Document:

ie10-1.htm

MASTER SERVICES AGREEMENT

Entered into

by

CHILTERN INTERNATIONAL INC.

and

INSMED INCORPORATED

Effective as of

11 February 2011

Chiltern Ref: 8001 / FIT1695                                                                Page of 41 Confidential

  

  

  

MASTER SERVICES AGREEMENT

TABLE OF CONTENTS

Chapter 1                                INTRODUCTION AND OPERATIVE PROVISION

1.           Introduction

2.           Operative Provision

Chapter 2                                DEFINITIONS AND INTERPRETATION

3.           Definitions

4.           Interpretation

Chapter 3                                SERVICES AND PERFORMANCE

5.           Services

6.           Third Party Providers and Investigators

7.           Personnel and Team Assignments

8.           Transfer of Obligations

9.           Identity of Sponsor of Study

10.           Test Materials

11.           Modification of Services

12.           Delays and Extension of Timelines

13.           Force Majeure

14.           Audits and Inspections

15.           Records and Reports

Chapter 4                                PAYMENT

16.           Payment

17.           Inflationary Adjustment

18.           Disputed Invoices

19.           Non-payment of Undisputed Amounts

20.           Travel and Out of Pocket Expenses

21.           Funds for Investigator Grants and Third Party Provider Payments

22.           Foreign Currency

Chapter 5                                PARTY OBLIGATIONS

23.           Confidentiality

24.           Insurance Obligations

25.           Use of Names, etc

26.           Employee Solicitation

27.           Dispute Resolution

28.           Ownership of Inventions, Discoveries etc.

29.           Exclusivity Commitment

 

	
Chapter 6

	
ADDITIONAL COVENANTS, REPRESENTATIONS, WARRANTIES, INDEMNITIES AND LIABILITY

 

30.           Representations, Warranties, and additional Covenants of Insmed

31.           Representations, Warranties, and additional Covenants of Chiltern

	
  

	
32.

	
Representations, Warranties, and additional Covenants of Insmed and Chiltern

33.           Chiltern’s Indemnity

34.           Insmed’s Indemnity

35.           Limitations of Liability

Chapter 7                                TERM AND TERMINATION

36.           Term of Agreement

37.           Termination on Notice

38.           Termination on Material Breach

39.           Termination on Insolvency, etc

40.           Payments on Termination

41.           Obligations of Parties on Termination

Chapter 8                                MISCELLANEOUS

42.           Notices

43.           Chiltern an Independent Contractor

44.           Assignment

45.           Entire Agreement

46.           Severability

47.           Law Applicable to Agreement; Submission to Jurisdiction; Waiver of Jury Trial

48.           Counterparts

49.           Language of Agreement

APPENDIX 1                                           LISTING OF DIVISIONS AND SUBSIDIARIES OF CHILTERN

APPENDIX 2                                           FORM OF WORK ORDER ArikaceTM inhaled antibiotic programs for Cystic Fibrosis (“CF”) or Nontuberculous  Mycobacteria (“NTM”)

APPENDIX 3                                           ELECTRONIC ACCESS TERMS AND CONDITIONS

APPENDIX 4:  CURRENT CHILTERN STUDIES FOR INHALED ANTIBIOTIC FOR CF

Chiltern Ref: 8001 / FIT1695                                                                Page of 41 Confidential

  

  

  

THIS MASTER SERVICES AGREEMENT is made effective as of the 11th day of February 2011   This date is referred to in this Agreement as the "Effective Date".

PARTIES

The Parties to this Agreement are:

CHILTERN INTERNATIONAL INC., a Delaware corporation which has a business address at 1241 Volunteer Parkway, Bristol, TN 37620, and its Affiliates, is referred to in this agreement as "Chiltern";

and

INSMED INCORPORATED, a Virginia corporation which has a business address at Princeton Corporate Plaza IV, 11 Deer Park Drive, Suite 117, Monmouth Junction, NJ 08852-1923 and is referred to in this agreement as "Insmed".

 

CHAPTER 1                                           INTRODUCTION AND OPERATIVE PROVISION

 

	
1.  

	
INTRODUCTION

	
1.1  

	
Chiltern is a contract research organization providing pharmaceutical development services, including project management of clinical trials, monitoring of clinical trials, data management, electronic data capture services, statistical services, regulatory affairs, medical writing, pharmacovigilance, quality assurance support and other product development services and scientific consulting.

	
1.2

	
By merger dated December 1, 2010, Insmed is the successor in interest to Transave, Inc. (“Transave”). Insmed is engaged in the research and development of therapeutic products.  Transave had executed a Confidential Disclosure Agreement (“CDA”) with Chiltern on April 12, 2010.  Insmed executed a Letter of Intent with respect to retaining Chiltern incorporating the CDA and therefore assumed rights under the CDA on December 31, 2010.

	
1.3

	
Insmed desires to retain Chiltern to provide services as described in Section 1.1 in connection with the conduct of phase III clinical studies through final clinical study reports, integrated summaries of safety and integrated summaries of effectiveness for NDA and MAA submission for registration of ArikaceTM (Insmed’s proprietary liposomal amikacin) for the treatment of cystic fibrosis (CF) and nontuberculous mycobacteria (NTM) lung infections (“Purpose”).  The Parties wish to agree to master terms to govern the relationship between them under which Insmed may, from time to time, require from Chiltern and Chiltern may provide services to Insmed.

	
2.  

	
OPERATIVE PROVISION

	
2.1  

	
In consideration of the mutual covenants and promises set out in this Agreement and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

	
  

	 

 

	
CHAPTER 2

	
DEFINITIONS AND INTERPRETATION

 

	
3.  

	
DEFINITIONS

	
3.1  

	
In this Agreement, unless the context otherwise requires:

"Affiliate", in relation to a Person, means any Person (including a division or subsidiary of an entity) that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person and with respect to Chiltern, shall include any division or subsidiary of Chiltern listed in Appendix 1.  For clarity, all of the Chiltern Affiliates providing Services are wholly owned subsidiaries of Chiltern International Group Ltd.

"Agreement" means this Master Services Agreement.

"Applicable Law" means all national, state, or local laws, rules and regulations applicable to the performance of a Study, including those of the US FDA and the EMEA, and including GCP and ICH guidelines, and including data privacy legislation.

"Audit", in respect of a Study, means an assessment by or on behalf of Insmed of all tools, processes, study related output, personnel and performance related to scope of work in accordance with GCP/ICH guidelines and Applicable Law, and per compliance with the Protocol to assure quality, integrity and compliance.

"CFR", means the United States Code of Federal Regulations.

"Claims", means any and all third party claims, costs, damages, and expenses, including but not limited to reasonable attorneys’ fees.

“Commercially Reasonable Efforts”, means those efforts customarily used by companies in the pharmaceutical industry for carrying out in a sustained manner a particular task or obligation, and at least equivalent to that level of effort applied by a Party for its other priority products.  For clarity, in the present context it means Chiltern’s actual commitment of personnel and resources so as to accomplish the Services described in a Work Order within the promised time frame and budget.

"Confidential Information", means all proprietary and confidential information provided orally, in writing, electronically, or as observed on visits to facilities, disclosed by one Party to the other Party, including information which relates to new or existing products and/or business operations including Study protocols, product development plans, standard operating procedures, pricing information (including pricing by Third Party Providers), financial information, business methods, trade secrets, know-how, business processes, business plans, inventions, techniques, testing methods, data, specifications, and other information not readily available to the public.

"Disclosing Party", in relation to Confidential Information, means the Party or its Representatives disclosing Confidential Information in connection with this Agreement.

“Essential Documents,” means those essential documents defined in ICH Guideline E6, Section 8 and as required by Applicable Law (including Case Report Forms, Investigator files, regulatory files, minutes of Project Team meetings, and any other core Study documentation agreed to in writing by the Parties as detailed in the Study Project Plans).

"Good Clinical Practice", means a standard for design, conduct, performance, monitoring, auditing, recording, analyses, and reporting of clinical trials that provides assurance that the data and reported results are credible and accurate, and that the rights, integrity, and confidentiality of Study subjects are protected as implemented within the laws and regulations where Services are performed.

"ICH GCP", means the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use Harmonised Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) together with such other good clinical practice requirements as are specified in local national law where the study is being performed including, by way of example, for studies in the European Union, Directive 2001/20/EC of the European Parliament and the Council as amended relating to medicinal products for human use and in guidance published by the European Commission pursuant to such Directive, and ICH E6 guidelines.

“Intellectual Property”, means all rights, in, to, or arising out of (i) any United States, international or foreign patent, utility model or registered design or any application therefor and any and all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof; (ii) inventions (whether or not patentable) in any country, invention disclosures, improvements, trade secrets, proprietary information, know-how, technology and technical data; (iii) copyrights and works of authorship, whether or not registered, including  applications and related items in the United States or any foreign country; (iv) and all other proprietary, nonpublic or confidential information, documents or materials in any media and all other intellectual property rights that are owned or controlled by a Party, including all applications and registrations with respect thereto, but excluding all trademarks, trade names, service marks, logos and other corporate identifiers.  Title to and ownership of all pre-existing Intellectual Property, of either Party shall remain in that Party.

"Investigator", means the person or entity responsible for the performance of a clinical trial at a trial site, except that if a trial is performed by a team of individuals at a trial site, the investigator is the responsible leader of the team and may be called the principal investigator. For purposes of this Agreement, investigator shall not be considered a Third Party Provider because Investigators are independent medical professionals with separate duties under ICH GCP Article 4.

 

 

"Investigator Agreement", means an agreement or group of agreements between an Investigator, hospital, or other parties and/or Insmed and Chiltern for the performance of a clinical trial at a trial site setting out the arrangements, tasks, obligations, including financial arrangements of the parties to the agreement.

"Party", means a party to this Agreement.

“Person”, means any individual or any partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity.

"Protocol", means one of TR02-108 - Randomized, Active-Controlled Multicenter Study to Assess the Efficacy, Safety and Tolerability of ArikaceTM in Cystic Fibrosis Patients with Chronic Infection Due to Pseudomonas aeruginosa, TR02-109 - Randomized, Placebo-Controlled, Double-Blind, Multicenter Study to Assess the Efficacy, Safety and Tolerability of ArikaceTM in Cystic Fibrosis Patients with Chronic Infection Due to Pseudomonas aeruginosa, TR02-110 - Long Term Safety and Tolerability of Open-Label Liposomal Amikacin for Inhalation (ArikaceTM) in Cystic Fibrosis Patients with Chronic Infection Due to Pseudomonas aeruginosa, TR02-112 - A Phase 2 Randomized, Double-Blind, Placebo-Controlled Study of Liposomal Amikacin for Inhalation (ArikaceTM) in Patients with Recalcitrant Nontuberculous Mycobacterial Lung Disease.

"Receiving Party", in relation to Confidential Information, means the Party or its Representatives receiving or otherwise acquiring Confidential Information in connection with this Agreement.

"Representatives", in relation to a Party, means the Affiliates of that Party, and the directors, officers, employees, agents, contractors (such as freelance Clinical Research Associates), and advisors of that Party and its Affiliates who have a need to know, handle or have access to the Confidential Information in connection with this Agreement and who have entered into agreements for the protection of the Confidential Information on terms substantially similar to the terms of this Agreement.

"Services", means the tasks or services described in this Agreement or in a Work Order in the performance of a Study according to one of the Protocols that are contracted to be provided by Chiltern, its Affiliates, and its permitted subcontractors.

"Site", means the location where activities related to the Study or trial are performed by the Investigator or others associated with the Investigator or where records relating to a Study are stored.

"Study", means a phase III clinical study conducted in accordance with one of the Protocols.

"Study Report", includes a document, status information, and any other reporting tool describing the progress or outcomes of a Study or other work undertaken by Chiltern for Insmed.

"Test Materials", in respect of a Study, means all compounds, devices, materials or other substances meeting relevant specifications that are necessary to enable Chiltern to perform the Study as stated in the Protocol.

"Third Party Provider", means third parties who perform services according to their respective standard operating procedures who are engaged by Chiltern for the provision of services not customarily performed by Chiltern, including but not limited to, central laboratories, investigating meeting planners, clinical trial material packagers, clinical trial material storage depots, couriers, and other scientific services.

"Third Party ProviderAgreement", means an agreement entered into between Chiltern and a Third Party Provider for the provision of goods or services relating to a Study.

"Work Order", means a written order substantially in the form set out in Appendix 2 for services relating to Insmed’s ArikaceTM inhaled antibiotic programs for Cystic Fibrosis (“CF”) or Nontuberculous  Mycobacteria (“NTM”) to this Agreement provided and signed by Insmed and accepted in writing by Chiltern which:

	
a.  

	
describes the nature and scope of the Services required to be provided by Chiltern in respect of a particular Study performed by Chiltern for Insmed;

	
b.  

	
sets out the schedule of work, including activities, milestones, and timelines, to be performed or consulting Services to be provided during the course of a particular Study performed by Chiltern for Insmed; and

	
c.  

	
specifies the budget and payment schedule for the required Services.

Work Orders shall not modify the terms of this Agreement.  For clarity, there shall be one Work Order for each of the four Studies conducted under the four Protocols.

	
4.  

	
INTERPRETATION

	
4.1  

	
Where a word or expression is defined in Section 3.1, other parts of speech and grammatical forms of the word or expression used in this Agreement have corresponding meanings.

	
4.2  

	
The headings contained in this Agreement are intended only to facilitate use of the Agreement and must not be used to interpret any of its provisions.

	
4.3  

	
References to "includes" or "including" are to be construed without limitation.

	
4.4  

	
References to "written" or "in writing" include any means of visible representation.

 

	
CHAPTER 3

	
SERVICES AND PERFORMANCE

 

	
5.  

	
SERVICES

	
5.1  

	
Chiltern agrees to provide the Services described in each Work Order entered into by the Parties pursuant to this Agreement and Insmed agrees to pay Chiltern for those Services as provided for in each such Work Order and Chapter 4 of this Agreement.

	
5.2  

	
Chiltern shall use Commercially Reasonable Efforts to provide the Services in accordance with this Agreement and the appropriate Work Order, to keep Insmed fully advised of progress, and to provide Insmed with such Reports and deliverables as described in the Work Order, as required by Applicable Law, or as reasonably requested by Insmed.   Chiltern will provide all Services in a timely and professional manner, in accordance with generally accepted industry standards and in compliance with Applicable Law, Good Clinical Practices, Protocol, and applicable standard operating procedures.  Chiltern will dedicate qualified and appropriate resources to perform activities related to the project, accomplish milestones and meet timelines set forth in each Work Order.

	
5.3  

	
Chiltern shall put in place and maintain through Commercially Reasonable Efforts safety measures and backup systems to protect and secure the Essential Documents in its possession that are generated as part of the Services, including the trial master file.  Chiltern shall protect data that is electronically stored by saving it in multiple locations around the world so that the integrity and availability of such data will be unaffected by foreseeable events outside of Chiltern’s control.

	
5.4  

	
Upon signature by Insmed and acceptance in writing by Chiltern, a Work Order is incorporated in and becomes part of this Agreement.

	
5.5  

	
Each Party will comply with all Applicable Law.

In carrying out its responsibilities under this Agreement, and in compliance with the Foreign Corrupt Practices Act (FCPA) of 1977 (15 U.S.C. §§ 78dd-1, et seq.), neither Party nor any of its respective representatives will pay, offer or promise to pay, or authorize the payment of, any money, or give or promise to give, or authorize the giving of, any services or anything else of value, either directly or through a third party, to any official or employee of any governmental authority or instrumentality, or of a public international organization, or of any agency or subdivision thereof, or to any political party or official thereof or to any candidate for political office for the purpose of improperly (i) influencing any act or decision of that person in his official capacity, including a decision to fail to perform his official functions with such governmental agency or instrumentality or such public international organization or such political party, (ii) inducing such person to use his influence with such governmental agency or instrumentality or such public international organization or such political party to affect or influence any act or decision thereof or (iii) securing any improper advantage.

	
6.  

	
THIRD PARTY PROVIDERS AND INVESTIGATORS

	
6.1  

	
As part of the Services, Chiltern may contract directly with Third Party Providers for the provision of Services not customarily performed by Chiltern, provided however that Chiltern provide prior notice to Insmed of the identity of the potential Third Party Provider and the purpose of the proposed engagement and obtain Insmed’s prior written approval before entering into any such agreement.  Chiltern shall bind such Third Party Providers appropriately in accordance with this Agreement.  Chiltern shall be fully responsible for the qualification of and performance of Services by Third Party Providers, and Chiltern shall ensure that Services are performed in compliance with this Agreement; provided however Chiltern’s responsibility for damages caused by Third Party Provider breaches, noncompliance, or failure to perform may not exceed the contracted value of the Third Party Provider’s services.

	
6.2  

	
Investigators will perform a Study at clinical sites and have independent duties under ICH GCP with respect to the fulfillment of Study related responsibilities.  Investigators are independent medical professionals responsible for their own performance of a Study.

	
6.3  

	
Insmed may contract directly with other third parties for the performance of activities related to a Study.  Chiltern's duties with respect to these other providers will be to liaise with and to inform them of the progress of the Study and to assist Insmed with the coordination of the other provider's activities in a manner that supports the successful execution of the Study.

	
6.4  

	
In the event a Third Party Provider or Investigator requests a promise of indemnity with respect to Insmed's products or actions, Chiltern shall notify Insmed and Insmed shall cooperate with Chiltern for the establishment of an indemnity agreement directly between Insmed and the Third Party Provider.

	
6.5  

	
Consistent with the provisions of Section 23, Chiltern shall only disclose that portion of Insmed Confidential Information to a Third Party Provider that is needed in order to perform Services and only to those individuals at the Third Party Provider who need to know such information in order to perform Services.

	
7.  

	
PERSONNEL AND TEAM ASSIGNMENTS

	
7.1  

	
Chiltern will ensure that persons performing Chiltern's obligations under this Agreement are suitably qualified and are bound by the obligations in this Agreement.  Chiltern may engage one or more of its Affiliates and consultants in addition to those listed in Appendix 1 to assist in the performance of Services provided that approval is obtained from Insmed and such Affiliates and consultants are bound by the terms of this Agreement.  Chiltern shall provide Insmed with the curriculum vitae of individuals who it identifies as key contributors to providing Services under this Agreement and, upon Insmed’s request, shall provide the curriculum vitae of any other individual who will be providing Services under this Agreement.  Chiltern shall obtain the prior written approval of Insmed before assigning additional team members to provide Services.  Insmed reserves the right to request that Chiltern replace team members in order to best fit the needs of the project, after discussion with Chiltern.  Chiltern will undertake Commercially Reasonable Efforts to replace team members at Insmed’s request.

	
7.2  

	
Chiltern will be solely responsible for the wages and employer related liabilities associated with the employment of its employees.

	
7.3  

	
CF - Chiltern shall allocate a team sufficient in size and expertise to carry out the Services related to CF (“CF Allocated Team Members”).  The names and functions of the CF Allocated Team Members shall be detailed in a CF Allocated Team Member Listing to be attached to the relevant Work Order Exhibit B.  As long as the scope of work for Chiltern contained in the CF Proposal is not materially reduced, Chiltern may not reassign the CF Allocated Team Members while they remain employed at Chiltern without Insmed’s written consent.  Team members may be reassigned during periods in which they are not able to perform their duties as CF Allocated Team Members, such as periods of disability, medical, family medical or military leave, or similarly recognized periods of absence.  In no event during the period of the CF Exclusivity Commitment shall a CF Allocated Team Member be reassigned to provide services in connection with any other project to develop an inhaled antibiotic for the treatment of CF until Insmed has made the initial regulatory filing for market approval (either NDA or MAA) relating to ArikaceTM for the treatment of CF.  The CF Allocated Team Member Listing will identify Team Members who are fully dedicated to Insmed’s CF program who may not be assigned to other non-Insmed projects (the “Ring Fenced Project Team”) and will also identify those Team Members who, despite being partially allocated to the Insmed CF program, may be allocated to other projects.  As long as Insmed continues to pay for the fixed costs of project management and site management, the funded members of the CF Ring Fenced Project Team may not be assigned to provide services in connection with any other sponsor’s project to develop an inhaled antibiotic for the treatment of CF until Insmed has made the initial regulatory filing for market approval (either NDA or MAA) relating to ArikaceTM for the treatment of CF.   In the event Chiltern acquires, is acquired by, merges, or otherwise combines or associates with another company that is conducting a project to develop an inhaled antibiotic for the treatment of CF then the CF Ring Fenced Project Team shall remain intact for the life of the CF Project.  This commitment to ring fence the CF Team Members will end in the event Insmed commits a material breach of this Agreement with regard to CF that is not cured within thirty (30) days or in the event the scope of services performed by Chiltern is materially reduced for reasons other than an uncured material breach by Chiltern, and in either event if Insmed is unable to put corrective action in place within thirty (30) days of written notice of breach, in which case appropriate transition of the project to an Insmed designee shall be made.  A termination of the CF Ring Fenced Project Team will not otherwise affect the rights or obligations of the Parties under this Agreement.  Regardless of whether or not the CF Ring Fenced Project Team is in place, Team Members shall not share with any third party or use in any third party project information relating to Insmed’s operations, strategy or plans, even if not attributed to Insmed or if presented in generic terms.

	
7.4  

	
NTM - Chiltern shall allocate a team sufficient in size and expertise to carry out the Services related to NTM (“NTM Allocated Team Members”).  The names and functions of the NTM Allocated Team Members shall be detailed in a NTM Allocated Team Member Listing to be attached to the relevant Work Order as Exhibit B.  As long as the scope of work for Chiltern contained in the NTM Proposal is not materially reduced, Chiltern may not reassign the NTM Allocated Team Members while they remain employed at Chiltern without Insmed’s written consent.  Team members may be reassigned during periods in which they are not able to perform their duties as NTM Allocated Team Members, such as periods of disability, medical, family medical or military leave, or similarly recognized periods of absence.  In no event during the period of the NTM Exclusivity Commitment shall NTM Allocated Team Members be reassigned to provide services in connection with any other project to develop an inhaled antibiotic for the treatment of NTM until Insmed has made the initial regulatory filing for market approval (either NDA or MAA) relating to ArikaceTM for the treatment of NTM.  The CF Allocated Team Member Listing will identify Team Members who are fully dedicated to Insmed’s NTM program, who may not be assigned to other non-Insmed projects (the “Ring Fenced Project Team”) and will also identify those Team Members who, despite being partially allocated to the Insmed NTM program, may be allocated to other projects.  As long as Insmed continues to pay for the fixed costs of project management and site management, the funded members of the NTM Ring Fenced Project Team may not be assigned to provide services in connection with any other sponsor’s project to develop an inhaled antibiotic for the treatment of NTM until Insmed has made the initial regulatory filing for market approval (either NDA or MAA) relating to ArikaceTM for the treatment of NTM.   In the event Chiltern acquires, is acquired by, merges, or otherwise combines or associates with another company that is conducting a project to develop an inhaled antibiotic for the treatment of NTM then the NTM Ring Fenced Project Team shall remain intact for the life of the NTM Project.  This commitment to ring fence the team NTM Team Members will end in the event Insmed commits a material breach of this Agreement with regard to NTM that is not cured within thirty (30) days or in the event the scope of services performed by Chiltern is materially reduced for reasons other than an uncured material breach by Chiltern, and in either event if Insmed is unable to put corrective action in place within thirty (30) days or written notice of breach, in which case appropriate transition of the project to an Insmed designee shall be made.  A termination of the NTM Ring Fenced Project Team will not otherwise affect the rights or obligations of the Parties under this Agreement.  Regardless of whether or not the NTM Ring Fenced Project Team is in place, Team Members shall not share with any third party or use in any third party project information relating to Insmed’s operations, strategy or plans, even if not attributed to Insmed or if presented in generic terms.

	
8.  

	
TRANSFER OF OBLIGATIONS

	
8.1  

	
Where applicable with respect to clinical studies, Insmed may transfer a portion of its obligations under 21 CFR §312.52 or ICH Guideline E6, 5.2 to Chiltern as set out in the applicable Work Order.  Notwithstanding the foregoing, Insmed retains all obligations not explicitly transferred to Chiltern in writing according to the Transfer of Obligations document attached as Attachment A to each Work Order, which Insmed shall modify accordingly if obligations change.  Insmed shall attach such modified Transfer of Obligations document to this document and notify the appropriate regulatory authority of such modification.  In the event of termination of this Agreement or a Work Order relating to a clinical study, all such obligations shall transfer back to Insmed.

	
9.  

	
IDENTITY OF SPONSOR OF STUDY

	
9.1  

	
Except as may otherwise be agreed by the Parties in writing, Insmed is, and at all times remains, the "Sponsor" or "principal" of the Study pursuant to or Applicable Law in all geographical regions where the Study is being performed.

	
9.2  

	
Insmed is responsible for ensuring that a local entity is available to act as sponsor of clinical Studies in the European Union as required pursuant to EU Directive 2001/20/EC.  Chiltern is responsible for ensuring that a local entity is available to act as sponsor of clinical Studies in Australia as required pursuant to Therapeutic Goods Administration Regulations in Australia.  In any other jurisdiction where a local entity is required by a regulatory agency to serve as the sponsor of a clinical Study, Chiltern shall be responsible for ensuring that a local entity is available to act as sponsor under the Applicable Law.

	
10.  

	
TEST MATERIALS

	
10.1  

	
Unless otherwise specified in the Work Order, Insmed will provide Chiltern with sufficient amounts of Test Materials for the purposes of the Study and will also provide such complete and accurate data as is necessary to inform Chiltern of the stability, proper storage and safe handling requirements of the Test Materials, including a Material Safety Data Sheet (MSDS) or equivalent documentation.  Insmed shall provide Chiltern with all available information regarding known or potential hazards associated with the use of any substances supplied to Chiltern by Insmed prior to execution of a Work Order.  As an ongoing obligation, each Party will promptly notify the other Party of the emergence of information impacting the safety of any Study participant or which otherwise impacts the toxicity assessment or risk profile of the Study product.

	
10.2  

	
Insmed agrees that all necessary approvals required under the Applicable Law will be obtained prior to the shipment of Test Materials to the extent that such necessary approvals are not an agreed Chiltern Service or deliverable set out in a Work Order.

	
10.3  

	
Unless otherwise specified in the Work Order, Insmed will cause Test Materials to be shipped properly packaged and labeled directly to the Investigator.

	
11.  

	
MODIFICATION OF SERVICES

	
11.1  

	
A Work Order may be amended from time to time by mutual written agreement of both Parties.  Either Party may request in writing that a Work Order be revised.  Modifications that may result in an amendment include, but are not limited to, changes in the contractual assumptions, responsibilities or timelines.  Written approval by both Parties shall be required before any amendment takes effect.

	
11.2  

	
An amendment requiring a material change in the scope of work (defined as a major amendment to a Protocol that impacts the execution of the Study, a commercial decision by Insmed that leads to significant changes in the scope of Services in the Work Order, or those events which the Parties agree are reasonably outside of the control of a Party) must be authorized by the Executive Vice President Development and Chief Medical Officer or the Chief Executive Officer of Insmed in writing (such as by letter or similar notification form, or by email or fax if followed by hard copy notification, in each case delivered in accordance with Section 42.3 hereof) before such an amendment takes effect and in such event Insmed will review the budget with Chiltern and negotiate in good faith to reach agreement on appropriate adjustments to the budget.  No amendment to the budget of a Work Order will be made for an amendment that is not a material change in the scope of work...

	
11.3  

	
Chiltern will not deviate in any material respect from a Work Order without Insmed's prior written approval.  In the event of an emergency, Chiltern must contact the Executive Vice President Development and Chief Medical Officer or the Chief Executive Officer of Insmed and obtain written approval before making any deviation from the applicable Work Order.

	
12.  

	
DELAYS AND EXTENSION OF TIMELINES

	
12.1  

	
Chiltern will use Commercially Reasonable Efforts to be responsive to inquiries from regulatory bodies relating to the Services so as not to cause unreasonable delays or require unreasonable extensions.  Insmed will use Commercially Reasonable Efforts to be responsive to inquiries from regulatory bodies relating to those aspects of clinical trials over which Insmed has control so as not to cause unreasonable delays or require unreasonable extensions.

	
13.  

	
FORCE MAJEURE

	
13.1  

	
Neither Party will be considered in default of the performance of any obligation under this Agreement to the extent and for the period that the performance of the obligation is prevented or delayed by fire, flood, earthquake, explosion, strike, acts of terrorism, war, insurrection, embargo, government requirement, civil or military authority, act of God, or any similar event, occurrence or condition which is not caused, in whole or in part by that Party and which is beyond the reasonable control of that Party, except that Chiltern will not be excused from default in performance to the extent it does not have appropriate safety measures and back-up systems in place to remove or reduce the effects of such event on data integrity. The affected Party shall provide notice to the other Party of such occurrence, and shall use Commercially Reasonable Efforts to avoid or remove such causes of non-performance.

	
13.2  

	
If any timeline or deadline set out in a Work Order is or will be materially delayed by Chiltern as a result of a Force Majeure, which in this case shall mean a delay by Chiltern of more than two months, then Insmed shall have the option to transfer that portion of Services to an alternate provider, in order to meet such timeline or deadline, and Insmed and Chiltern shall negotiate in good faith a reasonable reduction in the fee under the applicable Work Order.

	
14.  

