| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Incorporated under the laws | I.R.S. Employer Identification | |
| of South Carolina | No. 57-0248420 |
| Large accelerated filer þ | Accelerated filer o |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o | |||
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
September 28,
December 31,
2008
2007*
$
147,476
$
70,758
497,757
488,409
37,342
34,328
144,602
138,722
212,380
204,362
46,424
50,747
49,905
40,353
1,135,886
1,027,679
1,040,202
1,105,342
818,724
828,348
133,290
139,436
197,443
239,438
$
3,325,545
$
3,340,243
$
412,481
$
426,138
317,097
275,133
39,969
45,199
12,240
11,611
781,787
758,081
746,520
804,339
180,898
180,509
78,113
84,977
64,587
70,800
7,175
7,175
405,091
391,628
(135,991
)
(107,374
)
1,197,365
1,150,108
1,473,640
1,441,537
$
3,325,545
$
3,340,243
*
The year-end condensed consolidated
balance sheet data was derived from
audited financial statements but does
not include all disclosures required
by generally accepted accounting
principles.
Table of Contents
Three Months Ended
Nine Months Ended
September 28,
September 30,
September 28,
September 30,
2008
2007
2008
2007
$
1,063,250
$
1,029,764
$
3,187,813
$
2,979,874
878,514
842,485
2,621,994
2,417,357
184,736
187,279
565,819
562,517
92,989
96,881
292,039
306,390
5,530
17,401
77,838
27,496
86,217
72,997
195,942
228,631
12,682
16,188
40,763
45,261
(2,053
)
(2,134
)
(4,809
)
(6,959
)
75,588
58,943
159,988
190,329
21,807
(2,029
)
46,671
39,541
53,781
60,972
113,317
150,788
3,570
3,561
15,279
9,200
$
57,351
$
64,533
$
128,596
$
159,988
100,371
100,775
100,262
100,831
101,292
101,859
101,060
102,243
$
0.57
$
0.64
$
1.28
$
1.59
$
0.57
$
0.63
$
1.27
$
1.56
$
0.27
$
0.26
$
0.80
$
0.76
Table of Contents
Nine Months Ended
September 28,
September 30,
2008
2007*
$
128,596
$
159,988
42,651
—
16,469
14,067
138,662
133,591
6,840
7,782
(15,279
)
(9,200
)
7,507
7,638
2,203
3,593
805
9,525
(705
)
(9,266
)
(14,708
)
(11,931
)
(15,784
)
(51,510
)
(18,242
)
(15,525
)
(7,683
)
15,495
(1,336
)
(11,139
)
(11,141
)
(9,529
)
4,014
(23,952
)
39,565
21,100
7,766
27,179
310,200
257,906
(91,520
)
(135,279
)
(5,535
)
(215,341
)
4,557
11,618
(979
)
2,652
(93,477
)
(336,350
)
23,597
33,868
(98,462
)
(32,558
)
11,000
206,000
(4,206
)
(1,325
)
705
9,266
(79,626
)
(76,646
)
(809
)
(108,139
)
6,370
49,445
(141,431
)
79,911
1,426
(7,111
)
76,718
(5,644
)
70,758
86,498
$
147,476
$
80,854
*
Prior year’s data have been reclassified to conform to the current year’s presentation.
Table of Contents
(unaudited)
Three Months Ended
Nine Months Ended
September 28,
September 30,
September 28,
September 30,
2008
2007
2008
2007
$
57,351
$
64,533
$
128,596
$
159,988
100,371,000
100,775,000
100,262,000
100,831,000
921,000
1,084,000
798,000
1,412,000
101,292,000
101,859,000
101,060,000
102,243,000
$
0.57
$
0.64
$
1.28
$
1.59
$
0.57
$
0.63
$
1.27
$
1.56
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Stock options to purchase 1,250,679 and 617,000 shares at September 28, 2008 and
September 30, 2007, respectively, were not dilutive and, therefore, are excluded from the
computations of diluted income per common share amounts. No adjustments were made to
reported net income in the computations of earnings per share.
Stock Repurchases
The Company’s Board of Directors has authorized the repurchase of up to 5,000,000 shares
of the Company’s common stock. No shares were repurchased under this authorization
during the first nine months of 2008. Accordingly, at September 28, 2008, a total of
5,000,000 shares remain available for repurchase.
The Company occasionally repurchases shares of its common stock to satisfy employee tax
withholding obligations in association with the exercise of stock appreciation rights and
performance-based stock awards. These repurchases, which are not part of a publicly
announced plan or program, totaled 27,316 shares in the first nine months of 2008 at a
cost of $809.
Note 3:
Acquisitions
During the nine months ended September 28, 2008, the Company completed two acquisitions
at an aggregate cost of $5,535 in cash. These included the March 2008 acquisition of
Amtex Packaging, Inc., a packaging fulfillment company accounted for in the Packaging
Services segment, and the February 2008 acquisition of VoidForm International Ltd., a
construction tube business based in Canada accounted for in the Tubes and Cores/Paper
segment. The acquisition of these businesses is expected to generate annual sales of
approximately $6,000. In conjunction with these acquisitions, the Company recorded
identifiable intangibles of $4,890, goodwill of $179, and other net tangible assets of
$466. The Company has accounted for these acquisitions as purchases and, accordingly,
has included their results of operations in consolidated net income from the respective
dates of acquisition. Pro forma results have not been provided, as the acquisitions were
not material to the Company’s financial statements individually or in the aggregate.
Note 4:
Restructuring and Asset Impairment
The Company has two active restructuring plans, one of which was approved in October 2006
(the 2006 Plan), and the other in August 2003 (the 2003 Plan). In addition, during 2007
and 2008, the Company recognized charges associated with other restructuring actions that
were not part of a formal restructuring plan. Following are the total restructuring and
asset impairment charges, net of adjustments, recognized by the Company during the
periods presented:
2007
2008
Third
Nine
Third
Nine
Quarter
Months
Quarter
Months
$
—
$
—
$
4,526
$
13,395
15,105
15,105
566
19,431
2,458
12,556
357
1,873
(162
)
(165
)
81
488
$
17,401
$
27,496
$
5,530
$
35,187
(5,835
)
(8,290
)
(2,043
)
(12,063
)
(13
)
(56
)
(171
)
(5,379
)
$
11,553
$
19,150
$
3,316
$
17,745
Restructuring and asset impairment charges are included in “Restructuring/Asset
impairment charges” in the Condensed Consolidated Statements of Income, except for
restructuring charges applicable to equity method investments, which are included in
“Equity in earnings of affiliates/minority interest in subsidiaries, net of tax.”
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
The Company expects to recognize future additional costs totaling approximately $4,150 in
connection with previously announced restructuring actions. The Company believes that
the majority of these charges will be incurred and paid by the end of 2008.
Other 2008 Actions
During 2008, the Company initiated the following closures in its Tubes and Cores/Paper
segment: a tube and core plant in Spain, a tube and core plant in the United States, a
specialty paper operation at its paper mill in Holyoke, Massachusetts, and a paper mill
in Canada. In addition, the Company initiated the closures of two rigid packaging plants
in the United States that were part of its Consumer Packaging segment. These closures
were not part of a formal restructuring plan.
Below is a summary of the Other 2008 Actions and related expenses by type incurred and
estimated to be incurred through the end of the restructuring initiative.
2008
Total
Third
Nine
Incurred to
Estimated
Other 2008 Actions
Quarter
Months
Date
Total Cost
$
2,261
$
3,491
$
3,491
$
3,491
1,729
1,729
1,729
1,729
140
5,490
5,490
5,490
11
11
11
11
314
2,603
2,603
5,103
71
71
71
71
$
4,526
$
13,395
$
13,395
$
15,895
Other Costs in the Tubes and Cores/Paper segment include a curtailment charge of $2,289
related to a defined benefit pension plan maintained for the hourly union employees of
the Canadian paper mill.
The following table sets forth the activity in the Other 2008 Actions restructuring
accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated
Balance Sheets:
Severance
Asset
Other 2008 Actions
and
Impairment/
Accrual Activity
Termination
Disposal
Other
2008 Year to Date
Benefits
of Assets
Costs
Total
$
—
$
—
$
—
$
—
5,220
5,501
2,674
13,395
(2,666
)
—
(385
)
(3,051
)
—
(5,501
)
—
(5,501
)
12
—
—
12
—
—
(2,289
)
(2,289
)
$
2,566
$
—
$
—
$
2,566
The Company expects to pay the majority of the remaining Other 2008 Actions restructuring
costs by the end of 2008 using cash generated from operations.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Other 2007 Actions
In the third quarter of 2007, the Company initiated the closures of the following
operations: a metal ends plant in Brazil (Consumer Packaging segment), a rigid packaging
plant in the United States (Consumer Packaging segment), a paper mill in China (Tubes and
Cores/Paper segment), a molded plastics plant in Turkey (All Other Sonoco), and a
point-of-purchase display manufacturing plant in the United States (Packaging Services
segment). These closures were not part of a formal restructuring plan.
Below is a summary of the Other 2007 Actions and related expenses by type incurred and
estimated to be incurred through the end of the restructuring initiative.
2007
2008
Total
Third
Nine
Third
Nine
Incurred
Estimated
Other 2007 Actions
Quarter
Months
Quarter
Months
to Date
Total Cost
$
—
$
—
$
—
$
6,867
$
8,015
$
8,015
—
—
50
651
1,525
1,525
—
—
(13
)
120
254
254
—
—
—
—
36
36
—
—
145
4,873
4,873
4,873
14,660
14,660
—
3,731
20,079
20,079
445
445
(61
)
(61
)
536
536
—
—
—
216
216
366
—
—
445
3,034
3,307
3,757
—
—
—
—
228
228
$
15,105
$
15,105
$
566
$
19,431
$
39,069
$
39,669
The net charges for the nine months ended September 28, 2008 relate primarily to the
paper mill in China, the metal ends plant in Brazil, and the rigid packaging plant in the
United States. These charges include non-cash asset impairments totaling $8,604 on
property, plant and equipment at the Company’s metal ends plant in Brazil and paper mill
in China, and additional reserves on accounts receivable and inventory at the Company’s
paper mill in China as a direct result of the closure of this facility. Severance costs
became recognizable upon communication to the affected employees throughout the first and
second quarters of 2008. Other costs relate primarily to the dismantling of machinery
and equipment and other miscellaneous exit costs.
During the three and nine months ended September 28, 2008, the Company also recorded
non-cash, after-tax offsets in the amounts of $171 and $5,379, respectively, to reflect a
minority interest holder’s portion of restructuring costs that were charged to expense.
The following table sets forth the activity in the Other 2007 Actions restructuring
accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated
Balance Sheets:
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Severance
Asset
Other 2007 Actions
and
Impairment/
Accrual Activity
Termination
Disposal
Other
2008 Year to Date
Benefits
of Assets
Costs
Total
$
1,165
$
—
$
230
$
1,395
7,780
8,604
3,250
19,634
(3,841
)
—
(3,462
)
(7,303
)
—
(8,543
)
—
(8,543
)
264
—
(12
)
252
(142
)
(61
)
—
(203
)
$
5,226
$
—
$
6
$
5,232
The severance accrual above includes approximately $5,200 of severance and termination
benefits for the employees of the Company’s paper mill in China.
The Company expects to pay the majority of the remaining Other 2007 Actions restructuring
costs during 2008 using cash generated from operations.
The 2006 Plan
The 2006 Plan included the closure of 12 plant locations and the reduction of
approximately 540 positions worldwide. The majority of the restructuring program focused
on improving the cost effectiveness of international operations, principally in Europe.
These measures began in the fourth quarter of 2006 and are substantially complete.
Significant operations affected in the Tubes and Cores/Paper segment included a paper
mill in France, two tube and core plants in Canada, and one in the United States.
Operations affected in the Consumer Packaging segment included a rigid packaging plant in
Germany, rigid packaging production lines in the United Kingdom, and a flexible packaging
plant in Canada. Operations affected in All Other Sonoco included a molded plastics
plant and a wooden reels facility, both located in the United States. In addition, the
2006 Plan included downsizing actions in the Company’s European tube and core/paper
operations.
Below is a summary of the 2006 Plan and related expenses by type incurred and estimated
to be incurred through the end of the restructuring initiative.
2007
2008
Total
Third
Nine
Third
Nine
Incurred
Estimated
2006 Plan
Quarter
Months
Quarter
Months
to Date
Total Cost
$
1,398
$
2,848
$
41
$
813
$
13,975
$
13,975
68
3,696
—
(279
)
5,174
5,174
—
451
—
—
528
528
—
472
—
4
761
761
(84
)
(707
)
—
20
4,242
4,242
(50
)
2,237
—
—
1,686
1,686
—
—
67
67
328
328
789
2,090
196
853
7,055
7,355
289
983
20
222
1,666
1,966
48
486
33
173
780
780
$
2,458
$
12,556
$
357
$
1,873
$
36,195
$
36,795
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
During the three and nine months ended September 30, 2007, the Company recorded non-cash,
after-tax offsets in the amount of $13 and $56, respectively, in order to reflect a
minority interest holder’s portion of restructuring costs that were charged to expense.
The following table sets forth the activity in the 2006 Plan restructuring accrual
included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance
Sheets:
Severance
Asset
2006 Plan
and
Impairment/
Accrual Activity
Termination
Disposal
Other
2008 Year to Date
Benefits
of Assets
Costs
Total
$
3,517
$
—
$
470
$
3,987
776
87
1,297
2,160
(3,762
)
—
(1,175
)
(4,937
)
—
(87
)
—
(87
)
(29
)
—
(4
)
(33
)
(239
)
—
(48
)
(287
)
$
263
$
—
$
540
$
803
Other Costs consist primarily of building lease termination charges and other
miscellaneous exit costs. The Company expects to pay the majority of the remaining 2006
Plan restructuring costs, with the exception of certain building lease termination
expenses, by the end of 2008, using cash generated from operations.
The 2003 Plan
In August 2003, the Company announced general plans to reduce its overall cost structure
by $54,000 pretax by realigning and centralizing a number of staff functions and
eliminating excess plant capacity. Pursuant to these plans, the Company completed 22
plant closings and reduced its workforce by approximately 1,120 employees. As of
September 28, 2008, the Company had incurred cumulative pre-tax charges, net of
adjustments, of $103,227 associated with these activities.
The 2003 Plan is substantially complete. At September 28, 2008, the remaining
restructuring accrual for the 2003 Plan totaled $1,680. The accrual, included in
“Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheet,
relates primarily to a building lease termination. The Company expects to recognize
future pre-tax charges of approximately $450 associated with the 2003 Plan, primarily
related to this building lease termination. The Company expects both the liability and
the future costs to be fully paid at the end of 2012, using cash generated from
operations.
Note 5:
Financial Asset Impairment
As a result of the 2003 sale of the High Density Film business, the Company received a
preferred equity interest in the buyer and a subordinated note receivable due in 2013 as
a portion of the selling price. The Company’s year-end 2007 financial review of the
buyer indicated that collectibility was probable. However, based on updated information
provided by the buyer late in the first quarter of 2008, the Company concluded that
neither the collection of its subordinated note receivable nor redemption of its
preferred equity interest was probable, and that their value was likely zero.
Accordingly, the Company fully reserved these items in the first quarter of 2008,
recording a charge totaling $42,651 pretax ($30,981 after tax). Both the preferred
equity interest and the subordinated note receivable had been included in “Other Assets”
in the Company’s Condensed Consolidated Balance Sheets. On May 6, 2008, the buyer filed
a petition for relief under Chapter 11 with the United States Bankruptcy Court for the
District of Delaware that included a plan of reorganization, which was subsequently
approved by the court June 26, 2008. As part of the plan of reorganization, the
Company’s preferred equity interest and its subordinated note receivable were
extinguished.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Three Months Ended
Nine Months Ended
September 28,
September 30,
September 28,
September 30,
2008
2007
2008
2007
$
57,351
$
64,533
$
128,596
$
159,988
(53,579
)
42,206
(31,002
)
77,797
(657
)
(4,717
)
4,476
435
(14,802
)
(1,669
)
(2,091
)
190
$
(11,687
)
$
100,353
$
99,979
$
238,410
The following table summarizes the components of accumulated other comprehensive loss and
the changes in accumulated other comprehensive loss, net of tax as applicable, for the
nine months ended September 28, 2008:
Foreign
Accumulated
Currency
Defined
Derivative
Other
Translation
Benefit
Financial
Comprehensive
Adjustments
Plans
Instruments
Loss
$
72,819
$
(178,658
)
$
(1,535
)
$
(107,374
)
(31,002
)
4,476
(2,091
)
(28,617
)
$
41,817
$
(174,182
)
$
(3,626
)
$
(135,991
)
At September 28, 2008, the Company had commodity swaps outstanding to fix the costs of a
portion of raw materials and energy. These swaps, which have maturities ranging from
October 2008 to June 2011, qualify as cash flow hedges under Statement of Financial
Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” and related amendments. The amounts included in accumulated other
comprehensive loss related to these commodity swaps were an unfavorable position of
$5,714 ($3,626 after tax) at September 28, 2008, and an unfavorable position of $2,395
($1,535 after tax) at December 31, 2007.
The tax effect on Derivative Financial Instruments in the three and nine-month periods
ended September 28, 2008, was $8,693 and $1,228, respectively. The cumulative tax effect
of Derivative Financial Instruments was $2,088 and $860, at September 28, 2008 and
December 31, 2007, respectively.
The tax effect on Defined Benefit Plans in the three and nine-month periods ended
September 28, 2008, was $481 and $(1,208), respectively. The cumulative tax benefit of
the Defined Benefit Plans was $101,597 at September 28, 2008, and $102,805 at December
31, 2007.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Note 8:
Goodwill and Other Intangible Assets
Goodwill
A summary of the changes in goodwill for the nine months ended September 28, 2008 is as
follows:
Tubes and
Cores
Consumer
Packaging
/Paper
Packaging
Services
All Other
Segment
Segment
Segment
Sonoco
Total
$
245,130
$
366,223
$
151,000
$
65,995
$
828,348
179
—
—
—
179
76
1,488
—
332
1,896
(3,456
)
(8,132
)
(103
)
(8
)
(11,699
)
$
241,929
$
359,579
$
150,897
$
66,319
$
818,724
September 28,
December 31,
2008
2007
$
3,530
$
3,360
165,154
161,805
7,822
7,315
1,000
1,000
10,879
11,032
$
188,385
$
184,512
$
(55,095
)
$
(45,076
)
$
133,290
$
139,436
Other intangible assets are amortized, usually on a straight-line basis, over their
respective useful lives, which generally range from three to twenty years. Aggregate
amortization expense was $3,188 and $3,110 for the three months ended September 28, 2008
and September 30, 2007, respectively, and $10,150 and $8,147 for the nine months ended
September 28, 2008 and September 30, 2007, respectively. Amortization expense on other
intangible assets is expected to approximate $13,300 in 2008, $12,600 in 2009, $12,400 in
2010, $12,000 in 2011 and $11,400 in 2012.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
The Company recorded $4,890 of identifiable intangibles in connection with 2008 business
acquisitions, all of which related to customer lists that will be amortized over a period
of 15 years. In addition, the Company acquired various patents in the first nine months
of 2008 for a total cost of $170.
Note 9:
Fair Value Measurements
Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (FAS 157)
was issued to increase consistency and comparability in fair value measurements and to
expand disclosures about fair value measurements. Applicable provisions of FAS 157 were
adopted by the Company effective January 1, 2008, including the disclosures presented
below.
