the right to amend the Plan or any benefit agreement at any time; and

          Whereas, the Committee desires to, and hereby elects to, modify the medical and prescription drug benefit programs under the Plan as provided in this First Amendment to the Plan (this “Amendment”);

          Now, Therefore, the Plan is hereby amended as follows:

Article IV

Eligibility and Participation

          Section 1. Amendment of Article IV of the Plan. Article IV of the Plan is hereby amended by adding: notwithstanding any other provisions of the Retiree Medical Plan and the Retiree Prescription Drug Plan, a Participant who (a) receives an offer during July, 2008 from the Employer to participate in the voluntary hourly or salaried exit program or salaried involuntary severance program due to the reduction in force by means of an official letter from the Employer, (b) duly elects to accept such offer and presents his written election in accordance with the program before the deadline for making such election and (c) who meets the required 10 years of service eligibility but is not yet age 55, shall be eligible to participate in the Retiree Medical program and Retire Prescription Drug program once attaining age 55; if such employee subsequently elects to retire under the Sterling Chemicals, Inc. Salaried Employees Pension Plan or the Sterling Chemicals, Inc. Hourly Paid Employees Pension Plan upon reaching age 55.

          Section 2. Effect of Amendments. Except as amended and modified by this Amendment, the Plan shall continue in full force and effect. The Plan and this Amendment shall be read, taken and construed as one and the same instrument. This Amendment shall supersede any provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Amendment. Upon the effectiveness of this Amendment, each reference in the Plan to “this Plan” or “the Plan” shall mean and be a reference to the Plan as amended hereby.

          Section 3. Binding Effect. This Amendment shall inure to the benefit of, and shall be binding upon the Employer (as defined in the Plan) and its successors and assigns and upon the participants in the Plan and their respective heirs, executors, personal representatives, administrators, successors and assigns.

          Section 4. Severability. Should any clause, sentence, paragraph, subsection or Section of this Amendment be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Amendment, and the part or parts of this Amendment so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom as if such stricken part or parts had never been included herein.

          Section 5. Governing Law. To The Extent Not Superseded By The Laws Of The United States, This Amendment Shall Be Construed and Enforced in Accordance With, and the Rights of the Parties Shall Be Governed By, the Internal Laws of the State of Texas, Without Reference to Principles of Conflicts of Law.

          In Witness Whereof, the Corporation has caused this Amendment to be duly executed in its name and on its behalf by its proper officer thereunto duly authorized effective as of July 10, 2008.

Sterling Chemicals, Inc.

/s/ Kenneth M. Hale

Kenneth M. Hale

Senior Vice President and General Counsel

IMPORTANT NOTE

Prudential Financial, its contractors and any employees of Prudential Financial or its contractors cannot provide you with legal advice in connection with the execution of this document. Prior to execution of this document, you should consult your attorney on whether this document is appropriate for you.

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EX-10.14.B

Exhibit 10.14(b)

STERLING CHEMICALS, INC.

FLEXIBLE SPENDING ACCOUNT PLAN

(AMENDED AND RESTATED AS OF JANUARY 1, 2008)

TABLE OF CONTENTS

		Page
SECTION 1. INTRODUCTION			1
1.1	The Plan		1
1.2	Cafeteria Plan Status		1
1.3	Plan Administrator		1
1.4	Effective Date		1
1.5	Plan Year		1
1.6	Benefit Plan Year		1
SECTION 2. DEFINITIONS			2
2.1	Affiliated Employer		2
2.2	Code		2
2.3	Company		2
2.4	Compensation		2
2.5	Dental Plan		2
2.6	Dental Expense Contributions		2
2.7	Dependent Care Expense Reimbursement Supplement		2
2.8	Earnings Reduction Agreement		2
2.9	Election Period		2
2.10	Employee		3
2.11	Employer		3
2.12	Health Care Expense Reimbursement Supplement		3
2.13	Highly Compensated Employee		3
2.14	Key Employee		3
2.15	Medical Benefits Plan		4
2.16	Medical Expense Contributions		4
2.17	Participant		4
2.18	Plan		4
2.19	Plan Committee		4
2.20	Plan Year		4
2.21	Qualified Benefit		4
2.22	Termination of Employment		4
SECTION 3. ELIGIBILITY AND PARTICIPATION			4
3.1	Eligibility		4
3.2	Commencement of Participation		5

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		Page
3.3	Termination of Participation		5
3.4	Continuation of Coverage		5
SECTION 4. QUALIFIED BENEFITS AND ELECTION PROCEDURE			5
4.1	Qualified Benefits		5
4.2	Reference to Other Documents		6
4.3	Election of Qualified Benefits in Lieu of Cash		6
4.4	Election Procedure		6
4.5	Election Cutback		8
4.6	Forfeiture of Unused Benefits		8
4.7	Revocation of Election		8
SECTION 5. FORFEITURES			12
5.1	Unused Credits		12
5.2	Forfeiture Caused by Termination, etc		12
5.3	Forfeiture of Unused Credits		12
SECTION 6. NONDISCRIMINATION			13
6.1	Provisions to Prevent Discrimination		13
6.2	Nondiscrimination not Guaranteed		14
6.3	Inclusion in Income		14
SECTION 7. PLAN ADMINISTRATION			14
7.1	Plan Administrator		14
7.2	Plan Administrator's General Powers, Rights and Duties		14
7.3	Nondiscriminatory Exercise of Authority		15
7.4	Information Required by Plan Administrator		15
7.5	Examination of Records		15
7.6	Reliance on Tables, etc		15
7.7	Claims and Review Procedures		15
7.8	Indemnification of Plan Administrator		16
SECTION 8. AMENDMENT AND CONTINUATION OF SECTION 125			16
8.1	Amendment and Termination		16
8.2	Continuation of Section 125		16
SECTION 9. ADOPTION OF PLAN BY AFFILIATED EMPLOYERS			16
9.1	Adoption of Plan		16
9.2	Effect of Adoption		17

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		Page
9.3	Termination of Participation by Affiliated Employer		17
SECTION 10. GENERAL PROVISIONS			17
10.1	Notices		17
10.2	Source of Payments		17
10.3	Fiscal Records		17
10.4	Employment Rights		18
10.5	No Vested Interest		18
10.6	Interests Not Transferable		18
10.7	No Guarantee of Tax Consequences		18
10.8	Facility of Payment		18
10.9	Limit on Liability		18
10.10	Method of Compensation Reduction		18
10.11	Gender and Number		19
10.12	Controlling State Law		19
10.13	Severability		19
10.14	Statutory References		19
10.15	Headings		19
HEALTH CARE EXPENSE REIMBURSEMENT SUPPLEMENT TO THE STERLING CHEMICALS, INC. FLEXIBLE SPENDING ACCOUNT PLAN			20
DEPENDENT CARE EXPENSE REIMBURSEMENT SUPPLEMENT TO THE STERLING CHEMICALS, INC. FLEXIBLE SPENDING ACCOUNT PLAN			29

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STERLING CHEMICALS, INC.
FLEXIBLE SPENDING ACCOUNT PLAN

(Amended and Restated Effective as of January 1, 2008)

SECTION 1.
Introduction

     Sterling Chemicals, Inc. desires to merge the Sterling Chemicals, Inc. Hourly-Paid Employees’ Flexible Spending Account Plan and the Sterling Chemicals, Inc. Salaried Employees’ Flexible Spending Account Plan into a single plan. The provisions contained in this document shall constitute the Sterling Chemicals, Inc. Flexible Spending Account Plan (the “Plan”), which is the merger of and an amendment and restatement of the Sterling Chemicals, Inc. Hourly-Paid Employees’ Flexible Spending Account Plan and the Sterling Chemicals, Inc. Salaried Employees’ Flexible Spending Account Plan (collectively, “Former Plans”) as they existed immediately prior to the Effective Date of this Plan. The Former Plans were originally effective as of August 1, 1986 and were amended and restated as of January 1, 1991.

     In order to effect the merger of the Former Plans, the Sterling Chemicals, Inc. Flexible Spending Account Plan is hereby amended and restated effective January 1, 2008 to read as hereinafter set forth:

     1.1 The Plan. The purpose of this Plan is to provide the employees of Sterling Chemicals, Inc. and its Affiliated Employers the opportunity to better provide for their welfare by providing a choice between cash and Qualified Benefits.

     1.2 Cafeteria Plan Status. This Plan is intended to qualify as a cafeteria plan under Section 125 of the Internal Revenue Code of 1986, as amended (“Code”), and is to be interpreted and administered in a manner consistent with the requirements of Code Section 125.

     1.3 Plan Administrator. This Plan is administered by the Employee Benefits Plans Committee of the Company which is given the authority by the Company to serve as Plan Administrator hereunder (“Plan Administrator”). The Plan Administrator shall be a “Named Fiduciary” for purposes of Section 402(a)(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

     1.4 Effective Date. The Effective Date of this amended and restated Plan is January 1, 2008.

     1.5 Plan Year. This Plan is administered on the basis of a Plan Year (“Plan Year”). The Plan Year shall mean the Plan’s accounting year of twelve (12) months commencing on January 1 of each year and ending on the following December 31.

     1.6 Benefit Plan Year. The Benefit Plan Year shall mean the Plan Year. The Benefit Plan Year for an Employee who first becomes eligible to participate hereunder during a Plan Year shall be the period commencing on the date such Employee becomes a Participant and ending on the last day of the Plan Year. A Benefit Plan Year will be terminated prior to the end

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of a Plan Year for a Participant whose participation has ceased in accordance with the provisions of the Plan.

SECTION 2.
Definitions

     Wherever used herein, the following terms have the following meaning unless a different meaning is clearly required by the context:

     2.1 Affiliated Employer. “Affiliated Employer” means an entity which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code), or which is a trade or business (whether or not incorporated) which is under common control (within the meaning of Section 414(c) of the Code), or which is a member of an affiliated service group of employers (within the meaning of Section 414(m) of the Code) with the Employer; and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code.

     2.2 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     2.3 Company. “Company” means Sterling Chemicals, Inc.

