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HBI » Topics » Participation and Deferral Elections

This excerpt taken from the HBI 8-K filed Sep 5, 2006.

Participation and Deferral Elections

3.1 Participation. Subject to the conditions and limitations of the Plan, any Eligible Employee who makes a Deferral Election as described in Section 3.2 shall become a Participant in the Plan and shall remain a Participant until the entire balance of his Deferral Account is distributed to him.

3.2 Rules for Deferral Elections. Any Eligible Employee may make a Deferral Election for a Plan Year in accordance with the rules set forth below.

  (a) Eligibility. An Eligible Employee shall be eligible to make a Deferral Election only if he is an active, regular, full-time employee on the date such election is made.

 

  (b) Deferral Amounts. Under the Deferral Program, for each Plan Year, an Eligible Employee may make no more than one Deferral Election for each of the Eligible Employee’s Incentive Payments, Annual Bonus, Annual Base Salary and other payments in the amounts set forth below:

 

  (i) All or any portion of the Eligible Employee’s Annual Base Salary.

 

  (ii) All or any portion not less than 25 percent of the Eligible Employee’s Annual Bonus.

 

  (iii) All or any portion not less than 25 percent of the Eligible Employee’s Incentive Payment.

 

  (iv) With respect to any other bonuses and incentive payments under any plan or arrangement established by the Company or an Employer as the Committee may designate as compensation eligible for deferral under this Plan, in such increments and subject to such limitations and restrictions as the Committee may establish.

 

  (c) Timing and Other Requirements for Deferral Elections. All Deferral Elections must be made in such form as the Committee may prescribe and must be received by the Committee no later than the date specified by the Committee. With respect to deferrals of Annual Base Salary, the date specified by the Committee generally may be no later than the end of the calendar year preceding the calendar year in which the Annual Base Salary is anticipated to be paid. With respect to deferrals of Annual Bonuses, the date

specified by the Committee generally may be no later than the end of the calendar year preceding the beginning of the measurement period for such Annual Bonus; provided, however, that if the Committee determines that such Annual Bonus qualifies as “performance-based compensation” (as defined in Code Section 409A(4)(B)(iii) and the regulations thereunder), such Deferral Election may be made no later than 6 months before the end of the measurement period. With respect to deferrals of Incentive Payments, the date specified by the Committee generally may be no later than the end of the calendar year preceding the calendar year in which vesting in such Incentive Payment would begin; provided, however, that if the Committee determines that such Incentive Payment qualifies as “performance-based compensation” (as defined above), such Deferral Election may be made no later than 6 months before the end of the measurement period. The Committee, in its complete discretion, may modify the general rules set forth above as permitted by IRS Notice 2005-1 and regulations issued under Code Section 409A.

 

  (d) Special Rule for Newly Eligible Employees. Notwithstanding anything in paragraph (c) above to the contrary, in the first year in which an Eligible Employee becomes eligible to participate in the Plan, such Participant may make a Deferral Election within 30 days after the date the Participant first become eligible to participate; provided, however, that such election may only apply to compensation with respect to services to be performed subsequent to the election (with Annual Bonuses and Incentive Payments prorated to the extent necessary to comply with regulations issued under Code Section 409A).

 

  (e) Elections Generally Irrevocable. Deferral Elections shall be irrevocable; provided, that if the Committee determines that a Participant has an Unforeseeable Financial Emergency, then the Participant’s Deferral Elections then in effect shall be revoked with respect to all amounts not previously deferred.

  (f) Investment Election. As part of each Deferral Election, an Eligible Employee must elect the investment alternatives that shall apply to the Deferral in accordance with Section 4.2.

 

  (g) Distribution Dates. As part of each Deferral Election, the Eligible Employee must specify a Distribution Date. The Distribution Dates specified may be the earlier of a specified date or the Eligible Employee’s termination of employment, but in no case shall the Distribution Date be prior to the January 1 following the first anniversary of the date the Deferral Election is made. The Distribution Dates specified in an Eligible Employee’s Deferral Elections may, but need not necessarily, be the same for all Deferrals. Except as provided in subsection (i) below, each Distribution Date is irrevocable and shall apply only to that portion of the Participant’s Deferral Account which is attributable to the Deferral.

 

  (h) Distribution Form. As part of each Deferral Election, an Eligible Employee must elect the form in which the Deferral will be paid beginning on the selected Distribution Date in accordance with Section 5.1. The distribution form specified may, but need not necessarily be the same for all distribution events. Except as provided in Section 5.1, an Eligible Employee’s election as to the method of payment shall be irrevocable.

 

  (i) Re-Deferrals. A Participant may make a Re-Deferral Election; provided, that no Re-Deferral Election shall be effective unless (i) the Committee receives the election not later than 12 months prior to the Distribution Date to be changed, and (ii) the new Distribution Date is not earlier than the fifth anniversary of the prior Distribution Date. All Re-Deferral Elections must be made

pursuant to such rules as the Committee may prescribe. The Committee, in its complete discretion, may modify the general rules set forth above as permitted by IRS Notice 2005-1 and regulations issued under Code Section 409A. In addition, during 2005 and 2006, Re-Deferral Elections need not be received by the Committee 12 months prior to the Distribution Date to be changed, and the new Distribution Date may be earlier than the fifth anniversary of the prior Distribution Date; provided, however that Re-Deferral Elections made in 2006 may neither specify a Distribution Date in 2006 nor defer amounts otherwise payable in 2006.

3.3 Transfers. With the consent of the Committee and subject to such limits and in accordance with such rules as the Committee may establish in its sole discretion, a Participant who is employed by a subsidiary of the Company may elect to transfer his entire Deferral Account to a similar deferred compensation plan maintained by such subsidiary; provided, that no portion of a Participant’s Deferral Account that is attributable to a Deferral, the Distribution Date for which has or will have occurred before the scheduled transfer date, may be transferred under this provision.

3.4 Employer Deferrals. In addition to Deferrals made pursuant to a Participant’s Deferral Election under this Section 3, an Employer may credit an Employer Deferral to a Participant’s Deferral Account. The amount of any Employer Deferral shall be determined by the Employer it its complete discretion. At the time the Employer Deferral is credited to the Participant’s Deferral Account, the Employer shall specify the Distribution Date and the form of payment for the Employer Deferral. Once credited to the Participant’s Deferral Account, the Employer Deferral shall be treated as any other Deferral under the Plan.

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