The following table sets forth information regarding the Company’s financial assets and
financial liabilities that are measured at fair value. The Company does not currently
have any nonfinancial assets or liabilities that are recognized or disclosed at fair
value on a recurring basis.
Fair Value Measurements at Reporting Date Using
Quoted Market
Prices in Active
Significant
Market for
Other
Significant
Identical
Observable
Unobservable
Assets/Liabilities
Inputs
Inputs
Description
September 28, 2008
(Level 1)
(Level 2)
(Level 3)
$
1,776
$
—
$
1,776
$
—
$
1,992
$
1,992
$
—
$
—
$
6,831
$
—
$
6,831
$
—
The Company uses derivatives from time to time to mitigate the effect of raw material and
energy cost fluctuations, foreign currency fluctuations and interest rate movements. The
Company records qualifying derivatives in accordance with Statement of Financial
Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (FAS 133), and related amendments. Fair value measurements for the Company’s
derivatives, which at September 28, 2008, consisted primarily of natural gas swaps
entered into for hedging purposes and foreign currency swaps for which hedge accounting
has not been applied, are classified under Level 2 because such measurements are
determined using published market prices or estimated based on observable inputs such as
interest rates, yield curves, spot and future commodity prices and spot and future
exchange rates.
Certain deferred compensation plan liabilities are funded and the assets invested in
various exchange traded mutual funds. These assets are measured using quoted prices in
accessible active markets for identical assets.
None of the Company’s financial assets or liabilities currently covered by the disclosure
provisions of FAS 157 are measured at fair value using significant unobservable inputs.
Note 10:
Dividend Declarations
On July 16, 2008, the Board of Directors declared a regular quarterly dividend of $0.27
per share. This dividend was paid September 10, 2008 to all shareholders of record as of
August 15, 2008.
On October 13, 2008, the Board of Directors declared a regular quarterly dividend of
$0.27 per share. This dividend is payable December 10, 2008 to all shareholders of record
as of November 21, 2008.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Note 11:
Employee Benefit Plans
The Company provides non-contributory defined benefit pension plans for a majority of its employees in the United
States and certain of its employees in Mexico and Belgium. Effective December 31, 2003, the Company froze
participation for newly hired salaried and non-union hourly U.S. employees in its traditional defined benefit plan.
The Company adopted a defined contribution plan, the Sonoco Investment and Retirement Plan (SIRP), covering its
non-union U.S. employees hired on or after January 1, 2004. The Company also sponsors contributory pension plans
covering the majority of its employees in the United Kingdom, Canada, and the Netherlands, as well as postretirement
healthcare and life insurance benefits to the majority of its retirees and their eligible dependents in the United
States and Canada.
The components of net periodic benefit cost include the following:
Three Months Ended
Nine Months Ended
September 28,
September 30,
September 28,
September 30,
2008
2007
2008
2007
$
7,007
$
7,298
$
20,076
$
21,725
17,760
17,316
55,470
52,050
(22,181
)
(21,981
)
(67,205
)
(65,866
)
186
58
309
174
462
495
1,423
1,461
2,272
4,913
9,451
15,440
—
12
—
12
—
—
2,289
—
144
—
441
—
$
5,650
$
8,111
$
22,254
$
24,996
Three Months Ended
Nine Months Ended
September 28,
September 30,
September 28,
September 30,
2008
2007
2008
2007
$
516
$
586
$
1,544
$
1,810
1,128
1,109
3,372
3,577
(481
)
(542
)
(1,437
)
(1,584
)
(2,593
)
(2,427
)
(7,752
)
(7,279
)
776
741
2,319
3,027
$
(654)
$
(533
)
$
(1,954
)
$
(449
)
During the second quarter of 2008 the Company recognized a $2,289 curtailment loss
associated with the planned closure of a paper mill in Montreal, Quebec. This charge is
included in the caption “Restructuring/Asset impairment charges” in the Condensed
Consolidated Statements of Income.
During the nine months ended September 28, 2008, the Company made contributions of $7,404
to its retirement and retiree health and life insurance plans. The Company anticipates
that it will make additional contributions of approximately $2,700 in 2008. The Company
also contributed $3,737 to the SIRP during this same nine-month period. No additional
contributions are expected during the remainder of 2008. Funding of the Company’s U.S.
defined benefit pension plan was not required in 2008. The 2009 funding requirement will
not be determined until the December 31, 2008 asset values are known; however, based on
the September 28, 2008 asset values, the Company would not be required to make any
contributions to the Plan in 2009 due to its ability to utilize a credit balance that
exists due to having previously funded the Plan in excess of the minimum requirement.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Note 12:
Income Taxes
The Company adopted the provisions of Financial Accounting Standards Board Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48), on January 1, 2007. There
have been no significant changes in the Company’s liability for uncertain tax positions
since December 31, 2007.
The Company’s effective tax rate for the three and nine month periods ending September
28, 2008, was 28.8% and 29.2%, respectively. The rate for the third quarter varied from
the U.S. statutory rate primarily due to a tax benefit associated with a decrease in the
Company’s FIN 48 liabilities. This decrease resulted from the expiration of U.S. federal
and state statutes of limitations. The year-to-date rate varied from the U.S. statutory
rate due to these same factors, as well as a valuation allowance recorded against the
capital loss carryovers created by the impairment of certain financial assets in the
first quarter (see Note 5), the tax benefits from a change in Italian tax law recorded in
the second quarter, the favorable effect of international operations that are subject to
tax rates generally lower than the U.S. rate, and certain restructuring charges for which
tax benefits cannot be recognized.
The Company’s provision for income taxes was a benefit of $2,029 for the third quarter of
2007, primarily due to the release of reserves for uncertain tax positions upon
expiration of their related statutory assessment periods.
The Company and/or its subsidiaries file federal, state and local income tax returns in
the United States and various foreign jurisdictions. The Company is no longer subject to
U.S. federal income tax examination for years before 2005. With respect to state and
local income taxes, the Company is no longer subject to examination prior to 2002, with
few exceptions.
The Company’s estimate for the potential outcome for any uncertain tax issue is highly
judgmental. Management believes that any reasonably foreseeable outcomes related to these
matters have been adequately provided for. However, future results may include favorable
or unfavorable adjustments to estimated tax liabilities in the period the assessments are
made or resolved or when statutes of limitation on potential assessments expire.
Additionally, the jurisdictions in which earnings or deductions are realized may differ
from current estimates. As a result, the Company’s effective tax rate may fluctuate
significantly on a quarterly basis.
Note 13:
New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans” (FAS 158). The Company has complied with those
provisions of FAS 158 which became effective on December 31, 2006, and since that time
has recognized in its financial statements the funded status of its defined benefit
plans. The measurement date provision of FAS 158 becomes effective for the Company
beginning with its December 31, 2008 balance sheet. This provision requires companies to
measure the funded status of their plans at fiscal year end. Because the Company
currently uses December 31 as the measurement date for most of its plans, including its
major U.S.-based plans, implementation of this remaining measurement date provision will
not have a material effect on the Company’s financial statements.
In September 2006, the FASB issued FAS 157, “Fair Value Measurements,” which defines fair
value, establishes a framework for measuring fair value and expands disclosures about
fair value measurements. FAS 157 does not require any new fair value measurements. The
provisions of FAS 157 become effective in two phases. As of January 1, 2008, FAS 157
became effective for all financial assets and liabilities and for any nonfinancial assets
and liabilities measured at fair value on a recurring basis. Effective January 1, 2009,
the provisions of FAS 157 will apply to all assets and liabilities. Other than
additional disclosure, the adoption of FAS 157 has not and is not expected to have a
material impact on the Company’s financial statements.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Three Months Ended
Nine Months Ended
September 28,
September 30,
September 28,
September 30,
2008
2007
2008
2007
$
398,825
$
369,472
$
1,184,355
$
1,051,178
435,685
433,686
1,327,289
1,268,300
135,122
132,445
397,648
377,787
93,618
94,161
278,521
282,609
$
1,063,250
$
1,029,764
$
3,187,813
$
2,979,874
$
294
$
748
$
1,463
$
2,375
26,447
23,642
76,602
70,181
151
197
243
521
11,311
11,642
33,116
32,720
$
38,203
$
36,229
$
111,424
$
105,797
$
28,899
$
23,696
$
97,665
$
75,781
41,991
42,339
116,601
106,036
9,074
10,924
23,945
33,869
11,783
13,439
35,569
40,441
(5,530
)
(17,401
)
(77,838
)
(27,496
)
(10,629
)
(14,054
)
(35,954
)
(38,302
)
$
75,588
$
58,943
$
159,988
$
190,329
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
Table of Contents
October 29, 2008
Table of Contents
•
Availability and pricing of raw materials;
•
Success of new product development and introduction;
•
Ability to maintain or increase productivity levels and contain or reduce costs;
•
International, national and local economic and market conditions;
•
Availability of credit to us, our customers and/or our suppliers in needed amounts
and/or on reasonable terms;
•
Fluctuations in obligations and earnings of pension and postretirement benefit plans;
•
Ability to maintain market share;
•
Pricing pressures and demand for products;
•
Continued strength of our paperboard-based tubes and cores and composite can
operations;
•
Anticipated results of restructuring activities;
•
Resolution of income tax contingencies;
•
Ability to successfully integrate newly acquired businesses into the Company’s
operations;
•
Currency stability and the rate of growth in foreign markets;
•
Use of financial instruments to hedge foreign currency, interest rate and commodity
price risk;
•
Actions of government agencies and changes in laws and regulations affecting the
Company;
•
Liability for and anticipated costs of environmental remediation actions;
•
Ability to weather the current economic downturn;
•
Loss of consumer or investor confidence; and
•
Economic disruptions resulting from terrorist activities.
Table of Contents
Table of Contents
($ in millions)
$
30
27
9
(33
)
$
33
Table of Contents
Three Months Ended
September 28, 2008
September 30, 2007
$
398,825
$
369,472
435,685
433,686
135,122
132,445
93,618
94,161
$
1,063,250
$
1,029,764
Three Months Ended
September 28, 2008
September 30, 2007
$
28,899
$
23,696
41,991
42,339
9,074
10,924
11,783
13,439
(5,350
)
(17,401
)
(10,629
)
(14,054
)
$
75,588
$
58,943
Table of Contents
Table of Contents
($ in millions)
$
119
89
73
(73
)
$
208
Table of Contents
Nine Months Ended
September 28, 2008
September 30, 2007
$
1,184,355
$
1,051,178
1,327,289
1,268,300
397,648
377,787
278,521
282,609
$
3,187,813
$
2,979,874
Nine Months Ended
September 28, 2008
September 30, 2007
$
97,665
$
75,781
116,601
106,036
23,945
33,869
35,569
40,441
(77,838
)
(27,496
)
(35,954
)
(38,302
)
$
159,988
$
190,329
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Exhibit 10-1
–
Deferred Compensation Plan for Key Employees of Sonoco Products Company
(a.k.a. Deferred Compensation Plan for Corporate Officers of Sonoco Products
Company), as amended October 15, 2008
Exhibit 10-2
–
Omnibus Benefit Restoration Plan of Sonoco Products Company, amended and
restated as of January 1, 2008
Exhibit 10-3
–
Deferred Compensation Plan for Outside Directors of Sonoco Products
Company, as amended October 15, 2008
Exhibit 10-4
–
Sonoco Products Company Amended and Restated Trust Agreement for
Executives, as of October 15, 2008
Exhibit 10-5
–
Sonoco Products Company Amended and Restated Directors Deferral Trust
Agreement, as of October 15, 2008
Exhibit 15
–
Letter re: unaudited interim financial information
Exhibit 31
–
Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and 17
C.F.R. 240.13a-14(a)
Exhibit 32
–
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 17
C.F.R. 240.13a-14(b)
Table of Contents
SONOCO PRODUCTS COMPANY
(Registrant)
By: /s/ Charles J. Hupfer
Senior Vice President and Chief Financial Officer
(principal financial officer)
By: /s/ Barry L. Saunders
Vice President and Corporate Controller
(principal accounting officer)
Table of Contents
Exhibit
Number
Description
Deferred Compensation Plan for Key Employees of Sonoco Products
Company (a.k.a. Deferred Compensation Plan for Corporate Officers
of Sonoco Products Company), as amended October 15, 2008
Omnibus Benefit Restoration Plan of Sonoco Products Company,
amended and restated as of January 1, 2008
Deferred Compensation Plan for Outside Directors of Sonoco
Products Company, as amended October 15, 2008
Sonoco Products Company Amended and Restated Trust Agreement for
Executives, as of October 15, 2008
Sonoco Products Company Amended and Restated Directors Deferral
Trust Agreement, as of October 15, 2008
Letter re: unaudited interim financial information
Certifications of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and 17 C.F.R. 240.13a-14(a)
Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and 17 C.F.R. 240.13a-14(b)
|
ARTICLE I STATEMENT OF PURPOSE
|
3 | |||
|
|
||||
|
ARTICLE II DEFINITIONS
|
4 – 5 | |||
|
|
||||
|
ARTICLE III ELIGIBILTY AND PARTICIPATION
|
6 | |||
|
|
||||
|
ARTICLE IV DEFERRED COMPENSATION ELECTIONS
|
7 – 8 | |||
|
|
||||
|
ARTICLE V CREDITS TO DEFERRAL ACCOUNTS
|
9 – 10 | |||
|
|
||||
|
ARTICLE VI ADMINISTRATIVE COMMITTEE & CLAIMS
|
11 – 12 | |||
|
|
||||
|
ARTICLE VII AMENDMENT AND TERMINATION
|
13 | |||
|
|
||||
|
ARTICLE VIII MISCELLANEOUS
|
14 – 15 | |||
|
|
||||
|
ARTICLE IX CONSTRUCTION
|
16 |
| 1. | “Company” : Sonoco Products Company, a South Carolina Corporation, and Corporate successors. | ||
| 2. | “Committee” : The Administrative Committee appointed by the Board of Directors of the Company to administer this plan. | ||
| 3: | “Key Employee”: Any person who is serving as an officer of the Company. | ||
| 4: | “Participant” : A Key Employee or former Key Employee who has deferred fees hereunder and has a credit balance in his deferred compensation account. | ||
| 5. | “Separation from Service” : The date of termination of an employee’s active service, for reasons other than death, with the Company, which for this purpose includes all companies that would be considered a single employer under Section 414(b) of the Internal Revenue Code (“Code”) applying a standard of “at least 50 percent” instead of “at least 80 percent” as provided in the regulations to Section 409A of the Code. | ||
| 6. | “Plan” : The Deferred Compensation Plan for Key Employees of Sonoco Products Company as contained herein, and as may be amended from time to time hereafter, together with any election forms that the Committee requires a Participant to complete. | ||
| 7. | “Plan Year” : The period commencing January 1 and ending December 31. | ||
| 8. | “Stock Equivalent Account” : The account described in Article V. |
| 9. |
“Interest Account”
: The account described in Article V.
