EXHIBIT 10.8 BLUE RIDGE PAPER PRODUCTS EMPLOYEE STOCK OWNERSHIP PLANStock Option Agreement |
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Exhibit 10.8
BLUE RIDGE PAPER PRODUCTS
TABLE OF CONTENTS
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BLUE RIDGE PAPER PRODUCTS
GENERAL
1.1 Purpose and Effective Date . Effective as of May 14, 1999 (the “Effective Date”), BLUE RIDGE HOLDING CORP., a Delaware corporation (the “Company”), established the BLUE RIDGE PAPER PRODUCTS EMPLOYEE STOCK OWNERSHIP PLAN (the “Plan”) to enable the employees of the Company and its subsidiaries (including Blue Ridge Paper Products Inc.) to participate in the equity ownership of the Company. The Plan is intended to be an employee stock ownership plan within the meaning of Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended (the “Code”). The Plan is intended to be a money purchase and stock bonus plan, both of which are intended to qualify under Section 401(a) of the Code. All contributions to the trust (the “Trust”) which implements and forms a part of the Plan, not in excess of 15% of the aggregate compensation of participants under the Plan shall be made to the money purchase component of the plan and any contributions above such amount shall be made to the stock bonus component of the Plan.
1.2 Employers and Related Companies . The Company, Blue Ridge Paper Products Inc., and each Related Company which, with the Company’s consent, adopts the Plan are referred to below collectively as the “Employers” and individually as an “Employer.” The term “Related Company” means any corporation, trade or business during any period in which it is, along with the Company, a member of a controlled group of corporations, a group of trades or businesses under common control or an affiliated service group, as described in Sections 414(b), 414(c), 414(m), respectively, of the Code or as described in regulations issued by the Secretary of the Treasury or his delegate pursuant to Section 414(o) of the Code.
1.3 Trust Agreement and Plan Administration . All contributions made under the Plan will be held, managed and controlled by the U.S. Trust Company (the “Trustee”) acting as trustee of a Trust. The terms of the trust are set forth in a trust agreement known as the TRUST AGREEMENT FOR THE BLUE RIDGE PAPER PRODUCTS EMPLOYEE STOCK OWNERSHIP PLAN (the “Trust Agreement”). The Company shall be the administrator of the Plan (the “Plan Administrator”) and shall have the rights, duties and obligations of an “administrator” as that term is defined in Section 3(16)(A) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and of a “plan administrator” as that term is defined in Section 414(g) of the Code. The Company has delegated certain duties relating to the operation and administration of the Plan to a Committee, as described in Article 11.
1.4 Plan Year . The term “Plan Year” means the calendar year.
1.5 Accounting Date . The term “Accounting Date” means the last day of each Plan Year and/or an Accounting Date as may be determined by the Committee in a uniform and nondiscriminatory manner.
1.6 Applicable Laws . The Plan shall be construed and administered according to the laws of the State of North Carolina to the extent that such laws are not preempted by the laws of the United States of America.
1.7 Gender and Number . Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural, and the plural shall include the singular.
1.8 Notices . Any notice or document required to be filed with the Trustee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Trustee, U.S. Trust Company, N.A., 1300 Eye Street, N.W., Suite 280 East, Washington, DC, 20005-3314 (and, for periods on and after August 1, 2002, to the Trustee, GreatBanc Trust Company, 1301 W. 22nd Street, Suite 702, Oak Brook, IL 60523) and to the ESOP Committee, Blue Ridge Paper Products Inc., 41 Main Street, Canton, NC 28716. Any notice required under the Plan may be waived by the person entitled to notice.
1.9 Evidence . Evidence required of anyone under the Plan may be by certificates, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.
1.10 Action By Employer . Any action required or permitted to be taken by an Employer under the Plan shall be by resolution of its Board of Directors, or by a person or persons authorized by the Board of Directors. References in this Plan to an Employer’s “Board of Directors” shall be understood to include the Executive Committee, if any, of such Board of Directors.
