As filed with the Securities and Exchange Commission on June 5, 1998
Registration No. 333-
============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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COMPX INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0981653
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
200 Old Mill Road
Mauldin, South Carolina 29662
(Address of principal (Zip Code)
executive offices)
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NATIONAL CABINET LOCK, INC. CONTRIBUTORY RETIREMENT PLAN
(Full title of the plan)
--------------------
Andrew Louis, Esq.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
(972) 233-1700
(Name, address and telephone number
including area code of agent for service)
--------------------
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------
Proposed
maximum
offering Proposed
Title of price maximum
securities Amount per aggregate
offering Amount of
registered (1) registered (2) price (2) fee (2)
- ---------------- ---------- -------- --------- ------------
Class A Common
Stock, par value
$0.01 per share 500,000 $23.375 $11,687,500 $3,448
- ----------------------------------------------------------------------
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, as
amended (the "Securities Act"), this registration statement also covers an
indeterminate amount of interests to be offered or sold pursuant to the
National Cabinet Lock, Inc. Contributory Retirement Plan, as amended (the
"Plan").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h) under the Securities Act and based on the average
of the highest and lowest selling price per share of class A common stock
of the registrant on the New York Stock Exchange, Inc. on June 2, 1998.
=================================================================
PART I
INFORMATION REQUIRED IN SECTION 10(a) PROSPECTUS
The information required by Part I of Form S-8 to be contained in the
Section 10(a) prospectus is omitted from this registration statement in
accordance with Rule 428 under the Securities Act and the introductory Note to
Part I of Form S-8.
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The registrant and the Plan hereby incorporate by reference in this
registration statement the following documents previously filed by the
registrant with the Securities and Exchange Commission (the "Commission"):
(1) the registrant's prospectus dated March 6, 1998 (the
"Prospectus"), filed with the Commission on March 6, 1998 under the
Securities Act of 1933, as amended (the "Securities Act"), which Prospectus
constitutes a part of the registrant's Registration Statement on Form S-1
(File No. 333-41647), effective March 6, 1998 (the "Form S-1 Registration
Statement");
(2) the registrant's quarterly report on Form 10-Q for the quarter
ended March 31, 1998 filed with the Commission on May 12, 1998;
(3) the registrant's current reports on Form 8-K dated March 11, 1998
and April 21, 1998 filed with the Commission on March 12, 1998 and April
21, 1998, respectively;
(4) the description of the class A common stock, par value $0.01 per
share, of the registrant (the "Common Stock") set forth in the Registration
Statement on Form 8-A, filed with the Commission on February 25, 1998,
including any amendment or report filed for the purpose of updating such
description; and
(5) all documents filed by the registrant or the Plan with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
subsequent to the date of this registration statement shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of
the filing of such documents until such time as there shall have been filed
a post-effective amendment that indicates that all securities offered
hereby have been sold or that deregisters all securities remaining unsold
at the time of such amendment.
Item 6. Indemnification of Directors and Officers.
Section 102(b)(7) of the Delaware General Corporate Law (the "DGCL")
permits a Delaware corporation to limit the personal liability of its directors
in accordance with the provisions set forth therein.
Article nine of the restated certificate of incorporation of the registrant
provides as follows:
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that the foregoing
clause shall not apply to any liability of a director (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL or (iv) for any transaction from
which the director derived an improper personal benefit. Any repeal
or modification of this Article Nine by the stockholders of the
Corporation shall not adversely affect an right or protection of a
director of the Corporation existing at the time of such repeal or
modification.
Section 145 of the DGCL contains provisions permitting Delaware
corporations to indemnify directors, officers, employees or agents against
expenses, including attorneys' fees, judgments, fines, and amounts paid in
settlement actually and reasonably incurred in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person was or
is a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, provided that (i) such person acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the corporation's best
interest, and (ii) in the case of a criminal proceeding such person had no
reasonable cause to believe his or her conduct was unlawful. In the case of
actions or suits by or in the right of the corporation, no indemnification shall
be made in a case in which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall have determined upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses. Indemnification as described above shall only be
granted in a specific case upon a determination that indemnification is proper
in the circumstances because the indemnified person has met the applicable
standard of conduct. Such determination shall be made (a) by a majority vote of
the directors who are not parties to such proceeding, even though less than a
quorum, (b) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (c) by the stockholders of
the corporation. Notwithstanding the foregoing, to the extent that a director,
officer, employee or agent of the corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) or (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Article six of the restated certificate of incorporation of the registrant
provides as follows:
The Corporation shall, to the fullest extent permitted by
law, including Section 145 of the DGCL, as the same may be amended
and supplemented, indemnify any and all officers and directors
whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters
referred to in or covered by said Section, and the indemnification
provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer,
employee, trustee, fiduciary or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a
person.
The bylaws of the registrant generally provide for indemnification of its
directors and officers to the fullest extent permitted by the DGCL, except that
any determination of indemnification shall be made (i) by the board of directors
by a majority vote of a quorum consisting of directors who are not parties to
such action, suit or proceeding, or (ii) if such quorum is not obtainable, or,
even if obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the stockholders of
the registrant.
An underwriting agreement dated March 5, 1998 between the registrant and
certain underwriters and relating to the registrant's initial public offering of
Common Stock obligates such underwriters to indemnify the registrant and the
registrant's officers and directors against certain liabilities under the
Securities Act.
Item 8. Exhibits.
(a) Exhibits.
The following documents are filed as a part of this registration statement.
Exhibit Description of Exhibit
- --------- -----------------------------------------------------
4.1 Restated certificate of incorporation of the
registrant (incorporated by reference to Exhibit 3.1
to the registrant's Registration Statement on Form S-
1, File No. 333-42643, filed with the Commission).
4.2 Bylaws of the registrant (incorporated by reference
to Exhibit 3.2 to the registrant's Registration
Statement on Form S-1, File No. 333-42643, filed with
the Commission).
5.1* Opinion of Andrew Louis, Esq.
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Andrew Louis, Esq. (included in his
opinion filed as Exhibit 5.1).
24.1* Power of Attorney (see the initial signature page of
this registration statement).
99.1* National Cabinet Lock, Inc. Contributory Retirement
Plan, as amended.
- ----------
* Filed Herewith.
In accordance with Item 8 of Form S-8, the registrant undertakes to submit
the Plan and any substantive amendment thereto to the Internal Revenue Service
in a timely manner and will make all changes required by the Internal Revenue
Service in order to qualify the Plan under Section 401(a) and 401(k) of the
Internal Revenue Code of 1986, as amended.
Item 9. Undertakings.
A. The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on June 5, 1998:
COMPX INTERNATIONAL INC.
By: /s/ Steven L. Watson
---------------------------
Steven L. Watson
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Steven L. Watson, J. Mark Hollingsworth
and Antony Andrew R. Louis, and each of them, his true and lawful attorneys-in-
fact and agents with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement,
and to file the same with all exhibits, thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or either of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:
Signature Title Date
- -------------------------- --------------------- --------------
/s/ Joseph S. Compofelice Chairman of the June 5, 1998
- -------------------------- Board, and Chief
Joseph S. Compofelice Executive Officer
(Principal Executive
Officer and Principal
Financial Officer)
/s/ David A. Bowers President and June 2, 1998
- -------------------------- Director
David A. Bowers
/s/ Bobby D. O'Brien Vice President, June 5, 1998
- -------------------------- Treasurer and Chief
Bobby D. O'Brien Accounting Officer
(Principal Accounting
Officer)
/s/ Paul M. Bass, Jr. Director June 5, 1998
- --------------------------
Paul M. Bass, Jr.
/s/ Edward J. Hardin Director June 5, 1998
- --------------------------
Edward J. Hardin
/s/ Glenn R. Simmons Director June 5, 1998
- --------------------------
Glenn R. Simmons
/s/ Robert W. Singer Director June 5, 1998
- --------------------------
Robert W. Singer
Pursuant to the requirements of the Securities Act, the Administrative
Committee of the National Cabinet Lock, Inc. Contributory Retirement Plan, as
amended, has duly caused this registration statement to be signed on its behalf
by the undersigned thereunto duly authorized, in the City of Dallas, State of
Texas, on June 5, 1998.
National Cabinet Lock, Inc. Contributory
Retirement Plan
By: Administrative Committee of the National
Cabinet Lock, Inc. Contributory
Retirement Plan
/s/ Donald J. Kolkman
-----------------------
Donald J. Kolkman
/s/ Ronald W. Lance
-----------------------
Ronald W. Lance
/s/ Gary L. Fitzsimmons
-----------------------
Gary L. Fitzsimmons
/s/ Steve C. Taylor
-----------------------
Steve C. Taylor
/s/ Keith A. Johnson
-----------------------
Keith A. Johnson
INDEX TO EXHIBITS
Exhibit Description of Exhibit
- --------- -----------------------------------------------------
4.1 Restated certificate of incorporation of the
registrant (incorporated by reference to Exhibit 3.1
to the registrant's Registration Statement on Form S-
1, File No. 333-42643, filed with the Commission).
4.2 Bylaws of the registrant (incorporated by reference
to Exhibit 3.2 to the registrant's Registration
Statement on Form S-1, File No. 333-42643, filed with
the Commission).
5.1* Opinion of Andrew Louis, Esq.
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Andrew Louis, Esq. (included in his
opinion filed as Exhibit 5.1).
24.1* Power of Attorney (see the initial signature page of
this registration statement).
99.1* National Cabinet Lock, Inc. Contributory Retirement
Plan, as amended.
- ----------
* Filed Herewith.
COMPX INTERNATIONAL INC.
----------
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
----------
Telephone: (972) 233-1700
Telephone Facsimile: (972) 239-0142
Andrew Louis
Corporate Counsel and
Assistant Secretary
(972) 450-4243
June 5, 1998
The Board of Directors of CompX International Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
Re: Registration Statement on Form S-8 Relating to Plan Interests Offered
under the National Cabinet Lock, Inc. Contributory Retirement Plan and
500,000 Shares of Class A Common Stock of CompX International Inc.
Offered as and Investment Option under the Same Plan
Ladies and Gentlemen:
I have acted as corporate counsel for CompX International Inc., a Delaware
corporation (the "Company"), in connection with the preparation of the Company's
Registration Statement on Form S-8 (the "Registration Statement") to be filed
with the Securities and Exchange Commission on June 5, 1998 under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the offer of
interests under the National Cabinet Lock, Inc. Contributory Retirement Plan, as
amended (the "Plan"), and 500,000 shares (the "Shares") of the Company's class A
common stock, par value $0.01 per share (the "Class A Common Stock"), offered as
an investment option under the Plan.
A. Basis of Opinions
As the basis for the opinions expressed in this letter, I have examined and
considered originals, or copies certified or otherwise identified to my
satisfaction, of such documents, corporate records, and instruments as I have
deemed necessary or appropriate for the expression of such opinions, including,
without limitation, the following:
(1) the restated certificate of incorporation and bylaws of the Company,
both as amended to date;
(2) the minutes and records of the corporate proceedings of the Company
with respect to the establishment of the Plan and related matters; and
(3) the Plan.
B. Opinions
Based upon the foregoing, having regard for such legal considerations as I
have deemed relevant, and subject to the comments, assumptions, limitations,
qualifications and exceptions set forth in Section C, I hold the opinions set
forth below:
(1) The issuance of any Shares under the Plan out of the Company's
authorized but unissued shares of Class A Common Stock ("Originally
Issued Shares") has been duly authorized; and
(2) Any Originally Issued Shares, when issued, will be validly issued,
fully paid and nonassessable.
C. Comments, Assumptions, Limitations, Qualifications and Exceptions
The opinions expressed in Section B above are based upon and subject to the
further comments, assumptions, limitations, qualifications and exceptions as set
forth below.
(1) I have assumed, without investigation, the genuineness of all
signatures and the authenticity of all documents submitted to me as
originals, the conformity to authentic originals of all documents
submitted to me as copies and the veracity of all such documents.
(2) I have assumed that (a) any Originally Issued Shares will be issued in
accordance with the terms of the Plan; (b) the Company maintains an
adequate number of authorized but unissued shares of Class A Common
Stock available for the issuance of any Originally Issued Shares; and
(d) the consideration actually received by the Company (or the
increase in the Company's capital on the books of the Company, if
applicable) for each Originally Issued Share is proper consideration
for, and equal to or exceeds the par value of, each such Originally
Issued Share.
(3) The law covered by the opinions expressed in this letter is limited to
the federal law of the United States, the Delaware General Corporation
Law, as amended, and the law of the state of Texas.
(4) I am an assistant secretary of the Company and I am an employee of
Valhi, Inc., a Delaware corporation, an indirect parent corporation of
the Company.
(5) Except as set forth in subsection C.6 below, the opinions set forth
herein are expressed solely for your benefit, and no other party shall
be entitled to rely on my opinions without my prior express written
consent. Except as set forth in subsection C.6 below or without my
prior express written consent, this opinion letter may not be quoted
in whole or in part or otherwise referred to in any document or report
and may not be furnished to any person or entity.
(6) I consent to the filing of this letter as an exhibit to the
Registration Statement and to reference to my opinions included in or
made a part of the Registration Statement. In giving this consent, I
do not admit that I come within the category of a person whose consent
is required under Section 7 of the Securities Act or the rules and
regulations promulgated thereunder.
Respectfully submitted,
/s/ Andrew Louis
--------------------------------
Andrew Louis, Esq.
Corporate Counsel and Assistant Secretary of
CompX International Inc.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in CompX International Inc.'s
Registration Statement on Form S-8 pertaining to the National Cabinet Lock, Inc.
Contributory Retirement Plan of our report dated January 23, 1998 (except for
Note 12 as to which the date is March 5, 1998) with respect to the consolidated
financial statements and financial statement schedules of CompX International
Inc. and Subsidiary included in its Registration Statement on Form S-1 (File No.
333-42643).
COOPERS & LYBRAND L.L.P.
Dallas, Texas
June 4, 1998
THIRD AMENDMENT
OF
NATIONAL CABINET LOCK, INC.
CONTRIBUTORY RETIREMENT PLAN
WHEREAS, the Corporation maintains the National Cabinet Lock, Inc.
Contributory Retirement Plan (the "Plan"); and
WHEREAS, the Plan has been amended from time to time, and the further
amendment of the restated Plan now is considered desirable;
NOW, THEREFORE, BE IT HEREBY
RESOLVED, that by virtue and in exercise of the powers reserved to the
Corporation under section 12.1 of the Plan, the Plan be and hereby is amended in
the following particulars (the "Third Amendment") paragraphs 1, 2, 3, 4, 5, 6,
7, 8, 9, and 10 being effective June 4, 1998 and paragraph 12 being effective
January 1, 1997 and paragraph 11 being effective January 1, 1998:
1. By substituting the following sentence for the second sentence in
Section 1.1 of the Plan:
"The plan is maintained by CompX International Inc. (formerly known
as/doing business as National Cabinet Lock, Inc.) (the "company").
2. By adding the following Section 1.5 to the Plan:
"1.5 Company Stock. "Company stock" shall mean common stock issued by the
company (or by a corporation which is a member of the same controlled group of
corporations) which is readily tradable on an established securities market.
For purposes of this section 1.5 controlled group of corporations has the
meaning given to such term by Section 1563(a) of the Internal Revenue Code (as
amended) (determined without regard to subsections (a)(4) and (e)(3)(c) of
Section 1563)."
