CONVERGYS CORPORATION RETIREMENT AND SAVINGS PLAN

Exhibit 10.17 to 2008 10-K

CONVERGYS CORPORATION

RETIREMENT AND SAVINGS PLAN

(EGTRRA RESTATEMENT)

TABLE OF CONTENTS

 

CONVERGYS CORPORATION RETIREMENT AND SAVINGS PLAN

SECTION 1

NAME AND PURPOSE OF PLAN

1.1 Name . The plan set forth herein shall be known as the Convergys Corporation Retirement and Savings Plan (the “Plan”).

1.2 Purpose . The Plan is designated as a plan intended to qualify as a profit sharing plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

1.3 Plan History . The CBIS Retirement Savings Plan is the predecessor plan to the Plan. Effective January 1, 1999, the name of the Plan was changed to Convergys Corporation Retirement and Savings Plan and Convergys Corporation assumed sponsorship of the Plan. Except as otherwise provided herein, the terms of the Plan shall govern the investment, withdrawal and distribution of amounts transferred from merged plans.

1.3.1 Effective July 14, 2005, the Encore Receivables Management, Inc. 401(k) Plan (“Encore Plan”) was merged into the Plan. The account balances of participants in the Encore Plan who were employed by a Participating Company as of the effective date of the merger, shall become fully vested as of the effective date of the merger. The employer/matching contribution account of all other participants in the Encore Plan, shall remain subject to the vesting schedule provided for under the terms of the Encore Plan immediately prior to the merger date.

1.3.2 Reserved.

SECTION 2

GENERAL DEFINITIONS; GENDER AND NUMBER

2.1 General Definitions . For purposes of the Plan, the following terms shall have the meanings hereinafter set forth unless the context otherwise requires:

2.1.1 “Affiliated Employer” means Convergys, each corporation which is a member of a controlled group of corporations (within the meaning of Section 414(b) of the Code) which includes Convergys, each trade or business (whether or not incorporated) which is under common control (within the meaning of Section 414(c) of the Code) with Convergys, each member of an affiliated service group (within the meaning of Section 414(m) of the Code) which includes Convergys and each other entity required to be aggregated with Convergys under Section 414(o) of the Code.

2.1.2 “Approved Absence” means an absence from active service with an Affiliated Employer by reason of a vacation or leave of absence approved by the Affiliated Employer, any absence from active service with an Affiliated Employer while employment rights with the Affiliated Employer are protected by law and any other absence from active service with an Affiliated Employer that does not constitute a severance from employment with the Affiliated Employer under rules adopted by the Affiliated Employer and applied in a uniform and nondiscriminatory manner.

2.1.3 “Beneficiary” means the person or entity designated by a Participant, on forms furnished and in the manner prescribed by the Committee, to receive any benefit payable under the Plan after the Participant’s death. If a Participant fails to designate a beneficiary or if, for any reason, such designation is not effective, his “Beneficiary” shall be his surviving spouse, or, if none, his estate. Notwithstanding the foregoing, the “Beneficiary” of a married Participant shall be deemed to be his spouse unless (a) he has designated another person or entity as his beneficiary and his spouse has consented to such designation in a written consent which acknowledges the effect of such designation and is witnessed by a Plan representative or notary public or (b) it is established to the satisfaction of the Committee that his spouse cannot be located.

2.1.4 “CBI Shares” means common shares of Cincinnati Bell Inc.

2.1.5 “Committee” means the Convergys Employee Benefits Committee.

2.1.6 “Convergys” means Convergys Corporation.

2.1.7 “Convergys Shares” means common shares of Convergys.

2.1.8 “Covered Compensation” means, with respect to any Participant, for any computation period, the total salary, hourly wages, pay in lieu of paid time off, differential pay, company-paid short term disability pay, commissions, team awards, bonuses and overtime paid to him by a Participating Company during the computation period for services rendered as a Covered Employee, plus the additional amount of such compensation that the Participating Company would have paid to the Participant during the computation period for services rendered as a Covered Employee if the Participant had not entered into a cash or deferred arrangement described in Section 401(k) of the Code or elected non taxable benefits under a cafeteria plan described in Section 125 of the Code or elected a qualified transportation fringe under Section 132 of the Code, but excluding “spot” bonuses, referral bonuses, patent bonuses, hiring bonuses, retention bonuses, severance pay, relocation pay, imputed income, long term incentive payments (i.e., payments earned over a period longer than one year) and any other special forms of pay. In the case of a Participant on international assignment, his Covered Compensation shall not be increased or decreased by reason of any international service adjustments. For purposes of the Plan, an Employee’s “Covered Compensation” that is taken into account for any Plan Year shall not exceed $200,000 as adjusted for cost-of-living increases in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to the Employee’s Covered Compensation for the Plan Year that begins with or within such calendar year. Beginning with the January 1, 2008 Plan Year, Covered Compensation shall exclude amounts that are not compensation within the meaning of Section 415(c)(3) of the Code.

