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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition period from to
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Commission File Number: 1-8351
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0791746
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2600 Chemed Center, 255 East Fifth Street, Cincinnati, Ohio 45202-4726
(Address of principal executive offices) (Zip Code)
(513) 762-6900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Capital Stock - Par Value $1 Per Share New York 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 .
--- ---
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. X
---
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of said stock on the New York Stock
Exchange -Composite Transaction Listing on March 18, 1999 ($28.25 per share),
was $291,165,150.
At March 18, 1999, 10,602,225 shares of Chemed Corporation Capital Stock
(par value $1 per share) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
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1998 Annual Report to Stockholders (Specified Portions) Parts I, II and IV
Proxy Statement for Annual Meeting Part III
to be held May 17, 1999.
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CHEMED CORPORATION
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business............................................................. 1
Item 2. Properties........................................................... 5
Item 3. Legal Proceedings.................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders.................. 8
-- Executive Officers of the Registrant................................. 8
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.................................................. 9
Item 6. Selected Financial Data..............................................10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................10
Item 8. Financial Statements and Supplementary Data..........................10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................10
PART III
Item 10. Directors and Executive Officers of the Registrant...................10
Item 11. Executive Compensation...............................................11
Item 12. Security Ownership of Certain Beneficial Owners and
Management...........................................................11
Item 13. Certain Relationships and Related Transactions.......................11
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K..........................................................11
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PART I
ITEM 1. BUSINESS
GENERAL
Chemed Corporation was incorporated in Delaware in 1970 as a subsidiary of
W. R. Grace & Co. and succeeded to the business of W. R. Grace & Co.'s Specialty
Products Group as of April 30, 1971 and remained a subsidiary of W. R. Grace &
Co. until March 10, 1982. As used herein, "Company" refers to Chemed
Corporation, "Chemed" refers to Chemed Corporation and its subsidiaries and
"Grace" refers to W. R. Grace & Co. and its subsidiaries.
On March 10, 1982, the Company transferred to Dearborn Chemical Company,
a wholly owned subsidiary of the Company, the business and assets of the
Company's Dearborn Group, including the stock of certain subsidiaries within the
Dearborn Group, plus $185 million in cash, and Dearborn Chemical Company assumed
the Dearborn Group's liabilities. Thereafter, on March 10, 1982 the Company
transferred all of the stock of Dearborn Chemical Company to Grace in exchange
for 16,740,802 shares of the capital stock of the Company owned by Grace with
the result that Grace no longer has any ownership interest in the Company.
On December 31, 1986, the Company completed the sale of substantially all
of the business and assets of Vestal Laboratories, Inc., a wholly owned
subsidiary. The Company received cash payments aggregating approximately $67.4
million over the four-year period following the closing, the substantial portion
of which was received on December 31, 1986.
On April 2, 1991, the Company completed the sale of DuBois Chemicals,
Inc. ("DuBois"), a wholly owned subsidiary, to the Diversey Corporation
("Diversey"), then a subsidiary of The Molson Companies Ltd. Under the terms of
the sale, Diversey agreed to pay the Company net cash payments aggregating
$223,386,000, including deferred payments aggregating $32,432,000.
On December 21, 1992, the Company acquired The Veratex Corporation and
related businesses ("Veratex Group") from Omnicare, Inc., a publicly traded
company in which Chemed currently maintains a 1 percent ownership interest. The
purchase price was $62,120,000 in cash paid at closing, plus a post-closing
payment of $1,514,000 (paid in April 1993) based on the net assets of Veratex.
Effective January 1, 1994, the Company acquired all the capital stock of
Patient Care, Inc. ("Patient Care"), for cash payments aggregating $20,582,000,
including deferred payments with a present value of $6,582,000, plus 17,500
shares of the Company's Capital Stock. An additional cash payment of $1,000,000
was made on March 31, 1996 and another payment of $1,000,000 was made on March
31, 1997.
In July 1995, the Company's Omnia Group (formerly Veratex Group)
completed the sale of the business and assets of its Veratex Retail division to
Henry Schein, Inc. ("HSI") for $10 million in cash plus a $4.1 million note for
which payment was received in December 1995.
Effective September 17, 1996, the Company completed a merger of a
subsidiary of the Company, Chemed Acquisition Corp., and Roto-Rooter, Inc.
pursuant to a Tender Offer
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commenced on August 8, 1996 to acquire any and all of the outstanding shares of
Common Stock of Roto-Rooter, Inc. for $41.00 per share in cash.
On September 24, 1997, the Company completed the sale of its wholly owned
businesses comprising the Omnia Group to Banta Corporation for $50 million in
cash and $2.3 million in deferred payments.
Effective September 30, 1997, the Company completed a merger between its
81-percent-owned subsidiary, National Sanitary Supply Company, and a wholly
owned subsidiary of Unisource Worldwide, Inc. for $21.00 per share, with total
payments of $138.3 million.
The Company now conducts its business operations in three segments:
Roto-Rooter Group ("Roto-Rooter"), Patient Care and Service America Systems,
Inc. ("Service America").
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The required segment and geographic data for the Company's continuing
operations (as described below) for the three years ended December 31, 1996,
1997 and 1998, are shown in the "Segment Data" on pages 26 and 27 of the 1998
Annual Report to Stockholders and are incorporated herein by reference.
DESCRIPTION OF BUSINESS BY SEGMENT
The information called for by this item is included within Note 1 of the
Notes to Financial Statements appearing on page 17 of the 1998 Annual Report to
Stockholders and is incorporated herein by reference.
PRODUCT AND MARKET DEVELOPMENT
Each segment of Chemed's business engages in a continuing program for the
development and marketing of new services and products. While new products and
services and new market development are important factors for the growth of each
active segment of Chemed's business, Chemed does not expect that any new
products and services or marketing effort, including those in the development
stage, will require the investment of a material amount of Chemed's assets.
RAW MATERIALS
The principal raw materials needed for Chemed's United States
manufacturing operations are purchased from United States sources. No segment of
Chemed experienced any material raw material shortages during 1998, although
such shortages may occur in the future. Products manufactured and sold by
Chemed's active business segments generally may be reformulated to avoid the
adverse impact of a specific raw material shortage.
PATENTS, SERVICE MARKS AND LICENSES
The Roto-Rooter(R) trademark and service mark have been used and
advertised since 1935 by Roto-Rooter Corporation, a wholly owned subsidiary of
Roto-Rooter, Inc., a 100 percent-owned subsidiary of the Company. The
Roto-Rooter(R) marks are among the most highly recognized trademarks and service
marks in the United States. Chemed considers the Roto-Rooter(R) marks to be a
valuable asset and a significant factor in the marketing
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of Roto-Rooter's franchises, products and services and the products and services
provided by its franchisees.
COMPETITION
ROTO-ROOTER
All aspects of the sewer, drain, and pipe cleaning, and plumbing repair
businesses are highly competitive. Competition is, however, fragmented in most
markets with local and regional firms providing the primary competition. The
principal methods of competition are advertising, range of services provided,
speed and quality of customer service, service guarantees, and pricing.
No individual customer or market group is critical to the total sales of
this segment.
PATIENT CARE
The home healthcare services industry and, in particular, the nursing and
personal care segment is highly competitive. Patient Care competes with numerous
local, regional and national home healthcare services companies. Patient Care
competes on the basis of quality, cost-effectiveness and its ability to service
its referral base quickly throughout its regional markets.
Patient Care has contracts with several customers, the loss of any one or
more of which could have a material adverse effect on this segment.
SERVICE AMERICA
All aspects of the HVAC and appliance repair and maintenance service
industry are highly competitive. Competition is, however, fragmented in most
markets with local and regional firms providing the primary competition. The
principal methods of competition are advertising, range of services provided,
speed and quality of customer service, service guarantees, and pricing.
No individual customer or market group is critical to the total sales of
this segment.
RESEARCH AND DEVELOPMENT
Chemed engages in a continuous program directed toward the development of
new products and processes, the improvement of existing products and processes,
and the development of new and different uses of existing products. The research
and development expenditures from continuing operations have not been nor are
they expected to be material.
GOVERNMENT REGULATIONS
Roto-Rooter's franchising activities are subject to various federal and
state franchising laws and regulations, including the rules and regulations of
the Federal Trade Commission (the "FTC") regarding the offering or sale of
franchises. The rules and regulations of the FTC require that Roto-Rooter
provide all prospective franchisees
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with specific information regarding the franchise program and Roto-Rooter in the
form of a detailed franchise offering circular. In addition, a number of states
require Roto-Rooter to register its franchise offering prior to offering or
selling franchises in the state. Various state laws also provide for certain
rights in favor of franchisees, including (i) limitations on the franchisor's
ability to terminate a franchise except for good cause, (ii) restrictions on the
franchisor's ability to deny renewal of a franchise, (iii) circumstances under
which the franchisor may be required to purchase certain inventory of
franchisees when a franchise is terminated or not renewed in violation of such
laws, and (iv) provisions relating to arbitration. Roto-Rooter's ability to
engage in the plumbing repair business is also subject to certain limitations
and restrictions imposed by state and local licensing laws and regulations.
Service America's operations are regulated by the Florida and Arizona
Departments of Insurance. In accordance with certain Florida regulatory
requirements, Service America maintains cash with the Department of Insurance
and is also required to maintain additional unencumbered reserves. In addition,
Service America's air conditioning and appliance repair and maintenance business
is also subject to certain limitations imposed by state and local business laws
and regulations.
Patient Care's activities are subject to various federal and state laws
and regulations. Changes in the law, new interpretations of existing laws, or
changes in payment methodology, may have a dramatic effect on the definition of
permissible or impermissible activities, the relative costs associated with
doing business and the amount of reimbursement by both government and other
third-party payors. In addition to specific legislative and regulatory
influences, efforts to reduce the growth of the federal budget and the Medicare
and the Medicaid programs have resulted in enactment of the Balanced Budget Act
of 1997. This law contains several provisions affecting Medicare payment for the
coverage of home healthcare services which directly or indirectly, together with
Medicaid payments, accounted for 80 percent of Patient Care's net revenue in
1998. Certain of these provisions could have an adverse effect on Patient Care.
In addition, state legislatures periodically consider various healthcare reform
proposals. Congress and state legislatures can be expected to continue and
review and assess alternative healthcare delivery systems and payment
methodologies, and public debate of these issues can be expected to continue in
the future. The ultimate timing or effect of such additional legislative efforts
cannot be predicted and may impact Patient Care in different ways. No assurance
can be given that any such efforts will not have a material adverse effect on
Patient Care.
Certain of Patient Care's employees are subject to state laws and
regulations governing professional practice. Patient Care's operations are
subject to periodic survey by governmental and private accrediting entities to
assure compliance with applicable state licensing, and Medicare and Medicaid
certification and accreditation standards, as the case may be. From time to time
in the ordinary course of business, Patient Care, like other healthcare
companies, receives survey reports containing deficiencies for alleged failure
to comply with applicable requirements. Patient Care reviews such reports and
takes appropriate corrective action. The failure to effect such action or to
obtain, renew or maintain any of the required regulatory approvals,
certifications or licences could materially adversely affect Patient Care's
business, and could prevent the programs involved from offering products and
services to patients. There can be no assurance that either the states or the
federal government will not impose additional regulations upon the activities of
Patient Care which might materially adversely affect Patient Care.
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ENVIRONMENTAL MATTERS
Roto-Rooter's operations are subject to various federal, state, and local
laws and regulations regarding environmental matters and other aspects of the
operation of a sewer and drain cleaning and plumbing services business. For
certain other activities, such as septic tank pumping, Roto-Rooter is subject to
state and local environmental health and sanitation regulations. Compliance with
federal, state and local laws governing discharge of materials into the
environment have not had nor are expected to have a material effect upon the
operations of Roto-Rooter.
In connection with the sale of DuBois to the Diversey Corporation, the
Company contractually assumed for a period of ten years the estimated liability
for potential environmental cleanup and related costs arising from the sale of
DuBois up to a maximum of $25,500,000. The Company had accrued $15,500,000 with
respect to these potential liabilities. Based upon an updated assessment of the
Company's environmental-related liability by the Company's environmental
adviser, this accrual was reduced in 1998 and now has a balance of $4,200,000.
Prior to the sale of DuBois, DuBois had been designated as a Potentially
Responsible Party ("PRP") at fourteen Superfund sites by the U.S. Environmental
Protection Agency ("USEPA"). With respect to all of these sites, the Company has
been unable to locate any records indicating it disposed of waste of any kind at
such sites. Nevertheless, it settled claims at five such sites at minimal cost.
In addition, because there was a number of other financially responsible
companies designated as PRPs relative to these sites, management believes that
it is unlikely that such actions will have a material effect on the Company's
financial condition or results of operations. With respect to one of these
sites, the Company's involvement is based on the location of one of its
manufacturing plants. Currently, the USEPA and the state governmental agency are
attempting to resolve jurisdictional issues, and action against PRPs is not
proceeding.
Chemed, to the best of its knowledge, is currently in compliance in all
material respects with the environmental laws and regulations affecting its
operations. Such environmental laws, regulations and enforcement proceedings
have not required Chemed to make material increases in or modifications to its
capital expenditures and they have not had a material adverse effect on sales or
net income. Capital expenditures for the purposes of complying with
environmental laws and regulations during 1999 and 2000 with respect to
continuing operations are not expected to be material in amount; there can be no
assurance, however, that presently unforeseen legislative or enforcement actions
will not require additional expenditures.
EMPLOYEES
On December 31, 1998, Chemed had a total of 7,671 employees; 7,622 were
located in the United States and 49 were in Canada.
ITEM 2. PROPERTIES
Chemed has plants and offices in various locations in the United States
and Canada. The major facilities operated by Chemed are listed below by industry
segment. All "owned" property is held in fee and is not subject to any major
encumbrance. Except as otherwise shown, the leases have terms ranging from one
year to nine years. Management does not foresee any difficulty in renewing or
replacing the remainder of its current leases. Chemed considers all of its major
operating
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properties to be maintained in good operating condition and to be generally
adequate for present and anticipated needs.
<TABLE>
<CAPTION>
Location Type Owned Leased
-------- ---- ----- ------
ROTO-ROOTER GROUP
<S> <C> <C> <C>
Cincinnati, OH (1) Office and service 22,000 sq. ft. 28,000 sq. ft.
facilities
West Des Moines, Office, manufacturing and 29,000 sq. ft. --
IA distribution center facilities
Northeastern Office and service 27,000 sq. ft. 67,000 sq. ft.
U.S. Area (2) facilities
Central U.S. Office and service 17,000 sq. ft. 39,000 sq. ft.
Area (3) facilities
Mid-Atlantic Office and service 18,000 sq. ft. 24,000 sq. ft.
U.S. Area (4) facilities
Midwestern U.S. Office and service 10,000 sq. ft. 28,000 sq. ft.
Area (5) facilities
Southeastern U.S. Office and service 22,000 sq. ft. 36,000 sq. ft.
Area (6) facilities
Western U.S. Office and service 19,000 sq. ft. 84,000 sq. ft.
Area (7) facilities
Canada (8) Office and service -- 11,000 sq. ft.
facilities
PATIENT CARE
New Jersey (9) Office -- 58,000 sq. ft.
Connecticut (10) Office -- 42,000 sq. ft.
New York (11) Office -- 41,000 sq. ft.
Louisville, KY Office -- 4,000 sq. ft.
Illinois (12) Office -- 1,000 sq. ft.
Ohio (13) Office -- 3,000 sq. ft.
SERVICE AMERICA
Florida (14) Office and service 46,000 sq. ft. 48,000 sq. ft.
facilities
</TABLE>
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<TABLE>
<CAPTION>
Location Type Owned Leased
-------- ---- ----- ------
<S> <C> <C> <C>
Arizona (15) Office and service -- 11,000 sq. ft.
facilities
CORPORATE
Cincinnati, OH (16) Corporate offices and -- 47,000 sq. ft.
related facilities
</TABLE>
(1) Includes 6,000 square feet that formerly housed a service facility.
(2) Comprising locations in Stoughton, Springfield, West Springfield and
Woburn, Massachusetts; West Stratford, Groton, Bloomfield, and
Unionville, Connecticut; Buffalo, West Seneca, Staten Island, Rochester,
Farmingdale and Hawthorne, New York; and Cranston, Rhode Island.
(3) Comprising locations in Atlanta, Decatur, Keenesaw and Newnan, Georgia;
Birmingham, and Adamsville, Alabama; Memphis and Nashville, Tennessee;
Charlotte, North Carolina; and St. Louis, Missouri.
(4) Comprising locations in Pennsauken and North Brunswick, New Jersey;
Levittown, Pennsylvania; Fairfax, Virginia; Newark, Delaware; and
Baltimore and Jessup, Maryland.
(5) Comprising locations in Cleveland and Columbus, Ohio; Indianapolis,
Indiana; and Pittsburgh and Wilmerding, Pennsylvania.
(6) Comprising locations in Jacksonville, Longwood, Miami, Orlando, Tampa
and Ft. Lauderdale, Florida; Raleigh/Durham, North Carolina; and
Virginia Beach, Virginia.
(7) Comprising locations in Houston, San Antonio and Austin, Texas; Addison,
Schaumburg and Posen, Illinois; Commerce City, Colorado; Honolulu,
Hawaii; Minneapolis, St. Paul and Oakdale, Minnesota; Tacoma,
Washington; and Fresno and Menlo Park, California.
(8) Comprising locations in Port Coquitlam, British Columbia; and Winnipeg,
Manitoba.
(9) Comprising locations in Princeton, Jersey City, Ridgewood, Montclair,
Westfield, and West Orange, New Jersey.
(10) Comprising locations in Greenwich, Madison, Naugatuck, Newington,
Norwalk, New Haven, Stratford, Bridgeport and Danbury, Connecticut.
(11) Comprising locations in Brooklyn, Manhattan, Queens, Bronx and Staten
Island, New York.
(12) Comprising locations in Chicago and Lincolnshire, Illinois.
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(13) Comprising locations in Columbus and Mt. Vernon, Ohio.
(14) Comprising locations in Pompano Beach, Miami, Fort Myers, St.
Petersburg, Orlando, West Palm Beach, Deerfield Beach and Delray Beach,
Florida.
(15) Comprising locations in Phoenix and Tucson, Arizona.