1.11 No Reversion to Employers . No part of the corpus or income of the Trust Fund shall revert to any Employer or be used for, or diverted to, purposes other than for the exclusive benefit of Participants and other persons entitled to benefits under the Plan, except as follows:
1.11.1 Mistake of Fact . Notwithstanding any other provision herein contained, if any contribution is made due to a mistake of fact, such contribution shall, upon the direction of the Committee, which shall be given in conformity with the provisions of ERISA, be returned to the Employer or the party who made it, as directed by the Employer, without liability to any person (including, but not limited to, Participants and Beneficiaries) no later than one year after the date of such contribution.
1.11.2 Qualification of Plan . Notwithstanding any other provisions herein contained, the Trust Agreement is entered into on the condition that the
Plan and the Trust Agreement, as initially established, shall be approved by the Internal Revenue Service (the “IRS”) as a qualified and exempt plan and trust under the provisions of the Code and the Treasury Regulations. If such approval should be denied for any reason (including failure to comply with any conditions for such approval imposed by the IRS), contributions made on or after the execution of the Trust Agreement and prior to such denial shall, upon the direction of the Committee, which shall be given in conformity with the provisions of ERISA, be returned to the Employer or the party who made it, as directed by the Employer, without any liability to any person, within one year after the date of denial of such approval and all remaining assets in the Trust shall be returned to the Employers.
1.11.3 Deductibility of Contributions . Notwithstanding any other provisions herein contained, all contributions made under the Plan are hereby expressly conditioned upon their deductibility under Section 404 of the Code and the Treasury Regulations thereunder, as amended from time to time, and if the deduction for any contribution is disallowed in whole or in part, then such contribution (to the extent the deduction is disallowed) shall, upon the direction of the Committee, which shall be given in conformity with the provisions of ERISA, be returned to the Employer or the party who made it without liability to any person.
1.12 Highly Compensated Employees . The term “Highly Compensated Employee” means any employee who:
1.12.1 was, at any time during the relevant Plan Year or the preceding Plan Year, a 5% owner (as defined in Section 416(I) of the Code) of any Employer; or
1.12.2 for the preceding year:
(a) received compensation from any Employer in excess of $80,000, and
(b) if the Company elects, was in the top-paid (as defined in Code Section 414(q)) group of employees for such preceding year.
A former employee will be considered a member of the Highly Compensated Group if such former employee was a Highly Compensated Employee either when he separated from service with the Employers or at any time after he attained age 55. The determination of whether an employee is a Highly Compensated Employee will be made with reference to the definitions provided in Section 414(q) of the Code and any regulations issued by the Secretary of the Treasury thereunder (including any cost-of-living adjustments to the dollar figure above). Compensation for purposes of this Section shall be compensation within the meaning of Code Section 415(c)(3), including, to the extent permitted under Code Section 414(q), elective contributions to a Code Section 125 plan, a cash or deferred plan or a tax deferred annuity, if applicable, and, effective January 1, 2001, amounts not includible in the gross income of the Participant by reason of Section 132(f)(4) of the Code.
1.13 Investment of Trust Assets . Except as otherwise required by ERISA, the Trustee shall invest the assets of the Trust at all times in securities of the Company and its affiliates which constitute “qualifying employer securities” within the meaning of Section 407(d)(5) of ERISA and shall primarily invest the assets of the Trust at all times in “employer securities” within the meaning of Section 409(1) of the Code.
PLAN PARTICIPATION
2.1 Entry Date . In the case of each individual who is first employed by an Employer on or after August 15, 1999, “Entry Date” means the start date of his employment with that Employer. In the case of each individual who (i) was continuously employed by that Employer for the 60 days ending May 14, 1999 and (ii) remains continuously employed by that Employer for the period from May 14, 1999 through August 15, 1999, “Entry Date” means May 14, 1999. In the case of each individual who (i) is first employed by the Employer on or after May 14, 1999, but prior to August 15, 1999, and (ii) remains continuously employed by that Employer from the start date of his employment through August 15, 1999, “Entry Date” means the start date of his employment with that Employer. For purposes of this Section 2.1, employment with Champion International, Inc. prior to May 14, 1999 shall be considered to be employment with an Employer.