 

2

2.1.9 “Covered Employee” means an Employee who is employed by a Participating Company, subject to the following:

(a) The term “Covered Employee” shall not include a person who is classified as a job bank employee, a temporary employee, a co-op or an intern.

(b) The term “Covered Employee” shall not include a person who is a “leased employee” within the meaning of Section 414(n) of the Code. For purposes of the preceding sentence, the term “leased employee” means any person (other than an employee of the recipient) who pursuant to an agreement between the recipient and any other person (leasing organization) has performed services for the recipient (or for the recipient and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least one year, and such services are performed under primary direction or control by the recipient.

(c) The term “Covered Employee” shall not include any person (other than a Foreign Service Employee) who is employed at a location which is not within one of the States of the United States or any person who is a Rotational Employee. For purposes of this Section 2.1.9, “Foreign Service Employee” means an Employee who is a citizen of the United States and who has been classified by the Participating Company that employs him as a Foreign Service Employee and “Rotational Employee” means an Employee who is a nonresident alien employed within one of the States of the United States for a period not expected to exceed three years.

(d) The term “Covered Employee” shall not include any employee who is covered by a collective bargaining agreement that does not specifically provide for coverage under the Plan.

(e) The term “Covered Employee” shall not include any person who is not classified by an Affiliated Employer as a common law employee of an Affiliated Employer even if a court or administrative agency determines that such individual is a common law employee and not an independent contractor.

2.1.10 “Employee” means any person who is a common law employee of an Affiliated Employer and has not had a severance from employment from the Affiliated Employer, including any such person who is absent from active service with an Affiliated Employer by reason of an Approved Absence.

2.1.11 “Entry Date” means January 1, 2007 and the first day of each payroll period after January 1, 2007.

2.1.12 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

2.1.13 “Normal Retirement Date” means the date on which a Participant attains age 59 1/2.

 

3

2.1.14 “Participant” means a person who was a Participant in the Plan on December 31, 2006, or who thereafter becomes a Participant in the Plan in accordance with the provisions of Section 4, and who remains a Participant.

2.1.15 “Participating Company” means Convergys, Convergys Information Management Group Inc., Convergys Customer Management Group Inc., Convergys CMG Utah, Inc., Whisperwire, Inc., Encore Receivable Management, Inc., Convergys Learning Solutions, Inc., Finali Corporation and Convergys Government Solutions LLC. If a Participating Company ceases to be an Affiliated Employer, it shall thereupon cease to be a Participating Company.

2.1.16 “Plan Accounts” means, collectively, all outstanding bookkeeping accounts maintained for a Participant in accordance with the provisions of the Plan.

2.1.17 “Plan Year” means the calendar year.

2.1.18 “Total Disability” means a physical or mental disability which, in the opinion of a physician selected or first approved by the Committee, disables the Participant from performing his duties as an Employee and is expected to continue for one year or longer.

2.1.19 “Trust” means the trust established in conjunction with the Plan.

2.1.20 “Trustee” means the person or corporation serving as trustee of the Trust.

2.1.21 “Valuation Date” means the last day of each Plan Year and such other dates as may be selected by the Committee for the valuation of the Trust assets.

2.2 Gender and Numbe r. For purposes of the Plan, words used in any gender shall include all other genders, words used in the singular form shall include the plural form and words used in the plural form shall include the singular form, as the context may require.

SECTION 3

CREDITED SERVICE

3.1 Eligibility Service . Each Employee who has completed at least 1,000 Hours of Service during the 12 month period commencing on the day he first performs an Hour of Service for an Affiliated Employer shall be credited with one year of Eligibility Service as of the last day of such 12 month period. Each Employee who fails to complete at least 1,000 Hours of Service during the 12 month period commencing on the day he first performs an Hour of Service for an Affiliated Employer shall be credited with one year of Eligibility Service as of the last day of the first Plan Year (commencing on or after the day he first performs an Hour of Service for an Affiliated Employer) during which he completes at least 1,000 Hours of Service.

3.2 Vesting Service . Each Employee shall be credited with one year of Vesting Service for each Plan Year during which he completes at least 1,000 Hours of Service.

 

4

3.3 Break in Service . Except for service which was disregarded on December 31, 1998 under the break in service rules of the CBIS Retirement and Savings Plan in effect on that date, for purposes of the Plan, no years of Eligibility Service or Vesting Service shall be disregarded because the Employee has incurred a break in service.

3.4 Hours of Service . Subject to the rules contained in 29 CFR §2530.200b-2(b) and (c) (which are incorporated herein by reference), an Employee’s “Hours of Service” shall be computed as follows:

3.4.1 One Hour of Service shall be credited for each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Affiliated Employer during the applicable computation period.

3.4.2 One Hour of Service shall be credited for each hour for which an Employee is paid, or entitled to payment, by an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence:

(a) No more than 501 Hours of Service are required to be credited under this Section 3.4.2 to an Employee on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs in a single computation period);

(b) An hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed is not required to be credited to the Employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable workmen’s compensation, or unemployment compensation or disability insurance laws; and

(c) Hours of Service are not required to be credited for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee.