(16) Excludes 88,000 square feet in current Cincinnati, Ohio office
facilities that are sublet to outside parties - portions of this space
may revert to the Company beginning in 2000. Includes 38,000 square
feet leased for the Company's corporate office facilities.
ITEM 3. LEGAL PROCEEDINGS
On November 9, 1998, Paul Voet, who is an Executive Vice President
and a director of the Company, filed a lawsuit against the Company in the Court
of Common Pleas, Hamilton County, Ohio, in connection with the Company's sale of
its majority owned subsidiary, National Sanitary Supply Company, alleging that
the Company breached his employment agreement due to a material reduction in his
title, authority or responsibility. Mr. Voet is seeking a money judgment in the
principal amount of $6 million. The Company disputes these claims and believes
that the disposition of this matter will not have a material effect on the
financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Name Age Office First Elected
- ------------------ --- -------------------------------------------- ------------------------
<S> <C> <C> <C>
Edward L. Hutton 79 Chairman and Chief Executive Officer November 3, 1993 (1)
Kevin J. McNamara 45 President August 2, 1994 (2)
Paul C. Voet 52 Executive Vice President May 20, 1991 (3)
Timothy S. O'Toole 43 Executive Vice President and May 18, 1992 (4)
Treasurer
Sandra E. Laney 55 Senior Vice President and Chief November 3, 1993 (5)
Administrative Officer
Arthur V. Tucker, 49 Vice President and Controller May 20, 1991 (6)
Jr.
</TABLE>
(1) Mr. E. L. Hutton is the Chairman and Chief Executive Officer of the
Company and has held these positions since November 1993. Previously,
from April 1970 to November 1993, Mr. E. L. Hutton held the positions of
President and Chief Executive Officer of the Company. Mr. E. L. Hutton is
the father of Mr. T. C. Hutton, a director and a Vice President of the
Company.
(2) Mr. K. J. McNamara is President of the Company and has held this position
since August 1994. Previously, he served as an Executive Vice President,
Secretary and General Counsel of the Company, since November 1993, August
1986 and August 1986, respectively. He previously held the position of
Vice President of the Company, from August 1986 to May 1992.
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(3) Mr. P. C. Voet is an Executive Vice President of the Company and has held
this position since May 1991. From May 1988 to November 1993, he served
the Company as Vice Chairman.
(4) Mr. T. S. O'Toole is an Executive Vice President and the Treasurer of the
Company and has held these positions since May 1992 and February 1989,
respectively. Mr. O'Toole is Chairman and Chief Executive Officer of
Patient Care, Inc. and has held these positions since April 1995.
(5) Ms. S. E. Laney is Senior Vice President and the Chief Administrative
Officer of the Company and has held these positions since November 1993
and May 1991, respectively. Previously, from May 1984 to November 1993,
she held the position of Vice President of the Company.
(6) Mr. A. V. Tucker, Jr. is a Vice President and Controller of the Company
and has held these positions since February 1989. From May 1983 to
February 1989, he held the position of Assistant Controller of the
Company.
Each executive officer holds office until the annual election at the next
annual organizational meeting of the Board of Directors of the Company which is
scheduled to be held on May 17, 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Capital Stock (par value $1 per share) is traded on the New
York Stock Exchange under the symbol CHE. The range of the high and low sale
prices on the New York Stock Exchange and dividends paid per share for each
quarter of 1997 and 1998 are set forth below.
<TABLE>
<CAPTION>
Closing
-------
Dividends Paid
High Low Per Share
-------------------------------------------------------------
1998
<S> <C> <C> <C>
First Quarter $42-5/16 $38 $.53
Second Quarter 41-1/4 32-9/16 .53
Third Quarter 34-11/16 25-9/16 .53
Fourth Quarter 34-7/8 28-1/8 .53
1997
First Quarter $37-1/2 $35-1/2 $.52
Second Quarter 37-7/16 31-1/2 .52
Third Quarter 39-5/16 35-1/16 .52
Fourth Quarter 43 38-1/16 .53
</TABLE>
Future dividends are necessarily dependent upon the Company's earnings
and financial condition, compliance with certain debt covenants and other
factors not presently determinable.
As of March 18, 1999, there were approximately 5,167 stockholders of
record of the Company's Capital Stock. This number only includes stockholders of
record and does not
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include stockholders with shares beneficially held for them in nominee name or
within clearinghouse positions of brokers, banks or other institutions.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item for the five years ended
December 31, 1998 is set forth on pages 28 and 29 of the 1998 Annual Report to
Stockholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information called for by this Item is set forth on pages 32
through 35 of the 1998 Annual Report to Stockholders and is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the report thereon
of PricewaterhouseCoopers LLP dated February 2, 1999, appearing on pages 11
through 27 of the 1998 Annual Report to Stockholders, along with the
Supplementary Data (Unaudited Summary of Quarterly Results) appearing on page
31, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors of the Company are:
<TABLE>
<CAPTION>
<S> <C>
Edward L. Hutton Walter L. Krebs
James H. Devlin Sandra E. Laney
Charles H. Erhart, Jr. Kevin J. McNamara
Joel F. Gemunder John M. Mount
Lawrence J. Gillis Timothy S. O'Toole
Patrick P. Grace Donald E. Saunders
Thomas C. Hutton Paul C. Voet
George J. Walsh III
</TABLE>
Except with respect to Mr. Gillis, the additional information required
under this Item with respect to the directors and executive officers is set
forth in the Company's 1999 Proxy Statement and in Part I hereof under the
caption "Executive Officers of the Registrant" and is incorporated herein by
reference. Mr. Gillis is a Vice President of the Company and has held this
position since November 1996. He is also the Chairman of the Roto-Rooter Group
and has held this position since January 1999. Previously, he was President and
Chief Operating Officer of Roto-Rooter Services Company from October 1994 to
January 1999. He was Senior Vice President-Operations of Roto-Rooter Services
Company from February 1991 to October 1994.
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ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth in the Company's 1999
Proxy Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required under this Item is set forth in the Company's 1999
Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item is set forth in the Company's 1999
Proxy Statement, which is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
EXHIBITS
3.1 Certificate of Incorporation of Chemed Corporation.*
3.2 By-Laws of Chemed Corporation.*
10.1 Agreement and Plan of Merger among Diversey U.S. Holdings, Inc.,
D. C. Acquisition Inc., Chemed Corporation and DuBois Chemicals,
Inc., dated as of February 25, 1991.*
10.2 Stock Purchase Agreement between Omnicare, Inc. and Chemed
Corporation, dated as of August 5, 1992.*
10.3 Agreement and Plan of Merger among National Sanitary Supply
Company, Unisource Worldwide, Inc. and TFBD, Inc. dated as of
August 11, 1997.*
10.4 1981 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.5 1983 Incentive Stock Option Plan, as amended through May 20,
1991.*,**
10.6 1986 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.7 1988 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.8 1993 Stock Incentive Plan.*,**
10.9 1995 Stock Incentive Plan.*,**
10.10 1997 Stock Incentive Plan.*,**
10.11 Directors Emeriti Plan.*,**
10.12 Employment Contracts with Executives.*,**
10.13 Amendment to Employment Contracts with Executives.**
11
<PAGE> 14
10.15 Split Dollar Agreement with Executives.*,**
10.16 Split Dollar Agreement with Edward L. Hutton.*,**
10.17 Split Dollar Agreement with Paul C. Voet.*,**
10.18 Amendment No. 7 to Employment Agreement with Edward L.
Hutton.*,**
10.19 Excess Benefits Plan, as restated and amended, effective April 1,
1997.*,**
10.20 Non-Employee Directors' Deferred Compensation Plan.*,**
10.21 Stock Purchase Agreement by and Among Banta Corporation, Chemed
Corporation and OCR Holding Company as of September 24, 1997.*
10.22 Amendment No. 3 to Employment Contract with James H. Devlin.*,**
10.23 Employment Contracts with John M. Mount and Walter L. Krebs.*,**
10.24 Employment Contract with Lawrence J. Gillis.*,**
10.25 Chemed/Roto-Rooter Savings & Retirement Plan, effective
January 1, 1999.
10.26 1st Amendment to Split Dollar Agreement with Executives.**
10.27 Split Dollar Agreement - II with James H. Devlin.**
10.28 Split Dollar Agreement with Sandra E. Laney.**
13. 1998 Annual Report to Stockholders.
21. Subsidiaries of Chemed Corporation.
23. Consent of Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule +
* This exhibit is being filed by means of incorporation by reference (see
Index to Exhibits on page E-1). Each other exhibit is being filed with
this Annual Report on Form 10-K.
** Management contract or compensatory plan or arrangement.
+ Not filed herewith.
FINANCIAL STATEMENT SCHEDULE
See Index to Financial Statements and Financial Statement Schedule on
page S-1.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1998.
12
<PAGE> 15
SIGNATURES
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.
CHEMED CORPORATION
March 25, 1999 By /s/ Edward L. Hutton
------------------------------------
Edward L. Hutton
Chairman and Chief Executive Officer
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ EDWARD L. HUTTON Chairman and Chief --------
Edward L. Hutton Executive Officer and a |
Director (Principal |
Executive Officer) |
|
/S/ TIMOTHY S. O'TOOLE Executive Vice President |
Timothy S. O'Toole and Treasurer and a |
Director |
(Principal Financial |
Officer) |
|
/S/ ARTHUR V.TUCKER, JR. Vice President and | March 25, 1999
Arthur V. Tucker, Jr. Controller |
(Principal Accounting |
Officer) |
-------- |
James H. Devlin* Walter L. Krebs* | |
Charles H. Erhart, Jr.* Sandra E. Laney* | |
Joel F. Gemunder Kevin J. McNamara* | |
Lawrence J. Gillis* John M. Mount* |--Directors |
Patrick P. Grace* Donald E. Saunders* | |
Thomas C. Hutton* Paul C. Voet* | |
George J. Walsh III* | |
-------- --------
</TABLE>
- ---------------------
* Naomi C. Dallob by signing her name hereto signs this document on behalf
of each of the persons indicated above pursuant to powers of attorney
duly executed by such persons and filed with the Securities and Exchange
Commission.
March 25, 1999 /s/ Naomi C. Dallob
-------------- -----------------------------
Date Naomi C. Dallob
(Attorney-in-Fact)
13
<PAGE> 16
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
1996, 1997 AND 1998
CHEMED CORPORATION CONSOLIDATED FINANCIAL PAGE(S)
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants............................... 11*
Statement of Accounting Policies.................................12*
Consolidated Statement of Income.................................13*
Consolidated Balance Sheet.......................................14*
Consolidated Statement of Cash Flows.............................15*
Consolidated Statement of Changes in Stockholders' Equity........16*
Consolidated Statement of Comprehensive Income...................16*
Notes to Financial Statements....................................17-25*
Segment Data.....................................................26-27*
Report of Independent Accountants on Financial Statement
Schedule.......................................................S-2
Schedule II -- Valuation and Qualifying Accounts.................S-3-S-4
* Indicates page numbers in Chemed Corporation 1998 Annual Report to
Stockholders.
- ---------------------------
The consolidated financial statements of Chemed Corporation listed above,
appearing in the 1998 Annual Report to Stockholders, are incorporated herein by
reference. The Financial Statement Schedule should be read in conjunction with
the consolidated financial statements listed above. Schedules not included have
been omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto as listed above.
S-1
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Chemed Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 2, 1999 appearing on page 11 of the 1998 Annual Report to
Stockholders of Chemed Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14 of
this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Cincinnati, Ohio
February 2, 1999
S-2
<PAGE> 18
<TABLE>
<CAPTION>
SCHEDULE II
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS (a)
(in thousands)
Dr/(Cr)
Additions
-------------------------------------
(Charged) (Charged) Applicable
Credited Credited to
Balance at to Costs to Other Companies Balance
Beginning and Accounts Acquired Deductions at End
Description of Period Expenses (b) in Period (c) of Period
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allowances for doubtful
accounts (d)
For the year 1998......... $ (2,626) $(2,452) $ - $ (15) $(1,492) $ (3,601)
========= ======== ======== ========= ======== =========
For the year 1997......... $ (1,583) $ (702) $ - $ (974) $ 633 $ (2,626)
========= ======== ======== ========= ======== =========
For the year 1996......... $ (1,496) $ (877) $ (78) $ (16) $ 884 $ (1,583)
========= ======== ======== ========= ======== =========
Allowances for doubtful
accounts - notes
receivable (e)
For the year 1998......... $ (23) $ - $ - $ - $ - $ (23)
========= ======== ======== ========= ======== =========
For the year 1997......... $ (120) $ - $ - $ - $ 97 $ (23)
========= ======== ======== ========= ======== =========
For the year 1996......... $ (247) $ 8 $ 78 $ - $ 41 $ (120)
========= ======== ======== ========= ======== =========
Valuation allowance for
available-for-sale securities
For the year 1998......... $ 30,705 $ - $ 2,290 $ - $(12,589) $ 20,406
========= ======== ======== ========= ========= ========
For the year 1997......... $ 40,096 $ - $ 2,844 $ - $(12,235) $ 30,705
========= ======== ======== ========= ========= ========
For the year 1996......... $ 56,030 $ - $ 12,232 $ - $(28,166) $ 40,096
========= ======== ======== ========= ========= ========
</TABLE>
S-3
<PAGE> 19
- -------------------------
(a) Amounts are presented on a continuing operations basis.
(b) With respect to the valuation allowance for available-for-sale
securities, additions credited to other accounts comprise an increase
in net unrealized holding gains.
(c) With respect to allowances for doubtful accounts, deductions include
accounts considered uncollectible or written off, payments, companies
divested, etc. With respect to valuation allowance for
available-for-sale securities, deductions comprise net realized gains
on sales of investments.
(d) Classified in consolidated balance sheet as a reduction of accounts
receivable.
(e) Classified in consolidated balance sheet as a reduction of other
assets.
S-4
<PAGE> 20
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------ ----------- -----------
<S> <C> <C>
3.1 Certificate of Incorporation of Form S-3 4.1
Chemed Corporation Reg. No. 33-44177
11/26/91
3.2 By-Laws of Chemed Corporation Form 10-K 2
3/28/89
10.1 Agreement and Plan of Merger Form 8-K 1
among Diversey U.S. Holdings, 3/11/91
Inc., D.C. Acquisition Inc.,
Chemed Corporation and DuBois
Chemicals, Inc., dated as of
February 25, 1991
10.2 Stock Purchase Agreement between Form 10-K 5
Omnicare, Inc. and Chemed 3/25/93
Corporation dated as of August 5,
1992
10.3 Agreement and Plan of Merger Form 8-K 1
among National Sanitary 10/13/97
Supply Company, Unisource
Worldwide, Inc. and TFBD, Inc.
10.4 1981 Stock Incentive Plan, as Form 10- K 7
amended through May 20, 1991 3/27/92
10.5 1983 Incentive Stock Option Plan, Form 10-K 8
as amended through May 20, 1991 3/27/92
10.6 1986 Stock Incentive Plan, as Form 10-K 9
amended through May 20, 1991 3/27/92
10.7 1988 Stock Incentive Plan, as Form 10-K 10
amended through May 20, 1991 3/27/92
10.8 1993 Stock Incentive Plan Form 10-K 10.8
3/29/94
10.9 1995 Stock Incentive Plan Form 10-K 10.14
3/28/96
10.10 1997 Stock Incentive Plan Form 10-K 10.10
3/27/98
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Page Number
or
Incorporation by Reference
---------------------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------ ----------- -----------
<S> <C> <C>
10.11 Directors Emeriti Plan Form 10-Q 10.12
5/12/88
10.12 Employee Contracts with Form 10-K 10.13
Executives 3/28/89
10.13 Amendment to Employment
Contracts with Executives *
10.15 Split Dollar Agreements Form 10-K 10.16
3/28/96
10.16 Split Dollar Agreement with Form 10-K 10.17
Edward L. Hutton 3/28/96
10.17 Split Dollar Agreement with Form 10-K 10.18
Paul C. Voet 3/28/96
10.18 Amendment No. 7 to Employment Form 10-K 10.18
Agreement with Edward L. Hutton 3/27/97
10.19 Excess Benefits Plan, as restated Form 10-K 10.9
and amended, effective April 1, 3/27/98
1997
10.20 Non-Employee Directors' Deferred Form 10-K 10.10
Compensation Plan 3/24/88
10.21 Stock Purchase Plan by and Form 8-K 1
among Banta Corporation, Chemed 10/13/97
Corporation and OCR Holding
Company
10.22 Amendment No. 3 to Employment Form 10-K 10.22
Contract with James H. Devlin 3/27/98
10.23 Employment Contracts with John Form 10-K 10.23
M. Mount and Walter L. Krebs 3/27/98
10.24 Employment Contract with Lawrence Form 10-K 10.24
J. Gillis 3/27/98
10.25 Chemed/Roto-Rooter Savings & *
Retirement Plan, effective
January 1, 1999
2
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Page Number
or
Incorporation by Reference
---------------------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------ ----------- -----------
<S> <C> <C>
10.26 1st Amendment to Split Dollar *
Agreement with Executives
10.27 Split Dollar Agreement - II *
with James H. Devlin
10.28 Split Dollar Agreement with *
Sandra E. Laney
13 1998 Annual Report to Stockholders *
21 Subsidiaries of Chemed Corporation *
23 Consent of Independent Accountants *
24 Powers of Attorney *
27 Financial Data Schedule +
</TABLE>
- ------------------
* Filed herewith.
+ Not filed herewith.
3
<PAGE> 1
EXHIBIT 10.13
AMENDMENT
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 18, 1998 between ________________
("Employee") and Chemed Corporation (the "Company").
WHEREAS, Employee and the Company have entered into an
Employment Agreement dated as of May 2, 1988 and amended May 15, 1989, May 21,
1990, May 20, 1991, May 18, 1992, May 17, 1993, May 16, 1994, May 15, 1995, May
20, 1996 and May 19, 1997 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to further amend the
Employment Agreement in certain respects.
NOW, THEREFORE, Employee and the Company mutually agree that
the Employment Agreement shall be amended, effective as of May 18, 1998, as
follows:
A. The date, amended as of May 19, 1997, set forth in
Section 1.2 of the Employment Agreement, is hereby
deleted and the date of May 3, 2003 is hereby
substituted therefor.
