-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F0l5eLY9FKxyI0RqY5vUyDp7zUeoHjPZLnKZTQU6+tlI62bExqmBi4Dj8n770EdD M6KsAVeuQahbnYJHP1b1Cw== 0000898430-02-000698.txt : 20020414 0000898430-02-000698.hdr.sgml : 20020414 ACCESSION NUMBER: 0000898430-02-000698 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011229 FILED AS OF DATE: 20020219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIFIED WESTERN GROCERS INC CENTRAL INDEX KEY: 0000320431 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & GENERAL LINE [5141] IRS NUMBER: 950615250 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10815 FILM NUMBER: 02553333 BUSINESS ADDRESS: STREET 1: PO BOX 513396 CITY: LOS ANGELES STATE: CA ZIP: 90051-1396 BUSINESS PHONE: 3232645200 MAIL ADDRESS: STREET 1: 5200 SHEILA STREET CITY: LOS ANGELES STATE: CA ZIP: 90040 10-Q 1 d10q.txt FORM 10-Q, FOR PERIOD ENDING DECEMBER 29, 2001 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended December 29, 2001 ------------------------- AND [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission file number 0-10815 - -------------------------------------------------------------------------- Unified Western Grocers, Inc. - -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 95-0615250 - ------------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5200 Sheila Street, Commerce, CA 90040 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (323) 264-5200 ------------------- - -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) 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 X No ____ ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes _______ No _____ APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding Shares on February 12, 2002: Class A Shares 69,125 ---------------- Class B Shares 446,081 ---------------- Class C Shares 18 ---------------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (dollars in thousands)
(Unaudited) September 29, December 29, 2001 2001 ------------------------------------------ ASSETS Current Assets: Cash and cash equivalents $ 14,802 $ 13,927 Accounts and notes receivable, net 193,761 174,741 Inventories 224,438 214,524 Prepaid expenses 7,533 6,853 Deferred taxes 10,043 10,043 ------------------------------------------ Total current assets 450,577 420,088 Properties, net 122,657 122,317 Investments 48,983 55,171 Notes receivable 33,093 34,127 Goodwill, net 56,512 56,116 Other assets, net 56,345 61,358 ------------------------------------------ TOTAL ASSETS $768,167 $749,177 ========================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $184,810 $154,230 Accrued liabilities 96,824 90,999 Current portion of notes payable 10,535 10,762 Patrons' excess deposits and estimated patronage dividends 16,446 16,902 ------------------------------------------ Total current liabilities 308,615 272,893 Notes payable, due after one year 288,241 305,809 Long-term liabilities, other 63,944 65,580 Patrons' deposits and certificates: Patrons' required deposits 14,804 17,049 Subordinated patronage dividend certificates 4,105 1,843 Shareholders' equity: Class A Shares 11,576 11,576 Class B Shares 79,100 78,800 Additional paid-in capital 18,095 18,095 Accumulated deficit (18,708) (20,685) Accumulated other comprehensive loss (1,605) (1,783) ------------------------------------------ Total shareholders' equity 88,458 86,003 ------------------------------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $768,167 $749,177 ==========================================
The accompanying notes are an integral part of these statements. 2 UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (dollars in thousands)
THIRTEEN WEEKS ENDED -------------------------------------- December 30, December 29, 2000 2001 -------------------------------------- Net sales $740,572 $742,545 Costs and expenses: Cost of sales 659,349 662,091 Distribution, selling and administrative 70,049 73,500 -------------------------------------- Operating income 11,174 6,954 Interest expense 7,473 6,065 -------------------------------------- Earnings before estimated patronage dividends, income taxes and cumulative effect of a change in accounting principle 3,701 889 Estimated patronage dividends (4,640) (2,867) -------------------------------------- Loss before income taxes and cumulative effect of change in accounting principle (939) (1,978) Income taxes (benefit) -- -- -------------------------------------- Loss before cumulative effect of a change in accounting principle (939) (1,978) Cumulative effect of a change in accounting principle, net of taxes 31 -- -------------------------------------- Net loss (908) (1,978) Other comprehensive earnings (loss), net of income taxes: Cumulative effect of a change in accounting principle 1,143 -- Unrealized (loss) gain on valuation of interest rate collar (910) 18 Unrealized holding gain (loss) 532 (196) -------------------------------------- Comprehensive loss $ (143) $ (2,156) ======================================
The accompanying notes are an integral part of these statements. 3 UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollars in thousands)
THIRTEEN WEEKS ENDED ---------------------------------------- December 30, December 29, 2000 2001 ---------------------------------------- Cash flows from operating activities: Net loss $ (908) $ (1,978) Adjustments to reconcile net loss to net cash utilized by operating activities: Depreciation and amortization 6,161 6,382 Gain on disposal of properties (81) (23) (Increase) decrease in assets: Accounts and notes receivable, net 16,726 19,020 Inventories 7,125 9,914 Prepaid expenses 168 680 Notes receivable (3,947) (1,034) Increase (decrease) in liabilities: Accounts payable (29,412) (30,580) Accrued liabilities (852) (5,825) Patrons' excess deposits and estimated patronage dividends 138 456 Long-term liabilities, other (287) 1,636 ---------------------------------------- Net cash utilized by operating activities (5,169) (1,352) ---------------------------------------- Cash flows from investing activities: Purchase of properties (6,109) (4,207) Proceeds from sales of properties 990 339 Increase in other assets (2,314) (6,768) Investment in securities, net (10,093) (6,366) ---------------------------------------- Net cash utilized by investing activities (17,526) (17,002) ---------------------------------------- Cash flows from financing activities: Additions to long-term notes payable 28,500 21,386 Reduction of long-term notes payable -- (1,787) Additions to short-term notes payable 2,825 Reduction of short-term notes payable (4,193) (2,103) Redemption of patronage dividend certificates (1,862) (2,262) (Decrease) increase in members' required deposits (1,499) 2,245 Issuance of shares to members 341 -- ---------------------------------------- Net cash provided by financing activities 24,112 17,479 ---------------------------------------- Net increase (decrease) in cash and cash equivalents 1,417 (875) Cash and cash equivalents at beginning of year 10,355 14,802 ---------------------------------------- Cash and cash equivalents at end of period $ 11,772 $ 13,927 ======================================== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 7,555 $ 6,364 Income taxes $ 64 -- Supplemental disclosure of non-cash item: Issuance of subordinated redemption notes to repurchase Class B Shares from members $ 586 299
The accompanying notes are an integral part of these statements. 4 UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. The consolidated condensed financial statements include the accounts of Unified Western Grocers, Inc. and all of its subsidiaries (the "Company" or "Unified"). Intercompany transactions and accounts with subsidiaries have been eliminated. The interim financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (the "Commission"). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to Commission rules and regulations; nevertheless, management believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's latest annual report filed on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results for the full year. The accompanying consolidated condensed financial statements reflect all adjustments which are, in the opinion of management, both of a normal recurring nature and necessary for a fair statement of the results of the interim periods presented. Certain reclassifications have been made to prior period financial statements to present them on a basis comparable with the current period's presentation. In the 2001 period, the retail segment of the business was separated from the "all other" category to facilitate quarterly comparisons of reportable segments, since the retail segment now meets the quantitative thresholds of a reportable segment. Previously, the retail segment was grouped in the "all other" category that included finance, insurance and other services provided to members. 2. On September 27, 1999, the shareholders of Unified and United Grocers, Inc. ("United") each approved the provisions of a merger agreement (the "Merger"). The Merger became effective on September 29, 1999 and was accounted for as a purchase pursuant to Accounting Principles Board Opinion No. 16, "Business Combinations." As a result of the Merger, Unified now serves a broader geographic region. The Company serves independent supermarket operators in California, Oregon, Washington, western Idaho, Nevada, Arizona, Hawaii, Colorado, Utah and various countries in the South Pacific and elsewhere. In addition to offering a complete line of food and general merchandise products, Unified also provides finance, insurance, store design, security, payroll, real estate and information technology services to its patrons. In connection with the Merger, the Company established a reserve for the closure of various facilities. Periodic charges against the reserve represent lease costs for non-subleased facilities and rental income shortfalls for subleased facilities. The amount of this reserve and current period charges against the reserve are presented below. Balance at September 29, 2001 $ 4,778,000 Charges to the reserve (118,000) ----------- Balance at December 29, 2001 $ 4,660,000 =========== 3. The Company has identified two reportable segments - Wholesale Distribution and Retail. . Wholesale distribution includes the results of operations from the sale of food and general merchandise products to independent supermarket operators, both members and non-members, and sales to company-owned retail stores. . The retail segment includes the results of operations of SavMax, Thriftway, Apple Markets and stores that were purchased by the Company in connection with the merger of 5 Albertsons, Inc. and American Stores, Inc. (the "Divestiture Stores"). The Company's two remaining Divestiture Stores were closed during the first quarter of fiscal 2002 and are expected to be sold. The "all other" category includes the aggregation of finance, insurance and other services provided to a common customer base, none of which individually meets the quantitative thresholds of a reportable segment. Information about the Company's operations by segment is as follows (in thousands):
THIRTEEN WEEKS ENDED December 30, December 29, 2000 2001 -------------------------------------------- Net sales Wholesale distribution $ 717,920 $ 721,989 Retail 40,973 37,048 All other 10,610 10,716 Intersegment elimination (28,931) (27,208) -------------------------------------------- Total net sales $ 740,572 $ 742,545 -------------------------------------------- Operating income (loss) Wholesale distribution $ 12,340 $ 10,097 Retail (1,361) (3,799) All other 195 656 -------------------------------------------- Total operating income 11,174 6,954 Interest expense (7,473) (6,065) Estimated patronage dividends (4,640) (2,867) -------------------------------------------- Loss before income taxes and change in accounting principle $ (939) $ (1,978) -------------------------------------------- Depreciation and amortization Wholesale distribution $ 5,615 $ 5,708 Retail 240 555 All other 306 119 -------------------------------------------- Total depreciation and amortization $ 6,161 $ 6,382 -------------------------------------------- Capital expenditures Wholesale distribution $ 4,543 $ 2,460 Retail 1,464 1,653 All other 102 94 -------------------------------------------- Total capital expenditures $ 6,109 $ 4,207 -------------------------------------------- Identifiable assets Wholesale distribution $ 607,209 $ 593,034 Retail 60,288 63,763 All other 91,909 92,380 -------------------------------------------- Total identifiable assets $ 759,406 $ 749,177 --------------------------------------------
4. The Jerome Lemelson Foundation (the "Foundation"), which asserts ownership of certain patents relating to bar code technology, issued a demand that the Company enter into a license agreement with respect to certain patented technology which the Company is claimed to use and which allegedly infringes upon patents issued to Jerome Lemelson, which patents, upon the death of Jerome Lemelson, were 6 assigned to the Foundation. The Foundation has filed an action against the Company and others asserting patent infringement and seeking damages in unspecified amounts. The Company and the Foundation reached a settlement of the matter in the first quarter of fiscal 2002 at an amount that did not exceed the amounts reserved by Unified. 5. The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The statement requires that the Company recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The Company adopted this statement, as amended by SFAS Nos. 137 and 138, effective October 1, 2000. The Company entered into a five-year interest rate collar agreement during February 1999 in relation to certain borrowings on its variable rate revolving credit facility. The Company has designated the interest rate collar agreement as a cash flow hedge. Under the provisions of SFAS No. 133, the fair value of the collar must be reflected in the Company's financial statements. On October 1, 2000 the Company recognized the fair value of the collar, which totaled $1,195,000, as a cumulative effect of a change in accounting principle in other comprehensive earnings (loss). Additionally, SFAS No. 133 requires that the fair value of the collar be adjusted, with the change in fair value being recorded as an adjustment to other comprehensive earnings (loss). The fair value of the collar was $(1,772,000) as of December 29, 2001 compared to $(1,790,000) as of September 29, 2001. Due to the increase in interest rates , the Company recorded an unrealized gain of $18,000 for the thirteen week period ended December 29, 2001. The Company holds investments in various marketable securities and convertible bonds. Prior to the adoption of SFAS No. 133, the Company classified its convertible bonds as available for sale, with the changes in the fair value recorded in other comprehensive earnings (loss). With the adoption of SFAS No. 133, the convertible bonds were reclassified to trading securities, which resulted in the Company recognizing gains of $52,000 at October 1, 2000. The $52,000 of gains was comprised of a $31,000 cumulative effect of a change in accounting principle and a $21,000 reclassification of previously unrealized holding gains. For the thirteen week period ended December 29, 2001, the Company recorded gains due to the changes in the fair value of the convertible bonds totaling $0.3 million. In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that all business combinations be accounted for under the purchase method. The statement further requires separate recognition of intangible assets that meet one of two specified criteria. The statement applies to all business combinations initiated after June 30, 2001. SFAS No. 142 requires that an intangible asset that is acquired be initially recognized and measured based on its fair value. The statement also provides that goodwill should not be amortized, but should be tested for impairment annually, or more frequently if circumstances indicate potential impairment, through a comparison of its implied fair value to its carrying amount. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. The Company will implement the pronouncement beginning in the first quarter of fiscal year 2003. Existing goodwill will continue to be amortized through the remainder of fiscal 2002 at which time amortization will cease and the Company will perform a transitional goodwill impairment test. The Company is currently evaluating the impact of the new accounting standards on existing goodwill and other intangible assets. While the ultimate impact of the new accounting standards has yet to be determined, goodwill amortization expense for the thirteen week period ended December 29, 2001 was $0.4 million. Forward-Looking Information This document and the documents of Unified incorporated by reference may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These 7 statements relate to expectations concerning matters that (a) are not historical facts, (b) predict or forecast future events or results, (c) embody assumptions which may prove to have been inaccurate, including Unified's assessment of the probability and materiality of losses associated with litigation and other contingent liabilities; and Unified's expectations regarding the adequacy of capital and liquidity. Also, when we use words such as "believes," "expects," "anticipates" or similar expressions, we are making forward-looking statements. Although Unified believes that the expectations reflected in such forward- looking statements are reasonable, we cannot give you any assurance that such expectations will prove correct. Important factors that could cause actual results to differ materially from such expectations include the adverse effects of the changing industry environment and increased competition; sales decline and loss of customers; exposure to the uncertainties of litigation and other contingent liabilities; the failure of Unified to take steps to stem losses in its retail operations; the inability of the Company to establish and perform plans to improve its operating performance and equity base in order to meet financial covenants applicable to future periods; and the increased credit risk to Unified caused by the ability of former United members to establish their required minimum deposits over time through use of patronage dividends to purchase Class B Shares if such members default on their obligations to Unified prior to their deposit requirements being met and the existing deposit proves inadequate to cover such members' obligation. All forward-looking statements attributable to Unified are expressly qualified in their entirety by the factors which may cause actual results to differ materially. Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - ------------- Liquidity and Capital Resources The Company relies upon cash flow from operations, patron deposits, shareholdings and borrowings under the Company's credit lines to finance operations. Net cash utilized by operating activities totaled $1.4 million for the first thirteen weeks of fiscal 2002 (the "2002 period"), as compared to net cash utilized by operating activities of $5.2 million for the first thirteen weeks of fiscal 2001 (the "2001 period"). The decrease in net cash utilization for the 2002 period as compared to the 2001 period is primarily due to a decrease in accounts and notes receivable resulting from improved collection efforts, as well as a decrease in overall inventory levels resulting from implementation of an inventory reduction program. This decrease was partially offset by a decrease in accounts payable and accrued liabilities. At December 29, 2001, working capital was $147.2 million, as compared to $142.0 million at September 29, 2001, and the Company's current ratio was 1.5 to 1 at December 29, 2001 and 1.4 to 1 at September 29, 2001. The Company believes that cash flow from its operations and available credit lines will be sufficient to meet operating needs and capital spending requirements for the fiscal 2002 period. The Company issued Patronage Certificates in fiscal years 1993, 1994 and 1995. The outstanding Patronage Certificates have a seven-year term and bear interest payable on December 15 of each year. In the 2002 period, the Company redeemed the Patronage Certificates issued in 1994 for approximately $2.3 million and in the 2001 period the Company redeemed the patronage certificates issued in 1993 for approximately $1.9 million. The patronage certificates issued in 1995 are due December 15, 2002. Capital expenditures totaled $4.2 million in the 2002 period. These expenditures were primarily attributable to leasehold improvements and equipment associated with the remodeling of stores in the Company's SavMax operation, purchases of computer software and hardware, and warehousing and equipment. Unified has a $200 million secured revolving credit facility with a group of banks. The revolving credit agreement is secured, expires October 1, 2004 and bears interest at either an adjusted LIBOR rate plus a margin ranging from 2.00% to 3.00% depending on Unified's leverage ratio or 0.75% plus the higher of the bank base rate or 0.50% above the bank's federal funds borrowing rate. The revolving credit facility permits advances of up to 85% of eligible accounts receivable and 65% of eligible inventories. 8 At December 29, 2001, Unified had $72.8 million and $40.0 million outstanding in senior secured notes to certain insurance companies and pension funds under a note purchase agreement dated September 29, 1999 (as amended, the "Senior Note Agreement"). In fiscal year 2002, Unified amended the Senior Note Agreement and the revolving credit facility. For the Senior Note Agreement, the amendment modified two financial covenants (consolidated tangible net worth and fixed charge coverage). The amendment assumes that improvements will be made in future performance with respect to both ratios. In addition, interest rates on both senior secured notes have increased by 0.25% until such time consolidated tangible net worth increases to $80.0 million after excluding future consolidated net income generated after September 29, 2001. The amendment relating to the revolving credit facility changed the requirements of certain financial covenants at September 29, 2001 and through fiscal year 2002, with respect to minimum tangible net worth, the fixed charge coverage ratio and the ratio of funded debt to earnings before interest, taxes, depreciation and amortization, and patronage dividends ("EBITDAP"). At its December meeting, the Board of Directors adopted a plan for Equity Enhancement - Fiscal Year 2002 and, as required by the amendment, provided the adopted plan to the lenders. The amended covenants in the revolving credit facility require improved performance in future periods with respect to minimum adjusted tangible net worth, the fixed charge coverage ratio and EBITDAP. The amendment also increased borrowing costs to either: (i) LIBOR plus an increased applicable margin (the increase is reflected above) based on Unified's leverage ratio or (ii) 0.75% plus the higher of the lender's base rate or 0.50% above the lender's borrowing rate. The credit agreements contain customary representations, warranties, covenants and default provisions for these types of financing. In the event the Company is not in compliance with the financial covenants of the Senior Note or revolving credit facility, the continued availability of loan funds or the terms upon which such loans would be available could be adversely impacted, and the impact could be material. In December 2000, the Company purchased 80,000 shares of Preferred Stock of C&K Market, Inc. ("C&K") for $8.0 million. Douglas H. Nidiffer, a director of the Company, is a shareholder, director and officer of C&K. In connection with the stock purchase transaction, C&K executed a ten-year Supply Agreement and the shareholders of C&K granted to the Company a put with respect to the Preferred Stock, exercisable upon occurrence of designated events including the nonpayment of permitted dividends or mandatory redemption payments. The Preferred Stock bears a 9.5% cumulative dividend rate, with cash payment of dividends deferred until November 15, 2002, and then payable only if permitted by applicable loan agreements. The Preferred Stock is convertible into 15% of the common stock of C&K under certain circumstances. At September 29, 2001, the Company had net deferred tax assets totaling $22.0 million, of which $12.6 million related to net operating loss carryforwards that expire in various years through 2020. The Company has established a valuation allowance of $9.1 million to reduce the net deferred tax assets to their estimated net realizable value as the Company may not realize the entire net operating loss carryforwards before their expiration. The valuation allowance is primarily related to retail store losses which include the divestiture stores. The remaining balance of the net deferred tax asset is expected to be realized through future operating results, reversal of taxable temporary differences, and tax planning strategies. For the 2002 period, the Company reported a net loss of $2.0 million. However, a tax benefit was not recorded because the realization requirement per SFAS 109 of "more likely than not" was not met during the quarter. Historically, Unified has distributed at least 20% of the patronage dividends in cash and distributed Class B Shares as a portion of the patronage dividends distributed to its member-patrons. Dairy patronage dividends were paid in cash in the periods presented. The Board of Directors has adopted an equity enhancement plan for fiscal year 2002. As part of that plan, the patronage dividend payment policy was modified as follows: net earnings from business transacted on a patronage basis in the Cooperative Division with member and associate patrons shall be distributed on a patronage basis by written notices of allocation as defined in Section 1388 of the Internal Revenue Code in the form of: 9 . Shares of Class B Common Stock to the extent there exists any deficiency of a member-patron in meeting the requirements for holding Class B Shares specified in the Bylaws of the Company; . Subordinated Patronage Dividend Certificates ("Certificates") to the extent of the balance of such patronage dividends for member patrons, such Certificates to have a minimum term of five years, an interest rate equal to an appropriate benchmark interest rate as such rate exists on the issuance date of the Certificates, such rate to be adjusted annually thereafter to be equal to the same benchmark interest rate on each anniversary of the date of issuance of the Certificates, with such other terms and conditions as shall be recommended by management and approved by the Board of Directors, which terms may include provision for conversion of Certificates into Class B Shares for member patrons on a basis to be determined. Continued net operating losses from the Company's subsidiary and other non- patronage activities, if not offset by gains from other non-patronage activities or, enhancement to the Company's equity by other means could adversely affect operating results and the Company's equity. The current deficit in the Company's retained earnings has created restrictions on the Company's current ability to redeem its own shares. The Company's inability to redeem or repurchase Class B Shares could have an adverse effect on the Company's ability to attract new members. In addition to the Equity Enhancement Plan, the Board of Directors continues to consider other alternatives to improve the company's shareholder equity. Patrons are generally required to maintain a subordinated cash deposit with Unified. Member-patrons may satisfy the minimum deposit requirement through a combination of a cash deposit and the ownership of Class B Shares. In the Merger, former United members were provided the opportunity to build the minimum subordinated deposit over time, provided that they agreed to assign 80% of patronage dividends received for this purpose and maintain a supply agreement with Unified until the minimum deposit condition is satisfied. Upon termination of patron status, the withdrawing patron is entitled to recover deposits in excess of its obligations to Unified if permitted by the applicable subordination provisions, and a member-patron also will be entitled to have its shares redeemed, subject to applicable legal requirements, company policies and credit agreement limitations. With certain exceptions, Unified's current redemption policy limits the Class B Shares that Unified is obligated to redeem in any fiscal year to 5% of the number of Class B Shares deemed outstanding at the end of the preceding fiscal year. For fiscal 2000, this limitation was exceeded by repurchases of shares in connection with the Merger. In connection with the Merger, Unified redeemed 71,310 Class B Shares of discontinued members for a total consideration before set-offs of $13.4 million. As described in the Form 10-K, Unified is not obligated to repurchase Class B Shares of terminated members until after September 27, 2002. Redemption of all capital stock is subject to limitations imposed by the Articles of Incorporation and Bylaws, credit agreements to which the Company is a party, and restrictions imposed by law on the ability of a company to redeem its own shares. As a California corporation, the Company is subject to the provisions of the California General Corporation Law including Section 500 which limits the ability of the Company to make distributions, including distributions to repurchase its own shares and any payments on notes issued to repurchase Unified shares. Section 500 permits such repurchase and note payments only when retained earnings calculated in accordance with generally accepted accounting principles ("GAAP") equal or exceed the amount of any proposed distribution or an alternative asset/liability ratio test is met. Historically through the operations of its subsidiaries, the Company has maintained sufficient retained earnings to accomplish its share repurchase program. As a result of expenses associated with the Merger with United, operating losses of subsidiaries and Company-owned retail stores, including the Divestiture Stores, the Company's retained earnings have been eliminated and are currently inadequate to permit repurchase of Company shares. The repurchase test permitted under Section 500 based on the ratio of assets to liabilities determined under GAAP with certain adjustments cannot currently be met since the Company relies heavily on borrowings to finance its operations. The Company is also a party to credit agreements containing financial and other covenants, which limit the ability of the Company to make purchases of capital stock under certain circumstances. The Company has established a trust for the purpose of facilitating the transfer of shares by Unified members obligated or entitled to sell shares in accordance with the Company's redemption policy to existing members or new members who are authorized by the Board of Directors to buy shares in accordance with the Bylaws, 10 during periods when the Company is legally unable to buy shares or otherwise elects to cause or permit outstanding shares to be transferred between members. Funds used to purchase shares from selling members are exclusively sourced from funds provided by buying members. Results of Operations The following table sets forth selected financial data of the Company expressed as a percentage of net sales for the periods indicated below:
For the Thirteen Weeks Ended -------------------------------------- December 30, December 29, 2000 2001 -------------------------------------- Net sales 100.0% 100.0% Cost of sales 89.0 89.2 Distribution, selling and administrative 9.5 9.9 Operating income 1.5 0.9 Interest expense 1.0 0.8 Earnings before estimated patronage dividends, income taxes and cumulative effect of change in accounting principle 0.5 0.1 Estimated patronage dividends (0.6) (0.4) Loss before income taxes and cumulative effect of a change in accounting principle (0.1) (0.3) Income taxes 0.0 0.0 Loss before cumulative effect of change in accounting principle (0.1) (0.3) Cumulative effect of a change in accounting principle -- -- Net loss (0.1) (0.3)
Thirteen Week Period Net sales. Net sales for the 2002 and 2001 periods were $742.5 million and $740.6 million, respectively. Sales for the 2002 period increased $1.9 million over the 2001 period. The overall increase in sales is primarily related to the following: Wholesale Distribution Segment: . Wholesale Distribution Segment sales increased $4.0 million in the 2002 period compared to the 2001 period. The primary contributors to this increase were: . The Company implemented a new pricing program to re-focus on sales in the Hispanic product division. This program drove an increase in sales of $2.2 million over the 2001 period. . The Company's Dairy Division sales increased by $1.8 million compared to the same 2001 period. The Dairy Division sales increase was attributable to a combination of an increase in raw milk prices and higher distribution volume, as well as the addition of the Pacific Northwest Dairy Division in the third quarter of fiscal year 2001. Retail Segment: . Sales in the 2002 period for the Company-owned retail locations decreased by $3.9 million compared to the 2001 period. The Company acquired three stores in June 2001 that are now 11 operated under the Apple Markets banner. The three stores generated combined sales of $5.2 million for the 2002 period. This increase in sales was offset by the closure of three stores and an overall volume decline in the remaining store locations. A re-merchandising program was launched at the Company's SavMax stores during the 2002 period. Cost of sales. Cost of sales was $662.1 million (89.2% of net sales) for the fiscal 2002 period compared to $659.3 million (89% of net sales) in the 2001 period. Cost of sales as a percentage of net sales was slightly higher in the 2002 period compared to the 2001 period due to lower wholesale margins and lower retail sales that generally generate higher margins. Distribution, selling and administrative. Distribution, selling and administrative expenses were $73.5 million (9.9% of net sales) in the 2002 period, as compared to $70.0 million (9.5% of net sales) in the 2001 period. The $3.5 million increase in expenses is due to several factors. Wholesale Distribution Segment: . Certain distribution costs are variable and will fluctuate as volume fluctuates. The increased volume in the wholesale distribution segment accounts for an increase in variable expenses of $210,000. . The Company implemented a work force reduction in December 2001 as part of a comprehensive expense reduction program. As a result, severance cost of $550,000 was recorded in the 2002 period. The work force reduction, as well as the elimination of unfilled but budgeted positions, is expected to reduce expenses approximately $4.7 million in fiscal year 2002. . Pension expense for the 2002 period is higher than the 2001 period by $415,000 because of additional funding requirements associated with a decline in the value of pension plan assets attributable to a decline in the equity markets. . The Company recorded $402,000 of additional reserves relating to estimated lease shortfalls on leases guaranteed by the Company. Retail Segment: . Total retail expenses increased $1.8 million in the 2002 period over the 2001 period. The majority of the increase was in the SavMax stores ($1.4 million). Of these non-capitalizable expenditures, the Company spent $0.9 million to re-merchandise, reset store shelves and re-open at one location. The new format is expected to provide improved retail sales with the addition of several full-service department offerings that were not previously available. The stores operate in a highly competitive market place with very aggressive promotional activity for the consumer. In addition to the above activities, the SavMax stores have experienced higher ongoing operating costs related to utilities, advertising, and labor for the service activities of approximately $0.5 million over the 2001 period. The Company's other retail activities resulted in an increase of operating costs of $1.8 million related to the acquisition of three stores in June 2001 in northern California, with an offset of cost reductions of $1.4 million for the closure of the final two Divestiture stores in the 2002 period. Interest. Interest expense was $6.1 million (0.8% of net sales) in the 2002 period as compared to $7.5 million (1.0% of net sales) in the 2001 period. The Company's effective borrowing rates for the 2002 and 2001 periods were 6.1% and 8.5%, respectively. The effect of the decrease in interest rates was offset by the Company's higher borrowing levels. 12 Estimated patronage dividends. Estimated patronage dividends for the fiscal 2002 and 2001 periods were $2.9 million and $4.6 million, respectively. Estimated patronage earnings for fiscal 2002 are comprised of the interim patronage earnings from the Company's three patronage pools: the Cooperative Division and the Southern California and Pacific Northwest Dairy Divisions. For the 2002 period, the Company had interim patronage earnings of $91,000 in the Cooperative Division, $2.7 million in the Southern California Dairy Division and $71,000 in the Pacific Northwest Dairy Division. In the 2001 period, the Company had patronage earnings of $2.0 million in the Cooperative Division and $2.6 million in the Southern California Dairy Division. Net loss. The net loss for the 2002 period was $2.0 million compared to a net loss of $0.9 million for the 2001 period. Net profits or losses generated by the Company's subsidiaries and non-patronage activities are not included in patronage earnings of the Cooperative. The specialty food products, international, and certain other non-patronage distribution activities within the wholesale distribution segment contributed profits for the 2002 period of $727,000 compared to $550,000 for the 2001 period. The improvement is primarily attributed to the completion of transitioning the source of certain specialty volume from southern to northern California in the second quarter of the 2001 period. Retail losses for the 2002 and 2001 period were $3.4 million and $1.7 million, respectively. Operating losses and shutdown costs from the closed stores were the primary factors for the losses in both years. Higher losses in the 2002 period were primarily due to weakening sales and the higher costs associated with a re-merchandising and remodeling activity that occurred in the 2002 period. Continued operating losses from the Company's retail segment, if not offset by positive earnings from the Company's other non-patronage activities, could affect the Company's ability to comply with current financial covenant requirements, as well as the potential impairment of related intangible assets. The Company's other subsidiary activities had earnings of $695,000 for the 2002 period as compared to earnings of $211,000 for the 2001 period. Primary activities included in the Company's All Other segment are related to the Company's insurance and financing activities. Overall performance improved in the 2002 period as compared to the 2001 period primarily due to favorable insurance performance. The Company's financing activities experienced weakening revenues due to lower market-related interest rates. The Company will continue to evaluate under performing subsidiary operations and make a determination with regards to possible sale or closure. Additional Discussion and Analysis The Company's management deals with many risks and uncertainties in the course of performing their responsibilities. The Additional Discussion and Analysis section provides additional information on such issues. The Company's operating results are highly dependent upon maintaining and growing its distribution volume to members. The Company's top ten customers constitute approximately 30% of total sales. A significant loss in customers or volume could adversely affect the Company's operating results. The merger with United Grocers, Inc. (UG), as described in the Company's Form 10-K Annual Report, created goodwill that totals $29.9 million, net of amortization at December 29, 2001. The sales activity and customer base of the combined entity remain strong. However, a significant loss in volume from former customers of (UG) could potentially impair the carrying amount of goodwill and necessitate a write down in this asset. 13 Continued operating losses from the Company's retail segment could adversely affect the valuation of the business units and potentially impair the carrying amount of the goodwill related to SavMax. Total goodwill, net of amortization, as of December 29, 2001 related to SavMax is $21.6 million. The Company is subject to certain economic factors that are beyond the control of the Company, including inflation and deflation. The degree to which the acquisition cost of products purchased by the Company for resale to customers is stable and/or deflating could have an adverse effect on the Company's business and results of operations. The Company's pricing programs typically and generally assess a percentage fee above the Company's cost of the product. During periods of little or no inflation in the cost of goods procured for resale, the Company's ability to maintain the dollar profit margin needed to offset increases in costs is reduced. The Company operates in a highly competitive market place and increasing its charges to customers is difficult. The Company has recently experienced higher operating expenses, including but not limited to energy, fuel and employee wages and benefits. The Company's facilities are principally in California and the Pacific Northwest, regions that have experienced significant increased utility costs. In response to the increase in operating costs the Company has implemented a comprehensive expense reduction initiative. As part of this initiative the Company eliminated approximately 200 budgeted positions impacting nearly all divisions, departments and facilities. The Company expects that the position elimination will result in a reduction of personnel costs of approximately $6.2 million on a annualized basis. The Company also implemented an additional charge to its customers to offset the increased cost of energy incurred by the Company. Changes in economic conditions could also adversely effect the Company's customer's ability to meet certain obligations to the Company or leave the Company exposed for obligations the Company has guaranteed. Loans to members, trade receivables and lease guarantees could be at risk in a sustained recessionary environment. In response to this potential risk, the Company establishes reserves for notes receivable, trade receivables, and lease guarantees, net of sub-lease offsets, for which the Company may be at risk for default. In such a situation, the Company would be required to foreclose on assets provided as collateral or assume payments for leased locations for which the Company has guaranteed payment. Although the Company believes its reserves to be adequate, the Company's operating results could be adversely affected in the event that actual exposure exceeds established reserves. During the normal course of business, the Company is involved in litigation. In the event that management determines that the probability of an adverse judgement in pending litigation is likely and that the exposure can be reasonably estimated, appropriate reserves are established. The final outcome of any litigation could adversely affect operating results, if the actual liability exceeds recorded reserves and insurance coverage. The Company's insurance subsidiary is regulated by the State of California and subject to the rules and regulations promulgated by the appropriate regulatory agencies. Reserves are established to fund payments under policies issued to policy holders. The adequacy of the reserves are reviewed annually by actuarial evaluation conducted by a third party actuary. The amount of required reserves is affected by various assumptions and actuarial calculations including but not limited to health care cost trends, mortality rates, demographics, federal and state law, as well as insurance claim trends. As a result, the amount of reserves required to settle future claims may vary from year to year. Although the Company believes its reserves to be adequate, significant and adverse changes in the experience of claims settlement could negatively impact operating results if the Company's claim cost experiences exceed the actuarial calculations. As disclosed in the Company's Form 10-K Annual Report, the Company's loan agreements require improved performance in future periods to continue financial covenant compliance. Failure to improve performance could have an adverse affect upon the continued availability of loan funds or the terms upon which loan funds would continue to be available, and the impact could be material. Also, as noted above, the Company in the ordinary course of business assists its members by providing loans and loan guarantees, lease guarantees or subleases, and makes direct investments in members. The failure by members to perform their obligations under these arrangements could have an adverse affect upon the Company's liquidity. 14 The Company operates as a cooperative and as such does a portion of its business with its member shareholders on a patronage basis. Transactions with members are conducted on terms and conditions generally available to the membership or on negotiated terms pursuant to supply or credit support agreements. The Company also does business with non-members that may be on terms different than those offered to members. Item 3. Quantitative and Qualitative Disclosures About Market Risk. - -------------------------------------------------------------------- Unified has only limited involvement with derivative financial instruments. They are used to manage well defined interest rate risks. Unified entered into a five-year interest rate collar agreement in February 1999 in relation to certain borrowings on its variable rate revolving credit. The collar agreement was put in place without incurring a fee with respect to the collar transaction. The hedge agreement is structured such that Unified pays a variable rate of interest between 6% (cap rate) and 4.94% (floor rate) based on a notional amount of $50.0 million. The weighted average interest rate, prior to lender's margin, on borrowings on the revolving credit was 2.44% at December 29, 2001. The fair value of the collar was a negative $1,772,000 as of December 29, 2001 compared to a negative fair value of $1,790,000 as of September 29, 2001. As a result of the slight improvement in the fair value of the interest rate collar, the Company recorded an unrealized gain of $18,000 for the thirteen week period ended December 29, 2001. Unified is subject to interest rate changes on its notes payable under the Company's credit and note agreements which may affect the fair value of the notes payable. Based on the notes payable outstanding at December 29, 2001 and the current market condition, a 100 basis point increase in interest rates would decrease cash flow and earnings by approximately $2.8 million. Conversely, a 100 basis point decrease in interest rates would increase cash flow and earnings by approximately $2.8 million. With the adoption of SFAS No. 133, the Company's investments in convertible bonds were reclassified from available for sale securities to trading securities. As a result of changing the classification of the convertible bonds, the Company is subject to market risk associated with fluctuations in interest rates and the market value of the embedded conversion feature. For the 2002 period, the Company recorded gains due to the changes in the fair value of the convertible bonds totaling $0.3 million. PART II. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- As reported in the Company's Annual Report on Form 10-K for the fiscal year ended 2001, the Jerome Lemelson Foundation (the "Foundation"), which asserts ownership of certain patents relating to bar code technology, issued a demand that the Company enter into a license agreement with respect to certain patented technology which the Company is claimed to use and which allegedly infringes upon patents issued to Jerome Lemelson, which patents, upon the death of Jerome Lemelsom, were assigned to the Foundation. The Foundation filed an action against the Company and others asserting patent infringement and seeking damages in unspecified amounts. During the 2002 period, the Company and the Foundation reached a settlement of the matter at an amount that did not exceed the amounts reserved by Unified. Item 6. Exhibits and Reports on Form 8-K. - ----------------------------------------- (a) Exhibits 15 10.1 Amended and Restated Sheltered Savings Plan. 10.2 Amended and Restated Employee Savings Plan. 10.3 Amended and Restated Retirement Plan for Employees of Unified Western Grocers, Inc. (b) Reports on Form 8-K None 16 Pursuant to the requirements 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. Dated: February 19, 2002 Unified Western Grocers, Inc. - ----------------------------------- (Registrant) /s/ Alfred A. Plamann - ----------------------------------- By Alfred A. Plamann President and Chief Executive Officer /s/ Richard J. Martin - ----------------------------------- By Richard J. Martin Executive Vice President, Finance & Administration and Chief Financial Officer /s/ William O. Cote - ----------------------------------- By William O. Cote Vice President, Controller 17 EXHIBIT INDEX 10.1 Amended and Restated Sheltered Savings Plan. 10.2 Amended and Restated Employee Savings Plan. 10.3 Amended and Restated Retirement Plan for Employees of Unified Western Grocers, Inc. 18 EX-10.1 3 dex101.txt AMENDED AND RESTATED SHELTERED SAVINGS PLAN EXHIBIT 10.1 UNIFIED WESTERN GROCERS, INC. SHELTERED SAVINGS PLAN (Amended and Restated Effective as of August 31, 1997) (Formerly Known as the Certified Grocers of California, Ltd. Employees' Sheltered Savings Plan) TABLE OF CONTENTS ----------------- ARTICLE I NAME, DEFINITIONS & FUNDING POLICY............................................................ 1 Section 1.1 : Full Name................................................................................. 1 Section 1.2 : Certain Definitions....................................................................... 2 Section 1.3 : Other Definitions........................................................................ 12 Section 1.4 : Funding Policy........................................................................... 13 ARTICLE II PARTICIPATION................................................................................ 14 Section 2.1 : Eligibility Requirements................................................................. 14 Section 2.2 : Application For Participation And Beneficiary Designation................................ 15 Section 2.3 : Participation............................................................................ 15 Section 2.4 : Re-Employment............................................................................ 15 ARTICLE III CONTRIBUTIONS................................................................................ 16 Section 3.1 : Company's Non-Elective Contributions..................................................... 16 Section 3.2 : Elective Contributions Under Code Section 401(k)......................................... 16 Section 3.3 : Company's Matching Contribution.......................................................... 16 Section 3.4 : Participants' Contributions.............................................................. 17 Section 3.5 : Payment Of Non-Elective Contributions and Matching Contributions To The Trustee............................................................ 17 Section 3.6 : Payment Of Elective Contributions To The Trustee......................................... 18 Section 3.7 : Payment Of Participants' Contributions To The Trustee.................................... 18 Section 3.8 : Actual Deferral Percentage Test.......................................................... 18 Section 3.9 : Actual Contribution Percentage Test...................................................... 24 Section 3.10 : No Requirement For Profits............................................................... 29 ARTICLE IV ALLOCATIONS TO PARTICIPANTS' ACCOUNTS........................................................ 30 Section 4.1 : Retirement Accounts And Matching Contribution Accounts................................... 30 Section 4.2 : Deferred Income Accounts................................................................. 30 Section 4.3 : Voluntary Contribution Accounts And Rollover Contribution Accounts................................................................................ 30 Section 4.4 : Allocation Of Forfeitures, Gains And Losses.............................................. 30 Section 4.5 : Allocation Of Non-Elective Contribution And Matching Contribution............................................................................ 31 Section 4.6 : Accounts In General...................................................................... 31 Section 4.7 : Limitation On Annual Additions........................................................... 32 Section 4.8 : Investment Of Accounts................................................................... 34 ARTICLE V VESTING........................................................................................ 36 Section 5.1 : Vesting In Retirement Account And Matching Contribution Account................................................................................. 36
-i- Section 5.2 : Vesting In Other Accounts................................................................ 36 Section 5.3 : Forfeitures.............................................................................. 36 ARTICLE VI DISTRIBUTION OF BENEFITS..................................................................... 38 Section 6.1 : Distribution Of Benefits................................................................. 38 Section 6.2 : Survivor Annuity Requirements............................................................ 38 Section 6.3 : Optional Methods Of Distribution......................................................... 42 Section 6.4 : Timing Of Distributions.................................................................. 44 Section 6.5 : Postponed Retirement..................................................................... 46 Section 6.6 : Distributions Due Missing Persons........................................................ 47 Section 6.7 : Transfers To Another Qualified Plan...................................................... 47 Section 6.8 : Loans To Participants.................................................................... 48 Section 6.9 : Withdrawal At Age 59 1/2................................................................. 49 Section 6.10 : Hardship Withdrawals..................................................................... 49 Section 6.11 : Withdrawal Of Voluntary Contributions.................................................... 51 Section 6.12 : Withdrawal of Rollover Contributions..................................................... 51 ARTICLE VII TOP-HEAVY PLAN LIMITATIONS................................................................... 52 Section 7.1 : Application Of Top-Heavy Rules........................................................... 52 Section 7.2 : Definitions.............................................................................. 52 Section 7.3 : 60% Test - Special Rules................................................................. 55 Section 7.4 : Minimum Vesting Requirement.............................................................. 56 Section 7.5 : Minimum Contribution Requirement......................................................... 56 ARTICLE VIII THE COMMITTEE. .............................................................................. 58 Section 8.1 : Members.................................................................................. 58 Section 8.2 : Committee Action......................................................................... 58 Section 8.3 : Rights And Duties........................................................................ 59 Section 8.4 : Information.............................................................................. 60 Section 8.5 : Compensation, Indemnity And Liability.................................................... 61 Section 8.6 : Administrative Expenses Of The Plan...................................................... 61 ARTICLE IX AMENDMENT AND TERMINATION.................................................................... 62 Section 9.1 : Amendments............................................................................... 62 Section 9.2 : Discontinuance Of Plan................................................................... 63 Section 9.3 : Failure To Contribute.................................................................... 63 ARTICLE X CLAIMS PROCEDURE............................................................................. 64 Section 10.1 : Presentation Of Claim.................................................................... 64 Section 10.2 : Notification Of Decision................................................................. 64 Section 10.3 : Review Of A Denied Claim................................................................. 65 Section 10.4 : Decision On Review....................................................................... 65
-ii- ARTICLE XI MISCELLANEOUS................................................................................. 67 Section 11.1 : Contributions Not Recoverable............................................................ 67 Section 11.2 : Limitation On Participants' Rights....................................................... 67 Section 11.3 : Receipt Or Release....................................................................... 68 Section 11.4 : Nonassignability......................................................................... 68 Section 11.5 : Governing Law............................................................................ 68 Section 11.6 : Headings................................................................................. 68 Section 11.7 : Counterparts............................................................................. 68 Section 11.8 : Successors And Assigns................................................................... 69 Section 11.9 : Gender And Number........................................................................ 69 Section 11.10 : Merger, Consolidation Or Transfer Of Plan Assets........................................ 69 Section 11.11 : Joinder Of Parties...................................................................... 69 Section 11.12 : The Trust............................................................................... 69 Section 11.13 : Special Requirements For USERRA......................................................... 69 Signature Page........................................................................................... 71