3. By adding the following immediately after the word "plan" in Section
2.1(a) of the Plan:
"; and he is not an independent contractor as determined by the company in
its sole discretion"
4. By adding the following paragraph to Section 3.2(a) of the Plan
immediately after subparagraph 3.2(a)(ii):
"The employer's matching contributions described in Section 3.2(a)(i) above
and the employer's profit sharing contributions described in Section 3.2(a)(ii)
above may be made in cash or company stock or both, as determined by the
company's Board of Directors."
5. By adding the following sentence after the first sentence in Section
5.5 of the Plan.
"Investment funds may include "employer securities" issued by the company
(consisting of company stock, as defined in Section 1.5 above)."
6. By substituting the following sentence for the first sentence of
Section 5.6 of the Plan:
"Except where plan administration requires a shorter or longer period (such
as when changes in plan trustees, custodians, investment managers, etc., occur),
as of each accounting date each participant may elect, by giving written notice
on a form provided by it for this purpose or authorized telephonic voice
response to the plan administrator at least 30 days (or such other period as the
plan administrator requires) in advance, in accordance with uniform rules
established by the plan administrator, to have his account balances as of that
date (after all adjustments as of that date have been made) and future
contributions made by him or on his behalf (prior to any subsequent election he
may make) invested in accordance with his election entirely in one of the
investment funds or partially in each of two or more of the investment funds (so
that a multiple of 1% of each of his account balances, subject to a minimum
investment of 5%, is invested as of such date in each investment fund)."
7. By adding the following Section 5.9 to the Plan:
"5.9 Investments in Employer Securities. As provided in Section 5.5
above, participants may elect to have a portion or all of their accounts
invested by the trustee in any one or more of the investment funds, including
any fund that invests in employer securities. For this purpose it is intended
that the plan be considered an "eligible individual account plan" which
explicitly provides for the acquisition and holding of "qualifying employer
securities" (as those terms are defined in Sections 407(d)(3) and 407(d)(5) of
the Employee Retirement Income Security Act of 1974, as amended) and that the
trustee may invest up to 100 percent of the trust fund held by it in employer
securities, in accordance with the provisions of the plan. Employer securities
may be acquired by the trustee through purchases on the open market, private
purchases, purchases from the employers (including purchases from the company of
treasury shares or authorized but unissued shares), contributions in kind by the
employers, or otherwise. Except as respects employer securities purchased on
the open market, no purchase of company shares shall be made at a price in
excess of the closing price on the New York Stock Exchange or, if not traded on
the New York Stock Exchange, any other applicable exchange, for employer
securities on the business day on which employer securities were last traded
next preceding the date of purchase."
8. By adding the following Section 5.10 to the Plan:
"5.10 Allocation of Employer Securities. Employer Securities purchased on
behalf of participants shall be credited to their accounts, and their accounts
shall be charged therefor, on the basis of the actual purchase price paid for
such securities on behalf of respective participants. In applying the
provisions of the next preceding sentence, any employer securities which have
been contributed by the employers as a part of the employers' contribution shall
be deemed to have been purchased by the trustee on behalf of participants for an
amount equal to the fair market value of such securities when they were
contributed."
9. By adding the following Section 5.11 to the Plan:
"5.11 Additional Accounting Rules For Employer Securities. The following
additional accounting rules apply regarding employer securities:
(a) Uncredited cash dividends or interest attributable to
employer securities previously allocated to a participant's accounts
shall be credited to the participant's accounts.
(b) Uncredited whole and fractional employer securities
resulting from stock dividends or split-ups attributable to employer
securities previously allocated to a participant's accounts shall be
credited to such accounts.
(c) If rights or warrants are issued with respect to any
employer securities held by the trustee, such rights or warrants shall
be appropriately reflected in participants' accounts in accordance
with rules established by the plan administrator and uniformly applied
until sold or exercised by the trustee and the proceeds appropriately
reflected as directed by the plan administrator."
10. By adding the following Section 5.12 to the Plan:
"5.12 Voting of Employer Securities. The plan administrator shall furnish
to each participant who has employer securities credited to the participant's
accounts notice of the date and purpose of each meeting of the stockholders of
the company at which employer securities are entitled to be voted. The plan
administrator shall request from each such participant instructions as to the
voting at that meeting of employer securities credited to the participant's
accounts. If the participant furnishes such instructions within the time
specified in the notification given to the participant, the trustee shall vote
such employer securities in accordance with the participant's instructions. All
employer securities credited to accounts as to which the trustee does not
receive voting instructions as specified above and all unallocated employer
securities held by the trustee shall be voted by the plan administrator.
Similarly, the plan administrator shall furnish to each participant who has
employer securities credited to the participant's accounts notice of any tender
offer for, or a request or invitation for tenders of, employer securities made
to the trustee. The plan administrator shall request from each such participant
instructions as to the tendering of employer securities credited to the
participant's accounts and for this purpose the participants shall be provided
with a reasonable period of time in which they may consider any such tender
offer for, or request or invitation for tenders of employer securities. The
trustee shall tender the employer securities as to which the trustee has
received instructions to tender from participants within the time specified.
Employer securities credited to accounts as to which the trustee has not
received instructions from participants shall not be tendered. As to all
unallocated employer securities held by the trustee, the plan administrator
shall instruct the trustee as to the number (if any) of employer securities to
the tendered."
11. By adding the following immediately after "70 1/2 years" of the third
sentence of Section 6.5 of the Plan:
"or, if later, for participants who are not a 5% owner, the year in which
the participant retirees."
12. By substituting "$5,000" for "$3,500" in sentences 5 and 6 of Section
6.5 of the Plan.
EXECUTED June 4, 1998.
CompX International Inc.
By: /s/ Steven L. Watson
Steven L. Watson, Secretary
SECOND AMENDMENT
OF
NATIONAL CABINET LOCK, INC.
CONTRIBUTORY RETIREMENT PLAN
WHEREAS, this corporation maintains National Cabinet Lock, Inc.
Contributory Retirement Plan (the "plan"); and
WHEREAS, the plan has been amended from time to time, was last amended
effective as of January 1, 1994, and the further amendment of the restated plan
now is considered desirable;
NOW, THEREFORE, IT IS RESOLVED that, by virtue and in exercise of the power
reserved to this corporation by section 12.1 of the plan, the plan be and hereby
is amended in the following particulars:
1. By substituting for section 3.2 of the plan the following:
"3.2 Calculation of Employer's Contributions. The employer's
contributions for a plan year shall equal the sum of the amounts described in
subsections (a) and (b) below:
(a) For each plan year the employer will contribute to the plan under
subparagraphs (i) and (ii) below such amounts, if any, as shall be
determined by resolution of the company's Board of Directors. Any such
resolution shall specify the respective amounts of the contributions under
such subparagraphs (i) and (ii) or a definite basis or formula by which the
contributions can be determined within a reasonable time after the end of
that plan year.
(i) The employer's matching contributions for a year, if any, as
determined by the company's Board of Directors, shall be allocated pro
rata to active participants' accounts as of the last day of the plan
year for which they are made (or the last date of each pay period in
such year if a resolution establishing the matching contribution
percentage amount is adopted before the beginning of such year) based
upon each active participant's salary deferral contributions (as
defined in section 4.1 below) up to the matching level specified in
the resolution providing for such matching contribution; and
(ii) The employer's profit sharing contributions for a year, if
any, as determined by the company's Board of Directors, shall be
allocated pro rata to active participants' and inactive participants'
accounts as of the last day of the plan year for which they are made
based upon each such participant's earnings for such year.
Notwithstanding the foregoing, the company's contribution provided for
below for each plan year shall be allocated pro rata to active
participants' accounts as of the last day of the plan year for which they
are made based upon each active participant's salary deferral contributions
from the company which do not exceed six percent of the participant's
earnings for such year from the company (such salary deferral contributions
up to six percent of earnings are referred to herein as the participant's
"basic contributions"). The company's contribution with respect to each
active participant employed by it for a plan year shall be an amount equal
to the lesser of 100 percent of the participant's basic contributions for
the year, or that percentage of the participant's basic contributions for
the year equal to the percentage, not in excess of 100%, obtained by
dividing an amount equal to five percent of the company's adjusted before-
tax current profits, if any, for the year by the aggregate of the basic
contributions of all participants employed by the company for the year.
The adjusted before-tax current profits of the company for a year shall
mean the before-tax current profits, if any, of the company for the year,
as determined by the company's Board of Directors without regard to any
charges for interest expense, and without regard to any charges for
interest expense, and without regard to any dividends received from any
subsidiary of the company, but with regard to any amounts reasonably
accrued and expensed for contributions to this plan for such year.
(b) For each pay period of an employer which ends during a plan year,
each employer will contribute to the plan the salary deferral
contributions, if any, elected in accordance with section 4.1 by each
active participant employed by it for that pay period.
Each employer's contributions under the plan to be made in accordance with
subsection 3.2(b) for any pay period shall be paid to the trust fund (as
described in section 1.3) implementing the plan, without interest, as soon
as practicable after the end of that pay period, but in any event within 30
days after the end of the plan year in which such pay period ends. The
employer's contributions under the plan to be made in accordance with
subsection 3.2(a) for a plan year shall be made no later than the time
prescribed by law for filing the company's federal income tax return for
its fiscal year coinciding with the plan year for which such contributions
are made, including any extensions of time thereof."
2. By adding the following at the end of section 3.4 of the plan as a
part thereof:
"The applicable restrictions on the multiple use of the alternative
limitation under subsection 3.4(b) above and under subsection 4.2(b) shall apply
in accordance with the regulations under Section 401(m)(9)(A) of the Code to
appropriately limit the contribution percentage for highly compensated employees
under this section and the actual deferral percentage for highly compensated
employees under section 4.2. In applying such restrictions, the contribution
percentage and actual deferral percentage otherwise applicable for the group of
highly compensated employees shall be reduced first by reducing the actual
deferral percentage as necessary to the highest matching level for the year and
then by ratably reducing the contribution percentage and actual deferral
percentage until the resulting contribution percentage and actual deferral
percentage are in compliance with such restrictions."
3. By substituting for section 4.2 of the plan the following:
"4.2 Actual Deferral Percentage Test Limitation on Salary Deferral
Contributions. In addition to being subject to the contribution limitations of
sections 9.2 and 9.3, salary deferral contributions which may be made by a
participant for each plan year with respect to the participant's earnings
payable during such year (or payable with respect to such year and within two
and one half months after the end of such year) and which are allocated to the
participant's accounts as of a date within such plan year, shall be subject to
the nondiscrimination limitations of Section 401(k) of the Code. For this
purpose, such salary deferral contributions elected under section 4.1 shall be
adjusted each plan year by the plan administrator as provided below in this
section, by making the least adjustment necessary, so that either:
(a) The actual deferral percentage (as described below) for the
group of eligible highly compensated employees (as described below)
for a plan year shall not exceed 125 percent of the actual deferral
percentage for all other eligible employees (as described below) for
such plan year; or
(b) The actual deferral percentage for the group of eligible
highly compensated employees for a plan year shall not exceed the
actual deferral percentage for all other eligible employees for such
plan year by more than two percentage points, and the actual deferral
percentage for eligible highly compensated employees shall not exceed
200 percent of the actual deferral percentage for all other eligible
employees.
The 'actual deferral percentage' for a specified group of eligible employees for
any plan year shall be the average of the ratios (computed separately for each
eligible employee in such group) of the salary deferral contributions (and any
other employer contributions which meet the withdrawal restrictions and vesting
requirements of Sections 401(k)(2)(B) and (C) of the Code) for each eligible
employee in such group for such plan year to the employee's compensation (as
defined in Section 414(q) of the Code) earned while eligible to participate in
the plan for such plan year. An employee shall be considered an 'eligible
highly compensated employee' for any plan year in which he is a 'highly
compensated employee' within the meaning of Section 414(q) of the Code, and an
employee shall be considered an 'eligible employee' for any plan year in which
he meets the requirements of subsections 2.1(a), (b) and (c). An adjustment
shall be made hereunder only if neither subsection (a) nor (b) above is
satisfied. If any adjustment is required hereunder the maximum amount of salary
deferral contributions that may be elected by each eligible highly compensated
employee shall be reduced by subtracting from fifteen percent the smallest
percentage to the one/one hundredth of a percent reduction which will cause
either subsection (a) or (b) above to be satisfied and by reducing the salary
deferral contributions elected by all eligible highly compensated employees
which are in excess of such reduced maximum percentage to such reduced maximum
percentage. The amount by which a participant's salary deferral contributions
are reduced hereunder shall be paid to such participant (along with any income
allocable thereto) as soon as practicable following such determination, but in
any event by the end of the following plan year with respect to which such
salary deferral contributions were made. No matching employers' contribution
allocable with respect to a participant's salary deferral contributions shall be
allocated to the participant with respect to salary deferral contributions which
are reduced hereunder and paid to the participant, and any such employers'
matching contributions which have been made to the plan shall instead be used to
reduce employer contributions. For purposes of determining who is an eligible
highly compensated employee for any given determination period, the company may
elect to make the calendar year calculation election within the meaning of
Treas. Reg. Section 1.414(q)-1T Q&A(14)(b) by giving written notice to the plan
administrator; provided, however, such election must apply to all plans,
entities and arrangements of the company and members included in its controlled
group for purposes of determining who is a highly compensated employee under
Section 414(q) of the Code. In applying the provisions of this section, if this
plan is aggregated with another plan for purposes of complying with the
nondiscrimination and coverage requirements of Sections 401(a)(4) or 410(b) of
the Code, all elective contributions that are made under all such plans which
are aggregated shall be treated as made under a single plan and the aggregated
plans must satisfy Sections 401(a)(4) and 410(b) of the Code as if they were a
single plan for the purposes of such Sections. The amount of excess
contributions to be recharacterized under section 3.4 or to be distributed under
this section 4.2 shall be reduced by the excess deferrals distributed under
section 4.1."
4. By adding the following new sentence immediately after the first
sentence of section 4.6 of the plan as a part thereof:
"Similarly, if a covered employee becomes a participant in any other
qualified pension, profit sharing, stock bonus or other retirement plan
maintained by the employers or by another member of the controlled group of
corporations containing the employers, and such other plan permits the transfer
to it by this plan of the vested portion of the covered employee's benefits
hereunder, the plan administrator in its discretion may direct a transfer to
such other plan of an amount equal to the vested benefits of such employee under
this plan subject to the applicable requirements of Section 411 (d) (6) of the
Code."
5. By substituting for the third sentence of section 6.3 of the plan the
following:
"If the participant with respect to whom the remainder arose is reemployed
by an employer before the participant incurs five consecutive one year breaks in
service, the remainder shall remain credited to the participant's accounts
subject to the provisions hereof."
6. By adding the following section 7.3 to the Plan:
"7.3 Other Withdrawals. Notwithstanding any other provision hereof, a
participant who has attained age 59 1/2 years may elect to receive payment of
part or all of his vested account balances and any participant for whom a
rollover account or voluntary contribution account is maintained may elect to
receive payment of part or all of his balances in such accounts. Any such
election shall not affect the participant's continued plan participation."
7. By deleting Section 8.2 of the plan.
8. By adding the following at the end of subsection 14.4(b) of the plan
as a part thereof:
"For purposes hereof, elective contributions made on behalf of employees
who are not key employees shall be disregarded and elective contributions made
on behalf of key employees shall be taken into account."
* * * *
I, Steven L. Watson, Secretary of National Cabinet Lock, Inc. hereby
certify that the foregoing is a correct copy of an amendment duly adopted by the
Board of Directors of said corporation on October 28, 1996, and that the
amendment has not been changed or repealed.