|
||
| 10. | “Compensation” : Salary and annual incentive compensation. | ||
| 11. | “Fixed Payment Period ”: The period of years over which annual payments are made to a Participant following his Separation from Service or upon his death preceding his Separation from Service. |
| 1. | Key Employees of the Company are eligible to become participants in the plan, subject to approval of the Board of Directors. | |
| 2. | An eligible Key Employee participates in the plan by irrevocably electing on an annual basis, in the manner specified herein, to defer future Compensation earned for which the related services commence in the calendar year following the year in which the election is made. | |
| 3. | An eligible Key Employee may elect to defer up to fifty (50) percent of salary and up to fifty (50) percent of annual incentive earned during the year for which the deferral choice is made. | |
| 4. | An eligible Key Employee becomes a Participant in the Plan upon the execution and delivery of a Deferred Compensation Agreement. Such Agreement must be executed (and must become irrevocable) in all cases on or before December 31 preceding the calendar year in which the services related to the Compensation to be deferred commence. |
| 1. | A Participant electing to defer payment of compensation may elect his deferrals to be invested in the Interest Account and/or the Stock Equivalent Account. | |
| 2. | Subject to such limitations as the Committee may impose, a Participant electing to defer hereunder shall also elect at the same time as his deferral election, a Fixed Payment Period commencing six months following the Participant’s Separation from Service over which the amount deferred under such election shall be paid to him in annual installments and a Fixed Payment Period (which may be a different period) over which the unpaid portion of the amount deferred shall be paid to his beneficiary or estate in annual installments in the event of his death before Separation from Service occurs. Finally, the participant may elect to have the unpaid portion of the amount deferred paid in a lump sum to his beneficiary or estate in the event of his death following a Separation of Service. | |
| 3. | Any Fixed Payment Period Election to defer compensation shall be irrevocable and may not be changed or modified thereafter by a Participant or the Company. | |
| 4. | The fact that the Participant has made a particular election with respect to a deferral shall not preclude such Participant from making different elections with respect to new deferrals covering a future period of service. | |
| 5. | In the event of a Fixed Payment Period commencing due to a Separation from Service, the initial amount due shall be paid six months following Separation from Service. In the event of a Fixed Payment Period commencing due to a Participant’s death prior to a Separation from Service, the initial payment amount due shall be |
| paid upon death (or on such later date permitted under the regulations to Code Section 409A). The amount of any payment during a Fixed Payment Period shall equal the unpaid balance of the amount deferred (including any earnings thereon) immediately preceding the payment date divided by the number of annual payments remaining in the Fixed Payment Period (including the payment that is about to be made). | ||
| 6. | Upon consummation of a Change in Control that qualifies under 409A, all amounts credited to the Stock Equivalent Account and/or Interest Account (along with any amounts deferred but not yet credited to these accounts up to the date of payment), shall be paid in a lump sum payment to the Participant within 30 days following the Change in Control. |
| 1. | Deferred compensation shall be credited to the Stock Equivalent Account or the Interest Account of a Participant or a combination of these accounts, as the Participant may have elected, as follows: |
| (a) | The deferred incentive amount shall be credited to the Deferral account on the closing date of the Company’s fiscal month in which the incentive was to be paid in cash. | ||
| (b) | The deferred salary shall be credited on the closing date of the Company’s fiscal month in which the salary was to be paid in cash. |
| 2. | The compensation credited to a Stock Equivalent Account shall be converted on the closing date of each of the Company’s fiscal months into “Stock Equivalents” as though such compensation were applied to the purchase of common stock of the Company as follows: |
| 3. | As of the payment date for each dividend declared on the Company’s common stock, each Participant’s dividend shall be determined by multiplying the cash dividend per share by the number of full and fractional Stock Equivalents in the Participant’s Stock Equivalent Account on the dividend payment date. The resulting |
| dividend amount will be converted into stock equivalents as though such dividend amounts were applied to the purchase of common stock of the Company on the same date dividends are actually paid to common stock shareholders. | ||
| 4. | Six months following a Participant’s Separation from Service, the Participant will begin to receive payments from the Stock Equivalent Account and/or Interest Account in accordance with the Participant’s elections. Subsequent installments, if any, shall be paid each January until the accounts have been paid in full. Payment(s) from the Stock Equivalent Account will be in the form of shares of common stock equal in number to the amount of Deferred Stock Units credited to the eligible Participant’s Stock Equivalent Account as of the date of payment divided by the number of installment payments remaining to be paid immediately before the payment date. Any remaining fractional share at the end of the payment cycle, will be rounded up and issued as a whole share. | |
| 5. | Each month, the balance in the Interest Account will be credited with interest from the date the deferral is credited to the account until payment is complete, at a rate equal to the Merrill Lynch ten year high quality bond index for December 15 of each preceding year. |
| 1. | This plan shall be administered by the Governance Committee of the Board of Directors. | |
| 2. | The construction and interpretation by the Committee of any provision of this plan shall be final and conclusive. | |
| 3. | The administration of this plan is delegated to the Senior Vice President – Human Resources who is responsible for executive compensation and benefits, or at his election, to the Director, Compensation. | |
| 4. | No member of the Committee shall be personally liable for any actions taken by the Committee unless the member’s action involves willful misconduct. | |
| 5. | If any claim for benefits under the Plan is wholly or partially denied, the claimant shall be given notice in writing of such denial within a reasonable period of time (not to exceed 90 days after receipt of the claim or, if special circumstances require an extension of time, written notice of the extension shall be furnished to the claimant and an additional 90 days will be considered reasonable) setting forth the following information: (a) the specific reason or reasons for the denial; (b) specific reference to pertinent Plan provisions on which denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation that a full and fair review by the Committee of the decision denying the claim may be requested by the claimant or his authorized representative by filing with the Committee, within 60 days after such notice has been received, a written request for such review. |
| In the event that a claimant does choose to appeal, as described under (d) above, the claimant or his authorized representative may review pertinent documents and submit issues and comments in writing within the same 60-day period specified in subsection (d) above. Upon request (and free of charge), the Member/claimant shall be provided reasonable access to and copies of all documents, records, and other information relevant to his claim for benefits (as further described in DOL regulations, and as determined by the Committee, in its sole discretion), and shall also be informed of his right to bring suit under ERISA. | ||
| The decision of the Committee shall be made promptly, and not later than 60 days after the Committee’s receipt of the request for review, unless special circumstances require an extension of time for processing, in which case the claimant shall be so notified and a decision shall be rendered as soon as possible, but not later than 120 days after the receipt of the request for review. The claimant shall be given a copy of the decision promptly. The decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. |
| 1. | NON-ALIENATION OF BENEFITS. No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right or benefit under this Deferral shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefits. If the Participant or any beneficiary hereunder shall become bankrupt, or attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right hereunder, then such right or benefit shall, in the discretion of the Committee, cease and terminate, and in such event, the Committee may hold or apply the same or any part thereof for the benefit of the Participant or his beneficiary, spouse, children, or other dependents, or any of them in such manner and in such amounts and proportions as the Committee may deem proper. | |
| 2. | NO TRUST CREATED. The obligations of the Company to make payments hereunder shall constitute a liability of the Company to a Participant. Such payments shall be made from the general funds of the Company, and the Company shall not be required to establish or maintain any special or separate fund, or purchase or acquire life insurance on a Participant’s life, or otherwise segregate assets to assure that payment shall be made, and neither a Participant, his estate nor Beneficiary shall have any interest in any particular asset of the Company by reason of its obligations hereunder. The Participant’s rights to deferred amounts will be the same as an unsecured general creditor of the Company, and all property and rights to |
| property, including rights as a beneficiary of a life insurance contract purchased with deferred amounts, and all income attributable to the deferred amounts and property will remain solely the property of the Company and will be subject to claims of general creditors of the Company. Nothing contained in the Plan shall create or be construed as creating a trust of any kind of any other fiduciary relationship between the Company and a Participant or any other person. | ||
| 3. | The effective date of this plan is January 1, 1991. | |
| 4. | The plan has been amended effective July 18, 2007, to comply with Section 409A of the Code and the regulations thereunder. | |
| 5. | The plan has been amended effective October 15, 2008, to comply with Section 409A of the Code and the regulations thereunder. |
| 1. | GOVERNING LAW. This Plan shall be construed and governed in accordance with the laws of the State of South Carolina. | |
| 2. | GENDER. The masculine gender, where appearing in the plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. | |
| 3. | HEADINGS, ETC. The cover page of this plan, the Table of Contents and all headings used in this plan are for the convenience of reference only and are not part of the substance of this plan. |
|
Article 1. Introduction
|
1 | |||
|
1.1 Background and History
|
1 | |||
|
1.2 Restatement of Plan
|
1 | |||
|
1.3 Purpose and Applicability of the Plan
|
1 | |||
|
|
||||
|
Article 2. Definitions
|
2 | |||
|
2.1 Actuarial Equivalent
|
2 | |||
|
2.2 Affiliate
|
2 | |||
|
2.3 Beneficiary
|
2 | |||
|
2.4 Board
|
3 | |||
|
2.5 Code
|
3 | |||
|
2.6 Committee
|
3 | |||
|
2.7 Company
|
3 | |||
|
2.8 Company Stock
|
3 | |||
|
2.9 DB Restoration Benefit
|
4 | |||
|
2.10 DC Restoration Account
|
4 | |||
|
2.11 DC SERP Account
|
4 | |||
|
2.12 DC SERP Benefit
|
4 | |||
|
2.13 Eligible Compensation
|
4 | |||
|
2.14 Employee
|
5 | |||
|
2.15 Employer
|
5 | |||
|
2.16 ERISA
|
5 | |||
|
2.17 Executive Benefit
|
5 | |||
|
2.18 Final Average Pay
|
6 | |||
|
2.19 Five-Year Certain and Life Annuity
|
6 | |||
|
2.20 401(k) Plan
|
6 | |||
|
2.21 Gross Executive Restoration Benefit
|
6 | |||
|
2.22 Gross Executive SERP Benefit
|
6 | |||
|
2.23 Investment Plan
|
6 | |||
|
2.24 Joint and 50 Percent Survivor Annuity
|
6 | |||
|
2.25 Joint and 75 Percent Survivor Annuity
|
7 | |||
|
2.26 Joint and 100 Percent Survivor Annuity
|
7 | |||
|
2.27 Key Employee
|
7 | |||
|
2.28 Level Income Annuity
|
7 | |||
|
2.29 Military Leave
|
7 | |||
|
2.30 Net Executive Restoration Benefit
|
8 | |||
|
2.31 Net Executive SERP Benefit
|
8 | |||
|
2.32 Normal Retirement Date
|
8 |
i
|
2.33 Participant
|
8 | |||
|
2.34 Participation Agreement
|
8 | |||
|
2.35 Plan
|
8 | |||
|
2.36 Plan Year
|
8 | |||
|
2.37 Qualified Pension Plan
|
8 | |||
|
2.38 Restricted Stock Units
|
9 | |||
|
2.39 Separation from Service
|
9 | |||
|
2.40 Single Life Annuity
|
9 | |||
|
2.41 Social Security Benefit
|
9 | |||
|
2.42 Stable Value Fund
|
10 | |||
|
2.43 Target Date Retirement Fund
|
10 | |||
|
2.44 Ten-Year Certain and Life Annuity
|
10 | |||
|
2.45 Valuation Date
|
10 | |||
|
2.46 Years of Benefit Service
|
10 | |||
|
2.47 Years of Vesting Service
|
10 | |||
|
|
||||
|
Article 3. Executive Benefit
|
12 | |||
|
3.1 Eligibility and Participation
|
12 | |||
|
3.2 Normal Retirement Benefits
|
12 | |||
|
3.3 Early Retirement Benefits
|
13 | |||
|
3.4 Deferred Vested Retirement Benefits
|
14 | |||
|
3.5 Net Executive Restoration Benefit
|
16 | |||
|
3.6 Form of Payment
|
18 | |||
|
3.7 Preretirement Death Benefits
|
22 | |||
|
|
||||
|
Article 4. DB Restoration Benefit
|
26 | |||
|
4.1 Eligibility and Participation
|
26 | |||
|
4.2 Normal Retirement Benefit
|
26 | |||
|
4.3 Early Retirement Benefits
|
27 | |||
|
4.4 Deferred Vested Retirement Benefits
|
28 | |||
|
4.5 Form of Payment
|
29 | |||
|
4.6 Preretirement Death Benefits
|
30 | |||
|
|
||||
|
Article 5. DC Restoration Account
|
32 | |||
|
5.1 Eligibility and Participation
|
32 | |||
|
5.2 Benefits
|
32 | |||
|
5.3 Investment Gains and Losses.
|
33 | |||
|
5.4 Vesting
|
35 | |||
|
5.5 Distributions Following a Separation from Service
|
35 | |||
|
5.6 Distributions upon the Participant’s Death
|
36 | |||
|
|
||||
|
Article 6. DC SERP Benefit
|
37 | |||
|
6.1 Eligibility and Participation
|
37 |
ii
|
6.2 Benefits
|
37 | |||
|
6.3 Investment Gains and Losses.
|
38 | |||
|
6.4 Vesting
|
38 | |||
|
6.5 Distributions Following a Separation from Service
|
39 | |||
|
6.6 Distributions Upon the Participant’s Death
|
40 | |||
|
|
||||
|
Article 7. Participation Agreements
|
42 | |||
|
7.1 Social Security Bridge Benefit
|
42 | |||
|
7.2 Qualified Pension Plan Enhancement.
|
43 | |||
|
|
||||
|
Article 8. Financing and Administration
|
47 | |||
|
8.1 Financing
|
47 | |||
|
8.2 The Committee
|
47 | |||
|
8.3 Manner of Action
|
47 | |||
|
8.4 Committee’s Powers and Duties
|
48 | |||
|
8.5 Delegation of Powers and Duties
|
49 | |||
|
8.6 Committee’s Decisions Conclusive
|
49 | |||
|
8.7 Compensation, Indemnity and Liability
|
49 | |||
|
8.8 Notice of Address
|
49 | |||
|
8.9 Data
|
50 | |||
|
8.10 Benefit Claims Procedures
|
50 | |||
|
|
||||
|
Article 9. Amendment and Termination
|
52 | |||
|
9.1 Amendments
|
52 | |||
|
9.2 Termination and Liquidation of Plan
|
52 | |||
|
9.3 Successors
|
52 | |||
|
9.4 Prohibition on Changes Due to Code Section 409A
|
53 | |||
|
9.5 Employer Participation and Termination
|
53 | |||
|
|
||||
|
Article 10. Miscellaneous Provisions
|
54 | |||
|
10.1 Taxation
|
54 | |||
|
10.2 Withholding on Distributions
|
54 | |||
|
10.3 Benefit Cash-out
|
54 | |||
|
10.4 Permissible Delays or Accelerations
|
55 | |||
|
10.5 No Enlargement of Employment Rights
|
55 | |||
|
10.6 Non-Alienation
|
56 | |||
|
10.7 Code Section 409A Aggregation Rules
|
56 | |||
|
10.8 No Examination or Accounting
|
56 | |||
|
10.9 Incompetency
|
56 | |||
|
10.10 Records Conclusive
|
57 | |||
|
10.11 Service of Legal Process
|
57 | |||
|
10.12 Qualified Military Service
|
57 | |||
|
10.13 Counterparts
|
57 |
iii
| (a) | add an installment payment option with respect to a portion of the Executive Benefit; | |
| (b) | add a new supplemental retirement benefit for employees who are appointed as officers on and after January 1, 2008; and | |
| (c) | bring the Plan into compliance with Code section 409A. |
| (a) | Provide certain eligible employees with supplemental retirement income; and | |
| (b) | Restore to certain eligible employees benefits that may be lost or curtailed under the Company’s broad-based qualified retirement plans as a result of limits imposed on such benefits under the Internal Revenue Code. |
1
| (a) | General Rule. Actuarial Equivalent means a benefit having the same value as the benefit which it replaces, computed on the basis of— |
| (1) | the 1984 Unisex Pension Mortality Table, with no age setback for Participants and a three-year age setback for beneficiaries; and | ||
| (2) | interest at 9 percent compounded annually. |
| (b) | Lump Sum Payments. Notwithstanding section 2.1(a), the value of a lump sum payment calculated under section 10.3(a)(1) and 10.3(b) shall be computed on the basis of— |
| (1) | the mortality table specified in section 2.1(a)(1); and | ||
| (2) | an interest rate equal to the discount rate used to compute FAS-87 costs under the Qualified Pension Plan for the Plan Year immediately preceding the Plan Year in which the distribution occurs, as stated each year in the Company’s annual report to shareholders. |
| (a) | any corporation while it is a member of the same controlled group of corporations (within the meaning Code section 414(b) as the Company); and | |
| (b) | any other trade or business (whether or not incorporated) while it is under common control with the Company (within the meaning of Code section 414(c)). |
| (a) | Section 3.6(a), regarding survivor payments that may become due if the Participant elected to receive his or her Net Executive Restoration Benefit in one of the optional forms of payment described therein; |
2
| (b) | Section 3.6(b), regarding survivor payments that may become due if the Participant’s Net Executive SERP Benefit was being distributed in the form of a Ten-Year Certain and Life Annuity or three annual installments at the time of his or her death) | |
| (c) | Section 4.5(b), regarding survivor payments that may become due if the Participant elects to receive his or her DB Restoration Benefit in one of the optional forms of payment described therein; | |
| (d) | Section 5.6, regarding the vested portion of a Participant’s DC Restoration Account that remains unpaid at the time of the Participant’s death; or | |
| (e) | Section 6.6, regarding the vested portion of a Participant’s DC SERP Benefit that remains unpaid at the time of the Participant’s death; and | |
| (f) | Section 7.2(d), regarding survivor payments that may become due with respect to a Qualified Pension Plan enhancement payable under an individual Participation Agreement (depending on the form of payment in effect under such section). |
3
| (a) | 4 01(k) Plan Restoration Account means the portion of the Participant’s DC Restoration Account that evidences the value of benefits accumulated by the Participant under section 5.2(a), including any gains and losses attributable to such benefits, as determined under section 5.3(a). | |
| (b) | Investment Plan Restoration Account means the portion of the Participant’s DC Restoration Account that evidences the value of benefits accumulated by the Participant under section 5.2(b), including any gains and losses attributable to such benefits, as determined under section 5.3(b). |
| (a) | General Rule. Except as otherwise provided in subsections (b) and (c) below, “Eligible Compensation” means the sum of the total base salary received by the Participant for the Plan Year and any annual bonus earned by the Participant for the Plan Year (even if such bonus is actually paid in a subsequent year). | |
| (b) | DC Restoration Account. For the purpose of determining amounts to be credited to a Participant’s DC Restoration Account under Article 5 for a Plan Year, “Eligible Compensation” means the Participant’s compensation that is used in calculating contributions under the 401(k) Plan and Investment Plan for the same Plan Year, but |
4
| determined without regard to the limit imposed on such compensation by Code section 401(a)(17). | ||
| (c) | Special Rule for Last Year of Employment. When calculating Final Average Pay under section 2.18 for a Participant who incurs a Separation from Service before the last day of the Plan Year, Eligible Compensation for this final partial Plan Year of employment shall equal the sum of— |
| (1) | the base salary actually paid to the Participant for such Plan Year for employment before his or her Separation from Service; | ||
| (2) | the additional base salary the Participant would have received had he or she remained in active employment for the period beginning on the date of his or her Separation from Service and ending on the next following December 31 (at the same rate of base salary as in effect immediately prior to such Separation from Service); and | ||
| (3) | the annual bonus actually earned by Participant for such Plan Year for employment before his or her Separation from Service (even if such bonus is actually paid in a subsequent year). However, if such annual bonus has not been determined as of the Participant’s benefit commencement date, the annual bonus that will be treated as part of the Participant’s Eligible Compensation for his or her last partial Plan Year of employment shall equal the Participant’s target bonus percentage for such year multiplied by the base salary actually paid to the Participant for such year for employment before his or her Separation from Service. |
5
| (a) | is 4 percent of the Participant’s Final Average Pay multiplied by his or her Years of Benefit Service (but not to exceed 15 years); and | |
| (b) | is a fraction having a numerator equal to the Participant’s Years of Benefit Service and a denominator equal to the Years of Benefit Service the Participant would have earned had he or she continued in the employment of an Employer through his or her Normal Retirement Date. |
6
| (a) | one of the top-paid 50 officers of the Company or an Affiliate who has annual compensation in excess of $130,000 (as indexed from time to time in accordance with Code section 416(i)(1)); | |
| (b) | a 5-percent owner of the Company or an Affiliate; or | |
| (c) | a 1-percent owner of the Company or an Affiliate who has annual compensation in excess of $150,000. |
7
| (a) | section 3.1 (related to the Executive Benefit); | |
| (b) | section 4.1 (related to the DB Restoration Benefit); | |
| (c) | section 5.1 (related to the DC Restoration Account); | |
| (d) | section 6.1 (related to the DC SERP Benefit); and/or | |
| (e) | section 7.1 (related to individual Participation Agreements). |
8
| (a) | A Separation from Service shall be deemed to have occurred as of the date the Employee and the Company or any Affiliate reasonably anticipates, based on the facts and circumstances, that either: |
| (1) | The Employee will not provide any additional services for the Company or an Affiliate after that date; or | ||
| (2) | The level of bona fide services performed by the Employee after that date will permanently decrease to no more than 20 percent of the average level of bona fide services performed by the Employee over the immediately preceding 36 months. |
| (b) | If an Employee is absent from employment due to Military Leave, sick leave, or any other bona fide leave of absence authorized by the Company or an Affiliate, and there is a reasonable expectation that the Employee will return to perform services for the Company or an Affiliate, then a Separation from Service shall not occur until the later of: |
| (1) | The first date immediately following the date that is six months after the first date that an Employee was absent from employment; and | ||
| (2) | To the extent the Employee retains a right to reemployment with the Company or any Affiliates under an applicable statute or by contract, the date the Employee no longer retains a right to reemployment. |
9
| (a) | the Social Security Act in effect as of the date of the Participant’s Separation from Service; and | |
| (b) | an assumption that the Participant’s compensation does not increase after the last day of the Plan Year that precedes the date of the Participant’s Separation from Service. |
| (a) | Executive Benefit. For purposes of determining whether a Participant has a vested interest in the Executive Benefit under Article 3, “Years of Vesting Service” mean the vesting service earned by the Participant as determined under the Qualified Pension Plan (but considering only such service earned during the Participant’s period of active participation under Article 3). |
10
| (b) | DB Restoration Benefit. For purposes of determining whether a Participant has a vested interest in the DB Restoration Benefit under Article 4, “Years of Vesting Service” mean the vesting service earned by the Participant as determined under the Qualified Pension Plan. | |
| (c) | Investment Plan Restoration Account. For purposes of determining whether a Participant has a vested interest in an Investment Plan Restoration Account under Article 5, “Years of Vesting Service” mean the vesting service earned by the Participant as determined under the Investment Plan. | |