-iii- UNIFIED WESTERN GROCERS, INC. SHELTERED SAVINGS PLAN (Formerly Known as the Certified Grocers of California, Ltd. ------------------------------------------------------------ Employees' Sheltered Savings Plan) ---------------------------------- Unified Western Grocers, Inc. has adopted the following complete amendment and restatement of its profit sharing plan that evidences the plan portion of a profit sharing plan and trust for the benefit of qualified employees of the Company. Additionally, effective as of December 31, 2001, the United Grocers Special 401(k) Savings Plan (the "United Plan") is merged with and into the Plan. Accordingly, effective as of such merger date, the terms and conditions governing the former participants in the United Plan shall be as set forth in this Plan. As to the United facility Employees, the terms of the United Plan that existed prior to the merger date shall be effective until December 30, 2001, and the terms of this Plan shall only be applicable for one day (i.e., December 31, 2001) for the 2001 Plan Year. Notwithstanding the foregoing, those provisions of the Plan that relate to the Uruguay Round Agreements Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue Service Restructuring and Reform Act of 1998, and the Community Renewal Tax Relief Act of 2000 ("GUST") shall be applicable to the United facility Employees as of the dates required by GUST. The terms of the Plan are as follows: ARTICLE I --------- NAME, DEFINITIONS & FUNDING POLICY ---------------------------------- Section 1.1 : Full Name. This profit sharing plan shall be known as ----------- --------- the: UNIFIED WESTERN GROCERS, INC. SHELTERED SAVINGS PLAN The Plan was known, prior to December 31, 2001, as the Certified Grocers of California, Ltd. Employees' Sheltered Savings Plan. It is hereby designated as constituting a defined contribution plan intended to qualify under Code Section 401(a) that includes a cash or deferred arrangement under Code Section 401(k). The Trust established in connection with the Plan shall be known as the: UNIFIED WESTERN GROCERS, INC. SHELTERED SAVINGS PLAN TRUST -1- Section 1.2: Certain Definitions. As used in this document and in the ------------ ------------------- Trust, the following words and phrases shall have the following meanings, unless a different meaning is specified or clearly indicated by the context: "Accounts" shall mean, collectively, the Retirement Account, the Deferred Income Account, the Matching Contribution Account, the Voluntary Contribution Account, and the Rollover Contribution Account that may be established under the Plan for a Participant. If all of such accounts are not established for a Participant, then "Accounts" shall mean, collectively, all of such accounts that are established for such Participant. "Adjustment Factor" shall mean the cost of living adjustment factor prescribed by the Secretary of the Treasury under Code Section 415(d) for years beginning after December 31, 1987, as applied to such items and in such manner as the Secretary of the Treasury shall provide. "Affiliated Company" shall mean: (a) a member of a controlled group of corporations of which the Company is a member; (b) an unincorporated trade or business that is under common control with the Company, as determined in accordance with Code Section 414(c) and the applicable Regulations; (c) a member of an affiliated service group of which the Company is a member, as determined in accordance with Code Section 414(m) and the applicable Regulations; or (d) any other entity required to be aggregated with the Company pursuant to the Regulations under Code Section 414(o). For these purposes, a "controlled group of corporations" shall mean a controlled group of corporations as defined in Code Section 1563(a), determined without regard to Code Sections 1563(a)(4) and 1563(e)(3)(C). "Anniversary Date" shall mean the last day of each Plan Year. "Article" shall mean an Article of the Plan. "Beneficiary" shall mean the person or persons, as the context requires, last designated by a Participant to receive any benefit specified in the Plan that is payable upon such Participant's death. If there is no designated Beneficiary or -2- surviving Beneficiary, the Beneficiary shall be the Participant's surviving spouse; or, if none, the Participant's surviving descendants (including adopted persons), who shall take on the principle of representation; or, if none, the Participant's estate; or, if there is no legal representative appointed to represent the Participant's estate and if the Participant's vested interest does not exceed $2,000, a person (or the persons) selected by the Committee who is related to the Participant by blood, adoption or marriage. "Board of Directors" shall mean the Board of Directors of the Company. "Break in Service" shall mean a computation period in which an Employee has failed to complete more than 500 Hours of Service (unless due to an authorized, unpaid leave of absence granted by the Company in a nondiscriminatory manner). The computation period shall be, for eligibility and vesting purposes, the same computation period used in determining an Employee's Years of Service. Solely for purposes of determining whether a Break in Service has occurred in any computation period, an individual who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service that would otherwise have been credited to such individual but for such absence (or, in any case in which such Hours of Service cannot be determined, eight Hours of Service per work day of such absence). An absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this provision shall in no event exceed 501 hours, and they shall be credited (1) in the computation period in which the absence begins if such crediting is necessary to prevent a Break in Service in that period, or (2) in all other cases, in the following computation period. "Code" shall mean the Internal Revenue Code of 1986, as amended, and its successors. "Company" shall mean Unified Western Grocers, Inc. "Compensation" shall mean: a Participant's Earnings during the Plan Year, plus, for Plan Years beginning before January 1, 1998, the amount of his or her Elective Contributions, if any, and any amount that is contributed by the Company pursuant to a salary reduction agreement and that is not includable in such Participant's gross income under Code Sections 125, 402(e)(3), 402(h) or 403(b), reduced by all of the following -3- items (even if includable in gross income): reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation, and welfare benefits, and further reduced by any type of additional compensation for employees working outside their regularly scheduled tour of duty (such as overtime pay, premiums for shift differential, and call-in premiums) and bonuses. In addition to other applicable limitations set forth in the Plan, and despite any other provision of the Plan, the Compensation of each Participant shall not exceed the Compensation Limitation (defined below). The Compensation Limitation is $150,000, as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined beginning in such calendar year. If such a determination period consists of fewer than 12 months, the Compensation Limitation will be multiplied by a fraction, the numerator of which is the number of months in such determination period, and the denominator of which is 12. If Compensation for any prior determination period is taken into account in determining a Participant's benefits accruing in the current Plan Year, the Compensation for such prior determination period is subject to the Compensation Limitation in effect for such prior determination period. "Deferred Income Account" shall mean the account maintained by the Committee for each Participant on whose behalf an Elective Contribution is made. "Defined Benefit Plan" and "Defined Contribution Plan" shall have the same meanings as given these terms under ERISA. "Determination Year" shall mean the Plan Year. "Earnings" shall mean a Participant's annual "compensation", as that term is defined in Code Section 415, that is actually paid or made available to the Participant within the Plan Year. A Participant's Earnings shall include such Participant's wages, salaries, fees for professional services 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 Company or any Affiliated Company to the extent the amounts are includable in gross income under the Code (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements, and expense allowances). "Earnings" shall not include: (a) Any contribution made by the Company to a plan of deferred compensation to the extent that, before the application of the Code Section 415 limitations to that plan, the contributions are not includable in the gross income of the Participant for the taxable year in which contributed. In addition, the Company's contributions, if any, made on behalf of a Participant -4- to a simplified employee pension plan described in Code Section 408(k) are not considered Earnings for the taxable year in which contributed to the extent such contributions are deductible by the Participant under Code Section 219(b)(7). Additionally, any distributions from a plan of deferred compensation are not considered Earnings, regardless of whether such amounts are includable in the gross income of the Participant when distributed. However, any amount received by a Participant pursuant to an unfunded non-qualified plan may be considered Earnings in the year such amounts are includable in the gross income of the Participant. (b) Any amount realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by a Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture. (c) Any amount realized from the sale, exchange or other disposition of stock acquired under a qualified stock option. (d) Any other amount that receives 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), or contributions made by the Company (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Code Section 403(b) (whether or not the contributions are excludable from the gross income of the Participant). For Plan Years beginning after December 31, 1997, Earnings paid or made available during any Plan Year shall include any elective deferral (as defined in Code Section 402(g)(3)), and any amount that is contributed or deferred by the Company at the election of the Participant and that is not includable in the gross income of the Participant by reason of Code Section 125, 132(f)(4) (for Plan Years beginning after December 31, 2000), or 457. "Effective Date" shall mean August 31, 1997, which is the effective date of this amendment and restatement. Despite the foregoing, the attached Schedule A shall be effective as of January 1, 2002. "Eligible Participant" shall mean, as of any Anniversary Date, (i) each Participant who is an Employee on such date, and (ii) each Participant who ceased to be an Employee during the Plan Year ending with such Anniversary Date by reason of his or her involuntary layoff, retirement on or after his or her Normal Retirement Date, death, or Total Disability. "Employee" shall mean every person classified by the Company as a common law employee of the Company and any Affiliated Company that has adopted -5- the Plan with the permission of the Board of Directors. "Employee" shall not include any person who is (i) employed by or through a leasing, temporary, or similar agency or company, or (ii) classified by the Company as a leased employee (within the meaning of Code Section 414(n)(2)) of the Company or any such Affiliated Company. If any person described in the preceding sentence is determined to be a common law employee of the Company by court decision or otherwise, such person shall nonetheless continue to be treated as not being an Employee. "Employer" shall mean, with respect to an Employee, the Company, any Predecessor Employer and any Affiliated Company. "Employment Commencement Date" for each Employee shall mean the date such Employee first is credited with an Hour of Service. "Entry Date" shall mean the first day of each payroll period. Effective as of January 1, 1999, for purposes of eligibility to make Elective Contributions and Voluntary Contributions, the term "Entry Date" shall mean the first day of the first payroll period of each calendar quarter. Effective as of January 1, 2002, for purposes of eligibility to make Elective Contributions and Voluntary Contributions, the term "Entry Date" shall mean the first day of the first payroll period each month. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and its successors. "Fiduciary" shall mean a person who: (a) exercises any discretionary authority, discretionary control, or discretionary responsibility respecting the management or administration of the Plan; (b) exercises any authority or control respecting management or disposition of the Plan's assets; or (c) renders investment advice for a fee or other compensation, direct or indirect, with respect to any asset of the Plan, or has any authority or responsibility to do so. "Financial Institution" shall mean a bank, trust company, or other financial institution that is regulated by the United States or any State. -6- "Forfeiture" shall mean the nonvested portion of a Participant's Accounts that is forfeited and allocated to other Participants' Accounts in accordance with the Plan. "Highly Compensated Active Employee" shall mean any Participant who performed service for the Company during the Determination Year and who: (a) During the Look-Back Year received Earnings from the Company in excess of $80,000 (as adjusted pursuant to Code Section 415(d)), and, if the Company so elects, was a member of the Top-Paid Group for such year; or (b) Was a 5% Owner at any time during the Look-Back Year or the Determination Year. It is noted that the Company has not made the Top Paid Group Election. "Highly Compensated Employee" shall mean any Participant who is a "Highly Compensated Active Employee" or a "Highly Compensated Former Employee." "Highly Compensated Former Employee" shall mean any Participant who: (a) Separated from service (or was deemed to have separated from service) prior to the Determination Year, (b) Performed no service for the Company during the Determination Year, and (c) Was a Highly Compensated Active Employee in either (i) the Determination Year during which the Employee separated from service, or (ii) any Determination Year ending on or after the Employee's 55th birthday. For the purposes of this subsection (c), an Employee will be deemed to have separated from service if, in a Determination Year before the Employee attained age 55, the Employee received Earnings in an amount less than 50% of the Employee's average annual Earnings for the three consecutive calendar years preceding the Determination Year during which the Employee received the greatest amount of Earnings from the Company. "Hour of Service" shall mean: (a) Each hour for which an Employee was paid by, or entitled to payment from, an Employer. Hours under this subsection (a) shall be -7- credited to an Employee for the computation period or periods in which the services were performed. Generally, Hours of Service shall be determined from the Employer's employment records. Despite the foregoing, if an Employee's Compensation is not determined on the basis of certain amounts for each hour worked (such as salaried, commission or piece-work employees) and if his or her hours are not required to be counted and recorded by any federal law (such as the Fair Labor Standards Act), such Employee's Hours of Service need not be determined from employment records. Instead, such Employee may be credited with 190 Hours of Service for each month in which he or she would be credited with at least one Hour of Service pursuant to this subsection (a); (b) Each hour for which an Employee was paid by, or entitled to payment from, an Employer on account of a period during which no services were performed (irrespective of whether the employment relationship had terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this subsection (b) for any single continuous period (whether or not such period occurs in a single computation period); (c) Each hour for which back pay (irrespective of mitigation of damages) is either awarded against, or agreed to by, an Employer. The same Hours of Service shall not be credited under either subsection (a) or (b), whichever is applicable, and under this subsection (c). Hours of Service under this subsection (c) shall be credited for the computation period(s) to which the award or agreement pertains, rather than the computation period in which the award, agreement or payment is made; and (d) Hours under subsections (a) through (c) above shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations, which is incorporated here by reference. "Individual Medical Benefit Account" shall have the same meaning as is given that term under Code Section 415(l)(2). "Investment Manager" shall mean a person or entity who (that) is (a) registered as an investment advisor under the Investment Advisor's Act of 1940, (b) defined as a bank under that Act, or (c) an insurance company qualified under the laws of more than one state to manage, acquire and dispose of trust assets, and who has acknowledged in writing that he (she or it) is a Fiduciary with respect to the Plan. "Look-Back Year" shall mean the 12-month period preceding the Determination Year, or, if the Company elects and allowed by the applicable Regulations, the calendar year ending with or within the applicable Determination Year. -8- "Matching Contribution Account" shall mean the account maintained by the Committee for each Participant on whose behalf a Matching Contribution is made. "Named Fiduciary" shall have the same meaning as under Section 402(a) of ERISA and shall be determined as provided in Section 8.3. "Non-Highly Compensated Employee" shall mean any Participant who is not a Highly Compensated Employee. "Normal Retirement Age" shall mean a Participant's 65th birthday. "Normal Retirement Date" shall mean the first day of the month that coincides with or immediately follows a Participant's Normal Retirement Age. "Participant" shall mean any Employee who becomes eligible for participation in accordance with the provisions of the Plan, and, unless the context indicates otherwise, includes former Participants. "Plan" shall mean this document and the plan created by this document (including, unless the context indicates to the contrary, the Trust established in connection with the Plan), as it may be amended from time to time. "Plan Year" shall mean the period beginning on the Sunday following the Saturday nearest August 31st and ending on the Saturday nearest August 31st of the following year. Effective as of January 1, 1999, the Plan Year shall be the calendar year and there shall be a short Plan Year ending on December 31, 1998. The Plan Year shall be the "limitation year" for the Plan as defined in the Code. "Predecessor Employer" shall mean any predecessor employer of an Employee that maintained the Plan. "Regulations" shall mean the regulations issued under the Code or ERISA, or both of them, as well as under any other legislation that applies to the Plan. "Retirement Account" shall mean the account maintained by the Committee for each Participant which is to be credited with such Participant's share of the Company's contributions to the Trust. -9- "Rollover Contribution Account" shall mean the account maintained by the Committee for each Participant who makes a Rollover Contribution. "Rollover Contribution" shall mean a qualified rollover contribution as defined in Code Sections 402(c), 403(a)(4), and 408(d)(3), but shall not include a rollover contribution that is attributable to contributions made on behalf of a Key Employee in a Top-heavy Plan, unless such a rollover contribution is permissible under the Code or applicable Regulations. "Section" shall mean, when used in conjunction with some other reference (such as the Code or ERISA), a section of such other reference. When not used in conjunction with some other reference, Section shall refer to a section of the Plan or Trust, as the context requires. References to a Section include future amendments, and successors, to it. "Secretary" shall mean the Secretary or an Assistant Secretary of the Committee. "Secretary of the Treasury" shall mean the Secretary of the Treasury, as defined in Code Section 7701(a)(11). "Signature Page" shall mean the page(s) at the end of the Plan entitled "Signature Page." "Top-Paid Group" shall mean the group of Employees in a particular year that consists of the top 20% of the Employees, ranked on the basis of Earnings received from the Company during such year. (a) An Employee shall be disregarded for purposes of determining the Top-Paid Group if the Employee: (i) Has not performed an Hour of Service during such year; (ii) Has not completed six months of service; (iii) Normally works less than 17 1/2 hours per week or six months during any year; (iv) Has not attained age 21 by the end of such year; or (v) Is a non-resident alien and has received no earned income (within the meaning of Code Section 911(d)(2)) from the -10- Company constituting United States source income within the meaning of Code Section 861(a)(3). (b) In addition, if 90% or more of the Employees of the Company are covered under agreements the Secretary of Labor finds to be collective bargaining agreements between Employee representatives and the Company, and the Plan covers only Employees who are not covered under such agreements, then Employees covered by such agreements shall be excluded from both the total number of active Employees as well as from the identification of particular Employees in the Top Paid Group. (c) All Affiliated Companies shall be taken into account as a single employer, and leased employees, within the meaning of Code Sections 414(n)(2) and 414(o)(2), shall be considered Employees unless such leased employees are covered by a plan described in Code Section 414(n)(5) and are not covered in any qualified plan maintained by the Company. For the purpose of determining the number of active Employees in any year, the following Employees shall be excluded: (i) Employees with less than six months of service; (ii) Employees who normally work less than 17 1/2 hours per week; (iii) Employees who normally work less than six months during a year; and (iv) Employees who have not yet attained age 21. "Total Disability" or "Totally Disabled" shall each refer to a physical or mental impairment that, in the Committee's opinion, (a) is expected to be either of indefinite duration or result in death, and (b) renders a Participant unable to satisfactorily perform his or her duties for the Company or the duties of such other position or job that the Company makes available to such Participant and for which such Participant is qualified by reason of his or her training, education or experience. The Committee's opinion must be supported by the opinion of a qualified physician designated or approved by the Committee. "Trust" shall mean the trust established in connection with the Plan, as it may be amended from time to time. "Trust Valuation Date" shall mean each Anniversary Date and such other date or dates selected by the Committee. -11- "Trustee" shall mean the person(s) or entity, or combination of them, serving from time to time as the trustee(s) of the Trust. "Voluntary Contribution Account" shall mean the account maintained by the Committee for each Participant who makes a Voluntary Contribution. "Welfare Benefit Fund" shall have the same meaning as is given that term in Code Section 419(e). "Year of Service" shall mean any Plan Year during which an Employee is employed by the Company and during which the Employee has one Hour of Service. In order for a year to constitute a year of service, the Employee need not be employed by the Company on the last day of such Plan Year. "1% Owner" shall be determined in the same manner as a 5% Owner, defined below. "5% Owner" shall mean a Participant who (i) owns more than 5% of the outstanding stock (or owns stock possessing more than 5% of the total combined voting power of all classes of stock) of the Company (or any Affiliated Company), if the Company (or the Affiliated Company, whichever applies) is a corporation; or (ii) owns more than 5% of the capital or profit interest in the Company (or the Affiliated Company, whichever applies), if the Company (or the Affiliated Company, whichever applies) is not a corporation. A similar rule shall apply to the determination of a "1% Owner." Section 1.3: Other Definitions. As used in this document and in the ----------- ----------------- Trust, the following words and phrases shall have the meanings set forth in the indicated Sections, unless a different meaning is specified or clearly indicated by the context: Term Section ---- ------- "Actual Contribution Percentage" 3.9 "Actual Deferral Percentage" 3.8 "Additional Contribution" 3.8 "Aggregate Account" 7.2 "Aggregation Group" 7.2 "Annual Addition" 4.7 "Annuity Starting Date" 6.2 "Claimant" 10.1 "Committee" 8.1 -12- "Defined Benefit Plan Fraction" 4.7 "Defined Contribution Plan Fraction" 4.7 "Determination Date" 7.2 "Elective Contribution" 3.2 "Eligible Retirement Plan" 6.7 "Eligible Rollover Distribution" 7.2 "Key Employee" 6.7 "Matching Contribution" 3.3 "Non-Elective Contribution" 3.1 "Non-Key Employee" 7.2 "Preretirement Election Period" 6.2 "Present Value of Accrued Benefit" 7.2 "Qualified Election" 6.2 "Qualified Joint and Survivor Annuity" 6.2 "Qualified Life Annuity" 6.2 "Qualified Preretirement Survivor Annuity" 6.2 "Retirement Election Period" 6.2 "Top-heavy Group" 7.2 "Top-heavy Plan" 7.2 "USERRA" 11.13 "Valuation Date" 7.2 "Voluntary Contribution 3.3 "1.0 Rule" 4.7 Section 1.4: Funding Policy. The Plan is to be funded primarily through ----------- -------------- the Company's contributions and the Participants' contributions as provided for in the Plan. The Trust's assets shall be invested as provided for in the trust document in an effort to safely maximize potential retirement benefits, which shall be paid to Participants and Beneficiaries as provided for in the Plan. -13- ARTICLE II ---------- PARTICIPATION ------------- Section 2.1: Eligibility Requirements. ----------- ------------------------ (a) Each Employee shall become eligible to participate in the Plan on the Entry Date coincident with or next following the one year anniversary date following his or her Employment Commencement Date, provided that he or she is still an Employee on such Entry Date. Notwithstanding the foregoing, effective as of January 1, 1999, each Employee shall become eligible to make Elective Contributions and Voluntary Contributions beginning on the Entry Date coincident with or next following his or her Employment Commencement Date, provided that he or she is still an Employee on such Entry Date. Effective as of January 1, 2002, each Employee shall become eligible to make Elective Contributions and Voluntary Contributions beginning on the Entry Date coincident with or next following the 30th day following his or her Employment Commencement Date, provided that he or she is still an Employee on such Entry Date. For purposes of determining whether an Employee is eligible for Non-Elective Contributions and Matching Contributions, any Employee who is transferred to employment at a Certified Grocers facility on or after December 1, 1999, from a United Grocers facility, shall receive credit for service while employed at the United Grocers facility. (b) Notwithstanding any other provision of the Plan, the following classes of Employees shall not be eligible to participate in the Plan: (i) any Employee who is a member of a collective bargaining unit and who is covered by a collective bargaining agreement, which agreement does not provide for coverage of such Employee under this Plan, provided, that the matter of retirement benefits was at any time the subject of good faith bargaining between the Company and the collective bargaining unit of which the Employee is a member; (ii) any Employee who is a nonresident alien and who receives no earned income within the meaning of Section 911(b) of the Code from the Company which constitutes income from sources within the United States within the meaning of Section 861(a)(3) of the Code; and (iii) any Employee employed at a United Grocers facility. Notwithstanding the foregoing, if an Employee who is a Participant under the Plan is transferred to employment at a United Grocers facility on or after December 1, 1999, such Employee shall continue as a Participant under the Plan. Effective as of December 31, 2001, Employees employed at a United Grocers facility shall be a class of Employees eligible to participate in the Plan. In the event that a Participant becomes an ineligible Employee, he or she shall remain a Participant as to amounts already contributed and allocated for his or her benefit subject to all of the terms of the Plan. -14- Section 2.2: Application For Participation And Beneficiary Designation. ----------- --------------------------------------------------------- (a) Each Employee who becomes eligible to participate in the Plan shall be given an application for participation. That application shall (a) specify the beginning date of such Employee's participation, (b) shall contain such Employee's acceptance of the benefits of the Plan and Trust and his or her agreement to be bound by the terms of the Plan and Trust, and (c) allow such Employee to designate the Beneficiary whom he or she desires to receive benefits in the event of his or her death. A Participant may, from time to time, change his or her designated Beneficiary by filing a new written designation with the Committee. The Company, the Trustee, and the Committee may rely upon the designation of a Beneficiary that was last filed in accordance with the Plan. Despite the foregoing, a Participant's right to designate a Beneficiary to receive his or her death benefits shall be subject to the survivor annuity requirements set forth in Article VI. (b) Despite the provisions of subsection (a) above, a married Participant's Beneficiary shall in all events be such Participant's surviving spouse, unless such spouse consents to such Participant's designation of a Beneficiary other than such spouse. A spouse's consent to such a designation must satisfy the following requirements: (i) it must be in writing; (ii) it must acknowledge the effect of the Participant's designation of a Beneficiary other than the spouse; and (iii) it must be witnessed by a designated Plan representative or a notary public. Section 2.3: Participation. The participation of a Participant in the Plan ----------- ------------- shall begin as of his or her Entry Date, and shall continue until the Participant's entire benefit has been distributed in accordance with the Plan's terms. A Participant (or his or her Beneficiary) may not receive any distribution of benefits except as provided for in the Plan. Section 2.4: Re-Employment. In the event an Employee who was a Participant ----------- ------------- is re-employed before five consecutive Breaks in Service, such Employee shall become a Participant on the date of re-employment, provided the Employee satisfies the eligibility provisions of Section 2.1 above. In the event an Employee who was a Participant is re-employed after five consecutive Breaks in Service, then such Employee shall be treated as a new Employee and shall become a Participant upon satisfying the requirements of Section 2.1 above. -15- ARTICLE III ----------- CONTRIBUTIONS ------------- Section 3.1: Company's Non-Elective Contributions. ----------- ------------------------------------- (a) Subject to the Plan's other provisions, for each Plan Year in which the Plan is in effect, the Company shall make a contribution (the "Non-Elective Contribution") to the Trust from its current or accumulated net profits on behalf of each Eligible Participant. Despite the foregoing, the Company's Non- Elective Contributions are conditioned upon their deductibility under the Code. (b) The Company's Non-Elective Contribution under subsection (a) for each such Eligible Participant shall be an amount equal to 2% of such Eligible Participant's Compensation for such Plan Year. Notwithstanding the foregoing, if the Eligible Participant becomes a Participant during such Plan Year, then the Participant's Compensation shall only include that portion of the Compensation that he or she earned while a Participant. Section 3.2: Elective Contributions Under Code Section 401(k). ----------- ------------------------------------------------ (a) Subject to the limitations contained elsewhere in the Plan, each Participant may elect from time to time, by completing the appropriate forms provided by the Committee, to forgo receipt of up to 16% (effective as of January 1, 2002, 20%), stated in whole numbers only, or such other maximum, as may be determined by the Committee in its sole discretion, of his or her Compensation; provided, however, that the Participant's Elective Contributions and Voluntary Contributions may not exceed 16% (effective as of January 1, 2002, 20%), or such other maximum, as may be determined by the Committee, of his or her Compensation. The Company shall contribute to the Trust on behalf of each such electing Participant, out of its current or accumulated net profits, an amount equal to the Compensation forgone by such Participant (the "Elective Contribution"), and it shall be credited to such Participant's Deferred Income Account. Despite the foregoing, no Participant shall have any Elective Contributions under the Plan during any calendar year in excess of $7,000, as adjusted by the Adjustment Factor. (b) A Participant's election to forgo receipt of a portion of his or her Compensation shall be subject to such modification or cancellation as the Committee, in its discretion, shall permit; provided, however, that the Committee shall exercise its discretion in a uniform and nondiscriminatory manner. Section 3.3: Company's Matching Contribution. Subject to the Plan's other ----------- ------------------------------- provisions, for each Plan Year, the Company shall make a matching contribution (the "Matching Contribution") on behalf of each Participant and it shall be -16- credited to such Participant's Matching Contribution Account. The Company's Matching Contribution for each such Participant shall be an amount equal to: (i) 100% of the Participant's Elective Contributions and Voluntary Contributions for each pay period (or such other period, as determined by the Committee in its sole discretion) during the Plan Year, up to 4% of the Participant's Compensation for each such period; and (ii) A percentage from 0% to 50% (to be determined each Plan Year by the Committee in its sole discretion) of the next 4% of the Participant's Elective Contributions and Voluntary Contributions for each pay period (or such other period, as determined by the Committee in its sole discretion) during the Plan Year, up to 8% of the Participant's Compensation for each such period. Except as otherwise provided for in Section 4.4 below, the amount of the Company's Matching Contributions for a Plan Year shall be reduced by the amount of Forfeitures during such Plan Year, if any, and such Forfeitures shall be allocated as part of the Company's Matching Contributions pursuant to this Section. Section 3.4: Participants' Contributions. ----------- --------------------------- (a) Voluntary Contributions. Subject to the limitations contained ----------------------- elsewhere in the Plan, each Participant may elect from time to time, by completing the appropriate forms provided by the Committee, to contribute (on a nondeductible basis) up to 16% (effective as of January 1, 2002, 20%), stated in whole numbers only, or such other maximum, as may be determined by the Committee in its sole discretion, of his or her Compensation; provided, however, that the Participant's Elective Contributions and Voluntary Contributions may not exceed 16% (effective as of January 1, 2002, 20%), or such other maximum, as may be determined by the Committee, of his or her Compensation. The Company shall contribute to the Trust on behalf of each such electing Participant an amount equal to the Compensation forgone by such Participant (the "Voluntary Contribution"), and it shall be credited to such Participant's Voluntary Contribution Account. A Participant's election to forgo receipt of a portion of his or her Compensation shall be subject to such modification or cancellation as the Committee, in its discretion, shall permit; provided, however, that the Committee shall exercise its discretion in a uniform and nondiscriminatory manner. (b) Rollover Contributions. Effective as of July 1, 1998, a ---------------------- Participant may make a Rollover Contribution to the Plan or a trustee-to-trustee transfer described in Code Section 401(a)(31), provided that any asset so contributed or transferred is acceptable to the Committee and Trustee. Section 3.5: Payment Of Non-Elective Contributions and Matching ----------- -------------------------------------------------- Contributions To The Trustee. All payments of the Non-Elective Contributions and - ---------------------------- -17- Matching Contributions shall be made directly to the Trustee and may be made on any date(s) selected by the Company. Notwithstanding the foregoing, if the Matching Contributions are calculated on a pay period by pay period basis, then the Matching Contributions for a pay period must be made on or before the last day of the Plan quarter immediately following the Plan quarter for which the Matching Contributions relate. Despite the foregoing, the Company's total Non- Elective Contribution and Matching Contributions for each Plan Year must be paid on or before the date on which the Company's federal income tax return is due, including any extensions of time obtained for the filing of such return. Section 3.6: Payment Of Elective Contributions To The Trustee. All ----------- ------------------------------------------------ payments of Elective Contributions shall be made directly to the Trustee. Such payments shall be made as soon as is administratively practical following the date the forgone Compensation would have been paid to the electing Participant, but in no event later than the fifteenth business day of the month following the month in which the forgone Compensation would have been paid to the Participant. Section 3.7: Payment Of Participants' Contributions To The Trustee. ----------- ----------------------------------------------------- (a) Voluntary Contributions. All payments of Voluntary Contributions ----------------------- shall be made directly to the Trustee. Such payments shall be made as soon as is administratively practical following the date the forgone Compensation would have been paid to the electing Participant, but in no event later than the fifteenth business day of the month following the month in which the forgone Compensation would have been paid to the Participant. The Trustee may commingle such contributions with the Company's contributions. However, the Committee shall keep separate records of each Participant's Voluntary Contributions (and the income, gains and losses on them). The Trustee shall invest a Participant's Voluntary Contributions in the same manner as provided for the investment of the Company's contributions. (b) Rollover Contributions. A Participant's Rollover Contributions ---------------------- shall be paid directly to the Trustee. The Trustee may commingle such contributions with the Company's contributions. However, the Committee shall keep separate records of each Participant's Rollover Contributions (and the income, gains and losses on them). The Trustee shall invest a Participant's Rollover Contributions in the same manner as provided for the investment of the Company's contributions. Section 3.8: Actual Deferral Percentage Test. ----------- ------------------------------- (a) It is the Company's intent that all Elective Contributions shall satisfy the requirements of Code Section 401(k). (i) Accordingly, the amount of Elective Contributions made in any Plan Year on behalf of all Highly Compensated Employees shall not result -18- in an Actual Deferral Percentage for such Highly Compensated Employees that exceeds the greater of: (A) the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year, multiplied by 1.25; or (B) the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year, multiplied by two, provided that the Actual Deferral Percentage for all Highly Compensated Employees does not exceed the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year by more than two percentage points (or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee). (ii) For the purposes of this subsection (a), the amount of Elective Contributions shall relate to Compensation that either (A) would have been received by the Participant in the Plan Year but for the Participant's election to defer receipt of his or her Compensation pursuant to the terms of the Plan; or (B) is attributable to services performed by the Participant in the Plan Year and, but for the Participant's election to defer, would have been received by the Participant within 2 1/2 months after the close of the Plan Year. (iii) In order to prevent the multiple use of the alternative method described in subsection (i)(B) above and in Code Section 401(m)(9)(A), any Highly Compensated Employee eligible to (A) make elective deferrals pursuant to this Section, or (B) receive matching contributions under this Plan or under any other plan maintained by the Company or an Affiliated Company, shall have his actual contribution ratio reduced pursuant to Treasury Regulation Section 1.401(m)-2. (iv) For the purposes of subsection (i) above, the Committee may elect to use the current Plan Year rather than the preceding Plan Year. If the Committee makes this election, then such election may not be changed except as allowed for by the Secretary of the Treasury. (v) For the purposes of subsection (i) above and for purposes of the first Plan Year, the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year shall be: (A) 3%; or (B) the Actual Deferral Percentage for all Non-Highly Compensated Employees for the first Plan Year, if so elected by the Committee. (vi) Effective for Plan Years beginning after December 31, 1998, if the Committee elects to apply Code Section 410(b)(4)(B) to determine whether the cash or deferred arrangement provided for in the Plan satisfies -19- the coverage requirements provided for in Code Section 410(b)(1), then for purposes of subsection (i) above, the Committee may exclude all eligible Employees (other than Highly Compensated Employees) who have not met the minimum age and service requirements of Code Section 410(a)(1)(A). (b) Adjustment To Actual Deferral Percentage Tests. If the Committee ---------------------------------------------- determines at any time that the limitation on Elective Contributions set forth in subsection (a) above will be exceeded for any Plan Year: (i) the Company may, at its sole option (but still subject to the limitations contained elsewhere in the Plan), either (A) designate that all or any portion of its Non-Elective Contribution for such Plan Year (if, and to the extent, it has been made prior to such date and has not been previously allocated pursuant to Section 4.5) shall be treated as an Elective Contribution (the "Deemed Elective Contribution") or (B) make an additional contribution (the "Additional Contribution") on behalf of all Participants other than Highly Compensated Employees, or on behalf of all Participants, in the amount necessary so that the limitation set forth in subsection (a) will not be exceeded. Any Deemed Elective Contribution or Additional Contribution shall be (A) prorated among the Participants on whose behalf it was made, on the basis of each such Participant's Compensation for such Plan Year, and (B) credited to each such Participant's Deferred Income Account; or (ii) the Committee shall reduce the amount of the Elective Contributions made by the Highly Compensated Employees in the amount necessary so that the limitation set forth in subsection (a) above will not be exceeded. The amount by which each Highly Compensated Employee whose Elective Contributions is reduced (the "Excess Contributions") shall be returned to the Firm to be paid to such Highly Compensated Employee pursuant to subsection (h) below. For purposes of the foregoing, the amount of Excess Contributions made by the Highly Compensated Employees for a Plan Year is the excess of: (a) the aggregate amount of Elective Contributions actually taken into account in computing the Actual Deferral Percentage for all Highly Compensated Employees for such Plan Year, over (b) the maximum amount of such Elective Contributions permitted by the Actual Deferral Percentage test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of the Actual Deferral Percentages, beginning with the highest of such percentages). Such amount of Excess Contributions shall be allocated to the Highly Compensated Employees who made the largest amounts of Elective Contributions during the Plan Year, beginning with the Highly Compensated Employee with the largest amount of such Elective Contributions and continuing in descending order until all the Excess Contributions have been allocated. This leveling method, under which the Elective Contributions made by the Highly Compensated Employee who made the largest amount of Elective Contributions during the Plan Year is reduced, shall be repeated to the extent required to: -20- (A) Enable the Plan to satisfy the Actual Deferral Percentage test described in subsection (a) above, or (B) Cause such Highly Compensated Employee's Elective Contributions to equal the Elective Contributions of the Highly Compensated Employee with the next largest amount of Elective Contributions. The amount of Excess Contributions to be distributed pursuant to subsection (h) below for a Plan Year with respect to any Highly Compensated Employee shall not exceed the amount of Elective Contributions made on behalf of such Highly Compensated Employee for such Plan Year. (c) For the purposes of this Section, the following definitions shall apply: (i) "Actual Deferral Percentage" shall mean, with respect to the groups consisting of (A) all Highly Compensated Employees and (B) all Non- Highly Compensated Employees, the average of the Actual Deferral Ratios for each such group, calculated separately for each Participant in each such Group. (ii) "Actual Deferral Ratio" shall mean the ratio that: (A) the amount of the Elective Contributions, Deemed Elective Contributions, and Additional Contributions made on behalf of each Participant for a Plan Year, bears to (B) such Participant's Compensation for such Plan Year. (d) For the purposes of this Section, the Actual Deferral Percentage for any Highly Compensated Employee who is eligible to have Elective Contributions, Deemed Elective Contributions, or Additional Contributions allocated to his or her account(s) under two or more plans or arrangements described in Code Section 401(k) that are maintained by the Company or any Affiliated Company shall be determined as if all such Elective Contributions, Deemed Elective Contributions, and Additional Contributions were made under a single arrangement . (e) The determination and treatment of the Elective Contributions, Deemed Elective Contributions, Additional Contributions, and Actual Deferral Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (f) The determination of who is a Highly Compensated Employee, including the determination of the Compensation that is considered, will be made in accordance with Code Section 414(q). -21- (g) Distribution Of Excess Deferrals. -------------------------------- (i) If any Participant has any Excess Deferrals for any calendar year, and if he or she makes a claim pursuant to subsection (ii) below, then the Excess Deferrals allocable to the Plan pursuant to such claim shall be returned to the Company to be distributed to such Participant. Such distribution shall be made no later than the April 15th following the calendar year to which such Excess Deferrals relate. (ii) A Participant's claim for Excess Deferrals shall be in writing, signed by such Participant, and submitted to the Committee no later than the March 1st following the calendar year to which such Excess Deferrals relate. Such claim shall also specify the amount of such Participant's Excess Deferrals for such calendar year allocable to the Plan and shall be accompanied by such Participant's statement that, if such Excess Deferrals are not distributed, such Excess Deferrals, when added to all amounts deferred by such Participant under all plans or arrangements described in Code Sections 401(k), 408(k), or 403(b), exceed the limit imposed on such Participant by Code Section 402(g) for the year to which the Excess Deferrals relate. (iii) For the purposes of this Section, a Participant's "Excess Deferrals" shall mean the amount of such Participant's Elective Contributions for a calendar year that are allocated to the Plan pursuant to subsection (i) above. (iv) The Excess Deferrals shall be adjusted for income, gain or loss for the Plan Year pursuant to any reasonable method adopted by the Committee, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all Excess Deferrals under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts. (v) The Committee may elect to further adjust the Excess Deferrals for income, gain or loss for the gap period between (A) the last day of the Plan Year and (B) the date of distribution of the Excess Deferrals, provided that such adjustments are made pursuant to any reasonable method adopted by the Committee that does not violate Code Section 401(a)(4) and is used consistently for all Participants and for all Excess Deferrals under the Plan for the Plan Year. (h) Distribution Of Excess Contributions. ------------------------------------ (i) Despite any other provision of the Plan, any Excess Contributions that are to be distributed pursuant to Section 3.8(b), and the income, gain or loss allocable thereto, shall be distributed no later than the last -22- day of the Plan Year following the Plan Year to which such Excess Contributions relate. (ii) The Excess Contributions shall be adjusted for income, gain or loss for the Plan Year pursuant to any reasonable method adopted by the Committee, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all Excess Contributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts. (iii) The Committee may elect to further adjust the Excess Contributions for income, gain or loss, for the gap period between (A) the last day of the Plan Year and (B) the date of distribution of the Excess Contributions, provided that such adjustments are made pursuant to any reasonable method adopted by the Committee that does not violate Code Section 401(a)(4) and is used consistently for all Participants and for all Excess Contributions under the Plan for the Plan Year. (iv) The Excess Contributions that would otherwise be distributed to a Participant shall be reduced, in accordance with the Regulations, by the amount of Excess Deferrals distributed to such Participant. (i) Alternative Method of Satisfying the ADP Test. Despite any other --------------------------------------------- provision of the Plan, effective for Plan Years beginning after December 31, 1998, the Elective Contributions for any Plan Year shall be deemed to satisfy subsection (a)(i) above if: (i) Matching Contribution. The Company makes a Matching --------------------- Contribution on behalf of each Participant who is a Non-Highly Compensated Employee. The Company's Matching Contribution for each such Participant shall be an amount equal to: (A) 100% of the Participant's Elective Contributions for the Plan Year, up to 3% of the Participant's Compensation; plus (B) 50% of the Participant's Elective Contributions for the Plan Year that exceed 3% of his or her Compensation but do not exceed 5% of the Participant's Compensation. Despite the foregoing, the Committee may choose any other Matching Contribution rate, if such alternative rate satisfies the following requirements: (C) The rate does not increase as a Participant's Elective Contributions increase; and (D) The total amount of the Matching Contributions using this alternative rate must equal or exceed the total amount of -23- Matching Contributions using the rate provided for in the second sentence of subsection (i)(i) above. For all purposes under this subsection (i)(i), the Matching Contribution rate for any Participant who is a Highly Compensated Employee shall not be greater than the Matching Contribution rate for any Participant who is a Non-Highly Compensated Employee. (ii) Non-Elective Contribution. Alternatively, the Company may ------------------------- make a Non-Elective Contribution on behalf of each Participant who is a Non-Highly Compensated Employee. The Company's Non-Elective Contribution for each such Participant shall be an amount equal to three percent (3%) of the Participant's Compensation. (iii) In addition to satisfying either subsection (i) or (ii) above, the following requirements shall also apply for the Plan Year: (A) Within a reasonable period before each Plan Year, the Committee must give each Participant a written notice of the Participant's rights and obligations under the Plan. The written notice must be sufficiently accurate and comprehensive to apprise the Participant of his or her rights and obligations and written in a manner calculated to be understood by the average Participant; and (B) The Matching Contributions or Non-Elective Contributions provided for in subsections (i) and (ii) shall be treated for all purposes under Articles IV, V, and VI as Elective Contributions. Section 3.9: Actual Contribution Percentage Test. ----------- ----------------------------------- (a) It is the Company's intent that all Matching Contributions and Voluntary Contributions shall satisfy the requirements of Code Section 401(m). (i) Accordingly, the "Actual Contribution Percentage" for eligible Participants who are all Highly Compensated Employees shall not exceed the greater of: (A) the Actual Contribution Percentage for all eligible Participants who are Non-Highly Compensated Employees for the preceding Plan Year, multiplied by 1.25; or (B) the Actual Contribution Percentage for all eligible Participants who are Non-Highly Compensated Employees for the preceding Plan Year, multiplied by two, provided that the Actual Contribution Percentage for all eligible Participants who are Highly Compensated Employees does not exceed the Actual Contribution Percentage for all Participants who are Non-Highly Compensated -24- Employees for the preceding Plan Year by more than two percentage points (or such lesser amount as required in Treasury Regulation Section 1.401(m)-2 to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee). (ii) For the purposes of subsection (i) above, the Committee may elect to use the current Plan Year rather than the preceding Plan Year. If the Committee makes this election, then such election may not be changed except as allowed for by the Secretary of the Treasury. (iii) For the purposes of subsection (i) above and for purposes of the first Plan Year, the Actual Contribution Percentage for all Non-Highly Compensated Employees for the preceding Plan Year shall be (A) 3%, or (B) the Actual Contribution Percentage for all Non-Highly Compensated Employees for the first Plan Year, if so elected by the Committee. (iv) Effective for Plan Years beginning after December 31, 1998, if the Committee elects to apply Code Section 410(b)(4)(B) to determine whether the Plan satisfies the coverage requirements provided for in Code Section 410(b)(1), then for purposes of subsection (i) above, the Committee may exclude all eligible Employees (other than Highly Compensated Employees) who have not met the minimum age and service requirements of Code Section 410(a)(1)(A). (b) Definitions. For the purposes of this Section, the following ----------- definitions shall apply: (i) "Actual Contribution Percentage" shall mean, with respect to the groups consisting of (A) all Highly Compensated Employees and (B) all Non-Highly Compensated Employees, the average of the Actual Contribution Ratios for each such group, calculated separately for each Participant in each such group. (ii) "Actual Contribution Ratio" for a Plan Year shall mean the ratio that: (A) the amount of the Matching Contributions and Voluntary Contributions made on behalf of each Participant for a Plan Year, bears to (B) such Participant's Compensation for such Plan Year. The Actual Contribution Ratio must be rounded to the nearest 100th of 1%. (iii) "Excess Aggregate Contributions" shall mean, for each Highly Compensated Employee, the total Matching Contributions and Voluntary Contributions made on behalf of such Highly Compensated -25- Employee for such Plan Year, minus the amount determined by multiplying the Employee's Actual Contribution Ratio by the Employee's Compensation for such Plan Year. (c) Elective Deferrals And Non-Elective Contributions. For ------------------------------------------------- purposes of determining the Actual Contribution Percentage and the amount of Excess Aggregate Contributions pursuant to this Section, only Matching Contributions and Voluntary Contributions contributed to the Plan prior to the end of the succeeding Plan Year shall be considered. In addition, the Committee may elect to take into account, with respect to Employees eligible to have Matching Contributions pursuant to this Section allocated to their accounts, elective deferrals (as defined in Regulation 1.402(g)- 1(b)) and qualified nonelective contributions (as defined in Code Section 401(m)(4)(c)) contributed to any plan maintained by the Company. Such elective deferrals and qualified non-elective contributions shall be treated as Matching Contributions subject to Treasury Regulation Section 1.401(m)-1(b)(2). However, the Plan Year must be the same as the plan year of the plan to which the elective deferrals and the qualified nonelective contributions are made. (d) Plan Aggregation. For purposes of this Section and Code ---------------- Sections 401(a)(4), 410(b) and 401(m), if two or more plans, which are maintained by the Company or any Affiliated Company, to which matching contributions, Employee contributions, or both, are made, are treated as one plan for purposes of Code Sections 401(a)(4) or 410(b) (other than the average benefits tests under Code Section 410(b)(2)(A)(ii)), such plans shall be treated as one plan. (i) In addition, two or more plans of the Company to which matching contributions, Employee contributions, or both, are made may be considered as a single plan for purposes of determining whether or not such plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such a case, the aggregated plans must satisfy this Section and Code Sections 401(a)(4), 410(b) and 401(m) as though such aggregated plans were a single plan. However, plans may be aggregated under this subsection only if they have the same plan year. (ii) Despite the foregoing, an employee stock ownership plan described in Code Section 4975(e)(7) may not be aggregated with this Plan for purposes of determining whether the employee stock ownership plan or this Plan satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(m). (e) Plan Aggregation. If a Highly Compensated Employee is a ---------------- Participant under two or more plans (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)) which are maintained by the Company or an Affiliated Company to which matching contributions, Employee contributions, or both, are made, all such contributions on behalf of such Highly Compensated Employee shall be aggregated for purposes of determining such Highly Compensated Employee's Actual Contribution Ratio. However, if the plans have different plan -26- years, this subsection shall be applied by treating all plans ending with or within the same calendar year as a single plan. (f) Distribution of Excess Aggregate Contributions. ---------------------------------------------- (i) If the Committee determines at any time that the limitation on Matching Contributions and Voluntary Contributions set forth in subsection (a) above will be exceeded for any Plan Year, the Committee (on or before the 15th day of the third month following the end of the Plan Year) shall direct the Trustee to: (A) distribute to the Highly Compensated Employee who received the most Matching Contributions and Voluntary Contributions during the Plan Year, his or her vested portion of Excess Aggregate Contributions (and income allocable to such contributions) or, (B) if forfeitable, forfeit such non-vested Excess Aggregate Contributions attributable to Matching Contributions (and income allocable to such Forfeitures) until either one of the tests set forth in this Section is satisfied, or until the amount of Matching Contributions and Voluntary Contributions that such Highly Compensated Employee received equals the Matching Contributions and Voluntary Contributions received by the Highly Compensated Employee who received the second highest Matching Contributions and Voluntary Contributions. This process shall continue until one of the tests set forth in this Section is satisfied. (ii) The Excess Aggregate Contribution shall be adjusted for income, gain or loss for the Plan Year pursuant to any reasonable method adopted by the Committee, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all Excess Aggregate Contributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts. (iii) The Committee may elect to further adjust the Excess Aggregate Contributions for income, gain or loss for the gap period between (A) the last day of the Plan Year and (B) the date of distribution of the Excess Aggregate Contributions, provided that such adjustments are made pursuant to any reasonable method adopted by the Committee that does not violate Code Section 401(a)(4) and is used consistently for all Participants and for all Excess Aggregate Contributions under the Plan for the Plan Year. (iv) Any distribution (and/or Forfeiture) of less than the entire amount of Excess Aggregate Contributions (and income) shall be treated as a pro rata distribution (and/or Forfeiture) of Excess Aggregate Contributions and income. Distribution of Excess Aggregate Contributions shall be designated -27- by the Company as a distribution of Excess Aggregate Contributions (and income). Forfeitures of Excess Aggregate Contributions shall be treated in accordance with Section 4.4. However, no such Forfeiture may be allocated to a Highly Compensated Employee whose contributions are reduced pursuant to this Section. (v) Excess Aggregate Contributions shall be treated as Company contributions for purposes of Code Sections 404 and 415 even if distributed from the Plan. (vi) The determination of the amount of Excess Aggregate Contributions with respect to any Plan Year shall be made after first determining the Excess Contributions, if any, to recharacterized as a Deemed Elective Contribution (as described in Section 3.8(b) above) for the plan year of any other qualified cash or deferred arrangement (as defined in Code Section 401(k)) maintained by the Company that ends with or within the Plan Year. (vii) Despite the above, within 12 months after the end of the Plan Year, the Company may make a special qualified Non-Elective Contribution on behalf of Non-Highly Compensated Employees in an amount sufficient to satisfy one of the tests set forth in this Section. Such contribution shall be allocated to the Deferred Income Account of each Participant who is Non-Highly Compensated Employee in the same proportion that each such Participant's Compensation for the Plan Year bears to the total Compensation of all such Participants for such Plan Year. A separate accounting shall be maintained for the purpose of excluding such contributions for the "Actual Deferral Percentage" test set forth in Section 3.8. (g) Alternative Method of Satisfying the ACP Test. Despite any other --------------------------------------------- provision of the Plan, effective for Plan Years beginning after December 31, 1998, the Matching Contributions and Voluntary Contributions for any Plan Year shall be deemed to satisfy subsection (a)(i) if: (i) The Company makes the contribution provided for in Section 3.8(i)(i) or (ii); (ii) The Committee gives each Participant the written notice provided for in Section 3.8(i)(iii); (iii) The Matching Contribution does not exceed 6% of any Participant's Compensation; (iv) The rate of the Matching Contribution does not increase as the rate of the Elective Contribution and Voluntary Contribution increases; and -28- (v) The Matching Contribution rate for any Participant who is a Highly Compensated Employee is not greater than the Matching Contribution rate for any Participant who is a Non-Highly Compensated Employee. Section 3.10: No Requirement For Profits. Despite any other ------------ -------------------------- provision of the Plan, the Company may, but is not required to, make all contributions to the Plan for any Plan Year without regard to whether the Company has any net profits for the taxable year or years ending with or within such Plan Year. Despite the preceding sentence, the Plan shall continue to be designed to qualify as a profit sharing plan for the purposes of Code Sections 401(a), 402, 412, and 417. -29- ARTICLE IV ---------- ALLOCATIONS TO PARTICIPANTS' ACCOUNTS ------------------------------------- Section 4.1: Retirement Accounts And Matching Contribution Accounts. ----------- ------------------------------------------------------ (a) The Committee shall open and maintain a Retirement Account in the name of each Participant, and it shall be credited or charged with the amounts allocable to it as set forth below. (b) Committee shall open and maintain a Matching Contribution Account in the name of each Participant for whom a Matching Contribution is made. This Account shall be credited with each such Matching Contribution, and it shall be credited or charged with the amounts allocable to it as set forth below. Section 4.2: Deferred Income Accounts. The Committee shall open and ----------- ------------------------ maintain a Deferred Income Account in the name of each Participant for whom an Elective Contribution is made. This Account shall be credited with each such Elective Contribution (and such Participant's allocable share of any Deemed Elective Contribution or Additional Contribution) as it is received by the Trustee, and it shall be credited or charged with the amounts allocable to it as set forth below. Section 4.3: Voluntary Contribution Accounts And Rollover Contribution ----------- --------------------------------------------------------- Accounts. - -------- (a) The Committee shall open and maintain a Voluntary Contribution Account for each Participant who contributes a Voluntary Contribution. This Account shall be credited with such Participant's Voluntary Contributions, and it shall be credited or charged with the amounts allocable to it as set forth below . (b) The Committee shall open and maintain a Rollover Contribution Account for each Participant who contributes a Rollover Contribution. This Account shall be credited with such Participant's Rollover Contributions, and it shall be credited or charged with the amounts allocable to it as set forth below. Section 4.4: Allocation Of Forfeitures, Gains And Losses. ------------ ------------------------------------------- (a) Any Forfeitures of Excess Aggregate Contributions pursuant to Section 3.9 above shall be allocated to the Matching Contribution Accounts of the Eligible Participants who are Non-Highly Compensated Employees in the same proportion that each such Eligible Participant's Compensation for such Plan Year bears to the total Compensation of all such Eligible Participants for such Plan Year. -30- This allocation shall be made immediately preceding the allocation described in subsection (b) below. (b) Except as to that portion, if any, of the Trust's assets that the Committee or Board of Directors has elected to allow Participants to manage pursuant to Section 4.8 below, as of each Anniversary Date, and after any allocation is made of Forfeitures pursuant to subsection (a) above (but before any allocation is made of the Company's Non-Elective Contribution or Matching Contribution, if any, for the Plan Year ending on such Anniversary Date, if, and to the extent, made prior to such date), the Committee shall credit any income and investment gains (whether realized or unrealized) of the Trust, and shall charge any losses (whether realized or unrealized) and unallocated expenses of the Trust, to the Participants' Accounts in the same proportion that the balance in each such Account as of such Anniversary Date bears to the total balance in all Accounts as of such Anniversary Date. (i) Solely for the purposes of the allocation pursuant to this subsection (b), each Participant's Account balances as of such Anniversary Date shall be adjusted, in a uniform and nondiscriminatory manner, to reflect transactions that occurred during such Plan Year, including, without limitation, Elective Contributions, Matching Contributions, and Voluntary Contributions and withdrawals under Section 6.9 below. (ii) In determining the unrealized investment gains and losses to be credited or charged as of each Anniversary Date pursuant to this subsection (b), the Trustee shall value the assets of the Trust at their fair market value as of each such Anniversary Date. (c) Despite the provisions of subsection (b) above, a Participant's Rollover Contributions, if any, deposited in the Trust after the first day of any Plan Year shall share in the allocation pursuant to subsection (b) above pro rata, based on a fraction, the numerator of which is the number of whole months of the Plan Year for which such Rollover Contributions are on deposit in the Trust and the denominator of which is 12. Section 4.5: Allocation Of Non-Elective Contribution And Matching ----------- ---------------------------------------------------- Contribution. Subject to the limitations contained elsewhere in the Plan, as of - ------------ each Anniversary Date, the Company's Non-Elective Contribution (if any) made on account of the Plan Year ending on such Anniversary Date shall be allocated to the Retirement Accounts of the Eligible Participants in the same proportion that each Eligible Participant's Compensation for such Plan Year bears to the total Compensation of all Eligible Participants for such Plan Year. This allocation shall be made immediately following the allocations described in Section 4.4. Section 4.6: Accounts In General. Accounts shall not vest in such ----------- ------------------- Participant any right, title or interest in the Trust, except to the extent, at the time or times, and upon the terms and conditions set forth -31- in the Plan. Neither the Company, the Trustee, nor the Committee, to any extent, warrant, guarantee or represent that the value of any Participant's Accounts at any time will equal or exceed the amount previously allocated or contributed to such Accounts. Section 4.7: Limitation On Annual Additions. ----------- ------------------------------ (a) The following limitations shall apply to the allocations to each Participant's Accounts in any Plan Year: (i) As used in the Plan, a Participant's "Annual Addition" shall mean the sum for any Plan Year of: (A) Such Participant's share of the Company's contributions; plus (B) Such Participant's voluntary, nondeductible contributions to the Plan (excluding any Rollover Contribution); plus (C) Such Participant's share of any Forfeiture; plus (D) Such Participant's allocable share of the Company's contributions to any Individual Medical Benefit Account; and plus (E) With respect to any Participant who is a Key Employee, any amount that is derived from the Company's contributions paid or accrued after December 31, 1985 in taxable years ending after such date, and that is attributable to post-retirement medical benefits allocated to such Participant's account under a Welfare Benefit Fund maintained by the Company. Any excess amount applied under subsection (c) below in a Plan Year to reduce the Company's contributions on behalf of any Participant shall be considered to be an Annual Addition for such Participant for such Plan Year. (ii) Subject to the adjustments set forth below, during any Plan Year the maximum Annual Addition for any Participant shall in no event exceed the lesser of: (A) $30,000, as adjusted by the Adjustment Factor; or (B) 25% of the Participant's Earnings for such Plan Year. (iii) The earnings limitation referred to in subsection (a)(ii)(B) above shall not apply to (A) any contribution for medical benefits (within the -32- meaning of Code Section 419A(f)(2)) after separation from service that is otherwise treated as an Annual Addition, or (B) any amount otherwise treated as an Annual Addition under Code Section 415(l)(1). (b) For Plan Years beginning before January 1, 2000, the following additional limitations shall apply to any Participant when such Participant, in addition to his or her participation in the Plan (and any Welfare Benefit Fund), is also a participant in a Defined Benefit Plan maintained by the Company or an Affiliated Company: (i) The amount of (A) the Annual Additions to such Participant's account(s) or (B) such Participant's normal retirement benefit in any such plan(s) shall be reduced by each such plan's committee to the extent necessary to prevent the sum of the Defined Benefit Plan Fraction (defined below) and the Defined Contribution Plan Fraction (defined below) for any such year from exceeding 1.0 (the "1.0 Rule") (benefits under Welfare Benefit Funds shall be reduced first, then benefits under profit sharing plans, then benefits under other Defined Contribution Plans, and, finally, benefits under Defined Benefit Plans). (ii) For the purpose of applying the 1.0 Rule, the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction shall be applied in a manner consistent with the provisions of Code Section 415 and the Regulations under it. (iii) As used above, "Defined Benefit Plan Fraction" shall mean a fraction, the numerator of which is the Participant's projected annual benefit under the Defined Benefit Plan (determined as of the end of the plan year for such plan), and the denominator of which is the lesser of: (A) 1.25 multiplied by the dollar limitation in effect for such plan year (determined under Code Section 415(b)(1)(A)); or (B) 1.4 multiplied by 100% of such Participant's average Earnings for his or her highest three consecutive years, including such plan year (determined under Code Section 415(b)(1)(B)). (iv) As used above, "Defined Contribution Plan Fraction" shall mean a fraction, the numerator of which is the sum of the annual additions to the Participant's account(s) as of the end of the Plan Year, and the denominator of which is the sum of the lesser of the following amounts determined for such Plan Year and for each of such Participant's prior years of service with the Company: (A) 1.25 multiplied by the dollar limitation in effect for such Plan Year (determined under Code Section 415(c)(1)(A), but without regard to Code Section 415(c)(6)); or -33- (B) 1.4 multiplied by 25% of such Participant's Earnings for such Plan Year (determined under Code Section 415(c)(1)(B), or Code Section 415(c)(7), if applicable). (c) If, for any Plan Year, it is necessary to limit the Annual Addition of any Participant pursuant to subsections (a) or (b) above, the following reallocations shall be made: (i) First, the amount of such Participant's nondeductible, voluntary contributions for that Plan Year that are included in his or her Annual Addition shall be refunded to him or her; (ii) Second, the amount of such Participant's Elective Contribution for such Plan Year that causes such Participant's Annual Addition to exceed the applicable limitation shall be returned to the Company to be paid to such Participant; (iii) Third, the amount of the Company's contribution, inclusive of Forfeitures, that is allocable to such Participant and that causes such Participant's Annual Addition to exceed the applicable limitation shall, instead, be allocated to all other Participants who are not