Pension Plan (2003)Full Document 

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                             WATTS INDUSTRIES, INC.

                                  PENSION PLAN

            (As Amended and Restated Effective as of January 1, 1997)



                                TABLE OF CONTENTS



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INTRODUCTION......................................................................................................i

ARTICLE I - DEFINITIONS

       1.01       Accumulated Contributions Account...............................................................1
       1.02       Actuarial Equivalent............................................................................1
       1.03       Actuary.........................................................................................2
       1.04       Affiliated Employer.............................................................................2
       1.05       Beneficiary.....................................................................................3
       1.06       Board of Directors..............................................................................3
       1.07       Code............................................................................................3
       1.08       Committee.......................................................................................3
       1.09       Compensation....................................................................................3
       1.10       Contingent Annuitant............................................................................4
       1.11       Covered Compensation............................................................................4
       1.12       Effective Date..................................................................................4
       1.13       Eligible Employee...............................................................................4
       1.14       Employee........................................................................................5
       1.15       Employer........................................................................................5
       1.16       ERISA...........................................................................................5
       1.17       Fiduciary.......................................................................................6
       1.18       Final Average Compensation......................................................................6
       1.19       Highly Compensated Employee.....................................................................6
       1.20       Limitation Year.................................................................................7
       1.21       Maximum Offset Allowance........................................................................7
       1.22       Normal Retirement Age...........................................................................7
       1.23       Participant.....................................................................................7
       1.24       Plan............................................................................................8
       1.25       Plan Administrator..............................................................................8
       1.26       Plan Year.......................................................................................8
       1.27       Prior Plan......................................................................................8
       1.28       Retired Participant.............................................................................8
       1.29       Social Security Benefit.........................................................................8
       1.30       Social Security Compensation....................................................................9
       1.31       Social Security Retirement Age..................................................................9
       1.32       Social Security Taxable Wage Base...............................................................9
       1.33       Sponsoring Employer.............................................................................9
       1.34       Terminated Participant.........................................................................10
       1.35       Trust..........................................................................................10
       1.36       Trust Fund.....................................................................................10
       1.37       Trustee........................................................................................10






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ARTICLE 2 - SERVICE

       2.01       Service Prior to January 1, 1985...............................................................11
       2.02       Crediting of Service On and After January 1, 1985..............................................11
       2.021      Break in Service Defined On and After January 1, 1985..........................................11
       2.022      Recrediting of Service Upon Reemployment.......................................................12
       2.03       Hour of Service Defined........................................................................12
       2.04       Benefit Service................................................................................14
       2.05       Veterans' Rights...............................................................................15

ARTICLE 3 - PARTICIPATION

       3.01       Participation Requirements.....................................................................16
       3.02       Participation upon Re-employment...............................................................21

ARTICLE 4 - RETIREMENT DATES

       4.01       Normal Retirement Date.........................................................................25
       4.02       Early Retirement Date..........................................................................25
       4.03       Deferred Retirement Date.......................................................................25

ARTICLE 5 - RETIREMENT BENEFITS

       5.01       Form of Normal Retirement Benefit..............................................................26
       5.02       Spouse Joint and Survivor Annuity..............................................................26
       5.021      Amount of Spouse Joint and Survivor Annuity....................................................26
       5.022      Election Out of Spouse Joint and Survivor Annuity..............................................26
       5.023      Information Furnished to Participant...........................................................27
       5.024      Spousal Consent Required.......................................................................28
       5.03       Amount of Normal Retirement Benefit............................................................29
       5.031      Minimum Benefit for Participants on January 1, 1979............................................34
       5.032      Accrued Normal Retirement Benefit .............................................................34
       5.04       Maximum Retirement Benefits....................................................................35
       5.041      Limitation Applicable to Defined Contribution Plan Participants................................39
       5.042      Affiliated Employees...........................................................................41
       5.05       Early Retirement Benefit.......................................................................42
       5.051      Social Security Option.........................................................................42
       5.06       Deferred Retirement Benefit....................................................................43
       5.07       Suspension of Benefit Distributions............................................................45
       5.08       Non-Duplication of Benefits....................................................................46
       5.09       Retirement Prior to January 1, 1985............................................................47
       5.10       Participants who Attained Normal Retirement Age or Who Retired Prior to January 1, 1986........47






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ARTICLE 6 - TERMINATION OF SERVICE

       6.01       Requirements for Vested Benefits...............................................................49
       6.02       Vested Benefits................................................................................49
       6.021      Computation of a Vested Benefit................................................................50
       6.022      Early Commencement of a Vested Benefit.........................................................50

ARTICLE 7 - DEATH OF PARTICIPANT

       7.01       Death Prior to Retirement......................................................................51
       7.02       Surviving Spouse Benefit.......................................................................51
       7.03       Amount of Surviving Spouse Benefit.............................................................51
       7.04       Death After Commencement of Benefits or Normal Retirement Age..................................53