Dated this 28th day of October, 1996.
/s/ Steven L. Watson
Secretary of Aforesaid
(Corporate Seal)
FIRST AMENDMENT
OF
NATIONAL CABINET LOCK, INC.
CONTRIBUTORY RETIREMENT PLAN
WHEREAS, the Corporation maintains the National Cabinet Lock, Inc.
Contributory Retirement Plan (the "Plan"); and
WHEREAS, the Plan has been amended from time to time, was last amended and
completely restated effective as of January 1, 1994, and the further amendment
of the restated Plan now is considered desirable;
NOW, THEREFORE, BE IT HEREBY
RESOLVED, that by virtue and in exercise of the powers reserved to the
Corporation under section 12.1 of the Plan, the Plan be and hereby is amended
effective January 1, 1994, in the following particulars (the "First Amendment"):
1. By Adding the following sentence at the end of subsection 3.2(a)
of the plan as a part thereof:
"Notwithstanding the foregoing, the company's contribution
pursuant to the three preceding sentences for each active participant
for the plan year ended December 31, 1994 shall not be less than an
amount equal to Two Hundred Percent (200%) of each such participant's
basic contributions for such plan year."
2. By substituting the word "fifteen" for the word "ten" where such
latter word appears in the first sentence of section 4.1 of the Plan and in
the sixth sentence of section 4.2 of the Plan.
I, Steven L. Watson, Secretary of National Cabinet lock, Inc., hereby
certify that the foregoing is a correct copy of an amendment duly adopted by the
Board of Directors of said Corporation on the 9th day of April, 1996, and that
the amendment has not been changed or repealed.
Dated this 9th day of April, 1996.
/s/ Steven L. Watson
Steven L. Watson, Secretary
(Corporate Seal)
NATIONAL CABINET LOCK, INC.
CONTRIBUTORY RETIREMENT PLAN
(as amended and restated effective January 1, 1994)
CERTIFICATE
I, Steven L. Watson, Secretary of National Cabinet Lock, Inc., hereby
certify that the attached document is a correct copy of National Cabinet Lock,
Inc. Contributory Retirement Plan effective January 1, 1994, and as in effect on
the date hereof.
Dated this 30th day of December, 1994.
By: /s/ Steven L. Watson
Steven L. Watson
Secretary
(Corporate Seal)
NATIONAL CABINET LOCK, INC. CONTRIBUTORY RETIREMENT PLAN
Table of Contents
PAGE
ARTICLE 1 1
Introduction 1
History, Purpose of the Plan; Effective Date 1
Plan Administrator; Plan Year 1
The Trust 1
The Employers 1
ARTICLE 2 2
Participation 2
Participation 2
Eligibility Service 3
Hours of Service 4
Leave of Absence 4
Notice of Participation 4
ARTICLE 3
Employer's Contributions 5
Employer's Contributions 5
Calculation of Employers' Contributions 5
Verification of Employers' Contributions 5
Contribution Percentage Test Limitation on Employer
Matching Contributions 7
ARTICLE 4 9
Salary Deferral and Participant Contributions 9
Salary Deferral Contributions 9
Actual Deferral Percentage Test Limitation on
Salary Deferral Contributions 10
Variation, Discontinuance and Resumption of
Participant Contributions 11
Earnings 12
Rollover Contributions 13
Transferred Benefits 13
Restricted Participation with Respect to Rollover
Contributions and Transferred Benefits 14
ARTICLE 5 14
Plan Accounting and Investment Funds 14
Participant Account Balances 14
Accounting Dates 15
Date of Crediting Contributions and Remainders 15
Allocation of Employer Contributions 16
Investment Funds 16
Investment Elections 16
Adjustment of Participants' Accounts 17
Statement of Accounts 18
ARTICLE 6 18
Distribution of Account Balances 18
Retirement, Death or Disability 18
Resignation or Dismissal 18
Remainders 19
Method of Benefit Payment 20
Selection of Time and Manner of Benefit Payment 21
Designated Beneficiaries 22
Payment to Substitute Beneficiaries 22
Payment With Respect to Incapacitated Participants or
Beneficiaries 23
Final Court Orders 24
Rollover Distributions 24
ARTICLE 7 25
Withdrawals During Employment 25
Withdrawal From Salary Deferral Contribution Account 25
Loans to Participants 26
ARTICLE 8 29
Rehired Employee or Participant 29
Rehired Employee or Participant 29
Reinstatement of Remainders 29
ARTICLE 9 29
Maximum Contributions 29
Contribution Limitations 30
Participant Covered by Defined Contribution Plan Only 30
Participant Covered by Defined Contribution Plan
and Defined Benefit Plan 31
ARTICLE 10 32
Plan Administrator 32
Plan Administrator's Duties 32
Action by Plan Administrator 34
Information Required for Plan Administration 34
Decision of Plan Administrator Final 35
Review of Benefit Determinations 35
Uniform Rules 35
Plan Administrator's Expenses 35
Interested Plan Administrator 36
Resignation or Removal of Plan Administrative 36
Committee Members
Indemnification 36
ARTICLE 11 36
Relating to the Employers 36
Action by Employers 36
Additional Employers; the Valhi Companies 36
Restrictions on Reversions 37
ARTICLE 12 38
Amendment, Termination or Plan Merger 38
Amendment 38
Termination 38
Plan Merger 39
Continuation by a Successor or Purchaser 39
Notice to Participants of Amendments, 40
Terminations or Plan Mergers
Vesting and Distribution on Termination 40
ARTICLE 13 40
General Provisions 40
Examination of Plan Documents 40
Notices 40
Nonalienation of Plan Benefits 40
No Employment Guarantee 41
Participant Litigation 41
Successors 41
Adequacy of Evidence 41
Gender and Number 42
Waiver of Notice 42
Applicable Law 42
Severability 42
Fiduciary Responsibilities 42
Highly Compensated Employees 42
Family Aggregation Rules 44
Supplements 44
Leased Employees 44
ARTICLE 14 44
Top-Heavy Plan Rules 44
Key Employees 44
Top-Heavy Determinations 45
Aggregation of Plans 46
Top-Heavy Rules 46
SUPPLEMENT A 48
NATIONAL CABINET LOCK, INC.
CONTRIBUTORY RETIREMENT PLAN
ARTICLE 1
Introduction
1.1 History; Purpose of the Plan; Effective Date. This National Cabinet
Lock, Inc. Contributory Retirement Plan (the "plan") is effective as of
January 1, 1994 (the "effective date"). The plan is maintained by National
Cabinet Lock, Inc. (the "company"). The purpose of the plan is to enable
eligible employees of the company and eligible employees of the company's
subsidiaries and other related companies which adopt the plan with the company's
consent to accumulate funds and share in the profits of such adopting employers,
and thereby assist such employees in providing for their future security, and to
assist in providing plan participants with retirement benefits. The plan was
originally established effective July 1, 1982, was subsequently amended and
restated from time to time, and the provisions hereof constitute an amendment
and restatement of the plan, as previously amended.
1.2. Plan Administrator; Plan Year. The plan is administered by a plan
committee whose members shall be appointed by the company (the "plan
administrator"). The duties and responsibilities of the plan administrator are
described in Article 10 of the plan. The plan is administered on the basis of a
plan year which begins each year on January 1 and ends on the next following
December 31.
1.3. The Trust. The assets of the plan are held and invested by one or
more trustees (the "trustee") and may be held and invested by one or more
investment managers or insurance institutions acting and appointed for such
purposes in accordance with one or more trust agreements (the "trust") which
implement and form a part of the plan. Reference to the trust fund shall
include all assets including any insurance policies held by the trustee,
investment managers, and insurance institutions in accordance with the trust and
this plan.
1.4. The Employers. With the consent of the company, the plan may be
adopted in accordance with the provisions of section 11.2 by any subsidiary of
the company or any related company for the benefit of its eligible employees.
The company and its subsidiaries and related companies that adopt the plan are
referred to herein collectively as the "employers" and individually as an
"employer".
ARTICLE 2
Participation
2.1. Participation. Each employee of an employer will become a
participant in the plan as of the effective date or any January 1, April 1, July
1 or October 1 thereafter if he meets all of the following requirements:
(a) He is a "covered employee" (that is, he is a salaried or hourly
employee, exclusive of any such employee who is covered under a collective
bargaining agreement between the employer and such employee's collective
bargaining representative which does not provide for his participation in
the plan);
(b) He has completed one year of eligibility service (as defined in
section 2.2);
(c) He has attained age 20 years; and
(d) He has filed a written election to participate in the plan
effective as of such date with the plan administrator on such forms, in
such manner and at such time as the plan administrator shall require, which
forms shall evidence such employee's agreement (until subsequently modified
by him in accordance with section 4.3) to have contributions made on his
behalf as provided in section 4.1 of the plan and his authorization of his
employer to reduce his compensation accordingly.
During a period of employment with the employer while a participant is making
contributions to the plan as described in section 4.1, a participant shall be
deemed for all purposes of the plan to be an "active participant." During all
other periods of participation a participant shall be considered an "inactive
participant." Except as provided in section 3.2, only active participants are
entitled to share in employer contributions or make participant contributions.
Beneficiaries of deceased participants will be treated as inactive participants
for purposes of the plan although such beneficiaries may not designate
additional beneficiaries.
2.2. Eligibility Service. An employee of an employer shall be credited
with one year of eligibility service if he completes 1,000 or more hours of
service (as defined in section 2.3) in the twelve consecutive month period
commencing on the date his employment with the Valhi Companies (as defined in
section 11.2) commenced or if such employee does not complete 1000 hours of
service during such period, he shall be credited with one year of eligibility
service if he completes 1000 hours of service during any plan year following
such date.
2.3. Hours of Service. With respect to any employee of the Valhi
Companies, the term "hour of service" means:
(a) Each hour for which an employee is directly or indirectly
compensated or entitled to be compensated for his performance of duties for
any Valhi Company as an employee (with each overtime hour being taken into
account as if it were a normal work hour);
(b) Each hour for which an employee is directly or indirectly
compensated or entitled to be compensated by a Valhi Company with respect
to a period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacitation (including disability), layoff, military
duty or leave of absence (as defined in section 2.4); provided, however,
that not more than 501 hours of service shall be credited to an employee on
account of any single continuous period during which he performs no duties;
(c) Each other hour required by federal law to be counted as an "hour
of service," including each such hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by a Valhi Company;
provided, however, that not more than 501 hours of service shall be
credited for payments of back pay, to the extent that such back pay is
awarded for a period of time during which the employee did not or would not
have performed duties as an employee; and
(d) Each hour for which an employee is on a maternity or paternity
leave of absence in accordance with subsection 2.4(b), but only for
purposes of preventing the employee from incurring a one-year break in
service and only if the employee timely furnishes to the plan administrator
such information as it may reasonably require to establish that his absence
from work was due to a maternity or paternity leave of absence as defined
in subsection 2.4(b) and the number of days for which there was an absence;
provided, however, that not more than 501 hours of service shall be
credited by reason of a maternity or paternity leave of absence.
Compensated hours described in subsection (b) above shall be determined by
multiplying the number of scheduled work days during the applicable period for
which the employee is compensated by the number of hours in the average
scheduled work day (based on the scheduled work week for his job classification
then in effect, provided, however, that in the case of an employee without a
regular work schedule, such hours shall be computed on the basis of a 40 hour
work week). Hours described in subsection (d) next above for employees on
maternity or paternity leave of absence shall be determined in the same manner
as compensated hours described in subsection (b) next above. In determining
hours of service, hours shall be credited for the period in which such duties
were performed (regardless of when payment is due) or for which such
compensation was paid; provided that hours of service credited under subsection
(d) next above for a maternity or paternity leave of absence shall be credited
to the year in which such leave begins if such hours are required to prevent a
one-year break in service from occurring in such year, or if not so required in
that year, such hours shall be credited in the immediately following year. In
construing the foregoing provisions of this section, ambiguities shall be
resolved in favor of crediting employees with hours of service.
2.4. Leave of Absence. A "leave of absence" as used in the plan means:
(a) A leave of absence required by law or granted by a Valhi Company
on account of service in military or governmental branches described in any
applicable statute granting reemployment rights to employees who enter such
branches, or any other military or governmental branch designated by the
company;
(b) A leave of absence for any period the employee is absent from
work by reason of the employee's pregnancy, the birth of the child of the
employee, the placement of a child with the employee in connection with the
adoption of the child by the employee or the caring for the child for a
period beginning immediately after such birth or placement; and
(c) Any other absence from active employment with a Valhi Company
that is approved by such Valhi Company and not treated by it as a
termination of employment.
Leaves of absence granted by a Valhi Company will be governed by rules uniformly
applied to all employees of that Valhi Company similarly situated.
2.5. Notice of Participation. Each employee will be notified of the date
he becomes a plan participant, and each participant and other person receiving
benefits under the plan will be furnished with a copy of a summary plan
description.
ARTICLE 3
Employers' Contributions
3.1. Employers' Contributions. Subject to the conditions and limitations
of this Article 3, Article 5 and Article 9, for each plan year each employer
will make a contribution under the plan on behalf of participants in an amount
as is determined in accordance with section 3.2 below. Such contributions shall
be definitely determined prior to the end of the plan year to which they pertain
or as soon thereafter as practicable. In any event employer contributions shall
be determined and shall be paid to the trustee no later than the time for filing
the employer's federal income tax return for such plan year, including any
extensions of such time period. Plan participants shall be informed of the
amount of the employer's contribution each year or the manner in which such
contribution will be determined by such means of communication as the employer
may deem appropriate. In no event will the employer's contribution for any
plan year exceed the amount deductible by the employer for federal income tax
purposes for the taxable year of the employer during which such plan year ends
except to the extent that such contribution is deductible for such purposes for
the taxable year of the employer during which such plan year begins.
3.2. Calculation of Employers' Contributions. Each employer's
contribution for any plan year shall equal the sum of the amounts described in
subsections (a) and (b) below:
(a) Commencing with such plan year as an employer (other than the
company, unless the company intends to make additional contributions under
this subsection in addition to the contributions required of the company
below in this subsection) in its discretion determines to commence
contributions under this subsection, for each plan year that employer will
contribute to the plan such amount, if any, as shall be determined by
resolution of its Board of Directors. Any such resolution shall specify
the amount of the contributions or a definite basis or formula by which the
contribution can be determined within a reasonable time after the end of
that plan year. Such contributions shall be allocated as specified by the
Board of Directors of the employer in one of the following manners:
(i) pro rata to active participants' accounts as of the last day
of the plan year for which they are made based upon each participant's
earnings (as defined in section 4.4) from such employer for such year,
(ii) pro rata to active participants accounts as of the last day
of the plan year for which they are made (or the last date of each pay
period in such year if the resolution establishing the matching
contribution amount is adopted before the beginning of such year)
based upon each active participant's salary deferral contributions (as
defined in section 4.1 below) with respect to such employer; or
(iii) pro rata to active participants' and inactive
participants' accounts as of the last day of the plan year for which
they are made based upon each such participant's earnings from such
employer for such year.
