<PAGE>
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2000
/ / Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required) for the period from
______________ to ______________
Commission File Number 000-29105
CENTENNIAL FIRST FINANCIAL SERVICES
(Name of Small Business Issuer in its Charter)
Incorporated in the State of California
IRS Employer Identification Number 91-1995265
Address: 218 East State Street, Redlands, CA 92373
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock
Check whether the issuer: (1) filed all reports required to be filed by
Telephone: (909) 798-3611 Section 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common stock, 673,204 shares (March
31, 2000)
Transitional Small Business Disclosure Format: Yes / / No /X/
<PAGE>
FORM 10-QSB CROSS REFERENCE INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I
ITEM 1 Financial Statements 2-7
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-19
PART II
ITEM 1 Legal Proceedings 20
ITEM 2 Changes in Securities and Use of Proceeds 20
ITEM 3 Defaults Upon Senior Securities 20
ITEM 4 Submission of Matters to a Vote of Security Holders 20
ITEM 5 Other Information
ITEM 6 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 20
Signatures 20-23
</TABLE>
<PAGE>
CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
MARCH 31, 2000 AND DECEMBER 31, 1999
Dollar amounts in thousands
<TABLE>
<CAPTION>
2000 1999
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,279 $ 5,230
Federal funds sold 1,300 2,150
-------- --------
Total cash and cash equivalents 7,579 7,380
Interest-bearing deposits in financial institutions 3,417 3,612
Investment securities, available for sale 7,653 7,793
Federal Home Loan Bank stock, at cost 210 210
Loans, net 55,828 52,382
Accrued interest receivable 375 378
Premises and equipment, net 1,602 1,690
Other assets 2,887 2,562
-------- --------
Total assets $ 79,551 $ 76,007
======== ========
LIABILITIES
Deposits:
Noninterest-bearing $ 17,696 $ 18,135
Interest-bearing and NOW accounts 19,552 17,881
Savings 9,877 12,008
Time deposits $100,000 or greater 12,192 10,235
Other time deposits 10,786 10,881
-------- --------
Total deposits 70,103 69,140
Accrued interest payable 309 242
Other liabilities 256 297
-------- --------
Total liabilities 70,668 69,679
-------- --------
Federal Home Loan Bank borrowings 3,000 - -
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $4 stated value; authorized 10,000,000 shares, issued and
outstanding 673,204 and 677,028 shares
at March 31, 2000 and December 31, 1999, respectively 2,693 2,708
Additional paid-in capital 2,895 2,660
Retained earnings 485 1,165
Accumulated other comprehensive income (loss) (190) (205)
-------- --------
Total stockholders' equity 5,883 6,328
-------- --------
Total liabilities and stockholders' equity $ 79,551 $ 76,007
======== ========
</TABLE>
- 2 -
<PAGE>
CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Dollars in thousands except for per share amounts
<TABLE>
<CAPTION>
2000 1999
(UNAUDITED)
<S> <C> <C>
Interest income:
Interest and fees on loans $1,602 $1,096
Deposits in financial institutions 54 63
Federal funds sold 24 30
Investments 108 136
------ ------
Total interest income 1,788 1,325
------ ------
Interest expense:
Demand and savings deposits 176 148
Time deposits $100,000 or greater 140 85
Other time deposits 146 145
Interest expense on borrowed funds 17 - -
------ ------
Total interest expense 479 378
------ ------
Net interest income 1,309 947
Provision for loan losses 110 45
------ ------
Net interest income after provision for loan losses 1,199 902
------ ------
Other income:
Customer service fees 155 147
Gain from sale of loans 66 41
Gain (loss) from sale of investment securities - - - -
Other income 48 18
------ ------
Total other income 269 206
------ ------
Other expenses:
Salaries and wages 455 368
Employee benefits 203 140
Net occupancy expense 85 79
Other operating expense 468 376
------ ------
Total other expenses 1,211 963
------ ------
Income before provision for income taxes 257 145
Provision for income taxes 83 38
------ ------
Net income $ 174 $ 107
====== ======
Basic earnings per share $ .25 $ .15
====== ======
Diluted earnings per share $ .23 $ .14
====== ======
</TABLE>
- 3 -
<PAGE>
CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Dollars in thousands
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE
STOCK CAPITAL EARNINGS INCOME (LOSS) TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 $ 2,669 $ 2,634 $ 501 $ 14 $ 5,818
Comprehensive income:
Net income - - - - 107 - - 107
Change in net unrealized gain
on investment securities
available for sale, after
tax effects - - - - - - (25) (25)
-------------
Total comprehensive income 82
-------------
Exercise of stock options 12 11 - - - - 23
------------- ------------- ------------- ------------ -------------
BALANCE, MARCH 31, 1999 $ 2,681 $ 2,645 $ 608 $ (11) $ 5,923
============= ============= ============= ============ =============
BALANCE, DECEMBER 31, 1999 $ 2,708 $ 2,660 $ 1,165 $ (205) $ 6,328
Comprehensive income:
Net income - - - - 174 - - 174
Change in net unrealized gain (loss)
on investment securities
available for sale, after
tax effects - - - - - - 15 15
-------------
Total comprehensive income 189
-------------
Stock and cash dividend 135 412 (584) - - (37)
Exercise of stock options 24 16 - - - - 40
Repurchase and retirement of
common stock (174) (193) (270) - - (637)
------------- ------------- ------------- ------------ -------------
BALANCE, MARCH 31, 2000 $ 2,693 $ 2,895 $ 485 $ (190) $ 5,883
(UNAUDITED) ============= ============= ============= ============= =============
</TABLE>
- 4 -
<PAGE>
CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Dollars in thousands
<TABLE>
<CAPTION>
2000 1999
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 174 $ 107
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 67 53
Provision for loan losses 110 45
Gain from sale of loans (66) (41)
Amortization of deferred loan fees (85) (32)
Deferred income tax (provision) benefit (30) 48
Amortization of premiums on investment
securities available for sale 3 11
Amortization of premiums on investment
securities held to maturity - - 2
Increase in cash surrender value of life insurance (11) (49)
Decrease (increase) in assets:
Accrued interest receivable 3 (17)
Other assets (162) 291
Increase (decrease) in liabilities:
Accrued interest payable 67 7
Other liabilities (41) (51)
-------------- --------------
Net cash provided by operating activities 29 374
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest-bearing
deposits in financial institutions 195 53
Net sales, maturities and (purchases) of available-for-sale securities 162 (395)
Net increase in loans (3,405) (2,610)
Additions to bank premises and equipment (111) (27)
-------------- --------------
Net cash used in investing activities (3,159) (2,979)
-------------- --------------
</TABLE>
- 5 -
<PAGE>
CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2001 1999
(UNAUDITED)
<S> <C> <C>
Dollars in thousands
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand and savings deposits $ (899) $ (2,623)
Net increase (decrease) in time deposits 1,862 (270)
Proceeds from Federal Home Loan Bank borrowings 3,000 - -
Cash dividends paid in lieu of fractional shares (3) - -
Cash dividends paid (34) - -
Payments to acquire common stock and stock options (637) - -
Proceeds from exercise of stock options 40 23
-------------- --------------
Net cash provided by (used in) financing activities 3,329 (2,870)
-------------- --------------
Net increase (decrease) in cash and cash equivalents 199 (5,475)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7,380 11,305
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 7,579 $ 5,830
============== =============
SUPPLEMENTARY INFORMATION
Interest paid $ 412 $ 371
============== =============
Income taxes paid $ 90 $ 152
============== =============
</TABLE>
- 6 -
<PAGE>
CENTENNIAL FIRST FINANCIAL SERVICES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial information included herein
has been prepared in conformity with the accounting principles and
practices in Centennial First Financial Services Corporation's
("the Company") consolidated financial statements included in the
Annual Report for the year ended December 31, 1999. The
accompanying interim consolidated financial statements contained
herein are unaudited. However, in the opinion of the Company, all
adjustments, consisting of normal recurring items necessary for a
fair presentation of the operating results for the periods shown,
have been made. The results of operations for the three months
ended March 31, 2000 may not be indicative of operating results
for the year ending December 31, 2000. Certain prior year and
prior quarter amounts have been reclassified to conform to current
classifications. Cash and cash equivalents consist of cash, due
from banks, and federal funds sold.
NOTE 2. EARNINGS PER SHARE
Basic earnings per share represents income available to common
stockholders divided by the weighted-average number of common
shares outstanding during the period. Diluted earnings per share
reflects additional common shares that would have been outstanding
if dilutive potential common shares had been issued, as well as
any adjustment to income that would result from the assumed
issuance. Potential common shares that may be issued by the
Company relate solely to outstanding stock options and are
determined using the treasury stock method.
The weighted average number of shares used in the computation of
basic earnings per share was 705,281 for the three months ended
March 31, 2000 and 701,114 for the three months ended March 31,
1999. The weighted average number of shares used in the
computation of diluted earnings per share was 758,074 for the
three months ended March 31, 2000 and 755,886 for the three months
ended March 31, 1999.
- 7 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Centennial First Financial Services (the "Company") is the holding company for
Redlands Centennial Bank in Redlands, California. This discussion focuses
primarily on the results of operations of the Company on a consolidated basis
for the three months ended March 31, 2000 and the financial condition of the
Company as of that date.
The following discussion presents information pertaining to the financial
condition and results of operations of the Company and its subsidiary and should
be read in conjunction with the financial statements and notes thereto presented
in this 10-QSB. Average balances, including balances used in calculating certain
financial ratios, are generally comprised of average daily balances.
Certain matters discussed in this report are forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements. Such risks
and uncertainties include, but are not limited to, the competitive environment
and its impact on the Company's net interest margin, changes in interest rates,
asset quality risks, concentrations of credit and the economic health of the San
Bernardino Area and Southern California, volatility of rate sensitive deposits,
asset/liability matching risks, the dilutive impact which might occur upon the
issuance of new shares of common stock and liquidity risks. Therefore, the
matters set forth below should be carefully considered when evaluating the
Company's business and prospects. For additional information concerning these
risks and uncertainties, please refer to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999.
OVERVIEW
EARNINGS SUMMARY
The Company reported net income of $174,000, or $0.25 per share basic and $0.23
per share diluted, for the first quarter of 2000. This compares to net income of
$107,000, or $0.15 per share basic and $0.14 per share diluted, for the same
period in 1999. Growth in average loans as a percentage of earning assets
continued to positively impact the net interest margin during the three months
ended March 31, 2000.
Return on average assets and return on average equity for the first quarter of
2000 were 0.95% and 11.87%, respectively, as compared to 0.66% and 7.65%,
respectively, for the same period of 1999.
- 8 -
<PAGE>
LOANS HELD FOR INVESTMENT
Net loans held for investment increased by $3.4 million, or 6.6%, during the
first three months of 2000 as demand for commercial, real estate construction
and development loans increased. The following table sets forth the amount of
total loans outstanding by category as of the dates indicated (dollar amounts in
thousands):
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
<S> <C> <C> <C> <C>
Real estate loans
Construction and development $ 16,857 29.68% $ 15,248 28.70%
Mortgage loans 13,165 23.18% 12,533 23.60%
Commercial loans 20,228 35.62% 18,686 35.10%
Automobile loans 2,299 4.05% 2,468 4.60%
Indirect loans 1,632 2.87% 1,845 3.50%
Equity loans 1,089 1.92% 876 1.60%
Consumer and other loans 1,523 2.68% 1,531 2.90%
---------- ------- ---------- --------
56,793 100.00% 53,187 100.00%
Unearned income (275) (224)
Allowance for loan losses (690) (581)
-------- ---------
$ 55,828 $ 52,382
======== =========
</TABLE>
In the normal practice of extending credit, the Company accepts real estate
collateral on loans that have primary sources of repayment from commercial
operations. The total amount of loans secured by real estate equaled $36
million, or 64.0% of the total portfolio as of March 31, 2000. Due to the
Company's limited marketing area, its real estate collateral is primarily
concentrated in the San Bernardino Area and Southern California. The Company
believes that its prudent underwriting standards for real estate secured loans
provide an adequate safeguard against declining real estate prices that may
affect a borrower's ability to liquidate the property and repay the loan.
However, no assurance can be given that real estate values will not decline and
impair the value of the security for loans held by the Company.
The Company focuses its portfolio lending on commercial, real estate, and
construction loans. The performance of commercial loans is generally dependent
upon future cash flows from business operations including the sale of products,
merchandise and services. The successful completion or operation of real estate
projects is dependent upon future sales. Risks attributable to such loans can be
significantly increased, often to a greater extent than other loans, by regional
economic factors and real estate prices.
- 9 -
<PAGE>
NONPERFORMING ASSETS
The Company carefully monitors the quality of its loan portfolio and the factors
that affect it, including regional economic conditions, employment stability,
and real estate values. The accrual of interest on loans is discontinued when
the payment of principal or interest is considered to be in doubt, or when a
loan becomes contractually past due by 90 days or more with respect to principal
or interest, except for loans that are well secured and in the process of
collection.
As of March 31, 2000, the Company had non-performing assets in the amount of
$509,000, of which $304,000 represented one non-accrual loan. The Company had no
loans 90 days or more past due and still accruing at March 31, 2000. The
following table sets forth the balance of non-performing assets as of the dates
indicated (dollar amounts in thousands):
<TABLE>
<CAPTION>
December 31, 1999 March 31, 2000
<S> <C> <C>
Nonaccrual loans $ 61 $ 509
Loans 90 days or more past due
and still accruing 215 - -
------ ------
276 509
------ ------
As a percent of total loans 0.52% 0.90%
As a percent of total assets 0.36% 0.64%
</TABLE>
The increase in non-performing assets was due primarily to one large loan
classified as a non-accrual loan at March 31, 2000.
ALLOWANCE FOR LOAN LOSSES
The Company maintains an allowance for loan losses ("ALL"), which is reduced by
credit losses and increased by credit recoveries, and provisions to the ALL
charged against operations. Provisions to the ALL and the total of the ALL are
based, among other factors, upon the Company's credit loss experience, current
and projected economic conditions, the performance of loans within the
portfolio, evaluation of loan collateral value, and the prospects or worth of
respective borrowers and guarantors.
In determining the adequacy of its ALL and after carefully analyzing each loan
individually, the Company segments its loan portfolio into pools of homogeneous
loans that share similar risk factors. Each pool is given a risk assessment
factor that largely reflects the expected future losses from each category.
These risk assessment factors change as economic conditions shift and actual
loan losses are recorded. As of March 31, 2000, the ALL of $690,000, or 1.22% of
total loans was determined by management to be adequate against foreseeable
future losses. No assurance can be given that non-performing loans will not
increase or that future losses will not exceed the amount of the ALL.
- 10 -
<PAGE>
ALLOWANCE FOR LOAN LOSSES (Continued)
The following table summarizes, for the periods indicated, loan balances at the
end of each period and average balances during the period, changes in the ALL
arising from credit losses, recoveries of credit losses previously incurred,
additions to the ALL charged to operating expense, and certain ratios relating
to the ALL (dollar amounts in thousands):
<TABLE>
<CAPTION>
At and for the
At and for the Three Months
Year Ended Ended
December 31, March 31,
2000 2000
<S> <C> <C>
BALANCES:
Average loans during the period $ 46,978 $ 55,816
Loans at end of period 53,186 56,793
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period 433 581
Actual credit losses:
Commercial (13) - -
Consumer (83) (6)
----------- -----------
Total (96) (6)
----------- -----------
Actual credit recoveries:
Commercial 14 - -
Consumer 5 5
----------- -----------
Total 19 5
----------- -----------
Net credit (losses) recoveries (77) (1)
Provision charged to expense 225 110
Balance at end of period $ 581 $ 690
RATIOS:
Net credit losses (recoveries) to average loans 0.16% 0.00%
Allowance for loan losses to loans at end of period 1.09% 1.22%
Net credit losses (recoveries) to beginning of period
allowance for loan losses 17.78% 0.17%
</TABLE>
The Company provided $110,000 to the allowance for loan losses during the first
quarter of 2000 and $45,000 was made during the first quarter of 1999. The
$110,000 provision in the first quarter of 2000 was recorded as a prudent
measure, based upon growth in the loan portfolio.
- 11 -
<PAGE>
ALLOWANCE FOR LOAN LOSSES (Continued)
The following table sets forth the allocation of the ALL as of the dates
indicated (dollar amounts in thousands):
<TABLE>
<CAPTION>
December 31, 1999 March 31, 2000
% of Category % of Category
to Total to Total
ALL Loans ALL Loans
<S> <C> <C> <C> <C>
Commercial loans $ 304 52.32% $ 183 26.52%
Real estate loans 204 35.11% 282 40.87%
Consumer loans 73 12.56% 35 5.07%
Not allocated - - 0.00% 190 27.54%
------ ------- ------ -------
$ 581 100.00% $ 690 100.00%
====== ======= ====== =======
</TABLE>
The allowance is available to absorb losses from all loans, although allocations
have been made for certain loans and loan categories. The allocation of the
allowance as shown above should not be interpreted as an indication that
charge-offs in future periods will occur in these amounts or proportions, or
that the allocation indicates future charge-off trends. In addition to the most
recent analysis of individual loans and pools of loans, management's methodology
also places emphasis on historical loss data, delinquency and non-accrual trends
by loan classification category and expected loan maturity. This analysis,
management believes, identifies potential losses within the loan portfolio and
therefore results in allocation of a large portion of the allowance to specific
loan categories.