     2.4 Compensation. “Compensation” means the compensation (including payments for vacation or sick pay) paid to a Participant by the Employer during the Plan Year for services performed for the Employer which is currently includable in gross income pursuant to applicable provisions of the Code. Compensation shall be determined before reduction under an Earnings Reduction Agreement under the Plan (or under another cafeteria plan described in Section 125 of the Code), or any compensation deferral agreement under a plan described in Section 401(k) or Section 408(k) of the Code. Compensation shall also include any payments under the disability programs maintained by the Employer prior to a Participant’s Termination of Employment.

     2.5 Dental Plan. “Dental Plan” means the Dental Plan for eligible Employees maintained by the Employer.

     2.6 Dental Expense Contributions. “Dental Expense Contributions” means the contributions toward an Employee’s portion of the premiums under the Dental Plan.

     2.7 Dependent Care Expense Reimbursement Supplement. “Dependent Care Expense Reimbursement Supplement” means the Dependent Care Expense Reimbursement Supplement maintained as part of this Plan by the Company.

     2.8 Earnings Reduction Agreement. “Earnings Reduction Agreement” shall mean a written agreement signed by a Participant by which he agrees to reduce his cash compensation in order to receive one or more optional benefits under this Plan.

     2.9 Election Period. “Election Period” shall mean the time interval during which Employees may enroll or re-enroll in this Plan and Participants may modify or revoke their elections.

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     2.10 Employee. “Employee” shall mean any common-law employee of the Employer. The term “Employee” shall also include former employees for the limited purpose of allowing continued eligibility for benefits under the Plan for the remainder of the Plan Year in which an Employee ceases to be employed by the Employer, but only to the extent specifically provided elsewhere under this Plan.

     2.11 Employer. “Employer” shall mean the Company and any other Affiliated Employer of the Company that has adopted this Plan.

     2.12 Health Care Expense Reimbursement Supplement. “Health Care Expense Reimbursement Supplement” means the Health Care Expense Reimbursement Supplement maintained as part of this Plan by the Company.

     2.13 Highly Compensated Employee. “Highly Compensated Employee” means an Employee as defined under Section 125 of the Code and regulations thereunder who is:

     (a) an officer;

     (b) a shareholder owning more than five percent (5%) of the voting power or value of all classes of stock of the Employer;

     (c) a highly compensated employee; or

     (d) a spouse or dependent (within the meaning of Section 152 of the Code) of an individual described in subparagraph (a), (b), or (c) above.

     2.14 Key Employee. “Key Employee” means any Employee or former Employee of the Employer or Affiliated Employer (and the beneficiaries of such Employees) as defined under Section 416(i)(1)(A) of the Code who at any time during the Plan Year is:

     (a) An officer of the Employer or Affiliated Employer having annual compensation (within the meaning of Code Section 414(q)(4)) from the Employer or Affiliated Employer for a Plan Year greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002).

     For purposes of this paragraph (a), no more than 50 Employees (or, if lesser, the greater of (i) three (3) or (ii) ten percent (10%) of the Employees shall be treated as officers. Employees described in Code Section 414(q)(5) shall be excluded in making this determination. The number of Employees for purposes of determining the maximum number of officers to be taken into account shall be based on the greatest number of Employees during the Plan Year.

     (b) An Employee who owns (or is considered as owning within the meaning of Section 318 of the Code) more than five percent (5%) interest in the Employer (or in an Affiliated Employer); or

     (c) An Employee who owns (or is considered as owning within the meaning of Section 318 of the Code) more than one percent (1%) interest in the Employer (or in

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an Affiliated Employer) and whose compensation (within the meaning of Code Section 414(q)(4)) for the Plan Year from the Employer and all Affiliated Employers is more than $150,000.

     Notwithstanding any provisions herein to the contrary, the determination of who is a Key Employee shall be made in accordance with Sections 125 and 416(i) of the Code and the regulations thereunder.

     2.15 Medical Benefits Plan. “Medical Benefits Plan” shall mean the Medical Benefits Plan (which includes a prescription drug benefit) maintained for eligible Employees of the Employer.

     2.16 Medical Expense Contributions. “Medical Expense Contributions” shall mean contributions toward an Employee’s portion of the premiums under the Medical Benefits Plan.

     2.17 Participant. “Participant” shall mean any Employee of an Employer who participates in this Plan.

     2.18 Plan. “Plan” shall mean the Sterling Chemicals, Inc. Flexible Spending Account Plan.

     2.19 Plan Committee. “Plan Committee” shall mean the Employee Benefits Plans Committee of Sterling Chemicals, Inc.

     2.20 Plan Year. “Plan Year” shall mean the twelve (12) month period commencing on each January 1 and ending on the following December 31.

     2.21 Qualified Benefit. “Qualified Benefit” shall mean (i) optional benefits described in Section 4.1 offered to a Participant under the Plan, the value or cost of which, with the application of Section 125(a) of the Code, is not includable in the gross income of the Participant by reason of an express provision of the Code; and (ii) any other benefit including cash which may be permitted from time to time as a Qualified Benefit (whether or not excludable from gross income of the Participant) under Section 125 of the Code and applicable regulations.

     2.22 Termination of Employment. “Termination of Employment” or “Terminates Employment” shall mean the severance of an Employee’s employment relationship with the Employer and all other Affiliated Employers.

SECTION 3.
Eligibility and Participation

     3.1 Eligibility. Each regular, full-time Employee who is scheduled to work at least 20 hours per week for the Employer shall be eligible to participate in this Plan. All eligible Employees shall become eligible to participate in a particular Qualified Benefit offered under the Plan in accordance with the terms of such Qualified Benefit, as determined by the Plan Administrator. In relation to the Health Care Expense Reimbursement Supplement and the Dependent Care Expense Reimbursement Supplement, all Employees shall become eligible to

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participate in such Supplements as of the first day that the eligibility requirements set forth in the first sentence of this Section 3.1 are satisfied.

     3.2 Commencement of Participation. Each eligible Employee shall become a Participant on the effective date of any election made pursuant to Section 4.3.

     3.3 Termination of Participation. A Participant shall cease to be a Participant in this Plan on the earlier of:

     (a) the date he terminates or revokes his election to participate in this Plan pursuant to Section 4.4(c) below; or

     (b) the date he Terminates Employment with an Employer or retires or dies; or

     (c) the date he ceases to satisfy the eligibility provisions set forth in Section 3.1; or

     (d) the date the Plan is terminated; or

     (e) the date his Employer ceases to participate in the Plan.

     3.4 Continuation of Coverage. Notwithstanding any provision to the contrary contained in this Plan, in the event the Employer is required by Code Section 4980B, or any regulations promulgated thereunder, to provide continuation of coverage under an employer-sponsored group health plan upon the occurrence of events described therein which would otherwise result in loss of coverage, then to the extent any optional benefit available for selection under the Plan is subject to such continuation of coverage rules, no provision herein shall operate to deny a continuation of coverage option with regard to such benefit. Such continuation of coverage option shall be offered in such manner and to such person or persons as required under the Code. A person who elects to receive such continuation coverage shall be required to pay the cost thereof, with the amount of such cost and the method of payment thereof being determined in a manner consistent with the applicable requirements of the Code, and regulations thereunder. Continuation of coverage premiums under the Code shall not be paid with pre-tax dollars under the Plan.

SECTION 4.
Qualified Benefits and Election Procedure

     4.1 Qualified Benefits. A Participant may elect under this Plan to receive his total Compensation for any Plan Year in cash or to designate that a specified portion of his Compensation be applied by the Employer toward one or more of the following benefits:

     (a) Payment of Medical Expense Contributions as defined in the Medical Benefits Plan or premiums for membership in a health maintenance organization extended to Participants by the Employer, not to exceed an amount equal to the Medical Expense Contributions under the Medical Benefits Plan for the selected level of coverage (“Option A”);

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     (b) Benefits available to the Participant under the Health Care Expense Reimbursement Supplement (“Option B”);

     (c) Benefits available to the Participant under the Dependent Care Expense Reimbursement Supplement (“Option C”); and

     (d) Payment of Dental Expense Contributions as defined in the Dental Plan extended to the Participants by the Employer, not to exceed an amount equal to the Dental Expense Contributions under the Dental Plan for the selected level of coverage (“Option D”).

     4.2 Reference to Other Documents. The types, amounts, and costs of coverage and benefits of the Qualified Benefits described in Section 4.1 and other terms and conditions of eligibility for participation, coverage, and benefits may be set forth in separate written insurance contracts, certificates of coverage, separate written plans, contracts, supplements or other documents which represent such other Qualified Benefits. This Plan shall not operate in any way to modify the terms or conditions of such Qualified Benefits or be construed to require participation or coverage under such Qualified Benefits where such coverage or benefits are not available to a Participant under the terms thereof. Such insurance contracts, certificates of coverage, separate written plans, contracts, supplements or other documents providing such Qualified Benefits shall be controlling in every regard to the extent there is any conflict or inconsistency between the terms thereof and this Plan, provided, however, the terms and provisions of the documents evidencing the Qualified Benefits and the terms and provisions of the Plan shall be construed as mutually consistent to the fullest extent possible.

     4.3 Election of Qualified Benefits in Lieu of Cash. A Participant may elect under this Plan to receive one or more of the Qualified Benefits described in Section 4.1 in lieu of cash Compensation in accordance with the procedure described in Section 4.4. If a Participant elects Options A or D, the Participant’s cash Compensation will be reduced, and an amount equal to such reduction will be applied by the Employer to pay the Participant’s corresponding expense contributions under the corresponding plan on behalf of the Participant. If a Participant elects Options B or C, the Participant’s cash Compensation will be reduced, and an amount equal to the reduction will be credited by the Employer to a reimbursement account maintained for the Participant in accordance with the Health Care Expense Reimbursement Supplement or the Dependent Care Expense Reimbursement Supplement, as the case may be.

     4.4 Election Procedure.

     (a) Election Period and Procedure. Except as provided in Section 4.7 below, the benefit options may be elected, modified or revoked by a Participant only during an Election Period. Each Election Period shall begin approximately sixty (60) days prior to the commencement of the next Benefit Plan Year, as determined by the Plan Administrator. Each Election Period shall remain open until such date as the Plan Administrator shall determine, which date must be no later than the last day of the current Benefit Plan Year.

