<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended February 29, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _______ to ________.
Commission File No. 1-5774
THE TRANZONIC COMPANIES
- --------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
OHIO 34-0664235
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
30195 Chagrin Boulevard, Pepper Pike, Ohio 44124
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(Address of Principal Executive Office) (ZIP Code)
(216) 831-5757
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH
------------------- -------------------------
REGISTERED
----------
Class A Common Shares
without par value American Stock Exchange
Class B Common Shares
without par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 _____
[Cover Continued on Following Page]
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates
of the Registrant on May 9, 1996: $26,365,552.
-----------
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:
2,183,603 Class A Common Shares without par value at May 9, 1996
- --------------------------------------------------------------------------------
1,313,585 Class B Common Shares without par value at May 9, 1996
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1996 Annual Report to Shareholders -- Parts I and
II.
<PAGE> 3
PART I
------
ITEM 1. BUSINESS
- ------- --------
The Tranzonic Companies (the "Corporation") was incorporated under the
laws of the State of Ohio on September 26, 1946. The Corporation adopted its
current name on December 13, 1983.
The Corporation and its subsidiaries (hereinafter collectively referred to
as the "Registrant") are engaged principally in the distribution (and in the
majority of instances, designing, processing, producing and manufacturing) of
(i) personal care products, including feminine napkins, Tampax(R) tampons (and
the machines through which both are dispensed), children's disposable diapers,
adult incontinent briefs and toilet seat covers; (ii) industrial textiles; (iii)
spiral-wound paper tubes and cores. The Registrant distributes its products
throughout the United States from manufacturing and distribution facilities
located in Ohio, Kentucky, Arizona, Nevada, South Carolina, and Florida. In
addition, the Registrant sells industrial textiles in Canada; licenses the
distribution of housewares in, and distributes housewares to, foreign markets;
distributes paper tubing and cores in foreign markets; and sells a limited
amount of personal care products in foreign markets. Aggregate revenues derived
from foreign sources are not a material portion of the Registrant's gross
revenues.
The Registrant operates in one industry segment which is the conversion of
paper, cloth and allied materials. The majority of the Registrant's products are
produced from large rolls of paper, cloth or allied products purchased directly
from the mills where such materials are manufactured. These raw materials make
up a significant amount of the total product cost of the Registrant's products.
As a result, each of the Corporation's divisions displays similar purchasing
characteristics, such as bulk purchasing of raw materials at discount prices
from similar manufacturers, and similar manufacturing and processing
characteristics of those raw materials. In addition, the end use of most of the
Registrant's products is similar, as most of the Registrant's sales are of
disposable products that are used for personal hygiene and cleaning.
The Registrant, through its Personal Care Division, markets
and distributes through independent sales representatives various
products, including feminine napkins such as Maxithins(R), Tampax(R)
tampons, children's disposable diapers, adult incontinence
briefs, toilet seat covers, condoms and related items, as well as
restroom deodorant systems, accessories and supplies. The
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Registrant manufactures all of the feminine napkins, children's diapers, adult
incontinence products and toilet seat covers which it distributes, and
manufactures machines which dispense feminine napkins, Tampax(R) tampons,
condoms and other similar products. The Division is the exclusive distributor of
Tampax(R) tampons to the institutional trade for resale by others primarily
through coin-operated dispensing machines in the United States, Canada and
Mexico. The Division also wholesales, for resale through vending machines, its
proprietary feminine napkins, which have been marketed by the Division and a
predecessor since 1923 under its trademark Gards(R) and now MaxiThins(R), and
condoms manufactured by others. The Division markets feminine napkins under its
trademarks Maxithins(R), Everyday(R), Safe & Soft(R) and Soft & Thin(R) and
packages the feminine napkins which it manufactures for private label sale to
retail outlets. The Division markets children's disposable diapers for
over-the-counter sales under its trademarks Precious(R) and Bottoms Up(R) and
under private labels. The Division also markets adult incontinence products
under its trademark At Ease(R), toilet seat covers and odor control products
under its trademark Health Gards(R), and disposable Gards(R) obstetrical pads.
The Division also distributes stainless steel washroom accessories and supplies
under the name Hospeco(R), including such items as handrails for the handicapped
and dispensers for paper towels, tissues, soap and toilet seat covers. In
February 1996, the Division sold its feminine douche and enema product lines.
Through its wholly-owned subsidiary CCP Industries, Inc., the Registrant
processes, packages and distributes a varied range of industrial textiles and
related products. These products include industrial wiping materials, cleaning
chemicals, restroom supplies, disposable and durable work clothing, floor mats,
napery and safety products. This subsidiary employs a nationwide sales force
which markets such products to industrial, commercial and institutional users in
every state of the continental United States and in portions of Canada. In
March, 1995, a wholly-owned subsidiary of CCP Industries, Inc. acquired
substantially all of the business and assets of Plezall Wipers, Inc., a Florida
corporation, which is engaged in the business of converting, packaging and
distributing industrial textiles, wiping cloths and related products.
Through its wholly-owned subsidiary Baxter Tube Company, the Registrant
manufactures and distributes spiral-wound paper tubes and cores for use by a
variety of businesses, including the automotive, fiberglass and textile
industries. Baxter Tube Company also manufactures a line of paper sleeving
products. Although Baxter Tube Company distributes its products principally
throughout the United States, the bulk are distributed in the Midwest and
Midsouth. In addition, this subsidiary distributes a limited amount of its
products to Canada, Mexico, England,
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Taiwan, South Africa and Venezuela. This subsidiary sells directly and through
the services of independent marketing agents.
On March 29, 1996, the Registrant sold substantially all of the assets of
its wholly-owned subsidiaries, Design Trend, Inc. and Ever-Ready Appliance Mfg.
Co. to Whitney-Corr-Pak International, Inc. for approximately Ten Million
Dollars ($10,000,000). Through those subsidiaries, the Registrant formerly
designed, produced, manufactured and sold to retailers and others laundry
products, closet storage and closet organization products, cedar storage
products, and personal travel organizers.
Competition, Business Practices and Background Information
- ----------------------------------------------------------
The Registrant's operations are highly competitive and the principal bases
of competition are (i) quality and type of goods sold and services rendered and
(ii) price. Some of the Registrant's competitors have greater financial
resources than the Registrant and include manufacturers and distributors dealing
directly with retail or industrial customers. Based upon the limited information
available, the Registrant believes that it is not a significant factor in any
market in which it operates except for the distribution of feminine napkins and
tampons for resale through coin-operated dispensing machines.
The Registrant does not have any special or unusual working capital
requirements. The nature of the Registrant's business does not require it to
carry significant amounts of inventory to meet rapid delivery requirements of
customers or to assure itself of a continuous allotment of goods from suppliers.
The Registrant generally provides its customers with no more than thirty (30)
days to remit payment for goods and does not provide its customers with any
special rights to return goods. The Registrant believes that its practices
relating to working capital items are consistent with industry practices.
As of May 9, 1996, the Registrant had approximately 925 employees, some of
whom are represented by various labor unions. The Registrant considers its
employee relations satisfactory.
The Registrant uses in its business various service marks, trademarks,
trade names, and patents. The Registrant's patents relate to lock mechanisms
utilized in its coin-operated dispensing machines and to the process and
manufacture of paper tubes for the fiberglass industry. The Registrant's service
marks, trademarks, and trade names protect certain marks and names printed on
the Registrant's products. These marks and names are significant to the extent
they provide the Registrant with a certain amount of goodwill in the industry.
Although each
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of the foregoing contributes to the profitability of the Registrant, the
Registrant does not consider a material part of its business to be dependent on
any one or group of them.
ITEM 2. PROPERTIES
- ------- ----------
The following chart describes the principal properties that are owned by
the Registrant or one of its subsidiaries:
<TABLE>
<CAPTION>
Location Principal Use Approximate Acreage
- -------- ------------- -------------------
<S> <C>
Cleveland, Ohio Office, warehouse and 7 acres
manufacturing facilities
Nicholasville, Office, warehouse 13.14 acres
Kentucky and manufacturing
facilities
Minerva, Ohio Office, warehouse and 3.5 acres
manufacturing facilities
</TABLE>
The following chart describes the principal properties that are leased by the
Registrant or one of its subsidiaries:
<TABLE>
<CAPTION>
Approximate
Principal Square Expiration Renewal
Location Use Footage Date Options
- -------- --------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Highland Office, 108,750 2/28/09 Two 10-
Heights, warehouse year
Ohio and manu- renewal
facturing options
facilities
Tempe, Office, 50,580 2/28/09 Two 10-
Arizona warehouse year
and manu- renewal
facturing options
facilities
Perrysburg, Office, 43,000 8/31/97 None
Ohio warehouse
and manu-
facturing
facilities
Hialeah Office, 11,684 3/31/97 None
Gardens, warehouse
Florida and manu-
facturing
facilities
</TABLE>
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<TABLE>
<CAPTION>
Approximate
Principal Square Expiration Renewal
Location Use Footage Date Options
- -------- --------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Pepper Corporate 6,100 2/28/98 Two 5-
Pike, headquarters year
Ohio renewal
options
</TABLE>
ITEM 3. PENDING LEGAL PROCEEDINGS
- ------- -------------------------
The Registrant is not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The age (as of May 9, 1996), business experience during the past five
years, and offices held by each of the Registrant's executive officers who is
not also a Director of the Registrant are reported below. The Registrant's Code
of Regulations provides that officers shall hold office until their successors
are chosen and qualified in their stead, and that any officer may be removed
from office at any time by the Registrant's Board of Directors.
JAMES L. GLENN: Age 46; Vice President of the Registrant from June 1991
until March 1996. Executive Vice President and General Manager of American
Homeware, Inc. from November, 1990 to June, 1991. Vice President of Learsiegler
Seymour (manufacturers of housewares) from March, 1988 to November, 1990. Mr.
Glenn's employment with the Registrant terminated following the sale of the
assets of Design Trend, Inc. reported in Item 1 above.
DENNIS H. KELLY: Age 58; Vice President of the Registrant since June 1,
1989.
RICHARD J. SIMS: Age 45; Senior Vice President of the Registrant since
1992. Previously, Senior Vice President and General Counsel of Victoria
Financial Corporation (insurance holding corporation).
ALAYNE L. REITMAN: Age 32; Treasurer, Vice President--Finance and Chief
Financial Officer of the Registrant since October 1993. Previously, Financial
Analyst for American Airlines.
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RICHARD J. PENNZA: Age 41; Chief Accounting Officer of the Registrant
since October 1993. Previously, Controller of the Registrant.
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
- ------- ----------------------------------------------------
SECURITY HOLDER MATTERS
- -----------------------
Information in response to this Item is set forth on page 28 of the
Registrant's 1996 Annual Report to Shareholders (Exhibit 13), which information
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
Information in response to this Item is set forth on page 17 of the
Registrant's 1996 Annual Report to Shareholders (Exhibit 13), which information
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------
Information in response to this Item is set forth on pages 14 through 17
of the Registrant's 1996 Annual Report to Shareholders (Exhibit 13), which
information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
(a) Financial Statements
--------------------
Information in response to this Item is set forth on pages 18
through 27 of the Registrant's 1996 Annual Report to Shareholders (Exhibit 13),
which information is incorporated herein by reference.
(b) Supplementary Data
------------------
Information in response to this Item is set forth in the
financial statement schedules set forth on pages 22 through 24 of this Form
10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- ------- ----------------------------------------------------
None.
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PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
The information required by this Item in respect of Executive Officers who
are not also Directors of the Registrant is set forth on pages 5 and 6 of this
Form 10-K and is incorporated herein by reference.
The information concerning Directors is set forth below and is based in
part on information received from the respective Directors and in part on the
Registrant's records:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FIRST
NAME OF NOMINEE AGE AS OF DURING PAST FIVE YEARS BECAME
OR DIRECTOR MAY 9, 1996 AND OTHER DIRECTORSHIPS HELD DIRECTOR
- --------------- ----------- ---------------------------- --------
DIRECTORS CONTINUING IN OFFICE UNTIL 1998 ANNUAL MEETING OF SHAREHOLDERS
(CLASS I)
<S> <C> <C> <C>
James H. Berick 63 Chairman of Berick, Pearlman & 1970
(1)(2) Mills Co., L.P.A., Cleveland, Ohio
(attorneys) and Secretary of the
Corporation. Also, President and
Treasurer of Realty ReFund Trust
(real estate investment trust) and
President and Treasurer of Mid-America
ReaFund Advisors, Inc. (its advisor)
since January, 1990. Mr. Berick is a
Director of MBNA Corporation and
A. Schulman, Inc. and a Trustee of
The Town and Country Trust and
Realty ReFund Trust.
Robert S. Reitman 62 Chief Executive Officer, Chairman 1960
(3)(4) of the Board of Directors and
President of the Corporation.
Mr. Reitman is a Director of
Weirton Steel Corporation.
Sylvia K. Reitman 58 Investor, Cleveland, Ohio. 1989
DIRECTORS CONTINUING IN OFFICE UNTIL 1997 ANNUAL MEETING OF SHAREHOLDERS
(CLASS III)
David J. Golden 63 Senior Vice President of the
(3)(4) Corporation. 1958
Morton L. Reitman 59 Executive Vice President of the
(3)(4) Corporation. 1973
James C. Spira 53 Managing Partner, Diamond 1991
Technology Partners (management
consultants), since November,
1995. Previously Group Vice
President of the Corporation,
from 1991 until 1995.
</TABLE>
-7-
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FIRST
NAME OF NOMINEE AGE AS OF DURING PAST FIVE YEARS BECAME
OR DIRECTOR MAY 9, 1996 AND OTHER DIRECTORSHIPS HELD DIRECTOR
- --------------- ----------- ---------------------------- --------
DIRECTORS CONTINUING IN OFFICE UNTIL 1996 ANNUAL MEETING OF SHAREHOLDERS
(CLASS II)
<S> <C> <C> <C>
Joseph A. Campanella 53 Executive Vice President of Star 1979
(1)(2) Banc Corporation (bank holding
company) since 1991. Previously,
President of Star Bank, N.A.,
Cleveland from 1988 until 1991.
Thomas S. Robertson 53 Sainsbury Professor of Marketing, 1989
(1)(2) London Business School since 1994.
Prior thereto, Chairperson of the
Department of Marketing. The Wharton
School, University of Pennsylvania,
from 1988 until 1994.
Steven W. Percy 49 President of BP Oil Company and 1994
(1)(2) Executive Vice President of
BP America, Inc. since 1992.
Previously, Chief Executive Officer
of BP Finance International
(a division of BP International Ltd.),
and Group Treasurer of The British
Petroleum Company, p.l.c., from
1989 until 1992.
<FN>
-----------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Executive Committee.
(4) Member of the Pension Committee.
</TABLE>
David J. Golden and Sylvia K. Reitman are brother and sister. Sylvia K.
Reitman is the wife of Robert S. Reitman. Robert S. Reitman and Morton L.
Reitman are brothers. Alayne L. Reitman, Vice President--Finance and Treasurer
of the Registrant, is the daughter of Robert S. Reitman and Sylvia K. Reitman.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Registrant's executive officers and Directors, and persons who beneficially own
more than 10% of the Registrant's Common Shares, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. James C.
Spira reported the expiration of stock options in October 1995 subsequent to the
due date for such reporting.
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<PAGE> 11
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
The following table sets forth the compensation paid by the Registrant or
its subsidiaries during the Registrant's last three fiscal years to the
Registrant's Chief Executive Officer and each of the five most highly
compensated executive officers (as measured by salary and bonus) whose aggregate
salary and bonus during the fiscal year ended February 29, 1996, exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------
LONG
TERM
OTHER COMPEN-
ANNUAL SATION ALL OTHER
COMPEN- AWARDS COMPEN-
NAME AND FISCAL SALARY(1) BONUS SATION OPTIONS SATION
PRINCIPAL POSITION YEAR ($) ($) (2)($) (#) ($)
- ------------------------ ------ --------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Robert S. Reitman, 1996 424,208 89,987 -- 2,500 137,156(3)
Chief Executive Officer, 1995 407,819 192,531 23,618 2,500 133,312
Chairman of the Board of 1994 388,419 100,000 -- 9,500 114,090
Directors and President
Morton L. Reitman, 1996 355,535 -- 53,250 2,400 31,109(3)
Executive Vice President 1995 298,893 122,800 -- 2,400 26,115
1994 276,677 55,000 -- 2,600 24,645
Richard J. Sims, 1996 217,062 169,305 -- 2,400 4,011(3)
Vice President 1995 200,712 116,000(4) -- 2,000 3,967
1994 185,654 70,480 -- 2,000 5,051
James C. Spira, 1996 181,042 -- -- 2,400 3,724(3)
Group Vice President(5) 1995 261,619 -- -- 2,200 5,352
1994 248,968 -- -- 2,400 7,176
James L. Glenn, 1996 159,538 11,130 25,000(6) 1,000 1,342(3)
Vice President(6) 1995 152,550 -- 23,888 1,000 66,718
1994 144,700 20,000 -- 1,000 842
Dennis H. Kelly, 1996 123,600 79,936 4,250 1,000 3,618(3)
Vice President 1995 117,415 59,430 -- 1,000 3,595
1994 109,904 33,100 -- 1,000 3,038
<FN>
- ----------
(1) Includes amounts deferred pursuant to the Registrant's Salary Savings and
Profit Sharing Plan (the "Defined Contribution Plan"), a defined
contribution plan under Section 401(k) of the Internal Revenue Code.
</TABLE>
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(2) Except as otherwise noted, includes the net value (market value less
exercise price) realized in respect of Class A Common Shares and/or Class
B Common Shares purchased from the Registrant pursuant to exercise of
stock options.
(3) Includes (a) Registrant payments of premiums for long-term disability
insurance: Messrs. Robert S. Reitman, Morton L. Reitman and Sims $743
each; Mr. Spira $510; Mr. Glenn $588; and Mr. Kelly $456, (b) Registrant
contributions under the Defined Contribution Plan: Mr. Robert S. Reitman
$2,949; Mr. Morton L. Reitman $2,897; Mr. Spira $2,294; Mr. Sims $3,267;
Mr. Glenn $574; and Mr. Kelly $3,163, (c) Registrant payments of premiums
for life insurance: Mr. Morton L. Reitman $5,700, (d) amounts accrued
under deferred compensation agreements: Mr. Robert S. Reitman $132,084;
and Mr. Morton L. Reitman $21,768, and (e) Registrant payments of parking
fees: Mr. Robert S. Reitman $1,380 and Mr. Spira $920.
(4) The final calculation of Mr. Sim's fiscal 1995 bonus resulted in a higher
bonus than that reported in the Registrant's Proxy Statement dated May 12,
1995, which was calculated based upon figures available at that time.
(5) Mr. Spira's employment with the Registrant as an executive officer
terminated effective October 31, 1995. The 1996 compensation figures for
Mr. Spira reflect the period from March 1, 1995 through October 31, 1995.
(6) Mr. Glenn's employment with the Registrant terminated at the end of March,
1996 in connection with the Registrant's sale of its housewares division.
Mr. Glenn was paid $25,000 in respect of such termination.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during fiscal year 1996 to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZED VALUE
INDIVIDUAL GRANTS AT ASSUMED
-------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS EXERCISE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE EXPIR- OPTION TERM(3)
GRANTED(1) EMPLOYEES IN PRICE ATION -----------------
NAME (#) FISCAL YEAR(2) ($/SH) DATE 5% 10%
- ----------------- ---------- ------------- -------- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Robert S. Reitman 2,500 6.54% $16.02 2/29/00 $11,075 $24,450
Morton L. Reitman 2,400 6.27% $14.56 2/28/05 $21,984 $55,680
James C. Spira 2,400 6.27% $14.56 2/28/05 $21,984 $55,680
Richard J. Sims 2,400 6.27% $14.56 2/28/05 $21,984 $55,680
James L. Glenn 1,000 2.61% $14.56 2/28/05 $ 9,160 $23,200
Dennis H. Kelly 1,000 2.61% $14.56 2/28/05 $ 9,160 $23,200
</TABLE>
- --------------------
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<PAGE> 13
(1) All options are for Class B Common Shares and were granted pursuant to the
Registrant's 1995 Incentive Stock Option Plan. Such options become
exercisable on March 1, 1998.
(2) Based upon an aggregate of 38,250 options granted to all employees in
1995.
(3) The potential realizable values illustrated at 5% and 10% compound annual
appreciation assume that the price of the Registrant's Class B Common
Shares increases from $14.56 per share to $25.80 and $37.76 per share,
respectively, over the 10-year term of the options which were granted to
all named executive officers other than Robert S. Reitman. If those named
executive officers realize those values, the Registrant's Shareholders
will realize aggregate appreciation in the price of the 1,313,585 Class B
Common Shares of the Registrant outstanding of approximately $14,764,695
or $30,475,172, respectively, over the same period.
The following table contains information concerning stock option exercises
during fiscal year 1996 by the named executive officers and the value of their
unexercised options at February 29, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Value of Unexer-
Number of cised In-the-
Unexercised Options Money Options at
at Fiscal Year-End Fiscal Year-End
(#) ($)
Shares --------------------- -----------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ----------------- -------------- --------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Robert S. Reitman None None Class B: 4,000/14,500 Class B: 0/0
Morton L. Reitman Class A: 3,000 Class A: 36,000 Class A: 6,300/0 Class A: 31,225/0
Class B: 1,500 Class B: 17,250 Class B: 13,450/7,400 Class B: 19,363/0
James C. Spira None None Class B: 34,000/0 Class B: 0/0
Richard J. Sims None None Class B: 12,000/26,000 Class B: 0/0
James L. Glenn None None Class B: 3,200/3,000 Class B: 0/0
Dennis H. Kelly Class B: 2,000 Class B: 4,250 Class B: 5,200/3,000 Class B: 750/0
</TABLE>
COMPENSATION OF DIRECTORS
Each Director who is not an employee of the Registrant receives an annual
Director's fee of $12,000, plus $850 for attendance at each meeting of the Board
or any Committee. In addition, if such a Director elects to have his
compensation deferred and invested in Class B Common Shares pursuant to the
Registrant's Deferred Compensation Plan for Non-Employee Directors, then each
such Director receives, in Class B Common Shares, an additional amount equal to
25% of the amount so
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<PAGE> 14
deferred and invested.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James H. Berick, Secretary and Director, is Chairman of the law firm of
Berick, Pearlman & Mills Co., L.P.A., which is retained by the Corporation as
legal counsel.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
In 1990, the Registrant entered into employment agreements with Robert S.
Reitman and Morton L. Reitman. Robert S. Reitman's employment agreement, which
expires in June 1997, currently provides for an annual salary of $425,000, which
salary may be reviewed periodically by the Compensation Committee to determine
if the same should be increased. Robert S. Reitman's employment agreement also
provides for payment to Mr. Reitman of an annual incentive based upon certain
performance criteria, the maximum of which amount shall be not less than
$160,000, and for certain disability benefits.
Morton L. Reitman's employment agreement with the Registrant, which
expires in June 1996, currently provides for an annual salary of $303,000, which
salary may be reviewed periodically by the Compensation Committee to determine
if the same should be increased, and for certain disability benefits. Morton L.
Reitman also has a consultant agreement with the Registrant providing for
payment to Mr. Reitman for consulting services in the amount of $72,000 per
year, for a term of three years commencing upon the termination of his
employment.
In 1991, the Registrant entered into an employment agreement with James C.
Spira. Mr. Spira's employment agreement, which terminated effective October 31,
1995, provided for an annual salary of $273,000. In addition, pursuant to Mr.
Spira's employment agreement, the Registrant granted to Mr. Spira options to
purchase 70,000 Class B Common Shares of the Registrant, the exercise price of
which options is $14.50, the fair market value of such shares on the date of the
grant. 34,000 of the options became exercisable prior to the termination of Mr.
Spira's employment and Mr. Spira may exercise such options until February 29,
2000. Mr. Spira's remaining 36,000 unvested options expired on October 31, 1995.
In March 1995, a wholly-owned subsidiary of the Registrant entered into
an employment agreement with Mr. Dennis H. Kelly. Mr. Kelly's employment
agreement, which expires in February 1998, currently provides for an annual
salary of $124,000 plus incentives based upon performance.
The Registrant also has deferred compensation agreements with certain key
employees which provide for benefits for a term of
-12-
<PAGE> 15
ten years following retirement, disability or death. These benefits vary
according to the employee's corporate responsibility and the age of the employee
at the date of such event. The ranges of annual benefits under the deferred
compensation agreements for Messrs. Robert S. Reitman and Morton L. Reitman
during the first five years of said term are $34,800 to $68,400 and $15,600 to
$36,600, respectively. The amount of benefits payable to such executive officers
during the second five years of the term is 75% of the benefit payable during
the first five years.
The benefits payable to Messrs. Robert S. Reitman and Morton L. Reitman
under the deferred compensation agreements will be replaced with the benefits
payable to them under the Registrant's 1992 Supplemental Benefit Plan (the
"Supplemental Benefit Plan") upon the vesting of each such individual's rights
in that plan. Vesting under the Supplemental Benefit Plan does not occur unless
and until that individual has been a participant in the plan for ten years or
has attained age 65, whichever first occurs; provided, however, that a
participant who becomes disabled or dies shall be vested after six years of
employment by the Registrant. In addition, in the event that effective control
of the Registrant changes from that management in control at the date of
adoption of the Supplemental Benefit Plan, all participants immediately vest in
the plan benefits. Under the Supplemental Benefit Plan, Messrs. Robert S.
Reitman and Morton L. Reitman will receive $140,000 and $60,000, respectively,
in annual benefits for a term of fifteen years following their retirement, death
or disability. In the event that either individual's rights under the
Supplemental Benefit Plan fail to vest, then the benefits under the deferred
compensation agreements remain payable to such non-vested individual.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- ------------------------------------------------------------
MANAGEMENT
- ----------
The following tables, together with the accompanying footnotes, describe
the beneficial ownership of the Registrant's Class A Common Shares and Class B
Common Shares as of May 9, 1996 (except as otherwise indicated) of (1) each
person who was known to the Registrant to be the beneficial owner of more than
five percent of the total Shares of either class issued and outstanding on such
date, and (2) each current Director and nominee for election as Director, as
well as all executive officers and Directors as a group. Except as otherwise
indicated, the share figures shown below are based upon information supplied by
the named individuals and group members described in the tables and the
Registrant's records.
As used in the tables, a person is deemed to be the beneficial owner of
all shares in respect of which such person has or shares voting or investment
power (regardless of whether
-13-
<PAGE> 16
such individual is entitled to receive any economic benefits derived from such
shares). As used herein, "voting power" means the power to vote, or to direct
the voting of, shares and "investment power" means the power to dispose of, or
to direct the disposition of, shares. Also, included are shares which were not
owned on May 9, 1996 but which can be acquired within 60 days after that date.
As indicated specifically in the footnotes to the tables, certain Class A
Common Shares and Class B Common Shares included for the named individuals in
each table below are deemed to be beneficially owned by more than one of such
named individuals and, as a result, have been so reported. Certain individuals
listed in the tables have disclaimed beneficial ownership with respect to some
of the Shares disclosed as beneficially owned under the definition set forth
above.
BENEFICIAL OWNERSHIP OF MORE THAN FIVE PERCENT OF
CLASS A COMMON SHARES AND CLASS B COMMON SHARES
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP BY CLASS
----------------------------------------------
CLASS A CLASS B
NAME AND ADDRESS OF COMMON PERCENT OF COMMON PERCENT OF
BENEFICIAL OWNER SHARES CLASS SHARES(1) CLASS
- -------------------------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C>
David J. Golden 864,337 39.6% 435,688 33.2%
30195 Chagrin Boulevard (2)(3) (3)(4)
Pepper Pike, Ohio 44124
Sylvia K. Reitman 786,097 36.0% 393,048 29.9%
30195 Chagrin Boulevard (3)(5) (3)(5)
Pepper Pike, Ohio 44124
Estate of Miriam G. Golden 383,662(6) 17.6% 191,831(6) 14.6%
David J. Golden and
Sylvia K. Reitman,
Co-executors
30195 Chagrin Boulevard
Pepper Pike, Ohio 44124
Dimensional Fund 132,400(7) 6.1% 69,150(7) 5.3%
Advisors Inc.
1299 Ocean Avenue,
Suite 650
Santa Monica,
California 90401
</TABLE>
-14-
<PAGE> 17
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP BY CLASS
----------------------------------------------
CLASS A CLASS B
NAME AND ADDRESS OF COMMON PERCENT OF COMMON PERCENT OF
BENEFICIAL OWNER SHARES CLASS SHARES(1) CLASS
- -------------------------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Lazard Freres & Co. 108,618(8) 5.0% 79,592(8) 6.1%
One Rockefeller Plaza
New York, New York
10020
</TABLE>
- -----------------------
(1) Each Class A Common Share is convertible into one Class B Common Share.
Class B Common Shares issuable upon such conversion are not included.
Robert S. Reitman, having an address at 30195 Chagrin Boulevard, Pepper
Pike, Ohio 44124, beneficially owns 77,554 Class A Common Shares and
50,247 Class B Common Shares, as described in the Table of Beneficial
Ownership of Executive Officers, Directors and Nominees in this Proxy
Statement. Upon conversion of Mr. Reitman's Class A Common Shares into
Class B Common Shares, Mr. Reitman would beneficially own 127,801 Class B
Common Shares, representing 9.7% of such Class.
(2) Includes 7,700 Class A Common Shares held as trustee for the benefit of
Mr. Golden's son.
(3) Includes 383,662 Class A Common Shares or 191,831 Class B Common Shares,
as applicable, in respect of which David J. Golden and Sylvia K. Reitman
share voting and dispositive power as co-executors of the estate of Miriam
G. Golden; and 133,529 Class A Common Shares or 66,764 Class B Common
Shares, as applicable, in respect of which David J. Golden and Sylvia K.
Reitman, acting in concert, share the right to direct the voting and
disposition pursuant to the terms of the Louis B. Golden Insurance Trust
u/a/d October 20, 1980.
(4) Includes 3,500 Class B Common Shares which are not owned, but can be
purchased within 60 days upon the exercise of options granted under the
Registrant's 1989 Incentive Stock Option Plan (the "1989 Plan"). Also
includes 3,850 Class B Common Shares held as trustee for the benefit of
Mr. Golden's son.
(5) Does not include 77,554 Class A Common Shares or 50,247 Class B Common
Shares, as applicable, owned by Robert S. Reitman, as to which shares
Mrs. Reitman disclaims beneficial ownership.
(6) The estate of Miriam G. Golden is the record owner of the Shares shown;
however, the co-executors each are deemed to own beneficially all of such
Shares, as reported above.
(7) Information based solely upon Schedules 13G filed by such shareholder with
the Securities and Exchange Commission in January, 1995. Dimensional Fund
Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed
to have beneficial ownership of 132,400 Class A Common Shares and 69,150
Class B Common Shares, as applicable, as of December 31, 1994, all of
which Shares are held in portfolios of DFA Investment Dimensions Group,
Inc., a registered open-end
-15-
<PAGE> 18
investment company, in series of the DFA Investment Trust Company, a
Delaware business trust, or in the DFA Group Trust and DFA Participation
Group Trust, investment vehicles for qualified employee benefit plans, as
to all of which Dimensional serves as investment manager. Dimensional
disclaims beneficial ownership of all of such Shares.
(8) Information based solely upon Schedules 13G filed by such shareholder with
the Securities and Exchange Commission in February, 1995 in respect of
Class A Common Shares, and February, 1996 in respect of Class B Common
Shares.
BENEFICIAL OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND NOMINEES
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP BY CLASS
----------------------------------------------------------
CLASS A CLASS B
NAME OF DIRECTOR COMMON PERCENT OF COMMON PERCENT OF
OR NOMINEE SHARES CLASS SHARES(1)(2) CLASS (1)
- -------------------- --------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
James H. Berick 600 (3) 8,410 (3)
Joseph A. Campanella 500 (3) 6,310 (3)
David J. Golden 864,337(4)(5) 39.6% 435,668(4)(5) 33.2%
Robert S. Reitman 77,554(6) 3.6% 50,247(6) 3.8%
Morton L. Reitman 46,364(7)(8) 2.1% 34,046(8) 2.6%
Sylvia K. Reitman 786,097(4)(9) 36.0% 393,048(4)(9) 29.9%
Thomas S. Robertson 0 0% 6,110 (3)
James C. Spira 4,800 (3) 36,400 2.8%
Steven W. Percy 0 0% 2,955 (3)
Richard J. Sims 1,520 (3) 20,760 1.6%
Dennis H. Kelly 0 0% 9,200 (3)
James L. Glenn 0 0% 4,200 (3)
Executive Officers
and Directors
as a Group
(14 persons) 1,276,931 58.5% 758,034 57.7%
- ------------------
<FN>
(1) Includes the following number of Class B Common Shares which are not
owned, but can be purchased within 60 days upon the exercise of options
granted under the Corporation's 1981 Performance Share Option Plan (the
"1981 Plan") and 1989 Plan (and in the case of Mr. Spira under his
employment agreement which was terminated and Mr. Sims, under his existing
employment agreement): Robert S. Reitman - 13,500; Morton L. Reitman -
16,050; David J. Golden - 3,500; James C. Spira - 34,000; Richard J. Sims
- 20,000; Dennis H. Kelly - 6,200; James L. Glenn - 4,200; and all
executive officers and Directors as a group - 102,050.
(2) Each Class A Common Share is convertible into one Class B Common Share.
Class B Common Shares issuable upon such conversion are not included.
(3) Less than 1%.
(4) Includes 383,662 Class A Common Shares or 191,831 Class B Common Shares,
as
</TABLE>
-16-
<PAGE> 19
applicable, in respect of which David J. Golden and Sylvia K. Reitman
share voting and dispositive power as co-executors of the estate of
Miriam G. Golden; and 133,529 Class A Common Shares or 66,764 Class B
Common Shares, as applicable, in respect of which David J. Golden and
Sylvia K. Reitman, acting in concert, share the right to direct the
voting and disposition pursuant to the terms of the Louis B. Golden
Insurance Trust u/a/d October 20, 1980.
(5) Includes 7,700 Class A Common Shares and 3,850 Class B Common Shares, as
applicable, held as trustee for the benefit of Mr. Golden's son.
(6) Does not include 268,906 Class A Common Shares or 134,453 Class B Common
Shares, as applicable, owned by Mr. Reitman's wife or the Class A Common
Shares and Class B Common Shares, as applicable, described in note (4),
above, as to all of which shares Mr. Reitman disclaims beneficial
ownership.
(7) Includes the 6,300 Class A Common Shares, which are not owned, but can be
purchased within 60 days upon the exercise of options granted under the
Corporation's 1981 Plan by Morton L. Reitman.
(8) Includes 1,820 Class A Common Shares or 910 Class B Common Shares, as
applicable, held as custodian for the benefit of Mr. Reitman's adult
child. Does not include 1,200 Class A Common Shares or 600 Class B Common
Shares, as applicable, owned by Mr. Reitman's wife, as to which shares Mr.
Reitman disclaims beneficial ownership.
(9) Does not include 77,554 Class A Common Shares or 50,247 Class B Common
Shares, as applicable, owned by Mrs. Reitman's husband, as to all of which
shares Mrs. Reitman disclaims beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
Information in response to this Item is set forth on page 12 of this Form
10-K and is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
- ---------------------------------------------------------------
FORM 8-K
- --------
(a) The following documents are filed as part of this
report:
1. See the Index to Financial Statements for a list of
consolidated financial statements and financial
statement schedules included or incorporated herein
by reference.
-17-
<PAGE> 20
2. Exhibits:
Exhibit Number
--------------
3(a) Amended Articles of Incorporation
(incorporated by reference to Exhibit
3(a) of the Registrant's Form 10-K for
the fiscal year ended February 28, 1993)
3(b) Certificate of Amendment to Amended
Articles of Incorporation filed June
16, 1992 (incorporated by reference to
Exhibit 3(b) of the Registrant's Form
10-K for the fiscal year ended February
28, 1993)
3(c) Code of Regulations (incorporated by
reference to Exhibit 3(c) of the
Registrant's Form 10-K for the fiscal
year ended February 28, 1994)
10(a)* 1989 Incentive Stock Option Plan (incorporated
by reference to Exhibit 10(f) of the
Registrant's Form 10-K for the fiscal year
ended February 28, 1990)
10(b)* 1995 Incentive Stock Option Plan (incorporated
by reference to Exhibit 10(e) of the
Registrant's Form 10-K for the fiscal year
ended February 28, 1994)
10(c)* Adoption Agreement dated March 1, 1996
and PRISM(R) Prototype Retirement Plan and
Trust.
10(d)* Deferred Compensation Plan for Non-Employee
Directors (incorporated by reference to Exhibit
10(k) of the Registrant's Form 10-K for the
fiscal year ended February 28, 1993)
10(e)* 1992 Supplemental Benefit Plan (incorporated by
reference to Exhibit 10(l) of the Registrant's
Form 10-K for the fiscal year ended February
28, 1993)
10(f) Credit Agreement dated as of October 7,
1993, with Society National Bank,
individually and as Agent, and National
City Bank for borrowings up to
$30,000,000 (incorporated by reference to
Exhibit 10(i) of the Registrant's Form
10-K for the fiscal year ended February
28, 1995).
-18-
<PAGE> 21
10(g) First Amendment dated as of June 30,
1994 to Credit Agreement with
Society National Bank, individually and
as Agent, and National City Bank
(incorporated by reference to Exhibit
10(j) of the Registrant's Form 10-K for
the fiscal year ended February 28, 1995).
10(h)* Employment Agreement dated June 20, 1990
between the Registrant and Morton L. Reitman
(incorporated by reference to Exhibit 10(p) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1991)
10(i)* Consultant Agreement dated January 29, 1986
between the Registrant and Morton L. Reitman
(incorporated by reference to Exhibit 10(r) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1990)
10(j)* Employment Agreement dated June 18, 1990
between the Registrant and Robert S. Reitman
(incorporated by reference to Exhibit 10(r) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1991)
10(k)* Employment Agreement dated June 18, 1990
between the Registrant and David J. Golden
(incorporated by reference to Exhibit 10(p) of
the Registrant's Form 10-K for the fiscal year
ended February 29, 1992)
10(l)* Employment Agreement dated October 22, 1990
between the Registrant and James L. Glenn
(incorporated by reference to Exhibit 10(u) of
the Registrant's Form 10-K for the fiscal year
ended February 29, 1992)
10(m)* Employment Agreement dated March 1, 1995
between Baxter Tube Company and Dennis Kelly
(incorporated by reference to Exhibit 10(p) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1995).
-19-
<PAGE> 22
10(n)* Employment Agreement dated December 2, 1991
between the Registrant and James C. Spira
(incorporated by reference to Exhibit 10(w) of
the Registrant's Form 10-K for the fiscal year
ended February 29, 1992)
10(o)* Amendment to Employment Agreement dated May 4,
1994 between the Registrant and James C. Spira
(incorporated by reference to Exhibit 10(u) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1994)
10(p)* Employment Agreement dated July 1, 1992 between
the Registrant and Richard J. Sims
(incorporated by reference to Exhibit 10(v) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1993)
10(q) Asset Purchase Agreement by and among
Whitney-Corr-Pak International, Inc., the
Registrant, Design Trend, Inc. and Ever-
Ready Appliance Mfg. Co. dated February
29, 1996 (incorporated by reference to
Exhibit 10.1 of the Registrant's Current
Report on Form 8-K dated March 29, 1996)
13 The Registrant's 1996 Annual Report to
Shareholders
21 Subsidiaries of the Registrant
24 Powers of Attorney
27** Financial Data Schedule
*Management contract or compensatory plan or arrangement
required to be filed as an Exhibit hereto.
**Filed only in electronic format pursuant to Item
601(b)(27) of Regulation S-K.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the last quarter of the Registrant's
fiscal year ended February 29, 1996.
-20-
<PAGE> 23
S I G N A T U R E S
-------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE TRANZONIC COMPANIES
By:/s/ Robert S. Reitman
------------------------
Robert S. Reitman
Chairman, President and
Principal Executive Officer
Dated: May 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Dated: May 28, 1996 /s/ Robert S. Reitman
-----------------------------
Robert S. Reitman
Director
Dated: May 28, 1996 /s/ Alayne L. Reitman
-----------------------------
Alayne L. Reitman
Principal Financial Officer
Dated: May 28, 1996 /s/ Richard J. Pennza
-----------------------------
Richard J. Pennza
Principal Accounting Officer
James H. Berick, Director
Joseph A. Campanella, Director
David J. Golden, Director
Steven W. Percy, Director
Morton L. Reitman, Director
Sylvia K. Reitman, Director
Thomas S. Robertson, Director
James C. Spira, Director
Dated: May 28, 1996 By:/s/ Robert S. Reitman
-----------------------------
Robert S. Reitman
Attorney in Fact
Powers of attorney authorizing Robert S. Reitman to sign this Annual
Report on Form 10-K on behalf of Directors of the Registrant are being filed
with the Securities and Exchange Commission herewith (Exhibit 24).
-21-
<PAGE> 24
THE TRANZONIC COMPANIES
Index
-----
Financial Statements
- --------------------
Audited:
Consolidated Balance Sheets
February 29, 1996 and February 28, 1995
Consolidated Statements of Operations
Years ended February 29, 1996, and February 28, 1995 and 1994
Consolidated Statements of Shareholders' Equity
Years ended February 29, 1996, and February 28, 1995 and 1994
Consolidated Statements of Cash Flows
Years ended February 29, 1996, and February 28, 1995 and 1994
Notes to Consolidated Financial Statements
February 29, 1996, and February 28, 1995 and 1994
Schedule
- --------
Valuation and Qualifying Accounts and Reserves Schedule II
All other schedules have been oniitted because the material is not applicable
or is not required as permitted by the rules and regulations of the
Commission, or the required information is included in notes to consolidated
financial statements.
Financial statements of the parent company are omitted because it is primarily
an operating company and all subsidiaries included in the consolidated
financial statements are wholly owned.
-22-
<PAGE> 25
KPMG Peat Marwick LLP
1500 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3495
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Shareholders
The Tranzonic Companies:
Under date of March 29, 1996, we reported on the consolidated balance sheets of
The Tranzonic Companies as of February 29, 1996 and February 28, 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended February 29, 1996,
as contained in the 1996 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in
the annual report on Form 10-K for the year 1996. In connection with our audits
of the aforementioned consolidated financial statements, we also have audited
the financial statement schedule as listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement
schedule based on our audits.
In our opinion, this financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
/s/ KPMG Peat Marwick LLP
Cleveland, Ohio
March 29, 1996
Member Firm of
Klynveld Peat Marwick Goerdeler
-23-
<PAGE> 26
Schedule II
THE TRANZONIC COMPANIES
Valuation and Qualifying Accounts and Reserves
Years ended February 29, 1996, and February 28, 1995 and 1994
<TABLE>
<CAPTION>
Additions
---------------------
Balance at Charged to Balance at
Beginning Costs and End of
Classification of Period Expenses Recoveries Deductions Period
-------------- --------- -------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
Year ended February 29, 1996
Allowance for doubtful
accounts receivable $ 408,500 36,303 92,379 246,682(B) 290,500
========== ======= ====== ======= =======
Year ended February 28, 1995
Allowance for doubtful
accounts receivable $ 337,000 229,651 90,109 248,260(A) 408,500
========== ======= ====== ======= =======
Year ended February 28, 1994
Allowance for doubtful
accounts receivable $ 296,000 336,269 20,767 316,036(A) 337,000
========== ======= ====== ======= =======
<FN>
- ------------------
(A) Accounts written off.
(B) Accounts written off of $173,816 and $72,866 of reserves reclassified to
net assets of discontinued operations.
</TABLE>
-24-
<PAGE> 1
Exhibit 10(c)
03/24/95 Basic Plan Document # 05
Plan # 002
IRS Letter Serial No. - D363689a
PRISM(R) PROTOTYPE RETIREMENT PLAN & TRUST
SECTION 401(K) PROFIT SHARING PLAN
(NONSTANDARDIZED)
ADOPTION AGREEMENT(1)
The Employer(2), designated below, hereby establishes a profit-sharing plan
(optionally including a cash or deferred arrangement (as defined in Section
401(k) of the Internal Revenue Code)) for all Eligible Employees as defined in
this Adoption Agreement pursuant to the terms of the PRISM(R) PROTOTYPE
RETIREMENT PLAN & TRUST BASIC PLAN DOCUMENT #05.
A. EMPLOYER INFORMATION:
1. NAME: The Tranzonic Companies
--------------------------------------------------------
2. ADDRESS: 30195 Chagrin Blvd.
-------------------------------------------------------
3. ADDRESS: Pepper Pike, OH 44124
-------------------------------------------------------
4. ATTENTION: Alayne Reitman TELEPHONE: (216) 831-5757
----------------------- -------------------
5. EMPLOYER TAXPAYER IDENTIFICATION NUMBER(3): 34-0664235
-------------------
B. BASIC PLAN PROVISIONS:
1. PLAN NAME (SELECT ONE):
A. _____ This plan is established effective _________, 19__, (the
"Effective Date") as a profit sharing plan and trust
(optionally with a "cash or deferred arrangement" as defined
in Code Section 401(k)) to be known as ____________________
Plan and Trust (the "Plan") in the form of the PRISM(R)
PROTOTYPE RETIREMENT PLAN & TRUST.
- ----------
1 Footnotes in this Adoption Agreement are not to be construed as part of
the Plan provisions but are explanatory only. To the extent a footnote is
inconsistent with the provisions of the Basic Plan Document or applicable
law, the provisions of the Plan shall be construed in conformity with the
Basic Plan Document or law.
2 Terms that are capitalized are defined in the PRISM(R) PROTOTYPE
RETIREMENT PLAN & TRUST BASIC PLAN DOCUMENT.
3 The Plan will have an individual TIN, distinct from the Employer TIN.
<PAGE> 2
B. X This plan is an amendment and restatement in the form of the
--- PRISM(R) PROTOTYPE RETIREMENT PLAN & TRUST, effective MARCH
1, 1995, (the "Effective Date") of the THE TRANZONIC
COMPANIES SALARY SVGS AND PROFIT-SHRG Plan and Trust
(the "Plan"), originally effective as of OCT. 1, 1984
(the "Original Effective Date").
2. EMPLOYER'S THREE DIGIT PLAN NUMBER: ________________
3. COMMITTEE MEMBERS(4):
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
4. DEFINITIONS:
A. COMPENSATION for allocation purposes:
I Will be determined over the following applicable period
(select only one):
(A) the Plan Year
---
(B) X the period of Plan participation during the Plan
--- Year
(C) a consecutive 12 month period commencing on ____
--- and ending with, or within, the Plan Year.
II X If selected, Compensation will include Employer
--- contributions made pursuant to a Salary Reduction
Agreement, or other arrangement, which are not
includible in the gross income of the Employee under
Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) of the
Internal Revenue Code.
III Shall NOT include (select as many as desired):
(A) Bonuses
---
(B) Commissions
---
(C) X Taxable fringe benefits identified below:
--- Reimbursements or other expense allowances,
-------------------------------------------------
fringe benefits, moving expenses or welfare
------------------------------------------------
benefits.
------------------------------------------------
(D) Other items of remuneration identified below:
---
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
- ----------
4 Committee members direct the day to day operation of the Plan. Committee
members serve at the pleasure of the Employer. See Section 11.4 for
changes in Committee membership. If no Committee members are specified,
the Employer shall assume responsibility for the operations of the Plan.
PAGE 2
<PAGE> 3
IV Shall be limited to $___________, which shall be the maximum amount
of compensation considered for plan allocation purposes (but not for
testing purposes), and may not be an amount in excess of the
Internal Revenue Code Section 401(a)(17) limit in effect for the
Plan Year(5). If no amount is specified, Compensation shall be
limited to the Internal Revenue Code Section 401(a)(17) amount, as
adjusted by the Secretary of the Treasury from time to time.
B. EARLY RETIREMENT DATE:
I x is not applicable to this Plan
---
II is the latter of the date on which the Participant attains age
--- _____________ (not less than 55) and the date on which the
Participant completes _____________ Years of Service.
C. HOUR OF SERVICE shall be determined on the basis of the method selected
below. Only one method may be selected. The method shall be applied to
all Employees covered under the Plan as follows (select only one):
I X* On the basis of actual hours for which an Employee is paid, or
--- entitled to be paid.
II X* On the basis of days worked. An Employee shall be credited with
--- ten (10) Hours of Service if under Section 1.1(U) of the Plan
such Employee would be credited with at least one (1) Hour of
Service during the day.
III On the basis of weeks worked. An Employee shall be credited with
--- forty-five (45) Hours of Service if under Section 1.1(U) of the
Plan such Employee would be credited with at least one (1) Hour
of Service during the week.
IV On the basis of semi-monthly payroll periods. An Employee shall
--- be credited with ninety-five (95) Hours of Service if under
Section 1.1(U) of the Plan such Employee would be credited
with at least one (1) Hour of Service during the semi-monthly
payroll period.
V On the basis of months worked. An Employee shall be credited
--- with one hundred ninety (190) Hours of Service if under Section
1.1(U) of the Plan such Employee would be credited with at least
one (1) Hour of Service during the month.
*SEE ADDENDUM ITEM 1.
D. LIMITATION YEAR shall mean the 12 month period commencing on JANUARY 1
and ending on DECEMBER 31, EXCEPT FOR THE PERIOD BEGINNING MARCH 1, 1995
AND ENDING DECEMBER 31, 1995*.
*SEE ADDENDUM ITEM 2.
- ----------
5 If no amount is specified, the maximum amount of Compensation allowed under
Code Section 401(a)(17) (the "$150,000 limit" ("$200,000 limit" prior to the
Plan Year beginning before January 1, 1994)), as adjusted from time to time,
shall be used.