Notwithstanding the foregoing, the company's contribution provided for
below for each plan year shall be allocated pro rata to active
participants' accounts as of the last day of the plan year for which
they are made based upon each active participant's salary deferral
contributions from the company which do not exceed six percent of the
participant's earnings for such year from the company (such salary
deferral contributions up to six percent of earnings are referred to
herein as the participant's "basic contributions"). The company's
contribution with respect to each active participant employed by it
for a plan year shall be an amount equal to the lesser of 100 percent
of the participant's basic contributions for the year, or that
percentage of the participant's basic contributions for the year equal
to the percentage, not in excess of 100%, obtained by dividing an
amount equal to five percent of the company's adjusted before-tax
current profits, if any, for the year by the aggregate of the basic
contributions of all participants employed by the company for the
year. The adjusted before-tax current profits of the company for a
year shall mean the before-tax current profits, if any, of the company
for the year, as determined by the company's Board of Directors
without regard to any charges for interest expense, and without regard
to any dividends received from any subsidiary of the company, but with
regard to any amounts reasonably accrued and expensed for
contributions to this plan for such year.
(b) For each pay period of an employer which ends during a plan year,
each employer will contribute to the plan 100 percent of the salary
deferral contributions, if any, elected in accordance with section 4.1 by
each active participant employed by it for that pay period.
Each employer's contributions under the plan to be made in accordance with
subsection 3.2(b) for any pay period shall be paid to the trust fund (as
described in section 1.3) implementing the plan, without interest, as soon as
practicable after the end of that pay period, but in any event within 30 days
after the end of the plan year in which such pay period ends. Each employer's
contributions under the plan to be made in accordance with subsection 3.2(a) for
a plan year shall be made no later than the time prescribed by law for filing
the company's federal income tax return for its fiscal year coinciding with the
plan year for which such contributions are made, including any extensions of
time thereof.
3.3. Verification of Employers' Contributions. The certificate of an
independent accountant selected by the company as to the correctness of any
amounts or calculations relating to the employers' contributions under the plan
for any plan year shall be conclusive on all persons.
3.4. Contribution Percentage Test Limitation on Employer Matching
Contributions. In addition to being subject to the deduction limitation set
forth in section 3.1 above, and the contribution limitations set forth in
sections 9.2 and 9.3, employer contributions under subsection 3.2(a) other than
under subsection 3.2(a)(iii) ("employer matching contributions"), unless subject
to the nondiscrimination requirements of Section 401(k) of the Code as a
"qualified nonelective contribution", as defined therein, shall be subject to
the nondiscrimination limitations of Section 401(m) of the Code. Employer
matching contributions shall be adjusted each plan year by the plan
administrator as provided below in this section, by making the least adjustment
necessary, so that either:
(a) The contribution percentage (as described below) for the group of
eligible highly compensated employees (as defined in section 13.13 below)
shall not exceed 125 percent of the contribution percentage for all other
eligible employees for such plan year; or
(b) The contribution percentage for the group of eligible highly
compensated employees shall not exceed the contribution percentage for all
other eligible employees for such plan year by more than two percentage
points, and the contribution percentage for eligible highly compensated
employees shall not exceed 200 percent of the contribution percentage for
all other eligible employees.
The "contribution percentage" for a specified group of eligible employees for
any plan year shall be the average of the ratios (computed separately, to the
nearest one-hundredth of one percent, for each eligible employee in such group)
of employer matching contributions for each eligible employee in such group for
such plan year to the eligible employee's compensation (as defined in Section
414(s) of the Code, as modified by Section 414(s)(2) thereof) for such plan
year. A matching contribution will be taken into account for a given plan year
only if (i) it is made on account of the employee's salary deferral
contributions for that plan year, (ii) it is allocated to the participant's
account during that plan year and (iii) it is paid to the trust by the due date
for the contribution to qualify for a tax deduction on the employer's federal
tax return. A matching contribution that does not meet the foregoing
requirements will not be tested under Section 401(m) of the Code but must
separately satisfy Section 401(a)(4) of the Code for the plan year of allocation
as if it were the only employer allocation for that plan year. Contributions
allocated to the accounts of eligible participants under section 4.1 ("salary
deferral contributions") during such plan year which meet the vesting
requirements and withdrawal restrictions of Sections 401(k)(2)(B) and (C) of the
Code may be taken into account in satisfying either subsection 3.4(a) or (b)
above, provided that the salary deferral contributions satisfy the requirements
of Section 401(k)(3) of the Code both with and without the inclusion of
contributions used to satisfy the requirements of this section. Salary deferral
contributions cannot be used to satisfy the requirements of this section if the
effect is to increase the difference between the actual contribution percentage
of highly compensated eligible employees and that of other eligible employees.
Salary deferral contributions which are used to satisfy this section cannot be
taken into account to satisfy the requirements of section 4.2. An adjustment
shall be made hereunder only if neither subsection (a) nor (b) above is
satisfied. If any adjustment for a plan year is required hereunder, the excess
for such plan year of the aggregate amount of employer matching contributions
over the maximum amount of such contributions permitted under the limitations of
this section 3.4 (determined first by reducing aggregate contributions made on
behalf of highly compensated employees in the order of their contribution
percentages beginning with the highest of such percentages), the nonvested
portion of such excess employer contributions shall be forfeited by the highly
compensated employee or employees, as applicable, and such amount or amounts
shall be reallocated among the remaining active participants in the plan whose
contributions were not reduced pursuant to this section 3.4 in the same manner
in which employer contributions under subsection 3.2(a) were allocated for such
plan year. The vested portion of any such excess employer matching
contributions shall be distributed to the highly compensated employee or
employees, along with any income (or loss) allocable thereto. Allocable income
will include allocable income for the plan year and may include the period
between the end of the plan year and the date of distribution of any excess
contributions. Income allocable to excess contributions is determined by
multiplying the total income attributable to employer matching contributions for
the applicable period by a fraction, the numerator of which is the amount of the
participant's excess contributions and the denominator which is the
participant's employer contribution account balances as of the date of
distribution minus income allocable to such account for the applicable period
plus any losses allocated to the account for the applicable period. The
distribution of such excess aggregate contributions will be made on the basis of
the respective portions of such amounts that are attributable to each highly
compensated employee. Such corrective distribution shall be accomplished as
soon as practicable following the determination of excess contributions, but in
any event by the end of the plan year following the end of the plan year with
respect to which such contributions were made. If the company maintains two or
more plans that are treated as a single plan for purposes of Sections 401(a)(4)
or 410(b) of the Code, all employer matching contributions are to be treated as
made under the same plan for purposes of Sections 401(a)(4), 410(b) and 401(m)
of the Code. For purposes of determining the amount of excess contributions
under the contribution percentage test in this section 3.4, the compensation and
contributions of highly compensated employees who are either five percent owners
or among the ten most highly compensated employees includes the compensation and
contributions of their family members (as defined at section 13.13). Each group
of family members will be treated as one highly compensated employee and the
contribution percentage ratio for the group will be determined by combining the
compensation and employer matching contributions of all eligible family members.
This ratio will then be reduced, if required, in accordance with the procedure
set forth above for other highly compensated employees and the resulting excess
contributions will be allocated to the family members in proportion to their
respective employer matching contributions and other contributions combined to
determine the contribution ratio for the family group.
ARTICLE 4
Salary Deferral and Participant Contributions
4.1. Salary Deferral Contributions. Each active participant may elect to
defer receipt of his compensation in an amount equal to not less than one nor
more than ten percent (or such lower maximum percentage as determined by the
plan administrator for any plan year) of his earnings for such plan year, in one
percent increments, and his employer shall, in accordance with subsection
3.2(b), contribute the amount of such salary deferral to the plan as a salary
deferral contribution; provided, that a participant's aggregate salary deferral
contributions to this plan may not exceed $9,240 (or such other maximum amount
as may be permitted from time to time by the Secretary of Treasury or his
delegate or by law) or such lesser amount as may be determined by the plan
administrator in order to comply with section 4.2 below, in any calendar year.
The salary deferral contributions made on behalf of a participant and the
earnings thereon shall be fully vested and nonforfeitable at all times. Each
participant shall initially elect his rate of salary deferral pursuant to the
participant's written election described in subsection 2.1(d) which election
shall be effective as of the first day of any calendar quarter which commences
at least 30 days following receipt of the plan administrator of such election.
4.2. Actual Deferral Percentage Test Limitation on Salary Deferral
Contributions. In addition to being subject to the contribution limitations of
sections 9.2 and 9.3, salary deferral contributions shall be subject to the
nondiscrimination limitations of Section 401(k) of the Code. For this purpose,
salary deferral contributions elected under section 4.1 shall be adjusted each
plan year by the plan administrator as provided below in this section, by making
the least adjustment necessary, so that either:
(a) The actual deferral percentage (as described below) for the group
of highly compensated participants (as described below) shall not exceed
125 percent of the actual deferral percentage for all other participants
for such plan year; or
(b) The actual deferral percentage for the group of highly
compensated participants shall not exceed the actual deferral percentage
for all other participants for such plan year by more than two percentage
points, and the actual deferral percentage for highly compensated
participants shall not exceed 200 percent of the actual deferral percentage
for all other participants.
The "actual deferral percentage" for a specified group of participants for any
plan year shall be the average of the ratios (computed separately for each
participant in such group) of the salary deferral contributions (and any other
employer contributions which meet the withdrawal restrictions and vesting
requirements of Sections 401(k)(2)(B) and (C) of the Code) for each participant
in such group for such plan year to the participant's compensation (as defined
in Section 414(s) of the Code) earned while eligible to participate in the plan
for such plan year. A participant shall be considered a "highly compensated
participant" for any plan year in which he is a "highly compensated employee"
within the meaning of Section 414(q) of the Code. An adjustment shall be made
hereunder only if neither subsection (a) nor (b) above is satisfied. If any
adjustment is required hereunder the maximum amount of participant salary
deferral contributions that may be elected by each highly compensated
participant shall be reduced by subtracting from ten percent the smallest
percentage to the one/one hundredth of a percent reduction which will cause
either subsection (a) or (b) above to be satisfied and by reducing the salary
deferral contributions elected by all highly compensated participants which are
in excess of such reduced maximum percentage to such reduced maximum percentage.
The amount by which a participant's salary deferral contributions are reduced
hereunder shall be paid to such participant (along with any income allocable
thereto) as soon as practicable following such determination, but in any event
by the end of following plan year with respect to which such salary deferral
contributions were made. For purposes of determining who is a highly
compensated employee for any given determination period, the company may elect
to make the calendar year calculation election within the meaning of Treas. Reg.
Section 1.414(q)-IT Q&A 14(a)(3)(b) by giving written notice to the plan
administrator; provided, however, such election must apply to all plans,
entities and arrangements of the company and members included in its controlled
group for purposes of determining who is a highly compensated employee under
Section 414(q) of the Code.
4.3. Variation, Discontinuance and Resumption of Participant
Contributions. Effective as of the first day of any calendar quarter which
commences at least 30 days following receipt by the plan administrator of an
election form satisfactory to the plan administrator for this purpose, a
participant eligible to make salary deferral contributions may revise the rate
that such contributions are made by payroll deduction. A participant may elect
to discontinue making all such contributions as of any regularly scheduled
payday by filing an election form with the plan administrator at least ten
regularly scheduled work days prior to such payday. A participant who has
discontinued making contributions hereunder may resume making such contributions
by filing an election form with the plan administrator at least 30 days prior to
the first day of any calendar quarter as of which date such contributions shall
resume; provided that a participant may not resume making salary deferral
contributions for one year following the date of discontinuance of such
contributions. Any elections made in accordance with this section shall be made
on a form provided by the plan administrator for such purposes and shall be
signed by the participant.
4.4. Earnings. For purposes of the plan, a participant's "earnings" means
his total compensation for services rendered to the employers as a covered
employee not in excess of $150,000 (or such other maximum amount as may be
permitted pursuant to Section 401(a)(17) of the Code or from time to time by the
Secretary of the Treasury or his delegate or by law) for a plan year, including
overtime and bonuses but excluding:
(a) Any noncash compensation and any amounts contributed by the
employers for the participant's benefit to, or paid to the participant
under, this plan or any other profit sharing, pension, stock bonus or other
retirement or benefit plan maintained by the employers; provided that any
salary reduction amounts elected by the participant and credited on his
behalf to a cafeteria plan (as defined in Section 125(c) of the Code) or a
qualified cash or deferred arrangement (as defined in Section 401(k)(2) of
the Code) shall be included in his earnings;
(b) Any reimbursements for travel expenses, relocation allowances,
educational assistance allowances or other special allowances and awards;
(c) Any income realized for federal income tax purposes as a result
of (i) group life insurance, (ii) the grant or exercise of an option or
options to acquire shares of stock of any Valhi Company, the receipt of a
cash appreciation payment in lieu of the exercise of such an option or
options, the disposition of shares acquired on exercise of such an option,
or (iii) the transfer of restricted shares of stock or restricted property
of a Valhi Company, or the removal of any such restrictions;
(d) Any compensation received while on a leave of absence from active
work and any severance pay or unused vacation pay paid as a result of the
participant's termination of employment; and
(e) Any compensation paid or payable to the participant, or to any
governmental body or agency on account of the participant, under the terms
of any state, federal or foreign law requiring the payment of such
compensation because of the participant's voluntary or involuntary
termination of employment with any Valhi Company.
In determining a participant's earnings for purposes of the foregoing, the
family aggregation rules under Section 414(q) (6) of the Code shall apply,
except that in applying such rules, the term "family" shall include only the
spouse of the participant and any lineal descendants of the participant who have
not attained age 19 before the end of the plan year for which earnings are being
determined.
4.5. Rollover Contributions. The plan administrator may in its discretion
permit any covered employee to make a qualifying rollover contribution to the
plan. A "qualifying rollover contribution" means the contribution to the plan
by an employee of:
(a) An eligible rollover distribution (as defined in Section
402(c)(4) of the Code); or
(b) A rollover contribution (as defined in Section 408(d)(3) of the
Code).
A qualifying rollover contribution to be made by a covered employee must be made
to the trust, in care of the plan administrator, by not later than the sixtieth
day following the day upon which the employee received the rollover distribution
or rollover contribution with respect to which the qualifying rollover
contribution is to be made. The plan administrator shall refuse to permit the
contribution to the plan pursuant to subsection (a) next above of property other
than money (and shall require instead that the property be sold and the proceeds
contributed). If an employee makes a qualifying rollover contribution on a date
other than an accounting date (as defined in section 5.2), a segregated account
shall be established on such date on his behalf until the next accounting date
under the plan to reflect the income, losses, appreciation and depreciation
attributable thereto until such accounting date. A participant's qualifying
rollover contribution (as adjusted to reflect the investment experience of a
segregated account, if initially credited to a segregated account) shall be
credited to the participant's rollover account (as defined in subsection 5.1(c))
as of the accounting date coincident with or next following the date the
contribution is made.
4.6. Transferred Benefits. If a covered employee had previously
participated in any other qualified pension, profit sharing, stock bonus or
other retirement or employee benefit plan and such other plan permits the
transfer to this plan of the vested portion of the covered employee's benefits
under such other plan, and if so directed by the plan administrator in its
discretion, the trustee shall accept a transfer of cash to this plan equal to
the vested benefits of such employee under such other plan which are being
transferred to this plan. No amounts shall be transferred to this plan from any
other plan if the accrued benefit payable to the employee under such other plan
must be provided in the form of a qualified joint and survivor annuity or if a
qualified pre-retirement survivor annuity must be provided to the surviving
spouse of such employee with respect to such accrued benefit. If the date on
which such transfer is received by the trustee is not an accounting date, a
segregated account shall be established on such date on behalf of the covered
employee until the next accounting date under the plan to reflect the income,
losses, appreciation and depreciation attributable thereto until such accounting
date. The participants transferred benefits (as adjusted to reflect the
investment experience of a segregated account, if initially credited to a
segregated account) shall be credited to his rollover account as of the
accounting date coincident with or next following the date the transfer is made.