	
AUDITS AND INSPECTIONS

	
14.1  

	
On giving reasonable notice in writing, Insmed and/or its suitably qualified representative, may, during normal business hours and at mutually agreeable times, but not more than twice in a contract year without cause, visit any Chiltern facility where Services for a Study are being performed in order to conduct a full Audit of Chiltern's performance of the Study.  All Chiltern personnel time and resources necessary to complete such an Audit shall be provided at no cost to Insmed.  In the event Insmed seeks to conduct more than two full Audits or inspections, without cause, in a contract year, Insmed agrees to pay Chiltern a commercially reasonable fee and reasonable costs for hosting and responding to such additional Audits.  Co-monitoring by Insmed as needed to execute Insmed responsibilities and Audits conducted to correct noncompliance shall not be limited by this Article 14.

	
14.2  

	
Insmed will designate independent auditors to conduct an Audit, and will provide Chiltern with an agenda that outlines the full scope of the audit and advance notice to prepare for the audit.

	
14.3  

	
Chiltern agrees to permit representatives of any relevant regulatory or governmental authority to access, at reasonable times during normal business hours, relevant records and information (and where applicable make copies of the same), personnel and facilities.  Chiltern will notify Insmed promptly in the event of any actual or notified inspection by a regulatory or administrative authority of Chiltern's facilities where that inspection directly relates to a Study or Services being performed for Insmed.  In that event and to the extent permitted by Applicable Law, Chiltern will consult with and allow Insmed to participate in such inspection or audit, will promptly provide copies of any correspondence from the regulatory authority directly related to Insmed, and will allow Insmed to review and comment on any responses made by Chiltern to the authority relating to the inspection.

	
14.4  

	
Chiltern will also notify Insmed promptly in the event of any inspection by a regulatory or administrative authority of Chiltern's facilities where that inspection indirectly relates to a Study or Services being performed for Insmed if the inspection findings are reasonably expected to and/or actually do result in “Critical” findings as defined by the regulatory agency against Chiltern or result in an FDA Warning Letter or a Form FDA 483 or similar citations by EU regulatory authorities, provided however that Chiltern shall not disclose the identity of the sponsor or the confidential information of another entity.

 

 

	
15.  

	
RECORDS AND REPORTS

	
15.1  

	
Chiltern will keep appropriate records of the status and progress of a Study as required by the relevant Work Order and Applicable Law.

	
15.2  

	
Chiltern will provide reports or data to Insmed as specified in the applicable Work Order or as required by Applicable Law.  Such reports will be in Chiltern's standard format unless otherwise specified in the Work Order or as required by Applicable Law or otherwise agreed in the project plan for the Study.

	
15.3  

	
Despite section 15.2, if Insmed breaches any material obligation under this Agreement or under a Work Order that remains uncured, Chiltern is not obliged to provide any report or data not already paid for until all breaches have been remedied, unless required by Applicable Law.

	
15.4  

	
Study Reports, supporting documentation, and the resulting data prepared for the purposes of a Work Order are the property of Insmed.

	
15.5  

	
Chiltern shall provide Insmed with Essential Study Documents at any time during the term of Service if Insmed so requests in writing and Insmed is not in material uncured breach of its obligations hereunder as notified to Insmed by Chiltern in accordance with 42.3 hereof.  In any event, Essential Study Documents will be provided to Insmed within thirty (30) days of the completion of the Services.  Chiltern shall provide Insmed with true and accurate copies of any Investigator Agreements or Third Party Provider Agreements entered into by Chiltern with a Third Party Provider and may retain the originals.  Chiltern shall provide Insmed with electronic copies of all key correspondence related to the Studies that are not part of the TMF requirements in accordance with the Study Project Plan agreed between Insmed and Chiltern.

 

 

	
15.6  

	
Except for those documents referred to in Sections 15.4 and 15.5, and those documents that require a longer retention period under Applicable Law, Chiltern may dispose of Study documentation such as emails, documents, internal reports and data and all internal Study-related materials one (1) year after the date of its final invoice in respect of the Services for that Study, provided, however, that Chiltern first seek approval of the documents to be destroyed and obtain the written approval of Insmed’s Executive Vice President Development and Chief Medical Officer or her designee prior to such destruction.  In the event Chiltern provides written notice to Insmed requesting consent to destroy or other disposition instructions and Insmed does not respond within sixty (60) days either authorizing destruction or providing other disposition instructions at Insmed’s expense, Chiltern may proceed with the destruction of the files.

	
15.7  

	
If Insmed requires material to be held by Chiltern for a longer period than that provided for in Section 15.5, Chiltern agrees to store Insmed's property as agreed in the applicable Work Order in accordance with Chiltern's standard operating procedures and at Insmed's cost and expense.  Insmed is entitled upon reasonable notice to have reasonable access to such material and to copy any part of it at it its own expense.

	
15.8  

	
If Insmed elects to use electronic access made available by Chiltern, any such electronic access to Study material will be governed by Chiltern's standard electronic access terms and conditions, attached hereto as Appendix 3.  The fee for electronic access is included in the budget for each Work Plan.

 

	
CHAPTER 4

	
PAYMENT

 

	
16.  

	
PAYMENT

	
16.1  

	
Insmed is responsible for the financial funding, in U.S. Dollars, of all Services and third party costs including Third Party Provider costs, Investigator fees, and travel and out of pocket expenses related to any Work Order as specified in the budget of such Work Order.  The Work Order shall define the payment schedule.

	
16.2  

	
Insmed will pay Chiltern as set out in the applicable Work Order and, unless otherwise agreed in the Work Order, all invoices are due and payable and will be paid by Insmed within forty-five (45) - days of the date of receipt of invoice.

	
16.3  

	
If any amount payable under this Agreement by Insmed to Chiltern is subject in any jurisdiction to Value Added Tax or other nationally regulated sales tax, Insmed agrees to pay the amount of such tax to Chiltern on receiving the relevant invoice.  If any of such tax is refunded to Chiltern by the relevant taxing authority, then Chiltern shall pay the full amount of such refund to Insmed within thirty (30) days of receipt thereof by Chiltern.

	
17.  

	
INFLATIONARY ADJUSTMENT

There shall be no inflationary adjustment made to any Work Order budget that is not extended beyond the original term.  In the event the timelines are materially extended that is attributable to an act or omission of Insmed, Chiltern and Insmed agree to negotiate in good faith to agree on a reasonable inflationary adjustment based on applicable national indices.  In the event the timelines are materially extended that is attributable to an act or omission of Chiltern, there shall be no inflationary adjustment.

	
18.  

	
DISPUTED INVOICES

	
18.1  

	
If a dispute arises between the Parties with respect to any part of an invoice, Insmed:

	
a.  

	
must pay all undisputed parts of the invoice within the stipulated forty-five (45)   day period,

	
b.  

	
must notify Chiltern promptly in writing of the particulars of the dispute, and

	
c.  

	
may withhold payment of the disputed part of the invoice provided that the Parties endeavour promptly and in good faith to resolve the dispute ,and

	
d.  

	
if applicable and upon Insmed’s written request, Chiltern may re-issue a new invoice to Insmed for the undisputed portion.

	
19.  

	
NON-PAYMENT OF UNDISPUTED AMOUNTS

	
19.1  

	
If Insmed fails to pay the amount of any undisputed invoice or part of an invoice within the time prescribed in section 16.2, interest shall accrue on the undisputed unpaid amount at the rate of one percent (1%) per month, or the maximum rate allowed by Applicable Law if that is less than one percent (1%) per month, from the date when such payment was due until the date of payment.   If any dispute over payment is not resolved within sixty (60) days after delivery of a notice of dispute or demand for payment is delivered in accordance with Section 42.3 hereof, either party may commence proceedings in accordance with Article 27 of this Agreement.

	
19.2  

	
If any non-payment of an undisputed amount is not resolved within thirty (30) days after delivery of a written notice or written demand for payment is delivered in accordance with Section 42.3 hereof, Chiltern may elect to withhold reports or other material in respect of a Study for so long as Insmed fails to make any undisputed payment that is past due as provided by Section 16.2.

	
20.  

	
TRAVEL AND OUT OF POCKET EXPENSES

	
20.1  

	
Insmed will reimburse Chiltern on a pass through, at cost basis in accordance with the applicable Work Order for all reasonable travel and other reasonable out of pocket expenses as required to be incurred by Chiltern in connection with the performance of the Services.

	
20.2  

	
Unless otherwise agreed in the Work Order, Insmed will reimburse Chiltern for such travel and other out of pocket expenses within forty five (45) days of the date of invoice setting out those expenses and charges and such receipts or other supporting documentation as Insmed may reasonably request.

 

 

	
21.  

	
FUNDS FOR INVESTIGATOR GRANTS AND THIRD PARTY PROVIDER PAYMENTS

	
21.1  

	
Chiltern shall be responsible for administering Investigator grants or other Third Party Provider payments in connection with Services as provided in the Work Orders.  In order to provide for timely payments to Investigators and other Third Party Providers, Insmed agrees to make an advance float payment to Chiltern of either (a) ten percent (10%) of the projected Investigator grant budget and Third Party Provider Agreement budgets, respectively, or (b) the relevant Investigator or Third Party Provider Agreement advance milestone(s), whichever is applicable.  All payments to Investigators will be made according to the terms of the respective clinical trial agreement, which will be reviewed by Insmed prior to execution.  Insmed acknowledges that Chiltern will not make payments to Investigators or Third Party Providers unless sufficient funds are available and that Chiltern is only making such payments to the Investigators and Third Party Providers as pass-through amounts from Insmed.  Any advance payments will be applied against the final ten percent (10%) of the estimated Investigator grant and Third Party Provider expenses.  Within sixty (60) days of completion or termination of the Services, Chiltern will provide to Insmed a final reconciliation of Investigator and Third Party Provider expenses to ensure that Insmed pay only for those expenses actually and properly incurred.  Any excess advance payment will be refunded to Insmed within sixty (60) days from the date of the completion or termination of the Services.

	
21.2  

	
If Insmed fails to provide to Chiltern the funding required by Section 21.1, Chiltern is not liable in any way to make any payments required to be made to Third Party Providers in accordance with that section.

	
  

	 

	
22.  

	
FOREIGN CURRENCY

	
22.1  

	
Invoices and payments shall be made in U.S. Dollars unless otherwise stated in the approved Work Order. Where costs are incurred in other currencies, Chiltern will apply the applicable exchange spot rate published on www.oanda.com on the last business day of the relevant invoice period to the initial currency.  In the event oanda.com is no longer in service, Chiltern will apply the applicable exchange spot rate published in the Wall Street Journal.   Each Party agrees that neither Party should be significantly advantaged or disadvantaged as a result of differences between the foreign currency exchange rates used in the pricing of the fees for Services or expenses and the actual foreign currency exchange rates as of the dates of invoices, as published on www.oanda.com.  If such a difference is greater than five percent (5%), the Parties agree to negotiate revised compensation to Chiltern for amounts that would be due if the fees for Services were calculated at then current exchange rates.  If the difference fluctuates by five percent (5%) or more for more than ninety (90) days, either Party may request an adjustment to the exchange rates based on then current exchange rates for future invoices.

 

	
CHAPTER 5

	
PARTY OBLIGATIONS

 

	
23.  

	
CONFIDENTIALITY

	
23.1  

	
Insmed Confidential Information shall include, without limitation, ArikaceTM (liposomal amikacin), nebulizer for administration, Protocols, timelines, milestones, progress in carrying out Studies, financial position, all data produced in connection with a Study, and all information relating to the above.

	
23.2  

	
The Parties will exchange Confidential Information during the term of this Agreement, which is not available to the public, and each Receiving Party

	
a.  

	
will maintain such Confidential Information in strict confidence,

	
b.  

	
will use such Confidential Information only for the Purpose and not for any other purpose, and

	
c.  

	
will not disclose such Confidential Information to any third parties, except for disclosures to the Receiving Party's Representatives or to third parties, in either case who have a need to know or to have access to such information for the Purpose to the extent required or whose services are required for the performance of this Agreement or a Work Order, and to whom the confidentiality, use, and ownership of invention terms of this Agreement have been clearly communicated and who are bound to terms at least as strict as those in this Agreement.

	
23.3  

	
Each Receiving Party will store the Confidential Information in a secure location, and will handle and protect the Confidential Information with no less care than that with which it handles and protects its own highly confidential and proprietary information (but in no event less than a reasonable degree of care) to prevent unauthorized publication or disclosure of Confidential Information.

	
23.4  

	
If the Disclosing Party so requests in writing, the Receiving Party will, at the option and expense of the Disclosing Party, return or destroy and certify that it has destroyed the Confidential Information, including that which is mentioned in Section 15.5 above, except that in any event the Receiving Party may retain a single copy of the Confidential Information and related materials in its archives for the purposes of demonstrating or ensuring its compliance with the Agreement, Work Order or Applicable Law.

	
23.5  

	
The period for maintaining confidentiality and non-use shall survive until the information becomes public (or, if shorter, for the longest period permitted under applicable law), provided that such information does not become public as a result of a breach of this Agreement; in which case the burden of proof shall be on the Receiving Party.

	
23.6  

	
Provided that the burden of establishing the availability of the following exceptions shall be on the Receiving Party, the confidential provisions of Sections 23.1 to 23.5 and 23.7 to 23.10 do not apply to any part of the Confidential Information which

	
a.  

	
is known to the Receiving Party, without restriction on confidentiality or use, at the time it was obtained from the Disclosing Party,

	
b.  

	
is acquired by the Receiving Party, without restriction on confidentiality or use, from a third party that did not obtain such information directly or indirectly from the Disclosing Party while under an obligation not to disclose it,

	
c.  

	
is or becomes published or otherwise enters the public domain other than by violation of this Agreement by the Receiving Party, or

	
d.  

	
the Disclosing Party explicitly allows to be disclosed or used by written consent of an authorized representative.

	
23.7  

	
If any part of Confidential Information is required to be disclosed by the Receiving Party to comply with any applicable laws or regulations, including with respect to Insmed, any national securities exchange on which its securities are listed, or the order of a court of competent jurisdiction, the Receiving Party shall provide prompt written notice of such disclosure requirement to the Disclosing Party and shall cooperate with the Disclosing Party's reasonable and lawful actions to avoid and/or minimize the extent of such disclosure.  Such disclosed information shall remain Confidential Information.

	
23.8  

	
Chiltern shall only disclose that portion of Insmed Confidential Information to a Third Party Provider or Investigator that is necessary in order to perform Services in the case of a Third Party Provider or a Study in the case of an Investigator and only to those individuals at a Third Party Provider or Investigator who need to know such information in order to perform Services or the Study.  Prior to such disclosure, Chiltern shall inform Insmed of the nature of the information intended to be disclosed and obtain Insmed’s prior written approval before such disclosure.

	
23.9  

	
Neither Party shall publish or disclose to third parties the existence of this Agreement, the relationship between the Parties created by the Agreement or the terms of this Agreement, provided however, that either Party may disclose the existence of this Agreement, the relationship between the Parties created by the Agreement and the terms of this Agreement to regulatory authorities, as required by Applicable Law, and to third party investigators and thought leaders on a need-to-know basis in order to perform Services or carry out a Study.    .

	
23.10  

	
No Party shall have the right to publish the Confidential Information of the other Party.

	
23.11  

	
In connection with the Purpose of this Agreement, Insmed will need to disclose the Confidential Information of a third party, to which the following terms (“Third Party Terms”) shall apply

	
a  

	
“Third Party Confidential Information” shall mean (i) the Respiratory Signs and Symptoms Questionnaire (“RSSQ”) developed by Boehringer Ingelheim Pharmaceuticals, Inc. a Delaware corporation having offices at 900 Ridgebury Road, P.O. Box 368, Ridgefield, CT  06877 (“BI”); (ii) Insmed’s use of the RSSQ; (c) the limited license to use the RSSQ (“RSSQ License”) which requires restriction of access to the RSSQ and binding those with access to terms at least as strict as those in the RSSQ License; and (iii) these Third Party Terms; (iv) and any information relating to (i)-(iv) above.

	
b  

	
Receiving Party (i) shall not disclose to any third party, or use Third Party Confidential Information or any part or all of the RSSQ other than for the Purpose; (ii) shall take all reasonable steps to prevent the unauthorized disclosure of Third Party Confidential Information to any third party; (iii) shall limit access to Third Party Confidential Information only to those employees who have a need to know in order to carry out the Purpose of this Agreement and who are bound by the terms of this Agreement; and (iv) shall not remove or destroy any proprietary or confidentiality notice on the RSSQ or related materials.

	
c  

	
Receiving Party shall use the RSSQ solely for the Purpose and only to the extent necessary for the Purpose of the Agreement.  Receiving Party  shall not (i) transfer, reveal, market, sell, offer for sale, lease, license, sublicense, loan, or otherwise provide the RSSQ to any third party, whether or not such action is for commercial advantage, or (ii) create derivative works of, use, copy, modify, distribute, authorize the use of, publish, publicly perform, physically, optically, or digitally transmit, or display the whole or any portion of the RSSQ, except as specifically authorized herein.  Receiving Party  acknowledges and agrees that the use of the RSSQ to manipulate, report, distribute, or otherwise use any data in violation of any law or of any terms or limitations imposed by the Agreement shall be a violation of the Agreement and shall automatically terminate the rights granted in the Agreement.

	
d  

	
This Agreement shall not transfer any title or ownership rights in the RSSQ, including any intellectual property embodied therein or arising therefrom, which title and ownership rights shall at all times remain with BI.

	
e  

	
Upon termination of the review or evaluation, termination or expiration of the Agreement, or earlier request of Insmed, Receiving Party shall return to Insmed or destroy all copies of the RSSQ and certify in writing that they have done so, that they have not retained any copies, and that they have deleted any copies from all computers under their control.

	
f  

	
These obligations shall survive expiration or termination of the Agreement.

	
g  

	
Any responsibility for the accuracy or completeness of the RSSQ or its use or application is disclaimed.  NO REPRESENTATION OR WARRANTY IS MADE EITHER EXPRESS OR IMPLIED OF ANY KIND, INCLUDING MERCHANTABILITY OR THE ADEQUACY OR SUITABILITY OF THE RSSQ FOR ANY PARTICULAR PURPOSE OR TO PRODUCE ANY PARTICULAR RESULT.  NEITHER INSMED NOR BI NOR ANY EMPLOYEE OR AGENT OF INSMED OR BI SHALL HAVE ANY LIABILITY ARISING OUT OF THE USE OF THE RSSQ FOR ANY REASON, INCLUDING BUT NOT LIMITED TO THE INCOMPLETENESS, INADEQUACY OR UNSUITABILITY OF THE RSSQ FOR ANY PARTICULAR PURPOSE OR TO PRODUCE ANY PARTICULAR RESULT.

	
h  

	
Receiving Party will not use the name of BI, Insmed or any affiliate, employee or agent of BI or Insmed for any purpose related to the Agreement, the Purpose, the RSSQ License or Insmed without Insmed’s prior written consent.

	
i  

	
These Third Party Terms shall be governed by the laws of the State of Connecticut without regard to the conflict of laws, rules or principles, thereof.

	
j  

	
In the event of a conflict between these Third Party Terms and the Agreement, the terms of these Third Party Terms shall be controlling with regard to the Third Party Confidential Information only.

	
23.12  

	
The Confidential Disclosure Agreement dated April 12, 2010 between Transave and Chiltern remains in full force and effect.

	
24.  

	
INSURANCE OBLIGATIONS

	
24.1  

	
Chiltern and its Affiliates will keep in full force and effect and maintain at its/their sole cost and expense insurance coverage in types and amounts commensurate in the industry for the performance of services substantially similar to the Services by similarly sized service providers and as otherwise prudent or required by Applicable Law, including insurance coverage for clinical trials of amounts in accordance with Applicable Law and generally accepted standards for contract research organizations, which coverage will be placed with a reputable insurer.    Subject to the limitations contained in the certificate of liability insurance, Chiltern shall add Insmed as an additional insured under its own insurance policies, including its products/completed operations and professional liability policy coverages for the CRO services that it performs directly for or on behalf of Insmed in all clinical trials.  Upon request, Chiltern shall provide Insmed with copies of certificates of insurance and Chiltern shall notify Insmed immediately in the event of cancellation or material change in such insurance.  Chiltern shall maintain such coverage in full force and effect throughout the term of each Work Order and for three (3) years after the completion of the Work Order

	
24.2  

	
During the term of the Studies and for at least one (1) year thereafter, Insmed will maintain product liability or clinical trials insurance underwritten by a reputable insurer which: (i) is appropriate for the Studies; and (ii) provides coverage for claims relating to the test materials or Studies in amounts required by applicable law and (iii) does not contain exclusions that would preclude Claims by participating Study participants which arise from the Study in relation to the Test Materials where the Study participant has reasonably complied with the Protocol. Insmed must secure and maintain in full force and effect throughout the term of each Study and for three (3) years after the completion of the Study.  In those jurisdictions in which Chiltern is responsible for procuring an entity or designee to serve as the local sponsor or legal representative, Insmed agrees to name Chiltern or its designee as an additional insured under Insmed’s product liability or clinical trials insurance.

	
25.  

	
USE OF NAMES ETC.

	
25.1  

	
Neither Party will use the other Party's name, trademarks, or the name of any employee of the other Party in any advertising, online marketing, packaging, promotional material, or any other media or publicity relating to this Agreement without the prior written consent of the other Party.

	
26.  

	
EMPLOYEE SOLICITATION

	
26.1  

	
Each Party agrees that, during the term of a Study and for one hundred and eighty (180) days after the completion of a Study, it will not, without the prior written consent of the other Party, hire or engage as an independent contractor any employee of the other Party who has been directly involved in performing Services under the Agreement.

	
27.  

	
DISPUTE RESOLUTION

	
27.1  

	
If any dispute, controversy or Claim arises out of this Agreement, the Parties agree that they will attempt in good faith to resolve the matter through good faith negotiations, provided that if such good faith negotiations fail to resolve the matter within thirty (30) days of the date one Party first notifies the other Party of such dispute, controversy or Claim, either Party may submit the matter to mediation administered by the American Arbitration Association under its Commercial Mediation Procedures and the Parties agree to work in good faith to resolve such matter through such mediation.

	
27.2  

	
If efforts at mediation are unsuccessful within sixty (60) days after the date that the matter is submitted to mediation pursuant to Section 27.1 , either Party may submit the matter to an appropriate court for resolution in accordance with Section 47 hereof.

	
28.  

	
OWNERSHIP OF INVENTIONS, DISCOVERIES ETC.

	
28.1  

	
Title to and ownership of any and all Intellectual Property generated during performance of Services or related to the Protocols, Studies or ArikaceTM, shall reside in and be the sole property of Insmed (“Insmed IP”).  For value received, Chiltern agrees to assign and hereby assigns, sells, transfers and conveys unto Insmed, its successors, assigns and legal representatives, the entire right, title and interest, for all countries, in and to certain inventions relating to Insmed IP whether or not described in an application for Letters Patent of the United States and in and to any said application, and all divisions, renewals and continuations thereof, and all Letters Patent of the United States which may be granted, thereon, and all reissues and extensions thereof, and all applications for Letters Patent or other grants of protection of proprietary rights including, but not limited to, inventor's certificate, utility model, utility certificate, patent of importation, registration of patent and industrial design registration which may be filed, and which may be granted, upon said inventions in any countries or regions foreign to the United States, and all reissues, renewals and extensions thereof, and agrees to assist, at Insmed’s expense, in obtaining protection of Insmed IP, including without limit executing documents, and causing its and its affiliates employees, officers, directors, consultants, advisors, agents and anyone performing Services under this Letter of Intent to execute documents, that are necessary or useful for such purpose, such as assignments.

	
28.2  

	
No Licenses.  Except as expressly provided, no right or license, either express or implied, is granted under any intellectual property right or by virtue of the disclosure of Confidential Information under this Agreement, or otherwise.

	
29.  

	
EXCLUSIVITY COMMITMENT

	
29.1  

	
CF - Except for those studies previously disclosed to Insmed, which are listed in Appendix 4, neither Chiltern nor its Affiliates are currently conducting or actively seeking new business for another Phase II/III trial as material provider of clinical research services for the development of an inhaled antibiotic for CF and Chiltern agrees that neither Chiltern nor its Affiliates will commence or actively seek new business for another Phase II/III trial as material provider of clinical research services for the development of an inhaled antibiotic for CF until Insmed has made the initial regulatory filing for market approval (either NDA or MAA) relating to ArikaceTM (liposomal amikacin) for the treatment of CF (“CF Exclusivity Commitment”).  As used in the CF Exclusivity Commitment context, “actively seeking new business” is defined as responding to requests for proposals or otherwise submitting pricing or bids for another Phase II/III trial as a material provider of clinical research services for the development of an inhaled antibiotic for CF.  During the term of the CF Exclusivity Commitment, in the event Chiltern otherwise has an opportunity to provide services for another Phase II/III trial as material provider of clinical research services for the development of an inhaled antibiotic for CF, prior to submitting a response to a request for new business, Chiltern shall promptly notify Insmed and shall not submit a response to a request for new business or commence such services without the prior written consent of an authorized representative of Insmed.  It is Insmed’s intention to pursue the initial regulatory filing for market approval (either NDA or MAA) of ArikaceTM (liposomal amikacin) for the treatment of CF in as efficient a manner as is feasible based on the input of regulatory authorities.  In the event Insmed discontinues the development program for CF prior to filing the initial regulatory filing market approval (either NDA or MAA) or there is a material delay in the submission of the NDA or MAA following the completion of the Integrated Clinical Summaries, the Parties will discuss the reasonableness of the continuation of the CF Exclusivity Commitment and agree to negotiate in good faith to provide for either the continuation or suspension of the CF Exclusivity Commitment.  This CF Exclusivity Commitment will remain in place for the CF program as long as the scope of work for Chiltern contained in the CF Work Orders is not materially reduced.   A “material reduction in the scope of work for CF” is defined as a major amendment to a Protocol that impacts the execution of the CF Studies or a commercial decision by Insmed that leads to significant reductions in the scope of Services provided by Chiltern as described in the CF Proposal.  A reduction in scope of work shall not be considered material if occurring for reasons of uncured breach by Chiltern, which shall include Chiltern bidding for other CF projects while working on Insmed projects.  This CF Exclusivity Commitment will end in the event Insmed commits a material breach of this Agreement as it relates to CF that is not cured within thirty (30) days after notice.  A termination of the CF Exclusivity Commitment will not otherwise affect the rights or obligations of the Parties under this Agreement.  Regardless of whether or not the CF Exclusivity Commitment is in place, Chiltern shall not share with any third party or use in any third party project information relating to Insmed’s operations, strategy or plans, even if not attributed to Insmed or if presented in generic terms.

	
29.2  

	
NTM -  Except for those studies previously disclosed to Insmed, which are listed in Appendix 4, neither Chiltern nor its Affiliates are currently conducting or actively seeking new business for another Phase II/III trial as material provider of clinical research services for the development of an inhaled antibiotic for NTM and Chiltern agrees that neither Chiltern nor its Affiliates will commence or actively seek new business for another Phase II/III trial as material provider of clinical research services for the development of an inhaled antibiotic for NTM until Insmed has made the initial regulatory filing for market approval (either NDA or MAA) relating to ArikaceTM (liposomal amikacin) for the treatment of NTM (“NTM Exclusivity Commitment”).  As used in the NTM Exclusivity Commitment context, “actively seeking new business” is defined as responding to requests for proposals or otherwise submitting pricing or bids for another Phase II/III trial as a material provider of clinical research services for the development of an inhaled antibiotic for NTM. During the term of the NTM Exclusivity Commitment, in the event Chiltern otherwise has an opportunity to provide services for another Phase II/III trial as material provider of clinical research services for the development of an inhaled antibiotic for NTM, prior to submitting a response to a request for new business, Chiltern shall promptly notify Insmed and shall not submit a response to a request for new business or commence such services without the prior written consent of an authorized representative of Insmed.  It is Insmed’s intention to pursue the initial regulatory filing for market approval (either NDA or MAA) of ArikaceTM (liposomal amikacin) for the treatment of NTM in as efficient a manner as is feasible based on the input of regulatory authorities.  In the event Insmed discontinues the development program for NTM prior to filing the initial regulatory filing for market approval (either NDA or MAA) or there is a material delay in the submission of the NDA or MAA following the completion of the Integrated Clinical Summaries, the parties will discuss the reasonableness of the continuation of the NTM Exclusivity Commitment and agree to negotiate in good faith to provide for either the continuation or suspension of the NTM Exclusivity Commitment.  This NTM Exclusivity Commitment will remain in place for the NTM program as long as the scope of work for Chiltern contained in the NTM Work Order is not materially reduced.  A “material reduction in the scope of work for NTM” is defined as a major amendment to a Protocol that impacts the execution of the NTM Studies or a commercial decision by Insmed that leads to significant reductions in the scope of Services provided by Chiltern as described in the NTM Proposal.  A reduction in scope of work shall not be considered material if occurring for reasons of uncured breach by Chiltern, which shall include Chiltern bidding for other NTM projects while working on Insmed projects.  This NTM Exclusivity Commitment will end in the event Insmed commits a material breach of this Agreement as it relates to NTM that is not cured within thirty (30) days after notice.  A termination of the NTM Exclusivity Commitment will not otherwise affect the rights or obligations of the Parties under this Agreement.  Regardless of whether or not the NTM Exclusivity Commitment is in place, Chiltern shall not share with any third party or use in any third party project information relating to Insmed’s operations, strategy or plans, even if not attributed to Insmed or if presented in generic terms.