subject to this limitation, in proportion to their Compensation for such Plan Year; and (iv) Fourth, if the amount of the Company's contribution, inclusive of Forfeitures, is so great as to cause all Participants for such Plan Year to be subject to the limitations of this Section, then the excess of the Company's contributions that cannot be allocated for such Plan Year shall be held unallocated in a suspense account and applied against and reduce the Company's future contributions. (d) If a suspense account is in existence at any time during a Plan Year pursuant to subsection (c)(iii) above, it shall not participate in the Trust's income, gains and losses. (e) The limitations of this Section with respect to any Participant who, at any time, has been a participant in any other Defined Contribution Plan (whether or not terminated) or in more than one Defined Benefit Plan (whether or not terminated) maintained by the Company or by an Affiliated Company shall apply as if all such Defined Contribution Plans or all such Defined Benefit Plans in which the Participant has been a participant were one plan. Section 4.8: Investment Of Accounts. If so elected by the Committee or ----------- ---------------------- the Board of Directors, Participants shall manage the investment of all or a portion of the Trust's assets attributable to their Accounts. In such case, subject to uniform and nondiscriminatory rules adopted by the Committee, a Participant shall designate the percentage of any one or more of his or her Accounts that is to be invested in each of several authorized investments designated by the Committee from time to -34- time. For convenience, such designated investments are referred to in this Plan individually as a "Fund," and collectively as the "Funds." Despite the foregoing, the Trustee may invest and reinvest the principal and income of any Account in short term obligations or bank accounts, pending investment in designated Funds, and may retain such cash balances in each of the Accounts as the Committee directs to meet the current cash needs of the Plan. As of each Trust Valuation Date, each such Participant's Account shall be credited (or charged) with the income, gains, and losses of the Funds in which such Account is invested, as such income, gains, and losses are realized. For purposes of the foregoing, the Trustee shall value the assets of the Trust at their fair market value as of each such Trust Valuation Date. In addition, each Participant's Account shall be charged (as the Committee, in a uniform and nondiscriminatory manner, shall direct) with brokerage commissions and other direct costs related to investing such Participant's Account pursuant to his or her directions. -35- ARTICLE V --------- VESTING ------- Section 5.1: Vesting In Retirement Account And Matching Contribution ----------- ------------------------------------------------------- Account. Each Participant shall at all times be 100% vested in his or her - ------- Retirement Account and Matching Contribution Account. Notwithstanding the foregoing, each Participant who is a United facility Employee and who is an Employee on or after December 31, 2001 shall be 100% vested, and each Participant who is a United facility Employee and who is not an Employee on or after December 31, 2001 shall be vested in accordance with the vesting schedule provided for in the United Plan. Section 5.2: Vesting In Other Accounts. Each Participant shall at all ----------- ------------------------- times be 100% vested in his or her Deferred Income Account, Voluntary Contribution Account, and Rollover Contribution Account, if such Accounts have been established for such Participant. Section 5.3: Forfeitures. ----------- ----------- (a) If a Participant (i) ceases to be an Employee in any Plan Year for any reason, and (ii) as of the coinciding or immediately preceding Anniversary Date, such Participant was not 100% vested in his or her Retirement Account and Matching Contribution Account, then this Section shall apply. (b) Effective as of December 31, 2001, the nonvested portion shall be forfeited as of, and allocated on, the immediately following Anniversary Date as provided elsewhere in the Plan. (c) If the Participant becomes an Employee before he or she incurs five consecutive Breaks in Service and if he or she repays, subject to the provisions below, the amount of the distribution, if any, he or she received from his or her Retirement Account and Matching Contribution Account at his or her previous termination of employment, or if he or she had not yet received a distribution, the Participant shall be entitled to a restoration of his or her Forfeiture, as described in subsection (d) below. The sum of (A) either such repaid amount, in the event the Participant had previously received a distribution, or, the balance in his or her previous Retirement Account and Matching Contribution Account, in the event the Participant had not previously received a distribution, and (B) such restored Forfeiture, shall become the beginning balance in his or her new Retirement Account and Matching Contribution Account. Such repayment must be made (A) in the case of a distribution on account of separation from service, before the earlier of five years after the first date on which the Participant is subsequently re-employed by the Company, or the close of the first period of five consecutive one-year Breaks in Service commencing after the distribution; or (B) in the case of any other distribution, five years after the date of the distribution. -36- (d) Any restoration pursuant to subsection (c) above shall be made, first, from other Participants' Forfeitures that are forfeited in the Plan Year that the Participant's Forfeiture is restored, and, second, from a contribution by the Company directly to the Participant's Account. -37- ARTICLE VI ---------- DISTRIBUTION OF BENEFITS ------------------------ Section 6.1: Distribution Of Benefits. Subject to the survivor annuity ----------- ------------------------ requirements set forth in Section 6.2, benefits become distributable to a Participant or to the Beneficiary of a deceased Participant upon the first to occur of such Participant's Normal Retirement Date, Total Disability, death, or the date that such Participant's ceasing to be an Employee prior to his or her Normal Retirement Date for a reason other than his or her death or Total Disability. A Participant (or the Beneficiary of a deceased Participant) must make a claim for such Participant's benefits prior to any distribution. Such benefits shall be the sum of the following amounts: (i) The amount credited to his or her Deferred Income Account, Voluntary Contribution Account, and Rollover Contribution Account, if any, as of the Trust Valuation Date that coincides with or immediately precedes the first distribution of his or her benefits, adjusted as of such date if required by Section 4.4, plus contributions made by the Participant after such date; and (ii) The vested amount credited to his or her Retirement Account and Matching Contribution Account as of the Trust Valuation Date that coincides with or immediately precedes the first distribution of his or her benefits, adjusted as of such date if required by Sections 4.4 and 4.5(b). Section 6.2: Survivor Annuity Requirements. ----------- ----------------------------- (a) Applicability. This Section shall apply to all benefits payable ------------- from the Plan before April 1, 2002, and, accordingly, shall not apply to the benefits payable from the Plan on or after April 1, 2002. (b) Qualified Joint And Survivor Annuity. Unless an optional method ------------------------------------ of distribution is selected, a Participant who is married on his or her Annuity Starting Date shall receive his or her benefits in the form of a Qualified Joint and Survivor Annuity. An optional method of distribution may only be selected or changed pursuant to a Qualified Election made within the Retirement Election Period. (c) Qualified Life Annuity. Unless an optional method of distribution ---------------------- is selected, a Participant who is not married on his or her Annuity Starting Date shall receive his or her benefits in the form of a Qualified Life Annuity. An optional method of distribution may only be selected or changed pursuant to a Qualified Election made within the Retirement Election Period. (d) Qualified Preretirement Survivor Annuity. Unless an optional ---------------------------------------- method of distribution or different Beneficiary has been selected, if a married Participant dies before his or her Annuity Starting Date, such Participant's surviving -38- spouse, if any, shall receive such Participant's benefits in the form of a Qualified Preretirement Survivor Annuity. If an optional method of distribution or Beneficiary other than such Participant's surviving spouse has not been selected, such surviving spouse may direct that the payments under the Qualified Preretirement Survivor Annuity commence within a reasonable time after the Participant's death. An optional method of distribution or Beneficiary other than such Participant's surviving spouse may only be selected or changed pursuant to a Qualified Election made within the Preretirement Election Period. Despite the foregoing, and to the extent allowed by law, a deceased Participant's Beneficiary may, at any time after such Participant's death but before his or her Annuity Starting Date, select an optional method of distribution in accordance with Section 6.3(a), provided that such Participant had not elected against such a selection. (e) Definitions. For purposes of this Section, the following ----------- definitions shall apply: (i) "Annuity Starting Date" shall mean the first day of the first period for which an amount is payable as an annuity, or in the case of a benefit not payable in the form of an annuity, the first day on which all events have occurred that entitled the Participant to such benefit. For purposes of the foregoing sentence, the first day of the first period for which a benefit is to be received by reason of disability shall be treated as the Annuity Starting Date only if such benefit is not an auxiliary benefit under Code Section 417(f)(2)(B). (ii) "Preretirement Election Period" shall mean, with respect to any Participant, the period that begins on the first day of the Plan Year in which such Participant attains age 35 and ends on the date of such Participant's death. If a Participant separates from service before the first day of the Plan Year in which he or she attains age 35, the Preretirement Election Period shall begin on the date of separation with respect to benefits accrued before such separation. (iii) "Retirement Election Period" shall mean, with respect to any Participant, the 90-day period that ends on his or her Annuity Starting Date. (iv) "Qualified Election" shall mean an election to waive the Qualified Joint and Survivor Annuity, the Qualified Life Annuity, or the Qualified Preretirement Survivor Annuity form of benefit. Such election must satisfy the following requirements: (A) it must be in writing; (B) it must be consented to in writing by the Participant's spouse, if he or she is married; (C) it must designate a beneficiary (or a form of benefits) which may not be changed without the consent of the Participant's spouse (or the Participant's spouse's consent must expressly permit the Participant to designate a beneficiary without requiring further consent from the Participant's spouse); (D) such spouse's consent must acknowledge the effect of the election; and (E) such spouse's consent must be witnessed by a Plan representative or a -39- notary public. Spousal consent is not required if the Participant establishes to the satisfaction of a Plan representative that such consent cannot be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by Regulations. Any consent by a spouse (or establishment that the consent of a spouse cannot be obtained) shall be effective only as to such spouse. A Participant may revoke a prior Qualified Election and choose again to take a Qualified Joint and Survivor Annuity, Qualified Life Annuity, or Qualified Preretirement Survivor Annuity without the consent of his or her spouse, at any time and any number of times, within the applicable election period. (v) "Qualified Joint and Survivor Annuity" shall mean a benefit that can be purchased with the vested amount credited to a Participant's Accounts and that is payable in the form of an annuity for the life of the Participant with a survivor annuity for the life of such Participant's spouse. Such survivor annuity must not be less than 50% nor more than 100% of the amount of the annuity payable during the joint lives of the Participant and his or her spouse. (vi) "Qualified Life Annuity" shall mean a benefit that can be purchased with the vested amount credited to a Participant's Accounts and that is payable in the form of an annuity for the life of the Participant. (vii) "Qualified Preretirement Survivor Annuity" shall mean a benefit that can be purchased with the vested amount credited to a Participant's Accounts as of the date of such Participant's death (less any portion that is automatically forfeited upon such Participant's death pursuant to the Plan's other provisions) that is payable to such Participant's surviving spouse in the form of an annuity for the life of such spouse. Despite the foregoing, such annuity shall be the actuarial equivalent of at least 50% of the vested amount credited to a Participant's Accounts as of the date of such Participant's death. For the purposes of the foregoing, (A) any security interest held by the Plan, the Trust or the Trustee by reason of a loan outstanding pursuant to Section 6.8 to the Participant shall be taken into account in determining the amount of the Qualified Preretirement Survivor Annuity, and (B) the vested amount credited to such Participant's Accounts shall be first reduced by any such security interest held by reason of such loan. (f) Information To Participants. A Participant shall be provided with --------------------------- the following information with regard to the applicable Qualified Election: (i) With regard to the Qualified Election to waive the Qualified Joint and Survivor Annuity or Qualified Life Annuity form of benefit, a Participant shall be provided with a written explanation of (A) the terms and conditions of the Qualified Joint and Survivor Annuity or Qualified Life Annuity, -40- (B) the Participant's right to elect to waive the Qualified Joint and Survivor Annuity or Qualified Life Annuity form of benefit, (C) the right of the Participant's spouse to consent to any election to waive the Qualified Joint and Survivor Annuity form of benefit, and (D) the right of the Participant to revoke such an election, and the effect of such a revocation. Such written explanation shall be provided to a Participant no less than 30 days and no more than 90 days before the Annuity Starting Date. (ii) With regard to the Qualified Election regarding the Qualified Preretirement Survivor Annuity form of benefit, a Participant shall be provided with a written explanation of the Qualified Preretirement Survivor Annuity containing comparable information to that required pursuant to subparagraph (i) above. Such written explanation shall be provided to each Participant within whichever of the following periods ends last: (A) the period beginning with the first day of the Plan Year in which such Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which such Participant attains age 35, (B) a reasonable period after such Participant first became a Participant, or (C) a reasonable period after such Participant ceases to be an Employee in the case of a Participant who ceases to be an Employee before attaining age 35. (g) Cash-Out Restrictions. --------------------- (i) Despite the other provisions of this Section, but subject to the next sentence, if, when a Participant's benefits become distributable, the vested amount credited to such Participant's Accounts is not (nor never has been) in excess of $3,500 (or $5,000, for Plan Years beginning after August 5, 1997), the Committee may direct that such benefit be distributed as an immediate cash lump sum. No such distribution may be made after a Participant's Annuity Starting Date unless such Participant and his or her spouse (or, in the case of a deceased Participant, the surviving spouse) consent in writing to such distribution. (ii) Despite the other provisions of this Section, if, when a Participant's benefits become distributable, the vested amount credited to such Participant's Accounts is (or ever has been) in excess of $3,500 (or $5,000, for Plan Years beginning after August 5, 1997), the Committee may direct that such benefit be distributed as an immediate cash lump sum, provided the Participant and his or her spouse (or, where the Participant has died, his or her surviving spouse) consent in writing to such distribution during the 90-day period ending on the date such benefit is so distributed. If such Participant or his or her spouse (or surviving spouse) does not so consent, such failure to consent shall be deemed to be an election to defer distribution of such benefit until the later of age 62 or the Participant's Normal Retirement Age. -41- (h) The Annuity Starting Date for a distribution in a form other than a Qualified Joint and Survivor Annuity may be less than 30 days after receipt of the written explanation described above provided: (i) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the Qualified Joint and Survivor Annuity and elect (with spousal consent) to a form of distribution other than a Qualified Joint and Survivor Annuity; (ii) the Participant is permitted to revoke any affirmative distribution election at least until the Annuity Starting Date or, if later, at any time prior to the expiration of the seven-day period that begins the date after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant; and (iii) the Annuity Starting Date is a date after the date that the written explanation was provided to the Participant. For distributions on or after December 31, 1996, the Annuity Starting Date may be a date prior to the date the written explanation is provided to the Participant if the distribution does not commence until at least 30 days after such written explanation is provided, subject to the waiver of the 30-day period as provided for above. (i) Special Limitation. Despite any other provision of the Plan, no ------------------ preretirement death benefit in addition to the Qualified Preretirement Survivor Annuity shall be permitted to the extent such other benefit would violate the incidental benefit rule. Section 6.3: Optional Methods Of Distribution. ----------- -------------------------------- (a) If an optional form of benefit has been selected as set forth in Section 6.2 or if Section 6.2 is not applicable, then, when a Participant's benefits become distributable, the Committee shall, with reasonable promptness, direct the Trustee to distribute such Participant's benefits as follows: (i) If a Participant's benefits become distributable by reason of his or her death, the benefits shall be distributed to such deceased Participant's Beneficiary as an immediate cash lump sum. Such Participant's vested amount shall be reduced by any security interest held by the Plan, the Trust or the Trustee by reason of a loan outstanding pursuant to Section 6.8. (ii) If a Participant's benefits become distributable for a reason other than his or her death, the Participant, or the Beneficiary of a deceased Participant, may elect to receive the vested amount credited to the Participant's Accounts as an immediate cash lump sum, or for distributions prior to April 1, 2002, as an immediate cash lump sum or installments, or any combination of these. Despite the foregoing, if the vested amount credited to such Participant's Accounts is not (nor never has been) in excess of $3,500 (or $5,000, for Plan Years beginning after August 5, 1997), the Committee may direct the Trustee to distribute such benefits as an immediate cash lump sum, without such Participant's consent. -42- (iii) If distribution is to be made in installments pursuant to subsection (a)(ii) immediately above, such installments shall be paid in equal or nearly equal quarterly, semiannual, or annual installments over a period not exceeding: (A) the life expectancy of the Participant; or (B) the joint life and last survivor expectancy of the Participant and his or her Beneficiary. The expected return multiples of Section 1.72-9 of the Regulations under the Code shall be used to determine such life expectancy periods. (iv) If a Participant's benefits became distributable for a reason other than his or her death, and if such Participant properly elected to receive an optional form of benefit pursuant to this Section 6.3, then, if such Participant dies before his or her entire benefits have been distributed, his or her Beneficiary(ies) shall receive a death benefit equal to the balance of the remaining installments (if any) or deferred cash lump sum (if any) due such deceased Participant. (v) If a distribution is to be made in a deferred lump sum or in installments pursuant to subsections (a)(i) or (a)(ii) above, and to the extent it is directed by the Committee, the Trustee shall segregate a former Participant's benefit from the Trust and deposit it in a savings account with a Financial Institution. The former Participant (or his or her Beneficiary) shall be entitled to receive, in addition to the former Participant's benefit, the interest, if any, earned from such savings account, payable with the final installment. Despite the foregoing, the Committee may, in its discretion, if so requested by the former Participant or his or her Beneficiary, continue to hold the undistributed benefit as a segregated part of the Trust, in which event such benefit shall participate in the income, gains and losses realized by such segregated Trust fund, and such income or gains, if any, shall be payable with the final installment. (vi) Despite the foregoing provisions, the Committee may at any time, with the consent of a Participant or his or her Beneficiary, direct the Trustee to accelerate or to postpone any installment payment to such Participant or Beneficiary or to reduce or to increase the period over which future installments are to be made, in which latter event the Trustee shall adjust the amount of such installments accordingly. In addition, a Participant may at any time withdraw any or all of his or her undistributed benefit, and a Participant's Beneficiary shall, unless such Participant provided otherwise, have a similar withdrawal right. If less than all of the undistributed benefit is withdrawn, the remaining installment payments shall be adjusted accordingly. -43- (vii) In addition to the foregoing, prior to April 1, 2002, a Participant shall have the right to request the Committee, in lieu of the benefits provided herein, to direct the Trustee to purchase a non- transferable annuity, the cost of which shall be equal to the benefits to which such Participant is entitled, and the term of which shall not extend beyond the life expectancy of the Participant, or the joint life expectancies of the Participant or his or her spouse if the joint form is elected, and the Committee may, in its discretion, direct the Trustee to, and the Trustee shall, purchase such an annuity. (b) The complete distribution of a Participant's benefit as provided for above shall constitute full payment and satisfaction of any obligation of the Company, the Trustee or the Committee to such Participant or to the Beneficiary of a deceased Participant. (c) If a distribution is one to which Code Sections 401(a)(11) and 417 do not apply, such distribution may commence fewer than 30 days after the notice required under Section 1.411(a)-11(c) of the Regulations under the Code is given, provided that: (i) the Committee clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (ii) the Participant, after receiving the notice, affirmatively elects a distribution. Section 6.4: Timing Of Distributions. ----------- ----------------------- (a) Subject only to the survivor annuity requirements set forth in Section 6.2, the provisions of this Section shall govern the timing of the distribution of a Participant's benefit. (b) If a Participant's benefits become distributable because of his or her death or Total Disability, such benefits shall begin to be distributed as soon as is administratively practical after the Trust Valuation Date that coincides with or first follows the Committee's receipt of (i) written proof of such Participant's death or Total Disability and (ii) a properly completed claim for benefits. If a Participant's benefits become distributable for a reason other than his or her death or Total Disability, such Participant's benefits shall begin to be distributed as soon as is administratively practical after the Trust Valuation Date that coincides with or first follows the Committee's receipt of a properly completed claim for benefits. Despite the foregoing, and subject to subsections (c) and (d) below, a Participant's benefits must begin to be distributed no later than 60 days after the latest of the close of the Plan Year in which: -44- (i) the Participant attained age 65 (or Normal Retirement Age, if earlier); (ii) occurred the tenth anniversary of the year in which the Participant began participation in the Plan; or (iii) the Participant terminated his or her employment with the Company. Despite the foregoing, a Participant may elect a later date on which the distribution of his or her benefit is to begin, in a manner consistent with the applicable Regulations. Any failure by a Participant (or, if he or she is married, such Participant's spouse in the event of such Participant's death or in the event distribution is to be made in a form other than a Qualified Joint and Survivor Annuity) to consent to an immediate distribution of his or her benefit (provided that such benefit is otherwise then immediately distributable pursuant to the foregoing provisions) shall be deemed to be an election to defer distribution to the later of age 62 or such Participant's Normal Retirement Age. (c) Despite any other provision of the Plan, one of the following provisions shall apply: (i) A Participant's benefit shall be distributed to him or her not later than April 1 of the calendar year following the later of (A) the calendar year in which the Participant attains age 70 1/2, or (B) the calendar year in which the Participant retires, if such Participant is not a 5% Owner with respect to the Plan Year ending in the calendar year in which he or she attains age 70 1/2; or (ii) Alternatively, distributions to a Participant must begin no later than the date determined under subsection (c)(i) above and must be made, in accordance with the applicable Regulations, over the life of the Participant or over the lives of such Participant and his or her designated Beneficiary (or over a period not extending beyond the life expectancy of the Participant or the life expectancy of the Participant and his or her designated Beneficiary). (d) If a Participant dies before his or her entire interest has been distributed to him or her, the remaining portion of such Participant's interest must be distributed at least as rapidly as under the method of distribution being used as of the date of the Participant's death. (e) If a Participant dies before distribution of his or her benefits has begun, the entire benefit of such Participant must be distributed within five years after his or her death. -45- (f) For purposes of subsection (e) above, any portion of a Participant's benefits that is payable to or for the benefit of his or her Beneficiary shall be treated as distributed on the date on which such distribution begins if: (i) such portion will be distributed in accordance with the applicable Regulations over such Beneficiary's life (or over a period not extending beyond such Beneficiary's life expectancy), and (ii) such distribution must begin not later than the date that is one year after the date of such Participant's death (or such later date as the Secretary of the Treasury may by Regulations prescribe). However, if such Beneficiary is the Participant's surviving spouse, then the date on which the distribution is required to begin shall be not later than the date on which the Participant would have attained age 70 1/2, and if such spouse dies before the distribution to him or her begins, this subsection shall be applied as if such spouse were the Participant. (g) For purposes of subsection (f) above, the life expectancy of a Participant and his or her spouse (other than in the case of life annuity) may be redetermined on an annual or less frequent basis, and under Regulations prescribed by the Secretary of the Treasury, any amount paid to a child of a Participant shall be treated as if it had been paid to such Participant's surviving spouse if such amount will become payable to such spouse upon such child attaining majority (or any other designated event permitted under the applicable Regulations). (h) Despite the foregoing provisions, the Committee shall not permit any Participant to receive his or her benefits under a method of distribution that violates the Regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirements of proposed Regulation 1.401(a)(9)-2, or any successor or final Regulation. (i) With respect to distributions under the Plan made for calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of Section 401(a)(9) of the Internal Revenue Code in accordance with the regulations under Section 401(a)(9) that were proposed on January 17, 2001, notwithstanding any provision of the Plan to the contrary. This amendment shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under Section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service. Section 6.5: Postponed Retirement. If a Participant continues to be an ----------- -------------------- Employee beyond his or her Normal Retirement Date, his or her corresponding participation in the Plan shall likewise continue. In such case, to the extent permitted by law and the applicable Regulations, the distribution of such a Participant's benefits will be postponed until he or she actually ceases to be an Employee. Such benefits -46- will become distributable as of the first day of the month next following such Participant's actually ceasing to be an Employee. Section 6.6: Distributions Due Missing Persons. If the Trustee is ----------- --------------------------------- unable to distribute any benefit due to a missing Participant or Beneficiary, the Trustee shall (i) so advise the Committee and (ii) segregate such benefit from the Trust, in which event such benefit shall participate in the income, gains and losses realized by such segregated Trust Fund. The Committee shall then send a written notice to such Participant or Beneficiary at his or her last known address, as reflected in the Company's or Committee's records. If such Participant or Beneficiary shall not have presented himself or herself to the Company or to the Committee within three years of the date of such written notice, any undistributed benefit (and any income gains and losses realized by such segregated part) may be applied against and reduce the Company's future contributions to the Plan. Despite the foregoing, if at any subsequent time a valid claim for any undistributed benefit is presented to the Committee, such benefit that was so applied (and any income, gains and losses realized by such segregated part) shall be paid directly by the Company to such claimant. Section 6.7: Transfers To Another Qualified Plan. ----------- ----------------------------------- (a) If a Participant who is a distributee of any Eligible Rollover Distribution (as defined below) elects to have such distribution paid directly to an Eligible Retirement Plan and who specifies the Eligible Retirement Plan to which such distribution is to be paid (in such form and at such time as the Committee may prescribe), then such distribution shall be made in the form of a direct trustee-to-trustee transfer to such Eligible Retirement Plan, provided that such Eligible Retirement Plan accepts such a transfer. The foregoing sentence shall apply only to the extent that such Eligible Rollover Distribution would be includable in gross income if not transferred as provided in such sentence (determined without regard to Code Sections 402(c) and 403(a)(4)). (b) "Eligible Rollover Distribution" shall mean any distribution of all or any portion of the balance to the credit of the distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; any hardship distribution described in Code Section 401(k)(2)(B)(i)(IV) received after December 31, 1998; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). -47- (c) "Eligible Retirement Plan" shall mean an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (d) A Participant's (i) surviving spouse and (ii) spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the surviving spouse, spouse, or former spouse and shall have the same rights as a Participant to make a transfer in accordance with this Section 6.7 as to the interest of the surviving spouse, spouse, or former spouse. Section 6.8: Loans To Participants. ----------- --------------------- (a) The Committee shall be the fiduciary with authority to establish a loan program for Participants and to direct the Trustee concerning the investment of the Trust's assets pursuant to such a loan program. (b) A Participant may make a written application to the Committee for a loan from the Trust. Each such loan must be adequately secured, and if it is secured by the balance in such Participant's Accounts, then, prior to April 1, 2002, in the case of a married Participant, (i) such loan and security interest must be consented to in writing by such Participant's spouse during the 90-day period ending on the date on which the loan is so secured, (ii) such consent must acknowledge the effect of such loan and security interest, and (iii) such consent must be witnessed by a Plan representative or a notary public. (c) The Committee shall have sole discretion in granting or denying any such loan application; provided, however, that the Committee shall exercise such discretion in a uniform and nondiscriminatory manner. In connection with any such loan, a Participant shall sign such notes, evidences of indebtedness, security agreements and other documents as the Committee may, in its discretion, require. (d) Interest on such loans shall be charged at a reasonable rate, not in excess of that permitted by law, and all notes or other evidences of indebtedness shall require repayment of the principal amount of the loan and interest on it over a period certain, which shall not exceed five years. Such payments of interest and principal shall be made no less frequently than quarterly and shall provide for the level amortization of the loan over its term. Despite the foregoing, a loan's term may exceed five years if such loan is used to acquire any dwelling unit that is used or within a reasonable time (determined at the time the loan is made) will be used as the principal residence of the Participant. The Trustee, on receipt of authorization and the appropriate notes or other evidences of indebtedness from the Committee, shall -48- advance the amount of the loan to the Participant and shall treat such loan as an investment of the Trust. (e) In no event shall the outstanding principal balance of all loans from the Trust to any Participant exceed the lesser of: (i) $50,000, reduced by the excess (if any) of (A) the highest outstanding balance of all loans from the Trust to such Participant during the one-year period ending on the day before the date on which such loan is made, over (B) the outstanding balance of all loans from the Trust to such Participant on the date on which such loan is made; or (ii) one-half of the total vested amount credited to such Participant's Accounts. Section 6.9: Withdrawal At Age 59 1/2. Despite any other provision of ----------- ------------------------ the Plan, effective as of January 1, 2002, any Participant who has reached at least age 59 1/2 may elect to withdraw all or any portion of the vested balance of his or her Accounts, even though he or she is still an Employee. Any such withdrawal shall be subject to Section 6.2, and in the event an optional form of distribution is properly elected as set forth in such Section 6.2, such withdrawal shall be paid only in the form of a cash lump sum. Section 6.10: Hardship Withdrawals. ------------ -------------------- (a) With respect to his or her Deferred Income Account, a Participant may request a hardship withdrawal of the smaller of: (i) the aggregate amount of all of such Participant's Elective Contributions; (ii) the current value of such Participant's Deferred Income Account; or (iii) the amount required to meet the immediate and heavy financial need created by the hardship and not available to such Participant through the Plan or through all non-taxable loans available through the Company (including a withdrawal pursuant to Section 6.11). A request for such a withdrawal shall be written, dated and delivered to the Committee in accordance with rules promulgated by the Committee, and in the case of a married Participant, it must be consented to in writing by such Participant's spouse during the 90-day period ending on the date the withdrawal is made and such consent must be witnessed by a Plan representative or a notary public. If the Committee approves the withdrawal, distribution shall be made as soon thereafter as is administratively practical. -49- (b) The Committee may, in its sole discretion, approve or deny a hardship withdrawal request, but the Committee's determination shall be made in accordance with uniform and nondiscriminatory standards. The Committee shall approve a hardship withdrawal only if the withdrawal is necessary to satisfy one of the following immediate and heavy financial needs: (i) Payments of medical expenses incurred by the Participant and the Participant's spouse and dependants or payments necessary for those persons to obtain medical care. (ii) Payments (excluding mortgage payments) for the Participant's residence. (iii) Payments of tuition and related educational fees for the next 12 months of post-secondary education for the Participant and the Participant's spouse, children, and dependents. (iv) Payments to prevent the Participant's eviction from the Participant's principal residence. (v) Payments to prevent a foreclosure on the Participant's mortgage of the Participant's principal residence. (vi) Such other expenses that the Commissioner of the Internal Revenue Service deems to be an immediate and heavy financial need through the publication of revenue rulings, notices, and other documents of general applicability. The amount of an immediate and heavy financial need may include any amount that is necessary to pay federal, state, or local income taxes or penalties that are reasonably anticipated to result from the distribution. If a Participant has a balance in his or her Voluntary Contribution Account that is subject to withdrawal pursuant to Section 6.11, then such Participant must withdraw the maximum allowed pursuant to Section 6.11 before a withdrawal can be made pursuant to this Section 6.10(b). (c) For the purpose of this Section, the Committee may reasonably rely upon a Participant's representations regarding the Participant's financial affairs. (d) The Participant must sign an agreement that he or she will not make any elective contribution or employee contribution to the Plan or any other plan maintained by the Employer (including all qualified and nonqualified plans of deferred compensation, stock option plans, stock purchase plans, and cash or deferred arrangements that are part of a cafeteria plan) for twelve consecutive months following a hardship withdrawal. (e) The total amount of the Participant's Elective Contributions during the year following the Participant's taxable year in which the Participant made a hardship withdrawal may be no greater than (i) $7,000, as adjusted by the -50- Adjustment Factor, minus (ii) the amount of the Participant's Elective Contributions during the Participant's taxable year in which the hardship withdrawal was made. (f) Any earnings and gains on a Participant's Elective Contributions are not subject to withdrawal pursuant to this Section and shall be distributed only upon the events specified in Section 6.1 above. Section 6.11: Withdrawal Of Voluntary Contributions. With respect to ------------ ------------------------------------- his or her Voluntary Contribution Account, a Participant may direct that the smaller of (i) the aggregate amount of all of such Participant's Voluntary contributions or (ii) the current value of such Participant's Voluntary Contribution Account be distributed to him or her. Such direction shall be written, dated and delivered to the Committee in accordance with the rules promulgated by the Committee, and in the case of a married Participant, it must be consented to in writing by such Participant's spouse during the 90-day period ending on the date the withdrawal is made and such consent must be witnessed by a Plan representative or a notary public. Such distribution shall be made as soon thereafter as is practical. Any earnings and gains on such contributions cannot be withdrawn pursuant to this Section and may be distributed only upon the events specified in Section 6.1 above, unless otherwise required by Code Section 72(e)(8). Section 6.12: Withdrawal of Rollover Contributions. Despite any other ------------ ------------------------------------ provision of the Plan, effective as of January 1, 2002, a Participant may elect to withdraw all or any portion of the balance of his or her Rollover Contribution Account, even though he or she is still an Employee. Any such withdrawal shall be subject to Section 6.2, and in the event an optional form of distribution is properly elected as set forth in such Section 6.2, such withdrawal shall be paid only in the form of a cash lump sum. -51- ARTICLE VII ----------- TOP-HEAVY PLAN LIMITATIONS -------------------------- Section 7.1: Application Of Top-Heavy Rules. If the Plan is or ----------- ------------------------------ becomes a Top-heavy Plan, the limitations and requirements contained in this Article shall apply and shall supersede any conflicting provision of the Plan. Section 7.2: Definitions. ----------- ----------- (a) Top-heavy Plan. A "Top-heavy Plan" shall mean, with respect to -------------- any Plan Year, (i) any Defined Benefit Plan maintained by the Company or an Affiliated Company if, as of the Determination Date, the total Present Value of Accrued Benefits under such plan for Key Employees exceeds 60% of the total Present Value of Accrued Benefits under such plan for all participants in such plan; and (ii) any Defined Contribution Plan maintained by the Company or an Affiliated Company if, as of the Determination Date, the total Aggregate Accounts of Key Employees under the plan exceeds 60% of the total Aggregate Accounts of all participants under such plan. Each plan of the Company required to be included in an Aggregation Group shall be treated as a Top-heavy Plan if the Aggregation Group is a Top-heavy Group. (b) Top-heavy Group. A "Top-heavy Group" shall mean any Aggregation --------------- Group if the sum of (i) the total Present Value of Accrued Benefits for Key Employees under all Defined Benefit Plans included in the Aggregation Group (determined as of the Determination Date for each such plan), and (ii) the total Aggregate Accounts of Key Employees under all Defined Contribution Plans included in the Aggregation Group (determined as of the Determination Date for each such plan) exceeds 60% of a similar sum determined for all participants in such plans. For purposes of determining whether the plans in a Top-heavy Group exceed the foregoing 60% test, the plans shall be aggregated by adding together the results for each plan as of the Determination Dates for such plans that fall within the same calendar year. (c) Aggregation Group. An "Aggregation Group" shall mean each plan ----------------- of the Company or of an Affiliated Company in which a Key Employee is a participant, and each plan of the Company or of an Affiliated Company that enables the plan(s) containing a Key Employee to meet the antidiscrimination requirements of Code Sections 401(a)(4) or 410, including terminating or terminated plans maintained within the last five years ending on the Determination Date that would, but for such plan(s) termination, be part of the Aggregation Group. The Company can elect to include in the Aggregation Group any plan not otherwise required to be included, if such group, after such election, would continue to meet the antidiscrimination requirements of Code Sections 401(a)(4) and 410; provided, however, that any such plan will not be otherwise deemed a Top-heavy Plan by reason of such election. -52- (d) Determination Date. With respect to any plan year, ------------------ "Determination Date" shall mean the last day of the preceding plan year or, in the case of the first plan year of any plan, the last day of such plan year. (e) Present Value Of Accrued Benefit: A participant's "Present Value -------------------------------- of Accrued Benefit" as of any Determination Date shall be calculated: (i) as of the most recent valuation date ("Valuation Date") which is within the 12-month period ending on such Determination Date; (ii) for the first plan year, as if (1) the participant terminated service as of the Determination Date, or (2) the participant terminated service as of the Valuation Date, but taking into account the estimated Present Value of Accrued Benefit as of the Determination Date; (iii) for any other plan year, as if the participant terminated service as of the Valuation Date; and (iv) using the interest rate and mortality assumptions set forth in the Defined Benefit Plan. (v) Solely for the purposes of determining if the Plan, or any other plan included in the Aggregation Group, is a Top-heavy Plan, the accrued benefit of a Non-Key Employee shall be determined under (1) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Company and all Affiliated Companies, or (2) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code Section 411(b)(1)(C). For the foregoing purposes, the Valuation Date must be the same valuation date used for computing the defined benefit plan minimum funding costs, regardless of whether a valuation is performed that year. (f) Aggregate Account: A participant's "Aggregate Account" shall be ----------------- determined as follows: (i) For Defined Contribution Plans not subject to the minimum funding requirements of Code Section 412, a participant's Aggregate Account as of any Determination Date shall be the sum of: (A) such participant's account balance as of the most recent valuation date ("Valuation Date") occurring within the 12-month period ending on such Determination Date; plus (B) an adjustment for contributions due as of such Determination Date. Such adjustment is generally the amount of any contributions actually made after the Valuation Date but before the -53- Determination Date. In the first plan year, such adjustment shall also reflect any contributions actually made after the Determination Date that are allocated as of a date in that first plan year. (ii) For Defined Contribution Plans subject to the minimum funding requirements of Code Section 412, a participant's Aggregate Account as of any Determination Date shall be the sum of: (A) such participant's account balance as of the most recent valuation date ("Valuation Date") occurring within the 12-month period ending on such Determination Date, including contributions that would be allocated as of a date not later than such Determination Date; plus (B) an adjustment for contributions due as of such Determination Date. Such adjustment shall reflect the amount of any contribution actually made (or due to be made) after the Valuation Date but before the expiration of the extended payment period described in Code Section 412(c)(10). (g) Key Employee. "Key Employee" shall mean any participant of any plan maintained by the Company or an Affiliated Company who, at any time during the plan year or any of the four preceding plan years, was: (i) an officer of the Company or an Affiliated Company whose annual Compensation exceed 50% of the amount in effect under Code Section 415(b)(1)(A) for any such plan year (provided, however, that no more than 50 employees (or, if lesser, the greater of three employees or 10% of all employees) shall be treated as officers; provided further, however, that if the total number of officers exceeds this numerical limitation, only the highest compensated officers shall be included); (ii) one of the ten employees who (1) has annual Compensation for a plan year greater than the dollar limitation in effect under Code Section 415(c)(1)(A) for the calendar year in which such plan year ends, and (2) owns (or is considered to own under Code Section 318) both more than a 1/2% interest and the largest interests in the Company or an Affiliated Company; (iii) a 5% Owner of the Company or an Affiliated Company; or (iv) a 1% Owner of the Company or an Affiliated Company whose annual Compensation exceed $150,000, or such other amount as may be allowed under Code Section 416(i) and the applicable Regulations. In making this determination of a 5% Owner and a 1% Owner for purposes of this Section, (i) the Code Section 318(a)(2) corporate attribution rules, as modified by Code Section 416(i)(1)(B)(iii), shall apply, and (ii) the business aggregation rules of -54- Code Section 414 shall not apply. For purposes of the foregoing definition, (i) the beneficiary of a Key Employee shall be treated as a Key Employee, and (ii) the beneficiary of a former Key Employee shall be treated as a former Key Employee. Inherited benefits will retain the character of the benefits of the Key Employee who performed the services for the Company. For purposes of the foregoing, the identification of a Key Employee will be determined in accordance with Code Section 416(i). (h) Non-Key Employee. "Non-Key Employee" shall include any ---------------- Participant who is not a Key Employee, including any Participant who is a former Key Employee. Section 7.3: 60% Test - Special Rules. For purposes of applying the ----------- ------------------------ 60% test described in Section 7.2(a), the following special rules shall apply: (a) Participant Contributions. Benefits derived from both Participant ------------------------- contributions (whether voluntary or mandatory, but not deductible contributions) and the Company's contributions shall be considered. (b) Previous Distributions. In determining the Present Value of ---------------------- Accrued Benefit or the Aggregate Account of any participant under any plan (or plans that form the Aggregation Group), such present value or account shall be increased by the aggregate of distributions made to such participant from such plan (or plans forming the Aggregation Group) during the five-year period ending on the Determination Date. For this purpose, "participant" shall include an employee who is no longer employed by the Company or an Affiliated Company. Despite the foregoing, any distribution to a participant that is made after the Valuation Date and before the Determination Date for any plan year shall not be considered a distribution to the extent it is already included in such participant's Present Value of Accrued Benefit or Aggregate Account as of such Valuation Date. (c) Rollover Contributions. Rollover contributions shall be treated ---------------------- as follows: (i) The following rules shall apply to related rollovers and plan-to-plan transfers (ones either not initiated by the participant or made to a plan maintained by the Company or any Affiliated Company). If the plan provides such rollover or plan-to-plan transfer, it shall not be counted as a distribution for purposes of this Section 7.3. If the plan receives such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the participant's Present Value of Accrued Benefit or Aggregate Account, regardless of the date on which such rollover or plan-to-plan transfer was received. (ii) The following rules shall apply to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by a participant and made from a plan maintained by one employer to a plan maintained by another -55- employer). If the plan provides such rollover or plan-to-plan transfer, it shall always consider such rollover or plan-to-plan transfer as a distribution for purposes of this Section 7.3. If the plan receives such rollover or plan-to-plan transfer, it shall not consider such rollover or plan-to-plan transfer as part of the participant's Present Value of Accrued Benefit or Aggregate Account if it was accepted after December 31, 1983. (d) Change Of Status. The accrued benefit or account of a ---------------- participant who was formerly a Key Employee, but who ceased to be a Key Employee in any plan year, will not be taken into account for such plan year. (e) No Service For Last Five Years. If any individual has not ------------------------------ performed services for the employer maintaining the plan during the five-year period ending on the Determination Date, the accrued benefit or account of such individual shall not be taken into account. Section 7.4: Minimum Vesting Requirement. As the Plan's normal ----------- --------------------------- vesting schedule equals or exceeds the top-heavy vesting schedule, the normal vesting schedule shall continue to apply if the Plan becomes a Top-heavy Plan. Section 7.5 : Minimum Contribution Requirement. ----------- -------------------------------- (a) If the Plan is a Top-heavy Plan, then in no event shall the Company's annual contribution on behalf of any Non-Key Employee be less than 3% of such Participant's Earnings. This minimum contribution shall be made even though, under the other provisions of the Plan, the Participant would not otherwise be entitled to a contribution on his or her behalf, or would have received a lesser contribution for the Plan Year, because of (i) the Participant's failure to complete 1,000 Hours of Service, (ii) the Participant's failure to make mandatory employee contributions to the Plan, or (iii) the Participant's exclusion from the Plan because such Participant's Earnings is less than the Plan's stated amount. Despite the foregoing, no minimum contribution needs to be made under this Section on behalf of a Participant who was not an Employee on the last day of the Plan Year. (b) For Plan Years beginning on or after January 1, 1985, any Company contribution that is attributable to a salary reduction or similar arrangement shall be considered for purposes of satisfying the minimum contribution required by this Section. For Plan Years beginning on or after January 1, 1989, Elective Contributions on behalf of Key Employees are taken into account in determining the minimum required contribution under Code Section 416(c)(2), but such contributions on behalf of Non-Key Employees may not be treated as employer contributions for purposes of the minimum contribution or benefit requirements of Code Section 416. (c) If the Company maintains one or more qualified plans in addition to the Plan, and if the Plan is a Top-heavy Plan, then in accordance with the applicable Regulations, only one such plan need be designated by the Company to -56- provide the minimum benefit provided for in this Section. However, if for Plan Years beginning before January 1, 2000, such multiple plans, including the Plan, include a Defined Benefit Plan and a Defined Contribution Plan, the 1.0 Rule (as it may be modified by the top-heavy plan transitional rule under Code Section 416(h)(3)) shall be in effect if, and only if, the following two requirements are satisfied: (i) Minimum Benefit Requirement. The "3%" set forth in this --------------------------- Section shall be replaced by "4%". (ii) The 90% Test. The sum of the Present Value of Accrued ------------ Benefits plus the Aggregate Accounts held for all Key Employees under the plans cannot exceed 90% of a similar sum determined for all participants. For purposes of the 1.0 Rule, all references to "1.25" shall be replaced by "1.0," if either of the above additional requirements is not met. (d) Despite the foregoing, if (i) the total annual contribution allocated to the Accounts of each Key Employee is less than 3% of each Key Employee's Earnings and (ii) this Plan is not required to be included in an Aggregation Group to enable a Defined Benefit Plan to meet the requirements of Code Section 401(a)(4) or 410, then the total minimum annual contribution on behalf of each Non-Key Employee shall be equal to the largest percentage contribution on behalf of any Key Employee. -57- ARTICLE VIII ------------ THE COMMITTEE ------------- Section 8.1: Members. ----------- ------- (a) The Committee shall consist of three or more members and shall be appointed by the Board of Directors. Its members shall serve at the pleasure of the Board of Directors. A person so appointed shall become a member by filing a written notice of acceptance with the Board of Directors. A member of the Committee may resign by delivering a written notice of resignation to the Board of Directors. The Board of Directors may remove any member of the Committee by delivering a written notice of such removal to him or her. A resignation or removal shall be effective on the date specified in such notice or resolution. The Trustee shall be promptly notified by the Board of Directors of any change in the membership of the Committee, and shall be supplied with specimen signatures of each Committee member. (b) Vacancies in the membership of the Committee shall be filled promptly by the Board of Directors. If the Company is not in existence when a vacancy in the Committee membership arises, such vacancy shall be filled as follows, in the indicated order of priority: 1st: The remaining member(s) of the Committee shall appoint new --- member to fill all vacancies. 