4.7. Restricted Participation with Respect to Rollover Contributions and
Transferred Benefits. For purposes of the plan, a participant with respect to
whom a qualifying rollover contribution or a transfer of benefits is made in
accordance with section 4.5 or 4.6, respectively, shall not be eligible to make
salary deferral contributions or have employer contributions made on his behalf
before becoming a participant for all purposes of the plan in accordance with
section 2.1.
ARTICLE 5
Plan Accounting and Investment Funds
5.1. Participant Account Balances. The plan administrator will establish
and maintain the following separate accounts with respect to plan participants:
(a) Salary Deferral Contribution Account. A "salary deferral
contribution account" shall be maintained on behalf of each participant.
With respect to any plan participant, this account shall represent the
amount of salary deferral contributions made on the participant's behalf
and the earnings, expenses, appreciation and depreciation attributable to
such contributions under the plan.
(b) Employer Contribution Account. An "employer contribution
account" shall be maintained on behalf of each participant. With respect
to any plan participant, this account shall represent the portion of the
employer contributions (exclusive of salary deferral contributions) and any
remainders which are allocated for his benefit and the earnings, expenses,
appreciation and depreciation attributable to the employer contributions
and remainders under the plan.
(c) Rollover Account. A "rollover account" will be maintained in the
name of each participant with respect to whom a rollover contribution or
transfer of benefits (as described in sections 4.5 and 4.6) is made which
will reflect the portions of his rollover contributions and transferred
benefits from another plan attributable to deductible contributions to that
plan, if any, and the income, losses, appreciation and depreciation
attributable thereto.
(d) Voluntary Contribution Account. A "voluntary contribution
account" shall be maintained for each participant to record the amount of
nondeductible contributions made pursuant to any prior plan.
The maintenance of separate account balances shall not require physical
segregation of plan assets with respect to each account balance. The accounts
maintained hereunder represent the participants' interests in the plan and trust
and are intended as bookkeeping account records to assist the plan administrator
and the trustee in the administration of this plan. The plan administrator may
maintain such other accounts in the name of participants as it considers
desirable. Any reference to a participant's "accounts" or "account balances"
shall refer to all of the accounts maintained in the participant's name under
the plan.
5.2. Accounting Dates. An "accounting date" is each March 31, June 30,
September 30, and December 31, or such other dates not less frequently than
quarterly selected by the plan administrator (including daily dates); the date
of any termination or partial termination of the plan, the date of any merger or
consolidation of this plan with any other plan, and any other date selected by
the plan administrator or the trustee as an "interim accounting date" as of
which all account balances shall be adjusted in accordance with section 5.7.
5.3. Date of Crediting Contributions and Remainders. All employer
contributions and participant contributions made for any plan year will be
considered to have been made in cash and will be credited to the proper
participants' accounts on the accounting date which coincides with the end of
the plan year, regardless of when such contributions are actually paid to the
trust; provided, that if the trustee or an investment manager with respect to an
investment fund maintains participants' accounts and credits contributions
received more frequently than monthly, contributions invested in that investment
fund will be considered made and will be credited as provided in accordance with
the accounting rules in effect with respect to that investment fund. Remainders
are allocated as part of employer contributions as provided in section 6.3.
5.4. Allocation of Employer Contributions. Employer contributions and
remainders shall be allocated as of the end of each plan year to the employer
contribution accounts of plan participants who were employed either on the last
day of the plan year or during that plan year but who prior to the end of the
plan year died, retired or became permanently disabled (as defined in section
6.1).
5.5. Investment Funds. From time to time the plan administrator may cause
the trustee or an investment manager to establish one or more investment funds
for the investment and reinvestment of plan assets. The continued availability
of any investment fund is necessarily conditioned upon the terms and conditions
of investment management agreements and other investment arrangements. While
the plan administrator may arrange with the trustee and investment managers for
the establishment of investment funds, the continued availability of these funds
cannot be assured, nor is it possible to assure that the arrangements or the
investment funds managed by a particular investment manager or by the trustee
will continue to be available on the same or similar terms. Participants will
be informed from time to time of the availability of investment funds as they
are established or superseded. Any investment fund may be partially or entirely
invested in any common, commingled or collective trust fund, pooled investment
fund or mutual fund which is invested in property of the kind specified for that
investment fund.
5.6. Investment Elections. Except where plan administration requires a
shorter or longer period (such as when changes in plan trustees, custodians,
investment managers, etc., occur), as of each accounting date each participant
may elect, by giving written notice or authorized telephonic voice response to
the plan administrator at least 30 days (or such other period as the plan
administrator requires) in advance, in accordance with uniform rules established
by the plan administrator and on a form provided by it for this purpose, to have
his account balances as of that date (after all adjustments as of that date have
been made) and future contributions made by him or on his behalf (prior to any
subsequent election he may make) invested in accordance with his election
entirely in one of the investment funds or partially in each of two or more of
the investment funds (so that a multiple of 10% of each of his account balances
is invested as of such date in each investment fund). During any period for
which a participant has not made the above election, he will be considered to
have elected to have his account balances or his future contributions, or both,
as the case may be, invested entirely in a fund as the administrator may deem
appropriate. The plan administrator shall from time to time notify each trustee
or insurance company with custody of an investment fund of the aggregate amounts
to be invested in each investment fund in accordance with participants'
elections. All investment elections shall be in writing on forms, or
communicated through authorized telephonic voice response, as prescribed by the
plan administrator. Completion of any investment election by a participant,
whether in writing or communicated by telephonic voice response, shall
constitute an agreement by such participant to assume responsibility for the
risks of investment of the participant's accounts in accordance with such
investment election, it being expressly understood that all of the investment
funds involve some measure of investment risk including the risk of diminution
or loss of the principal amount of any investment. To the maximum extent
permissible under applicable law, all fiduciary responsibility with respect to
the allocation of a participant's accounts between the various funds shall be
considered to be delegated to the participant who directs the investment of his
or her contributions and accounts.
5.7. Adjustment of Participants' Accounts. As of each accounting date
(including any interim accounting date), the plan administrator shall adjust the
account balances of plan participants to reflect payments and withdrawals of
benefits, adjustments in the values of the trust fund and of the investment
funds, if any, and employers' and participants' contributions, as follows:
(a) First, charge to the proper accounts all payments, distributions,
or withdrawals made since the last accounting date and not previously
charged;
(b) Next, the accounts of each participant shall be credited with his
pro rata share of any increase, or charged with his pro rata share of any
decrease, since the immediately preceding accounting date, in the value of
the adjusted net worth (as defined below) of each investment fund in which
he has an interest as of that date (after taking into account any charges
in accordance with subsection (a) next above); and
(c) Finally, credit salary deferral contributions, employer
contributions, rollover contributions and transferred benefits made since
the last accounting date to the proper accounts of plan participants;
provided if an investment fund provides for daily investments and
valuations, this step shall be performed as a part of subsection 5.7(a)
above.
The "adjusted net worth" of an investment fund as of any date means the then net
worth of the investment fund as determined by the trustee, investment manager or
insurance company with custody of that investment fund in accordance with the
provisions of the applicable agreement with the trustee, investment manager or
insurance company, less an amount equal to the sum of any employer contributions
(including salary deferral contributions and remainders), rollover contributions
and transferred benefits not yet credited to participant accounts. Until
applied to reduce employer contributions in accordance with section 6.3, for-
feitures will be treated the same as participants' employer contribution
accounts and will be adjusted in accordance with (b) above.
5.8. Statement of Accounts. As soon as practicable after the last day of
each plan year, and at such other times as the plan administrator considers
desirable, each participant will be furnished with a statement reflecting the
condition of his accounts as of that date. No participant, except a member of
the plan administrative committee, shall have the right to inspect the records
reflecting the accounts of any other participant.
ARTICLE 6
Distribution of Account Balances
6.1. Retirement, Death or Disability. If a participant's employment with
the Valhi Companies is terminated by reason of his death, retirement after he
has attained 65 years of age, or permanent disability, the balance in his
accounts as at the accounting date coincident with or next following his termi-
nation date (after all adjustments required under the plan as of that date have
been made, but subject to any further adjustments required under the plan prior
to complete distribution of the participant's accounts) shall be fully vested
and nonforfeitable and shall be distributable to the participant or, in the
event of the participant's death, to his beneficiary, in accordance with section
6.4. "Permanent disability" means a disability caused by bodily injury,
disease, or mental condition which prevents the participant from engaging in his
usual and customary employment with the employers and in the opinion of a
licensed physician selected by the plan administrator, is likely to a persist
for the balance of the participant's life. A participant shall have a fully
vested and nonforfeitable interest in all his accounts on the date he attains
age 65.
6.2. Resignation or Dismissal. If a participant resigns or is dismissed
from the employ of the Valhi Companies before his retirement at or after age 65,
permanent disability, or death, the balance in his salary deferral contribution
account, rollover account and voluntary contribution account as of the
accounting date coincident with or immediately preceding his termination date
(after all adjustments required under the plan as of that date have been made,
but subject to any further adjustments required under the plan prior to complete
distribution of the participant's accounts), along with any contributions made
by him previously but not credited to an appropriate account, shall be fully
vested and nonforfeitable and shall be distributed to or for the benefit of the
participant in accordance with section 6.4. The portion of a participant's
employer contribution account, which is vested and nonforfeitable in accordance
with the vesting schedule set forth below based upon the balance of such account
as of the accounting date coincident with or immediately preceding the
participant's employment termination date (after adjustments required under the
plan as of that date have been made) will be distributable to or for the benefit
of the participant in accordance with section 6.4. The employer contribution
account balance of a participant to whom this section applies will be reduced to
the vested percentage thereof determined in accordance with the following
vesting schedule:
If the participant's His vested and
number of years of nonforfeitable
vesting service equals: percentage shall be:
------------------------ --------------------
Less than 1 year 0%
1 20%
2 40%
3 60%
4 80%
5 years or more 100%
For purposes of this Article, an employee shall be credited with a "year of
vesting service" for every plan year in which he has completed 1000 or more
hours of service (as defined in section 2.3) with the Valhi Companies.
6.3. Remainders. If a participant resigns or is dismissed from employment
with all of the Valhi Companies before the participant is fully vested in his or
her employer contributions account under the plan (and before the participant's
death or disability), the portion of the participant's employer contribution
account which is not vested shall be a "remainder". A remainder shall be
treated the same as other participants' accounts (subject to adjustment under
section 5.7 above) until the participant with respect to whom the remainder
arose incurs five consecutive one year breaks in service, at which time the
remainder shall be used to reduce the employer contribution. If the participant
with respect to whom the remainder arose is reemployed by an employer before the
participant incurs five consecutive one year breaks in service, the remainder
shall be reinstated as provided in section 8.2. A "one year break in service"
shall occur on the last day of any plan year in which a terminated employee or
participant does not complete more than 500 hours of service. If a rehired
participant subsequently resigns or is dismissed from the employ of the Valhi
Companies and the participant is not entitled to the full balance in his
employer contribution account, the amount to be distributed therefrom will be
determined in accordance with the following, notwithstanding the provisions of
Section 6.2:
(a) First, the amount of the distribution, if any, previously
received by the participant from the participant's employer contribution
account because of the participant's prior resignation or dismissal shall
be added to the balance in such account as of the accounting date
coincident with or next preceding the date of the participant's subsequent
termination of employment.
(b) Next, the amount determined under subsection (a) above shall be
multiplied by the vesting percentage applicable to the participant at the
participant's subsequent termination of employment.
(c) Finally, the amount determined under subsection (b) above shall
be reduced by the amount of the distribution previously received by the
participant from the participant's employer contribution account because of
the participant's prior resignation or dismissal.
The remaining portion of the participant's employer contribution account will be
treated as a remainder.
6.4. Method of Benefit Payment. A participant's account balances which
are distributable under section 6.1 or 6.2 shall be paid to or for the benefit
of the participant or his beneficiary by (i) payment in a lump sum, (ii) payment
in a series of substantially equal quarterly or annual installments over a
period of time not exceeding the lesser of (A) 30 years, or (B) the life
expectancy of the participant or, if the participant has designated a
beneficiary who is an individual, the joint life and last survivor expectancy of
the participant and his designated beneficiary (as determined by the plan
administrator in accordance with actuarial tables adopted by it for this
purpose), or (iii) a combination of such lump sum and installment payments.
Payment may be made in cash or property, or partly in each, provided that
property is distributed at its fair market value as of the date of distribution
as determined by the trustees. Notwithstanding the foregoing, if distribution
of a participant's accounts has not commenced prior to his death the
participant's accounts shall be distributed within five years of the date of his
death or as follows:
(a) If the participant's accounts are payable to or for the benefit
of a designated beneficiary who is an individual and such accounts are
distributed over a period beginning not later than one year after the date
of the participant's death (or such later date as the Secretary of the
Treasury may by regulations prescribe), then such accounts may be
distributed to such designated beneficiary over a period not exceeding the
lesser of 30 years or the beneficiary's life expectancy.
(b) If the participant's designated beneficiary is his surviving
spouse, distribution of the participant's accounts to such surviving spouse
need not begin until the date the participant would have attained age 70
1/2 years. If the surviving spouse dies before distributions to such
spouse begin, distribution of the participant's accounts pursuant to this
section 6.4 shall be made as if the surviving spouse were the employee.
6.5. Selection of Time and Manner of Benefit Payment. A participant may
elect the method of distribution of his benefits and, if he so desires, may
direct how his benefits are to be paid to his beneficiary. The plan
administrator shall select the method of distributing a participant's benefits
to him or his beneficiary if the participant has not filed a direction with the
plan administrator. Unless the participant elects to defer payment, payment of
a participant's benefits normally will be made within a reasonable period of
time after a participant's termination of employment, but not later than 60 days
after the end of the plan year in which occurs the later of the participant's
termination of employment or his attainment of age 65 years; provided that
payment of each participant's account balances must commence no later than April
1 of the calendar year following the calendar year in which he attains age 70
1/2 years (the "required beginning date"). Distributions made in any calendar
year beginning with or following the calendar year which contains the
participant's required beginning date shall satisfy the minimum distribution
requirements of Section 401(a)(9) of the Code and the regulations promulgated
thereunder. In addition, notwithstanding anything in this Article 6 to the
contrary, if at any time a participant's vested account balances exceed or ever
exceeded $3,500, no amount shall be distributable to the participant prior to
the date he attains age 65 years, without his consent. The plan administrator
may distribute a participant's account balance in a lump sum without the
participant's consent before the commencement of the distribution of benefits if
either the vested portion of the participant's accounts is not greater than
$3,500 or distribution commences after the participant attains age 65 years. If
written consent of the participant to a distribution is required, such consent
must be filed with the plan administrator not more than 90 days before the date
of such distribution.
6.6. Designated Beneficiaries. A participant may from time to time
designate a beneficiary or beneficiaries to whom the participant's benefits will
be distributed in the event of the participant's death prior to complete payment
of his benefits under the plan. A participant may designate contingent or
successive beneficiaries and may name individuals, legal persons or entities,
trusts, estates, trustees or other legal representatives as beneficiaries.