| (d) | DC SERP Benefit. For purposes of determining whether a Participant has a vested interest in a DC SERP Benefit under Article 6, “Years of Vesting Service” will be determined as follows: |
| (1) | If the Participant is accruing benefits under the Qualified Pension Plan, his or her “Years of Vesting Service” mean the vesting service earned by the Participant as determined under the Qualified Pension Plan (but considering only such service earned during the Participant’s period of employment as an officer of the Company). | ||
| (2) | If the Participant is an active participant in the Investment Plan, his or her “Years of Vesting Service” mean the vesting service earned by the Participant as determined under the Investment Plan (but considering only such service earned during the Participant’s period of employment as an officer of the Company). |
11
| (a) | Eligibility. Subject to section 3.1(b) below, an Employee who was a Participant with respect to the Executive Benefit as of December 31, 2007 shall continue to be a Participant with respect to this benefit on and after January 1, 2008. Each Employee who was not a Participant with respect to the Executive Benefit as of December 31, 2007 shall not be eligible to become a Participant under this Article 3. | |
| (b) | Duration of Participation. An individual who becomes a Participant under this Article 3 shall continue as an active Participant until the earlier of the date on which he or she— |
| (1) | is designated by the Committee as no longer eligible to be a Participant with respect to the Executive Benefit; or | ||
| (2) | incurs a Separation from Service. |
| When active participation ends under subsection (b)(1) or (b)(2), the individual will continue as an inactive Participant with respect to the Executive Benefit until he or she has received a complete distribution of any benefits to which he or she is entitled under this Article 3 (or forfeits any such benefits by incurring a Separation from Service before qualifying for a deferred vested retirement benefit under section 3.4(a)). |
| (a) | Eligibility. A Participant under this Article 3 who incurs a Separation from Service on or after attaining age 65 shall be eligible for a normal retirement benefit under this section 3.2. This benefit shall commence as of the date determined under section 3.2(c) and shall be paid in the form determined under section 3.6. | |
| (b) | Amount. The Executive Benefit payable under this section 3.2 to a Participant who retires after reaching age 65 shall equal the sum of— |
| (1) | the Participant’s Net Executive Restoration Benefit determined under section 3.5 as of the date of the Participant’s Separation from Service, but expressed as a Single Life Annuity (i.e., determined before converting the Gross Executive Restoration Benefit and the offset for the benefit payable under the Qualified Pension Plan into a Joint and 75 Percent Survivor Annuity under section 3.5(d)); and | ||
| (2) | the Participant’s Net Executive SERP Benefit, which shall equal (A) reduced by the sum of (B) and (C) where— |
| (A) | is the Gross Executive SERP Benefit determined as of the date of the Participant’s Separation from Service; |
12
| (B) | is the Gross Executive Restoration Benefit determined under section 3.5(b) as of the date of the Participant’s Separation from Service (after such amount has been converted into a Joint and 75 Percent Survivor Annuity in the manner described in section 3.5(d)); and | ||
| (C) | is the Participant’s Social Security Benefit. |
| (c) | Commencement. If a Participant becomes entitled to an Executive Benefit under this section 3.2 upon his or her Separation from Service, both the Net Executive Restoration Benefit and the Net Executive SERP Benefit shall commence as of the first day of the month next following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. If all or a portion of the Executive Benefit is paid as an annuity under section 3.6, the first such annuity payment shall include the monthly amounts (with no adjustment for interest) the Participant would have received had his or her benefit commencement date been the first day of the month next following the date on which the Participant incurs a Separation from Service. |
| (a) | Eligibility. A Participant under this Article 3 who incurs a Separation from Service before reaching age 65, but after reaching age 55, shall be eligible for an early retirement benefit under this section 3.3. This benefit shall commence on the date determined under section 3.3(c) and shall be paid in the form determined under section 3.6. | |
| (b) | Amount. The Executive Benefit payable under this section 3.3 shall equal the sum of the Net Executive Restoration Benefit determined under section 3.3(b)(1) and the Net Executive SERP Benefit determined under section 3.3(b)(2). |
| (1) | Net Executive Restoration Benefit. The Net Executive Restoration Benefit under this section 3.3 shall equal (A) reduced by (B) where— |
| (A) | is the Net Executive Restoration Benefit determined under section 3.5 as of the date of the Participant’s Separation from Service, but expressed as a Single Life Annuity (i.e., determined before converting the Gross Executive Restoration Benefit and the offset for the benefit payable under the Qualified Pension Plan into a Joint and 75 Percent Survivor Annuity under section 3.5(d)); and | ||
| (B) | is 0.30 percent of the amount determined under section 3.3(b)(1)(A) for each month by which the first day of the month that next follows the month in which the Participant incurred a Separation from Service precedes the first day of the month next following the month in which the Participant would attain age 65. |
13
| (2) | Net Executive SERP Benefit. The Net Executive SERP Benefit payable under this section 3.3 shall equal (A) reduced by the sum of (B) and (C) where— |
| (A) | is the Participant’s Gross Executive SERP Benefit determined as of the date of the Participant’s Separation from Service, reduced by 0.25 percent for each month by which the first day of the month that next follows the month in which the Participant incurred a Separation from Service precedes the first day of the month next following the month in which the Participant would attain age 62; | ||
| (B) | is the Gross Executive Restoration Benefit determined under section 3.5(b) as of the date of the Participant’s Separation from Service (after such amount has been converted into a Joint and 75 Percent Survivor Annuity in the manner described in section 3.5(d)), reduced for commencement before age 65 in the manner and amount described in section 3.3(b)(1)(B) above; and | ||
| (C) | is the Participant’s Social Security Benefit, calculated as if it were to commence on the first day of the month next following the later of (i) the month in which the Participant incurs a Separation from Service or (ii) the month in which the Participant attains age 62. (This offset for the Social Security Benefit shall first be applied as of the first day of the month next following the later of the month in which the Participant incurs a Separation from Service or attains age 62.) |
| (c) | Commencement. If a Participant becomes entitled to an Executive Benefit under this section 3.3 upon his or her Separation from Service, both the Net Executive Restoration Benefit and the Net Executive SERP Benefit shall commence as of the first day of the month next following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. If all or a portion of the Executive Benefit is paid as an annuity under section 3.6, the first such annuity payment shall include the monthly amounts (with no adjustment for interest) the Participant would have received had his or her benefit commencement date been the first day of the month next following the date on which the Participant incurs a Separation from Service. |
| (a) | Eligibility. A Participant under this Article 3 who incurs a Separation from Service before qualifying for early retirement under section 3.3, but after completing five or more Years of Vesting Service as a Participant under this Article 3, shall be eligible for a deferred vested retirement benefit under this section 3.4. This benefit shall commence on the date determined under section 3.4(c) and shall be paid in the form determined under section 3.6. |
14
| (b) | Amount. The Executive Benefit payable under this section 3.4 shall equal the sum of the Net Executive Restoration Benefit determined under section 3.4(b)(1) and the Net Executive SERP Benefit determined under section 3.4(b)(2). |
| (1) | Net Executive Restoration Benefit. The Net Executive Restoration Benefit payable under this section 3.4 shall equal (A) multiplied by (B) where— |
| (A) | is the Net Executive Restoration Benefit determined under section 3.5 as of the date of the Participant’s Separation from Service, but expressed as a Single Life Annuity (i.e., determined before converting the Gross Executive Restoration Benefit and the offset for the benefit payable under the Qualified Pension Plan into a Joint and 75 Percent Survivor Annuity under section 3.5(d)); and | ||
| (B) | is 64 percent. |
| (2) | Net Executive SERP Benefit. The Net Executive SERP Benefit payable under this section 3.4 shall equal (A) reduced by the sum of (B) and (C) where— |
| (A) | is 79 percent of the Participant’s Gross Executive SERP Benefit determined as of the date of the Participant’s Separation from Service; | ||
| (B) | is 64 percent of the Gross Executive Restoration Benefit determined under section 3.5(b) as of the date of the Participant’s Separation from Service, (after such amount has been converted into a Joint and 75 Percent Survivor Annuity in the manner described in section 3.5(d)); and | ||
| (C) | is the Participant’s Social Security Benefit, calculated as if it were to commence on the first day of the month next following the month in which the Participant attains age 62. (This offset for the Social Security Benefit shall first be applied as of the first day of the month next following the month in which the Participant attains age 62.) |
| (c) | Commencement. If a Participant becomes entitled to an Executive Benefit under this section 3.4 upon his or her Separation from Service, both the Net Executive Restoration Benefit and the Net Executive SERP Benefit shall commence as of the later of— |
| (1) | the first day of the month next following the month in which the Participant reaches age 55; or |
| (2) | the first day of the month next following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. |
| If all or a portion of the Executive Benefit is paid as an annuity under section 3.6, and the Participant’s benefit commencement date is the date determined under section 3.4(c)(2), the first such annuity payment shall include the monthly amounts |
15
| (with no adjustment for interest) the Participant would have received had his or her benefit commencement date been the first day of the month next following the month in which the Participant reaches age 55. |
| (a) | In General. A Participant’s Net Executive Restoration Benefit shall equal the difference between— |
| (1) | the Gross Executive Restoration Benefit determined as of the Participant’s Separation from Service under section 3.5(b); and |
| (2) | the benefit accrued by the Participant under the Qualified Pension Plan determined as of his or her Separation from Service as determined under 3.5(c). |
| (b) | Gross Executive Restoration Benefit. A Participant’s Gross Executive Restoration Benefit shall be determined initially as of December 31, 2008 (in accordance with section 3.5(b)(1)); then adjusted for each full Plan Year of participation thereafter (in accordance with section 3.5(b)(2)); and adjusted further for the Plan Year in which the Participant incurs a Separation from Service (in accordance with section 3.5(b)(3)). |
| (1) | Gross Executive Restoration Benefit as of December 31, 2008. The Gross Executive Restoration Benefit as of December 31, 2008 shall equal the amount that would have been accrued by the Participant under the Qualified Pension Plan as of such date without regard to the limits imposed by Code sections 401(a)(17) and 415, and calculated initially as a Single Life Annuity commencing on the Participant’s Normal Retirement Date, but then converted into a Joint and 75 Percent Survivor Annuity commencing on the Participant’s Normal Retirement Date (in the manner described in section 3.5(d)). |
| (2) | Annual Adjustments to Gross Executive Restoration Benefit for Full Plan Years of Participation. Beginning January 1, 2009, the Gross Executive Restoration Benefit determined as of the end of the immediately preceding Plan Year shall be increased as of the last day of each subsequent full Plan Year of participation by an amount equal to the lesser of (A) or (B) where— |
| (A) | is the difference (but not less than zero) between— |
| (i) | the amount that would have been accrued by the Participant under the Qualified Pension Plan through the last day of the current Plan Year without regard to the limits imposed by Code sections 401(a)(17) and 415, and calculated initially as a Single Life Annuity commencing on the Participant’s Normal Retirement Date, but then converted into a Joint and 75 Percent Survivor Annuity commencing on the Participant’s Normal Retirement Date (in the manner described in section 3.5(d)); and |
16
| (ii) | is the lesser of— |
| (I) | the amount that would have been accrued by the Participant under the Qualified Pension Plan through the last day of the immediately preceding Plan Year without regard to the limits imposed by Code sections 401(a)(17) and 415, calculated initially as a Single Life Annuity commencing on the Participant’s Normal Retirement Date but then converted into a Joint and 75 Percent Survivor Annuity commencing on the Participant’s Normal Retirement Date (in the manner described in section 3.5(d)); and | ||
| (II) | the amount of the Gross Executive Restoration Benefit as of the last day of the immediately preceding Plan Year; and |
| (B) | is the increase in the Gross Executive SERP Benefit for such full Plan Year of participation. (This increase shall equal the Gross Executive SERP Benefit as of the last day of the Plan Year reduced by the Gross Executive SERP Benefit determined as of the last day of the immediately preceding Plan Year.) |
| (3) | Final Determination of Gross Executive Restoration Benefit as of Separation from Service. As of the date of the Participant’s Separation from Service, the Gross Executive Restoration Benefit shall equal the Gross Executive Restoration Benefit determined under section 3.5(b)(2) as of the last day of the immediately preceding Plan Year increased through the date of the Participant’s Separation from Service by an amount equal to the lesser of (A) or (B) where— |
| (A) | is the difference (but not less than zero) between— |
| (i) | the amount that would have been accrued by the Participant under the Qualified Pension Plan through the date of his or her Separation from Service without regard to the limits imposed by Code sections 401(a)(17) and 415, calculated initially as a Single Life Annuity commencing on the Participant’s Normal Retirement Date, but then converted into a Joint and 75 Percent Survivor Annuity commencing on the Participant’s Normal Retirement Date (in the manner described in section 3.5(d)); and | ||
| (ii) | the lesser of— |
| (I) | the amount that would have been accrued by the Participant under the Qualified Pension Plan through the last day of the immediately preceding Plan Year without regard to the limits imposed by Code sections 401(a)(17) and 415, calculated initially as a Single Life Annuity commencing on the |
17
| Participant’s Normal Retirement Date, but then converted into a Joint and 75 Percent Survivor Annuity commencing on the Participant’s Normal Retirement Date (in the manner described in section 3.5(d)); and |
| (II) | the amount of the Gross Executive Restoration Benefit as of the last day of the immediately preceding Plan Year; and |
| (B) | is the increase in the Gross Executive SERP Benefit for the Plan Year in which the Participant incurred a Separation from Service. (This increase shall equal the Gross Executive SERP Benefit as of the date of the Participant’s Separation from Service reduced by the Gross Executive SERP Benefit determined as of the last day of the immediately preceding Plan Year). |
| (c) | Offset for Qualified Pension Plan Benefit. The offset described in section 3.5(a)(2) equal the amount accrued by the Participant under the Qualified Pension Plan as of the date of the Participant’s Separation from Service, calculated initially as a Single Life Annuity commencing on the Participant’s Normal Retirement Date, but then converted into a Joint and 75 Percent Survivor Annuity (in the manner described in section 3.5(d)). | |
| (d) | Adjustment to the Single Life Annuity Amounts. Amounts calculated initially as a Single Life Annuity under sections 3.5(b) and 3.5(c) shall be converted into actuarially equivalent Joint and 75 Percent Survivor Annuity by— |
| (1) | applying the mortality and interest assumptions described in section 2.1, and | ||
| (2) | for a Participant who is not married as of the applicable calculation date, by assuming that the Participant’s beneficiary under the Joint and 75 Percent Survivor Annuity is the same age as the Participant. |
| (a) | Net Executive Restoration Benefit. The portion of the Executive Benefit that is attributable to the Net Executive Restoration Benefit shall be paid as follows: |
| (1) | Before 2009. If a Participant’s benefit commencement date under this Article 3 is before January 1, 2009, and the Participant elects to commence his or her benefits under the Qualified Pension Plan before such date, the Participant’s Executive Restoration Benefit shall be paid in the same annuity form in effect for the Participant under the Qualified Pension Plan. Any annuity benefit payable under this section 3.6(a)(1) shall be the Actuarial Equivalent of the Single Life Annuity determined under section 3.2(b)(1), 3.3(b)(1), or 3.4(b)(1) (as applicable). |
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| (2) | After 2008. Subject to section 10.3, if a Participant’s benefit commencement date under this Article 3 is after December 31, 2008, such benefit shall be distributed as follows: |
| (A) | Normal Form of Payment. Unless a Participant elects an optional form under 3.6(a)(2)(B), the Net Executive Restoration Benefit shall be paid in the form of a Single Life Annuity, as determined under section 3.2(b)(1), 3.3(b)(1), or 3.4(b)(1) (as applicable). | ||
| (B) | Optional Forms of Payment. In lieu of the Single Life Annuity described in section 3.6(a)(2)(A), a Participant may elect instead, at any time before his or her benefit commencement date and in a manner specified by the Committee, to receive his or her Net Executive Restoration Benefit in any one of the following forms of payment (each of which shall be the Actuarial Equivalent of the Single Life Annuity): |
| (i) | Joint and 50 Percent Survivor Annuity; | ||
| (ii) | Joint and 75 Percent Survivor Annuity; | ||
| (iii) | Joint and 100 Percent Survivor Annuity; | ||
| (iv) | Five-Year Certain and Life Annuity; | ||
| (v) | 10-Year Certain and Life Annuity; or | ||
| (vi) | Level Income Annuity. |
| (b) | Net Executive SERP Benefit. |
| (1) | Normal Form of Payment. Except as provided in sections 3.6(b)(2) and 10.3, the portion of the Executive Benefit that is attributable to the Net Executive SERP Benefit shall be paid as follows: |
| (A) | Married Participant: If a Participant is married when the payment of his or her Executive Benefit commences under this Article 3, the Net Executive SERP Benefit (i.e., the monthly amount determined under section 3.2(b)(2), 3.3(b)(2), or 3.4(b)(2), as applicable) shall be paid in the form a Joint and 75 Percent Survivor Annuity, with the Participant’s spouse as his or her Beneficiary. | ||
| (B) | Unmarried Participant. If a Participant is not married when the payment of his or her Net Executive SERP Benefit commences under this Article 3, such benefit shall be paid in the form of a Ten-Year Certain and Life Annuity. This Ten-Year Certain and Life Annuity shall be the Actuarial Equivalent of the Joint and 75 Percent Survivor Annuity determined under section 3.2(b)(2), 3.3(b)(2), or 3.4(b)(2), as applicable (which shall be |
19
| valued assuming that the Participant’s Beneficiary is the same age as the Participant). |
| (2) | Optional Form of Payment. |
| (A) | Three Equal Installments. A Participant may waive the normal form of payment specified under Section 3.6(b)(1) and elect instead to receive the Net Executive SERP Benefit in the form of three equal installments, with the first installment payable on the benefit commencement date determined under section 3.2(c), 3.3(c), or 3.4(c) (as applicable), the second installment payable six months after the payment of the first installment, and the third installment payable 12 months after the payment of the second installment. | ||
| The amount of these installments shall be determined as follows: |
| (i) | The Net Executive SERP Benefit determined under 3.2(b)(2), 3.3(b)(2), or 3.4(b)(2) (as applicable) shall first be converted from an amount payable as a Joint and 75 Percent Survivor Annuity into an equivalent lump sum using— |
| (I) | a mortality table, modified as appropriate by the Secretary of the Treasury, that is based on the mortality table specified for the Plan Year under Code section 430(h)(3) (but determined without regard to Code sections 430(h)(3)(C) and 430(h)(3)(D)); and | ||
| (II) | an interest rate equal to the first, second, and third tier segment rates applied under rules similar to the rules of Code section 430(h)(2)(C), and adjusted in the manner described in Code section 417(e)(3)(D), for the month of November immediately preceding the first day of the Plan Year in which the distribution occurs. |
| (ii) | The lump sum determined under section 3.6(b)(2)(A)(i) shall then be converted into an equivalent payment stream of three installments by applying the first tier segment rate described in section 3.6(b)(2)(A)(i)(II). |
| (B) | Limitation on Final Installment Payments. If the amount of the final (i.e., third) installment payments made on behalf of all Participants who are entitled to such final installment payments in any Plan Year would trigger settlement accounting for such Plan Year under Statement of Financial Accounting Standards No. 88 (or any successor to such statement), the amount actually paid in such Plan Year shall be limited to avoid the application of settlement accounting in the manner described below. |
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| (i) | The aggregate excess amount for the Plan Year is equal to (I) minus (II) where— |
| (I) | is the total of all final (i.e., third) installment payments due to Participants under this section 3.6(b)(2) for the Plan Year; and | ||
| (II) | is the total amount of all final (i.e., third) installment payments that could be made for such Plan Year without triggering settlement accounting for the Plan Year. |
| (ii) | The aggregate excess amount for the Plan Year (as determined under section 3.6(b)(2)(B)(i)) shall be allocated among the Participants who are otherwise entitled to their final installment payments in the Plan Year in proportion to the amount of each individual’s final installment payment. |
| (iii) | The installment payment actually made to each such Participant for the Plan Year shall equal the difference between (I) and (II) where— |
| (I) | is the installment payment the Participant would otherwise be entitled to for the Plan Year without regard to this section 3.6(b)(2)(B); and | ||
| (II) | is the Participant’s proportionate share of the aggregate excess amount determined under section 3.6(b)(2)(B)(ii). |
| (iv) | Each affected Participant will then receive an additional payment during the next following Plan Year equal to the amount by which his or her third installment payment was reduced under section 3.6(b)(2)(B)(iii), provided such payment would not itself trigger settlement accounting for such Plan Year under Statement of Financial Accounting Standards No. 88 (or any successor to such statement). If such payment would trigger settlement accounting, the Committee will continue to apply the procedures described in this section 3.6(b)(2)(B) until the Participant has received a complete distribution of his or her final payment. |
| (C) | Electing an Optional Form. An election of the optional form of payment described in this section 3.6(b)(2) must be made by the Participant at a time and in a manner prescribed by the Committee, but not later than June 30, 2008. | ||
| (D) | Death of the Participant after the Benefit Commencement Date. If a Participant who has elected the optional form of payment described in this section 3.6(b)(2) dies after the benefit commencement date specified in section 3.2(c), 3.3(c), or 3.4(c) (as applicable), but before receiving all |
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| three installments, the remaining installments shall be paid to the Participant’s Beneficiary at the same time as such installments would have been paid to the Participant. |