ARTICLE 8 - OPTIONAL FORMS OF BENEFIT

       8.01       Time for Election..............................................................................54
       8.02       Contingent Annuitant Option....................................................................54
       8.03       Ten Year Certain Life Annuity Option...........................................................54
       8.04       Five Year Certain Life Annuity Option..........................................................55
       8.05       Refund of Accumulated Contribution Account.....................................................55
       8.06       When Option Effective..........................................................................56
       8.07       Beneficiary....................................................................................57
       8.08       Limitation of Election of Option...............................................................57
       8.09       Spousal Consent Requirement....................................................................57

ARTICLE 9 - CHANGE IN STATUS AND TRANSFER

       9.01       Change in Status from Eligible Employee to Non-Eligible Employee...............................58
       9.02       Change in Status from Non-Eligible Employee to Eligible Employee...............................58
       9.021      Non-Duplication of Benefits....................................................................58
       9.03       Transfer in Employment.........................................................................59
       9.031      Employment with an Affiliated Employer.........................................................59
       9.04       Employment with Watts Fluidair Co..............................................................60
       9.05       Employment with Spence Engineering Company, Inc................................................60






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ARTICLE 10 - ADMINISTRATION

       10.01      Allocation of Responsibility Among Fiduciaries for Plan and Trust Administration ..............61
       10.02      Indemnification................................................................................61
       10.03      Appointment of Committee.......................................................................62
       10.04      Records and Reports............................................................................62
       10.05      Other Committee Powers and Duties..............................................................63
       10.06      Rules and Decisions............................................................................64
       10.07      Committee Procedures...........................................................................65
       10.08      Authorization of Benefit Payments..............................................................65
       10.09      Application and Forms for Payment..............................................................65
       10.10      Claims Procedure...............................................................................66
       10.11      Appeal and Review Procedure....................................................................66
       10.12      Evidence.......................................................................................67

ARTICLE 11 - FUNDING OF THE PLAN

       11.01      Medium of Funding..............................................................................68
       11.02      Contributions..................................................................................68
       11.03      Fund to be for the Exclusive Benefit of Participants...........................................68
       11.04      Forfeitures....................................................................................68
       11.05      Interests of Participants in Trust Fund........................................................68
       11.06      Payment of Expenses............................................................................69

ARTICLE 12 - PAYMENT OF RETIREMENT BENEFITS

       12.01      Payment of Small Amounts.......................................................................70
       12.02      Deemed Distribution............................................................................70
       12.03      Payments for Incapacitated Persons ............................................................71
       12.04      Spendthrift....................................................................................71
       12.05      Payment Under Qualified Domestic Relations Orders..............................................71
       12.06      Latest Commencement of Benefits................................................................71
       12.07      Commencement of Benefits Prior to Normal Retirement Age........................................72
       12.08      Distribution of Benefits Beginning Before Death an After Death.................................72
       12.09      Direct Rollover Distributions..................................................................73

ARTICLE 13 - AMENDMENTS TO OR TERMINATION OF THE PLAN

       13.01      Rights of the Employer to Amend or Terminate...................................................75
       13.02      Termination of the Plan........................................................................75
       13.03      Limitations on Benefits Upon Termination.......................................................76
       13.04      Allocation of Assets...........................................................................76
       13.05      Distribution Media.............................................................................78






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ARTICLE 14 - DISTRIBUTION LIMITATIONS AND EARLY TERMINATION PROVISIONS

       14.01      Distribution Limitations...................................................................... 79

ARTICLE 15 - TOP-HEAVY PROVISIONS

       15.01      Article Controls...............................................................................82
       15.02      Definitions....................................................................................82
       15.03      Top-Heavy Status...............................................................................86
       15.04      Termination of Top-Heavy Status................................................................89

ARTICLE 16 - MISCELLANEOUS

       16.01      Rights Against the Employer....................................................................90
       16.02      Return of Contributions........................................................................90
       16.03      Merger.........................................................................................91
       16.04      Leased Employees...............................................................................91
       16.05      Applicable Law.................................................................................92
       16.06      Headings.......................................................................................92
       16.07      Gender and Number..............................................................................92




                                  INTRODUCTION

The Watts Industries, Inc. Retirement Plan for Salaried Employees, previously
known as the Watts Regulator Co. Retirement Plan for Salaried Employees,
(hereinafter the "Plan") was established, effective January 1, 1985, as a
successor to and a continuation of the Retirement Plan for Salaried Employees of
the Watts Regulator Co. and the Retirement Plan for Employees of the Webster
Foundry Division (hereinafter "the Prior Plans").