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     At the beginning of each Election Period, the Plan Administrator shall provide one or more written election forms and Earnings Reduction Agreements to each Participant and each other eligible Employee. Each Participant or other eligible Employee shall make his elections, revocations or modifications on the necessary forms and shall agree to a reduction in Compensation by executing an Earnings Reduction Agreement.

     The amount of the reduction in the Participant’s Compensation for the Benefit Plan Year for the Option A election shall be the amount of the Medical Expense Contributions under the Medical Benefits Plan or the amount of the Participant’s premium payments to the applicable health maintenance organization, not to exceed the Medical Expense Contributions under the Medical Benefits Plan for the selected level of coverage. The amount of the reduction in the Participant’s Compensation for the Benefit Plan Year for the Option D election shall be the amount of the Dental Expense Contributions under the Dental Plan, not to exceed the Dental Expense Contributions under the Dental Plan for the selected level of coverage. The amount of the reduction in the Participant’s Compensation for the Benefit Plan Year for any Participant who elects Option B and/or Option C shall be a specified amount per pay period as elected by the Participant, subject to the limitations of the Health Care Expense Reimbursement Supplement and the Dependent Care Expense Reimbursement Supplement.

     Each election form and Earnings Reduction Agreement must be completed by the Participant and returned to the Plan Administrator on or before such date as the Plan Administrator shall specify, which date shall be no later than the end of the applicable Election Period.

     The Participant’s contribution or share of the cost of each elected Qualified Benefit, pursuant to an Earnings Reduction Agreement, shall be deemed (i) Employer contributions on behalf of such Participant to the extent that such Participant’s contribution or share of the cost of any such Qualified Benefit is excludable from income under applicable provisions of the Code and regulations; and (ii) Employee contributions to the extent that such Participant’s contribution or share of the cost of any Qualified Benefit is not excludable from income. The portion of an Earnings Reduction Agreement which applies to the portion of the Participant’s contribution or share of the cost of each elected Qualified Benefit which is a Qualified Benefit that may be paid on a non-taxable basis shall apply only to amounts of Compensation that (i) the Participant has not actually or constructively received, and (ii) do not otherwise become currently available to the Participant.

     (b) New Participants. Newly-hired eligible Employees who are hired after the Effective Date shall have an Election Period that shall begin on the date they commence employment and shall end thirty (30) days after the date of hire.

     Any eligible Employee who is eligible to elect to participate may do so as provided in Section 4.4(a) above.

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     (c) Modification or Revocation of Election; Failure to Elect. Except as provided in Section 4.7 below, each option election shall remain in effect for the applicable Plan Year for which such election applies. A Participant may modify or revoke an election to participate during the Election Period for the next Plan Year.

     Unless modified or revoked during an Election Period, elections relating to Option A and Option D shall be automatically renewed for each successive Benefit Plan Year, unless the Plan Administrator provides timely notice to Participants that a new election form must be completed for a specific Plan Year. With respect to Option B and Option C, a Participant who fails to return a completed election form or Earnings Reduction Agreement to the Plan Administrator on or before the end of an Election Period shall be deemed to have elected to receive his total Compensation in cash and shall not be eligible to participate in Options B or C until the next Benefit Plan Year.

     A Participant who revokes his participation in this Plan during an Election Period is not eligible to re-enroll until the next succeeding Benefit Plan Year.

     4.5 Election Cutback. No election shall become valid to the extent it shall cause a Participant’s contributions to any retirement plan maintained by an Employer that is qualified under Section 401(a) of the Code, to exceed the limits placed on contributions by Section 415 of the Code.

     4.6 Forfeiture of Unused Benefits. Any amount of Compensation reduction not used for benefits incurred during a Plan Year shall be forfeited by the Participant to the Company.

     4.7 Revocation of Election. An Employee may not revoke an election of any available benefit after the start of the Benefit Plan Year and make a new election with respect to the remainder of the Benefit Plan Year unless both the revocation and new election are on account of, and consistent with, the requirements of this Section 4.7 and Treas. Reg. § 1.125-4.

     (a) Special Enrollment Rights. An Employee may revoke an election under a group health plan during a Benefit Plan Year and make a new election for the remaining portion of the Benefit Plan Year if the revocation and new election are both on account of a special enrollment event and are consistent with the special enrollment event. A special enrollment event occurs when an Employee is entitled to special enrollment rights under Code Section 9801(f) in relation to coverage under a group health plan as part of the portability provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

     (b) Change in Status. An Employee may revoke an election during a Benefit Plan Year and make a new election for the remaining portion of the Benefit Plan Year if the revocation and new election are both on account of a change in status and are consistent with the change in status. The following events shall constitute a change in status:

     (1) Legal Marital Status. Events that change an Employee’s legal marital status, including marriage, divorce, death of a spouse, legal separation or annulment in accordance with applicable state law;

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     (2) Number of Dependents. Events that change an Employee’s number of dependents, including birth, adoption, placement for adoption, or death of a dependent;

     (3) Employment Status. Any of the following events that change the employment status of the Employee, spouse, or dependent: termination or commencement of employment, a strike or lockout, commencement or return from an unpaid leave of absence, or a change in worksite. In addition, if the eligibility conditions of this Plan or other employee benefit plan of the employer of the Employee, spouse, or dependent depend on the employment status of the individual and there is a change in that individual’s employment status with the consequence that the individual becomes (or ceases to be) eligible under the plan, then that change constitutes a change in employment under this subsection;

     (4) Dependent Eligibility Status. Events that cause the dependent to satisfy or cease to satisfy eligibility requirements for coverage on account of attainment of age, student status, or any similar circumstance;

     (5) Residence. A change in the place of residence of the Employee, spouse, or dependent; or

     (6) Such other event or events which may constitute a change in status permitting the revocation of an election and, if applicable, the filing of a new election during a Benefit Plan Year as permitted from time to time under applicable law and regulations.

     Benefit election changes under this provision are consistent with status changes only if they are necessary and appropriately reflect the result of the change of status.

     (c) Judgment, Decree, or Court Order. In the case of a judgment, decree, or order (collectively referred to herein as “order”) resulting from a divorce, legal separation, annulment, or change in legal custody (including a qualified medical child support order defined in Section 609 of ERISA) which requires accident or health coverage for an Employee’s child or for a foster child who is a dependent of the Employee, an Employee may change an election to provide coverage for the child for a benefit offered under the Plan if the order requires such coverage under the Employee’s plan; or to cancel coverage for the child if the order requires the Employee’s spouse, former spouse or another individual to provide coverage for such child and that coverage is, in fact, provided.

     (d) Entitlement to Medicare or Medicaid. If an Employee, spouse or dependent who is enrolled in an accident or health plan of the Employer becomes entitled to coverage (i.e., becomes enrolled) under Part A or Part B of Title XVIII of the Social Security Act (Medicare) (Public Law 89-97 (79 Stat. 291)) or Title XIX of the Social Security Act (Medicaid) (Public Law 89-97 (79 Stat. 343)), other than coverage consisting solely of benefits under Section 1928 of the Social Security Act (the program

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for distribution of pediatric vaccines), the Employee may make a prospective election change to cancel or reduce coverage of that Employee, spouse, or dependent under the accident or health plan. In addition, if an Employee, spouse, or dependent who has been entitled to such coverage under Medicare or Medicaid loses eligibility for such coverage, the Employee may make a prospective election to commence or increase coverage of that Employee, spouse, or dependent under the accident or health plan.

     (e) Family and Medical Leave Act (“FMLA”). An Employee taking leave under the FMLA (Public Law 102-530 (88 Stat. 829)) may revoke an existing election of accident or health coverage during a Plan Year and make such other election for the remaining portion of the period of coverage as may be provided for under FMLA.

     (f) Changes in Cost. If the cost of a Qualified Benefit increases or decreases during the Plan Year and, under the terms of the plan, Participants are required to make a corresponding change in their payments, the amount of a Participant’s election pertaining to the payment will automatically increase or decrease, as the case may be, for all affected Participants.

     Notwithstanding the foregoing, if the cost to an Employee for a Qualified Benefit significantly increases or significantly decreases during the Plan Year, the Employee may make a corresponding change in election under the Plan. Changes that may be made include commencing participation in the Plan for the option with a decrease in cost, or, in the case of an increase in cost, revoking an election for that coverage and, in lieu thereof, either receiving on a prospective basis coverage under another Qualified Benefit providing similar coverage or dropping coverage if no other similar Qualified Benefit is available.

     (g) Change in Coverage.

     (1) Significant Curtailment Without Loss of Coverage. If an Employee (or an Employee’s spouse or dependent) has a significant curtailment of coverage under a Qualified Benefit during a Plan Year that is not a loss of coverage (such as a significant increase in the deductible, co-pay or out-of-pocket cost under an accident or health plan), an Employee who had been participating in such plan may revoke an existing election with respect to that coverage and make a new election on a prospective basis for coverage under another Qualified Benefit providing similar coverage. Coverage under a plan is significantly curtailed only if there is an overall reduction in coverage provided to participants under the plan so as to constitute reduced coverage to participants generally.

     (2) Significant Curtailment With Loss of Coverage. If an Employee (or an Employee’s spouse or dependent) has a significant curtailment of coverage under a Qualified Benefit during a Plan Year that is a loss of coverage, an Employee may revoke an existing election with respect to coverage thereunder and may elect to either (i) receive on a prospective basis coverage under another Qualified Benefit providing similar coverage or (ii) drop coverage if no similar Qualified Benefit is available. For purposes of this subparagraph, a loss of

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coverage means a complete loss of coverage under the Qualified Benefit or other coverage option (including the elimination of a Qualified Benefit, an HMO ceasing to be available in the area where the individual resides, or the individual losing all coverage under the Qualified Benefit by reason of an overall lifetime or annual limitation). In addition, the Plan may, at the direction of the Administrator, treat the following as a loss of coverage:

     (i) A substantial decrease in the medical care providers available under the Qualified Benefit (such as a major hospital ceasing to be a member of a preferred provider network or a substantial decrease in the physicians participating in a preferred provider network or an HMO);

     (ii) A reduction in the benefits for a specific type of medical condition or treatment with respect to which the Employee or the Employee’s spouse or dependent is currently in a course of treatment; or

     (iii) Any other similar fundamental loss of coverage.