2.2 Eligibility for Participation . Each employee of an Employer who is (i) employed by the Company or (ii) otherwise employed by an Employer at a location or facility acquired pursuant to that Asset Purchase Agreement among Champion International Corporation, Carolina Paper Products Holding Corp. and Carolina Paper Company, dated as of March 29, 1999 (or who was so employed at such a location or facility and is thereafter transferred to employment at some other location or facility of the Employer), shall automatically become a “Participant” in the Plan on his Entry Date if he is still an employee on that date; provided, that if he is a member of a group whose terms and conditions of employment are covered by a collective bargaining agreement, he shall be eligible to participate only if the collective bargaining agreement so provides. No other employee shall become a Participant in the Plan.
2.3 Participation Not Guarantee of Employment . Participation in the Plan does not constitute a guarantee or contract of employment and will not give any employee the right to be retained in the employ of the Employers or Related Companies nor any right or claim to any benefit under the terms of the Plan unless such right or claim has specifically accrued under the terms of the Plan.
2.4 Restricted Participation . Subject to the terms and conditions of the Plan, when distribution of the benefits to which a Participant is entitled under the Plan is deferred beyond or cannot be made until after his Termination Date (as described in Article 6) and during any period that a Participant is a member of a group or class of employees not covered by the Plan or employed by a Related Company, the Participant, or in the event of the Participant’s death, the Beneficiary (as defined in Section 7.9) of the
Participant, will be considered and treated as a Participant for all purposes of the Plan, except as follows:
2.4.1 the Participant will not share in Employer contributions (as described in Article 4); and
2.4.2 the Beneficiary of a deceased Participant cannot designate a Beneficiary under Section 7.9.
2.5 Leased Employees . For all purposes of the plan, an individual shall be an “employee” of or be “employed” by an employer for any Plan Year only if such individual is treated by the employer for purposes of employment taxes and wage withholding for federal income taxes, regardless of any subsequent reclassification by the employer, any governmental agency or court. A leased employee (as defined below) shall not be eligible to participate in the Plan. A “leased employee” means any person defined in Code Section 414(n), which includes any person who is not an employee of an Employer, but who has provided services to an Employer, which services are performed under the primary direction or control of the Employer, on a substantially full-time basis for a period of at least one year, pursuant to an agreement between the Employer and a leasing organization. If a leased employee is subsequently employed by an Employer, the period during which a leased employee performs services for an Employer shall be taken into account for purposes of Sections 2.2 and 7.12 of the Plan.
2.6 Military Service . Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code Section 414(u). A Participant returning from employment after serving in the uniformed services is treated as not having incurred a break in service during the period of qualified military service, as defined herein. Each period of qualified military service is considered under the Plan to be service with the Employer for the purposes of Section 7.12 of the Plan.
2.7 Omission of Eligible Employee . If, in any Plan Year, any employee who should be included as a Participant in the Plan is erroneously omitted, and discovery of such omission is not made until after a contribution by the Employer for the Plan Year has been made, the Employer shall make a subsequent contribution with respect to the omitted employee in the amount which the Company would have contributed if he or she had not been omitted. Such contribution shall be made regardless of whether or not it is deductible in who or in part in any taxable year under applicable provisions of the Code.
2.8 Inclusion of Ineligible Employee . If, in any Plan Year, any employee who should not have been included as a Participant in the Plan is erroneously included, and discovery of such incorrect inclusion is not made until after a contribution by the Company for the Plan Year has been made, the Company shall not be entitled to recover the contribution made with respect to the ineligible employee regardless of whether a deduction is allowable with respect to such contribution. In such event, the
amount contributed with respect to the ineligible employee shall constitute a forfeiture for the Plan Year in which the discovery is made.
[RESERVED]