2nd: A majority of the adults then entitled to benefits from the --- Plan shall appoint new member(s) to fill all vacancies. If such an adult is not able to participate in such appointment, then his or her spouse, if any, shall act for him or her. If there is no such spouse, then such adult's guardian or conservator shall act for him or her. 3rd: If vacancies on the Committee are not filled pursuant to the --- foregoing, then a court of competent jurisdiction shall fill such vacancies. The Trust shall pay the expenses incurred in connection with such court appointment. Section 8.2: Committee Action. ----------- ---------------- (a) The Committee shall choose a Secretary and an Assistant Secretary (either of whom is referred to below as the "Secretary") who shall keep minutes of the Committee's proceedings and all records and documents pertaining to the Committee's administration of the Plan. Any action of the Committee shall be taken pursuant to the vote of a majority, or pursuant to the written consent of a majority, of its members. A quorum of the Committee shall consist of two members. The Secretary may sign any certificate or other document on behalf of the -58- Committee. The Trustee and all other persons dealing with the Committee may conclusively rely upon any certificate or other document that is signed by the Secretary and that purports to have been duly authorized by the Committee. (b) A member of the Committee shall not vote or act upon any matter that relates solely to himself or herself as a Participant. If a matter arises affecting one member of the Committee as a Participant and the other members of the Committee are unable to agree on the disposition of such matter, the Board of Directors shall appoint a substitute member of the Committee in the place and stead of the affected member, for the sole purpose of passing upon and deciding that particular matter. If the Company is not in existence then, such substitute member of the Committee shall be appointed in the manner provided for in this Article when there is a vacancy in the Committee's membership. Section 8.3: Rights And Duties. ----------- ----------------- (a) Except as otherwise set forth in subsections (b), (c) and (d) below, all fiduciary responsibility respecting the management or administration of the Plan and its assets are vested in the Committee, and the Committee shall be the Named Fiduciary with respect to the Plan's assets, and the "administrator" of the Plan as defined in Section 3(16)(A) of ERISA. (b) The Trustee shall (i) have custody of the Plan's assets, (ii) have the powers designated in the trust document and (iii) be the Named Fiduciary with respect to the custody of the Plan's assets. (c) The Committee may designate one or more Investment Managers (including the Trustee, if the Trustee is authorized to be an Investment Manager) to manage the investment of the Plan's assets, and such Investment Manager(s) shall be the Named Fiduciary with respect to the management and investment of the Plan's assets. (d) The Committee may designate one or more persons or entities to carry out any of its functions under the Plan, other than those of managing and controlling the Plan's assets, which may only be done pursuant to subsections (b) or (c) immediately above. (e) The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, and shall be charged with the general administration of the Plan, except to the extent that powers are retained by the Company. The Committee shall have the discretion and authority to interpret the Plan. The Committee's powers shall include (without limitation) the power and discretion: (i) to determine all questions relating to the eligibility of Employees to participate in the Plan; -59- (ii) to determine, compute and certify to the Trustee the amount and kind of benefits payable to the Participants and their Beneficiaries; (iii) to authorize all disbursements by the Trustee from the Trust; (iv) to direct the Trustee with respect to all investments of the principal or income of the Trust and with respect to other matters concerning the Trust's assets; (v) to maintain all the necessary records for the administration of the Plan, other than those maintained by the Trustee; and (vi) to adopt, amend and interpret rules for the administration or regulation of the Plan that are not inconsistent with its terms and the applicable law and Regulations. (f) Members of the Committee and other Fiduciaries shall discharge their duties with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims. Subject to any right of Participants to direct how their Accounts will be invested and other provisions of the Plan, the Committee shall diversify the Plan's investments so as to minimize the risk of large losses, unless, under the circumstances, it is clearly prudent not to do so, or unless the Plan specifically provides for the acquisition and holding of qualifying employer real property or securities, as defined in Sections 407(d)(4) and (5) of ERISA. (g) A member of the Committee or other Fiduciary shall be liable for a breach of fiduciary responsibility of another member or another Fiduciary only if: (i) such member or Fiduciary participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other member or Fiduciary, knowing that such act or omission is a breach; (ii) such member or Fiduciary has enabled such other member or Fiduciary to commit a breach by virtue of his or her failure to comply with the duty of care set forth above in the administration of such member's or Fiduciary's own responsibilities as a Fiduciary; or (iii) such member or Fiduciary has knowledge of a breach by such other member or Fiduciary, unless such member or Fiduciary makes reasonable efforts under the circumstances to remedy such breach. Section 8.4: Information. To enable the Committee to perform its ----------- ----------- functions, the Company shall supply complete and timely information to the Committee on all matters relating to the compensation of all Participants, their -60- employment, their retirement, death, or the cause for termination of employment, and such other pertinent information as the Committee may require. The Committee shall advise the Trustee of such of the foregoing information as may be pertinent to the Trustee's administration of the Trust. Section 8.5: Compensation, Indemnity And Liability. ----------- ------------------------------------- (a) The members of the Committee shall serve without compensation for their services. No member of the Committee or other Fiduciary need be bonded, except as required by federal or state law or regulation. The Committee is authorized to employ such legal counsel or other persons as it may deem advisable to assist it in the performance of its duties under the Plan. (b) The Company shall indemnify and hold each member of the Committee harmless against any and all expenses and liabilities arising out of membership on the Committee (including reasonable attorneys' fees and disbursements), excepting only expenses and liabilities arising out of such member's own willful misconduct or gross negligence. The provisions of this subsection shall survive the termination of the Plan and the resignation or removal of the Committee member who is entitled to the indemnity. Section 8.6: Administrative Expenses Of The Plan. All expenses of ----------- ----------------------------------- administering the Plan shall by paid by the Trustee and shall be a charge against the trust estate, except to the extent that such expenses may be paid by the Company. The expense of maintaining errors and omissions liability insurance, if any, covering members of the Committee, the Trustee, or any other Fiduciary shall be paid by the Company. -61- ARTICLE IX ---------- AMENDMENT AND TERMINATION ------------------------- Section 9.1: Amendments. The Company may amend the Plan from time ----------- ---------- to time, and may amend or cancel any such amendment. Each amendment must be set forth in a document that is signed by the Company, and the Plan shall be deemed to have been amended in the manner and at the time set forth in such document, and all Participants shall be bound by it. Despite the foregoing, any such amendment shall be subject to the following provisions: (a) No amendment shall be effective that attempts to cause any asset of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants or their Beneficiaries, except for such changes, if any, that are required to permit the Plan to meet the applicable requirements of the Code, or as may be made to assure the deductibility for tax purposes of any contribution by the Company. (b) No amendment shall have any retroactive effect that would deprive any Participant of any benefit already vested, nor shall the vesting provisions of the Plan be amended, unless each Participant with at least three Years of Service is permitted to elect to continue to have the prior vesting provisions apply to him or her, except for such changes, if any, that are required to permit the Plan to meet applicable requirements of the Code, or as may be made to assure the deductibility for tax purposes of any contribution by the Company. Any such election must be made during the period beginning with the date the amendment is adopted and ending 60 days after the latest of: (i) the date the amendment is adopted; (ii) the date the amendment becomes effective; or (iii) the date on which the Participant receives written notice of the amendment from the Company or the Committee. (c) No amendment shall create or effect any discrimination in favor of Participants who are highly compensated Employees. (d) No amendment shall increase the duties or liabilities of the Trustee without the Trustee's written consent. (e) No amendment shall decrease any Participant's account balance or eliminate an optional form of distribution. -62- Section 9.2: Discontinuance Of Plan. ----------- ---------------------- (a) The Company expects that the Plan and the Company's contributions under it will be continued indefinitely, and the Trust is irrevocable. However, continuance of the Plan is not assumed as a contractual obligation of the Company, and the Company reserves the right to reduce, temporarily suspend, or discontinue contributions under the Plan if, and to the extent, permitted under ERISA or the Code. Upon a complete discontinuance of the Company's contributions, the interest of each Participant in each of his or her Accounts shall become 100% vested, if it is not already fully vested. In addition, upon a partial termination (within the meaning of Code Section 411(d)(3)), the interest of each affected Participant in each of his or her Accounts shall become 100% vested, if it is not already fully vested. (b) The Company may terminate the Plan at any time upon delivering a written notice to the Trustee. Upon the Plan's termination, the interest of each Participant in each of his or her Accounts shall become 100% vested, if it is not already fully vested. Upon the termination of the Plan without the establishment of a successor plan (within the meaning of Code Section 401(k)(10)(A)(i)), the Committee shall, as is necessary, direct the Trustee to liquidate the Trust's assets. After such liquidation, the Committee shall make, after deducting the estimated expenses of such liquidation and distribution, the allocations required under the Plan as though the date when such liquidation was completed were an Anniversary Date. After receiving appropriate instructions from the Committee, the Trustee shall promptly distribute the Trust's assets in accordance with such instructions. (c) The Plan shall automatically terminate upon the happening of any of the following events: (i) adjudication of the Company as a bankrupt; (ii) general assignment by the Company to or for the benefit of creditors; or (iii) dissolution of the business of the Company, provided, however, that the Plan may be continued by any successor business organization or any business organization into which the Company is merged or consolidated that employs some or all of the Participants, if such business organization agrees with the Trustee in writing to accept the obligations of the Plan and to continue it in full force and effect in accordance with Section 11.10. Section 9.3: Failure To Contribute. The Company's failure to ----------- --------------------- contribute to the Trust for any Plan Year shall not, of itself, be a discontinuance of contributions to the Plan. -63- ARTICLE X --------- CLAIMS PROCEDURE ---------------- Section 10.1: Presentation Of Claim. Any Participant or Beneficiary ------------ --------------------- of a deceased Participant or duly authorized representative of either (such Participant or Beneficiary or duly authorized representative being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts (i) credited to (or deducted from) such Claimant's Accounts, or (ii) distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. The claim must state with particularity the benefit determination desired by the Claimant. Section 10.2: Notification Of Decision. The Committee shall consider ------------ ------------------------ a Claimant's claim within a reasonable time, but not later than 90 days after receipt of the claim by the Plan, unless the Committee determines that special circumstances require an extension of time for processing the claim. If the Committee determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. Once the benefit determination is made in accordance with the foregoing, the Committee shall notify the Claimant in writing: (a) that the Claimant's requested benefit determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion adverse, in whole or in part, to the Claimant's requested benefit determination. The Committee's notice of adverse benefit determination must be written in a manner calculated to be understood by the Claimant, and it must contain: (i) the specific reason(s) for the adverse benefit determination; (ii) reference to the specific provisions of the Plan upon which such adverse benefit determination was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) a description of the Plan's claim review procedures set forth in Section 10.3 and the time limits applicable to such procedures, -64- including a statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review. Section 10.3: Review Of A Denied Claim. Within 60 days after ------------ ------------------------ receiving a notice from the Committee of an adverse benefit determination, a Claimant may file with the Board of Directors a written request for a review of such adverse determination. Thereafter, but not later than 30 days after the review procedure began, the Claimant: (a) may submit written comments, documents, records, and other information relating to the claim for benefits; (b) shall be provided, 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; and/or (c) may request a hearing, which the Board of Directors, in its discretion, may grant. The Board of Directors shall take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. Section 10.4: Decision On Review. The Board of Directors shall ------------ ------------------ render its decision on review within a reasonable time, and not later than 60 days after the receipt of the Claimant's review request, unless a hearing is held or other special circumstances require additional time, in which case the Board of Directors' decision must be rendered within 120 days after the receipt of the Claimant's review request. If the Board of Directors determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 60- day period. In no event shall such extension exceed a period of 60 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Board of Directors expects to render the benefit determination on review. The Board of Directors' decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) reference to the specific Plan provisions upon which the decision was based; (c) a statement that 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; -65- (d) a statement of the Claimant's right to bring an action under ERISA Section 502(a) concerning an adverse benefit determination; and (e) such other matters as the Board of Directors deems relevant. For purposes of this Article, a document, record, or other information shall be considered "relevant" to a Claimant's claim if such document, record, or other information was relied upon in making the benefit determination; was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination; or demonstrates compliance with the administrative processes and safeguards required under ERISA in making the benefit determination. -66- ARTICLE XI ---------- MISCELLANEOUS ------------- Section 11.1: Contributions Not Recoverable. Subject to the next two ------------ ----------------------------- sentences, it shall be impossible for any part of the Trust's principal or income to be used for, or diverted to, purposes other than the exclusive benefit of the Participants or their Beneficiaries. Despite any other provision of the Plan, the Company shall be entitled to recover (within one year of the specified event): (a) any contribution made to the Trust if (i) the Commissioner of Internal Revenue, or his delegate, determines that the Plan and the Trust do not meet the applicable requirements of the Code upon their initial qualification, with the result that the Trust is not exempt from federal income tax, (ii) such contribution was conditioned on such initial qualification of the Plan and Trust, (iii) the application for determination of such initial qualification was made within the time prescribed by law for filing the Company's tax return for the taxable year in which the Plan and Trust was adopted, or such later date as the Secretary of the Treasury may prescribe, and (iv) such contribution is returned to the Company within one year after the date the initial qualification is denied; (b) any contribution by the Company that was made by a mistake of fact, provided that such contribution is returned to the Company within one year of the contribution; (c) any contribution by the Company (or any portion of it) that was disallowed by the Internal Revenue Service as a deduction, provided that such contribution (or such portion of it), to the extent disallowed, is returned to the Company within one year of the disallowance of the deduction; and (d) upon termination of the Plan, any assets held in a suspense account pursuant to Section 4.7(c)(iv). Subsections (b) and (c) above shall be operative only if, and to the extent, expressly authorized by the applicable Regulations, or a Revenue Ruling, Revenue Procedure, or other official promulgation of the Internal Revenue Service. Section 11.2: Limitation On Participants' Rights. Participation in ------------ ---------------------------------- the Plan and Trust shall not give any Employee the right to be retained in the Company's employ or any right or interest in the Trust other than as provided in the Plan. The Company reserves the right to dismiss any Employee without any liability for any claim against the Trust (except to the extent provided in the Plan) or against the Company. All benefits payable under the Plan shall be provided solely from the assets of the Trust. -67- Section 11.3: Receipt Or Release. Any payment to any Participant or ------------ ------------------ Beneficiary pursuant to the Plan shall, to the extent of it, be in full satisfaction of all claims against the Trustee, the Committee, Board of Directors, and the Company, and the Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to sign a receipt and release to such effect. Section 11.4: Nonassignability. ------------ ---------------- (a) None of the benefits, payments, proceeds or claims of any Participant or Beneficiary shall be subject to any claim of any creditor and, in particular, they shall not be subject to attachment or garnishment or other legal process by any creditor. In addition, no Participant or Beneficiary shall have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under the Plan. (b) Any restriction or prohibition against the assignment or alienation of benefits under the Plan shall not apply to (i) a "qualified domestic relations order" ("QDRO"), as that term is defined in Code Section 414(p), or (ii) a benefit reduction or offset in accordance with Code Section 401(a)(13)(C). To the extent provided in any QDRO, a former spouse of a Participant shall be treated as the spouse or surviving spouse of such Participant for all purposes under the Plan. Notwithstanding any other provision in this Plan, a lump sum distribution may be made to an alternate payee under a QDRO at any time after the Committee has determined that such QDRO satisfies the requirements of Code Section 414(p) and Section 206(d) of ERISA, and regardless of whether or not the Participant who is a party to such QDRO is then eligible to receive a distribution under the Plan. Section 11.5: Governing Law. The Plan and the Trust shall be ------------ ------------- construed, administered, and governed in all respects under and by applicable federal law and, if they are not inconsistent with federal law, the laws of the State of California. If any provision is susceptible to more than one interpretation, the controlling interpretation shall be the one that is consistent with the Plan being a qualified plan under Code Section 401. If any provision of the Plan is held by a court of competent jurisdiction to be invalid or unenforceable, the other provisions shall continue to be fully effective. Section 11.6: Headings. Headings and subheadings in the Plan are ------------ -------- inserted for convenience of reference only, and they are not to be considered in construing the provisions of the Plan. Section 11.7: Counterparts. This Agreement may be signed in ------------ ------------ counterparts, each of which shall be deemed an original, and all such counterparts -68- shall constitute but one and the same document, which may be sufficiently evidenced by any one counterpart. Section 11.8: Successors And Assigns. This Agreement shall inure to ------------ ---------------------- the benefit of, and be binding upon, the parties to it, and their successors and assigns. Section 11.9: Gender And Number. As used in the Plan, the masculine, ------------ ----------------- feminine and neuter gender, and the singular and plural number, each include the other(s), unless the context indicates otherwise. Section 11.10: Merger, Consolidation Or Transfer Of Plan Assets. ------------- ------------------------------------------------ The Plan shall not be merged or consolidated with, nor shall its assets or liabilities be transferred to, any other plan (the "new plan") unless each Participant would receive in such new plan a benefit immediately after such merger, consolidation or transfer, if such new plan were then terminated, that is equal to, or greater than, the benefit he or she would have been entitled to receive immediately before such merger, consolidation or transfer, if the Plan had been terminated then. Section 11.11: Joinder Of Parties. In any action or other judicial ------------- ------------------ proceeding affecting the Plan, it shall be necessary to join as parties only the Trustee, the Committee and the Company, and no Participant or other person having an interest in the Plan shall be entitled to any notice or service of process. Section 11.12: The Trust. This Plan and the Trust are both part of ------------- --------- and constitute a single integrated employee benefit plan and trust and shall be construed together. Section 11.13: Special Requirements For USERRA. ------------- ------------------------------- (a) Despite any other provision of the Plan, an Employee re-employed under Chapter 43 of Title 38, United States Code ("USERRA") shall not incur a Break in Service by reason of such Employee's period of Qualified Military Service. (b) Each period of Qualified Military Service served by an Employee shall, upon re-employment under USERRA with the Company, constitute service with the Company for the purpose of determining the nonforfeitability of the Employee's accrued benefits under the Plan and for the purpose of determining the accrual of benefits under the Plan. -69- (c) An Employee re-employed under USERRA shall be entitled to accrued benefits that are contingent on the making of, or derived from, employee contributions or elective deferrals only to the extent the Employee makes payment to the Plan with respect to such contributions or deferrals. No such payment may exceed the amount the Employee would have been permitted or required to contribute had the Employee remained continuously employed by the Company throughout the period of Qualified Military Service. Any payment to the Plan shall be made during the period beginning on the date of re-employment and whose duration is three times the period of the Qualified Military Service (but not greater than five years). (d) For purposes of this Section, "Qualified Military Service" shall mean any service in the uniformed services (as defined in USERRA) by any Employee if such Employee is entitled to re-employment rights under USERRA with respect to such service. * * * * * * * * * [Signature Page Follows] -70- Signature Page -------------- The Company has signed the Plan on the date indicated below, to be effective as of the Effective Date. "Unified Western Grocers, Inc." December 19, 2001 By: /s/ Don Gilpin Its: Vice President, Human Resources -71- Schedule A ---------- EGTRRA Model Amendment ---------------------- Preamble 1. Adoption and Effective Date of Schedule A. This Schedule of the Plan is ----------------------------------------- adopted to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). This Schedule is intended as good faith compliance with the requirements of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued thereunder. Except as otherwise provided, this Schedule shall be effective as of the first day of the first Plan Year beginning after December 31, 2001. 2. Supersession of inconsistent provisions. This Schedule shall supersede the --------------------------------------- provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Schedule. Section N/A. Plan Loans for Owner-Employees and Shareholder Employees Effective for Plan loans made after December 31, 2001, Plan provisions prohibiting loans to any owner-Employee or shareholder-Employee shall cease to apply. Section 1. Limitations on Contributions 1. Effective Date. This Section shall be effective for limitation years -------------- beginning after December 31, 2001. 2. Maximum Annual Addition. Except to the extent permitted under Section 10 of ----------------------- this Schedule and Section 414(v) of the Code, if applicable, the Annual Addition that may be contributed or allocated to a Participant's Account under the Plan for any limitation year shall not exceed the lesser of: (a) $40,000, as adjusted for increases in the cost-of-living under Section 415(d) of the Code, or (b) 100 percent of the Participant's Compensation, within the meaning of Section 415(c)(3) of the Code, for the limitation year. The Compensation limit referred to in (b) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition. Section 2. Increase in Compensation Limit The annual Compensation of each Participant taken into account in determining allocations for any Plan Year beginning after December 31, 2001, shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Section -72- 401(a)(17)(B) of the Code. Annual Compensation means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Plan (the determination period). The cost-of- living adjustment in effect for a calendar year applies to annual Compensation for the determination period that begins with or within such calendar year. Section 3. Modification of Top-Heavy Rules 1. Effective Date. This Section shall apply for purposes of determining -------------- whether the Plan is a Top-heavy Plan under Section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of Section 416(c) of the Code for such years. This Section amends Article VII of the Plan. 2. Determination of top-heavy status. --------------------------------- 2.1 Key Employee. Key Employee means any Employee or former Employee ------------ (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Company having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for plan years beginning after December 31, 2002), a 5-Percent Owner of the Company, or a 1- Percent Owner of the Company having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable Regulations and other guidance of general applicability issued thereunder. 2.2 Determination of present values and amounts. This Section 2.2 shall ------------------------------------------- apply for purposes of determining the present values of accrued benefits and the amounts of Account balances of Employees as of the Determination Date. 2.2.1 Distributions during year ending on the Determination Date. ---------------------------------------------------------- The present values of accrued benefits and the amounts of Account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "5-year period" for "1-year period." -73- 2.2.2 Employees not performing services during year ending on the ----------------------------------------------------------- Determination Date. The accrued benefits and Accounts of any ------------------ individual who has not performed services for the Company during the 1-year period ending on the Determination Date shall not be taken into account. 3. Minimum benefits. ---------------- 3.1 Matching Contributions. Company Matching Contributions shall be taken ---------------------- into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to Matching Contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Company Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the Actual Contribution Percentage test and other requirements of Section 401(m) of the Code. N/A Contributions under other plans. The minimum benefit requirement ------------------------------- shall be met in another plan (including another plan that consists solely of a cash or deferred arrangement which meets the requirements of Section 401(k)(12) of the Code and Matching Contributions with respect to which the requirements of Section 401(m)(11) of the Code are met). N/A Minimum Benefits for Employees Also Covered Under Another Plan: (The -------------------------------------------------------------- Company should describe below the extent, if any, to which the top-heavy minimum benefit requirement of Section 416(c) of the Code and Section ___ of the Plan shall be met in another plan. This should include the name of the other plan, the minimum benefit that will be provided under such other plan, and the Employees who will receive the minimum benefit under such other plan.) Section N/A. Vesting of Company Matching Contributions 1. Applicability. This Section shall apply to Participants with accrued ------------- benefits derived from Company Matching Contributions who complete an hour of service under the Plan in a Plan Year beginning after December 31, 2001. This Section shall also apply to all other Participants with accrued benefits derived from Company Matching Contributions. 2. Vesting schedule. A Participant's accrued benefit derived from Company ---------------- Matching Contributions shall vest as provided by the attached schedule. If applicable, the election in Section _______ of the Plan [enter the Section of the Plan that provides for the election of the former vesting schedule under Section 411(a)(10) of the Code] shall apply. -74- 3. Application. ----------- (Check the following option to apply this Section to all Participants with accrued benefits derived from Company Matching Contributions, rather than just those who complete an hour of service under the Plan in a Plan Year beginning after December 31, 2001.) ____ This Section shall apply to all Participants with accrued benefits derived from Company Matching Contributions. Vesting Schedule for Company Matching Contributions: ____ Option 1. A Participant's accrued benefit derived from Company Matching Contributions shall be fully and immediately vested. ____ Option 2. A Participant's accrued benefit derived from Company Matching Contributions shall be nonforfeitable upon the Participant's completion of three years of vesting service. ____ Option 3. A Participant's accrued benefit derived from Company Matching Contributions shall vest according to the following schedule: Years of vesting service Nonforfeitable percentage 2 20 3 40 4 60 5 80 6 100 _________________________ Section 4. Direct Rollovers of Plan Distributions 1. Effective Date. This Section shall apply to distributions made after -------------- December 31, 2001. 2. Modification of definition of Eligible Retirement Plan. For purposes of the ------------------------------------------------------ direct rollover provisions in Section 6.7 of the Plan, an Eligible Retirement Plan shall also mean an annuity contract described in Section 403(b) of the Code and an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or -75- former spouse who is the alternate payee under a qualified domestic relation order, as defined in Section 414(p) of the Code. 3. Modification of definition of Eligible Rollover Distribution to exclude ----------------------------------------------------------------------- hardship distributions. For purposes of the direct rollover provisions in - ---------------------- Section 6.7 of the Plan, any amount that is distributed on account of hardship shall not be an Eligible Rollover Distribution and the distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan. 4. Modification of definition of Eligible Rollover Distribution to include ----------------------------------------------------------------------- after-tax Employee contributions. For purposes of the direct rollover - -------------------------------- provisions in Section 6.7 of the Plan, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax Employee contributions which are not includable in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is ineludible in gross income and the portion of such distribution which is not so includable. Section 5. Rollovers from Other Plans 1. Effective Date. The Plan will accept Participant Rollover Contributions -------------- and/or direct rollovers of distributions made after December 31, 2001. 2. Acceptable types of plans. ------------------------- 2.1 Direct Rollovers. ---------------- The Plan will accept a direct rollover of an Eligible Rollover Distribution from: . a qualified plan described in Section 401(a) or 403(a) of the Code, including after-tax Employee contributions. . an annuity contract described in Section 403(b) of the Code, excluding after-tax Employee contributions. . an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. 2.2 Participant Rollover Contributions from Other Plans. --------------------------------------------------- The Plan will accept a Participant Contribution of an Eligible Rollover Distribution from: . a qualified plan described in Section 401(a) or 403(a) of the Code. -76- . an annuity contract described in Section 403(b) of the Code. . an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. 2.3 Participant Rollover Contributions from IRAs. -------------------------------------------- The plan will accept a Participant Rollover Contribution of the portion of a distribution from an individual retirement account or annuity described in Section 408(a) or 408(b) of the Code that is eligible to be rolled over and would otherwise be includable in gross income. Section 6. Rollovers Disregarded in Involuntary Cash-Outs 1. Effective Date. The provisions of this section shall apply to distributions -------------- made after December 31, 2001. 2. Application. The provisions of this section shall apply with respect to ----------- participants who separated from service after December 31, 2001. 3. Valuation. For purposes of Article VI of the Plan, the value of a --------- Participant's nonforfeitable Account balance shall be determined without regard to that portion of the Account balance that is attributable to Rollover Contributions (and earnings allocable thereto) within the meaning of Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code. If the value of the Participant's nonforfeitable account balance as so determined is $5,000 or less, the Plan shall immediately distribute the participant's entire nonforfeitable account balance. Section 7. Repeal of Multiple Use Test The multiple use test described in Treasury Regulation Section 1.401(m)-2 and Section 3.8 of the Plan shall not apply for Plan Years beginning after December 31, 2001. Section 8. Elective Contributions -- Contribution Limitation No Participant shall be permitted to have Elective Contributions made under this Plan, or any other qualified plan maintained by the Company during any taxable year, in excess of the dollar limitation contained in Section 402(g) of the Code in effect for such taxable year, except to the extent permitted under Section 10 of this Schedule and Section 414(v) of the Code, if applicable. Section N/A. Maximum Salary Reduction Contributions Except to the extent permitted under Section 10 of this Schedule and Section 414(v) of the Code, if applicable, the maximum salary reduction contribution that can be -77- made to this Plan is the amount determined under Section 408(p)(2)(A)(ii) of the Code for the calendar year. Section 9. Modification of Top-Heavy Rules The Top-Heavy requirements of Section 416 of the Code and Article VII of the Plan shall not apply in any year beginning after December 31, 2001, in which the Plan consists solely of a cash or deferred arrangement which meets the requirements of Section 401(k)(12) of the Code and Matching Contributions with respect to which the requirements of Section 401(m)(11) of the Code are met. Section 10. Catch-Up Contributions 1. Effective Date. This Section shall apply to contributions made after the date -------------- selected by the Committee. 2. Eligibility. All Employees who are eligible to make Elective Contributions ----------- under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions. Further, any such catch-up contributions shall not be counted towards any Elective Contribution percentage limitation set forth in Section 3.2 of the Plan. 3. Limitation. Employees shall not be entitled to receive any Company Matching ---------- Contribution with respect to any catch-up contribution made pursuant to the foregoing. Section 11. Suspension Period Following Hardship Distribution A Participant who receives a distribution of Elective Contributions after December 31, 2001, on account of hardship shall be prohibited from making Elective Contributions and Employee contributions under this and all other plans of the Company for 6 months after receipt of the distribution. A Participant who receives a distribution of Elective Contributions in calendar year 2001 on account of hardship shall be prohibited from making Elective Contributions and Employee contributions under this and all other plans of the Company for 6 months after receipt of the distribution or until January 1, 2002, if later. Section N/A. Distribution upon Severance from Employment 1. Effective Date. This Section shall apply for distributions and severances -------------- from employment occurring after December 31, 2001, (regardless of when the severance -78- from employment occurred/ for severances from employment occurring after_________). (choose one). 2. New distributable event. A Participant's Elective Contributions, qualified ----------------------- Nonelective Contributions, qualified Matching Contributions, and earnings attributable to these contributions shall be distributed on account of the Participant's severance from employment. However, such a distribution shall be subject to the other provisions of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed. -79- EX-10.2 4 dex102.txt AMENDED AND RESTATED EMPLOYEE SAVINGS PLAN EXHIBIT 10.2 UNIFIED WESTERN GROCERS, INC. ----------------------------- EMPLOYEE SAVINGS PLAN --------------------- (Amended and Restated Effective as of August 31, 1997) (Formerly Known as the Certified Grocers of California, Ltd. Employee Savings Plan) TABLE OF CONTENTS ----------------- ARTICLE I NAME, DEFINITIONS & FUNDING POLICY....................................................... 1 Section 1.1: Full Name.......................................................................... 1 Section 1.2: Certain Definitions................................................................ 2 Section 1.3: Other Definitions.................................................................. 13 Section 1.4: Funding Policy..................................................................... 14 ARTICLE II PARTICIPATION............................................................................ 15 Section 2.1: Eligibility Requirements........................................................... 15 Section 2.2: Application For Participation And Beneficiary Designation.......................... 16 Section 2.3: Participation...................................................................... 16 Section 2.4: Re-Employment...................................................................... 16 Section 2.5: Re-Employment Of United Employees.................................................. 16 ARTICLE III CONTRIBUTIONS............................................................................ 18 Section 3.1: Company's Non-Elective Contributions............................................... 18 Section 3.2: Elective Contributions Under Code Section 401(k)................................... 19 Section 3.3: Participants' Contributions........................................................ 19 Section 3.4: Payment Of Non-Elective Contributions To The Trustee............................... 20 Section 3.5: Payment Of Elective Contributions To The Trustee................................... 20 Section 3.6: Payment Of Participants' Contributions To The Trustee.............................. 20 Section 3.7: Actual Deferral Percentage Test.................................................... 20 Section 3.8: Actual Contribution Percentage Test................................................ 26 Section 3.9: No Requirement For Profits......................................................... 31 ARTICLE IV ALLOCATIONS TO PARTICIPANTS' ACCOUNTS.................................................... 32 Section 4.1: Retirement Accounts And Voluntary Contribution Accounts............................ 32 Section 4.2: Deferred Income Accounts........................................................... 32 Section 4.3: Rollover Contribution Accounts..................................................... 32 Section 4.4: Allocation Of Forfeitures, Gains And Losses........................................ 32 Section 4.5: Allocation Of Non-Elective Contribution............................................ 33 Section 4.6: Accounts In General................................................................ 33 Section 4.7: Limitation On Annual Additions..................................................... 33 Section 4.8: Investment Of Accounts............................................................. 36 ARTICLE V VESTING.................................................................................. 37 Section 5.1: Vesting............................................................................ 37 ARTICLE VI DISTRIBUTION OF BENEFITS................................................................. 38 Section 6.1: Distribution Of Benefits........................................................... 38
-i- Section 6.2: Survivor Annuity Requirements...................................................... 38 Section 6.3: Optional Methods Of Distribution................................................... 42 Section 6.4: Timing Of Distributions............................................................ 44 Section 6.5: Postponed Retirement............................................................... 46 Section 6.6: Distributions Due Missing Persons.................................................. 47 Section 6.7: Transfers To Another Qualified Plan................................................ 47 Section 6.8: Loans To Participants.............................................................. 48 Section 6.9: Withdrawal at Age 59 1/2........................................................... 49 Section 6.10 Hardship Withdrawals............................................................... 49 Section 6.11: Withdrawal Of Voluntary Contributions.............................................. 51 Section 6.12: Withdrawal of Rollover Contributions............................................... 51 ARTICLE VII TOP-HEAVY PLAN LIMITATIONS............................................................... 52 Section 7.1: Application Of Top-Heavy Rules..................................................... 52 Section 7.2: Definitions........................................................................ 52 Section 7.3: 60% Test - Special Rules........................................................... 55 Section 7.4: Minimum Vesting Requirement........................................................ 56 Section 7.5: Minimum Contribution Requirement................................................... 56 ARTICLE VIII THE COMMITTEE............................................................................ 58 Section 8.1: Members............................................................................ 58 Section 8.2: Committee Action................................................................... 58 Section 8.3: Rights And Duties.................................................................. 59 Section 8.4: Information........................................................................ 60 Section 8.5: Compensation, Indemnity And Liability.............................................. 61 Section 8.6: Administrative Expenses Of The Plan................................................ 61 ARTICLE IX AMENDMENT AND TERMINATION.. ............................................................. 62 Section 9.1: Amendments......................................................................... 62 Section 9.2: Discontinuance Of Plan............................................................. 63 Section 9.3: Failure To Contribute.............................................................. 63 ARTICLE X CLAIMS PROCEDURE......................................................................... 64 Section 10.1: Presentation Of Claim.............................................................. 64 Section 10.2: Notification Of Decision........................................................... 64 Section 10.3: Review Of A Denied Claim........................................................... 65 Section 10.4: Decision On Review................................................................. 65 ARTICLE XI MISCELLANEOUS............................................................................ 67 Section 11.1: Contributions Not Recoverable...................................................... 67 Section 11.2: Limitation On Participants' Rights................................................. 67 Section 11.3: Receipt Or Release................................................................. 68
-ii- Section 11.4: Nonassignability................................................................... 68 Section 11.5: Governing Law...................................................................... 68 Section 11.6: Headings........................................................................... 68 Section 11.7: Counterparts....................................................................... 68 Section 11.8: Successors And Assigns............................................................. 69 Section 11.9: Gender And Number.................................................................. 69 Section 11.10: Merger, Consolidation Or Transfer Of Plan Assets................................... 69 Section 11.11: Joinder Of Parties................................................................. 69 Section 11.12: The Trust.......................................................................... 69 Section 11.13: Special Requirements For USERRA.................................................... 69 Signature Page..................................................................................... 71
-iii- UNIFIED WESTERN GROCERS, INC. ----------------------------- EMPLOYEE SAVINGS PLAN --------------------- (Formerly Known as the Certified Grocers of California, Ltd. ------------------------------------------------------------ Employee Savings Plan) ---------------------- Unified Western Grocers, Inc. has adopted the following complete amendment and restatement of its profit sharing plan that evidences the plan portion of a profit sharing plan and trust for the benefit of qualified employees of the Company. Additionally, effective December 31, 2001, the United Grocers Bargained Employees Savings Plan ("United Plan") is merged with and into the Plan. Accordingly, effective as of such merger date, the terms and conditions governing the former participants in the United Plan shall be as set forth in this Plan. As to the United Employees, the terms of the United Plan that existed prior to the merger date shall be effective until December 30, 2001, and the terms of this Plan shall only be applicable for one day (i.e., December 31, 2001) for the 2001 Plan Year. Notwithstanding the foregoing, those provisions of the Plan that relate to the Uruguay Round Agreements Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue Service Restructuring and Reform Act of 1998, and the Community Renewal Tax Relief Act of 2000 ("GUST") shall be applicable to the United Employees as of the dates required by GUST. The terms of the Plan are as follows: ARTICLE I --------- NAME, DEFINITIONS & FUNDING POLICY ---------------------------------- Section 1.1: Full Name. This profit sharing plan shall be known ----------- --------- as the: UNIFIED WESTERN GROCERS, INC. EMPLOYEE SAVINGS PLAN The Plan was known, prior to December 31, 2001, as the Certified Grocers of California, Ltd. Employee Savings Plan. It is hereby designated as constituting a defined contribution plan intended to qualify under Code Section 401(a) that includes a cash or deferred arrangement under Code Section 401(k). The Trust established in connection with the Plan shall be known as the: UNIFIED WESTERN GROCERS, INC. EMPLOYEE SAVINGS PLAN TRUST -1- Section 1.2: Certain Definitions. As used in this document and in the ----------- ------------------- Trust, the following words and phrases shall have the following meanings, unless a different meaning is specified or clearly indicated by the context: "Accounts" shall mean, collectively, the Retirement Account, the Deferred Income Account, the Voluntary Contribution Account, and the Rollover Contribution Account that may be established under the Plan for a Participant. If all of such accounts are not established for a Participant, then "Accounts" shall mean, collectively, all of such accounts that are established for such Participant. "Adjustment Factor" shall mean the cost of living adjustment factor prescribed by the Secretary of the Treasury under Code Section 415(d) for years beginning after December 31, 1987, as applied to such items and in such manner as the Secretary of the Treasury shall provide. "Affiliated Company" shall mean: (a) a member of a controlled group of corporations of which the Company is a member; (b) an unincorporated trade or business that is under common control with the Company, as determined in accordance with Code Section 414(c) and the applicable Regulations; (c) a member of an affiliated service group of which the Company is a member, as determined in accordance with Code Section 414(m) and the applicable Regulations; or (d) any other entity required to be aggregated with the Company pursuant to the Regulations under Code Section 414(o). For these purposes, a "controlled group of corporations" shall mean a controlled group of corporations as defined in Code Section 1563(a), determined without regard to Code Sections 1563(a)(4) and 1563(e)(3)(C). "Anniversary Date" shall mean the last day of each Plan Year. "Article" shall mean an Article of the Plan. "Beneficiary" shall mean the person or persons, as the context requires, last designated by a Participant to receive any benefit specified in the Plan that is payable upon such Participant's death. If there is no designated Beneficiary or surviving Beneficiary, the Beneficiary shall be the Participant's surviving spouse; or, if -2- none, the Participant's surviving descendants (including adopted persons), who shall take on the principle of representation; or, if none, the Participant's estate; or, if there is no legal representative appointed to represent the Participant's estate and if the Participant's vested interest does not exceed $2,000, a person (or the persons) selected by the Committee who is related to the Participant by blood, adoption or marriage. "Board of Directors" shall mean the Board of Directors of the Company. "Break in Service" shall mean a computation period in which an Employee has failed to complete more than 500 Hours of Service (unless due to an authorized, unpaid leave of absence granted by the Company in a nondiscriminatory manner). The computation period shall be, for eligibility and vesting purposes, the same computation period used in determining an Employee's Years of Service. Solely for purposes of determining whether a Break in Service has occurred in any computation period, an individual who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service that would otherwise have been credited to such individual but for such absence (or, in any case in which such Hours of Service cannot be determined, eight Hours of Service per work day of such absence). An absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this provision shall in no event exceed 501 hours, and they shall be credited (1) in the computation period in which the absence begins if such crediting is necessary to prevent a Break in Service in that period, or (2) in all other cases, in the following computation period. "Code" shall mean the Internal Revenue Code of 1986, as amended, and its successors. "Company" shall mean UNIFIED WESTERN GROCERS, INC. "Compensation" shall mean: (a) with respect to Employees who are not United Employees: (i) for purposes of determining the amount of the Company's contributions, Compensation shall be calculated on a weekly basis as a lesser of (A) (1.10) (straight time hourly rate actually -3- paid for the week) (40) plus any vacation pay included in the week's Earnings; or (B) a Participant's actual Earnings for the week. (ii) for all other purposes, Compensation shall mean a Participant's Earnings. (iii) for purposes of the foregoing, and for Plan Years beginning before January 1, 1998, a Participant's Compensation shall include the amount of his or her Elective Contributions, if any, and any amount that is contributed by the Company pursuant to a salary reduction agreement that is not includable in such Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b). (b) with respect to a United Employee, a Participant's Earnings during the Plan Year, plus, for Plan Years beginning before January 1, 1998, the amount of his or her Elective Contributions, if any, and any amount that is contributed on his or her behalf pursuant to a salary reduction agreement and that is not includable in such Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b). For purposes of Section 3.2, "Compensation" shall exclude severance pay, payment for forfeited vacation, pay in lieu of notice, referral bonuses, automobile allowance, tax and legal assistance plan payments, contest award payments, retroactive pay, or miscellaneous adjustments related to prior payroll periods. A new Participant's Compensation for the Plan Year in which his or her participation begins shall include only that Compensation paid for services rendered from and after his or her Entry Date. (c) In addition to other applicable limitations set forth in the Plan, and despite any other provision of the Plan, the Compensation of each Participant shall not exceed the Compensation Limitation (defined below). The Compensation Limitation is $150,000, as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17)(B). The cost-of- living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined beginning in such calendar year. If such a determination period consists of fewer than 12 months, the Compensation Limitation will be multiplied by a fraction, the numerator of which is the number of months in such determination period, and the denominator of which is 12. If Compensation for any prior determination period is taken into account in determining a Participant's benefits accruing in the current Plan Year, the Compensation for such prior determination period is subject to the Compensation Limitation in effect for such prior determination period. "Deferred Income Account" shall mean the account maintained by the Committee for each Participant on whose behalf an Elective Contribution is made. -4- "Defined Benefit Plan" and "Defined Contribution Plan" shall have the same meanings as given these terms under ERISA. "Determination Year" shall mean the Plan Year. "Earnings" shall mean a Participant's annual "compensation", as that term is defined in Code Section 415, that is actually paid or made available to the Participant within the Plan Year. A Participant's Earnings shall include such Participant's wages, salaries, fees for professional services 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 Company or any Affiliated Company to the extent the amounts are includable in gross income under the Code (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements, and expense allowances). "Earnings" shall not include: (a) Any contribution made by the Company to a plan of deferred compensation to the extent that, before the application of the Code Section 415 limitations to that plan, the contributions are not includable in the gross income of the Participant for the taxable year in which contributed. In addition, the Company's contributions, if any, made on behalf of a Participant to a simplified employee pension plan described in Code Section 408(k) are not considered Earnings for the taxable year in which contributed to the extent such contributions are deductible by the Participant under Code Section 219(b)(7). Additionally, any distributions from a plan of deferred compensation are not considered Earnings, regardless of whether such amounts are includable in the gross income of the Participant when distributed. However, any amount received by a Participant pursuant to an unfunded non-qualified plan may be considered Earnings in the year such amounts are includable in the gross income of the Participant. (b) Any amount realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by a Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture. (c) Any amount realized from the sale, exchange or other disposition of stock acquired under a qualified stock option. (d) Any other amount that receives 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), or contributions made by the Company (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Code -5- Section 403(b) (whether or not the contributions are excludable from the gross income of the Participant). For Plan Years beginning after December 31, 1997, Earnings paid or made available during any Plan Year shall include any elective deferral (as defined in Code Section 402(g)(3)), and any amount that is contributed or deferred by the Company at the election of the Participant and that is not includable in the gross income of the Participant by reason of Code Section 125, 132(f)(4) (for Plan Years beginning after December 31, 2000), or 457. "Effective Date" shall mean the first day of the 1997 Plan Year, which is the effective date of this amendment and restatement. Despite the foregoing, the attached Schedule A shall be effective as of January 1, 2002. "Eligible Participant" shall mean, as of any Anniversary Date, (i) each Participant who has completed a Year of Service on such Anniversary Date and who is an Employee on such date, and (ii) each Participant who ceased to be an Employee during the Plan Year ending with such Anniversary Date by reason of his or her retirement on or after his or her Normal Retirement Date, death, or Total Disability. A United Employee shall not be an Eligible Participant. "Employee" shall mean every person classified by the Company as a common law, hourly employee of the Company and any Affiliated Company that has adopted the Plan with the permission of the Board of Directors. With respect to persons employed in a United Grocers facility, "Employee" shall mean every person classified by the Company as a common law, collectively bargained employee of such a facility ("United Employee"). "Employee" shall not include any person who is (i) employed by or through a leasing, temporary, or similar agency or company, or (ii) classified by the Company as a leased employee (within the meaning of Code Section 414(n)(2)) of the Company or any such Affiliated Company. If any person described in the preceding sentence is determined to be a common law employee of the Company by court decision or otherwise, such person shall nonetheless continue to be treated as not being an Employee. "Employer" shall mean, with respect to an Employee, the Company, any Predecessor Employer and any Affiliated Company. "Employment Commencement Date" for each Employee shall mean the date such Employee first is credited with an Hour of Service. "Entry Date" shall mean the first day of each month. -6- "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and its successors. "Fiduciary" shall mean a person who: (a) exercises any discretionary authority, discretionary control, or discretionary responsibility respecting the management or administration of the Plan; (b) exercises any authority or control respecting management or disposition of the Plan's assets; or (c) renders investment advice for a fee or other compensation, direct or indirect, with respect to any asset of the Plan, or has any authority or responsibility to do so. "Financial Institution" shall mean a bank, trust company, or other financial institution that is regulated by the United States or any State. "Highly Compensated Active Employee" shall mean any Participant who performed service for the Company during the Determination Year and who: (a) During the Look-Back Year received Earnings from the Company in excess of $80,000 (as adjusted pursuant to Code Section 415(d)), and, if the Company so elects, was a member of the Top-Paid Group for such year; or (b) Was a 5% Owner at any time during the Look-Back Year or the Determination Year. It is noted that the Company has not made the Top Paid Group Election. "Highly Compensated Employee" shall mean any Participant who is a "Highly Compensated Active Employee" or a "Highly Compensated Former Employee." "Highly Compensated Former Employee" shall mean any Participant who: (a) Separated from service (or was deemed to have separated from service) prior to the Determination Year, (b) Performed no service for the Company during the Determination Year, and -7- (c) Was a Highly Compensated Active Employee in either (i) the Determination Year during which the Employee separated from service, or (ii) any Determination Year ending on or after the Employee's 55th birthday. For the purposes of this subsection (c), an Employee will be deemed to have separated from service if, in a Determination Year before the Employee attained age 55, the Employee received Earnings in an amount less than 50% of the Employee's average annual Earnings for the three consecutive calendar years preceding the Determination Year during which the Employee received the greatest amount of Earnings from the Company. "Hour of Service" shall mean: (a) Each hour for which an Employee was paid by, or entitled to payment from, an Employer. Hours under this subsection (a) shall be credited to an Employee for the computation period or periods in which the services were performed. Generally, Hours of Service shall be determined from the Employer's employment records. Despite the foregoing, if an Employee's Compensation is not determined on the basis of certain amounts for each hour worked (such as salaried, commission or piece-work employees) and if his or her hours are not required to be counted and recorded by any federal law (such as the Fair Labor Standards Act), such Employee's Hours of Service need not be determined from employment records. Instead, such Employee may be credited with 190 Hours of Service for each month in which he or she would be credited with at least one Hour of Service pursuant to this subsection (a); (b) Each hour for which an Employee was paid by, or entitled to payment from, an Employer on account of a period during which no services were performed (irrespective of whether the employment relationship had terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this subsection (b) for any single continuous period (whether or not such period occurs in a single computation period); (c) Each hour for which back pay (irrespective of mitigation of damages) is either awarded against, or agreed to by, an Employer. The same Hours of Service shall not be credited under either subsection (a) or (b), whichever is applicable, and under this subsection (c). Hours of Service under this subsection (c) shall be credited for the computation period(s) to which the award or agreement pertains, rather than the computation period in which the award, agreement or payment is made; and (d) Hours under subsections (a) through (c) above shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations, which is incorporated here by reference. -8- "Individual Medical Benefit Account" shall have the same meaning as is given that term under Code Section 415(l)(2). "Investment Manager" shall mean a person or entity who (that) is (a) registered as an investment advisor under the Investment Advisor's Act of 1940, (b) defined as a bank under that Act, or (c) an insurance company qualified under the laws of more than one state to manage, acquire and dispose of trust assets, and who has acknowledged in writing that he (she or it) is a Fiduciary with respect to the Plan. "Look-Back Year" shall mean the 12-month period preceding the Determination Year, or, if the Company elects and allowed by the applicable Regulations, the calendar year ending with or within the applicable Determination Year. "Named Fiduciary" shall have the same meaning as under Section 402(a) of ERISA and shall be determined as provided in Section 8.3. "Net Profits" shall mean, with respect to any Plan Year, the current net earnings of the Company before deduction of its Patronage Dividends and Incentive Compensation Plan determination for the Plan Year for which the contribution is being determined, as certified by the Company Treasurer for its report to members. "Non-Highly Compensated Employee" shall mean any Participant who is not a Highly Compensated Employee. "Normal Retirement Age" shall mean a Participant's 65th birthday. "Normal Retirement Date" shall mean a Participant's Normal Retirement Age, except in the case of a United Employee, it shall mean the first day of the month that coincides with or immediately follows a Participant's Normal Retirement Age. "Participant" shall mean any Employee who becomes eligible for participation in accordance with the provisions of the Plan, and, unless the context indicates otherwise, includes former Participants. "Plan" shall mean this document and the plan created by this document (including, unless the context indicates to the contrary, the Trust established in connection with the Plan), as it may be amended from time to time. -9- "Plan Year" shall mean calendar year; provided, however, that before January 1, 1999, "Plan Year" shall mean the period beginning on the Sunday following the Saturday nearest August 31 and ending on the Saturday nearest August 31 of the following year, and the Plan Year immediately preceding January 1, 1999 shall be a short Plan Year ending on December 31, 1998. The Plan Year shall be the fiscal year of the Plan. The Plan Year shall be the "limitation year" for the Plan as defined in the Code. "Predecessor Employer" shall mean any predecessor employer of an Employee that maintained the Plan. "Regulations" shall mean the regulations issued under the Code or ERISA, or both of them, as well as under any other legislation that applies to the Plan. "Retirement Account" shall mean the account maintained by the Committee for each Participant which is to be credited with such Participant's share of the Company's contributions to the Trust. "Rollover Contribution Account" shall mean the account maintained by the Committee for each Participant who makes a Rollover Contribution. "Rollover Contribution" shall mean a qualified rollover contribution as defined in Code Sections 402(c), 403(a)(4), and 408(d)(3), but shall not include a rollover contribution that is attributable to contributions made on behalf of a Key Employee in a Top-heavy Plan, unless such a rollover contribution is permissible under the Code or applicable Regulations. "Section" shall mean, when used in conjunction with some other reference (such as the Code or ERISA), a section of such other reference. When not used in conjunction with some other reference, Section shall refer to a section of the Plan or Trust, as the context requires. References to a Section include future amendments, and successors, to it. "Secretary" shall mean the Secretary or an Assistant Secretary of the Committee. "Secretary of the Treasury" shall mean the Secretary of the Treasury, as defined in Code Section 7701(a)(11). -10- "Signature Page" shall mean the page(s) at the end of the Plan entitled "Signature Page." "Top-Paid Group" shall mean the group of Employees in a particular year that consists of the top 20% of the Employees, ranked on the basis of Earnings received from the Company during such year. (a) An Employee shall be disregarded for purposes of determining the Top-Paid Group if the Employee: (i) Has not performed an Hour of Service during such year; (ii) Has not completed six months of service; (iii) Normally works less than 17 1/2 hours per week or six months during any year; (iv) Has not attained age 21 by the end of such year; or (v) Is a non-resident alien and has received no earned income (within the meaning of Code Section 911(d)(2)) from the Company constituting United States source income within the meaning of Code Section 861(a)(3). (b) In addition, if 90% or more of the Employees of the Company are covered under agreements the Secretary of Labor finds to be collective bargaining agreements between Employee representatives and the Company, and the Plan covers only Employees who are not covered under such agreements, then Employees covered by such agreements shall be excluded from both the total number of active Employees as well as from the identification of particular Employees in the Top Paid Group. (c) All Affiliated Companies shall be taken into account as a single employer, and leased employees, within the meaning of Code Sections 414(n)(2) and 414(o)(2), shall be considered Employees unless such leased employees are covered by a plan described in Code Section 414(n)(5) and are not covered in any qualified plan maintained by the Company. For the purpose of determining the number of active Employees in any year, the following Employees shall be excluded: (i) Employees with less than six months of service; (ii) Employees who normally work less than 17 1/2 hours per week; -11- (iii) Employees who normally work less than six months during a year; and (iv) Employees who have not yet attained age 21. "Total Disability" or "Totally Disabled" shall each refer to a physical or mental impairment that, in the Committee's opinion, (a) is expected to be either of indefinite duration or result in death, and (b) renders a Participant unable to satisfactorily perform his or her duties for the Company or the duties of such other position or job that the Company makes available to such Participant and for which such Participant is qualified by reason of his or her training, education or experience. The Committee's opinion must be supported by the opinion of a qualified physician designated or approved by the Committee. "Total Sales" shall mean the Company's total sales for the Plan Year for which the contribution is being determined as certified by the Company Treasurer for its report to members. "Trust" shall mean the trust established in connection with the Plan, as it may be amended from time to time. "Trust Valuation Date" shall mean each Anniversary Date and such other date or dates selected by the Committee. "Trustee" shall mean the person(s) or entity, or combination of them, serving from time to time as the trustee(s) of the Trust. "Voluntary Contribution Account" shall mean the account maintained by the Committee for each Participant who makes a Voluntary Contribution. "Welfare Benefit Fund" shall have the same meaning as is given that term in Code Section 419(e). "Year of Service" shall mean, except with respect to a United Employee, any Plan Year during which such Employee is employed by the Company and during which he or she has completed one Hour of Service. In order for a year to constitute a Year of Service, the Employee need not be employed by the Company on the last day of the Plan Year. -12- "1% Owner" shall be determined in the same manner as a 5% Owner, defined below. "5% Owner" shall mean a Participant who (i) owns more than 5% of the outstanding stock (or owns stock possessing more than 5% of the total combined voting power of all classes of stock) of the Company (or any Affiliated Company), if the Company (or the Affiliated Company, whichever applies) is a corporation; or (ii) owns more than 5% of the capital or profit interest in the Company (or the Affiliated Company, whichever applies), if the Company (or the Affiliated Company, whichever applies) is not a corporation. A similar rule shall apply to the determination of a "1% Owner." Section 1.3: Other Definitions. As used in this document and in the ----------- ----------------- Trust, the following words and phrases shall have the meanings set forth in the indicated Sections, unless a different meaning is specified or clearly indicated by the context: Term Section ---- ------- "Actual Contribution Percentage" 3.9 "Actual Deferral Percentage" 3.8 "Aggregate Account" 7.2 "Aggregation Group" 7.2 "Annual Addition" 4.7 "Annuity Starting Date" 6.2 "Claimant" 10.1 "Committee" 8.1 "Defined Benefit Plan Fraction" 4.7 "Defined Contribution Plan Fraction" 4.7 "Determination Date" 7.2 "Elective Contribution" 3.2 "Eligible Retirement Plan" 6.7 "Eligible Rollover Distribution" 7.2 "Key Employee" 6.7 "Non-Elective Contribution" 3.1 "Non-Key Employee" 7.2 "Preretirement Election Period" 6.2 "Present Value of Accrued Benefit" 7.2 "Qualified Election" 6.2 "Qualified Joint and Survivor Annuity" 6.2 "Qualified Life Annuity" 6.2 "Qualified Preretirement Survivor Annuity" 6.2 "Relevant Time" 5.3 "Retirement Election Period" 6.2 "Top-heavy Group" 7.2 -13- "Top-heavy Plan" 7.2 "USERRA" 11.13 "Valuation Date" 7.2 "Voluntary Contribution" 3.3 "1.0 Rule" 4.7 Section 1.4: Funding Policy. The Plan is to be funded primarily ----------- -------------- through the Company's contributions and the Participants' contributions as provided for in the Plan. The Trust's assets shall be invested as provided for in the trust document in an effort to safely maximize potential retirement benefits, which shall be paid to Participants and Beneficiaries as provided for in the Plan. -14- ARTICLE II ---------- PARTICIPATION ------------- Section 2.1: Eligibility Requirements. ----------- ------------------------ (a) Each Employee shall become eligible to participate in the Plan on the Entry Date coincident with or next following the one-year anniversary of such Employee's Employment Commencement Date, provided that he or she is still an Employee on such date. Despite the foregoing, each United Employee shall become eligible to participate in the Plan on the Entry Date that is the second month following his or her Employment Commencement Date, provided that he or she is still a United Employee on such Entry Date. (b) Notwithstanding any other provision of the Plan, any Employee who is a participant in, or who is eligible to become a participant in, the Unified Western Grocers, Inc. Sheltered Savings Plan ("SSP") shall be an ineligible Employee hereunder. (c) Notwithstanding any other provision of the Plan, any Participant who is included in a unit of employees covered by a collective bargaining agreement wherein retirement benefits were the subject of good faith bargaining (within the meaning of Code Section 410(b)(3)(A)) shall for the Plan Year(s) of such inclusion, be an ineligible Employee hereunder, unless such collective bargaining agreement expressly provides for participation in the Plan; provided, however, that as to any benefits already earned, such Participant shall remain a Participant, subject to all the terms of the Plan. (d) Notwithstanding any other provision of the Plan, any Employee who is a non-resident alien and who receives no earned income within the meaning of Code Section 911(b) from the Company that constitutes income from sources within