PAGE 3
<PAGE> 4
E. NORMAL RETIREMENT DATE for each Participant shall mean (select one):
I X the date the Participant attains age: 65 (not to exceed 65)
---
II The latter of the date the Participant attains age ________ (not
--- to exceed 65) or the ________ (not to exceed 5th) anniversary of
the participation commencement date. If for the Plan Years
beginning before January 1, 1988, Normal Retirement Date was
determined with reference to the anniversary of the
participation commencement date (more than 5 but not to exceed
10 years), the anniversary date for Participants who first
commenced participation under the Plan before the first Plan
Year beginning on or after January 1, 1988 shall be the earlier
of (A) the tenth anniversary of the date the Participant
commenced participation in the Plan (or such anniversary as had
been elected by the employer, if less than 10) or (B) the fifth
anniversary of the first day of the first Plan Year beginning on
or after January 1, 1988. Notwithstanding any other provisions
of the Plan, the participant commencement date is the first day
of the first Plan Year in which the Participant commenced
participation in the Plan.
F. PERMITTED DISPARITY LEVEL, for purposes of allocating Employer
Contributions, shall mean (select only one):
I X Not applicable - the Plan does not use permitted disparity.
---
II The Taxable Wage Base, which is the contribution and benefit
--- base under section 230 of the Social Security Act at the
beginning of the year.
III ___% (not greater than 100%) of the Taxable Wage Base as defined
--- in B(4)(f)(ii) above.
IV $________, provided that the amount does not exceed the Taxable
--- Wage Base as defined in B(4)(f)(ii) above.
G. PLAN YEAR shall mean (select and complete only one of the following):
I X the 12-consecutive month period which coincides with the
--- Limitation Year. The first Plan Year shall be the period
commencing on the Effective Date and ending on the last day of
the Limitation Year.
II the 12-consecutive month period commencing on _________, 19__,
--- and each annual anniversary thereof.
III the calendar year (January 1 through December 31).
---
PAGE 4
<PAGE> 5
H. QUALIFIED DISTRIBUTION DATE, for purposes of making distributions under
the provisions of a Qualified Domestic Relations Order (as defined in
Internal Revenue Code Section 414(p)), X SHALL ___ SHALL NOT be the date
the order is determined to be qualified. If SHALL is selected, the
Alternate Payee will be entitled to an immediate distribution of
benefits as directed by the Qualified Domestic Relations Order. If SHALL
NOT is selected, the Alternate Payee may only take a distribution on the
earliest date that the Participant is entitled to a distribution.
I. SPOUSE:
___ If selected, Spouse shall mean only that person who has actually
been the Participant's spouse for at least one year.
J. YEAR OF SERVICE shall mean:
I For ELIGIBILITY purposes (select one of the following):
(A) X the 12 consecutive months during which an Employee is
--- credited with 1000 (not more than 1000) Hours of Service.
(B) a Period of Service (using the elapsed time method of
--- counting Service, as described in Section 1.1(N)(3) of the
Plan).
II For ALLOCATION accrual purposes (select one of the following): N/A
(A) the 12 consecutive months during which an Employee is
--- credited with _____ (not more than 1000) Hours of Service.
(B) a Period of Service (using the elapsed time method of
--- counting Service, as described in Section 1.1(N)(3) of the
Plan).
III For VESTING service purposes (select one of the following): N/A
(A) the 12 consecutive months during which an Employee is
--- credited with ______ (not more than 1000) Hours of
Service.
(B) a Period of Service (using the elapsed time method of
--- counting Service, as described in Section 1.1(N)(3) of the
Plan).
IV For purpose of computing Years of Service in plans where Year of
Service is defined in terms of Hours of Service), the consecutive 12
month period shall be:
PAGE 5
<PAGE> 6
(A) For ELIGIBILITY purposes, the first Year of Service shall be
computed using the 12 month period commencing on the Employee's
date of hire and ending on the first annual anniversary of the
Employee's date of hire (the "Initial Computation Period"). In
the event an employee does not complete an eligibility Year of
Service during this initial computation period, the computation
period shall be (select only one):
(1) X the period commencing on each annual anniversary of
--- the Employee's date of hire and ending on the next
annual anniversary of the Employee's date of hire.
(2) the Plan Year, commencing with the Plan Year in which
--- the Initial Computation Period ends.
(B) For VESTING purposes, Years of Service shall be computed on the
basis of: N/A
(1) the period commencing on each annual anniversary of
--- the Employee's date of hire and ending on the next
annual anniversary of the Employee's date of hire.
(2) the Plan Year, commencing with the first Plan Year an
--- Employee completes an Hour of Service.
(C) For ALLOCATION accrual purposes, Year of Service shall be
computed on the basis of the Plan Year.
V X For ELIGIBILITY purposes, Years of Service with the follow-
--- ing Predecessor Employers shall count in fulfilling the eli-
gibility requirements for this Plan:
SEE ADDENDUM ITEM 3.
________________________________________________________
________________________________________________________
________________________________________________________
VI For VESTING purposes, Years of Service with the following
--- Predecessor Employers shall count for purposes of deter-
mining the nonforfeitable amount of a Participant's account:
________________________________________________________
________________________________________________________
________________________________________________________
5. COVERAGE:
This Plan is extended by the Employer to the following Employees who
have met the eligibility requirements (select as many as appropriate):
PAGE 6
<PAGE> 7
I All Employees
---
II Salaried Employees
---
III Sales Employees
---
IV Hourly Employees
---
V leased Employees
---
VI all Employees except (select as applicable):
---
(A) those who are members of a unit of Employees covered
--- by a collective bargaining agreement between the
Employer and Employee representatives, if retirement
benefits were the subject of good faith bargaining
and if two percent or less of the Employees who are
covered pursuant to that agreement are professionals
as defined in Section 1.410(b)-9 of the Regulations.
For this purpose, the term "Employee representative"
does not include any organization more than half of
whose members are Employees who are owners,
officers, or executives of the Employer.
(B) those who are nonresident aliens (within the meaning
--- of Internal Revenue Code Section 7701(b)(1)(B)) and
who receive no earned income (within the meaning of
Internal Revenue Code Section 911(d)(2)) from the
Employer which constitutes income from sources
within the United States (within the meaning of
Internal Revenue Code Section 861(a)(3)).
VII --- Union Employees (who are members of the following unions or
union affiliates:
________________________________________________________
________________________________________________________
________________________________________________________
VIII X Other Employees, described as follows:
---
All Employees except Leased Employees and those Employees
-------------------------------------------------------------
described above in Item B(5)(vi)(a) who have not bargained
-------------------------------------------------------------
for coverage under this Plan
-------------------------------------------------------------
6. ELIGIBILITY:
An Employee covered by the Plan may become a Participant upon completion
of the following eligibility requirements:
PAGE 7
<PAGE> 8
A. SERVICE(6):
I There shall be no minimum service requirement for an
--- Employee to become a Participant.
II X The Employee must complete 1 Years of Service (not more
--- than 2 years) to be a Participant for purposes of
receiving allocations of Employer Profit Sharing
Contributions.
B. AGE:
I There shall be no minimum age requirement for an Employee
--- to become a Participant.
II X The Employee must attain age 21 (not more than 21) to be a
--- Participant in the Plan.
C. WAIVER OF AGE AND SERVICE REQUIREMENTS:
I Notwithstanding the provisions of Items B(6)(a) and (b),
--- Employees who have not satisfied the age and service
requirements, but would otherwise be eligible to
participate in the plan, shall be eligible to participate
on the Effective Date.
II For new Plans, notwithstanding the provisions of Items
--- B(6)(a) and (b), Employees who have not satisfied the age
and service requirements, but would otherwise be eligible
to participate in the plan, shall be eligible to
participate on the Effective Date.
D. ENTRY DATES:
Upon completion of the eligibility requirements, an Employee shall
commence participation in the Plan (select only one):
I As soon as practicable under the payroll practices
--- utilized by the Employer, and consistently applied to all
Employees, or if earlier, the first day of the Plan
Year(7).
II As of the first day of the month following the completion
--- of the eligibility requirements.
- ----------
6 If a fractional year is elected, the elapsed time method of computing
service shall be used for the fractional year. Eligibility provisions for
optional cash or deferred arrangements are contained in Item C of this
Adoption Agreement.
7 Notwithstanding the foregoing, an Employee who has met the eligibility
requirements may not enter the Plan later than six months following the date
on which the Employee first completes the eligibility requirements.
PAGE 8
<PAGE> 9
III As of the earliest of the first day of the Plan Year,
--- fourth, seventh or tenth month of the Plan Year next
following completion of the eligibility requirements.
IV X* As of the earliest of the first day of the Plan Year or
--- seventh month of the Plan Year next following completion
of the eligibility requirements.
V As of the first day of the Plan Year next following
--- completion of the eligibility requirements (may only be
selected if the eligibility year of service requirement is
6 months or less).
*SEE ADDENDUM ITEM 4.
7. VESTING:
A. The percentage of a Participant's Employer Contribution Account
(attributable to Employer Profit Sharing Contributions) to be vested
in him or her upon termination of employment prior to attainment of
the Plan's Normal Retirement Date shall be(8):
COMPLETED YEARS OF SERVICE
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
<S> <C> <C> <C> <C> <C> <C> <C> <C>
I 100%
---- ---- ----
II 100%
---- ---- ---- ----
III 20% 40% 60% 80% 100%
---- ---- ---- ---- ---- ---- ----
IV 20% 40% 60% 80% 100%
---- ---- ---- ---- ---- ---- ---- ----
V 10% 20% 30% 40% 60% 80% 100%
---- ---- ---- ---- ---- ---- ---- ----
VI 100%
---- ---- ---- ---- ---- ----
VII 100%
---- ---- ---- ---- ---- ---- ---- ----
VIII X Full and immediate vesting upon entry into the Plan(9)
----
<FN>
Notwithstanding anything to the contrary in the Plan, the amount
inserted in the blanks above shall not exceed the limits specified in
Code Section 411(a)(2).
</TABLE>
B. For purposes of computing a Participant's vested account balance,
Years of Service for vesting purposes _______ SHALL _____ SHALL NOT
include Years of Service before the Employer maintained this Plan or
any predecessor plan, and _______ SHALL _____ SHALL NOT include
Years of Service before the Employee attained age 18.
C. Notwithstanding the provisions of this Item B(7)(c) of the Adoption
Agreement, a Participant shall become fully vested in his
Participant's Employer Contribution(10):
- ----------
8 Notwithstanding the selection made in this Item B(7)(a), a Participant shall
be fully vested in his or her Employer Contribution Accounts if the
Participant dies or becomes Disabled while in the employ of the Employer.
9 If more than one Year of Service is an eligibility requirement, Item viii
must be selected.
10 The provisions of this section will be administered by the Employer on a
consistent and nondiscriminatory basis.
PAGE 9
<PAGE> 10
I the Participant's job is eliminated without the
--- Participant being offered a comparable position
elsewhere with the Employer.
II for such reason as is described below:
---
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
8. EMPLOYER PROFIT SHARING CONTRIBUTIONS:
A. CONTRIBUTIONS:
I In its discretion, the Employer may contribute Employer
--- Profit Sharing Contributions to the Plan.
II X The Employer shall contribute Employer Profit Sharing
--- Contributions to the Plan in the amount of 0.5% of the
Compensation of all Eligible Participants under the Plan.
III X If selected, the Employer may make Employer Profit Sharing
--- Contributions without regard to current or accumulated Net
Profits of the Employer for the taxable year ending with,
or within the Plan Year.
IV If selected, the Employer may designate all or any part of
--- the Employer Profit Sharing Contributions as Qualified
Nonelective Contributions, provided, however, that
contributions so designated will be subject to the same
vesting, distribution, and withdrawal restrictions as
Before Tax Contributions(11).
B. ALLOCATIONS:
Employer Profit Sharing Contributions shall be allocated to the
accounts of eligible Participants according to the following
selected allocation formula:
I X The Employer Profit Sharing Contributions shall be
--- allocated to each eligible Participant's account in the
ratio which the Participant's Compensation bears to the
Compensation of all eligible Participants. Employer Profit
Sharing Plan Contributions, shall be allocated to the
accounts of Participants who have completed a Year of
Service(12) (select one): *SEE ADDENDUM ITEM 5.
- ----------
11 Amounts designated as Qualified Nonelective Contributions will be allocated
pursuant to Section 3.1(A)(14) of the Basic Plan Document.
12 In the event contributions are allocated on a basis other than a full plan
year, the Year of Service shall be based on the elapsed time method of
calculation, and a Participant shall be deemed to have completed an
appropriate
PAGE 10
<PAGE> 11
(A) --- as of the last day of the month preceding the
month in which the contribution was made.
(B) --- as of the last day of the Plan quarter preceding
the quarter in which the contribution was made.
(C) --- as of the last day of the Plan Year.
II --- The Employer Profit Sharing Contributions shall be
allocated in accordance with the following formula:
(A) If the Plan is Top-Heavy, the contribution shall be
first credited to each eligible Participant's
Account in the ratio which the Participant's
Compensation bears to the total Compensation of all
eligible Participants, up to 3% of each Participant's
Compensation.
(B) If the Plan is Top-Heavy, any Employer Profit Sharing
Contribution remaining after the allocation in
(a) above shall be credited to each eligible
Participant's account in the ratio which the
Participant's Excess Compensation (13)
bears to the total Excess Compensation of all
eligible Participants, up to 3% of each eligible
Participant's Excess Compensation.
(C) Any contributions remaining after the allocation in
(b) above shall be credited to each eligible
Participant's account in the ratio which the sum of
the Participant's total Compensation and Excess
Compensation bears to the sum of the total
Compensation and Excess Compensation of all
eligible Participants, up to an amount equal to the
maximum Excess Percentage times the sum of the
Participant's Compensation and Excess Compensation.
If the Plan is Top-Heavy, the maximum Excess
Percentage is ________% (insert percentage). If the
Plan is not Top-Heavy, the maximum Excess Percentage
is ________% (insert percentage, which shall not
exceed the prior Excess Percentage limitation
specified by more than 3).
NOTE: If the Permitted Disparity Level defined at Item
B(4)(f) is the Taxable Wage Base (which is the
contribution and benefit base under section 230 of
the Social Security Act at the beginning of the
year), then the
- --------------------------------------------------------------------------------
Period of Service for allocation purposes if the Participant has completed
a pro-rata Period of Service corresponding to the interval on which
contributions are allocated.
13 Excess Compensation means a Participant's Compensation in excess of the
Permitted Disparity Level specified in the Definitions section of this
Adoption Agreement.
Page 11
<PAGE> 12
maximum Excess Percentage should be 2.7% if the
Plan is Top-Heavy and 5.7% if the Plan is not
Top-Heavy.
If the Permitted Disparity Level defined at
Item B(4)(f) is greater than 80% but less than 100%
of the Taxable Wage Base, then the maximum Excess
Percentage should be 2.4% if the Plan is Top-Heavy
and 5.4% if the Plan is not Top-Heavy.
If the Permitted Disparity Level defined at
Item B(4)(f) is greater than the greater of $10,000
or 20% of the Taxable Wage Base, but not more than
80%, then the maximum Excess Percentage should be
1.3% if the Plan is Top-Heavy and 4.3% if the Plan is
not Top-Heavy.
(D) Any remaining Employer Profit Sharing Contribution
shall be allocated among eligible Participants'
accounts in the ratio which the Participant's
Compensation bears to the total Compensation of all
Participants.
III --- If selected, and the Employer has elected to allocate
Employer Profit Sharing Plan Contributions as of the
last day of the Plan Year, a Participant must be employed
by the Employer on the last day of the Plan Year in order
to receive an allocation (14).
IV --- A Participant who terminates before the end of the
period for which contributions are allocated shall
share in the allocation of Employer Profit Sharing
Contributions if termination of employment was the result
of (select all that apply):
(A) X retirement
---
(B) X disability
---
(C) X death
---
(D) other, as specified below:
---
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
9. ROLLOVER & TRANSFER CONTRIBUTIONS (SELECT ONE):
A. X Subject to policies, applied in a consistent and
--- nondiscriminatory manner, adopted by the Committee, each
Employee, who would otherwise be eligible to participate in the
Plan except that such Employee has not yet met the eligibility
requirements, and each
- ---------
14 This option shall only be effective if Item 8(b)(i)(c) has been selected.
Even if this Item is selected, the provisions of Section 4.8 of the Basic
Plan Document may supersede this requirement if necessary to satisfy Code
Sections 401(a)(26) and 410(b).
Page 12
<PAGE> 13
Participant may make a Rollover Contribution as described in
Internal Revenue Code Sections 402(a)(5), 403(a)(4) or
408(d)(3).
B. --- Subject to policies, applied in a consistent and
nondiscriminatory manner, adopted by the Committee, each
Participant may make a Rollover Contribution as described in
Internal Revenue Code Sections 402(a)(5), 403(a)(4) or 408(d)(3).
C. --- No Employee shall make Rollover Contributions to the Plan.
10. DISTRIBUTIONS:
A. DISTRIBUTIONS UPON SEPARATION FROM SERVICE:
The Normal Form of Benefit under the Plan shall be a single lump
sum distribution, made X (if selected) as soon as administratively
practical after receipt of a distribution request from a
Participant entitled to a distribution or ___ (if selected) upon the
Participant's attainment of the Plan's Early Retirement Date or the
Plan's Normal Retirement Date, whichever is earlier.
In addition to the Normal Form of Benefit, the Participant
shall be entitled to select from among the following optional forms
of benefit specified by the employer (select as many as apply):
I --- Installment payments
II X Such other forms as may be specified below:
--- SEE ADDENDUM ITEMS 8 & 9.
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
B. In-Service Distributions (select as may be appropriate):
I --- There shall be no in-service distribution of Participant
account balances derived from Employer Profit Sharing
Contributions.
II X Participants may request an in-service distribution of
--- their account balance attributable to Employer Profit
Sharing Contributions, for the following reasons:
(A) X For purposes of satisfying a financial hard-
--- ship, as determined in accordance with the
uniform nondiscriminatory policy of the
Committee;
(B) X Attaimnent of age 59-1/2 by the Participant; or
---
(C) X Attainment of the Plan's Normal Retirement
--- Date by the Participant.
*SEE ADDENDUM ITEM 6.
Page 13
<PAGE> 14
11. FORFEITURES:
A. Forfeitures of amounts attributable to Employer Profit Sharing
Contributions shall be reallocated as of:
I --- the last day of the Plan Year in which the Forfeiture
occurred.
II --- the last day of the Plan Year following the Plan Year in
which the Forfeiture occurred.
III --- the last day of the Plan Year in which the Participant
suffering the Forfeiture has incurred five consecutive
One Year Breaks in Service.
B. Forfeitures of Employer Profit Sharing Contributions shall be
reallocated as follows:
I x Not applicable as Employer Profit Sharing Contributions
--- are always 100% vested and nonforfeitable.
II --- Used first to pay the expenses of administering the Plan,
and then allocated pursuant to one of the following two
options(15):
III --- Forfeitures shall be allocated to Participant's accounts
in the same manner as Employer Profit Sharing
Contributions, Employer Matching Contributions,
Qualified Nonelective Contributions or Qualified Matching
Contributions, in the discretion of the Employer, for the
year in which the Forfeiture arose.
IV --- Forfeitures shall be applied to reduce the Employer Profit
Sharing Contributions, Employer Matching Contributions,
Qualified Nonelective Contributions or Qualified Matching
Contributions, in the discretion of the Employer, for the
Plan Year following the Plan Year in which the Forfeiture
arose.
12. LIMITATIONS ON ALLOCATIONS:
If the Employer maintains or ever maintained another qualified
retirement plan in which any Participant in this Plan is (or was) a
participant, or could possibly become a participant, the Employer must
complete the following:
A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer other than a Master or
Prototype Plan:
- ----------
15 If this option is selected, iii or iv must be selected to reallocate
Forfeitures of Employer Profit Sharing Contributions remaining after
expenses of administering the Plan have been paid.
Page 14
<PAGE> 15
I --- The provisions of this Plan shall apply as if the other
plan were a Master or Prototype plan; or,
II --- The following provisions will be effective to limit the
total Annual Additions to the Maximum Permissible Amount,
and will properly reduce any Excess Amounts, in a manner
that precludes Employer discretion:
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
B. If the Participant is or ever has been a participant in a qualified
defined benefit plan maintained by the Employer, the following
provisions will be effective to satisfy the 1.0 limitation of
Internal Revenue Code Section 415(e), in a manner that precludes
Employer discretion:
SEE ADDENDUM ITEM 7.
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
13. INTERNAL REVENUE CODE SECTION 411(D)(6) PROTECTED BENEFITS:
X If selected, the Plan has Internal Revenue Code Section 411(d)(6)
--- Protected Benefits from a prior plan that this Plan ainends, that
must be protected.
SEE ADDENDUM ITEM 8.
14. TOP-HEAVY PLAN PROVISIONS:
For each Plan Year in which the Plan is a Top-Heavy Plan the following
provisions will apply:
A. The percentage of a Participant's Employer Contribution Account to
be vested in him upon termination of employment prior to retirement
shall be:
I --- a percentage determined in accordance with the following
schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE PERCENTAGE
---------------- ----------
<S> <C>
Less than two 0
Two but less than three 20
Three but less than four 40
Four but less than five 60
Five but less than six 80
Six or more 100;
</TABLE>
II ---- 100% vesting after ___ (not to exceed 3) Years of Service;
provided, however, that Years of Service may not exceed
two (2) if the service requirement for eligibility
exceeds I year; or
Page 15
<PAGE> 16
III X computed in accordance with the vesting schedule selected
--- by the Employer in Items B(7)(a) or C(4)(d), as long as
the benefits under the vesting schedule in Items
B(7)(a) or C(4)(d) vest at least as rapidly as the two
options specified in this Item B(14)(a), above.
If the vesting schedule under the Plan shifts in or out of the
schedules above for any Plan Year because of the Plan's Top-Heavy
status, such shift is an amendment to the vesting schedule and the
election in Section 2.2 of the Basic Plan Document applies.
B. For purposes of minimum Top-Heavy allocations, contributions and
forfeitures equal to 3% (not less than 3%) of each Non-key
Employee's Compensation will be allocated to each Participant's
Contribution Account when the Plan is a Top-Heavy Plan, except as
otherwise provided in the Basic Plan Document. This Item 14 will
not apply to any Participant to the extent the Participant is
covered under any other plan or plans of the Employer and the
Employer completes the following: (Insert the name of the plan or
plans which will meet the minimum allocation or benefit
requirement applicable to Top-Heavy plans.)
-------------------------------------------------------------------
-------------------------------------------------------------------
C. The Valuation Date as of which account balances or accrued benefits
are valued for purposes of computing the Top-Heavy Ratio shall
be the last day of each Plan Year.
D. If the Employer maintains or has ever maintained one or more defined
benefit plans which have covered or could cover a Participant in
this Plan, complete the following:
Present Value: For purposes of establishing Present Value to
compute the Top-Heavy Ratio, any benefit shall be discounted only
for mortality and interest based on the following:
Interest rate __________% Mortality table __________
15. INVESTMENTS:
A. Investments made pursuant to the investment direction provisions
of the Basic Plan Document shall be made into any appropriate
Investment Fund as selected by the Employer. In addition,
investment of Plan assets is expressly authorized, as required by
Revenue Ruling 81-100, in each of the
Page 16
<PAGE> 17
following common or collective funds sponsored by the Trustee,
or an affiliate of the Trustee(16):
SOCIETY NATIONAL BANK EB MANAGED GUARANTEED INCOME CONTRACT
FUND, THE SOCIETY NATIONAL BANK MULTIPLE INVESTMENT TRUST FOR
EMPLOYEE BENEFIT TRUSTS, AND OTHER COLLECTIVE TRUSTS EXEMPT
FROM TAX UNDER IRC SECTION 501 AND AS DESCRIBED IN REV. RUL.
81-100
B. If selected, an Employer Stock Fund shall be available as an
--- Investment Fund pursuant to the terms of the Basic Plan
Document.
--- If selected, and an Employer Stock Fund is available as an
Investment Fund, Participants will have the right,
notwithstanding any other provisions of the Plan, to direct
that a portion of the Plan assets held for their benefit and
invested in the Employer Stock Fund be diversified pursuant
to the provisions of Section 10.7(F) of the Basic Plan
Document.
C. Participants may make changes of existing account balances and
future contributions from among the Investment Funds offered:
I X Once during each business day that the Trustee and the
--- New York Stock Exchange are open.
II --- Once during each calendar month.
III --- Once during each quarter of the Plan Year.
IV --- Once during each rolling ___ day period.
D. --- If selected, the Participant shall be restricted in making
changes of existing account balances from any Investment Fund,
as specified in the terms or conditions of such Investment Fund,
and the Employer shall attach an addendum specifying such
restriction.
E. The Participant will designate into which Investment Funds all
contributions to their accounts are made, except the following:
I --- Employer Profit Sharing Contributions
II --- Employer Mandatory Matching Contributions
III --- Employer Discretionary Matching Contributions
IV --- Qualified Matching Contributions
V --- Qualified Nonelective Contributions
F. --- If selected, and to the extent a selection is made above, the
Employer shall attach an Investment Direction Addendum specifying
- ---------------
16 This Item is for use in identifying collective trust funds, which, pursuant
to Revenue Ruling 81-100 must be specifically referenced in the Plan.
Actual Investment Funds are referenced on the Investment Fund Designation
form attached to this Adoption Agreement.
Page 17
<PAGE> 18
how the contributions so specified shall be invested among the
Investment Fund.
G. --- If selected, the Participant shall be restricted in the use of
the Employer Stock Fund as an Investment Fund for designating
the investment of contributions in the Participant's account,
as follows:
I --- The Participant may not direct the investment of Plan
assets held in their account into the Employer Stock
Fund.
II --- The Participant may direct __% of the following
contributions into the Employer Stock Fund:
(A) --- Employer Profit Sharing Contributions
(B) --- Employer Mandatory Matching Contributions
(C) --- Employer Discretionary Matching Contributions
(D) --- Qualified Matching Contributions
(E) --- Qualified Nonelective Contributions
III --- __% of the following contributions will be invested
into the Employer Stock Fund, with the balance
invested among:
(A) --- the other Investment Funds, including the
Employer Stock Fund
(B) --- the other Investment Funds, NOT including the
Employer Stock Fund
16. LOANS (SELECT ONE):
A. X* Loans may be made from the Plan in accordance with the
--- Basic Plan Document and such policies and procedures as the
Committee may adopt and apply on a consistent and
nondiscriminatory basis(17).
B. No loans shall be made from the Plan.
*SEE ADDENDUM ITEM 10.
17. TRUSTEE:
The Trustee of this Plan shall be KEY TRUST COMPANY OF OHIO, N,A.
(a bank or trust company affiliated with KeyCorp within the meaning of Internal
Revenue Code Section 1504).
- ----------------
17 If this option is selected, the Employer must establish appropriate
procedures for implementation of the Plan's loan program.
Page 18
<PAGE> 19
18. EFFECTIVE DATE ADDENDUM:
--- If selected, the following provisions shall have the specified
effective dates (which are different from the date specified in
Item B(1)):
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Page 19
<PAGE> 20
C. SECTION 401(K) PLAN PROVISIONS:
1. SERVICE:
An Eligible Employee shall be required to fulfill the following
eligibility service requirements in order to participate in the
Plan through a salary reduction agreement and for purposes of
receiving an allocation of Employer Matching Contributions:
A. X The Employee must complete 1 Years of Service (not more
--- than 1 year) to be a Participant for purposes of
receiving allocations of Employer Matching Contributions.
B. X The Employee must complete 1 Years of Service (not more
--- than 1 year) to be a Participant for purposes of entering
into a Salary Reduction Agreement and having Employee
Before Tax Contributions or Employee After Tax
Contributions contributed to the Plan on the Employee's
behalf.
2. EMPLOYEE SALARY DEFERRALS:
A. X* Participants shall be entitled to enter into a Salary
--- Reduction Agreement providing for Before Tax
Contributions to be made to the Plan.
I The minimum Before Tax Contribution shall be 1% of
the Participant's Compensation.
II The maximum Before Tax Contribution shall be 15% of
the Participant's Compensation.
B. X* Participants shall be entitled to enter into a Salary
--- Reduction Agreement providing for After Tax Contributions
to be made to the Plan.
I The minimum After Tax Contribution shall be 1% of the
Participant's Compensation.
II The maximum After Tax Contribution shall be 15% of
the Participant's Compensation.
III If selected, notwithstanding the above, a Participant
shall not be able to enter into a Salary Reduction
Agreement providing for After Tax Contributions to be
made to the Plan unless the Participant has entered
into a Salary Reduction Agreement that provides for
Before Tax Contributions to be made to the Plan in an
amount of at least __________% of the Participant's
Compensation.
*SEE ADDENDUM ITEM 11.
Page 20
<PAGE> 21
C. _______ If selected, a Participant shall be entitled to enter
into a Salary Reduction Agreement providing that any
extraordinary item of compensation, not yet payable
(including bonuses), be withheld from the Participant's
Compensation and contributed to the Plan as either a
Before Tax Contribution, or After Tax Contribution
(provided such contributions are authorized above, and to
the extent that such contribution, when aggregated with
either the Participants other Before Tax Contributions or
After Tax Contributions do not exceed the limitations
specified above, on an annual basis).
3. CONTRIBUTION CHANGES:
A. Participants may increase or decrease the amount of
contributions made to the Plan pursuant to a Salary Reduction
Agreement once each:
i ___ Plan Year
ii ___ Semi-annual period, based on the Plan Year
iii ___ Quarter, based on the Plan Year
iv ___ Month
v _X_ Other, as specified below (provided that it is at
least once per year):
QUARTER, BASED ON THE PLAN YEAR, EXCEPT FOR THE PERIOD
OF MARCH 1, 1995 TO MARCH 1, 1996 DURING WHICH
PARTICIPANTS MAY INCREASE OR DECREASE CONTRIBUTIONS AS
OF MARCH 1, JULY 1, AND SEPT 1, 1995 AND JANUARY 1 AND
MARCH 1, 1996.
B. Claims for returns of Excess Before Tax Contributions for the
Participant's preceding taxable year must be made in writing, and
submitted to the Committee by April 15 (specify a date between
March 1 and April 15)18.
4. EMPLOYER MATCHING CONTRIBUTIONS19:
A. Mandatory Matching Contributions:
The Employer shall make contributions to the Plan, in an amount
as specified below:
i ___ An amount, equal to ______% of each Participant's Before
Tax Contributions, however, no match shall be made on
[FN]
__________
18 The date specified is for the refund of amount deferred in excess of the
Code Section 402(g) limit (the $7,000 limit) for the Participant's taxable
year.
19 The Employer shall have the right to designate all, or any portion of
Employer Matching Contributions as Qualified Matching Contributions, which
shall then be subject to the same vesting, distribution, and withdrawal
restrictions as Before Tax Contributions.
Page 21
<PAGE> 22
Participant's Before Tax Contributions in excess of ____%
(or $____________________ ) of the Participant's
Compensation.
ii ___ An amount, equal to ___% of each Participant's After
Tax Contributions, but not to exceed ___% of the
Participant's Compensation, or $__________.
iii ___ An amount, equal to ___% of each Participant's
contributions made pursuant to a Salary Reduction
Agreement (including both Before Tax Contributions
and After Tax Contributions), but only if the
Participant has entered into a Salary Reduction Agreement
providing for Before Tax Contributions of at least ___%
of the Participant's Compensation, but not to exceed ___%
of the Participant's Compensation, or $__________.
iv _X*_ An amount equal to the sum of the following:
(a) ____% of the first ____% of the Participant's Com-
pensation deferred pursuant to a Salary Re-
duction Agreement; plus,
(b) ____% of the next ____% of the Participant's Com-
pensation deferred pursuant to a Salary Re-
duction Agreement; plus,
(c) ____% of the next ____% of the Participant's Com-
pensation deferred pursuant to a Salary Re-
duction Agreement, but not to exceed ____% of
the Participant's Compensation, or $______.
*SEE ADDENDUM ITEM 12.
v ___ An amount equal to $__________, for each Participant who
enters into a Salary Reduction Agreement providing for
__________ Before Tax Contributions, _________ After Tax
Contributions, or __________ either Before Tax
Contributions or After Tax Contributions (or a
combination of both) equal to or exceeding ____% of the
Participant's Compensation. Such contributions shall be
made and allocated:
(a) ____ only during the first Plan Year the Plan is in
effect, or if a restatement, for the first
Plan Year beginning with, or containing the
restatement Effective Date.
(b) ____ each Plan Year that a Participant has in force
a Salary Reduction Agreement meeting the
criteria specified above.
(c) ____ during the first Plan Year that the Participant
participates through a Salary Reduction
Agreement meeting the criteria specified above.
Page 22
<PAGE> 23
B. DISCRETIONARY MATCHING CONTRIBUTIONS:
______ The Employer shall make contributions to the Plan, in
an amount determined by resolution of the Board of
Directors on an annual basis. The Board resolution
shall provide for the percentage and/or amount of
Before Tax Contributions and/or After Tax Contributions
to be matched and the maximum percentage and/or
amount of Before Tax Contributions and/or After Tax
Contributions eligible for matching.
C. ALLOCATION OF MATCHING CONTRIBUTIONS:
Employer Matching Contributions shall be allocated pursuant to
the terms of the Basic Plan Document, notwithstanding the
foregoing:
i _X_ A Participant who terminates before the end of the
period for which contributions are allocated shall
share in the allocation of Employer Matching if
termination of employment was the result of (select
all that apply):
(A) _X_ retirement
(B) _X_ disability
(C) _X_ death
(D) ___ other, as specified below:
___________________________________________
___________________________________________
___________________________________________
ii _X_ Employer Matching Contributions shall be allocated
to the accounts of Participants (select one):
(A) _X_ as of each pay period for which a contri-
bution was made pursuant to a Salary
Reduction Agreement.
(B) ___ semi-monthly.
(C) ___ as of the last day of the month preceding
the month in which the contribution was
made.
(D) ___ as of the last day of the Plan quarter
preceding the quarter in which the
contribution was made.
(E) ___ as of the last day of the Plan year.
iii _X_ If selected, the Employer may make Employer Matching
Contributions without regard to current or
accumulated Net
Page 23
<PAGE> 24
Profits of the Employer for the taxable year ending
with, or within the Plan Year20.
D. The percentage of a Participant's Employer Matching
Contribution Account21 (attributable to Employer Matching
Contributions) to be vested in him or her upon termination of
employment prior to attainment of the Plan's Normal Retirement
Date shall be22:
Completed Years of Service
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
i _____ ____ 100%
ii _____ ____ ____ 100%
iii _____ ____ 20% 40% 60% 80% 100%
iv _____ ____ ____ 20% 40% 60% 80% 100%
v _____ 10% 20% 30% 40% 60% 80% 100%
vi _____ ____ ____ ____ ____ 100%
vii _____ ____ ____ ____ ____ ____ ____ 100%
viii __X__ Full and immediate vesting upon entry into the
Plan
</TABLE>
Notwithstanding anything to the contrary in the Plan,
the amount inserted in the blanks above shall not exceed
the limits specified in Code Section 411(a)(2).
E. Notwithstanding the provisions of this Item C(4)(e) of the
Adoption Agreement, a Participant shall become fully vested in
his Participant's Employer Matching Contribution Account if23:
i ____ the Participant's job is eliminated without the
Participant being offered a comparable position
elsewhere with the Employer.
ii ____ for such reason as is described below:
_________________________________________________
_________________________________________________
_________________________________________________
[FN]
________________
20 Net Profits will never be required for the contribution of Before Tax
Contributions, After Tax Contributions, Qualified Nonelective
Contributions or Qualified Matching Contributions.
21 Notwithstanding anything in the Adoption Agreement to the contrary,
amounts in a Participanfs account attributable to Before Tax
Contributions, Qualified Nonelective Contributions, and Qualified
Matching Contributions shall be 100% vested and nonforfeitable at all
time.
22 Notwithstanding the selection made in this Item B(7)(b), a Participant
shall be fully vested in his or her Employer Contribution Accounts if
the Participant dies or becomes Disabled while in the employ of the
Employer.
23 The provisions of this section will be administered by the Employer on a
consistent and nondiscriminatory basis.
Page 24
<PAGE> 25
F. CORRECTIVE CONTRIBUTIONS:
I X If selected, the Employer shall be authorized to make
--- Qualified Matching Contributions, subject to the
terms of the Basic Plan Document, in an amount
determined by resolution of the Board of Directors
on an annual basis.
III X If selected, the Employer shall be authorized to make
--- Qualified Nonelective Contributions, subject to the
terms of the Basic Plan Document, in an amount
determined by resolution of the Board of Directors on
an annual basis.
5. GAP EARNINGS:
X If selected, Gap Earnings, as defined in Section 3.2(G)(1) of
--- the Basic Plan Document, will be calculated for Excess
Elective Deferrals, Excess Contributions and Excess Aggregate
Contributions, and refunded to the Participant as provided for
in Article III of the Basic Plan Document.
6. FORFEITURES:
A. Forfeitures of amounts attributable to Employer Matching
Contributions shall be reallocated as of:
I the last day of the Plan Year in which the Forfeiture
--- occurred.
II the last day of the Plan Year following the Plan
--- Year in which the Forfeiture occurred.
III the last day of the Plan Year in which the Participant
--- suffering the Forfeiture has incurred the fifth
consecutive One Year Break in Service.
B. Forfeitures of Employer Matching Contributions shall be
reallocated as follows:
I X Not applicable as Employer Matching Contributions are
--- always 100% vested and nonforfeitable.
II Used first to pay the expenses of administering the Plan,
--- and then allocated pursuant to one of the following two
options:
III Forfeitures shall be allocated to Participan's accounts
--- in the same manner as Employer Profit Sharing
Contributions, Employer Matching Contributions, Qualified
Nonelective Contributions or Qualified Matching
Contributions, in the discretion of the Employer, for
the year in which the Forfeiture arose.
IV Forfeitures shall be applied to reduce the Employer
--- Profit Sharing Contributions, Employer Matching
Contributions,
Page 25
<PAGE> 26
Qualified Nonelective Contributions or Qualified
Matching Contributions, in the discretion of the
Employer, for the Plan Year following the Plan Year in
which the Forfeiture arose.
C. Forfeitures of Excess Aggregate Contributions shall be: N/A
I --- Applied to reduce Employer contributions for the Plan
Year in which the excess arose, but allocated as below,
to the extent the excess exceeds Employer contributions
for the Plan Year, or the Employer has already
contributed for such Plan Year.
II --- Allocated after all other forfeitures under the Plan:
(A) --- to the Matching Contribution account of each
Non-highly Compensated Participant who made
Before Tax Contributions or After Tax
Contributions in the ratio which each such
Participant's Compensation for the Plan Year
bears to the total Compensation of all such
Participants for the Plan Year; or,
(B) --- to the Matching Contribution account of each
Non-highly Compensated Eligible Participant in
the ratio which each Eligible Participant's
Compensation for the Plan Year bears to the
total Compensation of all Eligible Participants
for the Plan Year.
7. IN-SERVICE DISTRIBUTIONS (SELECT AS MAY BE APPROPRIATE):
A. --- There shall be no in-service distribution of Participant
account balances derived from Before Tax Contributions
(including Qualified Nonelective Contributions and Qualified
Matching Contributions treated as Before Tax Contributions
under the tenns of the Basic Plan Document), or Employer
Matching Contributions.
B. X Participants may request an in-service distribution of their
--- account balance attributable to Employer Matching Contributions,
for the following reasons*:
I --- For purposes of satisfying a financial hardship, as
determined in accordance with the uniform
nondiscriminatory policy of the Committee;
II X Attainment of age 59-1/2 by the Participant; or
---
III --- Attainment of the Plan's Normal Retirement Date by the
Participant.
*SEE ADDENDUM ITEM 6.
Page 26
<PAGE> 27
C. X Participants may request an in-service distribution of their
--- account balance attributable to Employee Before Tax
Contributions, for the following reasons:
I --- For purposes of satisfying a financial hardship, as
determined by the facts and circumstances of an
Employee's situation, in accordance with the
provisions of Section 3.9 of the Basic Plan Document;
II X For purposes of satisfying a financial hardship, using
--- the "safe harbor" provisions of Section 3.9 of the
Basic Plan Document.
III X Attainment of age 59-1/2 by the Participant; or
IV --- Attainment of the Plan's Normal Retirement Date by the
Participant.
Page 27
<PAGE> 28
NOTICE: The adopting Employer may not rely on an opinion letter issued by
the National Office of the Internal Revenue Service as evidence that the Plan
is qualified under the provisions of Section 401 of the Internal Revenue Code.
In order to obtain, reliance with respect to the Plan's qualification, the
Employer must apply to the Key District Office of the Internal Revenue Service
for a determination letter.
This Adoption Agreement may only be used in conjunction with Basic Plan
Document #05.
This Plan document may only be used under the express authority of KeyCorp, its
subsidiaries and affiliates, and is not effective as completed until executed
by a duly authorized officer of KeyCorp, one of its subsidiaries or affiliates,
and approved by KeyCorp's counsel.
KeyCorp, as sponsor, may amend or discontinue this prototype plan document upon
proper notification to all adopting Employers pursuant to Revenue Ruling 89-13.
Failure to properly fill out an Adoption Agreement may result in
disqualification of the Plan, and adverse tax consequences to the Employer and
Plan Participants.
This Plan is sponsored by:
KeyCorp, on behalf of its operating subsidiaries, banking and trust company
affiliates
127 Public Square
Cleveland, Ohio 44114
(800) 982-3811
In Witness Whereof, the Employer and Turstee, by their respective duly
authorized officers, have caused this Adoption Agreement to be executed on
this 31st day of March, 1995.
Employer: Trustee:
The Tranzonic Companies Key Trust Company of Ohio, N.A.
----------------------------- -------------------------------
By: /s/ Alayne L. Reitman By: /s/ Roberta D. Roth
----------------------------- -------------------------------
Title: Vice President Finance Title: Vice President
----------------------------- -------------------------------
and
By: /s/ Richard Lutts
--------------------------------
Title: Vice President
--------------------------------
Approved on Behalf of Trustee:
Initials: YMK Date 5-1-95
--- ------
Page 28
<PAGE> 29
Page 1 of 6 pages
THE TRANZONIC COMPANIES
SALARY SAVINGS AND PROFIT-SHARING PLAN AND TRUST
ADDENDUM
In case of any conflict between this Addendum and the Adoption Agreement,
provisions of the Addendum shall prevail.
1. ITEM B(4)(c)(i) AND (ii): HOUR OF SERVICE
------------------------
Hours of Service shall be determined based on actual hours for which an
Employee is paid or entitled to be paid for Employees who are compensated
on an hourly basis. For all other Employees, Hours of Service shall be
credited on the basis of days worked with 10 Hours of Service credited for
each day as described in Item B(4)(c)(ii) of the Adoption Agreement.
2. ITEM B(4)(d): LIMITATION YEAR
------------
The proration rule in Section 6.6(A)(11)(b) of the Plan shall apply to
the short Limitation Year of March 1, 1995 to December 31, 1995.
3. ITEM B(4)(j)(v): PREDECESSOR EMPLOYERS
---------------
Notwithstanding Section 1.1(U)(4) of the Basic Plan Document, for
eligibility purposes, Years of Service with Predecessor Employers will be
credited as determined by the Employer's Board of Directors. This
provision for crediting service with Predecessor Employers shall be given
the same effect as if the names of such Predecessor Employers were
included in the Adoption Agreement.
4. ITEM B(6)(d)(iv): ENTRY DATES
----------------
For the period beginning March 1, 1995 and ending March 1, 1996, an
Employee shall commence participation in the Plan as of the earliest of
March 1, July 1, September 1 of 1995, or January 1 or March 1, 1996 next
following completion of the eligibility requirements.
5. ITEM B(8)(b)(i): ALLOCATION OF EMPLOYER PROFIT SHARING CONTRIBUTIONS
---------------
Employer Profit Sharing Contributions shall be allocated to each eligible
Participant's account in the ratio which the Participant's Compensation
bears to the Compensation of all eligible Participants. Employer Profit
Sharing Contributions shall be allocated to the accounts of Participants
who are employed on the last day of the month, as of the last day of the
month for which the contribution was made.
<PAGE> 30
Page 2 of 6 pages
6. ITEM B(10)(b) AND C(7): IN-SERVICE DISTRIBUTIONS
----------------------
Values were credited to the following Accounts under the 1993 Amended
and Restated Salary Savings and Profit Sharing Plan of The Tranzonic
Companies prior to the transfer of the assets of such Plan to the
PRISM(R) Prototype Retirement Plan and Trust:
Prior Plan Account
Voluntary Investment Account
Such accounts shall be maintained under the Plan as restated on the
PRISM(R) document effective 3-1-95. Values in any such account may be
withdrawn by the Participant at any time on advance written notice to
the Administration. Amounts were credited prior to October 1, 1993 to
the Personal Care Matching Contrib. Account of a Participant maintained
under the Thrift Plan of the Personal Care Division of the Tranzonic
Companies. The values of such account at September 30, 1993 should be
determined and readjusted from time to time while held in the PRISM(R)
Plan ("Adjusted 1993 Value"). A distribution of the Adjusted 1993 Value
may be made to a Participant who was included in the Thrift Plan, the
Salary Savings Plan and this Plan for at least two years if he is able
to satisfy the Administrator that such a distribution is necessary to
meet a condition of financial necessity (such as the need to finance or
maintain a home, to meet a reduction in income or to educate a member of
the family) or financial emergency (such as preserving the health of a
member of the Participant's family or a death in the family or other
hardship). In the event of such withdrawal, such a person shall cease to
be a Participant in the PRISM(R) Plan beginning with the third payroll
period following the one of withdrawal and shall be denied the right to
be a Participant for six months.
7. ITEM B(12)(b): LIMITATIONS ON ALLOCATIONS
-------------
Contributions to this Plan will be reduced first, in the following order:
First, Participant Before Tax Contributions; Second, any Qualified
Matching Contributions; Third, any Qualified Nonelective Contributions;
Fourth, any Employer Matching Contributions; and Finally, any Employer
Profit Sharing Contributions. Contributions will only be reduced to the
extent necessary to satisfy the requirements of Section 415(e) of the
Code, and to the extent allowable, amounts which may be distributed to
the Participant to satisfy those requirements will be refunded.
<PAGE> 31
Page 3 of 6 pages
8. ITEM B(13): SECTION 411(d)(6) Protected Benefits:
-------------------------------------------------
Notwithstanding anything in the Plan to the contrary, pursuant to Section
7.8 of the Plan, the following are Section 411(d)(6) protected benefits
which shall be preserved in the Plan and be available as options to
Participants
OPTIONAL FORMS OF BENEFITS
Section 7.10(F) of the Basic Plan Document shall be operative solely
with respect to the vested account balance attributable to deductible
employee contributions within the meaning of Section 72(o)(5)(B) of the
Code. In other respects, such Section 7.10(F) shall not be operative as
to this Plan, but the other joint and survivor requirements of Section
7.10 of the Basic Plan Document shall be applicable to this Plan.
In lieu of receiving benefits in the form of a Qualified Joint and
Survivor Annuity as defined in Section 7.10 of the Basic Plan Document,
Participants may, with appropriate spousal consent as specified in the
Basic Plan Document, elect to have their benefits distributed in the
following methods:
(1) In a lump sum payment;
(2) In periodic installments from the Trust extending over a period of
not more than ten (10) years, the amount of any particular
installment to be determined by the market value of the applicable
Participant's Account on the February Valuation Date preceding
payment divided by the number of installments remaining to be paid;
(3) In monthly installments from the Trust, extending over a number of
months equal to the life expectancy of the Participant or the life
expectancy of the Participant and his spouse, as established in
Section 6.3 at the February Valuation Date preceding initial
payment, the amount of any particular installment in such period of
life expectancy to be determined by the market value of the
applicable Participant's Account on the February Valuation Date
preceding a monthly payment divided by the number of months
remaining in such initially established period;
(4) In monthly installments from the Trust, the amount of any particular
installment to be determined by the market value of the
applicable Participant's Account on the February Valuation Date
preceding payment divided by the number of months in the period of
his life expectancy, or the life expectancy of the Participant and
his spouse, as established under Section 6.3 on each February
Valuation Date preceding payment. It is the intent of this provision
that the divisor will equal the number of months in the life
expectancy of the Participant, or the Participant and his spouse, on
each February Valuation Date preceding payment and will change as
life progresses during the period of payment.
<PAGE> 32
Page 4 of 6 pages
Installment distributions which commenced prior to adoption of
this form of the Plan (effective 3-1-95) shall continue to be made
under the terms applying thereto at the commencement of payment.
The Participant, when making the election under subsection (3)
or (4) above, shall specify whether his life expectancy or the
life expectancy of himself and his spouse shall be used.
The number of months in the life expectancy of a Participant
for purposes of subsection (3) or (4) above shall be determined with
reference to Tables V and VI set forth in Treasury Regulations
Section 1.72-9.
The "Age" of a Participant for purposes of payment under
subsections (3) and (4) shall be his age on his birthday in the
calendar year of payment and the age of his spouse shall be
determined as of the Participant's birthday in that year.
The Participant, when making the election under subsection (3)
or (4) above, shall specify whether his life expectancy or the life
expectancy of himself and his spouse shall be used.
QUALIFIED DEDUCTIBLE VOLUNTARY CONTRIBUTIONS
STANDARD DATE OF DISTRIBUTION - A Participant shall be entitled
to begin receiving, at his Distribution Date (as later defined), such
benefits as are provided from his Qualified Deductible Voluntary
Contribution Account. A Participant shall execute all required
documents to have the benefits provided by his Qualified Deductible
Voluntary Contribution Account begin at his Distribution Date.
Distribution Date means any date prescribed in a written notice by a
Participant to the Administrator for distribution of his
Participant's Qualified Deductible Voluntary Contribution Account,
provided such date shall not be earlier than 6 months prior to such
Participant's 60th birthday unless the Participant specifically
requests the same in writing after written notification from the
Administrator that government penalties may apply because of such
distribution. Notwithstanding the foregoing, values credited to the
Qualified Deductible Voluntary Contribution Account of a Participant
shall be distributed to him on a date not later than one year after
his termination of employment with the Employer, which date shall
fall after written notification from the Administrator that
penalties may apply because of such distribution unless it is rolled
over.