Notwithstanding the foregoing or any beneficiary designation filed by a
participant, if a participant is married at the date of his death, the
participant's surviving spouse will be his designated beneficiary for all
purposes of the plan unless the surviving spouse consents in writing to the
participant's designation of another beneficiary. Beneficiary designations must
be completed and filed with the plan administrator during the participant's
lifetime. A beneficiary designation properly completed and filed will cancel
all such designations filed earlier. The consent of a surviving spouse to the
participant's designation of another beneficiary must be in writing, must
acknowledge the effect of such designation, and must be witnessed by a plan
representative or a notary public. In addition, such designation of another
beneficiary may not be changed without further spousal consent unless the
consent of the spouse expressly permits further designations without any
requirement of further consent.
6.7. Payment to Substitute Beneficiaries. If benefits remain to be paid
with respect to a plan participant at a time when the plan administrator is
unable to locate the participant, or his beneficiary or beneficiaries designated
in accordance with section 6.6, or following the death of the participant and
such beneficiaries, and if the participant failed to designate one or more other
beneficiaries in the manner described in section 6.6, then the plan
administrator shall cause the benefits for such participant to be distributed or
paid to the person or persons who can be located and agree to accept such
amounts within the applicable priority classification set forth below.
Participants and designated beneficiaries are required to maintain a current
post office address on file with the plan administrator by notifying the plan
administrator of such address in care of the employer. A substitute beneficiary
will not be determined under this section with respect to a missing participant
or missing designated beneficiary unless the participant or designated
beneficiaries, as the case may be, have failed to claim the participant's
account balances or notify the plan administrator of their whereabouts within
three years after the plan administrator notifies such participant or
beneficiaries at their last post office addresses filed with the plan
administrator. Such notice shall describe the amounts to which the participant
or the beneficiaries are entitled and shall describe the substitution procedures
of this section. In disposing of a participant's benefits in accordance with
this section, the plan administrator shall cause the participant's benefits to
be distributed in accordance with the following priority classifications:
(a) First Priority. A participant's benefits, in the case of a
missing plan participant, will first be distributed to the participant's
designated beneficiary or beneficiaries.
(b) Second Priority. A participant's benefits will next be
distributed or paid to the participant's spouse if the whereabouts of such
spouse is known.
(c) Third Priority. The participant's benefits will next be applied
by the payment of the participant's account balances to one or more of the
participant's relatives by blood, marriage or adoption in such proportions
as the plan administrator decides.
(d) Fourth Priority. After unsuccessful attempts have been made by
the plan administrator to locate persons described in the priority
categories set forth above, the benefits of the participant or of any
beneficiary will be disposed of in any manner permitted by law which the
plan administrator considers to be fair and equitable.
Notwithstanding the foregoing, if a participant's benefits cannot be paid as
provided above they shall be forfeited by allocating such benefits to the other
participants, but such benefits nevertheless will be reinstated if a claim is
made by the participant or beneficiary.
6.8. Payment With Respect to Incapacitated Participants or Beneficiaries.
If any person entitled to benefits under the plan is under a legal disability or
in the plan administrator's opinion is incapacitated in any way so as to be
unable to manage his financial affairs, the plan administrator may direct the
payment of such benefits to such person's legal representative or to a relative
or friend of such person for such person's benefit, or the plan administrator
may direct the application of such benefits to the benefit of such person.
Payments made in accordance with this section shall discharge all liabilities
for such payments under the plan.
6.9. Final Court Orders. Notwithstanding the other provisions of this
Article 6, if the trustee is required by a final court order to distribute the
benefits of a participant other than in the manner required under the plan, then
the trustee shall cause the participant's benefits to be distributed in a manner
consistent with such final court order. The trustee shall not be required to
comply with the requirements of a final court order in an action in which the
trustee, the plan administrator, the plan or the trust was not a party, except
to the extent such order is a qualified domestic relations order (as defined in
Section 414(p) of the Code).
6.10. Rollover Distributions. Notwithstanding any provision of the plan
to the contrary that would otherwise limit a distributee's election under this
section 6.10, a distributee may elect, at the time and in the manner prescribed
by the plan administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover. For purposes hereof:
(a) An "eligible rollover distribution" is any distribution of all or
any portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include (i) any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annual) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more, (ii) any distribution to the extent
such distribution is required under Section 401(a)(9) of the Internal
Revenue Code, and (iii) the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
(b) An "eligible retirement plan" is an individual retirement account
described in Section 408(a) of the Internal Revenue Code, an individual
retirement annuity described in Section 408(b) of the Internal Revenue
Code, an annuity plan described in Section 403(a) of the Internal Revenue
Code, or a qualified trust described in Section 401(a) of the Internal
Revenue Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(c) A "distributee" includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Internal Revenue Code, are distributees with regard
to the interest of the spouse or former spouse.
(d) A "direct rollover" is a payment by the plan to the eligible
retirement plan specified by the distributee.
ARTICLE 7
Withdrawals During Employment
7.1. Withdrawal From Salary Deferral Contribution Account. A participant
other than a former employee or beneficiary, who is experiencing a financial
hardship may request a withdrawal of all or any portion of the sum of the
contributions and transfers credited to such participant's salary deferral
contribution account and rollover account plus earnings on his rollover account.
The plan administrator will have discretion to grant or deny any such requests
for hardship withdrawals, subject to the following:
(a) Each request for financial hardship must describe the hardship
for which the withdrawal is requested.
(b) A withdrawal shall be considered on account of financial hardship
if it is necessary in light of the participant's immediate and heavy
financial need as described in (i) below and it is necessary to satisfy
such financial need, as described in (ii) below.
(i) A withdrawal will be on account of immediate and heavy
financial need only if it is on account of (A) unreimbursed medical
expenses incurred by the participant or the participant's spouse or
dependents; (B) purchase (excluding mortgage payments) of a principal
residence for the participant; (C) post-secondary education tuition
for the next 12-months of post-secondary education for the employee,
the employee's spouse, children or dependents; (D) the need to prevent
the eviction of the participant from the participant's principal
residence or the foreclosure on the mortgage of the participant's
principal residence; (E) the employee being judicially declared
bankrupt under the Federal Bankruptcy Act; or (F) such other purpose
deemed by the Commissioner of the Internal Revenue Service to
constitute immediate and heavy financial need.
(ii) A withdrawal will be necessary to satisfy the financial need
described in (i) above only if (A) the withdrawal does not exceed the
amount necessary to meet such financial needs; and (B) the participant
has obtained all distributions, other than hardship withdrawals, and
all nontaxable loans currently available under all plans maintained by
the Valhi Companies.
(c) In the event that the plan administrator grants a participant's
request for a hardship withdrawal, such participant shall not be permitted
to make salary deferral contributions under the plan until the first day of
the first plan year quarter coincident with or next following the date
which is twelve months from the date of withdrawal.
(d) Notwithstanding the provisions of section 4.1, the aggregate
salary reduction contributions to the plan and to any other plan maintained
by a Valhi Company for the calendar year immediately following the calendar
year in which the participant receives the hardship withdrawal shall not
exceed the excess of (i) the maximum amount specified in section 4.1 for
such year over (ii) the amount of such participant's salary reduction
contributions to this plan and to any other plan maintained by the Valhi
Companies in the calendar year in which the participant received the
hardship withdrawal.
All withdrawals under this section shall be made as of an accounting date. A
request for a withdrawal must be filed with the plan administrator on a form
provided by the plan administrator at least 30 days in advance (or by such other
date as the plan administrator may require). The minimum withdrawal shall be
the lesser of $500 or the participant's aggregate account balances from which
the withdrawal may be made. The plan administrator may establish uniform and
nondiscriminatory rules or guidelines for responding to such requests as it
considers appropriate. Withdrawals under this section 7.1 may not be made more
frequently than once in any twelve consecutive month period.
7.2. Loans to Participants. While it is the primary purpose of the plan
to provide funds for participants when they leave the employer, it is recognized
under some circumstances it would be in the best interests of participants to
permit loans to be made to them. Accordingly, the plan administrator may direct
that a loan be made to a participant for such substantial purposes as the plan
administrator in its discretion may approve, subject to the following:
(a) Each request for a loan under this section must be by written
application to the plan administrator supported by such evidence as it may
request. No loan will be made to a participant unless the plan
administrator believes the loan is reasonably necessary for the purpose
intended. No loan shall be made to any participant who is a shareholder-
employee. A shareholder-employee means an employee who owns (or is
considered as owning within the meaning of Section 318(a)(i) of the
Internal Revenue Code) more than 5 percent of the outstanding stock of the
company during any year in which the company elected to be taxed as a small
business corporation under the Internal Revenue Code.
(b) Each loan must be evidenced by a note in a form furnished by the
plan administrator and must be secured by a pledge of the participant's
accounts.
(c) Each loan will bear interest at a reasonable rate established by
the plan administrator in a uniform and nondiscriminatory manner and
include any fees directly associated with its processing and
administration.
(d) The principal amount of each loan, when added to any other
outstanding loan balances of a participant under the plan and all other
plans of the employer, may not exceed the lessor of $50,000 or 50% of the
participants' vested account balances. The $50,000 limit above shall be
reduced by the excess of (1) the highest outstanding balance of all loans
from plans maintained by the employer during the 12-month period ending on
the day before the date on which the loan is made, over (2) the outstanding
balance of all loans from such plans on the date the loan is made. The
principal amount of each loan shall not be less than $1,000.
(e) Each loan will be for a term not exceeding five years and will be
payable in level payments due at least quarterly; provided that the term of
a loan may be for more than a period of five years where the loan is used
to acquire any dwelling unit which within a reasonable time is to be used
as a principal residence of the participant.
(f) If after any participant's benefit commencement date any loan
made to him or any part thereof, together with accrued interest thereon,
remains unpaid, the total of the unpaid balance or balances and accrued
interest shall be charged to the balances of the participant's accounts, as
otherwise adjusted under the plan as of that date. The distribution of a
participant's canceled note to him (or to his beneficiary in the event of
his death) shall be considered as a payment for purposes of the plan.
(g) Each note evidencing a loan to a participant shall be held on the
participant's behalf and shall be considered an investment of his accounts.
Accordingly, principal and interest payments on the note shall be credited
to such accounts on the participant's behalf.
(h) A participant may have only one loan outstanding at a time under
the plan and all loans shall be payable through payroll deduction each
payroll period, except as to employees on authorized leave pursuant to
Section 2.4 and such leave does not exceed twelve months.
(i) All administrative costs associated with the loan, to include but
not limited to loan origination fees and annual maintenance fees, shall be
deducted from the participant's account balances.
(j) The plan administrator may adopt such policies that it deems
necessary for the administration of this loan program.
(k) If after any participant's termination of employment with the
employers any loan made to the participant or any part thereof, together
with accrued interest thereon, remains unpaid, the total of the unpaid
balance or balances and accrued interest shall be charged to the balances
of the participant's accounts, as otherwise adjusted under the plan as of
that date. The distribution of a participant's canceled note to the
participant (or to the participant's beneficiary in the event of the
participant's death) shall be considered as payment for purposes of the
plan.
(l) A participant must obtain the consent of the participant's
spouse, if any, within the 90-day period before the time a loan is made and
the participant's account balances are used as security for a loan. A new
consent is required if any account balances are used for any increase in
the amount of security. The consent shall comply with the requirements of
section 6.6, but shall be deemed to meet any requirements contained in such
section relating to the consent of any subsequent spouse.
(m) The following events will constitute default on a loan: (i) the
failure to make an installment payment of the date on which it becomes due;
(ii) any other person (other than the plan trustee) acquires an interest in
the participant's account except as otherwise required by law; (iii) the
participant dies or becomes legally incompetent; or(iv) the participant's
employment with the employer is terminated for any reason, including
retirement, disability, resignation or discharge. Upon default, the plan
may foreclose on the loan at the earliest opportunity permitted by law and
the loan will, consequently, be treated as a taxable distribution at such
time. During the period, if any, between the date of the event
constituting default and the date of foreclosure, interest on the loan will
continue to accrue and shall be charged to the participant's account.
ARTICLE 8
Rehired Employee or Participant
8.1. Rehired Employee or Participant. If an employee or a participant who
has completed less than one year of vesting service terminates his employment,
incurs a one-year break in service and is subsequently reemployed by the Valhi
Companies, his service prior to his termination of employment shall not be
reinstated for purposes of section 2.1 or 6.2. In all other cases an employee's
or participant's prior years of service shall be reinstated upon reemployment
for purposes of sections 2.1 and 6.2 However, in no event shall years of service
occurring after a participant incurs five consecutive one-year breaks in service
be used to determine the vested and nonforfeitable interest of a participant in
his employer contribution account as of his prior termination of employment
which has become a remainder. A rehired participant shall become a participant
as of the date of his rehire and shall be eligible to make salary deferral
contributions as of the pay period next following his date of rehire. A rehired
employee shall become a participant as of the date he meets the requirements of
section 2.1.
8.2. Reinstatement of Remainders. If a participant whose employment had
terminated because of resignation or dismissal is reemployed by a Valhi Company
prior to having incurred five consecutive one year breaks in service (as defined
in section 6.3), any remainder which otherwise would have resulted from such
participant's prior resignation or dismissal shall again be credited to such
account as of the accounting date coincident with or next following such
participant's date of rehire. For purposes of the preceding sentence, a
participant's account shall be appropriately restored first by application of
any unallocated remainders which arose during the plan year of such
participant's reemployment and then by means of an appropriate additional
contribution by such participant's employer for such plan year.
ARTICLE 9
Maximum Contributions
9.1. Contribution Limitations. Section 415 of the Code imposes certain
limitations on the amount of contributions that may be allocated to a
participant under a defined contribution plan (as defined in Section 414(i) of
the Code) maintained by his employer. If a participant in a defined
contribution plan maintained by his employer also is a participant in a defined
benefit plan (as defined in Section 414(j) of the Code) maintained by his
employer, Section 415 of the Code imposes certain combined limitations as to the
aggregate amount of contributions and benefits that may be provided for the
participant under both types of plans. This plan is a defined contribution plan
and, therefore, each participant in the plan shall be subject to the maximum
contribution and benefit limitations set forth in Section 415 of the Code and
the regulations thereunder which are incorporated herein by reference. For
purposes of Section 415 of the Code and this Article 9, the "limitation year"
with respect to this plan is the plan year, and a participant's "total
compensation" means, with respect to any plan year, the total compensation (as
defined in Section 415 of the Code and the regulations thereunder) paid to the
participant during that year for services rendered to the Valhi Companies as an
employee that is subject to withholding for federal income tax purposes (before
taking into account any withholding exemptions), but excluding any noncash
compensation and any compensation deferred beyond the participant's termination
of employment. In applying the limitations set forth in sections 9.2 and 9.3,
reference to the plan shall mean the plan and all other defined contribution
plans (whether or not terminated) maintained by the Valhi Companies and
reference to a defined benefit plan maintained by the Valhi Companies shall mean
that plan and all other defined benefit plans (whether or not terminated)
maintained by the Valhi Companies.