B. The base salary amount set forth in the first
sentence of Section 2.1 of the Employment Agreement
is hereby deleted and the base salary amount of
$_______ per annum is hereby substituted.
<PAGE> 2
C. The amount of unrestricted stock award recognized in
lieu of incentive compensation in 1997 is $_______.
Except as specifically amended in this Amendment No. 10 to
Employment Agreement, the Employment Agreement, as amended, shall continue in
full force and effect in accordance with its terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of the date first above written.
EMPLOYEE
---------------------
CHEMED CORPORATION
---------------------
Edward L. Hutton
Chairman
<PAGE> 3
SCHEDULE TO EXHIBIT 10.13
<TABLE>
<CAPTION>
Minimum Current
Annual Current (a) Expiration
Base Salary Stock Award Date of
Name and Position and Bonus Compensation Agreement
- ----------------- --------- ------------ ---------
<S> <C> <C> <C>
Edward L. Hutton $ 590,016.00 $ 399,071.00 5/3/2000
Chairman and 218,165.00
Chief Executive Officer
Kevin J. McNamara 309,648,00 101,169.00 5/3/2003
President 36,600.00
Lawrence J. Gillis 250,000.00 -0- 5/19/2001
Vice President 90,000.00
Timothy S. O'Toole 192,780.00 77,767.00 5/3/2003
Executive Vice President 22,200.00
and Treasurer
Sandra E. Laney 190,418.00 74,476.00 5/3/2003
Senior Vice President and 29,211.00
Chief Administrative Officer
Thomas C. Hutton 181,400.00 31,570.00 5/3/2003
Vice President 13,000.00
Arthur V. Tucker 115,300.00 24,134.00 5/3/2003
Vice President and Controller 16,085.00
</TABLE>
- ----------
(a) Amount of unrestricted stock award recognized in lieu of incentive
compensation in 1997.
<PAGE> 1
EXHIBIT 10.25
CHEMED/ROTO-ROOTER
----------------------------------------------
SAVINGS & RETIREMENT PLAN
----------------------------------------------
Adopted Effective July 1, 1971
Amended and Restated Effective August 1, 1985
Amended and Restated Effective January 1, 1989
Amended and Restated Effective January 1, 1999
<PAGE> 2
CHEMED/ROTO-ROOTER
----------------------------------------------
SAVINGS & RETIREMENT PLAN
----------------------------------------------
Adopted Effective July 1, 1971
Amended and Restated Effective August 1, 1985
Amended and Restated Effective January 1, 1989
Amended and Restated Effective January 1, 1999
<PAGE> 3
CHEMED/ROTO-ROOTER
SAVINGS & RETIREMENT PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION......................................................................................................8
1.1 Name of Plan..................................................................................I-1
1.2 Profit Sharing Plan...........................................................................I-1
1.3 Qualifying Employer Securities................................................................I-1
1.4 Securities Registration.......................................................................I-1
ARTICLE II - DEFINITIONS.......................................................................................II-1
2.1 Account or Accounts..........................................................................II-1
2.2 Affiliated Company...........................................................................II-1
2.3 Age..........................................................................................II-1
2.4 Basic Employee Contribution..................................................................II-1
2.5 Beneficiary..................................................................................II-1
2.6 Chemed.......................................................................................II-1
2.7 Compensation.................................................................................II-1
2.8 Disabled Participant.........................................................................II-2
2.9 Early Retirement Date........................................................................II-2
2.10 Effective Date...............................................................................II-2
2.11 Eligible Employee............................................................................II-2
2.12 Employee.....................................................................................II-2
2.13 Employee Contributions.......................................................................II-2
2.14 Employee Contribution Account................................................................II-2
2.15 Employer.....................................................................................II-2
2.16 Employer Contributions.......................................................................II-2
2.17 Employer Contribution Account................................................................II-2
2.18 Employing Unit...............................................................................II-3
2.19 Employment Date..............................................................................II-3
2.20 Entry Date...................................................................................II-3
2.21 ERISA........................................................................................II-3
2.22 401(k) Contribution..........................................................................II-3
2.23 401(k) Contribution Account..................................................................II-3
2.24 General Retirement Plan Account..............................................................II-3
2.25 Highly Compensated Employee..................................................................II-3
2.26 Hours of Service.............................................................................II-3
2.27 Inactive Participant.........................................................................II-4
2.28 Compensation/Incentive Committee.............................................................II-4
2.29 Internal Revenue Code or Code................................................................II-4
2.30 Investment Committee.........................................................................II-4
2.31 Investment Fund..............................................................................II-4
2.32 Late Retirement Date.........................................................................II-4
2.33 Leased Employee..............................................................................II-4
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
2.34 Limitation Year..............................................................................II-5
2.35 Net Gain or Net Loss.........................................................................II-5
2.36 Net Profits..................................................................................II-5
2.37 Normal Retirement Date.......................................................................II-5
2.38 One Year Break in Service....................................................................II-6
2.39 Participant..................................................................................II-6
2.40 Plan.........................................................................................II-6
2.41 Plan Administrator...........................................................................II-6
2.42 Plan Quarter.................................................................................II-6
2.43 Plan Year....................................................................................II-6
2.44 Related Company..............................................................................II-6
2.45 Retired Participant..........................................................................II-6
2.46 Spouse.......................................................................................II-7
2.47 Supplemental Employee Contribution...........................................................II-7
2.48 Thrift Contribution..........................................................................II-7
2.49 Thrift Contribution Account..................................................................II-7
2.50 Totally and Permanently Disabled.............................................................II-7
2.51 Trust Agreement..............................................................................II-7
2.52 Trust Fund...................................................................................II-7
2.53 Trustee......................................................................................II-7
2.54 Union Employee...............................................................................II-7
2.55 Valuation Date...............................................................................II-7
2.56 Years of Service.............................................................................II-8
ARTICLE III - PARTICIPATION...................................................................................III-1
3.1 Eligibility for Participation...............................................................III-1
3.2 Participation Date; Application for Participation...........................................III-1
3.3 Designation of Beneficiary..................................................................III-1
3.4 Resumption of Service with an Employing Unit................................................III-1
3.5 Change in Employment Status; Transfer to Affiliated Company.................................III-1
3.6 Transfer of Employment to Related Company...................................................III-2
3.7 Suspension of Participation.................................................................III-2
3.8 Employment by Employer; Service with Newly Acquired Entities;
Records of Employer................................................................III-2
3.9 Plan Binding................................................................................III-2
ARTICLE IV - CONTRIBUTIONS.....................................................................................IV-1
4.1 Establishment of Accounts....................................................................IV-1
4.2 Basic Employee Contributions.................................................................IV-1
4.3 Supplemental Employee Contributions..........................................................IV-1
4.4 Method for Effecting Employee Contributions..................................................IV-1
4.5 Changes in Employee Contributions............................................................IV-1
4.6 Limitations on Employee Contributions........................................................IV-2
4.7 Credits to Employee Contribution Accounts....................................................IV-4
4.8 Employer Contributions.......................................................................IV-4
4.9 Allocation of Employer Contributions.........................................................IV-5
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
4.10 Limitations on Employer Contributions........................................................IV-6
4.11 Compensation Limitation......................................................................IV-7
ARTICLE V - TRUSTEE; INVESTMENTS................................................................................V-1
5.1 Trustee Selection; Trust Agreement............................................................V-1
5.2 Powers and Duties of the Trustee..............................................................V-1
5.3 Appointment and Powers and Duties of Investment Committee.....................................V-1
5.4 Valuation of Trust Fund Assets................................................................V-1
5.5 Composition of the Trust Fund.................................................................V-1
5.6 Investment of Contributions...................................................................V-3
5.7 Change of Investment Election.................................................................V-3
5.8 Transfer of Funds.............................................................................V-3
5.9 Participant Chemed Stock Voting and Other Rights..............................................V-3
5.10 Adjustment Provisions.........................................................................V-4
5.11 Exchange or Tender Offers.....................................................................V-5
5.12 Omnicare Stock Fund...........................................................................V-5
ARTICLE VI - ALLOCATION OF PROFIT AND LOSS
OF TRUST FUND TO PARTICIPANT ACCOUNTS.................................................................VI-1
6.1 Date of Valuation............................................................................VI-1
6.2 Adjustment of Accounts as of Valuation Dates.................................................VI-1
6.3 Allocation of Profit and Loss................................................................VI-1
6.4 Statement of Account.........................................................................VI-2
ARTICLE VII - CODE SECTIONS 401(k) AND 401(m) LIMITATIONS.....................................................VII-1
7.1 Definitions.................................................................................VII-1
7.2 Code Section 402(g).........................................................................VII-2
7.3 Code Section 401(k) ADP Test................................................................VII-4
7.4 Code Section 401(a)(4) Excess Match Test....................................................VII-7
7.5 Code Section 401(m) ACP Test................................................................VII-8
7.6 Code Section 401(m) Multiple Use Test......................................................VII-12
7.7 Special Senior HCE Family Group Participant Rules..........................................VII-14
7.8 Special Rules..............................................................................VII-16
ARTICLE VIII - CODE SECTION 415 CONTRIBUTION LIMITATIONS.....................................................VIII-1
8.1 Definitions................................................................................VIII-1
8.2 Limitation If a Participant Does Not Participate in Any Other Plan.........................VIII-7
8.3 Limitation If a Participant Participates in Another Defined
Contribution Plan.................................................................VIII-7
8.4 Limitation If the Participant Participates in a Defined Benefit Plan.......................VIII-9
8.5 Required Aggregation of Plans.............................................................VIII-10
8.6 Disposition of Excess Amounts.............................................................VIII-10
8.7 Limitation on Subsequent Employer Contributions...........................................VIII-13
ARTICLE IX - CODE SECTION 416 TOP-HEAVY PROVISIONS.............................................................IX-1
9.1 Definitions..................................................................................IX-1
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
9.2 Top-Heavy and Super Top-Heavy Status.........................................................IX-4
9.3 Minimum Contribution.........................................................................IX-4
9.4 Minimum Vesting..............................................................................IX-5
9.5 Modification of Code Section 415 Limits......................................................IX-6
ARTICLE X - LOANS AND WITHDRAWALS...............................................................................X-1
10.1 Withdrawals from Thrift Contribution Accounts.................................................X-1
10.2 Withdrawals from Employer Contribution Accounts...............................................X-1
10.3 Withdrawals from 401(k) Contribution Accounts.................................................X-1
10.4 Effects of Withdrawals........................................................................X-3
10.5 Withdrawals after Normal Retirement Date......................................................X-4
10.6 Payment of Withdrawals........................................................................X-4
10.7 Loans.........................................................................................X-5
ARTICLE XI - BENEFIT PROVISIONS................................................................................XI-1
11.1 Amount of a Participant's Interest in His Accounts...........................................XI-1
11.2 Normal Retirement............................................................................XI-2
11.3 Late Retirement..............................................................................XI-2
11.4 Early Retirement.............................................................................XI-2
11.5 In-Service Retirement........................................................................XI-2
11.6 Total and Permanent Disability...............................................................XI-2
11.7 Death........................................................................................XI-2
11.8 Other Termination of Service.................................................................XI-2
11.9 Forfeitures..................................................................................XI-3
11.10 Additional Employer Contributions to Restore Forfeited Amounts...............................XI-4
11.11 CODA Separation From Service Distribution Limitation.........................................XI-4
ARTICLE XII - METHODS OF PAYMENT..............................................................................XII-1
12.1 Joint and Survivor Annuity; Preretirement Survivor Annuity..................................XII-1
12.2 Methods of Payment..........................................................................XII-1
12.3 Installment Distributions; Deferred Lump Sum Distributions..................................XII-5
12.4 Duty to Provide Forms and Proofs............................................................XII-6
12.5 Duty to Provide Mailing Address.............................................................XII-6
12.6 Benefit Payments in the Event of Incapacity.................................................XII-6
12.7 Distributions in Kind.......................................................................XII-7
12.8 Assignment of Benefits......................................................................XII-7
12.9 When Benefit Payments Begin.................................................................XII-7
12.10 TEFRA 242(b) Election.......................................................................XII-9
12.11 Participant Notice and Election Requirements...............................................XII-10
12.12 Merged Plans...............................................................................XII-12
ARTICLE XIII - QUALIFIED JOINT AND SURVIVOR AND
PRERETIREMENT SURVIVOR ANNUITIES....................................................................XIII-1
13.1 Applicability..............................................................................XIII-1
13.2 Definitions................................................................................XIII-1
13.3 Qualified Joint and Survivor Annuity.......................................................XIII-2
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
13.4 Qualified Preretirement Survivor Annuity...................................................XIII-3
13.5 Notice Requirements........................................................................XIII-3
ARTICLE XIV - PORTABILITY.....................................................................................XIV-1
14.1 Transfer to Qualified Plan..................................................................XIV-1
14.2 Transfer to Individual Retirement Account...................................................XIV-1
14.3 Transfer or Rollover from Qualified Plans...................................................XIV-1
14.4 Restricted Participation....................................................................XIV-2
14.5 Direct Rollovers............................................................................XIV-2
ARTICLE XV - PLAN ADMINISTRATION...............................................................................XV-1
15.1 Plan Administrator...........................................................................XV-1
15.2 Term of Office...............................................................................XV-1
15.3 General Duties...............................................................................XV-1
15.4 Retention of Advisors........................................................................XV-1
15.5 Directions to the Trustees...................................................................XV-1
15.6 Limitation on Plan Administrator's Powers....................................................XV-1
15.7 Claims and Appeal Procedure..................................................................XV-1
15.8 Delegation of Duties and Powers..............................................................XV-2
ARTICLE XVI - AMENDMENTS AND TERMINATION......................................................................XVI-1
16.1 Amendments to the Plan by Chemed............................................................XVI-1
16.2 Amendments Affecting Nonforfeitable Interests...............................................XVI-1
16.3 Change in Vesting Schedule..................................................................XVI-1
16.4 Complete Discontinuance of Employer Contributions...........................................XVI-1
16.5 Termination of Plan; Procedure on Termination...............................................XVI-2
16.6 Plan Amendment Procedures...................................................................XVI-2
16.7 Withdrawal by an Employer...................................................................XVI-2
16.8 CODA Plan Termination Distribution Limitation...............................................XVI-3
ARTICLE XVII - MISCELLANEOUS..................................................................................XVI-1
17.1 Plan Not Contract of Employment............................................................XVII-1
17.2 Records of the Employer....................................................................XVII-1
17.3 Gender and Number..........................................................................XVII-1
17.4 Headings...................................................................................XVII-1
17.5 Law Governing..............................................................................XVII-1
17.6 Successor Company..........................................................................XVII-1
17.7 Merger or Consolidation of Plan Assets.....................................................XVII-1
17.8 Indemnification............................................................................XVII-2
17.9 Expenses of Administration.................................................................XVII-2
17.10 Allocation of Fiduciary Responsibilities...................................................XVII-2
17.11 Severability...............................................................................XVII-2
17.12 Exclusive Benefit..........................................................................XVII-2
17.13 Qualified Military Service.................................................................XVII-4
</TABLE>
<PAGE> 8
CHEMED/ROTO-ROOTER
------------------
SAVINGS & RETIREMENT PLAN
- --------------------------------------------------------------------------------
INTRODUCTION
------------
The Chemed Corporation Employees Savings and Investment (the "Plan")
was adopted by the Board of Directors of Chemed Corporation effective July 1,
1971 and has been amended several times since then.
The purpose of the Plan is to encourage employees of the designated
Employing Units to adopt a regular savings program and to enable those employees
to participate in the profits of their employers. The Plan is funded through
employee contributions made by payroll deductions and through employer
contributions. The Plan contains a cash or deferred arrangement, referred to in
the Plan as 401(k) Contributions, described in Section 401(k) of the Internal
Revenue Code of 1986, as amended.
It is intended that this Plan, together with the Trust Agreement
entered into between Chemed Corporation and the Trustee, shall meet all of the
applicable requirements of the Internal Revenue Code of 1986, as amended, and
the Employee Retirement Income Security Act of 1974, as amended, and all formal
regulations issued thereunder.
The history of the Plan and Employer is set forth in Appendix A
attached hereto.
<PAGE> 9
ARTICLE I - NAME OF PLAN
------------------------
1.1 NAME OF PLAN. The Plan shall be known as the "Savings & Retirement
Plan".
1.2 PROFIT SHARING PLAN. The Plan is designated as a profit sharing
plan, as such designation is required under Section 401(a)(27)(B) of the
Internal Revenue Code, with a cash or deferred arrangement described in Section
401(k) of the Internal Revenue Code.
1.3 QUALIFYING EMPLOYER SECURITIES. The Plan is an eligible individual
account plan, as that term is defined in Section 407(d) (3) of ERISA. The
Trustee may invest the assets of the Trust Fund in Chemed common stock as
qualifying employer securities, as defined in Section 407(d)(5) of ERISA in
accordance with the exemptions provided in Sections 407(b) and 404(a)(2) of
ERISA. The Plan is designed and intended to permit the investment of its assets
in Chemed common stock as qualifying employer securities.
1.4 SECURITIES REGISTRATION. The Plan is a voluntary and contributory
plan which permits employee contributions to purchase Chemed common stock as
securities of the Employer. The sales of both the participation interests of the
Plan and Chemed common stock under the Plan (as securities for federal
securities law purposes) have been registered under the Securities Act of 1933
(using Form S-8).
I-1
<PAGE> 10
ARTICLE II - DEFINITIONS
------------------------
For purposes of this Plan, unless the context requires otherwise, the
following words and phrases shall have the meanings indicated:
2.1 "ACCOUNT" or "ACCOUNTS" shall mean any or all of the Employer
Contribution Account, the Employee Contribution Account, the 401(k) Contribution
Account, the Thrift Contribution Account, the General Retirement Plan Account
and any other Account(s) as may be established by the Plan Administrator, as the
context
requires.
2.2 "AFFILIATED COMPANY" shall mean any entity (other than the
Employer) which, when considered with the Employer, constitutes: (a) a
controlled group of corporations (within the meaning of Code section 414(b));
(b) a group of trades or businesses under common control (within the meaning of
Code section 414(c)); (c) an affiliated service group (within the meaning of
Code section 414(m)); or (d) an entity required to be aggregated with the
Employer under Code section 414(o).
2.3 "AGE" shall mean the age of the Employee or Participant as of his
last birthday.