DISABILITY DISTRIBUTION - A Participant who has a Qualified
Deductible Voluntary Contribution Account, who becomes Disabled, as
defined in Section 1.1(I) of the Basic Plan Document, prior to
reaching age 59-1/2, will have such benefits as are then available
from his Qualified Deductible Contribution Account payable to him
upon his execution of all documents reasonably required by the
Administrator.
DISTRIBUTION BEFORE AGE 59-1/2 - The Administrator shall not
direct the Trustee to make a distribution to a Participant in the
employ of the Employer
<PAGE> 33
Page 5 of 6 pages
of any value in his Qualified Deductible Voluntary Contribution
Account at any time before he has reached age 59-1/2; or
(a) The Participant is Disabled; or
(b) A Participant who has not terminated employment requests
the distribution in writing after having been notified by
the Administrator that a penalty is imposed by the
government because of a distribution before that age; or
(c) The Participant has terminated employment and the
Participant has reached his Distribution Date.
The Employer, Trustee and Administrator are not liable, jointly
and/or severally, for the consequences of any distribution to a
Participant of all or any part of the value of his Qualified
Deductible Voluntary Contribution or for the tax consequences
applying to the transfer of any values from his V.C. Account to his
Qualified Deductible Voluntary Contribution Account.
METHOD OF DISTRIBUTION - A distribution to a Participant of his
Qualified Deductible Voluntary Contribution Account under the above
sections shall be made as provided above in the Optional Forms of
Benefit.
NO INVESTMENT IN INSURANCE - No values held in the Plan that
are derivative of Qualified Deductible Voluntary Contributions shall
be invested in life insurance insuring the Participant who made such
contribution.
PAYMENT OF DEATH BENEFITS BEFORE DISTRIBUTION DATE - A
Participant shall specify, upon a form provided by the
Administrator for the purpose, that the value of his Qualified
Deductible Voluntary Contribution Account shall, in the event of his
death before the Distribution Date, be paid to his Beneficiary
elected as provided in Section 7.7 of the Basic Plan Document.
All other provisions of the Plan shall be unaffected by this item,
which shall be given force and effect only to the extent necessary
to preserve Section 411(d)(6) protected benefits consistent with the
provisions of the Code and regulations issued thereunder.
9. ITEM B(10)(a): TEFRA SECTION 242(B) ELECTIONS
-------------
Elections qualifying as TEFRA Section 242(b)(2) elections will be
recognized as valid and controlling elections for purposes of this Plan.
10. ITEM B(16): LOANS
-----------
Loans in effect prior to the adoption of this prototype Plan shall
continue in effect according to the terms thereof when such loans were
made.
<PAGE> 34
Page 6 of 6 pages
11. ITEM C(2)(a) AND (b): EMPLOYEE SALARY DEFERRALS
--------------------
In no event shall the aggregate amount of Before Tax Contributions and
After Tax Contributions made on behalf of any Participant exceed 15% of
the Participant's Compensation.
12. ITEM C(4)(a)(iv): MANDATORY MATCHING CONTRIBUTIONS
----------------
The Employer shall make contributions to the Plan equal to 40% of the
first 4% of the Participant's Compensation contributed pursuant to a
Salary Reduction/Deduction Agreement (including both Before Tax and
After Tax Contributions).
<PAGE> 35
03/24/95 Basic Plan Document No. 05
PRISM(R)
PROTOTYPE RETIREMENT
PLAN AND TRUST
<PAGE> 36
PRISM(R) PROTOTYPE RETIREMENT PLAN AND TRUST
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
I DEFINITIONS ............................................................... 1
1.1 Definitions ........................................................ 1
1.2 Gender and Number .................................................. 11
1.3 Control of Trades or Businesses by Owner-Employee .................. 11
II ELIGIBILITY AND VESTING ................................................... 12
2.1 Eligibility ........................................................ 12
2.2 Vesting ............................................................ 13
III CODE 401(k) AND CODE 401(m) ARRANGEMENTS .................................. 15
3.1 Provision Relating to Both Before Tax Contributions and After
Tax Contributions ........................................... 15
3.2 Before Tax Contributions (Elective Deferrals) ...................... 18
3.3 After Tax Contributions (Employee Contributions) ................... 23
3.4 Employer Contributions ............................................. 24
3.5 Limitations on After Tax Contributions (Employee Contributions)
and Matching Contributions .................................. 26
3.6 Net Profits Not Required if So Elected in Adoption Agreement ....... 28
3.7 Form, Payment and Allocation of Contributions ....................... 29
3.8 Distribution Requirements for Before Tax Contribution Account ...... 29
3.9 Hardship Distribution .............................................. 30
3.10 Withdrawal of After Tax Contributions .............................. 31
3.11 Withdrawal of Matching Contributions ............................... 31
IV OTHER CONTRIBUTIONS ....................................................... 32
4.1 Employer Contributions ............................................. 32
4.2 Separate Accounts .................................................. 32
4.3 Vesting ............................................................ 32
4.4 Limitation on Employer Contributions ............................... 33
4.5 Employee Contributions ............................................. 33
4.6 Exclusive Benefit .................................................. 34
</TABLE>
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4.7 Form, Payment and Allocation of Contributions ......................... 34
4.8 Safe Harbor Allocation ............................................... 34
V PERIOD OF PARTICIPATION ..................................................... 35
5.1 Termination Dates .................................................... 35
5.2 Restricted Participation ............................................. 36
VI ACCOUNTING ................................................................ 36
6.1 Accounts Established ............................................... 36
6.2 Employer Contributions Considered Made on Last Day of
Plan Year ................................................... 36
6.3 Accounting Steps ................................................... 36
6.4 Allocation of Employer Contributions ............................... 37
6.5 Allocation of Forfeitures .......................................... 37
6.6 Limitation on Allocations .......................................... 38
6.7 Reports to Participants ............................................ 45
VIII PAYMENT OF ACCOUNT BALANCES ............................................... 45
7.1 Termination of Employment Upon Disability or Death ................. 45
7.2 Timing for Determining Account Balance Upon Termination
of Employment Prior to Retirement, Disability or Death ...... 45
7.3 Vesting on Distribution Before Break-in-Service, Cash-Outs ......... 46
7.4 Restrictions on Immediate Distributions ............................ 46
7.5 Commencement of Benefits ........................................... 47
7.6 Timing and Modes of Distribution ................................... 48
7.7 Designation of Beneficiary ......................................... 54
7.8 Optional Forms of Benefit .......................................... 55
7.9 Distribution Upon Disability ....................................... 55
7.10 Joint and Survivor Annuity Requirements ............................ 55
7.11 Distributions to Qualified Plans ................................... 61
7.12 Profit Sharing Plans and 401(k) Profit Sharing Plans Only -
Withdrawal of Employer Contributions ........................ 61
7.13 Prohibition Against Alienation ..................................... 62
7.14 Missing Participant or Beneficiary ................................. 62
7.15 Limitation on Certain Distributions ................................ 63
7.16 Form of Distributions and Withdrawals .............................. 63
VIII DIRECT ROLLOVERS .......................................................... 64
8.1 General ............................................................ 64
8.2 Definitions ........................................................ 64
</TABLE>
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IX TOP-HEAVY PROVISIONS ...................................................... 65
9.1 Use of Top-Heavy Provisions ........................................ 65
9.2 Top-Heavy Definitions .............................................. 65
9.3 Minimum Allocation ................................................. 67
9.4 Minimum Vesting Schedules .......................................... 68
X TRUSTEE ................................................................... 68
10.1 Trustee ............................................................ 68
10.2 Records and Accounts of Trustee .................................... 68
10.3 Reports to Employer ................................................ 69
10.4 Powers of Trustee .................................................. 69
10.5 Trustee's Fees and Expenses ........................................ 71
10.6 Trustee May Resign or Be Removed ................................... 71
10.7 Separate Investment Funds .......................................... 72
10.8 Registration, Distribution and Voting of Employer Stock and
Procedures Regarding Tender Offers .......................... 76
10.9 Valuation of Investment Funds and Accounts ......................... 79
XI ADMINISTRATION ............................................................ 79
11.1 Committee Membership ............................................... 79
11.2 Powers and Duties of Committee ..................................... 80
11.3 Actions of the Committee ........................................... 81
11.4 Resignation, Removal and Designation of Successors ................. 81
11.5 Committee Review ................................................... 81
11.6 Records ............................................................ 82
11.7 Compensation ....................................................... 82
11.8 Designation of Named Fiduciaries and Allocation of
Responsibility Among Fiduciaries ............................ 82
11.9 Notice by Committee or Employer .................................... 82
11.10 Loans to Participants .............................................. 83
XII FAILURE TO ATTAIN OR RETAIN QUALIFIED STATUS .............................. 86
12.1 Failure to Qualify as a Prototype .................................. 86
12.2 Failure of Employer to Attain or Retain Qualification .............. 86
XIII MISCELLANEOUS ............................................................. 86
13.1 Employer Action .................................................... 86
13.2 No Guarantee of interests .......................................... 86
13.3 Employment Rights .................................................. 86
13.4 Interpretations and adjustments .................................... 86
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<TABLE>
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13.5 Uniform Rules ...................................................... 86
13.6 Evidence ........................................................... 87
13.7 Waiver of Notice ................................................... 87
13.8 Controlling Law .................................................... 87
13.9 Tax Exemption of Trust ............................................. 87
13.10 Counterparts ....................................................... 87
13.11 Annual Statement of Account ........................................ 87
13.12 No Duty to Inquire ................................................. 87
13.13 Invalidity ......................................................... 87
13.14 Titles ............................................................. 87
13.15 No Duty of Trustee to Collect Contributions ........................ 87
13.16 Trustee Distributes by Committee Direction ......................... 87
XIV AMENDMENT OR TERMINATION .................................................. 88
14.1 Amendment by the Sponsor ........................................... 88
14.2 Amendment by Adopting Employer ..................................... 88
14.3 Vesting - Plan Termination ......................................... 88
14.4 Vesting - Complete Discontinuance of Contributions ................. 88
14.5 Plan Merger - Maintenance of Benefit ............................... 88
14.6 Direct Transfer .................................................... 89
14.7 Termination of Participation by Employer ........................... 89
14.8 Notice of Amendment, Termination or Partial Termination ............ 89
14.9 Substitution of Trustee ............................................ 89
XV DISCHARGE OF DUTIES BY FIDUCIARIES ........................................ 89
15.1 Discharge of Duties ................................................ 89
XVI AMENDMENT AND CONTINUATION OF ORIGINAL PLAN ............................... 90
16.1 Amendment and Continuation ........................................... 90
</TABLE>
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PRISM(R) PROTOTYPE RETIREMENT PLAN AND TRUST
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Unless the context indicates otherwise, the following
terms, when used herein with initial capital letters, shall have the
meanings set forth below:
(A) ACCOUNTING DATE: The date which is the last business day of
each month of the Employer's Plan Year or such other date as
may be agreed upon between the Employer and the Trustee, but
only if the Employer has specifically requested the Trustee to
prepare an accounting on or before such date. Notwithstanding
the foregoing, the Trustee shall value the assets held in the
Trust on each business day that the Trustee and the New York
Stock Exchange are open for business.
(B) ADOPTION AGREEMENT: The Adoption Agreement adopting this Plan
which has been executed by the Employer and accepted by the
Trustee, including any amendment thereof, which is
incorporated herein by reference.
(C) BASIC PLAN DOCUMENT: This document, which, in connection with
the Adoption Agreement forms the Plan.
(D) BENEFICIARY: The person or persons to whom a deceased
Participant's benefits are payable under the Plan.
(E) BREAK IN SERVICE: A 12-consecutive month period during which
the Participant does not complete more than one-half of the
Hours of Service with the Employer required for a Year of
Service, as elected in the Adoption Agreement. For eligibility
purposes, the initial 12-consecutive month period is the
period beginning on the Employees date of hire. Subsequent
12-consecutive month periods for eligibility purposes will be
either the period ending on the annual anniversary of the
Employee's date of hire or the Plan Year, as selected in the
Adoption Agreement. For all other purposes, the 12-consecutive
month period shall be the Plan Year, or other computation
period as selected in the Adoption Agreement. If the elapsed
time method of crediting service is elected in the Adoption
Agreement, "Break In Service" will mean a Period of Severance
of at least 12 consecutive months.
(F) CODE: The Internal Revenue Code of 1986, and amendments
thereto.
(G) COMMITTEE: The Committee provided for in Article XI, which
shall be a Named Fiduciary as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
To the extent that the Employer does not appoint a Committee,
the Employer shall have the duty of the day to day
administration of the Plan and shall be the Named Fiduciary
for that purpose.
(H) COMPENSATION: Compensation shall have the following various
definitions, as may be appropriate within the context of the
Plan:
<PAGE> 41
(1) Compensation as that term is defined in Section
6.6(A) of the Plan. For any Self-Employed Individual
covered under the Plan, Compensation will mean Earned
Income. Compensation shall include only that
compensation which is actually paid to the
Participant during the determination period. Except
as provided elsewhere in this Plan, the determination
period shall be the period elected by the Employer in
the Adoption Agreement. If the Employer makes no
election, the determination period shall be the Plan
Year. For purposes of allocations of Employer Profit
Sharing or Matching Contributions, the definition of
Compensation in Section 6.6(A)(2)(a) shall be used,
as modified in the Adoption Agreement.
Notwithstanding the above, if elected by the Employer
in the Adoption Agreement, Compensation for
allocation purposes shall include any amount which is
contributed by the Employer pursuant to a salary
reduction agreement and which is not includible in
the gross income of the employee under Sections 125,
402(e)(3), 402(h)(1)(B) or 403(b) of the Code.
(2) For years beginning after December 31, 1988, and
prior to January 1, 1994, the annual Compensation of
each Participant taken into account for determining
all benefits provided under the Plan for any
determination period shall not exceed $200,000. This
limitation shall be adjusted by the Secretary at the
same time and in the same manner as under Section
415(d) of the Code except that the dollar increase in
effect on January 1 of any calendar year is effective
for plan years beginning in such calendar year and
the first adjustment to the $200,000 limitation is
effective on January 1, 1990. After December 31,
1993, the annual Compensation of each Participant
taken into account for determining all benefits
provided under the Plan for any determination period
shall not exceed $150,000, or such other lesser
amount as may be specified in the Adoption Agreement.
This limitation shall be adjusted by the Secretary at
the same time and in the same manner as under Section
415(d) of the Code. If a Plan determines Compensation
on a period of time that contains fewer than 12
calendar months, then the annual Compensation limit
is an amount equal to the annual Compensation limit
for the calendar year in which the Compensation
period begins multiplied by a ratio obtained by
dividing the number of full months in the period by
12.
In determining the Compensation of a Participant for
purposes of this limitation, the rules of Section
414(q)(6) of the Code shall apply, except in applying
such rules, the term "family" shall include only the
Spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19
before the close of the year. If, as a result of the
application of such rules the adjusted annual
compensation limitation is exceeded, then (except for
purposes of determining the portion of Compensation
up to the integration level if this Plan provides for
permitted disparity), the limitation shall be
prorated among the affected individuals in proportion
to each such individual's Compensation as determined
under this Section prior to the application of this
limitation.
If compensation for any prior determination period is
taken into account in determining an Employee's
allocations or benefits for the current determination
period, the compensation for such prior year is
subject to the applicable annual
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<PAGE> 42
compensation limit in effect for that prior year. For
this purpose, for years beginning before January 1,
1990, the applicable compensation limit is $200,000.
In addition, in determining allocations in plan years
beginning on or after January 1, 1994, the annual
compensation limit in effect for determination
periods beginning before that date is $150,000.
(I) DISABILITY: The inability to engage in any substantial gainful
activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months. The permanence and
degree of such impairment shall be supported by medical
evidence. The Employer shall determine the existence of a
Disability based on its current disability policy, applied on
a uniform and nondiscriminatory basis.
(J) EARNED INCOME: The net earnings from self-employment in the
trade or business with respect to which the Plan is
established, for which personal services of the individual are
a material income-producing factor. Net earnings will be
determined without regard to items not included in gross
income and the deductions allocable to such items. Net
earnings are reduced by contributions by the Employer to a
qualified Plan to the extent deductible under Section 404 of
the Code. Net earnings shall be determined with regard to the
deduction allowed to the taxpayer by Section 164(f) of the
Code for taxable years beginning after December 31, 1989.
(K) EARLY RETIREMENT DATE: The date specified in the Adoption
Agreement at which a participating Employee may receive an
early retirement benefit.
(L) EFFECTIVE DATE: The date specified in the Adoption Agreement
which shall be the effective date of the provisions of this
Plan, unless modified in Item B(18) of the Adoption Agreement.
If the Plan is a restatement of an existing Plan, the original
effective date of the Plan shall be as specified in the
Adoption Agreement.
(M) ELIGIBLE EMPLOYEE: Any Employee who is eligible to receive an
Employer contribution (including forfeitures), as defined in
Item B(6) of the Adoption Agreement.
(N) ELIGIBILITY COMPUTATION PERIOD: For purposes of determining
Years of Service and Breaks in Service for purposes of
eligibility, the initial Eligibility Computation Period is the
12-consecutive month period beginning on the Employee's
Employment Commencement Date.
(1) For plans in which the Eligibility Computation
Periods commence on the 12-consecutive month
anniversary of the Employee's Employment Commencement
Date, the succeeding 12-consecutive month periods
commence with the first anniversary of the Employee's
Employment Commencement Date.
(2) For plans in which the Eligibility Computation Period
shifts to the Plan Year, the succeeding
12-consecutive month periods commence with the first
Plan Year which commences prior to the first
anniversary of the Employee's Employment Commencement
Date regardless of whether the Employee is entitled
to be credited with number of Hours of Service
specified in the Adoption Agreement
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<PAGE> 43
during the initial Eligibility Computation Period. An
Employee who is credited with number of Hours of
Service specified in the Adoption Agreement in both
the initial Eligibility Computation Period and the
first Plan Year which commences prior to the first
anniversary of the Employee's initial Eligibility
Computation Period will be credited with two Years of
Service for purposes of eligibility to participate.
Years of Service and Breaks in Service will be
measured on the same Eligibility Computation Period.
(3) Notwithstanding any other provisions of this section,
if the elapsed time method of crediting service is
elected in the Adoption Agreement for purposes of
eligibility, an Employee will receive credit for the
aggregate of all time periods completed (as may be
elected in the Adoption Agreement) beginning with the
Employee's Employment Commencement Date or
Reemployment Commencement Date and ending on the date
a Break In Service begins. The Employee will receive
credit for any Period of Severance of less than 12
consecutive months.
(O) EMPLOYEE: Any employee, including any Self Employed
Individual, of the Employer maintaining the Plan or of any
other employer required to be aggregated with such Employer
under Sections 414(b), (c), (m) or (o) of the Code.
The term Employee shall also include any Leased Employee
deemed to be an Employee of any Employer described in the
previous paragraph as provided in Sections 414(n) or (o) of
the Code.
(P) EMPLOYER: The Employer specified in the Adoption Agreement and
any successor to the business of the Employer establishing the
Plan, which shall be the Plan Administrator for purposes of
Section 3(16) of ERISA, a Named Fiduciary as defined in ERISA,
and which may delegate all or any part of its powers, duties
and authorities in such capacity without ceasing to be such
Plan Administrator.
(Q) EMPLOYMENT COMMENCEMENT DATE: The date on which an Employee
first performs an Hour of Service for the Employer.
(R) ENTRY DATE: The date selected by the Employer in Item B(6)(d)
of the Adoption Agreement, which shall be:
(1) The Effective Date of the Plan, for any Employee who
has satisfied the eligibility requirements set forth
in the Adoption Agreement;
(2) The first day of the month which coincides with or
immediately follows the date on which the Employee
satisfies the eligibility requirements set forth in
the Adoption Agreement;
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<PAGE> 44
(3) The first day of the Plan Year or the fourth,
seventh, or tenth month of the Plan Year which
coincides with or immediately follows the date on
which the Employee satisfies such eligibility
requirements;
(4) The first day of the Plan Year or the seventh month
of the Plan Year which coincides with or immediately
follows the date on which the Employee satisfies such
eligibility requirements;
(5) The first day of the Plan Year, but only if the
eligibility service requirements specified in Item
B(6)(d) are six months or less; or,
(6) As soon as practicable after the Employee satisfies
such eligibility requirements specified in the
Adoption Agreement, but in no event beyond the date
which would be six months following the date on which
the Employee first completes the eligibility
requirements specified in the Adoption Agreement.
(S) ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
(T) HIGHLY COMPENSATED EMPLOYEE: The term Highly Compensated
Employee includes highly compensated active employees and
highly compensated former employees.
A highly compensated active employee includes any Employee who
performs service for the Employer during the determination
year and who, during the look-back year: (i) received
Compensation from the Employer in excess of $75,000 (as
adjusted pursuant to Section 415(d) of the Code); (ii)
received Compensation from the Employer in excess of $50,000
(as adjusted pursuant to Section 415(d) of the Code) and was a
member of the top-paid group for such year; or (iii) was an
officer of the Employer and received Compensation during such
year that is greater than 50 percent of the dollar limitation
in effect under section 415(b)(1)(A) of the Code. The term
Highly Compensated Employee also includes: (i) Employees who
are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back
year" and the Employee is one of the 100 Employees who receive
the most compensation from the Employer during the
determination year; and (ii) Employees who are 5 percent
owners at any time during the look-back year or determination
year.
If no officer has satisfied the Compensation requirement of
(iii) above during either a determination year or look-back
year, the highest paid officer for such year shall be treated
as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan
Year. The look-back year shall be the twelve-month period
immediately preceding the determination year. A highly
compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior
to the determination year, performs no service for the
Employer during the determination year, and was a highly
compensated active employee for either the separation year or
any determination year ending on or after the Employee's 55th
birthday.
PAGE 5
<PAGE> 45
If an Employee is, during a determination year or look-back
year, a family member of either a 5 percent owner who is an
active or former employee or a Highly Compensated Employee who
is one of the 10 most Highly Compensated Employees ranked on
the basis of Compensation paid by the Employer during such
year, then the family member and the 5 percent owner or
top-ten Highly Compensated Employee shall be aggregated. In
such case, the family member and 5 percent owner or top-ten
Highly Compensated Employee shall be treated as a single
employee receiving Compensation and Plan contributions or
benefits equal to the sum of such Compensation and
contributions or benefits of the family member and 5 percent
owner or top-ten Highly Compensated Employee.
For purposes of this Section, family member includes the
Spouse, lineal ascendants and descendants of the employee or
former employee and the spouses of such lineal ascendants and
descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of
Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the Compensation
that is considered, will be made in accordance with Section
414(q) of the Code and the regulations thereunder.
(U) HOUR OF SERVICE:
(1) Each hour for which an Employee is paid, or entitled
to payment, for the performance of duties for the
Employer. These hours shall be credited to the
Employee for the computation period in which the
duties are performed; and
(2) Each hour for which an Employee is paid, or entitled
to payment, by the Employer on account of a period of
time during which no duties are performed
(irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness,
incapacity (including Disability), layoff, jury duty,
military duty, or leave of absence. No more than 501
Hours of Service shall be credited under this
paragraph for any single continuous period (whether
or not such period occurs in a single computation
period). Hours under this paragraph shall be
calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations
which are incorporated herein by reference; and
(3) Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to
by the Employer. The same Hours of Service shall not
be credited both under subparagraph (1) or
subparagraph (2), as the case may be, and under this
subparagraph (3). These hours shall be credited to
the Employee for the computation period or periods to
which the award or agreement pertains rather than for
the computation period in which the award, agreement
or payment is made.
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<PAGE> 46
Hours of Service will be credited for employment with
other members of an affiliated service group (under
Section 414(m)), a controlled group of corporations
(under Section 414(b)), or a group of trades or
businesses under common control (under Section
414(c)) of which the adopting Employer is a member,
and any other entity required to be aggregated with
the Employer pursuant to Section 414(o).
Hours of Service will also be credited for any
individual considered an Employee for purposes of
this Plan under Sections 414(n) or 414(o).
(4) Where the Employer maintains the Plan of a
predecessor employer, service for such predecessor
employer shall be treated as service for the
Employer. If the Employer does not maintain the Plan
of a predecessor employer, the Plan does not credit
service with the predecessor employer, unless the
Employer identifies the predecessor in its Adoption
Agreement and specifies the purposes for which the
Plan will credit service with that predecessor
employer.
(5) Solely for purposes of determining whether a
Break-in-Service, as defined in Section 1.1(E), for
participation and vesting purposes has occurred in a
computation period, an individual who is absent from
work for maternity or paternity reasons shall receive
credit for the Hours of Service which would otherwise
have been credited to such individual but for such
absence, or in any case in which such hours cannot be
determined, 8 Hours of Service per day of such
absence. For purposes of this paragraph, an absence
from work for maternity or paternity reasons means an
absence (1) by reason of the pregnancy of the
individual, (2) by reason of a birth of a child of
the individual, (3) by reason of the placement of a
child with the individual in connection with the
adoption of such child by such individual, or (4) for
purposes of caring for such child for a period
beginning immediately following such birth or
placement. The Hours of Service credited under this
paragraph shall be credited (1) in the computation
period in which the absence begins if the crediting
is necessary to prevent a Break-in-Service in that
period, or (2) in all other cases, in the following
computation period.
(6) Hours of Service will be determined on the basis of
the method selected in the Adoption Agreement.
(V) INVESTMENT FUND: One of the funds provided for in Section
10.7, and as selected by the Employer, as a Named Fiduciary,
on the Investment Fund Designation portion of the Adoption
Agreement.
(W) LEASED EMPLOYEE: 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 Section 414(n)(6) of the
Code) on a substantially full time basis for a period of at
least one year, and such services are of a type historically
performed by employees in the business field of the recipient
employer. Contributions or benefits provided a leased employee
by the leasing organization which are attributable to services
PAGE 7
<PAGE> 47
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 if: (i) such employee is covered by a money purchase
pension Plan providing: (1) a nonintegrated employer
contribution rate of at least 10 percent of compensation, as
defined in Section 415(c)(3) of the Code, but including
amounts contributed pursuant to a salary reduction agreement
which are excludable from the employee's gross income under
Section 125, Section 402(e)(3), Section 402(h)(1)(B) or
Section 403(b) of the Code, (2) immediate participation, and
(3) full and immediate vesting; and (ii) leased employees do
not constitute more than 20 percent of the recipient's
nonhighly compensated workforce.
(X) NET PROFITS: Current and accumulated earnings of the Employer
before Federal and state taxes and contributions to this and
any other qualified Plan, determined by the Employer in
accordance with generally accepted accounting principles.
(Y) NONHIGHLY COMPENSATED EMPLOYEE: An Employee of the Employer
who is neither a Highly Compensated Employee nor a Family
Member.
(Z) NORMAL RETIREMENT DATE: The date specified in the Adoption
Agreement at which a participant shall become fully vested in
his account balances, as provided for in this document.
(AA) OWNER-EMPLOYEE: An individual who is a sole proprietor, or who
is a partner owning more than 10 percent of either the capital
or profits interest of the partnership.
(BB) PAIRED PLANS: The Employer has adopted Plan #001 and Plan #
003, both using this basic Plan document, which constitutes a
set of "paired plans" as defined by the Internal Revenue
Service in Revenue Procedure 89-9, or any successor thereto.
(CC) PARTICIPANT: A person who becomes eligible to participate in
accordance with the provisions of Article II, and whose
participation has not been terminated.
(DD) PERMITTED DISPARITY LEVEL: The level selected in the Adoption
Agreement, not to exceed the Taxable Wage Base in effect at
the beginning of the Plan Year. The Taxable Wage Base is the
contribution and benefit base under section 230 of the Social
Security Act at the beginning of the year.
(EE) PERIOD OF SERVICE: The period beginning on the Employee's
Employment Commencement Date or Reemployment Commencement
Date, and ending on the date a Period of Severance begins. The
Employee will receive credit for any Period of Service of less
than 12 consecutive months. Fractional periods of a year will
be expressed in days.
(FF) PERIOD OF SEVERANCE: A continuous period of time during which
the Employee is not employed by the Employer. A Period of
Severance begins on the date the Employee retires, quits, or
is discharged, or dies, or if earlier, the twelve month
anniversary of the date on which the Employee was first absent
from work for any other reason; provided, that if an Employee
is absent from work for any other reason and retires, quits,
is
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discharged, or dies within 12 months, the Period of Severance
begins on the day the Employee quits, retires, is discharged,
or dies.
(GG) PLAN: This Plan established by the Employer as embodied in
this agreement and in the Adoption Agreement, and all
subsequent amendments thereto.
(HH) PLAN YEAR: The 12-consecutive month period designated by the
Employer in the Adoption Agreement. In the event that the
original Effective Date is not the first day of the Plan Year,
the first Plan Year shall be a short Plan Year, beginning on
the original Effective Date, and ending on the last day of the
Plan Year as specified in the Adoption Agreement.
(II) QUALIFIED DISTRIBUTION DATE: For purposes of Section 7.13, the
Qualified Distribution Date, if selected in the Adoption
Agreement, shall be the earliest retirement date specified in
Code Section 414(p) and shall operate to allow a distribution
to an Alternate Payee at the time a domestic relations order
is determined to be qualified.
(JJ) REEMPLOYMENT COMMENCEMENT DATE: The date on which an Employee
completes an Hour of Service with the Employer after a Break
In Service or a Period of Severance.
(KK) RELATED EMPLOYERS: Any employer related to the Employer as a
controlled group of corporations (as defined in
Sectionss.414(b) of the Code), a group of trades or businesses
(whether or not incorporated) which are under common control
(as defined in Section 414(c)) or an affiliated service group
(as defined in Section 414(m) or in Section 414(o) of the
Code). If the Employer is a member of a related group, the
term "Employer" includes the related group members for
purposes of crediting Hours of Service, determining Years of
Service and Breaks in Service under Article II, applying
participation and coverage testing, applying the limitations
on allocations in Section 6.6, applying the top heavy rules
and the minimum allocation requirements of Article IX, the
definitions of Employee, Highly Compensated Employee,
Compensation and Leased Employee, and for any other purpose
required by the applicable Code section or by a Plan
provision. However, an Employer may contribute to the Plan
only by signing the Adoption Agreement or a Participation
Agreement to the Employer's Adoption Agreement. If one or more
of the Employer's related group members become Participating
Employers by executing a Participation Agreement to the
Employer's Adoption Agreement, the term "Employer" includes
the participating related group members for all purposes of
the Plan, and "Plan Administrator" means the Employer that is
the signatory to the Adoption Agreement.
If the Employer's Plan is a standardized Plan, all Employees
of the Employer or of any member of the Employer's related
group, are eligible to participate in the Plan, irrespective
of whether the related group member directly employing the
Employee is a Participating Employer. If the Employer's Plan
is a nonstandardized Plan, the Employer must specify in Item
B(5) of its Adoption Agreement, whether the Employees of
related group members that are not Participating Employers are
eligible to participate in the Plan. Under a nonstandardized
Plan, the Employer may elect to exclude from the definition of
"Compensation" for allocation purposes any Compensation
received from a related
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employer that has not executed a Participation Agreement and
whose Employees are not eligible to participate in the Plan.
(LL) SELF-EMPLOYED INDIVIDUAL: An individual who has Earned Income
for the taxable year from the trade or business for which the
Plan is established; also, an individual who would have had
Earned Income but for the fact that the trade or business had
no Net Profits for the taxable year.
(MM) SPOUSE: The person to whom the Participant is legally married
at the relevant time. Notwithstanding the foregoing, if
selected in the Adoption Agreement, Spouse shall only refer to
an individual to whom a Participant has been married to for a
period of at least one year, ending at the relevant time.
(NN) STOCKHOLDER-EMPLOYEE: An employee or officer of an electing
small business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of Section 318(a)(1)
of the Code), on any day during the taxable year of such
corporation, more than 5% of the outstanding stock of the
corporation.
(OO) TERMINATION DATE: The date on which a Participant's employment
is terminated as provided in Section 5.1.
(PP) TRUSTEE: The entity specified in Item B(17) of the Adoption
Agreement, which shall be any bank or trust company which is
affiliated with KeyCorp. within the meaning of Section 1504 of
the Code, each of which with full trust powers, and its
successors by merger or reorganization.
(QQ) TRUST FUND: All assets held under the Plan by the Trustee.
(RR) VALUATION DATE. The date on which the assets of the Trust
shall be valued, as provided for herein, with earning or
losses since the previous Valuation Date being credited, as
appropriate to Participant accounts. Notwithstanding anything
to the contrary in the Plan, the Valuation date shall be each
business day that the Trustee and the New York Stock Exchange
are each open for business, provided, however, that the
Trustee shall not be obligated to value the Trust in the
event, through circumstances beyond its control, appropriate
prices may not be obtained for the assets held in the
Investment Funds.
(SS) VESTING COMPUTATION PERIOD. The Vesting Computation Period
shall be the 12-consecutive month period selected by the
Employer in the Adoption Agreement.
(TT) YEAR OF PARTICIPATION: For purposes of vesting, a twelve (12)
month period in which an Employee has a balance in an account
established under a 401(k)/401(m) arrangement regardless of
whether the Employee is currently making contributions under
the arrangement.
(UU) YEAR OF SERVICE: (i) If the elapsed time method of crediting
service is elected in the Adoption Agreement, a Year of
Service will mean a one-year Period of Service. If the
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actual hours method of crediting service is elected in the
Adoption Agreement, a Year of Service will mean a
12-consecutive month period as specified in the Adoption
Agreement during which the Employee completes the number of
Hours of Service (not to exceed 1000) specified in the
Adoption Agreement.
1.2 GENDER AND NUMBER. Unless the context indicates otherwise, the
masculine shall include the feminine, and the use of any words herein
in the singular shall include the plural and vice versa.
1.3 CONTROL OF TRADES OR BUSINESSES BY OWNER-EMPLOYEE. If this Plan
provides contributions or benefits for one or more Owner-Employees who
control both the business for which this Plan is established and one or
more other trades or businesses, this Plan and the Plan established for
other trades or businesses must, when looked at as a single Plan,
satisfy Sections 401(a) and (d) for the employees of this and all other
trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a Plan
which satisfies Sections 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for
Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which are not controlled and the
individual controls a trade or business, then the contributions or
benefits of the employees under the Plan of the trades or businesses
which are controlled must be as favorable as those provided for him
under the most favorable Plan of the trade or business which is not
controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or
more Owner-Employees, will be considered to control a trade or business
if the Owner-Employee, or two or more Owner-Employees together:
(1) Own the entire interest in an unincorporated trade or
business, or
(2) In the case of a partnership, own more than 50 percent of
either capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an Owner-Employee, or
two or more Owner-Employees shall be treated as owning any
interest in a partnership which is owned, directly or
indirectly, by a partnership which such Owner-Employee, or
such two or more Owner-Employees, are considered to control
within the meaning of the preceding sentence.
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ARTICLE II
ELIGIBILITY AND VESTING
2.1 ELIGIBILITY.
(A) PARTICIPATION. Every Employee who meets the eligibility
requirements specified by the Employer in the Adoption
Agreement shall become eligible to commence participation in
this Plan.
(B) COMMENCEMENT OF PARTICIPATION.
(1) For purposes of Money Purchase Pension Plans, Profit
Sharing Plans and 401(k) Plans with Profit Sharing
Contributions, each Eligible Employee shall commence
participation on the Entry Date.
(2) For purposes of 401(k) and 401(m) arrangements, an
Eligible Employee may, but is not required to, enroll
as a Participant as of the Entry Date on which such
Employee is initially eligible by filing with the
Committee before such date, an enrollment form
prescribed by the Committee. The time period for
filing an enrollment form shall be determined by the
Committee. The form shall include an authorization
and request to the Employer to deduct from such
Participant's Compensation in each pay period the
designated After Tax Contributions, and/or to reduce
such Participant's Compensation in each pay period by
the amount of the designated Before Tax
Contributions.
(C) YEARS OF SERVICE COUNTED TOWARDS ELIGIBILITY. All Years of
Service with the Employer are counted toward eligibility
except the following:
(1) In a Plan which (a) requires an Employee to complete
more than one Year of Service as an eligibility
requirement and (b) provides immediate 100% vesting
in a Participant's Employer Contribution Account
after not more than two (2) Years of Service, if an
Employee has a 1-year Break in Service before
satisfying the Plan's requirement for eligibility,
service before such break will not be taken into
account.
(2) In the case of a Participant who does not have any
nonforfeitable right to the account balance derived
from Employer contributions, Years of Service before
a period of consecutive 1-year Breaks in Service will
not be taken into account in computing eligibility
service if the number of consecutive 1-year Breaks in
Service in such period equals or exceeds the greater
of 5 or the aggregate number of Years of Service.
Such aggregate number of Years of Service will not
include any Years of Service disregarded under the
preceding sentence by reason of prior Breaks in
Service.
(3) If a Participant's Years of Service are disregarded
pursuant to the preceding paragraph, such Participant
will be treated as a new Employee for eligibility
purposes. If a Participant's Years of Service may not
be disregarded pursuant to
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the preceding paragraph, such Participant shall
continue to participate in the Plan, or, if
terminated, shall participate immediately upon
reemployment.
(D) ELIGIBILITY BREAK IN SERVICE, ONE YEAR HOLD-OUT RULE. If the
Plan is a nonstandardized Plan, then:
(1) In the case of any Participant who has a 1-year Break
in Service or Severance, years of eligibility service
before such break will not be taken into account
until the Employee has completed a Year of Service
after returning to employment.
(2) For plans in which the eligibility computation is
measured with reference to the Employment
Commencement Date, such Year of Service will be
measured beginning on the Employee's Reemployment
Commencement Date and, if necessary, subsequent
12-consecutive month periods beginning on
anniversaries of the Reemployment Commencement Date.
(3) For plans which shift the Eligibility Computation
Period to the Plan Year, such Year of Service will be
measured by the 12-consecutive month period beginning
on the Employee's Reemployment Commencement Date and,
if necessary, Plan Years beginning with the Plan Year
which includes the first anniversary of the
Reemployment Commencement Date.
(4) If a Participant completes a Year of Service in
accordance with this provision, his or her
participation will be reinstated as a Participant as
of the Reemployment Commencement Date.
(E) PARTICIPATION UPON RETURN TO ELIGIBLE CLASS.
(1) In the event a Participant is no longer a member of
an eligible class of Employees and becomes ineligible
to participate but has not incurred a Break In
Service, such Employee shall participate immediately
upon returning to an eligible class of Employees. If
such Participant incurs a Break In Service
eligibility will be determined under the Break in
Service rules of the Plan.
(2) In the event an Employee who is not a member of an
eligible class of Employees becomes a member of an
eligible class, such Employee will participate
immediately if such Employee has satisfied the
minimum age and service requirements and would have
otherwise previously become a Participant.
2.2 VESTING.
(A) VESTING SCHEDULE. In the case of an Employee who terminates
participation under this Plan for any reason other than death,
Disability, or employment at the Normal Retirement Date, such
Participant, as of the last day of his participation under
this Plan, shall have a vested interest in his Employer
Contribution Account pursuant to the formula specified by the
Employer in the Adoption Agreement.
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(B) VESTING UPON NORMAL RETIREMENT DATE. Notwithstanding the
vesting schedule elected by the Employer in Items B(7)(a) or
C(4)(d) of the Adoption Agreement, an Employee's right to his
or her Employer Contribution balance shall be nonforfeitable
at the Employee's Normal Retirement Date.
(C) VESTING BREAK IN SERVICE - 1 YEAR HOLDOUT. In the case of any
Participant who has incurred a 1-year Break in Service, Years
of Service before such break will not be taken into account
until the Participant has completed a Year of Service after
such Break in Service.
(D) VESTING FOR PRE-BREAK AND POST-BREAK ACCOUNT. In the case of a
Participant who has 5 or more consecutive 1-year Breaks in
Service, all service after such Breaks in Service will be
disregarded for the purpose of vesting the employer-derived
account balance that accrued before such Breaks in Service.
Such Participant's pre-break service will count in vesting the
post-break employer-derived account balance only if either:
(1) such Participant has any nonforfeitable interest in
the account balance attributable to employer
contributions at the time of separation from service;
or
(2) upon returning to service the number of consecutive
1-year Breaks in Service is less than the number of
Years of Service. Separate accounts will be
maintained for the Participant's pre-break and
post-break Employer Contribution Account balance.
Both accounts will share in the earnings and losses
of the Trust Fund.
(E) AMENDMENT OF VESTING SCHEDULE. If the Plan's vesting schedule
is amended, or the Plan is amended in any way that directly or
indirectly affects the computation of the Participant's
nonforfeitable percentage or if the Plan is deemed amended by
an automatic change to or from a top-heavy vesting schedule,
each Participant with at least three (3) Years of Service with
the Employer may elect within a reasonable period after the
adoption of the amendment or change, to have the
nonforfeitable percentage computed under this Plan without
regard to such amendment or change. For Participants who do
not have at least 1 Hour of Service in any Plan Year beginning
after December 31, 1988, the preceding sentence shall be
applied by substituting "5 Years of Service" for "3 Years of
Service" where such language appears.
This period during which the election may be made shall
commence with the date the amendment is adopted or deemed to
be made and shall end on the latest of:
(1) Sixty (60) days after the amendment is adopted;
(2) Sixty (60) days after the amendment becomes
effective; or
(3) Sixty (60) days after the Participant is issued
written notice of the amendment by the Employer or
Committee.
(F) AMENDMENT AFFECTING VESTED AND/OR ACCRUED BENEFITS. No
amendment to the Plan shall be effective to the extent that it
has the effect of decreasing a Participant's accrued benefit.
Notwithstanding the preceding sentence, a Participant's
account balance may be reduced to the extent permitted under
Section 412(c)(8) of the Code. For purposes of
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this paragraph, a Plan amendment which has the effect of
decreasing a Participant's account balance or eliminating an
optional form of benefit, with respect to benefits
attributable to service before the amendment shall be treated
as reducing an accrued benefit. Furthermore, if the vesting
schedule of a Plan is amended, in the case of an Employee who
is a Participant as of the later of the date such amendment is
adopted or the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Employee's
Employer-derived accrued benefit will not be less than the
percentage computed under the Plan without regard to such
amendment.
ARTICLE III
CODE 401(K) AND CODE 401(M) ARRANGEMENTS
3.1 PROVISION RELATING TO BOTH BEFORE TAX CONTRIBUTIONS AND AFTER TAX
CONTRIBUTIONS.
(A) DEFINITIONS: The following definitions are applicable to this
Article of the Plan.
(1) ACTUAL DEFERRAL PERCENTAGE OR ADP: for a specified
group of Participants for a Plan Year, the average of
the ratios (calculated separately for each
Participant in such group) of (1) the amount of
Employer contributions actually paid over to the
trust on behalf of such Participant for the Plan Year
to (2) the Participant's Compensation for such Plan
Year (whether or not the Employee was a Participant
for the entire Plan Year, but limited to that portion
of the Plan Year in which the Employee was an
Eligible Participant if the Employer so elects for
such Plan Year to so limit Compensation for all
Eligible Employees). Employer contributions on behalf
of any Participant shall include (1) any Before Tax
Contributions made pursuant to the Participant's
deferral election, including Excess Before Tax
Contributions, but excluding Before Tax Contributions
that are taken into account in the Contribution
Percentage test (provided the ADP test is satisfied
both with and without exclusion of these Before Tax
Contributions); and (2) at the election of the
Employer, Qualified Non-elective Contributions and
Qualified Matching Contributions. For purposes of
computing Actual Deferral Percentages, an Employee
who would be a Participant but for the failure to
make Before Tax Contributions shall be treated as a
participant on whose behalf no Before Tax
Contributions are made.
(2) AFTER TAX CONTRIBUTIONS ("EMPLOYEE CONTRIBUTIONS"):
Any contribution made to the Plan by or on behalf of
a Participant that is included in the Participant's
gross income in the year in which made and that is
maintained under a separate account to which earnings
and losses are allocated.
(3) AGGREGATE LIMIT: The sum of (i) 125 percent of the
greater of the ADP of the Non-highly Compensated
Employees for the Plan Year or the ACP of Non-highly
Compensated Employees under the Plan subject to Code
Section 401(m) for the Plan Year beginning with or
within the Plan Year of the cash or deferred
arrangement and (ii) the lesser of 200% or two plus
the lesser of such ADP or ACP. "Lesser" is
substituted for "greater" in "(i)", above, and
"greater" is substituted for "lesser" after "two plus
the" in "(ii)" if it would result in a larger
Aggregate Limit.
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(4) AVERAGE CONTRIBUTION PERCENTAGE OR ACP: the average
(expressed as a percentage) of the Contribution
Percentages of the Eligible Participants in a group.
(5) BEFORE TAX CONTRIBUTIONS ("ELECTIVE DEFERRALS"):
Employer contributions made to the Plan at the
election of the Participant, in lieu of cash
compensation, which shall include contributions made
pursuant to a salary reduction agreement or other
deferral mechanism. With respect to any taxable year,
a Participant's Before Tax Contributions are the sum
of all Employer contributions made on behalf of such
Participant pursuant to an election to defer under
any qualified cash or deferred arrangement as
described in Section 401(k) of the Code, any
simplified employee pension cash or deferred
arrangement as described in Code Section
402(h)(1)(B), any eligible deferred compensation Plan
under Code Section 457, any Plan as described under
Code Section 457, any Plan as described under Code
Section 501(c)(18), and any Employer contributions
made on behalf of a Participant for the purchase of
an annuity contract under Code Section 403(b)
pursuant to a salary reduction agreement.
(6) CONTRIBUTION PERCENTAGE: The ratio (expressed as a
percentage) of the Participant's Contribution
Percentage Amounts to the Participant's Compensation
for the Plan Year (whether or not the Employee was a
Participant for the entire Plan Year, but limited to
that portion of the Plan Year in which the Employee
was an Eligible Participant if the Employer so elects
for such Plan Year to so limit Compensation for all
Eligible Employees).
(7) CONTRIBUTION PERCENTAGE AMOUNTS: The sum of the After
Tax Contributions, Matching Contributions, and
Qualified Matching Contributions (to the extent not
taken into account for purposes of the ADP test) made
under the Plan on behalf of the Participant for the
Plan Year. Such Contribution Percentage Amounts shall
not include Matching Contributions that are forfeited
either to correct Excess Aggregate Contributions or
because the contributions to which they relate are
Excess Before Tax Contributions, Excess Contributions
or Excess Aggregate Contributions. If so elected in
the Adoption Agreement the Employer may include
Qualified Non-elective Contributions in the
Contribution Percentage Amounts. The Employer also
may elect to use Before Tax Contributions in the
Contribution Percentage Amounts so long as the ADP
test is met before the Before Tax Contributions are
used in the ACP test and continues to be met
following the exclusion of those Before Tax
Contributions that are used to meet the ACP test.
(8) ELIGIBLE PARTICIPANT: Any Employee who is eligible to
make an After Tax Contribution or a Before Tax
Contribution (if the Employer takes such
contributions into account in the calculation of the
Contribution Percentage), or to receive a Matching
Contribution (including forfeitures) or a Qualified
Matching Contribution. If an After Tax Contribution
is required as a condition of participation in the
Plan, any Employee who would be a Participant in the
Plan if such Employee made such a contribution shall
be treated as an eligible Employee on behalf of whom
no After Tax Contributions are made.
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(9) EXCESS AGGREGATE CONTRIBUTIONS: With respect to any
Plan Year, the excess of:
(a) The aggregate Contribution Percentage
Amounts taken into account in computing the
numerator of the Contribution Percentage
actually made on behalf of Highly
Compensated Employees for such Plan Year,
over
(b) The maximum Contribution Percentage Amounts
permitted by the ACP test (determined by
reducing contributions made on behalf of
Highly Compensated Employees in order of
their Contribution Percentages beginning
with the highest of such percentages).
Such determination shall be made after first
determining Excess Before Tax Contributions
pursuant to Section 3.2(D) and (E) and then
determining Excess Contributions pursuant to
section 3.2(F), (G) and (H).
(10) EXCESS BEFORE TAX CONTRIBUTIONS ("EXCESS ELECTIVE
DEFERRALS"): Those Before Tax Contributions that are
includible in a Participant's gross income under
Section 402(g) of the Code to the extent such
Participant's Before Tax Contributions for a taxable
year exceed the dollar limitation under such Code
section. Excess Before Tax Contributions shall be
treated as Annual Additions under the Plan, unless
such amounts are distributed no later than the first
April 15 following the close of the Participants
taxable year. Excess Before Tax Contributions shall
be adjusted for income or loss up to the end of the
taxable year of the Employee, and if elected in the
Adoption Agreement, for the income or loss
attributable to the period from the end of the
Employee's taxable year to the date of distribution
(the "Gap Period"). The income or loss allocable to
Excess Before Tax Contributions is (1) the income or
loss allocable to the Participant's Before Tax
Contribution Account for the taxable year multiplied
by a fraction, the numerator of which is such
Participant's Excess Before Tax Contributions for the
year and the denominator is the Participant's account
balance attributable to Before Tax Contributions
without regard to any income or loss occurring during
such taxable year plus, (2) if Gap Period income or
loss applies, ten percent of the amount determined
under (1) multiplied by the number of whole calendar
months between the end of the Participant's taxable
year and the date of distribution, counting the month
of distribution if distribution occurs after the 15th
of such month.
(11) EXCESS CONTRIBUTIONS: With respect to any Plan Year,
the excess of:
(a) The aggregate amount of Employer
contributions actually taken into account in
computing the ADP of Highly Compensated
Employee for such Plan Year, over
(b) The maximum amount of such contributions
permitted by the ADP test (determined by
reducing contributions made on behalf of
Highly
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Compensated Employee in order of the ADPs,
beginning with the highest of such
percentages).
(12) MATCHING CONTRIBUTIONS: An Employer contribution made
to this or any other defined contribution Plan on
behalf of a Participant on account of an After Tax
Contribution made by such Participant, or on account
of a Participant's Before Tax Contribution, under a
Plan maintained by the Employer.