PLAN CONTRIBUTIONS
4.1 Annual Employer ESOP Contributions .
4.1.1 In General . Subject to the conditions and limitations of the Plan, for each Plan Year each Employer will contribute to the Trust, cash or Company Stock in such amount, if any, as the Board of Directors of that Employer shall determine by resolution; provided , however , that for each Plan Year, the Employers shall jointly contribute an amount in cash not less than the amount required to enable the Trustee to discharge any Acquisition Loan indebtedness (as described in Section 4.4) that is due for such year. Employer contributions otherwise required in cash may be made by forgiveness of indebtedness that is owing to the Company by the ESOP, pursuant to a written certificate of the Company describing the indebtedness that is forgiven, the date of forgiveness, and the principal and interest portions thereof, in which event the forgiven amount shall be treated as if a cash contribution. The Trustee shall apply any cash Employer ESOP Contribution under this Section 4.1 for any Plan Year first to pay the amount due during or prior to that Plan Year with respect to any Acquisition Loan. If any part of an Employer’s ESOP Contribution under this Section 4.1 for any Plan Year is in cash in an amount exceeding the amount needed to pay the amount due during or prior to that Plan Year with respect to an Acquisition Loan, such cash may (after allocation to ESOP Cash Accounts) be applied by the Trustee to either the purchase of Company Stock or to repay an Acquisition Loan.
4.1.2 In no event will an Employer’s contribution under this Section 4.1 for any Plan Year exceed the lesser of:
(a) the maximum amount deductible by that Employer as an expense for Federal income tax purposes; or
(b) the maximum amount which, together with the amount of the Employer’s contributions which are to be credited to the Accounts of Participants from a suspense account permitted under Code Section 415 for that year, can be credited for that year in accordance with the contribution limitation provisions of Section 5.5.
4.1.3 An Employer’s ESOP Contribution under this Section 4.1 for any Plan Year shall be due no later than the last day of the Plan
Year and, if not paid on that date, shall be payable to the Trustee as soon thereafter as practicable, but not later than the time prescribed for filing the Employer’s Federal income tax return for that Plan Year, including any extensions of time, without interest; provided, however, that in the event that an Acquisition Loan is outstanding, such contribution shall be payable to the Trustee not later than the principal and interest payment date.
4.2 Specific Implementation . It is presently expected that the Company will transfer 40% ownership of the Company to the Participants, through allocations under this ESOP (including the Overflow Plan described in Section 5.8), over seven years following the Effective Date, tied to a seven year labor contract. Assuming the labor contract is in effect for the seven year period beginning on the Effective Date, it is expected that approximately 5.7% of ownership of the Company will be allocated to Participants each Plan Year, except the first and last years, illustrated as follows:
The pace of contributions shall be subject to change pursuant to collective bargaining as described in Section 12.1.
(1) These ownership percentages refer to the Plan’s anticipated ownership of the Company’s total authorized common stock as of May 14, 1999. These ownership percentages will be appropriately adjusted to reflect any issuance, repurchase or reclassification of the Company’s common stock after that date.
4.3 Company Stock . For purposes of the Plan, the term “Company Stock” shall mean common stock issued by the Company that is readily tradable on an established securities market; provided , however , if the Company’s common stock is not readily tradable on an established securities market, the term “Company Stock” shall mean common stock issued by the Company having a combination of voting power and dividend rates equal to or in excess of (a) that class of common stock of the Company having the greatest voting power and (b) that class of common stock of the Company having the greatest dividend rights. Non-callable preferred stock shall be treated as Company Stock for purposes of the Plan if such stock is convertible at any time into stock that is readily tradable on an established securities market (or, if applicable, that meets the requirements of (a) and (b) next above) and if such conversion is at a conversion price that, as of the date of the acquisition by the Plan, is reasonable. For purposes of the immediately preceding sentence, preferred stock shall be treated as non-callable if, after the call, there will be a reasonable opportunity for a conversion that meets the requirements of the immediately preceding sentence. Company stock shall be held under the Trust only if such stock satisfies the requirements of Section 407(d)(5) of ERISA.
4.4 Acquisition Loans . An installment obligation incurred by the Trustee, in accordance with the Trust, in connection with the purchase of Company Stock shall constitute an Acquisition Loan. The Trustee may incur Acquisition Loans, in accordance with the Trust, from time to time, to finance (I) the acquisition for the Trust of Company Stock which are newly issued shares, outstanding shares held by the Company, or outstanding shares held by a shareholder, or (ii) the repayment of a prior Acquisition Loan. An Acquisition Loan shall be for a specific term, shall bear a reasonable rate of interest, and shall not be payable on demand except in the event of default. If the lender with respect to an Acquisition Loan is a Disqualified Person, the Acquisition Loan must provide that Trust assets will be transferred upon default only upon and to the extent of the failure of the Plan to meet the repayment schedule of the Acquisition Loan.