the United States within the meaning of Code Section 861(a)(3) shall be an ineligible Employee hereunder. (e) Notwithstanding any other provision of the Plan, any Employee who is employed in the job classification of part-time support staff (or such other designation as may be adopted by the Company) shall be an ineligible Employee hereunder. (f) Notwithstanding any other provision of the Plan, any United Employee who is employed on a temporary basis solely for the purpose of completing a special project shall be an ineligible Employee hereunder. (g) Notwithstanding any other provision of the Plan, any person with respect to a United Grocers facility who performs services but who is treated for payroll tax purposes as other than an Employee (and regardless of whether such person may subsequently be determined by governmental agency, by the conclusion -15- of threatened or pending litigation, or otherwise to be or have been an Employee shall be an ineligible Employee hereunder. Section 2.2: Application For Participation And Beneficiary ----------- --------------------------------------------- Designation. - ----------- (a) Each Employee who becomes eligible to participate in the Plan shall be given an application for participation. That application shall (a) specify the beginning date of such Employee's participation, (b) shall contain such Employee's acceptance of the benefits of the Plan and Trust and his or her agreement to be bound by the terms of the Plan and Trust, and (c) allow such Employee to designate the Beneficiary whom he or she desires to receive benefits in the event of his or her death. A Participant may, from time to time, change his or her designated Beneficiary by filing a new written designation with the Committee. The Company, the Trustee, and the Committee may rely upon the designation of a Beneficiary that was last filed in accordance with the Plan. Despite the foregoing, a Participant's right to designate a Beneficiary to receive his or her death benefits shall be subject to the survivor annuity requirements set forth in Article VI. (b) Despite the provisions of subsection (a) above, a married Participant's Beneficiary shall in all events be such Participant's surviving spouse as to at least 50% of the balance in the Participant's Accounts, unless such spouse consents to such Participant's designation of a Beneficiary other than such spouse. A spouse's consent to such a designation must satisfy the following requirements: (i) it must be in writing; (ii) it must acknowledge the effect of the Participant's designation of a Beneficiary other than the spouse; and (iii) it must be witnessed by a designated Plan representative or a notary public. Section 2.3: Participation. The participation of a Participant in the ----------- ------------- Plan shall begin as of his or her Entry Date, and shall continue until the Participant's entire benefit has been distributed in accordance with the Plan's terms. A Participant (or his or her Beneficiary) may not receive any distribution of benefits except as provided for in the Plan. Section 2.4: Re-Employment. In the event an Employee (other than a ----------- ------------- United Employee) who was a Participant is re-employed before five consecutive Breaks in Service, such Employee shall become a Participant on the date of re- employment, provided the Employee satisfies the eligibility provisions of Section 2.1. In the event an Employee (other than a United Employee) who was a Participant is re-employed after five consecutive Breaks in Service, then such Employee shall be treated as a new Employee and shall become a Participant upon satisfying the requirements of Section 2.1. Section 2.5: Re-Employment Of United Employees. A United Employee who ----------- --------------------------------- has never participated in the Plan and who is re-employed following a -16- Break in Service shall be treated as a new Employee with a new Employment Commencement Date. A United Employee who is a Participant and who is re-employed shall participate immediately upon re-employment. -17- ARTICLE III ----------- CONTRIBUTIONS ------------- Section 3.1: Company's Non-Elective Contributions. The Company has ------------ ------------------------------------ previously made substantial contributions to the Trust. Subject to the Plan's other provisions, for each Plan Year in which the Plan is in effect, the Company agrees that, out of its current net earnings, it will contribute to the Trust for each fiscal year of the Company, an amount determined in accordance with the following formula (the "Non-Elective Contribution"): (a) In the event net earnings are less than 1.50% of Total Sales, the Company will make no contribution hereunder. (b) In the event net earnings equal or exceed 1.50% but are less than 1.55% of Total Sales, the Company will contribute in the amount equal to 1.00% of the total Compensation of all Eligible Participants. (c) In the event net earnings equal or exceed 1.55% but are less than 1.60% of Total Sales, the Company will contribute in the amount equal to 1.45% of the total Compensation of all Eligible Participants. (d) In the event net earnings equal or exceed 1.60% but are less than 1.65% of Total Sales, the Company will contribute in the amount equal to 1.90% of the total Compensation of all Eligible Participants. (e) In the event net earnings equal or exceed 1.65% but are less than 1.70% of Total Sales, the Company will contribute in the amount equal to 2.35% of the total Compensation of all Eligible Participants. (f) In the event net earnings equal or exceed 1.70% but are less than 1.75% of Total Sales, the Company will contribute in the amount equal to 2.80% of the total Compensation of all Eligible Participants. (g) In the event net earnings equal or exceed 1.75% but are less than 1.80% of Total Sales, the Company will contribute in the amount equal to 3.40% of the total Compensation of all Eligible Participants. (h) In the event net earnings equal or exceed 1.80% but are less than 1.85% of Total Sales, the Company will contribute in the amount equal to 4.20% of the total Compensation of all Eligible Participants. (i) In the event net earnings equal or exceed 1.85% of Total Sales, the Company will contribute in the amount equal to 5.00% of the total Compensation of all Eligible Participants. The total amount of the Company contribution to this Plan is limited to 2 1/2% of total net earnings of the Company (excluding subsidiaries) prior to payment of Patronage -18- Dividends and prior to payment under the Company's Incentive Compensation Plan. In addition, the Board of Directors may determine and affect other adjustments which would have the impact of either raising or lowering the total net earnings of the Company for the purpose expressed herein. Despite the foregoing, the Company's Non-Elective Contributions are conditioned upon their deductibility under the Code. Section 3.2: Elective Contributions Under Code Section 401(k). ----------- ------------------------------------------------ (a) Subject to the limitations contained elsewhere in the Plan, each Participant who is a United Employee may elect from time to time, by completing the appropriate forms provided by the Committee, to forgo receipt of up to 15% (stated in whole numbers only) of his or her Compensation. The Company shall contribute to the Trust on behalf of each such electing Participant, out of its current or accumulated Net Profits, an amount equal to the Compensation forgone by such Participant (the "Elective Contribution"), and it shall be credited to such Participant's Deferred Income Account. Despite the foregoing, no such Participant shall have any Elective Contributions under the Plan during any calendar year in excess of $7,000, as adjusted by the Adjustment Factor. (b) A Participant's election to forgo receipt of a portion of his or her Compensation shall be subject to such modification or cancellation as the Committee, in its discretion, shall permit; provided, however, that the Committee shall exercise its discretion in a uniform and nondiscriminatory manner. Section 3.3: Participants' Contributions. ----------- --------------------------- (a) A Participant may make a nondeductible, voluntary contribution to the Plan ("Voluntary Contribution"). Each Participant who so desires may, but need not, contribute, in integral percentages, each year to the Trust for his or her benefit up to a maximum of 10% (or such other percentage as may be determined from time to time by the Committee) of his or her Compensation paid for or accrued to him or her. Such contributions may be made at the time the Participant receives his or her Compensation from the Company, and upon direction of the Participant, shall be withheld by the Company and deposited with the Trustee for the Voluntary Contribution Account of such Participant. A Participant may eliminate or change the amount to be contributed by him or her in any Plan Year as may be determined from time to time by the Committee; provided, however, that the ability of a Participant to contribute on an annual basis, shall be restricted to the extent that any contribution would violate the provisions of Section 4.7 hereof. With respect to United Employees, any such Voluntary Contributions must be at least $50, and any contribution in excess of $50 must be in even multiples of $50, and a Participant who is a United Employee may make one or more such contributions at any time during the Plan Year for credit with respect to such Plan Year. -19- (b) A Participant may make a Rollover Contribution to the Plan or a trustee-to-trustee transfer described in Code Section 401(a)(31), provided that any asset so contributed or transferred is acceptable to the Committee and Trustee. Section 3.4: Payment Of Non-Elective Contributions To The Trustee. All ----------- ---------------------------------------------------- payments of the Non-Elective Contributions shall be made directly to the Trustee and may be made on any date(s) selected by the Company. Despite the foregoing, the Company's total Non-Elective Contribution for each Plan Year must be paid on or before the date on which the Company's federal income tax return is due, including any extensions of time obtained for the filing of such return. Section 3.5: Payment Of Elective Contributions To The Trustee. All ----------- ------------------------------------------------ payments of Elective Contributions shall be made directly to the Trustee. Such payments shall be made as soon as is administratively practical following the date the forgone Compensation would have been paid to the electing Participant, but in no event later than the fifteenth business day of the month following the month in which the forgone Compensation would have been paid to the Participant. Section 3.6: Payment Of Participants' Contributions To The Trustee. ----------- ----------------------------------------------------- (a) Voluntary Contributions. All payments of Voluntary Contributions ----------------------- shall be made directly to the Trustee. Such payments shall be made as soon as is administratively practical following the date the forgone Compensation would have been paid to the electing Participant, but in no event later than the fifteenth business day of the month following the month in which the forgone Compensation would have been paid to the Participant. The Trustee may commingle such contributions with the Company's contributions. However, the Committee shall keep separate records of each Participant's Voluntary Contributions (and the income, gains and losses on them). The Trustee shall invest a Participant's Voluntary Contributions in the same manner as provided for the investment of the Company's contributions. (b) Rollover Contributions. A Participant's Rollover Contributions ---------------------- shall be paid directly to the Trustee. The Trustee may commingle such contributions with the Company's contributions. However, the Committee shall keep separate records of each Participant's Rollover Contributions (and the income, gains and losses on them). The Trustee shall invest a Participant's Rollover Contributions in the same manner as provided for the investment of the Company's contributions. Section 3.7: Actual Deferral Percentage Test. ----------- ------------------------------- (a) It is the Company's intent that all Elective Contributions shall satisfy the requirements of Code Section 401(k). -20- (i) Accordingly, the amount of Elective Contributions made in any Plan Year on behalf of all Highly Compensated Employees shall not result in an Actual Deferral Percentage for such Highly Compensated Employees that exceeds the greater of: (A) the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year, multiplied by 1.25; or (B) the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year, multiplied by two, provided that the Actual Deferral Percentage for all Highly Compensated Employees does not exceed the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year by more than two percentage points (or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee). (ii) For the purposes of this subsection (a), the amount of Elective Contributions shall relate to Compensation that either (A) would have been received by the Participant in the Plan Year but for the Participant's election to defer receipt of his or her Compensation pursuant to the terms of the Plan; or (B) is attributable to services performed by the Participant in the Plan Year and, but for the Participant's election to defer, would have been received by the Participant within 2 1/2 months after the close of the Plan Year. (iii) In order to prevent the multiple use of the alternative method described in subsection (i)(B) above and in Code Section 401(m)(9)(A), any Highly Compensated Employee eligible to (A) make elective deferrals pursuant to this Section, or (B) receive voluntary contributions under this Plan or under any other plan maintained by the Company or an Affiliated Company, shall have his actual contribution ratio reduced pursuant to Treasury Regulation Section 1.401(m)-2. (iv) For the purposes of subsection (i) above, the Committee may elect to use the current Plan Year rather than the preceding Plan Year. If the Committee makes this election, then such election may not be changed except as allowed for by the Secretary of the Treasury. (v) For the purposes of subsection (i) above and for purposes of the first Plan Year, the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year shall be: (A) 3%; or (B) the Actual Deferral Percentage for all Non-Highly Compensated Employees for the first Plan Year, if so elected by the Committee. -21- (vi) Effective for Plan Years beginning after December 31, 1998, if the Committee elects to apply Code Section 410(b)(4)(B) to determine whether the cash or deferred arrangement provided for in the Plan satisfies the coverage requirements provided for in Code Section 410(b)(1), then for purposes of subsection (i) above, the Committee may exclude all eligible Employees (other than Highly Compensated Employees) who have not met the minimum age and service requirements of Code Section 410(a)(1)(A). (b) Adjustment To Actual Deferral Percentage Tests. If the Committee ---------------------------------------------- determines at any time that the limitation on Elective Contributions set forth in subsection (a) above will be exceeded for any Plan Year: (i) the Company may, at its sole option (but still subject to the limitations contained elsewhere in the Plan), either (A) designate that all or any portion of its Non-Elective Contribution for such Plan Year (if, and to the extent, it has been made prior to such date and has not been previously allocated pursuant to Section 4.5) shall be treated as an Elective Contribution (the "Deemed Elective Contribution") or (B) make an additional contribution (the "Additional Contribution") on behalf of all Participants other than Highly Compensated Employees, or on behalf of all Participants, in the amount necessary so that the limitation set forth in subsection (a) will not be exceeded. Any Deemed Elective Contribution or Additional Contribution shall be (A) prorated among the Participants on whose behalf it was made, on the basis of each such Participant's Compensation for such Plan Year, and (B) credited to each such Participant's Deferred Income Account; or (ii) the Committee shall reduce the amount of the Elective Contributions made by the Highly Compensated Employees in the amount necessary so that the limitation set forth in subsection (a) above will not be exceeded. The amount by which each Highly Compensated Employee whose Elective Contributions is reduced (the "Excess Contributions") shall be returned to the Firm to be paid to such Highly Compensated Employee pursuant to subsection (h) below. For purposes of the foregoing, the amount of Excess Contributions made by the Highly Compensated Employees for a Plan Year is the excess of: (a) the aggregate amount of Elective Contributions actually taken into account in computing the Actual Deferral Percentage for all Highly Compensated Employees for such Plan Year, over (b) the maximum amount of such Elective Contributions permitted by the Actual Deferral Percentage test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of the Actual Deferral Percentages, beginning with the highest of such percentages). Such amount of Excess Contributions shall be allocated to the Highly Compensated Employees who made the largest amounts of Elective Contributions during the Plan Year, beginning with the Highly Compensated Employee with the largest amount of such Elective Contributions and continuing in descending order until all the Excess Contributions have been allocated. This leveling method, under which the Elective Contributions made by the Highly Compensated -22- Employee who made the largest amount of Elective Contributions during the Plan Year is reduced, shall be repeated to the extent required to: (A) Enable the Plan to satisfy the Actual Deferral Percentage test described in subsection (a) above, or (B) Cause such Highly Compensated Employee's Elective Contributions to equal the Elective Contributions of the Highly Compensated Employee with the next largest amount of Elective Contributions. The amount of Excess Contributions to be distributed pursuant to subsection (h) below for a Plan Year with respect to any Highly Compensated Employee shall not exceed the amount of Elective Contributions made on behalf of such Highly Compensated Employee for such Plan Year. (c) For the purposes of this Section, the following definitions shall apply: (i) "Actual Deferral Percentage" shall mean, with respect to the groups consisting of (A) all Highly Compensated Employees and (B) all Non- Highly Compensated Employees, the average of the Actual Deferral Ratios for each such group, calculated separately for each Participant in each such Group. (ii) "Actual Deferral Ratio" shall mean the ratio that: (A) the amount of the Elective Contributions, Deemed Elective Contributions, and Additional Contributions made on behalf of each Participant for a Plan Year, bears to (B) such Participant's Compensation for such Plan Year. (d) For the purposes of this Section, the Actual Deferral Percentage for any Highly Compensated Employee who is eligible to have Elective Contributions, Deemed Elective Contributions, or Additional Contributions allocated to his or her account(s) under two or more plans or arrangements described in Code Section 401(k) that are maintained by the Company or any Affiliated Company shall be determined as if all such Elective Contributions, Deemed Elective Contributions, and Additional Contributions were made under a single arrangement. (e) The determination and treatment of the Elective Contributions, Deemed Elective Contributions, Additional Contributions, and Actual Deferral Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. -23- (f) The determination of who is a Highly Compensated Employee, including the determination of the Compensation that is considered, will be made in accordance with Code Section 414(q). (g) Distribution Of Excess Deferrals. -------------------------------- (i) If any Participant has any Excess Deferrals for any calendar year, and if he or she makes a claim pursuant to subsection (ii) below, then the Excess Deferrals allocable to the Plan pursuant to such claim shall be returned to the Company to be distributed to such Participant. Such distribution shall be made no later than the April 15th following the calendar year to which such Excess Deferrals relate. (ii) A Participant's claim for Excess Deferrals shall be in writing, signed by such Participant, and submitted to the Committee no later than the March 1st following the calendar year to which such Excess Deferrals relate. Such claim shall also specify the amount of such Participant's Excess Deferrals for such calendar year allocable to the Plan and shall be accompanied by such Participant's statement that, if such Excess Deferrals are not distributed, such Excess Deferrals, when added to all amounts deferred by such Participant under all plans or arrangements described in Code Sections 401(k), 408(k), or 403(b), exceed the limit imposed on such Participant by Code Section 402(g) for the year to which the Excess Deferrals relate. (iii) For the purposes of this Section, a Participant's "Excess Deferrals" shall mean the amount of such Participant's Elective Contributions for a calendar year that are allocated to the Plan pursuant to subsection (i) above. (iv) The Excess Deferrals shall be adjusted for income, gain or loss for the Plan Year pursuant to any reasonable method adopted by the Committee, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all Excess Deferrals under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts. (v) The Committee may elect to further adjust the Excess Deferrals for income, gain or loss for the gap period between (A) the last day of the Plan Year and (B) the date of distribution of the Excess Deferrals, provided that such adjustments are made pursuant to any reasonable method adopted by the Committee that does not violate Code Section 401(a)(4) and is used consistently for all Participants and for all Excess Deferrals under the Plan for the Plan Year. -24- (h) Distribution Of Excess Contributions. ------------------------------------ (i) Despite any other provision of the Plan, any Excess Contributions that are to be distributed pursuant to Section 3.7(b), and the income, gain or loss allocable thereto, shall be distributed no later than the last day of the Plan Year following the Plan Year to which such Excess Contributions relate. (ii) The Excess Contributions shall be adjusted for income, gain or loss for the Plan Year pursuant to any reasonable method adopted by the Committee, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all Excess Contributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts. (iii) The Committee may elect to further adjust the Excess Contributions for income, gain or loss, for the gap period between (A) the last day of the Plan Year and (B) the date of distribution of the Excess Contributions, provided that such adjustments are made pursuant to any reasonable method adopted by the Committee that does not violate Code Section 401(a)(4) and is used consistently for all Participants and for all Excess Contributions under the Plan for the Plan Year. (iv) The Excess Contributions that would otherwise be distributed to a Participant shall be reduced, in accordance with the Regulations, by the amount of Excess Deferrals distributed to such Participant. (i) Alternative Method of Satisfying the ADP Test. Despite any other --------------------------------------------- provision of the Plan, effective for Plan Years beginning after December 31, 1998, the Elective Contributions for any Plan Year shall be deemed to satisfy subsection (a)(i) above if: (i) Matching Contribution. The Company makes a matching --------------------- contribution on behalf of each Participant who is a Non-Highly Compensated Employee. The Company's matching contribution for each such Participant shall be an amount equal to: (A) 100% of the Participant's Elective Contributions for the Plan Year, up to 3% of the Participant's Compensation; plus (B) 50% of the Participant's Elective Contributions for the Plan Year that exceed 3% of his or her Compensation but do not exceed 5% of the Participant's Compensation. Despite the foregoing, the Committee may choose any other matching contribution rate, if such alternative rate satisfies the following requirements: -25- (C) The rate does not increase as a Participant's Elective Contributions increase; and (D) The total amount of the matching contributions using this alternative rate must equal or exceed the total amount of matching contributions using the rate provided for in the second sentence of subsection (i)(i) above. For all purposes under this subsection (i)(i), the matching contribution rate for any Participant who is a Highly Compensated Employee shall not be greater than the matching contribution rate for any Participant who is a Non-Highly Compensated Employee. (ii) Non-Elective Contribution. Alternatively, the Company may ------------------------- make a Non-Elective Contribution on behalf of each Participant who is a Non-Highly Compensated Employee. The Company's Non-Elective Contribution for each such Participant shall be an amount equal to three percent (3%) of the Participant's Compensation. (iii) In addition to satisfying either subsection (i) or (ii) above, the following requirements shall also apply for the Plan Year: (A) Within a reasonable period before each Plan Year, the Committee must give each Participant a written notice of the Participant's rights and obligations under the Plan. The written notice must be sufficiently accurate and comprehensive to apprise the Participant of his or her rights and obligations and written in a manner calculated to be understood by the average Participant; and (B) The voluntary contributions or Non-Elective Contributions provided for in subsections (i) and (ii) shall be treated for all purposes under Articles IV, V, and VI as Elective Contributions. Section 3.8: Actual Contribution Percentage Test. ----------- ----------------------------------- (a) It is the Company's intent that all Voluntary Contributions shall satisfy the requirements of Code Section 401(m). (i) Accordingly, the "Actual Contribution Percentage" for eligible Participants who are all Highly Compensated Employees shall not exceed the greater of: (A) the Actual Contribution Percentage for all eligible Participants who are Non-Highly Compensated Employees for the preceding Plan Year, multiplied by 1.25; or -26- (B) the Actual Contribution Percentage for all eligible Participants who are Non-Highly Compensated Employees for the preceding Plan Year, multiplied by two, provided that the Actual Contribution Percentage for all eligible Participants who are Highly Compensated Employees does not exceed the Actual Contribution Percentage for all Participants who are Non-Highly Compensated Employees for the preceding Plan Year by more than two percentage points (or such lesser amount as required in Treasury Regulation Section 1.401(m)-2 to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee). (ii) For the purposes of subsection (i) above, the Committee may elect to use the current Plan Year rather than the preceding Plan Year. If the Committee makes this election, then such election may not be changed except as allowed for by the Secretary of the Treasury. (iii) For the purposes of subsection (i) above and for purposes of the first Plan Year, the Actual Contribution Percentage for all Non- Highly Compensated Employees for the preceding Plan Year shall be (A) 3%, or (B) the Actual Contribution Percentage for all Non-Highly Compensated Employees for the first Plan Year, if so elected by the Committee. (iv) Effective for Plan Years beginning after December 31, 1998, if the Committee elects to apply Code Section 410(b)(4)(B) to determine whether the Plan satisfies the coverage requirements provided for in Code Section 410(b)(1), then for purposes of subsection (i) above, the Committee may exclude all eligible Employees (other than Highly Compensated Employees) who have not met the minimum age and service requirements of Code Section 410(a)(1)(A). (b) Definitions. For the purposes of this Section, the following ----------- definitions shall apply: (i) "Actual Contribution Percentage" shall mean, with respect to the groups consisting of (A) all Highly Compensated Employees and (B) all Non-Highly Compensated Employees, the average of the Actual Contribution Ratios for each such group, calculated separately for each Participant in each such group. (ii) "Actual Contribution Ratio" for a Plan Year shall mean the ratio that: (A) the amount of the Voluntary Contributions made on behalf of each Participant for a Plan Year, bears to (B) such Participant's Compensation for such Plan Year. -27- The Actual Contribution Ratio must be rounded to the nearest 100th of 1%. (iii) "Excess Aggregate Contributions" shall mean, for each Highly Compensated Employee, the total Voluntary Contributions made on behalf of such Highly Compensated Employee for such Plan Year, minus the amount determined by multiplying the Employee's Actual Contribution Ratio by the Employee's Compensation for such Plan Year. (c) Elective Deferrals And Non-Elective Contributions. For purposes ------------------------------------------------- of determining the Actual Contribution Percentage and the amount of Excess Aggregate Contributions pursuant to this Section, only Voluntary Contributions contributed to the Plan prior to the end of the succeeding Plan Year shall be considered. In addition, the Committee may elect to take into account, with respect to Employees eligible to have Voluntary Contributions pursuant to this Section allocated to their accounts, elective deferrals (as defined in Regulation 1.402(g)-1(b)) and qualified nonelective contributions (as defined in Code Section 401(m)(4)(c)) contributed to any plan maintained by the Company. Such elective deferrals and qualified non-elective contributions shall be treated as Voluntary Contributions subject to Treasury Regulation Section 1.401(m)-1(b)(2). However, the Plan Year must be the same as the plan year of the plan to which the elective deferrals and the qualified nonelective contributions are made. (d) Plan Aggregation. For purposes of this Section and Code Sections ---------------- 401(a)(4), 410(b) and 401(m), if two or more plans, which are maintained by the Company or any Affiliated Company, to which voluntary contributions, Employee contributions, or both, are made, are treated as one plan for purposes of Code Sections 401(a)(4) or 410(b) (other than the average benefits tests under Code Section 410(b)(2)(A)(ii)), such plans shall be treated as one plan. (i) In addition, two or more plans of the Company to which voluntary contributions, Employee contributions, or both, are made may be considered as a single plan for purposes of determining whether or not such plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such a case, the aggregated plans must satisfy this Section and Code Sections 401(a)(4), 410(b) and 401(m) as though such aggregated plans were a single plan. However, plans may be aggregated under this subsection only if they have the same plan year. (ii) Despite the foregoing, an employee stock ownership plan described in Code Section 4975(e)(7) may not be aggregated with this Plan for purposes of determining whether the employee stock ownership plan or this Plan satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(m). (e) Plan Aggregation. If a Highly Compensated Employee is a ---------------- Participant under two or more plans (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)) which are maintained by the Company or an Affiliated Company to which voluntary contributions, Employee contributions, or both, -28- are made, all such contributions on behalf of such Highly Compensated Employee shall be aggregated for purposes of determining such Highly Compensated Employee's Actual Contribution Ratio. However, if the plans have different plan years, this subsection shall be applied by treating all plans ending with or within the same calendar year as a single plan. (f) Distribution of Excess Aggregate Contributions. ---------------------------------------------- (i) If the Committee determines at any time that the limitation on Voluntary Contributions set forth in subsection (a) above will be exceeded for any Plan Year, the Committee (on or before the 15th day of the third month following the end of the Plan Year) shall direct the Trustee to: (A) distribute to the Highly Compensated Employee who received the most Voluntary Contributions during the Plan Year, his or her vested portion of Excess Aggregate Contributions (and income allocable to such contributions) or, (B) if forfeitable, forfeit such non-vested Excess Aggregate Contributions attributable to Voluntary Contributions (and income allocable to such forfeitures) until either one of the tests set forth in this Section is satisfied, or until the amount of Voluntary Contributions that such Highly Compensated Employee received equals the Voluntary Contributions received by the Highly Compensated Employee who received the second highest Voluntary Contributions. This process shall continue until one of the tests set forth in this Section is satisfied. (ii) The Excess Aggregate Contribution shall be adjusted for income, gain or loss for the Plan Year pursuant to any reasonable method adopted by the Committee, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all Excess Aggregate Contributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts. (iii) The Committee may elect to further adjust the Excess Aggregate Contributions for income, gain or loss for the gap period between (A) the last day of the Plan Year and (B) the date of distribution of the Excess Aggregate Contributions, provided that such adjustments are made pursuant to any reasonable method adopted by the Committee that does not violate Code Section 401(a)(4) and is used consistently for all Participants and for all Excess Aggregate Contributions under the Plan for the Plan Year. (iv) Any distribution (and/or Forfeiture) of less than the entire amount of Excess Aggregate Contributions (and income) shall be treated as a pro rata distribution (and/or Forfeiture) of Excess Aggregate Contributions and income. Distribution of Excess Aggregate Contributions shall be designated -29- by the Company as a distribution of Excess Aggregate Contributions (and income). Forfeitures of Excess Aggregate Contributions shall be treated in accordance with Section 4.4. However, no such Forfeiture may be allocated to a Highly Compensated Employee whose contributions are reduced pursuant to this Section. (v) Excess Aggregate Contributions shall be treated as Company contributions for purposes of Code Sections 404 and 415 even if distributed from the Plan. (vi) The determination of the amount of Excess Aggregate Contributions with respect to any Plan Year shall be made after first determining the Excess Contributions, if any, to recharacterized as a Deemed Elective Contribution (as described in Section 3.7(b) above) for the plan year of any other qualified cash or deferred arrangement (as defined in Code Section 401(k)) maintained by the Company that ends with or within the Plan Year. (vii) Despite the above, within 12 months after the end of the Plan Year, the Company may make a special qualified Non-Elective Contribution on behalf of Non-Highly Compensated Employees in an amount sufficient to satisfy one of the tests set forth in this Section. Such contribution shall be allocated to the Deferred Income Account of each Participant who is Non-Highly Compensated Employee in the same proportion that each such Participant's Compensation for the Plan Year bears to the total Compensation of all such Participants for such Plan Year. A separate accounting shall be maintained for the purpose of excluding such contributions for the "Actual Deferral Percentage" test set forth in Section 3.7. (g) Alternative Method of Satisfying the ACP Test. Despite any other --------------------------------------------- provision of the Plan, effective for Plan Years beginning after December 31, 1998, the Voluntary Contributions for any Plan Year shall be deemed to satisfy subsection (a)(i) if: (i) The Company makes the contribution provided for in Section 3.7(i)(i) or (ii); (ii) The Committee gives each Participant the written notice provided for in Section 3.7(i)(iii); (iii) The matching contribution does not exceed 6% of any Participant's Compensation; (iv) The rate of the matching contribution does not increase as the rate of the Elective Contribution increases; and -30- (v) The matching contribution rate for any Participant who is a Highly Compensated Employee is not greater than the matching contribution rate for any Participant who is a Non-Highly Compensated Employee. Section 3.9: No Requirement For Profits. Despite any other provision ----------- -------------------------- of the Plan, the Company may, but is not required to, make all contributions to the Plan for any Plan Year without regard to whether the Company has any Net Profits for the taxable year or years ending with or within such Plan Year. Despite the preceding sentence, the Plan shall continue to be designed to qualify as a profit sharing plan for the purposes of Code Sections 401(a), 402, 412, and 417. -31- ARTICLE IV ---------- ALLOCATIONS TO PARTICIPANTS' ACCOUNTS ------------------------------------- Section 4.1: Retirement Accounts And Voluntary Contribution Accounts. ----------- ------------------------------------------------------- (a) The Committee shall open and maintain a Retirement Account in the name of each Participant, and it shall be credited or charged with the amounts allocable to it as set forth below. (b) Committee shall open and maintain a Voluntary Contribution Account in the name of each Participant for whom a Voluntary Contribution is made. This Account shall be credited with each such Voluntary Contribution, and it shall be credited or charged with the amounts allocable to it as set forth below. Section 4.2: Deferred Income Accounts. The Committee shall open and ----------- ------------------------ maintain a Deferred Income Account in the name of each Participant for whom an Elective Contribution is made. This Account shall be credited with each such Elective Contribution (and such Participant's allocable share of any Deemed Elective Contribution or Additional Contribution) as it is received by the Trustee, and it shall be credited or charged with the amounts allocable to it as set forth below. Section 4.3: Rollover Contribution Accounts. The Committee shall open ----------- ------------------------------ and maintain a Rollover Contribution Account for each Participant who contributes a Rollover Contribution. This Account shall be credited with such Participant's Rollover Contributions, and it shall be credited or charged with the amounts allocable to it as set forth below. Section 4.4: Allocation Of Forfeitures, Gains And Losses. ----------- ------------------------------------------- (a) Any forfeitures of Excess Aggregate Contributions pursuant to Section 3.8 above shall be allocated to the Voluntary Contribution Accounts of the Participants who are Non-Highly Compensated Employees in the same proportion that each such Participant's Compensation for such Plan Year bears to the total Compensation of all such Participants for such Plan Year. (b) Except as to that portion, if any, of the Trust's assets that the Committee or Board of Directors has elected to allow Participants to manage pursuant to Section 4.8 below, as of each Anniversary Date (but before any allocation is made of the Company's Non-Elective Contribution, if any, for the Plan Year ending on such Anniversary Date, if, and to the extent, made prior to such date), the Committee shall credit any income and investment gains (whether realized or unrealized) of the Trust, and shall charge any losses (whether realized or unrealized) and unallocated expenses of the Trust, to the Participants' Accounts in the -32- same proportion that the balance in each such Account as of such Anniversary Date bears to the total balance in all Accounts as of such Anniversary Date. (i) Solely for the purposes of the allocation pursuant to this Section 4.4, each Participant's Account balances as of such Anniversary Date shall be adjusted, in a uniform and nondiscriminatory manner, to reflect transactions that occurred during such Plan Year, including, without limitation, Elective Contributions and Voluntary Contributions and withdrawals under Article VI below. (ii) In determining the unrealized investment gains and losses to be credited or charged as of each Anniversary Date pursuant to this Section 4.4, the Trustee shall value the assets of the Trust at their fair market value as of each such Anniversary Date. Section 4.5: Allocation Of Non-Elective Contribution. Subject to the ------------ --------------------------------------- limitations contained elsewhere in the Plan, as of each Anniversary Date, the Company's Non-Elective Contribution (if any) made on account of the Plan Year ending on such Anniversary Date shall be allocated to the Retirement Accounts of the Eligible Participants in the same proportion that each Eligible Participant's Compensation for such Plan Year bears to the total Compensation of all Eligible Participants for such Plan Year. This allocation shall be made immediately following the allocations described in Section 4.4. Section 4.6: Accounts In General. The credits made to a Participant's ----------- ------------------- Accounts shall not vest in such Participant any right, title or interest in the Trust, except to the extent, at the time or times, and upon the terms and conditions set forth in the Plan. Neither the Company, the Trustee, nor the Committee, to any extent, warrant, guarantee or represent that the value of any Participant's Accounts at any time will equal or exceed the amount previously allocated or contributed to such Accounts. Section 4.7: Limitation On Annual Additions. ----------- ------------------------------ (a) The following limitations shall apply to the allocations to each Participant's Accounts in any Plan Year: (i) As used in the Plan, a Participant's "Annual Addition" shall mean the sum for any Plan Year of: (A) Such Participant's share of the Company's contributions; plus (B) Such Participant's voluntary, nondeductible contributions to the Plan (excluding any Rollover Contribution); plus -33- (C) Such Participant's share of any forfeiture; plus (D) Such Participant's allocable share of the Company's contributions to any Individual Medical Benefit Account; and plus (E) With respect to any Participant who is a Key Employee, any amount that is derived from the Company's contributions paid or accrued after December 31, 1985 in taxable years ending after such date, and that is attributable to post-retirement medical benefits allocated to such Participant's account under a Welfare Benefit Fund maintained by the Company. Any excess amount applied under subsection (c) below in a Plan Year to reduce the Company's contributions on behalf of any Participant shall be considered to be an Annual Addition for such Participant for such Plan Year. (ii) Subject to the adjustments set forth below, during any Plan Year the maximum Annual Addition for any Participant shall in no event exceed the lesser of : (A) $30,000, as adjusted by the Adjustment Factor; or (B) 25% of the Participant's Earnings for such Plan Year. (iii) The earnings limitation referred to in subsection (a)(ii)(B) above shall not apply to (A) any contribution for medical benefits (within the meaning of Code Section 419A(f)(2)) after separation from service that is otherwise treated as an Annual Addition, or (B) any amount otherwise treated as an Annual Addition under Code Section 415(l)(1). (b) For Plan Years beginning before January 1, 2000, the following additional limitations shall apply to any Participant when such Participant, in addition to his or her participation in the Plan (and any Welfare Benefit Fund), is also a participant in a Defined Benefit Plan maintained by the Company or an Affiliated Company: (i) The amount of (A) the Annual Additions to such Participant's account(s) or (B) such Participant's normal retirement benefit in any such plan(s) shall be reduced by each such plan's committee to the extent necessary to prevent the sum of the Defined Benefit Plan Fraction (defined below) and the Defined Contribution Plan Fraction (defined below) for any such year from exceeding 1.0 (the "1.0 Rule") (benefits under Welfare Benefit Funds shall be reduced first, then benefits under profit sharing plans, then benefits under other Defined Contribution Plans, and, finally, benefits under Defined Benefit Plans). -34- (ii) For the purpose of applying the 1.0 Rule, the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction shall be applied in a manner consistent with the provisions of Code Section 415 and the Regulations under it. (iii) As used above, "Defined Benefit Plan Fraction" shall mean a fraction, the numerator of which is the Participant's projected annual benefit under the Defined Benefit Plan (determined as of the end of the plan year for such plan), and the denominator of which is the lesser of: (A) 1.25 multiplied by the dollar limitation in effect for such plan year (determined under Code Section 415(b)(1)(A)); or (B) 1.4 multiplied by 100% of such Participant's average Earnings for his or her highest three consecutive years, including such plan year (determined under Code Section 415(b)(1)(B)). (iv) As used above, "Defined Contribution Plan Fraction" shall mean a fraction, the numerator of which is the sum of the annual additions to the Participant's account(s) as of the end of the Plan Year, and the denominator of which is the sum of the lesser of the following amounts determined for such Plan Year and for each of such Participant's prior years of service with the Company: (A) 1.25 multiplied by the dollar limitation in effect for such Plan Year (determined under Code Section 415(c)(1)(A), but without regard to Code Section 415(c)(6)); or (B) 1.4 multiplied by 25% of such Participant's Earnings for such Plan Year (determined under Code Section 415(c)(1)(B), or Code Section 415(c)(7), if applicable). (c) If, for any Plan Year, it is necessary to limit the Annual Addition of any Participant pursuant to subsections (a) or (b) above, the following reallocations shall be made: (i) First, the amount of such Participant's nondeductible, voluntary contributions for that Plan Year that are included in his or her Annual Addition shall be refunded to him or her; (ii) Second, the amount of such Participant's Elective Contribution for such Plan Year that causes such Participant's Annual Addition to exceed the applicable limitation shall be returned to the Company to be paid to such Participant; (iii) Third, the amount of the Company's contribution, inclusive of forfeitures, that is allocable to such Participant and that causes such Participant's Annual Addition to exceed the applicable limitation shall, instead, -35- be allocated to all other Participants who are not subject to this limitation, in proportion to their Compensation for such Plan Year; and (iv) Fourth, if the amount of the Company's contribution, inclusive of forfeitures, is so great as to cause all Participants for such Plan Year to be subject to the limitations of this Section, then the excess of the Company's contributions that cannot be allocated for such Plan Year shall be held unallocated in a suspense account and applied against and reduce the Company's future contributions. (d) If a suspense account is in existence at any time during a Plan Year pursuant to subsection (c)(iii) above, it shall not participate in the Trust's income, gains and losses. (e) The limitations of this Section with respect to any Participant who, at any time, has been a participant in any other Defined Contribution Plan (whether or not terminated) or in more than one Defined Benefit Plan (whether or not terminated) maintained by the Company or by an Affiliated Company shall apply as if all such Defined Contribution Plans or all such Defined Benefit Plans in which the Participant has been a participant were one plan. Section 4.8: Investment Of Accounts. If so elected by the Committee or ----------- ---------------------- the Board of Directors, Participants shall manage the investment of all or a portion of the Trust's assets attributable to their Accounts. In such case, subject to uniform and nondiscriminatory rules adopted by the Committee, a Participant shall designate the percentage of any one or more of his or her Accounts that is to be invested in each of several authorized investments designated by the Committee from time to time. For convenience, such designated investments are referred to in this Plan individually as a "Fund," and collectively as the "Funds." Despite the foregoing, the Trustee may invest and reinvest the principal and income of any Account in short term obligations or bank accounts, pending investment in designated Funds, and may retain such cash balances in each of the Accounts as the Committee directs to meet the current cash needs of the Plan. As of each Trust Valuation Date, each such Participant's Account shall be credited (or charged) with the income, gains, and losses of the Funds in which such Account is invested, as such income, gains, and losses are realized. For purposes of the foregoing, the Trustee shall value the assets of the Trust at their fair market value as of each such Trust Valuation Date. In addition, each Participant's Account shall be charged (as the Committee, in a uniform and nondiscriminatory manner, shall direct) with brokerage commissions and other direct costs related to investing such Participant's Account pursuant to his or her directions. -36- ARTICLE V --------- VESTING ------- Section 5.1: Vesting. Each Participant shall at all times be 100% ----------- ------- vested in all of his or her Accounts. -37- ARTICLE VI ---------- DISTRIBUTION OF BENEFITS ------------------------ Section 6.1: Distribution Of Benefits. ----------- ------------------------ (a) Subject to the survivor annuity requirements set forth in Section 6.2, benefits become distributable to a Participant or to the Beneficiary of a deceased Participant upon the first to occur of such Participant's Normal Retirement Date, Total Disability, death, or the date that such Participant ceases to be an Employee prior to his or her Normal Retirement Date for a reason other than his or her death or Total Disability. A Participant (or the Beneficiary of a deceased Participant) must make a claim for such Participant's benefits prior to any distribution. Such benefits shall be the sum of the following amounts: (i) The amount credited to his or her Deferred Income Account, Voluntary Contribution Account, and Rollover Contribution Account, if any, as of the Trust Valuation Date that coincides with or immediately precedes the first distribution of his or her benefits, adjusted as of such date if required by Section 4.4, plus contributions made by the Participant after such date; and (ii) The vested amount credited to his or her Retirement Account as of the Trust Valuation Date that coincides with or immediately precedes the first distribution of his or her benefits, adjusted as of such date if required by Sections 4.4 and 4.5. Section 6.2: Survivor Annuity Requirements. ----------- ----------------------------- (a) Applicability. This Section shall apply to all benefits payable ------------- from the Plan before April 1, 2002, and, accordingly, shall not apply to the benefits payable from the Plan on or after April 1, 2002. (b) Qualified Joint And Survivor Annuity. Unless an optional method ------------------------------------ of distribution is selected, a Participant who is married on his or her Annuity Starting Date shall receive his or her benefits in the form of a Qualified Joint and Survivor Annuity. An optional method of distribution may only be selected or changed pursuant to a Qualified Election made within the Retirement Election Period. (c) Qualified Life Annuity. Unless an optional method of distribution ---------------------- is selected, a Participant who is not married on his or her Annuity Starting Date shall receive his or her benefits in the form of a Qualified Life Annuity. An optional method of distribution may only be selected or changed pursuant to a Qualified Election made within the Retirement Election Period. (d) Qualified Preretirement Survivor Annuity. Unless an optional ---------------------------------------- method of distribution or different Beneficiary has been selected, if a married -38- Participant dies before his or her Annuity Starting Date, such Participant's surviving spouse, if any, shall receive such Participant's benefits in the form of a Qualified Preretirement Survivor Annuity. If an optional method of distribution or Beneficiary other than such Participant's surviving spouse has not been selected, such surviving spouse may direct that the payments under the Qualified Preretirement Survivor Annuity commence within a reasonable time after the Participant's death. An optional method of distribution or Beneficiary other than such Participant's surviving spouse may only be selected or changed pursuant to a Qualified Election made within the Preretirement Election Period. Despite the foregoing, and to the extent allowed by law, a deceased Participant's Beneficiary may, at any time after such Participant's death but before his or her Annuity Starting Date, select an optional method of distribution in accordance with Section 6.3(a), provided that such Participant had not elected against such a selection. (e) Definitions. For purposes of this Section, the following ----------- definitions shall apply: (i) "Annuity Starting Date" shall mean the first day of the first period for which an amount is payable as an annuity, or in the case of a benefit not payable in the form of an annuity, the first day on which all events have occurred that entitled the Participant to such benefit. For purposes of the foregoing sentence, the first day of the first period for which a benefit is to be received by reason of disability shall be treated as the Annuity Starting Date only if such benefit is not an auxiliary benefit under Code Section 417(f)(2)(B). (ii) "Preretirement Election Period" shall mean, with respect to any Participant, the period that begins on the first day of the Plan Year in which such Participant attains age 35 and ends on the date of such Participant's death. If a Participant separates from service before the first day of the Plan Year in which he or she attains age 35, the Preretirement Election Period shall begin on the date of separation with respect to benefits accrued before such separation. (iii) "Retirement Election Period" shall mean, with respect to any Participant, the 90-day period that ends on his or her Annuity Starting Date. (iv) "Qualified Election" shall mean an election to waive the Qualified Joint and Survivor Annuity, the Qualified Life Annuity, or the Qualified Preretirement Survivor Annuity form of benefit. Such election must satisfy the following requirements: (A) it must be in writing; (B) it must be consented to in writing by the Participant's spouse, if he or she is married; (C) it must designate a beneficiary (or a form of benefits) which may not be changed without the consent of the Participant's spouse (or the Participant's spouse's consent must expressly permit the Participant to designate a beneficiary without requiring further consent from the Participant's spouse); (D) such spouse's consent must acknowledge the effect of the election; and -39- (E) such spouse's consent must be witnessed by a Plan representative or a notary public. Spousal consent is not required if the Participant establishes to the satisfaction of a Plan representative that such consent cannot be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by Regulations. Any consent by a spouse (or establishment that the consent of a spouse cannot be obtained) shall be effective only as to such spouse. A Participant may revoke a prior Qualified Election and choose again to take a Qualified Joint and Survivor Annuity, Qualified Life Annuity, or Qualified Preretirement Survivor Annuity without the consent of his or her spouse, at any time and any number of times, within the applicable election period. (v) "Qualified Joint and Survivor Annuity" shall mean a benefit that can be purchased with the vested amount credited to a Participant's Accounts and that is payable in the form of an annuity for the life of the Participant with a survivor annuity for the life of such Participant's spouse. Such survivor annuity must not be less than 50% nor more than 100% of the amount of the annuity payable during the joint lives of the Participant and his or her spouse. (vi) "Qualified Life Annuity" shall mean a benefit that can be purchased with the vested amount credited to a Participant's Accounts and that is payable in the form of an annuity for the life of the Participant. (vii) "Qualified Preretirement Survivor Annuity" shall mean a benefit that can be purchased with the vested amount credited to a Participant's Accounts as of the date of such Participant's death (less any portion that is automatically forfeited upon such Participant's death pursuant to the Plan's other provisions) that is payable to such Participant's surviving spouse in the form of an annuity for the life of such spouse. Despite the foregoing, such annuity shall be the actuarial equivalent of at least 50% of the vested amount credited to a Participant's Accounts as of the date of such Participant's death. For the purposes of the foregoing, (A) any security interest held by the Plan, the Trust or the Trustee by reason of a loan outstanding pursuant to Section 6.8 to the Participant shall be taken into account in determining the amount of the Qualified Preretirement Survivor Annuity, and (B) the vested amount credited to such Participant's Accounts shall be first reduced by any such security interest held by reason of such loan. (f) Information To Participants. A Participant shall be provided with --------------------------- the following information with regard to the applicable Qualified Election: (i) With regard to the Qualified Election to waive the Qualified Joint and Survivor Annuity or Qualified Life Annuity form of benefit, a Participant shall be provided with a written explanation of (A) the terms and -40- conditions of the Qualified Joint and Survivor Annuity or Qualified Life Annuity, (B) the Participant's right to elect to waive the Qualified Joint and Survivor Annuity or Qualified Life Annuity form of benefit, (C) the right of the Participant's spouse to consent to any election to waive the Qualified Joint and Survivor Annuity form of benefit, and (D) the right of the Participant to revoke such an election, and the effect of such a revocation. Such written explanation shall be provided to a Participant no less than 30 days and no more than 90 days before the Annuity Starting Date. (ii) With regard to the Qualified Election regarding the Qualified Preretirement Survivor Annuity form of benefit, a Participant shall be provided with a written explanation of the Qualified Preretirement Survivor Annuity containing comparable information to that required pursuant to subparagraph (i) above. Such written explanation shall be provided to each Participant within whichever of the following periods ends last: (A) the period beginning with the first day of the Plan Year in which such Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which such Participant attains age 35, (B) a reasonable period after such Participant first became a Participant, or (C) a reasonable period after such Participant ceases to be an Employee in the case of a Participant who ceases to be an Employee before attaining age 35. (g) Cash-Out Restrictions. --------------------- (i) Despite the other provisions of this Section, but subject to the next sentence, if, when a Participant's benefits become distributable, the vested amount credited to such Participant's Accounts is not (nor never has been) in excess of $3,500 (or $5,000, for Plan Years beginning after August 5, 1997), the Committee may direct that such benefit be distributed as an immediate cash lump sum. No such distribution may be made after a Participant's Annuity Starting Date unless such Participant and his or her spouse (or, in the case of a deceased Participant, the surviving spouse) consent in writing to such distribution. (ii) Despite the other provisions of this Section, if, when a Participant's benefits become distributable, the vested amount credited to such Participant's Accounts is (or ever has been) in excess of $3,500 (or $5,000, for Plan Years beginning after August 5, 1997), the Committee may direct that such benefit be distributed as an immediate cash lump sum, provided the Participant and his or her spouse (or, where the Participant has died, his or her surviving spouse) consent in writing to such distribution during the 90-day period ending on the date such benefit is so distributed. If such Participant or his or her spouse (or surviving spouse) does not so consent, such failure to consent shall be deemed to be an election to defer distribution of such benefit until the later of age 62 or the Participant's Normal Retirement Age. -41- (h) The Annuity Starting Date for a distribution in a form other than a Qualified Joint and Survivor Annuity may be less than 30 days after receipt of the written explanation described above provided: (i) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the Qualified Joint and Survivor Annuity and elect (with spousal consent) to a form of distribution other than a Qualified Joint and Survivor Annuity; (ii) the Participant is permitted to revoke any affirmative distribution election at least until the Annuity Starting Date or, if later, at any time prior to the expiration of the seven-day period that begins the date after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant; and (iii) the Annuity Starting Date is a date after the date that the written explanation was provided to the Participant. For distributions on or after December 31, 1996, the Annuity Starting Date may be a date prior to the date the written explanation is provided to the Participant if the distribution does not commence until at least 30 days after such written explanation is provided, subject to the waiver of the 30-day period as provided for above. (i) Special Limitation. Despite any other provision of the Plan, no ------------------ preretirement death benefit in addition to the Qualified Preretirement Survivor Annuity shall be permitted to the extent such other benefit would violate the incidental benefit rule. Section 6.3: Optional Methods Of Distribution. ----------- -------------------------------- (a) If an optional form of benefit has been selected as set forth in Section 6.2 or if Section 6.2 is not applicable, then, when a Participant's benefits become distributable, the Committee shall, with reasonable promptness, direct the Trustee to distribute such Participant's benefits as follows: (i) If a Participant's benefits become distributable by reason of his or her death, the benefits shall be distributed to such deceased Participant's Beneficiary as an immediate cash lump sum. Such Participant's vested amount shall be reduced by any security interest held by the Plan, the Trust or the Trustee by reason of a loan outstanding pursuant to Section 6.8. (ii) If a Participant's benefits become distributable for a reason other than his or her death, the Participant, or the Beneficiary of a deceased Participant, may elect to receive the vested amount credited to the Participant's Accounts as an immediate cash lump sum, or for distributions prior to April 1, 2002, as an immediate cash lump sum or installments, or any combination of these. Despite the foregoing, if the vested amount credited to such Participant's Accounts is not (nor never has been) in excess of $3,500 (or $5,000, for Plan Years beginning after August 5, 1997), the Committee may direct the Trustee to distribute such benefits as an immediate cash lump sum, without such Participant's consent. -42- (iii) If distribution is to be made in installments pursuant to subsection (a)(ii) immediately above, such installments shall be paid in equal or nearly equal quarterly, semiannual, or annual installments over a period not exceeding: (A) the life expectancy of the Participant; or (B) the joint life and last survivor expectancy of the Participant and his or her Beneficiary. The expected return multiples of Section 1.72-9 of the Regulations under the Code shall be used to determine such life expectancy periods. (iv) If a Participant's benefits became distributable for a reason other than his or her death, and if such Participant properly elected to receive an optional form of benefit pursuant to this Section 6.3, then, if such Participant dies before his or her entire benefits have been distributed, his or her Beneficiary(ies) shall receive a death benefit equal to the balance of the remaining installments (if any) or deferred cash lump sum (if any) due such deceased Participant. (v) If a distribution is to be made in a deferred lump sum or in installments pursuant to subsections (a)(i) or (a)(ii) above, and to the extent it is directed by the Committee, the Trustee shall segregate a former Participant's benefit from the Trust and deposit it in a savings account with a Financial Institution. The former Participant (or his or her Beneficiary) shall be entitled to receive, in addition to the former Participant's benefit, the interest, if any, earned from such savings account, payable with the final installment. Despite the foregoing, the Committee may, in its discretion, if so requested by the former Participant or his or her Beneficiary, continue to hold the undistributed benefit as a segregated part of the Trust, in which event such benefit shall participate in the income, gains and losses realized by such segregated Trust fund, and such income or gains, if any, shall be payable with the final installment. (vi) Despite the foregoing provisions, the Committee may at any time, with the consent of a Participant or his or her Beneficiary, direct the Trustee to accelerate or to postpone any installment payment to such Participant or Beneficiary or to reduce or to increase the period over which future installments are to be made, in which latter event the Trustee shall adjust the amount of such installments accordingly. In addition, a Participant may at any time withdraw any or all of his or her undistributed benefit, and a Participant's Beneficiary shall, unless such Participant provided otherwise, have a similar withdrawal right. If less than all of the undistributed benefit is withdrawn, the remaining installment payments shall be adjusted accordingly. -43- (vii) In addition to the foregoing, prior to April 1, 2002, a Participant shall have the right to request the Committee, in lieu of the benefits provided herein, to direct the Trustee to purchase a non- transferable annuity, the cost of which shall be equal to the benefits to which such Participant is entitled, and the term of which shall not extend beyond the life expectancy of the Participant, or the joint life expectancies of the Participant or his or her spouse if the joint form is elected, and the Committee may, in its discretion, direct the Trustee to, and the Trustee shall, purchase such an annuity. (b) The complete distribution of a Participant's benefit as provided for above shall constitute full payment and satisfaction of any