Effective January 1, 1997, Consolidated Precision Corp. adopted the Plan for its
Eligible Employees who had been employees of Circle Seal Controls;

Effective January 1, 1998, Ames Company, Inc. adopted the Plan for its Eligible
Employees;

Effective March 17, 1998, Atkomatic Valve Company adopted the Plan for its
Eligible Employees;

Effective April 1, 1998, Aerodyne Controls Corporation adopted the Plan for its
Employees who became Eligible Employees of Circle Seal Corporation on January 5,
1998;

Effective October 18, 1999, the following Employers spun-off from the Plan into
the CIRCOR International, Inc. Retirement Plan for Salaried Employees: Circle
Seal Controls, Inc., (including Aerodyne Controls Corporation, Consolidated
Precision Corp., Keane Controls Corporation, Atkomatic Valve Company), KF
Industries, Inc. (including Eagle Value), Industrial Products Division, Leslie
Controls, Inc., Spence/Nicholson Engineering Company, Inc.;

Effective January 1, 2001, McCraney, Inc. (dba "Spacemaker") and Watts Heatway,
Inc. (now called Watts Radiant, Inc.) adopted the Plan for their Eligible
Employees; and

Effective January 1, 2002, Premier Manufactured Systems, Inc. adopted the Plan
for its Eligible Employees.

Watts Industries, Inc. (hereinafter the "Sponsoring Employer") is hereby
amending and restating the Plan, as hereinafter set forth, unless specifically
stated otherwise, effective January 1, 1997 and such later dates as may be
specified herein to comply with the General Agreement on Tariffs and Trade, the
Uniformed Services Employment and Reemployment Rights Act of 1994, the Small

                                       (i)


Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the
Internal Revenue Service Restructuring and Reform Act of 1998, and other
applicable laws.

Effective December 31, 2001, the Watts Industries, Inc. Hourly Pension Plan was
merged into the Plan and its terms and conditions were incorporated into the
Plan as Part A. Effective January 1, 2002, the Plan was renamed the Watts
Industries, Inc. Pension Plan.

It is the intention of the Employer that the Plan as herein amended and restated
shall continue to be recognized as a qualified pension plan under Sections
401(a) and 501(a) of the Internal Revenue Code. The provisions of the Plan as
set forth in this Plan document shall apply only to an Eligible Employee who
terminates employment on or after the effective date of a provision as set forth
herein. The rights and benefits, if any, of an Employee who terminated
employment prior to the effective date of a provision as set forth herein shall
be determined in accordance with the provisions of the Plan as in effect on the
date his employment terminated.

                                      (ii)


                             ARTICLE I - DEFINITIONS

The following words and phrases shall be defined as stated unless a different
meaning is plainly required by the context:

1.01   "ACCUMULATED CONTRIBUTIONS ACCOUNT" means (i) the sum of the amounts, if
       any, contributed prior to January 1, 1987 by the Participant to the
       Pension Plan for Employees of Spence Engineering Company, plus (ii) 5%
       interest per year through December 31, 1987 and at the rate(s) provided
       under Section 411(c)(2)(C)(iii) of the Code from January 1, 1988 to the
       first day of the calendar month coincident with or immediately following
       the date of withdrawal or the date of benefit commencement.

1.02   "ACTUARIAL EQUIVALENT" or any term of similar import, wherever used in
       the Plan, means a benefit of equivalent value determined as follows:

       (a)    For purposes of any determination requiring actuarial equivalence
              under Article 15, the Actuarial Equivalent will be determined
              using a 5% interest rate and the UP-1984 Mortality Table for
              employees and the UP-1984 Mortality Table set back three years for
              beneficiaries;

       (b)    The following provisions of this subsection (b) shall apply to
              Limitation Years beginning on or after January 1, 1995. For
              purposes of Section 5.04(e), the Actuarial Equivalent shall be
              determined using either an interest rate of 7% and the UP-1984
              Mortality Table or an interest rate of 5% and the mortality table
              prescribed by the IRS Commissioner in Rev. Rul. 95-6, 1995-1 CB
              80, whichever produces a larger reduction in the maximum annual
              amount. For purposes of Section 5.04(f), the Actuarial Equivalent
              shall be determined using either an interest rate of 7% and the
              UP-1984 Mortality Table or an interest rate of 5% and the
              mortality table prescribed by the IRS Commissioner in Rev. Rul.
              95-6, 1995-1 CB 80, whichever produces the smaller increase in the
              maximum annual amount. For purposes of Section 5.04(g), the
              Actuarial Equivalent will be determined using either an interest
              rate of 7% and the UP-1984 Mortality Table or an interest rate of
              5% and the mortality table prescribed by the IRS Commissioner in
              Rev. Rul. 95-6, 1995-1 CB 80, whichever produces the larger single
              life annuity. In the event the benefit is payable in the form of a
              lump sum payment, the 5% interest rate shall be replaced by the
              rate on 30-year Treasury Constant Maturities for the month of
              November prior to the Plan Year of the distribution date;

                                      - 1 -


       (c)    For purposes of Section 8.05, 12.01, and 12.02, Actuarial
              Equivalent will be determined by using the mortality table
              prescribed by the IRS Commissioner in Rev. Rul. 95-6, 1995-1 CB
              80, and using an interest rate equal to the rate on 30-year
              Treasury Constant Maturities for the month of November prior to
              the Plan Year of the distribution date;

       (d)    For purposes of subsections (b) and (c) above, the term
              "distribution date" means the date as of which an amount is paid,

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