4.4.1 Financed Shares . Shares of Company Stock acquired by the Trustee with the proceeds of an Acquisition Loan shall be described as “Financed Shares.” Except as provided in Section 409(1) of the Code or Treas. Reg. § 54.4975-7(b)(9) and (10), or as otherwise provided by applicable law, no shares acquired by the Trustee with the proceeds of an Acquisition Loan may be subject to a put, call or other option or buy-sell or similar arrangement while held by and when distributed from the Plan.
4.4.2 Collateral . An Acquisition Loan may be secured by a collateral pledge of the Financed Shares so acquired and any other Plan assets which are a permissible security within the provisions of Treas. Reg. § 54.4975-7(b). No other assets of the Plan or Trust may be pledged as collateral for an Acquisition Loan, and no lender shall have recourse against any other Plan assets.
4.4.3 Loan Payment . Repayment of principal and interest on any Acquisition Loan shall be made by the Trustee from annual Employer ESOP contributions made pursuant to Section 4.1 above and, may also be made from the following sources pursuant to the provisions of Section 10.3:
(a) Cash dividends on Financed Shares which are allocated to Participants’ ESOP Stock Accounts and earnings, if any, on such dividends; and
(b) Cash dividends on Financed Shares held in the Loan Suspense Account (as defined below) and earnings, if any, thereon.
Payments shall be applied first to pay interest, and then to pay principal obligations under the Acquisition Loan.
4.4.4 Release of Financed Shares . Financed Shares shall initially be credited to a “Loan Suspense Account” and shall be transferred for allocation to the ESOP Stock Accounts of Participants as payments of principal and interest are made on the Acquisition Loan by the Trustee, and any pledge of Financed Shares must, and shall be deemed to, provide for the release of shares so pledged on a consistent basis.
The number of Financed Shares to be released from the Loan Suspense Account for allocation to Participants’ ESOP Stock Accounts as of each Accounting Date shall equal the number of Financed Shares held in the Loan Suspense Account immediately prior to such Accounting Date multiplied by a fraction, the numerator of which is equal to the payments of principal and interest on the Acquisition Loan for the year ending on such date, and the denominator of which is equal to the sum of the numerator plus the total projected payments of principal and interest on the Acquisition Loan over the duration of the Acquisition Loan repayment period, subject to the provisions of Section 5.5.
4.4.5 Allocation of Financed Shares . The released Financed Shares shall be allocated to Participants’ ESOP Stock Accounts in accordance with the provisions of Section 5.4.
4.5 No Participant Contributions . Contributions by Participants are neither required nor permitted.
PLAN ACCOUNTING
5.1 Participants’ Accounts . On and after the Effective Date, the Committee shall maintain the following accounts:
5.1.1 An “ESOP Stock Account” in the name of each Participant, which will reflect his share of Employer ESOP Contributions made in Company Stock or cash that is used to purchase Company Stock, his allocable share of Financed Shares and any shares of Company Stock received as earnings on such shares. The ESOP Stock Account shall be adjusted as described in Section 5.2.
5.1.2 An “ESOP Cash Account” in the name of each Participant, which will reflect his share of Employer ESOP Contributions made in cash, any cash dividends on Company Stock allocated and credited to his ESOP Stock Account (other than currently distributable dividends) and any income, gains, losses, appreciation or depreciation attributable thereto. The ESOP Cash Account shall be adjusted as described in Section 5.3.
Reference to a Participant’s “Accounts” means his ESOP Stock Account and his ESOP Cash Account.
5.2 Adjustment of ESOP Stock Accounts . As of each Accounting Date, the Committee shall:
5.2.1 First , charge to the Accounts of each Participant all distributions and payments made to him, or on his account, since the last preceding Accounting Date that have not been charged previously;
5.2.2 Next , credit to each Participant’s ESOP Stock Account the shares of Company Stock, if any, that have been purchased with amounts from his ESOP Cash Account since the last preceding Accounting Date and adjust such ESOP Cash Account in accordance with the provisions of Section 5.3;
5.2.3 Finally , allocate and credit to each Participant’s ESOP Stock Account the shares of Company Stock, if any, representing each Employer’s ESOP Contributions, if any, that are to be allocated and credited as of that date in accordance with the provisions of Section 5.4.
