Fig. 539-A XXX EMPLOYEE AWARD PROGRAM Effective: [Date] CONTENTS

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1 Fig. 539-A XXX EMPLOYEE AWARD PROGRAM Effective: [Date] CONTENTS Section 1 Purpose 2 Effective Date 3 Definitions 4 Eligibility 5 Benefits 6 Award Procedures 7 Amendment or Termination 8 Miscellaneous 9 Entire Agreement Page Section 1 PURPOSE The Company is establishing this Employee Award Program to recognize and reward particular Employees for lengthy service [and/or outstanding safety records]. It is the intent of the Company that the Awards granted under this Program qualify to the maximum extent possible for exclusion from gross income under Code Section 74. The Company presently provides, and will continue to provide, a variety of other benefits to some or all of its Employees, including awards for productivity, achievement or job performance, some of which may qualify for exclusion from gross income under provisions other than Code Section 74. The Awards granted under the Program are provided in addition to such other benefits, which shall not constitute a part of this Program.

2 De Minimis Fringes Section 2 EFFECTIVE DATE The effective date of this Program shall be. [Note: Although an award program presumably could be effective retroactively or could count prior years of service by employees, tax-exempt awards for length of service can be made only once every five calendar years. Thus, if an award was made in 1991 to an employee with seven years of service and that employee receives a second award in 1994 after 10 years of service, the second award could not be excluded from the employee s income.] Section 3 DEFINITIONS 3.01 Award. An Award is an item of tangible personal property awarded under the Program to an Eligible Employee. The term shall not include cash, real estate, stock, bonds or other securities; or any services, including meals, lodging or tickets to theater, sporting or other entertainment events. The term shall include a gift certificate entitling the holder to receive an item of tangible personal property only if the holder is prevented from cashing out the certificate, selling it to another person, using it to purchase items worth far less than the certificate s value (with the bulk of its value received as cash) or using the certificate to reduce an outstanding account balance with the issuer of the certificate Code. Code means the Internal Revenue Code of 1986, as now in effect or as it may be amended hereafter, and includes any regulations or rulings issued thereunder Company. Company means [XXX] [or any other corporation or other entity affiliated with the Company within the meaning of the controlled group rules of Code Section 414(b), (c) or (m) that has adopted this Program] Eligible Employee. An Eligible Employee is any Employee who is eligible to receive an Award under Section 4 below Employees. Employees are all current Employees of the Company who are employed on a full-time [or part-time] basis [and who customarily work on a predetermined fixed weekly schedule and are hired with no termination date set prior to their employment]. [The term does not include any outside directors or independent contractors performing services for the Company.] The term [includes/does not include] any leased employees within the meaning of Code Section 414(n). [Note: It is not clear whether directors or independent contractors can be treated as employees under an employee gift plan. Leased employees clearly are counted as employees Indicates revised material. Page 52 Tab 500 May 2002 Employer s Guide to Fringe Benefit Rules