 

	
CHAPTER 6

	
ADDITIONAL COVENANTS, REPRESENTATIONS, WARRANTIES, INDEMNITIES AND LIABILITY

 

	
30.  

	
 REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF INSMED

	
30.1  

	
Insmed represents and warrants

	
a.  

	
that it owns all rights, title and interest in, or licenses the necessary rights to use, the Test Materials provided by it to Chiltern under this Agreement, and

	
b.  

	
that Chiltern's use in accordance with the Protocols of any and all of such Test Materials in connection with the Study does not to Insmed’s knowledge infringe any third party rights.

	
30.2  

	
Insmed agrees:

	
a.  

	
that data delivered to Chiltern under any Work Order, including but not limited to  the performance of data management, quality assurance or biostatistics Services will be delivered to Chiltern in a form and condition reasonably calculated to allow Chiltern to perform the tasks described in Work Orders in a timely fashion,

	
b.  

	
that, before entering into a Work Order, it will disclose to Chiltern all material facts relating to the Study and the Study data that may reasonably affect Chiltern's performance under this Agreement as well as any potential material hazards related to the Study materials,

	
c.  

	
that, after entering into a Work Order, Insmed will, as a continuing obligation, promptly disclose to Chiltern all material facts discovered relating to the Study, including but not limited to, the emergence of information impacting the safety of Study participants or which otherwise impacts the toxicity assessment or risk profile of the Study product, and

	
d.  

	
all necessary approvals under applicable regulatory schemes will be obtained prior to the shipment of any Test Materials, and

	
e.  

	
comply with all Applicable Law, rules and regulations and obligations of Insmed in this Agreement.

	
30.3  

	
Insmed agrees that it will obtain and maintain during the term of the Study all approvals and licenses necessary for the performance of the Study and related Services including but not limited to national regulatory approvals, software licenses, and medical coding dictionary licenses.

	
31.  

	
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF CHILTERN

	
31.1  

	
Chiltern warrants that the Services performed by it will conform to the nature and scope of Services as agreed in the Work Order and will comply with this Agreement and with all Applicable Law and regulations of the appropriate regulatory agencies.

	
31.2  

	
Chiltern represents and warrants that (i) it is duly formed and validly existing under the laws of its jurisdiction of formation and has all requisite power and authority to carry on its business, and to execute and perform its obligations under this Agreement and (ii) the execution and performance of this Agreement by Chiltern and the performance of Services under this Agreement do not and will not conflict with or result in a breach of or default under any of its agreements or obligations that would have a material adverse effect on Chiltern’s ability to perform its obligations under this Agreement.

	
31.3  

	
Chiltern agrees that during the course of providing Services, Chiltern shall not undertake to provide services for any third party that would conflict with, hinder, delay or adversely impact its performance of Services or its obligations under this Agreement.

	
31.4  

	
Chiltern shall provide all information requested by Insmed to comply with any disclosure requirements of Applicable Law, including any information required to be disclosed in connection with any financial relationship between Insmed and Chiltern.  Chiltern shall disclose to Insmed any financial interest, other than the payment for Services agreed to hereunder, that Chiltern might have in any Project.

	
31.5  

	
Chiltern does not warrant or represent that the results of the Study will be acceptable to any regulatory or governmental agency to which they are presented or that the results of the Study will enable Insmed to further develop, market or otherwise exploit the Test Materials or any other product or service.

	
31.6  

	
The warranty by Chiltern set out in Section 31.1 is in lieu of any and all other representations or warranties, express, or implied, including any implied warranties of merchantability or fitness for a particular purpose or for non-infringement of a patent, trademark or other intellectual property right.

	
32.  

	
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF INSMED AND CHILTERN

	
32.1  

	
Each Party represents, warrants and certifies that neither it nor any of its respective employees or contractors who are to perform any activities in connection with this Agreement have been (i) prohibited from providing medical or clinical research services or debarred, suspended, excluded, sanctioned, disqualified or otherwise restricted or made ineligible by any regulatory agency of any kind pursuant to any federal, state or foreign law, regulation, or healthcare program in any jurisdiction or (ii) convicted of a crime for which a person can be prohibited from providing medical or clinical research services or debarred in any jurisdiction. Each Party also confirms that neither it nor any of its respective employees or contractors have been (i) threatened to be debarred or otherwise prohibited from providing medical or clinical research services by any regulatory agency of any kind in any jurisdiction, or (ii) indicted for a crime or otherwise engaged in conduct for which a person can be prohibited from providing medical or clinical research services or debarred under any Applicable Law or regulation in any jurisdiction regulating the performance of services relating to pharmaceutical products or clinical Studies. Each Party further represents, warrants and certifies that neither it nor any of its respective employees or contractors has been debarred or convicted of any crime or offence which would subject said Party or employee to debarment under the laws of any country.  Each Party agrees to immediately disclose in writing to the other Party if any of the above-listed events occurs during the term of this Agreement.

	
33.  

	
CHILTERN’S INDEMNITY

	
33.1  

	
Subject to Section 33.2 and 33.3, Chiltern shall indemnify, defend and hold harmless Insmed and its Affiliates and its and their respective officers, directors, employees and agents (the “Insmed Indemnitees”) against Claims arising out of:

	
a  

	
a material breach of this Agreement by Chiltern; or

	
b  

	
the negligence, recklessness, omissions, or intentional misconduct of any Chiltern Indemnitee.

	
33.2  

	
Chiltern's obligations under Section 33.1 are subject to and conditional on

	
a.  

	
Insmed providing prompt written notice to Chiltern of any Claims for which indemnification is sought, and

	
b.  

	
Insmed cooperating in good faith with Chiltern in the defense thereof

	
c.  

	
Chiltern having the right to defend against such claim, including but not limited to the right to select counsel, accept a reasonable settlement, and otherwise control the proceedings, except that Chiltern shall not admit fault or liability on the part of Insmed without having Insmed's prior written consent.

	
33.3  

	
Notwithstanding Section 33.1, Chiltern is not under any duty to defend, indemnify or hold Insmed harmless with respect to any Claim which Insmed settles without Chiltern's prior written consent.

	
33.4  

	
Insmed shall have the right to select and to obtain representation by separate legal counsel at its own expense.  Notwithstanding anything to the contrary herein, Insmed, at its own expense, shall have the right to select counsel for, direct and control any proceeding related to any of its study drugs or study protocols.

	
34.  

	
INSMED’S INDEMNITY

	
34.1  

	
Insmed shall defend and indemnify Chiltern and its affiliates and its and their respective officers, directors, employees and agents (the “Chiltern Indemnitees”) against Claims arising out of:

	
a.  

	
ArikaceTM, or

	
b.  

	
the Studies, or

	
c.  

	
the negligence, recklessness, intentional misconduct, or breaches of this Agreement by Insmed,

except to the extent that such Claims result from the negligence, recklessness, intentional misconduct, omissions, or breaches of this Agreement by Chiltern Indemnitees.

	
34.2  

	
Insmed's obligations under Section 34.1 are subject to and conditional on:

	
a.  

	
Chiltern providing prompt written notice to Insmed of any Claims for which indemnification is sought , and

	
b.  

	
Chiltern cooperating fully with Insmed in the defense thereof, and

	
c.  

	
Insmed having the right to defend against such claim, including but not limited to the right to select counsel, accept a reasonable settlement, and otherwise control the proceedings, except that Insmed shall not admit fault or liability on the part of Chiltern without having Chiltern's prior written consent.

	
34.3  

	
Notwithstanding Section 34.1, Insmed is not under any duty to defend, indemnify or hold Chiltern harmless with respect to any Claim which Chiltern settles without Insmed's prior written consent.

	
34.4  

	
Chiltern shall have the right to select and to obtain representation by separate legal counsel at its own expense.

	
35.  

	
LIMITATIONS OF LIABILITY

	
35.1  

	
Neither Party shall be liable to the other Party for lost profits, loss of use, loss of opportunity, or any indirect, special, consequential, incidental, or punitive damages.

	
35.2  

	
Chiltern's liability under this Agreement or any Work Order is limited, regardless of the form of action, to actual damages and cannot exceed the total amount paid for the Services performed by Chiltern under the Work Order from which the liability arises.  This provision does not apply to Claims alleging death or personal injury caused by the negligence, recklessness, negligent or wrongful omissions, or intentional misconduct of Chiltern.

	
35.3  

	
Chiltern is not liable for any damages arising from or in connection with any decision by Insmed or any third party to further research, develop, market or use the Test Materials or any derivative or product or service related to the Test Materials.

 

	
CHAPTER 7

	
TERM AND TERMINATION

 

	
36.  

	
TERM OF AGREEMENT

	
36.1  

	
This Agreement comes into force and has effect on and from the Effective Date and will continue in force for five (5) years from that date unless earlier terminated in accordance with Section 37, 38 or 39.

	
37.  

	
TERMINATION ON NOTICE

	
37.1  

	
Insmed may terminate this Agreement or any Work Order at any time for any reason and without cause on giving thirty (30) days' prior written notice of termination to Chiltern and, if Insmed does so, Chiltern is entitled to receive termination payments as described in Section 40.

	
37.2  

	
Chiltern may terminate this Agreement or any Work Order at any time for any reason and without cause on giving one hundred twenty (120) days' prior written notice of termination to Insmed.

	
37.3  

	
In the event of notice of termination being given by either Party under Section 37.1 or 37.2, the Parties agree to cooperate in respect of the transition of ongoing Services during the period of notice.

	
38.  

	
TERMINATION ON MATERIAL BREACH

	
38.1  

	
Either Party may terminate this Agreement or any Work Order at any time for a material breach of the Agreement by the other Party effective on giving thirty (30) days' prior written notice of termination if such breach is not cured within the thirty (30) days notice period to the reasonable satisfaction of the terminating Party,  provided, however, excluding those breaches involving the payment of undisputed funds, if such breach is not capable of being cured within such thirty (30) day period, the cure period shall be extended for such amount of time as may be reasonably necessary to cure such breach, as long as the breaching Party is making diligent efforts to do so.

	
38.2  

	
If notice of termination is given by either Party under Section 38.1, the Parties agree to cooperate in respect of the transition of ongoing Services during the period of notice.

	
38.3  

	
A notice of breach must provide details sufficient to fully describe the breach.

	
38.4  

	
If Chiltern terminates this Agreement or a Work Order for a material breach by Insmed that has not been cured, Chiltern is entitled to receive termination payments as described in Section 40.

	
38.5  

	
Nonpayment of disputed amounts does not constitute a material breach of this Agreement.

	
39.  

	
TERMINATION ON INSOLVENCY ETC.

	
39.1  

	
Either Party may terminate this Agreement or any Work Order immediately on giving written notice to the other Party if that Party becomes insolvent, is dissolved or liquidated, makes a general assignment for the benefit of its creditors, or files or has filed against it a petition in bankruptcy, or has a receiver appointed for a substantial part of its assets.

	
39.2  

	
If Chiltern terminates this Agreement or a Work Order as a result of an occurrence described in Section 39.1 by or in respect of Insmed, Chiltern is entitled to receive termination payments as described in Section 40.

	
40.  

	
PAYMENTS ON TERMINATION

	
40.1  

	
If a Work Order is terminated by Insmed or Chiltern terminates this Agreement or any Work Order pursuant to Section 37.2 or 38.4 hereof, Chiltern is entitled to be paid, in accordance with the payment schedule in the Work Order,

	
a.  

	
for all Services performed on any agreed Work Order up to and including the date of termination, including a pro rata portion for any work in progress toward partially completed Services or incomplete units and milestones, as may be mutually agreed in good faith by the Parties, and

	
b.  

	
any reasonable additional expenses incurred or Services performed required by virtue of the termination of the Services, including any irrevocably committed costs or tasks necessary to end Chiltern's involvement in the Study, and

	
c.  

	
any additional Services requested by Insmed in connection with the termination;

provided that, if such Work Order is terminated by Insmed due to an uncured material breach by Chiltern, Insmed shall be entitled to offset any damages incurred by Insmed and properly due to Insmed hereunder or under such Work Order as a result of such breach against any such amounts otherwise payable to Chiltern.  Any overpayments shall be returned to Insmed.  Except for additional Services requested by Insmed, under no circumstances shall the amounts owing at time of termination exceed the total cost agreed to for the Services specified in the Work Order.

	
40.2  

	
 If a Work Order is terminated:

	
a.  

	
by Insmed for reasons other than an uncured material breach by Chiltern, or

	
b.  

	
by Chiltern on account of a material breach by Insmed or pursuant to Section 39.1,

	
  

	
Chiltern shall be entitled to a termination fee for the operational and administrative costs not covered in other sections of this Agreement or the Work Order payable sixty (60) days after such termination.

	
40.3  

	
A termination fee payable under Section 40.2 will be calculated, after reconciliation according to section 40.1, in accordance with the following formulas:

	
a.  

	
if Insmed has paid fifty percent (50%) or more of the total fees for Services specified in the Work Order, the termination fee payable to Chiltern by Insmed under Section 40.2 will be an amount equal to five percent (5%) of the difference between the fees for Services specified in the Study Budget and the amount paid for fees for Services, or

	
b.  

	
if Insmed has paid less than fifty percent (50%) of the total fees for Services specified in the Work Order, the termination fee payable to Chiltern by Insmed under Section 40.2 will be an amount equal to five percent (5%) of the amount paid for fees for Services .

	
40.4  

	
The termination fee payable under Section 40.2 is separate from and additional to payments necessary to wind up the Services.

	
41.  

	
OBLIGATIONS OF PARTIES ON TERMINATION

	
41.1  

	
On termination of the Agreement or a Work Order, neither Party will have any further obligations under the Agreement or Work Order, except for the survival beyond termination of

	
a.  

	
the obligations of Section 41.2 below,

	
b.  

	
the liabilities that have accrued up to and including the date of termination, and

	
c.  

	
the obligations which by their stated terms survive termination, including the applicable confidentiality, record keeping, regulatory compliance, intellectual property and indemnification provisions of the Agreement.

	
41.2  

	
Excluding termination by Chiltern as a result of an uncured material breach by Insmed, in the event of termination of the Agreement or a Work Order, Insmed shall have four (4) months from written notice of termination in which to identify an alternate service provider.  Chiltern shall continue to perform the work under the Work Order during this four (4) month period without interruption provided Insmed continues to make payments when due.  The Parties agree to use Commercially Reasonable Efforts to promptly agree to a transition plan and a wind-down plan.  The transition plan providing for transfer of work completed, work ongoing, and work planned under the Work Order shall be prepared by Chiltern and shall be subject to review and approval by Insmed.  The wind-down plan will provide for the transfer of regulatory obligations, the assignment or termination of Third Party Provider Agreements and Investigator Agreements and the completion of Services, including any additional wind-down activities, by a mutually agreed termination date.  The Parties further agree that Study materials will be released by Chiltern once regulatory obligations have been transferred from Chiltern to Sponsor or Sponsor’s designee and the Work Order financial reconciliation has been agreed between the Parties.  If Insmed terminates this Agreement or a Work Order for a material breach by Chiltern that has not been cured, Chiltern shall cooperate, at its own expense, in the transition of ongoing Services to a CRO of Insmed’s choosing.

	
41.3  

	
On termination of the Agreement or a Work Order, Insmed’s shall have the option to itself assume or to appoint a designee to assume the obligations under any Third Party Provider Agreements or Investigator Agreements to which Chiltern is a party without further liability to Insmed.   In the event Insmed fails to provide for the assignment and assumption of Chiltern’s obligations to Third Party Provider or Investigator Agreements within thirty (30) days following the termination of a Work Order, Chiltern may terminate any outstanding Third Party Provider or Investigator Agreements without further liability to Insmed.

 

	
CHAPTER 8

	
MISCELLANEOUS

 

	
42.  

	
NOTICES

	
42.1  

	
All notices given by one Party to the other (including delivery and acceptance of any Work Order or any approval given pursuant to this Agreement) must be in writing and must be delivered by addressing the notice to the applicable address set out below or to such other address as either Party may specify in writing to the other.

	
42.2  

	
Notices must be sent by courier service, certified mail with return receipt requested, or by other means of delivery requiring a written acknowledgment, that is not automatically generated by electronic means, of receipt upon delivery.

	
42.3  

	
All notices will be effective upon receipt to the following:

	
Chiltern International Inc.

	
Insmed Incorporated

	
Attention: General Counsel

	
Attention:  Executive VP Development and Chief Medical Officer

	
1241 Volunteer Parkway

	
Princeton Corporate Plaza IV

	
Bristol TN 37620

	
11 Deer Park Drive, Suite 117

	  	
Monmouth Junction, NJ 08852-1923

 

	  	  

With a copy to                                                                      With a copy to

Chiltern International Ltd                                                                      Chief Executive Officer

Attention: Chief Financial Officer                                                                      Chief Financial Officer

171 Bath Road                                                                      Insmed Incorporated

Slough                                                                      Princeton Corporate Plaza IV

Berkshire UK                                                                      11 Deer Park Drive, Suite 117

SL1 4AA                                                                      Monmouth Junction, NJ 08852-1923

mailto:

	
43.  

	
CHILTERN AN INDEPENDENT CONTRACTOR

	
43.1  

	
The business relationship of Chiltern to Insmed is that of an independent contractor and not that of a partner, joint venturer, employer, employee or any other kind of relationship.

	
44.  

	
ASSIGNMENT

	
44.1  

	
This Agreement and the rights and obligations under it may not be assigned or transferred by either Party without the prior written consent of the other Party, except in the case of an assignment to an Affiliate of the Party or in connection with the merger, consolidation or sale of all or substantially all the Party's assets related to the Study.

	
45.  

	
ENTIRE AGREEMENT

	
45.1  

	
This Agreement, together with the Work Orders, and the Confidential Disclosure Agreement between the Parties dated April 12, 2010, sets out the entire agreement and understanding between the Parties.  With the exception of the CDA dated April 12, 2010 between Transave and Chiltern, which remains in full force and effect, this Agreement supersedes any and all previous statements, negotiations, documents, agreements and understandings, whether oral or written, as to the subject matter of the Agreement, including the Letter of Intent between the Parties effective December 31, 2010.  In the event of a conflict between the CDA and this Agreement, this Agreement shall control.

	
45.2  

	
No modification or waiver of any provision of this Agreement is valid or binding on either Party unless it is in writing and signed by authorized representatives of both Parties.

	
45.3  

	
No waiver of any term, right or condition under this Agreement on any one occasion shall be construed or deemed to be a waiver or continuing waiver of any such term, right or condition on any subsequent occasion or a waiver of any other term, right or condition of the Agreement.

	
46.  

	
SEVERABILITY

	
46.1  

	
If any one or more provisions of this Agreement are held to be invalid, illegal or unenforceable in any respect, that invalidity, illegality or unenforceability does not affect any other provision of this Agreement and all other provisions will remain in full force and effect.

	
46.2  

	
If any provision of this Agreement is held to be excessively broad, it will be reformed and construed by limiting it and reducing it so as to be enforceable to the maximum extent permitted by law.

	
47.  

	
LAW APPLICABLE TO AGREEMENT; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL

	
47.1  

	
This Agreement will in all events and for all purposes be governed by and construed in accordance with the law of the state of New York, USA, except in the case of a conflict of laws provision which would apply the law of another jurisdiction.  The parties hereto hereby (a) submit to the exclusive jurisdiction of any federal or state court sitting in the state of New York for the purpose of any action arising out of or relating to this Agreement brought by any Party hereto and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the action is brought in an inconvenient forum, that the venue of the action is improper, or that this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the above-named courts.   EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 47.1

	
48.  

	
COUNTERPARTS

	
48.1  

	
This Agreement may be executed in two (2) or more counterparts, which taken together will constitute a single legal document.

	
49.  

	
LANGUAGE OF AGREEMENT

	
49.1  

	
The Parties acknowledge that it is their express wish that this Agreement and all notices and other documents to be given or executed under the Agreement be in English.

IN WITNESS WHEREOF, duly authorized representatives of the Parties have executed and delivered this Agreement as of the Effective Date.

Chiltern International Inc.                                                                                     Insmed Incorporated

	
By:

	
_________________________

duly authorized

	
By:

	
_________________________

duly authorized

	
Name:

	  	
Name:

	  
	
Title:

	  	
Title:

	  
	
Date:

	  	
Date:

	  

Chiltern Ref: 8001 / FIT1695                                                                Page of 41 Confidential

  

  

  

 

APPENDIX 1:  LISTING OF DIVISIONS AND SUBSIDIARIES OF CHILTERN

 

	
  

	
Chiltern International AB [Sweden]

	
  

	
Chiltern International BV [Netherlands]

	
  

	
Chiltern International GmbH [Germany]

	
  

	
Chiltern International Inc. [US, Delaware]

	
  

	
Chiltern International kft [Hungary]

	
  

	
Chiltern International LLC [Russia]

	
  

	
Chiltern International Ltd [England & Wales]

	
  

	
Chiltern (Early Phase) Ltd [Scotland]

	
  

	
Chiltern International Pvt Ltd [India]

	
  

	
Chiltern International Portugal Lda [Portugal]

	
  

	
Chiltern International Pte.Ltd [Singapore]

	
  

	
Chiltern International Pty Ltd [Australia]

	
  

	
Chiltern International SARL [France]

	
  

	
Chiltern International Spain SA [Spain]

	
  

	
Chiltern International SPRL [Belgium]

	
  

	
Chiltern International Sp Zoo [Poland]

	
  

	
Chiltern International SRL [Italy]

	
  

	
Chiltern International SRL [Argentina]

	
  

	
Chiltern International sro [Czech]

	
  

	
Chiltern International Switzerland Sarl [Switzerland]

	
  

	
Chiltern International Ukraine LLC [Ukraine]

Chiltern - Pesquisa Clinica Ltda. [Brazil]

	
  

	
Clinical Trial Management Services, Inc. [US, Tennessee]

	
  

	
Havenfern Ltd [England & Wales]

Chiltern Ref: 8001 / FIT1695                                                                Page of 41 Confidential

  

  

  

 

 

 

APPENDIX 2:  FORM OF WORK ORDER ArikaceTM inhaled antibiotic programs for Cystic Fibrosis (“CF”) or Nontuberculous  Mycobacteria (“NTM”)

 

	
1.  

	
Parties

The parties to this Work Order are Insmed Incorporated (which is referred to in this Work Order as "Insmed") and Chiltern International Inc. (which is referred to as "Chiltern").

	
2.  

	
Background

Insmed and Chiltern are Parties to a Master Services Agreement dated the 11th day of February, 2011 (which is referred to in this Work Order as "MSA"), the terms and conditions of which are used by the Parties by signing this Work Order to contract for the Services in relation to a Study described in the Work Order to be performed by Chiltern and paid for by Insmed.  Upon signature by Insmed and by Chiltern, the Work Order is incorporated in and becomes part of the MSA.   This Work Order is entered under the CF/NTM ArikaceTM Program in which the parties have agreed to apply additional contractual provisions relating to Chiltern’s exclusivity with respect to the performance of services relating to the development of other inhaled antibiotics for the treatment of CF/NTM and team continuity and ring fencing commitments in accordance with the terms stated in the MSA.

	
3.  

	
Effective Date

The effective date of this Work Order is the ___ day of ____________, 20__.

	
4.  

	
Title of the Study

The title of the Study is TITLE.

	
5.  

	
Performance of Services by Chiltern

Chiltern agrees to perform Services, in accordance with the terms of the MSA, with respect to the Study as described in the Protocol and in Attachments A to E.

	
6.  

	
Chiltern’s Exclusivity Commitment for Development Services for Inhaled Antibiotics for the Treatment of CF/NTM.

As stated in Sections 29.1/29.2 of the MSA.

	
7.  

	
Additional Requirements Relating to Team Assignments

As stated in Sections 7.3/7.4 of the MSA.

	
8.  

	
Payment by Insmed

In consideration of the performance of Services under this Work Order, Insmed will pay Chiltern in accordance with the Estimated Budget and the Schedule of Payments in Attachments C and D.

	
9.  

	
Term and termination

This Work Order continues until the Study is completed or until it is terminated in accordance with the provisions of Chapter 7 of the MSA.

	
10.  

	
Assignment of Exclusivity and Ring Fenced Project Team Commitments

Chiltern agrees to continue to be bound to the Exclusivity and Ring Fenced Project Team commitments contained in the MSA.

	
11.  

	
Inconsistencies between this Work Order and the MSA

If there should be any conflict or inconsistency between the MSA and this Work Order and any of its attachments, the terms of the MSA will be controlling.

	
12.  

	
Attachments

Each of the following attachments to this Work Order forms part of the Work Order:

 

Attachment "A"                                - Scope of Work and Transfer of Obligations

 

Attachment “B””                                -Allocated Team Member Listing

 

Attachment "C"                                - Estimated Budget

 

Attachment "D"                                - Schedule of Payments and Terms

 

Attachment "E"                                - Protocol

 

Signed on behalf of                                                                                     Signed on behalf of

 

Chiltern International Inc.                                                                                     Insmed Incorporated

 

By:                                                                           By:

 

Title:                                                                           Title:

 

Date:                                                                           Date:

 

Attachment "A"                                Scope of Work and Transfer of Obligations

To be inserted:

-Modified proposal text (if applicable)

-Assumptions

-Summary table of study-specific responsibilities

-Responsibilities check list

-SOP list

- Estimated timeline

(Reminder:                      Obligations not specifically transferred to by Chiltern in writing shall remain obligations of Insmed).

Attachment "B"                                Allocated Team Members Listing

Attachment “C”                                Estimated Budget (Budget to be inserted with version date visible)

Attachment "D"                                Schedule of Payments and Terms

Attachment "E"                                Protocol

(The Protocol has been prepared under separate cover and has been signed on behalf of the Parties for identification purposes).

Chiltern Ref: 8001 / FIT1695                                                                Page of 41 Confidential

  

  

  

APPENDIX 3:  ELECTRONIC ACCESS TERMS AND CONDITIONS

Customer Use Agreement

This Customer Use Agreement is entered into effective as of 11 February 2011 ("Agreement") by and between Chiltern International Inc. and its affiliates, with a business office located at 1241 Volunteer Parkway, Bristol, TN 37620 ("Chiltern") and Insmed Incorporated, with a business office located at Princeton Corporate Plaza IV, 11 Deer Park Drive, Suite 117, Monmouth Junction, NJ 08852-1923, a customer of Chiltern ("Customer").  The term "Customer" includes its employees, consultant and agents who are authorized by Customer to access a Chiltern electronic data capture systems, whether owned or licensed by Chiltern, information exchange sites, and related software ("Systems").

1.0           DEFINITIONS

1.1         Authorized User means Customer's employees, contractors, vendors or agents conducting a Study and its third party clinical Study sites participating in a Study.  Customer may re-designate Authorized Users from time to time as necessary to maintain a consistent number of Authorized Users for a particular Study.  Client may re-designate Authorized Users when an Authorized User's employment related to the Study is terminated, the Authorized User is absent from work for more than two (2) consecutive weeks for a leave of absence, the Authorized User is promoted to different responsibilities, the Authorized User is reassigned to a different Study, the Study for which the individual was an Authorized User ends, or other reasons requiring the end of the Authorized User’s use of the Systems.

1.2 Documentation means any and all License or Systems specifications, user manuals and guides, technical information, configuration information, flow diagrams, file descriptions, data models and other documentation and materials associated with the License and/or Systems.  For purposes of this Agreement, the term Documentation shall also mean Systems training and demonstration videos.

1.3 License means a non-exclusive, limited, non-transferable license granted by Chiltern to Customer for a particular Study, permitting the Customer and Study sites participating in a Study to access and use the Systems.

1.4 Study means any clinical trial study which Customer is sponsoring and using this License for certain Study purposes.

1.5 Systems Owner means the company who provides the software or other licensed product to Customer in connection with the License.

2.0           LICENSE TO ACCESS AND CONFIGURE

2.1         Subject to this Agreement and Customer's payment of the applicable License fee, Chiltern hereby grants Customer, during the term of this Agreement, a License to remotely access and use the object code version of the Systems only for Customer's internal business purposes.  Only Customer and Authorized Users, pursuant to the License granted herein may access the Systems on behalf of Customer.

2.2         Chiltern agrees to provide access to the Systems by designating usernames and passwords to all Authorized Users in accordance with this Agreement.  Customer and Authorized Users may access and use the internet-based Systems from locations worldwide.

2.3         Authorized Users may also need to provide to Chiltern certain registration information, all of which must be accurate and kept current.  Authorized Users may not: (a) select or use a username or password of another person with the intent to impersonate that person; (b) use a username or password in which another person has rights without such person's authorization; or (c) permit any third party to use his or her username and/or password.  Failure to comply with the foregoing shall constitute a breach of this Agreement, which may result in immediate termination of an Authorized User's or the Customer's access to the Site.  Customer agrees to keep assigned usernames and/or passwords confidential and to immediately notify Chiltern: (a) if there is any reason to believe an assigned username and/or password has been improperly disclosed or otherwise compromised; (b) of any known or suspected unauthorized use(s) of a username and/or password; or (c) any known or suspected breach of security, including loss, theft, or unauthorized use of a username and/or password.

