Lenovo 2009 Annual Report Download - page 73

2008/09 Annual Report Lenovo Group Limited
71
Retirement scheme arrangements (continued)
Defined Contribution Plans
United States of America (“U.S.”)-Lenovo Savings Plan
U.S. regular, full-time and part-time employees are eligible to participate in the Lenovo Savings Plan, which is a tax-qualified
defined contribution plan under section 401(k) of the Internal Revenue Code. The Company matches 50 percent of the employee’s
contribution up to the first 6 percent of the employee’s eligible compensation. In addition, for employees who have also completed
one year of service and who do not participate in the Lenovo Pension Plan, the Company provides a profit sharing contribution of
5 percent of eligible compensation. Some prior employees of IBM receive additional company contributions varying from 1% to 4%
of eligible compensation depending on their age and service as defined under the prior IBM plan they participated in. Employee
contributions are voluntary. All contributions, including the Company match, are made in cash, in accordance with the participants’
investment elections.
The Company match is immediately vested. However the 5% Company profit sharing contribution is subject to 3 years vesting.
Forfeitures of Company contributions arising from employees who leave before they are fully vested in Company contributions
are used to reduce future Lenovo contributions. For the period April 1, 2008 to March 31, 2009, the amount of forfeitures was
US$709,001, none of which had been used to reduce Lenovo contributions, leaving US$900,575 at March 31, 2009 to be used to
reduce Lenovo contributions in the future.
U.S. Lenovo Executive Deferred Compensation Plan
The Company also maintains an unfunded, non-qualified, defined contribution plan, the Lenovo Executive Deferred Compensation
Plan (“EDCP”), which allows eligible executives to defer compensation, and to receive Company matching contributions, with
respect to amounts in excess of Internal Revenue Service limits for tax-qualified plans. Compensation deferred under the plan, as
well as Company matching contributions are recorded as liabilities.
Deferred compensation amounts may be directed by participants into an account that replicates the return that would be received
had the amounts been invested in similar Lenovo Savings Plan investment options. Company matching contributions, are directed
to participant accounts and fluctuate based on changes in the stock prices of the underlying investment portfolio.
United Kingdom (“UK”)-Lenovo Savings Plan
UK regular, full-time and part-time employees are eligible to participate in the Lenovo Stakeholder Plan, which is a tax-qualified
defined contribution “stakeholder” plan. For employees hired after April 30, 2005, the Company contributes 6% of an employee’s
eligible compensation to the employee’s account each year until he is 35, and then contributes 8% of his eligible compensation
after that age. Prior employees of IBM receive Company contributions varying from 6.7% to 30% of eligible compensation
depending on their service and the prior IBM plan they participated in.
Company contributions to the plan are immediately vested and there are no forfeitures.
Canada – Lenovo Savings Plan
Canadian regular, full-time and part-time employees are eligible to participate in the Lenovo Savings Plan, which is a tax-qualified
defined contribution plan. The Company contributes 3% to 6% of the employee’s eligible compensation, depending on years
of service. All contributions, including the Company match, are made in cash, in accordance with the participants’ investment
elections.
Hong Kong – Mandatory Provident Fund
The Group operates a Mandatory Provident Fund Scheme for all qualified employees employed in Hong Kong. They are required to
contribute 5 percent of their compensations (subject to the ceiling under the requirements set out in the Mandatory Provident Fund
legislation). The employer’s contribution will increase from 5 percent to 7.5 percent and 10 percent respectively after completion of
five and ten years of service by the relevant employees.
Facility agreement with covenant on controlling shareholder
The Company entered into a facility agreement with a syndicate of banks on March 13, 2006 (the “Facility Agreement”) for a term
loan facility of up to US$400 million (the “Facility”). The Facility is repayable on the 42nd, 48th, 54th and 60th months after March
13, 2006. The Facility Agreement includes, inter alia, terms to the effect that it will be an event of default if Legend Holdings Limited,
the controlling shareholder of the Company: (i) is not or ceases to be the direct or indirect beneficial owner of 35% or more of the
issued share capital of the Company; (ii) does not or ceases to control the Company; or (iii) is not or ceases to be the single largest
shareholder of the Company. As at March 31, 2009, the Facility has been fully drawn by the Company.