 

For purposes of this Section 3.4.2, a payment shall be deemed to be made by or due from an Affiliated Employer regardless of whether such payment is made by or due from the Affiliated Employer directly, or indirectly through, among others, a trust fund, or insurer, to which the Affiliated Employer contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular Employees or are on behalf of a group of Employees in the aggregate.

3.4.3 One Hour of Service shall be credited for each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Affiliated Employer. The same hours of service shall not be credited both under Section 3.4.1 or Section 3.4.2, as the case may be, and under this Section 3.4.3. Crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in Section 3.4.2 shall be subject to the limitations set forth in that Section.

 

5

3.5 Service with Predecessor Entities . For purposes of the Plan, in the case of an employee of a Predecessor Entity who became an Employee as of the date on which the Predecessor Entity was acquired by an Affiliated Employer (“Acquisition Date”), from and after the Acquisition Date his service with the Predecessor Entity shall be deemed to be service with an Affiliated Employer. For purposes of this Section 3.5, “Predecessor Entity” includes NICE Corporation, Automated Phone Exchange Incorporated, Telephone Marketing Services, Inc., Ameritel Corporation, Waveland Associates, Inc., ADI Research, Inc., WATS Marketing of America, Inc., Software Support, Inc., Maritz, Inc., American Transtech, Inc. (ATI”) and, effective July 1, 2001, Geneva Technology Inc. In the case of an employee of Scherers Communications, Inc. (“Scherers”) who became an Employee on August 7, 1996, for purposes of the Plan, his service with Scherers prior to August 7, 1996 shall be deemed to be service with an Affiliated Employer. In the case of an employee of AT&T Corp. (“AT&T”) who became an Employee on March 1, 1998, for purposes of the Plan, his service with AT&T prior to March 1, 1998 shall be deemed to be service with an Affiliated Employer. In the case of an employee of AccuStaff Incorporated or People Systems Inc. (collectively, “AccuStaff”) who became an Employee during 1998 and who was supporting Convergys Customer Management Group Inc. immediately prior to becoming an Employee, for purposes of the Plan, his service with AccuStaff prior to the date he became an Employee shall be deemed to be service with an Affiliated Employer. Effective June 15, 1999, in the case of an employee of Technology Applications, Inc. who became an Employee on June 15, 1999, for purposes of the Plan, his service with Technology Applications, Inc. prior to the date he became an Employee shall be deemed to be service with an Affiliated Employer. In the case of an employee of Keane, Inc. (“Keane”) who became an Employee on February 9, 2001, for purposes of the Plan, his service with Keane prior to February 9, 2001 shall be deemed to be service with an Affiliated Employer. In the case of an employee of Geneva Technology Inc. (“Geneva”) who became an Employee of a Participating Company on July 1, 2001, for purposes of the Plan, his service with Geneva prior to July 1, 2001 shall be deemed to be service with an Affiliated Employer. In the case of an employee of iBasis Speech Solutions, Inc. (“iBasis”) who became an Employee of a Participating Company on August 1, 2002, for purposes of the Plan, his service with iBasis prior to August 1, 2002 shall be deemed to be service with an Affiliated Employer. In the case of an employee of Cygent, Inc. (“Cygent”) who became an Employee of a Participating Company on February 1, 2003, for purposes of the Plan, his service with Cygent prior to February 1, 2003 shall be deemed to be service with an Affiliated Employer. In the case of an employee of ALLTEL Communications, Inc. (or a related entity) (“ALLTEL”) who became an Employee of a Participating Company on January 1, 2004, for purposes of the Plan, his service with ALLTEL prior to January 1, 2004 shall be deemed to be service with an Affiliated Employer. In the case of an employee of Sprint/United Management Company (or a related entity) (“Sprint”) in its Nashville, TN contact center who became an Employee of a Participating Company pursuant to the terms of the Statement of Work between International Business Machines Corporation and Convergys Customer Management Group Inc. dated January 22, 2004, for purposes of the Plan, his service with Sprint prior to becoming an Employee shall be deemed to be service with an Affiliated Employer. In the case of an employee of Whisperwire, Inc. (“Whisperwire”) who became an Employee of a Participating Company on May 1, 2004, for purposes of the Plan, his service with Whisperwire prior to May 1, 2004 shall be deemed to be service with an Affiliated Employer. In the case of an employee of Encore Receivable Management, Inc. (“Encore”) who was employed by Encore on May 20, 2004, for purposes of the Plan, his service with Encore

 

6

prior to May 20, 2004 shall be deemed to be service with an Affiliated Employer. In the case of an employee of DigitalThink, Inc. (nka Convergys Learning Solutions, Inc.) (“DigitalThink”) who became an Employee of a Participating Company on June 1, 2004, for purposes of the Plan, his service with DigitalThink prior to June 1, 2004 shall be deemed to be service with an Affiliated Employer. In the case of an employee of Finali Corporation (“Finali”) who was employed by Finali on January 1, 2005, for purposes of the Plan, his service with Finali prior to January 1, 2005 shall be deemed to be service with an Affiliated Employer. In the case of an employee of Deloitte Consulting Outsourcing LLC (“Deloitte”) who became an Employee of a Participating Company on August 6, 2005, for purposes of the Plan, his service with Deloitte prior to August 6, 2005 shall be deemed to be service with an Affiliated Employer.