INVESTMENTS
The following tables set forth the amortized cost and approximate market value
of investment securities as of the dates indicated (dollar amounts in
thousands):
<TABLE>
<CAPTION>
March 31, 2000
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities $ 3,551 $ - - $ 83 $3,468
Obligations of states and local governments 4,015 - - 228 3,787
U.S. Treasury Obligations 404 - - 6 398
Federal Home Loan Bank stock 210 - - - - 210
--------- ------ ------- --------
$ 8,180 $ - - $ 317 $ 7,863
========= ====== ======= ========
</TABLE>
- 12 -
<PAGE>
INVESTMENTS (Continued)
<TABLE>
<CAPTION>
December 31, 1999
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities $ 3,722 $ - - $ 81 $3,641
Obligations of states and local governments 4,011 - - 258 3,753
U.S. Treasury Obligations 405 - - 6 399
Federal Home Loan Bank stock 210 - - - - 210
--------- ------ ------- --------
$ 8,348 $ - - $ 345 $ 8,003
========= ====== ======= ========
</TABLE>
DEPOSITS/OTHER BORROWINGS
Total consolidated deposits increased by $971,000 during the three months ended
March 31, 2000.
Rates paid on deposits increased during the three months ended March 31, 2000
contributing to the increase in the cost of funds of interest bearing deposits
to 3.54% during the three months ended March 31, 2000 from 3.29% for the year
ended December 31, 1999. The following table summarizes the distribution of
average deposits and the average rates paid for the periods indicated (dollar
amount in thousands):
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1999 March 31, 2000
Average Average Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
Interest Bearing Liabilities:
Demand deposits $ 15,059 - - $ 18,213 - -
Interest bearing demand deposits 9,578 1.13% 9,262 1.12%
Money market deposits 6,375 2.76% 10,049 3.18%
Savings deposits 11,308 2.72% 10,705 2.62%
Time deposits of $100,000 or more 7,120 4.78% 10,845 5.16%
Time deposits under $100,000 11,621 4.99% 11,302 5.17%
----------- ----- ----------- -----
Total interest-bearing deposits 46,002 3.29% 52,163 3.54%
----------- ----- ----------- -----
$ 61,061 2.48% $ 70,376 2.63%
=========== ===== =========== =====
</TABLE>
- 13 -
<PAGE>
DEPOSITS/OTHER BORROWINGS (Continued)
The following table sets forth the time remaining to maturity of the Company's
time deposits in amounts of $100,000 or more (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 March 31, 2000
<S> <C> <C>
Three months or less $ 3,183 $ 3,774
After three months to six months 1,048 5,152
After six months to one year 5,904 3,166
After one year 100 100
---------- ----------
Total $ 10,235 $ 12,192
========== ==========
</TABLE>
RESULTS OF OPERATIONS
NET INTEREST INCOME/NET INTEREST MARGIN
Net interest income for the quarter ended March 31, 2000 was $1,309,000, an
increase of 38.2% over the net interest income of $947,000 during the same
period of 1999. The increase was primarily due to the growth in average loans,
largely due to improved economic conditions in the Company's market areas.
The following table sets forth average assets, liabilities, and shareholders'
equity; the amount of interest income or interest expense; and the average yield
or rate for each category of interest-bearing assets and interest-bearing
liabilities and the net interest margin (net interest income divided by average
earning assets) for the periods indicated (dollar amounts in thousands):
<TABLE>
<CAPTION>
Quarter ended March 31,
2000 1999
Interest Average Interest Average
Average Earned/ Interest Average Earned/ Interest
Balance Paid Rate Balance Paid Rate
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Federal funds sold $ 1,758 $ 24 5.46 $ 2,914 $ 30 4.12
Interest-bearing deposits in
financial institutions 3,583 54 6.03 4,126 63 6.11
Investment securities 7,698 108 5.61 9,946 136 5.47
--------- --------- ---- ---------- -------- ----
Total investments 13,039 186 5.71 16,986 229 5.39
Loans 55,545 1,602 11.54 41,752 1,096 10.50
--------- --------- ------ ---------- -------- ------
Total interest earning assets $ 68,584 $ 1,788 10.43 $ 58,738 $ 1,325 9.02
========= ========= ====== ========== ======== ======
</TABLE>
- 14 -
<PAGE>
NET INTEREST INCOME/NET INTEREST MARGIN (Continued)
<TABLE>
<CAPTION>
Quarter ended March 31,
2000 1999
Interest Average Interest Average
Average Earned/ Interest Average Earned/ Interest
Balance Paid Rate Balance Paid Rate
<S> <C>
Interest Bearing Liabilities:
Demand deposits $ 18,213 $ - - - - $ 15,059 $ - - - -
Interest bearing demand deposits 9,262 26 1.12 9,578 27 1.13
Money market deposits 10,049 80 3.18 6,375 44 2.76
Savings deposits 10,705 70 2.62 11,308 77 2.72
Time deposits of $100,000 or more 10,845 140 5.16 7,120 85 4.78
Time deposits under $100,000 11,302 146 5.17 11,621 145 4.99
--------- --------- ------ ---------- -------- ------
Total deposits 70,376 462 2.63 61,061 378 2.48
Other borrowings 1,116 17 6.09 - - - - - -
--------- --------- ------ ---------- -------- -------
Total deposits and other
borrowings $ 71,492 $ 479 2.68 $ 61,061 $ 378 2.48
========= ========= ====== ========== ======== ======
Net interest income $ 1,309 $ 947
========= ==========
Net interest margin 7.75 6.55
====== ======
</TABLE>
The net interest margin increased to 7.75% during the first quarter of 2000 from
6.55% in the same quarter of 1999. The increase was primarily attributable to
growth in average loans as a percentage of earning assets. The increase in
average loans was largely due to the improved economic conditions in the
Company's market areas.
The following table presents the dollar amount of changes in interest earned and
interest paid for each major category of interest-earning asset and
interest-bearing liability and the amount of change attributable to average
balances (volume) fluctuations and average rate fluctuations. The variance
attributable to both balance and rate fluctuations is allocated to a combined
rate/volume variance (dollar amounts in thousands):
- 15 -
<PAGE>
NET INTEREST INCOME/NET INTEREST MARGIN (Continued)
<TABLE>
<CAPTION>
Quarter Ended March 31, 2000 Compared to
Quarter Ended March 31, 1999
Increase (decrease) due to change in:
Average Average
Volume Rate Total
<S> <C> <C> <C>
INCREASE (DECREASE) IN INTEREST INCOME
Federal funds sold $ (54) $ 48 $ (6)
Interest-bearing deposits in
financial institutions (39) 30 (9)
Investment securities (135) 107 (28)
Loans 1,324 (818) 506
--------- --------- -------
Total 1,096 (633) 463
--------- --------- -------
INCREASE (DECREASE) IN INTEREST EXPENSE
Interest bearing demand deposits (3) 2 (1)
Money market deposits 99 (63) 36
Savings deposits (12) 5 (7)
Time deposits of $100,000 or more 190 (135) 55
Time deposits under $100,000 5 (4) 1
Other borrowings 17 - - 17
--------- --------- -------
Total 296 (195) 101
--------- --------- -------
TOTAL CHANGE IN NET INTEREST INCOME $ 800 $ (438) $ 362
========= ========= =======
</TABLE>
NONINTEREST INCOME
The following table summarizes non-interest income for the periods indicated and
expresses the amounts as a percentage of average assets (dollar amounts in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C>
Components of Noninterest Income
Gain on sale of loans $ 66 $ 41
Service fees on deposit accounts 132 133
Loan Servicing fees 23 14
Other 48 18
------- ------
$ 269 $ 206
======= ======
</TABLE>
- 16 -
<PAGE>
NONINTEREST INCOME (Continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C>
As a percent of average assets (annualized)
Gain on sale of loans .34% .24%
Service fees on deposit accounts .67% .44%
Loan servicing fees .12% .08%
Other .24% .46%
----- -----
1.37% 1.23%
===== =====
</TABLE>
NONINTEREST EXPENSES
The following table summarizes non-interest expenses and the associated ratios
to average assets for the periods indicated (dollar amounts in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C>
Components of Noninterest Expense
Salaries $ 455 $ 368
Employee benefits 203 140
Occupancy expense 38 40
Furniture and equipment expense 48 39
Professional services 101 87
Stationary and supplies 36 27
Promotional expenses 35 29
Data processing fees 117 112
Regulatory assessments 7 7
Other 171 114
-------- ------
Total other expenses $ 1,211 $ 963
======== ======
As a percent of average assets (annualized)
Salaries 2.32% 2.19%
Employee benefits 1.03% .83%
Occupancy expense .19% .24%
Furniture and equipment expense .24% .23%
Professional services .51% .52%
Stationary and supplies .18% .16%
Promotional expenses .18% .17%
Data processing fees .60% .67%
Regulatory assessments .04% .04%
Other .87% .68%
-------- ------
6.16% 5.73%
======= ======
</TABLE>
- 17 -
<PAGE>
LIQUIDITY
Liquidity is the Company's ability to absorb fluctuations in deposits while
simultaneously providing for the credit needs of its borrowers. The objective in
liquidity management is to balance the sources and uses of funds. Primary
sources of liquidity for the Company include payments of principal and interest
on loans and investments, proceeds from the sale or maturity of loans and
investments, growth in deposits, and other borrowings. The Company holds
overnight federal funds as a cushion for temporary liquidity needs. During the
three months ended March 31, 2000 federal funds sold averaged $1.8 million, or
2.2% of total assets. In addition to its federal funds, the Company maintains
various lines of credit with correspondent banks, and the Federal Home Loan Bank
of San Francisco.
At March 31, 2000, the Company had cash, time deposits with banks, federal funds
sold, and unpledged investment securities of approximately $15.4 million, or
19.4% of total assets. This represented all available liquid assets.
Several methods are used to measure liquidity. One method is to measure the
balance between loans and deposits (gross loans divided by total deposits). In
general, the closer this ratio is to 100%, the more reliant an institution
becomes on its illiquid loan portfolio to absorb temporary fluctuations in
deposit levels. At March 31, 2000, the loan-to-deposit ratio was 79.6% as
compared to 75.7% at December 31, 1999.
As of March 31, 1999, the Company had no material commitments that were expected
to adversely impact liquidity.
ASSET/LIABILITY MANAGEMENT
The purpose for asset/liability management is to provide stable net interest
income growth by protecting the Bank's earnings from undue interest rate risk.
The Bank expects to generate earnings from increasing loan volume, appropriate
loan pricing and expense control and not from trying to accurately forecast
interest rates. Another important function of asset/liability management is
managing the risk/return relationships between interest rate risk, liquidity,
market risk and capital adequacy. The Bank gives priority to liquidity concerns
followed by capital adequacy, then interest rate risk and market risk in the
investment portfolio. The policy of the Bank will be to control the exposure of
the Bank's earnings to changing interest rates by generally maintaining a
position within a narrow range around an "earnings neutral position." An
earnings neutral position is defined as the mix of assets and liabilities that
generate a net interest margin that is not affected by interest rate changes.
However, Management does not believe that the Bank can maintain a totally
earnings neutral position. Further, the actual timing of repricing of assets and
liabilities does not always correspond to the timing assumed by the Bank for
analytical purposes. Therefore, changes in market rates of interest will
generally impact on the Bank's net interest income and net interest margin for
long or short periods of time.
- 18 -
<PAGE>
ASSET/LIABILITY MANAGEMENT (Continued)
The Bank monitors its interest rate risk on a quarterly basis through the use
of a model, which calculates the effect on earnings of changes in the
prevailing market interest rate. The model converts a prevailing market
interest rate change into rate changes for each major class of asset and
liability, then simulates the bank's net interest margin based on the bank's
actual repricing over a one year period, assuming that maturities are
reinvested in instruments identical to those maturing during the period. At
March 31, 2000, assuming the effect of a 2% increase or decrease in
prevailing market interest rates, the increase in economic value of equity
was approximately $3,333,000 and $5,918,000, respectively. This represents a
net portfolio value ratio of 11.14% and 13.76%, respectively, as compared to
the Bank's net portfolio value ratio of 7.41% at March 31, 2000. The net
portfolio value ratio represents the effect of a 2% increase or decrease in
prevailing market interest rates of total stockholders equity divided by
total assets. These forecasted results fall within the Bank's asset/liability
policy guidelines of 7% to 20%.
The Company has no sources of revenues or liquidity other than dividends, tax
equalization payments or management fees from the Bank. The ability of the Bank
to pay such items to the Company is subject to limitations under state and
Federal law.
CAPITAL RESOURCES
The principal source of capital for the Company is and will continue to be the
retention of operating profits. The ratios of average equity to average assets
for the periods indicated are set forth below.
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1999 March 31, 2000
<S> <C>
8.26% 7.67%
</TABLE>
Regulatory authorities have issued guidelines to implement risk-based capital
requirements. The guidelines establish a systematic analytical framework that
makes regulatory capital requirements more sensitive to differences in risk
profiles among banking organizations. Total capital is classified into two
components: Tier 1 (primarily shareholder's equity) and Tier 2 (supplementary
capital including allowance for possible credit losses, certain preferred stock,
eligible subordinated debt, and other qualifying instruments). The guidelines
require that total capital be 8% of risk-based assets, of which at least 4% must
be Tier 1 capital. As of March 31, 2000, the Company's total capital ratio was
10.94% and its Tier 1 capital ratio was 9.80%. In addition, the Company, under
the guidelines established for adequately capitalized institutions, must also
maintain a minimum leverage ratio (Tier 1 capital divided by total assets) of
4%. As of March 31, 2000, the Company's leverage ratio was 7.49%. It is the
Company's intention to maintain risk-based capital ratios at levels
characterized as "well-capitalized" for banking organizations: Tier 1 risk-based
capital of 6 percent or above and total risk-based capital at 10 percent or
above.
- 19 -
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In January 2000, the Company paid 5 cents per share cash dividend plus a 5
percent stock dividend to shareholders of record January 10, 2000.
In February 2000, the Company repurchased 43,500 shares of its common stock for
approximately $636,000 to better leverage its capital and improve earnings per
share to its shareholders.
In February 2000, the Company's subsidiary, Redlands Centennial Bank, formed and
funded an Employee's Stock Ownership Plan (ESOP) with $100,000 (Exhibit 10(i)).
The ESOP purchased 6,150 shares for approximately $90,000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
Subsequent to quarter-end, on April 1, 2000, the Company's subsidiary, Redlands
Centennial Bank sold its 23 percent interest in BancData Solutions, Inc. (BDS),
a bank service corporation providing item and data processing services to 19
California banks. Gross profit from the sale totaled approximately $906,000.
Management intends to use approximately $400,000 of the proceeds to boost the
ALL and other reserves. The balance of the gain on sale of subsidiary will flow
to retained earnings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
<TABLE>
<CAPTION>
Item Description
- ---- -----------
<S> <C>
2 Plan of Reorganization and Agreement of Merger
Dated December 1, 1999
Filed as exhibit to Form S-4 dated October 20, 1999
3(i) Articles of Incorporation
Filed as exhibit to Form S-4 dated October 20, 1999
</TABLE>
- 20 -
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (CONTINUED)
(A) EXHIBITS (Continued)
<TABLE>
<CAPTION>
Item Description
- ---- -----------
<S> <C>
3(ii) Bylaws
Filed as exhibit to Form S-4 dated October 20, 1999
10(i) Plan document for the Redlands Centennial Bank Employee Stock
Ownership Plan
10(ii)(A) 1. Employment Contract of Douglas C. Spencer, dated September 10, 1997
Filed as exhibit to Form S-4 dated October 20, 1999
2. Salary Continuation Agreement of Douglas C. Spencer, dated March 17, 1998
Filed as exhibit to Form S-4 dated October 20, 1999
3. Employment Agreement of Roy D. Lewis, dated March 20, 1998
Filed as exhibit to Form S-4 dated October 20, 1999
4. Employment Agreement of Anne E. Sanders, dated March 20, 1998
Filed as exhibit to Form S-4 dated October 20, 1999
5. Redlands Centennial Bank 1990 Stock Option Plan and Addendums
Filed as exhibit to Form S-4 dated October 20, 1999
27 Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the first quarter of 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTENNIAL FIRST FINANCIAL SERVICES
(REGISTRANT)
Date: May 10, 2000 /s/ Beth Sanders
---------------------------------------
Beth Sanders
Chief Financial Officer
(Principal Accounting Officer and officer
authorized to sign on behalf of the
registrant)
- 21 -
<PAGE>
REDLANDS CENTENNIAL BANK
EMPLOYEE STOCK OWNERSHIP PLAN
THIS PLAN, hereby adopted this 1st day of February, 2000,
by Redlands Centennial Bank (herein referred to as the "Employer").
W I T N E S S E T H:
WHEREAS, the Employer desires an Employee Stock Ownership
Plan so as to enable its eligible employees to acquire a proprietary interest
in capital stock of the Employer; and
WHEREAS, the Employer desires to recognize the contribution
made to its successful operation by its employees and to reward such
contribution by means of an Employee Stock Ownership Plan for those employees
who shall qualify as Participants hereunder; and
WHEREAS, contributions to the Plan will be made by the
Employer and such contributions made to the trust will be invested primarily
in the capital stock of the Employer;
NOW, THEREFORE, effective February 1, 2000, (hereinafter
called the "Effective Date"), the Employer hereby establishes an Employee
Stock Ownership Plan (ESOP) (which plan is hereinafter called the "Plan") for
the exclusive benefit of the Participants and their Beneficiaries, which is
intended to qualify as an "ESOP", according to the following terms:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
1.2 "Administrator" means the Employer unless another person or
entity has been designated by the Employer pursuant to Section 2.2 to
administer the Plan on behalf of the Employer.