3.0           SYSTEMS USE

3.1         Except as expressly authorized herein, Customer shall neither transfer nor permit the use of or access to the Systems by any third party.  Customer shall use the Systems only for lawful purposes and in accordance with this Agreement.  Customer shall not self-host the Systems on its own servers or those of any third party on its behalf.  Customer and its Authorized Users shall not reverse engineer, disassemble or decompile the Systems in any manner.  Customer shall not copy, enhance, modify, or create derivative works based on the Systems or disclose the results of Systems performance benchmarks to any third party without the Systems Owner's prior written consent.  Customer shall not transfer, sell, resell, give, distribute or sublicense the License to any other party.

3.2         Customer agrees to utilize the Systems in conformance with: (a) the protocols for the Studies, utilizing the Systems and any reasonable additional requirements of which Customer may notify Chiltern in writing and which have been agreed with Chiltern; (b) if applicable, generally accepted standards of good clinical practices (GCP); and (c) all applicable laws, rules, and regulations relating to the conduct of any Study, particularly those of the U.S. Food and Drug Administration.

3.3         Authorized Users may be permitted to post Study related information to the Systems.  Customer acknowledges and understands that Chiltern does not review all materials posted to the Systems by Authorized Users, and Chiltern is not responsible for any such materials posted by Authorized Users.  Chiltern reserves the right at all times to disclose any information as necessary to satisfy any law, regulation or government request, or to edit, refuse to post or to remove any information or materials, in whole or in part, that in Chiltern’s sole discretion are objectionable, or in violation of this Agreement.  Customer remains solely responsible for the content of messages and material posted to the Systems by it and/or its Authorized Users.  Chiltern reserves the right to reveal the identity of Customer or any of its Authorized Users in the event of legal action arising from use of the Systems.

	
4.0  

	
OWNERSHIP, COPYRIGHTS, TRADEMARKS AND SERVICE MARKS

4.1         The Systems are the privileged, proprietary and confidential property of the Systems Owner.  The Systems and all derivative works, modifications, enhancements and derivatives thereof contain trade secrets of Systems Owner and is, therefore, the privileged, proprietary and confidential property of Systems Owner.  Customer shall not remove, obscure or alter any copyright notices, trademarks or other proprietary rights notices affixed to or contained within the Systems.  Customer shall have no right to use, review or access the source code for the Systems.

4.2         Nothing herein shall be construed as a transfer or conveyance of any right, title or interest in Systems.  All applicable rights to patents, copyrights, trademarks, trade secrets and intellectual property in the Systems are and shall remain with the Systems Owner.  Customer acquires only the limited, non-exclusive License to access and use the Systems expressly granted herein.

4.3         Each party retains all rights, title and interest in and to all previously existing or newly created materials, methodologies, operating and applications software, programs, architecture data, processes, methods, creations, developments and technical information and intellectual property developed by such party.

5.0           CONFIDENTIALITY

5.1         The Customer may receive or have access to information or data (including without limitation any of the Systems, as well as any passwords, applicable structure, organization, design, algorithms, methods, templates, data models, data structures, flow charts, logic flow, and screen displays, program and system code, or Documentation that is disclosed by Chiltern or accessible through the use of the Systems to the Customer or its Authorized Users pursuant hereto ("Confidential Information").  Confidential Information is the property of Chiltern or the Systems Owner as applicable.  For the avoidance of doubt, the Confidentiality provisions of this Customer Use Agreement do not supersede or replace the obligations of Confidentiality of Chiltern or the Customer contained in service agreements or other contracts between the Customer and Chiltern.  To the maximum extent possible, the provisions of this agreement and any agreement for services between Chiltern and the Customer will be construed to give effect to all provisions of Confidentiality.

5.2         The Customer agrees to hold all Confidential Information in strict confidence and to only use the Confidential Information in accordance with this Agreement.  The Customer further agrees: (a) not to disclose or allow access to the Confidential Information to any third party, except those who have a need to access the Confidential Information and who have entered into written confidentiality agreements on terms as least as strict as the terms of this Agreement with Customer; (b) to only use Confidential Information in accordance with this agreement; (c) to use and require its contractors to use reasonable procedures and mechanisms to maintain the security of and to prevent the unauthorized access to the Systems; and (d) not permit any Customer affiliate or contractor that develops, markets software or systems similar to the Systems to have access to any Confidential Information.

5.3         Confidential information shall not include information that, as evidenced by documentary evidence: (a) is or becomes generally available to the public through no act or omission of the Customer or its Authorized Users; (b) was in the Customer's lawful possession prior to the disclosure and had not been obtained by the other party either directly or indirectly from Chiltern or the owner of the System or from a third party whom the Customer Party knows or should know is under an obligation of confidentiality with the owner of the Confidential Information; (c) is lawfully disclosed to the Customer by a third party without restriction on disclosure; (d) is independently developed by the Customer party.  The limitations on disclosure shall not apply to Confidential Information which the Customer is obligated to disclose by court order or government requirement provided the Customer provides prompt notice of the obligation to disclose to Chiltern and the Customer limits the Confidential Information disclosed to the maximum amount allowed by law.

	
6.0

	
REPRESENTATIONS AND WARRANTIES; DISCLAIMERS OF LIABILITY

6.1         Chiltern represents and warrants that for a period of one hundred and eighty (180) days from the date Customer is granted access to the Systems, without any configurations or alterations done thereto by Customer or any third party, shall conform in all material respects with Documentation issued by Chiltern for operation of the Systems, as such Documentation may be amended from time to time by the Systems Owner.

6.2         The Internet is inherently not a secure environment.  Chiltern and Systems Owners have taken precautions but cannot guarantee that the Systems and the associated server(s) is/are free of computer viruses.  When accessing the Systems, Customer agrees to use only computer systems employing reasonable and dependable means to check for and prevent the spread of computer viruses.  Chiltern and Systems Owner disclaim any and all responsibility and liability for interruptions of service to the Systems.  Neither Chiltern nor Systems Owner make representations or warranties that the Systems or the server that makes it available are free of viruses or other harmful components.  Chiltern and Systems Owner disclaim any and all responsibility and liability for any breach of security or unintentional disclosure of Customer's Confidential Information associated with the transmission of information through the Systems or any linked Systems.

6.3         Chiltern does not guarantee that the content of the Systems will be technically suitable for viewing on Customer's computer(s) or that the Systems will be accessible to Customer at all times (i.e., maintenance windows).  Chiltern makes no warranty that operation of the Systems will be uninterrupted or error free or that all defects will be corrected.

6.4         Although Chiltern strives to ensure the integrity and accuracy of the Systems, it makes no guarantees whatsoever as to the accuracy of data or information contained in the Systems and Chiltern and Systems Owner assume no liability or responsibility for errors or omissions contained therein.  In the event that errors or omissions arise, Chiltern must be informed promptly with documentation of the error so that they can be corrected.  Chiltern reserves the right, in its sole discretion, to correct any errors or omissions in any portion of the Systems.

6.5         The Systems, including any content or information contained within it or any Systems-related service, is provided "as is" with no representations, guarantees or warranties of any kind, either express , statutory or implied, including but not limited to, the implied warranties of merchantability or satisfactory quality, fitness for a particular purpose, or non-infringement.

6.6         Customer assumes total responsibility and risk for its use, and the use by any Authorized User of the Systems.  Neither Chiltern nor Systems Owner shall be liable for: (a) misuse of the Systems or the Licenses; (b) use of the Systems with data or software of third parties or with hardware which is incompatible with the Systems and not recommended by Chiltern or Systems Owner; (c) errors in the Systems resulting from configuration of the Systems, in each case not specifically recommended by Chiltern or Systems Owner; or (d) any claim by Customer or any third party resulting, directly or indirectly from any representation or warranty made by Customer to any third party with respect to the Systems or any Chiltern services beyond those contained herein.

6.7         In no event shall Chiltern, Systems Owner and its suppliers, licensors, service providers and subcontractors be responsible or liable for any direct, indirect, incidental, consequential, special, exemplary, punitive or other damages suffered by Customer or any third party, however, caused, regardless of the theory of liability, whether in contract, tort, product liability or otherwise, even if Chiltern or Systems Owner has been previously advised of the possibility, or has constructive knowledge, of such damages, and notwithstanding any failure of essential purpose.  This exclusion includes any liability that may arise out of third-party claims against Customer.

6.8         Customer's remedies for dissatisfaction with the Systems and/or Systems-related services for which Chiltern is responsible shall be limited to the following, at Chiltern's sole discretion: (a) to stop using the Systems and those services; (b) to receive a replacement of the applicable Systems; or (c) to receive a refund for amounts paid by Customer to Chiltern for the nonconforming Systems and termination of Customer's License therefore.

6.9         Except as expressly set forth in this Agreement, this Agreement shall not convey upon Customer or any third party any rights hereunder, and neither Customer nor any third party shall be deemed a third party beneficiary hereof.

6.10         Chiltern liability under this Agreement, regardless of the form of action, shall not exceed Twenty Five Thousand Dollars ($25,000.00).

	
7.0

	
SUSPENSION AND DISCONTINUATION OF THE SYSTEMS

7.1         Chiltern may change, suspend or discontinue any aspect of the Systems at any time, including but not limited to: (a) the availability of any Systems feature, database or content; (b) restricting availability times; (c) restricting compatibility with certain computer software or hardware; (d) restricting amounts of use permitted: and (e) restricting, suspending or terminating Customer's and any Authorized User's right to use the Systems.  Chiltern also may impose limits on certain features or services or restrict access to parts or all the Systems without prior notice or liability.

7.2         If Chiltern or Systems Owner reasonably believes that a Chiltern service or action requested by Customer would not conform with any requisite Study criteria, Chiltern may require prior to proceeding, that Customer provide a written certification of compliance with such Study criteria from a senior regulatory affairs officer in form and substance reasonably satisfactory to Chiltern and Systems Owner.

8.0           CUSTOMER COVENANTS

8.1         Customer represents, warrants and covenants, with respect to all clinical trials for which the Systems are used, that each such trial shall be conducted in compliance with all applicable laws and regulations relating to such trial (including the EU Data Protection Directive, to the extent applicable, and any other applicable regulations governing the transfer of personal data and/or medical records to other countries or the inspection of such records by government authorities or persons responsible for monitoring clinical trials).  Customer shall provide notice to Chiltern as soon as it becomes reasonably aware of any privacy or data protection statutes, rules or regulations which are or become applicable to Customer's business and which could be imposed on Chiltern or Systems Owner as a result of its performance of services for Customer or Customer's use of the Systems, and any actual or potential violations thereof.  Customer is solely responsible for and assumes all liability relating to: (a) the design, structure and content of all Study protocols; (b) decisions about Customer's computer and communications systems needed to access the Systems; and (c) all purchases of any necessary hardware, software, services or licenses required by Customer to access and use the Systems as contemplated herein.

8.2         Customer covenants that it will not engage in the operation of any business using the Systems that is illegal under any applicable laws.  Customer further covenants that Customer will not permit anyone to use the Systems for any business that is illegal under any applicable laws.  Customer represents and covenants that any Study conducted by it will be conducted in compliance with GCP guidelines and all applicable local and international laws, treaties, rules, regulations guidelines and codes of practice relating to the conduct of the Study.

8.3 Customer acknowledges that: (a) the data collected through the Systems does not comprise complete patient medical records; (b) the Systems are not a diagnostic or therapeutic aid and must be used solely for research purposes; and (c) data collected or analyses performed by the Systems must not be used for patient diagnosis, prognosis or therapy decisions.

9.0           TERM AND TERMINATION

9.1         The term of this Agreement shall begin on the last signature hereof and shall end upon the sooner of termination by either party of this Agreement or termination of the Customer Study.  Without prejudice to any other right, Chiltern may terminate this Agreement if Customer fails to comply with this Agreement.  Upon the termination of this Agreement, Customer shall cease use of the Systems and shall promptly return to Chiltern, or at Chiltern's request destroy, the originals and all copies of any materials containing Confidential Information.  All provisions of this Agreement which by their nature are intended to survive the termination of this Agreement shall survive such termination.

10.0           MISCELLANEOUS

10.1         Customer agrees that this Agreement constitutes the entire agreement between it and Chiltern with respect to use of the Systems, and supersedes all previous and contemporaneous agreements, representations, warranties and understandings, written or oral, between Chiltern and Customer with respect to the Systems.  No supplement or modification of this Agreement or the License rights granted herein shall be binding unless executed in writing by both parties hereto.

10.2         The United Nations Convention on Contracts for the Sale of Goods shall not apply to this Agreement.

10.3         This Agreement, and the rights and obligations hereunder, may not be assigned or transferred by either party without the prior written consent of the other party, except that either party may assign this Agreement to an affiliated company or in connection with a merger, consolidation or sale.

10.4         In the event that any one (1) or more of the provisions contained in this Agreement will, for any reason, be held to be invalid, illegal or unenforceable in any respect, that invalidity, illegality or unenforceability will not affect any other provisions of this Agreement, and all other provisions will remain in full force and effect.  If any provision of this Agreement is held to be excessively broad, it will be reformed and construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by law.

10.5         Customer acknowledges that Chiltern would be irreparably harmed and would not have an adequate remedy at law in the event of an actual violation by Customer of this Agreement, including, but not limited to, any effort to compromise the security facility in place to access data and information not specific to the Customer.  Therefore, the parties agree and consent that Chiltern shall be entitled to an injunction or any appropriate decree of specific performance for any such actual breach by the Customer, its employees, consultants or agents.  The foregoing remedy shall be in addition to any other remedies available to Chiltern in law or in equity.

10.6         The United States and certain foreign countries may regulate the export and re-export of technology originating in the United States.  Exporting and re-exporting may include the electronic transfer or dissemination of content and software to foreign countries, to certain foreign nationals, and to certain specially designated nationals.  Customer agrees to abide by these laws and their regulations, including but not limited to the U.S. Export Administration Act and the Arms Export Control Act.  Customer shall comply with all applicable provisions of export and import statutes and regulations.  Customer shall not export, re-export, transfer, divert, or disclose, directly or indirectly, including via remote access, the Systems, Documentation, the Licenses, the Chiltern services, or any Confidential Information contained or embodied in any of the foregoing, or any direct product thereof, except as authorized hereunder.

IN WITNESS WHEREOF, duly authorized representatives of the parties have signed this Agreement as of the Effective Date.

	
 

Insmed Incorporated

 

	
 

By:________________________________________

	
 

Print Name:_________________________________

	
 

Title:_______________________________________

	
 

Date:______________________________________

	
 

Chiltern International Inc.

 

	
 

By:________________________________________

	
 

Print Name:_________________________________

	
 

Title:_______________________________________

	
 

Date:______________________________________

Chiltern Ref: 8001 / FIT1695                                                                Page of 41 Confidential

  

  

  

APPENDIX 4:  CURRENT CHILTERN STUDIES FOR INHALED ANTIBIOTIC FOR CF

A phase III, Multi-center, randomized, placebo-controlled, double blind, study of inhaled xxxxxxxx, in adult patients with cystic fibrosis.

Open-label, randomized, Phase 3 trial to evaluate the efficacy and safety of Drug X for inhalation vs. Drug Y inhalation solution in an intermittent aerosolized antibiotic regimen in patients with cystic fibrosis.

Chiltern Ref: 8001 / FIT1695                                                                Page of 41 ConfidentialHEI Exhibit 4.1

 

HAWAIIAN ELECTRIC INDUSTRIES

RETIREMENT SAVINGS PLAN

 

(Restatement effective May 1, 2011)

 

 

 

TABLE OF CONTENTS

 

	
 
    	
Page
    
	
 
    	
 
    
	
INTRODUCTION
    	
1
    
	
 
    	
 
    
	
DEFINITIONS
    	
 
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
PARTICIPATION
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.1
    	
Eligibility   to Participate
    	
2
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Nonunion   Employees
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Bargaining   Unit Employees
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Salary   Reduction Elections
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
Section 1.2
    	
Reemployment
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.3
    	
Duration   of Participation
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
CONTRIBUTIONS
    	
4
    
	
 
    	
 
    	
 
    
	
Section 2.1
    	
Salary   Reduction Contributions
    	
4
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Regular   Salary Reduction Contributions
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Catch-up   Contributions
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Application   of Section 401(a)(17) Limit
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
No   Other Benefits Conditioned on Salary Reduction Election
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Deposit   of Salary Reduction Contributions
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(f)
    	
No   Prefunding of Salary Reduction Contributions
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(g)
    	
Administrative   Procedures
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
Section 2.2
    	
Matching   Contributions for Participants First Employed by a Participating Employer   After April 30, 2011 (or Deemed To Be New Employees After April 30,   2011, Under Section 1.2 of the HEI Retirement Plan)
    	
6
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Amount
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Matching   Contributions on Catch-up Contributions
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Deposit   of Matching Contributions
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
Section 2.3
    	
Return   of Contributions
    	
7
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Mistake   of Fact
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Loss   of Deduction
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
Section 2.4
    	
Rollover   Contributions
    	
7
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Direct   Rollovers
    	
7
    
	
 
    	
 
    	
 
    	
 
    
						

 

i

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Direct   Rollovers of After-Tax Amounts
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Traditional   Rollovers
    	
8
    
	
 
    	
 
    	
 
    	
 
    
	
Section 2.5
    	
USERRA   Rights of Participants Returning from Qualified Military Service
    	
8
    
	
 
    	
 
    	
 
    
	
Section 2.6
    	
Qualified   Nonelective Contributions
    	
8
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
NONDISCRIMINATION RULES; LIMITATIONS ON   CONTRIBUTIONS
    	
9
    
	
 
    	
 
    	
 
    
	
Section 3.1
    	
Section 401(k) Nondiscrimination   Rules (Effective January 1, 2006)
    	
9
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
ADP   Test
    	
9
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Prior-year   Testing Method
    	
9
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
ADP   Rules
    	
9
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Correction   of Excess Contributions
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
Section 3.2
    	
Maximum   401(k) Contributions
    	
11
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Dollar   Limit on Salary Reduction Contributions
    	
11
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Dollar   Limit on Catch-up Contributions
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
Section 3.3
    	
Section 401(m) Nondiscrimination   Rules
    	
12
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
ACP   Test
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Prior-year   Testing Method
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
ACP   Rules
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Correction   of Excess Aggregate Contributions
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
Section 3.4
    	
Section 415   Limitations
    	
14
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Annual   Additions
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Section 415   Aggregation Rules
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
Section 3.5
    	
Forfeiture   of Matching Contributions
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
ACCOUNTING   AND INVESTMENTS
    	
16
    
	
 
    	
 
    	
 
    
	
Section 4.1
    	
Assets   To Be Held by Trustee
    	
16
    
	
 
    	
 
    	
 
    
	
Section 4.2
    	
Accounting   and Expenses
    	
16
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Subaccounts
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Valuation   of Accounts
    	
16
    
						

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Expenses
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
Section 4.3
    	
Investment   of Accounts
    	
17
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Broad   Range of Investments
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Participant   Direction
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Qualified   Default Investment Alternative
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Section 404(c) Plan
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Company   Stock Fund
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
Section 4.4
    	
General   Investment Powers of the PIC
    	
20
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
General
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Investment   Managers
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Company   Stock and Bank Deposits
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Common   and Collective Trust Funds
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
81-100   Trusts
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
Section 4.5
    	
Plan   Loans to Active Participants
    	
20
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Loan   Sources
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Application   Procedures
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Maximum   Loan Amount
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Minimum   Loan Amount
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Repayment   Terms
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(f)
    	
Purposes   for Which Loans May Be Granted
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(g)
    	
Interest   Rates
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(h)
    	
Collateral
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(i)
    	
Repayment   Upon Distribution
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(j)
    	
Default
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(k)
    	
Leaves   of Absence
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(l)
    	
Self-Directed   Investment
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V
    	
VESTING   AND FORFEITURES
    	
23
    
	
 
    	
 
    	
 
    
	
Section 5.1
    	
Vesting
    	
23
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Immediate   Vesting in All Subaccounts Other than Matching Contribution Subaccounts
    	
23
    
						

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Vesting   in Matching Contribution Subaccounts
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Calculation   of Years of Vesting Service
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Employment   with Associated Companies
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
Section 5.2
    	
Forfeitures
    	
25
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Forfeiture   of Matching Contributions
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Restoration   of Forfeited Matching Contribution Subaccounts
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Use   of Forfeitures to Pay Plan Expenses and Reduce Employer Contributions
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
PAYMENT   OF VESTED BENEFITS
    	
27
    
	
 
    	
 
    	
 
    
	
Section 6.1
    	
Severance   from Employment
    	
27
    
	
 
    	
 
    	
 
    
	
Section 6.2
    	
Small   Account Balances
    	
27
    
	
 
    	
 
    	
 
    
	
Section 6.3
    	
Statutory   Commencement Date
    	
27
    
	
 
    	
 
    	
 
    
	
Section 6.4
    	
Forms   of Benefit Following Severance from Employment
    	
27
    
	
 
    	
 
    	
 
    
	
Section 6.5
    	
Installment   Option for HEISOP Subaccounts
    	
28
    
	
 
    	
 
    	
 
    
	
Section 6.6
    	
Periodic   Payments of Minimum Distributions
    	
28
    
	
 
    	
 
    	
 
    
	
Section 6.7
    	
Death   Benefits
    	
29
    
	
 
    	
 
    	
 
    
	
Section 6.8
    	
Required   Minimum Distributions
    	
30
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Precedence
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Requirements   of Treasury Regulations Incorporated
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Time   and Manner of Distribution
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Forms   of Distribution
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Required   Minimum Distributions During Participant’s Lifetime
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(f)
    	
Required   Minimum Distributions After Participant’s Death
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(g)
    	
Full   Distribution Required by End of Fifth Year After Death
    	
32
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(h)
    	
Definitions
    	
32
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(i)
    	
Suspension   of Required Minimum Distributions for 2009
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
Section 6.9
    	
In-Service   Withdrawals
    	
34
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Withdrawals   from Participant Voluntary, Voluntary HEISOP, and IRA Subaccounts
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Withdrawals   for Participants Who Have Reached Age 591⁄2
    	
34
    
						

 

iv

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Hardship   Withdrawals
    	
35
    
	
 
    	
 
    	
 
    	
 
    
	
Section 6.10
    	
Qualified   Domestic Relations Orders
    	
36
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
General
    	
36
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
DRO   Requirements
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Procedures
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Separate   Accounting
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
Section 6.11
    	
Eligible   Rollover Distributions
    	
37
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Definitions
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Notice
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Income   Tax Withholding
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
Section 6.12
    	
Special   Rules for Participants Called to Military Service
    	
39
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
HEART   Act Requirement (Effective January 1, 2009)
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Pension   Protection Act Requirements as Extended by the HEART Act (Effective   January 1, 2010)
    	
40
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
ADMINISTRATION
    	
41
    
	
 
    	
 
    	
 
    
	
Section 7.1
    	
PIC,   Administrative Committee, and Investment Committee
    	
41
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
PIC
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Administrative   Committee
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Investment   Committee
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Rules and   Procedures
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Consents   and Elections
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(f)
    	
Professional   Assistance
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(g)
    	
General
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
Section 7.2
    	
Plan   Administrator
    	
42
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Reporting   and Disclosure
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Legal   Process
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
Section 7.3
    	
Trust   Agreement
    	
42
    
	
 
    	
 
    	
 
    
	
Section 7.4
    	
Bonding
    	
42
    
	
 
    	
 
    	
 
    
	
Section 7.5
    	
Indemnification
    	
42
    
						

 

v

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
CLAIMS   PROCEDURES
    	
44
    
	
 
    	
 
    	
 
    
	
Section 8.1
    	
Claims   for Benefits
    	
44
    
	
 
    	
 
    	
 
    
	
Section 8.2
    	
Appeal
    	
44
    
	
 
    	
 
    	
 
    
	
Section 8.3
    	
Other   Remedies
    	
45
    
	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
AMENDMENT,   TERMINATION, AND MERGER
    	
46
    
	
 
    	
 
    	
 
    
	
Section 9.1
    	
Amendment
    	
46
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
General   Rule
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Nondiscrimination
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Anti-cutback   Rule
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Vesting   Schedule
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
Section 9.2
    	
Termination   or Discontinuance
    	
46
    
	
 
    	
 
    	
 
    
	
Section 9.3
    	
Merger   or Spinoff
    	
46
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    	
MISCELLANEOUS
    	
47
    
	
 
    	
 
    	
 
    
	
Section 10.1
    	
No   Right to Employment
    	
47
    
	
 
    	
 
    	
 
    
	
Section 10.2
    	
Inalienability
    	
47
    
	
 
    	
 
    	
 
    
	
Section 10.3
    	
Facility   of Payment
    	
47
    
	
 
    	
 
    	
 
    
	
Section 10.4
    	
Construction   of Plan
    	
47
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Headings
    	
47
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Controlling   Law
    	
47
    
	
 
    	
 
    	
 
    	
 
    
	
Section 10.5
    	
Benefits   Payable From Trust
    	
48
    
	
 
    	
 
    	
 
    
	
ARTICLE XI
    	
TOP-HEAVY   RULES
    	
49
    
	
 
    	
 
    	
 
    
	
Section 11.1
    	
Determination   of Top-Heavy Status
    	
49
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
“Key   Employee”
    	
49
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
“Top-heavy   Plan”
    	
49
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
“Top-heavy   Ratio”
    	
50
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
“Permissive   Aggregation Group”
    	
51
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
“Required   Aggregation Group”
    	
51
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(f)
    	
“Determination   Date”
    	
51
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(g)
    	
“Valuation   Date”
    	
51
    
						

 

vi

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
Section 11.2
    	
Special   Top-Heavy Rules
    	
51
    
	
 
    	
 
    	
 
    
	
ARTICLE XII
    	
DEFINITIONS
    	
53
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII
    	
EXECUTION
    	
59
    
				

 

vii

 

INTRODUCTION

 

Hawaiian Electric Industries, Inc. (the “Company”) established the Hawaiian Electric Industries Retirement Savings Plan (the “Plan”) effective April 1, 1984, to enable the eligible employees of the Company and its participating subsidiaries to save for retirement on a tax-deferred basis.  The Plan document was last restated effective January 1, 2008.  A determination letter application is pending with the Internal Revenue Service for the 2008 restatement.

 

This restatement adds a matching contribution for participants who are first employed by a participating employer after April 30, 2011 (or who are deemed to be new employees after April 30, 2011, under Section 1.2 of the Retirement Plan for Employees of Hawaiian Electric Industries, Inc. and Participating Subsidiaries).  This restatement also deletes all the provisions with respect to employees employed by American Savings Bank, F.S.B. and Pacific Energy Conservation Services, Inc., since these subsidiaries of the Company are no longer participating employers in this Plan.  Finally, this restatement incorporates all amendments made since the 2008 restatement.  This restatement is effective May 1, 2011, except as otherwise provided herein.

 

The Plan is a single-employer defined contribution retirement plan that covers both bargaining unit and non-bargaining unit employees.  The Plan is intended to meet the tax-qualification requirements in Sections 401(a) and 401(k) of the Internal Revenue Code.

 

A participant’s benefits and rights under the Plan shall be determined in accordance with the terms of the Plan in effect on the date the participant terminates employment and shall not be affected by any subsequent amendment to the Plan, unless, and only to the extent, specifically provided for in such amendment or otherwise required by law.

 

 

DEFINITIONS

 

Capitalized terms used in this document are defined in Article XII.

 

ARTICLE I
 PARTICIPATION

 

Section 1.1             Eligibility to Participate

 

(a)           Nonunion Employees.  A nonunion Eligible Employee shall become eligible to participate as of the date he or she first performs an Hour of Service for a Participating Employer.

 

(b)           Bargaining Unit Employees.  An Eligible Employee whose employment with a Participating Employer is governed by a collective bargaining agreement shall become eligible to participate as of the date he or she first performs an Hour of Service as a “regular” bargaining unit Eligible Employee.  “Regular” employment is defined by reference to the governing collective bargaining agreement.

 

(c)           Salary Reduction Elections.  An Eligible Employee who has met the requirements for participation in Section 1.1(a) or (b) becomes a Participant by making a salary reduction election.  A salary reduction election is an election by the Participant to forego taxable cash compensation in return for a tax-deferred, employer contribution of equal amount to the Participant’s Account in the Plan.  A Participant’s salary reduction election becomes effective as soon as practicable following its completion and submission in accordance with procedures approved by the Administrative Committee, but only with respect to amounts that are not “currently available” to the Participant at the time the election is made.  An amount is “currently available” if it has been paid to the Participant or if the Participant is able currently to receive the amount at the Participant’s discretion.

 

A Participant may amend or revoke a salary reduction election for any reason, such changes to take effect prospectively.  If a Participant voluntarily terminates a salary reduction election, the Participant may resume Salary Reduction Contributions by making and submitting a new election.  A Participating Employer, the PIC, or the Administrative Committee may also revoke or amend a salary reduction election to prevent the Participant from exceeding one of the maximum limitations described in Article III.  The Administrative Committee may adopt and modify rules and procedures for salary reduction elections.

 

Section 1.2             Reemployment

 

If a Participant terminates employment from the Participating Employers  and later returns to employment as an Eligible Employee, the Participant shall immediately recommence active participation in the Plan.