5.3 Adjustment of ESOP Cash Accounts . Upon the purchase of Company Stock with cash from a Participant’s ESOP Cash Account, such shares shall be credited to the Participant’s ESOP Stock Account, and the Participant’s ESOP Cash Account shall be charged by the amount of the cash used to buy such Company Stock. Subject to Article 10, the ESOP Cash Account of each applicable Participant shall be credited with any cash dividends paid on shares of Company Stock held in that Participant’s ESOP Stock Account as of the record date for such cash dividends. If applicable, cash dividends credited to a Participant’s ESOP Cash Account may be applied to the repayment of any outstanding Acquisition Loan, and the Participant’s ESOP Cash Account shall then be charged by the amount of cash used to purchase such Company Stock for his Account. As of each Accounting Date, before the allocation of any cash contributions as of such date, any appreciation, depreciation, gains or losses in the value of the Trust (exclusive of Company Stock) shall be allocated among and credited to the
ESOP Cash Accounts of Participants, pro rata, according to the balance of each ESOP Cash Account as of the immediately preceding Accounting Date, reduced by the amount of any charge to or distribution from said Account since the next preceding Accounting Date.
5.4 Allocation and Crediting of Company ESOP Contributions .
5.4.1 Allocation to ESOP Stock Accounts . As of the last day of each Plan Year, all shares of Company Stock transferred by the Employers to the Trustee for that Plan Year and shares of Company Stock released from the Suspense Account during that period shall be allocated among and credited to the ESOP Stock Accounts of Participants who were employed during the Plan Year, pro rata , according to their Compensation (as defined in Section 5.7) paid to them, by the Employers for that Plan Year. For purposes of determining the number of shares of Company Stock allocated to Participants with respect to 1999, (i) compensation paid to Participants prior to the Effective Date shall not be counted toward a Participant’s pro rata share and (ii) no shares of Common Stock shall be allocated among and credited with respect to those Participants who terminate employment with the Company, for any reason, on or before August 15, 1999. Participants described in the foregoing clause (ii) shall be disregarded in determining the number of shares of Common Stock to be allocated among, and credited with respect to, all other Participants for 1999.
5.4.2 Allocation to ESOP Cash Accounts . As of the last day of each Plan Year, Employer ESOP Contributions made in cash for that period, and cash dividends paid on Financed Shares held in the Loan Suspense Account and not used to repay an Acquisition Loan shall be allocated to the ESOP Cash Account of each Participant in the same manner as Company Stock is allocated to the ESOP Stock Accounts under the provisions of Subsection 5.4.1.
5.4.3 Allocation of Remaining Amounts . If after the allocations under Subsections 5.4.1 and 5.4.2 any portion of such amount remains unallocated because of the limitations of Section 5.5, then, to the extent permitted by the contribution limitation provisions of Section 5.5, such shares and amount shall be allocated and reallocated among and credited to the Accounts of the remaining Participants entitled to share in such allocations for that year, pro rata , in the same manner as Company Stock is allocated to the ESOP Stock Accounts under the provisions of Subsection 5.4.1 above. If, after this allocation any portion of such amount to be otherwise allocated still remains unallocated, such portion shall be credited to and held in a 415 Suspense Account to the extent that it does not exceed the amount contributed by the Employer for that Plan Year as a result of a reasonable error in estimating Participants’ Compensation or as a result of such other circumstances as the Commissioner of Internal Revenue may determine. For purposes of the Plan, amounts credited to a 415 Suspense Account for any Plan Year shall be treated as an Employer ESOP Contribution under the provisions of Section 4.1 for the subsequent Plan Year or Plan Years until all amounts so held have been credited to the Accounts of Participants.
5.5 Limitation on Allocations to Participants . Notwithstanding any other provisions of the Plan, the Annual Additions (as defined below) credited to a Participant’s Accounts in accordance with the provisions of this Article 5 for any Plan Year shall not exceed an amount equal to the lesser of:
5.5.1 $40,000, adjusted for each Plan Year to take into account any cost-of-living increase adjustment provided for that year in accordance with regulations promulgated by the Secretary of the Treasury under Section 415(d) of the Code; or
5.5.2 100 percent of the Section 415 Compensation paid to the Participant in that Plan Year.