2.4 "BASIC EMPLOYEE CONTRIBUTION" shall mean the contribution made by a
Participant to his Employee Contribution Account in an amount equal to any
integral percentage up to 6% of his Compensation.
2.5 "BENEFICIARY" shall mean the Participant's Spouse. If the
Participant does not have a Spouse, or the Participant has designated a
non-Spouse beneficiary pursuant to a Qualified Election (as defined in Article
XIII), the Participant's "Beneficiary" shall mean any person or entity
designated by the Participant in the form and manner the Plan Administrator may
prescribe or, in the absence of such designation or an effective designation,
the Participant's estate.
2.6 "CHEMED" shall mean Chemed Corporation, a Delaware corporation with
its principal place of business in Cincinnati, Ohio.
2.7 "COMPENSATION" shall mean the gross earnings of an Employee from an
Employing Unit for the Plan Year as set forth in his U.S. Treasury Department
Form W-2 or its equivalent. Compensation shall not include (i) Employer
Contributions, (ii) any other contributions to, or distributions from, any
employee benefit plan, including the Plan, (iii) any program of employee
benefits payable other than in cash (including, but not limited to, income
realized by the grant or exercise of stock options), (iv) non-cash prizes or
contest awards received from or under a program sponsored by an Employee Unit,
(v) expense allowances, and (v) any expenses reimbursed by an Employing Unit
(including, but not limited to, moving expense allowances and cost of
II-1
<PAGE> 11
living allowances paid to foreign-based Employees). Compensation shall include
any amount contributed by an Employing Unit on behalf of the Employee pursuant
to a salary reduction agreement and which is not includible in the Employee's
gross income under Code section 125 or 402 (a) (8). Compensation, as determined
pursuant to the preceding provisions, shall be subject to the maximum
compensation limitations of Section 4.11.
2.8 "DISABLED PARTICIPANT" shall mean any Participant who is Totally
and Permanently Disabled.
2.9 "EARLY RETIREMENT DATE" shall mean any date on which the
Participant's employment by the Employer terminates for any reason other than
death and which such date is coincident with or next following the date (i) on
which a Participant reaches Age 55 and completes ten Years of Service and (ii)
before the Participant reaches his Normal Retirement Date.
2.10 "EFFECTIVE DATE" shall mean July 1, 1971.
2.11 "ELIGIBLE EMPLOYEE" shall mean each Employee who is employed by an
Employing Unit and is not a Union Employee or Leased Employee.
2.12 "EMPLOYEE" shall mean each common law employee and Leased Employee
of an Employer or an Affiliated Company.
2.13 "EMPLOYEE CONTRIBUTIONS" shall mean the aggregate of Basic
Employee Contributions and Supplemental Employee Contributions.
2.14 "EMPLOYEE CONTRIBUTION ACCOUNT" shall mean either or both of a
Participant's 401(k) Contribution Account and Thrift Contribution Account.
2.15 "EMPLOYER" shall mean Chemed and any Affiliated Company designated
an Employing Unit under this Plan.
2.16 "EMPLOYER CONTRIBUTIONS" shall mean the aggregate of Employer
Matching Contributions (as described in Section 4.8(a))and Employer Nonelective
Contributions (as described in Section 4.8(b)).
2.17 "EMPLOYER CONTRIBUTION ACCOUNT" shall mean the separate account
established for a Participant pursuant to Article IV to receive the
Participant's share of Employer Contributions.
2.18 "EMPLOYING UNIT" shall mean Chemed and those divisions,
subsidiaries and Affiliated Companies (including each of their various
geographical locations) which shall be authorized by the Board of Directors of
Chemed to participate in the Plan and, in the case of a corporation, which shall
have adopted the Plan.
II-2
<PAGE> 12
2.19 "EMPLOYMENT DATE" shall mean the date an Employee first performs
an Hour of Service.
2.20 "ENTRY DATE" shall mean the first day of the first payroll period
coincident with or immediately following the first day of each Plan Quarter or
any other date specified by Chemed with respect to an Employing Unit.
2.21 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
2.22 "401(k) CONTRIBUTION" shall mean the contribution effected
pursuant to Article IV by a Participant to his 401(k) Contribution Account.
2.23 "401(k) CONTRIBUTION ACCOUNT" shall mean the separate Account
established for a Participant pursuant to Article IV to receive his 401(k)
Contributions.
2.24 "GENERAL RETIREMENT PLAN ACCOUNT" shall mean the separate account
of a Participant containing the assets of the Participant's account under the
Chemed Corporation General Retirement Plan transferred to this Plan.
2.25 "HIGHLY COMPENSATED EMPLOYEE" shall have the meaning as so defined
in Article VII.
2.26 "HOURS OF SERVICE" shall mean for any Employee the hours described
in the following provisions:
(a) PAID SERVICE. Each hour for which an Employee is paid, or
entitled to payment, for the performance of duties for an Employer or
an Affiliated Company. These hours shall be credited at the time the
duties are performed.
(b) PAID NON-SERVICE. Each hour for which an Employee is paid,
or entitled to payment, by an Employer or an Affiliated Company 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 shall be credited hereunder for any single continuous period
(whether or not the period extends occurs in a single computation
period).
(c) BACK PAY. Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by an Employer or
an Affiliated Company. The same hours shall not be credited both under
subsection (a) or subsection (b), as the case may be, and under this
subsection (c).
The nature and extent of such Hours of Service shall be determined pursuant to
DOL Regulation section 2530.200b-2, which is incorporated herein by reference.
II-3
<PAGE> 13
Nothing in this subsection shall be construed to alter, amend, modify,
invalidate, impair or supersede any law of the United States or any rule or
regulation issued under any such law. The nature and extent of any credit for
Hours of Service shall be determined under such law.
2.27 "INACTIVE PARTICIPANT" shall mean a Participant who: (i) ceases to
be an Eligible Employee (without regard to the service requirement thereof) but
remains in the service of the Employer or an Affiliated Company, or (ii) ceases
making Employee Contributions.
2.28 "COMPENSATION/INCENTIVE COMMITTEE" shall mean the Committee
designated by the Board of Directors of Chemed to administer the 1981 Stock
Incentive Plan of Chemed.
2.29 "INTERNAL REVENUE CODE" or "CODE" shall mean the Internal Revenue
Code of 1986, as amended.
2.30 "INVESTMENT COMMITTEE" shall mean the Committee appointed by the
Board of Directors of Chemed to manage the investment of the Trust Fund.
2.31 "INVESTMENT FUND" shall mean the Chemed Stock Fund, the Omnicare
Stock Fund and the Plan's various General Funds, as those terms are defined in
Article V.
2.32 "LATE RETIREMENT DATE" shall mean the date of termination of a
Participant's service with the Employer for any reason other than death where
the termination occurs subsequent to the Participant's Normal Retirement Date.
2.33 "LEASED EMPLOYEE" shall mean effective for Plan Years beginning on
and after January 1, 1997, an individual as defined under Code section 414(n):
(a) who otherwise is not a common law employee of the Employer
or Affiliated Company;
(b) who pursuant to a leasing agreement between the Employer
or Affiliated Company and any other entity, has performed services for
the Employer or Affiliated Company or for any entities related to the
Employer or Affiliated Company within the meaning of Code section
144(a)(3) on a substantially full time basis for at least one year; and
(c) who performs services under the primary direction or
control of the Employer or Affiliated Company.
II-4
<PAGE> 14
If a Leased Employee is treated as an Employee by reason of this section,
"Compensation" includes Compensation from the leasing organization which is
attributable to services performed for the Employer or Affiliated Company.
The Plan does not treat a Leased Employee as an Employee if the leasing
organization covers the Leased Employee in a safe harbor plan and, prior to
application of this safe harbor plan exception, 20% or less of the Employer's or
Affiliated Company's Employees (other than Highly Compensated Employees) are
Leased Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a nonintegrated
contribution formula equal to at least 10% of the Employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code section 415(c)(3) plus amounts which are not
includible in the Employee's gross income under Code section 125, 402(e)(3),
402(h) or 403(b) and contributed by the Employer at the Employee's election to a
cafeteria plan, Code section 401(k) arrangement, Simplified Employee Pension or
tax-sheltered annuity. If Code section 414(n) or the applicable Regulations are
amended, the definition of Leased Employee shall be amended accordingly.
2.34 "LIMITATION YEAR" shall mean the Plan Year.
2.35 "NET GAIN" or "NET LOSS" shall mean the increases and decreases in
the value of the Trust Fund and each Investment Fund between Valuation Dates.
2.36 "NET PROFITS" shall mean the current and accumulated net profits
of Chemed and its consolidated subsidiaries. This calculation shall be made in
accordance with Chemed's regular accounting practices by deducting from its
gross income all costs, expenses and charges incurred by it, but without
provision for Federal income taxes and without deduction of its contribution to
the Plan.
2.37 "NORMAL RETIREMENT DATE" shall mean the first day of the month
coincident with or next following the date on which a Participant reaches Age
65.
2.38 "ONE YEAR BREAK IN SERVICE" shall mean for any Employee each Plan
Year during which the Employee is not credited with at least 501 Hours of
Service. Solely for purposes of determining whether an Employee has incurred a
One Year Break in Service, additional Hours of Service shall be credited to the
Employee as provided herein. In the case of an Employee's Maternity or Paternity
Absence (defined herein), the Employee will be credited with Hours of Service
which otherwise would normally have been credited to the Employee but for the
Maternity or Paternity Absence or, if the foregoing Hours of Service cannot be
determined, eight Hours of Service for each normal workday of absence. These
Hours of Service shall be credited for the Plan Year in which the absence begins
if the Employee would be prevented from incurring a One Year Break In Service in
that Plan Year solely because the Maternity or Paternity Absence is treated as
Hours of Service hereunder, or, in any other case, in the
II-5
<PAGE> 15
immediately following Plan Year. No more than 501 Hours of Service shall be
credited for this purpose. For purposes hereof, a "Maternity or Paternity
Absence" shall mean an absence from work for any period because of the
Employee's pregnancy, the birth of the Employee's child, the placement of a
child with the Employee in connection with the adoption of the child by the
Employee or to care for such a child for a period beginning immediately
following birth or placement of a child. No absence from work will be counted as
a Maternity or Paternity Absence unless the Employee furnishes to the Plan
Administrator such timely information the Plan Administrator may reasonably
require to establish therefor.
2.39 "PARTICIPANT" shall mean any Eligible Employee who joins the Plan
as provided in Article III.
2.40 "PLAN" shall mean the "Savings & Retirement Plan" as set forth
herein an as may be amended from time to time.
2.41 "PLAN ADMINISTRATOR" shall mean the Administrative Committee
provided for in Article XIV.
2.42 "PLAN QUARTER" shall mean the three-consecutive month period
beginning on January 1, April 1, July 1 or October 1 of each Plan Year.
2.43 "PLAN YEAR" shall mean the calendar year.
2.44 "RELATED COMPANY" shall mean a corporation or other business
entity (i) in which the Employer maintains an ownership interest of less than
80% and at least 20%, or (ii) which itself maintains such an ownership interest
in the Employer.
2.45 "RETIRED PARTICIPANT" shall mean any Participant who has qualified
for retirement and the receipt of benefits under the Plan and who has separated
from service with the Employer.
2.46 "SPOUSE" shall mean a Participant's spouse (or surviving spouse),
or a Participant's former spouse to the extent provided by a qualified domestic
relations order (as defined in Code section 414(p)).
2.47 "SUPPLEMENTAL EMPLOYEE CONTRIBUTION" shall mean the contribution
made by a Participant to his Employee Contribution Account in excess of his
Basic Employee Contribution in an amount not to exceed 9% of his Compensation.
2.48 "THRIFT CONTRIBUTION" shall mean the contribution made by a
Participant pursuant to Article IV to his Thrift Contribution Account.
2.49 "THRIFT CONTRIBUTION ACCOUNT" shall mean the separate Account
established for a Participant pursuant to Article IV to receive his Thrift
Contributions.
II-6
<PAGE> 16
2.50 "TOTALLY AND PERMANENTLY DISABLED" shall mean suffering from a
physical or mental condition which, in the opinion of the Plan Administrator
based upon appropriate medical advice and examination and in accordance with
uniform rules applied uniformly to all Participants, totally and permanently
prevents the Participant from performing the customary duties of his regular job
with an Employing Unit.
2.51 "TRUST AGREEMENT" shall mean the agreement entered into between
Chemed and the Trustee, together with any amendments thereto.
2.52 "TRUST FUND" shall mean the cash, securities, life insurance
contracts, annuity contracts, real estate, shares of common trust funds and any
other property held by the Trustee pursuant to the Trust Agreement, together
with income therefrom.
2.53 "TRUSTEE" shall mean the trustee or trustees which may from time
to time be acting as Trustee under the Trust Agreement.
2.54 "UNION EMPLOYEE" shall mean an Employee: (a) with respect to whom
compensation, hours of work, or conditions of employment are determined through
collective bargaining with a recognized bargaining agent; or (b) is otherwise
considered a unionized employee for purposes of either (1) federal or state
labor laws or (2) pension laws under ERISA or the Code.
2.55 "VALUATION DATE" shall mean each business day of each month.
2.56 "YEARS OF SERVICE" shall mean the years described in subsections
(a), (b), and (c), subject to subsections (d) and (e).
(a) YEARS BEFORE JANUARY 1, 1989. For those periods prior to
January 1, 1989, "Years of Service" shall include an Employee's years
of service determined as of December 31, 1988 under the Plan as
constituted on that date.
(b) YEARS AFTER DECEMBER 31, 1988. For those periods beginning
on and after January 1, 1989, a "Year of Service" shall mean each Plan
Year during which an Employee has not less than 1,000 Hours of Service
or Elapsed Time Hours of Service.
(c) YEARS UNDER MERGED PLAN. An Employee's Years of Service
shall be no less than the years of service under any plan merged into
the Plan, or any plan having transferred assets to the Plan, as
determined as of the day before such merger into or transfer to the
Plan.
II-7
<PAGE> 17
(d) YEARS OF SERVICE DISREGARDED. If an Employee who is not
entitled to any vested interest in his Employer Contribution Account
incurs a One Year Break in Service and again becomes an Employee, his
aggregate One Year Breaks in Service before he again performs an Hour
of Service shall be compared to his Years of Service before the One
Year Breaks in Service that are not otherwise disregarded. If the
Employee's aggregate One Year Breaks in Service equal or exceed the
greater of (i) five or (ii) the Employee's Years of Service before the
One Year Break in Service, then his Years of Service before the One
Year Break in Service are not counted. If any Years of Service are not
counted because of the application of the preceding provisions, those
Years of Service are not counted in any subsequent application of the
preceding provisions. In addition, any Years of Service that were
previously disregarded under the Plan as in effect prior to January 1,
1989 shall not be reinstated under the Plan as a result of the
preceding provisions. In the event that an Employee's Years of Service
are disregarded hereunder, the Employee's eligibility service necessary
to become a Participant of the Plan also shall be disregarded.
(e) YEARS OF SERVICE NOT COUNTED. Years of Service before a
One Year Break in Service are not counted until the completion of one
Year of Service after returning to the service of the Employer.
II-8
<PAGE> 18
ARTICLE III - PARTICIPATION
---------------------------
3.1 ELIGIBILITY FOR PARTICIPATION. Each Eligible Employee who completes
not less than 500 Hours of Service during any six-month-consecutive period
(initially commencing on the Employee's Employment Date) shall be eligible to
become a Participant.
3.2 PARTICIPATION DATE; APPLICATION FOR PARTICIPATION. Each Eligible
Employee who was a Participant in the Plan on December 31, 1998 shall remain a
Participant effective January 1, 1999. Each other Eligible Employee who
completed the eligibility requirement of Section 3.1 prior to January 1, 1999,
or who thereafter completes such eligibility requirements, may become a
Participant on any Entry Date by filing an application with the Plan
Administrator. Once an Eligible Employee has become a Participant, the Eligible
Employee shall continue to be a Participant for as long as he continues to be an
Eligible Employee (without regard to the service requirement thereof).
3.3 DESIGNATION OF BENEFICIARY. Each Participant shall have the right
by written notice to the Plan Administrator to designate one or more
Beneficiaries to receive the sums payable after the death of the Participant.
3.4 RESUMPTION OF SERVICE WITH AN EMPLOYING UNIT. An Employee who
terminated service with an Employing Unit after he became a Participant and who
later resumes his service with an Employing Unit shall again become a
Participant upon his return to the status of an Eligible Employee. An Employee
who terminated service with an Employing Unit prior to meeting the eligibility
requirements of Section 3.1 and who later resumes his service with an Employing
Unit before incurring a One Year Break in Service shall be eligible to become a
Participant on the date he returns to the status of an Eligible Employee and
fulfills the requirements of Section 3.1, taking into account his period of
service prior to the date he terminated his service and after the date he
returned to the status of an Eligible Employee.
3.5 CHANGE IN EMPLOYMENT STATUS; TRANSFER TO AFFILIATED COMPANY. If a
Participant ceases to be an Eligible Employee due to a change in employment
status or transfer of service to an Affiliated Company while remaining employed
by the Employer or an Affiliated Company, he shall become an Inactive
Participant until he again becomes an Employee and satisfies the employment
requirements of an Eligible Employee. If an individual who is employed by the
Employer and who is not a Participant becomes an Eligible Employee due to a
change in employment status, he will be eligible to become a Participant as of
the Entry Date coincident with or next following the date of his employment
status changed, provided he would have been eligible to become a Participant had
he met the definition of an Eligible Employee.
3.6 TRANSFER OF EMPLOYMENT TO RELATED COMPANY. If a Participant ceases
to be an Eligible Employee by reason of his being employed by a Related Company,
the
III-1
<PAGE> 19
Participant shall become an Inactive Participant, he shall thereupon be
ineligible to make further Employee Contributions and his service with the
Related Company shall be deemed service with the Employer for vesting purposes
only. At such time as such Inactive Participant's Accounts become fully vested
and nonforfeitable, the total value of the Inactive Participant's Accounts may,
at the election of the Participant, be transferred in accordance with the
provisions of Article XIV either to the trustee of a plan maintained by the
Related Company or to an individual retirement account established by the
Inactive Participant. If the Inactive Participant's employment with the Related
Company terminates before his Accounts fully vest, and he is not then employed
by the Employer or an Affiliated Company, he shall be deemed to be a terminated
Participant and the value of his Accounts that are fully vested as of the date
he terminated employment with the Related Company shall be paid to him in
accordance with the Plan provisions applicable to Participants whose employment
with the Employer terminates and he shall thereupon forfeit the unvested portion
of his Employer Contribution Account.