| (a) | Eligibility. If a Participant under this Article 3 dies before his or her benefit commencement date, but after attaining age 55 or completing five or more Years of Vesting Service as a Participant under this Article 3, the Participant’s surviving spouse shall be entitled to the preretirement death benefit determined under this section 3.7. (If a Participant dies before meeting the eligibility requirements described above, or if the Participant does not have a surviving spouse as of the benefit commencement date determined under this section, no benefits will be payable under this section 3.7.) | |
| (b) | Net Executive Restoration Benefit. A surviving spouse who becomes entitled to a benefit under section 3.7(a) shall receive a preretirement death benefit attributable to the Participant’s Net Executive Restoration Benefit. The amount of such benefit shall be determined under subsection (b)(1). In addition, this benefit shall commence on the date determined under subsection (b)(2) and shall be paid in the form described in subsection (b)(3). |
| (1) | Benefit Amount. The preretirement death benefit attributable to the Participant’s Net Executive Restoration Benefit shall be a monthly benefit that is determined as follows: |
| (A) | In the case of a Participant who dies after reaching age 55, the surviving spouse shall receive a Single Life Annuity having monthly payments equal to the survivor portion of the Joint and 50 Percent Survivor Annuity that would have become payable to the Participant as a Net Executive Restoration Benefit under this Article 3 had he or she incurred a Separation from Service on the day before his or her death and commenced a benefit as of the date determined under section 3.2(c) or 3.3(c) (as applicable) in the form of a Joint and 50 Percent Survivor Annuity with the Participant’s spouse as his or her designated Beneficiary. | ||
| (B) | In the case of a Participant who dies before reaching age 55, the surviving spouse shall receive a Single Life Annuity having monthly payments equal to the survivor portion of the Joint and 50 Percent Survivor Annuity that would have become payable to the Participant as a Net Executive Restoration Benefit under this Article 3 had he or she incurred a Separation from Service on the date of his or her death, survived to the first day of the month next following the month in which the Participant would have attained age 55, and commenced a benefit as of such date in the form of a Joint and 50 Percent Survivor Annuity with the Participant’s spouse as his or her designated Beneficiary. |
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| (2) | Benefit Commencement Date. A preretirement death benefit that becomes payable under this section 3.7(b) shall commence on the first day of the month next following the later of— |
| (A) | the date of the Participant’s death; or | ||
| (B) | the date the Participant would have reached age 55. |
| (3) | Form of Payment. Except as provided in section 10.3, a preretirement death benefit under this section 3.7(b) shall be paid to the Participant’s surviving spouse in the form of a Single Life Annuity. |
| (c) | Net Executive SERP Benefit. A surviving spouse who becomes entitled to a benefit under section 3.7(a) shall receive a preretirement death benefit attributable to the Participant’s Net Executive SERP Benefit. The amount of such benefit shall be determined under subsection (c)(1). In addition, this benefit shall commence on the date determined under subsection (c)(2) and shall be paid in the form described in subsection (c)(3). |
| (1) | Benefit Amount. The preretirement death benefit attributable to the Participant’s Net Executive SERP Benefit shall be a monthly benefit that is determined as follows. |
| (A) | Death on or after Age 55. If a vested Participant dies before the commencement date of his or her Net Executive SERP Benefit, but on or after attaining age 55, the Participant’s surviving spouse shall be entitled to a Single Life Annuity with monthly payments equal to (i) reduced by (ii) where— |
| (i) | is 75 percent of the Gross Executive SERP Benefit accrued by the Participant as of the date of his or her death (with no reductions for early commencement)— |
| (I) | assuming the Participant had at least 15 Years of Benefit Service under section 2.22(a); | ||
| (II) | using the Participant’s actual Years of Benefit Service as of his or her date of death under section 2.22(b); and | ||
| (III) | replacing the offset for Social Security Benefits with an offset for the combined family Social Security benefit; and |
| (ii) | is the sum of— |
| (I) | the survivor portion of the amount that would have become payable to the Participant under the Qualified Pension Plan, assuming the Participant incurred a Separation from Service on |
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| the day before his or her death, and commenced a benefit under such plan as of the first day of the month next following the month of the Participant’s death in the form of a Joint and 50 Percent Survivor Annuity with the Participant’s spouse as his or her designated Beneficiary; and |
| (II) | the amount that would become payable to the Participant’s spouse under section 3.7(b) as of the first day of the month next following the month of the Participant’s death. |
| (B) | Death before Age 55. If a vested Participant dies before attaining age 55, the Participant’s surviving spouse shall be entitled to a Single Life Annuity with monthly payments equal to (i) reduced by (ii) where— |
| (i) | is the amount determined under section 3.7(c)(1)(A)(i) above as of the date of the Participant’s death; and | ||
| (ii) | is the sum of— |
| (I) | the survivor portion of the amount that would have become payable to the Participant under the Qualified Pension Plan, assuming the Participant incurred a Separation from Service on the day of his or her death, survived to the first day of the month next following the month in which the Participant would have attained age 55, and commenced a benefit as of such date in the form of a Joint and 50 Percent Survivor Annuity with the Participant’s spouse as his or her designated Beneficiary; and | ||
| (II) | the amount that would become payable to the Participant’s spouse under section 3.7(b) as of the first day of the month next following the month in which the Participant attains age 55. |
| (2) | Benefit Commencement Date. |
| (A) | Death on or after Age 55. A preretirement death benefit payable on behalf of a Participant described in section 3.7(c)(1)(A) shall commence as of the first day of the month next following the month of the Participant’s death. | ||
| (B) | Death before Age 55. A preretirement death benefit that becomes payable on behalf of a Participant under section 3.7(c)(1)(B) shall commence as of the first day of the month next following the month in which the Participant would have attained age 55. |
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| (3) | Form of Payment. |
| (A) | General Rule. Except as provided in sections 3.7(c)(3)(B) and 10.3, a preretirement death benefit under this section 3.7(c) shall be paid to the Participant’s surviving spouse in the form of a Single Life Annuity. | ||
| (B) | Installments. If a Participant made a timely election under section 3.6(b)(2)(C) to receive his or her Net Executive SERP benefit in the form of three equal installments, the preretirement death benefit attributable to the Net Executive SERP benefit under section 3.7(c) shall be paid to the Participant’s surviving spouse in the form of three equal installments (calculated in the manner described in section 3.6(b)(2)(A), but with the first installment to be paid as soon as practicable following the Participant’s death, and no later than the last day of the Plan Year in which the Participant died (or the 15 th day of the third calendar month following date of the Participant’s death, if later). The second installment shall be paid in January of the year following payment of the first installment, and the third installment shall be paid in January of the year following payment of the second installment). |
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| (a) | Eligibility. Each Employee who was a Participant with respect to the DB Restoration Benefit on December 31, 2007 shall continue to be Participant under this Article 4 on January 1, 2008. Each other Employee shall be eligible to become a Participant with respect to the DB Restoration Benefit described in this Article 4 if the Employee is— |
| (1) | a participant under the Qualified Pension Plan; and | ||
| (2) | determined by the Committee to be among a select group of management or highly compensated employees. |
| However, notwithstanding any provision in this Plan to the contrary, any Employee who is a Participant with respect to the Executive Benefit described in Article 3 shall not be a Participant with respect to the DB Restoration Benefit described in this Article 4. |
| (b) | Date of Participation. Each Employee who is eligible to participate under subsection (a) shall become a Participant under this Article 4 as of the first day of the month next following the month in which his or her accrued benefit under the Qualified Pension Plan becomes limited by Code section 401(a)(17) and/or Code section 415. | |
| (c) | Duration of Participation. An individual who becomes a Participant under this section 4.1 shall continue as an active Participant under this Article 4 until the earlier of the date on which he or she— |
| (1) | is determined by the Committee as no longer meeting the requirements of section 4,1(a); or | ||
| (2) | incurs a Separation from Service. |
| When active participation ends under subsection (c)(1) or (c)(2), the individual will continue as an inactive Participant with respect to the DB Restoration Benefit until he or she has received a complete distribution of any benefits earned under this Article 4 (or forfeits any such benefits by incurring a Separation from Service before meeting the eligibility requirements for a deferred vested retirement benefit under section 4.4(a)). |
| (a) | Eligibility. A Participant under this Article 4 who incurs a Separation from Service after reaching age 65 shall be entitled to a normal retirement benefit under this section 4.2. This normal retirement benefit shall be calculated as a Single Life Annuity commencing on the date specified in section 4.2(c)(1), but shall be paid in the form determined under section 4.5. |
26
| (b) | Amount. A Participant who is eligible for a normal retirement benefit under section 4.2(a) shall be entitled to a monthly benefit equal to the difference between— |
| (1) | the monthly benefit to which the Participant would be entitled to under the Qualified Pension Plan commencing as of the first day of the month next following the month in which the Participant incurs a Separation from Service, but calculated without regard to the compensation and benefit limits in effect under the Qualified Pension Plan pursuant to Code sections 401(a)(17) and 415; and | ||
| (2) | the monthly normal retirement benefit payable to the Participant under the Qualified Pension Plan commencing as of the first day of the month next following the month in which the Participant incurs a Separation from Service. |
| (c) | Benefit Commencement Date. |
| (1) | In General. Except as provided in section 4.2(c)(2), payment of benefits under this section 4.2 shall begin as of the first day of the month following the date on which the Participant incurs a Separation from Service. | ||
| (2) | Delayed Commencement for Key Employees. If the Participant is a Key Employee upon his or her Separation from Service, payment of the DB Restoration Benefit shall commence as of the first day of the month next following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. However, the first benefit payment will include the payments (with no adjustment for interest) the Participant would have received had his or her benefit commencement date been the date determined under section 4.2(c)(1). |
| (a) | Eligibility. A Participant under this Article 4 who incurs a Separation from Service after reaching age 55, but before meeting the requirements for a normal retirement benefit under section 4.2(a), shall be entitled to an early retirement benefit under this section 4.3. This early benefit shall be calculated as a Single Life Annuity commencing on the date specified in section 4.3(c)(1), but shall be paid in the form determined under section 4.5. | |
| (b) | Amount. The benefit payable to a Participant under this section 4.3 shall equal the normal retirement benefit accrued by the Participant under section 4.2(b) as of the date of his or her Separation from Service, reduced by 0.3 percent of such amount for each month by which the benefit commencement date described in section 4.3(c)(1) precedes the Participant’s Normal Retirement Date. |
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| (c) | Benefit Commencement Date. |
| (1) | In General. Except as otherwise provided in section 4.3(c)(2) below, payment of an early retirement benefit under this section 4.3 shall commence as of the date stated below: |
| (A) | Before 2009. For a Participant who incurs a Separation from Service before January 1, 2009, and who also elects to commence his or her benefit under the Qualified Pension Plan before such date, payment of benefits under this section 4.3 shall commence as of the same date on which the Participant’s benefit begins under the Qualified Pension Plan. |
| (B) | After 2008. For a Participant who is not described in section 4.3(c)(1)(A), payment of early retirement benefits under this section 4.3 shall commence as of the first day of the month next following the date on which the Participant incurs a Separation from Service (or as of January 1, 2009, if earlier). |
| (2) | Delayed Commencement for Key Employees. If the Participant is a Key Employee upon his or her Separation from Service, and such Participant’s benefit commencement date under section 4.3(c)(1) would otherwise occur on or after January 1, 2009, payment of the DB Restoration Benefit shall commence as of the first day of the month next following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. However, the first benefit payment will include the payments (with no adjustment for interest) the Participant would have received had his or her benefit commencement date been the date determined under section 4.3(c)(1)(B). |
| (a) | Eligibility. A Participant under this Article 4 who incurs a Separation from Service before becoming eligible for an early retirement benefit under section 4.3, but after completing five or more Years of Vesting Service, shall be entitled to a deferred vested retirement benefit under this section 4.4. This deferred vested retirement benefit shall be calculated as a Single Life Annuity commencing on the date specified in section 4.4(c)(1), but shall be paid in the form determined under section 4.5. | |
| (b) | Amount. The benefit payable to a Participant under this section 4.4 shall equal the normal retirement benefit accrued by the Participant under section 4.2(b) as of the date of his or her Separation from Service, reduced by 0.3 percent of such amount for each month by which the benefit commencement date described in section 4.4(c)(1) precedes the Participant’s Normal Retirement Date. |
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| (c) | Benefit Commencement Date. |
| (1) | In General. Except as otherwise provided in section 4.4(c)(2) below, payment of a deferred vested retirement benefit under this section 4.4 shall commence as of the date stated below: |
| (A) | Before 2009. For a Participant who incurs a Separation from Service before January 1, 2009, and who also elects to commence his or her benefit under the Qualified Pension Plan before such date, payment of benefits under this section 4.4 shall commence as of the same date on which the Participant’s benefit begins under the Qualified Pension Plan. | ||
| (B) | After 2008. For a Participant who is not described in section 4.4(c)(1)(A), payment of benefits under this section 4.4 shall commence as of the first day of the month next following the date on which the Participant reaches age 55 (or as of January 1, 2009, if later). |
| (2) | Delayed Commencement for Key Employees. If the Participant is a Key Employee upon his or her Separation from Service, and such Participant’s benefit commencement date under section 4.4(c)(1) would otherwise occur on or after January 1, 2009, payment of the DB Restoration Benefit shall commence as of the first day of the month next following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. However, the first benefit payment will include the payments (with no adjustment for interest) the Participant would have received had his or her benefit commencement date been the date determined under section 4.4(c)(1)(B). |
| (a) | Before 2009. If the Participant’s benefit commencement date under this Article 4 is before January 1, 2009, and the Participant elects to commence his or her benefit under the Qualified Pension Plan before such date, the Participant’s DB Restoration Benefit shall be paid in the same annuity form in effect for the Participant under the Qualified Pension Plan. Any annuity benefit payable under this subsection (a) shall be the Actuarial Equivalent of the Single Life Annuity calculated under section 4.2(b), 4.3(b), or 4.4(b) (as applicable). | |
| (b) | After 2008. Except as provided in section 10.3, if a Participant’s benefit commencement date under this Article 4 is after December 31, 2008, the benefit shall be distributed to the Participant as follows: |
| (1) | Normal Form of Payment. Unless a Participant elects an optional form under subsection (b)(2), the DB Restoration Benefit shall be paid in the form of a Single Life Annuity. | ||
| (2) | Optional Forms of Payment. In lieu of the Single Life Annuity described in subsection (b)(1), a Participant may elect instead, at any time before his or her |
29
| benefit commencement date and in a manner specified by the Committee, to receive his or her DB Restoration Benefit in any one of the following forms of payment (each of which shall be the Actuarial Equivalent of the Single Life Annuity): |
| (A) | Joint and 50 Percent Survivor Annuity; | ||
| (B) | Joint and 75 Percent Survivor Annuity; | ||
| (C) | Joint and 100 Percent Survivor Annuity; | ||
| (D) | Five-Year Certain and Life Annuity; | ||
| (E) | 10-Year Certain and Life Annuity; or | ||
| (F) | Level Income Annuity. |
| (a) | Eligibility. If a Participant under this Article 4 dies before his or her benefit commencement date, but after attaining age 55 or completing five or more Years of Vesting Service, the Participant’s surviving spouse shall be entitled to the preretirement death benefit determined under this section 4.6. No preretirement death benefit shall be payable under this Article 4 on behalf of a Participant who— |
| (1) | is not married at the time of his or her death; or | ||
| (2) | is married at the time of his or her death, but had not either attained age 55 or completed five or more Years of Vesting Service. |
| (b) | Amount. A surviving spouse who becomes eligible for a preretirement death benefit under section 4.6(a) shall be entitled to a monthly benefit equal to the difference between— |
| (1) | the preretirement death benefit to which the spouse would be entitled under the Qualified Pension Plan commencing as of the date specified under section 4.6(c), but calculated without regard to the compensation and benefit limits in effect under the Qualified Pension Plan pursuant to Code sections 401(a)(17) and 415; and | ||
| (2) | the preretirement death benefit that actually would be payable to the spouse under the Qualified Pension Plan if such benefit were to commence as of the date specified under subsection (c) below. |
| (c) | Benefit Commencement Date. A preretirement death benefit that becomes payable under this section 4.6 shall commence on the first day of the month following the later of— |
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| (1) | the date of the Participant’s death; or | ||
| (2) | the date the Participant would have reached age 55. |
| (d) | Form of Payment. Except as provided in section 10.3, a preretirement death benefit under this section 4.6 shall be paid to the Participant’s surviving spouse in the form of a Single Life Annuity. |
31
| (a) | Eligibility. Each Employee who was a Participant with respect to the “Excess ESSOP Benefit” (as defined under the Plan as in effect before the effective date of this Plan restatement) on December 31, 2007 shall continue to be Participant under this Article 5 on January 1, 2008. Each other Employee shall be eligible to become a Participant with respect to the DC Restoration Account described in this Article 5 if the Employee is— |
| (1) | a participant under the 401(k) Plan and/or Investment Plan; and | ||
| (2) | determined by the Committee to be among a select group of management or highly compensated employees. |
| (b) | Date of Participation. Each Employee who is eligible to participate under subsection (a) shall become a Participant under this Article 5 as of the first day of the month next following the month in which his or her benefits under the 401(k) Plan and/or Investment Retirement Plan become limited by Code section 401(a)(17) and/or Code section 415. | |
| (c) | Duration of Participation. An individual who becomes a Participant under this section 5.1 shall continue as an active Participant under this Article 5 until the earlier of the date on which he or she— |
| (1) | is determined by the Committee as no longer meeting the requirements of section 5.1(a); or | ||
| (2) | incurs a Separation from Service. |
| When active participation ends under subsection (c)(1) or (c)(2), the individual will continue as an inactive Participant with respect to the DC Restoration Account until he or she has received a complete distribution of all vested benefits earned under this Article 5. |
| (a) | 4 01(k) Plan Restoration Benefit. For each Plan Year, the Company shall credit to the 401(k) Plan Restoration Account of each Participant an amount equal to: |
| (1) | the portion of the Participant’s Eligible Compensation for the Plan Year that exceeds the limit in effect for such Plan Year under Code section 401(a)(17); multiplied by | ||
| (2) | the matching contribution percentage that would have applied to the Participant under the 401(k) Plan for such Plan Year assuming that he or she had been contributing at a rate to qualify for the maximum matching contribution percentage under the 401(k) Plan. |
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| (b) | Investment Plan Restoration Benefit. For each Plan Year, the Company shall credit to the Investment Plan Restoration Account of each Participant who is also an eligible participant under the Investment Plan during the same Plan Year an amount equal to the difference between— |
| (1) | the annual contribution to which the Participant would be entitled to under the Investment Plan for such Plan Year, calculated without regard to the compensation and benefit limits in effect pursuant to Code sections 401(a)(17) and 415; and | ||
| (2) | the annual contribution actually allocated to the Participant’s account under the Investment Plan for such Plan Year. |
| However, notwithstanding the above, a Participant shall be entitled to an allocation under this section 5.2(b) for a Plan Year only if (i) he or she is actively employed on the last day of the Plan Year or (ii) incurs a Separation from Service before the last day of the Plan Year on account of death, disability, or termination of employment after reaching age 55. |
| (c) | Timing. Contributions under this section 5.2 shall be credited to each Participant’s DC Restoration Account at the time or times determined by the Committee within its sole and absolute discretion, but in no event shall contributions for a Plan Year be allocated to a Participant’s DC Restoration Account later than March 1 of the next following Plan Year (or as soon as administratively practicable after such date). |
| (a) | 4 01(k) Plan Restoration Account. |
| (1) | Before 2009. Prior to January 1, 2009, a Participant’s 401(k) Plan Restoration Account shall be deemed to be invested at all times in Company Stock. |
| (A) | Company Allocations. Whenever an allocation is made to the Participant’s 401(k) Plan Restoration Account under section 5.2, such account shall be credited with a number of phantom shares of Company Stock equal to— |
| (i) | the amount of such Company allocation; divided by | ||
| (ii) | the closing price of the Company Stock on the date of such allocation. |
| (B) | Cash Dividends. Whenever the Company pays a cash dividend with respect to Company Stock, the Company will credit an additional number |
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| of phantom shares of Company Stock to the Participant’s 401(k) Plan Restoration Account equal to— |
| (i) | the number of phantom shares of Company Stock credited to such account as of the date of record for such dividend; multiplied by | ||
| (ii) | the per share cash dividend amount; divided by | ||
| (iii) | the closing price of the Company Stock on the dividend payment date. |
| (C) | Stock Dividends. Whenever the Company pays a stock dividend, the Company will credit an additional number of phantom shares of Company Stock to the Participant’s 401(k) Plan Restoration Account equal to— |