     (3) Addition or Improvement of a Qualified Benefit. If, during the Plan Year, a new Qualified Benefit or other coverage option is added or if coverage under an existing Qualified Benefit or other coverage option is significantly improved, an Employee (whether or not such Employee previously made an election under the Plan or has previously elected the Qualified Benefit) may revoke an existing election and, in lieu thereof, make an election on a prospective basis for coverage under the new or improved benefit package option.

     (4) Change in Coverage under Another Employer Plan. An Employee may make a prospective election change that is on account of and corresponds with a change made under another employer plan if (i) the cafeteria plan or qualified benefits plan permits its participants to make an election change permissible under the Code and Treasury Regulations thereunder or (ii) the Plan permits Participants to make an election for a Plan Year that is different from the plan year under the other cafeteria plan or qualified benefits plan.

     (5) Loss of Coverage under Other Group Health Coverage. An Employee may make an election on a prospective basis to add group health coverage under the Plan for the Employee, spouse or dependent if the Employee, spouse or dependent loses coverage under any group health coverage sponsored by a governmental or educational institution, including (i) a State’s children’s health insurance program (SCHIP) under Title XXI of the Social Security Act, (ii) a medical care program of an Indian Tribal government (as defined in Code Section 7701(a)(40)), the Indian Health Service, or a tribal organization, (iii) a State health benefits risk pool or (iv) a Foreign government group health plan.

     The Plan Administrator shall require the Participant to furnish a written request for change in benefit election. The request shall contain information relative to the change in status or other event described in this Section 4.7 sufficient for the Plan Administrator to determine that

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the criteria for such change has been satisfied and is in accordance with applicable law and regulations. The Plan Administrator shall have the right and the authority, but shall not be required, to request and receive any documents which it deems necessary to substantiate a change in status or other event described in this section. Such documents may include, but shall not be limited to, marriage certificate, divorce decree, birth or death certificate, or confirming letter from the spouse’s current or former employer. The requested election change must be consistent with the change in status or other event described in this section as determined by the Plan Administrator in its sole discretion. The Plan Administrator’s decision regarding the Participant’s ability to revoke or make a new election shall be final, conclusive, and binding on the Participant and all other persons, governmental agencies or entities.

     If a Participant is permitted to change elections on account of a change in status or other event described in this section, the Participant must complete new election forms and submit such forms to the Plan Administrator within thirty-one (31) days from the date the Plan Administrator approves the change. Any change which a Participant elects during a Benefit Plan Year because of a change in status or other event described in this section will be effective upon the later of (i) the actual date of occurrence of such event, or (ii) the date determined by the Plan Administrator, which date shall not be prior to the date the new election form is filed with the Plan Administrator.

SECTION 5.
Forfeitures

     5.1 Unused Credits. If a Participant elects benefit options described in this Plan, the credit in each of his reimbursement accounts may be used only to provide benefits under the Plan for which the account was established and to reimburse the Participant only for the qualifying expenses incurred by him in the Benefit Plan Year for which the credit was established, and only if the Participant applies for reimbursement on or before the date specified by the Plan Administrator following the close of the Benefit Plan Year. Such date shall be timely communicated to Participants and shall be approximately four months after the close of the Benefit Plan Year. Unused credits cannot be (i) used by Participants to provide another form of benefit under this Plan, (ii) carried over and applied against expenses incurred in the next Benefit Plan Year (except as specifically permitted during a Grace Period as set forth in the Supplements to this Plan) or (iii) paid to the Participant as current or deferred compensation.

     5.2 Forfeiture Caused by Termination, etc. If a Participant who elects a benefit option described in this Plan terminates his employment with an Employer or retires, dies or no longer receives supplemental payments under the Employer’s long term disability program, the Participant’s Earnings Reduction Agreement shall terminate, subject to the requirements of Section 3.4 of the Plan. The Participant or his estate shall be entitled to reimbursement only for expenses relating to each account that are incurred during the same Benefit Plan Year prior to the date his termination or other separation occurred. Any amounts not utilized for such expenses shall be treated as unused credits.

     5.3 Forfeiture of Unused Credits. If, after the close of the Benefit Plan Year on a date specified by the Plan Administrator, it is determined by the Plan Administrator that unused credits exist in any Participant’s account, the unused credits shall be forfeited by the affected

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Participants. The forfeitures from the accounts maintained for each of the options available under this Plan shall be considered separately. After the Plan Administrator declares the forfeitures from each account, such forfeitures shall be used by the Plan Administrator as permitted under applicable Treasury Regulations and DOL Regulations.

SECTION 6.
Nondiscrimination

     6.1 Provisions to Prevent Discrimination. This Plan is intended to be administered in a manner which complies with the applicable nondiscrimination requirements of (i) Section 125 of the Code and regulations issued thereunder as described below or such other Section of the Code and regulations thereunder which from time to time may be applicable to cafeteria plans under Section 125 of the Code; and (ii) other applicable provisions of the Code or regulations which may apply separately to the Qualified Benefits offered hereunder.

     The exclusion from income rule described in Section 125(a) of the Code may not apply to a Highly Compensated Employee for a Plan Year for which the Plan discriminates in favor of Highly Compensated Employees as to eligibility to participate, contributions, or benefits under the Plan. The exclusion from income rule described in Section 125(a) of the Code may not apply to a Key Employee for a Plan Year for which statutory nontaxable benefits provided to Key Employees (without regard to group term life insurance exceeding the dollar limitation of Section 79 of the Code) exceeds twenty-five (25%) percent of such benefits provided for all Employees under the Plan.

     For purposes of applying the nondiscrimination rules of Section 125 of the Code, Employees of Affiliated Employers shall be treated as employed by a single Employer.

     If the Plan Administrator determines during any Plan Year that the Plan may fail to satisfy any nondiscrimination requirement imposed by the Code or applicable regulations, or exceed any limitation on benefits provided to Highly Compensated Employees or such other employee or classification of Employees for whom benefits may not be discriminatory under the Code or regulations, the Plan Administrator shall have the discretion and authority to take such action as it deems necessary to assure compliance with such nondiscrimination requirement or limitation. Such action may include, without limitations, a modification or limit on elections by Highly Compensated Employees or such other Employees for whom benefits may not be discriminatory under the Code or regulations.

     A Participant shall be deemed upon executing an Earnings Reduction Agreement to have expressly consented to any modifications or limitations deemed necessary by the Plan Administrator in order to comply with applicable nondiscrimination requirements. Any reduction of benefits which may be necessary to meet the nondiscrimination tests of applicable law or regulations shall be made by the Plan Administrator on a uniform and nondiscriminatory basis. Contributions which may not be made to the Plan because of reductions in elections imposed by the Plan Administrator under this Section shall be included in the gross income of the affected Participant or forfeited as the case may be.

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     6.2 Nondiscrimination not Guaranteed. Neither the Employer, Plan Administrator, nor any agent or representative thereof represents that this Plan, the benefits provided hereunder, or contributions made hereto are at any particular point in time nondiscriminatory as determined in accordance with applicable provisions of the Code and regulations. The Employer, Plan Administrator, and any agent or representative thereof shall be held harmless by any Employee, Participant, their representatives, heirs, beneficiaries, dependents, estate, administrators or assigns from any and all tax liability of whatsoever nature which might arise by reason of the Plan being deemed discriminatory at any time and for any reason under any provision of the Code or regulations.

     6.3 Inclusion in Income. In the event any portion or all of a Qualified Benefit becomes taxable to a Participant by reason of the Plan being deemed discriminatory, such taxable benefit shall be treated as received or accrued in the taxable year of the Participant in which the Plan Year ends unless applicable law requires inclusion in income at some other point in time in which case such law shall be controlling.

SECTION 7.
Plan Administration

     7.1 Plan Administrator. The Plan, including each Supplement, shall be administered by the Plan Committee. It shall be the principal duty of the Plan Administrator to determine that the provisions of the Plan are carried out in accordance with its terms, for the exclusive benefit of persons entitled to participate in the Plan.

     7.2 Plan Administrator’s General Powers, Rights and Duties. The Plan Administrator shall have full power to administer the Plan in all of its details, subject to the applicable requirements of law. For this purpose, the Plan Administrator is, as respects the rights and obligations of all parties with an interest in this Plan, given the powers, rights and duties specifically stated elsewhere in the Plan, or any other document, and in addition is given, but not limited to, the following powers, rights and duties:

     (a) to determine all questions arising under the Plan, including the power to determine the rights or eligibility of Employees or Participants and any other persons, and the amounts of their contributions or benefits under the Plan, to interpret the Plan, and to remedy ambiguities, inconsistencies or omissions;

     (b) to adopt such rules of procedure and regulations, including the establishment of any claims procedure that may be required by law, as in its opinion may be necessary for the proper and efficient administration of the Plan and as are consistent with the Plan;

     (c) to direct payments or distributions from the Plan in accordance with the provisions of the Plan;

     (d) to furnish the Company with such information as may be required by it for tax or other purposes as respects the Plan; and

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     (e) to employ agents, attorneys, accountants or other persons (who also may be employed by the Company), and allocate or delegate to them such powers, rights and duties as the Plan Administrator may consider necessary or advisable to properly carry out the administration of the Plan, provided that such allocation or delegation and the acceptance thereof by such agents, attorneys, accountants or other persons, shall be in writing.

     All rules, regulations and decisions of the Plan Administrator shall be uniformly and consistently applied to persons in similar circumstances. The decision of the Plan Administrator shall be final, binding, and conclusive as to all affected parties.

     When making any determination hereunder, the Plan Administrator shall be entitled to rely upon any information or directions furnished, or actions taken, by the Employer, an Affiliated Employer, any plan administrator of a qualified benefit plan, Employee, Participant, dependent, beneficiary, or other party. Furthermore, it is intended that the Plan Administrator shall be responsible for the proper exercise of its powers, duties, and responsibilities hereunder, and shall not be responsible for any act, or failure to act, of the Employer, an Affiliated Employer, Employee, Participant, or other party.

     7.3 Nondiscriminatory Exercise of Authority. Whenever any discretionary action by the Plan Administrator is required, the Plan Administrator shall exercise its authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment.