SECTION 4

ELIGIBILITY AND PARTICIPATION

4.1 Eligibility . Each Employee (a) who is a Covered Employee, (b) who has attained age 21 and (c) who has been credited with at least one year of Eligibility Service shall be eligible to become a Participant in the Plan. The service requirement described in subclause (c) in the preceding sentence shall only apply in determining a non-collectively bargained Employee’s eligibility to receive Employer Contributions under Section 5.2 of the Plan.

4.2 Participation . Each Employee may elect to become a Participant in the Plan and to make Salary Deferral Contributions in accordance with Section 5.1 of the Plan on the Entry Date on which he satisfies the eligibility requirements of Section 4.1 by following enrollment procedures established by the Committee. Each Employee shall automatically become eligible to receive Employer Contributions under Section 5.2 as of the Entry Date on which he satisfies the applicable eligibility requirements of Section 4.1. Each Participant shall remain a Participant so long as he remains an Employee and until his Plan Accounts have been fully distributed or forfeited.

SECTION 5

CONTRIBUTIONS

5.1 Salary Deferral Contributions . Each Participant may authorize salary deferral contributions, of up to such percentage of his Covered Compensation as may be fixed by the Committee from time to time, pursuant to rules prescribed by the Committee. The Committee may prescribe a lower percentage applicable to Participants who are Highly Compensated Employees. A Participant may change his authorization for salary deferral contributions from one permissible percentage to another at such times as the Committee may permit pursuant to rules prescribed by the Committee. A Participant may suspend his authorization for salary deferral contributions at such times as the Committee may permit pursuant to rules prescribed by the Committee. A Participant who has suspended his authorization for salary deferral contributions may again authorize salary deferral contributions by the Committee within the time prescribed by the Committee. Subject to the limitations contained in Section 6, (a) the amount of

 

7

Covered Compensation otherwise payable to each Participant on or after January 1, 2007 shall be reduced by the amount of the salary deferral contributions authorized by the Participant with respect to such Covered Compensation and (b) the Participating Companies shall contribute to the Plan, for each such Participant, an amount equal to the amount by which his Covered Compensation has been reduced. Salary deferral contributions under this Section 5.1 shall be made in cash. In no event shall a Participating Company deliver salary deferral contributions to the Trustee on behalf of an eligible Participant prior to the date the Participant performs the services with respect to which the contribution is being made, unless such pre-funding is to accommodate a bona fide administrative concern and is not for the principal purpose of accelerating deductions.

5.2 Employer Contributions . The Participating Companies shall contribute to the Plan for each eligible Participant who (a) has satisfied the eligibility requirements for Employer Contributions under Sections 4.1 and 4.2, and (b) who authorized salary deferral contributions under Section 5.1 for a pay period, an amount equal to the sum of 100% of the first three percent of Covered Compensation with respect to which salary deferral contributions were authorized for the pay period and 50% of the next 2% of Covered Compensation with respect to which salary deferral contributions were authorized for the pay period. The Participating Companies’ contributions under this Section 5.2 may be made in cash or Convergys Shares. In no event shall a Participating Company deliver Employer Contributions to the Trustee on behalf of an eligible Participant prior to the date the Participant performs the services with respect to which the contribution is being made, unless such pre-funding is to accommodate a bona fide administrative concern and is not for the principal purpose of accelerating deductions.

5.3 Rollover Contributions . Subject to the approval of the Committee, a Covered Employee may rollover or have directly transferred to the Trust an eligible rollover distribution from one or more other retirement plans or conduit individual retirement accounts as specified in this Section 5.3. After-tax employee contributions and Roth 401(k) contributions may not be rolled over to the Plan. Any rollover contribution must be made in cash or Convergys Shares. A Covered Employee who makes a rollover contribution under this Section 5.3 prior to becoming a Participant shall thereupon become a Participant, provided that such Participant may not authorize contributions under Section 5.1 or share in Employer Contributions under Section 5.2 prior to the date on which his participation otherwise could have commenced respectively for those purposes under Section 4.1 and 4.2.

5.3.1 The Plan will accept, subject to the approval of the Committee, a direct rollover of an eligible rollover distribution from:

 

(a)

A qualified plan described in Section 401(a) or 403(a) of the Code, excluding after-tax employee contributions and excluding Roth 401(k) contributions.

 

(b)

An annuity contract described in Section 403(b) of the Code, excluding after-tax employee contributions.

 

(c)

An eligible plan under Section 457(b) of the Code that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

 

8

5.3.2 The Plan will accept, subject to the approval of the Committee, a rollover contribution of an eligible rollover distribution from:

 

(a)

A qualified plan described in Section 401(a) or 403(a) of the Code.