(13) QUALIFIED MATCHING CONTRIBUTIONS: Matching
Contributions which are subject to the distribution
and nonforfeitability requirements under Section
401(k) of the Code when made. Qualified Matching
Contributions shall be allocated, in the discretion
of Employer, to the accounts of all Employees, or
only to the accounts of Non-highly Compensated
Employees.
(14) QUALIFIED NON-ELECTIVE CONTRIBUTIONS: Contributions
(other than Matching Contributions or Qualified
Matching Contributions) made by the Employer and
allocated to Participants' accounts that the
Participants may not elect to receive in cash until
distributed from the Plan; that are nonforfeitable
when made; and that are distributable only in
accordance with the distribution provisions that are
applicable to Before Tax Contributions and Qualified
Matching Contributions. Qualified Non-elective
Contributions shall be allocated, in the discretion
of Employer, to the accounts of all Employees, or
only to the accounts of Non-highly Compensated
Employees.
(B) NONFORFEITABILITY AND VESTING. The Participant's accrued
benefits derived from Before Tax Contributions and After Tax
Contributions are nonforfeitable and fully vested.
(C) NOTICE TO COMMITTEE. The Committee shall set the time period
during which a Participant may provide written notice to
increase, decrease or terminate Before Tax Contributions and
After Tax Contributions.
(D) SUSPENSION AFTER RECEIPT OF HARDSHIP DISTRIBUTION. If the
Employer has elected in the Adoption Agreement to have the
"safe harbor" hardship rules apply, an Employee's Before Tax
Contributions and After Tax Contributions shall be suspended
for twelve months after the receipt by such Employee of a
Hardship distribution (as defined in Section 3.9) from this
Plan or any other Plan maintained by the Employer.
(E) SEPARATE ACCOUNTS. Separate accounts for Before Tax
Contributions and After Tax Contributions will be maintained
for each Participant. Each account will be credited with the
applicable contributions and earnings thereon.
3.2 BEFORE TAX CONTRIBUTIONS. (ELECTIVE DEFERRALS).
(A) ALLOCATION OF BEFORE TAX CONTRIBUTIONS. If the Employer
selects Item C(2) in the Adoption Agreement, for each Plan
Year the Employer will contribute and allocate to each
Participant's Before Tax Contribution Account an amount equal
to the amount of the Participant's Before Tax Contributions.
The provisions of the cash or deferred
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arrangement may be made effective as of the first day of the
Plan Year in which the cash or deferred option is adopted,
however, under no circumstances may a salary reduction
agreement or other deferral mechanism be adopted
retroactively. Before Tax Contributions must be contributed
and allocated to the Plan no later than thirty (30) days after
the close of the Plan Year for which the contributions are
deemed to be made, or such other time as provided in
applicable regulations under the Code.
(B) BEFORE TAX CONTRIBUTIONS PURSUANT TO A SALARY REDUCTION
AGREEMENT. To the extent provided in the Adoption Agreement, a
Participant may elect to have Before Tax Contributions made
under this Plan. Before Tax Contributions shall be continuing
contributions through payroll deduction made pursuant to a
salary reduction agreement.
(1) COMMENCEMENT OF BEFORE TAX CONTRIBUTIONS. An Employee
may elect to commence Before Tax Contributions as of
his or her Entry Date as described in Section 2.1(B).
Such election shall not become effective before the
Entry Date. Such election may not be made
retroactively.
(2) MODIFICATION AND TERMINATION OF BEFORE TAX
CONTRIBUTIONS. A Participant's election to commence
Before Tax Contributions shall remain in effect until
modified or terminated. A Participant may increase or
decrease his or her Before Tax Contributions as of
any date as selected by the Employer in Item C(3) of
the Adoption Agreement upon notice to the Committee.
A Participant may terminate his or her election to
make Before Tax Contributions as of the Participant's
next wage payment date upon notice to the Committee.
Any Participant who terminates Before Tax
Contributions may elect to recommence making Before
Tax Contributions as of the date selected by the
Employer in Item C(3) of the Adoption Agreement
following his or her suspension of contributions.
(C) CASH BONUSES. If Item C(2)(c) of the Adoption Agreement is
selected, a Participant may also enter into a salary reduction
agreement on cash bonuses that, directing that the amount of
such salary reduction be contributed to the Plan as a Before
Tax Contribution, or received by the Participant in cash. A
Participant shall be afforded a reasonable period to elect to
defer amounts described in this Section 3.2 to the Plan. Such
election shall not become effective before the Participant's
Entry Date.
(D) MAXIMUM AMOUNT OF BEFORE TAX CONTRIBUTIONS. A Participant's
Before Tax Contributions are subject to any limitations
imposed in Item C(2) of the Adoption Agreement, calculated on
an annual basis, and any further limitations under the Plan.
No Participant shall be permitted to have Before Tax
Contributions made under this Plan, or any other qualified
Plan maintained by the Employer, during any taxable year in
excess of the dollar limitation contained in Code Section
402(g) in effect at the beginning of such taxable year.
Furthermore, if an Employee receives a Hardship distribution
(as defined in Section 3.9, utilizing the "safe harbor" rules)
from this Plan or any other Plan maintained by the Employer,
the Employee may not make Before Tax Contributions for the
Employee's taxable year immediately following the taxable year
of the Hardship distribution in excess of the applicable limit
under Section 402(g) of the Code for such
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<PAGE> 59
taxable year less the amount of the Employee's Before Tax
Contributions for the taxable year of the Hardship
distribution.
(E) DISTRIBUTION OF EXCESS BEFORE TAX CONTRIBUTIONS. If a
Participant makes Before Tax Contributions to this Plan and to
another Plan, and the Participant has made Excess Before Tax
Contributions to one or more of the plans, the Participant may
assign the amount of any such Excess Before Tax Contributions
among the plans under which such Before Tax Contributions were
made. The Participant may assign to this Plan any Excess
Before Tax Contributions made during a taxable year of the
Participant to this Plan by notifying the Committee on or
before the date specified in the Adoption Agreement of the
amount of the Excess Before Tax Contributions to be assigned
to the Plan. A Participant is deemed to notify the Committee
of any Excess Before Tax Contributions that arise by taking
into account only those Before Tax Contributions made under
the Plan or Plans of this Employer.
Notwithstanding any other provision of the Plan, Excess Before
Tax Contributions, plus any income and minus any loss
allocable thereto, shall be distributed no later than April 15
to any Participant to whose account Excess Before Tax
Contributions were assigned for the preceding year and who
claims Excess Before Tax Contributions for such taxable year.
The Participant's claim shall be in writing; shall be
submitted to the Committee not later than the date elected in
Item CC of the Adoption Agreement; shall specify the amount of
the Participant's Excess Before Tax Contribution for the
preceding calendar year; and shall be accompanied by the
Participant's written statement that if such amounts are not
distributed, such Excess Before Tax Contributions, when added
to amounts deferred under other plans or arrangements
described in Sections 401(k), 408(k), or 403(b) of the Code,
will exceed the limit imposed on the Participant by Section
402(g) of the Code for the year in which the deferral
occurred.
(F) ACTUAL DEFERRAL PERCENTAGE. The ADP for Participants who are
Highly Compensated Employees for each Plan Year and the ADP
for Non-highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
(1) 1.25 LIMIT. The ADP for Participants who are Highly
Compensated Employees for the Plan Year shall not
exceed the ADP for Participants who are Non-highly
Compensated Employees for the same Plan Year
multiplied by 1.25; or
(2) 2.0 LIMIT. The ADP for Participants who are Highly
Compensated Employees for the Plan Year shall not
exceed the ADP for Participants who are Non-highly
Compensated Employees for the same Plan Year
multiplied by 2.0, provided that the ADP for
Participants who are Highly Compensated Employees
does not exceed the ADP for Participants who are
Non-highly Compensated Employees by more than two (2)
percentage points.
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<PAGE> 60
(3) SPECIAL RULES.
(a) The ADP for any Participant who is a Highly
Compensated Employee for the Plan Year and
who is eligible to have Before Tax
Contributions (and Qualified Non-elective
Contributions, or Qualified Matching
Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP
test) allocated to his or her accounts under
two or more arrangements described in
Section 401(k) of the Code, that are
maintained by the Employer, shall be
determined as if such Before Tax
Contributions (and, if applicable, such
Qualified Non-elective Contributions or
Qualified Matching Contributions, or both,)
were made under a single arrangement. If a
Highly Compensated Employee participates in
two or more cash or deferred arrangements
that have different Plan Years, all cash or
deferred arrangements ending with or within
the same calendar year shall be treated as a
single arrangement.
(b) In the event that this Plan satisfies the
requirements of Sections 401(k), 401(a)(4),
or 410(b) of the Code only if aggregated
with one or more other plans, or if one or
more other plans satisfy the requirements of
such Sections of the Code only if aggregated
with this Plan, then this section shall be
applied by determining the ADP of Employees
as if all such plans were a single Plan. For
Plan Years beginning after December 31,
1989, plans may be aggregated in order to
satisfy Section 401(k) of the Code only if
they have the same Plan Year.
(c) For purposes of determining the ADP of a
Participant who is a 5-percent owner or one
of the ten most highly-paid Highly
Compensated Employees, the Before Tax
Contributions (and Qualified Non-elective
Contributions or Qualified Matching
Contributions, or both, if treated as Before
Tax Contributions for purposes of the ADP
test) and Compensation of such Participant
shall include the Before Tax Contributions
(and, if applicable, Qualified Non-elective
Contributions) and Compensation for the Plan
Year of Family Members (as defined in
Section 414(q)(6) of the Code). Family
Members, with respect to such Highly
Compensated Employees, shall be disregarded
as separate employees in determining the ADP
both for Participants who are Non-highly
Compensated Employees and for Participants
who are Highly Compensated Employees.
(d) For purposes of determining the ADP test,
Before Tax Contributions if treated as
Before Tax Contributions and Qualified
Non-elective Contributions must be made
before the last day of the twelve-month
period immediately following the Plan Year
to which contributions relate.
(e) The Employer shall maintain records
sufficient to demonstrate satisfaction of
the ADP test and the amount of Qualified
Non-elective Contributions used in such
test.
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<PAGE> 61
(f) The determination and treatment of the ADP
amounts of any Participant shall satisfy
such other requirements as may be prescribed
by the Secretary of the Treasury.
(G) DISTRIBUTION OF EXCESS CONTRIBUTIONS. Notwithstanding any
other provision of the Plan, Excess Contributions, plus any
income and minus any loss allocable thereto, shall be
distributed no later than the last day of each Plan Year to
Participants to whose accounts Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts
are distributed more than 2-1/2 months after the last day of
the Plan Year in which such excess amounts arose, a ten (10)
percent excise tax will be imposed on the Employer maintaining
the Plan with respect to such amounts. Such distributions
shall be made to Highly Compensated Employees on the basis of
the respective portions of the Excess Contributions
attributable to each of such Employees. Excess Contributions
of Participants who are subject to the Family Member
aggregation rules shall be allocated among the Family Members
in proportion to the Before Tax Contributions (and amounts
treated as Before Tax Contributions) of each Family Member
that is combined to determine the combined ADP.
Excess Contributions (including the amounts recharacterized)
shall be treated as Annual Additions under the Plan.
(1) DETERMINATION OF INCOME OR LOSS. The Excess
Contributions shall be adjusted for income or loss up
to the date of distribution. The income or loss
allocable to Excess Contributions is (1) the income
or loss allocable to the Participant's Before Tax
Contribution Account (and, if applicable, the
Qualified Non-elective Contribution Account or the
Qualified Matching Contribution Account or both)
multiplied by a fraction, the numerator of which is
such Participant's Excess Contribution for the year
and the denominator is the Participant's account
balance attributable to Before Tax Contributions (and
Qualified Non-Elective Contributions or Qualified
Matching Contributions or both, if any of such
contributions are included in the ADP test) without
regard to any income or loss occurring during such
taxable year, plus, (2) if Gap Period income or loss
applies, as elected in the Adoption Agreement, ten
percent of the amount determined under (1) multiplied
by the number of whole calendar months between the
end of the Plan Year and the date of distribution,
counting the month of distribution if distribution
occurs after the 15th of such month.
(2) ACCOUNTING FOR EXCESS CONTRIBUTIONS. Excess
Contributions shall be distributed from the
Participant's Before Tax Contribution Account and
Qualified Matching Contribution Account (if
applicable) in proportion to the Participant's Before
Tax Contributions and Qualified Matching
Contributions (to the extent used in the ADP test)
for the Plan Year. Excess Contributions shall be
distributed from the participant's Qualified
Non-elective Contribution Account only to the extent
that such Excess Contributions exceed the balance in
the Participant's Before Tax Contribution Account.
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(H) RECHARACTERIZATION. If the Plan permits After Tax
Contributions (Employee Contributions), Excess Contributions
may be recharacterized pursuant to this subsection.
Recharacterized amounts may be used in the Plan from which
Excess Contributions arose or in another Plan of the employer
with the same Plan Year.
(1) TREATMENT OF AMOUNTS RECHARACTERIZED. A Participant
may treat his or her Excess Contributions as an
amount distributed to the Participant and then
contributed by the Participant to the Plan.
Recharacterized amounts will remain nonforfeitable
and subject to the same distribution requirements as
Before Tax Contributions. Amounts may not be
recharacterized by a Highly Compensated Employee to
the extent that such amount in combination with other
After Tax Contributions made by that Employee would
exceed any stated limit under the Plan on After Tax
Contributions.
(2) TIMING OF RECHARACTERIZATION. Recharacterization must
occur no later than two and one-half months after the
last day of the Plan Year in which such Excess
Contributions arose and is deemed to occur no earlier
than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and
the consequences thereof. Recharacterized amounts
will be taxable to the Participant for the
Participant's tax year in which the Participant would
have received them in cash.
(I) ADJUSTMENTS TO BEFORE TAX CONTRIBUTION PERCENTAGES. Anything
to the contrary in this Article III notwithstanding, the
Committee shall have the right to reduce the percentages
designated pursuant to Section 3.2(B), of any one or more
Highly Compensated Employees in a manner prescribed or
approved by the Committee to the extent necessary or
convenient to ensure that at least one of the ADP tests set
forth in Section 3.2(F) is satisfied, but in no event shall
such reduction result in a percentage less than zero. Any such
reduction shall be effected quarterly, or more frequently as
the Committee may determine and each affected Highly
Compensated Employee shall be deemed to have elected the
permissible percentage determined by the Committee. The
Committee may, on a prospective basis, and subject to the
percentage limits of Section 3.3 below, treat amounts
contributed to the Plan pursuant to a salary reduction
agreement as After Tax Contributions by each affected Highly
Compensated Employee; provided that if any such reduction
cannot be so treated because of the said percentage limits or
because of the nondiscrimination requirements of Code Section
401(m) or otherwise, then the amount of such reduction (and
any income allocable thereto) shall be distributed to each
affected Highly Compensated Employee pursuant to Code Section
401(k)(8) or Code Section 401(m)(6), if applicable, not later
than the close of the first 2-1/2 months of the Plan Year
following the Plan Year in which the contribution was made.
3.3 AFTER TAX CONTRIBUTIONS. (EMPLOYEE CONTRIBUTIONS).
(A) ALLOCATION OF AFTER TAX CONTRIBUTIONS. If the Employer selects
Item C(2)(b) in the Adoption Agreement, the Employer will
deduct from the Participant's pay and allocate to each
Participant's After Tax Contribution Account an amount equal
to the percentage of Compensation authorized by the
Participant as an After Tax Contribution. The
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<PAGE> 63
Employer shall transmit After Tax Contributions to the Trustee
within thirty (30) days after the month end in which such
deductions are made.
(B) EMPLOYEE AUTHORIZES AFTER TAX CONTRIBUTIONS. To the extent
provided in the Adoption Agreement, a Participant may elect to
make After Tax Contributions under the Plan.
(1) ELECTION TO MAKE AFTER TAX CONTRIBUTIONS. An Employee
may elect to make After Tax Contributions as of his
or her Entry Date as described in Section 2.1(B).
Such election will not become effective before the
Entry Date.
(2) MODIFICATION AND TERMINATION OF AFTER TAX
CONTRIBUTIONS. A Participant's election to commence
After Tax Contributions shall remain in effect until
modified or terminated. A Participant may increase or
decrease his or her After Tax Contributions as
selected by the Employer in Item C(3) of the Adoption
Agreement upon written notice to the Committee. A
Participant may terminate his or her election to make
After Tax Contributions at any time as of the
Participant's next wage payment date upon written
notice to the Committee. Any Participant who
terminates After Tax Contributions may elect to
recommence making After Tax Contributions as of the
date selected by the Employer in Item C(3) of the
Adoption Agreement following his or her suspension of
contributions.
(C) MAXIMUM AMOUNT OF AFTER TAX CONTRIBUTIONS. A Participant's
After Tax Contributions are subject to any limitations imposed
in Item C(3) of the Adoption Agreement, calculated on an
annual basis, and any further limitations under the Plan.
(D) CASH BONUSES. If Item C(2)(c) of the Adoption Agreement is
selected, a Participant may also enter into a salary reduction
agreement on cash bonuses, directing that the amount of such
salary reduction be contributed to the Plan as an After Tax
Contribution, or received by the Participant in cash. A
Participant shall be afforded a reasonable period to elect to
defer amounts described in this Section 3.3 to the Plan. Such
election shall not become effective before the Participant's
Entry Date.
3.4 EMPLOYER CONTRIBUTIONS.
(A) MATCHING CONTRIBUTIONS. If elected by the Employer in the
Adoption Agreement, the Employer will or may make Matching
Contributions to the Plan. The amount of such Matching
Contributions shall be calculated by reference to the
Participants' Before Tax Contributions and/or After Tax
Contributions as specified by the Employer in the Adoption
Agreement.
(B) QUALIFIED MATCHING CONTRIBUTIONS. If elected by the Employer
in the Adoption Agreement, the Employer may make Qualified
Matching Contributions to the Plan.
In addition, in lieu of distributing Excess Contributions as
provided in Section 3.2(G) of the Plan, or Excess Aggregate
Contributions as provided in Section 3.5(C) of the Plan, the
Employer may make Qualified Matching Contributions on behalf
of Employees that
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<PAGE> 64
are sufficient to satisfy either the Actual Deferral
Percentage or the Average Contribution Percentage test, or
both, pursuant to regulations under the Code.
(C) QUALIFIED NON-ELECTIVE CONTRIBUTIONS. If elected by the
Employer in the Adoption Agreement, the Employer may make
Qualified Non-elective Contributions to the Plan.
In addition, in lieu of distributing Excess Contributions as
provided in Section 3.2(G) of the Plan, or Excess Aggregate
Contributions as provided in Section 3.5(C) of the Plan, the
Employer may make Qualified Non-elective Contributions on
behalf of Employees that are sufficient to satisfy either the
Actual Deferral Percentage or the Average Contribution
Percentage test, or both, pursuant to regulations under the
Code.
(D) SEPARATE ACCOUNTS. An Employer Matching Account shall be
maintained for a Participant's accrued benefit attributable to
Matching Contributions. A Qualified Matching Contribution
Account shall be maintained for a Participant's accrued
benefit attributable to Qualified Matching Contributions. A
Qualified Non-elective Contribution Account shall be
maintained for a Participant's accrued benefit attributable to
Qualified Non-elective Contributions. Such accounts shall be
credited with the applicable contributions, earnings and
losses, distributions, and other adjustments.
(E) VESTING. Matching Contributions will be vested in accordance
with the Employer's election in Items C(4)(d) and C(4)(e) of
the Adoption Agreement. In any event, Matching Contributions
shall be fully vested at Normal Retirement Date, upon the
complete or partial termination of the Plan, or upon the
complete discontinuance of Matching Contributions, as
applicable. Qualified Non-elective Contributions and Qualified
Matching Contributions are nonforfeitable when made.
(F) FORFEITURES. Forfeitures of Matching Contributions shall be
used to reduce such contributions, or shall be allocated to
Participants, in accordance with the Employer's election in
Item C(6) of the Adoption Agreement.
(G) ALLOCATION OF DISCRETIONARY MATCHING CONTRIBUTIONS. If the
Employer selects Item C(4)(b) in the Adoption Agreement, any
discretionary Matching Contributions shall be allocated as of
the allocation date specified in Item C(4)(c)(ii) of the
Adoption Agreement, to the Employer Matching Account of each
Participant who has made Before Tax Contributions and/or After
Tax Contributions eligible for matching. If Item
C(4)(c)(ii)(e) has been selected (imposing a last day of the
Plan Year requirement) the allocation shall be made to a
Participant who (1) if a Participant in a nonstandardized
Plan, is employed or on leave of absence on the last day of
the Plan Year, and (2) if a Participant in a standardized
Plan, either completes more than 500 Hours of service during
the Plan Year or is employed on the last day of the Plan Year.
The following Participants will also share in the Matching
Contributions for the year, if elected in the Adoption
Agreement: (1) Participants in a nonstandardized Plan whose
employment terminated before the end of the Plan Year because
of retirement, death, disability or as specified in the
Adoption Agreement, and (2) Participants in a standardized
Plan whose employment terminated before the end of the Plan
Year because of retirement, death, disability or as specified
in the Adoption Agreement, and completed 500 Hours of
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<PAGE> 65
Service or less. Notwithstanding the foregoing, if the
Employer makes a contribution prior to the end of the Plan
Year, Participants shall be entitled to an allocation of that
contribution when made, without regard to any end of the Plan
Year requirement.
(H) LIMITATION ON EMPLOYER CONTRIBUTIONS. The Employer's
contributions for any Plan Year shall not exceed the maximum
amount which the Employer may deduct pursuant to Section 404
of the Code.
3.5 LIMITATIONS ON AFTER TAX CONTRIBUTIONS (EMPLOYEE CONTRIBUTIONS) AND
MATCHING CONTRIBUTIONS.
(A) CONTRIBUTION PERCENTAGE. The ACP for Participants who are
Highly Compensated Employees for each Plan Year and the ACP
for Participants who are Non-highly Compensated Employees for
the same Plan Year must satisfy one of the following tests:
(1) 1.25 LIMIT. The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not
exceed the ACP for Participants who are Non-highly
Compensated Employees for the same Plan Year by 1.25,
or
(2) 2.0 LIMIT. The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not
exceed the ACP for Participants who are Non-highly
Compensated Employees for the same Plan Year
multiplied by two (2), provided that the ACP for
Participants who are Highly Compensated Employees
does not exceed the ACP for Participants who are
Non-highly Compensated Employees by more than two (2)
percentage points.
(B) SPECIAL RULES.
(1) MULTIPLE USE. If one or more Highly Compensated
Employees participate in both a cash or deferred
arrangement and a Plan subject to the ACP test
maintained by the Employer and the sum of the ADP and
ACP of those Highly Compensated Employees subject to
either or both tests exceeds the Aggregate Limit,
then the ACP of those Highly Compensated Employees
who also participate in a cash or deferred
arrangement will be reduced (beginning with such
Highly Compensated Employee whose ACP is the highest)
so that the limit is not exceeded. The amount by
which each Highly Compensated Employee's Contribution
Percentage amounts is reduced shall be treated as an
Excess Aggregate Contribution. The ADP and ACP of the
Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests.
Multiple use does not occur if either the ADP and ACP
of the Highly Compensated Employees does not exceed
1.25 multiplied by the ADP and ACP of the Non-highly
Compensated Employees.
(2) AGGREGATION OF CONTRIBUTION PERCENTAGES. For purposes
of this section, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and
who is eligible to have Contribution Percentage
Amounts allocated to his or her accounts under two or
more plans described in Section 401(a) of the
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<PAGE> 66
Code, or arrangements described in Section 401(k) of
the Code, that are maintained by the Employer, shall
be determined as if the total of such Contribution
Percentage Amounts was made under each Plan. If a
Highly Compensated Employee participates in two or
more cash or deferred arrangements that have
different Plan years all cash or deferred
arrangements ending with or within the same calendar
year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be
treated as separate if mandated to be disaggregated
under regulations under Section 401(m) of the Code.
(3) AGGREGATION OF PLANS. In the event that this Plan
satisfies the requirements of Sections 401(m),
401(a)(4) or 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other
plans satisfy the requirements of such sections of
the Code only if aggregated with this Plan, then this
section shall be applied by determining the
Contribution Percentage of Employees as if all such
plans were a single Plan. For Plan Years beginning
after December 31, 1989, plans may be aggregated in
order to satisfy Section 401(m) of the Code only if
they have the same Plan Year.
(4) FAMILY AGGREGATION. For purposes of determining the
Contribution Percentage of a Participant who is a
five-percent owner or one of the ten most highly-paid
Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Employee
shall include the Contribution Percentage Amounts and
Compensation for the Plan Year of Family Members, as
defined in Section 414(q)(6) of the Code. Family
Members, with respect to Highly Compensated
Employees, shall be disregarded as separate employees
in determining the Contribution Percentage both for
Participants who are Non-highly Compensated Employees
and for Participants who are Highly Compensated
Employees.
(5) TIME OF CONTRIBUTIONS. For purposes of determining
the Contribution Percentage test, After Tax
Contributions are considered to have been made in the
Plan Year in which contributed to the Trust. Matching
Contributions and Qualified Non-elective
Contributions will be considered made for a Plan Year
if made no later than the end of the twelve-month
period beginning on the day after the close of the
Plan Year.
(6) RECORDS. The Employer shall maintain records
sufficient to demonstrate satisfaction of the ACP
test and the amount of Qualified Non-elective
Contributions or Qualified Matching Contributions, or
both, used in such test.
(7) REGULATIONS. The determination and treatment of the
Contribution Percentage of any Participant shall
satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
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<PAGE> 67
(C) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.
(1) GENERAL RULE. Notwithstanding any other provision of
this Plan, Excess Aggregate Contributions, plus any
income and minus any loss allocable thereto, shall be
forfeited, if forfeitable, or if not forfeitable,
distributed no later than the last day of each Plan
Year to Participants to whose accounts Excess
Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions
of Participants who are subject to the Family Member
aggregation rules shall be allocated among the Family
Members in proportion to the After Tax and Matching
Contributions (or amounts treated as Matching
Contributions) of each Family Member that is combined
to determine the combined ACP. If such Excess
Aggregate Contributions are distributed more than
2-1/2 months after the last day of the Plan Year in
which such excess amounts arose, a ten (10) percent
excise tax will be imposed on the Employer
maintaining the Plan with respect to those amounts.
Excess Aggregate Contributions shall be treated as
Annual Additions under the Plan.
(2) DETERMINATION OF INCOME OR LOSS. Excess Aggregate
Contributions shall be adjusted for income or loss up
to the date of distribution. The income or loss
allocable to Excess Aggregate Contributions is the
sum of: (1) income or loss allocable to the
Participant's After Tax Contribution Account,
Matching Contribution Account, Qualified Matching
Contribution Account, (if any, and if all amounts
therein are not used in the ADP test) and, if
applicable, the Qualified Non-elective Contribution
Account and Before Tax Contribution Account for the
Plan Year multiplied by a fraction, the numerator of
which is such Participant's Excess Aggregate
Contributions for the year and the denominator is the
Participant's account balance(s) attributable to
Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and
(2) ten percent of the amount determined under (1)
multiplied by the number of whole calendar months
between the end of the Plan Year and the date of
distribution, counting the month of distribution if
distribution occurs after the 15th of such month.
(3) FORFEITURES OF EXCESS AGGREGATE CONTRIBUTIONS.
Forfeitures of Excess Aggregate Contributions may
either be reallocated to the accounts of Non-Highly
Compensated Employees or applied to reduce Employer
Contributions, as elected by the Employer in Item
C(6)(c) of the Adoption Agreement.
(4) ACCOUNTING FOR EXCESS AGGREGATE CONTRIBUTIONS. Excess
Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a pro-rata basis from
the Participant's After Tax Contribution Account and
Matching Contribution Account and Qualified Matching
Contribution Account (and, if applicable, the
Participant's Qualified Non-elective Contribution
Account and Before Tax Contribution Account, or
both).
3.6 NET PROFITS NOT REQUIRED IF SO ELECTED IN ADOPTION AGREEMENT. If the
Employer elects, Matching
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<PAGE> 68
Contributions may be made without regard to Net Profits in
accordance with Item C(4)(c)(iii) of the Adoption Agreement. If the
Plan is a profit-sharing Plan, the Plan shall continue to be designed
to qualify as a profit-sharing Plan for purposes of Sections 401(a),
402, 412, and 417 of the Code. Net Profits shall not be required for
Before Tax Contributions or After Tax Contributions to be made to the
Plan.
3.7 FORM, PAYMENT AND ALLOCATION OF CONTRIBUTIONS. All contributions under
this Article III made for a Plan Year shall be made in cash, and shall
be delivered to the Trustee at such time or times as shall be agreed
upon between the Committee and the Trustee. The Committee shall
instruct the Trustee as to the allocation of contributions to the
Participant's accounts.
3.8 DISTRIBUTION REQUIREMENTS FOR BEFORE TAX CONTRIBUTION ACCOUNT. Before
Tax Contributions, Qualified Non-elective Contributions and Qualified
Matching Contributions, and income allocable to each are not
distributable to a Participant or his or her Beneficiary or
Beneficiaries, in accordance with such Participant's, Beneficiary's or
Beneficiaries' election, earlier than upon separation from service,
death, disability, or as selected in the Adoption Agreement. Such
amounts may not be distributed unless in accordance with the
Participant's election made pursuant to rules established by the
Committee as authorized in the Adoption Agreement, and upon:
(A) Termination of the Plan without the establishment of another
defined contribution Plan, other than an employee stock
ownership Plan (as defined in Section 4975(e) or Section 409
of the Code) or a simplified employee pension Plan as defined
in Section 408(k).
(B) The disposition by a corporation to an unrelated corporation
of substantially all of the assets (within the meaning of
Section 409(d)(2) of the Code) used in a trade or business of
such corporation if such corporation continues to maintain
this Plan after the disposition, but only with respect to
Employees who continue employment with the corporation
acquiring such assets.
(C) The disposition by a corporation to an unrelated entity of
such corporation's interest in a subsidiary (within the
meaning of Section 409(d)(3) of the Code) if such corporation
continues to maintain this Plan, but only with respect to
Employees who continue employment with such subsidiary.
(D) The attainment of age 59-1/2 in the case of a profit-sharing
Plan, or the attainment of the Plan's Normal Retirement Date,
if either or both are selected in the Adoption Agreement.
(E) The Hardship of the Participant as described in Section 3.9,
if selected in the Adoption Agreement.
All distributions that may be made pursuant to one or more of
the foregoing distributable events are subject to the spousal
and Participant consent requirements (if applicable) contained
in Sections 411(a)(11) and 417 of the Code. In addition,
distributions after March 31, 1988, that are triggered by any
of the first three events above, in Sections 3.8(A), (B) and
(C) must be made in a lump sum.
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3.9 HARDSHIP DISTRIBUTION.
(A) AMOUNT AVAILABLE FOR WITHDRAWAL. Upon the written request of a
Participant received and approved by the Committee, a
Participant may withdraw, in cash, up to one hundred per cent
(100%) of the amount of such Participant's Before Tax
Contributions (and any earnings credited to a Participant's
account as of the end of the last Plan Year ending before July
1, 1989) or such lesser amount as the Committee may approve,
in the event of Hardship. For purposes of this Section,
Hardship is defined as immediate and heavy financial need of
the Employee where such Employee lacks other available
resources. Hardship distributions are subject to the spousal
consent requirements contained in Sections 411(a)(11) and 417
of the Code. The Committee is authorized to and shall request
from the Participant making such a request such evidence as
the Committee deems necessary and appropriate to substantiate
a Hardship, the amount of expenses resulting from such
Hardship and the other resources of the Participant reasonably
available to meet such expenses.
(B) SPECIAL RULES:
(1) IMMEDIATE AND HEAVY NEED. The following are the only
financial needs considered immediate and heavy:
expenses incurred or necessary for medical care,
described in Section 213(d) of the Code, of the
Employee, the Employee's Spouse or dependents; the
purchase (excluding mortgage payments) of a principal
residence for the Employee; payment of tuition and
related educational fees for the next twelve months
of post-secondary education for the Employee, the
Employee's Spouse, children or dependents; or the
need to prevent the eviction of the Employee from, or
a foreclosure on the mortgage of, the Employee's
principal residence.
(2) SATISFACTION OF NEED. A distribution will be
considered as necessary to satisfy an immediate and
heavy financial need of the Employee only if:
(a) The Employee has obtained all distributions,
other than Hardship distributions, and all
nontaxable loans under all plans maintained
by the Employer;
(b) All plans maintained by the Employer provide
that the Employee's Before Tax Contributions
(and After Tax Contributions) will be
suspended for twelve months after the
receipt of the Hardship distribution;
(c) The distribution is not in excess of an
immediate and heavy financial need
(including amounts necessary to pay any
federal, state or local income taxes or
penalties reasonably anticipated to result
from the distribution); and
(d) All plans maintained by the Employer provide
that the Employee may not make Before Tax
Contributions for the Employee's taxable
year immediately following the taxable year
of the Hardship distribution in
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excess of the applicable limit under Section
402(g) of the Code for such taxable year
less the amount of such Employee's Before
Tax Contributions for the taxable year of
the Hardship distribution.
(3) TAXES AND PENALTIES. The amount of an immediate and
heavy financial need may include any amounts
necessary to pay any federal, state or local income
taxes or penalties reasonably anticipated to result
from the distribution.
3.10 WITHDRAWAL OF AFTER TAX CONTRIBUTIONS. Subject to the provisions of the
Plan, in accordance with rules for giving notice as determined by the
Committee, a Participant may withdraw as of the first Accounting Date
subsequent to receipt by the Committee of such notice:
(A) MAXIMUM AMOUNT. An amount equal to not more than 100% of the
Participant's After Tax Contribution Account determined as of
such Accounting Date. No Participant who has made any
withdrawal of After Tax Contributions in the twelve (12)
months preceding the giving of such notice may make a
withdrawal under this Section. A Participant who makes a
withdrawal of After Tax Contributions shall be required to
suspend After Tax Contributions for a period of six (6)
months, commencing with the effective date of such withdrawal.
A Participant may, pursuant to Article III, elect to commence
After Tax Contributions as of the first day of the first
payroll period of the month following the conclusion of such
suspension period, or the first payroll period of any month
thereafter, upon advance written notice to the Committee.
(B) MINIMUM AMOUNT. Notwithstanding anything to the contrary in
this Section 3.10, any withdrawal made pursuant to Section
3.10(A) shall be for a minimum whole dollar amount not less
than Five Hundred Dollars ($500.00); except that if the amount
available for withdrawal is less than Five Hundred Dollars
($500.00) then the minimum amount of the withdrawal shall be
the amount available.
(C) FORFEITURES. No forfeitures will occur solely as a result of
an Employee's withdrawal of After Tax Contributions.
(D) LOAN SECURITY. Notwithstanding anything to the contrary in
this Section 3.10, a Participant may not make a withdrawal
pursuant to this Section of any portion of the Participants
vested interest which has been assigned to secure repayment of
a loan in accordance with Section 11.10, below, until such
time as the Committee shall have released said portion so
assigned.
3.11. WITHDRAWAL OF MATCHING CONTRIBUTIONS. Subject to the provisions of the
Plan, in accordance with rules for giving notice as determined by the
Committee, and as elected in the Adoption Agreement, a Participant may
withdraw as of the first Accounting Date subsequent to receipt by the
Committee of such notice:
(A) MAXIMUM AMOUNT. An amount equal to not more than 100% of the
vested amounts in the Participant's Matching Contribution
Account determined as of such Accounting Date. No Participant
who has made any withdrawal of Matching Contributions in the
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twelve (12) months preceding the giving of such notice may
make a withdrawal under this Section.
(B) MINIMUM AMOUNT. Notwithstanding anything to the contrary in
this Section 3.11, any withdrawal made pursuant to Section
3.11(A) shall be for a minimum whole dollar amount not less
than Five Hundred Dollars ($500.00); except that if the amount
available for withdrawal is less than Five Hundred Dollars
($500.00) then the minimum amount of the withdrawal shall be
the amount available.
(C) FORFEITURES. No forfeitures will occur solely as a result of
an Employee's withdrawal of Matching Contributions.
(D) LOAN SECURITY. Notwithstanding anything to the contrary in
this Section 3.11, a Participant may not make a withdrawal,
pursuant to this Section of any portion of the Participant's
vested interest which has been assigned to secure repayment of
a loan in accordance with Section 11.10, below, until such
time as the Committee shall have released said portion so
assigned.
ARTICLE IV
OTHER CONTRIBUTIONS
4.1 EMPLOYER CONTRIBUTIONS.
(A) MONEY PURCHASE PENSION PLANS ONLY. As elected by the Employer
in the Adoption Agreement, the Employer shall make
contributions to the Plan.
(B) PROFIT SHARING PLANS AND 401(K) PLANS ONLY.
(1) EMPLOYER CONTRIBUTIONS. For each Plan Year, the
Employer, shall or may make contributions to the Plan
in an amount as selected in the Adoption Agreement or
determined by Resolution of the Board of Directors of
the Employer.
(2) NET PROFITS NOT REQUIRED IF SO ELECTED IN ADOPTION
AGREEMENT. If the Employer elects, Employer
Contributions under a profit sharing Plan may be made
without regard to Net Profits in accordance with Item
B(8)(a)(iii) of the Adoption Agreement. The Plan
shall continue to be designed to qualify as a
profit-sharing Plan for purposes of Sections 401(a),
402, 412, and 417 of the Code.
4.2 SEPARATE ACCOUNTS. An Employer Contribution Account shall be maintained
for each Participant to which will be credited the employer pension or
profit sharing contributions ("Employer Contributions"). Such accounts
shall be credited with the applicable contributions, earnings and
losses, distributions, and other adjustments.
4.3 VESTING. Employer Contributions will be vested in accordance with the
Employer's election in Item B(7), as applicable, of the Adoption
Agreement. In any event, Employer Contributions shall be fully vested
at Normal Retirement Date, upon the complete or partial termination of
the Plan, and, in profit sharing plans, upon the complete
discontinuance of Employer Contributions.
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4.4 LIMITATION ON EMPLOYER CONTRIBUTIONS. The Employer's Contribution for
any Plan Year shall not exceed the maximum amount which the Employer
may deduct pursuant to Section 404 of the Code. The Employer
Contributions shall be payable not later than the time for filing the
Employer's federal income tax return, including extensions.
4.5 EMPLOYEE CONTRIBUTIONS.
(A) DISTRIBUTIONS FROM QUALIFIED PLANS - ROLLOVERS.
(1) If the Employer selects Item B(9) in the Adoption
Agreement, an Employee who is entitled to make a
rollover contribution described in Section 402(a)(5),
Section 403(a)(4) or Section 408(d)(3) of the Code
("Rollover Contribution"), may elect, with the
approval of the Committee, to make such a Rollover
Contribution to the Plan. The Employee shall deliver
or cause to be delivered, to the Trustee the cash
which constitutes such Rollover Contribution at such
time or times and in such manner as shall be
specified by the Committee. As of the date of receipt
of such property by the Trustee, a Rollover Account
shall be established in the name of the Employee who
has made a Rollover Contribution as provided in this
Section 4.5 and shall be credited with such assets on
such date. A Rollover Contribution shall not be
deemed to be a contribution of such Employee for any
purpose of this Agreement. All Rollover Contributions
and the earnings on these contributions shall be
immediately fully vested and nonforfeitable.
(2) Subject to the provisions of the Plan, on advance
notice given to the Committee in accordance with
rules established by the Committee a Participant in a
profit sharing Plan or 401(k) profit sharing Plan may
withdraw all or any part (in any whole dollar amount
specified by the Participant) of the value of any
Rollover Account, provided no Participant who has
made any withdrawal under Section 4.5(A) during the
calendar year in which such notice is given may make
an additional withdrawal under this Section 4.5(A)
during the remainder of such year.
(B) NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS AND MATCHING
CONTRIBUTIONS NO LONGER ACCEPTED.
(1) This Plan will not accept nondeductible employee
contributions and matching contributions except
pursuant to a 401(m) arrangement described in Article
III. Employee contributions for Plan Years beginning
after December 31, 1986, together with any matching
contributions as defined in Section 401(m) of the
Code, will be limited so as to meet the
nondiscrimination test of Section 401(m).
(2) A separate account will be maintained by the Trustee
for the previously made nondeductible employee
contributions of each Participant.
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(3) Employee contributions and earnings thereon will be
nonforfeitable at all times. No forfeitures will
occur solely as a result of an Employee's withdrawal
of Employee contributions.
(C) DEDUCTIBLE EMPLOYEE CONTRIBUTIONS NO LONGER ACCEPTED. The
Committee will not accept deductible Employee contributions
which are made for a taxable year beginning after December 31,
1986. Contributions made prior to that date will be maintained
in a separate account which will be nonforfeitable at all
times. The account will share in the gains and losses of the
Trust Fund in the same manner as described in Article VI of
the Plan. No part of the deductible voluntary contribution
account will be used to purchase life insurance. Subject to
Section 7.10, Joint and survivor annuity requirements (if
applicable), the Participant may withdraw any part of the
deductible voluntary contribution account by making a written
application to the Committee.
4.6 EXCLUSIVE BENEFIT. Except as provided in the Plan, the Employer has no
beneficial interest in the Trust Fund, and no part of the Trust Fund
shall revert or be repaid to the Employer, directly or indirectly, or
diverted to purposes other than for the exclusive benefit of
Participants and their Beneficiaries, except that (1) any contribution
made by the Employer because of a mistake of fact must be returned to
the Employer within one year of the contribution; (2) in the event the
deduction of a contribution made by the Employer is disallowed under
Section 404 of the Code, such contribution (to the extent disallowed)
must be returned to the Employer within one year of the disallowance of
the deduction; and (3) in the event that the Commissioner of Internal
Revenue determines that the Plan is not initially qualified under the
Internal Revenue Code, any contribution made incident to that initial
qualification by the Employer must be returned to the Employer within
one year after the date the initial qualification is denied, but only
if the application for the qualification is made by the time prescribed
by law for filing the Employer's return for the taxable year in which
the Plan is adopted or such later date as the Secretary of the Treasury
may prescribe.
4.7 FORM, PAYMENT AND ALLOCATION OF CONTRIBUTIONS. Contributions made for a
Plan Year shall be made in cash; provided, however, that if the Plan
has an Employer Stock Fund, contributions for the Employer Stock Fund
may be made in Employer Stock. Contributions shall be delivered to the
Trustee at such time or times as shall be agreed upon between the
Committee and the Trustee. The Committee shall instruct the Trustee as
to the allocation of contributions to the Participant's accounts
pursuant to the elections made in the Adoption Agreement. Employer
Stock contributed to the Plan shall be valued at fair market value at
the time of its transfer to the Plan.
4.8 SAFE HARBOR ALLOCATION. Notwithstanding anything to the contrary in the
Adoption Agreement, in the event the requirements of Code Sections
401(a)(26) or 410(b) are not met during the Plan Year, Employer
Contributions will be allocated to Eligible Employees in the following
order until the applicable requirements are met:
(A) Eligible Employees employed by the Employer on the last day of
the Plan Year and who have completed more than 750 Hours of
Service during the Plan Year;
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<PAGE> 74
(B) Eligible Employees employed by the Employer on the last day of
the Plan Year and who have completed more than 500 but less
than 750 Hours of Service during the Plan Year;
(C) Eligible Employees employed by the Employer on the last day of
the Plan Year and who have completed 500 or fewer Hours of
Service during the Plan Year;
(D) Eligible Employees who have completed 750 or more Hours of
Service during the Plan Year;
(E) Eligible Employees who have completed more than 500 but less
than 750 Hours of Service during the Plan Year.
In no event will Employees who have terminated employment with
the Employer during the Plan Year and who have completed 500
or fewer Hours of Service during the Plan Year receive any
allocation of Employer Profit Sharing Contributions.
ARTICLE V
PERIOD OF PARTICIPATION
5.1 TERMINATION DATES. A Participant's Termination Date will be the date on
which his employment with the Employer is terminated because of the
first to occur of the following events:
(A) NORMAL RETIREMENT. The Participant retires from the employ of
the Employer upon attaining the Normal Retirement Date
selected in the Adoption Agreement. If the Employer enforces a
mandatory retirement age the Normal Retirement Date is the
date the Participant attains the lesser of that mandatory age
or the age specified in the Adoption Agreement.
(B) EARLY RETIREMENT. The Participant retires from the employ of
the Employer upon attaining the Early Retirement Date selected
in the Adoption Agreement. If a Participant terminates
employment prior to meeting any minimum age specified in the
Adoption Agreement but after having completed the specified
minimum service requirement, the terminated Participant shall
be entitled to an early retirement benefit upon attaining the
minimum age required.
(C) LATE RETIREMENT. The Participant retires from the employ of
the Employer after the Normal Retirement Date. A Participant
who continues to work beyond the Normal Retirement Date shall
continue participation in the Plan on the same basis as the
other Participants.
(D) DISABILITY RETIREMENT. The Participant is terminated from the
employ of the Employer because of Disability, as determined by
the Committee, as defined in Section 1.1(I), irrespective of
his age.
(E) DEATH. The Participant's death.
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(F) OTHER TERMINATION. The Participant terminates employment
before Normal, Early, Late or Disability Retirement.
If a Participant continues in the employ of the Employer but
no longer is a member of a class of Employees to which the
Plan has been and continues to be extended by the Employer,
the Participant's Termination Date nevertheless will be as
stated above and his or her accounts will be held as stated in
Section 5.2.
5.2 RESTRICTED PARTICIPATION. When distribution of part or all of the
benefits to which a Participant is entitled under the Plan is deferred
beyond or cannot be made until after the Participant's Termination
Date, or during any period that a Participant continues in the employ
of the Employer but no longer is a member of a class of Employees to
which the Plan has been and continues to be extended by the Employer,
the Participant, or in the event of his or her death such Participant's
Beneficiary, will be considered and treated as a Participant for all
purposes of the Plan, except that no share of contributions or
forfeitures will be credited to his or her Accounts (a) for any period
such Participant continues in the employ of the Employer but no longer
is a member of a class of Employees to which the Plan has been and
continues to be extended by the Employer, or (b) after the
Participant's Termination Date.
ARTICLE VI
ACCOUNTING
6.1 ACCOUNTS ESTABLISHED. There shall be established and maintained for
each Participant such accounts as are applicable, to reflect such
Participant's interest in each Investment Fund.
All income, expenses, gains and losses attributable to each account
shall be separately accounted for. The interest of each Participant in
the Trust Fund at any time shall consist of the amount credited to his
or her accounts as of the last preceding Valuation Date plus credits
and minus debits to such accounts since that date.
6.2 EMPLOYER CONTRIBUTIONS CONSIDERED MADE ON LAST DAY OF PLAN YEAR. Unless
otherwise elected in the Adoption Agreement, for purposes of this
Article VI, the Employer's Contribution under Article IV will be
considered to have been made on the last day of the Plan Year for which
contributed.
6.3 ACCOUNTING STEPS. As of each Valuation Date, the Trustee shall:
(A) Charge to the prior account balances all previously uncharged
payments or distributions made from Participants' accounts
since the last preceding Valuation Date.
(B) Adjust the net credit balances in Participants' accounts
upward or downward, pro rata, so that the total of such net
credit balances will equal the then adjusted net worth of the
Trust Fund;
(C) Allocate and credit Employer Contributions and any forfeitures
(as described in Section 7.3) that are to be allocated and
credited as of that date in accordance with Sections 6.5 and
6.6.
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Notwithstanding the preceding, the Trustee shall be authorized
to utilize such other method of accounting for the gains or
losses experience by the Trust as may accurately reflect each
Participant's interest therein.
6.4 ALLOCATION OF EMPLOYER CONTRIBUTIONS.
(A) DISCRETIONARY PROFIT SHARING CONTRIBUTIONS.
(1) NONSTANDARDIZED PLANS. If the Plan is a
nonstandardized Plan, Employer Contributions for the
Plan Year shall be allocated among and credited to
the Employer Contribution Accounts of each
Participant, including a Participant on leave of
absence, who is entitled to receive a contribution as
elected by the Employer in the Adoption Agreement,
pursuant to the formula elected by the Employer in
Item B(8)(b) of the Adoption Agreement If elected in
the Adoption Agreement, Participants whose employment
terminated because of retirement, death or disability
before the end of the Plan Year will share in the
contributions for the year if elected in the Adoption
Agreement.
(2) STANDARDIZED PLANS. Employer Contributions for the
Plan Year shall be allocated among and credited to
the Employer Contribution Account of each Participant
who either completes more than 500 Hours of Service
during the Plan Year (or such lesser number of Hours
of Service as may be specified in the Adoption
Agreement) or is employed on the last day of the Plan
Year pursuant to the formula elected by the Employer
in Item B(8)(b) of the Adoption Agreement. If elected
in the Adoption Agreement, Participants whose
employment terminated before the end of the Plan Year
because of retirement, death or disability will share
in the contributions for the year if elected in the
Adoption Agreement.
(B) MONEY PURCHASE PENSION PLANS. Employer Contributions will be
made and allocated to the Employer Contribution Accounts of
Participants for the Plan Year as elected in the Adoption
Agreement. Sections 6.4(A)(1) and (2) above also apply to the
Money Purchase Pension Plans.
(C) PAIRED PLANS. Notwithstanding anything in the Plan to the
contrary, if the Employer maintains two plans which are Paired
Plans, only one may contain an allocation, as elected in the
Adoption Agreement, utilizing permitted disparity as defined
in Code Section 401(l).
6.5 ALLOCATION OF FORFEITURES. As elected in Items B(11) and/or C(6) of the
Adoption Agreement, as of the last day of the Plan Year, any
forfeitures which arose under the Plan during that year shall be used
to: (i) pay the expenses of the Plan; (ii) reduce Employer
Contributions; or, (iii) be allocated to Participants accounts, as may
be selected in the Adoption Agreement. Forfeitures under (iii) shall be
allocated as provided in Section 6.4.
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6.6 LIMITATION ON ALLOCATIONS.