     7.4 Information Required by Plan Administrator. The Employer shall furnish the Plan Administrator with such data and information as the Plan Administrator may deem necessary or desirable in order to administer the Plan. The records of the Employer as to an Employee’s or Participant’s period or periods of employment, termination of employment and the reason therefor, leave of absence, reemployment and earnings will be conclusive on all persons unless determined to the Plan Administrator’s satisfaction to be incorrect. Participants and other persons entitled to benefits under the Plan also shall furnish the Plan Administrator with such evidence, data or information as the Plan Administrator considers necessary or desirable to administer the Plan.

     7.5 Examination of Records. The Plan Administrator will make available to each Participant such of his records under the Plan as pertain to him, for examination at reasonable times during normal business hours.

     7.6 Reliance on Tables, etc. In administering the Plan, the Administrator will be entitled, to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by, or in accordance with the instructions of any plan that is a Qualified Benefit, or by accountants, counsel or other experts employed or engaged by the Plan Administrator.

     7.7 Claims and Review Procedures. If any Participant believes he is being denied any rights or benefits under a Qualified Benefit offered by the Plan, such Participant may file a claim in writing with the Plan Administrator. If any claim filed by a Participant under a Qualified

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Benefit is wholly or partially denied, the procedure pursuant to which a claimant may appeal such decision shall be governed by the claims review procedures under the documents pertaining to such Qualified Benefit and in accordance with applicable law and regulation regarding claims review procedures which may be applicable to such Qualified Benefit.

     Notwithstanding the foregoing, any claim which arises under the Medical Benefits Plan or the Dental Plan shall not be subject to review under this Plan, and the Plan Administrator’s authority under this Section 7.7 shall not extend to any matter as to which a plan administrator under such other plan is empowered to make determinations under such plan.

     7.8 Indemnification of Plan Administrator. The Company agrees to indemnify and to defend to the fullest extent permitted by law any Employee serving as the Plan Administrator or as a member of the Plan Committee (including any Employee or former Employee who formerly served as Plan Administrator or as a member of the Plan Committee) against all liabilities, damages, costs and expenses (including attorney’s fees and amounts paid in settlement of any claim to act in connection with the Plan), if such act or omission is in good faith.

SECTION 8.
Amendment and Continuation of Section 125

     8.1 Amendment and Termination. While the Company expects and intends to continue the Plan, the Company reserves the right to amend, retroactively or prospectively, the Plan from time to time or to terminate it. The Plan may at any time and from time to time be amended or modified by action of the Company. Any such amendment or modification shall become effective on such date as the Company shall determine and may apply to persons eligible to receive benefits or persons receiving benefits under the Plan at the time thereof, or both, as well as to persons eligible to receive benefits in the future. This Plan may be terminated at any time with the approval of the Board of Directors of the Company, and no further benefits shall accrue or be paid under this Plan.

     Except as may be required in order to meet the requirements of the Code, ERISA or any other applicable state or federal law, no action of the Company hereunder shall alter the operation of the Plan as it applies to Employees with whom or with whose representatives there exists a written agreement pertaining to Plan benefits, during the term of any such agreement.

     8.2 Continuation of Section 125. This Plan is predicated upon the continuation of the existence of Section 125 of the Code, and shall terminate if Section 125 of the Code is repealed.

SECTION 9.
Adoption of Plan by Affiliated Employers

     9.1 Adoption of Plan. An Affiliated Employer may adopt this Plan for all or any classification of its Employees by furnishing to the Plan Administrator:

     (a) a properly written instrument executed by the Affiliated Employer setting forth its agreement to be bound by all the terms, provisions, conditions, and limitations of this Plan; and

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     (b) any other information required by the Employer, Plan Administrator, or any person or agent acting on behalf of the Employer or Plan Administrator.

     9.2 Effect of Adoption. The adoption instrument, when executed, shall become a part of this Plan. However, neither the adoption of this Plan by an Affiliated Employer, nor any act performed by it in relation to this Plan, shall ever create a joint venture or partnership relationship between it and any other Company. This Plan, as modified by the adoption instrument of any Company, will be a separate Plan from that adopted by any other Company.

     9.3 Termination of Participation by Affiliated Employer. An Affiliated Employer may terminate its participation in the Plan by executing and delivering to the Plan Administrator a written notice which specifies the date on which its participation in the Plan will terminate. Such termination of participation in the Plan shall have no effect with respect to the Employer or any other Affiliated Employer which continues to maintain the Plan for its Employees.

SECTION 10.
General Provisions

     10.1 Notices. Each Participant entitled to benefits under the Plan must file in writing with the Plan Administrator such Participant’s post office address and each change of post office address. Any communication, statement or notice addressed to any such Participant at the last post office address filed with the Plan Administrator will be binding upon such person for all purposes of the Plan, and neither the Plan Administrator nor the Company shall be obligated to search for or ascertain the whereabouts of any Participant. Any notice or document required to be given to or filed with the Plan Administrator shall be considered as given or filed if delivered or mailed by registered mail, postage prepaid, to the Benefits Representative in care of Sterling Chemicals, Inc., 333 Clay Street, Suite 3600, Houston, Texas 77002.

     10.2 Source of Payments. To the extent a Qualified Benefit is provided by an insurance carrier, payment of such benefit shall be made through and in accordance with the provisions of the contract or instrument governing such Qualified Benefit. All other benefits paid under the Plan shall be paid from the general assets of the Employer.

     Neither the Employer nor the Plan Administrator guarantee benefits payable under any insurance policy, contract, or other agreement for insured benefits described or referred to herein. Any Qualified Benefits payable thereunder shall be the exclusive responsibility of the insurer or entity which is required to provide such benefits under such policy, contract, or other agreement.

     In the case of any benefit provided pursuant to an insurance policy, contract, or other agreement with a third party, the Employer reserves the right to change insurers, policies, contracts, or agreement without changing the language of this Plan document. The Employer shall provide copies of the documents representing the benefits provided through third parties to the Plan Administrator.

     10.3 Fiscal Records. The fiscal records of this Plan are to be maintained on the basis of the Plan Year.

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     10.4 Employment Rights. The Plan does not constitute a contract of employment, and participation in the Plan will not give any Participant the right to be retained in the employ of the Employer, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.

     10.5 No Vested Interest. Except for the right to receive any benefit payable under this Plan, no person shall have any right, title or interest in or to the assets of the Employer because of this Plan.

     10.6 Interests Not Transferable. Except as may be required by law, including the federal income and employment tax withholding provisions of the Code, or of an applicable state’s income tax act, the interests of Participants and their beneficiaries under this Plan are not subject to the claims of their creditors and may not be voluntarily or involuntarily sold, transferred, alienated, assigned or encumbered.

     10.7 No Guarantee of Tax Consequences. Neither the Plan Administrator nor the Employer makes any commitment or guarantee that any amounts paid to or for the benefit of a Participant will be excludable from the Participant’s gross income for federal or state income tax purposes, or that any other federal or state tax treatment will apply to or be available to any Participant. It shall be the obligation of each Participant to determine whether each payment is excludable from the Participant’s gross income for federal and state income tax purposes, and to notify the Employer if the Participant has reason to believe that any such payment is not so excludable.

     10.8 Facility of Payment. When a Participant entitled to benefits under the Plan is under a legal disability, or, in the Plan Administrator’s opinion, is in any way incapacitated so as to be unable to manage his financial affairs, the Plan Administrator may direct that the benefits to which such Participant otherwise would be entitled shall be made to such Participant’s legal representative, or to a relative or friend of such Participant for such Participant’s benefit, or the Plan Administrator may direct the application of such benefits for the benefit of such Participant. Any payment made in accordance with the provisions of this Section 10.8 shall be a full and complete discharge of any liability for such payment under the Plan.

     10.9 Limit on Liability. Nothing contained in this Plan shall impose on the Plan Administrator, the Employer, or any directors, officers or Employees of the Employer any liability for the payment of benefits under this Plan other than liabilities resulting from willful neglect or fraud. The liability of the Employer for benefits shall be limited to the benefits provided under this Plan.

     10.10 Method of Compensation Reduction. Each payment of benefits shall be reflected by concurrent and equivalent reduction in Compensation payments to the Participant. Benefits shall be paid by the Employer in the amounts applicable to each Participant based on the Participant’s status and benefit levels as selected for each Qualified Benefit on the annual enrollment form.

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     10.11 Gender and Number. Where the context permits, words denoting the masculine gender shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.

     10.12 Controlling State Law. To the extent not superseded by the laws of the United States, the laws of the State of Texas shall be controlling in all matters relating to the Plan.

     10.13 Severability. In case any provisions of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provisions had never been set forth in the Plan.

     10.14 Statutory References. All references to the Code and ERISA include reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section of subsection.

     10.15 Headings. Section headings and titles are for reference only. In the event of a conflict between a title and the content of a section, the content of the section shall control.

     IN WITNESS WHEREOF, the amendment and restatement of this Plan has been executed this                      day of                                         , 2008, effective as of the day and year first written above.

STERLING CHEMICALS, INC.

By:

Name:

Title:

EXECUTION PAGE TO THE
STERLING CHEMICALS, INC.
FLEXIBLE SPENDING ACCOUNT PLAN

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HEALTH CARE EXPENSE REIMBURSEMENT SUPPLEMENT TO THE
STERLING CHEMICALS, INC. FLEXIBLE SPENDING ACCOUNT PLAN

SECTION 1.
Introduction

     Sterling Chemicals, Inc. desires to merge the Health Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Hourly-Paid Employees’ Flexible Spending Account Plan and the Health Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Salaried Employees’ Flexible Spending Account Plan into a single plan. The provisions contained in this supplement shall constitute the Health Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Flexible Spending Account Plan, which is the merger of and an amendment and restatement of the Health Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Hourly-Paid Employees’ Flexible Spending Account Plan and the Health Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Salaried Employees’ Flexible Spending Account Plan (collectively, “Former Supplements”) as they existed immediately prior to the Effective Date of this merged and restated plan. The Former Supplements were originally effective as of August 1, 1986 and were amended and restated as of January 1, 1991.

     The Health Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Flexible Spending Account Plan (“Supplement”) is hereby amended and restated effective January 1, 2008, to read as hereinafter set forth:

     1.1 The Supplement. The purpose of this Supplement is to enable the eligible Employees of Sterling Chemicals, Inc. (“Company” or “Plan Sponsor”) and its Affiliated Employers to elect to receive reimbursements of Qualifying Health Care Expenses that are excludable from the Participants’ gross income under Section 105(b) of the Internal Revenue Code of 1986, as amended (“Code”).