1.3 "Affiliated Employer" means any corporation which is a
member of a controlled group of corporations (as defined in Code Section
414(b)) which includes the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section
414(c)) with the Employer; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in Code Section
414(m)) which includes the Employer; and any other entity required to be
aggregated with the Employer pursuant to Regulations under Code Section
414(o).
1.4 "Aggregate Account" means, with respect to each
Participant, the value of all accounts maintained on behalf of a
1
<PAGE>
Participant, whether attributable to Employer or Employee contributions,
subject to the provisions of Section 9.2.
1.5 "Anniversary Date" means December 31st.
1.6 "Beneficiary" means the person to whom the share of a
deceased Participant's total account is payable, subject to the restrictions
of Sections 7.2 and 7.5.
1.7 "Code" means the Internal Revenue Code of 1986, as amended
or replaced from time to time.
1.8 "Company Stock" means common stock issued by the Employer
(or by a corporation which is a member of the controlled group of
corporations of which the Employer is a member) which is readily tradeable on
an established securities market. If there is no common stock which meets the
foregoing requirement, the term "Company Stock" means common stock issued by
the Employer (or by a corporation which is a member of the same controlled
group) having a combination of voting power and dividend rights equal to or
in excess of: (A) that class of common stock of the Employer (or of any other
such corporation) having the greatest voting power, and (B) that class of
common stock of the Employer (or of any other such corporation) having the
greatest dividend rights. Noncallable preferred stock shall be deemed to be
"Company Stock" if such stock is convertible at any time into stock which
constitutes "Company Stock" hereunder and if such conversion is at a
conversion price which (as of the date of the acquisition by the Trust) is
reasonable. For purposes of the preceding sentence, pursuant to Regulations,
preferred stock shall be treated as noncallable if after the call there will
be a reasonable opportunity for a conversion which meets the requirements of
the preceding sentence.
1.9 "Company Stock Account" means the account of a Participant
which is credited with the shares of Company Stock purchased and paid for by
the Trust Fund or contributed to the Trust Fund.
1.10 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments
of compensation by the Employer (in the course of the Employer's trade or
business) for a Plan Year for which the Employer is required to furnish the
Participant a written statement under Code Sections 6041(d), 6051(a)(3) and
6052. Compensation must be determined without regard to any rules under Code
Section 3401(a) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such as the
exception for agricultural labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of
Compensation shall be made by:
2
<PAGE>
(a) excluding commissions.
(b) including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code Sections
125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee
contributions described in Code Section 414(h)(2) that are treated as
Employer contributions.
For a Participant's initial year of participation,
Compensation shall be recognized for the entire Plan Year.
Compensation in excess of $160,000 shall be disregarded.
Such amount shall be adjusted for increases in the cost of living in
accordance with Code Section 407(a)(17), except that the dollar increase in
effect on January 1 of any calendar year shall be effective for the Plan Year
beginning with or within such calendar year. For any short Plan Year the
Compensation limit shall be an amount equal to the Compensation limit for the
calendar year in which the Plan Year begins multiplied by the ratio obtained
by dividing the number of full months in the short Plan Year by twelve (12).
1.11 "Contract" or "Policy" means any life insurance policy,
retirement income or annuity policy or annuity contract (group or individual)
issued pursuant to the terms of the Plan.
1.12 "Early Retirement Date." This Plan does not provide for a
retirement date prior to Normal Retirement Date.
1.13 "Eligible Employee" means any Employee.
Employees of Affiliated Employers shall not be eligible to
participate in this Plan unless such Affiliated Employers have specifically
adopted this Plan in writing.
1.14 "Employee" means any person who is employed by the Employer
or Affiliated Employer. Employee shall include Leased Employees within the
meaning of Code Sections 414(n)(2) and 414(o)(2) unless such Leased Employees
are covered by a plan described in Code Section 414(n)(5) and such Leased
Employees do not constitute more than 20% of the recipient's non-highly
compensated work force.
1.15 "Employer" means Redlands Centennial Bank and any successor
which shall maintain this Plan; and any predecessor which has maintained this
Plan. The Employer is a corporation with principal offices in the State of
California.
3
<PAGE>
1.16 "ESOP" means an employee stock ownership plan that meets
the requirements of Code Section 4975(e)(7) and Regulation 54.4975-11.
1.17 "Fiduciary" means any person who (a) exercises any
discretionary authority or discretionary control respecting management of the
Plan or exercises any authority or control respecting management or
disposition of its assets, (b) renders investment advice for a fee or other
compensation, direct or indirect, with respect to any monies or other
property of the Plan or has any authority or responsibility to do so, or (c)
has any discretionary authority or discretionary responsibility in the
administration of the Plan, including, but not limited to, the Trustee, the
Employer and its representative body, and the Administrator.
1.18 "Fiscal Year" means the Employer's accounting year of 12
months commencing on January 1st of each year and ending the following
December 31st.
1.19 "Forfeiture" means that portion of a Participant's Account
that is not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Terminated Participant's Account, or
(b) the last day of the Plan Year in which the
Participant incurs five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the
case of a Terminated Participant whose Vested benefit is zero, such
Terminated Participant shall be deemed to have received a distribution of his
Vested benefit upon his termination of employment. Restoration of such
amounts shall occur pursuant to Section 7.4(f)(2). In addition, the term
Forfeiture shall also include amounts deemed to be Forfeitures pursuant to
any other provision of this Plan.
1.20 "Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any reason.
1.21 "415" Compensation" with respect to any Participant means
such Participant's wages as defined in Code Section 3401(a) and all other
payments of compensation by the Employer (in the course of the Employer's
trade or business) for a Plan Year for which the Employer is required to
furnish the Participant a written statement under Code Sections 6041(d),
6051(a)(3) and 6052. "415 Compensation" must be determined without regard to
any rules under Code Section 3401(a) that limit the remuneration included in
wages based on the nature or location of the
4
<PAGE>
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of "415
Compensation" shall include any elective deferral (as defined in Code Section
401(g)(3)), and any amount which is contributed or deferred by the Employer
at the election of the Participant and which is not includible in the gross
income of the Participant by reason of Code Sections 125 and 457.
1.22 "Highly Compensated Employee" means an Employee described
in Code Section 414(q) and the Regulations thereunder, and generally means an
Employee who performed services for the Employer during the "determination
year" and is in one or more of the following groups:
(a) Employees who at any time during the "determination
year" or "look-back year" were "five percent owners" as defined in
Section 1.27(c).
(b) Employees who received "415 Compensation" during
the "look-back year" from the Employer in excess of $80,000.
The "determination year" shall be the Plan Year for which
testing is being performed, and the "look back year" shall be the immediately
preceding twelve-month period.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code Sections 125,
402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee contributions
described in Code Section 414(h)(2) that are treated as Employer
contributions. Additionally, the dollar threshold amount specified in (b)
above shall be adjusted at such time and in the same manner as under Code
Section 415(d), except that the base period shall be the calendar quarter
ending September 30, 1996. In the case of such an adjustment, the dollar
limit which shall be applied is the limit for the calendar year in which the
"look back year" begins.
In determining who is a Highly Compensated Employee,
Employees who are non-resident aliens and who received no earned income
(within the meaning of Code Section 911(d)(2)) from the Employer constituting
United States source income within the meaning of Code Section 861(a)(3)
shall not be treated as Employees. Additionally, all Affiliated Employers
shall be taken into account as a single employer and Leased Employees within
the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in
Code Section 414(n)(5) and are not covered in any qualified plan maintained
by the Employer. The exclusion of
5
<PAGE>
Leased Employees for this purpose shall be applied on a uniform and
consistent basis for all of the Employer's retirement plans. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees
without regard to whether they performed services during the "determination
year."
1.23 "Highly Compensated Former Employee" means a former Employee
who had a separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
"determination year" after attaining age 55. Notwithstanding the foregoing,
an Employee who separated from service prior to 1987 will be treated as a
Highly Compensated Former Employee only if during the separation year (or
year preceding the separation year) or any year after the Employee attains
age 55 (or the last year ending before the Employee's 55th birthday), the
Employee either received "415 Compensation" in excess of $50,000 or was a
"five percent owner." For purposes of this Section, "determination year,"
"415 Compensation" and "five percent owner" shall be determined in
accordance with Section 1.22. Highly Compensated Former Employees shall be
treated as Highly Compensated Employees. The method set forth in this Section
for determining who is a "Highly Compensated Former Employee" shall be
applied on a uniform and consistent basis for all purposes for which the Code
Section 414(q) definition is applicable.
1.24 "Highly Compensated Participant" means any Highly Compensated
Employee who is eligible to participate in the Plan.
1.25 "Hour of Service" means each hour for which an Employee is paid
or entitled to payment for the performance of duties for the Employer.
1.26 "Investment Manager" means an entity that (a) has the power to
manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.27 "Key Employee" means an Employee as defined in Code Section
416(i) and the Regulations thereunder. Generally, any Employee or former
Employee (as well as each of his Beneficiaries) is considered a Key Employee
if he, at any time during the Plan Year that contains the "Determination
Date" or any of the preceding four (4) Plan Years, has been included in one
of the following categories:
(a) an officer of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) having annual
"415 Compensation" greater than 50 percent of the amount in effect
under Code Section 415(b)(1)(A) for any such Plan Year.
6
<PAGE>
(b) one of the ten employees having annual "415 Compensation"
from the Employer for a Plan Year greater than the dollar limitation in
effect under Code Section 415(c)(1)(A) for the calendar year in which
such Plan Year ends and owning (or considered as owning within the
meaning of Code Section 318) both more than one-half percent interest
and the largest interests in the Employer.
(c) a "five percent owner" of the Employer. "Five percent
owner" means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than five percent (5%) of the
outstanding stock of the Employer or stock possessing more than five
percent (5%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than five percent (5%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c), (m)
and (o) shall be treated as separate employers.
(d) a "one percent owner" of the Employer having an annual
"415 Compensation" from the Employer of more than $150,000. "One
percent owner" means any person who owns (or is considered as owning
within the meaning of Code Section 318) more than one percent (1%) of
the outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c), (m)
and (o) shall be treated as separate employers. However, in determining
whether an individual has "415 Compensation" of more than $150,000,
"415 Compensation" from each employer required to be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code Sections 125,
402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee contributions
described in Code Section 414(h)(2) that are treated as Employer
contributions.
7
<PAGE>
1.28 "Late Retirement Date" means the first day of the month
coinciding with or next following a Participant's actual Retirement Date
after having reached his Normal Retirement Date.
1.29 "Leased Employee" means any person (other than an Employee of
the recipient) who pursuant to an agreement between the recipient and any
other person ("leasing organization") has performed services for the
recipient (or for the recipient and related persons determined in accordance
with Code Section 414(n)(6)) on a substantially full time basis for a period
of at least one year, and such services are performed under primary direction
or control by the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to
services performed for the recipient employer shall be treated as provided by
the recipient employer. A Leased Employee shall not be considered an Employee
of the recipient:
(a) if such employee is covered by a money purchase pension
plan providing:
(1) a non-integrated employer contribution rate of at least
10% of compensation, as defined in Code Section 415(c)(3),
but including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and
Employee contributions described in Code Section 414(h)(2)
that are treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
1.30 "Non-Highly Compensated Participant" means any Participant who
is not a Highly Compensated Employee.
1.31 "Non-Key Employee" means any Employee or former Employee (and
his Beneficiaries) who is not a Key Employee.
1.32 "Normal Retirement Age" means the Participant's 65th birthday.
A Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.33 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's Normal Retirement Age.
8
<PAGE>
1.34 "1-Year Break in Service" means a Period of Severance of at
least 12 consecutive months.
1.35 "Other Investments Account" means the account of a Participant
which is credited with his share of the net gain (or loss) of the Plan.
Forfeitures and Employer contributions in other than Company Stock and which
is debited with payments made to pay for Company Stock.
1.36 "Participant" means any Eligible Employee who participates in
the Plan and has not for any reason become ineligible to participate further
in the Plan.
1.37 "Participant's Account" means the account established and
maintained by the Administrator for each Participant with respect to his
total interest in the Plan and Trust resulting from the Employer
contributions.
1.38 "Period of Service" means the aggregate of all periods
commencing with the Employee's first day of employment or reemployment with
the Employer or Affiliated Employer and ending on the date a 1-Year Break in
Service begins. The first day of employment or reemployment is the first day
the Employee performs an Hour of Service. An Employee will also receive
partial credit for any Period of Severance of less than 12 consecutive
months. Fractional periods of a year will be expressed in terms of days.
1.39 "Period of Severance" means a continuous period of time during
which the Employee is not employed by the Employer. Such period begins on the
date the Employee retires, quits or is discharged, or if earlier, the 12
month anniversary of the date on which the Employee was otherwise first
absent from service.
In the case of an individual who is absent from work for maternity
or paternity reasons, the 12-consecutive month period beginning on the first
anniversary of the first day of such absence shall not constitute a 1-Year
Break in Service. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence (a) by reason of the
pregnancy of the individual, (b) by reason of the birth of a child of the
individual, (c) by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or (d) for
purposes of caring for such child for a period beginning immediately
following such birth or placement.
1.40 "Plan" means this instrument, including all amendments thereto.
1.41 "Plan Year" means the Plan's accounting year of twelve (12)
months commencing on January 1st of each year and ending the following
December 31st, except for the first Plan Year which commenced February 1st.
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1.42 "Regulation" means the Income Tax Regulations as promulgated by
the Secretary of the Treasury or his delegate, and as amended from time to
time.
1.43 "Retired Participant" means a person who has been a
Participant, but who has become entitled to retirement benefits under the
Plan.
1.44 "Retirement Date" means the date as of which a Participant
retires for reasons other than Total and Permanent Disability, whether such
retirement occurs on a Participant's Normal Retirement Date or Late
Retirement Date (see Section 7.1).
1.45 "Super Top Heavy Plan" means a plan described in Section 9.2(b).
1.46 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than by death,
Total and Permanent Disability or retirement.
1.47 "Top Heavy Plan" means a plan described in Section 9.2(a).
1.48 "Top Heavy Plan Year" means a Plan Year during which the Plan
is a Top Heavy Plan.
1.49 "Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing any gainful occupation and
which condition constitutes total disability under the federal Social
Security Acts.
1.50 "Trustee" means the person or entity named as trustee herein or
in any separate trust forming a part of this Plan, and any successors.
1.51 "Trust Fund" means the assets of the Plan and Trust as the same
shall exist from time to time.
1.52 "Valuation Date" means the Anniversary Date and such other date
or dates deemed necessary by the Administrator. The Valuation Date may
include any day during the Plan Year that the Trustee, any transfer agent
appointed by the Trustee or the Employer and any stock exchange used by such
agent are open for business.
1.53 "Vested" means the nonforfeitable portion of any account
maintained on behalf of a Participant.
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ARTICLE II
ADMINISTRATION
2.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) In addition to the general powers and
responsibilities otherwise provided for in this Plan, the Employer
shall be empowered to appoint and remove the Trustee and the
Administrator from time to time as it deems necessary for the proper
administration of the Plan to ensure that the Plan is being operated
for the exclusive benefit of the Participants and their Beneficiaries
in accordance with the terms of the Plan, the Code, and the Act. The
Employer may appoint counsel, specialists, advisers, agents (including
any nonfiduciary agent) and other persons as the Employer deems
necessary or desirable in connection with the exercise of its fiduciary
duties under this Plan. The Employer may compensate such agents or
advisers from the assets of the Plan as fiduciary expenses (but not
including any business (settlor) expenses of the Employer), to the
extent not paid by the Employer.
(b) The Employer may, by written agreement or
designation, appoint at its option an Investment Manager (qualified
under the Investment Company Act of 1940 as amended), investment
adviser, or other agent to provide direction to the Trustee with
respect to any or all of the Plan assets. Such appointment shall be
given by the Employer in writing in a form acceptable to the Trustee
and shall specifically identify the Plan assets with respect to which
the Investment Manager or other agent shall have authority to direct
the investment.
(c) The Employer shall establish a "funding policy and
method," i.e., it shall determine whether the Plan has a short run need
for liquidity (e.g., to pay benefits) or whether liquidity is a long
run goal and investment growth (and stability of same) is a more
current need, or shall appoint a qualified person to do so. The
Employer or its delegate shall communicate such needs and goals to the
Trustee, who shall coordinate such Plan needs with its investment
policy. The communication of such a "funding policy and method" shall
not, however, constitute a directive to the Trustee as to investment of
the Trust Funds. Such "funding policy and method" shall be consistent
with the objectives of this Plan and with the requirements of Title I
of the Act.
(d) The Employer shall periodically review the
performance of any Fiduciary or other person to whom duties have been
delegated or allocated by it under the
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provisions of this Plan or pursuant to procedures established
hereunder. This requirement may be satisfied by formal periodic review
by the Employer or by a qualified person specifically designated by the
Employer, through day-to-day conduct and evaluation, or through other
appropriate ways.
2.2 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall be the Administrator. The Employer may appoint
any person, including, but not limited to, the Employees of the Employer, to
perform the duties of the Administrator. Any person so appointed shall
signify his acceptance by filing written acceptance with the Employer. Upon
the resignation or removal of any individual performing the duties of the
Administrator, the Employer may designate a successor.