obligation of the Company, the Trustee or the Committee to such Participant or to the Beneficiary of a deceased Participant. (c) If a distribution is one to which Code Sections 401(a)(11) and 417 do not apply, such distribution may commence fewer than 30 days after the notice required under Section 1.411(a)-11(c) of the Regulations under the Code is given, provided that: (i) the Committee clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (ii) the Participant, after receiving the notice, affirmatively elects a distribution. Section 6.4: Timing Of Distributions. ----------- ----------------------- (a) Subject only to the survivor annuity requirements set forth in Section 6.2, the provisions of this Section shall govern the timing of the distribution of a Participant's benefit. (b) If a Participant's benefits become distributable because of his or her death or Total Disability, such benefits shall begin to be distributed as soon as is administratively practical after the Trust Valuation Date that coincides with or first follows the Committee's receipt of (i) written proof of such Participant's death or Total Disability and (ii) a properly completed claim for benefits. If a Participant's benefits become distributable for a reason other than his or her death or Total Disability, such Participant's benefits shall begin to be distributed as soon as is administratively practical after the Trust Valuation Date that coincides with or first follows the Committee's receipt of a properly completed claim for benefits. Despite the foregoing, and subject to subsections (c) and (d) below, a Participant's benefits must begin to be distributed no later than 60 days after the latest of the close of the Plan Year in which: -44- (i) the Participant attained age 65 (or Normal Retirement Age, if earlier); (ii) occurred the tenth anniversary of the year in which the Participant began participation in the Plan; or (iii) the Participant terminated his or her employment with the Company. Despite the foregoing, a Participant may elect a later date on which the distribution of his or her benefit is to begin, in a manner consistent with the applicable Regulations. Any failure by a Participant (or, if he or she is married, such Participant's spouse in the event of such Participant's death or in the event distribution is to be made in a form other than a Qualified Joint and Survivor Annuity) to consent to an immediate distribution of his or her benefit (provided that such benefit is otherwise then immediately distributable pursuant to the foregoing provisions) shall be deemed to be an election to defer distribution to the later of age 62 or such Participant's Normal Retirement Age. (c) Despite any other provision of the Plan, one of the following provisions shall apply: (i) A Participant's benefit shall be distributed to him or her not later than April 1 of the calendar year following the later of (A) the calendar year in which the Participant attains age 70 1/2, or (B) the calendar year in which the Participant retires, if such Participant is not a 5% Owner with respect to the Plan Year ending in the calendar year in which he or she attains age 70 1/2; or (ii) Alternatively, distributions to a Participant must begin no later than the date determined under subsection (c)(i) above and must be made, in accordance with the applicable Regulations, over the life of the Participant or over the lives of such Participant and his or her designated Beneficiary (or over a period not extending beyond the life expectancy of the Participant or the life expectancy of the Participant and his or her designated Beneficiary). (d) If a Participant dies before his or her entire interest has been distributed to him or her, the remaining portion of such Participant's interest must be distributed at least as rapidly as under the method of distribution being used as of the date of the Participant's death. (e) If a Participant dies before distribution of his or her benefits has begun, the entire benefit of such Participant must be distributed within five years after his or her death. -45- (f) For purposes of subsection (e) above, any portion of a Participant's benefits that is payable to or for the benefit of his or her Beneficiary shall be treated as distributed on the date on which such distribution begins if: (i) such portion will be distributed in accordance with the applicable Regulations over such Beneficiary's life (or over a period not extending beyond such Beneficiary's life expectancy), and (ii) such distribution must begin not later than the date that is one year after the date of such Participant's death (or such later date as the Secretary of the Treasury may by Regulations prescribe). However, if such Beneficiary is the Participant's surviving spouse, then the date on which the distribution is required to begin shall be not later than the date on which the Participant would have attained age 70 1/2, and if such spouse dies before the distribution to him or her begins, this subsection shall be applied as if such spouse were the Participant. (g) For purposes of subsection (f) above, the life expectancy of a Participant and his or her spouse (other than in the case of life annuity) may be redetermined on an annual or less frequent basis, and under Regulations prescribed by the Secretary of the Treasury, any amount paid to a child of a Participant shall be treated as if it had been paid to such Participant's surviving spouse if such amount will become payable to such spouse upon such child attaining majority (or any other designated event permitted under the applicable Regulations). (h) Despite the foregoing provisions, the Committee shall not permit any Participant to receive his or her benefits under a method of distribution that violates the Regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirements of proposed Regulation 1.401(a)(9)-2, or any successor or final Regulation. (i) With respect to distributions under the Plan made for calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of Section 401(a)(9) of the Internal Revenue Code in accordance with the regulations under Section 401(a)(9) that were proposed on January 17, 2001, notwithstanding any provision of the Plan to the contrary. This amendment shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under Section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service. Section 6.5: Postponed Retirement. If a Participant continues to be ----------- -------------------- an Employee beyond his or her Normal Retirement Date, his or her corresponding participation in the Plan shall likewise continue. In such case, to the extent permitted by law and the applicable Regulations, the distribution of such a Participant's benefits will be postponed until he or she actually ceases to be an Employee. Such benefits -46- will become distributable as of the first day of the month next following such Participant's actually ceasing to be an Employee. Section 6.6: Distributions Due Missing Persons. If the Trustee is ----------- --------------------------------- unable to distribute any benefit due to a missing Participant or Beneficiary, the Trustee shall (i) so advise the Committee and (ii) segregate such benefit from the Trust, in which event such benefit shall participate in the income, gains and losses realized by such segregated Trust Fund. The Committee shall then send a written notice to such Participant or Beneficiary at his or her last known address, as reflected in the Company's or Committee's records. If such Participant or Beneficiary shall not have presented himself or herself to the Company or to the Committee within three years of the date of such written notice, any undistributed benefit (and any income gains and losses realized by such segregated part) may be applied against and reduce the Company's future contributions to the Plan. Despite the foregoing, if at any subsequent time a valid claim for any undistributed benefit is presented to the Committee, such benefit that was so applied (and any income, gains and losses realized by such segregated part) shall be paid directly by the Company to such claimant. Section 6.7: Transfers To Another Qualified Plan. ----------- ----------------------------------- (a) If a Participant who is a distributee of any Eligible Rollover Distribution (as defined below) elects to have such distribution paid directly to an Eligible Retirement Plan and who specifies the Eligible Retirement Plan to which such distribution is to be paid (in such form and at such time as the Committee may prescribe), then such distribution shall be made in the form of a direct trustee-to-trustee transfer to such Eligible Retirement Plan, provided that such Eligible Retirement Plan accepts such a transfer. The foregoing sentence shall apply only to the extent that such Eligible Rollover Distribution would be includable in gross income if not transferred as provided in such sentence (determined without regard to Code Sections 402(c) and 403(a)(4)). (b) "Eligible Rollover Distribution" shall mean any distribution of all or any portion of the balance to the credit of the distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; any hardship distribution described in Code Section 401(k)(2)(B)(i)(IV) received after December 31, 1998; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). -47- (c) "Eligible Retirement Plan" shall mean an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (d) A Participant's (i) surviving spouse and (ii) spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the surviving spouse, spouse, or former spouse and shall have the same rights as a Participant to make a transfer in accordance with this Section 6.7 as to the interest of the surviving spouse, spouse, or former spouse. Section 6.8: Loans To Participants. ----------- --------------------- (a) The Committee shall be the fiduciary with authority to establish a loan program for Participants and to direct the Trustee concerning the investment of the Trust's assets pursuant to such a loan program. (b) A Participant may make a written application to the Committee for a loan from the Trust. Each such loan must be adequately secured, and if it is secured by the balance in such Participant's Accounts, then, prior to April 1, 2002, in the case of a married Participant, (i) such loan and security interest must be consented to in writing by such Participant's spouse during the 90-day period ending on the date on which the loan is so secured, (ii) such consent must acknowledge the effect of such loan and security interest, and (iii) such consent must be witnessed by a Plan representative or a notary public. (c) The Committee shall have sole discretion in granting or denying any such loan application; provided, however, that the Committee shall exercise such discretion in a uniform and nondiscriminatory manner. In connection with any such loan, a Participant shall sign such notes, evidences of indebtedness, security agreements and other documents as the Committee may, in its discretion, require. (d) Interest on such loans shall be charged at a reasonable rate, not in excess of that permitted by law, and all notes or other evidences of indebtedness shall require repayment of the principal amount of the loan and interest on it over a period certain, which shall not exceed five years. Such payments of interest and principal shall be made no less frequently than quarterly and shall provide for the level amortization of the loan over its term. Despite the foregoing, a loan's term may exceed five years if such loan is used to acquire any dwelling unit that is used or within a reasonable time (determined at the time the loan is made) will be used as the principal residence of the Participant. The Trustee, on receipt of authorization and the appropriate notes or other evidences of indebtedness from the Committee, shall -48- advance the amount of the loan to the Participant and shall treat such loan as an investment of the Trust. (e) In no event shall the outstanding principal balance of all loans from the Trust to any Participant exceed the lesser of: (i) $20,000, reduced by the excess (if any) of (A) the highest outstanding balance of all loans from the Trust to such Participant during the one-year period ending on the day before the date on which such loan is made, over (B) the outstanding balance of all loans from the Trust to such Participant on the date on which such loan is made; or (ii) one-half of the total vested amount credited to such Participant's Accounts. Section 6.9: Withdrawal at Age 59 1/2. Despite any other provision ----------- ------------------------ of the Plan, effective as of January 1, 2002, any Participant who has reached at least age 59 1/2 may elect to withdraw all or any portion of the vested balance of his or her Accounts, even though he or she is still an Employee. Any such withdrawal shall be subject to Section 6.2, and in the event an optional form of distribution is properly elected as set forth in such Section 6.2, such withdrawal shall be paid only in the form of a cash lump sum. Section 6.10 Hardship Withdrawals. ------------ -------------------- (a) With respect to his or her Deferred Income Account, a Participant may request a hardship withdrawal of the smaller of: (i) the aggregate amount of all of such Participant's Elective Contributions; (ii) the current value of such Participant's Deferred Income Account; or (iii) the amount required to meet the immediate and heavy financial need created by the hardship and not available to such Participant through the Plan or through all non-taxable loans available through the Company (including a withdrawal pursuant to Section 6.11). A request for such a withdrawal shall be written, dated and delivered to the Committee in accordance with rules promulgated by the Committee, and in the case of a married Participant, it must be consented to in writing by such Participant's spouse during the 90-day period ending on the date the withdrawal is made and such consent must be witnessed by a Plan representative or a notary public. If the Committee approves the withdrawal, distribution shall be made as soon thereafter as is administratively practical. -49- (b) The Committee may, in its sole discretion, approve or deny a hardship withdrawal request, but the Committee's determination shall be made in accordance with uniform and nondiscriminatory standards. The Committee shall approve a hardship withdrawal only if the withdrawal is necessary to satisfy one of the following immediate and heavy financial needs: (i) Payments of medical expenses incurred by the Participant and the Participant's spouse and dependants or payments necessary for those persons to obtain medical care. (ii) Payments (excluding mortgage payments) for the Participant's residence. (iii) Payments of tuition and related educational fees for the next 12 months of post-secondary education for the Participant and the Participant's spouse, children, and dependents. (iv) Payments to prevent the Participant's eviction from the Participant's principal residence. (v) Payments to prevent a foreclosure on the Participant's mortgage of the Participant's principal residence. (vi) Such other expenses that the Commissioner of the Internal Revenue Service deems to be an immediate and heavy financial need through the publication of revenue rulings, notices, and other documents of general applicability. The amount of an immediate and heavy financial need may include any amount that is necessary to pay federal, state, or local income taxes or penalties that are reasonably anticipated to result from the distribution. If a Participant has a balance in his or her Voluntary Contribution Account that is subject to withdrawal pursuant to Section 6.11, then such Participant must withdraw the maximum allowed pursuant to Section 6.11 before a withdrawal can be made pursuant to this Section 6.10(b). (c) For the purpose of this Section, the Committee may reasonably rely upon a Participant's representations regarding the Participant's financial affairs. (d) The Participant must sign an agreement that he or she will not make any elective contribution or employee contribution to the Plan or any other plan maintained by the Employer (including all qualified and nonqualified plans of deferred compensation, stock option plans, stock purchase plans, and cash or deferred arrangements that are part of a cafeteria plan) for twelve consecutive months following a hardship withdrawal. (e) The total amount of the Participant's Elective Contributions during the year following the Participant's taxable year in which the Participant made a hardship withdrawal may be no greater than (i) $7,000, as adjusted by the -50- Adjustment Factor, minus (ii) the amount of the Participant's Elective Contributions during the Participant's taxable year in which the hardship withdrawal was made. (f) Any earnings and gains on a Participant's Elective Contributions are not subject to withdrawal pursuant to this Section and shall be distributed only upon the events specified in Section 6.1 above. Section 6.11: Withdrawal Of Voluntary Contributions. With respect ------------ ------------------------------------- to his or her Voluntary Contribution Account, a Participant may direct that the smaller of (i) the aggregate amount of all of such Participant's Voluntary Contributions or (ii) the current value of such Participant's Voluntary Contribution Account be distributed to him or her. Such direction shall be written, dated and delivered to the Committee in accordance with the rules promulgated by the Committee, and in the case of a married Participant, it must be consented to in writing by such Participant's spouse during the 90-day period ending on the date the withdrawal is made and such consent must be witnessed by a Plan representative or a notary public. Such distribution shall be made as soon thereafter as is practical. Any earnings and gains on such contributions cannot be withdrawn pursuant to this Section and may be distributed only upon the events specified in Section 6.1 above, unless otherwise required by Code Section 72(e)(8). Section 6.12: Withdrawal of Rollover Contributions. Despite any ---------------------------------------------------- other provision of the Plan, effective as of January 1, 2002, a Participant may elect to withdraw all or any portion of the balance of his or her Rollover Contribution Account, even though he or she is still an Employee. Any such withdrawal shall be subject to Section 6.2, and in the event an optional form of distribution is properly elected as set forth in such Section 6.2, such withdrawal shall be paid only in the form of a cash lump sum. -51- ARTICLE VII ----------- TOP-HEAVY PLAN LIMITATIONS -------------------------- Section 7.1: Application Of Top-Heavy Rules. If the Plan is or ------------ ------------------------------ becomes a Top-heavy Plan, the limitations and requirements contained in this Article shall apply and shall supersede any conflicting provision of the Plan. Section 7.2: Definitions. ----------- ----------- (a) Top-heavy Plan. A "Top-heavy Plan" shall mean, with respect to -------------- any Plan Year, (i) any Defined Benefit Plan maintained by the Company or an Affiliated Company if, as of the Determination Date, the total Present Value of Accrued Benefits under such plan for Key Employees exceeds 60% of the total Present Value of Accrued Benefits under such plan for all participants in such plan; and (ii) any Defined Contribution Plan maintained by the Company or an Affiliated Company if, as of the Determination Date, the total Aggregate Accounts of Key Employees under the plan exceeds 60% of the total Aggregate Accounts of all participants under such plan. Each plan of the Company required to be included in an Aggregation Group shall be treated as a Top-heavy Plan if the Aggregation Group is a Top-heavy Group. (b) Top-heavy Group. A "Top-heavy Group" shall mean any Aggregation --------------- Group if the sum of (i) the total Present Value of Accrued Benefits for Key Employees under all Defined Benefit Plans included in the Aggregation Group (determined as of the Determination Date for each such plan), and (ii) the total Aggregate Accounts of Key Employees under all Defined Contribution Plans included in the Aggregation Group (determined as of the Determination Date for each such plan) exceeds 60% of a similar sum determined for all participants in such plans. For purposes of determining whether the plans in a Top-heavy Group exceed the foregoing 60% test, the plans shall be aggregated by adding together the results for each plan as of the Determination Dates for such plans that fall within the same calendar year. (c) Aggregation Group. An "Aggregation Group" shall mean each plan of ----------------- the Company or of an Affiliated Company in which a Key Employee is a participant, and each plan of the Company or of an Affiliated Company that enables the plan(s) containing a Key Employee to meet the antidiscrimination requirements of Code Sections 401(a)(4) or 410, including terminating or terminated plans maintained within the last five years ending on the Determination Date that would, but for such plan(s) termination, be part of the Aggregation Group. The Company can elect to include in the Aggregation Group any plan not otherwise required to be included, if such group, after such election, would continue to meet the antidiscrimination requirements of Code Sections 401(a)(4) and 410; provided, however, that any such plan will not be otherwise deemed a Top-heavy Plan by reason of such election. -52- (d) Determination Date. With respect to any plan year, "Determination ------------------ Date" shall mean the last day of the preceding plan year or, in the case of the first plan year of any plan, the last day of such plan year. (e) Present Value Of Accrued Benefit: A participant's "Present Value -------------------------------- of Accrued Benefit" as of any Determination Date shall be calculated: (i) as of the most recent valuation date ("Valuation Date") which is within the 12-month period ending on such Determination Date; (ii) for the first plan year, as if (1) the participant terminated service as of the Determination Date, or (2) the participant terminated service as of the Valuation Date, but taking into account the estimated Present Value of Accrued Benefit as of the Determination Date; (iii) for any other plan year, as if the participant terminated service as of the Valuation Date; and (iv) using the interest rate and mortality assumptions set forth in the Defined Benefit Plan. (v) Solely for the purposes of determining if the Plan, or any other plan included in the Aggregation Group, is a Top-heavy Plan, the accrued benefit of a Non-Key Employee shall be determined under (1) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Company and all Affiliated Companies, or (2) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code Section 411(b)(1)(C). For the foregoing purposes, the Valuation Date must be the same valuation date used for computing the defined benefit plan minimum funding costs, regardless of whether a valuation is performed that year. (f) Aggregate Account: A participant's "Aggregate Account" shall be ----------------- determined as follows: (i) For Defined Contribution Plans not subject to the minimum funding requirements of Code Section 412, a participant's Aggregate Account as of any Determination Date shall be the sum of: (A) such participant's account balance as of the most recent valuation date ("Valuation Date") occurring within the 12-month period ending on such Determination Date; plus (B) an adjustment for contributions due as of such Determination Date. Such adjustment is generally the amount of any contributions actually made after the Valuation Date but before the -53- Determination Date. In the first plan year, such adjustment shall also reflect any contributions actually made after the Determination Date that are allocated as of a date in that first plan year. (ii) For Defined Contribution Plans subject to the minimum funding requirements of Code Section 412, a participant's Aggregate Account as of any Determination Date shall be the sum of: (A) such participant's account balance as of the most recent valuation date ("Valuation Date") occurring within the 12-month period ending on such Determination Date, including contributions that would be allocated as of a date not later than such Determination Date; plus (B) an adjustment for contributions due as of such Determination Date. Such adjustment shall reflect the amount of any contribution actually made (or due to be made) after the Valuation Date but before the expiration of the extended payment period described in Code Section 412(c)(10). (g) Key Employee. "Key Employee" shall mean any participant of any ------------ plan maintained by the Company or an Affiliated Company who, at any time during the plan year or any of the four preceding plan years, was: (i) an officer of the Company or an Affiliated Company whose annual Compensation exceed 50% of the amount in effect under Code Section 415(b)(1)(A) for any such plan year (provided, however, that no more than 50 employees (or, if lesser, the greater of three employees or 10% of all employees) shall be treated as officers; provided further, however, that if the total number of officers exceeds this numerical limitation, only the highest compensated officers shall be included); (ii) one of the ten employees who (1) has annual Compensation for a plan year greater than the dollar limitation in effect under Code Section 415(c)(1)(A) for the calendar year in which such plan year ends, and (2) owns (or is considered to own under Code Section 318) both more than a 1/2% interest and the largest interests in the Company or an Affiliated Company; (iii) a 5% Owner of the Company or an Affiliated Company; or (iv) a 1% Owner of the Company or an Affiliated Company whose annual Compensation exceed $150,000, or such other amount as may be allowed under Code Section 416(i) and the applicable Regulations. In making this determination of a 5% Owner and a 1% Owner for purposes of this Section, (i) the Code Section 318(a)(2) corporate attribution rules, as modified by Code Section 416(i)(1)(B)(iii), shall apply, and (ii) the business aggregation rules of -54- Code Section 414 shall not apply. For purposes of the foregoing definition, (i) the beneficiary of a Key Employee shall be treated as a Key Employee, and (ii) the beneficiary of a former Key Employee shall be treated as a former Key Employee. Inherited benefits will retain the character of the benefits of the Key Employee who performed the services for the Company. For purposes of the foregoing, the identification of a Key Employee will be determined in accordance with Code Section 416(i). (h) Non-Key Employee. "Non-Key Employee" shall include any ---------------- Participant who is not a Key Employee, including any Participant who is a former Key Employee. Section 7.3: 60% Test - Special Rules. For purposes of applying the ----------- ------------------------ 60% test described in Section 7.2(a), the following special rules shall apply: (a) Participant Contributions. Benefits derived from both ------------------------- Participant contributions (whether voluntary or mandatory, but not deductible contributions) and the Company's contributions shall be considered. (b) Previous Distributions. In determining the Present Value of ---------------------- Accrued Benefit or the Aggregate Account of any participant under any plan (or plans that form the Aggregation Group), such present value or account shall be increased by the aggregate of distributions made to such participant from such plan (or plans forming the Aggregation Group) during the five-year period ending on the Determination Date. For this purpose, "participant" shall include an employee who is no longer employed by the Company or an Affiliated Company. Despite the foregoing, any distribution to a participant that is made after the Valuation Date and before the Determination Date for any plan year shall not be considered a distribution to the extent it is already included in such participant's Present Value of Accrued Benefit or Aggregate Account as of such Valuation Date. (c) Rollover Contributions. Rollover contributions shall be treated ---------------------- as follows: (i) The following rules shall apply to related rollovers and plan-to-plan transfers (ones either not initiated by the participant or made to a plan maintained by the Company or any Affiliated Company). If the plan provides such rollover or plan-to-plan transfer, it shall not be counted as a distribution for purposes of this Section 7.3. If the plan receives such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the participant's Present Value of Accrued Benefit or Aggregate Account, regardless of the date on which such rollover or plan-to-plan transfer was received. (ii) The following rules shall apply to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by a participant and made from a plan maintained by one employer to a plan maintained by another -55- employer). If the plan provides such rollover or plan-to-plan transfer, it shall always consider such rollover or plan-to-plan transfer as a distribution for purposes of this Section 7.3. If the plan receives such rollover or plan-to-plan transfer, it shall not consider such rollover or plan-to-plan transfer as part of the participant's Present Value of Accrued Benefit or Aggregate Account if it was accepted after December 31, 1983. (d) Change Of Status. The accrued benefit or account of a ---------------- participant who was formerly a Key Employee, but who ceased to be a Key Employee in any plan year, will not be taken into account for such plan year. (e) No Service For Last Five Years. If any individual has not ------------------------------ performed services for the employer maintaining the plan during the five-year period ending on the Determination Date, the accrued benefit or account of such individual shall not be taken into account. Section 7.4: Minimum Vesting Requirement. As the Plan's normal ----------- --------------------------- vesting schedule equals or exceeds the top-heavy vesting schedule, the normal vesting schedule shall continue to apply if the Plan becomes a Top-heavy Plan. Section 7.5: Minimum Contribution Requirement. ----------- -------------------------------- (a) If the Plan is a Top-heavy Plan, then in no event shall the Company's annual contribution on behalf of any Non-Key Employee be less than 3% of such Participant's Earnings. This minimum contribution shall be made even though, under the other provisions of the Plan, the Participant would not otherwise be entitled to a contribution on his or her behalf, or would have received a lesser contribution for the Plan Year, because of (i) the Participant's failure to complete 1,000 Hours of Service, (ii) the Participant's failure to make mandatory employee contributions to the Plan, or (iii) the Participant's exclusion from the Plan because such Participant's Earnings is less than the Plan's stated amount. Despite the foregoing, no minimum contribution needs to be made under this Section on behalf of a Participant who was not an Employee on the last day of the Plan Year. (b) For Plan Years beginning on or after January 1, 1985, any Company contribution that is attributable to a salary reduction or similar arrangement shall be considered for purposes of satisfying the minimum contribution required by this Section. For Plan Years beginning on or after January 1, 1989, Elective Contributions on behalf of Key Employees are taken into account in determining the minimum required contribution under Code Section 416(c)(2), but such contributions on behalf of Non-Key Employees may not be treated as employer contributions for purposes of the minimum contribution or benefit requirements of Code Section 416. (c) If the Company maintains one or more qualified plans in addition to the Plan, and if the Plan is a Top-heavy Plan, then in accordance with the applicable Regulations, only one such plan need be designated by the Company to -56- provide the minimum benefit provided for in this Section. However, if for Plan Years beginning before January 1, 2000, such multiple plans, including the Plan, include a Defined Benefit Plan and a Defined Contribution Plan, the 1.0 Rule (as it may be modified by the top-heavy plan transitional rule under Code Section 416(h)(3)) shall be in effect if, and only if, the following two requirements are satisfied: (i) Minimum Benefit Requirement. The "3%" set forth in this --------------------------- Section shall be replaced by "4%". (ii) The 90% Test. The sum of the Present Value of Accrued ------------ Benefits plus the Aggregate Accounts held for all Key Employees under the plans cannot exceed 90% of a similar sum determined for all participants. For purposes of the 1.0 Rule, all references to "1.25" shall be replaced by "1.0," if either of the above additional requirements is not met. (d) Despite the foregoing, if (i) the total annual contribution allocated to the Accounts of each Key Employee is less than 3% of each Key Employee's Earnings and (ii) this Plan is not required to be included in an Aggregation Group to enable a Defined Benefit Plan to meet the requirements of Code Section 401(a)(4) or 410, then the total minimum annual contribution on behalf of each Non-Key Employee shall be equal to the largest percentage contribution on behalf of any Key Employee. -57- ARTICLE VIII ------------ THE COMMITTEE ------------- Section 8.1: Members. ----------- -------- (a) The Committee shall consist of three or more members and shall be appointed by the Board of Directors. Its members shall serve at the pleasure of the Board of Directors. A person so appointed shall become a member by filing a written notice of acceptance with the Board of Directors. A member of the Committee may resign by delivering a written notice of resignation to the Board of Directors. The Board of Directors may remove any member of the Committee by delivering a written notice of such removal to him or her. A resignation or removal shall be effective on the date specified in such notice or resolution. The Trustee shall be promptly notified by the Board of Directors of any change in the membership of the Committee, and shall be supplied with specimen signatures of each Committee member. (b) Vacancies in the membership of the Committee shall be filled promptly by the Board of Directors. If the Company is not in existence when a vacancy in the Committee membership arises, such vacancy shall be filled as follows, in the indicated order of priority: 1st: The remaining member(s) of the Committee shall appoint new --- member(s) to fill all vacancies. 2nd: A majority of the adults then entitled to benefits from the Plan --- shall appoint new member(s) to fill all vacancies. If such an adult is not able to participate in such appointment, then his or her spouse, if any, shall act for him or her. If there is no such spouse, then such adult's guardian or conservator shall act for him or her. 3rd: If vacancies on the Committee are not filled pursuant to the --- foregoing, then a court of competent jurisdiction shall fill such vacancies. The Trust shall pay the expenses incurred in connection with such court appointment. Section 8.2: Committee Action. ----------- ---------------- (a) The Committee shall choose a Secretary and an Assistant Secretary (either of whom is referred to below as the "Secretary") who shall keep minutes of the Committee's proceedings and all records and documents pertaining to the Committee's administration of the Plan. Any action of the Committee shall be taken pursuant to the vote of a majority, or pursuant to the written consent of a majority, of its members. A quorum of the Committee shall consist of two members. The Secretary may sign any certificate or other document on behalf of the -58- Committee. The Trustee and all other persons dealing with the Committee may conclusively rely upon any certificate or other document that is signed by the Secretary and that purports to have been duly authorized by the Committee. (b) A member of the Committee shall not vote or act upon any matter that relates solely to himself or herself as a Participant. If a matter arises affecting one member of the Committee as a Participant and the other members of the Committee are unable to agree on the disposition of such matter, the Board of Directors shall appoint a substitute member of the Committee in the place and stead of the affected member, for the sole purpose of passing upon and deciding that particular matter. If the Company is not in existence then, such substitute member of the Committee shall be appointed in the manner provided for in this Article when there is a vacancy in the Committee's membership. Section 8.3: Rights And Duties. ----------- ----------------- (a) Except as otherwise set forth in subsections (b), (c) and (d) below, all fiduciary responsibility respecting the management or administration of the Plan and its assets are vested in the Committee, and the Committee shall be the Named Fiduciary with respect to the Plan's assets, and the "administrator" of the Plan as defined in Section 3(16)(A) of ERISA. (b) The Trustee shall (i) have custody of the Plan's assets, (ii) have the powers designated in the trust document and (iii) be the Named Fiduciary with respect to the custody of the Plan's assets. (c) The Committee may designate one or more Investment Managers (including the Trustee, if the Trustee is authorized to be an Investment Manager) to manage the investment of the Plan's assets, and such Investment Manager(s) shall be the Named Fiduciary with respect to the management and investment of the Plan's assets. (d) The Committee may designate one or more persons or entities to carry out any of its functions under the Plan, other than those of managing and controlling the Plan's assets, which may only be done pursuant to subsections (b) or (c) immediately above. (e) The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, and shall be charged with the general administration of the Plan, except to the extent that powers are retained by the Company. The Committee shall have the discretion and authority to interpret the Plan. The Committee's powers shall include (without limitation) the power and discretion: (i) to determine all questions relating to the eligibility of Employees to participate in the Plan; -59- (ii) to determine, compute and certify to the Trustee the amount and kind of benefits payable to the Participants and their Beneficiaries; (iii) to authorize all disbursements by the Trustee from the Trust; (iv) to direct the Trustee with respect to all investments of the principal or income of the Trust and with respect to other matters concerning the Trust's assets; (v) to maintain all the necessary records for the administration of the Plan, other than those maintained by the Trustee; and (vi) to adopt, amend and interpret rules for the administration or regulation of the Plan that are not inconsistent with its terms and the applicable law and Regulations. (f) Members of the Committee and other Fiduciaries shall discharge their duties with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims. Subject to any right of Participants to direct how their Accounts will be invested and other provisions of the Plan, the Committee shall diversify the Plan's investments so as to minimize the risk of large losses, unless, under the circumstances, it is clearly prudent not to do so, or unless the Plan specifically provides for the acquisition and holding of qualifying employer real property or securities, as defined in Sections 407(d)(4) and (5) of ERISA. (g) A member of the Committee or other Fiduciary shall be liable for a breach of fiduciary responsibility of another member or another Fiduciary only if: (i) such member or Fiduciary participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other member or Fiduciary, knowing that such act or omission is a breach; (ii) such member or Fiduciary has enabled such other member or Fiduciary to commit a breach by virtue of his or her failure to comply with the duty of care set forth above in the administration of such member's or Fiduciary's own responsibilities as a Fiduciary; or (iii) such member or Fiduciary has knowledge of a breach by such other member or Fiduciary, unless such member or Fiduciary makes reasonable efforts under the circumstances to remedy such breach. Section 8.4: Information. To enable the Committee to perform its ----------- ----------- functions, the Company shall supply complete and timely information to the Committee on all matters relating to the compensation of all Participants, their -60- employment, their retirement, death, or the cause for termination of employment, and such other pertinent information as the Committee may require. The Committee shall advise the Trustee of such of the foregoing information as may be pertinent to the Trustee's administration of the Trust. Section 8.5: Compensation, Indemnity And Liability. ----------- ------------------------------------- (a) The members of the Committee shall serve without compensation for their services. No member of the Committee or other Fiduciary need be bonded, except as required by federal or state law or regulation. The Committee is authorized to employ such legal counsel or other persons as it may deem advisable to assist it in the performance of its duties under the Plan. (b) The Company shall indemnify and hold each member of the Committee harmless against any and all expenses and liabilities arising out of membership on the Committee (including reasonable attorneys' fees and disbursements), excepting only expenses and liabilities arising out of such member's own willful misconduct or gross negligence. The provisions of this subsection shall survive the termination of the Plan and the resignation or removal of the Committee member who is entitled to the indemnity. Section 8.6: Administrative Expenses Of The Plan. All expenses of ----------- ----------------------------------- administering the Plan shall by paid by the Trustee and shall be a charge against the trust estate, except to the extent that such expenses may be paid by the Company. The expense of maintaining errors and omissions liability insurance, if any, covering members of the Committee, the Trustee, or any other Fiduciary shall be paid by the Company. -61- ARTICLE IX ---------- AMENDMENT AND TERMINATION ------------------------- Section 9.1: Amendments. The Company may amend the Plan from time ----------- ---------- to time, and may amend or cancel any such amendment. Each amendment must be set forth in a document that is signed by the Company, and the Plan shall be deemed to have been amended in the manner and at the time set forth in such document, and all Participants shall be bound by it. Despite the foregoing, any such amendment shall be subject to the following provisions: (a) No amendment shall be effective that attempts to cause any asset of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants or their Beneficiaries, except for such changes, if any, that are required to permit the Plan to meet the applicable requirements of the Code, or as may be made to assure the deductibility for tax purposes of any contribution by the Company. (b) No amendment shall have any retroactive effect that would deprive any Participant of any benefit already vested, nor shall the vesting provisions of the Plan be amended, unless each Participant with at least three Years of Service is permitted to elect to continue to have the prior vesting provisions apply to him or her, except for such changes, if any, that are required to permit the Plan to meet applicable requirements of the Code, or as may be made to assure the deductibility for tax purposes of any contribution by the Company. Any such election must be made during the period beginning with the date the amendment is adopted and ending 60 days after the latest of: (i) the date the amendment is adopted; (ii) the date the amendment becomes effective; or (iii) the date on which the Participant receives written notice of the amendment from the Company or the Committee. (c) No amendment shall create or effect any discrimination in favor of Participants who are highly compensated Employees. (d) No amendment shall increase the duties or liabilities of the Trustee without the Trustee's written consent. (e) No amendment shall decrease any Participant's account balance or eliminate an optional form of distribution. -62- Section 9.2: Discontinuance Of Plan. ----------- ---------------------- (a) The Company expects that the Plan and the Company's contributions under it will be continued indefinitely, and the Trust is irrevocable. However, continuance of the Plan is not assumed as a contractual obligation of the Company, and the Company reserves the right to reduce, temporarily suspend, or discontinue contributions under the Plan if, and to the extent, permitted under ERISA or the Code. Upon a complete discontinuance of the Company's contributions, the interest of each Participant in each of his or her Accounts shall become 100% vested, if it is not already fully vested. In addition, upon a partial termination (within the meaning of Code Section 411(d)(3)), the interest of each affected Participant in each of his or her Accounts shall become 100% vested, if it is not already fully vested. (b) The Company may terminate the Plan at any time upon delivering a written notice to the Trustee. Upon the Plan's termination, the interest of each Participant in each of his or her Accounts shall become 100% vested, if it is not already fully vested. Upon the termination of the Plan without the establishment of a successor plan (within the meaning of Code Section 401(k)(10)(A)(i)), the Committee shall, as is necessary, direct the Trustee to liquidate the Trust's assets. After such liquidation, the Committee shall make, after deducting the estimated expenses of such liquidation and distribution, the allocations required under the Plan as though the date when such liquidation was completed were an Anniversary Date. After receiving appropriate instructions from the Committee, the Trustee shall promptly distribute the Trust's assets in accordance with such instructions. (c) The Plan shall automatically terminate upon the happening of any of the following events: (i) adjudication of the Company as a bankrupt; (ii) general assignment by the Company to or for the benefit of creditors; or (iii) dissolution of the business of the Company, provided, however, that the Plan may be continued by any successor business organization or any business organization into which the Company is merged or consolidated that employs some or all of the Participants, if such business organization agrees with the Trustee in writing to accept the obligations of the Plan and to continue it in full force and effect in accordance with Section 11.10. Section 9.3: Failure To Contribute. The Company's failure to ----------- --------------------- contribute to the Trust for any Plan Year shall not, of itself, be a discontinuance of contributions to the Plan. -63- ARTICLE X --------- CLAIMS PROCEDURE ---------------- Section 10.1: Presentation Of Claim. Any Participant or Beneficiary ------------ --------------------- of a deceased Participant or duly authorized representative of either (such Participant or Beneficiary or duly authorized representative being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts (i) credited to (or deducted from) such Claimant's Accounts, or (ii) distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. The claim must state with particularity the benefit determination desired by the Claimant. Section 10.2: Notification Of Decision. The Committee shall consider a ------------ ------------------------ Claimant's claim within a reasonable time, but not later than 90 days after receipt of the claim by the Plan, unless the Committee determines that special circumstances require an extension of time for processing the claim. If the Committee determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. Once the benefit determination is made in accordance with the foregoing, the Committee shall notify the Claimant in writing: (a) that the Claimant's requested benefit determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion adverse, in whole or in part, to the Claimant's requested benefit determination. The Committee's notice of adverse benefit determination must be written in a manner calculated to be understood by the Claimant, and it must contain: (i) the specific reason(s) for the adverse benefit determination; (ii) reference to the specific provisions of the Plan upon which such adverse benefit determination was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) a description of the Plan's claim review procedures set forth in Section 10.3 and the time limits applicable to such procedures, -64- including a statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review. Section 10.3: Review Of A Denied Claim. Within 60 days after ------------ ------------------------ receiving a notice from the Committee of an adverse benefit determination, a Claimant may file with the Board of Directors a written request for a review of such adverse determination. Thereafter, but not later than 30 days after the review procedure began, the Claimant: (a) may submit written comments, documents, records, and other information relating to the claim for benefits; (b) shall be provided, 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; and/or (c) may request a hearing, which the Board of Directors, in its discretion, may grant. The Board of Directors shall take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. Section 10.4: Decision On Review. The Board of Directors shall render ------------ ------------------ its decision on review within a reasonable time, and not later than 60 days after the receipt of the Claimant's review request, unless a hearing is held or other special circumstances require additional time, in which case the Board of Directors' decision must be rendered within 120 days after the receipt of the Claimant's review request. If the Board of Directors determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 60- day period. In no event shall such extension exceed a period of 60 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Board of Directors expects to render the benefit determination on review. The Board of Directors' decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) reference to the specific Plan provisions upon which the decision was based; (c) a statement that 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; -65- (d) a statement of the Claimant's right to bring an action under ERISA Section 502(a) concerning an adverse benefit determination; and (e) such other matters as the Board of Directors deems relevant. For purposes of this Article, a document, record, or other information shall be considered "relevant" to a Claimant's claim if such document, record, or other information was relied upon in making the benefit determination; was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination; or demonstrates compliance with the administrative processes and safeguards required under ERISA in making the benefit determination. -66- ARTICLE XI ---------- MISCELLANEOUS ------------- Section 11.1: Contributions Not Recoverable. Subject to the next two ------------ ----------------------------- sentences, it shall be impossible for any part of the Trust's principal or income to be used for, or diverted to, purposes other than the exclusive benefit of the Participants or their Beneficiaries. Despite any other provision of the Plan, the Company shall be entitled to recover (within one year of the specified event): (a) any contribution made to the Trust if (i) the Commissioner of Internal Revenue, or his delegate, determines that the Plan and the Trust do not meet the applicable requirements of the Code upon their initial qualification, with the result that the Trust is not exempt from federal income tax, (ii) such contribution was conditioned on such initial qualification of the Plan and Trust, (iii) the application for determination of such initial qualification was made within the time prescribed by law for filing the Company's tax return for the taxable year in which the Plan and Trust was adopted, or such later date as the Secretary of the Treasury may prescribe, and (iv) such contribution is returned to the Company within one year after the date the initial qualification is denied; (b) any contribution by the Company that was made by a mistake of fact, provided that such contribution is returned to the Company within one year of the contribution; (c) any contribution by the Company (or any portion of it) that was disallowed by the Internal Revenue Service as a deduction, provided that such contribution (or such portion of it), to the extent disallowed, is returned to the Company within one year of the disallowance of the deduction; and (d) upon termination of the Plan, any assets held in a suspense account pursuant to Section 4.7(c)(iv). Subsections (b) and (c) above shall be operative only if, and to the extent, expressly authorized by the applicable Regulations, or a Revenue Ruling, Revenue Procedure, or other official promulgation of the Internal Revenue Service. Section 11.2: Limitation On Participants' Rights. Participation in the ------------ ---------------------------------- Plan and Trust shall not give any Employee the right to be retained in the Company's employ or any right or interest in the Trust other than as provided in the Plan. The Company reserves the right to dismiss any Employee without any liability for any claim against the Trust (except to the extent provided in the Plan) or against the Company. All benefits payable under the Plan shall be provided solely from the assets of the Trust. -67- Section 11.3: Receipt Or Release. Any payment to any Participant or ------------ ------------------ Beneficiary pursuant to the Plan shall, to the extent of it, be in full satisfaction of all claims against the Trustee, the Committee, Board of Directors, and the Company, and the Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to sign a receipt and release to such effect. Section 11.4: Nonassignability. ------------ ---------------- (a) None of the benefits, payments, proceeds or claims of any Participant or Beneficiary shall be subject to any claim of any creditor and, in particular, they shall not be subject to attachment or garnishment or other legal process by any creditor. In addition, no Participant or Beneficiary shall have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under the Plan. (b) Any restriction or prohibition against the assignment or alienation of benefits under the Plan shall not apply to (i) a "qualified domestic relations order" ("QDRO"), as that term is defined in Code Section 414(p), or (ii) a benefit reduction or offset in accordance with Code Section 401(a)(13)(C). To the extent provided in any QDRO, a former spouse of a Participant shall be treated as the spouse or surviving spouse of such Participant for all purposes under the Plan. Notwithstanding any other provision in this Plan, a lump sum distribution may be made to an alternate payee under a QDRO at any time after the Committee has determined that such QDRO satisfies the requirements of Code Section 414(p) and Section 206(d) of ERISA, and regardless of whether or not the Participant who is a party to such QDRO is then eligible to receive a distribution under the Plan. Section 11.5: Governing Law. The Plan and the Trust shall be ------------ ------------- construed, administered, and governed in all respects under and by applicable federal law and, if they are not inconsistent with federal law, the laws of the State of California. If any provision is susceptible to more than one interpretation, the controlling interpretation shall be the one that is consistent with the Plan being a qualified plan under Code Section 401. If any provision of the Plan is held by a court of competent jurisdiction to be invalid or unenforceable, the other provisions shall continue to be fully effective. Section 11.6: Headings. Headings and subheadings in the Plan are ------------ -------- inserted for convenience of reference only, and they are not to be considered in construing the provisions of the Plan. Section 11.7: Counterparts. This Agreement may be signed in ------------ ------------ counterparts, each of which shall be deemed an original, and all such counterparts -68- shall constitute but one and the same document, which may be sufficiently evidenced by any one counterpart. Section 11.8: Successors And Assigns. This Agreement shall inure to ------------ ---------------------- the benefit of, and be binding upon, the parties to it, and their successors and assigns. Section 11.9: Gender And Number. As used in the Plan, the masculine, ------------ ----------------- feminine and neuter gender, and the singular and plural number, each include the other(s), unless the context indicates otherwise. Section 11.10: Merger, Consolidation Or Transfer Of Plan Assets. The ------------- ------------------------------------------------ Plan shall not be merged or consolidated with, nor shall its assets or liabilities be transferred to, any other plan (the "new plan") unless each Participant would receive in such new plan a benefit immediately after such merger, consolidation or transfer, if such new plan were then terminated, that is equal to, or greater than, the benefit he or she would have been entitled to receive immediately before such merger, consolidation or transfer, if the Plan had been terminated then. Section 11.11: Joinder Of Parties. In any action or other judicial ------------- ------------------ proceeding affecting the Plan, it shall be necessary to join as parties only the Trustee, the Committee and the Company, and no Participant or other person having an interest in the Plan shall be entitled to any notice or service of process. Section 11.12: The Trust. This Plan and the Trust are both part of and ------------- --------- constitute a single integrated employee benefit plan and trust and shall be construed together. Section 11.13: Special Requirements For USERRA. ------------- ------------------------------- (a) Despite any other provision of the Plan, an Employee re-employed under Chapter 43 of Title 38, United States Code ("USERRA") shall not incur a Break in Service by reason of such Employee's period of Qualified Military Service. (b) Each period of Qualified Military Service served by an Employee shall, upon re-employment under USERRA with the Company, constitute service with the Company for the purpose of determining the nonforfeitability of the Employee's accrued benefits under the Plan and for the purpose of determining the accrual of benefits under the Plan. -69- (c) An Employee re-employed under USERRA shall be entitled to accrued benefits that are contingent on the making of, or derived from, employee contributions or elective deferrals only to the extent the Employee makes payment to the Plan with respect to such contributions or deferrals. No such payment may exceed the amount the Employee would have been permitted or required to contribute had the Employee remained continuously employed by the Company throughout the period of Qualified Military Service. Any payment to the Plan shall be made during the period beginning on the date of re-employment and whose duration is three times the period of the Qualified Military Service (but not greater than five years). (d) For purposes of this Section, "Qualified Military Service" shall mean any service in the uniformed services (as defined in USERRA) by any Employee if such Employee is entitled to re-employment rights under USERRA with respect to such service. * * * * * * * * * [Signature Page Follows] -70- Signature Page -------------- The Company has signed the Plan on the date indicated below, to be effective as of the Effective Date. "Company" UNIFIED WESTERN GROCERS, INC. December 19, 2001 By: /s/ Don Gilpin Its: Vice President, Human Resources -71- Schedule A ---------- EGTRRA Model Amendment ---------------------- Preamble 1. Adoption and Effective Date of Schedule A. This Schedule of the Plan is ----------------------------------------- adopted to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). This Schedule is intended as good faith compliance with the requirements of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued thereunder. Except as otherwise provided, this Schedule shall be effective as of the first day of the first Plan Year beginning after December 31, 2001. 2. Supersession of inconsistent provisions. This Schedule shall supersede the --------------------------------------- provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Schedule. Section N/A. Plan Loans for Owner-Employees and Shareholder Employees Effective for Plan loans made after December 31, 2001, Plan provisions prohibiting loans to any owner-Employee or shareholder-Employee shall cease to apply. Section 1. Limitations on Contributions 1. Effective Date. This Section shall be effective for limitation years -------------- beginning after December 31, 2001. 2. Maximum Annual Addition. Except to the extent permitted under Section ----------------------- 414(v) of the Code, if applicable, the Annual Addition that may be contributed or allocated to a Participant's Account under the Plan for any limitation year shall not exceed the lesser of: (a) $40,000, as adjusted for increases in the cost-of-living under Section 415(d) of the Code, or (b) 100 percent of the Participant's Compensation, within the meaning of Section 415(c)(3) of the Code, for the limitation year. The Compensation limit referred to in (b) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition. Section 2. Increase in Compensation Limit The annual Compensation of each Participant taken into account in determining allocations for any Plan Year beginning after December 31, 2001, shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Section -72- 401(a)(17)(B) of the Code. Annual Compensation means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Plan (the determination period). The cost-of- living adjustment in effect for a calendar year applies to annual Compensation for the determination period that begins with or within such calendar year. Section 3. Modification of Top-Heavy Rules 1. Effective Date. This Section shall apply for purposes of determining -------------- whether the Plan is a Top-heavy Plan under Section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of Section 416(c) of the Code for such years. This Section amends Article VII of the Plan. 2. Determination of top-heavy status. --------------------------------- 2.1 Key Employee. Key Employee means any Employee or former Employee ------------ (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Company having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for plan years beginning after December 31, 2002), a 5-Percent Owner of the Company, or a 1- Percent Owner of the Company having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable Regulations and other guidance of general applicability issued thereunder. 2.2 Determination of present values and amounts. This Section 2.2 shall ------------------------------------------- apply for purposes of determining the present values of accrued benefits and the amounts of Account balances of Employees as of the Determination Date. 2.2.1 Distributions during year ending on the Determination Date. ---------------------------------------------------------- The present values of accrued benefits and the amounts of Account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "5-year period" for "1-year period." -73- 2.2.2 Employees not performing services during year ending on the ----------------------------------------------------------- Determination Date. The accrued benefits and Accounts of any ------------------ individual who has not performed services for the Company during the 1-year period ending on the Determination Date shall not be taken into account. 3. Minimum benefits. ---------------- 3.1 Matching Contributions. Company Matching Contributions shall be taken ---------------------- into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to Matching Contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Company Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the Actual Contribution Percentage test and other requirements of Section 401(m) of the Code. N/A Contributions under other plans. The minimum benefit requirement ------------------------------- shall be met in another plan (including another plan that consists solely of a cash or deferred arrangement which meets the requirements of Section 401(k)(12) of the Code and Matching Contributions with respect to which the requirements of Section 401(m)(11) of the Code are met). N/A Minimum Benefits for Employees Also Covered Under Another Plan: (The -------------------------------------------------------------- Company should describe below the extent, if any, to which the top-heavy minimum benefit requirement of Section 416(c) of the Code and Section ___ of the Plan shall be met in another plan. This should include the name of the other plan, the minimum benefit that will be provided under such other plan, and the Employees who will receive the minimum benefit under such other plan.) Section N/A. Vesting of Company Matching Contributions 1. Applicability. This Section shall apply to Participants with accrued ------------- benefits derived from Company Matching Contributions who complete an hour of service under the Plan in a Plan Year beginning after December 31, 2001. This Section shall also apply to all other Participants with accrued benefits derived from Company Matching Contributions. 2. Vesting schedule. A Participant's accrued benefit derived from Company ---------------- Matching Contributions shall vest as provided by the attached schedule. If applicable, the election in Section _______ of the Plan [enter the Section of the Plan that provides for the election of the former vesting schedule under Section 411(a)(10) of the Code] shall apply. -74- 3. Application. ----------- (Check the following option to apply this Section to all Participants with accrued benefits derived from Company Matching Contributions, rather than just those who complete an hour of service under the Plan in a Plan Year beginning after December 31, 2001.) ____ This Section shall apply to all Participants with accrued benefits derived from Company Matching Contributions. Vesting Schedule for Company Matching Contributions: ____ Option 1. A Participant's accrued benefit derived from Company Matching Contributions shall be fully and immediately vested. ____ Option 2. A Participant's accrued benefit derived from Company Matching Contributions shall be nonforfeitable upon the Participant's completion of three years of vesting service. ____ Option 3. A Participant's accrued benefit derived from Company Matching Contributions shall vest according to the following schedule:
Years of vesting service Nonforfeitable percentage 2 20 3 40 4 60 5 80 6 100