     1.2 Health Care Expense Reimbursement Plan Status. This Supplement is intended to qualify as a medical reimbursement plan under Section 105(b) of the Code and is to be interpreted in a manner consistent with the requirements of Section 105.

     1.3 Plan Administrator. This Supplement is administered by the Employee Benefits Plans Committee which is given the authority by the Company to serve as Plan Administrator (“Plan Administrator”). The Plan Administrator shall be a “Named Fiduciary” for purposes of Section 402(a)(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

     1.4 Component of Plan. This Supplement is a component of the Sterling Chemicals, Inc. Flexible Spending Account Plan (the “Plan”), and the applicable provisions of the Plan are hereby incorporated by reference into this Supplement. The Company shall separately account for the reimbursements made under this Supplement.

     1.5 Effective Date. The Effective Date of this amended and restated Supplement shall be January 1, 2008.

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     1.6 Plan Year. This Supplement is administered on the basis of a Plan Year. The Plan Year is the accounting year of twelve (12) months commencing on January 1st of each year and ending the following December 31st.

SECTION 2.
Definitions

     Wherever used herein, the following terms have the following meaning unless a different meaning is clearly required by the context:

     2.1 Claims Administrator. “Claims Administrator” shall mean the Plan Administrator or the entity designated by the Plan Administrator to receive and process claims for reimbursement under this Supplement.

     2.2 Dental Plan. “Dental Plan” means the Dental Plan maintained by the Employer for eligible Employees.

     2.3 Dependent. “Dependent” shall mean any individual who falls within the definition of dependent provided in Section 152 of the Code.

     2.4 Employer. “Employer” shall mean the Company and any other Affiliated Employer of the Company that has adopted the Plan.

     2.5 Health Care Expense Reimbursement Account. “Health Care Expense Reimbursement Account” shall mean the account described in Section 4 hereof.

     2.6 Medical Benefits Plan. “Medical Benefits Plan” shall mean the Medical Benefits Plan maintained by the Employer for eligible Employees.

     2.7 Participant. “Participant” shall mean any individual employed by an Employer who is a Participant in the Plan and in this Supplement.

     2.8 Qualifying Health Care Expense. “Qualifying Health Care Expense” shall mean an expense incurred by a Participant, or by the spouse or Dependent of such Participant, for medical care as defined in Section 213 of the Code and as determined by the Claims Administrator (including, without limitation, amounts paid for hospital bills, doctor and dental bills and drugs, excluding certain expenses set forth in Section 5.3), but only to the extent that the Participant or other person incurring the expense is not reimbursed for the expense through the Medical Benefits Plan, Dental Plan, any health maintenance organization, an insurance arrangement, a self-insured medical benefits plan, another Section 125 cafeteria plan or otherwise (other than under this Supplement).

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SECTION 3.
Maximum and Minimum Amount of Reimbursement

     Effective as of January 1, 2008, the maximum amount by which a Participant may reduce his or her Compensation under this Supplement in any Plan Year shall be $5,000.

SECTION 4.
Health Care Expense Reimbursement Accounts

     4.1 Establishment of Accounts. The Company shall establish and maintain on its books a Health Care Expense Reimbursement Account for each Plan Year with respect to each Participant who has elected to receive reimbursement of Qualifying Health Care Expenses incurred during the Plan Year.

     4.2 Crediting of Accounts. There shall be credited to a Participant’s Health Care Expense Reimbursement Account for each Plan Year, as of each regular pay date in such Plan Year, an amount equal to the reduction, if any, to be made in such Compensation in accordance with the Participant’s election and Earnings Reduction Agreement under the Plan.

     4.3 Debiting of Accounts. A Participant’s Health Care Expense Reimbursement Account for each Plan Year shall be debited from time to time in the amount of any reimbursement under Section 5 to or for the benefit of the Participant for Qualifying Health Care Expenses incurred during such Plan Year.

     4.4 Uniform Coverage. The maximum amount of reimbursement elected by a Participant for a Plan Year shall be available at all times during such Plan Year (properly reduced as of any particular time for prior reimbursements for the same Plan Year).

SECTION 5.
Payment of Health Care Reimbursement

     5.1 Claims for Reimbursement. A Participant who has elected to receive health care reimbursement for a Plan Year may apply to the Claims Administrator for reimbursement of Qualifying Health Care Expenses incurred during the Plan Year by submitting a claim in writing to the Claims Administrator, in such form as the Claims Administrator may prescribe The claim shall set forth:

     (a) the amount, date and nature of the expense with respect to which a benefit is requested;

     (b) the name of the person, organization or entity to which the expense was paid;

     (c) such other information as the Claims Administrator may from time to time require; and

     (d) the amount recovered from any health maintenance organization or third party or under any insurance arrangement, the Company’s Medical Benefits Plan or

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Dental Plan, any other self-insured medical benefits plan, any other Section 125 cafeteria plan, or any other plan or arrangement with respect to the expense.

     Such application shall be accompanied by bills, invoices, receipts, canceled checks or other statements showing the amounts of such expenses, together with any additional documentation which the Claims Administrator may request.

     Expenses are treated as having been incurred when the Participant, spouse or Dependent is provided with the medical care that gives rise to the medical expenses, and not when the Participant, spouse or Dependent is formally billed or charged for, or pays for the medical care. In addition, a Participant will not be reimbursed for any expenses incurred before the date the Participant is first enrolled under this Supplement.

     5.2 Included Expenses. Provided that they otherwise constitute Qualifying Health Care Expenses, and that the Participant follows the claim procedure set forth in Section 5.1, reimbursable expenses under this Supplement shall include but not be limited to:

     (a) medical insurance deductibles and co-payments under the Medical Benefits Plan and the Dental Plan;

     (b) routine physical examinations and well baby care;

     (c) vision care, including examinations and purchase of eyeglasses and contact lenses;

     (d) hearing care, including examinations and hearing aids;

     (e) charges for any non-prescription drug or medicine (to the extent allowed by the Internal Revenue Service);

     (f) adult orthodontia and other unreimbursed qualifying dental expenses; and

     (g) cosmetic surgery if needed to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease.

     5.3 Excluded Expenses. Notwithstanding the foregoing, expenses not covered by the Supplement include the following:

     (a) expenses for which the Participant (or his or her spouse or Dependent) is eligible for reimbursement under the Medical Benefits Plan or the Dental Plan;

     (b) expenses for which the Participant (or his or her spouse or Dependent) is eligible for reimbursement through any health maintenance organization, any insurance arrangement, any other self-insured medical benefits plan, or any other Section 125 cafeteria plan;

     (c) charges for which a payment from a third party have been or will be received;

     (d) charges for any occupational illness or injury;

     (e) charges for non-medical custodial care;

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     (f) charges for capital improvements unless prior approval of the Plan Administrator is received;

     (g) charges for travel, whether or not recommended by a physician, incurred to allow the Participant a rest, vacation or change; and

     (h) cosmetic surgery unless it qualifies under Section 5.2(f).

     5.4 Reimbursement of Expenses. The Claims Administrator shall reimburse the Participant from the Participant’s Health Care Expense Reimbursement Account for Qualified Health Care Expenses incurred during the Plan Year for which the Participant submits documentation in accordance with Section 5.1.

     5.5 Notification of Eligible Employees. The Plan Administrator shall provide reasonable notification of the availability and terms of this Supplement to eligible Employees.

     5.6 Forfeitures. Amounts remaining in a Participant’s Health Care Expense Reimbursement Account after the expiration of the period during which claims for reimbursement for a Plan Year may be submitted shall be forfeited.

     5.7 Grace Period. Notwithstanding anything herein to the contrary, Qualifying Health Care Expenses incurred during the period through the fifteenth day of the third month following the close of the Plan Year (the “Grace Period”) may be paid or reimbursed from unused amounts set aside for health care expense reimbursement that remain unused at the end of the immediately preceding Plan Year. A Participant who has unused amounts relating to the Supplement from the immediately preceding Plan Year and who incurs expenses under the Supplement during the Grace Period may be paid or reimbursed for those expenses from the unused amounts for the Supplement as if the expenses had been incurred in the immediately preceding Plan Year, except that the Grace Period will not apply to a Participant whose employment with the Employer has terminated (unless (i) employment terminates during the Grace Period (in which the Participant may submit claims for reimbursement for the duration of the Grace Period) or (ii) the Participant has COBRA continuation coverage in place with respect to this Supplement as of the last day of the Plan Year). Notwithstanding anything to the contrary, unused amounts relating to the Supplement may only be used to pay or reimburse expenses incurred with respect to the Supplement and not with respect to any other Qualified Benefit (as defined in the Plan) under the Plan. To the extent that any unused amounts from the immediately preceding Plan Year exceed the expenses for the Supplement incurred during the Grace Period, those remaining unused amounts may not be carried forward to any subsequent period and shall be forfeited pursuant to Section 5.6.

SECTION 6.
HIPAA Privacy and Security Standards

     6.1 Disclosure of Protected Health Information to the Plan Sponsor Upon Receipt of Certification of Compliance by Plan Sponsor. In accordance with the privacy and security rules under the Health Insurance Portability and Accountability Act (“HIPAA”), this Supplement may only disclose protected health information to the Plan Sponsor upon receipt of the Plan Sponsor’s certification that the Plan Sponsor agrees to:

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     (a) Not use or further disclose the information other than as permitted or required by the Supplement documents or as required by law;

     (b) Ensure that any agents, including a subcontractor, to whom it provides protected health information received from the Supplement agree to the same restrictions and conditions that apply to the Plan Sponsor with respect to such information;

     (c) Not use or disclose the information for employment-related actions and decisions or in connection with any other benefit plan of the Plan Sponsor;

     (d) Report to the Supplement any use or disclosure of the information that is inconsistent with the uses or disclosures provided for of which it becomes aware;

     (e) Make available protected health information in accordance with 45 CFR 164.524;

     (f) Make available protected health information for amendment and incorporate any amendments to protected health information in accordance with 45 CFR 164.526;

     (g) Make available the information required to provide an accounting of disclosures in accordance with 45 CFR 164.528;

     (h) Make its internal practices, books and records relating to the use and disclosure of protected health information received from the Supplement available to Health and Human Services for purposes of determining the Supplement’s compliance with the privacy rules;

     (i) If feasible, return or destroy all protected health information received from the Supplement that the Plan Sponsor still maintains in any form and retain no copies of such information when no longer needed for the purpose for which disclosure was made, except that, if such return or destruction is not feasible, limit further uses and disclosures to those purposes that make the return or destruction of the information infeasible; and

     (j) Ensure that adequate separation between the Supplement and the Plan Sponsor has been established.