(A) DEFINITIONS: For purposes of limiting allocations pursuant to
this section, the following definitions shall apply:
(1) ANNUAL ADDITIONS: The sum of the following amounts
credited to a Participant's account for the
Limitation Year:
(a) Employer Contributions;
(b) Employee Contributions;
(c) forfeitures;
(d) amounts allocated, after March 31, 1984, to
an individual medical account, as defined in
Section 415 (l)(2) of the Code, which is
part of a pension or annuity Plan maintained
by the Employer are treated as Annual
Additions to a defined contribution Plan.
Also 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
benefits, allocated to the separate account
of a Key Employee, as defined in Section
419A(d)(3) of the Code, under a welfare
benefit fund, as defined in Section 419(e)
of the Code, maintained by the Employer are
treated as Annual Additions to a defined
contribution Plan; and,
(e) allocations under a simplified employee
pension.
For this purpose, any Excess Amount applied under
Sections 6.6(B)(4) or 6.6(C)(6) in the Limitation
Year to reduce Employer Contributions will be
considered Annual Additions for such Limitation Year.
(2) COMPENSATION: Compensation as described below,
interpreted consistently with the provisions of Code
Section 414(s) and the regulations issued thereunder,
as may be selected by the Employer, and uniformly
applied for testing purpose:
(a) W-2 COMPENSATION (WAGES, TIPS, AND OTHER
COMPENSATION REQUIRED TO BE REPORTED UNDER
SECTIONS 6041, 6051, AND 6052 OF THE CODE,
AS REPORTED ON FORM W-2). Compensation is
defined as wages within the meaning of
Section 3401(a) and all other payments of
compensation to an Employee by the Employer
(in the course of the Employer's trade or
business) for which the Employer is required
to furnish the Employee a written statement
under Sections 6041(d), 6051(a)(3) and 6052
of the Code. Compensation must be determined
without regard to any rules under 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 Section 3401(a)(2).
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(b) WITHHOLDING COMPENSATION (SECTION.3401(A)).
Compensation is defined as wages within the
meaning of Section 3401(a) for the purposes
of income tax withholding at the source but
determined without regard to any rules 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
Section 3401(a)(2)).
(c) SECTION 415 SAFE-HARBOR COMPENSATION.
Compensation is defined as wages, salaries,
and fees for professional services and other
amounts received (without regard to whether
or not an amount is paid in cash) for
personal services actually rendered in the
course of employment with the Employer
maintaining the Plan to the extent that the
amounts are includible in gross income
(including, but not limited to, commissions
paid salesman, compensation for services on
the basis of a percentage of profits,
commissions on insurance premiums, tips,
bonuses, fringe benefits, and reimbursements
or other expense allowances under a
nonaccountable Plan (as described in
1.62-2(c)), and excluding the following:
(i) Employer contributions to a Plan of
deferred compensation which are not
includible in the Employee's gross
income for the taxable year in which
contributed, or Employer
contributions under a simplified
employee pension Plan to the extent
such contributions are deductible by
the Employee, or any distributions
from a Plan of deferred
compensation;
(ii) amounts realized from the exercise
of a non-qualified stock option, or
when restricted stock (or property)
held by an Employee becomes freely
transferable or is no longer subject
to a substantial risk of forfeiture;
(iii) amounts realized from the sale,
exchange or other disposition of
stock acquired under a qualified
stock option; and
(iv) other amounts which received special
tax benefits, or contributions made
by the Employer (whether or not
under a salary reduction agreement)
towards the purchase of an annuity
contract described in Section 403(b)
of the Code (whether or not the
contributions are actually
excludable from the gross income of
the Employee).
Notwithstanding anything in the definitions of
Compensation preceding, at the discretion of the
Employer, uniformly applied, Compensation shall, for
purposes of ADP and ACP testing as provided for in
Article III, include amounts not currently includible
in income pursuant to Code Sections 125, 402(a)(8),
402(h) and 403(b). For allocation purposes, such
amounts shall be includible as elected in the
Adoption Agreement.
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For any self-employed Individual, Compensation will
mean Earned Income.
For Limitation Years beginning after December 31,
1991, for purposes of applying the limitations of
Section 6.6, Compensation for a Limitation Year is
the compensation actually paid or made available
during such Limitation Year.
Notwithstanding the preceding sentence, Compensation
for a Participant in a defined contribution Plan who
is permanently and totally disabled (as defined in
Section 22(e)(3) of the Code) is the Compensation
such Participant would have received for the
Limitation Year if the Participant had been paid at
the rate of Compensation paid immediately before
becoming permanently and totally disabled; such
imputed compensation for the disabled Participant may
be taken into account only if the Participant is not
a Highly Compensated Employee, (as defined in Section
414(q) of the Code), and contributions made on behalf
of such Participant are nonforfeitable when made.
(3) DEFINED BENEFIT FRACTION: A fraction, the numerator
of which is the sum of the Participant's Projected
Annual Benefits under all the defined benefit plans
(whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser
of 125 percent of the dollar limitation determined
for the Limitation Year under Sections 415(b) and (d)
of the Code or 140 percent of the Participant's
Highest Average Compensation, including any
adjustments under Section 415(b) of the Code.
Notwithstanding the above if the Participant was a
participant as of the first day of the first
Limitation Year beginning after December 31, 1986, in
one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than
125 per cent of the sum of the annual benefits under
such plans which the Participant had accrued as of
the close of the last Limitation Year beginning
before January 1, 1987, disregarding any changes in
the terms and conditions of the Plan after May 5,
1986. The preceding sentence applies only if the
defined benefit plans individually and in the
aggregate satisfied the requirements of Section 415
for all Limitation Years beginning before January 1,
1987.
(4) DEFINED CONTRIBUTION DOLLAR LIMITATION: For purposes
of calculating the Maximum Permissible Amount:
$30,000 or, if greater, one-fourth of the defined
benefit dollar limitation set forth in Section
415(b)(1) of the Code as in effect for the Limitation
Year.
(5) DEFINED CONTRIBUTION FRACTION: A fraction, the
numerator of which is the sum of the Annual Additions
to the Participant's accounts under all the defined
contribution plans (whether or not terminated)
maintained by the Employer for the current and all
prior Limitation Years, (including the Annual
Additions attributable to the Participant's
nondeductible employee contributions to all defined
benefit plans, whether or not terminated, maintained
by the Employer, and the Annual Additions
attributable to all welfare benefit funds, as defined
in
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Section 419(e) of the Code, individual medical
accounts, as defined in Section 415(l)(2) of the
Code, and simplified employee pension, maintained by
the Employer), and the denominator of which is the
sum of the maximum aggregate amounts for the current
and all prior Limitation Years of service with the
Employer (regardless of whether a defined
contribution Plan was maintained by the Employer).
The maximum aggregate amount in any Limitation Year
is the lesser of 125 percent of the dollar limitation
determined under Sections 415(b) and (d) of the Code
in effect under Section 415(c)(1)(A) of the Code or
35 percent of the Participant's Compensation for such
year.
If the Employee was a participant as of the end of
the first day of the first Limitation Year beginning
after December 31, 1986, in one or more defined
contribution plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of
this fraction will be adjusted if the sum of this
fraction and the Defined Benefit Fraction would
otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product
of (1) the excess of the sum of the fractions over
1.0 times (2) the denominator of this fraction, will
be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of
the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but
using the Section 415 limitation applicable to the
first Limitation Year beginning on or after January
1, 1987.
The Annual Addition for any Limitation Year beginning
before January 1, 1987, shall not be recomputed to
treat all Employee contributions as Annual Additions.
(6) EMPLOYER: For purposes of this Section 6.6: the
Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in
section 414(b) of the Code as modified by Section
415(h), all commonly controlled trades or businesses
(as defined in Section 414(c) as modified by Section
415(h)) or affiliated service groups (as defined in
Section 414(m)) of which the adopting Employer is a
part, and any other entity required to be aggregated
with the Employer pursuant to regulations under
Section 414(o) of the Code.
(7) EXCESS AMOUNT: The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum
Permissible Amount.
(8) HIGHEST AVERAGE COMPENSATION: For purposes of
calculating the Defined Benefit Fraction, the average
compensation for the three (3) consecutive Years of
Service with the Employer that produces the highest
average. A Year of Service with the Employer is the
twelve-consecutive month period defined in Item
B(4)(j) of the Adoption Agreement.
(9) LIMITATION YEAR: A calendar year or any other 12
consecutive month period elected in Item B(4)(d) of
the Adoption Agreement. All qualified plans
maintained by the Employer must use the same
Limitation Year. If the
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Limitation Year is amended to a different
12-consecutive month period, the new Limitation Year
must begin on a date within the Limitation Year in
which the amendment is made.
(10) MASTER OR PROTOTYPE PLAN: A Plan the form of which is
the subject of a favorable opinion letter from the
Internal Revenue Service.
(11) MAXIMUM PERMISSIBLE AMOUNT: The maximum Annual
Addition that may be contributed or allocated to a
Participant's account under the Plan for any
Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation,
or
(b) 25 percent of the Participant's Compensation
for the Limitation Year.
The Compensation limitation referred to in
(b) shall not apply to any contribution for
medical benefits (within the meaning of
Section 401(h) or Section 419A(f)(2) of the
Code) which is otherwise treated as an
Annual Addition under Section 415(l)(1) or
419A(d)(2) of the Code.
If a short Limitation Year is created
because of an amendment changing the
Limitation Year to a different
12-consecutive month period, the Maximum
Permissible Amount will not exceed the
Defined Contribution Dollar Limitation
multiplied by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
(12) PROJECTED ANNUAL BENEFIT: For purposes of calculating
the Defined Benefit Fraction: the annual retirement
benefit (adjusted to an actuarially equivalent
straight life annuity if such benefit is expressed in
a form other than a straight life annuity or
qualified joint and survivor annuity) to which the
Participant would be entitled under the terms of the
Plan, assuming: (1) the Participant will continue
employment until Normal Retirement Date under the
Plan, (or current age, if later), and (2) the
Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine
benefits under the Plan will remain constant for all
future Limitation Years.
(B) ANNUAL ADDITION LIMITATIONS:
(1) If the Participant does not participate in, and has
never participated in another qualified Plan or
welfare benefit fund, as defined in Section 419(e) of
the Code maintained by the Employer, or an individual
medical account, as defined in Section 415(l)(2) of
the Code, maintained by the Employer, or a simplified
employee pension, as defined in Section 408(K) of the
Code, maintained by the Employer which provides an
Annual Addition as defined in Section 6.6(E), the
amount of Annual Additions which may be credited to
the Participant's account
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for any Limitation Year will not exceed the lesser of
the Maximum Permissible Amount or any other
limitation contained in this Plan. If the Employer
Contribution that would otherwise be contributed or
allocated to the Participant's account would cause
the Annual Additions for the Limitation Year to
exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the
Annual Additions for the Limitation Year will equal
the Maximum Permissible Amount.
(2) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer
may determine the Maximum Permissible Amount for a
Participant on the basis of a reasonable estimation
of the Participant's Compensation for the Limitation
Year, uniformly determined for all Participants
similarly situated.
(3) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible
Amount for the Limitation Year will be determined on
the basis of the Participant's actual Compensation
for the Limitation Year.
(4) If pursuant to Section 6.6(B)(3) or as result of the
allocation of forfeitures, there is an Excess Amount,
the excess will be disposed of as follows:
(a) Any nondeductible voluntary employee
contributions, to the extent they would
reduce the Excess Amount, will be returned
to the Participant.
(b) If after the application of paragraph (a) an
Excess Amount still exists and the
Participant is covered by the Plan at the
end of the Limitation Year, the Excess
Amount in the Participant's account will be
used to reduce Employer Contributions
(including any allocation of forfeitures)
for such Participant in the next Limitation
year, and each succeeding Limitation Year,
if necessary.
(c) If after the application of paragraph (a) an
Excess Amount still exists, and the
Participant is not covered by the Plan at
the end of a Limitation Year, the Excess
Amount will be held unallocated in a
suspense account. The suspense account will
be applied to reduce future Employer
Contributions (including allocation of any
forfeitures) for all remaining Participants
in the next Limitation Year and each
succeeding Limitation Year, if necessary.
(d) If a suspense account is in existence at any
time during a Limitation Year pursuant to
this Section 6.6(A), it will not participate
in the allocation of the trust's investment
gains and losses. If a suspense account is
in existence at any time during a particular
Limitation Year, all amounts in the suspense
account must be allocated and reallocated to
Participants' accounts before any Employer
Contributions or any Employee contributions
may be made to the Plan for that Limitation
Year. Excess Amounts may not be distributed
to Participants or former Participants.
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(C) MULTIPLE PLAN LIMITATION.
(1) This Section 6.6(C) applies if, in addition to this
Plan, the Participant is covered under another
qualified Master or Prototype defined contribution
Plan maintained by the Employer, a welfare benefit
fund, as defined in Section 419(e) of the Code
maintained by the Employer, or an individual medical
account, as defined in Section 415(l)(2) of the Code,
maintained by the Employer, or a simplified employee
pension maintained by the employer which provides an
Annual Addition as defined in Section 6.6(A) during
any Limitation Year. The Annual Additions which may
be credited to a Participant's accounts under this
Plan for any such Limitation Year shall not exceed
the Maximum Permissible Amount reduced by the Annual
Additions credited to a Participant's accounts under
the other qualified master and prototype defined
contribution plans, welfare benefit funds, individual
medical accounts, and simplified employee pensions
for the same Limitation Year. If the Annual Additions
with respect to the Participant under other qualified
master and prototype defined contribution plans and
welfare benefit funds, individual medical accounts,
and simplified employee pension, maintained by the
Employer are less than the Maximum Permissible Amount
and the contributions that would otherwise be
contributed or allocated to the Participant's
Employer Contribution Account under this Plan would
cause the Annual Additions for the Limitation Year to
exceed this limitation, the amount contributed or
allocated will be reduced so that the Annual
Additions under all such plans and funds for the
Limitation Year will equal the Maximum Permissible
Amount. If the Annual Additions with respect to the
Participant under such other qualified master and
prototype defined contribution plans, welfare benefit
funds individual medical accounts, and simplified
employee pension, in the aggregate are equal to or
greater than the Maximum Permissible Amount, no
amount will be contributed or allocated to the
Participant's Employer Contribution Account under
this Plan for the Limitation Year.
(2) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer
may determine the Maximum Permissible Amount for a
Participant in the manner described in Section
6.6(B)(2).
(3) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible
Amount for the Limitation Year will be determined on
the basis of the Participant's actual Compensation
for the Limitation Year.
(4) If, pursuant to Section 6.6(C)(3) or as a result of
the allocation of forfeitures, a Participant's Annual
Additions under this Plan and all other plans result
in an Excess Amount for a Limitation Year, the Excess
Amount shall be deemed to consist of the amounts last
allocated, except that Annual Additions attributable
to a simplified employee pension will be deemed to
have been allocated first, followed by annual
additions to a welfare benefit fund or individual
medical account regardless of the actual allocation
date.
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<PAGE> 84
(5) If an Excess Amount was allocated to a Participant on
an allocation date of this Plan which coincides with
an allocation date of another Plan, the Excess Amount
attributed to this Plan will be the product of:
(a) the total Excess Amount allocated as of such
date, times
(b) the ratio of (i) the Annual Additions
allocated to the Participant for the
Limitation Year as of such date under this
Plan to (ii) the total Annual Additions
allocated to the Participant for the
Limitation Year as of such date under this
and all other qualified Master or Prototype
defined contribution plans.
(6) Any Excess Amount attributed to this Plan should be
disposed of as provided in Section 6.6(C)(4).
(D) If the Participant is covered under another qualified defined
contribution Plan maintained by the Employer which is not a
Master or Prototype Plan, Annual Additions which may be
credited to the Participant's accounts under this Plan for any
Limitation Year will be limited in accordance with Section
6.6(C) (1-6) as though the Plan were a Master or Prototype
Plan unless the Employer provides other limitations in Item
B(12) of the Adoption Agreement.
(E) If the Employer maintains, or at any time maintained, a
qualified defined benefit Plan covering any Participant in
this Plan, the sum of the Participant's Defined Benefit Plan
Fraction and Defined Contribution Plan Fraction will not
exceed 1.0 in any Limitation Year. The Annual Additions which
may be credited to the Participant's accounts under this Plan
for any Limitation Year will be limited in accordance with
Item B(12) of the Adoption Agreement.
6.7 REPORTS TO PARTICIPANTS. The Committee shall cause reports to be made
at least annually to each Participant and to the Beneficiary of each
deceased Participant as to the value of each such Participant's
accounts, as of an appropriate preceding Valuation Date.
ARTICLE VII
PAYMENT OF ACCOUNT BALANCES
7.1 TERMINATION OF EMPLOYMENT UPON DISABILITY OR DEATH. A Participant shall
become fully vested in his or her Employer Contribution Accounts if the
Participant becomes Disabled under Sections 5.1(A), (B), (C) or (D) or
dies while still employed. The accounts of a Participant who retires
becomes Disabled or dies will become distributable to the Participant
or to his or her Spouse or Beneficiary. If distributed immediately,
subject to Section 7.4, the distributable balance, after adjustments,
will be determined as soon as practicable following the receipt by the
Trustee of written notice of the Participant's termination from the
Committee.
7.2 TIMING FOR DETERMINING ACCOUNT BALANCE UPON TERMINATION OF EMPLOYMENT
PRIOR TO RETIREMENT, DISABILITY OR DEATH. If a Participant terminates
employment with the Employer before retirement under Sections 5.1(F)
the vested portion of the Participant's Employer
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Contribution Account and/or Matching Account shall be determined and
such Participant's accounts will be distributable to the Participant.
If distributed immediately, subject to Section 7.4, the distributable
balance, after adjustments, will be determined as soon as practicable
following receipt by the Trustee of written notice of the Participant's
termination from the Committee. The account balance shall be
distributable at such time as elected in the Adoption Agreement, but in
no event shall an account balance not be distributable later than the
Participant's Normal Retirement Date.
7.3 VESTING ON DISTRIBUTION BEFORE BREAK-IN-SERVICE; CASH-OUTS.
(A) If an Employee terminates service, and the value of the
Employee's vested account balance derived from Employer and
Employee contributions is not greater than $3,500, the
Employee will receive a distribution of the value of the
entire vested portion of such account balances, and Rollover
Account balance, if any. The nonvested portion will be treated
as a forfeiture. For purposes of this Section 7.3, if the
value of an Employee's vested account balance is zero, the
Employee shall be deemed to have received a distribution of
such vested account balance. A Participant's vested account
balance shall not include accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of the
Code for Plan Years beginning prior to January 1, 1989.
(B) If an Employee terminates service, and elects, in accordance
with the requirements of Section 7.4, to receive the value of
the Employee's vested account balance, the nonvested portion
will be treated as a forfeiture. If the Employee elects to
have distributed less than the entire vested portion of the
balance in the Employer Contribution Account, the part of the
nonvested portion that will be treated as a forfeiture is the
total nonvested portion multiplied by a fraction, the
numerator of which is the amount of the distribution
attributable to Employer Contributions and the denominator of
which is the total value of the vested balance in the Employer
Contribution Account.
(C) If an Employee receives a distribution pursuant to this
Section 7.3 and the Employee resumes employment covered under
this Plan, the Employee's Employer Contribution Account and/or
Matching Account balance will be restored to the amount on the
date of distribution if the Employee repays to the Plan the
full amount of the distribution attributable to Employer
contributions before the earlier of 5 years after the first
date on which the Participant is subsequently reemployed by
the Employer, or the date the Participant incurs five (5)
consecutive one (1) year Breaks in Service following the date
of the distribution. If an Employee is deemed to receive a
distribution pursuant to this Section 7.3, and the Employee
resumes employment covered under this Plan before the date the
Participant incurs five (5) consecutive one (1) year Breaks in
Service, upon the reemployment of such Employee, the Employer
Contribution Account balance and/or Matching Account balance
of the Employee will be restored to the amount on the date of
such deemed distribution.
7.4 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS.
(A) If the value of a Participant's vested account balance derived
from Employer and Employee contributions exceeds (or at the
time of any prior distribution exceeded)
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<PAGE> 86
$3,500, and the account balance is immediately distributable,
the Participant and the Participant's Spouse (or where either
the Participant or the Spouse has died, the survivor) must
consent to any distribution of such account balance. The
consent of the Participant and the Participant's Spouse shall
be obtained in writing within the 90-day period ending on the
annuity starting date. The annuity starting date is the first
day of the first period for which an amount is paid as an
annuity or any other form. The Committee shall notify the
Participant and the Participant's Spouse of the right to defer
any distribution until the Participant's account balance is no
longer immediately distributable. Such notification shall
include a general description of the material features, and an
explanation of the relative values of, the optional forms of
benefit available under the Plan in a manner that would
satisfy the notice requirements of Section 417(a)(3), and
shall be provided no less than 30 days and no more than 90
days prior to the annuity starting date. However, distribution
may commence less than 30 days after the notice described in
the preceding sentence is given, provided the distribution is
one to which sections 401(a)(11) and 417 of the Internal
Revenue Code do not apply, the plan 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 the participant, after receiving the notice,
affirmatively elects a distribution.
Notwithstanding the foregoing, only the Participant need
consent to the commencement of a distribution in the form of a
Qualified Joint and Survivor Annuity while the account balance
is immediately distributable. (Furthermore, if payment in the
form of a Qualified Joint and Survivor Annuity is not required
with respect to the Participant pursuant to Section 7.10 of
the Plan, only the Participant need consent to the
distribution of an account balance that is immediately
distributable. Neither the consent of the Participant nor the
Participant's Spouse shall be required to the extent that a
distribution is required to satisfy Section 401(a)(9) or
Section 415 of the Code. In addition, upon termination of this
Plan if the Plan does not offer an annuity option (purchased
from a commercial provider), and if the Employer or any entity
within the same controlled group as the Employer does not
maintain another defined contribution Plan (other than an
employee stock ownership Plan as defined in Section 4975(e)(7)
of the Code), the Participant's account balance will, without
the Participant's consent, be distributed to the Participant.
However, if any entity within the same controlled group as the
Employer maintains another defined contribution Plan (other
than an employee stock ownership Plan as defined in Section
4975(e)(7) of the Code) then the Participant's account balance
will be transferred, without the Participant's consent, to the
other Plan if the Participant does not consent to an immediate
distribution.
An account balance is immediately distributable if any part of
the account balance could be distributed to the Participant
(or surviving spouse) before the Participant attains or would
have attained if not deceased) the later of the Normal
Retirement Date or age 62.
(B) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first
day of the first Plan Year beginning after December 31, 1988,
the Participant's vested account balance shall not include
amounts attributable to accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of the
Code.
7.5 COMMENCEMENT OF BENEFITS. Unless the Participant elects otherwise,
payments will be made or commence to a Participant by the Trustee, as
directed by the Committee, no later than the sixtieth (60th) day after
the latest of the close of the Plan Year in which (1) the Participant
attains age sixty-five (65) (or Normal Retirement Date; if earlier);
(2) occurs the tenth (10th)
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anniversary of the year in which the Participant commenced
participation in the Plan; or (3) the Participant terminates his or her
service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and Spouse
to consent to a distribution while a benefit is immediately
distributable, within the meaning of Section 7.4 of the Plan, shall be
deemed to be an election to defer commencement of payment of any
benefit sufficient to satisfy this section.
7.6 TIMING AND MODES OF DISTRIBUTION.
(A) GENERAL RULES.
(1) Subject to Section 7.10, Joint and Survivor Annuity
Requirements, the requirements of this Section 7.6
shall apply to any distribution of a Participant's
interest and will take precedence over any
inconsistent provisions of this Plan. Unless
otherwise specified, the provisions of this Section
7.6 apply to calendar years beginning after December
31, 1984.
(2) All distributions required under this Section 7.6
shall be determined and made in accordance with the
Income Tax Regulations under Section 401(a)(9),
including the minimum distribution incidental benefit
requirement of Section 1.401(a)(9)-2 of the
regulations.
(3) The normal form of payment for a profit-sharing Plan
satisfying the requirements of Section 7.10(F) hereof
shall be a single sum with no option for annuity
payments; provided, however, that distributions may
be made:
(a) In installment payments, if the Employer has
elected installment payments in Item
B(10)(a) of the Adoption Agreement;
(b) Through such other form of benefit as may be
identified in Item B(10)(a) of the Adoption
Agreement, which shall be available to
Participants as an optional form of benefit
payment, and shall preclude Employer
discretion;
(c) Through such other form of benefits as may
be required to be protected as Section
411(d)(6) protected benefits.
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(B) REQUIRED BEGINNING DATE. The entire interest of a Participant
must be distributed or begin to be distributed no later than
the Participant's required beginning date.
(C) LIMITS ON DISTRIBUTION PERIODS. As of the first distribution
calendar year, distributions, if not made in a single-sum, may
only be made over one of the following periods (or a
combination thereof):
(1) the life of the Participant,
(2) the life of the Participant and a designated
Beneficiary,
(3) a period certain not extending beyond the life
expectancy of the Participant, or
(4) a period certain not extending beyond the joint and
last survivor expectancy of the Participant and a
designated Beneficiary.
(D) DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR. If the
Participant's interest is to be distributed in other than a
single sum, the following minimum distribution rules shall
apply on or after the required beginning date:
(1) INDIVIDUAL ACCOUNT.
(a) If a Participant's benefit is to be
distributed over:
(i) a period not extending beyond the
life expectancy of the participant
or the joint life and last survivor
expectancy of the Participant and
the Participant's designated
Beneficiary; or
(ii) a period not extending beyond the
life expectancy of the designated
Beneficiary, the amount required to
be distributed for each calendar
year, beginning with distributions
for the first distribution calendar
year, must at least equal the
quotient obtained by dividing the
Participant's benefit by the
applicable life expectancy.
(b) For calendar years beginning before January
1, 1989, if the Participant's Spouse is not
the designated beneficiary, the method of
distribution selected must assure that at
least 50% of the present value of the amount
available for distribution is paid within the
life expectancy of the Participant.
(c) For calendar years beginning after December
31, 1988, the amount to be distributed each
year, beginning with distributions for the
first distribution calendar year shall not be
less than the quotient obtained by dividing
the Participant's benefit by the lesser of
(1) the applicable life expectancy or
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(2) if the Participant's Spouse is not the
designated Beneficiary, the applicable
divisor determined from the table set forth
in Q&A-4 of Section 1.401(a)(9)-2 of the
Income Tax Regulations. Distributions after
the death of the Participant shall be
distributed using the applicable life
expectancy in Section (1)(a) above as the
relevant divisor without regard to
Regulations Section 1.401(a)(9)-2.
(d) The minimum distribution required for the
Participant's first distribution calendar
year must be made on or before the
Participant's required beginning date. The
minimum distribution for other calendar
years, including the minimum distribution for
the distribution calendar year in which the
Employee's required beginning date occurs,
must be made on or before December 31 of that
distribution calendar year.
(2) OTHER FORMS. If the Participant's benefit is
distributed in the form of an annuity purchased from
an insurance company, distributions thereunder shall
be made in accordance with the requirements of
Section 401(a)(9) of the Code and the regulations
thereunder.
(E) DEATH DISTRIBUTION PROVISIONS
(1) DISTRIBUTION BEGINNING BEFORE DEATH. If the
Participant dies after distribution of his or her
interest has begun, the remaining portion of such
interest will continue to be distributed at least as
rapidly as under the method of distribution being
used prior to the Participant's death.
(2) DISTRIBUTION BEGINNING AFTER DEATH. If the
Participant dies before distribution of his or her
interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of
the calendar year containing the fifth anniversary of
the Participant's death except to the extent that an
election is made to receive distributions in
accordance with (a) or (b) below:
(a) if any portion of the Participant's interest
is payable to a designated Beneficiary,
distributions may be made over the life or
over a period certain not greater than the
life expectancy of the designated
Beneficiary commencing on or before December
31 of the calendar year immediately
following the calendar year in which the
Participant died;
(b) if the designated Beneficiary is the
Participant's surviving Spouse, the date
distributions are required to begin in
accordance with (a) above shall not be
earlier than the later of (1) December 31 of
the calendar year immediately following the
calendar year in which the Participant died
and (2) December 31 of the calendar year in
which the Participant would have attained
age 70-1/2.
If the Participant has not made an election
pursuant to this Section 7.6(E)(2) by the
time of his or her death, the Participant's
designated Beneficiary
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must elect the method of distribution no
later than the earlier of (1) December 31 of
the calendar year in which distributions
would be required to begin under this
section, or (2) December 31 of the calendar
year in which contains the fifth anniversary
of the date of death of the Participant. If
the Participant has no designated
Beneficiary, or if the designated
Beneficiary does not elect a method of
distribution, distribution of the
Participant's entire interest must be
completed by December 31 of the calendar
year containing the fifth anniversary of the
Participant's death.
(3) SURVIVING SPOUSE'S DEATH. For purposes of Section
(E)(2) above, if the surviving Spouse dies after the
Participant, but before payments to such Spouse
begin, the provisions of Section (E)(2) with the
exception of paragraph (b) therein, shall be applied
as if the surviving Spouse were the Participant.
(4) MINOR BENEFICIARY. For purposes of this Section (E),
any amount paid to a child of the Participant will be
treated as if it had been paid to the surviving
Spouse if the amount becomes payable to the surviving
Spouse when the child reaches the age of majority.
(5) DISTRIBUTION CONSIDERED TO BEGIN ON REQUIRED
BEGINNING DATE. For the purposes of this Section (E),
distribution of a Participant's interest is
considered to begin on the Participant's required
beginning date (or, if Section (E)(3) above is
applicable, the date distribution is required to
begin to the surviving Spouse pursuant to Section
(E)(2) above). If distribution in the form of an
annuity irrevocably commences to the Participant
before the required beginning date, the date
distribution is considered to begin is the date
distribution actually commences.
(F) DEFINITIONS.
(1) APPLICABLE LIFE EXPECTANCY: The life expectancy (or
joint and last survivor expectancy) calculated using
the attained age of the Participant (or designated
Beneficiary) as of the Participant's (or designated
Beneficiary's) birthday in the applicable calendar
year reduced by one for each calendar year which has
elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated,
the applicable life expectancy shall be the life
expectancy as so recalculated. The applicable
calendar year shall be the first distribution
calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
(2) DESIGNATED BENEFICIARY: The individual who is
designated as the Beneficiary under the Plan in
accordance with Section 401(a)(9) and the proposed
regulations thereunder.
(3) DISTRIBUTION CALENDAR YEAR: A calendar year for which
a minimum distribution is required. For distributions
beginning before the Participant's death, the first
distribution calendar year is the calendar year
immediately preceding the calendar
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year which contains the Participant's required
beginning date. For distributions beginning after the
Participant's death, the first distribution calendar
year is the calendar year in which distributions are
required to begin pursuant to Section (E) above.
(4) LIFE EXPECTANCY: Life expectancy and joint and last
survivor expectancy are computed by use of the
expected return multiples in Tables V and VI of
Section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or
Spouse, in the case of distributions described in
Section (E)(2)(b) above) by the time distributions
are required to begin, life expectancies shall be
recalculated annually. Such election shall be
irrevocable as to the Participant (or Spouse) and
shall apply to all subsequent years. The life
expectancy of a non-spouse Beneficiary may not be
recalculated.
(5) PARTICIPANT'S BENEFIT:
(a) The account balance as of the last valuation
date in the calendar year immediately
preceding the distribution calendar year
(valuation calendar year) increased by the
amount of any contributions or forfeitures
allocated to the account balance as of dates
in the valuation calendar year after the
valuation date and decreased by
distributions made in the valuation calendar
year after the valuation date.
(b) Exception for second distribution calendar
year. For purposes of paragraph (a) above,
if any portion of the minimum distribution
for the first distribution calendar year is
made in the second distribution calendar
year on or before the required beginning
date, the amount of the minimum distribution
made in the second distribution calendar
year shall be treated as if it had been made
in the immediately preceding distribution
calendar year.
(6) REQUIRED BEGINNING DATE:
(a) GENERAL RULE. The required beginning date of
a Participant is the first day of April of
the calendar year following the calendar
year in which the Participant attains age
70-1/2.
(b) TRANSITIONAL RULES. The required beginning
date of a Participant who attains age 70-1/2
before January 1, 1988, shall be determined
in accordance with (1) or (2) below:
(i) Non-5-percent owners. The required
beginning date of a Participant who
is not a 5-percent owner is the
first day of April of the calendar
year following the calendar year in
which the later of retirement or
attainment of age 70-1/2 occurs.
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(ii) 5-percent owners. The required
beginning date of a Participant who
is a 5-percent owner during any year
beginning after December 31, 1979,
is the first day of April following
the later of:
(a) the calendar year in which
the participant attains age
70-1/2, or
(b) the earlier of the calendar
year with or within which
ends the Plan Year in which
the Participant becomes a
5-percent owner, or the
calendar year in which the
Participant retires.
The required beginning date of a Participant
who is not a 5-percent owner who attains age
70-1/2 during 1988 and who has not retired
as of January 1, 1989, is April 1, 1990.
(c) 5-PERCENT OWNER. A Participant is treated as
a 5-percent owner for purposes of this
Section if such Participant is a 5-percent
owner as defined in Section 416(i) of the
Code (determined in accordance with Section
416 but without regard to whether the Plan
is top-heavy) at any time during the Plan
Year ending with or within the calendar year
in which such owner attains age 66-1/2 or
any subsequent Plan Year.
(d) Once distributions have begun to a 5-percent
owner under this Section, they must continue
to be distributed, even if the Participant
ceases to be a 5-percent owner in a
subsequent year.
(G) TRANSITIONAL RULE.
(1) DISTRIBUTIONS TO 5-PERCENT OWNERS. Notwithstanding
the other requirements of this Section 7.6 and
subject to the requirements of Section 7.10, Joint
and Survivor Annuity Requirements, distributions on
behalf of any Employee, including a 5-percent owner,
may be made in accordance with all of the following
requirements (regardless of when such distribution
commences):
(a) The distribution by the plan is one which
would not have disqualified such plan under
Section 401(a)(9) of the Internal Revenue
Code as in effect prior to amendment by the
Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a
method of distribution designated by the
Employee whose interest in the plan is being
distributed or, if the Employee is deceased,
by a Beneficiary of such Employee.
(c) Such designation was in writing, was signed
by the Employee or the Beneficiary, and was
made before January 1, 1984.
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(d) The Employee had accrued a benefit under the
Plan as of December 31, 1983.
(e) The method of distribution designated by the
Employee or the Beneficiary specifies the
time at which distribution will commence,
the period over which distributions will be
made, and in the case of any distribution
upon the Employee's death, the Beneficiaries
of the Employee listed in order of priority.
(2) DISTRIBUTION ON DEATH. A distribution upon death will
not be covered by this transitional rule unless the
information in the designation contains the required
information described above with respect to the
distributions to be made upon the death of the
Employee.
(3) DESIGNATION OF DISTRIBUTION METHOD. For any
distribution which commences before January 1, 1984,
but continues after December 31, 1983, the Employee,
or the Beneficiary, to whom such distribution is
being made, will be presumed to have designated the
method of distribution under which the distribution
is being made if the method of distribution was
specified in writing and the distribution satisfies
the requirements in subsections (G)(1)(a) and (e).
(4) REVOCATION OF DESIGNATIONS. If a designation is
revoked any subsequent distribution must satisfy the
requirements of Section 401(a)(9) of the Code and the
regulations thereunder. If a designation is revoked
subsequent to the date distributions are required to
begin, the plan must distribute by the end of the
calendar year following the calendar year in which
the revocation occurs the total amount not yet
distributed which would have been required to have
been distributed to satisfy Section 401(a)(9) of the
Code and the regulations thereunder, but for the
Section 242(b)(2) election. For calendar years
beginning after December 31, 1988, such distributions
must meet the minimum distribution incidental benefit
requirements in Section 1.401(a)(9)-2 of the Income
Tax Regulations. Any changes in the designation will
be considered to be a revocation of the designation.
However, the mere substitution or addition of another
Beneficiary (one not named in the designation) under
the designation will not be considered to be a
revocation of the designation, so long as such
substitution or addition does not alter the period
over which distributions are to be made under the
designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in
which an amount is transferred or rolled over from
one Plan to another Plan, the rules in Q&A J-2 and
Q&A J-3 shall apply.
7.7 DESIGNATION OF BENEFICIARY.
(A) DEFAULT BENEFICIARY. In the case of a Participant who is
married, the Participant's Beneficiary shall be the
Participant's Spouse, but if the Participant's Spouse consents
as provided in this Section 7.7, or if the Participant is not
married, then the Participant
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shall have the right to designate that after such
Participant's death such Participant's accounts shall be
distributed to a designated Beneficiary or Beneficiaries.
(B) SPOUSAL CONSENT. Any consent of a Spouse given pursuant to
this Section must be in writing and given prior to the death
of the Participant. Such consent must acknowledge the effect
of the Participant's Beneficiary designation, the identity of
any non-Spouse Beneficiary, including any class of
Beneficiaries and contingent Beneficiaries, and the consent
must be witnessed by a Plan representative or a Notary Public.
The Participant may not subsequently change the designation of
his or her Beneficiary unless his Spouse consents to the new
designation in accordance with the requirements set forth in
the preceding sentence. The consent of a Participant's Spouse
shall not be required if the Participant establishes to the
satisfaction of the Committee that consent may not be obtained
because there is no Spouse, the Spouse cannot be located or
because of such other circumstances as the Secretary of the
Treasury may prescribe by regulations. A Spouse's consent
shall be irrevocable. Any consent by a Spouse, or
establishment that the consent of the Spouse may not be
obtained, shall be effective only with respect to that Spouse.
(C) CHANGING BENEFICIARIES. Subject to Subparagraphs (A) and (B)
above, the Participant's designation of Beneficiary may be
made, changed or revoked by the Participant at any time by a
written instrument, in form satisfactory to the Committee, and
shall become effective only when executed by such Participant
(and, if applicable, consented to by the Participant's Spouse
as set forth in Section 7.7(B)) and filed with the Committee
prior to such Participant's death. If all of the Beneficiaries
named in such designation shall have predeceased such
Participant, or die prior to complete distribution of the
Participant's accounts, or if such Participant fails to
execute and file a designation and is not survived by a Spouse
the payment of such Participant's accounts shall be made
pursuant to the Plan and to such Beneficiaries as required by
state law. Neither the Employer, the Committee, nor the
Trustee, shall have any duty to see that such Participant, any
Spouse or any Beneficiary executes and files any such
designation with the Committee.
7.8 OPTIONAL FORMS OF BENEFIT. The optional forms of benefit provided by
this Plan are not subject to Employer discretion and are made available
to all Participants on a nondiscriminatory basis. The optional forms of
benefit are described in Articles III and VII, as may be selected in
the Adoption Agreement. If selected in Item B(13) of the Adoption
Agreement, the Employer may attach to the Plan a list of the Section
"411(d)(6) protected benefits" that must be preserved from a
individually designed Plan or other prototype Plan which this Plan
amends.
7.9 DISTRIBUTION UPON DISABILITY. In the event of the Disability of the
Participant, the Trustee, following receipt of notification of such
Disability from the Committee, shall make distributions from the
Account.
7.10 JOINT AND SURVIVOR ANNUITY REQUIREMENTS.
(A) APPLICATION. The provisions of this Section 7.10 shall apply
to any Participant who is credited with at least one Hour of
Service with the Employer on or after August 23, 1984, and
such other Participants as provided in Section 7.10(G).
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(B) QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an optional form
of benefit is selected pursuant to a Qualified Election within
the ninety-day period ending on the Annuity Starting Date, a
married Participant's Vested Account Balance will be paid in
the form of a Qualified Joint and Survivor Annuity and an
unmarried Participant's Vested Account Balance will be paid in
the form of a life annuity. The Participant may elect to have
such annuity distributed upon attainment of the Earliest
Retirement Age under the Plan.
(C) QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY. Unless an optional
form of benefit has been selected within the election period
pursuant to a Qualified Election, if a Participant dies before
the Annuity Starting Date then the Participant's Vested
Account Balance shall be applied toward the purchase of an
annuity for the life of the surviving Spouse. The surviving
Spouse may elect to have such annuity distributed within a
reasonable period after the Participant's death.
(D) DEFINITIONS.
(1) ELECTION PERIOD: The period which begins on the first
day of the Plan Year in which the Participant attains
age 35 and ends on the date of the Participant's
death. If a Participant separates from service prior
to the first day of the Plan Year in which age 35 is
attained, with respect to the account balance as of
the date of separation, the election period shall
begin on the date of separation.
Pre-age 35 waiver: A Participant who will not yet
attain age 35 as of the end of any current Plan Year
may make a special Qualified Election to waive the
Qualified Preretirement Survivor Annuity for the
period beginning on the date of such election and
ending on the first day of the Plan Year in which the
Participant will attain age 35. Such election shall
not be valid unless the Participant receives a
written explanation of the Qualified Preretirement
Survivor Annuity in such terms as are comparable to
the explanation required under Section 7.10(E).
Qualified Preretirement Survivor Annuity coverage
will be automatically reinstated as of the first day
of the Plan Year in which the Participant attains age
35. Any new waiver on or after such date shall be
subject to the full requirements of this Section
7.10.
(2) EARLIEST RETIREMENT AGE: The earliest date on which,
under the Plan, the Participant could elect to
receive retirement benefits.
(3) QUALIFIED ELECTION: A waiver of a Qualified Joint and
Survivor Annuity or a Qualified Preretirement
Survivor Annuity. Any waiver of a Qualified Joint and
Survivor Annuity or a Qualified Preretirement
Survivor Annuity shall not be effective unless: (a)
the Participant's Spouse consents in writing to the
election; (b) the election designates a specific
Beneficiary including any class of Beneficiaries or
any contingent Beneficiaries, which may not be
changed without spousal consent (or the Spouse
expressly permits designations by the Participant
without any further spousal consent); (c) the
Spouse's consent acknowledges the
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effect of the election; and (d) the Spouse's consent
is witnessed by a Plan representative or Notary
Public. Additionally, a Participant's waiver of the
Qualified Joint and Survivor Annuity shall not be
effective unless the election designates a form of
benefit payment which may not be changed without
spousal consent (or the spouse expressly permits
designations by the Participant without any further
spousal consent). If it is established to the
satisfaction of a Plan representative that there is
no Spouse or that the Spouse cannot be located, a
waiver will be deemed a Qualified Election.
Any consent by a Spouse obtained under this provision
(or establishment that the consent of a Spouse may
not be obtained) shall be effective only with respect
to such Spouse. A consent that permits designations
by the Participant without any requirement of further
consent by such Spouse must acknowledge that the
Spouse has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where
applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A
revocation of a prior waiver may be made by a
Participant without the consent of the Spouse at any
time before the commencement of benefits. The number
of revocations shall not be limited. No consent
obtained under this provision shall be valid unless
the Participant has received notice as provided in
Paragraph (E) below.
(4) QUALIFIED JOINT AND SURVIVOR ANNUITY: An immediate
annuity for the life of the Participant with a
survivor annuity for the life of the Spouse which is
not less than 50 percent and not more than 100
percent of the amount of the annuity which is payable
during the joint lives of the Participant and the
Spouse and which is the amount of benefit which can
be purchased with the Participant's vested account
balance. The percentage of the survivor annuity under
the Plan shall be 50%.
(5) SPOUSE (SURVIVING SPOUSE): the Spouse or surviving
Spouse of the Participant, provided that a former
Spouse will be treated as the Spouse or surviving
Spouse and the current Spouse will not be treated as
the Spouse or surviving Spouse to the extent provided
under a qualified domestic relations order as
described in Section 414(p) of the Code.
(6) ANNUITY STARTING DATE: The first day of the first
period for which an amount is payable as an annuity
or any other form.
(7) VESTED ACCOUNT BALANCE: The aggregate value of the
Participant's vested account balances derived from
Employer and Employee contributions (including
rollovers), whether vested before or upon death. The
provisions of this Section 7.10 shall apply to a
Participant who is vested in amounts attributable to
Employer contributions, Employee contributions (or
both) at the time of death or distribution.
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(E) NOTICE REQUIREMENTS.
(1) QUALIFIED JOINT AND SURVIVOR ANNUITY. In the case of
a Qualified Joint and Survivor Annuity as described
in Section 7.10(B), the Committee shall no less than
30 days and no more than 90 days prior to the Annuity
Starting Date provide each Participant a written
explanation of: (i) the terms and conditions of a
Qualified Joint and Survivor Annuity; (ii) the
Participant's right to make and the effect of an
election to waive the Qualified Joint and Survivor
Annuity form of benefit; (iii) the rights of a
Participant's Spouse; and (iv) the right to make, and
the effect of, a revocation of a previous election to
waive the Qualified Joint and Survivor Annuity.
(2) QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY. In the
case of a Qualified Pre-Retirement Survivor Annuity
as described in Section 7.10(C), the Committee shall
provide each Participant within the applicable period
for such Participant a written explanation of the
Qualified Pre-Retirement Survivor Annuity in such
terms and in such manner as would be comparable to
the explanation provided for meeting the requirements
of Section 7.10(E) applicable to a Qualified Joint
and Survivor Annuity.
The applicable period for a Participant is whichever
of the following periods ends last: (i) the period
beginning with the first day of the Plan Year
preceding the Plan Year in which the Participant
attains age thirty-two (32) and ending with the close
of the Plan Year in which the Participant attains age
thirty-five (35); (ii) a reasonable period ending
after the individual becomes a Participant; (iii) a
reasonable period ending after Section 7.10(E)(3)
ceases to apply to the Participant; and (iv) a
reasonable period ending after Section 7.10 first
applies to the Participant. Notwithstanding the
foregoing, notice must be provided within a
reasonable period ending after separation from
service in the case of a Participant who separates
from service before attaining age thirty-five (35).
For purposes of applying the preceding paragraph, a
reasonable period ending after the enumerated events
described in (ii), (iii) and (iv) is the end of the
two-year period beginning one year prior to the date
the applicable event occurs, and ending one year
after that date. In the case of a Participant who
separates from service before the Plan Year in which
age 35 is attained, notice shall be provided within
the two-year period beginning one-year prior to
separation and ending one year after separation. If
such a Participant thereafter returns to employment
with the Employer, the applicable period for such
participant shall be redetermined.
(3) SUBSIDIZED ANNUITY DISTRIBUTIONS. Notwithstanding the
other requirements of this Section 7.10(E), the
respective notices prescribed by this Section 7.10(E)
need not be given to a Participant if (1) the Plan
"fully subsidizes" the cost of a Qualified Joint and
Survivor Annuity or Qualified Pre-Retirement Survivor
Annuity, and (2) the Plan does not allow the
Participant to waive the Qualified Joint and Survivor
Annuity or Qualified Preretirement Survivor Annuity
and does
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not allow a married Participant to designate a
non-Spouse Beneficiary. For purposes of this Section
7.10(E), a Plan fully subsidizes the cost of a
benefit if no increase in cost, or decrease in
benefits to the Participant may result from the
Participant's failure to elect another benefit.
(F) SAFE HARBOR RULES.
(1) APPLICATION. This Section shall apply to a
Participant in a profit-sharing Plan, and to any
distribution, made on or after the first day of the
first Plan Year beginning after December 31, 1988,
from or under a separate account attributable solely
to accumulated deductible employee contributions, as
defined in Section 72(o)(5)(B) of the Code, and
maintained on behalf of a Participant in a money
purchase pension Plan, (including a target benefit
Plan) if the following conditions are satisfied: (1)
the Participant does not or cannot elect payments in
the form of a life annuity, and (2) on the death of
the Participant, the Participant's vested account
balance will be paid to the Participant's surviving
Spouse, but if there is no surviving Spouse or, if
the surviving Spouse has already consented in a
manner conforming to a Qualified Election, then to
the Participant's designated Beneficiary. The
surviving Spouse may elect to have distribution of
the vested account balance commence within the 90-day
period following the date of the Participant's death.
The account balance shall be adjusted for gains or
losses occurring after the Participant's death in
accordance with the provisions of the Plan governing
the adjustment of account balances for other types of
distributions. This Section 7.10(F) shall not be
operative with respect to a Participant in a
profit-sharing Plan if the Plan is a direct or
indirect transferee of a defined benefit Plan, money
purchase Plan, a target benefit Plan, stock bonus, or
profit-sharing Plan which is subject to the survivor
annuity requirements of Section 401(a)(11) and
Section 417 of the Code. If this Section 7.10(F) is
operative, then the provisions of this Section 7.10,
other than in Section 7.10(G), shall be inoperative.
(2) WAIVER. The Participant may waive the spousal death
benefit described in this section at any time
provided that no such waiver shall be effective
unless it satisfies the conditions of Section
7.10(D)(3) (other than the notification requirement
referred to therein) that would apply to the
Participant's waiver of the Qualified Preretirement
Survivor Annuity.
(3) VESTED ACCOUNT BALANCE. For purposes of this Section
7.10(F), vested account balance shall mean, in the
case of a money purchase pension Plan or a target
benefit Plan, the Participant's separate account
balance attributable solely to accumulated deductible
employee contributions within the meaning of Section
72(o)(5) (B) of the Code. In the case of a
profit-sharing Plan, vested account balance shall
have the same meaning as provided in Section
7.10(D)(7).
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(G) TRANSITIONAL RULES.
(1) Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the
benefits prescribed by the previous sections of this
Section 7.10 must be given the opportunity to elect
to have the prior sections of this Section 7.10 apply
if such Participant is credited with at least one
Hour of Service under this Plan or a predecessor Plan
in a Plan Year beginning on or after January 1, 1976,
and such Participant had at least ten (10) years of
vesting service when he or she separated from
service.
(2) Any living Participant not receiving benefits on
August 23, 1984 who was credited with at least one
Hour of Service under this Plan or predecessor Plan
on or after September 2, 1974, and who is not
otherwise credited with any service in a Plan Year
beginning on or after January 1, 1976 must be given
the opportunity to have his or her benefits paid in
accordance with Section 7.10(G)(4).
(3) The respective opportunities to elect (as described
in Section 7.10(G)(1) and (2) above) must be afforded
to the appropriate Participants during the period
commencing on August 23, 1984 and ending on the date
benefits would otherwise commence to these
Participants.