3.7 SUSPENSION OF PARTICIPATION. A Participant may suspend his
participation in the Plan and become an Inactive Participant by suspending his
Employee Contributions pursuant to Section 4.5.
3.8 EMPLOYMENT BY EMPLOYER; SERVICE WITH NEWLY ACQUIRED
ENTITIES; RECORDS OF EMPLOYER.
(a) SERVICE CREDIT. In the event the Employer has or shall
acquire the control of any organization by the purchase of assets or
stock, merger, amalgamation, consolidation or any other similar event,
the Employer may direct to what extent, if any, employment with such
organization shall be deemed to be employment with the Employer and, in
connection therewith, may specify a special Entry Date. Such service
credit shall be set forth in Appendix B attached hereto.
(b) RECORDS. The personnel records of the Employer or any
Affiliated Company shall be conclusive evidence for the purpose of
determining the period of employment of any and all Employees.
3.9 PLAN BINDING. Upon becoming a Participant, a Participant shall be
bound then and thereafter by the terms of the Plan and the Trust Agreement,
including all duly authorized amendments to the Plan and the Trust Agreement.
III-2
<PAGE> 20
ARTICLE IV - CONTRIBUTIONS
--------------------------
4.1 ESTABLISHMENT OF ACCOUNTS. The Plan Administrator shall establish
and maintain or cause to be maintained for each Participant an Employer
Contribution Account, a 401(k) Contribution Account, a Thrift Contribution
Account, a General Retirement Plan Account and such other Account(s) as may be
determined by the Plan Administrator. Each such Account shall be maintained
separately and credited or debited as provided in the Plan.
4.2 BASIC EMPLOYEE CONTRIBUTIONS. A Participant may elect to contribute
Basic Employee Contributions in an amount equal to any integral percentage up to
6% of his Compensation. A Participant electing to make such contributions shall
specify whether such contributions shall be made wholly to his 401(k)
Contribution Account or to his Thrift Contribution Account or, in specified
increments of 1% of his Compensation, to his 401(k) Contribution Account and to
his Thrift Contribution Account. Unless a Participant specifies in writing
otherwise, Basic Employee Contributions shall be deemed to be made to a
Participant's Thrift Contribution Account.
4.3 SUPPLEMENTAL EMPLOYEE CONTRIBUTIONS. A Participant who has
authorized Basic Employee Contributions in an amount equal to 6% of his
Compensation may also make Supplemental Employee Contributions in an amount
equal to an integral percentage up to an additional 9% of his Compensation. A
Participant electing to make Supplemental Employee Contributions shall specify
whether such contributions shall be made wholly to his 401(k) Contribution
Account or to his Thrift Contribution Account or, in specified increments of 1%
of his Compensation, to his 401(k) Contribution Account and to his Thrift
Contribution Account. Unless a Participant specifies in writing otherwise,
Supplemental Employee Contributions shall be deemed to be made to a
Participant's Thrift Contribution Account.
4.4 METHOD FOR EFFECTING EMPLOYEE CONTRIBUTIONS. Employee Contributions
shall be effected by payroll deduction by completing the forms the Plan
Administrator prescribes. The initial rate of deduction the Participant
authorizes and his election as to the Accounts to which his contributions shall
be credited shall become effective on the Participant's Entry Date.
4.5 CHANGES IN EMPLOYEE CONTRIBUTIONS. A Participant may in the manner
prescribed by the Plan Administrator:
(a) Suspend either (i) Supplemental Employee Contributions or (ii)
Basic Employee Contributions and Supplemental Employee Contributions. A
Participant who suspends his Basic Employee Contributions shall not be
permitted to make Supplemental Employee Contributions until he again
reinstates the required amount of Basic Employee Contributions.
IV-1
<PAGE> 21
(b) Reinstate suspended Basic Employee Contributions or
Supplemental Employee Contributions as of the first day of the Plan
Quarter following the date the notice of resumption is received and
which is at least three months after the effective date of the last
suspension. A Participant cannot reinstate suspended Supplemental
Employee Contributions unless he is then making, or concurrently
reinstates, the required amount of Basic Employee Contributions.
4.6 LIMITATIONS ON EMPLOYEE CONTRIBUTIONS.
(a) CODE SECTION 402(g) $10,000 LIMIT. Effective January 1, 1998,
401(k) Contributions for any Participant shall not exceed $10,000 for
any calendar year, or such larger amount as designated by the Secretary
of the Treasury under Code section 402(g). If an Employer or Affiliated
Company maintains a plan with a cash or deferred arrangement described
in Code section 401(k), the Code section 402(g) limit shall be applied
as if such plan and the Plan were one plan.
(b) CODE SECTIONS 401(k) ADP AND 401(m) ACP LIMITATIONS. If for any
Plan Year the Plan Administrator determines on the basis of estimates
during the Plan Year that the limitations of Article VII of the Plan
may be exceeded, the Plan Administrator may in its sole discretion
limit the amount of Employee Contributions that may thereafter be made
by Participants so that the limitations of Article VII will not be
exceeded.
(c) CODE SECTION 415 ANNUAL ADDITION LIMITATIONS. A Participant's
Employee Contributions may not cause the limitations in Article VIII to
be exceeded. In the event that the limitations are expected to be
exceeded for any Participant, the Plan Administrator shall cause the
Participant's following Plan Contributions for the Plan Year to be
reduced in the following order: (1) supplemental Thrift Contributions;
(2) supplemental 401 (k) Contributions; (3) basic Thrift Contributions
(with a corresponding reduction or elimination of the Participant's
allocation of the Employer Matching Contribution); and (4) basic 401(k)
Contributions (with a corresponding reduction or elimination of the
Participant's allocation of the Employer Matching Contribution).
(d) CODE SECTION 404 DEDUCTIBILITY LIMIT. A Participant's Employee
Contributions may not cause the Code section 404 deductibility
limitations to be exceeded. In the event such contribution limit would
be exceeded, the Employers shall not make Plan contributions to the
Plan to the extent necessary to avoid exceeding such limit, all in a
uniform, consistent and nondiscriminatory manner. For purposes of the
Plan generally, nothing herein shall prohibit any Employer from making
a Plan contribution on behalf of another Employer consistent with the
provisions of Code section 404(a)(3)(B) (concerning profit sharing
plans and stock bonus plans of an affiliated group).
IV-2
<PAGE> 22
(e) CONTRIBUTION SUSPENSION UPON 401(k) HARDSHIP WITHDRAWAL. If the
Participant received a hardship withdrawal under Section 10.2(b) of the
Plan, the Participant shall be prohibited from resuming Employee
Contributions for at least 12 months after date of receipt of the
withdrawal. In such case, the Participant's Code section 402(g) limit
for the calendar year following the calendar of the withdrawal shall be
reduced by the amount of the 401(k) Contributions authorized by the
Participant for the calendar year of the hardship withdrawal.
(f) DEFERRED COMPENSATION PLAN.
(1) Notwithstanding any provision herein to the contrary, and
except as provided in (3) below, the 401(k) Contribution of a
Participant who participates during the Plan Year in the
Roto-Rooter Management Company Deferred Compensation Plan No. 1 or
No. 2 (individually or collectively "Deferred Compensation Plan")
may not exceed 5% of Compensation.
(2) As soon as practicable after the end of each Plan Year, the
Employer shall determine the maximum amount of 401(k) Contributions
which could have been made by such Participant for such Plan Year
under this Plan consistent with the limitations under Code sections
402(g) and 401(k)(3). The lesser of (i) such maximum amount or (ii)
the amount of the 401(k) Contribution made by such Participant for
such Plan Year under the Deferred Compensation Plan shall, if the
Participant so elects in accordance with the terms of the Deferred
Compensation Plan, be contributed to this Plan (exclusive of any
earnings thereon) which shall occur no later than March 15 of the
next ensuing Plan Year.
(3) The Employer's matching contribution made on behalf of such
Participant under the Deferred Compensation Plan (exclusive of any
earnings thereon) attributable to the amount of 401(k)
Contributions contributed to this Plan pursuant to (2) above shall
be contributed to this Plan by no later than March 15 of the next
ensuing Plan Year, subject to the limitations under Code sections
401(m) and 401(a)(4).
4.7 CREDITS TO EMPLOYEE CONTRIBUTION ACCOUNTS.
(a) 401(k) CONTRIBUTIONS AND THRIFT CONTRIBUTIONS. The amount of
401(k) Contributions and Thrift Contributions for each month will be
remitted to the Trustee and credited to the appropriate Account
(determined under subsection (c) below) as of the last day of the
month. Such Contributions shall be considered allocated to the
appropriate Account effective as of the date
IV-3
<PAGE> 23
prescribed in Section 7.8(e) of the Plan (for purposes of the
Code section 402(g) limit and the ADP and ACP Tests).
(b) TRUST CONTRIBUTIONS. For purposes of complying with DOL
Regulations section 2510.103-3 (concerning ERISA plan assets and
transfer of participant contributions to trust), the Employer shall pay
the Employee Contributions to the Trust as of the earliest date such
contributions can reasonably be segregated from the Employer's general
assets, but in any event no later than the 15th business day following
the end of the month the Employee Contributions are received by the
Employer.
(c) APPROPRIATE ACCOUNTS. A Participant's Employee Contributions
shall be credited to his 401(k) Contribution Account and his Thrift
Contribution Account consistent with his elections under Sections 4.2
and 4.3, except that, notwithstanding anything in the Participant's
election to the contrary, a Participant's total Employee Contributions
shall be first credited to his 401(k) Contribution Account as Basic
Employee Contributions, to the extent the Participant so designated all
such Employee Contributions as 401(k) Contributions, and the remainder
of his Employee Contributions shall be then credited to his Thrift
Contribution Account as either Basic Employee Contributions or
Supplemental Employee Contributions (as applicable).
4.8 EMPLOYER CONTRIBUTIONS.
(a) EMPLOYER MATCHING CONTRIBUTIONS. Subject to authorization by
the Board of Directors of Chemed acting only upon and in accordance
with the recommendations of its Compensation/Incentive Committee and
rules and procedures established by the Plan Administrator, the
Employer may contribute on an Employing Unit-by-Employing Unit basis to
the Trust Fund an amount up to a percentage (as determined for each
Plan Year by the Board of Directors) of the Basic Employee
Contributions made during the Plan Year by, and on the last day of the
Plan Year still credited to the Accounts of, those Employees of the
Employing Units for which the Matching Employer Contribution is made
who are Participants, former Participants, Inactive Participants and
former Inactive Participants described in Section 4.9(a).
(b) EMPLOYER NONELECTIVE CONTRIBUTIONS. Subject to the
authorization by the Board of Directors of Chemed acting only upon and
in accordance with the recommendations of its Compensation/Incentive
Committee and rules and procedures established by the Plan
Administrator, the Employer may contribute on an Employing Unit - by -
Employing Unit basis to the Trust Fund an amount which the Board of
Directors deems advisable.
(c) APPLICATION OF FORFEITURES. Employer Contributions shall
be reduced by any forfeitures during the Plan Year pursuant to Sections
10.4 and
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<PAGE> 24
11.9. Forfeitures shall be applied to satisfy the Employer Contribution
obligations otherwise described in this Section 4.8.
4.9 ALLOCATION OF EMPLOYER CONTRIBUTIONS.
(a) EMPLOYER MATCHING CONTRIBUTIONS.
(1) Employer Matching Contributions shall be credited to the
Employer Contribution Accounts of those Participants, Inactive
Participants, former Participants and former Inactive Participants
who meet the following criteria as of the dates indicated:
(A) Participants and Inactive Participants must (i) have
been Participants or Inactive Participants on the last day of
the Plan Year for which the Employer Matching Contribution is
made, (ii) have completed 1,000 Hours of Service during such
Plan Year and (iii) except for Participants who have made
withdrawals pursuant to Section 10.5, as of such date must not
have withdrawn any Basic Employee Contributions made during
that Plan Year. Participants who died, attained Normal
Retirement Age or who became Totally and Permanently Disabled
during the Plan Year shall be deemed to have been employed
throughout the Plan Year. If an Employee has made a partial
withdrawal of such Basic Employee Contributions, the amount of
the Employer Matching Contribution made to his Employer
Contribution Account shall be ratably reduced. A Participant
who has made a withdrawal pursuant to Section 10.5 or who has
effected an In-Service Retirement pursuant to Section 11.5
shall have his pro rata share of the Employer Matching
Contribution determined on the basis of the Basic Employee
Contributions made during the Plan Year for which the Employer
Matching Contribution is made without regard to any withdrawals
thereof.
(B) Former Participants or former Inactive Participants
must have been Participants or Inactive Participants on the
last day of the Plan Year for which the Employer Matching
Contribution is made, must not have withdrawn any Basic
Employee Contributions made during the Plan Year for which the
Employer Matching Contribution is made and must have terminated
participation in the Plan because of retirement, death or Total
and Permanent Disability. If a former Participant or former
Inactive Participant has made a partial withdrawal of such
Basic Employee Contributions, the amount of Employer Matching
Contribution made to his Employer Contribution Account shall be
ratably reduced.
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<PAGE> 25
(2) As of the last day of each Plan Year, the Plan
Administrator shall allocate or cause to be allocated to the
Employer Contribution Account of each Participant described in
Section 4.9(a)(1) that percentage of the Employer Matching
Contribution for the Plan Year equal to (i) the aggregate Basic
Employee Contributions for that Participant for the Plan Year then
credited to the Participant's Accounts, divided by (ii) the
aggregate Basic Employee Contributions for all Participants
described in Section 4.9(a)(1) for the Plan Year then credited to
all such Participants' Accounts.
(b) EMPLOYER NONELECTIVE CONTRIBUTIONS. The Employer Nonelective
Contribution for the Plan Year will be allocated among Participants who
have completed 1,000 Hours of Service during the Plan Year and who are
employed by the Employer on the last day of the Plan Year. Participants
who died, attained Normal Retirement Age or who became Totally and
Permanently Disabled during the Plan Year shall be deemed to have been
employed throughout the Plan Year. Each Participant's share shall be
determined by crediting the Employer Nonelective Contribution to each
Participant in the same proportion of such contribution as such
Participant's Compensation for such Plan Year bears to the Compensation
of all Participants for such Plan Year.
4.10 LIMITATIONS ON EMPLOYER CONTRIBUTIONS.
(a) CODE SECTION 415 ANNUAL ADDITION LIMITATIONS. A Participant's
allocation of Employer Contributions may not cause the limitations in
Article VIII to be exceeded.
(b) CODE SECTION 404 DEDUCTIBILITY LIMIT. A Participant's
allocation of Employer Contributions may not cause the Code section 404
deductibility limitations to be exceeded. In the event such
contribution limit would be exceeded, the Employers shall not make Plan
contributions to the Plan to the extent necessary to avoid exceeding
such limit, all in a uniform, consistent and nondiscriminatory manner.
For purposes of the Plan generally, nothing herein shall prohibit any
Employer from making a Plan contribution on behalf of another Employer
consistent with the provisions of Code section 404(a)(3)(B) (concerning
profit sharing plans and stock bonus plans of an affiliated group).
4.11 COMPENSATION LIMITATION. A Participant's Compensation considered
for Plan contribution purposes for any Plan Year shall not exceed $160,000, or
such greater or lesser amount in effect for such Plan Year as permitted by the
Secretary of the Treasury.
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<PAGE> 26
ARTICLE V - TRUSTEE; INVESTMENTS
--------------------------------
5.1 TRUSTEE SELECTION; TRUST AGREEMENT. The Trustee shall be a person
or persons, bank or trust company designated by the Board of Directors of
Chemed. Chemed and the Trustee shall execute a Trust Agreement providing for the
investment of the Trust Fund and prescribing the powers, duties, obligations and
functions of the Trustee with respect to the Plan.
5.2 POWERS AND DUTIES OF THE TRUSTEE. The Trustee shall invest the
assets of the Trust Fund in the manner described in this Article V and in
accordance with the Trust Agreement. The Trustee shall not be responsible for
the validity of the Plan and the trust created by the Trust Agreement but shall
be accountable only for funds paid to or received by it under the Trust
Agreement.
5.3 APPOINTMENT AND POWERS AND DUTIES OF INVESTMENT COMMITTEE. The
Board of Directors of Chemed may appoint an Investment Committee which shall
have full power to select the General Funds and to retain and, if the Investment
Committee so determines, dismiss and replace such investment advisors and
managers, counsel, accountants and other agents as the Investment Committee
shall deem advisable.
5.4 VALUATION OF TRUST FUND ASSETS. The assets of the Trust Fund shall
be valued at their fair market value by the Trustee as of the close of business
on each Valuation Date and the values so determined shall be certified to the
Employer and the Plan Administrator together with a statement of the cost of the
assets and a statement of receipts and disbursements for the period between
Valuation Dates and for the Plan Year.
5.5 COMPOSITION OF THE TRUST FUND. The Trust Fund shall consist of the
General Funds, a Chemed Stock Fund and an Omnicare Stock Fund.
(a) GENERAL FUNDS. The General Funds shall be selected by the
Investment Committee from time to time and for which the Investment
Committee shall direct the Trustee in writing. The Investment Committee
may select as a General Fund any of the following: (i) any security of
any issuer registered under the Investment Company Act of 1940 (mutual
fund security); (ii) any common, collective or commingled fund,
consisting of any combination of securities or investments, including
but not limited to, bonds, notes, debentures or other evidences of
indebtedness, whether or not secured; stocks, shares and other
interests in associations, firms or corporations; interests in
property, real or personal, capital, common and preferred stocks,
(which may include stocks or securities of Chemed or any affiliate),
personal, corporate and governmental obligations, secured or unsecured;
mortgages, leaseholds, fees and other interest in realty; oil, gas or
mineral properties, rights, royalties, payments or
other interests in such property; contracts, conditional sale
agreements, choices in action, trust and participation certificates, or
other evidences of ownership,
V-1
<PAGE> 27
part ownership, interest or part interest, and such common, collective
or commingled funds may include funds held by the Trustee subject to
other trusts, including, without limitation, any pooled investment
trust maintained by the Trustee for investment of funds of qualified
employee benefit plans; (iii) any contracts with insurance companies as
may be approved by the Investment Committee, specifically including but
not limited to, group annuity contracts. In making such investment
selections, the Investment Committee shall not be limited or restricted
by any statute or rule of law now or hereafter in effect governing
trust investments.