 

(b)

An annuity contract described in Section 403(b) of the Code.

 

(c)

An eligible plan under Section 457(b) of the Code that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

5.3.3 The Plan will accept, subject to the approval of the Committee, a 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 includible in gross income.

5.4 Mistake of Fact; Disallowance of Deduction . Any contribution made by a Participating Company by reason of a mistake of fact or conditioned on its deductibility under Section 404 of the Code, to the extent disallowed, shall be repaid to the Participating Company, at the Participating Company’s election, provided that such repayment is made within one year after the mistaken payment of the contribution or within one year of the disallowance of the deduction. Earnings attributable to such contributions may not be paid to the Participating Company, but any losses attributable thereto shall reduce the amount which may be repaid. All Participating Company contributions shall be conditioned on their deductibility under Section 404 of the Code.

5.5 Application of Forfeitures . Any forfeitures arising under the Plan in any Plan Year shall be applied first, to make any restorals called for under Section 8.5 and second, to reduce the contributions otherwise required of the Participating Companies.

5.6 Catch-Up Contributions . For any Plan Year, each Participant who is eligible to make salary deferral contributions under Section 5.1 of the Plan and who is projected to attain age 50 before the close of such 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 be made pursuant to rules prescribed by the Committee. 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 Sections 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. Catch-up contributions made pursuant to this Section 5.6 shall be treated as salary deferral contributions for purposes of calculating the amount of a Participants’ Employer Contributions pursuant to Section 5.2.

 

9

SECTION 6

LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS

6.1 Section 404 Limitations . In no event shall the Participating Companies’ contributions to the Plan for any Plan Year under Sections 5.1 and 5.2 exceed the limitation described in Section 404 of the Code. If the Companies’ total contributions for any Plan Year could exceed the limitation described in the preceding sentence, the following adjustments shall be made in the following order so that such limitations are not exceeded: first, the amounts to be contributed under Section 5.2 shall be reduced proportionately; and, second, the amounts to be contributed under Section 5.1 shall be reduced proportionately.

6.2 Section 401(k) Limitations . Subject to the provisions of Section 6.9, if for any Plan Year the Participating Companies’ contributions under Section 5.1 on behalf of those Participants who are Highly Compensated Employees exceed both the limitation contained in Section 6.2.1 and the limitation contained in Section 6.2.2, the contributions of such Participants as determined hereunder (together with the earnings thereon, as determined under Treas. Reg. Section 1.401(k)-2(b)(2)(iv) for the Plan Year and the “gap period”) shall be distributed to such Participants prior to the end of the following Plan Year, provided, however, the income or loss for the “gap period” may be determined as of a date that is no more than 7 days before the date of distribution. For purposes of this Section 6.2, “gap period” means the period between the close of the Plan Year in which “Excess Contributions” were made and the date the contributions are distributed.

6.2.1 The Average Deferral Percentage for those Eligible Employees who are Highly Compensated Employees must not be more than the Average Deferral Percentage of all other Eligible Employees multiplied by 1.25.

6.2.2 The excess of the Average Deferral Percentage for those Eligible Employees who are Highly Compensated Employees over the Average Deferral Percentage of all other Eligible Employees must not be more than two percentage points and the Average Deferral Percentage for those Eligible Employees who are Highly Compensated Employees must not be more than the Average Deferral Percentage of all other Eligible Employees multiplied by two.

In the event the foregoing limitations are exceeded in any Plan Year, the dollar amount of the excess shall be determined by reducing the dollar amount of the contributions included in determining the Average Deferral Percentage of Highly Compensated Employees in order of their Individual Deferral Percentages as follows:

 

(a)

The highest Individual Deferral Percentage shall be reduced to the greater of (1) the maximum Individual Deferral Percentage that satisfies the limitation on contributions made under Section 5.1 described in this Section 6.2 or (2) the next highest Individual Deferral Percentage.

 

(b)

If the limitation on contributions made under Section 5.1 described in this Section 6.2 would still be exceeded after application of the provisions of paragraph (a),

 

10

the Individual Deferral Percentages of Highly Compensated Employees shall continue to be reduced, continuing with the next highest Individual Deferral Percentage in the manner provided in paragraph (a) until the limitation on contributions made under Section 5.1 described in this Section 6.2 is satisfied.

After determining the dollar amount of the excess pursuant to the foregoing provisions, such excess shall be allocated among Highly Compensated Employees in order of the dollar amount of the contributions made under Section 5.1 as follows:

 

(c)

The salary deferral contributions made on behalf of the Highly Compensated Employee(s) with the largest dollar amount of salary deferral contributions allocated to his Salary Deferral Account for the Plan Year shall be reduced by the dollar amount of the excess (with such dollar amount being allocated equally among all such Highly Compensated Employee(s)), but not below the dollar amount of such contributions made on behalf of the Highly Compensated Employee(s) with the next highest dollar amount of such contributions allocated to his Salary Deferral Account for the Plan Year.