 

Section 1.3             Duration of Participation

 

Once an Eligible Employee becomes a Participant, he or she shall have all rights to active participation (applicable contributions, etc.) as long as he or she receives Compensation from the

 

2

 

Company and continues to be an Eligible Employee.  A Participant who terminates employment with the Participating Employers with a vested Account balance shall continue to be a Participant on an inactive basis until his or her entire vested Account balance is distributed in accordance with the terms of the Plan.

 

3

 

ARTICLE II
  CONTRIBUTIONS

 

There are three types of possible contributions to the Plan.  Salary Reduction Contributions (which include Catch-up Contributions) and Rollover Contributions may be made by all Participants.  Matching contributions are made only for Participants who are first employed by a Participating Employer after April 30, 2011, or who are  deemed to be new Employees  after April 30, 2011, under Section 1.2 of the HEI Retirement Plan.

 

Section 2.1             Salary Reduction Contributions

 

Each Participating Employer shall make Salary Reduction Contributions in accordance with this Section and the salary reduction elections made by its Participants in accordance with Section 1.1(c).

 

(a)           Regular Salary Reduction Contributions.  Effective May 3, 2004, a Participant may elect Regular Salary Reduction Contributions of up to 30% of the Participant’s Compensation for the period in the Plan Year during which he or she is a Participant.  In addition to this percentage limitation, a Participant’s Regular Salary Reduction Contributions are subject to the limitations in Article III of the Plan.

 

(b)           Catch-up Contributions.  Any Participant who will have attained age 50 before the end of the taxable year (a “catch-up eligible Participant”) is eligible to make Catch-up Contributions in accordance with, and subject to the limitations in, Section 3.2(b) of the Plan and Section 414(v) of the Code.  Catch-up Contributions are not subject to the 30%-of-Compensation limit that applies to Regular Salary Reduction Contributions, but total Salary Reduction Contributions (Regular Salary Reduction Contributions plus Catch-up Contributions) may not exceed 75% of a Participant’s Compensation.

 

Catch-up Contributions are not subject to the limits on annual additions, are not counted in the ADP test, and are not counted in determining the minimum allocation under Section 416 of the Code (but Catch-up Contributions made in prior years are counted in determining whether the Plan is top-heavy).  Provisions in the Plan relating to Catch-up Contributions apply to Salary Reduction Contributions made after 2001.

 

A catch-up eligible Participant may elect to make Catch-up Contributions for the Plan Year regardless of whether his or her Regular Salary Reduction Contributions have yet reached the Plan limitation set forth in Section 2.1(a) or the Code limitations set forth in Sections 3.2 or 3.4.  However, if such catch-up eligible Participant’s Regular Salary Reduction Contributions do not reach such limits by the end of the Plan Year, the Catch-up Contributions shall be recharacterized as Regular Salary Reduction Contributions to the extent necessary to meet the requirements of Section 414(v) of the Code.

 

4

 

(c)           Application of Section 401(a)(17) Limit.  Section 401(a)(17) of the Code limits the amount of Compensation that may be taken into account in determining contributions for a Plan Year, and this limit is reflected in the definition of Compensation in Article XII.  The limit applies on an annual basis.  However, salary reduction elections are applied on a payroll period basis.  In accordance with Section 1.1(c), a Participant may change the salary reduction percentage in effect at any time.  Since contributions are limited by dollar amount under Section 402(g) of the Code ($16,500 for 2011), the Section 402(g) limit will apply to stop contributions before a Participant is limited by the Plan’s 30% limit on Compensation, as capped by Section 401(a)(17) of the Code ($245,000 for 2011).

 

Example:  Participant A, age 45, earns $10,000 per payroll period.  For the first twenty payroll periods, Participant A has a salary reduction election in effect to contribute 5% of Compensation ($500) to the Plan.  By the end of the twentieth payroll period, Participant A has contributed $10,000 to the Plan.  Beginning with the twenty-first payroll period, Participant A decides to maximize her Salary Reduction Contributions for the year up to the Section 402(g) limit.  Participant A increases her contributions to 15% of Compensation.  During the next five payroll periods, Participant A contributes a total of $6,500 to the Plan, reaching the 402(g) limit.  (Her Salary Reduction Contributions are capped in the twenty-fifth payroll period at the 402(g) limit.)  During the year, Participant A has not contributed in excess of 30% of the Section 401(a)(17) limit.

 

(d)           No Other Benefits Conditioned on Salary Reduction Election.  No other employee benefit, including, but not limited to, benefits under a defined benefit plan, non-elective employer contributions to a defined contribution plan (other than Matching Contributions), the availability, cost, or amount of health benefits, vacations or vacation pay, life insurance, dental benefits, legal services plans, loans (including Plan loans), financial planning services, subsidized retirement benefits, stock options, property subject to Code Section 83, or dependent care assistance, shall be directly or indirectly conditioned upon any Participant making a salary reduction election.

 

(e)           Deposit of Salary Reduction Contributions.  The Participating Employers shall deposit Salary Reduction Contributions with the Trustee on the earliest date such contributions can reasonably be segregated from the Participating Employer’s general assets; provided that, except as permitted under U.S. Department of Labor Regulations, Salary Reduction Contributions must be deposited no later than the fifteenth (15th) business day of the month following the month in which such amounts would have been paid to the Participant in cash but for the Participant’s salary reduction election.

 

(f)            No Prefunding of Salary Reduction Contributions.  In accordance with Section 1.401(k)-1(a)(3)(iii) of the Treasury Regulations, effective January 1, 2006, the Participating Employers may not make Salary Reduction Contributions prior to the Participant’s 401(k) election and the Participant’s performance of service with respect to which the Salary Reduction

 

5

 

Contributions are made.  However, this “prefunding” limitation shall not apply to contributions that are made due to bona fide administrative considerations as provided in the Treasury Regulations.

 

(g)           Administrative Procedures.  The Administrative Committee shall have the power to adopt reasonable procedures for administering Salary Reduction Contributions.  Such procedures may provide for salary reduction elections to be stated as dollar amounts, percentages, or a combination thereof, and may employ measures of compensation other than Compensation as defined in Section 12.8.  The procedures may impose reasonable limitations on the amount a Participant may contribute for any pay period, provided such limitations do not unreasonably limit Participants’ opportunities to make the maximum permissible Regular Salary Reduction Contributions and Catch-up Contributions over the course of a Plan Year.  The procedures may provide for an Eligible Employee to receive salary reduction election materials within a reasonable time before or after he or she becomes eligible to participate, and thus may defer the effective date of the Eligible Employee’s initial election for a reasonable time after his or her eligibility date to allow for the distribution of election materials and the processing of the initial election.  The procedures shall not discriminate in favor of Highly Compensated Employees.

 

Section 2.2             Matching Contributions for Participants First Employed by a Participating Employer After April 30, 2011 (or Deemed To Be New Employees After April 30, 2011, Under Section 1.2 of the HEI Retirement Plan)

 

A Participant who is first employed by a Participating Employer after April 30, 2011, or who is deemed to be a new Employee of a Participating Employer after April 30, 2011, under Section 1.2 of the HEI Retirement Plan, shall be eligible for the Matching Contributions described in this Section 2.2.  Any Participant who was first employed by a Participating Employer prior to May 1, 2011, and who is not deemed to be a new Employee  after April 30, 2011, under Section 1.2 of the HEI Retirement Plan, is not eligible for the Matching Contributions described in this Section 2.2.

 

(a)           Amount.  The Participating Employers shall match the Salary Reduction Contributions of their eligible Participants on the following basis: a 50% match on the first 6% of annual Compensation deferred by the Participant  (i.e., maximum Matching Contribution of 3% of the Participant’s annual Compensation).  Since Section 12.8 limits the Compensation taken into account in determining contributions to Compensation earned after an Eligible Employee becomes a Participant, in a Participant’s first year of participation, Compensation earned before the Participant begins participation shall not be counted in the Participant’s annual Compensation for purposes of calculating the Participant’s Matching Contribution.

 

(b)           Matching Contributions on Catch-up Contributions.  Catch-up Contributions are treated as “elective deferrals” under the Code and Treasury Regulations.  Accordingly, Catch-up Contributions are eligible for Matching Contributions.  However, since Matching Contributions are made only on the first 6% of Compensation deferred, so long as the interplay of the limitations in Sections 401(a)(17) and 402(g) of the Code make it impossible for Catch-up Contributions to be within the first 6% of a Participant’s Compensation, no Matching Contributions shall be made on Catch-up Contributions.

 

6

 

(c)           Deposit of Matching Contributions.  The Participating Employers will pay the Matching Contributions to the Trustee no later than the due date, including extensions thereof, for filing the Company’s tax return for the taxable year with respect to which the Matching Contributions are made.  If the Participating Employers pay the Matching Contributions to the Trustee prior to the end of the year with respect to which the Matching Contributions are made, the Participating Employers shall true-up the Matching Contributions at or after the end of the year to make sure that each Participant received a Matching Contribution equal to 50% of the first 6% of annual Compensation deferred by the Participant for the year.

 

Section 2.3             Return of Contributions

 

(a)           Mistake of Fact.  If a contribution is made because of a mistake of fact, the contribution may be returned within one year after the contribution is made.  The amount that may be returned is the amount contributed over the amount that would have been contributed had no mistake of fact occurred.  Earnings on mistaken Matching Contributions may not be returned, but losses attributable thereto reduce the amount returned.  Mistaken Regular Salary Reduction and Catch-up Contributions shall be adjusted for earnings or losses.

 

(b)           Loss of Deduction.  If a Matching Contribution is not deductible under the Code, such contribution (to the extent the deduction is disallowed) may be returned to the Participating Employer within one year after the disallowance of the deduction.  Earnings on nondeductible contributions may not be returned, but losses attributable thereto reduce the amount returned.

 

Section 2.4             Rollover Contributions

 

(a)           Direct Rollovers.  A Participant or an Eligible Employee (whether or not a Participant) may make a “direct rollover” to the Plan of an “eligible rollover distribution” from: (i) a retirement plan qualified under Section 401(a) of the Code; (ii) an annuity plan described in Section 403(a) of the Code; (iii) an annuity contract described in Section 403(b) of the Code; (iv) an individual retirement account or individual retirement annuity described in Section 408 of the Code; or (v) an eligible Section 457(b) deferred compensation plan established and maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

 

A “direct rollover” is a direct payment of an eligible rollover distribution by any reasonable means from the trustee or annuity provider of the former plan or arrangement to the trustee of this Plan.  An “eligible rollover distribution” means a payment of cash, the full amount of which would otherwise be taxable to the Participant, which is not one of a series of periodic payments, and which is not a payment required to be distributed to the Participant under Section 401(a)(9) of the Code.

 

The Administrative Committee may adopt reasonable standards and procedures for determining whether a proposed rollover is permissible.

 

(b)           Direct Rollovers of After-Tax Amounts.  The Plan may accept direct rollovers of after-tax amounts from retirement plans qualified under Section 401(a) of the Code or from annuity contracts described in Section 403(b) of the Code.  The Trustee shall separately account for the after-tax portion of any direct rollover under this Section 2.4(b).

 

7

 

(c)           Traditional Rollovers.  The Administrative Committee may consider traditional rollovers by Eligible Employees.  To protect the tax-qualified status of the Plan, the Administrative Committee may ask the Eligible Employee to provide an opinion of counsel or other evidence to establish that the requirements for a rollover distribution have been satisfied.

 

Section 2.5             USERRA Rights of Participants Returning from Qualified Military Service

 

If a Participant returns to employment with a Participating Employer following a leave of absence for Qualified Military Service, the Participant shall be eligible to have his or her military leave of absence counted as employment with the Participating Employer for purposes of Salary Reduction Contributions and Matching Contributions, as applicable.  The Administrative Committee has established written procedures to meet the requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”).  These procedures establish rules permitting reemployed veterans to make up Salary Reduction Contributions upon their return to employment with a Participating Employer and granting makeup Matching Contributions for returning Participants who would have been entitled to Matching Contributions during the military leave of absence.  The USERRA procedures are incorporated herein by this reference and may be amended at any time without notice and without further amendment to this document.

 

Section 2.6             Qualified Nonelective Contributions

 

The Participating Employers may make qualified nonelective contributions if necessary to correct a qualification failure in accordance with the Employee Plans Compliance Resolution System.  A “qualified nonelective contribution” is an employer contribution that is 100% vested when made, that the Participant may not elect to receive in cash, and that is distributable only in accordance with the distribution restrictions applicable to Salary Reduction Contributions, except that qualified nonelective contributions may not be distributed on account of hardship.

 

8

 

ARTICLE III
  NONDISCRIMINATION RULES; LIMITATIONS ON CONTRIBUTIONS

 

Section 3.1             Section 401(k) Nondiscrimination Rules (Effective January 1, 2006)

 

(a)           ADP Test.  Salary Reduction Contributions are tested for discrimination under the actual deferral percentage (“ADP”) test of Section 401(k)(3)(ii) of the Code.  For purposes of ADP testing, the portion of the Plan that covers nonunion Participants and the portion of the Plan that covers bargaining unit Participants are treated as separate plans and tested separately.

 

(b)           Prior-year Testing Method.  The Plan uses the prior-year ADP testing method, under which the ADP in the current year for the group of Eligible Employees who are HCE’s is compared to the ADP in the previous year for the group of Eligible Employees who were NHCE’s in the previous year.  The comparative percentages must satisfy one of the following tests:

 

(i)            1.25 Test.  The ADP for the current Plan Year for the group of Eligible Employees who are HCE’s is not more than the ADP in the previous Plan Year for the group of Eligible Employees who were NHCE’s in the previous Plan Year multiplied by 1.25 [HCE ADP < (NHCE ADP x 1.25)], or

 

(ii)           2% Spread Test.  The excess of the ADP for the current Plan Year for the group of Eligible Employees who are HCE’s is not more than two percentage points greater than the ADP in the previous Plan Year for the group of Eligible Employees who were NHCE’s in the previous Plan Year, and the ADP for the current Plan Year for the group of Eligible Employees who are HCE’s is not more than twice the ADP in the previous Plan Year for the group of Eligible Employees who were NHCE’s in the previous Plan Year [HCE ADP < (NHCE ADP + 2%)] and [HCE ADP < (NHCE ADP x 2)].

 

(c)           ADP Rules

 

(i)            Groups.  The ADP for a specified group of Eligible Employees for a Plan Year means the average of the ratios (calculated separately for each Eligible Employee in such group) of (A) the amount of salary reduction contributions allocated to the Eligible Employee’s Account as of a date within such Plan Year to (B) such Eligible Employee’s ADP Compensation for such Plan Year.  The ADP of an Eligible Employee who is eligible to but does not elect to have Salary Reduction Contributions made on his or her behalf for a Plan Year is zero.

 

(ii)           Special Rule for HCE’s.  The ADP for any Eligible Employee who is an HCE for the Plan Year and who is eligible to have contributions allocated to his or her account under two or more cash or deferred arrangements described in Section 401(k) of the Code that are maintained by a Participating Employer shall be determined as if such contributions were made under a single arrangement.

 

(iii)          Lookback.  The ADP for the eligible NHCE’s is determined using the actual deferral ratios for the Eligible Employees who were NHCE’s in the previous Plan

 

9

 

Year, regardless of whether those NHCE’s are Eligible Employees or NHCE’s in the Plan Year for which the ADP test is being calculated.

 

(iv)          Catch-up Contributions.  Catch-up Contributions are not taken into account under the ADP test for any Plan Year.

 

The provisions of Section 401(k)(3) of the Code and Section 1.401(k)-2 of the Treasury Regulations are incorporated in the Plan by this reference.

 

(d)           Correction of Excess Contributions.  Excess contributions are corrected under a four-step process as follows:

 

(i)            Step 1.  If the Plan does not satisfy either of the ADP tests for a Plan Year, the dollar amount of excess contributions for each affected HCE shall be calculated in a manner consistent with Section 401(k)(8)(B) of the Code and Section 1.401(k)-2(b)(2) of the Treasury Regulations, which states that the amount of excess contributions for an HCE is the amount (if any) by which such HCE’s contributions must be reduced for the HCE’s actual deferral ratio (“ADR”) to equal the highest permitted ADR for the year.  To calculate the highest permitted ADR, the ADR of the HCE with the highest ADR is reduced by the amount required to cause that HCE’s ADR to equal the ADR of the HCE with the next highest ADR.  If a lesser reduction would enable the arrangement to satisfy the ADP test after reductions, only this lesser reduction would be used.  The process described in this Step 1 must be repeated until the arrangement would satisfy the ADP test after reductions.  The sum of all reductions for all HCE’s is the total amount of excess contributions for the Plan Year.

 

(ii)           Step 2.  The total amount of excess contributions determined in Step 1 shall be apportioned among the HCE’s in accordance with this Step 2.  The contributions of the HCE with the highest dollar amount of contributions taken into account under the ADP test shall be reduced by the amount required to cause that HCE’s contributions to equal the dollar amount of the contributions for the HCE with the next highest dollar amount of contributions taken into account under the ADP test.  However, if a lesser apportionment to the HCE would enable the Plan to apportion the total amount of excess contributions, only the lesser apportionment would apply.  The procedure in this Step 2 must be repeated until the total amount of excess contributions has been apportioned.

 

(iii)          Step 3.  The amount of excess contributions apportioned to an HCE shall be adjusted for any income or loss attributable to such excess contributions, provided that there shall be no adjustment for earnings or losses occurring in the gap period between the end of the Plan Year in which the excess contributions were made and the time when the excess contributions are distributed.  The income or loss allocable to the excess contributions shall be calculated by multiplying the income or loss allocable to the HCE’s Salary Reduction Subaccount for the Plan Year in which the excess contributions occurred by a fraction, the numerator of which is the HCE’s excess contributions for the Plan Year and the denominator of which is the balance of the HCE’s Salary Reduction Subaccount as of the beginning of the Plan Year plus the HCE’s Salary Reduction Contributions during the Plan Year.

 

10

 

(iv)          Step 4.  Within twelve months after the close of the Plan Year in which the excess contribution occurred, the Plan must distribute to each HCE the excess contributions apportioned to the HCE under Step 2 and the allocable income determined under Step 3.  To avoid the 10% excise tax under Section 4979 of the Code, the distributions must be made within 21⁄2 months after the close of the Plan Year in which the excess contribution occurred.  The distribution shall be designated as a corrective distribution of excess contributions.

 

(v)           Special Rule for Catch-up Contributions.  If an HCE who would otherwise receive a corrective distribution is eligible to make Catch-up Contributions for the year in which the excess contributions occurred and if the Catch-up Contributions for such HCE are less than the Catch-up Contribution dollar limit in Section 3.2(b), some or all of the amount that would otherwise be distributed to the HCE shall be recharacterized as a Catch-up Contribution and retained in such HCE’s Account.  The amount to be recharacterized and retained shall be equal to the lesser of (1) the difference between the Catch-up Contribution dollar limit for the Plan Year and the HCE’s prior Catch-up Contributions for the Plan Year or (2) the total amount that would otherwise be distributed to the HCE as a corrective distribution.

 

Section 3.2             Maximum 401(k) Contributions

 

(a)           Dollar Limit on Salary Reduction Contributions.  No Participant shall be permitted to make Salary Reduction Contributions during any calendar year in excess of the amount of elective deferrals permitted by Section 402(g)(1) of the Code.  The limit is set annually by the IRS and is adjusted for cost-of-living increases.  For 2011, the limit is $16,500.

 

(i)            Designation of Excess Elective Deferrals.  The 402(g) limit applies to the Participant and is based not only on Salary Reduction Contributions to this Plan but also on “elective deferrals” to any other qualified retirement plan, including plans of other employers.  “Elective deferrals” are contributions made to employer-sponsored, qualified retirement plans pursuant to salary reduction agreements and include 401(k) contributions, 403(b) annuity contributions, and elective contributions to SIMPLE plans.  Since neither the Participating Employers, the PIC, nor the Administrative Committee has knowledge of a Participant’s elective deferrals to qualified retirement plans of other employers, it is the Participant’s responsibility to monitor this limit with respect to all elective deferrals.  If a Participant’s elective deferrals for a Plan Year are in excess of the 402(g) limit, the Participant must choose which plan to allocate the excess to.  If the Participant chooses to allocate some or all of the excess to this Plan, the Participant must so notify the Administrative Committee no later than March 1 of the year following the year in which the excess occurred.  The Participant’s notice to the Administrative Committee must (a) be in writing, (b) specify the amount of such excess for the preceding year allocated to the Plan, and (c) be accompanied by the Participant’s written statement to the effect that if such amounts are not distributed, such excess (when added to amounts deferred under other qualified retirement plans or arrangements) would exceed the limit imposed on the Participant by Section 402(g) of the Code for the year in which the contribution occurred.  A Participant shall be deemed to have provided the foregoing notice to the Administrative Committee if the Participant’s elective deferrals have

 

11

 

exceeded the 402(g) limit taking into account only Salary Reduction Contributions to this Plan and elective deferrals to other plans sponsored by the Participating Employers  or an Associate Company.

 

(ii)           Distribution of Excess Elective Deferrals.  Any excess elective deferrals allocated to the Plan in accordance with the foregoing paragraph, plus any income and minus any loss allocable thereto through the end of the Plan Year, shall be distributed to the Participant no later than April 15 of the year following the year in which the excess elective deferrals were contributed.  The income or loss allocable to such excess elective deferrals shall be calculated by multiplying the income or loss allocable to the Participant’s Salary Reduction Subaccount for the Plan Year by a fraction, the numerator of which is the Participant’s excess elective deferrals for the Plan Year and the denominator of which is the balance of the Participant’s Salary Reduction Subaccount as of the beginning of the Plan Year plus the Participant’s Salary Reduction Contributions during the Plan Year.  There shall be no adjustment for earnings or losses occurring in the gap period between the end of the Plan Year in which the excess elective deferrals were made and the time when the excess elective deferrals are distributed.

 

(iii)          Special Rule for Catch-up Contributions.  If a catch-up eligible Participant has made Regular Salary Reduction Contributions in excess of the 402(g) limit but has not made the full amount of Catch-up Contributions permitted under Section 3.2(b), the amount of Regular Salary Reduction Contributions in excess of the 402(g) limit shall be recharacterized as Catch-up Contributions to the extent permitted under Section 3.2(b).

 

(b)           Dollar Limit on Catch-up Contributions.  No catch-up eligible Participant shall be permitted to make Catch-up Contributions during any calendar year in excess of the amount permitted under Section 414(v)(2)(B)(i) of the Code, as adjusted for cost-of-living increases.  For 2011, the limit is $5,500.

 

Section 3.3             Section 401(m) Nondiscrimination Rules

 

(a)           ACP Test.  Matching Contributions made on behalf of nonunion Participants are tested for discrimination under the actual contribution percentage (“ACP”) test of Section 401(m)(2) of the Code.  (Matching Contributions made on behalf of bargaining unit Participants automatically satisfy the Section 401(m) nondiscrimination requirements.)

 

(b)           Prior-year Testing Method.  The Plan uses the prior-year ACP testing method, under which the ACP in the current year for the group of Eligible Employees who are HCE’s is compared to the ACP in the previous year for the group of Eligible Employees who were NHCE’s in the previous year.  The comparative percentages must satisfy one of the following tests:

 

(i)            1.25 Test.  The ACP for the current Plan Year for the group of Eligible Employees who are HCE’s is not more than the ACP in the previous Plan Year for the group of Eligible Employees who were NHCE’s in the previous Plan Year multiplied by 1.25 [HCE ACP < (NHCE ACP x 1.25)], or

 

12

 

(ii)           2% Spread Test.  The excess of the ACP for the current Plan Year for the group of Eligible Employees who are HCE’s is not more than two percentage points greater than the ACP in the previous Plan Year for the group of Eligible Employees who were NHCE’s in the previous Plan Year, and the ACP for the current Plan Year for the group of Eligible Employees who are HCE’s is not more than twice the ACP in the previous Plan Year for the group of Eligible Employees who were NHCE’s in the previous Plan Year [HCE ACP < (NHCE ACP + 2%)] and [HCE ACP < (NHCE ACP x 2)].

 

(c)           ACP Rules.

 

(i)            Groups.  The ACP for a specified group of Eligible Employees for a Plan Year means the average of the ratios (calculated separately for each Eligible Employee in such group) of (A) the amount of Matching Contributions allocated to the Eligible Employee’s Account as of a date within such Plan Year to (B) such Eligible Employee’s ADP Compensation for such Plan Year.

 

(ii)           Special Rule for the 2011 Plan Year.  For the 2011 Plan Year, which is the first year in which Matching Contributions are made, the ACP for NHCE’s shall be deemed to be 3%.

 

(iii)          Special Rule for HCE’s.  The ACP for any Eligible Employees who is an HCE for the Plan Year and who is eligible for matching contributions or employee contributions under more than one plan maintained by a Participating Employer shall be determined as if such contributions were made under a single arrangement.

 

(iv)          Lookback.  The ACP for the eligible NHCE’s is determined using the actual contribution ratios for the Eligible Employees who were NHCE’s in the previous Plan Year, regardless of whether those NHCE’s are Eligible Employees or NHCE’s in the Plan Year for which the ACP test is being calculated.

 

The provisions of Section 401(m)(2) of the Code and Section 1.401(m)-2 of the Treasury Regulations are incorporated in the Plan by this reference.

 

(d)           Correction of Excess Aggregate Contributions.  Excess aggregate contributions are corrected under a four-step process as follows:

 

(i)            Step 1.  If the Plan does not satisfy either of the ACP tests for a Plan Year, the dollar amount of excess aggregate contributions for each affected HCE shall be calculated in a manner consistent with Section 401(m)(6) of the Code and Section 1.401(m)-2(b)(2) of the Treasury Regulations, which states that the amount of excess aggregate contributions for an HCE is the amount (if any) by which such HCE’s contributions must be reduced for the HCE’s actual contribution ratio (“ACR”) to equal the highest permitted ACR for the year.  To calculate the highest permitted ACR, the ACR of the HCE with the highest ACR is reduced by the amount required to cause that HCE’s ACR to equal the ACR of the HCE with the next highest ACR.  If a lesser reduction would enable the arrangement to satisfy the ACP test, only this lesser reduction would be used.  The process described in this Step 1 must be repeated until the

 

13

 

arrangement would satisfy the ACP test after reductions.  The sum of all reductions for all HCE’s is the total amount of excess aggregate contributions for the Plan Year.

 

(ii)           Step 2.  The total amount of excess aggregate contributions determined in Step 1 shall be apportioned among the HCE’s in accordance with this Step 2.  The contributions of the HCE with the highest dollar amount of contributions taken into account under the ACP test shall be reduced by the amount required to cause that HCE’s contributions to equal the dollar amount of the contributions for the HCE with the next highest dollar amount of contributions taken into account under the ACP test.  However, if a lesser apportionment to the HCE would enable the Plan to apportion the total amount of excess aggregate contributions, only the lesser apportionment would apply  The procedure in this Step 2 must be repeated until the total amount of excess aggregate contributions has been apportioned.

 

(iii)          Step 3.  The amount of excess aggregate contributions apportioned to an HCE shall be adjusted for any income or loss attributable to such excess aggregate contributions, provided that there shall be no adjustment for earnings or losses occurring in the gap period between the end of the Plan Year in which the excess aggregate contributions were made and the time when the excess aggregate contributions are distributed.  The income or loss allocable to the excess aggregate contributions shall be calculated by multiplying the income or loss allocable to the HCE’s Matching Contribution Subaccount for the Plan Year in which the excess aggregate contributions occurred by a fraction, the numerator of which is the HCE’s excess aggregate contributions for the Plan Year and the denominator of which is the balance of the HCE’s Matching Contribution Subaccount as of the beginning of the Plan Year plus the HCE’s Matching Contributions for the Plan Year.

 

(iv)          Step 4.  Within twelve months after the close of the Plan Year in which the excess aggregate contributions occurred, the Plan must distribute to each HCE the excess aggregate contributions apportioned to the HCE under Step 2 and the allocable income determined under Step 3.  To avoid the 10% excise tax under Section 4979 of the Code, the distributions must be made within 21⁄2 months after the close of the Plan Year in which the excess aggregate contributions occurred.  The distribution shall be designated as a corrective distribution of excess aggregate contributions.

 

Section 3.4             Section 415 Limitations

 

(a)           Annual Additions.  For each Plan Year, “Annual Additions” to the Plan (plus “Annual Additions” to any other defined contribution plan that a Participating Employer maintains) on behalf of each Participant may not exceed the lesser of $40,000 (adjusted for cost-of-living increases under Section 415(d) of the Code ($49,000 for 2011)) or 100% of the Participant’s 415 Compensation for the Plan Year.  “Annual Additions” means the sum credited to a Participant’s Account for a Plan Year of:

 

·              all employer contributions (including Salary Reduction Contributions),

 

·              all Employee contributions (none are currently allowed),

 

14

 

·              forfeitures,

 

·              with respect to “Key Employees” only, as defined in Section 11.1(a), amounts contributed to a 401(h) account in a defined benefit plan or to a qualified asset account in a welfare benefit fund to provide postretirement medical benefits to or on behalf of the Key Employee, except that the 100% limitation on Annual Additions shall not apply to any amounts treated as Annual Additions under this paragraph.