(b) CHEMED STOCK FUND.
(1) The Trustee shall invest the assets of the Chemed Stock
Fund in shares of the capital stock, par value $1.00 per share, of
Chemed ("Chemed Stock"). The Trustee shall purchase Chemed Stock on
the principal stock exchange on which Chemed Stock is listed. If
Chemed Stock is not then listed on a stock exchange, the Trustee
shall purchase Chemed Stock in the over the counter market at a
price not exceeding the prevailing market "asked" price through
brokers selected by the Trustee, or at a price not greater than the
then prevailing market "asked" price through private transactions.
These purchases shall be made as soon as reasonably practicable
after receipt of funds by the Trustee. The Chemed Stock purchased
by the Trustee shall be registered in its name or in the name of
its nominee, as the Trustee shall elect.
(2) In lieu of making purchases described in Section 5.5(b) (1)
and/or sales of Chemed Stock in the open market, the Trustee may,
in its discretion, match purchases and sales of Chemed Stock to be
made at substantially the same time. In that event, the price at
which the Chemed Stock shall be considered to have been purchased
and sold shall be determined by the Trustee based upon the then
prevailing market price for Chemed Stock.
(c) OMNICARE STOCK FUND. The Trustee shall hold the assets of the
Omnicare Stock Fund in the shares of the capital stock, par value $1
per share, of Omnicare, Inc. ("Omnicare Stock") which were transferred
to the Plan from the Omnicare Employees Savings and Investment Plan and
the Omnicare Employee Stock Ownership Plan. The Trustee shall hold the
Omnicare Stock until such time as the Omnicare Stock is distributed
pursuant to the provisions of the Plan. The Trustee shall not purchase
additional Omnicare Stock, nor permit any investment or reinvestment in
Omnicare Stock. The Omnicare Stock held by the Trustee shall be
registered in its name, or the name of its nominee, as the Trustee
shall elect.
5.6 INVESTMENT OF CONTRIBUTIONS.
(a) EMPLOYER CONTRIBUTIONS. All Employer Contributions received
will be invested by the Trustee in the Chemed Stock Fund and/or General
Funds.
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<PAGE> 28
(b) EMPLOYEE CONTRIBUTIONS. At the time an Eligible Employee
enrolls in the Plan, he shall elect in writing to have his Basic and
Supplemental Employee Contributions invested in any combination of
General Funds or the Chemed Stock Fund in accordance with rules and
procedures established by the Plan Administrator.
(c) REINVESTMENT OF EARNINGS. Earnings on assets of the General
Funds, the Chemed Stock Fund or the Omnicare Stock Fund shall be
reinvested in the Investment Fund in which the assets were held.
(d) INVESTMENT RISK. Each Participant assumes all risks connected
with any decrease in the value of any securities or other investment in
the Trust Fund.
5.7 CHANGE OF INVESTMENT ELECTION. A Participant may change his
election of investment pursuant to Section 5.6(b) in accordance with procedures
established by the Plan Administrator.
5.8 TRANSFER OF FUNDS. A Participant may throughout each Plan Year
elect to transfer funds in accordance with rules and procedures established by
the Plan Administrator; provided, however, that after attaining age 60, a
Participant may elect to transfer 20% of the value of his vested Employer
Contribution Account from the Chemed Stock Fund to any General Fund.
5.9 PARTICIPANT CHEMED STOCK VOTING AND OTHER RIGHTS.
(a) GENERAL. Each Participant, Inactive Participant, former
Participant or Beneficiary is entitled to direct the Trustee as to the
manner in which Chemed Stock allocated or allocable to the vested
portion of the Participant's Employer Contribution Account and Employee
Contribution Account is to be voted, and as to the manner in which
rights other than voting rights with respect to that Chemed Stock are
to be exercised.
(b) NOTICE. The Trustee shall notify each Participant, Inactive
Participant, former Participant and Beneficiary of each occasion for
the exercise of voting rights within a reasonable period before the
rights are to be exercised. The notice shall include all proxy
solicitation and other materials distributed by Chemed to shareholders
with regard to exercise of voting rights, together with a form
requesting confidential instructions to the Trustee on how to vote the
Chemed Stock described in subsection (a) above. Instructions received
from Participants, Inactive Participants, former Participants and
Beneficiaries shall not be divulged or released to any person,
including officers or employees of the Employer.
V-3
<PAGE> 29
(c) TRUSTEE DILIGENCE. The Trustee shall take whatever steps are
reasonably necessary to allow Participants, Inactive Participants,
former Participants and Beneficiaries to exercise rights other than
voting rights with respect to Chemed Stock allocated to the vested
portion of their Employer Contribution Accounts and Employee
Contribution Accounts.
(d) SHARES ALLOCATED. The number of shares to which any
Participant, Inactive Participant, former Participant and Beneficiary
described in subsection (a) shall have the rights described in
subsections (a) and (c) shall be determined for any record date by the
number of shares allocated to the vested portion of his Employer
Contribution Account and Employee Contribution Account on the previous
Valuation Date.
(e) FRACTIONAL SHARES. The Trustee shall vote fractional shares by
combining the confidential directions on voting of all fractional
shares to the extent possible.
(f) NON-RETURNED INSTRUCTIONS. The Trustee shall vote any shares or
exercise rights other than voting with respect to (i) shares of Chemed
Stock allocated to the nonvested portion of Employer Contribution
Accounts and Employee Contribution Accounts of Participants, Inactive
Participants, former Participants and Beneficiaries described in
subsection (a), and (ii) shares described in subsection (a) for which
no direction has been received, in the same proportion and in the same
manner as shares described in subsection (a) are collectively voted.
5.10 ADJUSTMENT PROVISIONS. In the event (i) any recapitalization of
Chemed or reclassification, split-up, combination or consolidation of shares of
Chemed Stock shall be effected, or (ii) the outstanding shares of Chemed Stock
shall, in connection with a reorganization or consolidation of Chemed be
exchanged for a different number or class of shares of the capital stock or
other securities of Chemed, the Trustee shall take such action as shall be
ordered by the Board of Directors of Chemed acting upon and in accordance with
the recommendations of the Incentive Committee of the Board of Directors of
Chemed and to the extent that Chemed Stock is to be exchanged for a different
number or class of the capital stock or other securities of Chemed pursuant to
such order, then such different number or class of shares of the capital stock
or other securities of Chemed shall be exchanged for Chemed Stock by the Trustee
and the name and class of such shares of capital stock or other securities of
Chemed received in exchange for Chemed Stock shall be substituted in all
respects for all references to Chemed Stock as presently stated in this Plan.
5.11 EXCHANGE OR TENDER OFFERS.
(a) CHEMED STOCK ALLOCATED TO EMPLOYER CONTRIBUTION ACCOUNTS. In
the event there shall be extended to the stockholders of Chemed
generally an
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<PAGE> 30
offer to exchange or purchase all or a portion of the issued and
outstanding shares of Chemed Stock for cash and/or other consideration,
the Trustee shall take action as shall be ordered by the Board of
Directors of Chemed acting upon and in accordance with the Incentive
Committee of the Board of Directors of Chemed.
(b) CHEMED STOCK ALLOCATED TO EMPLOYEE CONTRIBUTION ACCOUNTS. In
the event there shall be extended to the stockholders of Chemed
generally an offer to exchange or purchase all or a portion of the
issued and outstanding shares of Chemed Stock for cash and/or other
consideration, the Trustee shall take with respect to shares of Chemed
Stock allocated to Employee Contribution Accounts such action as the
Participants having shares of Chemed Stock allocated to their Employee
Contribution Accounts shall specify. Instructions received from
individual Participants shall not be divulged or released to any
person, including officers or employees of the Employer or Chemed. In
the absence of instructions from Participants, the Trustee shall take,
with respect to those shares of Chemed Stock for which no Participant
instructions were received, such action as shall be ordered by the
Board of Directors of Chemed acting upon and in accordance with the
recommendations of the Incentive Committee of the Board of Directors of
Chemed.
5.12 OMNICARE STOCK FUND. Before each annual or special meeting of the
stockholders of Omnicare, Inc., the Company shall cause to be sent to each
Participant having shares of Omnicare Stock allocated or allocable to his
Account (all of which are fully vested) a copy of the proxy solicitation
material therefor, together with a form requesting confidential instructions to
the Trustee on how to vote such shares. Upon receipt of such instructions, the
Trustee shall vote the shares of Omnicare Stock as instructed. Instructions
received from individual Participants shall not be divulged or released to any
person, including officers or employees of Omnicare or the Company. The Trustee
shall have the right to vote, in person or by proxy, at its discretion any
shares of Ornnicare Stock for which voting instructions shall not have been
received.
V-5
<PAGE> 31
ARTICLE VI - ALLOCATION OF PROFIT AND LOSS
------------------------------------------
OF TRUST FUND TO PARTICIPANT ACCOUNTS
-------------------------------------
6.1 DATE OF VALUATION. As of the close of business on each Valuation
Date, the Trustee shall value the assets in the Trust Fund at their then market
value.
6.2 ADJUSTMENT OF ACCOUNTS AS OF VALUATION DATES. Each Account of a
Participant, Inactive Participant and former Participant as of a Valuation Date
shall be equal to the value of such Account as of the preceding Valuation Date,
and adjusted in the following order and manner:
(a) Each Account shall be reduced by the amount of any
distributions and withdrawals from the Account since the preceding
Valuation Date.
(b) Each Account shall be increased by the amount of Employer
Contributions and Employee Contributions allocated to the Account
pursuant to Article IV.
(c) Each Account shall be increased or decreased by the Net Gain or
Net Loss allocated to the Account under Section 6.3.
6.3 ALLOCATION OF PROFIT AND LOSS. As of each Valuation Date, there
shall be allocated to each Account its proportionate share of the Net Gain or
Net Loss since the last Valuation Date.
(a) For the purpose of determining the Net Gain or Net Loss of each
Investment Fund as of any current Valuation Date for the period since
the preceding Valuation Date, the Plan Administrator shall cause a
valuation to be made of the assets of each Investment Fund as of the
current Valuation Date based on the then fair market values which shall
give effect to gains, earnings, losses and other items of income and
expense as of the current Valuation Date. The Net Gain or Net Loss of
each Investment Fund for the period shall be the amount by which the
total net value of all such assets determined as of the current
Valuation Date exceeds or is less than the total net value of all such
assets determined as of the preceding Valuation Date, reduced by the
total of any Employer Contributions and Employee Contributions made
since the next preceding Valuation Date, and increased by the total of
any withdrawals and distributions since the preceding Valuation Date.
(b) The Net Gain or Net Loss of each Investment Fund shall be
allocated among the Accounts of all Participants invested in each
Investment Fund in the same ratio that the balance in each such Account
invested as of the preceding Valuation Date, less withdrawals and
distributions since the preceding Valuation Date, bears to the total
amount of all balances of all Accounts invested
VI-1
<PAGE> 32
in each Investment Fund on that date, decreased by all such
withdrawals and distributions since the preceding Valuation Date.
6.4 STATEMENT OF ACCOUNT. The computations required in this Article VI
shall be made as soon as practicable following each Valuation Date. Not less
frequently than quarterly, the Plan Administrator shall prepare and furnish, or
cause to be prepared and furnished, to each Participant a statement of the
status of his Accounts in the Trust Fund, which statement shall show the gross
amount of each Account in each Investment Fund as of the last day of each Plan
Quarter.
VI-2
<PAGE> 33
ARTICLE VII - CODE SECTIONS 401(k) AND 401(m) LIMITATIONS
---------------------------------------------------------
7.1 DEFINITIONS. For purposes of this Article, the following terms and
phrases shall have the meanings as set forth therein:
(a) "CODE SECTION 414(q) COMPENSATION" shall mean for any Plan
Year, Code section 414(s) Compensation, as defined in subsection (b)
below, but adding back the elective amounts as provided in paragraph
(1) therein and without regard to the Plan participation compensation
provision in paragraph (2) therein.
(b) "CODE SECTION 414(s) COMPENSATION" shall mean, for any Plan
Year, any one of the permitted Code section 415 Compensation
definitions of Article VIII of the Plan, subject to the following
provisions:
(1) PLAN PARTICIPATION COMPENSATION. For any Plan Year, Chemed,
in its discretion, may elect to limit a Participant's Code section
414(s) Compensation to the portion of the Participant's Code
section 414(s) Compensation received in the part of the Plan Year
during which the Participant was an Eligible Employee of the Plan.
(2) $160,000 COMPENSATION LIMITATION. A Participant's Code
section 414(s) Compensation for any Plan Year, as determined
pursuant to the foregoing provisions of this subsection, shall not
exceed $160,000, or such greater or lesser amount as designated by
the Secretary of the Treasury for the Plan Year.
(c) "EARNINGS" shall mean the earnings, gain and loss (whether
realized or unrealized), net of applicable expenses, as actually
allocated to a Participant's Account under the normal provisions of the
Plan as contained in Article VI.
(d) "GAP PERIOD MONTHS" shall mean the number of months which
follow the end of the Plan Year (or, if applicable, the calendar year)
and precede the applicable distribution, with a distribution occurring
on or before the fifteenth day of a month being treated as having
occurred on the last day of the preceding month and a distribution
occurring after the fifteenth day of a month being treated as having
been made on the first day of the next following month.
(e) Effective for Plan Years beginning on and after January 1,
1997, "HIGHLY COMPENSATED EMPLOYEE" shall mean any Employee who, during
either the Plan Year or the Lookback Year (the twelve month period
immediately preceding the Plan Year) is a five-percent (5%) owner of
the Employer (as
VII-1
<PAGE> 34
defined in Code section 416(i)(1)(B)(i) or who during the Lookback Year
has Compensation in excess of $80,000 (or such greater amount pursuant
to adjustments under Code section 415(d)) and if the Employer elects
(in a manner consistent with Code section 414(q) and Treasury
Regulations thereunder), was in the group of employees consisting of
the top twenty percent (20%) of employees when ranked on the basis of
Compensation for the Lookback Year. A Highly Compensated Employee also
shall include any former Employee who was a Participant of the Plan
who: (1) separates from service (or was deemed to have separated) prior
to the Plan Year; (2) performs no services for the Employer or an
Affiliated Company during the Plan Year; and (3) was a Highly
Compensated Employee under the preceding provisions for either the Plan
Year of his separation or any Plan Year ending on or after his 55th
birthday.
(f) "MATCHING ACCOUNT" shall mean a Participant's Employer Matching
Contribution Account.
(g) "MATCHING CONTRIBUTIONS" shall mean the Participant's Employer
Matching Contribution.
(h) "QUALIFIED NON-ELECTIVE CONTRIBUTIONS" shall have the meaning
as provided in Treasury Regulation section 1.401(k)-1(g)(13).
7.2 CODE SECTION 402(g).
(a) CODE SECTION 402(g) LIMIT. For any calendar year, a
Participant's Elective Deferrals shall not exceed the limit as set
forth in Section 4.6(a).
(b) CORRECTIVE DISTRIBUTION OF ATTRIBUTABLE EXCESS DEFERRALS. For
each calendar year a Participant's Elective Deferrals exceed the limit
contained in Section 4.6(a) above, the Plan Administrator shall direct
the Trustee to distribute the Participant's Attributable Excess
Deferrals and Allocable Earnings thereon to the Participant no later
than the April 15th of the following calendar year. The amount of
Attributable Excess Deferrals to be distributed for a calendar year
shall be reduced by the Excess Contributions under Section 7.3
previously distributed for the Plan Year beginning in such calendar
year.
(c) CODE SECTION 402(g) RELATED DEFINITIONS. For purposes of this
Section, the following terms and phrases shall have the meanings as set
forth below. These definitions shall be modified, if applicable and to
the extent provided, by the special rules of Sections 7.7 and 7.8.
(1) "ELECTIVE DEFERRALS" of a Participant shall mean the sum of
(A) his 401(k) Contributions allocated to his 401(k) Contribution
Account
VII-2
<PAGE> 35
within the calendar year (as determined pursuant to Section 7.8(e))
and (B) other elective deferrals as so defined in Treasury
Regulation section 1.402(g)-1(b) under any other plan of an
Employer, Affiliated Company or any other employer (whether or not
related to the Employer or Affiliated Company).
(2) "EXCESS DEFERRALS" of a Participant shall mean the amount
of his Elective Deferrals for a calendar year in excess of the Code
section 402(g) limit described in Section 4.6(a).
(3) "ATTRIBUTABLE EXCESS DEFERRALS" of a Participant shall be
that amount of the Participant's Excess Deferrals as designated by
the Participant to be attributable to the Plan.
(4) "ALLOCABLE EARNINGS" of a Participant who has Attributable
Excess Deferrals shall be equal to the sum of the Subject Calendar
Year Earnings and, through the Plan Year beginning on January 1,
1993, the Gap Period Earnings.
(5) "SUBJECT CALENDAR YEAR EARNINGS" of a Participant shall be
equal to the product of: (A) the Earnings allocated to his 401(k)
Contribution Account for the calendar year; multiplied by (B) a
fraction, with (i) the numerator being the Participant's
Attributable Excess Deferrals for the calendar year and (ii) the
denominator being the sum of (I) the balances of his 401(k)
Contribution Account as of the first day of the calendar year and
(II) the 401(k) Contributions allocated to his 401(k) Contribution
Account for the calendar year.
(6) "GAP PERIOD EARNINGS" of a Participant shall be equal to
the product of: (A) ten percent (10%) of the Subject Calendar Year
Earnings; multiplied by (B) the number of Gap Period Months prior
to the distribution of the Participant's Attributable Excess
Deferrals.
(d) DISREGARDED 401(k) CONTRIBUTIONS. Contributions which have been
properly distributed to the Participant as an Excess Amount pursuant to
Section 8.6 (concerning correction of Code section 415 Excess Amounts)
shall not be considered 401(k) Contributions for purposes of this
Section 7.2.