(4) Any Participant who has elected pursuant to Section
7.10(G)(2) and any Participant who does not elect
under Section 7.10(G)(1) or who meets the
requirements of Section 7.10(G)(1) except that such
Participant does not have at least ten (10) years of
vesting service when he or she separates from
service, shall have his or her benefits distributed
in accordance with all of the following requirements
of benefits would have been payable in the form of a
life annuity:
a) Automatic joint and survivor annuity. If
benefits in the form of a life annuity
become payable to a married participant who:
(i) begins to receive payments under the
Plan on or after Normal Retirement
Date; or
(ii) dies on or after Normal Retirement
Date while still working for the
Employer; or
(iii) begins to receive payments on or
after the Qualified Early Retirement
Age; or
(iv) separates from service on or after
attaining Normal Retirement Date (or
the Qualified Early Retirement Age)
and after satisfying the eligibility
requirements for the payment of
benefits under the Plan and
thereafter dies before beginning to
receive such benefits;
then such benefits will be received under
this Plan in the form of a Qualified Joint
and Survivor Annuity, unless the Participant
has elected otherwise during the election
period. The election period must begin at
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least 6 months before the Participant
attains Qualified Early Retirement Age and
end not more than 90 days before the
commencement of benefits. Any election
hereunder will be in writing and may be
changed by the Participant at any time.
b) Election of early survivor annuity. A
Participant who is employed after attaining
the Qualified Early Retirement Age will be
given the opportunity to elect, during the
election period, to have a survivor annuity
payable on death. If the Participant elects
the survivor annuity, payments under such
annuity must not be less than the payments
which would have been made to the Spouse
under the Qualified Joint and Survivor
Annuity if the Participant had retired on
the day before his or her death. Any
election under this provision will be in
writing and may be changed by the
Participant at any time. The election period
begins on the later of (1) the 90th day
before the Participant attains the Qualified
Early Retirement Age, or (2) the date on
which participation begins, and ends on the
date the Participant terminates employment.
c) For purposes of this Section 7.10(G)(4):
(i) Qualified Early Retirement Age is
the latest of: (i) the earliest
date, under the Plan, on which the
Participant may elect to receive
retirement benefits, (ii) the first
day of the 120th month beginning
before the Participant reaches
Normal Retirement Date, or (iii) the
date the Participant begins
participation.
(ii) Qualified Joint and Survivor Annuity
is an annuity for the life of the
participant with a survivor annuity
for the life of the Spouse as
described in Section 7.10(D)(4).
(H) NONTRANSFERABILITY. Any annuity distributed from the Plan must
be nontransferable.
(I) INCORPORATION OF TERMS. The terms of any annuity contract
purchased and distributed by the Plan to a Participant or
Spouse shall comply with the requirements of this Plan.
7.11 DISTRIBUTIONS TO QUALIFIED PLANS. In the event a former Employee whose
accounts have not been fully distributed becomes an active participant
in a Plan qualified under Section 401(a) of the Code, the Committee may
direct the Trustee to transfer the amount in such Participant's
account(s) to any such Plan provided the Plan to receive such transfers
authorizes accepting the transfer, provides that assets transferred
shall be held in a separate account and requires that the assets
transferred shall not be subject to any forfeiture provisions.
7.12 PROFIT SHARING PLANS AND 401(K) PROFIT SHARING PLANS ONLY - WITHDRAWAL
OF EMPLOYER CONTRIBUTIONS. Subject to the provisions of the Plan, in
accordance with rules for giving notice as determined by the Committee,
and as elected in the Adoption Agreement, a Participant may withdraw as
of the first Accounting Date subsequent to receipt by the Committee of
such notice:
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(A) An amount equal to not more than 100% of the Participant's
Employer Contribution Account determined as of such Accounting
Date. No Participant who has made any withdrawal of Employer
Contributions in the twelve (12) months preceding the giving
of such notice may make a withdrawal under this Section.
(B) Notwithstanding anything to the contrary in this Section 7.12,
any withdrawal made pursuant to Section 7.12(A) shall be for a
minimum whole dollar amount not less than Five Hundred Dollars
($500.00); except that if the amount available for withdrawal
is less than Five Hundred Dollars ($500.00) then the minimum
amount of the withdrawal shall be the amount available.
(C) No forfeitures will occur solely as a result of an Employee's
withdrawal of Employer Contributions.
(D) Notwithstanding anything to the contrary in this Section 7.12,
a Participant may not make a withdrawal, pursuant to this
Section of any portion of the Participant's vested interest
which has been assigned to secure repayment of a loan in
accordance with Section 10.10, below, until such time as the
Committee shall have released said portion so assigned.
7.13. PROHIBITION AGAINST ALIENATION.
(A) Except as provided in Sections 401(a)(13) and 414(p) of the
Code, no benefit or interest available under this Plan will be
subject to assignment or alienation, either voluntarily or
involuntarily.
(B) The preceding sentence shall also apply to the creation,
assignment, or recognition of a right to any benefit payable
with respect to a Participant pursuant to a domestic relations
order, unless the Committee determines that such order is a
qualified domestic relations order, as defined in Section
414(p) of the Code, or any domestic relations order entered
before January 1, 1985.
(C) 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, an immediate 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 reached the "earliest
retirement age" under the Plan, provided that in no event will
any such distribution accelerate the repayment of any loan
made to the affected Participant under the Plan, unless such
Participant consents thereto in writing. For purposes of this
Section 7.13, "alternate payee," "qualified domestic relations
order" and "earliest retirement age" shall have the meaning
set forth under Code Section 414(p), unless a Qualified
Distribution Date has been selected in the Adoption Agreement,
in which case the earliest retirement age shall be the date on
which the domestic relations order is determined to be
qualified.
7.14 MISSING PARTICIPANT OR BENEFICIARY. Each Participant and/or each
Beneficiary must file with the Committee from time to time in writing
his or her post office address and each change of post
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office address. Any communication, statement or notice addressed to a
Participant and/or Beneficiary at such last post office address filed
with the Committee or if no address is filed with the Committee then at
the last post office address as shown on the Employer's records, will
be binding on the Participant and/or Beneficiary for all purposes of
the Plan. Neither the Committee nor the Trustee shall be required to
search for or locate a Participant or Beneficiary.
Any other provision of the Plan to the contrary notwithstanding, if any
application for a benefit has not been filed by a Participant otherwise
eligible therefor within ninety (90) days after the Plan Year in which
occurred his or her termination date, the Committee shall mail to such
Participant and/or Beneficiary at his or her last known address an
application for benefit and a reminder that he or she is eligible for
such benefit. If such application is not filed with the Committee in
accordance with the provisions of the Plan within ninety (90) days
after it is so mailed to such Participant or his or her termination
date, whichever is later, the benefit shall be forfeited and shall be
used to reduce future Employer Contributions as though the Participant
were not vested in his or her accounts as of the end of said ninety
(90) day period. Upon the subsequent filing of an application therefor
by the Participant and/or his Beneficiary, such accounts shall be
immediately reinstated pursuant to this provision as though the
Participant were 100% vested in his or her accounts in an amount equal
to the cash value of the accounts on the date forfeited. To the extent
forfeited amounts are not available, the Employer shall contribute the
amount required to reinstate the Participant's account balance.
7.15 LIMITATION ON CERTAIN DISTRIBUTIONS. Notwithstanding anything contained
herein to the contrary, the Trustee may, in its discretion, delay
satisfying requests for distributions for up to one year where
distributions require amounts to be withdrawn from the Guaranteed
Investment Contract Fund; provided, however, that in no event shall the
Trustee delay distributions to a Participant beyond the legally
required time for distribution as set forth in Section 7.5.
7.16 FORM OF DISTRIBUTIONS AND WITHDRAWALS. The Trustee shall make all
distributions and withdrawals under the Plan, including Hardship
withdrawals, other withdrawals while the Participant is still employed,
and distributions upon retirement, disability, death and separation
from service, pro rata, from all accounts and Investment Funds, as
follows:
(A) In a Plan with no Employer Stock Fund, all withdrawals and
distributions under the Plan shall be made in cash.
(B) In a Plan with an Employer Stock Fund:
(1) Withdrawals and distributions under the Plan from the
other Investment Fund(s) shall be made in cash.
(2) Withdrawals and distributions under the Plan from the
Employer Stock Fund may be made in cash or in full
shares of Employer Stock, with any fractional share
paid in cash, as elected by the Participant. For the
cash portion of any distribution or withdrawal, the
Participant will receive the cash proceeds from the
sale of shares of Employer Stock as of the sale date.
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ARTICLE VIII
DIRECT ROLLOVERS
8.1 GENERAL. This Article applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article, a
distributee may elect, at the time and in the manner prescribed by the
Plan administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement Plan specified by
the distributee in a direct rollover.
8.2 DEFINITIONS.
(A) ELIGIBLE ROLLOVER DISTRIBUTION: 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 section 401(a)(9)
of the Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
(B) ELIGIBLE RETIREMENT PLAN: An eligible retirement Plan is an
individual retirement account described in section 408(a) of
the Code, an individual retirement annuity described in
section 408(b) of the Code, an annuity Plan described in
section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, 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.
(C) DISTRIBUTEE: A distributee includes an Employee or former
Employee. In addition, the Employee's or former 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 section
414(p) of the Code, are distributees with regard to the
interest of the Spouse or former Spouse.
(D) DIRECT ROLLOVER: A direct rollover is a payment by the Plan to
the eligible retirement Plan specified by the distributee.
(E) WAIVER OF NOTICE. If a distribution is one to which Sections
401(a)(11) and 417 of the Internal Revenue Code do not apply,
such distribution may commence less than 30 days after the
notice required under Section 1.411(a)-(11)(c) of the Income
Tax Regulations is given, provided that: (1) the plan
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.
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ARTICLE IX
TOP-HEAVY PROVISIONS
9.1 USE OF TOP-HEAVY PROVISIONS. If the Plan becomes a Top-Heavy Plan in
any Plan Year after December 31, 1983, the provisions of this Article
IX will supersede any conflicting provision in the Plan or the Adoption
Agreement. The Committee has sole responsibility to make the
determination as to the top-heavy status of the Plan.
9.2 TOP-HEAVY DEFINITIONS.
(A) KEY EMPLOYEE: Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the
determination period was an officer of the Employer if such
individual's annual Compensation exceeds 50% of the dollar
limitation under Section 415(b)(1)(A) of the Code, an owner
(or considered an owner under Section 318 of the Code) of one
of the ten largest interests in the Employer if such
individual's Compensation exceeds 100% of the dollar
limitation under Section 415(c)(1)(A) of the Code, a 5 per
cent owner of the Employer, or a 1 per cent owner of the
Employer who has an annual Compensation of more than $150,000.
Annual compensation means compensation as defined in Item
B(4)(a) of the Adoption Agreement, but including amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the Employee's gross
income under Section 125, Section 402(e)(3), Section
402(h)(1)(B) or Section 403(b) of the Code. The determination
period is the Plan Year containing the Determination Date and
the 4 preceding Plan Years.
The determination of who is Key Employee will made by the
Committee in accordance with Section 416(i)(1) of the Code and
the regulations thereunder.
(B) TOP-HEAVY PLAN: This Plan, for any Plan Year beginning after
December 31, 1983, if any of the following conditions exists:
(1) If the Top-Heavy Ratio for this Plan exceeds 60
percent and this Plan is not part of any Required
Aggregation Group or Permissive Aggregation Group of
plans.
(2) If this Plan is a part of a Required Aggregation
Group of plans but not part of a Permissive
Aggregation Group and the Top-Heavy Ratio for the
group of plans exceeds 60 percent.
(3) If this Plan is a part of a Required Aggregation
Group and part of a Permissive Aggregation Group of
plans and the Top-Heavy Ratio for the Permissive
Aggregation Group exceeds 60 percent.
(C) TOP-HEAVY RATIO: For purposes of determining if the Plan is a
Top-Heavy Plan:
(1) If the Employer maintains one or more defined
contribution plans (including any Simplified employee
pension Plan) and the Employer has not maintained any
defined benefit Plan which during the 5-year period
ending on the Determination
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Date(s) has or has had accrued benefits, the
Top-Heavy Ratio for this Plan alone or for the
Required or Permissive Aggregation Group as
appropriate is a fraction, the numerator of which is
the sum of the account balances of all Key Employees
as of the Determination Date(s) (including any part
of any account balance distributed in the 5-year
period ending on the Determination Date(s)), and the
denominator of which is the sum of all account
balances (including any part of any account balance
distributed in the 5-year period ending on the
Determination Date(s), both computed in accordance
with Section 416 of the Code and the regulations
thereunder. Both the numerator and denominator of the
Top-Heavy Ratio are increased to reflect any
contribution not actually made as of the
Determination Date, but which is required to be taken
into account on that date under Section 416 of the
Code and the regulations thereunder.
(2) If the Employer maintains one or more defined
contribution plans (including any Simplified Employee
Pension Plan) and the Employer maintains or has
maintained one or more defined benefit plans which
during the 5-year period ending on the Determination
Date(s) has or has had any accrued benefits, the
Top-Heavy Ratio for any Required or Permissive
Aggregation Group as appropriate is a fraction, the
numerator of which is the sum of account balances
under the aggregated defined contribution plan or
plans for all Key Employees determined in accordance
with (1) above, and the Present Value of accrued
benefits under the aggregated defined benefit plan or
plans for all Key Employees as of the Determination
Date(s), and the denominator of which is the sum of
the account balances under the aggregated defined
contribution plan or plans for all Participants,
determined in accordance with (1) above, and the
Present Value of accrued benefits under the defined
benefit plan or plans for all Participants as of the
Determination Date(s), all determined in accordance
with Section 416 of the Code and regulations
thereunder. The accrued benefits under a defined
benefit plan in both the numerator and denominator of
the Top-Heavy Ratio are increased for any
distribution of an accrued benefit made in the
five-year period ending on the Determination Date.
(3) For purposes of (1) and (2) above, the value of
account balances and the Present Value of accrued
benefits will be determined as of the most recent
Valuation Date that falls within or ends with the
12-month period ending on the Determination Date,
except as provided in Section 416 of the Code and the
regulations thereunder for the first and second Plan
years of a defined benefit Plan. The account balances
and accrued benefits of a Participant (a) who is not
a Key Employee but who was a Key Employee in a prior
year, or (b) who has not been credited with at least
one Hour of Service with any Employer maintaining the
Plan at any time during the five-year period ending
on the Determination Date will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to
which distributions, rollovers, and transfers are
taken into account will be made in accordance with
Section 416 of the Code and the regulations
thereunder. Voluntary deductible employee
contributions will not be taken into account for
purposes of computing the Top-Heavy Ratio. When
aggregating plans the value of account balances and
accrued benefits will be calculated with reference to
the Determination Dates that fall within the same
calendar year.
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The accrued benefit of a Participant other than a Key
Employee shall be determined under (a) the method, if
any, that uniformly applies for accrual purposes
under all defined benefit plans maintained by the
Employer, or (b) if there is no such method, as if
such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional
rule of Section 411(b)(1)(C) of the Code.
(D) PERMISSIVE AGGREGATION GROUP: The Required Aggregation Group
of plans plus any other Plan or plans of the Employer which,
when considered as a group with the Required Aggregation
Group, would continue to satisfy the requirements of Section
401(a)(4) and Section 410 of the Code.
(E) REQUIRED AGGREGATION GROUP: (1) Each qualified Plan of the
Employer in which at least one Key Employee participates or
participated at any time during the determination period
(regardless of whether the Plan has terminated), and (2) any
other qualified Plan of Employer which enables a Plan
described in (1) to meet the requirements of Section 401(a)(4)
or Section 410 of the Code.
(F) DETERMINATION DATE: For purposes of determining if there is a
Key Employee and for calculating the Top-Heavy Ratio: 1) for
any Plan Year subsequent to the first Plan Year, the last day
of the preceding Plan Year, and 2) for the first Plan Year of
the Plan, the last day of that year.
(G) VALUATION DATE: The date specified in Item B(14)(c) of the
Adoption Agreement as of which account balances or accrued
benefits are valued for purposes of calculating the Top-Heavy
Ratio.
(H) PRESENT VALUE: Present Value shall be based only on the
interest and mortality rates specified in the Adoption
Agreement.
9.3 MINIMUM ALLOCATION.
(A) Except as otherwise provided in Section 9.3(C) and (D) below,
the Employer Contributions and forfeitures allocated on behalf
of any Participant who is not a Key Employee shall not be less
than the lesser of three per cent (3%) of such Participant's
Compensation or in the case where the Employer has no defined
benefit Plan which designates this Plan to satisfy Section 401
of the Code, the largest percentage of Employer contributions
and forfeitures, as a percentage of the Key Employee's
Compensation, as limited by Section 401(a)(17) of the Code,
allocated on behalf of any Key Employee for that year. The
minimum allocation is determined without regard to any Social
Security contribution. This minimum allocation shall be made
even though, under other Plan provisions, the Participant
would not otherwise be entitled to receive an allocation or
would have received a lesser allocation for the year because
of (i) such Participants failure to complete 1,000 Hours of
Service (or any other equivalent provided in the Plan) or (ii)
the Employee's failure to make mandatory contributions or
(iii) Compensation less than a stated amount.
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(B) For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in Section 6.6(A) as
limited by Section 401(a)(17) of the Code.
(C) Section 9.3(A) shall not apply to any Participant who was not
employed by the Employer on the last day of the Plan Year.
(D) Section 9.3(A) shall not apply to any Participant to the
extent the Participant is covered under any other plan or
plans of the Employer and the Employer has provided in Item
B(14) of the Adoption Agreement that the minimum allocation or
benefit requirement applicable to Top-Heavy Plans will be met
in the other plan or plans.
(E) The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Section 411(a)(3)(B) or Section 411(a)(3)(D)
of the Code.
(F) For each Plan Year in which the Paired Plans are Top-Heavy,
the Top-Heavy requirements set forth in Article VIII of the
Plan and Item B(14) of the Adoption Agreement shall apply.
(G) Neither Before Tax Contributions nor Matching Contributions
may be taken into account for the purpose of satisfying the
minimum Top-Heavy contribution requirements.
9.4 MINIMUM VESTING SCHEDULES. For any Plan Year in which this Plan is a
Top-Heavy Plan, the vesting schedule elected by the Employer in Item
B(14) and/or C(4)(d) of the Adoption Agreement will automatically apply
to the Plan. The minimum vesting schedule applies to all benefits
within the meaning of Section 411(a)(7) of the Code except those
attributable to Employee contributions, including benefits accrued
before the effective date of Section 416 and benefits accrued before
the Plan became a Top-Heavy Plan. Further, no decrease in a
Participant's nonforfeitable percentage may occur in the event the
Plan's status as a Top-Heavy Plan changes for any Plan Year. However,
this Section 9.4 does not apply to the account balance of any Employee
who does not have an Hour of Service after the Plan has initially
become a Top-Heavy Plan and such Employee's account balance
attributable to employer contributions and forfeitures will be
determined without regard to this Section 9.4.
ARTICLE X
TRUSTEE
10.1 TRUSTEE. The Trustee shall receive, hold, invest, administer and
distribute the Trust Fund in accordance with the provisions of the Plan
as herein set forth.
10.2 RECORDS AND ACCOUNTS OF TRUSTEE. The Trustee shall maintain accurate
and detailed records and accounts of all its transactions of the Trust
Fund, which shall be available at all reasonable times for inspection
or audit by any person designated by the Employer and by any other
person or entity to the extent required by law.
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10.3 REPORTS TO EMPLOYER. As soon as practicable following the close of each
accounting period and following the effective date of the termination
of the Plan, the Trustee shall file a written report with the Employer.
The report shall set forth all transactions with respect to the Trust
Fund during the period listing the Trust Fund assets with their market
value as of the close of the period covered by the report.
10.4 POWERS OF TRUSTEE. The Trustee shall administer the Trust Fund as a
nondiscretionary Trustee, and the Trustee shall not have any discretion
or authority with regard to the investment of the Trust Fund and shall
act solely as a directed Trustee of the fund contributed to it. The
Trustee, as a nondiscretionary Trustee, as may be directed by the
Employer (or the Participants to the extent provided herein) is
authorized and empowered, by way of limitation, with the following
powers, rights and duties, each of which the Trustee shall exercise in
a nondiscretionary manner as directed in accordance with the direction
of the Employer (or the Participants) as a Named Fiduciary (except to
the extent that Plan assets are subject to the control and management
of a properly appointed Investment Manager):
(A) At the direction of the Named Fiduciary, to sell, write
options on, convey or transfer, invest and reinvest any part
thereof in each and every kind of property, whether real,
personal or mixed, tangible or intangible, whether income or
non-income producing and wherever situated, including, but not
limited to, time deposits (including time deposits in the
Trustee or its affiliates, or any successor thereto, if the
deposits bear a reasonable rate of interest), fee simple,
leasehold or lesser estates in real estate, shares of common
and preferred stock, mortgages, bonds, leases, notes,
debentures, equipment or collateral trust certificates,
rights, warrants, convertible or exchangeable, and other
corporate, individual or government securities or obligations,
annuity, retirement or other insurance contracts, mutual funds
(including funds for which the Trustee or its affiliates serve
as investment advisor), units of group or collective trusts
established to permit the pooling of funds of separate pension
and profit sharing trusts, provided the Internal Revenue
Service has ruled such group trust to be qualified under Code
Section 401(a) and exempt under Code Section 501(a) (or the
applicable corresponding provision of any other Revenue Act)
or in units of any other common, collective or commingled
trust fund heretofore or hereafter established and maintained
by the Trustee or its affiliates; as long as the Trustee holds
any units hereunder, the instrument establishing such common
trust fund (including all amendments thereto) shall be deemed
to have been adopted and made a part of this Plan, and such
other investments as the Named Fiduciary shall direct the
Trustee to invest Plan assets or hold as an Investment Fund
for the investment of Plan assets pursuant to Participant
direction.
(B) At the direction of the Named Fiduciary, to sell, convert,
redeem, exchange, grant options for the purchase or exchange
of, or otherwise dispose of any property held hereunder, at
public or private sale, for cash or upon credit with or
without security, without obligation on the part of any person
dealing with the Trustee to see to the application of the
proceeds of or to inquire into the validity, expediency, or
propriety of any such disposal;
(C) At the direction of the Named Fiduciary, to manage, operate,
repair, partition and improve and mortgage or lease (with or
without an option to purchase) for any length of
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time any property held in the Trust Fund; to renew or extend
any mortgage or lease, upon such terms as the Trustee may deem
expedient; to agree to reduction of the rate of interest on
any mortgage; to agree to any modification in the terms of any
lease or mortgage, or of any guarantee pertaining to either of
them; to exercise and enforce any right of foreclosure; to bid
in property on foreclosure; to take a deed in lieu of
foreclosure with or without paying consideration therefor and
in connection therewith to release the obligation on the bond
secured by the mortgage; and to exercise and enforce in any
action, suit or proceeding at law or in equity any rights,
covenants, conditions, or remedies with respect to any lease
or mortgage or to any guarantee pertaining to either of them
or to waive any default in the performance thereof;
(D) In accordance with the direction of a Named Fiduciary, to
vote, personally or by general or limited proxy, any shares of
stock or other securities held in the Trust Fund, provided
that all voting rights pertaining to shares of any financial
institution in the state where the Trustee is located shall be
exercised by the trustee only if and as directed in writing by
the Committee; provided further, that the Trustee and the
Employer may agree in writing that such voting rights be
passed through to the Participant's in proportion to their
interest in the Investment Funds, to delegate discretionary
voting power to the trustees of a voting trust for any period
of time; and to exercise or sell, personally or by power of
attorney, any conversion or subscription or other rights
appurtenant to any securities or other property held in the
Trust Fund;
(E) As may be directed by the Named Fiduciary, to join in or
oppose any reorganization, recapitalization, consolidation,
merger or liquidation, or any Plan therefor, or any lease
(with or without an option to purchase), mortgage or sale of
the property of any organization the securities of which are
held in the Trust Fund; to pay from the Trust Fund any
assessments, charges, or compensation specified in any Plan of
reorganization, recapitalization, consolidation, merger or
liquidation; to deposit any property with any committee or
depository; and to retain any property allotted to the Trust
Fund in any reorganization, recapitalization, consolidation,
merger or liquidation;
(F) In accordance with the written instructions of a Named
Fiduciary, to settle, compromise or commit to arbitration any
claim, debt or obligation of or against the Trust Fund; to
enforce or abstain from enforcing any right, claim, debt, or
obligation; and to abandon any property determined by it to be
worthless;
(G) As may be directed by the Named Fiduciary, to continue to hold
any property of the Trust Fund, whether or not productive of
income; to reserve from investment and keep unproductive of
income, without liability for interest, such cash as it deems
advisable and, consistent with its obligations as Trustee
hereunder, to hold such cash in a demand deposit in the
Trustee bank, its affiliates, or any successor thereto;
(H) To hold property of the Trust Fund in its own name, or in the
name of nominee, without disclosure of this trust, or in
bearer form so that it may pass by delivery, and to deposit
property with any depository, but no such holding or
depositing shall relieve the Trustee of its responsibility for
the safe custody and disposition of the Trust Fund in
accordance with the provisions of this agreement as may be
directed by the Named Fiduciary, and the Trustee's records
shall at all times show that such property is part of the
Trust Fund;
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(I) As directed by the Named Fiduciary, to make, execute and
deliver, as Trustee, any deeds, conveyances, leases (with or
without option to purchase), mortgages, options, contracts,
waivers, or other instruments that the Trustee shall deem
necessary or desirable in the exercise of its powers under
this agreement;
(J) To employ, at the expense of the Employer or the Trust Fund,
agents and delegate to them such duties as the Trustee sees
fit; the Trustee shall not be responsible for any loss
occasioned by any such agents selected by it with reasonable
care; the Trustee may consult with legal counsel (who may be
counsel for the Employer) concerning any questions which may
arise with reference to its power or duties under this Plan,
and the written opinion of such counsel shall be full and
complete protection with respect to any action taken or not
taken by the Trustee in good faith and in accordance with the
written opinion of such counsel;
(K) To pay out of the Trust Fund any taxes imposed or levied with
respect to the Trust Fund and may contest the validity or
amount of any tax, assessment, penalty, claim or demand
respecting the Trust Fund; however, unless the Trustee shall
have first been indemnified to its satisfaction, it shall not
be required to contest the validity of any tax, or to
institute, maintain or defend against any other action or
proceeding either at law or in equity;
(L) To make loans to Participants in accordance with policies
established by the Committee and in accordance with the terms
of the Plan and the and to segregate or otherwise identify
property of the Trust Fund as directed by the Committee for
such purpose including providing collateral for loans made
pursuant to the Plan.
10.5 TRUSTEE'S FEES AND EXPENSES. The Trustee shall be entitled to receive
reasonable fees for its services hereunder in accordance with its
schedule of fees then in effect and shall be entitled to receive
reimbursement for all reasonable expenses incurred by it in the
administration of this Plan. Except to the extent that the Employer
shall pay such fees and expenses, they shall be charged to and
collected by the Trustee from each Participant's accounts. The
Trustee's fees and expenses for extraordinary services in connection
with any Participant's accounts may be charged to and collected by the
Trustee from such accounts.
10.6 TRUSTEE MAY RESIGN OR BE REMOVED. The Trustee may resign by written
notice to the Employer which shall be effective sixty (60) days after
delivery unless the Trustee and the Employer agree to an earlier
effective date. The Trustee may be removed by the Employer by written
notice to the Trustee which shall be effective sixty (60) days after
delivery unless the Trustee and the Employer agree to an earlier
effective date. Prior to the effective date of such resignation or
removal, the Employer shall amend its Plan to eliminate any reference
to the PRISM(R) PROTOTYPE RETIREMENT PLAN AND TRUST, and appoint a new
trustee. The Trustee shall deliver the Trust Fund to its successor on
the effective date of resignation or removal, or as soon after such
effective date as practicable. However, the Trustee may first subtract
any amounts owed it from the Trust Fund for compensation, expenses and
taxes due.
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If the Employer fails to so amend the Plan and appoint a successor
trustee within the sixty (60) days, or longer period as the Trustee
permits in writing, the Trustee shall apply to a court of competent
jurisdiction for appointment of a successor trustee.
10.7 SEPARATE INVESTMENT FUNDS.
(A) The assets of the Trust Fund shall be held in such number of
Investment Funds as the Employer and the Trustee may agree,
plus an Employer Stock Fund if selected by the Employer in the
Adoption Agreement, as the Employer shall designate in writing
on the Investment Fund Designation form affixed to the
Adoption Agreement. Such Investment Funds shall be selected by
the Employer from among the funds offered by the Trustee for
use as Investment Funds in the PRISM(R)PROTOTYPE RETIREMENT
PLAN & TRUST. The Trustee reserves the right to change the
funds available for use as Investment Funds in the
PRISM(R)PROTOTYPE RETIREMENT PLAN & TRUST, from time to time,
and the Employer agrees to execute an amended Investment Fund
Designation form to reflect any such changes as may impact the
Investment Funds available to the Employer's Plan. The
Employer hereby acknowledges that, available as Investment
Funds are interests in registered investment companies (i.e.
mutual funds) for which the sponsoring organization, its
parent, affiliates or successors may serve as investment
advisor and receive compensation from the registered
investment company for its services as investment advisor. The
Employer acknowledges that it, as Named Fiduciary, has the
sole responsibility for selection of the Investment Funds
offered under the Plan, and it has done so on the basis of the
Employer's determination, after due inquiry, of the
appropriateness of the selected Investment Funds as vehicles
for the investment of Plan assets pursuant to the terms of the
Plan, considering all relevant facts and circumstances,
including but not limited to (i) the investment policy and
philosophy of the Employer developed pursuant to
ERISAss.402(b)(1); (ii) the Participants, including average
level of investment experience and sophistication; (iii) the
ability of Participants, using an appropriate mix of
Investment Funds, to diversify the investment of Plan assets
held for their benefit; (iv) the ability of Participants to,
utilizing an appropriate mix of Investment Funds, to structure
an investment portfolio within their account in the Plan with
risk and return characteristics within the normal range of
risk and return characteristics for individuals with similar
investment backgrounds, experience and expectations; and, (v)
in making the selection of Investment Funds, the Employer did
not rely on any representations or recommendations from the
Trustee or any of its employees, except as may have been
provided through written materials, including marketing
materials provided by the various sponsors or distributors of
the Investment Funds, and that the Investment Fund selection
has not be influenced, approved, or encouraged through the
actions of the Trustee or its employees.
For purposes of the Plan, "Employer Stock" shall mean common
stock listed on a recognized securities exchange issued by an
Employer of Employees covered by the Plan or by an affiliate
of such Employer and which shall be a "qualifying employer
security" as defined in ERISA. The Employer Stock Fund shall
be invested and reinvested in shares of Employer Stock, which
stock shall be purchased by the Trustee to the extent not
contributed to the Plan by the Employer, except for amounts
which may reasonably be expected to be necessary to satisfy
distributions to be made in cash. No Employer
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Stock shall be acquired or held in any Investment Fund other
than the Employer Stock Fund. Up to 100% of the assets of the
Trust Fund may be invested in Employer Stock.
All contributions shall be allocated by the Trustee to the
Plan's Investment Funds specified by the Employer. Dividends,
interest and other distributions shall be reinvested in the
same Investment Fund from which received.
Employers sponsoring 401(k) profit sharing plans may elect to
determine the Investment Funds, including an Employer Stock
Fund, if applicable, into which Matching Contributions and/or
Employer Contributions will be invested and/or into which
Participants may not direct contributions. By making these
designations, the Employer shall be deemed to have advised the
Trustee in writing regarding the retention of investment
powers.
Notwithstanding the foregoing provisions of this Section
10.7(A), the Trustee may, in its discretion, accept certain
investments which have been, and are, held as part of the
Trust Fund prior to the date the Employer adopted this Plan.
Such investments shall be considered investments directed by
the Employer or an Investment Committee for the Plan
("Investment Committee"), if one is acting. The Trustee shall
hold, administer and dispose of such investments in accordance
with directions to the Trustee contained in a written notice
from the Employer or Investment Committee. Any such notice
shall advise the Trustee regarding the retention of investment
powers by the Employer or the Investment Committee and shall
be of a continuing nature or otherwise, and may be revoked in
writing by the Employer or Investment Committee.
The Trustee shall not be liable but shall be fully protected
by reason of its taking or refraining from taking any action
at the direction of the Employer or Investment Committee, nor
shall the Trustee be liable but shall be fully protected by
reason of its refraining from taking any action because of the
failure of the Employer or the Investment Committee to give a
direction or order. The Trustee shall be under no duty to
question or make inquiry as to any direction, notification or
order or failure to give a direction, notification or order by
the Employer or the Investment Committee. The Trustee shall be
under no duty to make any review of investments directed by
the Employer or Investment Committee acquired for the Trust
Fund and under no duty at any time to make any recommendation
with respect to disposing of or continuing to retain any such
investments. While the Employer may direct the Trustee with
respect to Plan investments, the Employer may not (1) borrow
from the Fund or pledge any assets of the Fund as security for
a loan; (2) buy property or assets from or sell property or
assets to the Fund; (3) charge any fee for services rendered
to the Fund; or (4) receive any services from the Fund on a
preferential basis.
The Employer hereby indemnifies and holds the Trustee or its
nominee harmless from any and all actions, claims, demands,
liabilities, losses, damages or reasonable expenses of
whatsoever kind and nature in connection with or arising out
of (1) any action taken or omitted in good faith or any
investment or disbursement of any part of the Trust Fund made
by the Trustee in accordance with the directions of the
Employer or the Investment Committee or any inaction with
respect to any Employer or Investment Committee directed
investment or with respect to any investment previously made
at the direction of
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the Employer or Investment Committee in the absence of
directions from the Employer or Investment Committee therefor,
or (2) any failure by the Trustee to pay for any property
purchased by the Employer or the Investment Committee for the
Trust Fund by reason of the insufficiency of funds in the
Trust Fund.
Anything hereinabove to the contrary notwithstanding, the
Employer shall have no responsibility to the Trustee under the
foregoing indemnification if the Trustee knowingly
participated in or knowingly concealed any act or omission of
the Employer or Investment Committee knowing that such act or
omission constituted a breach of fiduciary responsibility, or
if the Trustee fails to perform any of the duties undertaken
by it under the provisions of this Plan, or if the Trustee
fails to act in conformity with the directions of an
authorized representative of the Employer or the Investment
Committee.
(B) Each Participant shall by such mechanism as may be agreed upon
between the Trustee and Employer, direct that the
contributions made to his or her accounts for which the
Participant may direct investments, as selected by the
Employer in the Adoption Agreement, be invested in one or more
of the Investment Funds, including the Employer Stock Fund, if
applicable. At the time an Employee becomes eligible for the
Plan, he or she shall specify the percentage of his or her
accounts (expressed in percentage increments as may be agreed
to between the Employer and the Trustee) to be invested
pro-rata in each such Investment Fund.
(C) Upon prior written notice to the Trustee, or other form of
notice acceptable to the Trustee, a Participant may change an
investment direction with respect to future contributions.
Through acceptable notice to the Trustee, the Participant may
elect to transfer all or a portion of such Participant's
interest in each Investment Fund (based on the value of such
interest on the Valuation Date immediately preceding such
election), including an Employer Stock Fund, if applicable, to
any other of the Investment Funds selected by the Employer so
that the Participant's interest in the said Investment Funds
immediately after the transfer is allocated in percentage
increments as may be agreed to by the Employer and the
Trustee.
Notwithstanding any Participant's election to change
Investment Funds, the Trustee may, in its discretion, delay
satisfaction of requests to change from a guaranteed
investment contract fund for up to one year, or delay
satisfaction of changes in Investment Funds pending settlement
of prior changes in Investment Funds.
(D) The Employer will be responsible when transmitting Employer
and Employee contributions to show the dollar amount to be
credited to each Investment Fund for each Employee.
(E) Except as otherwise provided in the Plan, neither the Trustee,
nor the Employer, nor any fiduciary of the Plan shall be
liable to the Participant or any of his or her beneficiaries
for any loss resulting from action taken at the direction of
the Participant.
(F) In a 401(k) profit sharing Plan where the Employer has elected
to invest a portion or all of the Matching Contributions
and/or Employer Contributions in the Employer Stock Fund, then
the following shall apply:
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If selected by the Employer in the Adoption Agreement, a
Participant who is fifty-five (55) years of age or older and
who is 100% vested in his Matching Contribution account and/or
Employer Contribution account may elect to have the Employer
Stock (and any earnings thereon) attributable to such Matching
Contributions and/or Employer Contributions diversified in the
other Investment Funds under the Plan in accordance with the
following rules and limitations. The amount of Employer Stock
which may be diversified each Plan Year shall be determined in
accordance with the following schedule:
<TABLE>
<CAPTION>
==================================== =========================================
THEN THE PERCENT OF THE NUMBER OF WHOLE
SHARES (ROUNDED TO THE NEAREST WHOLE
NUMBER) CREDITED TO THE PARTICIPANTS'
MATCHING ACCOUNT AND/OR EMPLOYER
IF THE AGE ATTAINED BY THE CONTRIBUTION ACCOUNT ON THE LAST DAY OF
PARTICIPANT THE PRECEDING PLAN YEAR WHICH MAY BE
DURING THE PLAN YEAR IS: DIVERSIFIED PURSUANT TO THE RULES BELOW
MAY NOT EXCEED
==================================== =========================================
<S> <C>
55 25%
==================================== =========================================
56 25%
==================================== =========================================
57 30%
==================================== =========================================
58 40%
==================================== =========================================
59 50%
==================================== =========================================
60 60%
==================================== =========================================
61 70%
==================================== =========================================
62 80%
==================================== =========================================
63 90%
==================================== =========================================
64 100%
==================================== =========================================
</TABLE>
The election to diversify may only be made once each Plan
Year. The election may be made in any month by providing
notice to the Committee in accordance with the frequency
selected by the Employer for other Investment Fund changes
under the Plan. Each election to make a transfer pursuant to
this Section shall specify the Investment Fund(s) into which
the shares subject to diversification will be reinvested so
that the Participant's interest in the said Investment
Fund(s), immediately after the transfer, is allocated in
increments as may be allowed by the Trustee. Thereafter, the
Participant's interest in said Investment Fund(s) shall be
subject to transfer in accordance with this Section.
(G) Forfeitures arising under the Plan will be invested in an
Investment Fund as may be selected in the discretion of the
Employer.
(H) In the event the Trust holds life insurance, the following
restrictions shall apply:
(1) Limitations on Premium Payments
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(a) If ordinary or whole life insurance
contracts are purchased on the life of a
Participant, less than one-half of the
insured Participant's current allocation of
contributions will be used to pay premiums
attributable to such insurance. Ordinary or
whole life insurance contracts are those
with both nondecreasing benefits and
nonincreasing premiums.
(b) If term or universal life insurance
contracts are purchased, no more than
one-quarter of the insured Participant's
current allocation of contributions will be
used to pay premiums attributable to such
insurance.
(c) If a combination of ordinary or whole life
insurance contracts and term or universal
life insurance contracts are purchased, the
sum of one-half of the ordinary life
insurance premiums and all other life
insurance premiums will not exceed
one-fourth of the aggregate employer
contributions allocated to any participant.
(2) The Plan Administrator will direct the Trustee to
convert the entire value of any life insurance
contract at or before the Participant's actual
retirement or distribution on termination of
employment, but not later than the Participant's
Required Beginning Date to provide cash values or
retirement annuity income, or, subject to the Joint
and Survivor Annuity waiver requirements of Section
7.10, the Plan Administrator may direct the Trustee
to distribute the insurance contract directly to the
Participant.
(3) The Trustee, at the direction of the Employer shall
be entitled to exercise all rights and options with
respect to any such life insurance contracts held by
the Plan.
10.8 REGISTRATION, DISTRIBUTION AND VOTING OF EMPLOYER STOCK AND PROCEDURES
REGARDING TENDER OFFERS.
(A) All voting rights on shares of Employer Stock held in the
Employer Stock Fund shall be exercised by the Trustee only as
directed by the Participants acting in their capacity as
"Named Fiduciaries" (as defined in Section 402 of the Act) in
accordance with the following provisions of this Section
10.8(A):
(1) As soon as practicable before each annual or special
shareholders' meeting of the Employer, the Trustee
shall furnish to each Participant sufficient copies
of the proxy solicitation material sent generally to
shareholders, together with a form requesting
confidential instructions on how the shares of
Employer Stock allocated to such Participant's
account, and, separately, such shares of Employer
Stock as may be unallocated ("Unallocated Shares") or
allocated to Participant accounts but for which the
Trustee does not receive timely voting instruction
from the Participant ("Non-Directed Shares"),
(including fractional shares to 1/1000th of a share)
are to be voted. The direction with respect to
Non-Directed Shares and Unallocated Shares shall
apply to such number of votes equal to the total
number of votes attributable to Non-Directed Shares
and Unallocated Shares multiplied by a fraction, the
numerator of which is the number of shares of
Employer Stock credited to the Participant's account
and the denominator of which is the total number of
shares credited to the accounts of all such
Participants who have timely provided directions to
the Trustee with respect to Non-Directed Shares and
Unallocated Shares under this Section 10.8(A)(1). The
Employer and the Committee will cooperate with the
Trustee to ensure that Participants receive the
requisite information in a timely manner. The
materials furnished to the Participants shall include
a notice from the Trustee that the Trustee will vote
any shares for which timely instructions are not
received by the Trustee as may be directed by those
voting Participants, acting in their capacity as
Named Fiduciaries of the Plan as provided above. Upon
timely receipt of such instructions, the Trustee
shall vote the shares as instructed. The instructions
received by the Trustee from Participants or
Beneficiaries shall be held by the Trustee in strict
confidence and shall not be divulged or released to
any person including directors, officers or employees
of the Employer, or of any other company, except as
otherwise required by law.
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(2) With respect to all corporate matters submitted to
shareholders, all shares of Employer Stock shall be
voted only in accordance with the directions of such
Participants as Named Fiduciaries as given to the
Trustee as provided in Section 10.8(A)(1). With
respect to shares of Employer Stock allocated to the
account of a deceased Participant, such Participant's
Beneficiary, as Named Fiduciary, shall be entitled to
direct the voting of shares of Employer Sock as if
such Beneficiary were the Participant.
(B) All tender or exchange decisions with respect to Employer
Stock held in the Employer Stock Fund shall be made only by
the Participants acting in their capacity as Named Fiduciaries
with respect to the Employer Stock allocated to their accounts
in accordance with the following provisions of this Section
10.8(B):
(1) In the event an offer shall be received by the
Trustee (including a tender offer for shares of
Employer Stock subject to Section 14(d)(1) of the
Securities Exchange Act of 1934 or subject to Rule
13e-4 promulgated under that Act, as those provisions
may from time to time be amended) to purchase or
exchange any shares of Employer Stock held by the
Trust, the Trustee will advise each Participant who
has shares of Employer Stock credited to such
Participant's account in writing of the terms of the
offer as soon as practicable after its commencement
and will furnish each Participant with a form by
which he may instruct the Trustee confidentially
whether or not to tender or exchange shares allocated
to such Participant's account, and, separately,
Unallocated Shares and Non-Directed Shares (including
fractional shares to 1/1000th of a share). The
directions with respect to Non-Directed Shares and
Unallocated Shares shall apply to such number of
Non-Directed Shares and Unallocated Shares equal to
the total number of Non-Directed Shares and
Unallocated Shares multiplied by a fraction, the
numerator of which is the number of shares of
Employer Stock credited to the Participant's account
and the denominator of which is the total number of
shares credited to the accounts of all such
Participants who have timely provided directions to
the Trustee with respect to Non-Directed Shares and
Unallocated Shares under this Section 10.8(B). The
materials furnished to the Participants shall include
(i) a notice from the Trustee that, except as
provided in this Section 10.8(B), the Trustee will
not tender or exchange any shares for which timely
instructions are not received by the Trustee and (ii)
such related documents as are prepared by any person
and provided to the shareholders of the Employer
pursuant to the Securities Exchange Act of 1934. The
Committee and the Trustee may also provide
Participants with such other material concerning the
tender or exchange offer as the Trustee or the
Committee in its discretion determines to be
appropriate; provided, however, that prior to any
distribution of materials by the Committee, the
Trustee shall be furnished with sufficient numbers of
complete copies of all such materials. The Employer
and the Committee will cooperate with the Trustee to
ensure that Participants receive the requisite
information in a timely manner.
(2) The Trustee shall tender or not tender shares or
exchange shares of Employer Stock (including
fractional shares to 1/1000th of a share) only as and
to the extent instructed by the Participants as Named
Fiduciaries as provided in Section 10.8(B)(1). With
respect to shares of Employer Stock allocated to the
account of a deceased Participant, such Participant's
Beneficiary, as a Named Fiduciary, shall be entitled
to direct the Trustee whether or not to tender or
exchange such shares as if such Beneficiary were the
Participant. If tender or exchange instructions for
shares of Employer Stock allocated to the account of
any Participant are not timely received by the
Trustee, the Trustee will treat the
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non-receipt as a direction not to tender or exchange
such shares. The instructions received by the Trustee
from Participants or Beneficiaries shall be held by
the Trustee in strict confidence and shall not be
divulged or released to any person, including
directors, officers or employees of the Employer, or
of any other company, except as otherwise required by
law.
(3) In the event, under the terms of a tender offer or
otherwise, any shares of Employer Stock tendered for
sale, exchange or transfer pursuant to such offer may
be withdrawn from such offer, the Trustee shall
follow such instructions respecting the withdrawal of
such securities from such offer in the same manner
and the same proportion as shall be timely received
by the Trustee from the Participants, as Named
Fiduciaries, entitled under this Section 10.8(B) to
give instructions as to the sale, exchange or
transfer of securities pursuant to such offer.
(4) In the event an offer shall be received by the
Trustee and instructions shall be solicited from
Participants pursuant to Section 10.8(B)(1-3)
regarding such offer, and prior to termination of
such offer, another offer is received by the Trustee
for the securities subject to the first offer, the
Trustee shall use its best efforts under the
circumstances to solicit instructions from the
Participants to the Trustee (i) with respect to
securities tendered for sale, exchange or transfer
pursuant to the first offer, whether to withdraw such
tender, if possible, and, if withdrawn, whether to
tender any securities so withdrawn for sale, exchange
or transfer pursuant to the second offer and (ii)
with respect to securities not tendered for sale,
exchange or transfer pursuant to the first offer,
whether to tender or not to tender such securities
for sale, exchange or transfer pursuant to the second
offer. The Trustee shall follow all such instructions
received in a timely manner from Participants in the
same manner and in the same proportion as provided in
Section 10.8(B)(1-3). With respect to any further
offer for any Employer Stock received by the Trustee
and subject to any earlier offer (including
successive offers from one or more existing
offerors), the Trustee shall act in the same manner
as described above.
(5) A Participant's instructions to the Trustee to tender
or exchange shares of Employer Stock will not be
deemed a withdrawal or suspension from the Plan or a
forfeiture of any portion of the Participant's
interest in the Plan. Funds received in exchange for
tendered shares will be credited to the account of
the Participant whose shares were tendered and will
be used by the Trustee to purchase Employer Stock, as
soon as practicable. In the interim, the Trustee will
invest such funds in short-term investments permitted
under the Plan, and in the same manner in which
forfeited amounts are invested.
(6) In the event the Employer initiates a tender or
exchange offer, the Trustee may, in its sole
discretion, enter into an agreement with the Employer
not to tender or exchange any shares of Employer
Stock in such offer, in which event, the foregoing
provisions of this Section 10.8(B) shall have no
effect with respect to such offer and the Trustee
shall not tender or exchange any shares of Employer
Stock in such offer.
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(C) The Trustee acting with respect to the Employer Stock Fund may
with the consent of the Committee designate any Employee or
other Trustee as agent to solicit the instructions to vote
provided for in Subsection (A) of this Section, and shall be
held harmless in relying upon such agent's written advice as
to how shares are to be voted, and said Trustee may, with the
consent of the Committee, designate any Employee as agent to
solicit instructions from Participants regarding such a tender
offer, as required under Subsection (B) above, and shall be
held harmless in relying upon such agent's written advice as
to whether shares of Employer Stock are to be tendered.
(D) The Employer shall be responsible for complying with
applicable federal and state securities laws and regulations.
10.9 VALUATION OF INVESTMENT FUNDS AND ACCOUNTS.
(A) As of each Valuation Date, the Trustee shall determine the
fair market value of each Investment Fund, including an
Employer Stock Fund, if any, being administered by the
Trustee. With respect to each such Investment Fund, the
Trustee shall determine (a) the change in value between the
current Valuation Date and the then last preceding Valuation
Date, (b) the net gain or loss resulting from expenses paid
(including fees and expenses, if any, which are to be charged
to such Fund) and (c) realized and unrealized gains and
losses.
The transfer of funds to or from an Investment Fund pursuant
to Section 10.7(C) and payments, distributions and withdrawals
from an Investment Fund to provide benefits under the Plan for
Participants or Beneficiaries shall not be deemed to be gains,
expenses or losses of an Investment Fund.
After each Valuation Date, the Trustee shall allocate the net
gain or loss of each Investment Fund as of such Valuation Date
to the accounts of Participants participating in such
Investment Fund on such Valuation Date. Contributions,
forfeitures and rollovers received and credited to
Participants' accounts as of such Valuation Date, or as of any
earlier date since the last preceding Valuation Date shall not
be considered in allocating gains or losses allocated to
Participants' accounts.
(B) The reasonable and equitable decision of the Trustee as to the
value of each Investment Fund, including an Employer Stock
Fund, if any, and of any account as of each Valuation Date
shall be conclusive and binding upon all persons having any
interest, direct or indirect, in the Investment Funds or in
any account.
ARTICLE XI
ADMINISTRATION
11.1 COMMITTEE MEMBERSHIP. The Employer shall appoint a Committee which
shall consist of at least one member. The Committee members will be
named in the Adoption Agreement and may be, but are not required to be,
Employees of the Employer. All members of the Committee shall serve at
the pleasure of the Employer. In the event that the Committee has
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more than one member, one member shall serve as Chairman and one as
Secretary. Any member of the Committee may resign by notice in writing
to the Employer. Any vacancy in the Committee shall be filled by the
Employer as soon as practicable after a vacancy. If the Employer does
not designate a Committee, the Employer shall assume all of the duties
of the Committee.