 

Catch-up Contributions and  assets transferred or rolled over from another qualified plan are not Annual Additions.  Furthermore, the reinvestment of dividends on Company Stock held in the Company Stock Fund, described in Sections 4.3(a) and (e), the allocation of a restorative payment, described in Section 1.415(c)-1(b)(2)(ii)(C) of the Treasury Regulations, and the repayment of a Plan loan are not Annual Additions.  However, Annual Additions include excess Salary Reduction Contributions and excess aggregate contributions for a Plan Year that are subsequently distributed to a Participant pursuant to Section 3.1(d) and 3.3(d), as applicable.  Annual Additions also include Salary Reduction Contributions that exceed the limits of Section 402(g) of the Code, except to the extent such excess amounts are refunded to the Participant by April 15 of the following Plan Year.

 

(b)           Section 415 Aggregation Rules.  In applying the limitations of Section 415 of the Code, all defined contribution plans (whether or not terminated) of a Participating Employer (or a predecessor employer, as defined in Section 1.415(f)-1(c) of the Treasury Regulations) under which the Participant has received Annual Additions shall be treated as one plan, and the term “Participating Employer” shall include the Company and all corporations that are members of the same controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)), all commonly controlled trades or businesses (as defined in Code Section 414(c), as modified, except in the case of a brother-sister group of trades or businesses under common control, by Code Section 415(h)), affiliated service groups (as defined in Code Section 414(m)), and any other entity required to be aggregated with the Company under Code Section 414(o).

 

Section 3.5             Forfeiture of Matching Contributions

 

Matching Contributions shall be forfeited if the Salary Reduction Contributions to which the Matching Contributions relate are returned to the Participant because the Salary Reduction Contributions are determined to be excess contributions under Section 3.1 or excess elective deferrals under Section 3.2.  Matching Contributions that are forfeited shall be adjusted for income or loss in the same way as the Salary Reduction Contributions that are returned to the Participant.  To the extent that the Matching Contributions represent excess aggregate contributions that are distributed to the Participant under Section 3.3, the forfeiture shall not occur.

 

Any Matching Contributions forfeited under this Section 3.5 shall be used to pay administrative expenses of the Plan or to reduce the Participating Employers’ Matching Contributions in accordance with Section 5.2(c).

 

15

 

ARTICLE IV

ACCOUNTING AND INVESTMENTS

 

Section 4.1             Assets To Be Held by Trustee

 

All assets of the Plan shall be held and invested by the Trustee pursuant to the Trust Agreement and the rules set forth in this Article IV.

 

Section 4.2             Accounting and Expenses

 

The Trustee or an affiliate of the Trustee shall maintain accurate accounting of each Participant’s interest in the Plan in accordance with the Trust Agreement or separate record keeping agreement.

 

(a)           Subaccounts.  Although the total interest of a Participant in the Plan is reflected in or expressed as his or her Account, the Trustee may maintain Subaccounts to reflect different sources of contributions to a Participant’s Account.  For example, all Salary Reduction Contributions and any other 401(k) monies must be separately accounted for to ensure that the distribution restrictions under Section 401(k) are complied with.  As of May 1, 2011, the Trustee maintains the following Subaccounts with respect to Participant Accounts:

 

	
·
    	
Salary   Reduction
    
	
·
    	
Rollover
    
	
·
    	
Matching   Contribution
    
	
·
    	
Employer   ASB
    
	
·
    	
IRA
    
	
·
    	
Employer   HEISOP
    
	
·
    	
After-Tax   Rollover
    
	
·
    	
Participant   Voluntary
    
	
·
    	
HEI   Diversified Plan (“HEIDI”)
    
	
·
    	
AmeriMatch
    
	
·
    	
Employer   Supplemental
    
	
·
    	
Voluntary   HEISOP
    
	
·
    	
Employee   Pre-Tax Catch-up
    

 

The Subaccounts may be changed by agreement between the PIC and the Trustee.

 

(b)           Valuation of Accounts.  The Account and Subaccounts of each Participant shall be valued at the end of each day that the New York Stock Exchange is open (each, a “valuation date”).  All distributions, withdrawals, and Plan loans shall be based on the value of a Participant’s Account as of the last valuation date.

 

(c)           Expenses.  To the extent not paid by the Participating Employers, all costs and expenses of the Plan and any taxes assessed against the Plan shall be paid from the Plan.  Each Participant may be assessed a recordkeeping fee by the Trustee with respect to his or her Account.  Other fees and expenses paid from the Plan shall be allocated among Accounts as determined by the Administrative Committee, which shall have the authority, in its discretion, to cause fees and expenses that are properly allocable to particular, individual Accounts to be charged directly to such Accounts and to cause fees and expenses that are not so allocable to be allocated among all Accounts in a reasonable manner determined by the Administrative Committee.  The Administrative Committee shall maintain and make available, or ensure that the Trustee maintains and makes available, a current fee schedule for routine fees and expenses that the Administrative Committee has determined to be directly chargeable to the Accounts of

 

16

 

particular Participants and Beneficiaries; provided, however, that the Administrative Committee may cause specific expenses to be allocated directly to one or more particular Accounts if the Administrative Committee determines that such allocation is reasonable and appropriate under applicable law and administrative guidance, even if such expenses are not listed on the fee schedule.

 

Section 4.3             Investment of Accounts

 

(a)           Broad Range of Investments.  The Plan offers a broad range of investment funds, including, but not limited to, mutual funds managed by an affiliate of the Trustee and other companies, a money market account at American Savings Bank, F.S.B., and an employer stock fund that invests primarily in common stock of the Company (the “Company Stock Fund”).  The PIC may change the investment funds offered at any time.  A prospectus describing the Plan and the investment risks associated with an investment in the Plan is available to Participants.  Appendix A to such prospectus describes the investment funds offered under the Plan.  Prospectuses are also available for the mutual fund options.

 

(b)           Participant Direction.  Each Participant is responsible for investing all of his or her Account.  A Participant exercises his or her investment responsibility by choosing from among the investment funds offered.  Participants are responsible for educating themselves regarding the investment funds available to them.  Initial investment choices and subsequent changes are made directly with the Trustee via the telephone or internet.  The PIC is authorized to establish additional rules to regulate or restrict investment elections.  The Trustee and the mutual funds may impose their own rules and restrictions with respect to investments, including imposing redemption fees and penalties to restrict certain trading practices.  Investment elections and exchanges under the Plan are subject to all such rules, restrictions, fees, and penalties.

 

(c)           Qualified Default Investment Alternative.  Effective August 1, 2007, if a Participant does not choose an investment option for any portion of the Participant’s Account, the Participant shall be deemed to have chosen the appropriate target-date Fidelity Freedom Fund (“Target Fund”) as the investment option applicable to the non-directed portion of the Participant’s Account.  It is intended that the Target Funds shall meet the requirements to be a “qualified default investment alternative,” as defined in U.S. Department of Labor (“DOL”) Regulations implementing Section 404(c)(5) of ERISA.

 

(d)           Section 404(c) Plan.  The Plan is intended to constitute a plan described in Section 404(c) of ERISA and the DOL Regulations thereunder.  Under Section 404(c) of ERISA, fiduciaries of the Plan are relieved of liability for any losses that are the direct and necessary result of a Participant’s or Beneficiary’s exercise of control over investments in the Participant’s Account.  This means that each Participant bears the risks and rewards of the Participant’s own investment decisions.  Investment losses may occur based on those decisions.  Neither the Participating Employers nor their officers and directors, the PIC, the Administrative Committee, the Trustee, nor any of their representatives insure or otherwise guarantee the performance of any investment fund offered under the Plan.

 

17

 

(e)           Company Stock Fund

 

(i)            ESOP Status.  The portion of the Plan comprising the Company Stock Fund is an “employee stock ownership plan” (“ESOP”), as defined in Section 4975(e)(7) of the Code.  The Company Stock Fund is a unitized fund that is invested primarily in common stock of the Company.

 

(ii)           Voting of Shares.  Each Participant shall have the right to direct the Trustee as to the manner in which the Trustee is to vote that number of shares of common stock of the Company represented by units in the Company Stock Fund credited to the Participant’s Account.  Participant ownership of Company stock and voting by Participants with respect to such stock shall be kept confidential in accordance with procedures approved by the PIC.  The Trust Agreement sets forth the responsibilities of the Company, the PIC, and the Trustee with respect to notification to Participants of annual or special meetings, the means of communicating directions, and the voting of shares for which no direction is received by the Trustee.  The Trust Agreement, as it may be amended, shall be followed by the Trustee in performing its responsibilities with respect to common stock of the Company held by the Plan.

 

(iii)          Tender Offers.  In the event of a tender offer or other situation that involves the potential for undue influence, tabulation of Participant votes shall be controlled by the Trustee in accordance with the terms of the Trust Agreement.

 

(iv)          Section 16 Insiders.  With respect to a Participant who is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 (an “Affected Participant”), the provisions of the Plan and all transactions hereunder are intended and shall be construed and applied so as to comply with all applicable requirements and conditions for exemption under Rule 16b-3 or any successor rule.  In this regard, an Affected Participant’s investment election directing the investment, disposition, or reinvestment of the Participant’s Account in the Company Stock Fund shall be structured to meet the requirements for a “discretionary transaction” under Title 17, Section 240.16b-3(f) of the Code of Federal Regulations.  Specifically, the Affected Participant shall be allowed to make such investment election with respect to the acquisition or disposition of an interest in the Company Stock Fund only if such election is made on or after the date that is six months following the date of the most recent investment election for an “opposite way” transaction under any employee benefit plan sponsored by a Participating Employer or Associated Company.  For this purpose, an “opposite way” transaction means a previous acquisition if the current transaction is a disposition, and vice versa.  However, an acquisition or disposition of an interest in the Company Stock Fund resulting from an election to receive, or defer the receipt of, Company stock or cash in connection with the death, Disability, Retirement, or termination of service of the Participant falls outside the meaning of a “discretionary transaction” under Rule 16b-3(f), and shall not be subject to, or considered in applying, the above six-month election restriction.

 

(v)           Change in Shares.  If the outstanding shares of common stock of the Company are decreased or exchanged for a different number or kind of shares or other

 

18

 

securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of common stock or other securities through merger, consolidation, sale of all or substantially all the assets of the Company, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other distribution with respect to such shares of common stock or other securities, an appropriate and proportionate adjustment may be made to the maximum number and kind of shares or other securities that are subject to an effective registration statement filed with the Securities Exchange Commission pursuant to the Securities Act of 1933, as amended.  Any adjustment under this paragraph shall be subject to the requirements of applicable federal and state securities laws and regulations.

 

(vi)          Purchase and Sale of Shares.  All purchases of Company stock by the Trustee shall be made at a price that does not exceed the fair market value of such Company stock as of the date of purchase.  Purchases may be made directly with the Company or on the open market.  The PIC may direct the Trustee to sell or resell shares of Company stock to any person, including the Company or any Participating Employer, at a price that is not less than the fair market value of such Company stock as of the date of sale.  Any such sale shall be made in conformance with Section 408(e) of ERISA.

 

(vii)         Diversification.  Subject to Section 4.3(e)(iv) and applicable trading restrictions imposed by the PIC, the Trustee, or an investment fund, Participants are free to diversify the investments of their Accounts at all times.

 

(viii)        Limitations on Investments in the Company Stock Fund.  There are two limitations on the amount a Participant may invest in the Company Stock Fund.  First, a Participant may not direct more than 20% of any contribution to the Company Stock Fund.  Second, Participants and Beneficiaries are prohibited from making transfers or exchanges from other investment alternatives into the Company Stock Fund if the transfer or exchange would cause the Participant’s or Beneficiary’s investment in the Company Stock Fund to exceed 20% of the Participant’s or Beneficiary’s total Account balance.  At any time, the PIC may further restrict investments in the Company Stock Fund or eliminate the Company Stock Fund or any other form of investment in Company stock as an investment alternative under the Plan.

 

(ix)           Dividends.  Dividends on Company stock held in the Company Stock Fund shall be paid to the Trustee and allocated among Participants in accordance with their Account balances invested in the Company Stock Fund.  Each Participant’s allocable share of each such dividend payment shall, at the election of the Participant, be either (A) paid to the Participant in cash, or (B) reinvested in the Company Stock Fund for the benefit of the Participant and held as part of such Participant’s Account.  Such Participant elections and cash payments shall be made in accordance with procedures established by the Administrative Committee.  The Administrative Committee may establish reasonable restrictions on the right to receive dividends in cash, including a reasonable minimum amount for such distributions and a reasonable deadline prior to each dividend distribution for making elections.  If a Participant does not affirmatively elect to receive a dividend in cash, he or she shall be deemed to have elected reinvestment of such dividend.  Any payment of cash dividends to the Participants (or

 

19

 

Beneficiaries) shall be accounted for as if the Participants (or Beneficiaries) receiving the dividends were direct owners of the shares of Company stock, and the payment shall not be treated as a Plan distribution for purposes of Article VI.

 

Section 4.4             General Investment Powers of the PIC

 

(a)           General.  The PIC may authorize or direct investments in any investment permitted under ERISA and agreed to by the Trustee.  The PIC may remove the authority given to Participants to direct the investments in their own Accounts, in which case the PIC or other fiduciary will be responsible for the investments in Participant Accounts.

 

(b)           Investment Managers.  The PIC may contract with one or more investment managers for the management of all or a portion of the Plan’s assets in accordance with the requirements of ERISA.  An investment manager must be registered as an investment adviser under the Investment Advisers Act of 1940 or otherwise meet the requirements of Section 3(38)(B) of ERISA, and an investment manager must acknowledge in writing that the investment manager is a fiduciary of the Plan.  The PIC may remove or replace an investment manager, as the PIC deems appropriate, in accordance with the applicable investment management contract.

 

(c)           Company Stock and Bank Deposits.  Subject to the limitations in Sections 407 and 408 of ERISA, up to 100% of the assets of the Plan may be invested in (i) common stock of the Company or (ii) the American Savings Bank, F.S.B., Money Market Account or other bank deposits of American Savings Bank that bear a reasonable rate of interest.

 

(d)           Common and Collective Trust Funds.  A transaction may be made between the Plan (including a trust or insurance contract forming a part thereof) and (i) a common or collective trust fund or pooled investment fund maintained by a party in interest (as such term is defined in ERISA) that is a bank or trust company supervised by a state or federal agency or (ii) a pooled investment fund of an insurance company qualified to do business in a state, if (A) the transaction is a sale or purchase of an interest in such fund, and (B) the bank, trust company, or insurance company receives not more than reasonable compensation.

 

(e)           81-100 Trusts.  Assets of the Plan may be invested in a group trust qualifying for exemption from tax under Section 501(a) of the Code in accordance with Revenue Ruling 81-100, as modified by Revenue Ruling 2004-67, (an “81-100 Trust”).  To the extent any assets of the Plan are invested in an 81-100 Trust, the provisions of the trust agreement governing the 81-100 Trust, as amended from time to time, and the trust thereby created, are hereby adopted as part of this Plan and the trust hereunder with respect to Plan assets invested therein.

 

Section 4.5             Plan Loans to Active Participants

 

A Plan loan program is available to Participants who are actively employed by a Participating Employer.  Participants who are no longer actively employed by a Participating Employer may access their Accounts through distributions in accordance with the provisions of Article VI.  The loan program is administered by the Trustee in accordance with procedures approved by the Administrative Committee.  The loan procedures are incorporated herein by this reference and may be amended at any time without notice and without further amendment to the Plan.  If there

 

20

 

is any conflict between the loan procedures and this Section 4.5, the loan procedures shall control.

 

(a)           Loan Sources.  Plan loans may be taken only from the following Subaccounts: Salary Reduction, AmeriMatch, Participant Voluntary, Rollover, Employer ASB, Employee Pre-Tax Catch-up, and After-Tax Rollover.

 

(b)           Application Procedures.  A Participant wishing to obtain a loan may initiate the process with the Trustee by telephone or internet.  The Participant has thirty days after initiating the loan to complete the loan application process.  If the process is not completed within thirty days, the Participant must reinitiate the process.  The loan application includes a promissory note and security agreement.

 

(c)           Maximum Loan Amount.  The maximum amount which may be borrowed by any Participant is the lesser of:

 

(i)            50% of the Participant’s vested Account balance, or

 

(ii)           $50,000, reduced by the excess (if any) of:

 

(A)          the highest outstanding balance of loans from the Plan during the one-year period ending on the day before the date on which the loan is made, minus

 

(B)           the outstanding balance of loans from the Plan on the date the loan is made.

 

(d)           Minimum Loan Amount.  Loans will not be permitted for less than $1,000.

 

(e)           Repayment Terms.  Loans must be repaid within five years, unless the Participant establishes that the loan proceeds are to be used to buy the Participant’s principal residence, in which case the Administrative Committee may agree to a repayment period of up to fifteen years.  The principal residence exception to the five-year repayment rule does not apply to loans for the improvement of a Participant’s principal residence.  A Participant seeking a loan must agree to have the loan repaid by payroll deduction.  If a Participant has terminated employment, or is on a leave of absence other than for Qualified Military Service and is not receiving sufficient Compensation to cover the loan payments, the Participant must make loan payments directly to the Trustee.  Interest shall be paid as it accrues, with level amortization.

 

(f)            Purposes for Which Loans May Be Granted.  A Participant may have up to two loans outstanding without restriction on the use of the loan proceeds, provided the maximum loan amount is not exceeded.  Under no circumstances shall the Administrative Committee or the Trustee administer the loan program in a manner that is more favorable to Participants who are HCE’s than to other Participants.

 

(g)           Interest Rates.  The interest rate charged for Plan loans during any calendar month shall be one percentage point above the Federal Reserve prime rate of interest as of the last working day of the month preceding the month in which the loan is made.  The Administrative

 

21

 

Committee has the authority, in its discretion, to revise the interest rate charged on Plan loans, in which event the interest rate so determined by the Administrative Committee shall apply to Plan loans made thereafter in lieu of the interest rate set forth herein.

 

(h)           Collateral.  The loan shall be secured by 50% of the Participant’s vested Account balance at the time the loan is approved.

 

(i)            Repayment Upon Distribution.  If a Participant or Beneficiary applies for or otherwise becomes entitled to an immediate distribution in accordance with Article VI of the Plan upon the Participant’s severance from employment, Retirement, Disability, or death (including the automatic distribution of a small Account balance without the Participant’s consent), the unpaid balance of any outstanding loan shall be due and payable in full immediately prior to such distribution.  If repayment is not made in full prior to the distribution, the Participant’s Account shall be reduced or offset by the unpaid balance when the distribution is made.  The offset amount will be part of the taxable distribution to the Participant or Beneficiary.

 

(j)            Default.  Default will occur if the Participant fails to make a payment within ninety (90) days of when the payment was due.  If there is a default, the following will occur:

 

·              The principal amount of the loan plus interest accrued through the date of default will be a deemed distribution, subject to all applicable taxes.  The Trustee will issue Internal Revenue Service Form 1099-R to the Participant, reflecting the deemed distribution.

 

·              Although the default will be a deemed distribution, the Trustee will not reduce the Participant’s Account until a distributable event occurs under the terms of the Plan.

 

·              The Participant will not be able to take another Plan loan until the Participant repays the balance of the defaulted loan (with interest).

 

(k)           Leaves of Absence.  Generally, repayments must continue in a timely manner during an authorized leave of absence.  However, the repayment of any Plan loan may be suspended while the Participant is on leave for Qualified Military Service, and, if requested by the Participant, the interest rate on the loan while the Participant is on leave for Qualified Military Service may not exceed 6%.  The USERRA procedures adopted by the Administrative Committee contain rules with respect to suspension of loan payments.

 

(l)            Self-Directed Investment.  As with all other Plan investments, a Plan loan is a self-directed investment.  In accordance with Section 4.2(c), the reasonable expenses of a loan may be charged against the Participant’s Account.  Interest and principal paid on a loan will be credited solely to the Participant’s Account, and any loss suffered by reason of default or otherwise will be borne solely by the Participant’s Account.

 

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ARTICLE V

VESTING AND FORFEITURES

 

Section 5.1            Vesting

 

Vesting determines the portion of the Participant’s Account that the Participant is entitled to receive when a distributable event occurs, such as Retirement or other severance from employment.  Any portion of a Participant’s Account that is not vested upon severance from employment shall be forfeited in accordance with the rules in Section 5.2.

 

(a)          Immediate Vesting in All Subaccounts Other than Matching Contribution  Subaccounts

 

Each Participant is always 100% vested in all the Participant’s Subaccounts other than any Matching Contribution Subaccount.

 

(b)          Vesting in Matching Contribution Subaccounts

 

(i)            Termination of Employment Prior to Attainment of Normal Retirement Age.  Matching Contributions and their earnings are not immediately vested when made.  Rather, for a Participant who terminates employment with the Participating Employers prior to the attainment of Normal Retirement Age, vesting in the Participant’s Matching Contribution Subaccount, if any, is determined under the following schedule:

 

	
Years of Vesting Service
    	
 
    	
Vested Percentage
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Less than 2 Years
    	
 
    	
0
    	
%
    
	
2 Years
    	
 
    	
20
    	
%
    
	
3 Years
    	
 
    	
40
    	
%
    
	
4 Years
    	
 
    	
60
    	
%
    
	
5 Years
    	
 
    	
80
    	
%
    
	
6 or more Years
    	
 
    	
100
    	
%
    

 

(ii)           Attainment of Normal Retirement Age.  If a Participant reaches Normal Retirement Age while employed by a Participating Employer, the Participant shall be 100% vested in his or her total Account, including any Matching Contribution Subaccount, regardless of the Participant’s Years of Vesting Service.

 

(c)           Calculation of Years of Vesting Service.  Years of Vesting Service are calculated using the elapsed time method, which is based on periods of employment.

 

(i)            General Rule.  Vesting service is granted for the period of time beginning on the date a Participant first performs one Hour of Service for a Participating Employer or Associated Company and ending on the date the Participant severs from service with all Participating Employers and Associated Companies.  A Participant “severs from

 

23

 

service” on the earlier of (i) the date the Participant quits, Retires, is discharged, or dies, or (ii) the first anniversary of the first day of absence for any other reason (e.g., Disability, vacation, or leave of absence).

 

(ii)           Reemployment.  If a former Participant is reemployed by a Participating Employer or Associated Company, vesting service shall be granted for the period of time beginning on the date such Participant is reemployed and ending on the date such Participant subsequently severs from service with all the Participating Employers and Associated Companies.  If such Participant is reemployed within the 12-consecutive month period following the date on which the Participant severs from service, vesting service shall also be granted for the interim period.

 

(iii)          Maternity and Paternity Absences.  If a Participant is absent from work for any period (a) by reason of pregnancy, the birth of a child, or the placement of a child in connection with the Participant’s adoption of the child or (b) for purposes of caring for such child for a period beginning immediately following such birth or adoption, the Participant shall be credited with additional vesting service equal to the lesser of such period or twelve months.  The severance from service date for a Participant who is absent from work beyond the first anniversary of the first day of maternity or paternity absence shall be the second anniversary of the first day of such absence.  The period between the first and second anniversaries shall not be regarded as a period of service or a period of severance.

 

(iv)          Other Leaves of Absence.  With respect to leaves of absence other than maternity or paternity, vesting service shall be granted for:

 

(A)          Military Leave.  The period of time spent on leave for Qualified Military Service.  Except as provided in Section 6.7 (with respect to a Participant who dies while performing Qualified Military Service), if a Participant on leave for Qualified Military Service does not return to covered employment within five years after the completion of the Qualified Military Service, no additional vesting credit shall be granted for the period of the Qualified Military Service.

 

(B)           Authorized Personal Leave.  Personal leave of absence authorized by a Participating Employer that is not in excess of one year.  In determining leaves of absence, a Participating Employer must act in a nondiscriminatory manner.

 

(C)           Curtailment of Work.  A period of absence because of curtailment of work, not to exceed six months, provided the Participant returns to employment within two weeks after notification by a Participating Employer that work is available.

 

(v)           Break-in-Service Rules

 

(A)          One-Year Break-in-Service.  Following a One-Year Break in Service, a Participant’s Years of Vesting Service prior to the break will not be taken into account in determining the Participant’s vested interest in Matching

 

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Contributions made after the break until such Participant has again completed one Year of Vesting Service.

 

(B)           Five-Year Break-in-Service.  If a Participant incurs five consecutive One-Year Breaks in Service, vesting service credited subsequent to such One-Year Breaks in Service shall be disregarded for purposes of determining the vesting percentage in Matching Contributions made before such One-Year Breaks in Service.

 

(d)           Employment with Associated Companies.   Employment by an Associated Company shall be treated as employment by a Participating Employer for purposes of determining a Participant’s vesting service.

 

Section 5.2             Forfeitures

 

(a)           Forfeiture of Matching Contributions.  If a Participant terminates employment with the Participating Employers without being 100% vested in his or her Matching Contribution Subaccount, the nonvested portion of the Participant’s Matching Contribution Subaccount shall be forfeited at the time the vested portion of the Participant’s Account is distributed or, if earlier, at the end of the period in which the Participant has incurred five (5) consecutive One-Year Breaks in Service.  A Participant with a 0% vested interest in Matching Contributions and the earnings thereon shall be deemed to have received a distribution of the vested portion of the Participant’s Matching Contribution Subaccount upon termination of employment, causing an immediate forfeiture of any Matching Contributions and the earnings thereon credited to such Participant’s Account.

 

(b)           Restoration of Forfeited Matching Contribution Subaccounts.  Any forfeiture from a Matching Contribution Subaccount may be restored if the Participant is reemployed by a Participating Employer before the Participant incurs five (5) consecutive One-Year Breaks in Service and the Participant repays the full amount of any distribution made to the Participant from the Participant’s Matching Contribution Subaccount after the Participant terminated employment.  The Participant shall have five years from the date of reemployment to make the necessary repayment.  If the Participant makes the repayment, the exact amount forfeited shall be restored to the Participant’s Matching Contribution Subaccount, without adjustment for interest or any earnings or losses for the interim period.  If the forfeiture occurred because the Participant had a 0% vested interest in his or her Matching Contribution Subaccount, the restoration shall occur when the Participant has completed one Year of Vesting Service upon return to employment with the Participating Employers.  Any forfeited amounts that must be restored shall be restored first from current forfeitures from Matching Contribution Subaccounts or second from an additional contribution by the Participant’s Participating Employer.

 

(c)           Use of Forfeitures To Pay Plan Expenses and Reduce Employer Contributions.  Forfeited Matching Contribution Subaccounts that are not used to restore amounts previously forfeited under Section 5.2(b) shall be used first to pay administrative expenses in accordance with Section 4.2(c) and as permitted under Section 404(a) of ERISA.  To the extent forfeitures exceed the amount required to pay administrative expenses, the forfeitures shall be used to reduce the Participating Employers’ Matching Contributions for the Plan Year in which the

 

25

 

forfeiture occurred.  If the forfeitures for a Plan Year exceed the Matching Contributions for such Plan Year, the excess shall be held in a suspense account and used to reduce Matching Contributions in succeeding years.

 

26

 

ARTICLE VI

PAYMENT OF VESTED BENEFITS

 

Section 6.1             Severance from Employment

 

A Participant may apply for and receive a distribution of his or her vested Account balance (determined as of the most recent valuation date preceding the distribution and reduced for any outstanding Plan loan) as soon as administratively feasible following the Participant’s severance from employment.

 

Section 6.2             Small Account Balances

 

Effective March 28, 2005, if a Participant’s vested Account balance is $1,000 or less (determined without regard to source), the Participant’s vested Account balance shall be distributed to the Participant in a single sum as soon as administratively practicable following the Participant’s severance from employment.  No consent of the Participant or Participant’s spouse is required for this involuntary cashout to be made.  If a Participant’s vested Account balance is more than $1,000 but less than or equal to $5,000 and if the Participant does not elect to have the Participant’s Account balance rolled over in a direct rollover or distributed to the Participant, the Participant’s Account balance shall automatically be rolled over into an individual retirement account designated by the Administrative Committee.  If a Participant’s vested Account balance exceeds $5,000 (disregarding any amounts attributable to Rollover Contributions), no distribution may be made to the Participant before the Participant reaches Normal Retirement Age without the consent of the Participant.

 

Section 6.3             Statutory Commencement Date

 

Benefits must commence no later than the 60th day after the close of the Plan Year in which the latest of the following occurs:

 

(a)           the Participant reaches Normal Retirement Age,

 

(b)           the Participant reaches the tenth anniversary of the year in which the Participant commenced participation in the Plan, or

 

(c)           the Participant severs employment.

 

Notwithstanding the foregoing, subject to Section 6.8, a Participant must make a claim for benefits and complete the proper distribution processes before benefits will commence under this Section 6.3.

 

Section 6.4             Forms of Benefit Following Severance from Employment

 

The forms of benefit available to Participants and Beneficiaries following severance from employment are:

 

(a)           a single sum (also known as a lump sum) payable as soon as administratively feasible following completion of all applicable distribution forms;

 

27

 

(b)           an installment option with respect to HEISOP Subaccounts only, as described in Section 6.5;

 

(c)           periodic payments of required minimum distributions only, as described in Section 6.6; and

 

(d)           a partial withdrawal of the Participant’s vested Account balance (reduced by any outstanding loan balance) as elected by the Participant.  A Participant may elect a partial withdrawal no more than once in any Plan Year.