| (i) | the number of phantom shares of Company Stock credited to such account as of the date of record for such dividend; multiplied by | ||
| (ii) | the per share stock dividend rate. |
| (2) | After 2008. Except as otherwise provided in subsection (c) below: |
| (A) | All allocations made to a Participant’s 401(k) Plan Restoration Account under section 5.2 on and after January 1, 2009 shall be deemed to be invested in the Target Date Retirement Fund; | ||
| (B) | Effective February 19, 2009, 50 percent of the portion of the Participant’s 401(k) Plan Restoration Account that is deemed to be invested in phantom shares of Company Stock (as determined on February 18, 2009) shall be transferred from such deemed investment into a deemed investment in the Target Date Retirement Fund; and | ||
| (C) | Effective May 21, 2009, the remaining portion of the Participant’s 401(k) Plan Restoration Account that is deemed to be invested in phantom shares of Company Stock (as determined on May 20, 2009) shall be transferred from such deemed investment into a deemed investment in the Target Date Retirement Fund. |
| (b) | Investment Plan Account. Except as provided in subsection (c) below, 75 percent of all amounts allocated to the Investment Plan Restoration Account shall be deemed to be invested in the Target Date Retirement Fund and 25 percent of all such amounts shall be deemed to be invested in the Stable Value Fund. | |
| (c) | Investment Transfers. |
| (1) | Active Participants. A Participant who continues in active employment after reaching age 55 may, one time per Plan Year, transfer all or any portion of his or |
34
| her DC Restoration Account that is deemed to be invested in the Target Date Retirement Fund to the Stable Value Fund. Any such election shall be made at a time, and in a manner, prescribed by the Committee. |
| (2) | Former Participants. A Participant who incurs a Separation from Service before reaching age 65, and who has not yet received a complete distribution of his or her DC Restoration Account, may one time per Plan Year, transfer all or any portion of his or her DC Restoration Account that is deemed to be invested in the Target Date Retirement Fund to the Stable Value Fund. |
| (a) | 4 01(k) Plan Restoration Account. A Participant shall at all times have a fully vested interest in his or her 401(k) Plan Restoration Account. | |
| (b) | Investment Plan Restoration Account. A Participant will become fully vested in his or her Investment Plan Restoration Account upon the earlier of— |
| (1) | completing three Years of Vesting Service; or | ||
| (2) | attaining age 55 while actively employed by the Company or an Affiliate. |
| A Participant who incurs a Separation from Service before reaching age 55 or completing three Years of Vesting Service will forfeit all amounts accumulated in his or her Investment Plan Restoration Account. |
| (a) | Time of Payment. The payment of vested benefits under this Article 5 shall commence as soon as administratively practicable following the first day of the month next following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. In no event, however, shall payment commence later than the last day of the Plan Year in which such six-month anniversary occurs (or the 15 th day of the third calendar month following such six-month anniversary, if later). | |
| (b) | Form of Payment. Except as otherwise provided in section 10.3, the Participant’s DC Restoration Account shall be distributed as of the benefit payment date determined under section 5.5(a) in the form of three installments, with— |
| (1) | the first installment occurring on the benefit payment date determined under section 5.5(a) above, and comprised of a cash payment equal to one-third of the amount credited to the Participant’s DC Restoration Account as of such payment date; | ||
| (2) | the second installment occurring in January of the Plan Year next following the Plan Year in which the first installment is paid, and comprised of a cash payment equal to 50 percent of the amount credited to the Participant’s DC Restoration Account as of such payment date; and |
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| (3) | the third installment occurring in January of the Plan Year next following the Plan Year in which the second installment is paid, and comprised of a cash payment equal to the balance remaining in the Participant’s DC Restoration Account as of such payment date. |
| During the installment distribution period described under this section 5.5(b), the Participant’s remaining DC Restoration Account will continue to be adjusted for gains and losses under section 5.3 until such account has been completely distributed. |
| (a) | Death Before the Benefit Commencement Date. If a Participant dies after having received one or more installment payments under section 5.5, any installment that remains unpaid as of the date of the Participant’s death shall be distributed to the Participant’s Beneficiary on the same date on which such installment payment would have been distributed to the Participant in accordance with section 5.5(b). | |
| (b) | Death After Benefit Commencement Date. If a Participant dies before his or her benefit commencement date (as determined under section 5.5), the vested balance of the Participant’s DC Restoration Account shall be distributed to the Participant’s Beneficiary in three installments, with— |
| (1) | the first installment occurring as soon as practicable following the Participant’s death, but no later than the last day of the Plan Year in which the Participant died (or the 15 th day of the third calendar month following date of the Participant’s death, if later), and comprised of a cash payment equal to one-third of the amount credited to the Participant’s DC Restoration Account; | ||
| (2) | the second installment occurring in January of the Plan Year next following the Plan Year in which the first installment is paid, and comprised of a cash payment equal to one-half of the amount credited to the Participant’s DC Restoration Account; and | ||
| (3) | the third installment occurring in January of the Plan Year next following the Plan Year in which the second installment is paid, and comprised of a cash payment equal to the balance remaining in the Participant’s DC Restoration Account. |
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| (a) | Eligibility. An Employee shall be eligible to become a Participant with respect to the DC SERP Benefit described in this Article 6 if he or she— |
| (1) | first becomes an officer of the Company on or after January 1, 2008; and | ||
| (2) | is determined by the Committee to be among a select group of management or highly compensated employees. |
| (b) | Date of Participation. Each Employee who is eligible to participate under subsection (a) shall become a Participant under this Article 6 as of the first day of the month next following the month in which he or she first meets the eligibility requirements described in section 6.1(a). | |
| (c) | Duration of Participation. An individual who becomes a Participant under this section 6.1 shall continue as an active Participant under this Article 6 (and be entitled to the benefits described in section 6.2 below) until the earlier of the date on which he or she— |
| (1) | is determined by the Committee as no longer meeting the requirements of subsection (a); or | ||
| (2) | incurs a Separation from Service. |
| When active participation ends under subsection (c)(1) or (c)(2), the individual will continue as an inactive Participant with respect to the DC SERP Benefit until he or she has received a complete distribution of any benefits earned under this Article 6 (or forfeits any such benefits under section 6.4). |
| (a) | Amount. For each Plan Year: |
| (1) | the Company shall credit 7 . 50 percent of each Participant’s Eligible Compensation for that Plan Year to his or her DC SERP Account; and | ||
| (2) | the Company shall provide the Participant with a number of Restricted Stock Units equal to (A) 2.50 percent of the Participant’s Eligible Compensation for that Plan Year, divided by (B) the closing price of the Company Stock as of the contribution date determined under subsection (b) below. |
| (b) | Timing. |
| (1) | The amount determined under section 6.2(a)(1) for any Plan Year shall be credited to the Participant’s DC SERP Account as of a date or dates selected by |
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| the Committee within its sole and absolute discretion, but in no event shall these amounts be credited later than March 1 of the next following Plan Year (or as soon as administratively practicable after such date). |
| (2) | The Restricted Stock Units determined under section 6.2(a)(2) for any Plan Year shall be issued to the Participant as of a date or dates selected by the Committee within its sole and absolute discretion, but in no event shall these Restricted Stock Units be issued later than March 1 of the next following Plan Year (or as soon as administratively practicable after such date). |
| (a) | DC SERP Account: A Participant’s DC SERP Account shall be adjusted for earnings as of each Valuation Date at a rate equal to 120 percent of the Federal long-term rate as determined under Code section 1274(d) for January of the Plan Year in which the Valuation Date occurs. | |
| (b) | Restricted Stock Units: Each Participant shall be entitled to the following with respect to his or her Restricted Stock Units: |
| (1) | Cash Dividends. Whenever the Company pays a cash dividend with respect to Company Stock, the Company will issue an additional number of Restricted Stock Units to a Participant under this Article 6 equal to— |
| (A) | the number of Restricted Stock Units held by the Participant as of the date of record for such dividend; multiplied by | ||
| (B) | the per share cash dividend amount; divided by | ||
| (C) | the closing price of the Company’s Stock on the dividend payment date. |
| (2) | Stock Dividends. Whenever the Company pays a stock dividend with respect to Company Stock, the Company will issue an additional number of Restricted Stock Units to a Participant under this Article 6 equal to— |
| (A) | the number of Restricted Stock Units held by the Participant as of the date of record for such dividend; multiplied by | ||
| (B) | the per share stock dividend rate. |
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| (a) | Time of Payment. The payment of vested benefits under this Article 6 shall commence as soon as administratively practicable following the first day of the month next following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. In no event, however, shall payment commence later than the last day of the Plan Year in which such six-month anniversary occurs (or the 15 th day of the third calendar month following such six-month anniversary, if later). | |
| (b) | Form of Payment. Except as otherwise provided in section 10.3, the Participant’s vested benefit under this Article 6 shall be distributed as of the benefit payment date determined under section 6.5(a) in the form of three installments, with— |
| (1) | the first installment occurring on the benefit payment date determined under section 6.5(a) above, and comprised of— |
| (A) | a cash payment equal to one-third of the amount credited to the Participant’s DC SERP Account as of such payment date; and | ||
| (B) | a number of shares of Company Stock equal to one-third of the number of the Participant’s Restricted Stock Units as of such payment date (rounded down to the nearest whole number with the any remaining fractional Restricted Stock Unit converted to, and distributed as, cash); |
| (2) | the second installment occurring in January of the Plan Year next following the Plan Year in which the first installment is paid, and comprised of— |
| (A) | a cash payment equal to one-half of the amount credited to the Participant’s DC SERP Account as of such payment date; and | ||
| (B) | a number of shares of Company Stock equal to one-half of the number of the Participant’s Restricted Stock Units as of such payment date (rounded down to the nearest whole number with the any remaining fractional Restricted Stock Unit converted to, and distributed as, cash); and |
| (3) | the third installment occurring in January of the Plan Year next following the Plan Year in which the second installment is paid, and comprised of – |
| (A) | a cash payment equal to the balance remaining in the Participant’s DC SERP Account as of such payment date; and | ||
| (B) | a number of shares of Company Stock equal to remaining number of the Participant’s Restricted Stock Units as of such payment date (rounded down to the nearest whole number with the any remaining fractional Restricted Stock Unit converted to, and distributed as, cash). |
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| During the installment distribution period described under this section 6.5(b), the Participant’s DC SERP Benefit will continue to be adjusted for gains and losses under section 6.3 until the entire benefit has been completely distributed. |
| (a) | Death Before the Benefit Commencement Date. If a Participant dies after having received one or more installment payments under section 6.5, any installment that remains unpaid as of the date of the Participant’s death shall be distributed to the Participant’s Beneficiary on the same date (and in the same manner) on which such installment payment would have been distributed to the Participant in accordance with section 6.5(b). | |
| (b) | Death After Benefit Commencement Date. If a Participant dies before his or her benefit commencement date (as determined under section 6.5), the Participant’s vested DC SERP Benefit shall be distributed to the Participant’s Beneficiary in three installments, with— |
| (1) | the first installment occurring as soon as administratively practicable following the Participant’s death, but no later than the last day of the Plan Year in which the Participant died (or the 15 th day of the third calendar month following date of the Participant’s death, if later), and comprised of— |
| (A) | a cash payment equal to one-third of the amount credited to the Participant’s DC SERP Account as of such payment date; and | ||
| (B) | a number of shares of Company Stock equal to one-third of the number of the Participant’s Restricted Stock Units as of such payment date (rounded down to the nearest whole number with the any remaining fractional Restricted Stock Unit converted to, and distributed as, cash); |
| (2) | the second installment occurring in January of the Plan Year following the Plan Year in which the first installment is paid, and comprised of— |
| (A) | a cash payment equal to one-half of the amount credited to the Participant’s DC SERP Account as of such payment date; and | ||
| (B) | a number of shares of Company Stock equal to one-half of the number of the Participant’s Restricted Stock Units as of such payment date (rounded down to the nearest whole number with the any remaining fractional Restricted Stock Unit converted to, and distributed as, cash); and |
| (3) | the third installment occurring in January of the Plan Year following the Plan Year in which the second installment is paid, and comprised of – |
| (A) | a cash payment equal to the balance remaining in the Participant’s DC SERP Account as of such payment date; and |
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| (B) | a number of shares of Company Stock equal to the remaining number of the Participant’s Restricted Stock Units as of such payment date (rounded down to the nearest whole number with the any remaining fractional Restricted Stock Unit converted to, and distributed as, cash). |
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| (a) | Eligibility. An Employee shall be eligible to become a Participant with respect to the Social Security bridge benefit described in this section 7.1 if he or she— |
| (1) | is determined by the Committee to be among a select group of management or highly compensated employees; and | ||
| (2) | has entered into a Participation Agreement requiring his or her immediate retirement from the Company and its Affiliates in exchange for the Social Security bridge benefit described below. |
| An individual who has met the eligibility requirements described in paragraphs (1) and (2) above shall become a Participant with respect to the Social Security bridge benefit described in this section 7.1 as of the first day of the month next following the month in which he or she incurred a Separation from Service. Such Participant shall continue as an inactive Participant under this Article 7 until he or she has received a complete distribution of all benefits to which he or she is entitled under his or her individual Participation Agreement. |
| (b) | Amount. The Social Security bridge benefit payable pursuant to a Participation Agreement shall be a monthly payment equal to the amount specified in the Participant’s Participation Agreement (but not to exceed the estimated monthly benefit the Participant would be entitled to under the Social Security Act commencing at age 62). | |
| (c) | Commencement. |
| (1) | In General. Except as otherwise provided in subsection (c)(2), the monthly Social Security bridge benefit described in this section 7.1 shall commence on the first day of the month next following the month in which the Participant incurred a Separation from Service. | ||
| (2) | Delayed Commencement for Key Employees. If the Participant is a Key Employee upon his or her Separation from Service, payment of the Social Security bridge benefit described in this section 7.1 shall commence as of the first day of the month next following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. However, the first benefit payment will include the payments (with no adjustment for interest) the Participant would have received had his or her benefit commencement date been the date determined under section 7.1(c)(1). |
| (d) | Duration. The payment of the monthly Social Security bridge benefit under this section 7.1 shall cease as of the first day of the month next following the earlier of— |
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| (1) | the month in which the Participant attains age 62; or | ||
| (2) | the month of the Participant’s death. |
| (a) | Eligibility. An Employee shall be eligible to become a Participant with respect to the Qualified Pension Plan enhancement described in this section 7.2 if he or she— |
| (1) | is an active participant under the Qualified Pension Plan; | ||
| (2) | would be entitled to an immediate normal or early retirement benefit under the Qualified Pension Plan upon his or her Separation from Service; | ||
| (3) | is determined by the Committee to be among a select group of management or highly compensated employees; and | ||
| (4) | has entered into a Participation Agreement requiring his or her immediate retirement from the Company and its Affiliates in exchange for the Qualified Pension Plan enhancement described below. |
| An individual who has met the eligibility requirements described in this subsection (a) shall become a Participant under this section 7.2 as of the first day of the month next following the month in which he or she incurred a Separation from Service. Such Participant shall continue as an inactive Participant under this Article 7 until he or she has received a complete distribution of all benefits provided for under his or her individual Participation Agreement. |
| (b) | Amount. |
| (1) | Executive Benefit Participants. The Qualified Pension Plan enhancement payable under a Participation Agreement on behalf of a Participant who is also entitled to an Executive Benefit under Article 3 shall equal (A) minus the sum of (B), (C), and (D) where: |
| (A) | is the Gross Executive SERP Benefit determined as of the Participant’s benefit commencement date under Article 3, but calculated— |
| (i) | assuming the Participant’s Years of Benefit Service are a stated number of years greater than his or her actual Years of Benefit Service (as specified in the individual Participation Agreement); and | ||
| (ii) | assuming the Participant’s age as of the date of his or her Separation from Service is a stated number of years older than his or her actual age (as specified in the individual Participation Agreement); and |
| (B) | is the Net Executive SERP Benefit actually payable to the Participant as of the benefit commencement date determined under Article 3 (and |
43
| calculated without regard to the additional Years of Benefit Service and years of age specified under section 7.2(b)(1)(A)); |
| (C) | is the Gross Executive Restoration Benefit determined as of the Participant’s benefit commencement date under Article 3 (and calculated without regard to the additional Years of Benefit Service and years of age specified under section 7.2(b)(1)(A)); | ||
| (D) | is the Participant’s Social Security Benefit (with such offset applied as of the later of the Participant’s benefit commencement date under Article 3 or the first day of the month next following the month in which the Participant reaches age 62). |
| (2) | DB Restoration Participants. The Qualified Pension Plan enhancement payable under a Participation Agreement on behalf of a Participant who is also entitled to a DB Restoration Benefit under Article 4 shall be calculated initially as a Single Life Annuity equal to (A) minus (B) where: |
| (A) | is the monthly benefit to which the Participant would be entitled under Article 4 as of the first day of the month next following the month in which the Participant incurs a Separation from Service , but calculated— |
| (i) | assuming the Years of Benefit Service used in the calculation of the amount described in section 4.2(b)(1) are a stated number of years greater than his or her actual Years of Benefit Service (as specified in the individual Participation Agreement); and |
| (ii) | assuming the Participant’s age as of the date of his or her Separation from Service that is used in calculating the reductions under section 4.3(b) or 4.4(b) (as applicable) is a stated number of years older than his or her actual age (as specified in the individual Participation Agreement); and |
| (B) | is the monthly benefit actually payable to the Participant under Article 4 as of the first day of the month next following the month in which the Participant incurs a Separation from Service (and calculated without regard to the additional Years of Benefit Service and years of age specified under section 7.2(b)(2)(A)). |
| (3) | Other Participants. The Qualified Pension Plan enhancement payable under a Participation Agreement on behalf of a Participant who is not entitled to a benefit under Article 3 or Article 4 shall be calculated initially as a Single Life Annuity equal to (A) minus (B) where: |
| (A) | is the monthly benefit to which the Participant would be entitled under the Qualified Pension Plan commencing as of the first day of the month next |
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| following the month in which the Participant incurs a Separation from Service, but calculated— |
| (i) | without regard to the compensation and benefit limits in effect under the Qualified Pension Plan pursuant to Code sections 401(a)(17) and 415; | ||
| (ii) | assuming the Participant’s Years of Benefit Service are a stated number of years greater than his or her actual Years of Benefit Service (as specified in the individual Participation Agreement); and | ||
| (iii) | assuming the Participant’s age as of the date of his or her Separation from Service is a stated number of years older than his or her actual age (as specified in the individual Participation Agreement); and |
| (B) | is the monthly benefit actually payable to the Participant under the Qualified Pension Plan as of the first day of the month next following the month in which the Participant incurs a Separation from Service (as limited by Code sections 401(a)(17) and 415 and calculated without regard to the additional Years of Benefit Service and years of age specified under section 7.2(b)(3)(A)). |
| (c) | Commencement. |
| (1) | Executive Benefit Participants. The Qualified Pension Plan enhancement payable to a Participant who is also entitled to an Executive Benefit under Article 3 shall be the Participant’s benefit commencement date as determined under Article 3. | ||
| (2) | DB Restoration Participants. The Qualified Pension Plan enhancement payable to a Participant who is also entitled to a DB Restoration Benefit under Article 4 shall be the Participant’s benefit commencement date as determined under Article 4. | ||
| (3) | Other Participants. |
| (A) | General Rule. Except as otherwise provided in subparagraph (c)(3)(B), the Qualified Pension Plan enhancement payable to a Participant who is not described in subsection (c)(1) or (c)(2) above shall commence on the first day of the month next following the month in which the Participant incurs a Separation from Service. | ||
| (B) | Delayed Commencement for Key Employees. If a Participant described in this subsection (c)(3) is a Key Employee upon his or her Separation from Service, payment of the Qualified Pension Plan enhancement described in this section 7.2 shall commence as of the first day of the month next |
45