11.2 POWERS AND DUTIES OF COMMITTEE. The Committee shall have all powers and
duties and only the powers and duties as are specifically conferred
upon it by this Plan or as the Employer may delegate to or impose upon
it consistent with the provisions of this Plan, ERISA and the Code.
Without limiting the generality of the foregoing, the Committee shall
have the following powers and duties:
(A) to interpret and construe the terms and provisions of this
Plan and to decide any questions which may arise hereunder,
including but not limited to --
(1) the amount of a Participant's Compensation,
(2) a Participant's Years of Service,
(3) the age of any person who might be entitled to
receive benefits,
(4) the right of any person to receive benefits,
(5) the amount of any benefits to be paid to any persons;
(B) to cause to be maintained all necessary records and accounts
under this Plan and to keep in convenient form any data as may
be necessary for valuation of the assets and liabilities;
(C) to rely upon the records of the Employer or upon any
certificate, statement or other representation made to it by a
Participant, a Beneficiary, the authorized representative of
the Participant or Beneficiary, or the Trustee concerning any
fact required to be determined under any of the provisions of
this Plan, and the Committee shall not be required to make
inquiry into the propriety of any action by the Employer or
the Trustee;
(D) to give written notice to a Participant, a Beneficiary, or the
authorized representative of the Participant or Beneficiary,
of the amount of benefits payable under this Plan;
(E) to make and enforce any rules, not inconsistent with this
Plan, as it shall deem necessary or proper for the efficient
administration of this Plan;
(F) to have and exercise such other authority as it deems
necessary to carry out the purposes and provisions of this
Plan, provided that any act of discretion permitted shall be
exercised in a uniform non-discriminatory manner with respect
to individuals in like or similar circumstances;
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(G) to adopt rules and guidelines for the administration of this
Plan, provided that they are not inconsistent with the terms
of this Plan and are uniformly applicable to all persons
similarly situated and to delegate in accordance with Section
11.8 such functions and duties as the Committee deems
advisable;
(H) to establish a funding policy and investment objectives
consistent with the purposes of the Plan and the requirements
of law;
(I) to employ such attorneys, accountants and agents as it shall
determine to assist it in carrying out its duties hereunder.
Except as otherwise provided in this Plan or determined by the
Employer, any action or determination taken or made by the Committee or
any interpretation or construction made by the Committee shall be final
and shall be binding upon all persons. The Committee shall at all times
exercise the power and authority given to it under this Plan in a fair,
reasonable and non-discriminatory manner.
11.3 ACTIONS OF THE COMMITTEE. Any act authorized or required to be taken by
the Committee shall be taken by a decision of the majority of the
members acting at the time. Any decision of the Committee may be
expressed by a vote at a Committee meeting or in writing, signed by all
members of the Committee, without a meeting. All allocation statements,
notices, directions, approvals, instructions and all other
communications required or authorized to be given by the Committee
under this Plan shall be in writing and signed by a majority of the
members of the Committee. The Committee may, however, by an instrument
in writing signed by all the members and filed with the Trustee,
designate one or more if its members as having the authority to sign
all such communications on behalf of the Committee. Until notified in
writing to the contrary, the Trustee shall be fully protected in acting
in accordance with all communications which it considers genuine and to
have been signed on behalf of the Committee by the members authorized
to sign communications. If at any time for any reason the Committee
shall be unable to act with respect to any matter, the Employer shall
act with respect to that matter and its action shall be final and it
shall be binding upon all persons.
11.4 RESIGNATION, REMOVAL AND DESIGNATION OF SUCCESSORS. Any member of the
Committee may resign at any time and any member may be removed by the
Employer with or without cause. In case of resignation, death, removal
or inability or failure for any cause of any member of the Committee to
serve or to continue to serve, a successor shall be appointed by the
Employer. The Committee shall promptly notify the Trustee of any change
in its membership.
11.5 COMMITTEE REVIEW. If any Participant, Spouse, Beneficiary, or other
authorized representative of a Participant, Spouse or Beneficiary shall
file an application with the Committee for benefits under the Plan and
the application is denied, in whole or in part, such applicant shall be
notified of the denial in writing within ninety (90) days of receipt of
the claim. The notice to the applicant shall state that the Committee
has denied the application pursuant to the exercise of its
discretionary powers. This notice shall set forth the specific reasons
for the denial, specific reference to pertinent Plan provisions upon
which the denial is based, a description of any additional information
needed to perfect the claim with an explanation of why it is necessary
and an explanation of procedure for appeal.
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Any Participant, Spouse, Beneficiary, or other authorized
representative of the Participant, Spouse or Beneficiary whose
application for benefits has been denied may, within sixty (60) days
after receiving the notification, make a written application to the
Committee to review the denial. The applicant may request that the
review be made by written statements submitted by the applicant and the
Committee, at a hearing, or by both. Any hearing shall be held in the
main offices of the Employer on a date and time as the Employer shall
designate with at least seven (7) days notice to the applicant unless
the applicant accepts shorter notice. Within sixty (60) days after the
review has been completed, the Employer shall render a written decision
and shall send a copy to the applicant. This decision shall include
specific reasons for the decision, as well as specific references to
the pertinent Plan provisions upon which the decision is based.
If the Participant, Spouse, Beneficiary, or other authorized
representative of a Participant, Spouse or Beneficiary does not file
written notice with the Employer at the times set forth above, the
individual shall have waived all benefits under this Plan other than as
set forth in the notice from the Committee.
11.6 RECORDS. The Committee shall keep or cause to be kept records of all
meetings, proceedings and actions held, undertaken or performed by it
and shall furnish to the Employer reports as the Employer may request.
11.7 COMPENSATION. The members of the Committee shall serve without
compensation for services as such, but all reasonably incurred fees and
expenses shall be paid by the Employer.
11.8 DESIGNATION OF NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY AMONG
FIDUCIARIES. The Employer, the Committee and the Trustee shall be
"Named Fiduciaries" with respect to this Plan as that term is defined
in ERISA. The Named Fiduciaries shall have only those specific powers,
duties, responsibilities and obligations as are given to them under
this Plan. The Named Fiduciaries may designate any person or persons as
a fiduciary and may delegate to such person or persons any one or more
of their powers, functions, duties and responsibilities with respect to
the Plan as set forth in this Plan, authorizing or providing for such
direction, information or action. Any such designation shall be made in
writing and shall become effective upon written acceptance. No such
designation or delegation by the Employer or the Committee of any of
its powers, authority or responsibilities to the Trustee shall become
effective unless such designation or delegation shall first be accepted
by the Trustee in a writing signed by it and delivered to the Employer
or the Committee, as applicable. Furthermore, each Named Fiduciary may
rely upon any such direction, information or action of another Named
Fiduciary as being proper under this Plan and is not required to
inquire into the propriety of any such direction, information or
action. It is intended that under this Plan each Named Fiduciary shall
be responsible for the proper exercise of its own powers, duties,
responsibilities and obligations and shall not be responsible for act
or failure to act of another fiduciary.
11.9 NOTICE BY COMMITTEE OR EMPLOYER. Any communication or notice to any
person by the Committee or the Employer shall be in writing and may be
given by delivery to the person or by first class mail with postage
prepaid addressed to the person at the last address on file with the
Committee or the Employer. Any notice delivered as provided above shall
be deemed to
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have been given when delivered, and any notice mailed as provided above
shall be deemed to have been given when mailed.
11.10 LOANS TO PARTICIPANTS.
(A) (1) In accordance with Section 11.8 above, the
Committee is hereby designated as the named fiduciary
with sole authority and responsibility to approve or
deny loans and, except as provided in subsections (G)
and (H) of this Section, collect unpaid loans, in
accordance with the provisions of this Section 11.10.
This Section 11.10 shall apply if the Employer is
eligible to and elects Item B(16) of the Adoption
Agreement.
(2) Subject to the consent of the Committee, loans may be
made upon approval of the written application of a
Participant or Beneficiary submitted to the
Committee. Such application shall be submitted during
a specified period established by the Committee prior
to the date the loan is to be made. The Committee
shall notify the Participant or Beneficiary whether
the loan has been approved or denied. Loans shall be
made available to all Participants and Beneficiaries
on a reasonably equivalent basis, except that no
loans will be made to any Stockholder-Employee or
Owner-Employee and no loan shall be made to any
Participant which the Committee, upon reviewing the
Participant's written application determines may be
reasonably expected to be unable to repay the loan.
Loans shall not be made available to Highly
Compensated Employees (as defined in Section 414(q)
of the Code) in an amount greater than the amount
made available to other Employees. Except for loans
made prior to the date this Plan is adopted, a
Participant or Beneficiary shall have no more than
five loans outstanding at any given time.
(3) All loans will be adequately secured and will bear a
reasonable rate of interest. Rates of interest will
be determined daily by the Trustee for Plan loans.
The Committee will determine the minimum loan amount
for the Plan.
(B) In reviewing and approving or denying loan applications
hereunder, the Committee shall bear sole responsibility for
ensuring compliance with all applicable federal or state laws
and regulations, including the federal Truth In Lending Act
(15 U.S.C. ss.1601 et seq.), and Equal Credit Opportunity Act
(15 U.S.C. ss.1691 et seq.). The Committee shall upon request
supply the Trustee with evidence that it has complied with
such federal or state law.
(C) Notwithstanding Section 7.13 above, each loan made hereunder
shall be secured by a written assignment, in favor of the
Plan, of that portion of the Participant's accounts which the
Committee determines to be necessary to adequately secure
repayment of the loan.
(D) A Participant must obtain the consent of his or her Spouse, if
any, to use the account balance as security for the loan.
Spousal consent shall be obtained no earlier than the
beginning of the ninety (90) day period that ends on the date
the loan is to be so secured. The consent must be in writing
and must be witnessed by a Plan representative or Notary
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Public. Such consent shall thereafter be binding with respect
to the consenting spouse or any subsequent spouse with respect
to that loan. A new consent shall be required if the account
balance is used for renegotiation, extension, renewal, or
other revision of the loan.
Notwithstanding the preceding paragraph, no spousal consent is
required for the use of the account balance as security for a
Plan loan to the Participant under a safe-harbor profit
sharing Plan as described in Section 7.10(F).
(E) No loan shall be approved by the Committee to any Participant
or Beneficiary in any amount which exceeds the lesser of
(1) $50,000, reduced by the excess (if any) of -
(a) the highest outstanding balance of loans
from the Plan during the one-year period
ending on the day before the date on which
such loan was made, over,
(b) the outstanding balance of loans from the
Plan on the date on which such loan was
made, or
(2) fifty percent (50%) of the present value of the
Participant's nonforfeitable accrued benefit.
For purposes of the above limitation, all loans from all plans
of the Employer and other members of a group of employers
described in Sections 414(b), (c), (m) and (o) of the Code are
aggregated.
The term of the loan shall be determined by the Committee.
Furthermore, any loan shall, by its terms require that
repayment (principal and interest) be amortized in level
payments, not less frequently than quarterly over a period not
extending beyond five years from the date of the loan, except
that the Committee, in its discretion, may permit a repayment
period in excess of five years for loans made to a Participant
or Beneficiary used to acquire a dwelling unit which, within a
reasonable time (determined at the time the loan is made) will
be used as a principal residence of the borrower.
An assignment or pledge of any portion of the participant's
interest in the Plan will be treated as a loan under this
paragraph.
(F) Each loan hereunder shall be made pro rata from the borrowing
Participant's available accounts and Investment Funds. Loan
repayments shall generally be made via payroll deduction,
except that the repayment of outstanding principal at
maturity, in the event the loan is called, or in the event the
Participant chooses to prepay the loan shall be made in such
manner as the Committee shall determine. Loan repayments and
interest thereon shall be credited to the Investment Funds and
accounts in accordance with current elections. No loan shall
be considered a general investment of the Trust Fund. Each
loan shall be evidenced by a written agreement, evidencing the
Participant's obligation to repay the borrowed amount to the
Plan, in such form and with such
PAGE 84
<PAGE> 124
provisions consistent with this Section 11.10 as is acceptable
to the Trustee. All loan agreements shall be deposited with
the Trustee.
(G) In the event a Participant does not repay the principal of
such loan or interest thereon at such times as are required by
the terms of the loan or if the Participant ceases to be an
Employee while such Participant has a loan made hereunder
which is outstanding, the Committee, in its discretion, may
direct the Trustee to take such action as the Committee may
reasonably determine, including:
(1) demand repayment of the loan and, subject to Section
10.4(K), institute legal action against the
Participant to enforce collection of any balance due
from the Participant, or
(2) demand repayment of the loan, and charge the total
amount of the unpaid loan and unpaid interest against
the balance credited to the Participant's vested
account balance which was assigned as security for
the loan and reduce any payment or distribution from
the Trust Fund to which the Participant or the
Participant's Beneficiary may become entitled to the
extent necessary to discharge the obligation on the
loan.
Notwithstanding the foregoing provisions of this Paragraph
(G), in the event of default, foreclosure on the note and
attachment of security will not occur until a distributable
event occurs in the Plan.
(H) In the event the Committee fails or refuses for any reason to
direct the Trustee as provided in Paragraph (G) above or if
the Trustee otherwise reasonably concludes that the
collectibility of a loan hereunder is in jeopardy, the Trustee
is authorized to take such action as it may reasonably
determine to enforce repayment and satisfaction of the loan.
The Employer shall be responsible for costs and expenses
incurred in collecting any loan balance.
(I) In the event that the amount of any payment or distribution
from the Trust Fund is insufficient to repay the balance due
on any loan, the Participant shall be liable for and continue
to make repayments on such balance.
(J) If a valid spousal consent has been obtained in accordance
with Paragraph (D), then, notwithstanding any other provision
of this Plan, the portion of the Participant's vested account
balance used as a security interest held by the Plan by reason
of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account
balance payable at the time of death or distribution, but only
if the reduction is used as repayment of the loan. If less
than 100% of the Participant's vested account balance
(determined without regard to the preceding sentence) is
payable to the surviving Spouse, then the account balance
shall be adjusted by first reducing the vested account balance
by the amount of the security used as repayment of the loan,
and then determining the benefit payable to the surviving
Spouse.
PAGE 85
<PAGE> 125
ARTICLE XII
FAILURE TO ATTAIN OR RETAIN QUALIFIED STATUS
12.1 FAILURE TO QUALIFY AS A PROTOTYPE. This Plan is established with the
intent that it shall qualify under Section 401 of the Code and that it
shall comply with ERISA and all other applicable laws, regulations and
rulings. It may be modified and amended retroactively, if necessary, to
secure such qualification. Should the Internal Revenue Service
determine that this Plan does not qualify under the Code or any statute
of similar import, or fails or refuses to issue an opinion, and if the
Plan is not amended, as required to qualify, before the time allowed by
law for the Employer to file its corporate federal tax return for the
taxable year in which the Effective Date occurs, the Plan shall be
considered to be rescinded and of no force and effect. Any assets
attributable to contributions made by the Employer shall be returned to
the Employer by the Trustee as soon as administratively feasible. The
Employer shall refund to the Participant any contributions made by the
Participant to the Plan.
12.2 FAILURE OF EMPLOYER TO ATTAIN OR RETAIN QUALIFICATION. If the
Employer's Plan fails to attain or retain qualification, such Plan will
no longer participate in this prototype Plan and will be considered an
individually designed Plan.
ARTICLE XIII
MISCELLANEOUS
13.1 EMPLOYER ACTION. Except as may be specifically provided herein, any
action required or permitted to be taken by the Employer may be taken
on behalf of the Employer by any officer of the Employer.
13.2 NO GUARANTEE OF INTERESTS. Neither the Trustee, the Employer nor any
other named fiduciary in any way guarantees the Trust Fund from loss or
depreciation, nor do they guarantee any payment to any person. The
liability of the Trustee, the Employer and a named fiduciary to make
any payments hereunder is limited to the available assets of the Trust
Fund.
13.3 EMPLOYMENT RIGHTS. The Plan is not a contract of employment.
Participation in the Plan will not give any Participant the right to be
retained in the Employer's employ, nor any right or claim to any
benefit under the Plan, unless the right or claim has specifically
accrued under the Plan.
13.4 INTERPRETATIONS AND ADJUSTMENTS. To the extent permitted by law, an
interpretation of the Plan and a decision on any matter within a named
fiduciary's discretion made in good faith is binding on all persons. A
misstatement or other mistake of fact shall be corrected when it
becomes known and the person responsible shall make such adjustment on
account thereof as he or she considers equitable and practicable.
13.5 UNIFORM RULES. In the administration of the Plan, uniform rules will be
applied to all Participants similarly situated.
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<PAGE> 126
13.6 EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person
acting on it considers pertinent and reliable and signed, made or
presented by the proper party or parties.
13.7 WAIVER OF NOTICE. Any notice required under the Plan may be waived by
the person entitled to notice.
13.8 CONTROLLING LAW. The law of the state where the Trustee is located
shall be the controlling state law in all matters relating to the Plan
and shall apply to the extent that it is not preempted by the laws of
the United States of America.
13.9 TAX EXEMPTION OF TRUST. The trust herein created is designated as
constituting a part of a Plan intended to qualify under Sections 401(a)
of the Code and to be tax-exempt under Section 501(a) of the Code.
13.10 COUNTERPARTS. The Plan may be executed in two or more counterparts, any
one of which will be an original without reference to the others.
13.11 ANNUAL STATEMENT OF ACCOUNT. The assets of the Trust Fund will be
valued annually at fair market as of the last day of each Plan Year. On
such date the earning and losses of the Trust Fund will be allocated to
each Participant's accounts in the ratio that such account balance
bears to all account balances. The Trustee will deliver to the Employer
a statement of each Participant's account balances as of the last day
of Plan Year.
13.12 NO DUTY TO INQUIRE. No person shall have any duty to make any inquiry
as to the application or use of the Trust Fund, or any part thereof, or
to inquire into the validity, expediency or propriety of any matter or
thing done or proposed to be done by the Trustee.
13.13 INVALIDITY. In case any provisions of this Plan shall be invalid, this
fact shall not affect the validity of any other provision.
13.14 TITLES. Titles to Articles and Sections are for convenience only and
shall have no bearing upon the construction or interpretation of this
Plan.
13.15 NO DUTY OF TRUSTEE TO COLLECT CONTRIBUTIONS. The Trustee shall be
accountable for all contributions received but shall have no duty to
require any contributions to be delivered or to determine if the
contributions received comply with the Plan or with any Board of
Directors resolution of the Employer providing for contributions.
13.16 TRUSTEE DISTRIBUTES BY COMMITTEE DIRECTION. The Trustee shall make
distributions only through Committee direction. The Trustee shall have
no responsibility to see how distributions are applied or to ascertain
whether the Committee's directions comply with the Plan.
Notwithstanding anything in the Plan to the contrary, payments made in
accordance with these provisions will continue only so long as amounts
remain in the Participant's accounts.
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<PAGE> 127
ARTICLE XIV
AMENDMENT OR TERMINATION
14.1 AMENDMENT BY THE SPONSOR. Society National Bank, the sponsoring
organization, reserves the right without being required to obtain the
approval of the Employer to amend any part of the Plan from time to
time, subject to the provisions of Article XII, Section 14.2 and the
following:
(A) Except as provided in Section 14.1(B) and (C), no amendment
shall become effective until at least thirty (30) days' prior
written notice (unless the Employer agrees to shorter notice)
has been given to the Employer, nor shall any such amendment
reduce Participants' benefits to less than the benefits to
which they would have been entitled if they had resigned from
the employ of the Employer on the effective date of the
amendment;
(B) An amendment of the Plan and Trust which the sponsor deems
necessary to enable the Plan and Trust to meet the
requirements of Section 401(a) of the Code may be made
effective as of the date the Plan and Trust was established by
the sponsor or as of any subsequent date;
(C) An amendment of the Plan and Trust to conform the Plan and
Trust to any change in the law, regulations or rulings of the
United States may take effect as of the date such amendment is
required to be effective. Any amendment executed pursuant to
the provisions of this Section 14.1 shall be executed by an
authorized officer of the sponsor, or its successor. For
purposes of this Section 14.1, the Employer shall be deemed to
have been furnished a copy of any amendment on the business
day next following the mailing by the sponsor or the Trustee.
14.2 AMENDMENT BY ADOPTING EMPLOYER. The Employer may (1) change the choice
of options in the Adoption Agreement, (2) add overriding language in
the Adoption Agreement when such language is necessary to satisfy
Section 415 or Section 416 of the Code because of the required
aggregation of multiple plans, and (3) add certain model amendments
published by the Internal Revenue Service which specifically provide
that their adoption will not cause the Plan to be treated as
individually designed. An Employer that amends the Plan for any other
reason, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, will no longer participate in this Master
or Prototype Plan and will be considered to have an individually
designed Plan.
14.3 VESTING - PLAN TERMINATION. In the event of termination or partial
termination of the Plan, the account balance of each affected
Participant will be nonforfeitable.
14.4 VESTING - COMPLETE DISCONTINUANCE OF CONTRIBUTIONS. In the event of a
complete discontinuance of contributions under the Plan, the account
balance of each affected Participant will be nonforfeitable.
14.5 PLAN MERGER - MAINTENANCE OF BENEFIT. In the event of a merger or
consolidation with, or transfer of assets to any other Plan, each
Participant will receive a benefit immediately after the merger,
consolidation or transfer (if the Plan then terminated) which is at
least equal to the
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<PAGE> 128
benefit the Participant was entitled to immediately before such merger,
consolidation or transfer (if the Plan had then terminated).
14.6 DIRECT TRANSFER. In its discretion, the Trustee may accept the direct
transfer of Plan assets from the trustee of other retirement plans
described in Code Section 401(a). If the Plan receives a direct
transfer of elective deferrals (or amounts treated as elective
deferrals) under a Plan with a Code Section 401(k) arrangement, the
distribution restrictions of Code Sections 401(k)(2) and (10) continue
to apply to those transferred elective deferrals.
14.7 TERMINATION OF PARTICIPATION BY EMPLOYER. The Employer expects to
continue its participation in this Plan indefinitely but reserves the
right to terminate this Plan as to its Employees at any time by written
instrument filed with the Trustee. In the event of such termination,
partial termination or complete discontinuance of contributions, or
termination as provided in Section 13.3, the account balance of each
affected Participant will be nonforfeitable. Distribution to
Participants who have theretofore become entitled to the payment of any
benefits hereunder or to Spouses or Beneficiaries of deceased
Participants shall be made in the same manner as if the Employer's
participation had not terminated or contributions had not been
discontinued.
The account(s) of each such Participant, in the event of payment in
other than a single sum, need not be converted into cash, but may
continue to remain in the trust, with a right and obligation thereafter
to participate in the net earnings, losses, taxes and expenses of the
trust.
If any Participant shall die after the termination of the Employer's
participation and before all of said Participant's interest has been
paid, then, upon the written direction of Employer, the entire
undistributed portion shall be paid in a single sum to the
Participant's Beneficiary.
In the event of complete discontinuance of contributions, the Employer
shall terminate this Plan as to its Employees and each Participant's
interest shall be distributed to such Participant.
14.8 NOTICE OF AMENDMENT, TERMINATION OR PARTIAL TERMINATION. The Committee
will notify affected Participants of an amendment, termination or
partial termination of the Plan within a reasonable time.
14.9 SUBSTITUTION OF TRUSTEE. Any corporation or association into which the
Trustee may be converted, merged or with which it may be consolidated,
or any corporation or association resulting from any conversion,
merger, reorganization or consolidation to which the Trustee may be a
party, shall be the successor of the Trustee hereunder without the
execution or filing of any instrument or the performance of any further
act.
ARTICLE XV
DISCHARGE OF DUTIES BY FIDUCIARIES
15.1 DISCHARGE OF DUTIES. Subject to the provisions of Articles IX and X,
the Named Fiduciaries and any other fiduciary shall discharge their
respective duties set forth in the Plan solely in the interest of the
Participants and their Spouses and Beneficiaries and:
(A) for the exclusive purpose of:
PAGE 89
<PAGE> 129
(1) providing benefits to Participants and their Spouses
and Beneficiaries; and
(2) defraying reasonable expenses of administering the
Plan;
(B) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in
a like capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and with like
aims; and
(C) by diversifying the investments of the Plan so as to minimize
the risk of large losses, unless under the circumstances it is
clearly prudent not to do so.
ARTICLE XVI
AMENDMENT AND CONTINUATION OF ORIGINAL PLAN
16.1 AMENDMENT AND CONTINUATION. Notwithstanding any of the foregoing
provisions of the Plan to the contrary, an Employer which has
previously established a profit sharing Plan and trust or money
purchase pension Plan and trust, as applicable, (the "Original Plan")
may, in accordance with the provisions of the Original Plan, amend and
continue that Plan in the form of this Plan and Trust and become an
Employer hereunder, subject to the following:
(A) Subject to the conditions and limitations of the Plan, each
person who is a Participant or former Participant under the
Original Plan immediately prior to the Effective Date of the
amendment and continuation thereof in the form of this Plan
will continue as a Participant under this Plan;
(B) The words "Original Plan" shall be substituted for the word
"Plan" where the word appears in Section 2.2 of the Plan;
(C) No election may be made in the Adoption Agreement if such
election will reduce the benefits of a Participant under the
Original Plan to less than the benefits to which he would have
been entitled if he had resigned from the employ of the
Employer on the date of the amendment and continuation of the
Original Plan in the form of this Plan;
(D) The amounts, if any, credited to a Participant's or former
Participant's accounts, immediately prior to the Effective
Date of the amendment and continuation of the Original Plan in
the form of this Plan shall constitute the opening balances in
his or her accounts, as appropriate, under this Plan and
Trust;
(E) Amounts being paid to a former Participant or Beneficiary in
accordance with the provisions of the Original Plan shall
continue to be paid in accordance with such provisions; and
(F) Any Beneficiary designation in effect under the Original Plan
immediately before its amendment and continuation in the form
of this Plan shall be deemed to be a valid Beneficiary
designation filed with the Employer under Section 7.7 of this
Plan, to the extent consistent with the provisions of this
Plan, unless and until the Participant or
PAGE 90
<PAGE> 130
former Participant revokes such Beneficiary designation or
makes a new Beneficiary designation under this Plan.
IN WITNESS WHEREOF, Society National Bank has established this
prototype Plan as of the 24th day of March, 1995.
SOCIETY NATIONAL BANK
By: /s/ Edward J. Tognetti
---------------------------------------------------
Title: Senior Vice President and General Counsel
------------------------------------------------
PAGE 91
<PAGE> 131
<TABLE>
<S> <C>
INTERNAL REVENUE SERVICE Department of the Treasury
Plan Description: Prototype Non-standardized Profit Sharing Plan with CODA
FFN: 50351860005-002 Case: 9401342 EIN: 34-0797057 Washington, DC 20224
BPD: 05 Plan: 002 Letter Serial No: D363689a
SOCIETY NATIONAL BANK Person to Contact: Ms. Arrington
127 PUBLIC SQUARE Telephone Number: (202) 622-8173
CLEVELAND, OH 44114 Refer Reply to: CP:E:EP:T5
Date: 03/24/95
</TABLE>
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit of
their employees. This opinion relates only to the acceptability of the form of
the plan under the Internal Revenue Code. It is not an opinion of the effect of
other Federal or local statutes.
You must furnish a copy of this Letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). Therefore, an employer adopting the form of the plan should apply for a
determination letter by filing an application with the Key District Director of
Internal Revenue Service on Form 5307, Short Form Application for Determination
for Employee Benefit Plan.
Because you submitted this plan for approval after March 31, 1991, the
continued, interim and extended reliance provisions of sections 13 and 17.03 of
Rev. Proc. 89-9, 1989-1 C.B. 780, are not applicable.
Because you submitted this plan on or after July 1, 1994, it does not meet the
requirements for the extension of the remedial amendment period provided by
Rev. Proc. 95-12, 1995-3 I.R.B. 24.
This letter may not be relied upon with respect to whether the plan satisfies
the qualification requirements as amended by Uruguay Round Agreements Act,
Pub. L. 103-465.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
/s/ Jeanne Royal Singley
Chief, Employee Plans Technical Branch
<PAGE> 1
Exhibit 13
[OUTSIDE FRONT COVER]
THE TRANZONIC COMPANIES
[TRANZONIC LOGO]
[PHOTO 1: Photo of Morton L. Reitman, William E. Hermann, Kathleen A. Metzger
and Beth Smylie Richardson, the President, Executive Vice President, Vice
President Administration and Vice President Retail Division, respectively, of
the Personal Care Division, and miscellaneous personal care products.]
ANNUAL REPORT 1996
[PHOTO 2: Photo of Richard J. Sims, Christopher T. Cira and Norman D. Sull, the
President, Assistant Vice President Finance, and Vice President Purchasing,
respectively, of the Industrial Textiles Division, and miscellaneous industrial
wiping and cleaning products.]
THE BEST PEOPLE
[PHOTO 3: Photo of Dennis H. Kelly, James D. Armstrong, Jr., and Robert E.
Isaacs, the President, Plant Manager - Perrysburg, and National Sales Manager,
respectively, of the Industrial Packaging Divisions, and miscellaneous paper
tubes, sleeves and cores.]
PRODUCE THE BEST RESULTS
<PAGE> 2
THE TRANZONIC COMPANIES
Headquartered in Cleveland, Ohio, The Tranzonic Companies manufactures and
distributes nationally a wide variety of products to the industrial,
institutional, and consumer sectors. Expanding outward from strengths in paper
and cloth products, Tranzonic has added complementary product lines in personal
hygiene, maintenance and safety, and industrial packaging in order to serve as a
primary supplier in each of its customer segments. Product quality and customer
service have been primary growth drivers, and the Company has been enhancing
efficiency through the implementation of leading-edge management and information
strategies. The Company has expanded through both internal development and
strategic acquisitions of growth businesses that have strong synergy with
existing operations.
[PHOTO 4: Photo of miscellaneous personal care products.]
[PHOTO 5: Photo of miscellaneous industrial wiping and cleaning products and
protective garments.]
[PHOTO 6: Photo of miscellaneous paper tubes, sleeves and cores.]
[INSIDE FRONT COVER]
<PAGE> 3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
For the Years Ended February 29/28 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Sales .......................................... $ 137,215,521 126,940,765
Operating earnings ............................. 7,179,566 7,621,726
Earnings from continuing operations............. 4,416,310 4,531,342
Earnings from discontinued operations
(net of income taxes) ........................ 410,032 754,054
Loss on disposal of Housewares Division
(net of income taxes) ....................... (7,250,000) --
Net earnings (loss) ............................ (2,423,658) 5,285,396
Net earnings (loss) per Common Share:
From continuing operations ................... 1.25 1.29
From discontinued operations ................. (1.94) .22
Cash dividends:
Per Class A Common Share ..................... .195 .18
Per Class B Common Share ..................... .355 .34
Total assets ................................... 75,021,643 80,279,466
Long-term debt ................................. 7,000,000 7,600,000
Shareholders' equity ........................... 49,154,116 52,236,347
Shareholders' equity per Common Share .......... 14.03 15.03
Common Shares outstanding ...................... 3,503,388 3,474,338
</TABLE>
1
<PAGE> 4
TO OUR SHAREHOLDERS
Although financial results in fiscal 1996 were disappointing, several
aspects of Tranzonic's performance suggest that we should emerge successfully
from that difficult period. Each of our divisions produced record sales, and all
were profitable during the year ended February 29th.
Fiscal 1996 consolidated sales from continuing operations grew to $137.2
million, up 8.1 percent from the $126.9 million recorded a year earlier.
However, throughout the year we experienced mounting pressure on profit margins
primarily as a result of raw material cost increases, customer pricing demands
and competition for market share. These market conditions, combined with changes
in product mix, led to a 5.8 percent decline in operating earnings from
continuing operations to $7.2 million. The comparable number last fiscal year
was $7.6 million.
While we have been able to improve operating efficiency, effect cost
savings through our materials procurement practices, and obtain price increases
in some markets, the struggle to preserve margins has been particularly acute in
certain retail segments of our business. Over the past year, we have been
evaluating the opportunities in each of the markets we serve, and reassessing
how best to deploy our resources to achieve long-term profitable growth. This
process included analysis of the factors influencing growth and of the
investment requirements necessary to achieve our goals.
From this assessment, we determined that changes occurring in the retail
marketplace limit the opportunity for adequate earnings growth and return in
relation to the market risks. Thus, we concluded to reduce our involvement in
certain consumer products.
To accomplish this, in late February 1996 we entered into a definitive
agreement to sell our Housewares Division, which principally markets laundry and
closet storage products to mass merchants and specialty retailers, to Whitney
Corr.Pak International, Inc. We completed the sale on March 29, 1996. As a
result of this divestiture, we incurred a one-time fourth quarter non-cash,
after-tax charge of $7.3 million. Together with earnings from discontinued
operations of $410 thousand net of tax, the fourth quarter loss from
discontinued operations totaled $6.8 million, or $1.94 per share, result-
<TABLE>
<CAPTION>
Sales from
Continuing
Operations
(In Thousands)
<S> <C>
92 $105,765
93 $110,188
94 $115,919
95 $126,941
96 $137,216
</TABLE>
<TABLE>
<CAPTION>
Operating
Earnings from
Continuing
Operations
(In Thousands)
<S> <C>
92 $7,490
93 $6,544
94 $4,019
95 $7,622
96 $7,180
</TABLE>
2
<PAGE> 5
[PHOTO 7: Photo of Robert S. Reitman]
Robert S. Reitman
Chairman, President and
Chief Executive Officer
ing in a net loss of $2.4 million for the year. On a per share basis, the
quarter and full year net loss totaled $1.58 and $.69 per share, respectively.
In addition, the douche and enema product lines manufactured by our
Hospital Specialty unit were sold in February 1996, for cash, to NutraMax
Products, Inc., based in Gloucester, Massachusetts. This transaction served to
reduce further our exposure to a particularly price-sensitive segment of the
retail marketplace.
THE DIVESTITURES IN PERSPECTIVE
A significant aspect of our long-term growth plan is to become more
important to each of our customers. We have worked toward that objective by
broadening our product line offerings through internal expansion and
acquisitions. Our investment in building the housewares business from
approximately $3 million when we entered that market in 1988 to $24 million last
year met our original revenue growth objectives. We achieved that level of scale
through internal growth and the four acquisitions that comprised Design Trend,
which would have served us well in the retail environment we entered in 1988.
However, consumer price sensitivity, coupled with the immense purchasing
and pricing power of mass merchandisers, substantially increased the threshold
of scale required to achieve reasonable profitability. Indeed, even large
players in the housewares market balked at raising prices last year--despite
dramatic increases in raw material costs--in the face of pressure from
mass-merchants and specialty retailers.
While such market dynamics may be cyclical, the more important reason for
exiting what has become a very intense retail arena is that it enables us to
focus financial and management resources on growing our businesses which serve
industrial and institutional markets. It is those areas served by our three
remaining business units--Hospital Specialty, CCP Industries and Baxter Tube--in
which we have special experience and knowledge, historically have earned better
margins and a higher rate of return, and see the greatest long-term opportunity.
<TABLE>
<CAPTION>
Net Earnings
from Continuing
Operations
(In Thousands)
<S> <C>
92 $4,693
93 $4,101
94 $2,331
95 $4,531
96 $4,416
</TABLE>
<TABLE>
<CAPTION>
Net Earnings
Per Common Share
from Continuing
Operations
<S> <C>
92 $1.33
93 $1.15
94 $ .67
95 $1.29
96 $1.25
</TABLE>
3
<PAGE> 6
CONTINUED DEVELOPMENT OF CORE STRATEGIES
Building upon the established foundations of each of our remaining
businesses is our first priority going forward. We remain committed to becoming
a much larger company able to deliver profitable growth and a corresponding
increase in shareholder value. That will be achieved by implementing our core
strategies discussed in this letter a year ago, namely: focusing on customers,
implementing technology, and enabling human resource development.
To expand our importance to customers and our customer base, we
aggressively seek acquisitions which add to our array of complementary products.
Our acquisition criteria require a strong existing management team, moderate to
low-cost products that enhance our value to customers as a single source
supplier, and the ability to enhance earnings upon consolidation. Our
acquisition of Plezall Wipers early last year is a good case in point. Now part
of our CCP Industries unit, Plezall increased CCP's scale by expanding
significantly our line of woven textiles thereby, complementing our non-woven
product offerings, expanding CCP's markets and customer base, and opening new
opportunities for market penetration. Plezall was successfully integrated into
CCP and contributed to CCP's strong sales and profit results in fiscal 1996.
Our strategy of implementing information technology has been effective in
improving our sales forecasting, purchasing practices, inventory management, and
cost controls, and in helping to identify market and other trends which offer
opportunity. We are working smarter and more efficiently. Just one reflection of
this is that in a year of rising costs (fiscal 1996), we experienced a modest
decline in the ratio of selling, general and administrative expense to sales.
Important to migrating this technology throughout the Tranzonic
organization is the third part of our core strategy--enabling human resource
development. Strong division management in each of our business units is
supported by the valued experience and dedication of the people who make
<TABLE>
<CAPTION>
Total
Capitalization
(In Thousands)
<S> <C> <C>
92 $42,744 - $195
93 $46,329 - $2,900
94 $47,479 - $9,000
95 $52,236 - $7,600
96 $49,154 - $7,000
Long-Term
Debt
Shareholders'
Equity
</TABLE>
4
<PAGE> 7
up our organization. We rely on them individually and as a team to absorb and
successfully integrate new technologies into their operations, and to identify
the products and services which strengthen our relationships with customers.
THE OUTLOOK
We believe the near- and long-term outlook for The Tranzonic Companies is
bright. While fiscal 1996 produced a pause in our bottom line growth, we believe
that the results of the divestitures will be positive. Proceeds of the sales,
along with our strong financial position and ready access to capital, provide
ample resources to support our acquisition pursuits and other corporate
requirements. We will continue our assessment of each division in the context of
the changing needs of our markets and how to best meet them, and this year we
will implement strategic refinements to our operations that focus on
strengthening our customer-partner relationships and growing our position in the
industrial and institutional markets.
We would like to commend our employees who remain focused on quality and
customer service. We also are grateful to our directors for their important
contributions in shaping our Company and thank our customers for their loyalty
and our shareholders for their continued support in this challenging transition
period.
Sincerely,
/s/ Robert S. Reitman
Robert S. Reitman
Chairman, President and Chief Executive Officer
May 17, 1996
<TABLE>
<CAPTION>
Shareholders'
Equity
Per Share
<S> <C>
92 $12.32
93 $13.21
94 $13.75
95 $15.03
96 $14.03
</TABLE>
5
<PAGE> 8
CRITERIA TO IDENTIFY
ACQUISITION TARGETS
- ----------------------------------- HOSPITAL SPECIALTY [PHOTO 8:
Photo of miscellaneous personal
care products.]
ENHANCE IMPORTANCE TO CUSTOMERS
HIGH-AFFINITY PRODUCT LINE
DIVERSIFICATION
NEW CHANNELS
REGIONAL STRENGTH
CONSOLIDATION POTENTIAL
PRIORITIZING
ACQUISITION TARGETS
- ----------------------------------------------------- CCP INDUSTRIES [PHOTO 9:
Photo of miscellaneous
industrial wiping and
cleaning products and
protective garments.]
OPERATIONS FINANCIAL
SUPERIOR MANAGEMENT EARNINGS MOMENTUM
LOW COST TO PRODUCE BALANCE SHEET HEALTH
TECHNOLOGY RIGHT SIZE
CONSUMABLES
CRITICAL/LOW-COST COMPONENTS
BAXTER TUBE [PHOTO 10: Photo
of miscellaneous paper tubes,
sleeves and cores.]
6
<PAGE> 9
THE OPERATIONS AND MARKETS OF
THE TRANZONIC COMPANIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAJOR PRODUCTS PRINCIPAL MARKETS PRIMARY CUSTOMERS
-------------------------------------------------------------------
<S> <C> <C>
Feminine Hygiene Institutional Grocery and Drug Chains
Adult Incontinence Commercial Mass Merchandisers
Baby Diapers Away From Home Paper Distributors
Toilet Seat Covers Healthcare Janitorial Distributors
Odor Control Consumer Medical Distributors
Washroom Accessories Home Healthcare Dealers
Food Service Distributors
- --------------------------------------------------------------------------------
Industrial Wiping Cloths Automotive Tens of thousands of small
Personal Safety Manufacturing businesses across the U.S.
Work Apparel Food Service and Canada
Specialty Chemicals Facility Maintenance
Environmental Protection Healthcare
Washroom Supplies Graphic Arts
- --------------------------------------------------------------------------------
Forming Tubes Automotive Fiberglass Manufacturers
General-purpose Tubes Industrial Automotive and Industrial
Sleeves Construction Manufacturers
Construction Products
Distributors
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
HOSPITAL SPECIALTY
...the Division is focused on reducing manufacturing costs,
improving productivity, and maintaining an aggressive
marketing posture to hold or gain share...
Hospital Specialty, the Company's Personal Care Division and largest
operating unit, had a modest increase in sales to a new record level in fiscal
1996, with increases recorded in all but one major product category. Operating
profits, however, fell well below those of the prior year primarily as a result
of rapid cost increases in raw materials such as fluff pulp, which is used in
many of the Division's products, and continued pricing pressure in all markets
served. The impact of raw material increases would have been substantially
greater but for the Division's forward purchases of fluff pulp as prices rose.
While the Division was able to obtain price increases for some of its products,
the markets it serves remain very price sensitive. In this environment, the
Division is focused on reducing manufacturing costs, improving productivity, and
maintaining an aggressive marketing posture to hold or gain share.
The Division serves institutional, industrial and to a lesser extent
consumer markets with a broad line of personal care and washroom related
products. Several initiatives undertaken during the year helped to improve
quality and service to distributor-partners and retail customers, and
contributed to sales growth. These initiatives included: introduction of
restroom deodorant systems; continued product bundling for industrial
distribution; improved use of computerized distribution systems; restructuring
of sales, technical and administrative staff; and aggressive marketing of many
new products.
Building on its program of bundling synergistic products, the Division's
"Total Washroom Essentials" (TWE) program accounted for solid growth including
sales of restroom deodorant systems. The TWE program features MAXITHINS(R) and
GARDS(R) feminine napkins, Tampax(R) brand tampons, HEALTHGARDS(R) toilet seat
covers, HEALTHGARDS(R) odor control systems, and Hospeco washroom accessories.
The TWE program was introduced in fiscal 1995 and has proven successful
through offering an integrated bundle of value-added products to institutional
and industrial customers. The program is a significant shift from traditional
product focus to a total program concept that enhances the Division's value as a
single-source supplier to our industrial distributors.
The largest sales gain came from the toilet seat cover segment where the
Division was able to gain market share. In addition to toilet seat covers, sales
of restroom deodorant systems were also strong throughout most of the year. Both
are integral lines in the Division's core business. The institutional business
offers the greatest opportunities for profitable growth which will be augmented
by new products added through internal development and acquisitions. As noted in
the Letter to Shareholders, the Division sold its douche and enema product lines
during the year, thus reducing its exposure to a particularly price-sensitive
segment of the retail marketplace.
Personal Care Division
- ----------------------
MORTON L. REITMAN (Standing middle)
President
WILLIAM E. HEMANN (Standing left)
Executive Vice President
KATHLEEN A. METZGER (Seated)
Vice President Administration
BETH SMYLIE RICHMAN (Standing right)
Vice President Retail Division
8
<PAGE> 11
[PHOTO 11: Photo of Morton L. Reitman, William E. Hermann, Kathleen A. Metzger
and Beth Smylie Richardson, the President, Executive Vice President, Vice
President Administration, and Vice President Retail Division, respectively, of
the Personal Care Division, in the foreground, with shelves stocked with
miscellaneous personal care products in the background.]
9
<PAGE> 12
[PHOTO 12: Photo of Richard J. Sims, Christopher T. Cira, David J. Williams,
Robert W. Dailey III, Norman D. Sull, Helen Malhotra, Brian H. Markowitz and
Daniel R. Moon, the President, Assistant Vice President Finance, Vice President
Sales, Vice President Market Development, Vice President Purchasing, Assistant
Vice President Information Systems, Vice President and Assistant Vice President
Marketing, respectively, of the Industrial Textiles Division, seated at and
standing by a table of miscellaneous industrial wiping and cleaning products
and protective garments.]
10
<PAGE> 13
CCP INDUSTRIES, INC.
...additional development and enhancement of key procurement
relationships resulted in a better than expected expansion
into wholesale channel sales...
Fiscal 1996 was a year of record performance for CCP Industries, our
Industrial Textiles Division. All three of the Division's business units: CCP
U.S., CCP Canada and Plezall Wipers, acquired at the beginning of the fiscal
year, contributed to the significant gains in sales and operating income.
This superior performance was driven by a number of key initiatives in
CCP's business plan. Continuous improvement initiatives in marketing, sales
management and operations resulted in product line diversification, development
of additional management information systems, sales training and service
enhancements. Additional development and enhancement of key procurement
relationships resulted in a better than expected expansion into wholesale
channel sales. These accomplishments were consistent with business strategies
which focus on customer relationship management, strategic acquisitions and
alliances, profit maximization and development of a progressive corporate
culture.
Lavatory supplies, safety products and work apparel product categories
registered the strongest growth last year. Growth in all product categories is
accomplished most effectively by increasing sales to existing customers. Product
development and line diversification play a large part in achieving that end.
During the past year dozens of products were added to the Division's work
apparel, wiping cloths, washroom, chemicals and cleaning supplies, and safety
lines. CCP has sharpened its focus on specific industry segments, such as
automotive and graphics, to achieve greater market penetration. It has expanded
its use of telephone sales and developed new management information enabling CCP
quickly to direct its resources toward under-performing areas. All of these
initiatives have contributed to CCP's ability to serve customers in a broad
array of industrial, commercial and institutional markets.
Intensive on-going sales training programs equip our more than 250 sales
people to better communicate the benefits and cost savings which CCP offers as a
primary supplier. Among these benefits are quality guaranteed product bundles,
application solutions, reduced procurement cost through our Primary Supplier
Approach, and customized products and solutions. Training extends to programs
aimed at improving management skills, and addresses specific operating functions
such as purchasing, inventory management, computer systems, and safety, to name
only a few. In addition to helping employees develop their potential and become
more productive, training is an important inducement to retaining the best
people.
CCP continues to develop into a progressive manufacturing and distribution
company focused on long-term growth, supported by a large sales force and
product line diversification that improves its position as a primary supplier to
customers. To increase this diversification, CCP will continue to develop
creative resources and undertake strategic acquisitions and alliances that
strengthen relationships with major suppliers and heighten value to customers.
Industrial Textiles Division
- ----------------------------------------
(Starting in lower left going clockwise)
RICHARD J. SIMS
President
CHRISTOPER T. CIRA
Assistant Vice President Finance
DAVID J. WILLIAMS
Vice President Sales
ROBERT W. DAILEY, III
Vice President
Market Development
NORMAN D. SULL
Vice President Purchasing
HELEN MALHOTRA
Assistant Vice President
Information Systems
BRIAN H. MARKOWITZ
Vice President
DANIEL R. MOON
Assistant Vice President
Marketing
11
<PAGE> 14
BAXTER TUBE COMPANY
...Baxter employees provide a high degree of knowledgeable
support in product application and problem solving that
enhances customer satisfaction...
Baxter Tube Company, our Industrial Packaging Division, overcame a myriad
of challenges in fiscal 1996 to score double-digit increases in sales over the
prior record year and achieve the best operating earnings in its history. This
progress was achieved despite flattening of sales among some existing customers
as business levels peaked. Baxter offset this condition through a combination of
pricing initiatives which enabled it to hold its position with existing
customers while successfully developing new account activity.
Baxter met the challenges of rapidly rising raw material costs and
restricted availability of certain raw materials through internal improvements
and corrective actions which, combined with a recent easing in the raw material
market and active purchasing efforts, indicates improved earnings potential in
the period ahead.
Baxter produces spiral wound paper tubes, cores and sleeves for a wide
variety of industrial applications. It focuses on customer relations with an
emphasis on consumable products that meet all requirements for cost
effectiveness and quality. Baxter's products are used in industries, such as
fiberglass production, where its forming tubes have proven to be technically
superior and cost-efficient, and in the automotive industry where Baxter
products have found a wide range of general and product-specific uses. While
Baxter's business is global, the majority of revenue arises in the United
States.
Baxter's products are manufactured under carefully controlled conditions
emphasizing techniques that ensure the high quality required to satisfy our
customers' performance criteria. This close attention to quality manufacturing
was recognized again in fiscal 1996 as the Division's Minerva, Ohio, plant
achieved International Organization for Standardization Certification,
ISO-9002:94. Its Ware Shoals, South Carolina, plant received that status in
fiscal 1995. ISO Certification affirms, through an audit by the ISO third party
assessor, that a company documents its quality policies and procedures, trains
its people and audits processes to ensure compliance. The Certification
confirms, in effect, that Baxter does what it says it will do in delivering
products manufactured to its high quality levels. Since only some 700 U.S.
companies are currently ISO Certified, Baxter is in very select company. In
addition to a strong quality system, Baxter employees provide a high degree of
knowledgeable support in product application and problem solving that enhances
customer satisfaction.
Baxter's sales efforts will be enhanced by further training and aggressive
deployment of its direct sales force--an initiative that will impact positively
its ability to sell in increasing depth to volume core and tube users. In
addition, the Division remains focused on continued product development and
increased plant productivity.