2.3 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such
delegation is made by the Employer, the Administrators may allocate the
responsibilities among themselves, in which event the Administrators shall
notify the Employer and the Trustee in writing of such action and specify the
responsibilities of each Administrator. The Trustee thereafter shall accept
and rely upon any documents executed by the appropriate Administrator until
such time as the Employer or the Administrators file with the Trustee a
written revocation of such designation.
2.4 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall administer
the Plan in accordance with its terms and shall have the power and discretion
to construe the terms of the Plan and to determine all questions arising in
connection with the administration, interpretation, and application of the
Plan. Any such determination by the Administrator shall be conclusive and
binding upon all persons. The Administrator may establish procedures, correct
any defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry
out the purpose of the Plan; provided, however, that any procedure,
discretionary act, interpretation or construction shall be done in a
nondiscriminatory manner based upon uniform principles consistently applied
and shall be consistent with the intent that the Plan shall continue to be
deemed a qualified plan under the terms of Code Section 401(a),
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and shall comply with the terms of the Act and all regulations issued
pursuant thereto. The Administrator shall have all powers necessary or
appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to
the eligibility of Employees to participate or remain a Participant
hereunder and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with
respect to the amount and the kind of benefits to which any Participant
shall be entitled hereunder;
(c) to authorize and direct the Trustee with respect to
all nondiscretionary or otherwise directed disbursements from the
Trust;
(d) to maintain all necessary records for the
administration of the Plan;
(e) to interpret the provisions of the Plan and to make
and publish such rules for regulation of the Plan as are consistent
with the terms hereof;
(f) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from which
such Contract shall be purchased;
(g) to compute and certify to the Employer and to the
Trustee from time to time the sums of money necessary or desirable to
be contributed to the Plan;
(h) to consult with the Employer and the Trustee
regarding the short and long-term liquidity needs of the Plan in order
that the Trustee can exercise any investment discretion in a manner
designed to accomplish specific objectives;
(i) to establish and communicate to Participants a
procedure for allowing each Participant to direct the Trustee as to the
distribution of his Company Stock Account pursuant to Section 4.6;
(j) to assist any Participant regarding his rights,
benefits, or elections available under the Plan.
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2.5 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, policies, and other data that may
be necessary for proper administration of the Plan and shall be responsible
for supplying all information and reports to the Internal Revenue Service,
Department of Labor, Participants, Beneficiaries and others as required by
law.
2.6 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, agents (including
nonfiduciary agents) and other persons as the Administrator or the Trustee
deems necessary or desirable in connection with the administration of this
Plan, including but not limited to agents and advisers to assist with the
administration and management of the Plan, and thereby to provide, among such
other duties as the Administrator may appoint, assistance with maintaining
Plan records and the providing of investment information to the Plan's
investment fiduciaries.
2.7 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses
incident to the functioning of the Administrator, or any person or persons
retained or appointed by any Named Fiduciary incident to the exercise of
their duties under the Plan, including, but not limited to, fees of
accountants, counsel, Investment Managers, and other specialists and their
agents, and other costs of administering the Plan. Until paid, the expenses
shall constitute a liability of the Trust Fund.
2.8 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be
furnished to the claimant within 90 days after the application is filed. In
the event the claim is denied, the reasons for the denial shall be
specifically set forth in the notice in language calculated to be understood
by the claimant, pertinent provisions of the Plan shall be cited, and, where
appropriate, an explanation as to how the claimant can perfect the claim will
be provided. In addition, the claimant shall be furnished with an explanation
of the Plan's claims review procedure.
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2.9 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has
been denied a benefit by a decision of the Administrator pursuant to Section
2.8 shall be entitled to request the Administrator to give further
consideration to his claim by filing with the Administrator (on a form which
may be obtained from the Administrator) a request for a hearing. Such
request, together with a written statement of the reasons why the claimant
believes his claim should be allowed, shall be filed with the Administrator
no later than 60 days after receipt of the written notification provided for
in Section 2.8. The Administrator shall then conduct a hearing within the
next 60 days, at which the claimant may be represented by an attorney or any
other representative of his choosing and at which the claimant shall have an
opportunity to submit written and oral evidence and arguments in support of
his claim. At the hearing (or prior thereto upon 5 business days written
notice to the Administrator) the claimant or his representative shall have an
opportunity to review all documents in the possession of the Administrator
which are pertinent to the claim at issue and its disallowance. Either the
claimant or the Administrator may cause a court reporter to attend the
hearing and record the proceedings. In such event, a complete written
transcript of the proceedings shall be furnished to both parties by the court
reporter. The full expense of any such court reporter and such transcripts
shall be borne by the party causing the court reporter to attend the hearing.
A final decision as to the allowance of the claim shall be made by the
Administrator within 60 days of receipt of the appeal (unless there has been
an extension of 60 days due to special circumstances, provided the delay and
the special circumstances occasioning it are communicated to the claimant
within the 60 day period). Such communication shall be written in a manner
calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee shall be eligible to participate hereunder on the
date of his employment with the Employer.
3.2 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the
date on which he satisfies the eligibility requirements of Section 3.1.
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3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee
for participation in the Plan based upon information furnished by the
Employer. Such determination shall be conclusive and binding upon all
persons, as long as the same is made pursuant to the Plan and the Act. Such
determination shall be subject to review per Section 2.9.
3.4 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
classification of an Eligible Employee to an ineligible Employee, such
Former Participant shall continue to vest in his interest in the Plan
for each Period of Service completed while a noneligible Employee,
until such time as his Participant's Account shall be forfeited or
distributed pursuant to the terms of the Plan. Additionally, his
interest in the Plan shall continue to share in the earnings of the
Trust Fund.
(b) In the event a Participant is no longer a member of
an eligible class of Employees and becomes ineligible to participate,
such Employee will participate immediately upon returning to an
eligible class of Employees.
3.5 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission
is not made until after a contribution by his Employer for the year has been
made, the Employer shall make a subsequent contribution with respect to the
omitted Employee in the amount which the said Employer would have contributed
with respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any
taxable year under applicable provisions of the Code.
3.6 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included
as a Participant in the Plan is erroneously included and discovery of such
incorrect inclusion is not made until after a contribution for the year has
been made, the Employer shall not be entitled to recover the contribution
made with respect to the ineligible person regardless of whether or not a
deduction is allowable with respect to such contribution. In such event, the
amount contributed with respect to the ineligible person shall constitute a
Forfeiture for the Plan Year in which the discovery is made.
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3.7 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate
must be communicated to the Employer, in writing, at least thirty (30) days
before the beginning of a Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION
(a) For each Plan Year, the Employer shall contribute to
the Plan such amount as shall be determined by the Employer.
(b) The Employer contribution shall not be limited to
years in which the Employer has current or accumulated net profit.
Additionally, to the extent necessary, the Employer shall contribute to
the Plan the amount necessary to provide the top heavy minimum
contribution. All contributions by the Employer shall be made in cash
or in such property as is acceptable to the Trustee.
4.2 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION
Employer contributions will be paid in cash, Company Stock or other
property as the Employer may from time to time determine. Company Stock and
other property will be valued at their then fair market value. The Employer
shall pay to the Trustee its contribution to the Plan for each Plan Year
within the time prescribed by law, including extensions of time, for the
filing of the Employer federal income tax return for the Fiscal Year.
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in
the name of each Participant to which the Administrator shall credit
as of each Anniversary Date all amounts allocated to each such
Participant as
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper
allocation of the Employer contributions for each Plan Year. Within
a reasonable period of time after the date of receipt by the
Administrator of such information, the Administrator shall allocate
such contribution to each Participant's Account in the same
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proportion that each such Participant's Compensation for the year
bears to the total Compensation of all Participants for such year.
Only Participants who have completed a Period of Service
during the Plan Year shall be eligible to share in the discretionary
contribution for the year.
(c) The Company Stock Account of each Participant shall be
credited as of each Anniversary Date with Forfeitures of Company
Stock and his allocable share of Company Stock (including fractional
shares) purchased and paid for by the Plan or contributed in kind by
the Employer. Stock dividends on Company Stock held in his Company
Stock Account shall be credited to his Company Stock Account when
paid. Cash dividends on Company Stock held in his Company Stock
Account shall be credited to his Other Investments Account when paid.
(d) As of each Valuation Date, before the current valuation
period allocation of Employer contributions and Forfeitures, any
earnings or losses (net appreciation or net depreciation) of the
Trust Fund shall be allocated in the same proportion that each
Participant's and Former Participant's nonsegregated accounts (other
than each Participant's Company Stock Account) bear to the total of
all Participants' and Former Participants' nonsegregated accounts
(other than each Participant's Company Stock Account) as of such
date.
(e) As of each Anniversary Date any amounts which became
Forfeitures since the last Anniversary Date shall first be made
available to reinstate previously forfeited account balances of
Former Participants, if any, in accordance with Section 7.4(f)(2).
The remaining Forfeitures, if any, shall be allocated among the
Participants' Accounts of Participants otherwise eligible to share
in the allocation of discretionary contributions in the same
proportion that each such Participant's Compensation for the year
bears to the total Compensation of all such Participants for the
year.
Provided, however, that in the event the allocation of
Forfeitures provided herein shall cause the "annual addition" (as
defined in Section 4.4) to any Participant's Account to exceed the
amount allowable by the Code, the excess shall be reallocated in
accordance with Section 4.5.
(f) For any Top Heavy Plan Year, Employees not otherwise eligible
to share in the allocation of
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contributions and Forfeitures as provided above, shall receive the
minimum allocation provided for in Section 4.3(h) if eligible pursuant
to the provisions of Section 4.3(j).
(g) Notwithstanding the foregoing, Participants who are not
actively employed on the last day of the Plan Year due to Retirement
(Normal or Late), Total and Permanent Disability or death shall not
share in the allocation of contributions and Forfeitures for that
Plan Year.
(h) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum
of the Employer contributions and Forfeitures allocated to the
Participant's Account of each Employee shall be equal to at least
three percent (3%) of such Employee's "415 Compensation" (reduced by
contributions and forfeitures, if any, allocated to each Employee in
any defined contribution plan included with this plan in a Required
Aggregation Group). However, if (1) the sum of the Employer
contributions and Forfeitures allocated to the Participant's Account
of each Key Employee for such Top Heavy Plan Year is less than three
percent (3%) of each Key Employee's "415 Compensation" and (2) this
Plan is not required to be included in an Aggregation Group to
enable a defined benefit plan to meet the requirements of Code
Section 401(a)(4) or 410, the sum of the Employer contributions and
Forfeitures allocated to the Participant's Account of each Employee
shall be equal to the largest percentage allocated to the
Participant's Account of any Key Employee.
However, no such minimum allocation shall be required in this
Plan for any Employee who participates in another defined
contribution plan subject to Code Section 412 included with this
Plan in a Required Aggregation Group.
(i) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Account of any Key
Employee shall be equal to the ratio of the sum of the Employer
contributions and Forfeitures allocated on behalf of such Key
Employee divided by the "415 Compensation" for such Key Employee.
(j) For any Top Heavy Plan Year, the minimum allocations set
forth above shall be allocated to the Participant's Account of all
Employees who are Participants and who are employed by the Employer
on the last day of the Plan Year, including Employees who
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have (1) failed to complete a Period of Service; and (2) declined to
make mandatory contributions (if required) to the Plan.
(k) For the purposes of this Section, "415 Compensation" shall be
limited to $150,000. Such amount shall be adjusted for increases in
the cost of living in accordance with Code Section 401(a)(17),
except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or
within such calendar year. For any short Plan Year the "415
Compensation" limit shall be an amount equal to the "415
Compensation" limit for the calendar year in which the Plan Year
begins multiplied by the ratio obtained by dividing the number of
full months in the short Plan Year by twelve (12).
(l) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate accounts shall
be maintained as follows:
(1) one account for nonforfeitable benefits attributable to
pre-break service; and
(2) one account representing his status in the Plan attributable to
post-break service.
4.4 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual
additions" credited to a Participant's accounts for any "limitation
year" shall equal the lesser of: (1) $30,000 adjusted annually as
provided in Code Section 415(d) pursuant to the Regulations, or (2)
twenty-five percent (25%) of the Participant's "415 Compensation" for
such "limitation year." For any short "limitation year," the dollar
limitation in (1) above shall be reduced by a fraction, the numerator
of which is the number of full months in the short "limitation year"
and the denominator of which is twelve (12).
(b) For purposes of applying the limitations of Code
Section 415, "annual additions" means the sum credited to a
Participant's accounts for any "limitation year" of (1) Employer
contributions, (2) Employee contributions, (3) forfeitures, (4) amounts
allocated, after March 31, 1984, to an individual medical account, as
defined in Code Section 415(l)(2) which is part of a pension or annuity
plan maintained by the Employer and (5) amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years
ending after such date, which are attributable to post-retirement
medical
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benefits allocated to the separate account of a key employee (as
defined in Code Section 419A(d)(3)) under a welfare benefit plan (as
defined in Code Section 419(e)) maintained by the Employer. Except,
however, the "415 Compensation" percentage limitation referred to in
paragraph (a)(2) above shall not apply to: (1) any contribution for
medical benefits (within the meaning of Code Section 419A(f)(2)) after
separation from service which is otherwise treated as an "annual
addition," or (2) any amount otherwise treated as an "annual addition"
under Code Section 415(l)(1) .
(c) For purposes of applying the limitations of Code
Section 415, the transfer of funds from one qualified plan to another
is not an "annual addition." In addition, the following are not
Employee contributions for the purposes of Section 4.4(b): (1) rollover
contributions (as defined in Code Sections 402(a)(5), 403(a)(4),
403(b)(8) and 408(d)(3)); (2) repayments of loans made to a Participant
from the Plan; (3) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(7)(B) (cash-outs); (4) repayments of
distributions received by an Employee pursuant to Code Section
411(a)(3)(D) (mandatory contributions); and (5) Employee contributions
to a simplified employee pension excludable from gross income under
Code Section 408(k)(6).
(d) For purposes of applying the limitations of Code
Section 415, the "limitation year" shall be the Plan Year.
(e) For the purpose of this Section, all qualified
defined contribution plans (whether terminated or not) ever maintained
by the Employer shall be treated as one defined contribution plan.
(f) For the purpose of this Section, if the Employer is a
member of a controlled group of corporations, trades or businesses
under common control (as defined by Code Section 1563(a) or Code
section 414(b) and (c) as modified by Code Section 415(h)), is a member
of an affiliated service group (as defined by Code Section 414(m)), or
is a member of a group of entities required to be aggregated pursuant
to Regulations under Code Section 414(o), all Employees of such
Employers shall be considered to be employed by a single Employer.
(g) For the purpose of this Section, if this Plan is a
Code Section 413(c) plan, each Employer who
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maintains this Plan will be considered to be a separate Employer.
(h)(1) If a Participant participates in more than one
defined contribution plan maintained by the Employer which have
different Anniversary Dates, the maximum "annual additions" under this
Plan shall equal the maximum "annual additions" for the "limitation
year" minus any "annual additions" previously credited to such
Participant's accounts during the "limitation year."
(2) If a Participant participates in both a defined
contribution plan subject to Code Section 412 and a defined
contribution plan not subject to Code Section 412 maintained
by the Employer which have the same Anniversary Date, "annual
additions" will be credited to the Participant's accounts
under the defined contribution plan subject to Code Section
412 prior to crediting "annual additions" to the Participant's
accounts under the defined contribution plan not subject to
Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained
by the Employer which have the same Anniversary Date, the
maximum "annual additions" under this Plan shall equal the
product of (A) the maximum "annual additions" for the
"limitation year" minus any "annual additions" previously
credited under subparagraphs (1) or (2) above, multiplied by
(B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's
accounts under this Plan without regard to the limitations of
Code Section 415 and (ii) the denominator of which is such
"annual additions" for all plans described in this
subparagraph.
(i) Notwithstanding anything contained in this Section to
the contrary, the limitations, adjustments and other requirements
prescribed in this Section shall at all times comply with the
provisions of Code Section 415 and the Regulations thereunder, the
terms of which are specifically incorporated herein by reference.
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Compensation, a
reasonable error in
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determining the amount of elective deferrals (within the meaning of
Code Section 402(g)(3)) that may be made with respect to any
Participant under the limits of Section 4.4 or other facts and
circumstances to which Regulation 1.415-6(b)(6) shall be applicable,
the "annual additions" under this Plan would cause the maximum "annual
additions" to be exceeded for any Participant, the Administrator shall
(1) distribute any elective deferrals (within the meaning of Code
section 402(g)(3)) or return any Employee contributions (whether
voluntary or mandatory), and for the distribution of gains attributable
to those elective deferrals and Employee contributions, to the extent
that the distribution or return would reduce the "excess amount" in the
Participant's accounts (2) hold any "excess amount" remaining after the
return of any elective deferrals or voluntary Employee contributions in
a "Section 415 suspense account" (3) allocate and reallocate the
"Section 415 suspense account" in the next "limitation year" (and
succeeding "limitation years" if necessary) to all Participants in the
Plan before any Employer or Employee contributions which would
constitute "annual additions" are made to the Plan for such "limitation
year" (4) reduce Employer contributions to the Plan for such
"limitation year" by the amount of the "Section 415 suspense account"
allocated and reallocated during such "limitation year."
(b) For purposes of this Article, "excess amount" for any
Participant for a "limitation year', shall mean the excess, if any, of
(1) the "annual additions" which would be credited to his account under
the terms of the Plan without regard to the limitations of Code Section
415 over (2) the maximum "annual additions" determined pursuant to
Section 4.4.