 

(d)

If the excess has not been fully allocated after application of the provisions of paragraph (c), the contributions made on behalf of Highly Compensated Employee(s) shall continue to be reduced, continuing with the Highly Compensated Employee(s) with the largest remaining dollar amount of such contributions allocated to their Salary Deferral Accounts for the Plan Year, in the manner provided in paragraph (c) until the entire excess determined above has been allocated.

Notwithstanding the foregoing, at the election of Convergys, in lieu of making distributions of excess contributions to those Participants who are Highly Compensated Employees, the Participating Companies may make a qualified nonelective contribution to the Plan for the Plan Year in an amount sufficient to satisfy the limitations of Sections 6.2.1 or 6.2.2. Any discretionary qualified nonelective contribution made by a Participating Company for the Plan Year shall be allocated among its Participants during the contribution period who are not Highly Compensated Employees. The allocable share of each such Participant in the qualified nonelective contribution shall be in the ratio which his Compensation from the Participating Company for the contribution period bears to the aggregate of such Compensation for all such Participants.

For purposes of the Plan, (a) the “Average Deferral Percentage” for a specified group of Eligible Employees shall be the average of such Eligible Employees’ Individual Deferral Percentages and (b) “Individual Deferral Percentage” means, with respect to any Eligible Employee for the Plan Year, the ratio of the salary deferral contributions paid to the Plan for the Eligible Employee under Section 5.1 for the Plan Year to the Eligible Employee’s Compensation for such Plan Year. For purposes of determining the Individual Deferral Percentage of an Eligible Employee who is a Highly Compensated Employee, salary deferral contributions and qualified nonelective contributions (to the extent after-tax contributions or qualified nonelective contributions are taken into account in determining the Average Deferral Percentage) made to his accounts under this Plan and all other 401(k) plans maintained by any Affiliated Employer in

 

11

which the Eligible Employee is eligible to participate that are not manditorily disaggregated pursuant to Treas. Reg. Section 1.410(b)-7(c), as modified by Treas. Reg. Section 1.401(k)-1(b)(4) (without regard to the prohibition on aggregating plans with inconsistent testing methods contained in Treas. Reg. Section 1.401(k)-1(b)(4)(iii)(B) and the prohibition on aggregating plans with different plan years contained in Treas. Reg. Section 1.410(b)-7(d)(5)), shall be treated as if all such contributions were made to the Plan; provided, however, that if such a plan has a plan year different from the Plan Year, any such contributions made to the Highly Compensated Employee’s account under the other plan during the Plan Year shall be treated as if such contributions were made to the Plan. If one or more plans of a Participating Company or Affiliated Employer are aggregated with the Plan for purposes of satisfying the requirements of Section 401(a)(4) or 410(b) of the Code, then the Individual Deferral Percentages under the Plan shall be calculated as if the Plan and such one or more other plans were a single plan. Pursuant to Treas. Reg. Section 1.401(k)-1(b)(4)(v), the Committee may elect to calculate the Individual Deferral Percentages aggregating employee stock ownership plans and other plans. In addition, the Committee may elect to calculate Individual Deferral Percentages aggregating bargained plans maintained for different bargaining units, provided that such aggregation is done on a reasonable basis and is reasonably consistent from year to year. Plans may be aggregated under this paragraph only if they have the same plan year and utilize the same testing method to satisfy the requirements of Section 401(k) of the Code.

If the Plan applies Section 410(b)(4)(B) of the Code in determining whether the cash or deferred arrangement under the Plan meets the requirements of Section 410(b)(1) of the Code, the Committee may apply the limitations on salary deferral contributions of Highly Compensated Employees described in this Article VI either by (i) comparing the Average Deferral Percentage of all Participants who are Highly Compensated Employees for the Plan Year to the Average Deferral Percentage for the Plan Year of those Participants who are not Highly Compensated Employees and who have satisfied the minimum age and service requirements under Section 410(a)(1) of the Code or (ii) separately with respect to Participants who have not satisfied the minimum age and service requirements under Section 410(a)(1) of the Code and Participants who have satisfied such minimum age and service requirements.

6.3 Section 401(m) Limitations . Subject to the provisions of Section 6.9, if for any Plan Year the total contributions under Section 5.2 made on behalf of those Participants who are Highly Compensated Employees exceed both the limitation contained in Section 6.3.1 and the limitation contained in Section 6.3.2, the excess contributions of such Participants as determined hereunder (together with the earnings thereon, as determined under Treas. Reg. Section 1.401(m)-2(b)(2)(iv) for the Plan Year and the “gap period”) shall be distributed to such Participants prior to the end of the following Plan Year. For purposes of this Section 6.3, “gap period” means the period between the close of the Plan Year in which such contributions were made and the date that is no more than 7 days before the date the contributions are distributed pursuant to this Section 6.3.

6.3.1 The Average Contribution Percentage for those Eligible Employees who are Highly Compensated Employees must be not more than the Average Contribution Percentage of all other Eligible Employees multiplied by 1.25.