3 De Minimis Fringes eligible to receive awards, but they may be excluded from an award program provided that their exclusion does not make the program discriminatory. Similarly, part-time employees can receive length-of-service awards (but not safety achievement awards), although they may be excluded from award eligibility on a nondiscriminatory basis.] 3.06 Full-time Employee. A Full-time Employee is an Employee who works at least [pick a number between 30 and 40] hours per week for the Company Program. The Program is the [XXX] Employee Award Program, as it exists and may be amended from time to time Program Administrator. The Program Administrator is an administrative committee of [pick an odd number, such as three (3) ] Employees appointed by the Company. Any member of such Program Administrator committee shall have authority and responsibility to take any reasonable actions necessary to control and manage the operation and administration of this Program under rules applied on a uniform and nondiscriminatory basis to all Participants, including retaining an independent company to perform administrative services such as Program recordkeeping or Award distribution. Any member of such Program Administrator committee may resign at any time by giving thirty (30) days written notice to the Company and the other members of the committee. The Company may remove any member of the Program Administrator committee at any time by giving thirty (30) days written notice to that member and the other members of the committee. All reasonable expenses of the Program Administrator shall be paid by the Company and any expenses not paid by the Company shall not be the responsibility of the committee members personally Year of Service. Year of Service shall mean each twelve (12) consecutive [or nonconsecutive] month period of service as an Employee of the Company [or as an employee of any predecessor or related employer] for which compensation is paid, beginning with the first day of the calendar month of an Employee s commencement date of employment, or reemployment following any termination of service due to resignation, discharge, retirement or layoff. [A month of service shall be counted for this purpose even if the Employee is on paid or unpaid leave of absence due to disability or illness.] [A predecessor employer for this purpose shall include any employer that may have been acquired by the Company, whether by reason of merger, consolidation, reorganization or acquisition of property or stock. A related employer for this purpose shall include any corporation or other entity that is affiliated with the Company within the meaning of Code Sections 414(b), (c) or (m).] [Note: The employer could define year of service to require 12 consecutive months of service, in which case an employee who works 11 months, quits for 2 months, then works 10 Thompson Publishing Group, Inc. May 2002 Tab 500 Page 53

4 De Minimis Fringes more months would not be treated as having a year of service. However, because excludable awards can be made every five calendar years, most plans count service even in nonconsecutive months and make liberal allowances for counting service while employees are on leaves of absence. Some plans count a year of service if the eligible employee has worked during at least half the months in a calendar year.] [Note: Proposed regulations under Sections 74 and 274 do not specifically permit service for predecessor or related employers to be counted in determining an employee s years of service, although the statute would appear to allow at least service for related employees to be counted for purposes of the five-years-of-service rule for length of service awards and the oneyear-of-service rule for safety achievement awards.] Section 4 ELIGIBILITY 4.01 Length-of-service Awards. Any Full-time [or Part-time] Employee with at least five Years of Service with the Company is eligible to receive an Award for length of service under Section [4.02 Safety Achievement Awards. Any Full-time Employee with at least one Year of Service with the Company is eligible to receive an Award for an outstanding safety record under Section 5.02.] [Note: Only full-time employees are eligible to receive safety achievement awards, but the proposed regulations do not specify what minimum hours of work would constitute full-time employment. ] Section 5 BENEFITS 5.01 Length-of-service Awards. An Award recognizing an Employee s length of service shall be presented to each Eligible Employee upon each completion by the Employee of five (5) Years of Service. [Examples of the types of Awards to which Eligible Employees will be entitled upon completing each incremental period of five Years of Service are described in Appendix A.] No more than one Award shall be presented to an Employee for each incremental period of five Years of Service, although other rewards for length of service may be presented outside of this Program. Indicates revised material. Page 54 Tab 500 May 2002 Employer s Guide to Fringe Benefit Rules

5 De Minimis Fringes [5.02 Safety Achievement Awards. An award recognizing an Employee s outstanding safety record shall be presented to each Eligible Employee who satisfies the safety achievement standards described in Appendix B, and who is not a manager or an administrative, clerical or professional employee.] 5.03 Taxability of Awards. In administering this Program, the Program Administrator will ensure that the average cost of all Awards does not exceed $400. If, in the judgment of the Program Administrator, the operation of the Program would result in the average cost of Awards exceeding this $400 limit, the Program Administrator shall reduce the cost of Awards to Eligible Employees during the calendar year. If any Award to a particular Employee costs more than $1,600, the recipient Employee will be taxed on an amount equal to the greater of the cost or value of the Award in excess of $1,600. [If safety achievement awards are presented in any calendar year to more than 10 percent of the Company s Full-time Employees, excluding managers, administrators, clerical or professional Employees, and Employees with less than one Year of Service, awards in excess of this 10 percent limit will be treated as taxable to the recipients, in accordance with Section 274(j) and the underlying regulations.] However, awards that are not taxable as de minimis benefits are not included for purposes of the 10 percent test. Any employment tax withholding owed with respect to the taxable portion of any Award shall be deducted from the Employee s other compensation in the same calendar quarter in which the Award is made Nondiscriminatory Awards. The Program is intended not to discriminate in favor of highly compensated employees (as defined in Code Section 414(q)) as to eligibility to participate or Award distribution, and to comply in this respect with the requirements of the Code. If, in the judgment of the Program Administrator, the operation of the Program in any calendar year would result in such discrimination, then such Program Administrator shall select and exclude from participation in the Program such Employees as shall be necessary to ensure that, in the judgment of the Program Administrator, the Program does not discriminate. Section 6 AWARD PROCEDURES 6.01 Notification and Selection of Award. An Eligible Employee who has qualified for an Award specified in Appendix A [or Appendix B] shall be notified of the Award by the Program Administrator. [In cases where the Employee is eligible to choose between several different Awards, the Employee should notify the Program Administrator [as promptly as possible/within days] after receiving notification of the Award.] Indicates revised material. Thompson Publishing Group, Inc. May 2002 Tab 500 Page 55