In the event a Participant herein is also a Participant at any time in a Related Defined Contribution Plan (as defined below) maintained by an Employer or Related Company, the sum of Annual Additions under the Plan and the Related Defined Contribution Plan in any Plan Year shall not exceed the limitations described in 5.5.1 or 5.5.2. To the extent a Participant’s Annual Additions would exceed these limits, these limitations shall first be applied to reduce allocations under other plans, other than salary reduction and matching contributions under 401(k) plans; second, to matching contributions under 401(k) plans; and third, to salary reduction contributions under 401(k) plans; and finally, to allocations under this plan.
Effective for Plan Years beginning before January 1, 2000, if a Participant in this Plan also is a participant in any Related Defined Benefit Plan (as defined below), the aggregate benefits payable to, or on account of, him under both plans will be determined in a manner consistent with Section 415 of the Code. Accordingly, there will be determined with respect to the Participant a defined contribution plan fraction and a defined benefit plan fraction in accordance with Code Section 415. The benefits provided for the Participant under this Plan and each Related Defined Benefit Plan will be adjusted to the extent necessary so that the sum of such fractions determined with respect to the Participant does not exceed 1.0, with all adjustments being made in this Plan prior to any adjustment in the Related Defined Benefit Plan.
The term “Related Defined Benefit Plan” means any defined benefit plan (as defined in Code Section 414(j)) maintained or previously maintained by the Company or a Related Company. The term “Related Defined Contribution Plan” means any defined contribution plan (as defined in Code section 414(I)) maintained by the Employer or a Related Company. The term “Annual Additions” means the total amount of employer contributions and voluntary employee contributions allocated to the Accounts of a Participant under this Plan and any Related Defined Contribution Plan for a Plan Year, except that if, during any Plan Year, no more than one-third of the Employer ESOP Contributions which are deductible under Code section 404(a)(9) are allocated to the Accounts of Highly Compensated Employees (as defined in Section 1.12) during the Plan Year, then any ESOP Contributions which are applied by the Trustee to pay interest on an Acquisition Loan, shall not be included in computing Annual Additions. Allocations to Highly Compensated Employees may be reduced pro rata according to the Compensation
of each Highly Compensated Employee to the extent necessary to prevent the allocations to Highly Compensated Employees from exceeding one-third of the Employer ESOP Contribution deductible under Code Section 404(a)(9). For purposes of this Section, shares of Company Stock that are released from the Suspense Account and credited to a Participant’s ESOP Stock Account during any Plan Year shall be valued at the lesser of: (i) the Participant’s allocable share of Employer contributions for that year that are used to repay the Acquisition Loan; or (ii) the fair market value of the Company Stock that is allocated to the Participant’s ESOP Stock Account. If shares of Company Stock are sold out of the Loan Suspense Account, the gain on the sale shall be considered earnings, not Annual Additions, and will be allocated as such.
5.6 Statement of Plan Interest . The Trustee shall, as of each Accounting Date, make a good faith determination of the “fair market value” of the Company Stock by obtaining the advice of an experienced “Independent Appraiser,” as defined in Section 401(a)(28) of the Code and in regulations issued pursuant to Section 3(18) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Trustee shall promptly notify the Committee as to the valuation of the Company Stock.