9.2. Participant Covered by Defined Contribution Plan Only. If a
participant in the plan is not covered by a defined benefit plan maintained by
the Valhi Companies, the annual addition (as defined below) which is allocated
to his accounts under this plan and under any other defined contribution plans
maintained by the Valhi Companies shall not exceed the lesser of $30,000 (or if
greater, one-fourth of the defined benefit dollar limitation set forth in
Section 415(b) (1) of the Code of 1986 as in effect for the limitation year)
(the "defined contribution dollar limitation") or 25 percent of the
participant's total compensation. In applying the preceding limitation, the
annual addition to a participant's accounts under this defined contribution plan
will be limited before the annual addition to his account under any such other
plan is limited. Any employers' contributions described in subsection 3.1 which
cannot be credited to a participant's accounts because of the limitations of
this section 9.2 or section 9.3 shall be held under the plan and applied to
reduce the employer's contributions otherwise required to be made and allocated
to participants' accounts in succeeding plan years, in order of time. Any
salary deferral contributions described in subsection 3.2(b) elected by a
participant which cannot be credited to a participant's accounts because of the
limitations of sections 4.1, 4.2, 9.2 or 9.3 shall be paid to such participant
as soon as practicable. A participant's "annual addition" for any plan year
means the sum for that year of the following:
(a) Employer contributions (including salary reduction contributions)
credited to the participant's accounts under this plan and under any
related defined contribution plans;
(b) Forfeitures credited to the participant's accounts under this
plan or under any related defined contribution plans;
(c) The amount of the participant's voluntary contributions to any
related defined contribution or defined benefit plan (determined without
regard to rollover contributions, if any);
(d) Amounts allocated to an individual medical account, as defined in
Section 415(l)(2) of the Code, which is a part of a pension or annuity plan
maintained by the Valhi Companies; and
(e) Amounts derived from contributions which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee, as defined in Section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in Section 419(e) of the Code, maintained by the
Valhi Companies.
9.3. Participant Covered by Defined Contribution Plan and Defined Benefit
Plan. If a participant in the plan also is a participant in a defined benefit
plan maintained by the Valhi Companies, the contributions made on behalf of the
participant and the benefits payable to the participant shall be determined in a
manner consistent with Section 415 of the Code, as follows:
(a) A fraction shall be determined indicating the ratio of the
participant's annual additions under the defined contribution plans of the
Valhi Companies for each plan year to the aggregate of the "defined
contribution limitation amount" in effect for each year of the
participant's employment by the Valhi Companies. The "defined contribution
limitation amount" for any year shall be the lesser of (i) 1.25 multiplied
by the dollar limitation in effect under Section 415(c)(l) (A) of the Code
for such year, provided that in any year in which the plan would be a top-
heavy plan, if 90% is substituted for 60%, 1.0 shall be substituted for
1.25, or (ii) 1.4 multiplied by 25% of the participant's total compensation
for such year.
(b) A fraction shall also be determined which will equal the benefits
accrued or payable to or for such participant under the defined benefit
plans of the Valhi Companies as of the end of the plan year divided by the
"defined benefit limitation amount" in effect for that year. The "defined
benefit limitation amount" for any plan year shall be the lesser of
(i) 1.25 multiplied by the dollar limitation in effect under Section
415(b)(l)(A) of the Code for such year, provided that in any year in which
the plan would be a top-heavy plan, if 90% is substituted for 60%, 1.0
shall be substituted for 1.25, or (ii) 1.4 multiplied by 100 percent of the
participant's average annual total compensation for the three consecutive
plan years during which he actively participated in a defined benefit plan
of the Valhi Companies and in which his aggregate total compensation was
the greatest; provided that such amount shall be appropriately adjusted, if
necessary, as provided in Section 415(b) of the Code.
(c) The benefits under all defined benefit plans of the Valhi
Companies and the contributions under this plan and under any other defined
contribution plans of the Valhi Companies will be adjusted to the extent
necessary (by first adjusting the benefits and contributions under such
other plans) so that the sum of the fractions determined with respect to
any participant in accordance with subsections (a) and (b) above will not
exceed 1.0 (or such other applicable maximum amount permitted by law).
ARTICLE 10
Plan Administrator
10.1. Plan Administrator's Duties. As provided in section 1.2, a
committee appointed by the company is responsible for the administration of the
plan. Except as otherwise specifically provided and in addition to the powers,
rights and duties specifically given to the plan administrator elsewhere in the
plan, the plan administrator shall have the following powers, rights and duties:
(a) To construe and interpret the plan, to decide all questions of
plan eligibility, to determine the amount, manner and time of payment of
any benefits under the plan, and to remedy ambiguities, inconsistencies or
omissions.
(b) To adopt such rules of procedure as may be necessary for the
efficient administration of the plan and as are consistent with the plan,
and to enforce the plan in accordance with its terms and such rules.
(c) To make determinations as to the right of any person to a
benefit, to afford any person dissatisfied with such determination the
right to a hearing thereon, and to direct payments or distributions from
the trust in accordance with the provisions of the plan.
(d) To furnish the employers with such information as may be required
by them for tax or other purposes in connection with the plan.
(e) To enroll participants in the plan, to distribute and receive
plan administration forms, and to comply with all applicable governmental
reporting and disclosure requirements.
(f) To employ agents, attorneys, accountants, actuaries or other
persons (who also may be employed by the employers, the trustee, or any
investment manager or managers) and to allocate or delegate to them such
powers, rights and duties as the plan administrator considers necessary or
advisable to properly carry out the administration of the plan (including
but not limited to the preparation of recommendations of actuarial
assumptions which shall be reviewed by the plan administrator), provided
that any such allocation or delegation and the acceptance thereof must be
in writing.
(g) To report to the directors of the company or to such person or
persons as the directors of the company designate as to the administration
of the plan, any significant problems which have developed in connection
with the administration of the plan and any recommendations which the plan
administrator may have as to the amendment of the plan or the modification
of plan administration.
(h) For purposes of determining who is a highly compensated employee
for any given determination period, the employer may elect to make the
calendar year calculation election within the meaning of Treas. Reg.
Section 1.414(q) - IT Q&A 14(a)(3)(b) by giving written notice to the plan
administrator; provided, however, such election must apply to all plans,
entities and arrangements of the company and members included in its
controlled group for purposes of determining who is a highly compensated
employee under section 414(q) of the Internal Revenue Code.
10.2. Action by Plan Administrator. During a period in which two or more
plan administrative committee members are acting, any action by the plan
administrator will be subject to the following provisions:
(a) The committee may act by meeting (including a meeting from
different locations by telephone conference) or by document signed without
meeting, and documents may be signed through the use of a single document
or concurrent documents.
(b) A committee member by writing may delegate part or all of his
rights, powers, duties and discretions to any other committee member, with
such other committee member's consent.
(c) The committee shall act by a majority decision, which action
shall be as effective as if such action had been taken by all members of
the committee; provided that by majority action one or more committee
members or other persons may be authorized to act with respect to
particular matters on behalf of all committee members.
(d) If there is an equal division among the committee members with
respect to any questions, a disinterested party may be selected by a
majority vote to decide the matter. Any decision by such disinterested
party will be binding.
(e) The certificate of the secretary of the committee or the majority
of the committee members that the committee has taken or authorized any
action shall be conclusive in favor or any person relying on such
certificate.
(f) Except as required by law, no member of the committee shall be
liable or responsible for an act or omission of other committee members in
which the former has not concurred.
10.3. Information Required for Plan Administration. The employers shall
furnish the plan administrator with such data and information as the plan
administrator considers necessary or desirable to perform its duties with
respect to plan administration. The records of an employer as to an employee's
or participant's period or periods of employment, termination of employment and
the reason therefor, leaves of absence, reemployment, and compensation will be
conclusive on all persons unless determined to the plan administrator's
satisfaction to be incorrect. Participants and other persons entitled to
benefits under the plan also shall furnish the plan administrator with such evi-
dence, data or information as the plan administrator considers necessary or
desirable for the plan administrator to perform his duties with respect to plan
administration.
10.4. Decision of Plan Administrator Final. Subject to applicable law and
the provision of section 10.5, any interpretation of the provisions of the plan
and any decision on any matter within the discretion of the plan administrator
made by the plan administrator in good faith shall be binding on all persons. A
misstatement or other mistake of fact shall be corrected when it becomes known,
and the plan administrator shall make such adjustment on account thereof as the
plan administrator considers equitable and practicable.
10.5. Review of Benefit Determinations. If a claim for benefits made by a
participant or his beneficiary is denied, the plan administrator shall, within
90 days (or 180 days if special circumstances require an extension of time)
after the claim is made, furnish the person making the claim with a written
notice specifying the reasons for the denial. Such notice shall also refer to
the pertinent plan provisions on which the denial is based, describe any
additional material or information necessary for properly completing the claim
and explain why such material or information is necessary, and explain the
plan's claim review procedures. If requested in writing, the plan administrator
shall afford each claimant whose claim has been denied a full and fair review of
the plan administrator's decision and, within 60 days (120 days if special
circumstances require additional time) of the request for reconsideration of the
denied claim, the plan administrator shall notify the claimant in writing of the
plan administrator's final decision.
10.6. Uniform Rules. The plan administrator shall perform his duties with
respect to plan administration on a reasonable and nondiscriminatory basis and
shall apply uniform rules to all participants similarly situated.
10.7. Plan Administrator's Expenses. All costs, charges and expenses
reasonably incurred by the plan administrator will be paid by the employers in
such portions as the company shall direct; provided no compensation will be paid
to a committee member as such.
10.8. Interested Plan Administrator. If a member of the plan committee is
also a participant in the plan, he may not decide or determine any matter or
question concerning his benefits unless such decision or determination could be
made by him under the plan if he were not a committee member.
10.9. Resignation or Removal of Plan Administrative Committee Members. A
member of the committee may be removed by the company at any time by ten days'
prior notice to him and the other members of the committee. A member of the
committee may resign at any time by giving ten days' prior written notice to the
company and the other members of the committee. The company may fill any
vacancy in the membership of the committee; provided, however, that if a vacancy
reduces the membership of the committee to less than three, such vacancy shall
be filled as soon as practicable. The company shall give prompt written notice
thereof to the other members of the committee. Until any such vacancy is
filled, the remaining members may exercise all of the powers, rights and duties
conferred on the plan administrator.
10.10. Indemnification. To the extent permitted by law, no person
(including a trustee, any present or former plan administrative committee
member, and any present or former director, officer or employee of any employer)
shall be personally liable for any act done or omitted to be done in good faith
in the administration of the plan or the investment of the pension fund. To the
extent permitted by law, each present or former director, officer or employee of
any employer to whom the plan administrator or an employer has delegated any
portion of its responsibilities under the plan and each present or former plan
administrative committee member shall be indemnified and saved harmless by the
employers (to the extent not indemnified or saved harmless under any liability
insurance or other indemnification arrangement with respect to the plan) from
and against any and all claims of liability to which they are subjected by
reason of any act done or omitted to be done in good faith in connection with
the administration of the plan or the investment of the trust fund, including
all expenses reasonably incurred in their defense if the employers fail to
provide such defense.
ARTICLE 11
Relating to the Employers
11.1. Action by Employers. Any action required or permitted of an
employer under the plan shall be by resolution of its Board of Directors or by a
duly authorized committee of its Board of Directors, or by a person or persons
authorized by resolution of its Board of Directors or such committee.
11.2. Additional Employers; the Valhi Companies. Any subsidiary or other
related company that is not an employer may adopt the plan and become an
employer thereunder by filing with the trustee and the plan administrator a
certified copy of a resolution of the Board of Directors of the subsidiary or
other related company providing for its adoption of the plan and a certified
copy of a resolution of the Board of Directors of the company consenting to such
adoption. For this purpose, a "subsidiary" means any corporation more than 50
percent of the voting stock of which is directly or indirectly owned by the
company and a "related company" means any corporation (other than the company
and its subsidiaries) more than 50 percent of the voting stock of which is
directly or indirectly owned by any corporation or any person or group of
persons who directly or indirectly own more than 50 percent of the voting stock
of the company. The term "Valhi Companies" includes the employers and all
subsidiaries and related companies that have not adopted the plan (and each such
corporation is sometimes referred to herein individually as a "Valhi Company").
Any corporation which is not an employer under the plan and which does not
qualify as a subsidiary or related company, but is a member of a controlled
group of corporations (within the meaning of Section 1563(a) of the Internal
Revenue Code (the "Code"), determined without regard to Sections 1563(a)(4) and
1563(e)(3)(C) thereof) which contains an employer under the plan or a member of
an affiliated service group (as defined in Section 414(m) of the Code) which
contains an employer under the plan shall, for purposes of the plan, be
considered as a subsidiary or related company that has not adopted the plan.
11.3. Restrictions on Reversions. The employers shall have no right,
title or interest in the assets of the plan, nor will any part of the assets of
the plan at any time revert or be repaid to an employer, directly or indirectly,
except as follows:
(a) If the Internal Revenue Service initially determines that the
plan, as applied to any employer, does not meet the requirements of a
"qualified plan" under Section 401(a) of the Code, the assets of the plan
attributable to contributions made by that employer under the plan shall be
returned to that employer within one year of the date of denial of
qualification of the plan as applied to that employer.
(b) If a contribution or a portion of a contribution is made by an
employer as a result of a mistake of fact, such contribution or portion of
a contribution shall not be considered to have been contributed under the
plan by that employer and, after having been reduced by any losses of the
trust fund allocable thereto, shall be returned to that employer within one
year of the date the amount is contributed under the plan.
(c) Each contribution made by an employer is conditioned upon the
deductibility of such contribution as an expense for federal income tax
purposes and, therefore, to the extent that a contribution is made by an
employer under the plan for a period for which the deduction for a
contribution made by the employer is disallowed, then such contribution or
portion of a contribution, after having been reduced by any losses of the
trust fund allocable thereto, shall be returned to that employer within one
year of the date of disallowance of the deduction.
ARTICLE 12
Amendment, Termination or Plan Merger
12.1. Amendment. While the employers expect and intend to continue the
plan, the company must necessarily reserve and hereby does reserve the right,
subject to Article 11, to amend the plan from time to time, except as follows:
(a) The duties and liabilities of the plan administrator cannot be
changed substantially without its consent; and
(b) No amendment shall reduce the value of a participant's benefits
to less than the amount he would be entitled to receive if he had resigned
from the employ of all of the Valhi Companies on the day of the amendment.
The foregoing provisions of this section shall be subject to any applicable
collective bargaining agreements, provided that the company may amend the plan
at any time to the extent necessary in order that the plan shall meet the
requirements of a "qualified plan" under Section 401(a) of the Code and any
other requirements of applicable law.
12.2. Termination. The plan will terminate as to all employers on any
date specified by the company if advance written notice of the termination is
given to the plan administrator and any other employers. The plan will
terminate as to an individual employer on the first to occur of the following:
(a) The date it is terminated by that employer, if ten days' advance
written notice of the termination is given to the company, the plan
administrator and the other employers.
(b) The date that employer is judicially declared bankrupt or
insolvent.
(c) The dissolution, merger, consolidation or reorganization of that
employer, or the sale by that employer of all or substantially all of its
assets, except that:
(i) In any such event arrangements may be made with the consent
of the company whereby the plan will be continued by any successor to
that employer or any purchaser of all or substantially all of its
assets without a termination thereof, in which case the successor or
purchaser will be substituted for that employer under the plan; and
(ii) If any employer is merged, dissolved or in any way
reorganized into, or consolidated with, any other employer, the plan
as applied to the former employer will automatically continue in
effect without a termination thereof.
Notwithstanding the foregoing, if any of the events described above should occur
but some or all of the participants employed by an employer are transferred to
employment with one or more of the other employers coincident with or
immediately after the occurrence of such event, the plan as applied to those
participants will automatically continue in effect without a termination
thereof. The foregoing provisions of this section shall be subject to any
applicable collective bargaining agreements.
12.3. Plan Merger. In no event shall there by any merger or consolidation
of the plan with, or transfer of assets or liabilities to, any other plan unless
each participant in the plan would (if the plan then terminated) received a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit the participant would have been entitled to
receive immediately before the merger, consolidation or transfer (if the plan
had then terminated).