| following the month in which the six-month anniversary of the Participant’s Separation from Service occurs. However, the first benefit payment will include the payments (with no adjustment for interest) the Participant would have received had his or her benefit commencement date been the date determined under section 7.2(c)(3)(A). |
| (d) | Form of Payment. |
| (1) | Executive Benefit Participant. The Qualified Pension Plan enhancement payable to a Participant who is also entitled to an Executive Benefit under Article 3 shall be distributed to the Participant in the same form (and with the same Beneficiary) as his or her Net Executive SERP Benefit. (If this Qualified Pension Plan enhancement is distributed in a form other than a Joint and 75 Percent Survivor Annuity, the amount payable shall be the Actuarial Equivalent of such Joint and 75 Percent Survivor Annuity, as determined under section 3.6(b).) | ||
| (2) | DB Restoration Participant. The Qualified Pension Plan enhancement payable to a Participant who is also entitled to a DB Restoration Benefit under Article 4 shall be distributed to the Participant in the same form (and with the same Beneficiary, as applicable) as his or her DB Restoration Benefit. (If this Qualified Pension Plan enhancement is distributed in a form other than a Single Life Annuity, the amount payable shall be the Actuarial Equivalent of the Single Life Annuity calculated under section 7.2(b)(2) above.) | ||
| (3) | Other Participants. In lieu of the Single Life Annuity determined under section 7.2(b)(3), a Participant who is not described in subsection (d)(1) or (d)(2) above may elect instead, at any time before his or her benefit commencement date and in a manner specified by the Committee, to receive his or her Qualified Pension Plan enhancement in any one of the following forms of payment (each of which shall be the Actuarial Equivalent of the Single Life Annuity): |
| (A) | Joint and 50 Percent Survivor Annuity; | ||
| (B) | Joint and 75 Percent Survivor Annuity; | ||
| (C) | Joint and 100 Percent Survivor Annuity; | ||
| (D) | Five-Year Certain and Life Annuity; | ||
| (E) | 10-Year Certain and Life Annuity; or | ||
| (F) | Level Income Annuity. |
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| (a) | General Creditors. The Plan constitutes a mere promise of the Company to make payments in accordance with the terms of the Plan. This Plan does not give any Participant or Beneficiary any interest, lien, or claim in or against any specific assets of the Company or any Affiliate. Each Participant and Beneficiary shall have only the rights of general, unsecured creditors of the Company and its Affiliates with respect to their rights under the Plan. | |
| (b) | Allocation Among Employers. The obligation to pay Plan benefits shall be the obligation of the Employers whose Employees are Participants entitled to such benefits. Except to the extent provided in subsection (c), each Employer shall provide the benefits described in the Plan to its Employees from its general assets. However, the Company may, in its sole discretion, allocate the total liability to pay benefits under the Plan among the Employers in such manner and amounts as it deems appropriate. | |
| (c) | Alternative Funding. The Company may, but shall not be required to, establish a grantor trust as a funding source for its obligations under the Plan. If such a trust is established, it shall constitute an unfunded arrangement for purposes of the Plan, and the Plan shall continue to be an unfunded plan maintained for the purpose of providing deferred compensation to a select group of management or highly compensated employees under ERISA. With respect to any Participant, the assets of any such trust shall remain subject to the claims of the creditors of that Participant’s Employer in the event of the Employer’s bankruptcy or insolvency. However, to the extent that funds placed in a trust and allocable to the benefits payable under the Plan are sufficient, the trust assets may be used to pay benefits under the Plan. If such trust assets are not sufficient to pay all benefits due under the Plan, then the appropriate Employer shall have the obligation, and the Participant or Beneficiary who is due such benefits shall look to such Employer to provide such benefits. |
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| (a) | To construe and interpret the Plan, to supply all omissions from, correct deficiencies in and resolve ambiguities in the language of the Plan, and to determine any question arising under the Plan or in connection with the administration or operation thereof; | |
| (b) | To decide all questions of eligibility; | |
| (c) | To determine the amount, manner, and time of payment of any benefits that may be payable to any person; | |
| (d) | With the advice of an actuary, from time to time to adopt, for purposes of the Plan, such actuarial and other tables as it may deem necessary or appropriate for the operation of the Plan; | |
| (e) | To obtain from individuals such information as shall be necessary for the proper administration of the Plan and, when appropriate, to furnish such information promptly to the persons entitled thereto; | |
| (f) | To prepare and distribute, in such manner as the Company determines to be appropriate, information explaining the Plan; | |
| (g) | To establish rules for the administration of the Plan; | |
| (h) | To maintain the necessary records, as determined by the Company in its sole discretion, of the administration of the Plan; | |
| (i) | To authorize all disbursements by the Employers pursuant to the Plan; | |
| (j) | To prepare and file, or respond to any governmental forms or documents; | |
| (k) | To designate Affiliates as Employers as described in Plan section 8.5 (to the extent authorized by the Board); | |
| (l) | To delegate to other individuals or entities from time to time the performance of any of its duties or responsibilities hereunder; | |
| (m) | To hire agents, accountants, actuaries, consultants and legal counsel to assist in operating and administering the Plan; and | |
| (n) | To exercise such other powers as are not inconsistent with the intent and purposes of this Plan. |
48
| (a) | Subcommittees. The Committee may appoint one or more subcommittees and delegate such of its power and duties as it deems desirable to any such subcommittee, in which case every reference made herein to the Committee shall be deemed to include the subcommittees as to matters within their jurisdiction. | |
| (b) | Specialists. The Committee may authorize one or more of their members or any agent to execute or deliver any instrument or instruments on their behalf, and may employ such counsel, auditors, and other specialists and such clerical, actuarial, and other services as they may require in carrying out the provisions of the Plan. |
49
| (a) | No lawsuit may be initiated by any person before fully pursuing the procedures set forth in this Plan section, including the appeal permitted under subsection (d).The right of a Participant, Beneficiary, alternate payee, or any other person entitled to claim a benefit under the Plan shall be determined by the Committee; provided, however, that the Committee may delegate its responsibility to any person. All persons entitled to claim a benefit under the Plan shall be referred to as a “Claimant” for purpose of this section 8.10. The term “Claimant” shall also include, where appropriate to the context, any person authorized to represent the Claimant under procedures established by the Committee. |
| (1) | The Claimant may file a claim for benefits by written notice to the Committee. | ||
| (2) | Any such claim shall be filed with the Committee no later than 18 months after the date that a transaction occurred, or should have occurred, with respect to a Claimant’s benefits under the Plan. The Committee in its sole discretion shall determine whether this limitation period has been exceeded. |
| (b) | If a claim for benefits is wholly or partially denied, the Committee shall, within a reasonable period of time, but no later than 90 days after receipt of the claim, notify the Claimant of the denial of benefits. In the case of a claim, if special circumstances justify extending the period up to an additional 90 days, the Claimant shall be given written notice of this extension within the initial 90-day period, and such notice shall set forth the special circumstances and the date on which a decision is expected. | |
| (c) | A notice of denial: |
| (1) | shall be written in a manner calculated to be understood by the Claimant; and | ||
| (2) | shall contain: |
| (A) | the specific reasons for denial of the claim; | ||
| (B) | specific reference to the Plan provisions on which the denial is based; |
50
| (C) | a description of any additional material or information necessary for the Claimant to perfect the claim, along with an explanation as to why such material or information is necessary; and | ||
| (D) | an explanation of the Plan’s claim review procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under ERISA section 502(a) following an adverse determination on review. |
| (d) | Within 60 days of the receipt by the Claimant of the written denial of his or her claim or, if the claim has not been granted, within a reasonable period of time (which shall not be less than the applicable time period specified in subsection (b)), the Claimant may file a written request with the Committee that it conduct a full review of the denial of the claim. In connection with the Claimant’s appeal, upon request, the Claimant may review and obtain copies of all documents, records and other information relevant to the Claimant’s claim for benefits, but not including any document, record or information that is subject to any attorney-client or work-product privilege or whose disclosure would violate the privacy rights or expectations of any person other than the Claimant. The Claimant may submit issues and comments in writing and may submit written comments, documents, records, and other information relating to the claim for benefits. All comments, documents, records, and other information submitted by the Claimant shall be taken into account in the appeal without regard to whether such information was submitted or considered in the initial benefit determination. | |
| (e) | The Committee shall deliver to the Claimant a written decision on the claim promptly, but no later than 60 days after the receipt of the Claimant’s request for such review, unless special circumstances exist that justify extending this period up to an additional 60 days. If the period is extended, the Claimant shall be given written notice of this extension during the initial 60-day period and such notice shall set forth the special circumstances and the date a decision is expected. The decision on review of the denial of the claim shall: |
| (1) | be written in a manner calculated to be understood by the Claimant; | ||
| (2) | include specific reasons for the decision; | ||
| (3) | contain specific references to the Plan provisions on which the decision is based; | ||
| (4) | contain a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and other information relevant to the Claimant’s claim for benefits; and | ||
| (5) | contain a statement of the Claimant’s right to bring a civil action under ERISA section 502(a) following an adverse determination on review. |
51
| (a) | The date the resolution to terminate and discontinue the Plan is adopted, or | |
| (b) | The date the resolution to terminate and discontinue the Plan is effective. |
52
| (a) | Conditions of Participation . By accepting such designation or continuing as a party to the Plan, each Employer acknowledges that: |
| (1) | It is bound by such terms and conditions relating to the Plan as the Company or the Committee may reasonably require; | ||
| (2) | It has authorized the Company and the Committee to act on its behalf with respect to Employer matters pertaining to the Plan; and | ||
| (3) | It shall cooperate fully with the Plan officials and their agents by providing such information and taking such other actions, as they deem appropriate for the efficient administration of the Plan. |
| (b) | Withdrawal by Affiliate. Subject to the concurrence of the Board or Committee, any Affiliate may withdraw from the Plan, and end its status as an Employer hereunder, by communicating in writing to the Committee its desire to withdraw. The withdrawal shall be effective as of the date agreed to by Board or Committee, as the case may be, and the Affiliate. Upon such withdrawal, the Plan shall not be terminated with respect to such Affiliate until all Plan benefits have been distributed to Participants affected by such termination in accordance with other provisions of this Plan. | |
| (c) | Termination by Company. The Company, acting through the Board or, if authorized by the Board, the Committee, reserves the right, in its sole discretion and at any time, to terminate the participation in this Plan of any Employer. Such termination shall be effective immediately upon the notice of such termination from the Company and the Employer being terminated, whichever occurs first, or such later effective date agreed to by the Company. Upon such termination, this Plan shall not be terminated with respect to such Affiliate until all Plan benefits have been distributed to Participants affected by such termination in accordance with other provisions of this Plan. |
53
| (a) | Cash-Out of Retirement Benefits. |
| (1) | If the Actuarial Equivalent lump sum value of the benefits a Participant is entitled to under Article 3, Article 4, Article 7, and all other “nonaccount balance plans” of the Company and its Affiliates does not exceed the Code section 402(g)(1)(B) limit as of a date certain, the Committee may, in its sole discretion, distribute all such benefits under Article 3, Article 4, and Article 7 to the Participant in a single lump sum payment if all of the Participant’s other nonaccount balance plan benefits are also paid in a single lump sum payment as of the same date. To the extent that a distribution is being made under this section 10.3(a)(1) on account of a Participant’s Separation from Service (for reasons other than the Participant’s death), and such Participant is a Key Employee upon his or her Separation from Service, the single lump sum payment described in this section 10.3(a)(1) shall not be paid before the end of the six-month period following the Participant’s Separation from Service. | ||
| (2) | If the benefits a Participant is entitled to under Article 5, Article 6, and all other “account balance plans” of the Company and its Affiliates does not exceed the Code section 402(g)(1)(B) limit as of a date certain, the Committee may, in its sole discretion, distribute all such benefits under Article 5 and Article 6 to the Participant in a single lump sum payment if all of the Participant’s other account balance plan benefits are also paid in a single lump sum payment as of the same date. To the extent that a distribution is being made under this section 10.3(a)(2) on account of a Participant’s Separation from Service (for reasons other than the |
54
| Participant’s death), and such Participant is a Key Employee upon his or her Separation from Service, the single lump sum payment described in this section 10.3(a)(2) shall not be paid before the end of the six-month period following the Participant’s Separation from Service. |
| (b) | Cash-Out of Pre-Retirement Death Benefits. If the Actuarial Equivalent lump sum value of all preretirement death benefits that become payable to a Participant’s surviving spouse under Article 3, Article 4, and all other “nonaccount balance plans” of the Company and all Affiliates does not exceed the Code section 402(g)(1)(B) limit as of a date certain, the Committee may, in its sole discretion, distribute to the surviving spouse in a single lump sum payment all preretirement death benefits to which he or she is entitled to under Article 3 and Article 4 if all of such surviving spouse’s other nonaccount balance plan benefits are also paid in a single lump sum payment as of the same date. | |
| (c) | Definitions. |
| (1) | For purposes of this section 10.3, a “nonaccount balance plan” is a plan that meets the requirements of Treasury Regulation section 1.409A-1(c)(2)(i)(C) and which must be aggregated with this Plan under this regulation. | ||
| (2) | For purposes of this section 10.3, an “account balance plan” is a plan that meets the requirements of Treasury Regulation section 1.409A-1(c)(2)(i)(A) and which must be aggregated with this Plan under this regulation. |
55
| (a) | Except as otherwise permitted by the Plan, no benefit payable at any time under the Plan shall be subject to the debts or liabilities of a Participant or his or her Beneficiary. Any attempt to alienate, sell, transfer, assign, pledge, or otherwise encumber any such benefit, whether presently or thereafter payable, shall be void. Except as provided in this Plan section, no benefit under the Plan shall be subject in any manner to attachment, garnishment, or encumbrance of any kind. | |
| (b) | Payment may be made from a Participant’s Plan benefits to an alternate payee pursuant to a domestic relations order. |
| (1) | The Committee shall establish reasonable written procedures for reviewing court orders pursuant to state domestic relations law (including a community property law), relating to child support, alimony payments, or marital property rights of a spouse, former spouse, child, or other dependent of a Participant and for notifying Participants and alternate payees of the receipt of such orders and of the Plan’s procedures for determining if the orders are domestic relations orders and for administering distributions under domestic relations orders. | ||
| (2) | Except as may otherwise be required by applicable law, such domestic relations orders may not require a retroactive transfer of all or part of a Participant’s Plan benefits. |
56
57
| Sonoco Products Company | ||||||||
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58
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ARTICLE I
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STATEMENT OF PURPOSE | 3 | ||||
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ARTICLE II
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DEFINITIONS | 4 – 5 | ||||
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ARTICLE III
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ELIGIBILTY AND PARTICIPATION | 6 | ||||
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ARTICLE IV
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DEFERRED COMPENSATION ELECTIONS | 7 – 8 | ||||
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ARTICLE V
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CREDITS TO DEFERRAL ACCOUNTS | 9 – 10 | ||||
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ARTICLE VI
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ADMINISTRATIVE COMMITTEE & CLAIMS | 11 – 12 | ||||
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ARTICLE VII
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AMENDMENT AND TERMINATION | 13 | ||||
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ARTICLE VIII
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MISCELLANEOUS | 14 – 15 | ||||
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ARTICLE IX
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CONSTRUCTION | 16 |
| 1. | “Company”: Sonoco Products Company, a South Carolina Corporation, and its corporate successors. | ||
| 2. | “Committee”: The Administrative Committee appointed by the Board of Directors of the Company to administer this plan. | ||
| 3. | “Director”: Any person who is serving on the Board of Directors and is not an employee of the Company or any of its subsidiaries. | ||
| 4. | “Participant”: A Director or former Director who has deferred fees hereunder and has a credit balance in his deferred compensation account. | ||
| 5. | “Separation from Service”: The date of termination of a Director’s active service with the Company as defined under code section 409A. | ||
| 6. | “Plan”: The Deferred Compensation Plan for Outside Directors of Sonoco Products Company as contained herein, and as may be amended from time to time hereafter, together with any election forms that the Committee requires a Participant to complete. | ||
| 7. | “Plan Year”: The period commencing January 1 and ending December 31. | ||
| 8. | “Stock Equivalent Account”: The account described in Article V. | ||
| 9. | “Interest Account”: The account described in Article V. | ||
| 10. | “Director’s Fees”: Retainer fees and meeting fees. |
| 11. | “Fixed Payment Period”: The period of years over which annual payments are made to a Participant following his Separation from Service or upon his death preceding his Separation from Service. |
| 1. | Any Director of the Company who is not also an employee of the Company is eligible to participate in the plan. | ||
| 2. | The Director may elect to defer receipt of all or a specified part of the compensation payable to the Director for serving on the Board of Directors or committees of the Board of Directors of the Company. | ||
| 3. | An eligible Director participates in the plan by irrevocably electing on an annual basis, in the manner specified herein, to defer future Director’s Fees earned for which the related services commence in the calendar year following the year in which the election is made. Participation commences upon the execution and delivery of a Deferred Compensation Agreement. Such Agreement must be executed (and must become irrevocable) in all cases on or before December 31 preceding the calendar year in which the services related to the Director’s Fees to be deferred commence. |
| 1. | A Director electing to defer payment of fees may elect deferral to be invested in the Interest Account and/or the Stock Equivalent Account. | ||
| 2. | Subject to such limitations as the Committee may impose, a Director electing to defer hereunder shall also elect at the same time as his deferral election, a Fixed Payment Period commencing six months following the Director’s Separation from Service over which the amount deferred under such election shall be paid to him in annual installments and a Fixed Payment Period (which may be a different period) over which the unpaid portion of the amount deferred shall be paid to his beneficiary or estate in annual installments in the event of his death before Separation from Service occurs. Finally, the Director may elect to have the unpaid portion of the amount deferred paid in a lump sum to his beneficiary or estate in the event of his death following a Separation of Service. | ||
| 3. | Any Fixed Payment Period Election to defer compensation shall be irrevocable and may not be changed or modified thereafter by a Participant or the Company. | ||
| 4. | The fact that a Director has made a particular election with respect to a deferral shall not preclude such Director from making different elections with respect to new elections to defer fees covering future period of service. | ||
| 5. | In the event of a Fixed Payment Period commencing due to a Separation from Service, the initial amount due shall be paid six months following Separation from Service. In the event of a Fixed Payment Period commencing due to a Participant’s death prior to a Separation from Service, the initial payment amount due shall be paid upon death (or on such later date permitted under the regulations to Code |
| Section 409A). The amount of any payment during a Fixed Payment Period shall equal the unpaid balance of the amount deferred (including any earnings thereon) immediately preceding the payment date divided by the number of annual payments remaining in the Fixed Payment Period (including the payment that is about to be made). | |||
| 6. | Upon consummation of a Change in Control that qualifies under 409A, all amounts credited to the Stock Equivalent Account and/or Interest Account (along with any amounts deferred but not yet credited to these accounts up to the date of payment), shall be paid in a lump sum payment to the Participant within 30 days following the Change in Control. |
| 1. | Deferred compensation shall be credited to the Stock Equivalent Account or the Interest Account of a Participant or a combination of these accounts, as the Participant may have elected, as follows: |
| a) | One fourth of the annual retainer fee shall be credited on the closing date for each of the Company’s fiscal quarters. | ||
| b) | The committee meeting fee shall be credited on the closing date for the Company’s fiscal quarter in which the Director attends the committee meeting. |
| 2. | The fees credited to a Stock Equivalent Account shall be converted on the closing date for each of the Company’s fiscal quarters into “Stock Equivalents” as though such fees were applied to the purchase of common stock of the Company as follows: |
| The Director’s Account shall be assigned Stock Equivalents which shall be the number of full and fractional (rounded to the nearest tenth) shares of the Company’s common stock that could be purchased, with the fees credited to the Director’s Account, at the closing price of such common stock as of the end of the fiscal quarter as quoted by the New York Stock Exchange. |
| 3. | As of the payment date for each dividend declared on the Company’s common stock, each Director’s dividend shall be determined by multiplying the cash dividend per share by the number of full and fractional Stock Equivalents in the Director’s Stock Equivalent Account on the dividend payment date, with the resulting dividend amount converted into stock equivalents as though such dividend amounts were applied to the purchase of common stock of the Company. |