6 De Minimis Fringes 6.02 Award Ceremony. Employees receiving Awards during any calendar year will be recognized at a [an annual] ceremony in which the Awards are formally presented or announced and each recipient Employee s achievement is recognized. Section 7 AMENDMENT OR TERMINATION This Program may be amended or terminated at any time by the Company, provided, however, that any termination or amendment shall not affect the right of any Employee to claim an Award for which he may have qualified prior to such termination or amendment, to the extent such amounts are payable under the terms of the Program as in effect prior to the calendar month in which the Program is amended or terminated. Section 8 MISCELLANEOUS 8.01 Right to Interpret the Program. All final decisions in interpreting provisions of the Program shall be the responsibility of the Program Administrator No Personal Liability. Nothing contained herein shall impose on any officers or directors of the Company any personal liability for any Award due an Employee pursuant to this Program Additional Procedures. Any rules, regulations or procedures that may be necessary for the proper administration or functioning of this Program that are not covered in this Program shall be promulgated and adopted by the Program Administrator Agreement Not an Employee Contract. This Program shall not be deemed to constitute a contract between the Company and any Employee or to be a consideration or an inducement for the employment of any Employee. This Program shall not be deemed to give any Employee the right to be retained in the service of the Company or to interfere with the right of the Company to discharge any Employee at any time regardless of the effect which such discharge shall have upon such person as a participant in this Program. This Program shall not be deemed to give the Company the right to require any Employee to remain in the employ of the Company or to restrict any such person s right to terminate his employment at any time Severability. If any provision of this Program shall be held invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Program and this Program shall be construed and enforced as if such illegal and invalid provisions had never been included. Page 56 Tab 500 May 2002 Employer s Guide to Fringe Benefit Rules

7 De Minimis Fringes Gender and Number. In the construction of this Program, reference to any gender shall include the masculine, feminine and neuter genders, the plural shall include the singular and the singular the plural, whenever appropriate Construction. The terms of the Program shall be construed under the laws of [insert state name] except to the extent such laws are pre-empted by the laws of any other state or by federal law. Section 9 ENTIRE AGREEMENT This document (including any Appendices attached hereto and any future amendments of such Appendices that may be made by the Program Administrator) sets forth the entire Program. Except as provided in this Program, no other employee benefit plan which is, or may hereafter be, maintained by the Company on a nonelective basis shall constitute a part of this Program. IN WITNESS WHEREOF, the Employer has caused this Program to be executed this day of, 20, to be effective as of, 20. XXX, INC. [CORPORATE SEAL] By: Attest: Title: Title: [Additional signatures of other adopting employers:] [CORPORATE SEALS] By: Attest: Title: Title: [APPENDIX A; APPENDIX B] [Describe in these appendices the different awards (or award choices) available to eligible employees who have served 5, 10, 15 (and additional 5-year increments) years of service (Appendix A) or who have specified rewardable safety records (Appendix B).] Thompson Publishing Group, Inc. May 2002 Tab 500 Page 57