 

12

6.3.2 The excess of the Average Contribution Percentage for those Eligible Employees who are Highly Compensated Employees over the Average Contribution Percentage of all other Eligible Employees must not be more than two percentage points and the Average Contribution Percentage for those Eligible Employees who are Highly Compensated Employees must not be more than the Average Contribution Percentage of all other Eligible Employees multiplied by two.

In the event the foregoing limitations are exceeded in any Plan Year, the dollar amount of the excess shall be determined by reducing the dollar amount of the contributions included in determining the Average Contribution Percentage of Highly Compensated Employees in order of their Individual Contribution Percentages as follows:

 

(a)

The highest Individual Contribution Percentage shall be reduced to the greater of (1) the maximum Individual Contribution Percentage that satisfies the limitation on contributions made under Section 5.2 described in this Section 6.3 or (2) the next highest Individual Contribution Percentage.

 

(b)

If the limitation on contributions made under Section 5.2 described in this Section 6.3 would still be exceeded after application of the provisions of paragraph (a), the Individual Contribution Percentages of Highly Compensated Employees shall continue to be reduced, continuing with the next highest Individual Contribution Percentage in the manner provided in paragraph (a) until the limitation on contributions made under Section 5.2 described in this Section 6.3 is satisfied.

After determining the dollar amount of the excess pursuant to the foregoing provisions, such excess shall be allocated among Highly Compensated Employees in order of the dollar amount of the contributions made under Section 5.2 as follows:

 

(c)

The employer contributions made on behalf of the Highly Compensated Employee(s) with the largest dollar amount of employer contributions allocated to his Employer Contribution Account for the Plan Year shall be reduced by the dollar amount of the excess (with such dollar amount being allocated equally among all such Highly Compensated Employee(s)), but not below the dollar amount of such contributions made on behalf of the Highly Compensated Employee(s) with the next highest dollar amount of such contributions allocated to his Employer Contribution Account for the Plan Year.

 

(d)

If the excess has not been fully allocated after application of the provisions of paragraph (c), the contributions made on behalf of Highly Compensated Employee(s) shall continue to be reduced, continuing with the Highly Compensated Employee(s) with the largest remaining dollar amount of such contributions allocated to their Employer Contribution Accounts for the Plan Year, in the manner provided in paragraph (c) until the entire excess determined above has been allocated.

 

13

Notwithstanding the foregoing, at the election of Convergys, in lieu of making distributions to those Participants who are Highly Compensated Employees, the Participating Companies may make a qualified nonelective contribution to the Plan for the Plan Year in an amount sufficient to satisfy the limitations of Sections 6.3.1 or 6.3.2. Any qualified nonelective contribution made by a Participating Company for the Plan Year shall be allocated among the Employer Contribution Accounts of those Participants who were not Highly Compensated Employees during the contribution period. The allocable share of each such Participant in the qualified nonelective contribution shall be in the ratio which his Compensation from the Participating Company for the contribution period bears to the aggregate of such Compensation for all such Participants. That portion of any Employer Contribution Account which is attributable to the qualified nonelective contributions made hereunder shall at all times be fully vested and non-forfeitable.

For purposes of the Plan, (a) the “Average Contribution Percentage” for a specified group of Eligible Employees shall be the average of such Eligible Employees’ Individual Contribution Percentages and (b) “Individual Contribution Percentage” means, with respect to any Eligible Employee for the Plan Year, the ratio of the contributions paid to the Plan for the Eligible Employee under Section 5.2 for the Plan Year to the Eligible Employee’s Compensation for the Plan Year. For purposes of determining the Average Contribution Percentages of an Eligible Employee who is a Highly Compensated Employee for a Plan Year, employer contributions, after-tax contributions and qualified nonelective contributions (to the extent after-tax contributions or qualified nonelective contributions are taken into account in determining the Average Contribution Percentage) made to his accounts under this Plan and all other 401(k) plans maintained by any Affiliated Employer in which the Eligible Employee is eligible to participate that are not manditorily disaggregated pursuant to Treas. Reg. Section 1.410(b)-7(c), as modified by Treas. Reg. Section 1.401(m)-1(b)(4) (without regard to the prohibition on aggregating plans with inconsistent testing methods contained in Treas. Reg. Section 1.401(m)-1(b)(4)(iii)(B) and the prohibition on aggregating plans with different plan years contained in Treas. Reg. Section 1.410(b)-7(d)(5)), shall be treated as if all such contributions were made to the Plan; provided, however, that if such a plan has a plan year different from the Plan Year, any such contributions made to the Highly Compensated Employee’s account under the other plan during the Plan Year shall be treated as if such contributions were made to the Plan. If one or more plans of a Participating Company or Affiliated Employer are aggregated with the Plan for purposes of satisfying the requirements of Sections 401(a)(4) or 410(b) of the Code, then the Individual Contribution Percentages under the Plan shall be calculated as if the Plan and such one or more other plans were a single plan. Pursuant to Treas. Reg. Section 1.401(m)-1(b)(4)(v), the Committee may elect to calculate the Individual Contribution Percentages aggregating employee stock ownership plans and other plans. In addition, the Committee may elect to calculate Individual Contribution Percentages aggregating bargained plans maintained for different bargaining units, provided that such aggregation is done on a reasonable basis and is reasonably consistent from year to year. Plans may be aggregated under this paragraph only if they have the same plan year and utilize the same testing method to satisfy the requirements of Section 401(m) of the Code.