| 4. | Six months following a Participant’s Separation from Service, the Participant will begin to receive payment(s) from the Stock Equivalent Account and/or Interest Account in accordance with the Participant’s elections. Subsequent installments, if any, shall be paid each January until the accounts have been paid in full. Payment(s) from the Stock Equivalent Account will be in the form of shares of common stock equal in number to the amount of Stock Equivalents credited to the eligible Director’s Stock Equivalent Account as of the date of payment divided by the number of installment payments remaining to be paid immediately before the payment date. Any remaining fractional share at the end of the payment cycle, will be rounded up and issued as a whole share. | ||
| 5. | Each month, the balance in the Interest Account will be credited with interest from the date the deferral is credited to the account until payment is complete, at a rate equal to the Merrill Lynch ten year high quality bond index for December 15 of each preceding year. |
| 1. | This plan shall be administered by the Governance Committee of the Board of Directors. | ||
| 2. | The construction and interpretation by the Committee of any provision of this plan shall be final and conclusive. | ||
| 3. | The administration of this plan is delegated to the Senior Vice President — Human Resources who is responsible for executive compensation and benefits, or at his election, to the Director, Compensation. | ||
| 4. | No member of the Committee shall be personally liable for any actions taken by the Committee unless the member’s action involves willful misconduct. | ||
| 5. | If any claim for benefits under the Plan is wholly or partially denied, the claimant shall be given notice in writing of such denial within a reasonable period of time (not to exceed 90 days after receipt of the claim or, if special circumstances require an extension of time, written notice of the extension shall be furnished to the claimant and an additional 90 days will be considered reasonable) setting forth the following information: (a) the specific reason or reasons for the denial; (b) specific reference to pertinent Plan provisions on which denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation that a full and fair review by the Committee of the decision denying the claim may be requested by the claimant or his authorized representative by filing with the Committee, within 60 days after such notice has been received, a written request for such review. |
| In the event that a claimant does choose to appeal, as described under (d) above, the claimant or his authorized representative may review pertinent documents and submit issues and comments in writing within the same 60-day period specified in subsection (d) above. Upon request (and free of charge), the Member/claimant shall be provided reasonable access to and copies of all documents, records, and other information relevant to his claim for benefits (as further described in DOL regulations, and as determined by the Committee, in its sole discretion), and shall also be informed of his right to bring suit under ERISA. | |||
| The decision of the Committee shall be made promptly, and not later than 60 days after the Committee’s receipt of the request for review, unless special circumstances require an extension of time for processing, in which case the claimant shall be so notified and a decision shall be rendered as soon as possible, but not later than 120 days after the receipt of the request for review. The claimant shall be given a copy of the decision promptly. The decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. |
| 1. | NON-ALIENATION OF BENEFITS. No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right or benefit under this Deferral shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefits. If the Participant or any beneficiary hereunder shall become bankrupt, or attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right hereunder, then such right or benefit shall, in the discretion of the Committee, cease and terminate, and in such event, the Committee may hold or apply the same or any part thereof for the benefit of the Participant or his beneficiary, spouse, children, or other dependents, or any of them in such manner and in such amounts and proportions as the Committee may deem proper. | ||
| 2. | NO TRUST CREATED. The obligations of the Company to make payments hereunder shall constitute a liability of the Company to a Participant. Such payments shall be made from the general funds of the Company, and the Company shall not be required to establish or maintain any special or separate fund, or purchase or acquire life insurance on a Participant’s life, or otherwise segregate assets to assure that payment shall be made, and neither a Participant, his estate nor Beneficiary shall have any interest in any particular asset of the Company by reason of its obligations hereunder. The Participant’s rights to deferred amounts will be the same as an unsecured general creditor of the Company, and all property and rights to property, including rights as a beneficiary of a life insurance contract purchased with deferred |
| amounts, and all income attributable to the deferred amounts and property will remain solely the property of the Company and will be subject to claims of general creditors of the company. Nothing contained in the Plan shall create or be construed as creating a trust of any kind or any other fiduciary relationship between the Company and a Participant or any other person. | |||
| 3. | The effective date of this plan is January 1, 1990. | ||
| 4. | The plan has been amended effective October 15, 2008, to comply with Section 409A of the Code and the regulations thereunder. |
| 1. | GOVERNING LAW. This Plan shall be construed and governed in accordance with the laws of the State of South Carolina. | ||
| 2. | GENDER. The masculine gender, where appearing in the plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. | ||
| 3. | HEADINGS, ETC. The cover page of this plan, the Table of Contents and all headings used in this plan are for the convenience of reference only and are not part of the substance of this plan. |
| ARTICLE I | 2 | |||||||
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| 1.1 |
Trust Fund
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2 | ||||||
| 1.2 |
Irrevocability
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2 | ||||||
| 1.3 |
Grantor Trust
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2 | ||||||
| 1.4 |
Separate and Apart
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2 | ||||||
| 1.5 |
Benefits Not Transferable
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2 | ||||||
| 1.6 |
Acceptance of Trust
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3 | ||||||
| 1.7 |
Additional Obligations
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3 | ||||||
| 1.8 |
Definitions
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3 | ||||||
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| ARTICLE II | 4 | |||||||
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| 2.1 |
Initial Contributions
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4 | ||||||
| 2.2 |
Additional Contributions
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4 | ||||||
| 2.3 |
Credit Contributions
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5 | ||||||
| 2.4 |
Substitution of Assets
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5 | ||||||
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| ARTICLE III | 5 | |||||||
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| 3.1 |
Benefit Entitlement
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5 | ||||||
| 3.2 |
Participant Information
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5 | ||||||
| 3.3 |
Company Responsibility
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6 | ||||||
| 3.4 |
Payment Due To Taxable Income
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6 | ||||||
| 3.5 |
Separate Accounting
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6 | ||||||
| 3.6 |
Company Reimbursement
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6 | ||||||
| 3.7 |
Initiation of Payment
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7 | ||||||
| 3.8 |
Following a Change of Control
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7 | ||||||
| 3.9 |
Return of Assets
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8 | ||||||
| 3.10 |
Excess Asset Determination
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9 | ||||||
| 3.11 |
Letter of Credit Funding on a Change of Control or Threatened Change of Control
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9 | ||||||
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| ARTICLE IV | 10 | |||||||
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| 4.1 |
Powers
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10 | ||||||
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| ARTICLE V | 11 | |||||||
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| 5.1 |
Purchase of Contracts
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11 | ||||||
| 5.2 |
Trustee Powers and Duties Over Contracts
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12 | ||||||
| 5.3 |
Proceeds
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12 | ||||||
| 5.4 |
Payments of Premiums, Assessments and Dues
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12 | ||||||
| 5.5 |
Insurance Company Not Party
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12 | ||||||
| 5.6 |
Contracts
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13 | ||||||
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| ARTICLE VI | 13 | |||||||
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| 6.1 |
Trustee Records
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13 | ||||||
| 6.2 |
Taxes
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13 | ||||||
| 6.3 |
Compensation and Expenses
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14 | ||||||
| 6.4 |
Judicial Settlement
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14 | ||||||
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| ARTICLE VII | 14 | |||||||
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| 7.1 |
Reliance
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14 | ||||||
| 7.2 |
Advice of Counsel
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15 | ||||||
| ARTICLE VIII | 15 | |||||||
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| 8.1 |
Resignation
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15 | ||||||
| 8.2 |
Removal
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15 | ||||||
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| ARTICLE IX | 16 | |||||||
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| 9.1 |
Insolvency
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16 | ||||||
| 9.2 |
Determination of Insolvency
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16 | ||||||
| 9.3 |
Company Obligations
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17 | ||||||
| 9.4 |
Certain Transactions
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17 | ||||||
| 9.5 |
Amendment
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17 | ||||||
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| ARTICLE X | 18 | |||||||
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| 10.1 |
Governing Law
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18 | ||||||
| 10.2 |
Titles and Headings
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18 | ||||||
| 10.3 |
Affiliates
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18 | ||||||
| 10.4 |
Assignment
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18 | ||||||
| 10.5 |
Entire Agreement
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18 | ||||||
| 10.6 |
Severability
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18 | ||||||
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 2 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 3 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 4 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 5 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 6 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 7 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 8 |
|
Wachovia Bank, National Association
Attn: Executive Benefits Group/Sonoco Products Company NC6251 One West Fourth Street Winston-Salem, NC 27101 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 9 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 10 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 11 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 12 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 13 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 14 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 15 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 16 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 17 |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 18 |
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Attest:
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| /s/ Sandy L. Jones | ||||
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Attest:
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| /s/ Tracy C. Hartsell | ||||
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SONOCO PRODUCTS COMPANY
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| By: | /s/ Ritchie L. Bond [Seal] | |||
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WACHOVIA BANK, National Association
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| By: | /s/ D. Michael Hill [Seal] | |||
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 19 |
| 1. | Omnibus Benefit Restoration Plan of Sonoco Products Company | |
| 2. | Deferred Compensation Plan for Key Employees of Sonoco Products Company | |
| 3. | Sonoco Products Company 2008 Long-Term Incentive Plan |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 20 |
| 1. | During a Threatened Change in Control Period the Trustee shall invest the funds contributed in accordance with Section 2.2 (b) in any of the following: |
| a) | Direct obligations of the United States of America, or any agency thereof, or obligations guaranteed by the United States of America, provided that such obligations mature within 90 days from the date of acquisition thereof; | ||
| b) | Acquisitions of certificates of deposit maturing within 90 days from the date of acquisition, bankers’ acceptances, Eurodollar bank deposits, or overnight bank deposits, in each case issued by, created by, or with a bank or trust company organized under the laws of the United States of America or any state thereof having capital and surplus aggregating at least $100,000,000; | ||
| c) | Acquisitions of commercial paper given a rating of “A2” or better by Standard & Poor’s Corporation or “P2” or better by Moody’s Investors Service, Inc. and maturing not more than 90 days from the date of creation thereof; or | ||
| d) | Investments in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing clauses (a) through (c). |
| 2. | Subsequent to a Change in Control, the Trustee shall have discretion to invest the funds in a manner that best satisfies its fiduciary duty to the Participants and Beneficiaries. |
| Sonoco Products Company | ||
| Amended and Restated Trust Agreement for Executives | Page 21 |
| ARTICLE I | 2 | |||||||
| 1.1 |
Trust Fund
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2 | ||||||
| 1.2 |
Irrevocability
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2 | ||||||
| 1.3 |
Grantor Trust
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2 | ||||||
| 1.4 |
Separate and Apart
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2 | ||||||
| 1.5 |
Benefits Not Transferable
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2 | ||||||
| 1.6 |
Acceptance of Trust
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3 | ||||||
| 1.7 |
Additional Obligations
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3 | ||||||
| 1.8 |
Definitions
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3 | ||||||
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| ARTICLE II | 4 | |||||||
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| 2.1 |
Initial Contributions
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4 | ||||||
| 2.2 |
Additional Contributions
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4 | ||||||
| 2.3 |
Credit Contributions
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4 | ||||||
| 2.4 |
Substitution of Assets
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5 | ||||||
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| ARTICLE III | 5 | |||||||
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| 3.1 |
Benefit Entitlement
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5 | ||||||
| 3.2 |
Participant Information
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5 | ||||||
| 3.3 |
Company Responsibility
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5 | ||||||
| 3.4 |
Payment Due To Taxable Income
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5 | ||||||
| 3.5 |
Separate Accounting
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6 | ||||||
| 3.6 |
Company Reimbursement
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6 | ||||||
| 3.7 |
Initiation of Payment
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6 | ||||||
| 3.8 |
Following a Change of Control
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7 | ||||||
| 3.9 |
Return of Assets
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8 | ||||||
| 3.10 |
Excess Asset Determination
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8 | ||||||
| 3.11 |
Letter of Credit Funding on a Change of Control or Threatened Change of Control
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9 | ||||||
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| ARTICLE IV | 9 | |||||||
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| 4.1 |
Powers
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9 | ||||||
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| ARTICLE V | 11 | |||||||
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| 5.1 |
Purchase of Contracts
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11 | ||||||
| 5.2 |
Trustee Powers and Duties Over Contracts
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11 | ||||||
| 5.3 |
Proceeds
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12 | ||||||
| 5.4 |
Payments of Premiums, Assessments and Dues
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12 | ||||||
| 5.5 |
Insurance Company Not Party
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12 | ||||||
| 5.6 |
Contracts
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12 | ||||||
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| ARTICLE VI | 13 | |||||||
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| 6.1 |
Trustee Records
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13 | ||||||
| 6.2 |
Taxes
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13 | ||||||
| 6.3 |
Compensation and Expenses
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13 | ||||||
| 6.4 |
Judicial Settlement
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14 | ||||||
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| ARTICLE VII | 14 | |||||||
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| 7.1 |
Reliance
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14 | ||||||
| 7.2 |
Advice of Counsel
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15 | ||||||
| ARTICLE VIII | 15 | |||||||
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| 8.1 |
Resignation
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15 | ||||||
| 8.2 |
Removal
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15 | ||||||
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| ARTICLE IX | 15 | |||||||
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| 9.1 |
Insolvency
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| 9.2 |
Determination of Insolvency
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16 | ||||||
| 9.3 |
Company Obligations
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17 | ||||||
| 9.4 |
Certain Transactions
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17 | ||||||
| 9.5 |
Amendment
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| ARTICLE X | 17 | |||||||
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| 10.1 |
Governing Law
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17 | ||||||
| 10.2 |
Titles and Headings
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17 | ||||||
| 10.3 |
Affiliates
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17 | ||||||
| 10.4 |
Assignment
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18 | ||||||
| 10.5 |
Entire Agreement
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18 | ||||||
| 10.6 |
Severability
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18 | ||||||
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 2 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 3 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 4 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 5 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 6 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 7 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 8 |
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Wachovia Bank, National Association
Attn: Executive Benefits Group/Sonoco Products Company NC6251 One West Fourth Street Winston-Salem, NC 27101 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 9 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 10 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 11 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 12 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 13 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 14 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 15 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 16 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 17 |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 18 |
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Attest:
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| /s/ Sandy L. Jones | ||||
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Attest:
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| /s/ Tracy C. Hartsell | ||||
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SONOCO PRODUCTS COMPANY
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| By: | /s/ Ritchie L. Bond [Seal] | |||
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WACHOVIA BANK, National Association
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| By: | /s/ D. Michael Hill [Seal] | |||
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 19 |
| 1. | Deferred Compensation Plan for Outside Directors of Sonoco Products Company | |
| 2. | Sonoco Products Company 2008 Long Term Incentive Plan |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 20 |
| 1. | During a Threatened Change in Control Period the Trustee shall invest the funds contributed in accordance with Section 2.2 (b) in any of the following: |
| a) | Direct obligations of the United States of America, or any agency thereof, or obligations guaranteed by the United States of America, provided that such obligations mature within 90 days from the date of acquisition thereof; | ||
| b) | Acquisitions of certificates of deposit maturing within 90 days from the date of acquisition, bankers’ acceptances, Eurodollar bank deposits, or overnight bank deposits, in each case issued by, created by, or with a bank or trust company organized under the laws of the United States of America or any state thereof having capital and surplus aggregating at least $100,000,000; | ||
| c) | Acquisitions of commercial paper given a rating of “A2” or better by Standard & Poor’s Corporation or “P2” or better by Moody’s Investors Service, Inc. and maturing not more than 90 days from the date of creation thereof; or | ||
| d) | Investments in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing clauses (a) through (c). |
| 2. | Subsequent to a Change in Control, the Trustee shall have discretion to invest the funds in a manner that best satisfies its fiduciary duty to the Participants and Beneficiaries. |
| Sonoco Products Company | ||
| Amended and Restated Directors Deferral Trust Agreement | Page 21 |
| 1. | I have reviewed this quarterly report on Form 10-Q of Sonoco Products Company; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: October 29, 2008 | By: /s/ Harris E. DeLoach, Jr. | |||
| Harris E. DeLoach, Jr. | ||||
| Chief Executive Officer | ||||
| 1. | I have reviewed this quarterly report on Form 10-Q of Sonoco Products Company; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: October 29, 2008 | By: /s/ Charles J. Hupfer | |||
| Charles J. Hupfer | ||||
| Senior Vice President and Chief Financial Officer | ||||
| /s/Harris E. DeLoach, Jr. | ||||
| Harris E. DeLoach, Jr. | ||||
| Chief Executive Officer | ||||
| /s/Charles J. Hupfer | ||||
| Charles J. Hupfer | ||||
| Chief Financial Officer | ||||