(c) For purposes of this Section, "Section 415 suspense
account" shall mean an unallocated account equal to the sum of "excess
amounts" for all Participants in the Plan during the "limitation year."
The "Section 415 suspense account" shall not share in any earnings or
losses of the Trust Fund.
(d) The Plan may not distribute or return "excess
amounts," other than elective deferrals (within the meaning of Code
Section 402(g)(3)) or Employee contributions (whether voluntary or
mandatory) and gains attributable to such elective deferrals and
Employee contributions, to Participants or Former Participants.
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<PAGE>
4.6 DIRECTED INVESTMENT ACCOUNT
(a) Each "Qualified Participant" may elect within ninety
(90) days after the close of each Plan Year during the "Qualified
Election Period" to direct the Trustee in writing as to the
distribution in cash and/or Company Stock of 25 percent of the total
number of shares of Company Stock acquired by or contributed to the
Plan that have ever been allocated to such "Qualified Participant's"
Company Stock Account (reduced by the number of shares of Company Stock
previously distributed in cash and/or Company Stock pursuant to a prior
election). In the case of the election year in which the Participant
can make his last election, the preceding sentence shall be applied by
substituting "50 percent" for "25 percent." If the "Qualified
Participant" elects to direct the Trustee as to the distribution of his
Company Stock Account, such direction shall be effective no later than
180 days after the close of the Plan Year to which such direction
applies.
Notwithstanding the above, if the fair market value
(determined pursuant to Section 6.1 at the Plan Valuation Date
immediately preceding the first day on which a "Qualified Participant"
is eligible to make an election) of Company Stock acquired by or
contributed to the Plan and allocated to a "Qualified Participant's"
Company Stock Account is $500 or less, then such Company Stock shall
not be subject to this paragraph. For purposes of determining whether
the fair market value exceeds $500, Company Stock held in accounts of
all employee stock ownership plans (as defined in Code Section
4975(e)(7)) and tax credit employee stock ownership plans (as defined
in Code Section 409(a)) maintained by the Employer or any Affiliated
Employer shall be considered as held by the Plan.
(b) For the purposes of this Section the following
definitions shall apply:
(1) "Qualified Participant" means any Participant or Former
Participant who has completed ten (10) Periods of Service as a
Participant and has attained age 55.
(2) "Qualified Election Period" means the six (6) Plan Year
period beginning with the first Plan Year in which the
Participant first became a "Qualified Participant."
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<PAGE>
4.7 TREATMENT OF QUALIFIED MILITARY SERVICE
Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service will be provided in accordance with Code
section 414(u).
ARTICLE V
FUNDING AND INVESTMENT POLICY
5.1 INVESTMENT POLICY
(a) The Plan is designed to invest primarily in Company
Stock.
(b) With due regard to subparagraph (a) above, the
Administrator may also direct the Trustee to invest funds under the
Plan in other property described in the Trust or in life insurance
policies to the extent permitted by subparagraph (c) below, or the
Trustee may hold such funds in cash or cash equivalents.
(c) With due regard to subparagraph (a) above, the
Administrator may also direct the Trustee to invest funds under the
Plan in insurance policies on the life of any "keyman" Employee. The
proceeds of a "keyman" insurance policy may not be used for the
repayment of any indebtedness owed by the Plan which is secured by
Company Stock. In the event any "keyman" insurance is purchased by the
Trustee, the premiums paid thereon during any Plan Year, net of any
policy dividends and increases in cash surrender values, shall be
treated as the cost of Plan investment and any death benefit or cash
surrender value received shall be treated as proceeds from an
investment of the Plan.
(d) The Plan may not obligate itself to acquire Company
Stock from a particular holder thereof at an indefinite time determined
upon the happening of an event such as the death of the holder.
(e) The Plan may not obligate itself to acquire Company
Stock under a put option binding upon the Plan. However, at the time a
put option is exercised, the Plan may be given an option to assume the
rights and obligations of the Employer under a put option binding upon
the Employer.
(f) All purchases of Company Stock shall be made at a
price which, in the judgment of the Administrator, does not exceed the
fair market value thereof. All sales of Company Stock shall be made at
a price which, in the judgment of the Administrator, is not less than
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<PAGE>
the fair market value thereof. The valuation rules set forth in Article
VI shall be applicable.
5.2 TRANSACTIONS INVOLVING COMPANY STOCK
(a) No portion of the Trust Fund attributable to (or
allocable in lieu of) Company Stock acquired by the Plan in a sale to
which Code Section 1042 applies may accrue or be allocated directly or
indirectly under any plan maintained by the Employer meeting the
requirements of Code Section 401(a):
(1) during the "Nonallocation Period," for the benefit of
(i) any taxpayer who makes an election under Code
Section 1042(a) with respect to Company Stock,
(ii) any individual who is related to the taxpayer
(within the meaning of Code Section 267(b)), or
(2) for the benefit of any other person who owns (after
application of Code Section 318(a) applied without regard to
the employee trust exception in Code Section 318(a)(2)(B)(i))
more than 25 percent of
(i) any class of outstanding stock of the Employer or
Affiliated Employer which issued such Company Stock,
or
(ii) the total value of any class of outstanding
stock of the Employer or Affiliated Employer.
(b) Except, however, subparagraph (a)(1)(ii) above shall
not apply to lineal descendants of the taxpayer, provided that the
aggregate amount allocated to the benefit of all such lineal
descendants during the "Nonallocation Period" does not exceed more than
five (5) percent of the Company Stock (or amounts allocated in lieu
thereof) held by the Plan which are attributable to a sale to the Plan
by any person related to such descendants (within the meaning of Code
Section 267(c)(4)) in a transaction to which Code Section 1042 is
applied.
(c) A person shall be treated as failing to meet the
stock ownership limitation under paragraph (a)(2) above if such person
fails such limitation:
26
<PAGE>
(1) at any time during the one (1) year period ending on the
date of sale of Company Stock to the Plan, or
(2) on the date as of which Company Stock is allocated to
Participants in the Plan.
(d) For purposes of this Section, "Nonallocation Period"
means the period beginning on the date of the sale of the Company Stock
and ending on the date which is ten (10) years after the date of sale.
ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Valuation Date,
to determine the net worth of the assets comprising the Trust Fund as it exists
on the Valuation Date. In determining such net worth, the Trustee shall value
the assets comprising the Trust Fund at their fair market value as of the
Valuation Date and shall deduct all expenses for which the Trustee has not yet
obtained reimbursement from the Employer or the Trust Fund.
6.2 METHOD OF VALUATION
Valuations must be made in good faith and based on all relevant factors
for determining the fair market value of securities. In the case of a
transaction between a Plan and a disqualified person, value must be determined
as of the date of the transaction. For all other Plan purposes, value must be
determined as of the most recent Valuation Date under the Plan. An independent
appraisal will not in itself be a good faith determination of value in the case
of a transaction between the Plan and a disqualified person. However, in other
cases, a determination of fair market value based on at least an annual
appraisal independently arrived at by a person who customarily makes such
appraisals and who is independent of any party to the transaction will be deemed
to be a good faith determination of value. Company Stock not readily tradeable
on an established securities market shall be valued by an independent appraiser
meeting requirements similar to the requirements of the Regulations prescribed
under Code Section 170(a)(1).
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal
27
<PAGE>
Retirement Date. However, a Participant may postpone the termination of his
employment with the Employer to a later date, in which event the participation
of such Participant in the Plan, including the right to receive allocations
pursuant to Section 4.3, shall continue until his Late Retirement Date. Upon a
Participant's Retirement Date, or as soon thereafter as is practicable, the
Trustee shall distribute, at the election of the Participant, all amounts
credited to such Participant's Account in accordance with Sections 7.5 and 7.6.
7.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement
Date or other termination of his employment, all amounts credited to
such Participant's Account shall become fully Vested. If elected,
distribution of the Participant's Account shall commence not later than
one (1) year after the close of the Plan Year in which such
Participant's death occurs. The Administrator shall direct the Trustee,
in accordance with the provisions of Sections 7.5 and 7.6, to
distribute the value of the deceased Participant's accounts to the
Participant's Beneficiary.
(b) Upon the death of a Former Participant, the
Administrator shall direct the Trustee, in accordance with the
provisions of Sections 7.5 and 7.6, to distribute any remaining Vested
amounts credited to the accounts of a deceased Former Participant to
such Former Participant's Beneficiary.
(c) The Administrator may require such proper proof of
death and such evidence of the right of any person to receive payment
of the value of the account of a deceased Participant or Former
Participant as the Administrator may deem desirable. The
Administrator's determination of death and of the right of any person
to receive payment shall be conclusive.
(d) The Beneficiary of the death benefit payable pursuant
to this Section shall be the Participant's spouse. Except, however, the
Participant may designate a Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the
Participant's Beneficiary, or
(2) the Participant is legally separated or has been
abandoned (within the meaning of local law) and the
Participant has a court order to such effect (and there is no
"qualified domestic relations order" as defined in Code
Section 414(p) which provides otherwise), or
28
<PAGE>
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall
be made on a form satisfactory to the Administrator. A Participant may
at any time revoke his designation of a Beneficiary or change his
Beneficiary by filing written notice of such revocation or change with
the Administrator. However, the Participant's spouse must again consent
in writing to any change in Beneficiary unless the original consent
acknowledged that the spouse had the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elected to
relinquish such right. In the event no valid designation of Beneficiary
exists at the time of the Participant's death, the death benefit shall
be payable to his estate.
(e) Any consent by the Participant's spouse to waive any
rights to the death benefit must be in writing, must acknowledge the
effect of such waiver, and be witnessed by a Plan representative or a
notary public. Further, the spouse's consent must be irrevocable and
must acknowledge the specific nonspouse Beneficiary.
7.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to
his Retirement Date or other termination of his employment, all amounts credited
to such Participant's Account shall become fully Vested. In the event of a
Participant's Total and Permanent Disability, the Trustee, in accordance with
the provisions of Sections 7.5 and 7.6, shall distribute to such Participant all
amounts credited to such Participant's Account as though he had retired. If such
Participant elects, distribution shall commence not later than one (1) year
after the close of the Plan Year in which Total and Permanent Disability occurs.
7.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) If a Participant's employment with the Employer is
terminated for any reason other than death, Total and Permanent
Disability or retirement, such Participant shall be entitled to such
benefits as are provided hereinafter pursuant to this Section 7.4.
If a portion of a Participant's Account is forfeited,
Company Stock allocated to the Participant's Company Stock Account must
be forfeited only after the
29
<PAGE>
Participant's Other Investments Account has been depleted. If interest
in more than one class of Company Stock has been allocated to a
Participant's Account, the Participant must be treated as forfeiting
the same proportion of each such class.
Distribution of the funds due to a Terminated
Participant shall be made on the occurrence of an event which would
result in the distribution had the Terminated Participant remained in
the employ of the Employer (upon the Participant's death, Total and
Permanent Disability or Normal Retirement). However, at the election of
the Participant, the Administrator shall direct the Trustee to cause
the entire Vested portion of the Terminated Participant's Account
attributable to Company Stock to be payable to such Terminated
Participant one (1) year after the close of the Plan Year which is the
fifth Plan Year following the Plan Year in which the Participant
otherwise separates from service. However, if such Terminated
Participant is reemployed by the Employer before distribution is
required to commence under this paragraph, such distribution shall be
postponed. Any distribution under this paragraph shall be made in a
manner which is consistent with and satisfies the provisions of
Sections 7.5 and 7.6, including, but not limited to, all notice and
consent requirements of Code Section 411(a)(11) and the Regulations
thereunder.
If the value of a Terminated Participant's Vested
benefit derived from Employer and Employee contributions does not
exceed $5,000, the Administrator shall direct the Trustee to cause the
entire Vested benefit to be paid to such Participant in a single lump
sum.
For purposes of this Section 7.4, if the value of a
Terminated Participant's Vested benefit is zero, the Terminated
Participant shall be deemed to have received a distribution of such
Vested benefit.
(b) The Vested portion of any Participant's Account shall
be a percentage of the total amount credited to his Participant's
Account determined on the basis of the Participant's number of whole
years of his Period of Service according to the following schedule:
<TABLE>
<CAPTION>
Vesting Schedule
Periods of Percentage
Service
<S> <C>
1 0 %
2 40 %
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
3 60 %
4 80 %
5 100 %
</TABLE>
(c) Notwithstanding the vesting schedule provided for in
paragraph (b) above, for any Top Heavy Plan Year, the Vested portion of
the Participant's Account of any Participant who has an Hour of
Service after the Plan becomes top heavy shall be a percentage of the
total amount credited to his Participant's Account determined on the
basis of the Participant's number of whole years of his Period of
Service according to the following schedule:
If in any subsequent Plan Year, the Plan ceases to be
a Top Heavy Plan, the Administrator shall revert to the vesting
schedule in effect before this Plan became a Top Heavy Plan. Any such
reversion shall be treated as a Plan amendment pursuant to the terms of
the Plan.
(d) Notwithstanding the vesting schedule above, upon the
complete discontinuance of the Employer contributions to the Plan or
upon any full or partial termination of the Plan, all amounts credited
to the account of any affected Participant shall become 100% Vested and
shall not thereafter be subject to Forfeiture.
(e) The computation of a Participant's nonforfeitable
percentage of his interest in the Plan shall not be reduced as the
result of any direct or indirect amendment to this Plan. For this
purpose, the Plan shall be treated as having been amended if the Plan
provides for an automatic change in vesting due to a change in top
heavy status. In the event that the Plan is amended to change or modify
any vesting schedule, a Participant with at least three (3) whole
years of his Period of Service as of the expiration date of the
election period may elect to have his nonforfeitable percentage
computed under the Plan without regard to such amendment. If a
Participant fails to make such election, then such Participant shall be
subject to the new vesting schedule. The Participant's election period
shall commence on the adoption date of the amendment and shall end 60
days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
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<PAGE>
(3) the date the Participant receives written notice of
the amendment from the Employer or Administrator.
(f)(1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall continue to
participate in the Plan in the same manner as if such termination had
not occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service,
and such Former Participant had received, or was deemed to
have received, a distribution of his entire Vested interest
prior to his reemployment, his forfeited account shall be
reinstated only if he repays the full amount distributed to
him before the earlier of five (5) years after the first date
on which the Participant is subsequently reemployed by the
Employer or the close of the first period of five (5)
consecutive 1-Year Breaks in Service commencing after the
distribution, or in the event of a deemed distribution, upon
the reemployment of such Former Participant. In the event the
Former Participant does repay the full amount distributed to
him, or in the event of a deemed distribution, the
undistributed portion of the Participant's Account must be
restored in full, unadjusted by any gains or losses occurring
subsequent to the Valuation Date coinciding with or preceding
his termination. The source for such reinstatement shall first
be any Forfeitures occurring the year. If such source is
insufficient, then the Employer shall contribute an amount
which is sufficient to restore any such forfeited Accounts
provided, however, that if a discretionary contribution is
made for such year, such contribution shall first be applied
to restore any such Accounts and the remainder shall be
allocated in accordance with Section 4.3.
(3) If any Former Participant is reemployed after a
1-Year Break in Service has occurred, Periods of Service shall
include Periods of Service prior to his 1-Year Break in
Service subject to the following rules:
(i) If a Former Participant has a 1-Year Break in
Service, his pre-break and post-break service shall
be used for computing Periods of Service for vesting
purposes only after he has been employed for
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<PAGE>
one (1) Period of Service following the date of his
reemployment with the Employer;
(ii) Any Former Participant who under the Plan does
not have a nonforfeitable right to any interest in
the Plan resulting from Employer contributions shall
lose credits otherwise allowable under (i) above if
his consecutive 1-Year Breaks in Service equal or
exceed the greater of (A) five (5) or (B) the
aggregate number of his pre-break Periods of
Service;
(iii) After five (5) consecutive 1-Year Breaks in
Service, a Former Participant's Vested Account
balance attributable to pre-break service shall not
be increased as a result of post-break service;
(iv) If a Former Participant is reemployed by the
Employer, he shall participate in the Plan
immediately on his date of reemployment;
(v) If a Former Participant (a 1-Year Break in
service previously occurred, but employment had not
terminated) is credited with an Hour of Service
after the first eligibility computation period in
which he incurs a 1-Year Break in Service, he shall
participate in the Plan immediately.
(g) In determining Periods of Service for purposes of
vesting under the Plan, Periods of Service prior to the Employee's
eighteenth birthday shall be excluded.
7.5 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a Participant or
his Beneficiary any amount to which he is entitled under the Plan in
one or more of the following methods:
(1) One lump-sum payment.
(2) Payments over a period certain in monthly, quarterly,
semiannual, or annual installments. The period over which such
payment is to be made shall not extend beyond the earlier of
the Participant's life expectancy (or the life expectancy of
the Participant and his designated Beneficiary) or the
33
<PAGE>
limited distribution period provided for in Section 7.5(b).
(b) Unless the Participant elects in writing a longer
distribution period, distributions to a Participant or his Beneficiary
attributable to Company Stock shall be in substantially equal monthly,
quarterly, semiannual, or annual installments over a period not longer
than five (5) years. In the case of a Participant with an account
balance attributable to Company Stock in excess of $500,000, the five
(5) year period shall be extended one (1) additional year (but not more
than five (5) additional years) for each $100,000 or fraction thereof
by which such balance exceeds $500,000. The dollar limits shall be
adjusted at the same time and in the same manner as provided in Code
Section 415(d).