 

All distributions shall be in cash, except that a Participant’s investment in the Company Stock Fund shall be converted to an equivalent number of shares of common stock of the Company.  However, a Participant may elect to receive cash in lieu of common stock (and shall be deemed to have made such an election with respect to any automatic distribution of $5,000 or less, in accordance with Section 6.2, unless the Participant affirmatively elects to receive the distribution in the form of Company stock before the automatic distribution is made).  No fractional shares shall be issued; the value of any fractional share of stock shall be paid in cash.

 

Materials explaining the available forms of benefit and the benefit election procedures will be provided to Participants upon termination of employment, and a Participant may make a benefit election on the Trustee’s website or by contacting the Trustee by telephone.  Effective January 1, 2007, a Participant shall be informed of the Participant’s right to defer distribution until the Participant’s Normal Retirement Date and the consequences of failing to defer the distribution.  Distribution materials shall be provided to the Participant no less than thirty (30) days and no more than one hundred eighty (180) days before the distribution commences; provided, however, that the distribution may commence less than thirty (30) days after the distribution materials are provided to the Participant if the materials clearly inform the Participant that the Participant has the right to a period of at least thirty (30) days to consent to the distribution and, after receiving the materials, the Participant affirmatively elects a distribution.

 

Section 6.5             Installment Option for HEISOP Subaccounts.

 

Unless the Participant elects otherwise, the portion of the Participant’s HEISOP Subaccounts, if any, invested in the Company Stock Fund shall be distributed in substantially equal periodic payments (not less frequently than annually) over a period not longer than the greater of

 

(i)            five years, or

 

(ii)           in the case of a Participant with investments in the Company Stock Fund in excess of $985,000, five years plus one additional year (but no more than five additional years) for each $195,000 or fraction thereof by which such balance exceeds $985,000.  The $985,000 and $195,000 amounts are subject to increase with the cost of living in accordance with Section 409(o)(2) of the Code.

 

Section 6.6             Periodic Payments of Minimum Distributions

 

Effective for Participants with “required beginning dates” on or after April 1, 2005, a Participant may request that his or her vested Account balance be distributed in the form of periodic

 

28

 

payments of required minimum distributions only, commencing on the Participant’s required beginning date and continuing until the Participant’s Account has been fully distributed to the Participant in accordance with this Section 6.6 or to the Participant’s Beneficiary in accordance with Section 6.7, and determined and paid in accordance with Section 6.8.  A Participant who has elected to receive periodic payments of required minimum distributions may elect to receive a single-sum distribution of his or her remaining vested Account balance (reduced by any outstanding loan balance)  at any time.  “Required beginning date” is defined in Section 6.8(h)(v).

 

Section 6.7             Death Benefits

 

If a Participant dies prior to distribution of the Participant’s total vested Account balance, such Participant’s designated Beneficiary shall be entitled to receive the Participant’s remaining Account balance (reduced by any outstanding loans) as a death benefit.  Death benefits may be paid as soon as administratively feasible following the Participant’s death and must be made by the end of the year which contains the fifth anniversary of the Participant’s death.  Death benefits shall be paid in a single sum distribution, except that (a) to the extent, if any, that required minimum distributions are required to be made to the Beneficiary between the date of the Participant’s death and the time at which the remaining Account balance is required to be distributed pursuant to the preceding sentence (or, if earlier, the date the Beneficiary elects to receive a single sum distribution), such required minimum distributions shall be made in accordance with Section 6.8; and (b) subject to Section 6.8, the Beneficiary may elect (or, if distributions to the Participant previously commenced, may continue to receive) installment payments with respect to HEISOP Subaccounts only, as described in Section 6.5.

 

A Participant’s Beneficiary shall be the person or legal entity designated by the Participant in accordance with procedures approved by the Administrative Committee, provided that a married Participant’s spouse shall automatically be his or her Beneficiary unless the spouse has consented to an alternate Beneficiary.  The spouse’s signature on the consent form must be notarized or witnessed by an authorized Plan representative.  A married Participant may name a contingent Beneficiary in the event the spouse predeceases the Participant.  Unmarried Participants may name a primary and a secondary Beneficiary.  Spousal consent shall not be required if it is established to the satisfaction of the Administrative Committee that such consent may not be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Treasury Regulations may prescribe.

 

Subject to the rights of a married Participant’s spouse, a Participant may revoke or change designation of the Participant’s Beneficiary at any time in accordance with procedures approved by the Administrative Committee.  Whenever a Participant designates a new Beneficiary, all former Beneficiary designations by such Participant shall be revoked automatically.  If, upon the death of a Participant, there is no valid Beneficiary designation on file with the Administrative Committee or third-party record keeper or the Beneficiary has predeceased the Participant, the Beneficiary of the Participant’s vested Account balance shall be, in order of priority:

 

(a)           the Participant’s surviving spouse, if any;

 

(b)           the estate of the deceased Participant.

 

29

 

Facts as shown by the records of the Plan at the time of the Participant’s death shall be conclusive as to the identity of the proper Beneficiary.  If a Beneficiary has expressly waived his or her rights as a Beneficiary as part of a court-approved property settlement in a divorce and the Administrative Committee receives a copy of the court order approving the waiver, the waiver will be treated as a valid waiver of the Beneficiary’s rights under the Plan.  Any person who has waived his or her rights as a Beneficiary shall be treated as the Beneficiary under this Plan only if after the divorce the Participant expressly redesignates the person as the Participant’s Beneficiary.

 

If a Participant dies while performing Qualified Military Service, the survivors of the Participant are entitled to any additional benefits (other than benefit accruals relating to the period of Qualified Military Service) provided under the Plan had the Participant resumed and then terminated employment on account of death.  This means that the Participant will be fully vested in his or her Account balance.

 

Section 6.8             Required Minimum Distributions

 

The provisions of this Section 6.8 shall apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.

 

(a)           Precedence.  The requirements of this Section 6.8 shall take precedence over any inconsistent provisions of the Plan, provided that this Section 6.8 shall not be read to create a form of distribution that is not otherwise available under this Article VI.

 

(b)           Requirements of Treasury Regulations Incorporated.  All distributions required under this Section 6.8 shall be determined and made in accordance with the Treasury Regulations under Section 401(a)(9) of the Code, which are incorporated herein by this reference.

 

(c)           Time and Manner of Distribution.

 

(i)            Required Beginning Date.  The Participant’s entire interest must be distributed, or begin to be distributed, no later than the Participant’s required beginning date.

 

(ii)           Death of Participant Before Distributions Begin.  If the Participant dies before distributions begin, the Participant’s entire interest will be distributed to the Participant’s Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

 

(d)           Forms of Distribution.  Distributions shall be made in accordance with Sections 6.8(e) and (f).

 

(e)           Required Minimum Distributions During Participant’s Lifetime.

 

(i)            Amount of Required Minimum Distribution for Each Distribution Calendar Year.  During the Participant’s lifetime, the minimum amount distributed for each distribution calendar year shall be the lesser of:

 

30

 

(A)          the quotient obtained by dividing the Participant’s Account balance by the distribution period in the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9, Q&A-2, of the Treasury Regulations, using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or

 

(B)           if the Participant’s sole designated Beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account balance by the number in the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9, Q&A-3, of the Treasury Regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.

 

(ii)           Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death.  Required minimum distributions shall be determined under this Section 6.8(e) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

 

(f)            Required Minimum Distributions After Participant’s Death.

 

(i)            Death On or After the Date Distributions Begin.

 

(A)          Participant Survived by Designated Beneficiary.  If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that must be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated Beneficiary, determined as follows:

 

(1)           The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

 

(2)           If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year.  For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

 

(3)           If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, the designated Beneficiary’s remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

 

31

 

(B)           No Designated Beneficiary.  If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that shall be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

 

(ii)           Death Before Date Distributions Begin.

 

(A)          General Rule.  If the Participant dies before the date distributions begin, the minimum amount that shall be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the remaining life expectancy of the Participant’s designated Beneficiary, determined as provided in Section 6.8(f)(i).

 

(B)           No Designated Beneficiary.  If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

 

(C)           Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin.  If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under Section 6.8(c)(ii), this Section 6.8(f)(ii) shall apply as if the surviving spouse were the Participant.

 

(g)           Full Distribution Required by End of Fifth Year After Death.  This Section 6.8 establishes the minimum amount that must be distributed for each distribution calendar year after the year of the Participant’s death, but shall not be read to permit any Beneficiary to retain an Account in the Plan after the date on which distribution is required under Section 6.7.

 

(h)           Definitions.  The following definitions supplement the definitions in other parts of the Plan, in particular Article XII.

 

(i)            Designated Beneficiary.  The “designated Beneficiary” is the individual who is designated as the Beneficiary in accordance with Section 6.7 of the Plan and is the designated Beneficiary under Section 401(a)(9) of the Code and Section 1.401(a)(9)-4 of the Treasury Regulations.  Section 1.401(a)(9)-4, Q&A-5 permits the designation of a trust as Beneficiary provided the requirements of the cited Section are met.  Under Section 6.7 of the Plan, spousal consent is required for a married Participant to designate a trust or any other person or entity other than the Participant’s surviving spouse as Beneficiary.

 

(ii)           Distribution Calendar Year.  A “distribution calendar year” is a calendar year for which a minimum distribution is required.  For distributions beginning before the

 

32

 

Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year that contains the Participant’s required beginning date.  For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 6.8(c)(ii).  The required minimum distribution for the Participant’s first distribution calendar year shall be made on or before the Participant’s required beginning date.  The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s required beginning date occurs, shall be made on or before December 31 of that distribution calendar year.

 

(iii)          Life Expectancy.  “Life expectancy” means life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9, Q&A-1, of the Treasury Regulations.

 

(iv)          Participant’s Account Balance.  A “Participant’s Account balance” is the total balance of a Participant’s Account as of the last valuation date in the calendar year immediately preceding the distribution calendar year (the “valuation calendar year”) increased by the amount of any contributions made and allocated to the Participant’s Account as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date.  The Account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

 

(v)           Required Beginning Date.  “Required beginning date” means the following:

 

(A)          5% Owners.  The “required beginning date” for a Participant who was a 5% owner at any time during the five Plan Year period ending in the calendar year in which the Participant attains age 701⁄2 shall be April 1 of the calendar year following the calendar year in which the Participant attains age 701⁄2.  In the case of a Participant who becomes a 5% owner during any subsequent Plan Year, the required beginning date shall be the April 1 of the calendar year following the calendar year in which such subsequent Plan Year ends.  Once distributions begin to a 5% owner because they are required to begin under this Section 6.8, they must continue even if the Participant ceases to be a 5% owner in a subsequent calendar year.

 

(B)           Other Participants.  The “required beginning date” for a Participant who is not a 5% owner shall be April 1 of the calendar year following the later of the calendar year in which the Participant attains age 701⁄2 or the calendar year in which the Participant Retires.  Every Participant other than a 5% owner who reaches age 701⁄2 while actively employed by a Participating Employer may elect (1) to commence receiving benefits on April 1 following the calendar year in which the Participant attains age 701⁄2 or (2) to defer the commencement of

 

33

 

benefits to a date no later than April 1 following the calendar year in which the Participant Retires.

 

(C)           Transition Rule.  Any active Participant other than a 5% owner who reached age 701⁄2 before January 1, 2000, and has already begun receiving distributions may elect to stop distributions and recommence further distributions in the same form no later than April 1 following the calendar year in which such Participant Retires.  The recommencement of distributions shall not constitute a new annuity starting date.

 

(D)          5% Owner.  A “5% owner” is any person who owns (or is considered to own under the attribution rules in Section 318 of the Code) more than 5% of the outstanding stock of the Company or stock possessing more than 5% of the total combined voting power of the Company.

 

(i)            Suspension of Required Minimum Distributions for 2009.  Notwithstanding the foregoing provisions of this Section 6.8, a Participant or Beneficiary who would have been required to receive required minimum distributions for 2009 but for the enactment of Section 401(a)(9)(H) of the Code (“2009 RMDs”), and who would have satisfied that requirement by receiving distributions that are (i) equal to the 2009 RMDs or (ii) one or more payments in a series of substantially equal distributions (that include the 2009 RMDs) made at least annually and expected to last for the life (or life expectancy) of the Participant, the joint lives (or joint life expectancy) of the Participant and the Participant’s designated Beneficiary, or for a period of at least 10 years (“Extended 2009 RMDs”), will not receive those distributions for 2009 unless the Participant or Beneficiary chooses to receive such distributions.  Participants and Beneficiaries described in the preceding sentence will be given the opportunity to elect to receive the distributions described in the preceding sentence.  In addition, notwithstanding Section 6.11 of the Plan, and solely for purposes of applying the direct rollover provisions of the Plan, 2009 RMDs and Extended 2009 RMDs will be treated as eligible rollover distributions.

 

Section 6.9             In-Service Withdrawals

 

(a)           Withdrawals from Participant Voluntary, Voluntary HEISOP, and IRA Subaccounts.  A Participant may at any time request (in accordance with procedures approved by the Administrative Committee) a withdrawal from the following Subaccounts: Participant Voluntary, Voluntary HEISOP, or IRA.  Any withdrawal will be processed as soon as administratively practicable after the request is made.

 

(b)           Withdrawals for Participants Who Have Reached Age 591⁄2.  A Participant who has attained age 591⁄2 may at any time request (in accordance with procedures approved by the Administrative Committee) a withdrawal of all or any part of the Participant’s vested Account balance (reduced by any outstanding loan balance), except that in-service withdrawals are not permitted from Matching Contribution Subaccounts.  Only one such withdrawal shall be permitted for any Plan Year.  Any withdrawal will be processed as soon as administratively practicable after the request is made.

 

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(c)           Hardship Withdrawals

 

(i)            Available Sources.  Hardship withdrawals may be made from the Participant’s vested interest in the following Subaccounts: Salary Reduction, Employee Pre-Tax Catch-up, AmeriMatch, Employer ASB, and Employer HEISOP.  However, no hardship withdrawal shall include any income earned after January 1, 1989, that is allocable to Salary Reduction Contributions.

 

(ii)           Procedures.  To qualify for a hardship withdrawal, a Participant must demonstrate (in accordance with procedures adopted by the Administrative Committee) that the Participant has an “immediate and heavy financial need” and that the distribution is necessary to satisfy the immediate and heavy financial need.

 

(iii)          Immediate and Heavy Financial Need.  A Participant shall be deemed to have an immediate and heavy financial need in connection with:

 

(A)          Burial or funeral expenses for the Participant’s deceased parent, spouse, child, dependent (as defined in Section 152 of the Code without regard to subsection 152(d)(1)(B)), or designated Beneficiary.

 

(B)           Expenses incurred (or necessary to obtain) medical care that would be deductible under Section 213(d) of the Code (determined without regard to whether expenses exceed 7.5% of adjusted gross income) for the Participant, the Participant’s spouse, child, dependent, or designated Beneficiary.

 

(C)           Costs directly related to the purchase of the Participant’s principal residence (excluding mortgage payments).

 

(D)          Payment of tuition, related educational fees, and room and board expenses for up to the next 12 months of post-secondary education for the Participant or the Participant’s spouse, child, dependent (as defined in Code Section 152 without regard to Section 152(b)(1), (b)(2), and (d)(1)(B)), or designated Beneficiary.

 

(E)           Payments necessary to prevent the eviction of the Participant from the Participant’s principal residence or foreclosure on the mortgage of the Participant’s principal residence.

 

(F)           Expenses for the repair of damage to the Participant’s principal residence that would qualify for the casualty deduction under Section 165 of the Code (determined without regard to whether the loss exceeds 10% of adjusted gross income).

 

(iv)          Withdrawal May Not Exceed Amount of Need.  The amount of any hardship withdrawal may not exceed the amount necessary to relieve the immediate and heavy financial need after taking into account the amount of such need that may be satisfied from other resources reasonably available to the Participant.  The withdrawal may include the amount necessary to pay any federal, state, or local taxes or penalties

 

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reasonably anticipated to result from the withdrawal.  In determining the amount of the immediate and heavy financial need that cannot be satisfied from other resources, the Administrative Committee or third-party service provider  may rely on the Participant’s written representation that the need cannot be relieved:

 

(A)          Through reimbursement or compensation by insurance or otherwise,

 

(B)           By liquidation of the Participant’s assets,

 

(C)           By cessation of Salary Reduction Contributions,

 

(D)          By other currently available distributions (including distributions of ESOP dividends under Section 404(k) of the Code) or nontaxable (at the time of the loan) loans from the Plan or other plans maintained by a Participating Employer or any other employer of the Participant, or

 

(E)           By borrowing from commercial sources on reasonable commercial terms in an amount sufficient to satisfy the need.

 

For purposes of Section 6.9(c)(iv)(D), the phrase “plans maintained by a Participating Employer” means all qualified and nonqualified plans of deferred compensation, including a cash or deferred arrangement that is part of a cafeteria plan within the meaning of Section 125 of the Code.  However, it does not include the mandatory employee contributions portion of a health or welfare benefit plan (including one that is part of a cafeteria plan).

 

(v)           Suspension of Salary Reduction Contributions for Six Months.  If a Participant qualifies for and receives a hardship withdrawal under this Section 6.9(c), the Participant shall not be permitted to make Salary Reduction Contributions to the Plan for six months following the distribution.

 

Section 6.10           Qualified Domestic Relations Orders

 

(a)           General.  Through a Qualified Domestic Relations Order (“QDRO”), a Participant’s spouse, child, or other tax dependent (each, an “alternate payee”) may obtain rights to the Participant’s benefits.  A QDRO is a domestic relations order which assigns to an alternate payee or recognizes an alternate payee’s right to receive all or a portion of the benefits payable with respect to a Participant under the Plan.  A domestic relations order is not a QDRO and shall not be honored by the Administrative Committee if it requires the Plan to provide any form of benefit or other option of any kind not otherwise available under the Plan or requires the Plan to pay benefits in excess of the Participant’s vested Account balance.  The one exception to this rule is that, in accordance with a domestic relations order that the Administrative Committee or a court of competent jurisdiction determines to be a QDRO, the Administrative Committee may direct that a single-sum distribution be made to the alternate payee as soon as practicable notwithstanding age, employment status, or any other factor that might prevent the Participant from receiving a distribution from his or her Account at the same time.

 

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(b)           DRO Requirements.  To be a QDRO, a domestic relations order must clearly specify (a) the name and last known mailing address of the Participant (unless otherwise known by the Administrative Committee) and the name and mailing address of the alternate payee, (b) the amount or percentage of the Participant’s benefits to be paid by the Plan to each alternate payee or the manner in which such amount is to be determined, and (c) the form in which the benefit is to be paid.  The domestic relations order must specifically designate the Plan as the Plan from which the benefits are to be paid.  Finally, a domestic relations order cannot require the payment of benefits to an alternate payee that are required to be paid to another alternate payee under a previous QDRO.

 

(c)           Procedures.  The Administrative Committee has established procedures for determining whether a domestic relations order is a QDRO and for notifying the Participant and the alternate payee(s) of the receipt of the domestic relations order and of the steps that will be taken to determine whether the order is a QDRO.  The procedures are incorporated herein by this reference and may be amended at any time without notice and without further amendment to the Plan.

 

(d)           Separate Accounting.  If the Administrative Committee determines that a domestic relations order is a QDRO, the Administrative Committee will honor the QDRO.  If the QDRO does not direct an immediate distribution as permitted by this Section 6.10, the Administrative Committee will direct the Trustee to establish a separate Account in the Plan for the alternate payee, and the alternate payee shall have all rights afforded under the Plan to Beneficiaries.  Primarily, this means the alternate payee will be able to direct the investment of his or her Account in accordance with the rules in Article IV, but the alternate payee will not be able to borrow from his or her Account.

 

Section 6.11           Eligible Rollover Distributions

 

A “Distributee” who is entitled to a distribution may elect, in accordance with procedures approved by the Administrative Committee, to have any portion of an “Eligible Rollover Distribution” paid directly in a “Direct Rollover” to an “Eligible Retirement Plan”.

 

(a)           Definitions.  For purposes of this Section 6.11, the following definitions apply:

 

(i)            “Eligible Rollover Distribution” means any distribution of all or any portion of a Participant’s Account, except that an Eligible Rollover Distribution shall not include:

 

(A)          any distribution that is one of a series of substantially equal periodic payments made no less frequently than annually for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s beneficiary, or for a specified period of ten years or more;

 

(B)           any distribution to the extent such distribution is required under Section 401(a)(9) of the Code;

 

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(C)           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); and

 

(D)          any hardship withdrawal.

 

Notwithstanding the foregoing, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income.  However, effective January 1, 2007, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code or to a qualified trust (defined contribution or defined benefit) or 403(b) annuity contract, provided the qualified trust or annuity contract agrees to separately account for amounts so transferred (and the earnings thereon), including separately accounting for the portion of such distribution that is includible in gross income and the portion that is not so includible.

 

(ii)                  “Eligible Retirement Plan” means any of the following accounts or plans to the extent it accepts the Distributee’s Eligible Rollover Distribution:

 

(A)          A qualified retirement plan described in Code Section 401(a);

 

(B)           An individual retirement account described in Code Section 408(a);

 

(C)           An individual retirement annuity described in Code Section 408(b) (other than an endowment contract);

 

(D)          An annuity plan described in Code Section 403(a);

 

(E)           An annuity contract described in Code Section 403(b); or

 

(F)           An eligible deferred compensation plan under Code Section 457(b) that is maintained by a state, a political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state, and that agrees to separately account for amounts transferred into such plan from this Plan.

 

(iii)                 A “Distributee” includes a Participant, the surviving spouse of a deceased Participant, and the current or former spouse of a Participant who is an alternate payee under a QDRO that has been approved by the Administrative Committee.

 

(iv)                A “Direct Rollover” is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

 

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(v)                 Effective January 1, 2008, a non-spouse Beneficiary may do a Direct Rollover to an individual retirement account or individual retirement annuity described in clause (i) or (ii) of Section 402(c)(8)(B) of the Code (including a Roth IRA) that is established for the purpose of receiving the distribution on behalf of the non-spouse Beneficiary and that will be treated as an inherited IRA pursuant to the provisions of Section 402(c)(11) of the Code.

 

(vi)                Effective January 1, 2008, a Distributee may do a Direct Rollover to a Roth IRA if the Distributee meets the requirements that apply to rollovers from a traditional IRA to a Roth IRA (i.e., for tax years prior to January 1, 2010, the Distributee’s modified adjusted gross income cannot exceed $100,000, and the Distributee must not be married filing a separate return).

 

(b)           Notice.  Prior to a distribution to a Distributee, the Administrative Committee or third party service provider shall provide the Distributee a notice describing the Distributee’s right to have lump-sum distributions rolled over in a Direct Rollover to an Eligible Retirement Plan and describing certain tax consequences that will follow if a Direct Rollover is not made (the “402(f) Notice”).  The Administrative Committee or third party service provider shall issue the 402(f) Notice at least thirty (30) days but no more than one hundred eighty (180) days prior to the date a distribution is made.  However, such Eligible Rollover Distribution may commence less than thirty (30) days after the notice is given provided that the 402(f) Notice clearly informs the Distributee that the Distributee has the right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a Direct Rollover and the Distributee, after receiving the notice, affirmatively elects a distribution.

 

(c)           Income Tax Withholding.  Any amount that can be directly rolled over but that the Distributee chooses not to have directly rolled over is subject to 20% income tax withholding.  This includes distributions that the Distributee intends to rollover in a traditional 60-day rollover transaction.  However, this automatic withholding does not apply prior to January 1, 2010, to distributions to non-spouse Beneficiaries that are eligible for special rollover rights after December 31, 2007.  Such amounts are not subject to mandatory withholding if they are not directly rolled over.

 

Section 6.12                                Special Rules for Participants Called to Military Service

 

(a)           HEART Act Requirement (Effective January 1, 2009)

 

A Participant who is performing Qualified Military Service while on active duty for a period of more than 30 days shall be treated as having been severed from employment.  This permits a Participant to take a distribution from his or her vested Account balance.  If a Participant takes a distribution based on this deemed severance from employment, the Participant may not make Salary Reduction Contributions to the Plan for 6 months following the distribution.

 

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(b)           Pension Protection Act Requirements as Extended by the HEART Act (Effective January 1, 2010)

 

(i)            Permissible Withdrawals of Salary Reduction Contributions.  If a Participant is (by reason of being a member of a reserve component (as defined in Section 101 of Title 37 of the United States Code)) ordered or called to active duty for a period in excess of 179 days or for an indefinite period, the Participant may request a withdrawal from the Participant’s Salary Reduction and Employee Pre-Tax Catch-up Subaccounts during the period beginning on date of the order or call to active duty and ending at the close of the active duty period.

 

(ii)           Relief from Early Distribution Penalty Tax.  Any withdrawal under Section 6.12(b)(i) is exempt for the early distribution penalty tax under Section 72(t) of the Code in accordance with Section 72(t)(2)(G).  (A distribution under Section 6.12(a) qualifies for this relief only if the distribution meets the requirements of Section 6.12(b)(i).)

 

(iii)          Repayment Possibility.  Any Participant who receives a withdrawal under Section 6.12(b)(i) may, at any time during the 2-year period beginning on the day after the end of the active duty period, make one or more contributions to an individual retirement plan of such Participant in an aggregate amount not to exceed the amount of such distribution.  The dollar limitations otherwise applicable to contributions to individual retirement plans shall not apply to any contributions made pursuant to the preceding sentence.  No deductions shall be allowed for any contributions made to an individual retirement plan pursuant to this paragraph.

 

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ARTICLE VII
  ADMINISTRATION

 

Section 7.1                                      PIC, Administrative Committee, and Investment Committee

 

(a)           PIC.  The PIC has plenary authority to oversee the administration of the Plan and the investment options offered under the Plan.  At its discretion, the Compensation Committee may appoint, remove, and replace members of the PIC.

 

(b)           Administrative Committee.  The PIC has established the Administrative Committee and authorized it to oversee the day-to-day administration of the Plan.  The Administrative Committee is authorized, in its discretion, to: (i) interpret and construe the provisions of the Plan; (ii) resolve any ambiguities and reconcile any inconsistencies in the provisions of the Plan; and (iii) monitor the performance of third-party administrators, including the administrative performance of the Trustee.  Subject to the Claims Procedures in Article VIII, the Administrative Committee shall determine, in its discretion, all questions with respect to any individual’s rights under the Plan, including, but not limited to, eligibility for participation and eligibility for and the amount of benefits payable from the Plan.

 

(c)           Investment Committee.  The PIC has established the Investment Committee and authorized it to oversee the day-to-day financial affairs of the Plan.  The Investment Committee is authorized to: (i) monitor the investment options offered under the Plan and the investment policy statement for the Plan; (ii) monitor the financial performance and reporting of the Trustee; (iii) maintain or cause to be maintained proper financial records for the Plan; and (iv) file or cause to be filed all reports and other filings required by the United States Securities and Exchange Commission with respect to the Plan.

 

(d)           Rules and Procedures.  The PIC, Administrative Committee, and Investment Committee may promulgate and publish such rules and procedures as each deems appropriate for its own actions and for the operation, administration, and investments of the Plan.  A member of the PIC, Administrative Committee, or Investment Committee shall not have the right to vote on any matter relating solely to his or her own interests in the Plan, but may vote on matters affecting a class or group of Participants of which the member is a part.

 

(e)           Consents and Elections.  All consents, elections, applications, designations, and other submissions required or permitted under the Plan must be made in accordance with procedures approved by the Administrative Committee, and shall be valid only if properly completed, executed, and returned to the Administrative Committee or a third party service provider appointed by the Company, the PIC, or the Administrative Committee.

 

(f)            Professional Assistance.  The PIC, Administrative Committee, and Investment Committee may employ attorneys, actuaries, accountants, investment consultants, and other service providers, as appropriate, to give counsel to or otherwise assist them in performing their duties hereunder.  The fees and expenses of such persons may be paid in accordance with Section 4.2(c).

 

(g)           General.  The PIC, Administrative Committee, and Investment Committee shall have all other powers granted to them in other sections of this document or their governing

 

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charters.  At its discretion, the PIC may remove or replace the members of the Administrative Committee and Investment Committee and may revoke, amend, or enlarge the authority of the Administrative Committee and Investment Committee.  The decisions of the PIC, Administrative Committee, and Investment Committee  on any matters within their jurisdiction shall be binding and conclusive upon the Participating Employers and upon each Participant, Beneficiary, and other interested party.

 

Section 7.2                                      Plan Administrator

 

The Company shall be the Plan “Administrator,” as defined in Section 3(16)(A) of ERISA.

 

(a)           Reporting and Disclosure.  The Company shall be responsible for filing with governmental authorities and disclosing to Participants and their Beneficiaries all returns, reports, and other materials required under ERISA or the Code.

 

(b)           Legal Process.  The Company shall be the Plan’s agent for the service of legal process.

 

Section 7.3                                      Trust Agreement

 

The Company has entered into a Trust Agreement with the Trustee for the investment and custody of Plan assets.  The trust is part of the Plan, and any rights or benefits accruing to any person under the Plan shall be subject to all of the relevant terms of the Trust Agreement.  In addition to the powers of the Trustee set forth in the Trust Agreement, the Trustee shall have any powers, express or implied, granted to it under the Plan.  In the event of any conflict between the provisions of the Trust Agreement and the provisions of the Plan, the provisions of the Plan shall control, except in matters concerning the duties and responsibilities of the Trustee, in which case the Trust Agreement shall control.  The fees and expenses of the Trustee shall be paid in accordance with the Trust Agreement and Section 4.2(c) hereunder.