_________________________ Section 4. Direct Rollovers of Plan Distributions 1. Effective Date. This Section shall apply to distributions made after -------------- December 31, 2001. 2. Modification of definition of Eligible Retirement Plan. For purposes of the ------------------------------------------------------ direct rollover provisions in Section 6.7 of the Plan, an Eligible Retirement Plan shall also mean an annuity contract described in Section 403(b) of the Code and an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or -75- former spouse who is the alternate payee under a qualified domestic relation order, as defined in Section 414(p) of the Code. 3. Modification of definition of Eligible Rollover Distribution to exclude ----------------------------------------------------------------------- hardship distributions. For purposes of the direct rollover provisions in - ---------------------- Section 6.7 of the Plan, any amount that is distributed on account of hardship shall not be an Eligible Rollover Distribution and the distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan. 4. Modification of definition of Eligible Rollover Distribution to include ----------------------------------------------------------------------- after-tax Employee contributions. For purposes of the direct rollover - -------------------------------- provisions in Section 6.7 of the Plan, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax Employee contributions which are not includable in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is ineludible in gross income and the portion of such distribution which is not so includable. Section 5. Rollovers from Other Plans 1. Effective Date. The Plan will accept Participant Rollover Contributions -------------- and/or direct rollovers of distributions made after December 31, 2001. 2. Acceptable types of plans. ------------------------- 2.1 Direct Rollovers. ---------------- The Plan will accept a direct rollover of an Eligible Rollover Distribution from: . a qualified plan described in Section 401(a) or 403(a) of the Code, including after-tax Employee contributions. . an annuity contract described in Section 403(b) of the Code, excluding after-tax Employee contributions. . an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. 2.2 Participant Rollover Contributions from Other Plans. --------------------------------------------------- The Plan will accept a Participant Contribution of an Eligible Rollover Distribution from: . a qualified plan described in Section 401(a) or 403(a) of the Code. -76- . an annuity contract described in Section 403(b) of the Code. . an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. 2.3 Participant Rollover Contributions from IRAs. -------------------------------------------- The plan will accept a Participant Rollover Contribution of the portion of a distribution from an individual retirement account or annuity described in Section 408(a) or 408(b) of the Code that is eligible to be rolled over and would otherwise be includable in gross income. Section 6. Rollovers Disregarded in Involuntary Cash-Outs 1. Effective Date. The provisions of this section shall apply to distributions -------------- made after December 31, 2001. 2. Application. The provisions of this section shall apply with respect to ----------- participants who separated from service after December 31, 2001. 3. Valuation. For purposes of Article VI of the Plan, the value of a --------- Participant's nonforfeitable Account balance shall be determined without regard to that portion of the Account balance that is attributable to Rollover Contributions (and earnings allocable thereto) within the meaning of Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code. If the value of the Participant's nonforfeitable account balance as so determined is $5,000 or less, the Plan shall immediately distribute the participant's entire nonforfeitable account balance. Section 7. Repeal of Multiple Use Test The multiple use test described in Treasury Regulation Section 1.401(m)-2 and Section 3.8 of the Plan shall not apply for Plan Years beginning after December 31, 2001. Section 8. Elective Contributions -- Contribution Limitation No Participant shall be permitted to have Elective Contributions made under this Plan, or any other qualified plan maintained by the Company during any taxable year, in excess of the dollar limitation contained in Section 402(g) of the Code in effect for such taxable year, except to the extent permitted under Section 414(v) of the Code, if applicable. Section N/A. Maximum Salary Reduction Contributions Except to the extent permitted under Section 414(v) of the Code, if applicable, the maximum salary reduction contribution that can be made to this Plan is the amount determined under Section 408(p)(2)(A)(ii) of the Code for the calendar year. -77- Section 9. Modification of Top-Heavy Rules The Top-Heavy requirements of Section 416 of the Code and Article VII of the Plan shall not apply in any year beginning after December 31, 2001, in which the Plan consists solely of a cash or deferred arrangement which meets the requirements of Section 401(k)(12) of the Code and Matching Contributions with respect to which the requirements of Section 401(m)(11) of the Code are met. Section N/A. Catch-Up Contributions 1. Effective Date. This Section shall apply to contributions made after the -------------- date selected by the Committee. 2. Eligibility. All Employees who are eligible to make Elective Contributions ----------- under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions. Further, any such catch-up contributions shall not be counted towards any Elective Contribution percentage limitation set forth in Section 3.2 of the Plan. 3. Limitation. Employees shall not be entitled to receive any Company Matching ---------- Contribution with respect to any catch-up contribution made pursuant to the foregoing. Section 11. Suspension Period Following Hardship Distribution A Participant who receives a distribution of Elective Contributions after December 31, 2001, on account of hardship shall be prohibited from making Elective Contributions and Employee contributions under this and all other plans of the Company for 6 months after receipt of the distribution. A Participant who receives a distribution of Elective Contributions in calendar year 2001 on account of hardship shall be prohibited from making Elective Contributions and Employee contributions under this and all other plans of the Company for 6 months after receipt of the distribution or until January 1, 2002, if later. Section N/A. Distribution upon Severance from Employment 1. Effective Date. This Section shall apply for distributions and severances -------------- from employment occurring after December 31, 2001, (regardless of when the severance from employment occurred/ for severances from employment occurring after_________). (choose one). -78- 2. New distributable event. A Participant's Elective Contributions, qualified ----------------------- Nonelective Contributions, qualified Matching Contributions, and earnings attributable to these contributions shall be distributed on account of the Participant's severance from employment. However, such a distribution shall be subject to the other provisions of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed. -79- EX-10.3 5 dex103.txt AMENDED AND RESTATED RETIREMENT PLAN FOR EMPLOYEES EXHIBIT 10.3 RETIREMENT PLAN FOR EMPLOYEES ----------------------------- OF -- UNIFIED WESTERN GROCERS, INC. ----------------------------- (Amended and Restated as of March 1, 1997) TABLE OF CONTENTS ARTICLE I DEFINITIONS................................................................................... 2 Section 1.01 - Accrued Benefit................................................................... 2 Section 1.02 - Actuarial Equivalent.............................................................. 2 Section 1.03 - Affiliated Company................................................................ 4 Section 1.04 - Benefit Commencement Date......................................................... 4 Section 1.05 - Code.............................................................................. 4 Section 1.06 - Company........................................................................... 4 Section 1.07 - Conversion Date................................................................... 5 Section 1.08 - Early Retirement Age.............................................................. 5 Section 1.09 - Early Retirement Date............................................................. 5 Section 1.010 - Effective Date.................................................................... 5 Section 1.011 - Employee.......................................................................... 5 Section 1.012 - Gender............................................................................ 6 Section 1.013 - Member............................................................................ 6 Section 1.014 - Month of Service.................................................................. 6 Section 1.015 - Normal Retirement Age............................................................. 6 Section 1.016 - Normal Retirement Date............................................................ 6 Section 1.017 - Plan.............................................................................. 6 Section 1.018 - Plan Administrator................................................................ 6 Section 1.019 - Plan Year......................................................................... 6 Section 1.020 - Restatement Date.................................................................. 7 Section 1.021 - Retirement Date................................................................... 7 Section 1.022 - Service........................................................................... 7 Section 1.023 - Social Security Covered Compensation.............................................. 7 Section 1.024 - Social Security Retirement Age.................................................... 7 Section 1.025 - Social Security Taxable Wage Base................................................. 7 Section 1.026 - Spouse............................................................................ 8 Section 1.027 - Unified Employee.................................................................. 8 Section 1.028 - Unified Member.................................................................... 8 Section 1.029 - United Employee................................................................... 8 Section 1.030 - United Member..................................................................... 8 ARTICLE II SERVICE...................................................................................... 8 Section 2.01 - Hour of Service................................................................... 8 Section 2.02 - Benefit Accrual Service........................................................... 9 (a) For Service Prior to March 1, 1976....................................................... 9 (b) For Service on and After March 1, 1976 and Prior to Conversion Date (March 1, 1983)...... 10
-i- (c) For Service on and After the Conversion Date (March 1, 1983)........................... 10 (d) Benefit Accrual Service for Certain Union Unified Employees............................ 11 (e) Benefit Service for United Members..................................................... 11 (f) Ceasing of Benefit Accrual Service..................................................... 11 Section 2.03 - Vesting Service................................................................... 11 Section 2.04 - Break in Service.................................................................. 12 (a) One Year Break in Service for Unified Employees........................................ 12 (b) One Year Break in Service for United Employees......................................... 12 (c) Effect of a One Year Break in Service for Unified Employees............................ 13 (d) Effect of a One Year Break in Service for United Employees............................. 13 Section 2.05 - Eligibility Service............................................................... 13 (a) For Unified Employees.................................................................. 13 (b) For United Employees................................................................... 14 Section 2.06 - Years of Employment............................................................... 14 Section 2.07 - USERRA Service Credit............................................................. 14 ARTICLE III MEMBERSHIP.................................................................................. 14 Section 3.01 - Eligibility to be a Unified Member................................................ 14 Section 3.02 - Unified Employees Not Eligible to be a Unified Member and Entry Date........................................................................ 15 Section 3.03 - United Employees Not Eligible to be a United Member............................... 15 Section 3.04 - Employment by Affiliates.......................................................... 15 Section 3.05 - Acquisitions of Affiliates........................................................ 16 Section 3.06 - Reemployment of Unified Member.................................................... 16 Section 3.07 - Reemployment of Unified Member Following Forfeiture............................... 16 Section 3.08 - Reemployment of United Member..................................................... 16 ARTICLE IV ELIGIBILITY FOR PLAN BENEFITS................................................................ 16 Section 4.01 - Normal Retirement Benefit......................................................... 16 Section 4.02 - Deferred Retirement Benefit....................................................... 17 Section 4.03 - Early Retirement Benefit.......................................................... 17 Section 4.04 - Vested Deferred Benefit........................................................... 17 Section 4.05 - Pre-Retirement Death Benefit...................................................... 17 ARTICLE V RETIREMENT BENEFIT............................................................................ 18 Section 5.01 - Normal Retirement Benefits for Unified Members.................................... 18 Section 5.02 - Normal Retirement Benefits for United Members..................................... 21 Section 5.03 - Early Retirement Benefits for Unified Members..................................... 22 Section 5.04 - Early Retirement Benefits for United Members...................................... 24 Section 5.05 - Deferred Retirement Benefits for Unified Members.................................. 24 Section 5.06 - Deferred Retirement Benefits for United Members................................... 24
-ii- Section 5.07 - Termination of Service before Early or Normal Retirement Age...................... 25 Section 5.08 - Pre-Retirement Death Benefit...................................................... 25 Section 5.09 - Maximum Amount of Benefit......................................................... 26 Section 5.010 - Small Benefit Payments............................................................ 30 Section 5.011 - When Benefits Begin............................................................... 30 Section 5.012 - Suspension of Benefits Upon Reemployment or After Normal Retirement Date.......... 30 ARTICLE VI MANNER AND FORM OF PAYMENT................................................................... 31 Section 6.01 - Form of Retirement Benefit........................................................ 31 Section 6.02 - Joint and Survivor Annuity for Married Member..................................... 32 Section 6.03 - Life Annuity for Unmarried Members................................................ 35 Section 6.04 - Joint and Survivor Annuity for Other Members...................................... 35 (a) 50% Joint and Survivor Life Annuity.................................................... 36 (b) 100% Joint and Survivor Life Annuity................................................... 36 Section 6.05 - Period Certain Life Annuity Benefit............................................... 36 Section 6.06 - Optional Temporary Annuity for Unified Members.................................... 36 Section 6.07 - Disability Retirement Benefit for United Members.................................. 36 Section 6.08 - Retirement Benefit From United Member Contributions............................... 36 Section 6.09 - Lump Sum Benefits................................................................. 37 Section 6.010 - Minimum Distribution of Benefits.................................................. 37 Section 6.011 - Minimum Distribution Following Death.............................................. 37 ARTICLE VII CONTRIBUTIONS AND FUNDING................................................................... 37 Section 7.01 - Funding of Plan................................................................... 37 Section 7.02 - Company Contributions............................................................. 38 Section 7.03 - Contributions to Group Annuity Contract........................................... 38 Section 7.04 - No Return of Company Contributions; Exceptions.................................... 38 Section 7.05 - United Employee Contributions..................................................... 38 ARTICLE VIII ADMINISTRATION............................................................................. 39 Section 8.01 - Named Fiduciary................................................................... 39 Section 8.02 - Benefits Committee as Plan Administrator.......................................... 39 Section 8.03 - Additional Duties of Benefits Committee........................................... 39 Section 8.04 - Authority of Benefits Committee................................................... 40 ARTICLE IX AMENDMENT AND TERMINATION OF THE PLAN........................................................ 40 Section 9.01 - Amendment of the Plan............................................................. 40 Section 9.02 - Termination of the Plan........................................................... 41 Section 9.03 - Allocation of Assets Upon Plan Termination........................................ 41
-iii- Section 9.04 - Merger or Consolidation........................................................... 42 ARTICLE X LIMITATION OF BENEFITS FOR HIGHLY PAID MEMBER................................................. 42 Section 10.01 - Limitation on Certain Distributions............................................... 42 ARTICLE XI TOP HEAVY PROVISIONS......................................................................... 44 Section 11.01 - Top Heavy Definitions............................................................. 44 Section 11.02 - Special Top Heavy Rules........................................................... 45 Section 11.03 - Top Heavy Benefits and Vesting.................................................... 46 ARTICLE XII MISCELLANEOUS PROVISIONS.................................................................... 47 Section 12.01 - Evidence of Survival.............................................................. 47 Section 12.02 - Non-Alienation of Benefits........................................................ 48 Section 12.03 - Payments to Incompetents.......................................................... 48 Section 12.04 - Misstated Information............................................................. 48 Section 12.05 - Beneficiary....................................................................... 48 Section 12.06 - Forfeiture Upon Failure to Locate................................................. 49 Section 12.07 - Direct Transfer of Benefits....................................................... 49 Section 12.08 - Claims Procedure.................................................................. 50 Section 12.09 - Applicable Law.................................................................... 52
-iv- RETIREMENT PLAN FOR EMPLOYEES ----------------------------- OF -- UNIFIED WESTERN GROCERS, INC. ----------------------------- THIS AGREEMENT, executed by Unified Western Grocers, Inc., a California corporation (hereinafter called the "Company"), evidences the terms of the Retirement Plan for Employees of Unified Western Grocers, Inc., as amended and restated as of March 1, 1997. The plan was originally adopted and made effective on March 1, 1957, and subsequently amended from time to time thereafter. Unless otherwise indicated, this amendment and restatement is effective for the Plan Year beginning on or after March 1, 1997. In addition, effective as of December 31, 2001, the United Grocers, Inc., Pension Plan and Trust (the "United Plan") is merged with and into the Plan. Accordingly, effective as of such merger date, the terms and conditions governing the former participants in the United Plan shall be as set forth in this Plan. As to the employees of the Company who are employed at a United Grocers facility, the terms of the United Plan that existed prior to the merger date shall be effective until December 30, 2001, and the terms of this Plan shall only be applicable for one day (i.e., December 31, 2001) for the 2001 Plan Year. Furthermore, as of January 1, 2002, the Plan Year will be the calendar year. Notwithstanding the foregoing, those provisions of the Plan that relate to the Uruguay Round Agreements Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue Service Restructuring and Reform Act of 1998, and the Community Renewal Tax Relief Act of 2000 ("GUST") shall be applicable to the United Employees as of the dates required by GUST. Furthermore, as of December 31, 2001, Unified Members will cease to earn additional Years of Benefit Accrual Service and United Members will cease to earn additional years of Benefit Service (as defined in Section 1.6 of the United Plan), and no additional Employees shall become eligible to become Members of the Plan. Nothing contained in this Agreement shall be deemed to divest, or accelerate the vesting of, the interest of any Member herein or to deprive any Member of any rights which that Member had as of the execution date or the effective date of this Agreement. The rights and benefits of all employees of the Company after the effective date of this Agreement shall be as set forth herein. -1- ARTICLE I --------- DEFINITIONS ----------- The following words and phrases when used throughout this Plan and any subsequent amendment thereof shall have the meanings set forth below, whether or not capitalized, unless a different meaning is clearly required by the context. Section 1.01 - Accrued Benefit - ------------ --------------- The "Accrued Benefit" of a Unified Member, as of his termination of service, means the greater of (a) or (b): (a) his normal retirement benefit determined under Section 5.01, calculated on the basis of his Years of Benefit Accrual Service as of his termination of service; or (b) the actuarial equivalent based on a single life annuity of the benefit accrued on the Conversion Date under the terms of the Plan, including the normal form of benefit, in effect immediately preceding the Conversion Date. The "Accrued Benefit" for a United Member, as of his termination of service, means his normal retirement benefit determined under Section 5.02, calculated on the basis of his years of Benefit Service (as defined in Section 1.6 of the United Plan) as of his termination of service. Notwithstanding the foregoing, as of December 31, 2001, Unified Members will cease to earn additional Years of Benefit Accrual Service and United Members will cease to earn additional years of Benefit Service. Section 1.02 - Actuarial Equivalent - ------------ -------------------- (a) For Unified Members, "Actuarial Equivalent" or "Actuarially Equivalent" means an amount of equivalent value when computed on the basis of a specified mortality table and interest rate assumption. Unless a different mortality table and interest rate assumption is specified elsewhere in the document for a specific purpose, an Actuarially Equivalent amount shall be computed on the basis of the 1971 Towers, Perrin, Forster and Crosby Forecast Mortality Table with an interest rate assumption of 8% per annum. For the purpose of determining the lump sum value of a Member's benefit under the Plan as provided under Sections 5.03(d) and 5.010, such lump sum value shall be calculated using the Applicable Interest Rate and Applicable Mortality Table. -2- "Applicable Interest Rate" means the annual rate of interest on thirty (30) year Treasury securities in effect for November of the Plan Year preceding the Plan Year in which payment is made, or such other interest rate as may be required under code section 417(e) and the regulations thereunder. "Applicable Mortality Table" means the 1983 Group Annuity Mortality Table (as published in IRS Revenue Ruling 95-6) or other such mortality table as may be required under code section 417(e) and the regulations thereunder. For purposes of determining maximum benefits under Section 5.09, the assumptions set forth in such section shall be limited pursuant to Code Section 415(b)(2)(E). (b) For United Members, "Actuarial Equivalent" or "Actuarially Equivalent" means a benefit of equivalent value when computed at the rate of 7 percent interest and on the basis of the 1971 Group Annuity and Mortality Table, male rates, pre- and post-retirement. In the event of a change in the Plan's actuarial equivalent factors, the Actuarial Equivalent of the Accrued Benefit on or after the date of a change is the greater of the Actuarial Equivalent of the Accrued benefit as of the date of the change computed on the old basis or the Actuarial Equivalent of the total Accrued Benefit computed on the new basis. For the purpose of cashing out any United Member's benefits and determining whose consent is necessary for a cash out, the interest rate used in such present value determination as of the date of the distribution shall not be greater than the "applicable interest rate." The "applicable interest rate" shall mean the interest rate or rates that would have been used by the Pension Benefit Guaranty Corporation ("PBGC"), as of the first day of the Plan Year that contains the date that distribution commences, for the purpose of determining the present value of that Participant's benefits under the Plan if the Plan had terminated on the date distribution commences with insufficient assets to provide benefits guaranteed by the PBGC on that date. For the purpose of determining the lump sum value of a Member's benefit under the Plan as provided under Sections 5.03(d), 5.010 and 6.09, such lump sum value shall be calculated using the Applicable Interest Rate and Applicable Mortality Table. "Applicable Interest Rate" means the annual rate of interest on thirty (30) year Treasury securities in effect for November of the Plan Year preceding the Plan Year in which payment is made, or such other interest rate as may be required under code section 417(e) and the regulations thereunder. -3- "Applicable Mortality Table" means the 1983 Group Annuity Mortality Table (as published in IRS Revenue Ruling 95-6) or other such mortality table as may be required under code section 417(e) and the regulations thereunder. For purposes of determining maximum benefits under Section 5.09, the assumptions set forth in such section shall be limited pursuant to Code Section 415(b)(2)(E). Section 1.03 - Affiliated Company - ------------ ------------------ "Affiliated Company" means: (a) Any corporation which is included in a controlled group of corporations, within the meaning of Section 414(b) of the Code, of which group the Company is also a member, (b) Any trade or business which is under common control with the Company within the meaning of Section 414(c) of the Code, (c) Any member of an affiliated service group, within the meaning of Section 414(m) of the Code, that includes the Company, and (d) Any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code. Notwithstanding the foregoing, an entity shall be deemed to be an Affiliated Company only with respect to periods during which the test under Code Section 414(b) (c), (m), or (o), as applicable, is met. Section 1.04 - Benefit Commencement Date - ------------ ------------------------- "Benefit Commencement Date" means the date on which a Member's benefit commences under the Plan. The Benefit Commencement Date for a Unified Member who continues employment after his Normal Retirement Date and who dies prior to receiving benefits under the Plan shall be the first day of the month following his date of death. The Benefit Commencement Date for a United Member who continues employment after his Normal Retirement Date is set forth in Section 6.11(F) of the United Plan. Section 1.05 - Code - ------------ ---- "Code" means the Internal Revenue Code of 1986, as amended from time to time. Section 1.06 - Company - ------------ ------- -4- "Company" means Unified Western Grocers, Inc. (formerly Certified Grocers of California, Ltd.) and any Affiliated Company which has adopted the Plan. Section 1.07 - Conversion Date - ------------ --------------- "Conversion Date" means March 1, 1983. Section 1.08 - Early Retirement Age - ------------ -------------------- "Early Retirement Age" for a Unified Member means either (a) or (b) below: (a) The date the Unified Member has both attained his 55th birthday and completed at least 5 Years of Vesting Service. (b) For any Unified Member who on or before March 1, 1983 has both attained his 40th birthday and completed at least 20 years of service, the date such Unified Member has both attained his 45th birthday and completed at least 25 years of service. "Early Retirement Age" for a United Member means either (c) or (d) below: (c) The date the United Member has both attained his 60th birthday and completed at least 10 Years of Vesting Service. (d) The date the United Member has both attained his 55/th/ birthday and completed at least 15 Years of Vesting Service. Section 1.09 - Early Retirement Date - ------------ --------------------- "Early Retirement Date" means the first day of any month before his Normal Retirement Age in which a Member elects to retire provided he has attained his Early Retirement Age. Section 1.010- Effective Date - ------------- -------------- "Effective Date" means March 1, 1997. Section 1.011- Employee - ------------- -------- "Employee" means a Unified Employee or a United Employee. -5- Section 1.012- Gender - ------------- ------ "Gender" means the masculine pronoun whenever used shall include the feminine. Section 1.013- Member - ------------- ------ "Member" means a Unified Member or a United Member. Notwithstanding the foregoing, as of December 31, 2001, no additional Employees may become eligible to become a Member of the Plan. Section 1.014- Month of Service - ------------- ---------------- "Month of Service" means the month, or a four or five week period, regularly used by the Company for its payroll records during which a Member is credited with an Hour of Service. Section 1.015- Normal Retirement Age - ------------- --------------------- "Normal Retirement Age" means the date a Member attains his 65th birthday. Section 1.016- Normal Retirement Date - ------------- ---------------------- "Normal Retirement Date" means the first day of the month next following a Member's Normal Retirement Age. Section 1.017- Plan - ------------- ---- "Plan" means the provisions of the Retirement Plan for Employees of Unified Western Grocers, Inc., as set forth herein and as may be amended from time to time. Effective as December 31, 2001, the United Plan is merged with and into the Plan. Section 1.018- Plan Administrator - ------------- ------------------ "Plan Administrator" or "Plan Administration Committee" means the person or persons named pursuant to Article VIII who exercise discretionary authority and control with respect to the administration and management of the Plan. Section 1.019- Plan Year - ------------- --------- "Plan Year" means each twelve month period beginning on March 1 and ending on the last day of February. However, effective as of January 1, 2002, the Plan Year shall be the calendar year, and for the Plan, there shall be a short Plan Year -6- beginning on March 1, 2001 and ending on December 31, 2001, and for the United Plan, there shall be a short Plan Year beginning on October 1, 2001 and ending on December 31, 2001. Section 1.020- Restatement Date - ------------- ---------------- "Restatement Date" means March 1, 1997. Section 1.021- Retirement Date - ------------- --------------- "Retirement Date" means the Member's Normal Retirement Date or, if applicable, Early Retirement Date. Section 1.022- Service - ------------- ------- "Service" means an Employee's period of employment with the Company credited in accordance with Article II. Section 1.023- Social Security Covered Compensation - ------------- ------------------------------------ "Social Security Covered Compensation" means for any Plan Year, the average (without indexing) of the Social Security Taxable Wage Base in effect for each calendar year during the thirty-five (35) year period ending with the last day of the calendar year in which the Member attains (or will attain) Social Security Retirement Age. In determining a Member's Social Security Covered Compensation for a Plan Year, the Social Security Taxable Wage Base for the current Plan Year and any subsequent Plan Year shall be assumed to be the same as in effect for the Plan Year for which the determination is being made. A Member's Covered Compensation for any Plan Year after the thirty-five (35) year period is the Member's Social Security Covered Compensation for the Plan Year in which the Member attained Social Security Retirement Age. Section 1.024- Social Security Retirement Age - ------------- ------------------------------ "Social Security Retirement Age" means: (a) For a Member born prior to 1938, the first day of the calendar month coincident with or next following his sixty-fifth birthday; (b) For a Member born after 1937 and before 1955, the first day of the calendar month coincident with or next following his sixty-sixth birthday; and (c) For a Member born after 1954, the first day of the calendar month coincident with or next following his sixty-seventh birthday. Section 1.025- Social Security Taxable Wage Base - ------------- --------------------------------- -7- "Social Security Taxable Wage Base" means the contribution and benefit limit in effect under Section 3121(a)(1) of the Code. Section 1.026- Spouse - ------------- ------ "Spouse" means the person to whom a Member has been legally married during the twelve month period immediately preceding the Member's date of death, if such death is earlier than his Early, Normal or Deferred Retirement Date, or the person to whom the Member is married commencing at his benefit commencement date commencing at his Early, Normal or Deferred Retirement Date, if applicable. Section 1.027- Unified Employee - ------------- ---------------- "Unified Employee" means a person employed by the Company, except a person who is a United Employee. Section 1.028- Unified Member - ------------- -------------- "Unified Member" means a Unified Employee who satisfies the requirements for membership pursuant to Article III, and whose membership shall not have terminated pursuant to such Article. Section 1.029- United Employee - ------------- --------------- "United Employee" means a person employed by the Company at a United Grocers facility. Section 1.030- United Member - ------------- ------------- "United Member" means a United Employee who satisfies the requirements for membership pursuant to Article II of the United Plan, and whose membership shall not have terminated pursuant to such Article. ARTICLE II ---------- SERVICE ------- Section 2.01 - Hour of Service - ------------ --------------- A Unified Employee shall receive credit for an Hour of Service for: (a) Each hour for which he is directly or indirectly paid or entitled to payment by the Company for the performance of duties during the applicable Computation Period. These hours shall be credited to the Unified Employee in the Computation Period or periods in which the duties were performed; and -8- (b) Each hour not credited in (a) for which back pay has been either awarded or agreed to by the Company. These hours shall be credited to the Unified Employee in the Computation Period or periods to which the award or agreement pertains rather than the Computation Period in which the award, agreement, or payment is made; and (c) Each hour not credited in (a) or (b) for which a Unified Employee is directly or indirectly paid, or entitled to such payment by the Company for reasons other than the performance of duties during an applicable Computation Period. The completion of the non-work hours described in this paragraph shall be computed in accordance with the provisions of Department of Labor Regulations 2530.200b-2. These hours shall be credited in the Computation Period in which either payment is actually made or amounts payable to the Unified Employee become due. These hours shall be determined by dividing the payments received or due by the Unified Employee's most recent hourly rate of Compensation for the performance of duties; (d) Each hour not credited in (a), (b) or (c) while a Unified Employee is on Authorized Leave of Absence. These hours shall be credited for purposes of Sections 2.02 and 2.03; and (e) Each hour not credited in (a), (b), (c) or (d) that is required to be credited under federal law. The nature and extent of such credit shall be determined under such law. Notwithstanding subsections (a)-(e) above, a United Employee shall receive credit for an Hour of Service as determined under Section 1.19 of the United Plan. Section 2.02 - Benefit Accrual Service - ------------ ----------------------- (a) For Service Prior to March 1, 1976 ---------------------------------- A Unified Member shall be credited with a Year of Benefit Accrual Service for each full year of continuous service with the Company, except that an employee of an Affiliated Company on the date of acquisition by Unified Western Grocers, Inc., shall be credited with a Year of Benefit Accrual Service for each full year of membership in the Plan, as determined in accordance with the provisions of the Plan as in effect prior to March 1, 1976. Service under any other plan and not a predecessor of this Plan shall not be considered service hereunder. A Unified Member shall also be credited with a fractional Year of Benefit Accrual Service for the period measured from his last anniversary of employment immediately preceding March 1, 1976 to March 1, 1976, if such period is -9- less than twelve months. The applicable fraction shall be determined by dividing the number of completed months of employment during such period, by 12. For purposes of this subsection (a), an Authorized Leave of Absence as described in 2.01(d) shall not be deemed to have interrupted the continuity of employment. (b) For Service on and After March 1, 1976 and Prior to Conversion -------------------------------------------------------------- Date (March 1, 1983) -------------------- A Unified Member who completes 1800 Hours of Service during an "Accrual Computation Period" shall be credited with a Year of Benefit Accrual Service for such "Accrual Computation Period". A Unified Member who completes at least 1000 Hours of Service but less than 1800 Hours of Service during an "Accrual Computation Period" shall be credited with a fractional Year of Benefit Accrual Service for such "Accrual Computation Period" by dividing the number of Hours of Service credited to him by 1800. The "Accrual Computation Period" shall be the twelve month period measured from March 1 commencing with the later of March 1, 1976 and March 1 of (a) the Plan Year in which he is employed by the Company or (b) with respect to an Employee of an Affiliated Company on the date of acquisition by Unified Western Grocers, Inc., the Plan Year in which he becomes a Unified Member of the Plan. Notwithstanding the above, if either (a) a Unified Employee is employed by the Company, (b) a Unified Employee of an Affiliated Company becomes a Unified Member of the Plan or (c) a Unified Employee terminates employment with the Company while a Unified Member of the Plan, on a date other than the first day of an Accrual Computation Period, such Unified Employee shall receive credit for a Year of Benefit Accrual Service or fraction thereof during such Accrual Computation Period provided he completes the "Minimum Hours of Service" requirement. The "Minimum Hours of Service" requirement is the product of 1000 and a fraction, the numerator being the number of months of employment with the Company during such Accrual Computation Period and the denominator being 12. A Unified Member who completes the Minimum Hours of Service shall be credited with a Year of Benefit Accrual Service, or fraction thereof, by dividing the number of Hours of Service credited to him by 1800. (c) For Service on and After the Conversion Date (March 1, 1983) ------------------------------------------------------------ -10- A Unified Member shall be credited with 1/12th of a Year of Benefit Accrual Service for each Month of Service credited on or after the Conversion Date; provided, however, a Year of Benefit Accrual Service for a Unified Member who is not actively performing services for the Company as an Employee because of a disability shall be determined under paragraph (b). Years of Benefit Accrual Service shall be the sum of each year, and fractional part thereof, of Benefit Accrual Service described in (a), (b) and (c) above, not forfeited due to a Break in Service in accordance with Section 2.04. Service under any other plan and not a predecessor of this Plan shall not be considered service hereunder. (d) Benefit Accrual Service for Certain Union Unified Employees ----------------------------------------------------------- Notwithstanding any of the provisions contained herein to the contrary, any Unified Employee who is a Unified Member prior to March 1, 1983 (and who was an active employee of the Company on January 1, 1984), who became a Unified Member between March 1, 1976 and March 1, 1983 by no longer being excluded as a Unified Member of the Plan under Section 3.02(a), shall be deemed to have received credit for a Year of Benefit Accrual Service calculated from the first date of continuous employment with the Company to becoming a Unified Member, provided that the amount of the normal retirement benefit calculated pursuant to Section 5.01 for such Unified Member shall be reduced by the amount, if any, of the retirement benefit earned by the Unified Member under any other retirement plan while employed by the Company, but during which such Unified Member was excluded as a Unified Member under Section 3.02(a), at any time from employment with the Company between March 1, 1976 and March 1, 1983. (e) Benefit Service for United Members ---------------------------------- Notwithstanding (a)-(d) above, a United Member receives Benefit Service as determined in Section 4.1 of the United Plan. (f) Ceasing of Benefit Accrual Service ---------------------------------- Notwithstanding the foregoing, as of December 31, 2001, Unified Members will cease to earn additional Years of Benefit Accrual Service and United Members will cease to earn additional years of Benefit Service (as defined in Section 1.6 of the United Plan). Section 2.03 - Vesting Service - ------------ --------------- (a) For Unified Employees --------------------- -11- A Unified Employee who completes 1000 Hours of Service during a "Vesting Computation Period" shall be credited with a Year of Vesting Service. The "Vesting Computation Period" shall be the twelve consecutive month period measured from the date of hire and each anniversary thereafter and including all such similar periods of service with the Company or any Affiliated Company, but not including any such periods with any Company prior to the time such Company became a member of a controlled group with the Unified Western Grocers, Inc. Years of Vesting Service shall be the sum of each Year of Vesting Service with the exception of the following: (A) Each Year of Vesting Service forfeited due to a Break in Service in accordance with Section 2.04; and (B) Each Year of Vesting Service before January 1, 1971 unless the Unified Employee has had at least three Years of Vesting Service after December 31, 1970. (b) For United Employees -------------------- A United Employee shall be credited with a year of Vesting Service as determined in Section 4.2 of the United Plan. Section 2.04 - Break in Service - ------------ ---------------- (a) One Year Break in Service for Unified Employees ----------------------------------------------- A Unified Employee who completes less than three Months of Service during an Accrual Computation Period shall incur a One Year Break in Service for purposes of determining Benefit Accrual Service. For purposes of determining whether a Break in Service Year has occurred for participation and vesting purposes, an individual who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such individual but for such absence, or in any case in which such hours cannot be determined, eight Hours of Service per day of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence by reason of the pregnancy of the individual, by reason of a birth of a child of the individual, by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this paragraph shall be credited in the computation period in which the absence begins if the crediting is necessary to prevent a Break in Service in that period, or in all other cases, in the following computation period. (b) One Year Break in Service for United Employees ---------------------------------------------- -12- A United Employee shall incur a One Year Break in Service as determined under Section 1.7 of the United Plan. (c) Effect of a One Year Break in Service for Unified Employees ----------------------------------------------------------- If a Unified Employee incurs a One Year Break in Service during a Vesting Computation Period and before he is eligible for a Vested Deferred Benefit and the number of consecutive One Year Breaks in Service equals or exceeds the greater of five or his Years of Vesting Service prior to such Break in Service, he shall forfeit his Years of Vesting Service credited prior to his Break in Service. If a Unified Employee incurs a One Year Break in Service during an Eligibility Computation Period and before he is eligible for a Vested Deferred Benefit and the number of consecutive One Year Breaks in Service equals or exceeds the greater of five or his Years of Eligibility Service credited prior to such Break in Service, he shall forfeit the Years of Eligibility Service. If a Unified Employee incurs a One Year Break in Service during an Accrual Computation Period and before he is eligible for a Vested Deferred Benefit and the number of consecutive One Year Breaks in Service equals or exceeds the greater of five, he shall forfeit his Years of Benefit Accrual Service previously credited to him. (d) Effect of a One Year Break in Service for United Employees ---------------------------------------------------------- If a United Employee incurs a One Year Break in Service, forfeiture of Eligibility Service and Benefit Service will be determined pursuant to Section 4.3 of the United Plan. Section 2.05 - Eligibility Service - ------------ ------------------- (a) For Unified Employees --------------------- A Unified Employee who completes 1000 Hours of Service during an "Eligibility Computation Period" shall be credited with a Year of Eligibility Service on the last day of such computation Period, whether or not he is an Employee as of such date. The "Eligibility Computation Period" shall be each twelve month period measured from the first day the Unified Employee is credited with an Hour of Service or, if he fails to complete 1000 Hours of Service during such period, the twelve month period shall then be measured from the first day of each Plan Year following such date of employment. -13- Years of Eligibility Service for a Unified Employee shall be the sum of each Year of Eligibility Service not forfeited due to a Break in Service in accordance with Section 2.04. (b) For United Employees -------------------- A United Employee shall be credited with a Year of Eligibility Service as determined under Section 2.2 of the United Plan. Years of Eligibility Service for a United Employee shall be the sum of each Year of Eligibility Service not forfeited due to a Break in Service in accordance with Section 1.7 of the United Plan. Section 2.06 - Years of Employment - ------------ ------------------- Years of Employment shall be the sum of each calendar year in which an Employee completes at least one Hour of Service. Section 2.07 - USERRA Service Credit - ------------ --------------------- Effective as of December 12, 1994, notwithstanding any provision to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code Section 414(u). ARTICLE III ----------- MEMBERSHIP ---------- Section 3.01 - Eligibility to be a Unified Member - ------------ ---------------------------------- Each Unified Employee who is a Unified Member of the Plan as of March 1, 1976 or thereafter shall continue to participate in accordance with the provisions of the Plan in effect on and after March 1, 1976, unless excluded under the terms of Section 3.02. Each other Unified Employee, except any Unified Employee who is not eligible to become a Member as provided in Section 3.02, provided he has met the minimum Hours of Service requirement under Section 2.05, shall become a Unified Member of the Plan on the later of: (i) March 1, 1976; or (ii) The Entry Date which is March 1 occurring during the first eligibility computation period during which the Unified Employee is credited with a year of eligibility service. Notwithstanding the foregoing, as of December 31, 2001, no additional Unified Employees may become eligible to become a Unified Member in the Plan. -14- Section 3.02 - Unified Employees Not Eligible to be a Unified Member and Entry - ------------ --------------------------------------------------------------- Date ---- The following persons shall not be eligible to be Unified Members in the Plan: (a) Any Unified Employee who is included in a collective bargaining unit covered by a collective bargaining agreement, which agreement does not provide for coverage of such Unified Employee, provided, that the matter of retirement benefits was the subject of good faith bargaining between the Company and the collective bargaining unit of which the Unified Employee is a part; (b) Directors, unless otherwise employed as Unified Employees and otherwise eligible; and (c) Any Unified Employee on a retainer or fee basis or as an independent contractor, as determined by the Employer (except an Employee of an Affiliated Company). (d) Any Employee employed at a United Grocers facility. Notwithstanding the foregoing, if an Unified Employee who is a Unified Member of the Plan is transferred to employment at a United Grocers facility on or after December 1, 1999, such Employee shall continue to be a Unified Member of the Plan and his employment at the United Grocers facility shall be treated as eligible employment for all purposes under the Plan. (e) Any United Employee who becomes a Unified Employee due to a transfer to a Unified Grocers facility on or after December 1, 1999. Section 3.03 - United Employees Not Eligible to be a United Member - ------------ --------------------------------------------------- United Employees who meet one or more of the qualifications of Section 2.1(A)-(D) of the United Plan shall not be eligible to become a United Member. Notwithstanding the foregoing, as of December 31, 2001, no additional United Employees may become eligible to become a United Member in the Plan. Section 3.04 - Employment by Affiliates - ------------ ------------------------ The Employees of any Affiliated Company shall be entitled to participate in the Plan subject to the approval of the Board of Directors; provided further, that only those Employees of an affiliate who otherwise meet the requirements for membership as set forth in the Plan shall be entitled to participate in the Plan, subject to the requirements of Section 3.04. -15- Section 3.05 - Acquisitions of Affiliates - ------------ -------------------------- Each Employee of an Affiliated Company who was employed by such Affiliated Company on the date of its acquisition shall be entitled to become a Member in the Plan on March 1 coinciding with or next following the date on which he or she completes six calendar months measured from date of employment. In no event shall an Employee who completes one year of service fail to qualify. Section 3.06 - Reemployment of Unified Member - ------------ ------------------------------ In the event a Unified Member who has previously terminated employment returns to the employ of the Company as a Unified Employee covered under the Plan, he shall resume his membership in the Plan immediately unless, prior to his reemployment, he forfeited his Years of Eligibility Service and Years of Benefit Accrual Service due to a Break in Service in accordance with Section 2.04, in which case the provisions of 3.07 shall apply. Section 3.07 - Reemployment of Unified Member Following Forfeiture - ------------ --------------------------------------------------- A Unified Member of the Plan who forfeits his Years of Eligibility Service and Years of Benefit Accrual Service due to a Break in Service in accordance with Section 2.04 shall cease to be entitled to any benefits under the Plan with respect to such Service. He may reenter the Plan as a new Unified Member by again satisfying the membership requirements in accordance with Section 3.02. Section 3.08 - Reemployment of United Member - ------------ ----------------------------- In the event a United Member who has previously terminated employment returns to the employ of the Company as a United Employee covered under the Plan, he shall resume his membership in the Plan as determined under Section 2.4 (Resumption) of the United Plan. A United Member of the Plan who forfeits his Years of Eligibility Service and Years of Benefit Accrual Service due to a Break in Service in accordance with Section 2.04(d) above shall be reinstated in accordance with Section 4.4 of the United Plan. ARTICLE IV ---------- ELIGIBILITY FOR PLAN BENEFITS ----------------------------- Section 4.01 - Normal Retirement Benefit - ------------ -16- Except as provided in Section 4.02, a Unified Member shall be eligible for a Normal Retirement Benefit if his employment is terminated on or after he attains his Normal Retirement Age. Notwithstanding the foregoing, a United Member shall be eligible for a Normal Retirement Benefit in accordance with Section 5.2 of the United Plan. Section 4.02 - Deferred Retirement Benefit - ------------ --------------------------- A Unified Member who continues employment after his Normal Retirement Date shall be eligible for a Deferred Retirement Benefit when he terminates employment. Notwithstanding the foregoing, a United Member shall be eligible for a Deferred Retirement Benefit in accordance with Section 5.3 of the United Plan. Section 4.03 - Early Retirement Benefit - ------------ ------------------------ A Unified Member shall be eligible for an Early Retirement Benefit if his employment is terminated before he attains his Normal Retirement Age but on or after he attains his Early Retirement Age. A terminated Unified Member who is entitled to a Vested Deferred Benefit shall be eligible for an Early Retirement Benefit on or after he attains his Early Retirement Age. Notwithstanding the foregoing, a United Member shall be eligible for an Early Retirement Benefit in accordance with Section 5.1 of the United Plan. Section 4.04 - Vested Deferred Benefit - ------------ ----------------------- A Unified Member who has completed at least five Years of Vesting Service shall be eligible for a Vested Deferred Benefit if his employment with the Company is terminated on or after March 1, 1987, for any reason other than death and before he is eligible for a retirement benefit. If employment with the Company is terminated for any reason other than death and before the Unified Member's retirement (a) prior to March 1, 1987 but on or after March 1, 1976, then ten Years of Vesting Service is required; and (b) prior to March 1, 1976, then fifteen Years of Vesting Service is required. Notwithstanding the foregoing, a United Member's Vested Deferred Benefit shall be determined under Section 7.1 of the United Plan. Section 4.05 - Pre-Retirement Death Benefit - ------------ ---------------------------- -17- If a Unified Member dies after Early Retirement Age and while employed by the Company, then the surviving Spouse of the Unified Member shall be entitled to a survivor's benefit as set forth in Section 5.05 of the Plan. Notwithstanding the foregoing, if a United Member dies, his or her spouse may be entitled to a survivor's benefit as set forth in Section 6.10 of the United Plan. ARTICLE V --------- RETIREMENT BENEFIT ------------------ Section 5.01 - Normal Retirement Benefits for Unified Members - ------------ ---------------------------------------------- For the Plan Year commencing March 1, 1989, upon the termination of service of any Unified Member on his Normal Retirement Date, such Unified Member shall be entitled to receive a monthly annuity for life equal to the greater of either his accrued benefit or the greater of (a) or (b) below plus (c) as follows: (a) An amount equal to the sum of: (i) .95% of his Average Monthly Earnings not in excess of his Social Security Covered Compensation multiplied by his Years of Benefit Accrual Service (up to 33-1/3 years); plus (ii) .0145% of his Average Monthly Earnings in excess of his Social Security Covered Compensation multiplied by his Benefit Accrual Service (up to 33-1/3 years). (b) An amount equal to $22.50 multiplied by his Years of Benefit Accrual Service subject to a maximum of $750.00. (c) An amount equal to the Unified Member's annualized gross base rate of pay from the Company in effect on November 1, 1986, multiplied by the fraction 2/280, multiplied by a fraction (not greater than 1), the numerator of which is the Unified Member's Benefit Accrual Service in the Plan and the denominator of which is 10, or if greater, the Unified Member's Benefit Accrual Service under the Plan if the Unified Member would have continued to participate in the Plan until the Unified Member became age 55; provided, however, for purposes of this subparagraph, any Unified Member who is an officer of the Company on November 1, 1986, shall be limited to annualized gross base rate of pay from the Company of no greater than $50,000.00, and shall use a fraction of 1/280 instead of 2/280 mentioned above. -18- (d) For purposes of this Plan, the following additional definitions shall be as follows: (i) "Earnings" before March 1, 1976, means gross compensation received by the Company. (ii) "Earnings" on and after March 1, 1976, means 1/12th of a Unified Member's annual gross compensation derived from employment by the Company, plus such additional amounts as may be reduced from the Unified Member's compensation and contributed by the Company under the Unified Western Grocers, Inc. Sheltered Savings Plan (formerly the Certified Grocers of California, Ltd. Employees' Sheltered Savings Plan) and the Spending Account Plan, but excluding any retiree unused sick leave payoff and severance pay; provided, however, Earnings shall not include any amounts in excess of $200,000 (and as adjusted by the Secretary of the Treasury in the same manner and time as provided under Section 415(d) of the Code) for the Plan Year commencing March 1, 1989 through the Plan Year ending February 28, 1994, and for Plan Years commencing on or after March 1, 1994, Earnings shall not include amounts in excess of $150,000, as adjusted by the Secretary of the Treasury for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code. For a Unified Member who completed less than 1800 Hours of Service during any calendar year, Earnings shall be such Unified Member's actual monthly earnings. (iii) Effective January 1, 1980, "Average Monthly Earnings" means the average of the Unified Member's monthly "Earnings" during any three calendar years within the last ten calendar years in which Earnings were highest. If a Unified Member has Earnings for a period of less than three calendar years, his "Average Monthly Earnings" shall be the average of his monthly "Earnings" for the total period worked. (e) Notwithstanding anything contained in this section to the contrary, with respect to each Unified Member, the monthly retirement Benefit shall be the greater of either the amount of the retirement Benefit that accrued through February 29, 1992, for all Unified Employees (except Unified Employees who are highly compensated employees described in Section 414(q)(1)(A) or (B) of the Code (hereinafter "Super Highly Compensated Employee") limited to the retirement benefit that accrued through February 28, 1989), as determined under the provisions (including the definition of Credited Service) in the Plan in effect for the Plan Year ending February 28, 1989, or the amount determined hereunder. A Unified Member who is a Super Highly Compensated Employee for the Plan Years commencing on or after March 1, 1990 (but not for the 1989 Plan Year), will be limited to the greater of the retirement Benefit that accrued through February 28, 1989, as determined under -19- the provisions (including the definition of Credited Service) in the Plan in effect for the Plan Year ending February 28, 1989, or the amount determined hereunder. (f) Effective March 1, 1989 through February 28, 1994, for purposes of providing a transition for the implementation of the limitation on Earnings in excess of $200,000 (as adjusted) as provided in paragraph (d)(ii) (hereinafter the "$200,000 Compensation Limitation"), the Unified Member's Accrued Benefit shall be the greater of (i) or (ii), but in no event greater than (iii), as follows: (i) the Unified Member's Accrued Benefit as of November 30, 1989, determined without regard to the Compensation Limitation, plus the Unified Member's Accrued $200,000 Benefit accrued from December 1, 1989, with regard to the $200,000 Compensation Limitation, (ii) the Unified Member's Accrued Benefit determined on the basis of the total Years of Benefit Accrual Service and by applying the $200,000 Compensation Limitation to all such Years of Benefit Accrual Service, (iii) the Unified Member's Accrued Benefit determined on the basis of total Years of Benefit Accrual Service without regard to the $200,000 Compensation Limitation. (g) Effective March 1, 1994, for purposes of providing a transition for the implementation of the limitation on Earnings in excess of $150,000 (as adjusted) as provided in paragraph (d)(ii) (hereinafter "$150,000 Compensation Limitation"), the Unified Member's Accrued Benefit shall be the greater of (i) or (ii), but in no event greater than (iii), as follows: (i) the Unified Member's Accrued Benefit as of February 28, 1994, in accordance with subsection (f), plus the Unified Member's Accrued Benefit accrued from March 1, 1994, with regard to the $150,000 Compensation Limitation, (ii) the Unified Member's Accrued Benefit determined on the basis of the total Years of Benefit Accrual Service and by applying the $150,000 Compensation Limitation to all such Years of Benefit Accrual Service, (iii) the Unified Member's Accrued Benefit determined on the basis of total Years of Benefit Accrual Service without regard to the $150,000 Compensation Limitation. (h) For purposes of this section, a Unified Employee who received the compensation as a Unified Employee from more than one of the Companies -20- participating in this Plan shall have his average monthly compensation from all Companies used to determine his total credit hereunder, for each Year in which he was employed by all such Companies. The retirement Benefits to be provided by each such Company shall be determined by prorating such credit by the ratio of the average monthly compensation received from such Company over the total average monthly compensation received from all Companies. (i) Monthly Benefits, if any, accrued to a Unified Employee of such an Affiliated Company under a Plan in effect prior to the date of acquisition of such affiliate by Unified Western Grocers, Inc., shall be in accordance with the terms of the prior Plan, if any, of that affiliate which was in existence prior the date of acquisition and shall be in addition to benefits provided under this Plan. (j) In determining the Earnings of a Unified Employee for purposes of the Compensation limitation under paragraphs (f) or (g), as adjusted, the rules of Section 414(q)(6) of the Code shall apply, except that in applying such rules, the term "family" shall include only the spouse of the Unified Employee and any lineal descendants of the Unified Employee who have not attained age 19 before the close of the Plan Year. If the Compensation limitation under paragraphs (f) or (g), as adjusted, applies to the combined Earnings of the Unified Employee or one or more Family Members, the benefit provisions of this Article will be applied by prorating the Compensation limitation under paragraphs (f) or (g), as adjusted, among the Unified Employee and his Family Members in proportion that each such individual's Compensation determined prior to the application of this limitation bears to the total Earnings of all such individuals determined prior to the application of this limitation. (k) The number of Years of Benefit Accrual Service taken into account under paragraph a(i) for any Unified Member will not exceed the Unified Member's cumulative permitted disparity limit. The Unified Member's cumulative permitted disparity limit is equal to 35 minus the number of years credited to the Unified Member for purposes of the benefit formula or the accrual method under the Plan under one or more qualified plans or simplified employee pensions (whether or not terminated) ever maintained by the Company, other than years for which a Unified Member earned a year of Service under the benefit formula in paragraph (a)(i). For purposes of determining the Unified Member's cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year. If the Unified Member's cumulative permitted disparity limit is less than the period of years specified in paragraph (a)(i), then for years after the Unified Member reaches the cumulative permitted disparity limit and through the end of the period specified in paragraph (a)(i), the Unified Member's benefit will be equal to the excess benefit percentage. Section 5.02 - Normal Retirement Benefits for United Members - ------------ --------------------------------------------- -21- Normal Retirement Benefits for United Members shall be determined as set forth in Section 6.2 of the United Plan. Section 5.03 - Early Retirement Benefits for Unified Members - ------------ --------------------------------------------- (a) Except as provided in Section 5.03(c), a Unified Member who elects to retire at an Early Retirement Date shall receive a monthly benefit equal to the amount determined in Section 5.01(a) multiplied by the appropriate percentage in accordance with the following schedule. Schedule of Early Retirement Factors - ------------------------------------ Years Prior to Normal Retirement Date Percentage --------------------- ------------------- 0 100 1 95 2 90 3 85 4 80 5 75 6 70 7 65 8 60 9 55 10 or more 50 Straight line interpolation of these percentages will be employed where fractional completed years prior to Normal Retirement Date are involved. (b) Notwithstanding the foregoing, a Unified Member who on March 1, 1983 is both age 40 or older and has 20 or more years of service, will be eligible to retire at any time after reaching age 45 or older and having 25 or more years of service, and will receive a monthly benefit equal to the amount determined in Section 5.01(a) multiplied by the appropriate percentage in accordance with the following schedule: Age at Early Benefit Reduction Retirement Factor ------------------ -------------------- 54 48% 53 46% 52 44% -22- 51 42% 50 40% 49 