(c) Any distribution to a Participant who has a benefit
which exceeds $5,000, shall require such Participant's consent if such
distribution commences prior to the later of his Normal Retirement Age
or age 62. However, if a Participant has begun to receive distributions
pursuant to an optional form of benefit under which at least one
scheduled periodic distribution has not yet been made, and if the value
of the Participant's benefit, determined at the time of the first
distribution under that optional form of benefit exceeded $5,000, then
the value of the Participant's benefit is deemed to continue to exceed
such amount. With regard to this required consent:
(1) The Participant must be informed of his right to
defer receipt of the distribution. If a Participant fails to
consent, it shall be deemed an election to defer the
commencement of payment of any benefit. However, any election
to defer the receipt of benefits shall not apply with respect
to distributions which are required under Section 7.5(f).
(2) Notice of the rights specified under this paragraph
shall be provided no less than 30 days and no more than 90
days before the date the distribution commences.
(3) Consent of the Participant to the distribution must
not be made before the Participant receives the notice and
must not be made more than 90 days before the date the
distribution commences.
34
<PAGE>
(4) No consent shall be valid if a significant detriment
is imposed under the Plan on any Participant who does not
consent to the distribution.
Any such distribution may commence less than 30 days
after the notice required under Regulation 1.411(a)-11(c) is given,
provided that: (1) the Administrator clearly informs the Participant
that the Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and (2) the Participant, after receiving the notice,
affirmatively elects a distribution.
(d) Notwithstanding anything herein to the contrary, the
Administrator, in his sole discretion, may direct that cash dividends
on shares of Company Stock allocable to Participants' or Former
Participants Company Stock Accounts be distributed to such
Participants or Former Participants within 90 days after the close of
the Plan Year in which the dividends are paid.
(e) Any part of a Participant's benefit which is retained
in the Plan after the Anniversary Date on which his participation ends
will continue to be treated as a Company Stock Account or as an Other
Investments Account (subject to Section 7.4(a)) as provided in Article
IV. However, neither account will be credited with any further Employer
contributions or Forfeitures.
(f) Notwithstanding any provision in the Plan to the
contrary, the distribution of a Participant's benefits shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder including
Regulation 401(a)(9)-2), the provisions of which are incorporated
herein by reference:
(1) A Participant's benefits shall be distributed or must
begin to be distributed to him not later than April 1st of the
calendar year following the later of the calendar year in
which the Participant attains age 70 1/2 or (ii) the calendar
year in which the Participant retires, provided, however, that
this clause (ii) shall not apply in the case of a Participant
who is a "five (5) percent owner" at any time during the Plan
Year ending with or within the calendar year in which such
owner attains age 70 1/2. Such distributions
35
<PAGE>
shall be equal to or greater than any required distribution.
Alternatively, distributions to a Participant must begin no
later than the applicable April 1st as determined under the
preceding paragraph and must be made over a period certain
measured by the life expectancy of the Participant (or the
life expectancies of the Participant and his designated
Beneficiary) in accordance with Regulations,
(2) Distributions to a Participant and his Beneficiaries
shall only be made in accordance with the incidental death
benefit requirements of Code Section 401(a) (9) (G) and the
Regulations thereunder.
(g) Notwithstanding any provision in the Plan to the
contrary, distributions upon the death of a Participant shall be made
in accordance with the following requirements and shall otherwise
comply with Code Section 401(a) (9) and the Regulations thereunder. If
it is determined pursuant to Regulations that the distribution of a
Participant's interest has begun and the Participant dies before his
entire interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as under the
method of distribution selected pursuant to Section 7.5 as of his date
of death. If a Participant dies before he has begun to receive any
distributions of his interest under the Plan or before distributions
are deemed to have begun pursuant to Regulations, then his death
benefit shall be distributed to his Beneficiaries by December 31st of
the calendar year in which the fifth anniversary of his date of death
occurs.
However, the 5-year distribution requirement of the
preceding paragraph shall not apply to any portion of the deceased
Participant's interest which is payable to or for the benefit of a
designated Beneficiary. In such event, such portion shall be
distributed over a period not extending beyond the life expectancy of
such designated Beneficiary provided such distribution begins not later
than December 31st of the calendar year immediately following the
calendar year in which the Participant died. However, in the event the
Participant's spouse (determined as of the date of the Participant's
death) is his Beneficiary, the requirement that distributions commence
within one year of a Participant's death shall not apply. In lieu
thereof, distributions must commence on or before the later of: (1)
December 31st of the calendar year
36
<PAGE>
immediately following the calendar year in which the Participant died;
or (2) December 31st of the calendar year in which the Participant
would have attained age 70 1/2. If the surviving spouse dies before
distributions to such spouse begin, then the 5-year distribution
requirement of this Sections shall apply as if the spouse was the
Participant.
(h) For purposes of this Section, the life expectancy of
a Participant and a Participant's spouse shall not be redetermined in
accordance with Code Section 401(a)(9)(D). Life expectancy and joint
and last survivor expectancy shall be computed using the return
multiples in Tables V and VI of Regulation 1.72-9.
(i) Except as limited by Sections 7.5 and 7.6, whenever
the Trustee is to make a distribution or to commence a series of
payments, the distribution or series of payments may be made or begun
as soon as is practicable. However, unless a Former Participant elects
in writing to defer the receipt of benefits (such election may not
result in a death benefit that is more than incidental), the payment of
benefits shall begin not later than the 60th day after the close of the
Plan Year in which the latest of the following events occurs:
(1) the date on which the Participant attains the earlier
of age 65 or the Normal Retirement Age specified herein;
(2) the 10th anniversary of the year in which the
Participant commenced participation in the Plan; or
(3) the date the Participant terminates his service with
the Employer.
(j) If a distribution is made at a time when a
Participant is not fully Vested in his Participant's Account and the
Participant may increase the Vested percentage in such account;
(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
37
<PAGE>
(2) at any relevant time, the Participant's Vested
portion of the separate account shall be equal to an
amount ("X") determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested
percentage at the relevant time, AB is the account balance at
the relevant time, D is the amount of distribution, and R is
the ratio of the account balance at the relevant time to the
account balance after distribution.
7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED
(a) Distribution of a Participant's benefit may be made
in cash or Company Stock or both, provided, however, that if a
Participant or Beneficiary so demands, such benefit shall be
distributed only in the form of Company Stock. Prior to making a
distribution of benefits, the Administrator shall advise the
Participant or his Beneficiary, in writing, of the right to demand that
benefits be distributed solely in Company Stock.
(b) If a Participant or Beneficiary demands that benefits
be distributed solely in Company Stock, distribution of a Participant's
benefit will be made entirely in whole shares or other units of
Company Stock. Any balance in a Participant's Other Investments Account
will be applied to acquire for distribution the maximum number of whole
shares or other units of Company Stock at the then fair market value.
Any fractional unit value unexpended will be distributed in cash. If
Company Stock is not available for purchase by the Trustee, then the
Trustee shall hold such balance until Company Stock is acquired and
then make such distribution, subject to Sections 7.5(i) and 7.5(f).
(c) The Trustee will make distribution from the Trust
only on instructions from the Administrator.
(d) Notwithstanding anything contained herein to the
contrary, if the Employer charter or by-laws restrict ownership of
substantially all shares of Company Stock to Employees and the Trust
Fund, as described in Code Section 409 (h) (2) (B) (ii) (I) , the
Administrator shall distribute a Participant's Account entirely in cash
without granting the Participant the right to demand distribution in
shares, of Company Stock.
38
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(e) Except as otherwise provided herein, Company Stock
distributed by the Trustee may be restricted as to sale or transfer by
the by-laws or articles of incorporation of the Employer, provided
restrictions are applicable to all Company Stock of the same class. If
a Participant is required to offer the sale of his Company Stock to the
Employer before offering to sell his Company Stock to a third party, in
no event may the Employer pay a price less than that offered to the
distributee by another potential buyer making a bona fide offer and in
no event shall the Trustee pay a price less than the fair market value
of the Company Stock.
7.7 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain
unpaid solely by reason of the inability of the Administrator, after sending
a registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such
Participant or his Beneficiary, the amount so distributable shall he treated
as a Forfeiture pursuant to the Plan. In the event a Participant or
Beneficiary is located subsequent to his benefit being reallocated, such
benefit shall be restored unadjusted for earnings or losses.
7.9 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant
in this Plan shall be subject to the rights afforded to any alternate payee"
under a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and as not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations
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order" and "earliest retirement age" shall have the meaning set forth under
Code Section 414 (p).
7.10 DIRECT ROLLOVER
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under
this Section, a distributee may elect, at the time and in the manner
prescribed by the Administrator, to have any portion of an eligible
rollover distribution that is equal to at least $500 paid directly to
an eligible retirement plan specified by the distributee in a direct
rollover.
(b) For purposes of this Section the following
definitions shall apply:
(1) An eligible rollover distribution is any distribution
of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more; any
distribution to the extent such distribution is required
under Code Section 401(a)(9); the portion of any other
distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities) ; and any
other distribution that is reasonably expected to total less
than $200 during a year.
(2) An eligible retirement plan is an individual
retirement account described in Code Section 408 (a) , an
individual retirement annuity described in Code Section
408(b), an annuity plan described in Code Section 403(a), or a
qualified trust described in Code Section 401(a), that accepts
the distributee's eligible rollover distribution. However, in
the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) A distributee includes an Employee or former
Employee. In addition, the Employee's or former
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Employee's surviving spouse and the Employee's or former
Employee's, spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code
Section 414(p), are distributees with regard to the interest
of the spouse or former spouse.
(4) A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to
amend the Plan, subject to the limitations of this Section. However,
any amendment which affects the rights, duties or responsibilities of
the Trustee and Administrator, other than an amendment to remove the
Trustee or Administrator, may only be made with the Trustee's and
Administrator's written consent. Any such amendment shall become
effective as provided therein upon its execution. The Trustee shall not
be required to execute any such amendment unless the Trust provisions
contained herein are a part of the Plan and the amendment affects the
duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it
authorizes or permits any part of the Trust Fund (other than such part
as is required to pay taxes and administration expenses) to be used for
or diverted to any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or causes any reduction
in the amount credited to the account of any Participant; or causes or
permits any portion of the Trust Fund to revert to, or become property
of the Employer.
(c) Except as permitted by Regulations, no Plan amendment
or transaction having the effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be effective to the extent
it eliminates or reduces any "Section 411(d)(6) protected benefit" or
adds or modifies conditions relating to "Section 411(d)(6) protected
benefits," the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d)(6) protected benefits" are benefits
described in Code
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Section 411(d)(6)(A), early retirement benefits and retirement-type
subsidies, and optional forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to
terminate the Plan by delivering to the Trustee and Administrator
written notice of such termination. Upon any full or partial
termination, all amounts credited to the affected Participants'
Accounts shall become 100% Vested as provided in Section 7.4 and
shall not thereafter be subject to forfeiture, and all unallocated
amounts shall be allocated to the accounts of all Participant in
accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer
shall direct the distribution of the assets of the Trust Fund to
Participants in a manner which is consistent with and satisfies the
provisions of Sections 7.5 and 7.6. Except as permitted by Regulations,
the termination of the Plan shall not result in the reduction of
"Section 411(d)(6) protected benefits" in accordance with
Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the 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 such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 8.1(c).
ARTICLE IX
TOP HEAVY
9.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 7.4 of the Plan and
the special minimum allocation requirements of Code Section 416(c) pursuant to
Section 4.3 of the Plan.
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9.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year
in which, as of the Determination Date, (1) the Present Value of
Accrued Benefits of Key Employees and (2) the sum of the Aggregate
Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds sixty percent (60%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan
Year, but such Participant was a Key Employee for any prior Plan Year,
such Participant's Present Value of Accrued Benefit and/or Aggregate
Account balance shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy or Super Top Heavy Plan
(or whether any Aggregation Group which includes this Plan is a Top
Heavy Group). In addition, if a Participant or Former Participant has
not performed any services for any Employer maintaining the Plan at
any time during the five year period ending on the Determination Date,
any accrued benefit for such Participant or Former Participant shall
not be taken into account for the purposes of determining whether
this Plan is a Top Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any
Plan Year in which, as of the Determination Date, (1) the Present Value
of Accrued Benefits of Key Employees and (2) the sum of the Aggregate
Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds ninety percent (90%) of the Present Value of
Accrued Benefits and Aggregate Accounts of all Key and Non-key
Employees under this Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account
as of the Determination Date is the sum of:
(1) his Participant's Account balance as of the most
recent valuation occurring within a twelve (12) month period
ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of any
contributions actually made after the Valuation Date but due
on or before the Determination Date, except for the first Plan
Year when such adjustment shall also reflect the amount of any
contributions made after the Determination
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Date that are allocated as of a date in that first Plan Year.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distributions
made after the Valuation Date and prior to the Determination
Date, such distributions are not included as distributions for
top heavy purposes to the extent that such distributions are
already included in the Participant's Aggregate Account
balance as of the Valuation Date. Notwithstanding anything
herein to the contrary, all distributions, including
distributions under a terminated plan which if it had not been
terminated would have been required to be included in an
Aggregation Group, will be counted. Further, distributions
from the Plan (including the cash value of life insurance
policies) of a Participant's account balance because of death
shall be treated as a distribution for the purposes of this
paragraph.
(4) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax deductible
qualified voluntary employee contributions shall not be
considered to be a part of the Participant's Aggregate Account
balance.
(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and
made from a plan maintained by one employer to a plan
maintained by another employer), if this Plan provides the
rollovers or plan-to-plan transfers, it shall always consider
such rollovers or plan-to-plan transfers as a distribution for
the purposes of this Section. If this Plan is the plan
accepting such rollovers or plan-to-plan transfers, it shall
not consider such rollovers or plan-to-plan transfers as part
of the Participant's Aggregate Account balance.
(6) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made
to a plan maintained by the same employer), if this Plan
provides the rollover or plan-to-plan transfer, it shall not
be counted as a distribution for purposes of this Section. If
this Plan is the plan accepting such rollover or plan-to-plan
transfer it shall consider such rollover or plan-to-plan
transfer as part of the Participant's Aggregate Account
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balance, irrespective of the date on which such rollover or
plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers
are to be treated as the same employer in (5) and (6) above,
all employers aggregated under Code Section 414(b), (c), (m)
and (o) are treated as the same employer.
(d) "Aggregation Group" means either a Required
Aggregation Group or a Permissive Aggregation Group as hereinafter
determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each plan of the Employer in
which a Key Employee is a participant in the Plan Year
containing the Determination Date or any of the four preceding
Plan Years, and each other plan of the Employer which enables
any plan in which a Key Employee participates to meet the
requirements of Code Sections 401(a)(4) or 410, will be
required to be aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top Heavy Plan if the Required
Aggregation Group is a Top Heavy Group. No plan in the
Required Aggregation Group will be considered a Top Heavy Plan
if the Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group. The Employer may also
include any other plan not required to be included in the
Required Aggregation Group, provided the resulting group,
taken as a whole, would continue to satisfy the provisions of
Code Sections 401(a)(4) and 410. Such group shall be known as
a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan
that is part of the Required Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which the
Determination Dates fall within the same calendar
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year shall be aggregated in order to determine whether such
plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated
plan of the Employer if it was maintained within the last five
(5) years ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the
preceding Plan Year, or (b) in the case of the first Plan Year, the
last day of such Plan Year.
(f) Present Value of Accrued Benefit: In the case of a
defined benefit plan, the Present Value of Accrued Benefit for a
Participant other than a Key Employee, shall be as determined using the
single accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C). The determination of
the Present Value of Accrued Benefit 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 Code
Section 416 and the Regulations thereunder for the first and second
plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in
which, as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key
Employees under all defined benefit plans included in the
group, and
(2) the Aggregate Accounts of Key Employees under all
defined contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum
determined for all Participants.
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the
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Employer to discharge any Participant or Employee at any time regardless of the
effect which such discharge shall have upon him as a Participant of this Plan.
10.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit
which shall be payable out of the Trust Fund to any person (including
a Participant or his Beneficiary) shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be void;
and no such benefit shall in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by the
Trustee, except to such extent as may be required by law.
(b) This provision shall not apply to a "qualified
domestic relations order" defined in Code Section 414(p), and those
other domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the
extent provided under a "qualified domestic relations order," a former
spouse of a Participant shall be treated as the spouse or surviving
spouse for all purposes under the Plan.
10.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the
Act and the laws of the State of California, other than its laws respecting
choice of law, to the extent not preempted by the Act.
10.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
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10.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee, the Employer or
the Administrator may be a party, and such claim, suit, or proceeding is
resolved in favor of the Trustee, the Employer or the Administrator, they
shall be entitled to be reimbursed from the Trust Fund for any and all costs,
attorney's fees, and other expenses pertaining thereto incurred by them for
which they shall have become liable.
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically
permitted by law, it shall be impossible by operation of the Plan or of
the Trust, by termination of either, by power of revocation or
amendment, by the happening of any contingency, by collateral
arrangement or by any other means, for any part of the corpus or
income of any trust fund maintained pursuant to the Plan or any funds
contributed thereto to be used for, or diverted to, purposes other
than the exclusive benefit of Participants, Retired Participants, or
their Beneficiaries.
(b) In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the time of
payment and the Trustees shall return such amount to the Employer
within the one (1) year period. Earnings of the Plan attributable to
the excess contributions may not be returned to the Employer but any
losses attributable thereto must reduce the amount so returned.