(e) RULE OF APPLICATION - NEXT APPLY ARTICLE VIII CODE SECTION 415
LIMITATIONS. After application of this Section 7.2, the Plan
Administrator should apply the provisions of Article VIII (concerning
the Code section 415 limitations) for the following reasons:
VII-3
<PAGE> 36
(1) Attributable Excess Deferrals, if properly and timely
distributed, are not Annual Additions for purposes of the Code
section 415 contribution limitations; and
(2) As noted in Sections 7.3 and 7.5, any Code section 415
Excess Amounts under Article VIII which are distributed to the
Participant pursuant to Section 8.6, and which consist of 401(k)
Contributions and/or Thrift Contributions, are not considered for
purposes of the application of the Code sections 401(k) ADP and
401(m) ACP nondiscrimination tests of Sections 7.3 and 7.5 below.
7.3 CODE SECTION 401(k) ADP TEST. The Plan Administrator shall
determine whether the Plan meets at least one of the two limitations contained
in subsection (a) below for the Plan Year. In the event that neither limitation
is met, the Plan Administrator shall direct the Trustee to distribute the Excess
Contributions and Allocable Earnings thereon pursuant to subsection (b) below.
(a) CODE SECTION 401(k) ADP TEST LIMITATIONS. The following are the
Code section 401(k) ADP Limitations:
(1) 1.25 LIMITATION. The Average Deferral Percentage for
the group of ADP Participants who are Highly Compensated
Employees is not more than the Average Deferral Percentage of
the group of all other ADP Participants multiplied by 1.25.
(2) 2+2 LIMITATION. (A) The excess of the Average Deferral
Percentage for the group of ADP Participants who are Highly
Compensated Employees over the Average Deferral Percentage of
the group of all other ADP Participants is not more than two
percentage points; and (B) the Average Deferral Percentage for
the group of ADP Participants who are Highly Compensated
Employees is not more than the Average Deferral Percentage of
the group of all other ADP Participants multiplied by two.
(b) CORRECTIVE DISTRIBUTION OF EXCESS CONTRIBUTIONS. For each Plan
Year the Plan fails to meet subsection (a) above, the Plan
Administrator shall identify the Participants who are Highly
Compensated Employees who made Excess Contributions and shall direct
the Trustee to distribute the Excess Contributions and Allocable
Earnings thereon to the applicable Participant prior to 2 1/2 months
after the end of the Plan Year (so as to avoid the employer-level 10%
excise tax under Code section 4979) and in any event no later than the
close of the following Plan Year (so as to preserve the qualified
status of the Plan under Code section 401(k)). The amount of Excess
Contributions to be distributed for a Plan Year shall be reduced by the
Attributable Excess Deferrals under Section 7.2 previously distributed
for the calendar year ending in the same
VII-4
<PAGE> 37
Plan Year. The "Excess Contributions" are the amount of 401(k)
Contributions and Qualified Non-Elective Contributions (if any) made by
or on behalf of the Highly Compensated Employees which causes the Plan
to fail to satisfy the ADP test. The Plan Administrator will determine
the amount of the Excess Contributions by starting with the Highly
Compensated Employee(s) who has the greatest ADP, reducing his ADP (but
not below the next highest ADP), then, if necessary, reducing the ADP
of the Highly Compensated Employee(s) at the next highest ADP,
including the ADP of the Highly Compensated Employee(s) whose ADP the
Plan Administrator already has reduced (but not below the next highest
ADP), and continuing in this manner until the average ADP for the
Highly Compensated Group satisfies the ADP test.
After the Plan Administrator has determined the Excess
Contribution amount, the Trustee, as directed by the Plan
Administrator, then will distribute to each Highly Compensated Employee
his respective share(s) of the Excess Contributions. Effective for Plan
Years beginning on and after January 1, 1997, the Plan Administrator
will determine the respective share(s) of Excess Contributions by
starting with the Highly Compensated Employee(s) who has the highest
401(k) Contributions, reducing his 401(k) Contributions (but not below
the next highest level of 401(k) Contributions), then, if necessary,
reducing the 401(k) Contributions of the Highly Compensated Employee(s)
at the next highest level of 401(k) Contributions including the 401(k)
Contributions of the Highly Compensated Employee(s) whose 401(k)
Contributions the Plan Administrator already has reduced (but not below
the next highest level of 401(k) Contributions), and continuing in this
manner until the Trustee has distributed all Excess Contributions.
(c) ADP RELATED DEFINITIONS. For purposes of this Section, the
following terms and phrases shall have the meanings as set forth below.
These definitions shall be modified, if applicable and to the extent
provided, by the special rules of Sections 7.7 and 7.8.
(1) "AVERAGE DEFERRAL PERCENTAGE" of the group of ADP
Participants who are Highly Compensated Employees and the
group of all other ADP Participants shall mean the average of
the Individual Deferral Percentages of each Participant of the
respective groups. Effective for Plan Years beginning on and
after January 1, 1997, in determining whether the Plan
satisfies either of the limitations contained in Section
7.3(a)(1) or (2) above, the Plan Administrator shall use the
Average Deferral Percentage of the non-Highly Compensated
group for the Plan Year preceding the Plan Year of the
calculation, unless the Employer elects (in accordance with
applicable Treasury Regulations) to use the current Plan
Year's Average Deferral Percentage of the non-Highly
Compensated group.
VII-5
<PAGE> 38
(2) "ADP PARTICIPANT" shall mean each Eligible Employee
who is either: (A) a Participant who makes or is eligible to
make 401(k) Contributions to the Plan at any time during the
Plan Year (including, if applicable, those Participants whose
401(k) Contributions are suspended by reason of the hardship
withdrawal rule of Section 10.2 of the Plan); or (B) if
applicable under the Plan, an Eligible Employee who could
elect to become a Participant at any time prior to the end of
the Plan Year by enrolling in the Plan pursuant to Article
III.
(3) "INDIVIDUAL DEFERRAL PERCENTAGE" of an ADP Participant
shall mean a percentage (rounded to the nearest one-hundredth
of a percent, E.G., 2.85%) which is the quotient of: (A) the
sum of the ADP Participant's 401(k) Contributions and Employer
Qualified Non-Elective Contributions allocated to the
Participant's respective Account within the Plan Year (as
determined pursuant to Section 7.8(e)); divided by (B) the
Participant's Code section 414(s) Compensation for the Plan
Year.
(4) "ALLOCABLE EARNINGS" of a Participant shall be equal
to the sum of the Subject Plan Earnings and, through the Plan
year beginning on January 1, 1993, the Gap Period Earnings.
(5) "SUBJECT PLAN YEAR EARNINGS" of a Participant shall be
equal to the product of: (A) the Earnings allocated to his
401(k) Contribution Account for the Plan Year; multiplied by
(B) a fraction, with (i) the numerator being the Participant's
Excess Contributions for the Plan Year and (ii) the
denominator being the sum of (i) his 401(k) Contribution
Account as of the first day of the Plan Year and (ii) the
401(k) Contributions and Employer Qualified Non-Elective
Contributions allocated to his 401(k) Contribution Account for
the Plan Year.
(6) "GAP PERIOD EARNINGS" of a Participant shall be equal
to the product of: (A) 10% (.10) of the Subject Plan Year
Earnings; multiplied by (B) the number of Gap Period Months
prior to the distribution of the Participant's Excess
Contributions.
(d) DISREGARDED 401(k) CONTRIBUTIONS. For purposes of this
Section 7.3, the following special rules shall apply:
(1) DISTRIBUTED CODE SECTION 415 EXCESS AMOUNTS.
Contributions which have been properly distributed to the
Participant as an Excess Amount pursuant to Section 8.6
(concerning correction of Code section 415 Excess Amounts)
shall not be considered 401(k) Contributions for purposes of
this Section 7.3.
VII-6
<PAGE> 39
(2) NON-HCE ATTRIBUTABLE EXCESS DEFERRALS. 401(k)
Contributions which represent Attributable Excess Deferrals of
Highly Compensated Employees, but not non-Highly Compensated
Employees, shall be considered for purposes of this Section 7.3.
7.4 CODE SECTION 401(a)(4) EXCESS MATCH TEST. For each Plan Year a
Matching Contribution is made to the Plan, the Plan Administrator shall
determine whether any Participant's Matching Contribution exceeds the limitation
contained in subsection (a) below for the Plan Year. In the event the limitation
is exceeded, the Plan Administrator shall direct the Trustee to forfeit the
Excess Matching Contributions and Allocable Earnings thereon pursuant to
subsection (b) below.
(a) CODE 401(a)(4) EXCESS MATCH LIMITATION. A Participant's
Corrective Distributions are not more than his Supplemental Employee
Contributions, so that none of his Basic Employee Contributions, for
which Matching Contributions are allocated, have been distributed to
him.
(b) CORRECTIVE FORFEITURE OF EXCESS MATCHING CONTRIBUTIONS. For
each Plan Year the Plan fails to meet the limitation in subsection (a)
above, the Plan Administrator shall identify those Participants who
were allocated Excess Matching Contributions and shall direct the
Trustee to forfeit the Excess Matching Contributions and Allocable
Earnings thereon prior to 2 1/2 months after the end of the Plan Year
and in any event no later than the close of the following Plan Year (so
as to preserve the qualified status of the Plan under Code section
401(a)). Any corrective forfeitures hereunder shall be applied in the
manner prescribed by Section 11.9(e) of the Plan (I.E., generally to
reduce Employer Contributions).
(c) EXCESS MATCH RELATED DEFINITIONS. For purposes of this Section,
the following terms and phrases shall have the meanings as set forth
below. These definitions shall be modified, if applicable and to the
extent provided, by the special rules of Sections 7.7 and 7.8.
(1) "CORRECTIVE DISTRIBUTIONS" of a Participant shall mean the
sum of his corrective distributions of: (A) Attributable Excess
Deferrals (under Section 7.2(b)) for the calendar year ending with
or within the Plan Year; (B) Excess Amounts consisting of 401(k)
Contributions and/or Thrift Contributions (under Section 8.6); and
(C) Excess Contributions (under Section 7.3(b)) for the Plan Year,
in each such case exclusive of Allocable Earnings.
(2) "EXCESS MATCHING CONTRIBUTIONS" of a Participant shall mean
the amount by which his Matching Contributions for the Plan Year
are attributable to Corrective Distributions for the Plan Year
which have exceeded his Basic Employee Contributions for the Plan
Year.
VII-7
<PAGE> 40
(3) "ALLOCABLE EARNINGS" of a Participant shall be equal to the
sum of the Subject Plan Year Earnings and, through the Plan Year
beginning on January 1, 1993, the Gap Period Earnings.
(4) "SUBJECT PLAN YEAR EARNINGS" of a Participant shall be
equal to the product of: (A) the Earnings allocated to the
Participant's Matching Account for the Plan Year; multiplied by (B)
a fraction, with (i) the numerator being the Participant's Excess
Matching Contributions for the Plan Year and (ii) the denominator
being the sum of (I) the balance of the Participant's Matching
Account as of the first day of the Plan Year and (II) the Matching
Contributions allocated to the Participant's Matching Account for
the Plan Year.
(5) "GAP PERIOD EARNINGS" of a Participant shall be equal to
the product of: (A) ten percent (10%) of the Subject Plan Year
Earnings; multiplied by (B) the number of Gap Period Months prior
to the distribution of the Participant's Excess Matching
Contributions.
7.5 CODE SECTION 401(m) ACP TEST. For each Plan Year, the Plan
Administrator shall determine whether the Plan meets at least one of the two
limitations contained in subsection (a) below for the Plan Year. In the event
that neither limitation is met, the Plan Administrator shall direct the Trustee
to distribute the Excess Aggregate Contributions and Allocable Earnings thereon
pursuant to subsection (b) below.
(a) CODE SECTION 401(m) ACP TEST LIMITATIONS. The following are the
Code section 401(m) ACP Limitations:
(1) 1.25 LIMITATION. The Average Contribution Percentage for
the group of ACP Participants who are Highly Compensated Employees
is not more than the Average Contribution Percentage of the group
of all other ACP Participants multiplied by 1.25.
(2) 2+2 LIMITATION. (A) The excess of the Average Contribution
Percentage for the group of ACP Participants who are Highly
Compensated Employees over the Average Contribution Percentage of
the group of all other ACP Participants is not more than two
percentage points; and (B) the Average Contribution Percentage for
the group of ACP Participants who are Highly Compensated Employees
is not more than the Average Contribution Percentage of the group
of all other ACP Participants multiplied by two.
(b) CORRECTIVE DISTRIBUTION/FORFEITURE OF EXCESS AGGREGATE
CONTRIBUTIONS. For each Plan Year the Plan fails to meet subsection (a)
above, the Plan Administrator shall identify the Participants who are
Highly
VII-8
<PAGE> 41
Compensated Employees with Excess Aggregate Contributions and shall
direct the Trustee to take the following steps to correct the Excess
Aggregate Contributions:
(1) The Trustee shall first distribute the Participant's Excess
Aggregate Contributions consisting of Thrift Contributions which
are Supplemental Employee Contributions and Allocable Earnings
thereon.
(2) If Excess Aggregate Contributions still remain, the Plan
Administrator shall direct the Trustee to next distribute the
Participant's Excess Aggregate Contributions consisting of Thrift
Contributions which are Basic Employee Contributions and Allocable
Earnings thereon. The Plan Administrator then shall reapply the
Section 7.4 Excess Matching Test taking into consideration the
distribution of basic Thrift Contributions and then further reapply
the Section 7.5 ACP Test taking into consideration any forfeited
Excess Matching Contributions (which are disregarded for purposes
of the ACP Test).
(3) If Excess Aggregate Contributions still remain, the Plan
Administrator shall direct the Trustee to finally (i) forfeit the
non-vested portion of the Excess Aggregate Contributions and
Allocable Earnings thereon (with such non-vested portion being
determined without regard to any increase in vesting that may occur
after the end of the Plan Year) and (ii) distribute the vested
portion of the Excess Aggregate Contributions and Allocable
Earnings thereon to the applicable Participant.
(4) The Trustee shall take such foregoing corrective
distribution and forfeiture of the Participant's Excess Aggregate
Contributions prior to 2 1/2 months after the end of the Plan Year
(so as to avoid the employer level 10% excise tax under Code
section 4979) and in any event no later than the close of the next
following Plan Year (so as to preserve the qualified status of the
Plan under Code section 401(m)).
(5) Any corrective forfeitures hereunder shall be applied in
the manner prescribed by Section 11.9(e) of the Plan (I.E..
generally to reduce Employer Contributions).
(6) The Plan Administrator will determine the amount of the
Excess Aggregate Contributions by starting with the Highly
Compensated Employee(s) who has the greatest ACP, reducing his ACP
(but not below the next highest ACP), then, if necessary, reducing
the ACP of the Highly Compensated Employee(s) at the next highest
ACP, including the ACP of the Highly Compensated Employee(s) whose
ACP the Plan Administrator already has reduced (but not below the
next highest ACP), and continuing
VII-9
<PAGE> 42
in this manner until the ACP for the Highly Compensated Group
satisfies the ACP test.
After the Plan Administrator has determined the Excess
Aggregate Contribution amount, the Trustee, as directed by the Plan
Administrator, then will distribute to each Highly Compensated
Employee his respective share of the Excess Aggregate
Contributions. Effective for Plan Years beginning on and after
January 1, 1997, the Plan Administrator will determine the
respective share(s) of Excess Aggregate Contributions by starting
with the Highly Compensated Employee(s) who has the greatest amount
of aggregate contributions, reducing the amount of his aggregate
contributions (but not below the next highest amount of the
aggregate contributions), then, if necessary, reducing the amount
of aggregate contributions of the Highly Compensated Employee(s) at
the next highest level of aggregate contributions, including the
aggregate contributions of the Highly Compensated Employee(s) whose
aggregate contributions the Plan Administrator already has reduced
(but not below the next highest level of aggregate contributions),
and continuing in this manner until the Trustee has distributed all
Excess Aggregate Contributions.
(c) ACP RELATED DEFINITIONS. For purposes of this Section, the
following terms and phrases shall have the meanings as set forth below.
These definitions shall be modified, if applicable and to the extent
provided, by the special rules of Sections 7.7 and 7.8.
(1) "AVERAGE CONTRIBUTION PERCENTAGE" of the group of ACP
Participants who are Highly Compensated Employees and the group of
all other ACP Participants shall mean the average of the Individual
Contribution Percentages of each ACP Participant of the respective
groups. Effective for Plan Years beginning on and after January 1,
1997, in determining whether the Plan satisfies either of the
limitations contained in Section 7.5(a)(1) or (2) above, the Plan
Administrator shall use the Average Contribution Percentage of the
non-Highly Compensated group for the Plan Year preceding the Plan
Year of the calculation, unless the Employer elects (in accordance
with applicable Treasury Regulations) to use the current Plan
Year's Average Contribution Percentage of the non-Highly
Compensated group.
(2) "ACP PARTICIPANT" shall mean each Eligible Employee who is:
(A) a Participant who receives or is eligible to receive (if he
made a Basic Employee Contribution to the Plan) a Matching
Contribution under the Plan; (B) a Participant who can authorize a
Thrift Contribution to the Plan; or (C) if applicable under the
Plan, an Eligible Employee who could elect
VII-10
<PAGE> 43
to become a Participant of the Plan at any time prior to the end
of the Plan Year by enrolling in the Plan pursuant to Article
III.
(3) "EXCESS AGGREGATE CONTRIBUTIONS" shall mean the amount of
Employer Matching Contributions and Thrift Contributions allocated
on behalf of the Highly Compensated Employees which causes the Plan
to fail to satisfy the ACP test.
(4) "INDIVIDUAL CONTRIBUTION PERCENTAGE" of a Participant shall
mean a percentage (rounded to the nearest one-hundredth of a
percent, E.G., 2.85%) which is the quotient of. (A) the sum of the
ACP Participant' s Matching Contributions and Thrift Contributions
allocated to the Participant's respective Accounts within the Plan
Year (as determined pursuant to Section 7.8(e)); divided by (B) the
Participant's Code section 414(s) Compensation for the Plan Year.
(5) "ALLOCABLE EARNINGS" of a Participant shall be equal to the
sum of the Subject Plan Earnings and, through the Plan Year
beginning on January 1, 1993, the Gap Period Earnings.