 

Section 7.4                                      Bonding

 

Subject to the exceptions in Section 412 of ERISA, every person who handles funds or other property of the Plan shall be bonded.

 

Section 7.5                                      Indemnification

 

Except as required by ERISA, the Plan’s fiduciaries shall not be liable for any mistake of judgment or other action taken in good faith.  No fiduciary shall be personally liable by virtue of any contract, agreement, bond, or other instrument made or executed by himself or herself or any other fiduciary on behalf of the Plan.

 

The Participating Employers shall indemnify, defend, and hold harmless the members of the PIC, Administrative Committee, and Investment Committee and employees of the Participating Employers acting on their behalf with respect to the Plan from and against any and all claims, losses, damages, expenses, and liabilities arising, directly or indirectly, from their responsibilities in connection with the Plan, except where any such liability is judicially determined to be the

 

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result of willful misconduct.  The Participating Employers may purchase fiduciary liability insurance against this risk.

 

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ARTICLE VIII
  CLAIMS PROCEDURES

 

Section 8.1                                      Claims for Benefits

 

If a Participant or Beneficiary or any other person (each, a “claimant”) believes he or she is entitled to a benefit from the Plan, such claimant may file a written claim for benefits with the Administrative Committee.  The Administrative Committee shall consider such written claim and respond to the claimant within 90 days after receiving the claim unless special circumstances require an extension of time.  The Administrative Committee may extend the response period by up to 90 additional days by notifying the claimant in writing, prior to the end of the initial 90-day period, that additional time is required.  The notice of extension must set forth the special circumstances and the date by which the Administrative Committee expects to render its decision.  If the Administrative Committee denies the claim, in whole or in part, the Administrative Committee shall provide the claimant with written notice of the denial and of the claimant’s right to an appeal.  The notice shall set forth, in a manner calculated to be understood by the claimant:

 

·                                          the specific reason or reasons for the denial,

·                                          a reference to the specific Plan provisions on which the denial is based,

·                                          a description of additional material or information, if any, which the claimant might provide to perfect the claim and an explanation of why it is needed,

·                                          an explanation of the Plan’s appeal procedure in Section 8.2 and the time limits applicable to an appeal, and

·                                          a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on appeal.

 

Section 8.2                                      Appeal

 

Within 90 days after receiving notice that a claim has been denied, the claimant may file a written appeal with the PIC.  The claimant may provide written testimony and written documentation in support of the claimant’s appeal.  Upon written request from the claimant, the PIC shall provide free of charge to such claimant reasonable access to and copies of all documents, records, and other information relevant (as defined in applicable ERISA regulations) to the particular claim.  The PIC shall undertake a full and fair review of the appeal, taking into account all testimony, documents, records, and other information submitted by the claimant, without regard to whether such information was submitted or considered in the initial benefit determination.  The PIC may hold a hearing and may require the claimant to provide additional information or testimony as the PIC, in its sole discretion, deems useful or appropriate to its consideration of the claim.  The PIC shall render its final decision within 60 days of receipt of the appeal unless special circumstances require an extension of time.  The PIC may extend the appeal period by up to 60 additional days by notifying the claimant in writing, prior to the end of the initial 60-day period, that additional time is required.  The notice of extension must set forth the special circumstances and the date by which the PIC expects to render its final decision.  If the PIC’s final decision is a denial of the claim, the PIC shall provide written notice of the denial, which notice shall set forth, in a manner calculated to be understood by the claimant:

 

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·                                          the specific reason or reasons for the denial,

·                                          a reference to the specific Plan provisions on which the denial is based,

·                                          a statement that the claimant is entitled to receive, upon written request and free of charge, reasonable access to and copies of all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim, and

·                                          a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA.

 

Section 8.3                                      Other Remedies

 

If the Administrative Committee or PIC fail to respond to a claimant within the time limits set forth in this Article VIII, the claimant may consider the claim denied.  A claimant must comply with these procedures and exhaust all possibilities contained herein before filing a civil action under Section 502(a) of ERISA or otherwise seeking relief in any other forum.  If a claimant seeks relief in another forum, the evidence presented will be strictly limited to the evidence timely presented in the administrative claims process.  In addition, the claimant must commence an action in another forum within 180 days after the PIC’s final decision on appeal under Section 8.2.

 

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ARTICLE IX
  AMENDMENT, TERMINATION, AND MERGER

 

Section 9.1                                      Amendment

 

(a)           General Rule.  The Company reserves the right to amend the Plan in whole or in part at any time and for any reason and to give such amendment retroactive effect to the extent permitted by applicable law.  The PIC may approve any amendment to the Plan necessary to comply with the Code or ERISA or that does not have a substantial impact on the cost or design of the Plan.  All other amendments must be approved by the Board of Directors of the Company or a Committee of the Board or one or more officers of the Company or a Participating Employer to whom the Board has delegated amendment authority.

 

(b)           Nondiscrimination.  The timing of an amendment must not have the effect of discriminating significantly in favor of HCE’s.

 

(c)           Anti-cutback Rule.  No amendment may reduce the accrued benefit of any Participant.

 

(d)           Vesting Schedule.  If an amendment is made to the vesting schedule, every Participant who is actively employed and who has at least three (3) Years of Vesting Service must be permitted, within a reasonable period of time after the adoption of the amendment, to have his or her vesting percentage determined under the Plan without regard to the amendment.

 

Section 9.2                                      Termination or Discontinuance

 

The Company reserves the right to terminate the Plan at any time and for any reason, and each Participating Employer reserves the right to terminate its own participation in the Plan or discontinue contributions to the Plan at any time and for any reason.  If the Plan is terminated (in full or in part) or if there is a complete discontinuance of contributions under the Plan, the rights of affected Participants to benefits accrued to the date of such termination or complete discontinuance, to the extent funded as of such date, shall be fully vested and nonforfeitable.

 

Section 9.3                                      Merger or Spinoff

 

The Plan may be merged or consolidated with or its assets and liabilities may be transferred to another qualified plan and trust only if the benefits that would be received by a Participant in the event of a termination of the transferee plan immediately after such transfer, merger, or consolidation are at least equal to the benefits the Participant would have received if the Plan had terminated immediately before the transfer, merger, or consolidation, and only if such transfer, merger, or consolidation does not otherwise result in the elimination of any accrued benefit.  The Plan may be split into two or more plans by way of a spinoff if, after the spinoff: (a) the sum of the account balances for each of the participants in the resulting plans equals the Account balance of the Participant in this Plan before the spinoff, and (b) the assets in each of the plans immediately after the spinoff equals the sum of the account balances for all participants in that plan.

 

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ARTICLE X
  MISCELLANEOUS

 

Section 10.1                                No Right to Employment

 

Nothing contained in the Plan gives any Participant or Employee the right to be retained in the service of a Participating Employer or interferes with the right of a Participating Employer to discharge any Employee at any time.

 

Section 10.2                                Inalienability

 

No Participant, Beneficiary, alternate payee, or any other person having or claiming to have any right or interest of any kind in the Plan shall have any right to sell, assign, transfer, convey, hypothecate, anticipate, or otherwise dispose of such interest.  No interest in the Plan shall be subject to any liabilities or obligations of, or any bankruptcy proceedings, claims of creditors, attachment, garnishment, execution, levy, or other legal or equitable process against a Participant, Beneficiary, alternate payee, or any other person having or claiming to have any interest under this Plan, or such person’s property.  The prior sentence shall not apply to the creation, assignment, or recognition of any benefit payable with respect to a Participant pursuant to a qualified domestic relations order, or to the enforcement of a judgment, settlement, or order described in Section 401(a)(13)(C) of Code, or to any other exception provided under Section 401(a)(13) of the Code or the Treasury Regulations thereunder.

 

Section 10.3                                Facility of Payment

 

If any Participant, Beneficiary, or Alternate Payee eligible to receive payments under the Plan is, in the opinion of the Administrative Committee, legally, physically, or mentally incapable of personally receiving and receipting for any payment under the Plan, the Administrative Committee may direct that such payments, or any portion thereof, be made to any person(s) or institution who have custody of such payee, or are providing necessities of life (including, without limitation, food, shelter, clothing, and medical or custodial care) to such payee, to the extent deemed appropriate by the Administrative Committee.  Such payments shall constitute a full discharge of the liability of the Plan to the extent thereof.  The Administrative Committee may withhold all other amounts due to such payee until a claim for such amounts is duly made by a duly appointed guardian or other legal representative of such payee.

 

Section 10.4                                Construction of Plan

 

(a)           Headings.  The headings of Articles and Sections are included herein solely for the convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control.

 

(b)           Controlling Law.  To the extent not preempted by ERISA or other federal law, the Plan shall be governed and construed according to the laws of the State of Hawaii.

 

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Section 10.5           Benefits Payable From Trust

 

All benefits payable under the Plan shall be paid solely from the trust, and the Participating Employers assume no liability or responsibility therefore.

 

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ARTICLE XI

TOP-HEAVY RULES

 

Section 11.1                                Determination of Top-Heavy Status

 

For purposes of this Article XI, the following terms shall have the meanings set forth below:

 

(a)                                  “Key Employee”.  In determining whether the Plan is top-heavy, “Key Employee” means any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date was:

 

(i)            An officer of a Participating Employer having annual 415 Compensation greater than $160,000 (as adjusted under Section 416(i)(1) of the Code); provided however, no more than the lesser of (A) 50 Employees or (B) the greater of three Employees or 10% of all Employees shall be regarded as officers,

 

(ii)           A 5% owner of the Company, or

 

(iii)          A 1% owner of the Company having annual 415 Compensation of more than $150,000.

 

The determination of who is a Key Employee shall be made in accordance with Section 416(i)(1) of the Code and the regulations and other guidance of general applicability issued thereunder.

 

A “non-Key Employee” is any Employee who is not a Key Employee.

 

(b)                                 “Top-heavy plan”:  The Plan is top-heavy if any of the following conditions exists:

 

(i)            If the Top-Heavy Ratio for the Plan exceeds 60% and the Plan is not part of any required aggregation group or permissive aggregation group of plans.

 

(ii)           If the Plan is part of a required aggregation group of plans but not part of a permissive aggregation group and the Top-Heavy Ratio for the group of plans exceeds 60%.

 

(iii)          If the Plan is part of a required aggregation group and part of a permissive aggregation group of plans and the Top-Heavy Ratio for the permissive aggregation group exceeds 60%.

 

(iv)          For purposes of determining whether the Plan is a top-heavy plan, the accrued benefit of an individual who has not performed services for a Participating Employer during the 1-year period ending on the Determination Date shall be disregarded.

 

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(c)           “Top-Heavy Ratio”.

 

(i)            If a Participating Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Participating Employer has not maintained any defined benefit plan that during the 5-year period ending on the Determination Date has or had accrued benefits, the Top-Heavy Ratio for the Plan alone or for the required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of the Account balances of all Key Employees as of the Determination Date (including any part of any Account balance distributed in the 1-year period ending on the Determination Date) (5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death, or disability), and the denominator of which is the sum of all Account balances (including any part of any Account balance distributed in the 1-year period ending on the Determination Date) (5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death, or disability), both computed in accordance with Section 416 of the Code and the regulations thereunder.  Both the numerator and denominator of the Top-Heavy Ratio shall be increased to reflect any contribution not actually made as of the Determination Date but which is required to be taken into account on that date under Section 416 of the Code and the regulations thereunder.

 

(ii)           If a Participating Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Participating Employer maintains or has maintained one or more defined benefit plans that during the 5-year period ending on the Determination Date has or has had any accrued benefits, the Top-Heavy Ratio for any required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of Account balances under the aggregated defined contribution plan or plans for all Key Employees and the present value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date, and the denominator of which is the sum of Account balances under the aggregated defined contribution plans for all Participants, determined in accordance with Section 11.1(c)(i) above, and the present value of accrued benefits under the defined benefit plans for all Participants as of the Determination Date, all as determined in accordance with Section 416 of the Code and the regulations thereunder.  The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are increased for any distribution of an accrued benefit made in the 1-year period ending on the Determination Date (5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death, or disability).

 

(iii)          For purposes of subparagraphs (i) and (ii) above, the value of Account balances and the present value of accrued benefits shall be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Section 416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan.  The Account balances and accrued benefits of a Participant (i) who is not a Key Employee but who was a Key Employee in a prior year or (ii) who has not been credited with at least one

 

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Hour of Service with any employer maintaining the Plan at any time during the 1-year period ending on the Determination Date shall be disregarded.  The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account shall be made in accordance with Section 416 of the Code and the regulations thereunder.  Deductible employee contributions shall not be taken into account for purposes of computing the Top-Heavy Ratio.  When aggregating plans, the value of Account balances and accrued benefits shall be calculated with reference to the Determination Dates that fall within the same calendar year.

 

(iv)          The accrued benefit of a Participant other than a Key Employee shall be determined under (A) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Participating Employer, or (B) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code.

 

(d)           “Permissive aggregation group” means the required aggregation group of plans plus any other plan or plans of the Participating Employer that, when considered as a group with the required aggregation group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.

 

(e)           “Required aggregation group” means  (i) each qualified plan of the Participating Employer in which at least one Key Employee participates or participated at any time during the Plan Year containing the Determination Date or any of the four preceding Plan Years (regardless of whether the plan has terminated), and (ii) any other qualified plan of the Participating Employer that enables a plan described in (i) to meet the requirements of Sections 401(a)(4) or 410 of the Code.  For this purpose, “Participating Employer” shall include all employers aggregated under Section 414(b), (c), or (m) with a Participating Employer.

 

(f)            “Determination Date”.  For any Plan Year subsequent to the first Plan Year, the Determination Date means the last day of the preceding Plan Year.  For the first Plan Year, the Determination Date means the last day of that year.

 

(g)           “Valuation Date” means the Determination Date as of which account balances or accrued benefits are valued for purposes of calculating the Top-Heavy Ratio.

 

Section 11.2           Special Top-Heavy Rules

 

(a)           If the Plan is or becomes top-heavy in any Plan Year, the provisions of this Article XI shall supersede any conflicting provisions in the Plan.

 

(i)            Except as otherwise provided in subparagraph (iv) below, the Participating Employer contributions allocated on behalf of any Participant who is not a Key Employee shall be not be less than the lesser of (A) 3% of such Participant’s 415 Compensation or (B) in the case where the Participating Employer has no defined benefit plan that designates the Plan to satisfy Section 401 of the Code, the largest percentage of Participating Employer contributions, as a percentage of the first $245,000 (as adjusted) of the Key Employee’s 415 Compensation, allocated on behalf of any Key Employee for that year.  The minimum allocation shall be determined without regard to any Social

 

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Security contribution.  This minimum allocation shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation because of the Participant’s failure to (i) complete 1,000 Hours of Service (or any equivalent provided in the Plan), (ii) to make mandatory employee contributions to the Plan, or (iii) to earn Compensation in excess of a stated amount.

 

(ii)           If a Participant is covered by both this Plan and a defined benefit plan, the minimum benefit required by Section 416 of the Code shall be provided by the defined benefit plan, provided that such benefit shall be offset by the benefits, if any, provided by this Plan.

 

(iii)          The minimum allocation required (to the extent required to be nonforfeitable under Section 416(b)) may not be forfeited under Section 411(a)(3)(B) or 411(a)(3)(D) of the Code.

 

(iv)          The provision in (i) above shall not apply to any Participant who was not employed by a Participating Employer on the last day of the Plan Year.

 

(b)           The vesting schedule for Matching Contribution Subaccounts meets the requirements for top-heavy vesting schedules in Section 416(b) of the Code, and shall apply in all years, whether or not the Plan is top-heavy.

 

(c)           The minimum benefit requirements in this Section 11.2 shall not apply with respect to any Employee included in a unit of employees covered by a collective bargaining agreement if there is evidence the retirement benefits were the subject of good faith bargaining between Employee representatives and the Participating Employer.  For this purpose, the term “Employee representatives” does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Participating Employer.

 

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ARTICLE XII

DEFINITIONS

 

Wherever used in this document, the following capitalized terms have the indicated meanings unless the context clearly implies otherwise:

 

12.1         “Account” means the separate account maintained for each Participant which represents such Participant’s total proportionate interest in the Plan and Trust Fund as of any valuation date.  A Participant’s Account may include one or more Subaccounts, as described in Section 4.2(a).  A Participant’s Account balance is the Participant’s accrued benefit.

 

12.2         “Administrative Committee” means the Hawaiian Electric Industries, Inc. Retirement Plans Administrative Committee appointed by the PIC to oversee the day-to-day administration of the Plan.  See Section 7.1(b).

 

12.3         “Associated Company” means (i) a corporation that is not a Participating Employer, but is a member of the same controlled group of corporations (within the meaning of Section 1563(a) of the Code, determined without regard to Sections 1563(a)(4) and (e)(3)(C) of the Code) as a Participating Employer, (ii) a trade or business, whether or not incorporated, that is not a Participating Employer, but is under common control (within the meaning of Section 414(c) of the Code) with a Participating Employer; or (iii) a member, other than a Participating Employer, of an affiliated service group (within the meaning of Section 414(m) of the Code) that includes a Participating Employer.

 

12.4         “Beneficiary” means the person or entity to whom all or a portion of a deceased Participant’s Account is payable as a death benefit in accordance with Section 6.7 of the Plan.

 

12.5         “Catch-up Contribution” means an elective contribution made on behalf of a catch-up eligible Participant that is in excess of an otherwise applicable Plan limit.  An otherwise applicable Plan limit is a limit in the Plan that applies to elective contributions without regard to Catch-up Contributions, such as the limit on annual additions in Section 415(c) of the Code, the dollar limitation under Section 402(g) of the Code, or the limit imposed by the actual deferral percentage test in Section 401(k)(3) of the Code.

 

12.6         “Code” means the Internal Revenue Code of 1986, as amended.

 

12.7         “Company” means Hawaiian Electric Industries, Inc., or any successor thereto.

 

12.8         “Compensation” has different meanings for different purposes.  “Compensation” is used to calculate Salary Reduction Contributions and Matching Contributions.  “ADP Compensation” and “415 Compensation” are used for ADP testing and 415 testing, respectively, and other specific purposes under the Plan.

 

“Compensation” means the Employee’s Box 1, W-2 earnings from the Employee’s Participating Employer for the Plan Year, modified (i) to exclude discretionary bonuses, fringe benefits, FlexCredits, reimbursements, moving expenses and other expense allowances, retroactive pay increases, and special executive compensation; and (ii) to include elective contributions made by a Participating Employer to this Plan, a cafeteria plan (other than FlexCredits), or a

 

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transportation spending plan that are excluded from the taxable income of the Employee under Sections 402(e)(3), 125, or 132(f) of the Code.  Special executive compensation is noncash compensation and nonqualified deferred compensation available only to a select group of management Employees.  Compensation earned prior to an Eligible Employee becoming a Participant shall not be counted in determining contributions to the Plan.  Effective with the April 23, 2006, payroll for Maui Electric Company, Limited, the exclusion for “retroactive pay increases” does not apply.  Effective with the April 30, 2006, payroll for the Company  and Hawaiian Electric Company, Inc., the exclusion for “retroactive pay increases” does not apply.  Effective with the July 16, 2006, payroll for Hawaii Electric Light Company, Inc., the exclusion for “retroactive pay increases” does not apply.

 

For all Employees, “ADP Compensation” means the Employee’s Box 1, W-2 earnings for the Plan Year, without modification.

 

For all Employees, “415 Compensation” means the Employee’s Box 1, W-2 earnings for the Plan Year, modified to include elective contributions made by a Participating Employer to this Plan, a cafeteria plan, or a transportation spending plan that are excluded from the taxable income of the Employee under Sections 402(e)(3), 125, or 132(f) of the Code.

 

“Compensation,” “ADP Compensation,” and “415 Compensation” generally do not include amounts paid after severance from employment.  However, “Compensation,” “ADP Compensation,” and “415 Compensation” shall include amounts paid by the later of 21⁄2 months after the Participant’s  severance from employment or the end of the calendar year that includes the date of the Participant’s  severance from employment, if the amounts would have been included in the applicable definition of compensation if paid prior to severance from employment and if:

 

(a)           the payment is regular compensation for services during the Participant’s regular working hours, or compensation for services outside the Participant’s regular working hours (such as overtime or shift differential), commissions, bonuses, or similar payments, and, absent the severance from employment, the payments would have been paid to the Participant while the Participant continued in employment with the Participating Employer; or

 

(b)           the payment is for unused accrued bona fide sick, vacation, or other leave that the Participant would have been able to use if employment had continued.

 

“415 Compensation” shall also include amounts paid by the later of 21⁄2 months after the Participant’s  severance from employment or the end of the calendar year that includes the date of the Participant’s  severance from employment, if the payment is received by the Participant pursuant to an unfunded, nonqualified deferred compensation plan and would have been paid at the same time if employment continued, but only to the extent includible in gross income.

 

Back pay, within the meaning of Section 1.415(c)-2(g)(8) of the Treasury Regulations, shall be treated as 415 Compensation for the limitation year (calendar year) to which the back pay relates to the extent the back pay represents wages and compensation that would otherwise be included as 415 Compensation under this definition.

 

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“Compensation,” “ADP Compensation,” and “415 Compensation” shall be limited to $245,000 annually, as automatically adjusted for increases in the cost of living in accordance with Sections 401(a)(17)(B) and 415(d) of the Code.

 

For purposes of this Section 12.8, “elective contributions” under Section 125 of the Code shall include any amount that is not available to an Employee in cash in lieu of group health coverage under a Section 125 arrangement because the Employee is not able to certify in accordance with the Hawaii Prepaid Healthcare Act that he or she has other health coverage.  An amount shall be treated as an elective contribution under the foregoing sentence only if the Participating Employer does not request or collect information regarding the Employee’s other health coverage as part of the enrollment process for the health plan except as necessary to comply with the Hawaii Prepaid Healthcare Act.

 

A Participant receiving a differential wage payment (as defined in Section 3401(h)(2) of the Code) shall be treated as an Employee of the Participating Employer making the payment, and the payment will be treated as wages for purposes of Section 3401 of the Code.  Furthermore, the differential wage payment shall be treated as ADP Compensation and 415 Compensation for purposes of the Plan.

 

12.9         “Compensation Committee” means the Compensation Committee of the Board of Directors of the Company.

 

12.10       “Disability” means a disability as defined in the then existing long-term disability plan maintained by the Participant’s Participating Employer, regardless of whether the Participant is covered under that plan.

 

12.11       “Early Retirement Age” means age 55.

 

12.12       “Eligible Employee” means any Employee, other than a Leased Employee or an Employee employed on a “contract basis”.  An Employee is employed on a “contract basis” if the Employee is hired under written contract for a specific task or assignment.

 

12.13       “Employee” means a common law employee of a Participating Employer who is treated as such on the payroll records of a Participating Employer.  “Employee” includes Leased Employees, except that a Leased Employee shall not be treated as an Employee if (1) the leasing organization covers the Leased Employee under a money purchase pension plan that provides a nonintegrated employer contribution of at least 10% of compensation, full and immediate vesting, and immediate participation for all employees it leases, and (2) Leased Employees do not constitute more than 20% of the Participating Employer’s workforce.

 

A person who performs services for a Participating Employer as an independent contractor is not an Employee and is not eligible to participate in the Plan.  An independent contractor is a person who performs services as an independent businessperson, as determined in accordance with the Code and ERISA.  A person shall not be treated as an Employee for purposes of the Plan during any period in which such person is classified as an independent contractor by a Participating Employer, even if the person is later determined to have been a common-law employee during such period.

 

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

 

12.15       “HEI Retirement Plan” means the Retirement Plan for Employees of Hawaiian Electric Industries, Inc. and Participating Subsidiaries, as amended.

 

12.16       “Highly Compensated Employee” or “HCE” means—

 

(a)           any Employee who, during the Plan Year being tested or the immediately preceding year, owns or owned, directly or by attribution, more than 5% of the outstanding stock of the Company or more than 5% of the voting control of the Company; or

 

(b)           any Employee who for the preceding year had 415 Compensation from a Participating Employer in excess of $110,000, as adjusted for increases in the cost of living in accordance with Section 415(d) of the Code.

 

A “non-Highly Compensated Employee” or “NHCE” is any Employee who is not an HCE for the year.

 

12.17       “Hour of Service” means the following hours as determined from the payroll or other reliable records of a Participating Employer:

 

(a)           Each hour during the Plan Year for which an Employee is paid or entitled to payment by a Participating Employer for the performance of duties.  These hours are credited to the Plan Year in which they are performed.

 

(b)           Each hour for which an Employee is paid or entitled to payment by a Participating Employer for periods during which the Employee performs no duties because of vacation, holiday, illness, incapacity (including short-term disability), layoff, jury duty, military duty, or other approved leave of absence, except that Hours of Service shall not be counted where such payment is made or is due under a plan maintained solely for the purpose of complying with applicable worker’s compensation, unemployment, or disability insurance laws, or solely to reimburse an Employee for medical or medically related expenses.  To which Plan Year these hours are credited depends on the calculation of the payment.  If the payment is calculated based on units of time, such as payment for two weeks vacation, the hours shall be credited to the Plan Year during which the time occurred (the Employee took the vacation).  If the payment is based on an event rather than a period of time, such as a single sum payment made because of layoff or disability, the hours shall be credited to the first Plan Year or allocated reasonably and consistently between the first Plan Year and the second Plan Year during which the event took place.

 

(c)           Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by a Participating Employer.  The same Hours of Service shall not be credited both under subparagraph (a) or (b), as the case may be, and this subparagraph (c).  These hours will be credited to the Plan Year to which the award or agreement pertains and not to the Plan Year in which the award, agreement, or payment is made.

 

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(d)           The Hour of Service rules stated in Department of Labor Regulations §2530.200b-2 are incorporated herein by reference, and any questions on the crediting of Hours of Service shall be resolved by reference to such regulations.

 

12.18       “Investment Committee” means the Hawaiian Electric Industries, Inc. Retirement Plans Investment Committee appointed by the PIC to oversee the day-to-day financial affairs of the Plan.  See Section 7.1(c).

 

12.19       “Leased Employee” means a person who is not a common law employee of a Participating Employer or an Associated Company but who performs services for such under an agreement with a third party that treats the person as the third party’s employee for payroll and withholding purposes, if (1) such person has performed the services for a Participating Employer or an Associated Company on a substantially full-time basis for a period of one year, and (2) a Participating Employer or an Associated Company exercises primary direction or control over the performance of services by the person.

 

12.20       “Matching Contributions” means the matching contributions made by the Participating Employers pursuant to Section 2.2.

 

12.21       “Normal Retirement Age” means age 65.

 

12.22       “One-Year Break in Service” means severance from the employment of the Participating Employers and Associated Companies for a 12-consecutive month period.

 

12.23       “Participant” means any Eligible Employee who has met the requirements for participation, as applicable, in Article I.

 

12.24       “Participating Employer” means the Company and any entity affiliated with the Company whose participation in the Plan has been approved by the Company and by such entity’s board of directors.  As of May 1, 2011, the Participating Employers are: Hawaiian Electric Industries, Inc.; Hawaiian Electric Company, Inc.; Maui Electric Company, Limited; and Hawaii Electric Light Company, Inc.

 

12.25       “PIC” means the Hawaiian Electric Industries, Inc. Pension Investment Committee.

 

12.26       “Plan” means the Hawaiian Electric Industries Retirement Savings Plan, as described in this instrument, including all amendments hereto.

 

12.27       “Plan Year” means the calendar year.

 

12.28       “Qualified Military Service” means any service in the Armed Forces (Army, Air Force, Navy, Marine Corps, or Coast Guard), the Army National Guard and the Air National Guard when engaged in active duty for training, inactive duty training, or full-time National Guard duty, the commissioned corps of the Public Health Service, and any other category of persons designated by the President in time of war or national emergency.

 

12.29       “Regular Salary Reduction Contribution” means a Salary Reduction Contribution made pursuant to a Participant’s salary reduction election under Section 2.1(a).

 

57

 

12.30       “Retire” or “Retirement” refers to a Participant’s termination of employment after reaching Early Retirement Age.

 

12.31       “Rollover Contributions” means contributions made by Eligible Employees pursuant to Section 2.4.

 

12.32       “Salary Reduction Contributions” means a Participant’s elective contributions described in Section 2.1.  Salary Reduction Contributions are comprised of two components: Regular Salary Reduction Contributions and Catch-up Contributions.

 

12.33       “Trust Agreement” means the agreement between the Company and the Trustee establishing a trust for the custody and investment of Plan assets.

 

12.34       “Trust Fund” means all cash and property held by the Trustee pursuant to the Trust Agreement.

 

12.35       “Trustee” means Fidelity Management Trust Company, a Massachusetts trust company, or any successor appointed by the Company or the PIC.

 

12.36       “Year of Vesting Service” is determined under Article V.

 

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ARTICLE XIII

EXECUTION

 

This restatement is executed April 20, 2011.

 

 

	
 
    	
HAWAIIAN ELECTRIC   INDUSTRIES, INC.
    
	
 
    	
 
    
	
 
    	
By   
    	
/s/   Chester A. Richardson 
    
	
 
    	
 
    	
Its   Senior Vice President, General Counsel, 
    
	
 
    	
 
    	
Secretary   and Chief Administrative Officer
    
				

 

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