     6.2 Permitted Uses and Disclosures of Protected Health Information to the Plan Sponsor. The Supplement (and any business associate acting on behalf of the Supplement) will disclose protected health information to the Plan Sponsor only to permit the Plan Sponsor to carry out administrative functions in relation to the Supplement. Such disclosures shall be consistent with the provisions of 45 CFR 164.

     6.3 Disclosures of Summary Health Information and Enrollment and Disenrollment Information to the Plan Sponsor. The Supplement (and any business associate acting on behalf of the Supplement) may disclose summary health information to the Plan Sponsor if the Plan Sponsor requests summary health information for the purpose of modifying, amending or terminating the Supplement.

     The Supplement may disclose to the Plan Sponsor information on whether an individual is participating in the Plan or whether an individual is enrolled in or has disenrolled from the Supplement.

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     6.4 Required Separation Between the Plan and the Plan Sponsor. In accordance with 45 CFR 164.504(f)(2)(iii), the Company shall designate those classifications of employees or workforce members under the control of the Plan Sponsor who may be provided access to protected health information received from the Supplement. Such authorized individuals include employees and contractors within the Human Resources Department and Health Services Department of the Company.

     Such authorized personnel may receive protected health information relating to payment under, health care operations of, or other matters pertaining to plan administration functions that the Plan Sponsor provides for the Supplement. These individuals shall have access to protected health information solely to perform their job functions for the Plan Sponsor and they will be subject to disciplinary action for any use or disclosure of protected health information in violation of the provisions of this Section 6 or the provisions of 45 CFR 164. The Plan Sponsor shall promptly report any such breach or violation to the Supplement and will cooperate to correct the violation, to impose appropriate disciplinary action and to mitigate any deleterious effect of such violation.

     6.5 Plan Sponsor’s Obligations to Safeguard Electronic Protected Health Information. Where electronic protected health information will be created, received, maintained or transmitted to or by the Plan Sponsor on behalf of the Supplement, the Plan Sponsor shall reasonably safeguard such electronic protected health information as follows:

     (a) The Plan Sponsor shall implement administrative, physical and technical safeguards that reasonably and appropriately protect the confidentiality, integrity and availability of the electronic protected health information that the Plan Sponsor creates, maintains or transmits on behalf of the Supplement;

     (b) The Plan Sponsor shall ensure that any agents, including a subcontractor, to whom it provides electronic protected health information agree to implement reasonable and appropriate security measures to protect such information;

     (c) The Plan Sponsor shall ensure that the adequate separation required by 45 CFR 164.504(f)(2)(iii) is supported by reasonable and appropriate security measures; and

     (d) The Plan Sponsor shall report to the Supplement any security incident (as defined in 45 CFR 164.304) of which it becomes aware.

SECTION 7.
Claims Provisions

     7.1 Claims. Claims for benefits under this Supplement shall be made on forms maintained by the Claims Administrator. To obtain reimbursement for medical expenses hereunder, a Participant must submit a request for reimbursement for medical expenses incurred, together with such evidence of payment of such expenses as shall be required by the Claims Administrator in accordance with rules uniformly applied.

     7.2 Denial of Coverage. If any claim for benefits under this Supplement is denied in whole or in part, the Claims Administrator shall furnish the claimant promptly with a written notice:

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(a) setting forth the reason for the denial;

(b) citing the Supplement provisions upon which such denial is based;

(c) describing any additional material or information from the claimant which is necessary in order for the claimant to perfect his claim
      and why; and

(d) explaining the claim review procedure set forth herein.

     7.3 Timing of Adverse Claim Determinations. The Claims Administrator will notify the claimant of the Supplement’s adverse benefit determination within a reasonable period of time but no later than 30 days after receipt of the claim. If matters beyond control of the Claims Administrator require an extension, the Claims Administrator may have up to 15 additional days to review the claim; provided that the Claims Administrator notifies the claimant prior to the expiration of the original 30 day period. If such an extension is necessary due to a failure of the claimant to submit the information necessary to decide the claim, the notice of extension shall specifically describe the required information and the claimant shall be afforded at least 45 days from receipt of the notice within which to provide the specified information.

     7.4 Appeal of Denial of Coverage. Within 180 days after denial of any claim for benefits under this Supplement, the claimant may request in writing a review of the denial by the Claims Administrator. Any claimant seeking review hereunder is entitled to examine all pertinent documents, and to submit issues and comments in writing. The Claims Administrator shall render a decision on review of a claim not later than 60 days after receipt of a request for review hereunder. The decision of the Claims Administrator on review shall be in writing, shall state the reason for the decision, referring to the Supplement provisions upon which it is based and shall provide for the identification of medical or vocational experts whose advice was obtained on behalf of the Supplement in connection with a claimant’s adverse benefit determination (if applicable) without regard to whether the advice was relied upon in making the benefit determination.

     The review under this Section 7.4 shall not afford deference to the initial adverse benefit determination and shall be conducted by an appropriate named fiduciary of the Supplement who is neither the individual who made the initial adverse benefit determination nor the subordinate of such individual. In deciding an appeal of any adverse benefit determination that is based in whole or in part on a medical judgment, including determinations with regard to whether a particular treatment, drug or other item is not medically necessary or appropriate, the appropriate named fiduciary shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment. Such health care professional shall be an individual who is neither an individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual.

     The claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits. If a claim has been denied on appeal, in whole or in part, a claimant may file suit in a court of competent jurisdiction under ERISA Section 502(a).

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SECTION 8.
General Provisions

     8.1 ERISA and QMCSOs. The Supplement shall provide benefits in accordance with the applicable requirements of any qualified medical child support order as defined in Section 609 of the Employee Retirement Security Act of 1974 (“ERISA”) relating to a child of a Participant (a “QMCSO”). Benefits shall be paid directly to a child covered by a QMCSO or to the child’s custodial parent or legal guardian.

     8.2 Leave of Absence. If a Participant takes a leave of absence under the federal Family and Medical Leave Act of 1993 (the “Act”), benefits shall continue to be paid under this Supplement as if the Participant remained an active Employee.

     8.3 Certificate of Creditable Coverage. At the time an individual’s coverage under the Supplement terminates, the Company shall furnish a certificate of creditable coverage under the Supplement in accordance with Section 9801 of the Code. In addition, the Company shall furnish a certificate of creditable coverage upon request of an individual made not longer than 24 months after cessation of coverage under the Supplement, and shall furnish to another group health plan upon request information on coverage of classes and categories of health benefits under the Supplement.

     8.4 Governing Law. To the extent not pre-empted by the Employee Retirement Income Security Act of 1974 (ERISA), as amended, questions concerning the proper interpretation of the terms of this agreement shall be determined in accordance with the law of the State of Texas.

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DEPENDENT CARE EXPENSE REIMBURSEMENT SUPPLEMENT TO THE
STERLING CHEMICALS, INC. FLEXIBLE SPENDING ACCOUNT PLAN

SECTION 1.
Introduction

     Sterling Chemicals, Inc. desires to merge the Dependent Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Hourly-Paid Employees’ Flexible Spending Account Plan and the Dependent Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Salaried Employees’ Flexible Spending Account Plan into a single plan. The provisions contained in this supplement shall constitute the Dependent Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Flexible Spending Account Plan, which is the merger of and an amendment and restatement of the Dependent Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Hourly-Paid Employees’ Flexible Spending Account Plan and the Dependent Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Salaried Employees’ Flexible Spending Account Plan (collectively, “Former Supplements”) as they existed immediately prior to the Effective Date of this merged and restated plan. The Former Supplements were originally effective as of August 1, 1986 and were amended and restated as of January 1, 1991.

     The Dependent Care Expense Reimbursement Supplement to the Sterling Chemicals, Inc. Flexible Spending Account Plan (“Supplement”) is hereby amended and restated effective January 1, 2008 to read as hereinafter set forth:

     1.1 The Supplement. The purpose of this Supplement is to enable the eligible Employees of Sterling Chemicals, Inc. (the “Company”) and its Affiliated Employers the opportunity to elect to receive reimbursements of their Dependent Care Expenses that are excludable from the Participants’ gross income under Section 129(b) of the Internal Revenue Code of 1986, as amended (“Code”).

     1.2 Dependent Care Reimbursement Program Status. This Supplement is intended to qualify as a dependent care reimbursement plan under Section 129 of the Code and is to be interpreted in a manner consistent with the requirements of Section 129.

     1.3 Plan Administrator. This Supplement is administered by the Employee Benefits Plans Committee of the Company (“Plan Administrator”).

     1.4 Component of Plan. This Supplement is a component of the Sterling Chemicals, Inc. Flexible Spending Account Plan (the “Plan”), and the applicable provisions of the Plan are hereby incorporated by reference into this Supplement. The Company shall separately account for the reimbursements made under this Supplement.

     1.5 Effective Date. The Effective Date of this amended and restated Supplement shall be January 1, 2008.

     1.6 Plan Year. This Supplement is administered on the basis of a Plan Year. The Plan Year is the accounting year of twelve (12) months commencing on January 1st of each year and ending the following December 31st.

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SECTION 2.
Definitions

     Wherever used herein, the following terms have the following meaning unless a different meaning is clearly required by the context:

     2.1 Claims Administrator. “Claims Administrator” shall mean the Plan Administrator or the entity designated by the Plan Administrator to receive and process claims for reimbursement under this Supplement.

     2.2 Dependent. As defined in Section 21(b)(1) of the Code, “Dependent” shall mean any individual who is (a) a dependent of a Participant who is under the age of 13 and with respect to whom the Participant is entitled to claim expenses on Federal Income Tax Form 2441 “Credit for Child and Dependent Care,” or (b) a dependent or spouse of a Participant who is physically or mentally incapable of caring for himself.