10.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless
exempted by the Act and regulations thereunder, shall be bonded in an amount
not less than 10% of the amount of the funds such Fiduciary handles;
provided, however, that the minimum bond shall be $1,000 and the maximum
bond, $500,000. The amount of funds handled shall be determined at the
beginning of each Plan Year by the amount of funds handled by such person,
group, or class to be covered and their predecessors, if any, during the
preceding Plan Year, or if there is no preceding Plan Year, then by the
amount of the funds to be handled during the then current year. The bond
shall provide protection to the Plan against any loss by reason of acts of
fraud or dishonesty by the Fiduciary alone or in connivance with others. The
surety shall be a corporate surety company (as such term is used in Act
Section
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412(a)(2)), and the bond shall be in a form approved by the Secretary of
Labor. Notwithstanding anything in the Plan to the contrary, the cost of such
bonds shall be an expense of and may, at the election of the Administrator,
be paid from the Trust Fund or by the Employer.
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer, the Administrator, nor the Trustee, nor their
successors shall be responsible for the validity of any Contract issued
hereunder or for the failure on the part of the insurer to make payments
provided by any such Contract, or for the action of any person which may delay
payment or render a Contract null and void or unenforceable in whole or in part.
10.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
10.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary,
or to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the
Employer, either of whom may require such Participant, legal representative,
Beneficiary, guardian or committee, as a condition precedent to such payment, to
execute a receipt and release thereof in such form as shall be determined by
the Trustee or Employer.
10.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
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10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan or as accepted by or assigned to them pursuant to any
procedure provided under the Plan, including but not limited to any agreement
allocating or delegating their responsibilities, the terms of which are
incorporated herein by reference. In general, unless otherwise indicated herein
or pursuant to such agreements, the Employer shall have the duties specified in
Article II hereof, as the same may be allocated or delegated thereunder,
including but not limited to the responsibility for making the contributions
provided for under Section 4.1; and shall have the authority to appoint and
remove the Trustee and the Administrator; to formulate the Plan's "funding
policy and method"; and to amend or terminate, in whole or in part, the Plan.
The Administrator shall have the responsibility for the administration of the
Plan, including but not limited to the items specified in Article II of the
Plan, as the same may be allocated or delegated thereunder. The Trustee shall
have the responsibility of management and control of the assets held under the
Trust, except to the extent directed pursuant to Article II or with respect to
those assets, the management of which has been assigned to an Investment
Manager, who shall be solely responsible for the management of the assets
assigned to it, all as specifically provided in the Plan and any agreement with
the Trustee. Each named Fiduciary warrants that any directions given,
information furnished, or action taken by it shall be in accordance with the
provisions of the Plan, authorizing or providing for such direction, information
or action. Furthermore, each named Fiduciary may rely upon any such direction,
information or action of another named Fiduciary as being proper under the
Plan, and is not required under the Plan to inquire into the propriety of any
such direction, information or action. It is intended under the Plan that each
named Fiduciary shall be responsible for the proper exercise of its own powers,
duties, responsibilities and obligations under the Plan as specified or
allocated herein. No named Fiduciary shall guarantee the Trust Fund in any
manner against investment loss or depreciation in asset value. Any person or
group may serve in more than one Fiduciary capacity. In the furtherance of their
responsibilities hereunder, the "named Fiduciaries" shall be empowered to
interpret the Plan and Trust and to resolve ambiguities, inconsistencies and
omissions, which findings shall be binding, final and conclusive.
10.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
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10.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan receives
an adverse determination with respect to its initial qualification,
then the Plan may return such contributions to the Employer within one
year after such determination, provided the application for the
determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted,
or such later date as the Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary,
except Sections 3.5, 3.6, and 4.1(b), any contribution by the Employer
to the Trust Fund is conditioned upon the deductibility of the
contribution by the Employer under the Code and, to the extent any such
deduction is disallowed, the Employer may, within one (1) year
following the disallowance of the deduction, demand repayment of such
disallowed contribution and the Trustee shall return such contribution
within one (1) year following the disallowance. Earnings of the Plan
attributable to the excess contribution may not be returned to the
Employer, but any losses attributable thereto must reduce the amount so
returned.
10.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
10.16 SECURITIES AND EXCHANGE COMMISSION APPROVAL
The Employer may request an interpretative letter from the
Securities and Exchange Commission stating that the transfers of Company
Stock contemplated hereunder do not involve transactions requiring a
registration of such Company Stock under the Securities Act of 1933. In the
event that a favorable interpretative letter is not obtained, the Employer
reserves the right to amend the Plan and Trust retroactively to their
Effective Dates in order to obtain a favorable interpretative letter or to
terminate the Plan.
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10.17 VOTING COMPANY STOCK
The Trustee shall vote all Company Stock held by it as part of the
Plan assets at such time and in such manner as the Administrator shall
direct. Provided, however, that if any agreement entered into by the Trust
provides for voting of any shares of Company Stock pledged as security for
any obligation of the Plan, then such shares of Company Stock shall be voted
in accordance with such agreement. If the Administrator fails or refuses to
give the Trustee timely instructions as to how to vote any Company Stock as
to which the Trustee otherwise has the right to vote, the Trustee shall not
exercise its power to vote such Company Stock and shall consider the
Administrator's failure or refusal to give timely instructions as an exercise
of the Administrator's rights and a directive to the Trustee not to vote said
Company Stock.
Notwithstanding the foregoing, if the Employer has a
registration-type class of securities each Participant or Beneficiary shall
be entitled to direct the Trustee as to the manner in which the Company Stock
which is entitled to vote and which is allocated to the Company Stock Account
of such Participant or Beneficiary is to be voted. If the Employer does not
have a registration-type class of securities, each Participant or Beneficiary
in the Plan shall be entitled to direct the Trustee as to the manner in which
voting rights on shares of Company Stock which are allocated to the Company
Stock Account of such Participant or Beneficiary are to be exercised with
respect to any corporate matter which involves the voting of such shares with
respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such similar
transaction as prescribed in Regulations. For purposes of this Section the
term "registration-type class of securities" means: (A) a class of securities
required to be registered under Section 12 of the Securities Exchange Act of
1934; and (B) a class of securities which would be required to be so
registered except for the exemption from registration provided in subsection
(g) (2) (H) of such Section 12.
If the Employer does not have a registration-type class of
securities and the by-laws of the Employer require the Plan to vote an issue
in a manner that reflects a one-man, one-vote philosophy, each Participant or
Beneficiary shall be entitled to cast one vote on an issue and the Trustee
shall vote the shares held by the Plan in proportion to the results of the
votes cast on the issue by the Participants and Beneficiaries.
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IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
Redlands Centennial Bank
By /s/ Beth Sanders
--------------------------------
EMPLOYER
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REDLANDS CENTENNIAL BANK
EMPLOYEE STOCK OWNERSHIP PLAN
SUMMARY PLAN DESCRIPTION
<PAGE>
TABLE OF CONTENTS
I
INTRODUCTION TO YOUR PLAN
II
GENERAL INFORMATION ABOUT YOUR PLAN
1. General Plan Information .......................................2
2. Employer Information ...........................................2
3. Plan Administrator Information .................................2
4. Plan Trustee Information .......................................3
5. Service of Legal Process .......................................3
III
PARTICIPATION IN YOUR PLAN
1. Eligibility Requirements .......................................3
2. Participation Requirements .....................................3
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan .............................4
2. Your Share of Employer Contributions ...........................4
3. Compensation ...................................................5
4. Forfeitures ....................................................6
5. Directed Investments............................................6
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement ................6
2. Distribution of Benefits Upon Late Retirement...................6
3. Distribution of Benefits Upon Death ............................6
4. Distribution of Benefits Upon Disability .......................7
5. Distribution of Benefits Upon Termination of Employment ........8
6. Vesting in Your Plan............................................8
7. Benefit Payment Options.........................................9
8. Treatment of Distributions From Your Plan......................10
9. Domestic Relations Order.......................................11
<PAGE>
10. Pension Benefit Guaranty Corporation............................11
VI
INFORMATION REGARDING COMPANY STOCK
1. Voting of Company Stock ........................................12
VII
SERVICE RULES
1. Period of Service...............................................12
2. Hour of Service.................................................12
3. 1-Year Break in Service.........................................13
4. Uniformed Service Employment and Reemployment Rights Act........13
VIII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of Top Heavy Rules..................................14
IX
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
1. The Claim, Review Procedure.....................................15
X
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights................................15
XI
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment.......................................................17
2. Termination.....................................................17
<PAGE>
REDLANDS CENTENNIAL BANK
EMPLOYEE STOCK OWNERSHIP PLAN
SUMMARY PLAN DESCRIPTION
I
INTRODUCTION TO YOUR PLAN
Redlands Centennial Bank wishes to recognize the efforts its employees
have made to its success and to reward them by adopting an Employee Stock
Ownership Plan. This Plan will be for the exclusive benefit of eligible
employees and their beneficiaries.
The purpose of this Plan is to reward eligible employees for long and
loyal service by providing them with retirement benefits.
Between now and your retirement, your Employer intends to make
contributions for you and other eligible employees. Contributions to the Plan
will be invested primarily in Company Stock. Your efforts added to the
efforts of all other employees contribute to the profitability and growth of
the employer and thereby increase the value of Company Stock and your
benefits in the Plan. When you retire, you will be entitled to, receive the
value of the amounts which have accumulated in your account in the form of
Company Stock.
Your Employer has the right to submit this Plan to the Internal
Revenue Service for approval. The Internal Revenue Service will issue a
"determination letter" to your Employer approving this Plan as a "qualified"
retirement plan, if this Plan meets specific legal requirements.
This Summary Plan Description is a brief description of your Plan
and your rights, obligations, and benefits under that Plan. Some of the
statements made in this Summary Plan Description are dependent upon this Plan
being "qualified" under the provisions of the Internal Revenue Code. This
Summary Plan Description is not meant to interpret, extend, or change the
provisions of your Plan in any way. The provisions of your Plan may only be
determined accurately by reading the actual Plan document.
A copy of your Plan is on file at your Employer's office and may be
read by you, your beneficiaries, or your legal representatives at any
reasonable time. If you have any questions regarding either your Plan or this
Summary Plan Description, you should ask your Plan's Administrator. In the
event of any discrepancy between this Summary Plan Description and the actual
provisions of the Plan, the Plan will govern.
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II
GENERAL INFORMATION ABOUT YOUR PLAN
There is certain general information which you may need to know
about your Plan. This information has been summarized for you in this section.
1. General Plan Information
Redlands Centennial Bank Employee Stock Ownership Plan is the name of
your Plan.
Your Employer has assigned Plan Number 002 to your Plan.
The provisions of your plan become effective on February 1, 2000, which
is called the Effective Date of the Plan.
Your Plan's, records are maintained on a twelve-month period of
time. This is known as the Plan Year. The Plan Year begins on January 1st and
ends on December 31st, except for the first Plan Year which begins on
February 1st and ends on December 31st.
Certain valuations and distributions are made on the Anniversary Date
of your Plan. This date is December 31st.
The contributions made to your Plan will be held and invested by the
Trustee of your Plan.
Your Plan and Trust will be governed by the laws of the State of
California.
2. Employer Information
Your Employer's name, address and identification number are:
Redlands Centennial Bank
218 East State Street
Redlands, California 92373
3. Plan Administrator Information
The name, address and business telephone number of your Plan's
Administrator are:
Redlands Centennial Bank
218 East State Street
Redlands, California 92373
(909) 798-3611
Your Plan's Administrator keeps the records for the Plan and is
responsible for the administration of the Plan. The
2
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Administrator has discretionary authority to construe the terms of the Plan
and make determinations on questions which may affect your eligibility for
benefits. Your Plan's Administrator will also answer any questions you may
have about your Plan,
4. Plan Trustee Information
The name of your Plan's Trustee is:
Douglas C. Spencer
The principal place of business of your Plan's Trustee is:
218 East State Street
Redlands, California 92373
Your Plan's Trustee has been designated to hold and invest Plan
assets for the benefit of you and other Plan participants. The trust fund
established by the Plan's Trustee will be the funding medium used for the
accumulation of assets from which benefits will be distributed.
S. Service of Legal Process
The name and address of your Plan's agent for service of legal
process are:
Plan Administrator of Redlands Centennial Bank Employee
Stock Ownership Plan
218 East State Street
Redlands, California 92373
Service of legal process may also be made upon the Trustee.
III
PARTICIPATION IN YOUR PLAN
Before you become a member or a "participant" in the Plan, there are
certain eligibility and participation rules which you must meet. These rules are
explained in this section.
1. Eligibility Requirements
You will be eligible to participate in the Plan on the date of your
employment.
2. Participation Requirements
Once you have satisfied your Plan's eligibility requirements, your
next step will be to actually become a member or a "participant" in the Plan.
You will become a participant on a specified day of the Plan Year. This day
is called the Effective Date of Participation.
3
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You will become a participant on the day you meet the eligibility
requirements.
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan
As a participant, you may be eligible to share in and benefit from
the contributions made by your employer. Each year, your Employer's
contribution, if any, will be placed into a trust fund for the benefit of
Plan participants. The Administrator of your Plan will then establish and
maintain a separate account for you and all other participants, into which
the contributions will be placed.
Each year, your Employer will determine the amount to contribute to
your Plan. This contribution is discretionary.
You must complete a Period of Service during the Plan Year to share in
this contribution.
In determining your eligibility to share in contributions for the
year, there are special rules which apply if your employment terminates due
to your Retirement (Normal or Late) , Total and Permanent Disability or death.
In such cases, you will be eligible to share in the contributions made
by your Employer in accordance with the following:
If the reason your employment terminated is due to your Retirement
(Normal or Late) , Total and Permanent Disability or death, then you
will not be eligible to share in the contribution for the year even if
you satisfied the requirements explained above.
2. Your Share of Employer Contributions
Your Employer's contribution will be "allocated" or divided among
participants eligible to share in the contribution for the Plan Year. Your share
of the contribution will depend upon how much compensation you received during
the year and the compensation received by other eligible participants.
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Your share of your Employer's discretionary contribution is determined
by the following fraction:
Your Compensation
Employer's X -------------------------
Discretionary contribution Total Compensation of All
Participants Eligible to
Share
For example:
Suppose the Employer's contribution for the Plan Year is $20,000.
Employee A's compensation for the Plan Year is $25,000. The total
compensation of all participants eligible to share, including Employee
A, is $250,000. Employee A's share will be:
$20,000 X $25,000 or $2,000
--------
$250,000
In addition to the Employer's contributions made to your account, your
account will be credited annually with a share of the investment earnings or
losses of the trust fund.
You should also be aware that the law imposes certain limits on how
much money may be allocated to your account for a year. These limits are
extremely complex but generally no more than the lesser of $30,000 or 25% of
your compensation may be allocated to you (excluding earnings or losses) in any
year. The Administrator will inform you if these limits have affected you.
3. Compensation
For the purposes of your Plan, compensation has a special meaning.
Compensation is defined as your total compensation during a Plan Year that is
subject to income tax and is reflected on your W-2 Form, but
-- excluding commissions.
-- including your salary reduction contributions to any
plan or arrangement maintained by your Employer.
Your compensation will be recognized for benefit purposes for the
entire Plan Year.
For the Plan Year beginning in 2000 and for Plan Years thereafter, the
Plan, by law, cannot recognize compensation in excess of $170,000. This amount
will be adjusted in future years for cost of living increases. For any short
Plan Year, the adjusted limit will be prorated based upon the number of full
months in the short Plan Year.
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4. Forfeitures
Forfeitures are created when participants terminate employment
before becoming entitled to their full benefits under the Plan. Your
account may grow from the forfeitures of other participants. -Forfeitures
will be "allocated" or divided among participants eligible to share for a
Plan Year.
5. Directed Investments
When you have completed ten (10) Periods of Service as a participant
and have attained age fifty-five (55), you will have the right to direct the
investment of a portion of your account attributable to Company Stock. The
Administrator will advise you of any such rights.
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement
Your Normal Requirement Date is the first day of the month coinciding
with or next following your normal Retirement Age.
You will attain your Normal Retirement Age when you reach your 65th
birthday.
At your Normal Retirement Age, you will be entitled to 100% of your
account balance. Payment of your benefits will, at your election, begin as soon
as practicable following your actual retirement but not prior to your Normal
Retirement Date. If you continue working after your Normal Retirement Age, your
benefits will be deferred to your Late Retirement Date. However, if you are a 5%
owner, payment cannot be deferred past the April 1st following the end of the
year in which you attain age 70 1/2.
2. Distribution of Benefits Upon Late Retirement
You may remain employed past your Plan's Normal Retirement Date and
retire instead on your Late Retirement Date. Your Late Retirement Date is the
first day of the month coinciding with or next following the date you choose
to retire after first having reached your Normal Retirement Date. On your Late
Retirement Date, you will be entitled to 100% of your Account. Actual benefit
payments will begin as soon as practicable following your Late Retirement
Date.
3. Distribution of Benefits upon Death
Your beneficiary will he entitled to 100% of your account balance upon
your death.
6
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If you are married at the time of your death, your spouse will be the
beneficiary of the death benefit, unless you otherwise elect in writing on a
form to be furnished to you by the Administrator. IF YOU WISH TO DESIGNATE A
BENEFICIARY OTHER THAN YOUR SPOUSE, HOWEVER, YOUR SPOUSE MUST IRREVOCABLY
CONSENT TO WAIVE ANY RIGHT TO THE DEATH BENEFIT. YOUR SPOUSE'S CONSENT MUST BE
IN WRITING, BE WITNESSED BY A NOTARY OR A PLAN REPRESENTATIVE AND ACKNOWLEDGE
THE SPECIFIC NONSPOUSE BENEFICIARY.