Industrial Packaging Division
- ------------------------------
DENNIS H. KELLY (Seated right)
President
ROBERT A. DOUGLAS (Seated left)
Financial Manager
KENNETH E. ZWICK (Standing left)
Plant Manager-Minerva
JAMES D. ARMSTRONG, JR. (Standing middle)
Plant Manager-Perrysburg
ROBERT E. ISAACS (Standing right)
National Sales Manager
BUSTER T. SIMPSON (not pictured)
Plant Manager-Ware Shoals, SC
12
<PAGE> 15
[PHOTO 13: Photo of Dennis H. Kelly, Robert A. Douglas, Kenneth E. Zwick, James
D. Armstrong, Jr., and Robert E. Isaacs, the President, Financial Manager,
Plant Manager - Mineva, Plant Manager - Perrysburg, and National Sales Manager,
respectively, of the Industrial Packaging Division, seated on or standing near
paper tubes and cores.]
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS:
FISCAL 1996 COMPARED TO FISCAL 1995
On February 29, 1996, the Company signed a definitive agreement to sell for
cash substantially all net operating assets of its Housewares Division, Design
Trend. Conse-quently, results of operations discussed below have been
reclassified to reflect both continuing and discontinued operations. The
divestiture, which occurred on March 29, 1996, represents a strategic
redirection in the Company's allocation of resources away from the consumer
retail market.
As a result of that transaction, the Company incurred a fourth quarter
non-cash after-tax charge of $7.3 million, or $2.06 per share. This charge,
combined with earnings from discontinued operations of $410 thousand, or 12
cents per share, resulted in a fiscal 1996 loss from discontinued operations of
$6.8 million, or $1.94 per share. Earnings from discontinued operations in
fiscal 1995 were $754 thousand, or 22 cents per share. In combining continued
and discontinued operations the Company reported a fiscal 1996 net loss of $2.4
million, or 69 cents per share, compared with prior fiscal year earnings of $5.3
million, or $1.51 per share.
Sales from continuing operations for the fiscal year ended February 29, 1996
were $137.2 million, 8.1 percent above the $126.9 million of fiscal 1995. Each
of the three continuing operating units contributed to this sales gain. Of the
sales increase recorded in fiscal 1996, 52 percent resulted from the addition of
Plezall Wipers, acquired at the beginning of the fiscal year. Selective price
increases instituted during the year added 30 percent to year over year sales
gains. The introduction of new products such as our restroom deodorants systems
distributed through Hospital Specialty (our Personal Care Division), and the
expansion of new safety products distributed by CCP Industries (our Industrial
Textiles Division), added 16 percent to the fiscal year overall increase. The
Company's continuing initiatives to improve sales force effectiveness through
product line extensions, sales force training and the use of sales management
information systems helped to improve volume sales.
The cost of goods sold for continuing operations increased to 68.6 percent
of sales in fiscal 1996 from 65.8 percent for fiscal 1995. This increase was the
result of a combination of forces, including the dramatic increase in the price
of fluff pulp and paper which did not begin to subside until late in the fourth
quarter of fiscal 1996. Pricing of fluff pulp, the major raw material component
of product cost at Hospital Specialty, nearly doubled at its peak in late fiscal
1996 over its lowest level in fiscal 1995. Other factors influencing cost of
goods as a percent of sales include competitive pricing in consumer markets and
the increase in sales of lower gross margin wholesale products.
Tight control of selling, general and administrative expenses and continued
improvement in administrative efficiency resulting from the effective use of
technology in the areas of marketing and distribution resulted in a decrease in
these expenses to 26.1 percent of sales for fiscal 1996 from 28.2 percent for
the prior fiscal year. Two other events, which occurred during the fourth
quarter of the current fiscal year, added to this favorable decline. Consistent
with the strategic redirection exemplified by the sale of Design Trend, our
Hospital Specialty Division sold for a gain ($931,800) certain assets comprising
its douche and enema line of business. In addition, the insurance company which
administers the Company's health and welfare benefits plan converted to a stock
company from a
14
<PAGE> 17
mutual company. In the conversion, the Company received shares which it sold for
a gain ($604,500). The proceeds will be used to fund future health claims.
Earnings from continued operations declined 2.5 percent to $4.4 million in
fiscal 1996 from $4.5 million in fiscal 1995. Highly competitive and
price-sensitive customers forced the Company to absorb rapidly escalating raw
material costs in several product categories. As a result, earnings from
continued operations fell to 3.2 percent from 3.6 percent in fiscal 1995.
Net interest expense increased to $594 thousand in fiscal 1996, as compared
to $317 thousand in fiscal 1995. This 87.2 percent increase was the result of
higher borrowing levels related to the acquisition of Plezall and forward
purchases of raw materials, and higher interest rates which raised the cost of
borrowing. Interest coverage, calculated as operating earnings divided by net
interest expense, fell to 12.1 times for fiscal 1996 from 24.0 times for fiscal
1995.
Earnings from continuing operations before income taxes for fiscal 1996
declined to $6.6 million from $7.3 million in the preceding fiscal year.
Consistent with the lower earnings, income taxes fell to $2.2 million from $2.8
million for fiscal 1995. The effective tax rate also declined to 32.9 percent
for fiscal 1996 versus 38.0 percent for the prior fiscal year. This improvement
resulted from lower state and local taxes and the increase in tax-exempt income
earned by the Company.
RESULTS OF OPERATIONS:
FISCAL 1995 COMPARED TO FISCAL 1994
Fiscal 1995 sales from continuing operations were $126.9 million, 9.5
percent above the $115.9 million level achieved in fiscal 1994. Growth in adult
incontinent product sales provided the largest increase in sales for Hospital
Specialty. Sales gains at CCP Industries and Baxter Tube resulted from strong
general domestic economic growth and improved marketing efficiencies.
Cost of goods sold decreased slightly to 65.8 percent of sales in fiscal
1995 versus 66.0 percent of sales in fiscal 1994. Product mix changes and
procurement opportunities more than offset the initial stages of raw material
cost increases which carried into fiscal 1996.
The implementation of technology to improve efficiency resulted in the
reduction of selling, general and administrative expenses as a percent of sales
to 28.2 percent in fiscal 1995, from 29.4 percent in 1994. Improved productivity
allows the expense level to be leveraged over greater volume.
Fiscal 1995 earnings from continuing operations totaled $4.5 million, or
$1.29 per share, compared to the $2.3 million, or 67 cents per share, reported
in fiscal 1994. Included in continuing operations for the fourth quarter of
fiscal 1994 is a one-time charge taken by the Company in connection with the
consolidation of Design Trend equal to 22 cents per share. Earnings from
discontinued operations were $754 thousand, or 22 cents per share in fiscal
1995, as compared with $467 thousand, or 13 cents per share in fiscal 1994.
Consolidated net earnings in fiscal 1995 increased to $5.3 million, or $1.51 per
share, from $2.8 million, or 80 cents per share in fiscal 1994.
Net interest expense increased 22.5 percent, primarily as a result of higher
interest rates and the year-over-year impact of borrowings to finance
acquisitions made in fiscal 1994. Interest coverage for fiscal 1995 was 24.0
times.
15
<PAGE> 18
Earnings from continuing operations before income taxes for fiscal 1995 of
$7.3 million provided a 94.3 percent increase over the $3.8 million recorded in
fiscal 1994. As a result, income taxes for fiscal 1995 rose to $2.8 million from
$1.4 million for the prior fiscal year. The tax rate was 38.0 percent for fiscal
1995 and fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position continues to be strong. Current assets are
3.2 times current liabilities at February 29, 1996 as compared to 2.9 times at
February 28, 1995. Cash and cash equivalents nearly tripled by fiscal year end
1996 as a result of strong operating cash flow and the influx of cash from
Hospital Specialty's sale of its douche and enema line of business. The
reclassification of certain non-current assets to current as a result of the
Housewares Division divestiture also added to an improved current ratio.
Working capital at fiscal year end of $33.2 million increased 9.6 percent
from the prior year's $30.3 million. The Company's debt-to-equity ratio of 14.2
percent at fiscal year end increased from 14.5 percent at prior year end.
Cash provided from operations is the primary source of liquidity and
amounted to $9.7 million in fiscal 1996, $3.9 million in fiscal 1995 and $7.2
million in fiscal 1994. These internally generated funds are used primarily for
capital expenditures, dividends paid to shareholders and other miscellaneous
investing and financing activities.
The Company invested $3.2 million in property, plant and equipment to expand
capacity and improve productivity. This amount compares to the $2.6 million
invested in fiscal 1995 and $2.8 million in fiscal 1994. Fiscal 1997 investments
are budgeted to be consistent with prior years.
In March 1995, the Company acquired Plezall Wipers, Inc., a Miami, Florida
distributor of woven textile wipers, for $2.9 million in a cash transaction
accounted for as a purchase.
In fiscal 1996 the Company increased its dividend payout to shareholders 7.7
percent to $885 thousand from $822 thousand. The Company's objective is to
increase dividends periodically in a manner consistent with increases in free
cash flow.
The Company maintains a $30.0 million line of credit to finance working
capital requirements if needed and to finance acquisitions. Cash received
subsequent to fiscal year end 1996 from the sale of the Housewares Division was
used to pay off outstanding debt.
In fiscal 1995 the need to increase certain inventory stock at Design Trend
to strengthen its ability to respond quickly to orders and the need to stock raw
materials ahead of price increases at Hospital Specialty, caused the downward
trend in cash provided by operations as compared to fiscal 1994. Further debt
repayment and investments in property, plant and equipment in fiscal 1995 also
added to the decreased cash levels from fiscal 1994.
ACCOUNTING CHANGES
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation," which provides a basis for measurement and recognition of all
stock-based employee compensation plans. The disclosure requirements of this
Statement are effective for fiscal years beginning after December 15, 1995. The
Company expects that it will maintain its current accounting method for
stock-based compensation and disclose the pro-forma effects on net income and
earnings per share of the fair market value method as permitted by the
Statement.
16
<PAGE> 19
INFLATION
Fiscal 1996 saw rising raw material costs, particularly for fluff pulp,
paper and steel which significantly outpaced general inflation. Competitive
pricing and customer pricing pressures, especially in the retail sectors which
the Company serves, put downward pressure on operating margins. The Company
attempts to alleviate these pressures by increasing selling prices to help
offset rising costs, increasing productivity and improving manufacturing
techniques.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
For the Years Ended February 29/28 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales ......................................... $ 137,215,521 126,940,765 115,919,011 110,187,909 105,765,052
Operating earnings ............................ 7,179,566 7,621,726 4,018,590 6,543,941 7,489,936
Earnings from continuing operations
before income taxes ......................... 6,585,310 7,304,342 3,759,432 6,514,297 7,705,153
Income taxes .................................. 2,169,000 2,773,000 1,428,000 2,413,000 3,012,000
Earnings from continuing operations ........... 4,416,310 4,531,342 2,331,432 4,101,297 4,693,153
Earnings from discontinued operations
(net of income taxes) ....................... 410,032 754,054 467,833 112,685 (116,872)
Loss on disposal of Housewares
Division (net of income taxes) .............. (7,250,000) -- -- -- --
Net earnings (loss) ........................... (2,423,658) 5,285,396 2,799,265 4,213,982 4,576,281
Net earnings (loss) per Common Share:
From continuing operations .................. 1.25 1.29 .67 1.15 1.33
From discontinued operations ................ (1.94) .22 .13 .04 (.04)
Cash dividends:
Per Class A Common Share .................... .195 .18 .18 .165 .16
Per Class B Common Share .................... .355 .34 .34 .325 .32
Total assets .................................. 75,021,643 80,279,466 73,537,946 63,675,545 58,015,061
Long-term debt ................................ 7,000,000 7,600,000 9,000,000 2,900,000 195,000
Shareholders' equity .......................... 49,154,116 52,236,347 47,479,072 46,328,637 42,743,659
Shareholders' equity per Common
Share ....................................... 14.03 15.03 13.75 13.21 12.32
Common Shares outstanding ..................... 3,503,388 3,474,338 3,452,038 3,507,838 3,468,128
</TABLE>
Fiscal year 1994 includes a $1,300,000 charge to operating earnings ($792,000
after tax or 22 cents per share) for costs associated with restructuring the
Housewares Division.
17
<PAGE> 20
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
Years Ended February 29/28 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales ....................................................... $ 137,215,521 126,940,765 115,919,011
Costs and expenses:
Cost of goods sold ....................................... 94,171,671 83,580,232 76,560,280
Selling, general and administrative expenses (note N) .... 35,864,284 35,738,807 34,040,141
Restructuring cost ....................................... -- -- 1,300,000
- ----------------------------------------------------------------------------- ----------- ------------
130,035,955 119,319,039 111,900,421
- ----------------------------------------------------------------------------- ----------- ------------
Operating earnings .................................... 7,179,566 7,621,726 4,018,590
Interest income ............................................. 91,386 70,236 54,369
Interest expense ............................................ (685,642) (387,620) (313,527)
- ----------------------------------------------------------------------------- ----------- ------------
Earnings from continuing operations before income taxes 6,585,310 7,304,342 3,759,432
Income taxes (note I) ....................................... 2,169,000 2,773,000 1,428,000
- ----------------------------------------------------------------------------- ----------- ------------
Earnings from continuing operations ................... 4,416,310 4,531,342 2,331,432
- ----------------------------------------------------------------------------- ----------- ------------
Discontinued operations (note O):
Earnings from discontinued operations, net of income taxes
of $400,000 in 1996; $581,000 in 1995; and $372,000
in 1994 ................................................ 410,032 754,054 467,833
Loss on disposal of discontinued operations, net of income
tax benefit of $1,250,000 .............................. (7,250,000) -- --
- ----------------------------------------------------------------------------- ----------- ------------
Earnings (loss) from discontinued operations .......... (6,839,968) 754,054 467,833
- ----------------------------------------------------------------------------- ----------- ------------
Net earnings (loss) ................................... $ (2,423,658) 5,285,396 2,799,265
- ----------------------------------------------------------------============= =========== ============
Net earnings (loss) per Common Share:
From continuing operations ............................... $ 1.25 1.29 .67
From discontinued operations ............................. $ (1.94) .22 .13
Net earnings (loss) per Common Share .................. $ (.69) 1.51 .80
- ----------------------------------------------------------------============= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
February 29/28 1996 1995
- --------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash (including cash equivalents of $4,673,200 in 1996
and $349,600 in 1995) ................................................ $ 6,610,933 2,387,540
Receivables, less allowance for doubtful receivables of
$290,500 in 1996 and $408,500 in 1995 ................................ 13,752,460 16,995,651
Inventories (note C) .................................................... 15,338,665 23,173,604
Deferred income taxes (note I) .......................................... 1,804,106 1,285,533
Prepaid expenses and other current assets ............................... 1,219,235 2,046,517
Net assets of discontinued operations (note O) .......................... 9,274,244 --
- ------------------------------------------------------------------------------------------ -----------
Total current assets ........................................... 47,999,643 45,888,845
Property, plant and equipment, net (note D) ................................ 19,376,208 23,102,181
Other noncurrent assets .................................................... 2,477,913 2,416,958
Intangible assets (note E) ................................................. 5,167,879 8,871,482
- ------------------------------------------------------------------------------------------ -----------
$75,021,643 80,279,466
- -------------------------------------------------------------------------------=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable .................................................. $ 8,337,445 9,657,007
Accrued compensation .................................................... 2,943,971 2,981,782
Other payables and accrued expenses ..................................... 3,489,484 2,922,604
- ------------------------------------------------------------------------------------------ -----------
Total current liabilities ...................................... 14,770,900 15,561,393
Long-term debt, noncurrent portion (note F) ................................ 7,000,000 7,600,000
Deferred gain .............................................................. 1,912,230 2,071,830
Deferred income taxes (note I) ............................................. 935,573 1,878,728
Other noncurrent liabilities ............................................... 1,248,824 931,168
Shareholders' equity (notes F, G and L):
Serial preferred shares without par value.
Authorized 200,000; no shares issued ................................. -- --
Class A Common Shares, no par value; shares at stated value.
Authorized 4,000,000; issued 2,658,149 in 1996 and
2,660,404 in 1995 ................................................. 664,537 665,101
Class B Common Shares, no par value; shares at stated value.
Authorized 8,000,000; issued 1,337,390 in 1996 and
1,316,385 in 1995 ................................................. 334,348 329,096
Additional paid-in capital .............................................. 5,780,774 5,643,705
Retained earnings ....................................................... 46,471,200 49,780,163
- ------------------------------------------------------------------------------------------ -----------
53,250,859 56,418,065
Less cost of shares held in treasury--
Class A Common Shares - 472,846 in 1996 and 483,146 in 1995 .......... 3,899,037 3,984,012
Class B Common Shares - 19,305 in 1996 and 1995 ...................... 197,706 197,706
- ------------------------------------------------------------------------------------------ -----------
Total shareholders' equity ..................................... 49,154,116 52,236,347
- ------------------------------------------------------------------------------------------ -----------
Commitments (note K) ....................................................... -- --
- ------------------------------------------------------------------------------------------ -----------
$75,021,643 80,279,466
- -------------------------------------------------------------------------------=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 22
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
Years Ended February 29/28 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net earnings (loss) ......................................................... $ (2,423,658) 5,285,396 2,799,265
Adjustments to reconcile net earnings (loss) to net cash provided
by continuing operations:
(Earnings) loss from discontinued operations ............................. 6,839,968 (754,054) (467,833)
Depreciation and amortization ............................................ 3,517,521 3,616,163 3,438,898
Gain on sale of assets ................................................... (910,637) -- --
Deferred income taxes .................................................... (246,000) 170,000 311,000
Other, net ............................................................... 38,122 (132,103) 140,831
Change in assets and liabilities, net of effects of acquisitions:
Receivables, net ........................................................ (136,600) (1,174,977) (37,400)
Inventories ............................................................. 2,904,762 (5,292,712) (801,189)
Prepaid expenses and other current assets ............................... 546,861 430,586 (1,138,407)
Trade accounts payable .................................................. (668,092) 2,083,258 907,464
Accrued compensation .................................................... 158,733 637,717 26,799
Other payables and accrued expenses ..................................... 541,811 284,393 471,451
- ---------------------------------------------------------------------------------------------- ---------- -----------
Net cash provided by continuing operations ........................ 10,162,791 5,153,667 5,650,879
Net cash provided by (used in) discontinued operations ............ (455,770) (1,291,739) 1,505,909
- ---------------------------------------------------------------------------------------------- ---------- -----------
Net cash provided by operating activities ......................... 9,707,021 3,861,928 7,156,788
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit .............................................. 6,400,000 3,400,000 13,100,000
Repayments of long-term debt ................................................ (7,000,000) (4,900,000) (6,995,000)
Cash dividends .............................................................. (885,305) (821,833) (826,501)
- ---------------------------------------------------------------------------------------------- ---------- -----------
Net cash provided by (used in) financing activities ............... (1,485,305) (2,321,833) 5,278,499
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired ............................. (2,909,735) -- (6,939,193)
Purchase of treasury shares ................................................. -- -- (922,953)
Proceeds on exercise of share options ....................................... 217,626 276,775 93,688
Non-compete payments ........................................................ -- (180,000) (230,000)
Proceeds from sale of property, plant and equipment ......................... 1,992,513 248,981 34,074
Purchases of property, plant and equipment .................................. (3,163,078) (2,586,894) (2,811,717)
Other, net .................................................................. (135,649) (214,608) (165,388)
- ---------------------------------------------------------------------------------------------- ---------- -----------
Net cash used in investing activities ....................................... (3,998,323) (2,455,746) (10,941,489)
- ---------------------------------------------------------------------------------------------- ---------- -----------
CASH AND CASH EQUIVALENTS:
Increase (decrease) during the year ......................................... 4,223,393 (915,651) 1,493,798
Beginning balance ........................................................... 2,387,540 3,303,191 1,809,393
- ---------------------------------------------------------------------------------------------- ---------- -----------
Ending balance .............................................................. $ 6,610,933 2,387,540 3,303,191
- ----------------------------------------------------------------------------------============ ========== ===========
Supplemental schedule of non-cash investing and financing activities:
On March 1, 1995, the Company purchased substantially all the assets
and assumed certain liabilities of Plezall Wipers, Inc.; in conjunction with
the acquisition, liabilities were assumed as follows:
Fair value of assets acquired ......................................... $ 3,091,802 -- --
Cash paid ............................................................. 2,909,735 -- --
- ---------------------------------------------------------------------------------------------- ---------- -----------
Liabilities assumed ................................................... $ 182,067 -- --
- ----------------------------------------------------------------------------------============ ========== ===========
The Company purchased all of the outstanding shares of Ever-Ready
Appliance Mfg. Co. for $7,730,651; in conjunction with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired ......................................... $ -- -- 8,370,094
Cash paid for shares .................................................. -- -- 7,730,651
- ---------------------------------------------------------------------------------------------- ---------- -----------
Liabilities assumed ................................................... $ -- -- 639,443
- ----------------------------------------------------------------------------------============ ========== ===========
Supplemental disclosures of cash flow information:
Income taxes paid ........................................................... $ 2,351,618 1,599,723 2,003,522
Interest paid ............................................................... $ 689,440 393,797 305,929
- ----------------------------------------------------------------------------------============ ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 23
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
Class A Class B Additional Treasury Shares
Common Common paid-in Retained -----------------------
Years Ended February 29/28 Shares Shares capital earnings Class A Class B
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1993 ........ $ 669,306 321,316 5,419,067 43,343,836 (3,064,207) (360,681)
Net earnings ........................ -- -- -- 2,799,265 -- --
Cash dividends, $.18 per Class A
Common Share ...................... -- -- -- (400,697) -- --
Cash dividends, $.34 per Class B
Common Share ...................... -- -- -- (425,804) -- --
Exercise of 400 Class A
Common and 7,900 Class B
Common Share options .............. -- 1,975 88,565 -- 3,148 --
Acquisition of 64,100 Class A Common
Shares for treasury ............... -- -- -- -- (922,953) --
Tax benefit associated with incentive
share options ..................... -- -- 6,936 -- -- --
Conversion of 6,369 Class A
Common Shares to 6,369
Class B Common Shares ............. (1,592) 1,592 -- -- -- --
- ------------------------------------------------- ------- --------- ---------- --------- -------
Balance at February 28, 1994 ........ 667,714 324,883 5,514,568 45,316,600 (3,984,012) (360,681)
Net earnings ........................ -- -- -- 5,285,396 -- --
Cash dividends, $.18 per Class A
Common Share ...................... -- -- -- (391,608) -- --
Cash dividends, $.34 per Class B
Common Share ...................... -- -- -- (430,225) -- --
Exercise of 22,300 Class B
Common Share options .............. -- 1,600 112,200 -- -- 162,975
Tax benefit associated with incentive
share options ..................... -- -- 16,937 -- -- --
Conversion of 10,451 Class A
Common Shares to 10,451
Class B Common Shares ............. (2,613) 2,613 -- -- -- --
- ------------------------------------------------- ------- --------- ---------- --------- -------
Balance at February 28, 1995 ........ 665,101 329,096 5,643,705 49,780,163 (3,984,012) (197,706)
Net (loss) .......................... -- -- -- (2,423,658) -- --
Cash dividends, $.195 per Class A
Common Share ...................... -- -- -- (425,775) -- --
Cash dividends, $.355 per Class B
Common Share ...................... -- -- -- (459,530) -- --
Exercise of 10,300 Class A
Common and 18,750 Class B
Common Share options .............. -- 4,688 127,963 -- 84,975 --
Tax benefit associated with incentive
share options ..................... -- -- 9,106 -- -- --
Conversion of 2,255 Class A
Common Shares to 2,255
Class B Common Shares ............. (564) 564 -- -- -- --
- ------------------------------------------------- ------- --------- ---------- --------- -------
Balance at February 29, 1996 ........ $ 664,537 334,348 5,780,774 46,471,200 (3,899,037) (197,706)
- ----------------------------------------========= ======= ========= ========== ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TRANZONIC COMPANIES
Years Ended February 29, 1996, and February 28, 1995 and 1994
- --------------------------------------------------------------------------------
A NATURE OF OPERATIONS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The Tranzonic Companies manufactures and distributes nationally a wide
variety of products to the industrial, institutional and consumer sectors
through its three remaining operating divisions. The principal market for the
Company's products is the continental United States. Tranzonic's Personal Care
Division, Hospital Specialty, provides personal care and other washroom related
products. Its Industrial Textiles Division, CCP Industries, distributes
industrial wiping cloths, washroom supplies, specialty chemicals, and safety and
work apparel. Baxter Tube, its Industrial Packaging Division, manufactures paper
tubes, cores and sleeves used in a wide variety of industrial applications.
(1) Principles of Consolidation
All of the Company's subsidiaries are wholly-owned and their accounts are
included in the accompanying consolidated financial statements. All material
inter-company balances and transactions have been eliminated.
(2) Inventories
Inventories are stated at the lower of cost or market with cost determined
using the first-in, first-out (FIFO) method.
(3) Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation and
amortization is computed on the straight-line method over the estimated useful
lives of the assets.
(4) Intangibles
Goodwill, the excess of cost over net assets of acquired companies, is being
amortized over periods not exceeding 40 years. At each quarterly balance sheet
date, management assesses whether there has been an impairment in the carrying
value, primarily by reviewing current and projected sales, operating income and
annual cash flows.
(5) Income Taxes
Deferred taxes are provided on the asset and liability method whereby
deferred tax assets are recognized for deductible temporary differences and loss
carryforwards, and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax basis. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
The Company files a consolidated Federal income tax return with its
subsidiaries.
(6) Share Options
Upon the exercise of Class A or Class B Common Share options granted under
the Company's incentive share option plans, the Company, at its discretion, can
either distribute newly issued shares or shares from treasury. Additional
paid-in capital is adjusted to reflect the balance of the option price.
(7) Net Earnings Per Common and Common Equivalent Share
Net earnings per common and common equivalent share have been calculated
based on the weighted average Class A and Class B Common Shares outstanding
during the period plus the incremental shares (calculated using the treasury
share method) for those outstanding share options which are considered common
share equivalents. Weighted average common and common equivalent shares used in
the calculation were 3,525,457, 3,508,467, and 3,515,658 in 1996, 1995 and 1994,
respectively.
(8) Cash Equivalents
The Company considers all highly liquid short-term investments, with
maturities when purchased of three months or less, to be cash equivalents.
(9) Revenue Recognition
The Company recognizes revenue as goods are shipped to customers.
(10) Deferred Gain
The deferred gain recorded on the books of the Company which resulted from a
sale and leaseback of certain real property is being amortized in proportion to
rental payments over 20 years, the life of the lease.
22
<PAGE> 25
(11) New Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation," which provides a basis for measurement and recognition of all
stock-based employee compensation plans. The disclosure requirements of this
Statement are effective for fiscal years beginning after December 15, 1995. The
Company expects that it will maintain its current accounting method for
stock-based compensation and disclose the pro-forma effects on net income and
earnings per share of the fair market value method as permitted by the
Statement.
(12) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(13) Reclassification
Certain prior year amounts have been reclassified to conform to the current
year presentation.
B ACQUISITIONS / RESTRUCTURING
- --------------------------------------------------------------------------------
On March 1, 1995, the Company acquired substantially all the assets and
assumed certain liabilities of Plezall Wipers, Inc., a Miami, Florida,
distributor of woven textile wipers for $2.9 million in a cash transaction. The
acquisition was accounted for under the purchase method of accounting. Results
of operations have been reflected in the Company's consolidated financial
statements from the date of acquisition.
In fiscal 1994, the Company announced plans to consolidate the operating
units making up its Housewares Division. As a result, the Company recorded a
$1,300,000 charge to operating earnings ($792,000 after tax or 22 cents per
share). The restructuring cost includes the cost of closing its Housewares
Division units in Dallas and Philadelphia and relocation to St. Louis.
Results of operations of Ever-Ready Appliance Mfg. Co., acquired on August
13, 1993, classified as discontinued operations as a result of the divestiture
of the Housewares Division, have been reflected in the Company's consolidated
financial statements from the date of acquisition.
C INVENTORIES
- --------------------------------------------------------------------------------
The components of inventories are summarized below:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Raw materials ................ $ 7,182,278 13,318,921
Finished goods ............... 8,156,387 9,854,683
- ---------------------------------------------- ----------
$ 15,338,665 23,173,604
- ---------------------------------============= ==========
</TABLE>
D PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
The components of property, plant and equipment, net, are summarized below:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Land, buildings and
improvement................... $ 14,084,556 14,490,801
Machinery and equipment ...... 27,925,060 30,198,293
- ---------------------------------------------- ----------
42,009,616 44,689,094
Accumulated depreciation
and amortization ............. 22,633,408 21,586,913
- ---------------------------------------------- ----------
$ 19,376,208 23,102,181
- ---------------------------------============= ==========
</TABLE>
E INTANGIBLE ASSETS
- --------------------------------------------------------------------------------
Intangible assets consist primarily of goodwill. Amortizable goodwill
included therein of $4,396,697 and $8,098,026 in 1996 and 1995, respectively, is
shown net of accumulated amortization of $1,399,388 and $2,118,953 in those
years. In fiscal 1996, goodwill increased $2,120,202 resulting from the
acquisition of Plezall Wipers (note B) and decreased $5,476,905 as a result of
the Housewares Division divestiture (note O).
F LONG-TERM DEBT
- --------------------------------------------------------------------------------
A description of the long-term debt follows:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Revolving credit ............. $ 7,000,000 7,600,000
- ----------------------------------============ =========
</TABLE>
The Company has a $30,000,000 revolving credit facility maturing June 30,
1997. Funds borrowed may be used for working capital and/or acquisition
purposes. In lieu of a compensating balance requirement, the agreement requires
an annual fee of 3/10 of 1% on the unused portion. At the Company's option,
borrowings under the agreement bear interest at either the bank's prime rate or
at 1/2 of 1% above an adjusted LIBOR
23
<PAGE> 26
rate, subject to certain conditions in the rate structure. At February 29, 1996,
interest rates applicable to total borrowings outstanding range from 5.8125% to
5.875%.
The debt agreements contain restrictions on the Company with respect to
investments, maintenance of working capital, net worth, use of cash for payments
of dividends, and purchase of treasury shares. Capital distributions during any
fiscal year are limited to 50% of average consolidated net earnings over a
three-year period. The Company was in compliance with all debt agreement
restrictions or has obtained waivers.
G SHARE OPTIONS
- --------------------------------------------------------------------------------
The Company has three performance share option plans in effect for key
employees. Under these plans 180,000 Class A Common Shares and 400,000 Class B
Common Shares were reserved for issuance at a per share option price of not less
than 100% of the market price on the dates these options were awarded.
Additionally, 60,000 Class A Common Shares were reserved for issuance at a per
share option price from 10% to 95% of the market price on the dates these
options were awarded, and 95,000 Class B Common Shares were granted as part of
certain employment contracts at 100% of market price at the date of grant. At
February 29, 1996, there were 136,250 Class B Common Shares available for grant
under these plans.
Details pertaining to the Company's plans are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------
<S> <C> <C> <C>
Options granted:
Class B-Common ..... 38,250 35,950 48,400
Average option price:
Class B-Common ..... $ 14.75 12.04 14.08
Options exercised:
Class A-Common ..... 10,300 -- 400
Class B-Common ..... 18,750 22,300 7,900
Average option price:
Class A-Common ..... $ 3.95 -- 10.17
Class B-Common ..... $ 9.44 12.41 11.34
Options which became
exercisable:
Class B-Common .... 38,700 42,900 46,300
Average option price:
Class B-Common ..... $ 15.22 12.63 12.26
Options unexercised at
year-end:
Class A-Common .... 16,500 27,800 27,800
Class B-Common .... 243,835 281,485 279,400
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------
<S> <C> <C> <C>
Option price range per
share:
Class A-Common.......... $ 5.08 .50 .50
........................ to to to
........................ $10.17 10.17 10.17
Class B-Common.......... $ 5.08 .50 .50
........................ to to to
........................ $ 16.78 16.78 16.78
Options cancelled:
Class A-Common........... 1,000 -- --
Class B-Common........... 57,150 11,565 14,400
Options exercisable:
Class A-Common.......... 16,500 27,800 27,800
Class B-Common.......... 121,850 107,400 90,700
</TABLE>
H RETIREMENT PLANS
- --------------------------------------------------------------------------------
Late in fiscal 1996, the Company received a favorable determination by the
IRS and the PBGC to terminate and make final distributions of pension benefits
from its General Employee's Retirement Plan of the Personal Care Division. As of
fiscal year end most of the pension benefits were distributed.
The Salary Savings and Profit-sharing Plan of The Tranzonic Companies is a
defined contribution plan covering certain qualifying employees. The Company's
contributions to The Salary Savings and Profit-sharing Plan were $385,311 in
1996, $363,690 in 1995 and $219,850 in 1994 for continuing operations.
I INCOME TAXES
- --------------------------------------------------------------------------------
The provision for income taxes from continuing operations consists of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal ....... $ 2,127,000 2,332,000 704,000
State and local 288,000 271,000 413,000
- ------------------------------- --------- ---------
2,415,000 2,603,000 1,117,000
Deferred:
Federal ....... (213,000) 92,000 311,000
State and local (33,000) 78,000 --
- ------------------------------- --------- ---------
(246,000) 170,000 311,000
- ------------------------------- --------- ---------
$ 2,169,000 2,773,000 1,428,000
- --------------------=========== ========= =========
</TABLE>
24
<PAGE> 27
The Company's effective tax rate from continuing operations differs from the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------
<S> <C> <C> <C>
Computed income taxes at
statutory rate ....... 35.0% 35.0% 35.0%
State and local income
taxes, net of federal
income tax benefit ... 2.6 3.1 7.7
Tax-exempt income ...... (3.5) (.3) (.9)
General business
tax credit ........... (1.1) (1.0) (1.9)
Lower rate benefit ..... (1.0) (1.0) (1.0)
Other .................. 0.9 2.2 (.9)
- --------------------------------- ---- ----
32.9% 38.0% 38.0%
- -----------------------------==== ==== ====
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Bad debt reserve ............................. $ 109,712 149,565
Inventory valuation .......................... 299,848 557,984
Vacation accrual ............................. 32,152 55,095
Bonus accrual ................................ 65,658 170,032
Deferred compensation ........................ 480,165 293,461
Deferred book gain ........................... 772,793 832,324
Package design costs ......................... 166,551 196,124
Deferred tax losses .......................... 2,491,925 --
Other ........................................ 316,678 287,620
- ------------------------------------------------------------- ---------
Total gross deferred tax assets .............. 4,735,482 2,542,205
Less valuation allowance ..................... 1,506,995 --
- ------------------------------------------------------------- ---------
Net deferred tax assets ...................... 3,228,487 2,542,205
Deferred tax liabilities:
Depreciation ................................. 1,994,855 2,334,910
Incentive compensation ....................... -- 264,986
Other ........................................ 365,099 535,504
- ------------------------------------------------------------- ---------
Total deferred tax liabilities ............... 2,359,954 3,135,400
- ------------------------------------------------------------- ---------
Net deferred tax (assets) liabilities .......... $(868,533) 593,195
- ----------------------------------------------------========= =========
</TABLE>
The valuation allowance for deferred tax assets as of February 29, 1996 is
$1,506,995. This newly established allowance represents the Federal tax effect
of a net capital loss carryforward created through the divestiture of the
Housewares Division. The capital loss carryforward is available to offset future
net capital gains, if any, through fiscal year 2002.
J SEGMENT DATA
- --------------------------------------------------------------------------------
The industry segment in which the Company operates is primarily the
conversion of paper and allied products.
The majority of the Company's products originate from large rolls of paper
or allied products purchased directly from mills where such materials are
manufactured. As such, each of the Company's divisions displays similar
purchasing function characteristics. Also, the end-use of most of the Company's
products is similar, as the majority of sales are of disposable products used
for personal hygiene and cleaning.
The Company's foreign operations and export sales are immaterial.
K LEASE COMMITMENTS
- --------------------------------------------------------------------------------
The Company conducts operations at certain facilities under various
non-cancellable operating leases. Rent expense charged to continuing operations
was $1,515,572, $1,328,365 and $1,180,269 in fiscal years 1996, 1995 and 1994,
respectively.
Rental commitments at February 29, 1996 for noncancellable operating leases
with initial terms greater than one year are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 .................................... $ 1,180,814
1998 .................................... 1,036,511
1999 .................................... 914,631
2000 .................................... 919,875
2001 .................................... 919,875
after 2001 .............................. 6,973,236
- -----------------------------------------------------------
$ 11,944,942
- -----------------------------------------------============
</TABLE>
L CLASS B COMMON SHARES
- --------------------------------------------------------------------------------
Class B Common Shares, each of which have one-tenth the voting power of a
Class A Common Share, must be paid a per share dividend at least equal to that
paid on the Class A Common Shares. Class A Common Shares may be converted into
Class B Common Shares on a one-for-one basis at the holder's option.
25
<PAGE> 28
M QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- --------------------------------------------------------------------- ----------- ----------- -----------
1996
<S> <C> <C> <C> <C>
Sales ................................................. $37,745,313 32,088,588 34,558,178 32,823,442
Cost of goods sold .................................... 25,808,914 21,574,980 23,781,598 23,006,179
Earnings from continuing operations before income taxes 1,543,277 1,442,183 1,267,185 2,332,665
Income taxes .......................................... 510,345 475,081 453,074 730,500
Earnings from continuing operations ................... 1,032,932 967,102 814,111 1,602,165
Discontinued operations:
Earnings from discontinued operations,
net of income taxes ................................. 7,841 213,993 99,751 88,447
Loss on disposal of Housewares Division,
net of income tax benefit ........................... -- -- -- (7,250,000)
Earnings (loss) from discontinued operations .......... 7,841 213,993 99,751 (7,161,553)
Net earnings (loss) ................................... 1,040,773 1,181,095 913,862 (5,559,388)
Per share amounts:
From continuing operations .......................... .29 .27 .23 .45
From discontinued operations ........................ .01 .06 .03 (2.04)
Net earnings (loss) ................................. .30 .33 .26 (1.58)
Cash dividends paid:
Class A Common ..................................... .045 .05 .05 .05
Class B Common ..................................... .085 .09 .09 .09
1995
Sales ................................................. $34,364,892 29,204,398 32,391,524 30,979,951
Cost of goods sold .................................... 22,945,701 18,943,156 21,402,800 20,288,575
Earnings from continuing operations before income taxes 1,722,914 1,975,796 1,808,446 1,797,186
Income taxes .......................................... 649,124 773,566 651,810 698,500
Earnings from continuing operations ................... 1,073,790 1,202,230 1,156,636 1,098,686
Earnings from discontinued operations,
net of income taxes ................................. 186,873 287,609 134,093 145,479
Net earnings .......................................... 1,260,663 1,489,839 1,290,729 1,244,165
Per share amounts:
From continuing operations .......................... .31 .35 .32 .31
From discontinued operations ........................ .05 .08 .04 .04
Net earnings ........................................ .36 .43 .36 .35
Cash dividends paid:
Class A Common ..................................... .045 .045 .045 .045
Class B Common ..................................... .085 .085 .085 .085
- -------------------------------------------------------------------------------------------------------------
</TABLE>
N SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
- --------------------------------------------------------------------------------
In the current fiscal year fourth quarter the Company realized a gain of
$931,800 from the sale of its Personal Care Division's douche and enema product
lines. In addition the Company realized a gain of $604,500 from the sale of
stock received when the Company's health and welfare benefits plan administrator
converted from a mutual to a stock company. Both of these transactions are
included in selling, general and administrative expense.
26
<PAGE> 29
O DISCONTINUED OPERATIONS
- --------------------------------------------------------------------------------
On February 29, 1996 the Company signed a definitive agreement to sell for
cash substantially all operating net assets of its Housewares Division.
Accordingly, their operations are segregated in the accompanying consolidated
financial statements. The Company closed the sale on March 29, 1996. A reserve
for loss on discontinued operations was established for expected transaction
costs, estimated adjustment to purchase price based on final audited numbers,
and estimated contingencies. Sales from discontinued operations were
$24,110,273, $21,957,298 and $14,910,820 for the fiscal years ended February 29,
1996 and February 28, 1995 and 1994, respectively.
The components of net assets of discontinued operations included in the
accompanying consolidated balance sheet as of February 29, 1996 (fiscal year
1995 amounts are shown as they were historically classified) are as follows:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Current assets:
Receivables, net .............. $ 4,793,777 3,885,801
Inventories ................... 5,815,190 5,421,083
Prepaid expenses and other
current assets ............... 458,789 291,694
- ----------------------------------------------- ---------
Total current assets ...... 11,067,756 9,598,578
Current liabilities:
Trade accounts payable ........ 671,490 803,102
Accrued compensation .......... 235,909 210,043
Other payables and accrued
expenses ..................... 146,955 --
- ----------------------------------------------- ---------
Total current liabilities . 1,054,354 1,013,145
- ----------------------------------------------- ---------
Total .................. 10,013,402 8,585,433
- ----------------------------------------------- ---------
Noncurrent assets:
Property, plant and equipment . 314,276 710,597
Other noncurrent assets ....... 113,691 200,575
Intangibles ................... 29,661 26,696
- ----------------------------------------------- ---------
Total noncurrent assets ... 457,628 937,868
- ----------------------------------------------- ---------
Net assets ............. 10,471,030 9,523,301
Reserve for loss on disposal of
discontinued operations ...... 1,196,786 --
- ----------------------------------------------- ---------
Net assets of
discontinued operations . $ 9,274,244 9,523,301
- ------------------------------------=========== =========
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Tranzonic Companies:
We have audited the accompanying consolidated balance sheets of The Tranzonic
Companies and subsidiaries as of February 29, 1996 and February 28, 1995, and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended February 29, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Tranzonic
Companies and subsidiaries as of February 29, 1996 and February 28, 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended February 29, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Cleveland, Ohio
March 29, 1996
27
<PAGE> 30
SHAREHOLDER INFORMATION
SHARE PRICE RANGE
THE TRANZONIC COMPANIES
Traded on the American Stock Exchange
Years Ended February 29/28
<TABLE>
<CAPTION>
Class A Common Class B Common
Symbol -- TNZA Symbol -- TNZB
--------------------------- ---------------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter 161/8 133/4 121/2 107/8 151/8 131/2 123/8 103/4
2nd Quarter 153/8 131/2 143/8 111/4 153/8 131/2 135/8 101/2
3rd Quarter 153/8 131/2 221/2 131/4 143/4 13 203/8 121/8
4th Quarter 143/4 111/4 191/4 143/4 141/2 115/8 173/4 143/8
</TABLE>
As of May 6, 1996, there were 367 Class A Common and 363 Class B Common
shareholders of record.
DIVIDEND PAYMENTS
THE TRANZONIC COMPANIES
Years Ended February 29/28
<TABLE>
<CAPTION>
Class A Common Class B Common
-------------- --------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1st Quarter 4.5(cent) 4.5(cent) 8.5(cent) 8.5(cent)
2nd Quarter 5.0(cent) 4.5(cent) 9.0(cent) 8.5(cent)
3rd Quarter 5.0(cent) 4.5(cent) 9.0(cent) 8.5(cent)
4th Quarter 5.0(cent) 4.5(cent) 9.0(cent) 8.5(cent)
- ------------------------------------- --------- --------- ---------
19.5(cent) 18.0(cent) 35.5(cent) 34.0(cent)
- ----------------------------========= ========= ========= =========
</TABLE>
TRANSFER AGENT AND REGISTRAR
KeyCorp Shareholder Services, Inc.
Cleveland, Ohio 44115
GENERAL COUNSEL
Berick Pearlman & Mills Co., L.P.A.
Cleveland, Ohio 44114
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Cleveland, Ohio 44114
FORM 10-K
Shareholders who desire a copy of the fiscal 1996 annual report on Form 10-K may
obtain it without charge by writing to Alayne L. Reitman, Vice President-Finance
and Treasurer
THE TRANZONIC COMPANIES
30195 Chagrin Blvd.
Pepper Pike, Ohio 44124
216/831-5757
28
<PAGE> 31
BOARD OF DIRECTORS
*JAMES H. BERICK
Chairman, Berick, Pearlman & Mills Co., L.P.A. (Attorneys)
*JOSEPH A. CAMPANELLA
Executive Vice President, Star Banc Corporation
+DAVID J. GOLDEN
Senior Vice President
*STEVEN W. PERCY
President, BP Oil Co. and
Executive Vice President, BP America Inc.
+MORTON L. REITMAN
Executive Vice President and President-Personal Care Division
+ROBERT S. REITMAN
Chairman, President and Chief Executive Officer
SYLVIA K. REITMAN
Investor
*THOMAS S. ROBERTSON
Sainsbury Professor of Marketing Chair, London Business School
JAMES C. SPIRA
Managing Partner, Diamond Technology Partners
*Members of Audit and Compensation Committees
+Members of Executive Committee
OFFICERS
ROBERT S. REITMAN
Chairman, President and Chief Executive Officer
MORTON L. REITMAN
Executive Vice President and President-Personal Care Division
DAVID J. GOLDEN
Senior Vice President
RICHARD J. SIMS
Senior Vice President and President-Industrial Textiles Division
DENNIS H. KELLY
Vice President and President-Industrial Packaging Division
ALAYNE L. REITMAN
Vice President-Finance and Treasurer
ROBERT D. WEITZNER
Vice President-Information Technology
RICHARD J. PENNZA
Chief Accounting Officer
JAMES H. BERICK
Secretary
WILLIAM E. HEMANN
Executive Vice President-Personal Care Division
ERNEST L. CLARKE
Vice President Medical Division-Personal Care Division
PAUL D. MARION, JR.
Vice President National Accounts-Personal Care Division
KATHLEEN A. METZGER
Vice President Administration-Personal Care Division
BETH SMYLIE RICHMAN
Vice President Retail Division-Personal Care Division
NORMAN D. SULL
Vice President Purchasing-Industrial Textiles Division
DAVID J. WILLIAMS
Vice President Sales-Industrial Textiles Division
CHRISTOPHER T. CIRA
Assistant Vice President Finance-Industrial Textiles Division
HELEN MALHOTRA
Assistant Vice President Information Systems-Industrial Textiles Division
DANIEL R. MOON
Assistant Vice President Marketing-Industrial Textiles Division
[INSIDE BACK COVER]
<PAGE> 32
THE TRANZONIC COMPANIES
30195 Chagrin Blvd.
Pepper Pike, Ohio 44124
[OUTSIDE BACK COVER]
<PAGE> 1
Exhibit 21
<TABLE>
<CAPTION>
State of
Subsidiaries of Registrant Incorporation
- -------------------------- -------------
<S> <C>
Baxter Tube Company Ohio
CCP Industries, Inc. Ohio
Former D-T, Inc. (formerly Ohio
known as Design Trend, Inc.)
Former E-R, Inc. (formerly known Missouri
as Ever-Ready Appliance Mfg. Co.)
Plezall Wipers Incorporated Ohio
</TABLE>
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the year ended
February 29, 1996, hereby constitutes and appoints ROBERT S. REITMAN and JAMES
H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of April,
1996.
/s/ Sylvia K. Reitman
-------------------------
Sylvia K. Reitman
<PAGE> 2
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the year ended
February 29, 1996, hereby constitutes and appoints ROBERT S. REITMAN with full
power of substitution and resubstitution, as attorney to sign for the
undersigned and in my name, place and stead, as Director of said corporation,
said Annual Report and any and all amendments and exhibits thereto, and any and
all applications and documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report, with full power and authority to
do and perform any and all acts and things whatsoever requisite, necessary or
advisable to be done in the premises, as fully and for all intents and purposes
as the undersigned could do if personally present, hereby approving the acts of
said attorney, and any of them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of April, 1996
/s/ James H. Berick
----------------------
James H. Berick
<PAGE> 3
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the year ended
February 29, 1996, hereby constitutes and appoints ROBERT S. REITMAN and JAMES
H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of April,
1996.
/s/ Thomas S. Robertson
---------------------------
Thomas S. Robertson
<PAGE> 4
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the year ended
February 29, 1996, hereby constitutes and appoints ROBERT S. REITMAN and JAMES
H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of April,
1996.
/s/ Steven W. Percy
-----------------------
Steven W. Percy
<PAGE> 5
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the year ended
February 29, 1996 hereby constitutes and appoints ROBERT S. REITMAN and JAMES
H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of May,
1996.
/s/ James C. Spira
----------------------
James C. Spira
<PAGE> 6
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the year ended
February 29, 1996, hereby constitutes and appoints ROBERT S. REITMAN and JAMES
H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of April,
1996.
/s/ Morton L. Reitman
--------------------------
Morton L. Reitman
<PAGE> 7
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the year ended
February 29, 1996 hereby constitutes and appoints ROBERT S. REITMAN and JAMES
H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of April,
1996.
/s/ Joseph A. Campanella
----------------------------
Joseph A. Campanella
<PAGE> 8
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the year ended
February 29, 1996 hereby constitutes and appoints ROBERT S. REITMAN and JAMES
H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of April,
1996.
/s/ David J. Golden
--------------------------
David J. Golden
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT FEBRUARY 29, 1996 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 29, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000001761
<NAME> TRANZONIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 6,610,933
<SECURITIES> 0
<RECEIVABLES> 13,752,460
<ALLOWANCES> 290,500
<INVENTORY> 15,338,665
<CURRENT-ASSETS> 47,999,643
<PP&E> 42,009,616
<DEPRECIATION> 22,633,408
<TOTAL-ASSETS> 75,021,643
<CURRENT-LIABILITIES> 14,770,900
<BONDS> 0
<COMMON> 998,885<F1>
0
0
<OTHER-SE> 52,251,974<F2>
<TOTAL-LIABILITY-AND-EQUITY> 75,021,643
<SALES> 137,215,521
<TOTAL-REVENUES> 137,215,521
<CGS> 94,171,671
<TOTAL-COSTS> 130,035,955
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 685,642
<INCOME-PRETAX> 6,585,310
<INCOME-TAX> 2,169,000
<INCOME-CONTINUING> 4,416,310
<DISCONTINUED> (6,839,968)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,423,658)
<EPS-PRIMARY> (.69)
<EPS-DILUTED> 0
<FN>
<F1>THIS FIGURE INCLUDES $664,537 CLASS A COMMON AND $334,348 CLASS B COMMON
SHARES.
<F2>THIS FIGURE INCLUDES $5,780,774 IN ADDITIONAL PAID IN CAPITAL AND $46,471,200
IN RETAINED EARNINGS.
</FN>
</TABLE>