Employer Contributions made under Section 5.2 in excess of 100% of the salary deferral contributions of an Eligible Employee who is not a Highly Compensated Employee for a Plan Year shall not be used in computing such Eligible Employee’s Individual Contribution Percentage for the Plan Year to the extent that such matching contributions exceed the greater of (i) 5% of the Eligible Employee’s Compensation for the Plan Year or (ii) the product of 2 times

 

14

the Plan’s “representative match rate” multiplied by the Eligible Employee’s salary deferral contributions for the Plan Year. For purposes hereof, the Plan’s “representative match rate” is the lowest “match rate” of any Eligible Employee who is a not a Highly Compensated Employee for the Plan Year in either (i) the group consisting of half of all Eligible Employees who are not Highly Compensated Employees for the Plan Year or (ii) the group of all Eligible Employees who are not Highly Compensated Employees for the Plan Year and who are employed by a Participating Company or an Affiliated Employer on the last day of the Plan Year and who make salary deferral contributions for the Plan Year, whichever results in the greater amount. An Eligible Employee’s “match rate” means the matching contributions made on behalf of the Eligible Employee for the Plan Year divided by the Eligible Employee’s salary deferral contributions for the Plan Year.

If the Plan applies Section 410(b)(4)(B) of the Code in determining whether the portion of the Plan subject to Section 401(m) of the Code meets the requirements of Section 410(b)(1) of the Code, the Committee may apply the limitations on matching contributions of Highly Compensated Employees described in this Article VI either by (i) comparing the Average Contribution Percentage of all Participants who are Highly Compensated Employees for the Plan Year to the Average Contribution Percentage for the Plan Year of those Participants who are not Highly Compensated Employees and who have satisfied the minimum age and service requirements under Section 410(a)(1) of the Code or (ii) separately with respect to Participants who have not satisfied the minimum age and service requirements under Section 410(a)(1) of the Code and Participants who have satisfied such minimum age and service requirements.

6.4 Maximum Annual Additions . The total Annual Additions allocable to a Participant’s Plan Accounts for any Plan Year shall be limited in accordance with the following provisions:

6.4.1 Notwithstanding any other provision of the Plan to the contrary, in no event shall a Participant’s Annual Additions for any Plan Year 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 Plan Year. The compensation limit referred to in subclause (b) above shall not apply to any contribution for medical benefits after separation from service (within the meaning of Section 401(h) of the Code or 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition.

6.4.2 If for any Plan Year beginning prior to July 1, 2007, as a result of reasonable error in estimating a Participant’s Compensation or other facts and circumstances approved by the Commissioner of Internal Revenue, a Participant’s Annual Additions could exceed the limitations set forth in Section 6.4.1, the following adjustments shall be made in the following order to the extent necessary to insure such limitations will not be exceeded: first, the Participating Companies’ contributions for the Plan Year on behalf of the Participant under Section 5.2 shall be allocated to a suspense account under Section 6.4.3; and second, the Participating Companies’ contributions for the Plan Year on behalf of the Participant under Section 5.1 shall be allocated to a suspense account under Section 6.4.3

 

15

6.4.3 That portion of the Participating Companies’ contributions for a Plan Year which is allocated to a suspense account under Section 6.4.2 shall be applied to reduce the contributions otherwise required of the Participating Companies in the first Plan Year in which they can be applied without exceeding the limitations of Section 6.4.1. The suspense account shall not share in the income, expenses, profits or losses of the Trust. The Participating Companies shall not contribute any amount to the Trust which results in additional amounts being credited to the suspense account. If the Plan is terminated, any amount credited to the suspense account which cannot be allocated to the Participants’ Plan Accounts shall be paid to the Participating Companies.

6.4.4 For purposes hereof, “Annual Additions” means, with respect to any Participant, the sum of all Participating Company and Participant contributions (other than rollover contributions) and forfeitures allocated to his accounts for a Plan Year under this Plan and all other defined contribution plans maintained by any Affiliated Employer. If a Participant in this Plan is a participant in one or more other defined contribution plans, the limitations contained in this Section 6.4 shall be applied to reduce the annual additions which otherwise would have been credited to his accounts in this Plan and such other plans, beginning with the most current annual additions.

6.5 Highly Compensated Employee . For purposes of the Plan, “Highly Compensated Employee” means an Employee (a) who, during the Plan Year for which the determination is being made or the preceding Plan Year, was at any time a 5 percent owner (as defined in Section 416(i)(1) of the Code) of any Affiliated Employer; or (b) who, during the Plan Year preceding the Plan Year for which the determination is being made, received Compensation in excess of $80,0