If, however,
(a) your spouse has validly waived any right to the death
benefit in the manner outlined above,
(b) your spouse cannot be located; or
(c) you are not married at the time of your death,
then your death benefit be paid to the beneficiary of your own choosing in
installments or as a single lump sum, as you or your beneficiary may elect. You
may designate the beneficiary on a form to be supplied to you by the
Administrator. If you change your designation, your spouse must again consent
to the change.
If your designated beneficiary is a person (rather than your estate or
most trusts) then minimum distributions of your death benefit must generally
begin within one year of your death and must be paid over a period not extending
beyond your beneficiary's life expectancy. If your spouse is the beneficiary,
the start of payments may be delayed until the year in which you would have
attained age 70 1/2. Generally, if your beneficiary is not a person, then your
entire death benefit must he paid within five years after your death.
Since your spouse had certain rights in the death benefit, you should
immediately report any change in your marital status to the Administrator.
4. Distribution of Benefits Upon Disability
Under your Plan, disability is defined as a physical or mental
condition resulting from bodily injury, disease, or mental disorder which
renders you incapable of continuing any gainful occupation with your Employer.
This condition must constitute total disability under the federal Social
Security Acts.
If you become disabled while a participant, you will be entitled to
100% of your account balance. Payment of your disability benefits will be made
to you as if you had retired. However, if the value of your vested benefit is
less than a certain dollar threshold, a distribution will be made to you
7
<PAGE>
within a reasonable time after you terminate employment. (See the Section in
this Article entitled "Benefit Payment Options.")
5. Distribution of Benefit Upon Termination of Employment
Your Plan is designed to encourage you to stay with your Employer until
retirement. Payment of your account balance under your Plan is only available
upon your death, disability or retirement.
If your employment terminates for reasons other than those listed above,
you will be entitled to receive only your "vested percentage" of your account
balance and the remainder of your account will be forfeited. Only contributions
made by your Employer are subject to forfeiture. (See the Section in this
Article entitled "Vesting in Your Plan.")
If you so elect, the Administrator will direct the Trustee to distribute
your vested benefit attributable to Company Stock to you before the date it
would normally be distributed (upon your death, disability or retirement), but
not until one year after the close of the Plan Year which is the fifth Plan Year
following the Plan Year in which you terminate employment. If you are reemployed
within such period, the commencement of your distribution will be postponed.
However, if the value of your vested benefit is less than a certain dollar
threshold, a distribution will be made to you within a reasonable time after you
terminate employment. (See the Section in this Article entitled "Benefit
Payment Options.")
6. Vesting in Your Plan
Your "vested percentage" in your account is determined under the following
schedule and is based on vesting Periods of Service. You will always, however,
be 100% vested upon your Normal Retirement Age. (See the Section in this
Article entitled "Distribution of Benefits Upon Normal Retirement.")
Vesting Schedule
Periods of Percentage
Service
1 0%
2 40%
3 60%
4 80%
5 100%
Periods of Service prior to the time you attained age 18 will not be
counted for vesting purposes.
Your vested benefit will be distributed to you or your beneficiary upon
your death, disability or retirement.
8
<PAGE>
7. Benefit Payment Options
The Administrator, in accordance with your election, will direct the
Trustee to pay your benefits to you under one or more of the following options:
(a) a single lump-sum payment,
(b) installments over a period not extending beyond the
earlier of your assumed life expectancy (or your and your beneficiary's
assumed life expectancies) determined at the time of distribution.
Notwithstanding the above, unless you elect in
writing a longer period, Company Stock will he distributed to you in
substantially equal installments over a period not longer than five
years. A special rule may spread the distribution of the Company Stock
in the account of participants with large account balances over an
even longer period of time.
Distribution of your account at retirement will be in the form of cash
or Company Stock or both. However, you or your beneficiary may demand
distribution of your entire account in the form of Company Stock. Cash may be
paid (1) in lieu of partial shares of Company Stock, or (2) in certain
circumstances where it may not be possible for the Plan to purchase Company
Stock for distribution.
If your vested benefit under the Plan does not exceed $5,000, the
Administrator will direct the Trustee to distribute your vested benefit to you
if the distribution occurs prior to the later of your age 62 or Normal
Retirement Age.
If your vested benefit under the Plan exceeds $5,000, you must give
written consent before the distribution may be made.
If you have started receiving installments, and the value of your
vested benefit at the time of the first installment exceeded the limit in the
preceding paragraph, then the Administrator cannot pay out your benefits to you
without your consent if the value of your vested benefit is now less than the
limit at the time of your first installment.
In addition to the benefit payment mentioned above, there are rules
which require that certain minimum distributions be made from the Plan. If you
are a 5% owner, distributions are required to begin not later than the April
1st following the end of the year in which you reach age 70 1/2. If you are not
a 5% owner, distributions are required to begin not later than the later of the
April 1st following the end of the year in which you
9
<PAGE>
reach age 70 1/2 or retire. You should see the Administrator if you feel you
may be affected by these rules.
8. Treatment of Distributions From Your Plan
Whenever you receive a distribution from your Plan, it will normally be
subject to income taxes. You may, however, reduce, or defer entirely, the tax
due on your distribution through use of one of the following methods:
(a) The rollover of all or a portion of the distribution
to an Individual Retirement Account (IRA) or another qualified employer
plan. This will result in no tax being due until you begin withdrawing
funds from the IRA or other qualified employer plan. The rollover of
the distribution, however, MUST be made within strict time frames
(normally, within 60 days after you receive your distribution). Under
certain circumstances all or a portion of a distribution may not
qualify for this rollover treatment. In addition, most distributions
will be subject to mandatory federal income tax withholding at a rate
of 20%. This will reduce the amount you actually receive. For this
reason, if you wish to rollover all or a portion of your distribution
amount, the direct transfer option described in paragraph (b) below
would be the better choice.
(b) You may request for most distributions that a direct
transfer of all or a portion of your distribution amount be made to
either an Individual Retirement Account (IRA) or another qualified
employer plan willing to accept the transfer. A direct transfer will
result in no tax being due until you withdraw funds from the IRA or
other qualified employer plan. Like the rollover, under certain
circumstances all or a portion of the amount to be distributed may not
qualify for this direct transfer, e.g., a distribution of less than
$500 will not be eligible for a direct transfer. If you elect to
actually receive the distribution rather than request a direct
transfer, then in most cases 20% of the distribution amount will be
withheld for federal income tax purposes.
(c) The election of favorable income tax treatment under
"10-year forward averaging," "5-year forward averaging" or, if you
qualify, "capital gains" method of taxation.
WHENEVER YOU RECEIVE A DISTRIBUTION, THE ADMINISTRATOR WILL DELIVER TO
YOU A MORE DETAILED EXPLANATION OF THESE OPTIONS. HOWEVER, THE RULES WHICH
DETERMINE WHETHER YOU QUALIFY FOR FAVORABLE TAX TREATMENT ARE VERY COMPLEX.
YOU SHOULD CONSULT WITH QUALIFIED TAX COUNSEL BEFORE MAKING A CHOICE.
10
<PAGE>
9. Domestic Relations Order
As a general rule, your interest in your account, including your
"vested interest," may not be alienated. This means that your interest may not
be sold, used as collateral for a loan, given away or otherwise transferred. In
addition, your creditors may not attach, garnish or otherwise interfere with
your account.
There is an exception, however, to this general rule. The
Administrator may be required by law to recognize obligations you incur as a
result of court ordered child support or alimony payments. The Administrator
must honor a "qualified domestic relations order." A "qualified domestic
relations order" is defined as a decree or order issued by a court that
obligates you to pay child support or alimony, or otherwise allocates a
portion of your assets in the Plan to your spouse, former spouse, child or
other dependent. If a qualified domestic relations order is received by the
Administrator, all or a portion of your benefits may be used to satisfy the
obligation. The Administrator will determine the validity of any domestic
relations order received.
10. Pension Benefit Guaranty Corporation
Benefits provided by your Plan are NOT insured by the Pension Benefit
Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income
Security Act of 1974 because the insurance provisions under ERISA are not
applicable to your Plan.
11
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VI
INFORMATION REGARDING COMPANY STOCK
1. Voting of Company Stock
The Trustee of the Plan will vote all company Stock held by it as a
part of the Plan assets at the direction of the Administrator, provided that
you or your beneficiary will be entitled to direct the Trustee as to the
manner in which voting rights on shares of Company Stock which are allocated
to your account are to be exercised (i) with respect to any corporate matter
which involves the voting of such shares with respect to the approval or
disapproval of any corporate merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially all assets
of a trade or business, or such similar transaction, and (ii) with respect to
all corporate matters if, at the time of the vote thereon, the Company Stock
is a "registration-type" class of securities. If you do not timely exercise
your right to vote Company Stock, the Trustee, at the direction of the
Administrator, will vote such Company Stock.
VII
SERVICE RULES
1. Period of Service
The term "Period of Service" is used in this Summary Plan Description
and in your Plan.
Your Period of Service is the aggregate of all your periods commencing
with the first day of your employment or reemployment with your Employer and
ending on the date a 1-Year Break in Service begins. Your first day of
employment or reemployment is the first day you perform an Hour of Service. You
will also receive credit for any Period of Severance of less than twelve
consecutive months. Fractional periods of a year will be expressed in terms of
days.
You will incur a Period of Severance for any continuous period of time
during which you are not employed by your Employer. Such period will begin on
the date you retire, quit or are discharged, or if earlier, the twelve
consecutive month anniversary of the date on which you were otherwise first
absent from service.
2. Hour of Service
You will be credited with an Hour of Service for each hour for which
you are paid or entitled to payment for the performance of duties for your
Employer.
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3. 1-Year Break in Service
A 1-Year Break in Service is a Period of Severance of at least
twelve consecutive months. However, if you are absent from work for maternity
or paternity reasons, the twelve consecutive month period beginning on the
first anniversary of your first day of such absence will not constitute a
1-Year Break in Service.
4. Uniformed Services Employment and Reemployment Rights Act
If you are a veteran and are reemployed under the Uniformed Services
Employment and Reemployment Rights Act of 1994, your qualified military
service may be considered service with the Employer. If you may be affected
by this law, ask your Administrator for further details.
VIII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules"
A Plan that primarily benefits "key employees" is called a "top
heavy plan." Key employees are certain owners or officers of your Employer. A
Plan is a "top heavy plan" when more than 60% of the contributions or
benefits have been allocated to key employees.
Each year, the Administrator is responsible for determining whether
your Plan is a "top heavy plan."
If your Plan becomes top heavy in any Plan Year, then non-key and
key employees will be entitled to certain "top heavy minimum benefits," and
other special rules will apply. Among these top heavy rules are the following:
(a) Your Employer may be required to make a contribution
to your account in order to provide you with at least "top heavy
minimum benefits."
(b) If you are a participant in more than one Plan, you
may not be entitled to "top heavy minimum benefits" under both Plans.
IX
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
Benefits will be paid to participants and their beneficiaries without
the necessity of formal claims. You or your beneficiaries, however, may make a
request for any Plan benefits to which you may be entitled. Any such request
must be made in writing, and it should be made to the Administrator. (See the
Article in this Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN.")
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Your request for Plan benefits shall be considered a claim for Plan
benefits, and it will be subject to a full and fair review. If your claim is
wholly or partially denied, the Administrator will furnish you with a written
notice of this denial. This written notice must be provided to you within a
reasonable period of time (generally 90 days) after the receipt of your claim by
the Administrator. The written notice must contain the following information:
(a) the specific reason or reasons for the denial;
(b) specific reference to those Plan provisions on which
the denial is based;
(c) a description of any additional information or
material necessary to correct your claim and an explanation of why such
material or information is necessary; and
(d) appropriate information as to the steps to be taken
if you or your beneficiary wishes to submit your claim for review.
If notice of the denial of a claim is not furnished to you in
accordance with the above within a reasonable period of time, your claim will be
deemed denied. You will then be permitted to proceed to the review stage
described in the following paragraphs.
If your claim has been denied, and you wish to submit your claim for
review, you must follow the Claims Review Procedure.
1. The Claims Review Procedure
(a) Upon the denial of your claim for benefits, you may
file your claim for review, in writing, with the Administrator.
(b) YOU MUST FILE THE CLAIM FOR REVIEW NO LATER THAN 60
DAYS AFTER YOU HAVE RECEIVED WRITTEN NOTIFICATION OF THE DENIAL OF YOUR
CLAIM FOR BENEFITS, OR IF NO WRITTEN DENIAL OF YOUR CLAIM WAS PROVIDED,
NO LATER THAN 60 DAYS AFTER THE DEEMED DENIAL OF YOUR CLAIM.
(c) You may review all pertinent documents relating to
the denial of your claim and submit any issues and comments, in
writing, to the Administrator.
(d) Your claim for review must be given a full and fair
review. If your claim is denied, the Administrator must provide you
with written notice of this denial within 60 days after the
Administrator's receipt of your written claim for review. There may
be times when this 60 day period may
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be extended. This extension may only be made, however, where there are
special circumstances which are communicated to you in writing within
the 60 day period. If there is an extension, a decision shall be made
as soon as possible, but not later than 120 days after receipt by the
Administrator of your claim for review.
(e) The Administrator's decision on your claim for
review will be communicated to you in writing and will include specific
references to the pertinent Plan provisions on which the decision was
based.
(f) If the Administrator's decision on review is not
furnished to you within the time limitations described above, your
claim will be deemed denied on review.
(g) If benefits are provided or administered by an
insurance company, insurance service, or other similar organization
which is subject to regulation under the insurance laws, the claims
procedure relating to these benefits may provide for review. If so,
that company, service, or organization will be the entity to which
claims are addressed. If you have any questions regarding the proper
person or entity to address claims, you should ask the Administrator.
X
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights
As a participant in this Plan you are entitled to certain rights and
protections under the Employee Retirement income Security Act of 1974, also
called ERISA. ERISA provides that all Plan participants are entitled to:
(a) examine, without charge, all Plan documents,
including:
(1) insurance contracts;
(2) collective bargaining agreements; and
(3) copies of all documents filed by the Plan with the
U.S. Department of Labor, such as detailed annual reports and
Plan descriptions.
This examination may take place at the Administrator's office
and at other specified employment locations of the Employer.
(See the Article in this Summary entitled "GENERAL INFORMATION
ABOUT YOUR PLAN"):
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(b) obtain copies of all Plan documents and other Plan
information upon written request to the Plan Administrator. The
Administrator may make a reasonable charge for the copies;
(c) receive a summary of the Plan's annual financial
report. The Administrator is required by law to furnish each
participant with a copy of this summary annual report;
(d) obtain a statement telling you whether you have a
right to receive a retirement benefit at Normal Retirement Age and, if
so, what your benefits would be at Normal Retirement Age if you stop
working under the Plan now. If you do not have a right to a retirement
benefit, the statement will tell you how many years you have to
work to get a right to a retirement benefit. THIS STATEMENT MUST BE
REQUESTED IN WRITING AND IS NOT REQUIRED TO BE GIVEN MORE THAN ONCE A
YEAR. The Plan must provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the Plan. The
people who operate your Plan, called "fiduciaries" of the Plan, have a duty to
do so prudently and in the interest of you and other Plan participants and
beneficiaries. No one, including your employer or any other person, may fire you
or otherwise discriminate against you in any way to prevent you from obtaining a
pension benefit or exercising your rights under ERISA.
If your claim for a retirement benefit is denied in whole or in part,
you must receive a written explanation of the reason for the denial. You have
the right to have the Administrator review and reconsider your claim. (See the
Article in this Summary entitled "CLAIMS BY PARTICIPANTS AND BENEFICIARIES.")
Under ERISA, there are steps you can take to enforce the above
rights. For instance, if you request materials from the Plan and do not
receive them within 30 days, you may file suit in a federal court. In such a
case, the court may require the Administrator to provide the materials and
pay you up to $110.00 a day until you receive the materials, unless the
materials were not sent because of reasons beyond the control of the
Administrator.
If you have a claim for benefits which is denied or ignored, in whole
or in part, you may file suit in a state or federal court.
If the Plan's fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in a federal court. The court
will decide who should pay
16
<PAGE>
court costs and legal fees. If you are successful, the court may order the
person you have sued to pay these costs and fees. If you lose, the court may
order you to pay these costs and fees if, for example, it finds your claim is
frivolous.
If you have any questions about this statement, or about your rights
under ERISA, you should contact the nearest office of the Pension and Welfare
Benefits Administration, U.S. Department of Labor, listed in your telephone
directory or the Division of Technical Assistance and Inquiries, Pension and
Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution
Avenue, N.W., Washington, D.C. 20210.
XI
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment
Your Employer has the right to amend your plan at any time. In no
event, however, will any amendment:
(a) authorize or permit any part of the Plan assets to
be used for purposes other than the exclusive benefit of participants
or their beneficiaries; or
(b) cause any reduction in the amount credited to your
account.
2. Termination
Your Employer has the right to terminate the plan at any time. Upon
termination, all amounts credited to your accounts will become 100% vested. A
complete discontinuance of contributions by your Employer will constitute a
termination.
17
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<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF CONDITION AND CONSOLIDATED STATEMENT OF EARNINGS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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0
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