     2.3 Dependent Care Expense Reimbursement Account. “Dependent Care Expense Reimbursement Account” shall mean the account described in Section 4 hereof.

     2.4 Dependent Care Service Provider. “Dependent Care Service Provider” shall mean a person who provides care or other services described in Section 2.7 below, but shall not include (a) a dependent care center (as defined in Section 21(b)(2)(D) of the Code), unless the requirements of Code Section 21(b)(2)(C) are satisfied, or (b) a related individual described in Section 129(c) of the Code.

     2.5 Employer. “Employer” shall mean the Company and any other Affiliated Employer of the Company that has adopted the Plan.

     2.6 Participant. “Participant” shall mean any individual employed by an Employer who is a Participant in the Plan and in this Supplement.

     2.7 Qualifying Dependent Care Expenses. “Qualifying Dependent Care Expenses” shall mean expenses, as provided in Sections 21 and 129 of the Code and as determined by the Claims Administrator, incurred by a Participant which (a) are incurred for the care of a Dependent of the Participant or for related household services, (b) are paid or payable to a Dependent Care Service Provider, and (c) are incurred to enable the Participant to be gainfully employed for any period for which there are one or more Dependents with respect to the Participant. Qualifying Dependent Care Expenses shall not include expenses incurred for services outside the Participant’s household for the care of a Dependent unless such Dependent is described in Section 2.2 or regularly spends at least eight hours each day in the Participant’s household.

SECTION 3.
Maximum and Minimum Amount of Dependent
Care Expense Reimbursement

     The maximum amount by which a Participant may reduce his or her Compensation under this Supplement in any Plan Year shall be the least of (a) the Participant’s earned income for the

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Plan Year (after all reductions in Compensation including the reduction related to dependent care reimbursement), (b) the actual or deemed earned income of the Participant’s spouse for the Plan Year, or (c) $5,000 ($2,500 in the case of a separate return by a married Participant). In the case of a spouse who is a full-time student at an educational institution or is physically or mentally incapable of caring for himself or herself, such spouse shall be deemed to have earned income of not less than $200 per month if the Participant has one Dependent and not less than $400 per month if the Participant has two or more Dependents. The minimum amount of any reimbursement in any Plan Year shall be determined by the Claims Administrator and communicated to Participants in a timely manner.

SECTION 4.
Dependent Care Expense Reimbursement Accounts

     4.1 Establishment of Accounts. The Company shall establish and maintain on its books a Dependent Care Expense Reimbursement Account for each Plan Year with respect to each Participant who has elected to receive dependent care expense reimbursement for the Plan Year.

     4.2 Crediting of Accounts. There shall be credited to a Participant’s Dependent Care Expense Reimbursement Account for each Plan Year, as of each regular pay date in such Plan Year, an amount equal to the reduction, if any, to be made in such Compensation in accordance with the Participant’s election and Earnings Reduction Agreement under the Plan.

     4.3 Debiting of Accounts. A Participant’s Dependent Care Expense Reimbursement Account for each Plan Year shall be debited from time to time in the amount of any reimbursement under Section 5 to or for the benefit of the Participant for Qualifying Dependent Care Expenses incurred during such Plan Year.

SECTION 5.
Payment of Dependent Care Expense Reimbursement

     5.1 Claims for Reimbursement. A Participant who has elected to receive dependent care expense reimbursement for a Plan Year may apply to the Claims Administrator for reimbursement of Qualifying Dependent Care Expenses incurred during the Plan Year by submitting a claim in writing to the Claims Administrator, in such form as the Claims Administrator may prescribe. The claim shall set forth:

     (a) the amount, date and nature of the expenses with respect to which a benefit is requested;

     (b) the name and tax identification number of the person, organization or entity to which the expense was paid; and

     (c) such other information as the Claims Administrator may from time to time require.

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     Such application shall be accompanied by bills, invoices, receipts, canceled checks or other statements showing the amount of such expenses, together with any additional documentation which the Claims Administrator may request.

     The Claims Administrator shall reimburse the Participant only if the expenses constitute dependent care assistance expenses within the meaning of Section 129 of the Code. No expense may be submitted by a Participant if the Participant or any other person has claimed the expense as a credit or deduction for federal income tax purposes.

     Qualifying Dependent Care Expenses shall be deemed to be incurred at the time the services to which the expenses relate are rendered, and not when the Participant is formally billed or charged for, or pays for the services. In addition, a Participant will not be reimbursed for any expenses incurred before the date the Participant is first enrolled under this Supplement.

     5.2 Reimbursement of Expenses. The Claims Administrator shall reimburse the Participant from the Participant’s Dependent Care Expense Reimbursement Account for Qualifying Dependent Care Expenses incurred during the Plan Year for which the Participant submits documentation in accordance with Section 5.1. No reimbursement under this Section 5.2 of expenses incurred during a Plan Year shall at any time exceed the balance of the Participant’s Dependent Care Expense Reimbursement Account for the Plan Year at the time of the reimbursement. The amount of any Qualifying Dependent Care Expenses not reimbursed as a result of the preceding sentence shall be carried over and reimbursed only if and when the balance in such Account permits such reimbursement during the Plan Year as provided in Section 5.1.

     5.3 Notification of Eligible Employees. The Plan Administrator shall provide reasonable notification of the availability and terms of this Supplement to eligible employees.

     5.4 Report to Participants. On or before January 31st of each year, the Plan Administrator shall furnish to each Participant who has received dependent care expense reimbursement during the immediately preceding Plan Year a written statement showing the amount of such reimbursement made during such Plan Year with respect to the Participant.

     5.5 Forfeitures. Amounts remaining in a Participant’s Dependent Care Expense Reimbursement Account after the expiration of the period during which claims for reimbursement for a Plan Year may be submitted shall be forfeited.

     5.6 Grace Period. Notwithstanding anything herein to the contrary, Qualifying Dependent Care Expenses incurred during the period through the fifteenth day of the third month following the close of the Plan Year (the “Grace Period”) may be paid or reimbursed from unused amounts set aside for dependent care expense reimbursement that remain unused at the end of the immediately preceding Plan Year. A Participant who has unused amounts relating to the Supplement from the immediately preceding Plan Year and who incurs expenses for the Supplement during the Grace Period may be paid or reimbursed for those expenses from the unused amounts for the Supplement as if the expenses had been incurred in the immediately preceding Plan Year, except that the Grace Period will not apply to a Participant whose employment with the Employer has terminated (unless employment terminates during the Grace

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Period in which the Participant may submit claims for reimbursement for the duration of the Grace Period). Notwithstanding anything to the contrary, unused amounts relating to the Supplement may only be used to pay or reimburse expenses incurred with respect to the Supplement and not with respect to any other Qualified Benefit (as defined in the Plan) under the Plan. To the extent that any unused amounts from the immediately preceding Plan Year exceed the expenses for the Supplement incurred during the Grace Period, those remaining unused amounts may not be carried forward to any subsequent period and shall be forfeited pursuant to Section 5.5.

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EX-12.1

Exhibit 12.1

Exhibit 12.1 Ratio of Earnings (Losses) to Fixed Charges
(000’s)

	2008			2007			2006			2005			2004
Earnings (Losses):
Loss from continuing operations, pre-tax		(173	)		(11,842	)		(2,582	)		(8,794	)		(42,339	)
Fixed charges		17,528			17,411			11,510			11,790			11,422
Total		17,355			5,569			8,928			2,996			(30,917	)
Fixed Charges:
Interest expense, excluding int. income & capitalized interest		16,181			16,478			11,110			11,390			11,024
Amortized expenses related to indebtedness		1,347			933			400			400			398
Total		17,528			17,411			11,510			11,790			11,422
Ratio of earnings (losses) to fixed charges		0.99			0.32			0.78			0.25			(2.71	)
Additional pre-tax earnings needed to achieve a 1:1 ratio		(173	)		(11,842	)		(2,582	)		(8,794	)		(42,339	)

EX-21.1

Exhibit 21.1

Subsidiaries of
STERLING CHEMICALS, INC.
As of December 31, 2008

Owns 100% of:

Sterling Chemicals JV Holdings, Inc.

Sterling Chemicals Fuels, LLC (owned 100% by Sterling Chemicals JV Holdings, Inc.)

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 16, 2009, with respect to the consolidated financial statements included in the Annual Report of Sterling Chemicals, Inc. on Form 10-K for the year ended December 31, 2008. We hereby consent to the incorporation by reference of said report in the Registration Statement of Sterling Chemicals, Inc. on Form S-8 (File No. 333-105794, effective June 3, 2003).

/s/ GRANT THORNTON LLP

Houston, Texas

March 17, 2009

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-105794 on Form S-8 of our report dated April 10, 2008, relating to the 2007 and 2006 consolidated financial statements (before retrospective adjustments to the consolidated financial statements) of Sterling Chemicals, Inc. and subsidiaries (not presented herein) (which report expresses an unqualified opinion and includes an explanatory paragraph regarding a change in the method of accounting for defined benefit pension and other postretirement plans as of December 31, 2006), appearing in this Annual Report on Form 10-K of Sterling Chemicals, Inc. and subsidiaries for the year ended December 31, 2008.

DELOITTE & TOUCHE LLP

Houston, Texas
March 17, 2009

EX-31.1

Exhibit 31.1

I, John V. Genova, certify that:

1.	I have reviewed this annual report on Form 10-K of Sterling Chemicals, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2009	/s/ JOHN V. GENOVA
	John V. Genova
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, John R. Beaver, certify that:

1.	I have reviewed this annual report on Form 10-K of Sterling Chemicals, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2009	/s/ JOHN R. BEAVER
	John R. Beaver
	Senior Vice President - Finance and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     I, John V. Genova, as President and Chief Executive Officer of Sterling Chemicals, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

     (1) the accompanying Form 10-K report of the Company for the period ending December 31, 2008, as furnished with the U.S. Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 17, 2009	/s/ JOHN V. GENOVA
	John V. Genova,
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     I, John R. Beaver, as Senior Vice President — Finance and Chief Financial Officer of Sterling Chemicals, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

     (1) the accompanying Form 10-K report of the Company for the period ending December 31, 2008, as furnished with the U.S. Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 17, 2009	/s/ JOHN R. BEAVER
	John R. Beaver,
	Senior Vice President -- Finance and Chief Financial Officer