38% 48 36% 47 34% 46 32% 45 30% (c) A Unified Member who elects to retire at an Early Retirement Date shall receive a monthly benefit equal to the amount determined in Section 5.01(c) multiplied by the appropriate percentage in accordance with the following schedule: Schedule of Early Retirement Factors - ------------------------------------ Years Prior to Normal Retirement Date Percentage --------------------------------- ----------------------- 0 through 5 100 6 95 7 90 8 85 9 80 10 75 11 73 12 71 13 69 14 67 15 65 16 63 17 61 18 59 19 57 20 55 (d) Notwithstanding the foregoing, a Unified Member who elects to retire at an Early Retirement Date and who: (i) is a non-union employee; (ii) will have attained at least age fifty-five (55) on December 31, 1999; -23- (iii) will have attained at least sixty-five (65) Points under the 1999 Early Retirement Program of the Company on December 31, 1999; (iv) filed a written notice with the Company, pursuant to Early Retirement Program, on or before September 30, 1999, electing to retire from employment with the Company; and (v) agreed to continue to work for the Company through the date, as required and specified by the Company based on its business needs, between December 31, 1999 and December 31, 2000, shall, for purposes of Section 5.03(a) and Section 5.03(c) above, have his age be determined by adding up to an additional five (5) years of age on December 31, 1999. However, such determined age shall not exceed sixty-five (65) years of age. In addition to the five (5) years of age credit described above, a Unified Member who will have attained at least eighty-five (85) Points under Early Retirement Program on December 31, 1999, will also be entitled to a Supplemental Pension Benefit as described in Appendix A. A Unified Member entitled to a Supplemental Pension Benefit may elect to receive such Benefit in a lump sum amount using the Actuarial Equivalent basis as described in Section 5.010. For purposes of this Section 5.03(d), a Unified Member's "Points" under the Early Retirement Program shall mean the sum of (i) such Unified Member's age (in whole years) on December 31, 1999, and (ii) such Unified Member's completed years of service (in whole years) on December 31, 1999. Section 5.04 - Early Retirement Benefits for United Members - ------------ -------------------------------------------- Normal Retirement Benefits for United Members shall be determined as set forth in Section 6.1 of the United Plan. Section 5.05 - Deferred Retirement Benefits for Unified Members - ------------ ------------------------------------------------ If a Unified Member continues to be employed by the Company after his Normal Retirement Date and after March 1, 1988, an additional retirement benefit will accrue to the Unified Member for Credited Service with the Company after his Normal Retirement Date and for such subsequent service as provided in Section 5.01(a). Upon retirement at a Deferred Retirement Date, the Unified Member shall receive the retirement benefit. Section 5.06 - Deferred Retirement Benefits for United Members - ------------ ----------------------------------------------- Normal Retirement Benefits for United Members shall be determined as set forth in Section 6.3 of the United Plan. -24- Section 5.07 - Termination of Service before Early or Normal Retirement Age - ------------ ------------------------------------------------------------ In the event of the termination of service of a Unified Member on or after March 1, 1987, for any reason other than death or disability prior to the attainment of Early Retirement Date or Normal Retirement Date, a Unified Member's vested retirement benefit commencing at his Normal Retirement Date shall be equal to a percentage of the amount determined in (a) or (b) below, in accordance with the following schedule: Years of Vesting Service Percentage ------------------------ ---------- 0 - 4 0% 5 or more 100% On attainment of Normal Retirement Age, a Unified Member's Normal Retirement Benefit shall be non-forfeitable. (a) The monthly amount payable on a single life annuity form shall be equal to his accrued benefit at his date of termination of service. (b) The monthly amount on a form other than the single life annuity shall be the actuarial equivalent of the amount equal to his accrued benefit at his date of termination of service. If a Unified Member elects to receive his Vested Deferred Benefit at an Early Retirement Date, this benefit shall be equal to the amount determined in this Section 5.010 multiplied by the appropriate percentages in accordance with the "Schedule of Early Retirement Factors" in Section 5.03. Section 5.08 - Pre-Retirement Death Benefit - ------------ ---------------------------- (a) If a Unified Member with a vested benefit dies while employed by the Company, or if a Unified Member with a vested benefit terminates employment with the Company after his Early Retirement Age and dies prior to his Benefit Commencement Date, then the surviving Spouse of such Unified Member shall be entitled to a survivor's benefit, provided that such Unified Member and surviving Spouse have been married to each other throughout the one year period preceding such Unified Member's death. (b) For a Unified Member who dies after attaining Early Retirement Age, the survivor's benefit payable hereunder shall be in an amount equal to the monthly benefit which such Spouse would have received under Section 5.07(a) of the Plan had the Unified Member retired immediately prior to his death and elected to receive benefits under Section 5.07(a) of the Plan, provided that such Unified Member -25- and surviving Spouse have been married to each other throughout the one year period preceding such Unified Member's death. Upon the death of the Spouse, no other benefit shall be payable under the Plan. If the Unified Member dies prior to his earliest retirement age, the survivor's benefit hereunder shall be in a monthly payment commencing on the first day of the calendar month following the month in which the Unified Member would have attained his earliest retirement age and ending with the calendar month in which the spouse dies, equal to 50% of the monthly amount the Unified Member would have received if he retired electing a joint and survivor annuity under Section 5.07(a), and if such Unified Member had: (i) a Separation from Service on or prior to the date of death, (ii) survived to the earliest retirement age, (iii) retired with an immediate qualified Joint and Survivor Annuity at the earliest retirement age, and (iv) died on the day after the day on which such Unified Member would have attained the earliest retirement age. (c) The provisions of this Section shall apply only if: (i) a Unified Member has at least one Hour of Service with the Company on or after August 23, 1984; or (ii) a Unified Member has at least one Hour of Service on or after January 1, 1976, and when such Unified Member incurred a Separation from Service, he had ten (10) or more Years of Vesting Schedule Service; or (iii) a Unified Member who has one Hour of Service on or after September 2, 1974, was employed by the Company after the earliest date on which such Unified Member was eligible for early retirement benefits under the Plan; and (iv) such Unified Member dies after August 23, 1984, prior to reaching his Annuity Starting Date. (d) Notwithstanding the foregoing, the Pre-Retirement Death Benefit for a United Member shall be determined in accordance with Section 6.10 of the United Plan. Section 5.09 - Maximum Amount of Benefit - ------------ ------------------------- (a) The amount of annual benefit payable to a Member shall not exceed the lesser of: -26- (i) the defined benefit limitation in effect at the beginning of each Plan Year (which, effective for the Plan Year commencing March 1, 1991, is $115,641, and for each Plan Year thereafter shall be adjusted automatically as provided by the Secretary of the Treasury as provided by Section 415(d) of the Code); or (ii) 100% of the Member's average Compensation for the three consecutive calendar years while a Member of the Plan in which his Compensation was highest. (b) If the annual benefit of the Member commences before the Member's Social Security Retirement Age, but on or after age 62, the defined benefit dollar limitation as reduced above, if necessary, shall be determined as follows: (i) If a Member's Social Security Retirement Age is 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the defined benefit dollar limitation by 5/9 of one percent for each month by which benefits commence before the month in which the Member attains age 65. (ii) If a Member's Social Security Retirement Age is greater than 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the defined dollar limitation by 5/9 of one percent for each of the first 36 months and 5/12 of one percent for each of the additional months (up to 24 months) by which benefit commence before the month of the Member's Social Security Retirement Age. If the annual benefit of a Member commences prior to age 62, the determination as to whether the limitations described in this Section have been satisfied shall be made in accordance with the Regulations prescribed by the Secretary of the Treasury or his delegate by adjusting the dollar limitation so it is the Actuarial Equivalent of the dollar limitation applicable at age 62. Actuarial Equivalent for this purpose shall be subject to the limitations of Code Section 415(b)(2)(E). If the annual benefit of a Member commences after the Member's Social Security Retirement Age, the determination as to whether the limitations described in this Section have been satisfied shall be made in accordance with the Regulations prescribed by the Secretary of the Treasury or his delegate by adjusting the dollar limitation so it is the Actuarial Equivalent of the dollar limitation applicable at the Member's Social Security Retirement Age. Actuarial Equivalent for this purpose shall be subject to the limitations of Code Section 415(b)(2)(E). (c) If the Member has less than 10 years of participation with the Company, the defined benefit dollar limitation is reduced by one-tenth for each year of -27- participation (or part thereof) less than ten. If the Member has less than ten years of service with the Company, the compensation limitation is reduced by one-tenth for each year of service (or part thereof) less than ten. The adjustments of this section (c) shall be applied in the denominator of the defined benefit fraction based upon years of service. Years of service shall include future years occurring before the Member's normal retirement age. Such future years shall include the year which contains the date the Member reaches normal retirement age, only if it can be reasonably anticipated that the Member will receive a year of service for such year. If the Member's benefit payable under this Plan is payable in a form other than a benefit payable on a Life Annuity or a Qualified Joint and Survivor Life Annuity, the determination as to whether the limitations described in this Section have been satisfied shall be made in accordance with Regulations prescribed by the Secretary of the Treasury or his delegate by adjusting such benefit so that it is the Actuarial Equivalent to a benefit in the form of a Life Annuity. (d) If the Company maintains, or at any time maintained, another defined of any Member's benefits from all such plans may not exceed the maximum benefit described in paragraph (a). Actuarial Equivalent for this purpose shall be subject to the limitations of Code Section 415(b)(2)(E). (e) In the case of any Employee who is a Member in this Plan and any defined contribution plan of the Company, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any year shall not exceed 1.0. In the event the sum of such fractions exceeds 1.0 the Committee shall prescribe the manner in which the annual benefits to this Plan or the annual addition under any of the other of the Company's defined contribution plans shall be reduced in order that no plans shall be disqualified under applicable sections of the Code. Effective for Plan Years beginning after December 31, 1999, the defined benefit/defined contribution 1.0 rule of repealed Code Section 415(e) is deleted from the Plan. (f) For purposes of applying the limitations of (b), the following rules shall prevail: (i) The term "defined benefit plan fraction" shall mean a fraction the numerator of which is the projected annual benefit payable under this Plan or any other defined benefit plan of the Company, (determined as of the close of the year) and the denominator of which is the lesser of (a) the product of 1.25 multiplied by the dollar limitation in effect under Section 415(b)(1)(A) of the Code for such year, or (b) the amount which may -28- be taken into account under Section 415(b)(1)(B) of the Code with respect to such Employee under the defined benefit plan for such year multiplied by 1.4. (ii) The term "defined contribution plan fraction" shall mean the aggregate annual additions to all defined contribution plans of the Company, if any, determined as of the close of the year without regard to limitations on contributions over the sum of the lesser of the following amounts determined for such year and for each prior Year of Service with the Company: (a) the dollar limitation in effect under Section 415(c)(1)(a) of the Code for such year (determined without regard to Section 415(c)(6) of the Code) multiplied by 1.25, or (b) the amount which may be taken into account under Section 415(c)(1)(B) (or Section 415(c)(7) or (8), if applicable) of the Code with respect to such Employee under such plan for such year multiplied by 1.4. (g) For purposes of (a)(ii), "Compensation" means a Member's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Company (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 excluding the following: (i) Company contributions to a plan of Deferred Compensation which are not included in the Member's gross income for the taxable year in which contributed or Company contributions under a simplified Employee pension plan to the extent such contributions are deductible by the Member, or any distributions from a plan of Deferred Compensation; (ii) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Member either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (iii) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (iv) other amounts which received special tax benefits, or contributions made by the Company (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Member). Compensation for any limitation year is the Compensation actually paid or includable in gross income during such year. The limitation year shall be the Plan Year. -29- Section 5.010 - Small Benefit Payments - ------------- ---------------------- If the Actuarial Equivalent of a Member's vested Accrued Benefit does not exceed $5,000 at the time of distribution (or any prior distribution) such Actuarial Equivalent shall be paid to the Member in a single lump cash payment. Such payment will be made as soon as practicable following termination of the Member's employment. The lump sum cash payment shall be an amount equal to the Actuarial Equivalent of the Member's vested Accrued Benefit which would otherwise be payable at the Member's Normal Retirement Date in the Single Life Annuity form. In determining the amount of a lump sum payment under this Section 5.010 for Unified Members, the interest rate to be used shall be the Applicable Interest Rate (as defined in Section 1.02), and the mortality table to be used shall be the Applicable Mortality Table (as defined in Section 1.02); however, the amount of a lump sum payment determined at any time after February 28, 1998 shall not be less than the lump sum Actuarial Equivalent of the Unified Member's Accrued Benefit as of February 28, 1998, determined using an 8% interest rate and the 1971 Towers, Perrin, Forster and Crosby Forecast Mortality Table. If the Actuarial Equivalent value of the Unified Member's vested Accrued Benefit is zero, the member shall be deemed to have received a distribution hereunder of such vested Accrued Benefit. Notwithstanding the foregoing, a partial or total distribution may not be made after the Benefit Commencement Date, regardless of the present value of the non-forfeitable Accrued Benefit, without appropriate consent of the Unified Member and the Unified Member's Spouse. Section 5.011 - When Benefits Begin - ------------- ------------------- Unless the Member elects otherwise, benefit payments must begin not later than the sixtieth day after the close of the Plan Year in which the latest of the following events occurs: (a) The Member attains age 65 or earlier normal retirement age; or (b) The tenth anniversary of the time when the Member commenced participation in the Plan; or (c) The Member terminates his service with the Company. Section 5.012 - Suspension of Benefits Upon Reemployment or After Normal - ------------- -------------------------------------------------------- Retirement Date --------------- (a) If any Unified Member again becomes an Employee and completes at least forty (40) Hours of Service in any month (hereinafter "Section 203(a)(3)(B) Service") after his Early, Normal or Late Retirement Date, all -30- Benefit payments under this Article shall cease. Similarly, for a Unified Member who continues to be employed in Section 203(a)(3)(B) Service after his Normal Retirement Date, the actuarial value of Benefits which commence later than Normal Retirement Date will be computed without regard to the deferred commencement date and without regard to amounts which would have been suspended under the preceding sentence had the Unified Member been receiving Benefits since his Normal Retirement Date. (b) If Benefit payments have been suspended, payments shall resume no later than the first day of the third calendar month after the calendar month in which the Unified Member ceases to be employed in Section 203(a)(3)(B) Service. The initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume. Such Unified Member or his Beneficiary shall be entitled to the Benefits provided under this Article, reduced by the Actuarial Equivalent of Benefits or payments paid under this Article before such re-employment. (c) For a Unified Member who has commenced receipt of benefit payments, no Benefit payment shall be withheld by the Plan pursuant to this section unless the Plan notifies the Unified Employee by personal delivery or first class mail during the first calendar month or payroll period in which the Plan withholds payments that his Benefits are suspended. Such notifications shall contain a description of the specific reasons why Benefit payments are being suspended, a general description of the Plan provision relating to the suspension of payments, a copy of such provisions, and a statement to the effect that applicable Department of Labor regulations may be found in Section 2530.203-3 of the Code of Federal Regulations. In addition, the notice shall inform the Unified Member of the Plan's procedures for affording a review of the suspension of benefits in accordance with the claims procedure under Section 12.08. (d) Notwithstanding the foregoing, if a United Member is reemployed after Retirement, Section 6.13 of the United Plan shall apply. ARTICLE VI ---------- MANNER AND FORM OF PAYMENT -------------------------- Section 6.01 - Form of Retirement Benefit - ------------ -------------------------- A Member's retirement benefit or Vested Deferred Benefit shall, except as provided under Section 5.010, be payable as an annuity commencing on the first day of the month next following the Member's Retirement Date. The annuity shall be paid either as a single life annuity payable monthly during the lifetime of the Member (hereinafter "Single Life Annuity"), or as one of the other forms described in the following paragraphs of this Article. If the Member selects the Single Life Annuity, no benefit shall be payable after the Member's death. -31- Section 6.02 - Joint and Survivor Annuity for Married Member - ------------ --------------------------------------------- (a) A Member's retirement benefit shall, except as provided under Section 5.07, be payable as an annuity commencing on the Member's Retirement Date or as of the first day of the month coinciding with or next following his termination of employment, if later. The annuity shall be paid either as a Single Life Annuity payable monthly during the lifetime of the Member, or as one of the other forms described in the following paragraphs of this Article. If the Member selects the Single Life Annuity, no benefit shall be payable after the Member's death. All alternative forms of benefit described in Sections 6.03, 6.04, 6.05 and 6.06 shall be the Actuarial Equivalent of the Single Life Annuity. (b) The provisions of this section shall take precedence over any conflicting provisions in the Plan and shall apply to any Unified Member who is credited with at least one Hour of Service with the Company on or after August 23, 1984, and such other Members as are covered by subsection (e) of this section. Unless an optional form of benefit is selected within the Applicable Election period pursuant to a Qualified Election, a Unified Member's benefit shall be paid as follows: (i) In the form of a Qualified Joint and Survivor Annuity providing for an annuity for the life of the Unified Member and a survivor annuity for the life of the Unified Member's Spouse following the Unified Member's death, at a rate of 50% of the amount payable during the joint lives of the Unified Member and the Unified Member's Spouse, or (ii) If the Unified Member dies after the Earliest Retirement Age, in the form of a 50% Qualified Pre-Retirement Survivor Annuity providing for an immediate annuity for the life of the surviving Spouse at a rate at least equal to the survivor annuity described in subsection (i). (iii) If the Unified Member dies on or before the Earliest Retirement Age, in the form of a 50% Qualified Pre-Retirement Survivor Annuity providing for a deferred annuity for the life of the Spouse at a rate equal to the survivor annuity which would have been payable under subsection (i) if the Unified Member had separated from Service on his or her date of death, survived to the Earliest Retirement Age, retired with an immediate 50% Qualified Joint and Survivor Annuity at the Earliest Retirement Age, and died on the day after the Earliest Retirement Age. The annuity payable under this subsection shall begin at the Earliest Retirement Age unless the surviving Spouse elects a later date, in which case the payments shall be actuarially adjusted on a reasonable basis to reflect the delayed commencement of payments. -32- (c) The provisions of Section 6.6(B) of the United Plan shall apply to United Members' Joint and Survivor Annuity Benefits. (d) Whenever any of the following terms is used in the Plan, it shall have the meaning specified below unless the context clearly indicates to the contrary. (i) "Annuity Starting Date" means the first day of the first period for which an amount is paid as an annuity or any other form. (ii) "Applicable Election Period" shall mean with respect to the Qualified Joint and Survivor Annuity described in subsection (b)(i), the ninety day period ending on the date benefit payments are to commence; and, with respect to the Qualified Pre-Retirement Survivor Annuities described in subsections (b)(ii) and (b)(iii), the period which begins on the first day of the Plan Year in which the Member attains age 35 or, if earlier, the date of his or her Termination of Service and ends on the date of the Member's death. (iii) "Earliest Retirement Age" means the earliest date on which, under the Plan, the Member could elect to receive retirement benefits. (iv) "Qualified Election" means a written election of a form of benefit other than a Qualified Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor Annuity. An election shall be a Qualified Election only if the Member's Spouse consents to the election in writing and his or her consent is witnessed by a Plan representative or notary public. Any waiver of a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity shall not be effective unless: (a) the - Member's spouse consents in writing to the election; (b) the election - designates a specific alternate beneficiary, including any class of beneficiaries or any contingent beneficiaries, which may not be changed without spousal consent (or the Spouse expressly permits designations by the Member without any further spousal consent); (c) the spouse's consent - acknowledges the effect of the election; and (d) the spouse's consent is - witnessed by a plan representative or notary public. Additionally, a Member's waiver of the qualified joint and survivor annuity will not be effective unless the election designates a form of benefit payment which may not be changed without spousal consent (or the spouse expressly permits designations by the Member without any further spousal consent). If it is established to the satisfaction of a Plan Administrator that such written consent may not be obtained because there is no spouse or the spouse cannot be located, a waiver will be deemed a Qualified Election. Any consent by a spouse obtained under this provision (or establishment that the consent of a spouse may not be obtained) shall be effective only with respect to such spouse. A consent that permits designations -33- by the Member without any requirement of further consent by such Spouse must acknowledge that the spouse has the right to limit consent to a specific beneficiary, and a specific form of benefit where applicable, and that the Spouse voluntarily elects to relinquish either or both of such rights. A revocation of a prior waiver may be made by a Member without the consent of the Spouse at any time prior to the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Member has received a notice as provided in paragraph (d). Notwithstanding this consent requirement, if the Member establishes to the satisfaction of the Company that such written consent cannot be obtained because the Member has no Spouse, or because the Spouse cannot be located, the election shall be deemed a Qualified Election. (v) "Spouse" means Spouse or surviving Spouse of the Member provided that a former Spouse will be treated as the Spouse to the extent provided under a qualified domestic relations order as described in Section 414(p) of the Code, and with respect to benefits provided under subsection (b)(ii) and (b)(iii), such Spouse and Member were married throughout the one year period ending on the Member's death. (e) Within no less than 30 days and no more than 90 days prior to the Annuity Starting Date, the Company shall provide the Member with a written explanation of the following: (i) The terms and conditions of the Qualified Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor Annuity, as applicable; The Member's right to elect a benefit other than a Qualified Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor Annuity, as applicable, and the effect of such an election; (ii) The rights of the Member's Spouse with respect to the Qualified Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor Annuity, as applicable; (iii) The right of the Member to revoke a previous election and the effect of such revocation; and (iv) With respect to the Qualified Joint and Survivor Annuity, the relative values of the various optional forms of benefit under the Plan. Notwithstanding the foregoing, the written explanation may be provided after the Annuity Starting Date. The 90-day applicable election period to waive the -34- qualified joint and survivor annuity described in Section 417(a)(6)(A) of the Code, shall not end before the 30/th/ day after the date on which such explanation is provided. The Secretary may by regulations limit the period of time by which the Annuity Starting Date precedes the provision of the written explanation other than by providing that the Annuity Starting Date may not be earlier than termination of employment. A Member may elect (with applicable Spousal Consent) to waive any requirement that the written explanation be provided at least 30 days before the Annuity Starting Date (or to waive the 30 day requirement under the above paragraph) if the distribution commences more than 7 days after such explanation is provided. (f) (i) If the present value of a Member's vested benefit exceeds (or at the time of any prior distribution exceeded) $3,500 ($5,000 for Plan Years beginning after August 5, 1997), and the benefit is immediately distributable, the Member and the Member's Spouse (or where either the Member or the Spouse has died, the survivor) must consent to any distribution of such benefit. The consent of the Member and the Member's Spouse shall be obtained in writing in accordance with subsection (c)(ii) . (ii) Notwithstanding the foregoing, only the Member need consent to the commencement of a distribution in the form of a qualified Joint and Survivor Annuity while the benefit is immediately distributable. Neither the consent of the Member nor the Member's Spouse shall be required to the extent that a distribution is required to satisfy Section 401(a)(9) or Section 415 of the Code. (iii) A benefit is immediately distributable if any part of the benefit could be distributed to the Member (or surviving Spouse) before the Member attains (or would have attained if not deceased) the later of Normal Retirement Age or age 62. Section 6.03 - Life Annuity for Unmarried Members - ------------ ---------------------------------- A Member who does not have an Eligible Spouse at his Benefit Commencement Date shall have his benefit paid on the Single Life Annuity form under Section 6.01 unless he elects to have his benefit paid in another form as provided herein. Section 6.04 - Joint and Survivor Annuity for Other Members - ------------ -------------------------------------------- Benefits may be paid in one of the following forms for Unified Members: -35- (a) 50% Joint and Survivor Life Annuity ----------------------------------- A monthly benefit payable during the lifetime of the Unified Member and upon his death 50% of such monthly benefit payable to his Eligible Spouse for the Eligible Spouse's lifetime. No benefit shall be payable after the death of the Unified Member and his Eligible Spouse. (b) 100% Joint and Survivor Life Annuity ------------------------------------ A monthly benefit payable during the lifetime of the Unified Member and upon his death 100% of such monthly benefit payable to his Eligible Spouse for Eligible Spouse's lifetime. No benefit shall be payable after the death of the Unified Member and his Eligible Spouse. Section 6.05 - Period Certain Life Annuity Benefit - ------------ ----------------------------------- This form of benefit provides for monthly payments continuing to the first day of the month in which the Member's death occurs or the end of the certain period of 120 months (60, 120 or 180 for United Members), whichever is later. If the Member dies before the end of the certain period, payments in the same amount shall be continued to his designated beneficiary to the end of such period. Section 6.06 - Optional Temporary Annuity for Unified Members - ------------ ---------------------------------------------- A Unified Member whose retirement benefit or Vested Deferred Benefit commences under the Plan before the earliest date on which his primary insurance benefit begins under the Social Security Act may elect to receive an adjusted benefit prior to the first date on which he becomes eligible to receive such primary insurance benefit and a reduced benefit thereafter. The adjusted benefit shall be calculated so that his retirement benefit or Vested Deferred Benefit payable to the Unified Member prior to the date on which he becomes eligible to receive his primary insurance benefit shall be equal as nearly as possible to the sum of (a) the reduced amount payable after such date and (b) the estimated primary insurance benefit payable to the Unified Member beginning on such date. A Unified Member may elect this Optional Temporary Annuity by filing a written request with the Plan Administrator prior to his Retirement Date. Section 6.07 - Disability Retirement Benefit for United Members - ------------ ------------------------------------------------ A disabled United Member may be eligible for a disability benefit under Section 6.8 of the United Plan. Section 6.08 - Retirement Benefit From United Member Contributions - ------------ --------------------------------------------------- -36- A United Member may be entitled to a monthly retirement benefit from his or her contributions under Section 6.9 of the United Plan. Section 6.09 - Lump Sum Benefits - ------------ ----------------- A United Member may be eligible for quarterly, semiannual, or annual installments or a lump sum distribution under Section 6.11(B) of the United Plan. Section 6.010- Minimum Distribution of Benefits - ------------- -------------------------------- Notwithstanding any other provision contained herein to the contrary, the entire interest of the Member will be distributed either: (a) in the case of an employee who is not a 5-percent owner (as described in Section 416(i) of the Code), the Member has the option to select one of the following: (A) beginning the April 1 of the calendar year following the calendar year in which the Member attains age 70 1/2; or (B) beginning the April 1 of the calendar year following the later of the calendar year in which the Member attains age 70 1/2 or the calendar year in which the Member retires. (b) in the case of an employee who is a 5-percent owner, beginning the April 1 of the calendar year following the calendar year in which the Member attains age 70 1/2. Section 6.011- Minimum Distribution Following Death - ------------- ------------------------------------ If a Member dies after his Benefit Commencement Date and before his entire interest has been distributed to him, then the remaining portion of such interest, if any, will continue to be distributed at least as rapidly as provided under the form of distributions in effect prior to death. If a Member with a vested benefit dies prior to his Benefit Commencement Date, the only benefit payable shall be as provided in Section 5.08. ARTICLE VII ----------- CONTRIBUTIONS AND FUNDING ------------------------- Section 7.01 - Funding of Plan - ------------ --------------- -37- The Plan shall be funded for the exclusive purpose of providing benefits to Members and their beneficiaries and for defraying reasonable expenses in administering the Plan. Section 7.02 - Company Contributions - ------------ --------------------- The Company shall bear the total costs of the Plan. Such costs will include the amounts necessary to provide benefit payments to Plan Members and their beneficiaries and the payment of administrative expenses including the payment of premiums for Plan termination insurance to the Pension Benefit Guaranty Corporation. Notwithstanding the foregoing, for the short Plan Year ending December 31, 2001, the deductible limit under Section 404(a)(1) of the Code shall be limited by the requirements of Section 5 of Revenue Procedure 87- 27. Section 7.03 - Contributions to Group Annuity Contract - ------------ --------------------------------------- Contributions to the Plan and benefit payments from the Plan may be made under one or more group annuity contracts issued by Equitable Life Assurance Society of the United States, or any other insurance company, or may be made under a trust established for that purpose. Section 7.04 - No Return of Company Contributions; Exceptions - ------------ ---------------------------------------------- Contributions to the Plan may not be returned to the Company, except in the following instances: (a) If the amount of a contribution is incorrect, such as an amount based on an arithmetical error or a mistake in fact, the amount in excess of the correct amount may be returned to the Company within one year after the payment of the contribution. (b) If the Plan fails to qualify under Section 401(a) of the Internal Revenue Code, contributions made to the Plan may be returned to the Company within one year after the date of denial of qualification of the Plan. (c) If a contribution is disallowed as a federal tax deduction under Section 404(a)(2) of the Internal Revenue Code, then to the extent the deduction is disallowed the contribution may be returned to the Company within one year after the disallowance of the contribution. (d) If the Plan is terminated, contributions may be returned to the Company as provided under the provisions of Article IX. Section 7.05 - United Employee Contributions - ------------ ----------------------------- -38- Prior to December 10, 1979, a United Member was required to contribute to participate in the United Plan. No United Member contributions are required or permitted after December 9, 1979. A United Member is entitled to withdraw required contributions with interest as described in Section 6.9 of the United Plan on having a Break in Service (as defined in the United Plan). ARTICLE VIII ------------ ADMINISTRATION -------------- Section 8.01 - Named Fiduciary - ------------ --------------- The Company has the overall responsibility and authority as the named fiduciary to manage and control the operation and administration of the Plan and may designate one or more persons or committees to carry out its fiduciary responsibilities and authority under the Plan and its duties as the Plan Administrator. Section 8.02 - Benefits Committee as Plan Administrator - ------------ ---------------------------------------- The Benefits Committee, whose membership is to be determined by the Company, is the named fiduciary to act on behalf of the Company in the management and control of the Plan assets and to establish and carry out a funding policy consistent with the Plan objectives and with the requirements of any applicable law. The Benefits Committee shall carry out the Company's responsibility and authority: (a) To appoint one or more persons to serve as investment manager with respect to all or part of the Plan assets, including assets maintained under separate accounts of an insurance company; (b) To allocate the responsibilities and authority being carried out by the Benefits Committee among the Members of the Committee; (c) To take any action appropriate to assure that the Plan assets are invested for the exclusive purpose of providing benefits to Members and their beneficiaries in accordance with the Plan and defraying reasonable expenses of administering the Plan, subject to the requirements of any applicable law; and (d) To employ one or more persons to render advice with respect to any responsibility or authority being carried out by the Benefits Committee. Section 8.03 - Additional Duties of Benefits Committee - ------------ --------------------------------------- The Company has also designated the Benefits Committee, whose membership is to be determined by the Company, to carry out its fiduciary responsibilities and authority under the Plan and its duties as the Plan Administrator. -39- (a) To determine and advise the Company as to the amounts of Company contributions to the Plan, based on appropriate information, and in a manner consistent with the funding policy established by the Benefits Committee; (b) To determine the amounts and time of payment of benefits and the rights of Members and their beneficiaries to Plan benefits, to take any actions necessary to assure timely payment of benefits to any Member or beneficiary eligible to receive benefits under this Plan, and to assure a full and fair review for any person who is denied a claim to any benefit under the plan; (c) To maintain Plan records, to communicate appropriate information to the Board of Directors, to communicate to Members and their beneficiaries, and to submit required reports to appropriate authorities; (d) To employ other persons to render advice with respect to any responsibility or authority being carried out by the Benefits Committee, including the employment of counsel, and to assist in the administration of the Plan; (e) To employ, on behalf of Plan Members, an enrolled actuary and an independent qualified public accountant; (f) To take any action necessary or appropriate to assure that the Plan is administered for the exclusive purpose of providing benefits to Members and their beneficiaries in accordance with the Plan and defraying reasonable expenses of administering the Plan, subject to the requirements of any applicable law; and (g) Generally, to operate and administer the Plan in all matters other than those for which the Benefits Committee has been designated. Section 8.04 - Authority of Benefits Committee - ------------ ------------------------------- The Benefits Committee shall have absolute discretion in carrying out its responsibilities under Section 8.01 and 8.02, and any decision by the Benefits Committee shall be final and binding on all Members and beneficiaries. Without limiting the authority or responsibilities of the Benefits Committee contained in this Article, the Benefits Committee shall have the discretionary authority to determine eligibility for benefits and to construe the terms of the Plan. ARTICLE IX ---------- AMENDMENT AND TERMINATION OF THE PLAN ------------------------------------- Section 9.01 - Amendment of the Plan - ------------ --------------------- -40- The Company reserves the right to modify or amend this Plan from time to time and to any extent that it may deem advisable including any amendment deemed necessary to insure the continued qualification of this Plan under the provisions of the Internal Revenue Code. Any amendment shall be made pursuant to a resolution duly adopted by the Company's Board of Directors. No amendment shall have the effect of re-vesting in the Company the whole or any part of the assets of this Plan or of diverting any part of the assets of this Plan to purposes other than for the exclusive benefit of the Members and their beneficiaries at any time prior to the satisfaction of all the liabilities under this Plan with respect to such persons. If such amendment reduces the accrued benefit of any Member, such amendment shall not be valid unless approved by the Secretary of Labor or unless he fails to take action disapproving such amendment within 90 days after receiving notice of it. No amendment shall adversely affect the Vested Deferred Benefit of a Member. A Plan amendment that changes the Plan's vesting schedule shall not be effective with respect to any Member with three Years of Vesting Service who makes an irrevocable election during the election period to have such benefit determined without regard to such amendment. For purposes of the preceding paragraph, the election period shall begin on the date the Plan amendment is adopted and end on the latest of the following dates: (a) The date which is 60 days after the Plan amendment is adopted; (b) The date which is 60 days after the Plan amendment is effective; or (c) The date which is 60 days after the day the Member is issued written notice of the Plan amendment by the Plan Administrator. Section 9.02 - Termination of the Plan - ------------ ----------------------- The Company reserves the right to terminate the Plan at any time. Upon termination of the Plan by the Company or upon partial termination of the Plan, the rights of all affected Members to their accrued benefits to the date of termination or date of partial termination shall be non-forfeitable as of such date except as provided under the provisions of Article X. Section 9.03 - Allocation of Assets Upon Plan Termination - ------------ ------------------------------------------ Upon termination of the Plan in accordance with the provisions of Section 9.02 but subject to the provisions of Section 10.02, the Plan's assets shall be allocated in accordance with the following order: (a) Benefits payable as an annuity to -41- (i) Members and their beneficiaries who began receiving benefits at least three years prior to the termination date of the Plan, and (ii) Members and their beneficiaries who could have been receiving benefits as of three years prior to the termination date of the Plan if they had retired prior to the beginning of the three year period and if their benefits had commenced (on the single life annuity form under this Plan) as of the beginning of such period, based on the provisions of the Plan (as in effect during the five year period ending on such termination date) under which benefits would be least. (b) All other benefits, which are insured by the Pension Benefit Guaranty Corporation, determined without regard to Section 4022(b)(5) of the Employee Retirement Income Security Act or would have been so insured if Section 4022(b)(6) of such Act did not apply. (c) All other non-forfeitable benefits under the Plan (d) All other benefits under the Plan. If the assets of the Plan available for allocation under (a) or (b) are insufficient to satisfy in full the benefits which are described, the assets shall be allocated pro rata among such individuals on the basis of the present value (as of the Plan's date of termination) of their respective benefits. Any residual assets of the Plan remaining after the satisfaction of all liabilities of the Plan shall be distributed to the Company. Section 9.04 - Merger or Consolidation - ------------ ----------------------- No merger or consolidation with, or transfer of assets or liabilities to, any other Plan shall be made unless, in the event the Plan is terminated immediately after such merger, consolidation or transfer, each Member in this Plan would receive a benefit equal to or greater than the benefit he would have been entitled to receive if this Plan terminated immediately before the merger, consolidation or transfer. ARTICLE X --------- LIMITATION OF BENEFITS FOR HIGHLY PAID MEMBER --------------------------------------------- Section 10.01 - Limitation on Certain Distributions - ------------- ----------------------------------- (a) In the event of Plan termination, the benefit of any highly compensated Member or highly compensated former Member is limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the Code, as follows: -42- (i) Benefits distributed to any of the twenty-five (25) most highly compensated Members and highly compensated former Members ("Restricted Member") are restricted such that the annual payments are no greater than the amount equal to the payment that would be made on behalf of the Restricted Member under a single life annuity that is the Actuarial Equivalent of the sum of the Restricted Member's Accrued Benefit and the Restricted Member's other benefits under the Plan. (ii) Paragraph (i) shall not apply if: a. after payment of the benefit to a Restricted Member, the value of Plan assets equals or exceeds 110% of the value of current liabilities, as defined in Section 412(1)(7) of the Code, b. the value of the benefit for a Restricted Member is less than 1% of the value of current liabilities, or c. the value of the benefits payable under the Plan to a Restricted Member does not exceed $3,500 ($5,000 for Plan Years beginning after August 5, 1997). (iii) for purposes of this Section, benefit includes any periodic income, any withdrawal values payable to a living Restricted Member, and any death benefits not provided for by insurance on the Restricted Member's life. (b) In the event that Congress provides by statute, or the Internal Revenue Service provides by regulation or ruling, that the limitations set forth in this Article X are not necessary for the Plan to meet the requirements of Section 401(a) or other applicable provisions of the Code then in effect, such limitations shall become void and shall no longer apply without the necessity of further amendment to the Plan. (c) Notwithstanding the foregoing, the limitations of (a)(i) above shall not apply to any Restricted Member otherwise subject thereto who enters into a prior written agreement with the Company to the effect that if the Plan is terminated and distribution of benefits has been or will be made to such Restricted Member regardless of the limitation of subsection (ii) above, such Restricted Member (or, in the case of his or her death, his or her estate or representatives) shall repay to the Trustee a sum equal to the total amounts by which his or her benefits under the Plan shall exceed benefits determined under the preceding limitation ("Restricted Benefits"). As security for the repayment of the Restricted Benefits, such written agreement shall: (i) Require the Restricted Member to deposit with a financial institution acceptable to the Company, property having a fair market value equal at least to 125% of the amount of the restricted benefits; -43- (ii) Require such Restricted Member, at any time that the fair market value of the property falls below 110% of the amount of the Restricted Benefits, to deposit additional property with the financial institution to bring the value of all property held by the financial institution up to 125% of such amount; or (iii) Contain a provision prohibiting the financial institution from returning any property to such Restricted Member (or his or her estate or representatives) except upon receipt of a certification of the Company that such property is no longer required as security for the repayment of the obligation of the Restricted Member. Notwithstanding the foregoing, the requirements of subsections (i) and (ii) of the preceding sentence shall be satisfied to the extent that the Restricted Member deposits with a financial institution acceptable to the Company any combination of the following property: Cash, U.S. Treasury bills, shares in money market mutual funds, a bank letter of credit, and/or federally insured savings accounts or certificates, or certificates of deposit, in a face or principal amount equal to 100% of the amount of the restricted benefits, or the portion thereof secured by such property. In lieu of the written agreement described above, the Restricted Member may enter into any other written agreement with the Company for the repayment of the Restricted Benefits which is determined to be acceptable by ruling of the Internal Revenue Service. ARTICLE XI ---------- TOP HEAVY PROVISIONS -------------------- Section 11.01 - Top Heavy Definitions - ------------- --------------------- Whenever any of the following terms is used in the Plan with the first letter or letters capitalized, it shall have the meaning specified below unless the context clearly indicates to the contrary. (a) "Aggregation Group" means each Plan of the Company in which a Key Employee is a Member and each other plan of the Company which enables the Plan or Plans containing a Key Employee to meet the antidiscrimination requirements of Sections 401(a)(4) or 410 of the Internal Revenue Code. In addition, the Administrator may include in the Aggregation Group any other Plan of the Company that satisfies the requirements of Sections 401(a)(4) and 410 of the Code when considered together with the other Plans in the Aggregation Group. -44- (b) "Determination Date" means with respect to any Plan Year the last day of the preceding Plan Year, or in the case of the first plan year of the Plan, the last day of such plan year. (c) "Key Employee" means a Member who, at any time during the Plan Year or any of the four preceding Plan Years, is: (i) An officer of the Company, (ii) One of the ten Employees owning (or considering as owning within the meaning of Section 318 of the Code) the largest interest in the Company, (iii) A five percent owner of the Company, or (iv) A one percent owner of the Company having an annual Compensation from the Company or more than $150,000. For purposes of paragraph (i), no more than fifty Employees (or, if lesser, the greater of three Employees or ten percent of the Employees) shall be treated as officers. In addition, a "Non-Key Employee" means an Employee who is not a Key Employee. The beneficiaries of an Employee acquire the character of such Employee. (d) "Top Heavy Group" means any Aggregation Group if the sum of the Actuarial Equivalent of cumulative accrued benefits for Key Employees under all defined benefit pension plans included in the Aggregation Group (using the provisions of Section 1.02 as the actuarial assumptions for all such defined benefit plans), and the sum of the accounts of Key Employees under all defined contribution plans included in the Aggregation Group, exceeds 60% of such amounts determined for all employees. (e) "Top Heavy Plan" means each Plan of the Company or Companies required to be included in an Aggregation Group, if the Aggregation Group is a Top Heavy Group. Section 11.02- Special Top Heavy Rules - ------------- ----------------------- For purposes of determining whether a Top Heavy Group exists, the following special rules shall apply: (a) Benefits derived from voluntary or mandatory Member contributions and Company contributions shall be taken into account. -45- (b) The Aggregate of distributions made to any Member from the Plan or any plans in the Aggregation Group, during the five year period ending on the Determination Date shall be taken into account in determining the Actuarial Equivalent accrued benefit of any Member or the account of any Member under any such plan. (c) If a Member who was a Key Employee ceases to be a Key Employee for a Plan Year, the cumulative accrued benefit or account of such Member will not be taken into account for determining whether a Top Heavy Group exists for such Plan Year. (d) Solely for the purpose of determining if the Plan, or any other plan included in a Top Heavy Group of which this Plan is a part, is top heavy, the accrued benefit of a Member other than a Key Employee shall be determined under (i) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Member or by other members of an Affiliated Company of which the Company is a member and any other entity required to be aggregated with the Company pursuant to regulations under Section 414 of the Code, or (ii) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Section 411(b)(1)(C) of the Code. Section 11.03- Top Heavy Benefits and Vesting - ------------- ------------------------------- If the Plan is a Top Heavy Plan for any Plan Year beginning after December 31, 1983, then with respect to such Plan Year the following provisions shall apply: (a) Each Unified Member who has completed three or more Years of Service with the Company shall be fully vested in his or her Accrued Benefit derived from Company contributions. (b) Each United Member who is not a Key Employee shall be vested in his or her Accrued Benefit derived from Company contributions at least as rapidly as provided under the following schedule:
Years of Vesting Service Vesting Percentage ------------------------ ------------------ 2 20 3 40 4 60 5 80 6 100
-46- (c) Notwithstanding any other provision in this plan except subsection (d) or (e) below, each Member who is not a Key Employee and has completed 1,000 hours of service will accrue a benefit (to be provided solely by employer contributions and expressed as a life annuity commencing at Normal Retirement Age) of not less than two percent of his or her highest average Compensation for the five consecutive years for which the Member had the highest Compensation. The minimum accrual is determined without regard to any Social Security contribution. The minimum accrual applies even though under other plan provisions, the Member would not otherwise be entitled to receive an accrual, or would have received a lesser accrual for the year because: (i) the non-key employee fails to make mandatory contributions to the Plan; (ii) the non-key employee's Compensation is less than a stated amount; (iii) the non-key employee is not employed on the last day of the accrual computation period; or (iv) the plan is integrated with Social Security. (d) No additional benefit accruals shall be provided pursuant to subsection (c) above to the extent that the total accruals on behalf of the Member attributable to employer contributions will provide a benefit expressed as a life annuity commencing at Normal Retirement Age that equals or exceeds 20 percent of the Member's highest average Compensation for the five consecutive years for which the Member had the highest Compensation. (e) The provisions in (c) above shall not apply to any Member to the extent that the Member is covered under any other plan or plans of the Company and the Company has provided the minimum allocation or benefit requirement applicable to this top heavy plan in the other plan or plans. (f) The limitation of contained in Section 5.09(g) shall be replaced by 1.0. ARTICLE XII ----------- MISCELLANEOUS PROVISIONS ------------------------ Section 12.01- Evidence of Survival - ------------- -------------------- Where a benefit payment is contingent upon the survival of any person, evidence of such person's survival must be furnished either by personal endorsement -47- of the check drawn for such payment or by other evidence satisfactory to the Plan Administrator. Section 12.02- Non-Alienation of Benefits - ------------- -------------------------- Neither the Company nor the Trustee shall recognize any transfer, mortgage, pledge, hypothecation, order or assignment by any Member or beneficiary of all or part of his interest hereunder, and such interest shall not be subject in any manner to transfer by operation of law, and shall be exempt from the claims of creditors or other claimants from all orders, decrees, levies, garnishment and/or executions and other legal or equitable process or proceedings against such Member or beneficiary to the fullest extent which may be permitted by law. The preceding sentence shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Member pursuant to a domestic relations order, unless such order is determined to be a qualified domestic relations order as defined in Section 414(p) of the Code, or upon approval of the committee in its sole discretion any domestic relations order entered before January 1, 1985. Notwithstanding any other provisions contained in the Plan that limit the right of a Member to commence to receive a distribution from the Plan, payment of benefits from the Plan to an alternate payee under a qualified domestic relations order shall commence at such time as provided in the qualified domestic relations order or as soon thereafter as administratively feasible. Section 12.03- Payments to Incompetents - ------------- ------------------------ If the Company receives evidence satisfactory to it that (a) a payee entitled to receive any payment under the Plan is physically or mentally incompetent to receive such payment or is a minor, (b) another person or an institution is then maintaining or has custody of such payee and (c) no guardian, Committee or other representative of the estate of such payee has been appointed, the Plan Administrator may direct that payments be made (in the case of a minor at a rate not exceeding $50.00 a month) to such other person or institution. Section 12.04- Misstated Information - ------------- --------------------- If any information has been misstated on which a benefit under the Plan with respect to a person was based, such benefit shall not be invalidated but the amount of the benefit shall be adjusted to the proper amount as determined on the basis of the correct information. Overpayments, if any, with interest as determined by the Plan Administrator shall be charged against any payments accruing with respect to the person. The Plan Administrator reserves the right to require proof of age of any person entitled to a benefit under this Plan. Section 12.05- Beneficiary - ------------- ----------- -48- Subject to the consent of the member's spouse as provided in Section 6.02, a Member shall designate, with the right to change such designation, a beneficiary to receive any payment or payments to which a beneficiary may become entitled under the Plan in the event retirement benefits are distributed in accordance with Section 6.05. Any other person to whom periodic payments are payable under this Plan may designate, with the right to change such designation, a beneficiary to receive any remaining periodic payments becoming due upon the death of such person, provided that no prior conflicting designation by a Member is then in effect with respect thereto. If no designated beneficiary is surviving when a payment is to be made to a beneficiary, the commuted value of any remaining periodic payments shall be made to the person or persons in the first surviving class of the following classes of successive preference beneficiaries: (a) the Member's widow or widower, (b) the Member's surviving children, or (c) the executors or administrators of the person upon whose death the payments become due. Section 12.06- Forfeiture Upon Failure to Locate - ------------- --------------------------------- The Committee shall declare a forfeiture of any Account of any Member or beneficiary under the Plan who cannot be found within one year after the benefit would have otherwise been payable under the Plan. Neither the Company, the Committee or the Trustee shall be obligated to search for the whereabouts of any person. Any amounts forfeited shall be used to reduce Company contributions. In the event such Member or beneficiary is thereafter located, such previously forfeited benefit shall be restored. Section 12.07- Direct Transfer of Benefits - ------------- --------------------------- (a) This paragraph applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's (defined below) election under this paragraph, a Distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (b) The following definitions apply to paragraph (a): (i) An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually), made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) -49- of the Code; effective March 1, 1999, any hardship distribution described in Code Section 401(k)(2)(B)(i)(IV); and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (ii) An Eligible Retirement Plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (iii) A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse. (iv) A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. Section 12.08- Claims Procedure - ------------- ---------------- (a) Any Member or beneficiary of a deceased Member or duly authorized representative of either (such Member or beneficiary or duly authorized representative being referred to below as a "Claimant") may deliver to the Benefits Committee a written claim for a determination with respect to the (i) Claimant's Accrued Benefits, or (ii) benefits distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. The claim must state with particularity the benefit determination desired by the Claimant. (b) The Benefits Committee shall consider a Claimant's claim within a reasonable time, but not later than 90 days after receipt of the claim by the Plan, unless the Benefits Committee determines that special circumstances require an extension of time for processing the claim. If the Benefits Committee determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Benefits Committee expects to render the -50- benefit determination. Once the benefit determination is made in accordance with the foregoing, the Benefits Committee shall notify the Claimant in writing: (i) that the Claimant's requested benefit determination has been made, and that the claim has been allowed in full; or (ii) that the Benefits Committee has reached a conclusion adverse, in whole or in part, to the Claimant's requested benefit determination. The Benefits Committee's notice of adverse benefit determination must be written in a manner calculated to be understood by the Claimant, and it must contain: a. the specific reason(s) for the adverse benefit determination; b. reference to the specific provisions of the Plan upon which such adverse benefit determination was based; c. a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and d. a description of the Plan's claim review procedures set forth in (c) below and the time limits applicable to such procedures, including a statement of the Claimant's right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA") following an adverse benefit determination on review. (c) Within 60 days after receiving a notice from the Benefits Committee of an adverse benefit determination, a Claimant may file with the Board of Directors a written request for a review of such adverse determination. Thereafter, but not later than 30 days after the review procedure began, the Claimant: (i) may submit written comments, documents, records, and other information relating to the claim for benefits; (ii) shall be provided, 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; and/or (iii) may request a hearing, which the Board of Directors, in its discretion, may grant. -51- The Board of Directors shall take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. (d) The Board of Directors shall render its decision on review within a reasonable time, and not later than 60 days after the receipt of the Claimant's review request, unless a hearing is held or other special circumstances require additional time, in which case the Board of Directors' decision must be rendered within 120 days after the receipt of the Claimant's review request. If the Board of Directors determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 60-day period. In no event shall such extension exceed a period of 60 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Board of Directors expects to render the benefit determination on review. The Board of Directors' decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (i) specific reasons for the decision; (ii) reference to the specific Plan provisions upon which the decision was based; (iii) a statement that 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; (iv) a statement of the Claimant's right to bring an action under ERISA Section 502(a) concerning an adverse benefit determination; and (v) such other matters as the Board of Directors deems relevant. For purposes of this Article, a document, record, or other information shall be considered "relevant" to a Claimant's claim if such document, record, or other information was relied upon in making the benefit determination; was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination; or demonstrates compliance with the administrative processes and safeguards required under ERISA in making the benefit determination. Section 12.09- Applicable Law - ------------- -------------- -52- The law of the State of California shall be the controlling state law in all matters relating to the Plan and shall apply to the extent it is not preempted by the laws of the United States of America. -53- IN WITNESS WHEREOF, the undersigned has executed this instrument on the 19/th/ day of December, 2001. UNIFIED WESTERN GROCERS, INC. By: /s/ Don Gilpin --------------------------------- Its: Vice President, Human Resources --------------------------------- -54- Appendix A ---------- The Supplemental Pension Benefit identified in Section 5.03(d) is determined as of the Unified Member's retirement date by multiplying such Unified Member's completed years of service (in whole years, limited to 26) on December 31, 1999, by such Unified Member's Weekly Rate of Pay, the product then divided by the Actuarial Equivalent factor for converting an immediate annuity to a cash lump sum amount under Section 5.010. Weekly Rate of Pay, for purposes of this Appendix A, shall mean such Unified Member's weekly base pay, excluding bonuses or other compensation such as unused sick leave payoff, but including amounts reduced from such Unified Member's compensation and contributed by the Company under the Unified Western Grocers, Inc. Employees' Sheltered Savings Plan and the Spending Account Plan. -55- -----END PRIVACY-ENHANCED MESSAGE-----