5.7 Compensation and Section 415 Compensation . The term “Compensation” and “Section 415 Compensation” means a 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 Employer or any Related Employer to the extent that the amounts are includible in gross income (including but not limited to commissions paid to salespeople, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses, fringe benefits, reimbursements, or other expense allowances; but excluding long term disability payments and reimbursements for or regarding relocation policy or program costs), plus amounts deferred under salary deferral agreements with the Employers under Section 125 or 401(k) plans, amounts not includible in the gross income of the Participant by reason of Section 132(f)(4) of the Code and disability payments received if the Participant was on an approved leave of absence for disability. A Participant’s Compensation in excess of $200,000 (adjusted each Plan Year to take into account any applicable cost-of-living adjustment provided for that year pursuant to regulations promulgated under Section 401(a)(17)(B) of the Code) shall be disregarded. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined (a “determination period”) beginning in such calendar year. If a determination period consists of fewer than 12 months, the annual Compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. “Compensation” shall exclude:
5.7.1 contributions made by the Employer to a plan of deferred compensation to the extent that before the application of Code Section 415 limitations to the plan, the contributions are not includible in the
gross income of the Participant for the taxable year in which contributed. Additionally, any distributions from a plan of deferred compensation are not considered as Compensation regardless of whether such amounts are includible in the gross income of the Participant when distributed;
5.7.2 amounts realized from the exercise of nonqualified stock option, or when restricted stock (or property) held by a Participant becomes freely transferable or is not longer subject to substantial risk of forfeiture (within the meaning of Code Section 83 and the regulations thereunder);
5.7.3 amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option; and
5.7.4 other amounts which receive special tax benefits such as premiums for group term life insurance (but only to the extent that the premiums are not includible in the gross income of the Participant).
5.8 Overflow Plan . To the extent that, for any Plan Year, shares of Company Stock cannot be allocated to a Participant’s account by reason of any Code limitations, including Code section 401(a)(17), Code section 415 and Code section 401(a)(4), appropriate credits will be made to the accounts of the affected Participants under a non-qualified Overflow Plan to be established by the Company if and to the extent necessary to protect the expectations of Participants as described in Section 4.2; provided, however, that if any such unallocable shares are Financed Shares, such Financed Shares shall, to the maximum extent permitted under the Code, be credited to a 415 Suspense Account in the manner set forth in Section 5.4.3. Special terms of the Overflow Plan may be established by the Company’s Board of Directors, including provisions that would disregard some Compensation over the Code section 401(a)(17) limit in allocating credits under the Overflow Plan. Without limiting Board’s powers pursuant to the foregoing, unless and until the Company’s Board of Directors shall otherwise resolve, the Overflow Plan shall not take into consideration for any Plan Year Compensation in excess of the Code section 401(a)(17) limit.
TERMINATION DATE
6.1 Overview on Distributions . Under this Plan, distributions shall not be made to a Participant who is actively employed. Distributions shall only be made following the Participant’s termination of employment. This Article 6 provides details about the relevant Termination Date and Article 7 of this Plan provides details about distributions.
6.2 Termination Date . A Participant’s “Termination Date” will be the date on which his employment with the Company and all Related Companies is terminated because of the first to occur of the following events:
6.2.1 Normal or Late Retirement . The Participant retires or is retired from the employ of the Employers and all Related Companies on or after the date on which he attains age 55 and has completed at least 10 years of service (including employment prior to May 14, 1999 at Champion International, Inc.) (the “Normal Retirement Date” or “Normal Retirement Age”). “Years of service” shall be defined for purposes of this Plan as defined in the collectively bargained defined benefit plan of the Company. A Participant’s right to the balances in his ESOP Accounts shall be nonforfeitable at all times.
6.2.2 Death . The Participant’s death.
6.2.3 Disability . The Participant is retired from the employ of the Employers and all Related Companies at any age because of a physical or mental disability, as determined by the Committee upon the basis of a written certificate of a physician acceptable to the Committee.
6.2.4 Resignation or Dismissal . The Participant resigns or is dismissed from the employ of the Employers and all Related Companies other than in accordance with paragraphs 6.2.1 or 6.2.3 and prior to death.
DISTRIBUTIONS
7.1 Distributions on Account of Termination of Employment . Subject to the following provisions of this Article 7, a Participant (or, in the case of a Participant’s death, his Beneficiary) shall become eligible to receive a distribution of a Participant’s ESOP Stock Account and ESOP Cash Account (collectively, the “ESOP Accounts”) following the Participant’s Termination Date, in accordance with the provisions of this Article 7.
7.2 Manner of Distributions . Distribution of the Participant’s Account Balance shall be made by payment in a series of five substantially equal annual installments, provided, however, that (i) a distribution pursuant to the second sentence of subsection 7.4.2 (or pursuant to subsect | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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