12.4. Continuation by a Successor or Purchaser. Notwithstanding section
12.2, the plan and the trust shall not terminate in the event of dissolution,
merger, consolidation or reorganization of an employer or sale by an employer of
its entire assets or substantially all of its assets if arrangements are made in
writing between the employer and any successor to the employer or purchaser of
all or substantially all of its assets whereby such successor or purchaser will
continue the plan and the trust. If such arrangements are made, then such
successor or purchaser shall be substituted for the employer under the plan and
the trust agreement.
12.5. Notice to Participants of Amendments, Terminations or Plan Mergers.
Participants affected thereby shall be notified by the company within a
reasonable time following any amendment, termination, plan merger, or
consolidation.
12.6. Vesting and Distribution on Termination. The date of any
termination or partial termination as respects all employers (and, at the
discretion of the company, on a termination or partial termination of the plan
as respects any employer that does not result in the termination or partial
termination of the plan as respects all employers) and any permanent discontinu-
ance of employer contributions as respects all employers, will be an "interim
accounting date", and the benefits of each participant affected by such
termination, partial termination, or permanent discontinuance of employer
contributions as respects all employers will be fully vested.
ARTICLE 13
General Provisions
13.1. Examination of Plan Documents. Copies of the plan and any
amendments thereto will be on file at the principal office of each employer
where they may be examined by any participant or any other person entitled to
benefits under the plan.
13.2. Notices. A notice mailed to a participant or beneficiary at his
last address filed with the plan administrator in care of the company will be
binding on the participant or beneficiary for all purposes of the plan. Any
notice or document relating to the plan required to be given to or filed with
the plan administrator or any employer shall be considered as given or filed if
delivered or mailed by registered or certified mail, postage prepaid, to the
plan administrator, in care of the company.
13.3. Nonalienation of Plan Benefits. The rights or interests of any
participant or any participant's beneficiaries to any benefits or future
payments hereunder shall not be subject to attachment or garnishment or other
legal process by any creditor of any such participant or beneficiary, nor shall
any such participant or beneficiary have any right to alienate, anticipate,
commute, pledge, encumber or assign any of the benefits or rights which he may
expect to receive, contingently or otherwise under this plan except as may be
required by the tax withholding provisions of the Code or of a state's income
tax act or pursuant to a qualified domestic relations order (as defined in
Section 414(p) of the Code) which provides for an immediate lump sum
distribution.
13.4. No Employment Guarantee. None of the establishment of the plan,
modification thereof, the creation of any fund or account, or the payment of any
benefits shall be construed as giving to any participant or other person any
legal or equitable right against the employers, the plan administrator or
trustee, except as herein provided. Under no circumstances shall the terms of
employment of any participant be modified or in any way affected hereby. The
maintenance of this plan shall not constitute a contract of employment, and
participation in the plan will not give any participant a right to be retained
in the employ of the employers. None of the employers, the plan administrator
or the trustee in any way guarantees any assets of the plan from loss or
depreciation or any payment to any person. The liability of the plan
administrator or any employer as to any payment or distribution of benefits
under the plan is limited to the available assets of the trust fund.
13.5. Participant Litigation. In any action or proceeding regarding the
plan assets or any property constituting a portion or all thereof or regarding
the administration of the plan, employees or former employees of the employers
or their beneficiaries or any other persons having or claiming to have an
interest in this plan shall not be necessary parties and shall not be entitled
to any notice or process. Any final judgment which is not appealed or
appealable and may be entered in any such action or proceeding shall be binding
and conclusive on the parties hereto and all persons having or claiming to have
any interest in this plan. To the extent permitted by law, if a legal action is
begun against the employers, the plan administrator or the trustee by or on
behalf of any person, and such action results adversely to such person, or if a
legal action arises because of conflicting claims to a participant's or other
person's benefits, the costs to the employers, the plan administrator or the
trustee of defending the action will be charged to the sums, if any, which were
involved in the action or were payable to the participant or other person
concerned. To the extent permitted by applicable law, acceptance of
participation in this plan shall constitute a release of the employers, the plan
administrator and the trustee and their agents from any and all liability and
obligation not involving willful misconduct or gross neglect.
13.6. Successors. The plan and the trust will be binding on all persons
entitled to benefits hereunder and their respective heirs and legal
representatives, and on the plan administrator and the trustee and their
successors.
13.7. Adequacy of Evidence. Evidence which is required of anyone under
the plan shall be executed or presented by the proper individuals or parties and
may be in the form of certificates, affidavits, documents or other information
which the plan administrator, the trustee, the employers or other persons acting
on such evidence considers pertinent and reliable.
13.8. Gender and Number. Words denoting the masculine gender shall
include the feminine and neuter genders and the singular shall include the
plural and the plural shall include the singular wherever required by the
context.
13.9. Waiver of Notice. Any notice required under the plan may be waived
by the person entitled to notice.
13.10. Applicable Law. The plan and the trust shall be construed in
accordance with the provisions of ERISA and other applicable federal laws. To
the extent not inconsistent with such laws, or preempted thereby, this plan
shall be construed in accordance with the laws of the State of Texas.
13.11. Severability. If any provision of the plan shall be held illegal
or invalid for any reason, such illegal or invalid provision shall not affect
the remaining provisions of the plan, and the plan shall be construed and
enforced as if such illegal or invalid provisions had never been contained in
the plan.
13.12. Fiduciary Responsibilities. It is specifically intended that all
provisions of the plan shall be applied so that all fiduciaries with respect to
the plan shall be required to meet the prudence and other requirements and
responsibilities of applicable law to the extent such requirements of
responsibilities apply to them. No provisions of the plan are intended to
relieve a fiduciary from any responsibility, obligation, duty or liability
imposed by applicable law. In general, a fiduciary shall discharge his duties
with respect to the plan solely in the interests of participants and other
persons entitled to benefits under the plan and with the care, skill, prudence,
and diligence under the circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims.
13.13. Highly Compensated Employees. An employee shall be considered a
"highly compensated employee" for any plan year if at any time during the plan
year or the preceding plan year:
(a) He or she was a 5-percent owner as defined in Section
416(i)(1)(B)(i) of the Code;
(b) He or she received compensation from an employer in excess of
$75,000 (or such adjusted number as may be determined under the Code or
regulations thereunder to reflect a change in the cost-of-living index);
(c) He or she received compensation from an employer in excess of
$50,000 (or such adjusted number as may be determined under the Code or
regulations thereunder to reflect a change in the cost-of-living index) and
was in the group consisting of the top 20 percent of the employers'
employees when ranked on the basis of compensation paid by the employer
during such year;
(d) He or she was at any time an officer and received compensation
greater than 50 percent of the amount in effect under Section 415(b)(1)(A)
of the Code for such year, provided that no more than 50 employees (or, if
lesser, the greater of three employees or 10 percent of the employees)
shall be treated as officers and provided further that if for any year no
officer of an employer is described in this subparagraph (iv), the highest
paid officer of an employer for such plan year shall nonetheless be treated
as if he or she were described herein; or
(e) He or she is a family member (as defined below), of either a 5-
percent owner who is an active or former employee (as defined below) or a
highly compensated employee who is one of the ten most highly compensated
employees ranked on the basis of compensation paid by the employer during
such year.
An employee who is not described under subsections (b), (c) or (d) for the
preceding plan year shall not be deemed a highly compensated employee for a plan
year unless he was a member of the group of the 100 employees paid the greatest
compensation during the plan year. A "family member" is an individual who is a
family member with respect to any employee or former employee, including such
employee's or former employee's spouse and lineal ascendants or descendants and
the spouse of lineal ascendants and descendants. In the determination of a
family member with respect to an employee or former employee, legal adoptions
shall be taken into account. A "highly compensated former employee" is any
employee who, with respect to the employer, had a separation year prior to the
determination year and was a highly compensated active employee for either such
employee's separation year (as defined in Treasury Regulation Section1.414(q)-
1T) or any determination year ending on or after the employee's 55th birthday.
"Compensation" for purposes of determination of highly compensated employee
means compensation within the meaning of Section 415(c)(3) of the Code which
includes elective or salary deferral contributions to a cafeteria plan, cash or
deferred arrangement or tax-sheltered annuity.
13.14. Family Aggregation Rules. Notwithstanding any other provision of
the plan, the family aggregation rules of Sections 401(a)(17) and 414(q) of the
Code shall apply for the purpose of determining and limiting a participant's
compensation and benefits hereunder (including for purposes of determining his
earnings under section 4.4 and compensation under Article 9 and for purposes of
the benefit limitations under sections 3.4 and 4.2 and Article 9), in accordance
with the provisions of section 13.13.
13.15. Supplements. Supplements to this plan may be adopted from time to
time and will be attached to and form a part of the plan. The provisions of any
such supplements shall be given the same effect that such provisions would have
if they were incorporated within the basic text of the plan. Supplements may
modify or supplement provisions of the plan as they apply to particular groups
of participants. Each supplement will specify the persons affected and shall
supersede the other provisions of the plan to the extent necessary to eliminate
inconsistencies between the plan provisions and the provisions of such
supplement. The terms used in such supplements shall have the same meanings as
those terms have for all other purposes under the plan and all provisions of the
plan not inconsistent with such supplements will continue to apply to the
persons affected by such supplements or exhibits.
13.16. Leased Employees. Notwithstanding any other provision of the plan,
a leased employee will not be considered a covered employee and may not become a
participant in the plan. However, for purposes of the plan, a leased employee
shall be treated as an employee of the recipient employer and benefits provided
by the leasing organization which are attributable to services performed for the
recipient employer shall be treated as provided by the recipient employer. The
term "leased employee" means any person (other than an employee of the recipient
employer) who pursuant to an agreement between the recipient employer and any
other person (the "leasing organization") has performed services for the
recipient employer (or for the employer and related persons determined in
accordance with Section 414(n)(6) of the Code) on a substantially full time
basis for a period of at least one year and such services are of a type
historically performed by employees in the business field of the recipient
employer.
ARTICLE 14
Top-Heavy Plan Rules
14.1. Key Employees. A "key employee" means an employee or former
employee who during any plan year or during any of the four preceding plan years
is:
(a) An officer of an employer having annual compensation in excess of
50 percent of the dollar limitation in effect under Section 415(b)(1)(A) of
the Code for the plan year;
(b) One of the ten employees of the employer having annual
compensation from the employer in excess of the dollar limitation in effect
under Section 415(c)(1)(A) of the Code for the plan year and owning (or
considered as owning within the meaning of Section 318 of the Code) more
than one-half of one percent and the largest interests in the employer;
(c) Any person who owns (or is considered as owning within the
meaning of Section 318 of the Code) more than 5 percent of the outstanding
stock of the employer or stock possessing more than 5 percent of the total
combined voting power of all the employer's stock; or
(d) Any person having annual total compensation in excess of $150,000
who owns (or is considered as owning within the meaning of Section 318 of
the Code) more than one percent of the outstanding stock of the employer or
stock possessing more than one percent of the total combined voting power
of all the employer's stock.
For purposes of (a) above, if the number of officers exceeds 50, only the 50
officers with the highest total compensation shall be considered key employees
and if the number of officers is less than 50, the number of officers considered
key employees shall not exceed the greater of 3 such officers or 10 percent of
all employees. For purposes of (c) and (d) above, Section 318(a) (2)(C) of the
Code shall be applied by substituting "5 percent" for the reference to "50
percent" therein and the rules of Sections 414(b), (c) and (m) of the Code shall
not apply for purposes of determining ownership in the employer. The term
"employer" includes all Valhi Companies. The beneficiary of a key employee
shall be considered a key employee. Any employee who is not a key employee, as
described above, is a non-key employee.
14.2. Top-Heavy Determinations. The plan will be considered top-heavy for
any plan year if as of the last day of the preceding plan year (but the last day
of the initial plan year in the case of that year) (the "determination date")
the sum of (a) the aggregate of the account balances of key employees under the
plan and all other defined contribution plans in an aggregation group of plans
as described in section 14.3 and (b) the present value determined as of the date
of the most recent valuation which is within a twelve-month period ending on the
determination date of the aggregate cumulative accrued benefits for key
employees under all defined benefit plans in an aggregation group of plans as
described in section 14.3 exceeds 60 percent of such sum determined for all
participants under all such plans, excluding participants who are former key
employees. Included in the determination of a participant's account balances
and accrued benefit under such plan are any amounts distributed to him during
the preceding five-year period. For purposes of determining whether the plan is
a top-heavy plan, there shall not be taken into account (i) a rollover
contribution initiated by an employee and made to the plan or any other plan in
an aggregation group of plans after December 31, 1983; or (ii) any accrued
benefit (and any plan account) of any individual who has not performed any
services for an the employer at any time during the five-year period ending on
the determination date.
14.3. Aggregation of Plans. All employer plans in a required aggregation
group of plans shall be considered top heavy if the required aggregation group
of plans or permissive aggregation group of plans, as the case may be, is
determined to be top-heavy under section 14.2. If the required aggregation
group of plans or permissive aggregation group of plans is not top-heavy, no
employer plans in the group shall be considered top-heavy. A "required
aggregation group of plans" shall include each employer plan (whether or not
terminated) in which a key employee participates and any other employer plan
which enables any plan in which a key employee participates to meet the coverage
and nondiscrimination requirements of Sections 401(a)(4) or 410 of the Code. A
"permissive aggregation group of plans" shall include all plans in the required
aggregation group plus any other employer plans which satisfy the requirements
of Sections 401(a)(4) and 410 of the Code when considered together with the
required aggregation group or plans.
14.4. Top-Heavy Rules. If the plan is considered top-heavy in any year,
the following rules will apply:
(a) Combined Benefit Limitations for Top-Heavy Plan. For purposes of
determining the combined benefit limitations under section 9.3 of this
plan, for any plan year in which the plan would be top-heavy, 1.0 shall be
substituted for 1.25 in determining the dollar limitation in effect under
Section 415(b)(1)(A) and 415(c)(l)(A) of the Code for such year.
(b) Minimum Benefit. Notwithstanding anything to the contrary in
Article 3, the amount contributed by an employer for each active
participant who is a non-key employee employed by that employer for each
plan year in which the plan is considered a top-heavy plan shall not be
less than the lesser of (i) 3 percent of each active participant's total
compensation for that year, or (ii) the highest percentage of such
compensation contributed by such employer for such plan year on behalf of a
key employee; provided if for such plan year the minimum benefit under
Section 416(c) of the Code is provided for under any other plan to which
the employer contributes, no minimum contribution shall be made under this
subsection (b) for the participant. For purposes of the preceding sentence
only, the group of participants shall include a participant who would
otherwise not be considered a participant solely because of his failure to
make salary deferral contributions for such plan year.
SUPPLEMENT A
TO
NATIONAL CABINET LOCK, INC. CONTRIBUTORY RETIREMENT PLAN
The purpose of this Supplement A is to establish a retroactive effective
date for section 6.10 of the plan. Notwithstanding any other provision of the
plan, the provisions of section 6.10 shall apply to all eligible rollover
distributions paid to a distributee on and after January 1, 1993.
WITNESSETH THAT:
Pursuant to the authority delegated to the undersigned officers of National
Cabinet Lock, Inc., the document attached hereto entitled "National Cabinet
Lock, Inc. Contributory Retirement Plan" is hereby adopted effective as of
January 1, 1994.
Dated this 30th day of December,
1994.
NATIONAL CABINET LOCK, INC.
By: /s/ Steven L. Watson
Its: Vice President
ATTEST:
/s/ J. Mark Hollingsworth
Its: Assistant Secretary