(6) "SUBJECT PLAN YEAR EARNINGS" of a Participant shall be
equal to the product of: (A) the sum of the Earnings allocated to
the Participant's Matching Account and Thrift Contribution Account
for the Plan Year; multiplied by (B) a fraction, with (i) the
numerator being the Participant's Excess Aggregate Contributions
for the Plan Year and (ii) the denominator being the sum of (I) the
balances of the Participant's Matching Account and Thrift
Contribution Account as of the first day of the Plan Year and (II)
the Matching Contributions and Thrift Contributions allocated to
the Participant's Matching Account and Thrift Contribution Account
for the Plan Year.
(7) "GAP PERIOD EARNINGS" of a Participant shall be equal to
the product of: (A) ten percent (10%) of the Subject Plan Year
Earnings; multiplied by (B) the number of Gap Period Months prior
to the distribution of the Participant's Excess Aggregate
Contributions.
(d) DISREGARDED CONTRIBUTIONS. For purposes of this Section, the
following special rules shall apply:
(1) DISTRIBUTED CODE SECTION 415 EXCESS AMOUNTS. Thrift
Contributions which have been properly distributed to the
Participant as an Excess Amount pursuant to Section 8.6 (concerning
correction of Code section 415 Excess Amounts) shall not be
considered Thrift Contributions for purposes of this Section 7.5.
VII-11
<PAGE> 44
(2) DISREGARD FORFEITED EXCESS MATCH. Any Matching
Contributions which are Excess Matching Contributions forfeited
pursuant to the provisions of Section 7.4 (concerning Excess
Matching Contributions) shall not be taken into account for
purposes of this Section 7.5.
7.6 CODE SECTION 401(m) MULTIPLE USE TEST. If for any Plan Year
Multiple Use of the Alternative Limitation (as defined below) has occurred for
the Plan Year, the Plan Administrator shall determine whether the Plan meets the
aggregate limitation contained in subsection (a) below for the Plan Year. In the
event that the limitation is not met, the Plan Administrator shall direct the
Trustee to take the prescribed corrective action pursuant to subsection (b)
below.
(a) CODE SECTION 401(m) MULTIPLE USE/AGGREGATE LIMITATION. The
following is the Code section 401(m) Multiple Use/Aggregate Limitation:
The Multiple Use Percentage for Participants who are Highly Compensated
Employees is not more than the greater of the following percentages:
(1) 1.25 GREATER/2+2 LESSER. The sum of: (A) 125% of the
greater of (i) the Average Deferral Percentage of all other
Participants or (ii) the Average Contribution Percentage of all
other Participants; and (B) two percentage points plus the lesser
of (i) the Average Deferral Percentage of all other Participants or
(ii) the Average Contribution Percentage of all other Participants,
in either case up to twice the lesser of such Average Deferral
Percentage or such Average Contribution Percentage.
(2) 1.25 LESSER/2+2 GREATER. The sum of: (A) 125% of the lesser
of (i) the Average Deferral Percentage of all other Participants or
(ii) the Average Contribution Percentage of all other Participants;
and (B) two percentage points plus the greater of (i) the Average
Deferral Percentage of all other Participants or (ii) the Average
Contribution Percentage of all other Participants, in either case
up to twice the greater of such Average Deferral Percentage or such
Average Contribution Percentage.
(b) CORRECTION OF MULTIPLE USE. For each Plan Year the Plan fails
to meet the limitation of subsection (a) above, the Plan Administrator
shall take either of the following actions:
(1) REDUCE ADP AND/OR ACP TO MEET MULTIPLE USE LIMITATION. The
Plan Administrator, in its discretion, may either or both: (A)
reduce the Average Deferral Percentage of the group of Participants
who are Highly Compensated Employees, determined after application
of Sections 7.2 and 7.3, to the extent necessary to meet the
limitation contained in subsection (a); or (B) reduce the Average
Contribution Percentage of the
VII-12
<PAGE> 45
group of Participants who are Highly Compensated Employees,
determined after application of Sections 7.4 and 7.5, to the
extent necessary to meet the limitation contained in subsection
(a). Thereafter, the Plan Administrator shall reapply (as
applicable): (A) the provisions of Section 7.3 (concerning the
Code section 401(k) ADP Test) on the basis of the reduced Average
Deferral Percentage and thereby effect whatever distributions of
Excess Contributions resulting therefrom; or (B) Section 7.5
(concerning the Code section 401(m) ACP Test) on the basis of the
reduced Average Contribution Percentage and thereby effect
whatever distributions of Excess Aggregate Contributions
resulting therefrom.
(2) RECALCULATE ADP OR ACP USING 1.25 LIMITATION. The Plan
Administrator may, in its discretion, either: (A) reduce the
Average Deferral Percentage of the group of Participants who are
Highly Compensated Employees, determined after application of
Sections 7.2 and 7.3, to the extent necessary to meet the
limitation contained in Section 7.3(a) (1) (the 1.25 limitation);
or (B) reduce the Average Contribution Percentage of the group of
Participants who are Highly Compensated Employees, determined after
application of Sections 7.4 and 7.5, to the extent necessary to
meet the limitation contained in Section 7.5(a)(1) (the 1.25
limitation). Thereafter, the Plan Administrator shall reapply (as
applicable): (A) the provisions of Section 7.3 (concerning the Code
section 401(k) ADP Test) on the basis of the reduced Average
Deferral Percentage and thereby effect whatever distributions of
Excess Contributions resulting therefrom; or (B) Section 7.5
(concerning the Code section 401(m) ACP Test) on the basis of the
reduced Average Contribution Percentage and thereby effect whatever
distributions of Excess Aggregate Contributions resulting
therefrom.
(c) MULTIPLE USE RELATED DEFINITIONS. For purposes of this Section,
the following terms and phrases shall have the meanings as set forth
below. These definitions shall be modified, if applicable and to the
extent provided, by the special rules of Sections 7.7 and 7.8.
(1) "MULTIPLE USE OF THE ALTERNATIVE LIMITATION" shall mean
that both: (A) the Average Deferral Percentage, determined after
application of Sections 7.2 and 7.3 of the Plan, exceeded the
limitation contained in Section 7.3(a)(1) of the Plan (the 1.25
limitation); and (B) the Average Contribution Percentage,
determined after application of Sections 7.4 and 7.5 of the Plan,
exceeded the limitation contained in Section 7.5(a)(1) of the Plan
(the 1.25 limitation); in each case for the group of ADP
Participants and ACP Participants who are Highly Compensated
Employees.
VII-13
<PAGE> 46
(2) "MULTIPLE USE PERCENTAGE" shall mean the sum of: (A) the
Average Deferral Percentage, determined after application of
Sections 7.2 and 7.3 of the Plan; and (B) the Average Contribution
Percentage, determined after application of Sections 7.4 and 7.5,
in each case of the group of ADP Participants and ACP Participants
who are Highly Compensated Employees.
7.7 SPECIAL SENIOR HCE FAMILY GROUP PARTICIPANT RULES. This Section
shall not apply to Plan Years beginning on and after January 1, 1997. For
purposes of this Article, a Senior Highly Compensated Employee and each of his
Family Members who are Participants of the Plan shall be aggregated and treated
as a single Participant who is a Highly Compensated Employee (the "Senior HCE
Family Group Participant"). With respect to overlapping family groups, if a
Participant is required to be aggregated as a Family Member of more than one
Senior HCE Family Group Participant, then all Participants who are Family
Members of these Senior HCE Family Group Participants shall be treated as one
Senior HCE Family Group Participant.
(a) SINGLE INDIVIDUAL DEFERRAL AND CONTRIBUTION PERCENTAGES. The
Individual Deferral Percentage and the Individual Contribution
Percentage of the Senior HCE Family Group Participant shall be
determined in the same manner as therein prescribed, except that the
applicable Contributions of all persons of the Senior HCE Family Group
Participant shall be aggregated and divided by the Family Group
Compensation to reach one such Individual Deferral Percentage and one
such Individual Contribution Percentage for the Senior HCE Family Group
Participant.
(b) CORRECTIVE DISTRIBUTIONS. In the case of any required
corrective distribution to the Senior HCE Family Group Participant, the
distribution shall be made in proportion to respective contributions of
the individual Participants of the Senior HCE Family Group Participant.
(c) SENIOR HCE RELATED DEFINITIONS. For purposes of this Section,
the following terms and phrases shall have the meanings as set forth
below. These definitions shall be modified, if applicable and to the
extent provided, by the special rules of Section 7.8.
(1) "SENIOR HIGHLY COMPENSATED EMPLOYEE" shall mean a Highly
Compensated Employee who is: (A) a five percent (5%) owner (as
defined for purposes of the definition of Highly Compensated
Employee); or (B) a Highly Compensated Employee who is one of the
10 most Highly Compensated Employees (ranked on the basis of his
Code section 414(q) Compensation paid by the Employer or Affiliated
Company), in either foregoing case during either a Plan Year or a
Lookback Year.
VII-14
<PAGE> 47
(2) "FAMILY MEMBER" shall mean the Spouse, lineal ascendants
and descendants of the Senior Highly Compensated Employee and the
spouses of such lineal ascendants and descendants.
(3) "FAMILY GROUP COMPENSATION" shall mean the aggregate Code
section 414(s) Compensation of all persons of the Senior HCE Family
Group Participant, except that the Code section 414(s) Compensation
of the Senior Highly Compensated Employee and his Core Family
Members who are Participants of the Plan shall be limited to
$200,000 or, for Plan Years beginning on and after January 1, 1994,
$150,000, or such greater or lesser amount as may be designated by
the Secretary of the Treasury for the Plan Year.
(4) "CORE FAMILY MEMBER" shall mean the Spouse of the Senior
Highly Compensated Employee and lineal descendants of the Senior
Highly Compensated Employee who have not yet reached their 19th
birthday by the end of the Plan Year.
7.8 SPECIAL RULES. The provisions of this Article VII shall be subject
to the following rules (as applicable):
(a) NONDISCRIMINATION PLAN AGGREGATION. If the Plan satisfies the
requirements of Code sections 401(k), 401(a)(4) or 410(b) (other than
the average benefit percentage test under Code section
410(b)(2)(A)(ii)) only if aggregated with one or more other plans of an
Employer or an Affiliated Company, or if one or more other such plans
satisfy the requirements of Code sections 401(k), 401(a)(4) or 410(b)
(other than the average benefit percentage test under Code section
410(b)(2)(A)(ii)) only if aggregated with the Plan, then the Average
Deferral Percentages and the Average Contribution Percentages shall be
calculated as if the Plan and all such plans were a single plan. If the
Plan is aggregated with one or more plans for purposes of Code sections
401(k) or 401(m), the aggregated plans must also satisfy Code sections
401(a)(4) and 410(b) as though they were a single plan. Plans may be
aggregated in order to satisfy Code sections 401(k) and 401(m) only if
they have the same plan year.
(b) HCE MULTIPLE PLAN PARTICIPATION. If during any Plan Year a
Participant who is a Highly Compensated Employee is also a Participant
in any other plan or arrangement described in Code sections 401(k) or
401(m) which is maintained by the Employer or an Affiliated Company,
then, for purposes of determining the Individual Deferral Percentage
and Individual Contribution Percentage of the Participant, the
applicable contributions from such other plan shall be treated as made
under the Plan for the Plan Year. If the Participant participates in
two or more such plans or arrangements that have different Plan Years,
all such plans and arrangements ending with or within the same calendar
year shall be treated as a single arrangement. Notwithstanding the
foregoing, plans that are not permitted to be aggregated under Treasury
Regulation section
VII-15
<PAGE> 48
1.401(k)-1(b)(3)(ii)(B) or section 1.401(m)-1(b)(3)(ii) (E.G., ESOPs)
are not aggregated for this purpose.
(c) SEPARATE TESTING FOR MINIMUM AGE AND SERVICE PARTICIPANTS.
If for any Plan Year the Plan satisfies Code section 410(b) pursuant to
the application of Treasury Regulation section 1.410(b)-6(b)(3)
applicable to qualified retirement plans benefiting minimum age and
service employees, the Plan shall treat the portion of the Plan
benefiting minimum age and service employees as a separate plan from
the remainder of the Plan for purposes of applying the ADP Test of
Section 7.3, the ACP Test of Section 7.5 and the Multiple Use Test of
Section 7.6, pursuant to the interpretive authority of IRS Announcement
93-105, 1993- 27, IRB 8/16/93, Part V.
(d) CONTRIBUTION DEADLINE. For purposes of this Article, all
Contributions considered under this Article must be made before the
last day of the twelve month period immediately following the Plan Year
to which the Contributions relate.
(e) CONSIDERED CONTRIBUTIONS. For purposes of identifying the
Contributions considered for any calendar year for the Code section
402(g) limit and for any Plan Year for ADP and ACP nondiscrimination
testing under Sections 7.3 and 7.5, (1) the 401(k) Contributions and
Thrift Contributions shall be considered allocated to the Participants'
respective Accounts effective as of each pay day during the Plan Year,
as the date within the Plan Year on which the Participant would have
received the Contributions as compensation but for the Participant' s
election to defer or contribute to the Plan and (2) the Matching
Contributions and Qualified Non-Elective Contributions shall be
considered allocated to the Participants' Matching Accounts effective
as of the last day of the Plan Year for which the Contributions are
being made to the Plan.
(f) MATCHING CONTRIBUTIONS IN ADP TEST. Chemed may elect to treat
all or a portion of the Matching Contributions and/or Thrift
Contributions made to the Plan as 401(k) Contributions for purposes of
the ADP Test of Section 7.3, provided: (1) such Contributions when made
are nonforfeitable and subject to the same distribution restrictions
applicable to 401(k) Contributions (without regard to whether such
Contributions are actually taken into account under the ADP Test); and
(2) the ACP Test of Section 7.5 is met before the Matching
Contributions and/or Thrift Contributions are used in the ADP Test and
continues to be met following the exclusion of those Contributions are
used in the ADP Test; and (3) the conditions prescribed in Treasury
Regulations section 1.401(k)-1(b)(5), which are incorporated herein by
reference, are satisfied.
(g) 401(k) CONTRIBUTIONS IN ACP TEST. Chemed may elect to include
all or a portion of 401(k) Contributions and/or Qualified Non-Elective
Contributions (if any) for purposes of passing the ACP Test of Section
7.5, provided: (1) the
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<PAGE> 49
ADP Test of Section 7.3 is met before the 401(k) Contributions and/or
Qualified Non-Elective Contributions are used in the ACP Test and
continues to be met following the exclusion of those Contributions are
used to meet the ACP Test; and (2) the applicable requirements of
Treasury Regulation section 1.401(m)- 1(b)(5), which are incorporated
by reference, are satisfied. The foregoing provision shall not be
interpreted to permit such use of 401(k) Contributions in the ACP Test
by the Chemed ESOP I or the Chemed ESOP II, except as permitted by
applicable Treasury Regulations.
(h) ALTERNATIVE INCOME DETERMINATION. The Plan Administrator may,
instead of the methodology of determining "Allocable Earnings" in this
Article, use any reasonable method for computing the income allocable
to the Contributions, provided that the method is: (1)
nondiscriminatory and is used consistently for all Participants and for
all corrective distributions under the Plan for the Plan Year; and (2)
actually used by the Plan for allocating income to Accounts.
(i) CHARGING PLAN ACCOUNTS. The Participant's Attributable Excess
Deferrals, Excess Contributions, Excess Matching Contributions and
Excess Aggregate Contributions, and Subject Plan Year Earnings thereon,
shall be charged against the Participant's applicable Accounts.
However, the amounts of a Participant's Gap Period Earnings shall be
charged against the Participant's applicable Accounts only to the
extent such amounts have been previously credited to these Accounts. If
the Participant's Gap Period Earnings have not yet been credited to the
Participant's Accounts, the Participant's Gap Period Earnings shall be
charged against the Plan's general earnings for the Plan Year which
includes the Gap Period Earnings.
(j) RECORDS. The Employer shall maintain records sufficient to
demonstrate satisfaction of the limitations and nondiscrimination tests
under this Article and the amount of all Contributions used thereunder.
(k) TREASURY REGULATIONS. The application of the tests under this
Article shall satisfy such other requirements as may be prescribed by
the Secretary of the Treasury. For periods prior to the finalization of
Treasury Regulations applicable hereunder, Chemed shall be entitled to
rely, in lieu of any provision under this Article, on any previous
proposed or final such Treasury Regulations as may be permitted under
such Treasury Regulations.
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<PAGE> 50
ARTICLE VIII - CODE SECTION 415 CONTRIBUTION LIMITATIONS
--------------------------------------------------------
8.1 DEFINITIONS. For the purpose of this Article, the following terms
and phrases shall have the meanings as set forth therein:
(a) "ANNUAL ADDITIONS" for a Limitation Year means the sum of the
401(k) Contributions, Thrift Contributions, Company Contributions and
forfeitures credited to a Participant's Accounts for the Limitation
Year. For purposes hereof, the following rules shall apply:
(1) The foregoing Contributions do not fail to be Annual
Additions merely because they are Attributable Excess Deferrals,
Excess Contributions or Excess Aggregate Contributions (as such
terms are defined in Article VII) or merely because such
Contributions may be corrected through distribution. However,
Attributable Excess Deferrals that are distributed in accordance
with Section 7.2(b) and Treasury Regulation section
1.402(g)-l(e)(2) and (3) are not Annual Additions.
(2) Any Excess Amounts applied under Section 8.6 in the
Limitation Year will be considered Annual Additions to the
Limitation Year so applied.
(3) Amounts allocated to an individual medical account, as
defined in Code section 415(l)(2), which is part of a pension or
annuity plan maintained by the Employer, are treated as Annual
Additions to a defined contribution plan.
(4) Amounts derived from contributions which are attributable
to post-retirement medical benefits (as described in Code section
419A(d)(2)) allocated to the separate account of a Key Employee (as
defined in Article IX) under a welfare benefit fund (as defined in
Code section 419(e)) maintained by the Employer, are treated as
Annual Additions to a defined contribution plan.
(5) For purposes of applying the limitations of this Article,
Annual Additions shall be allocated (or credited) to the Accounts
of Participants within the Limitation Year at the time the Annual
Additions are considered allocated pursuant to the respective and
applicable provisions of Article IV concerning allocation of Plan
contributions, and as otherwise consistent with Treasury Regulation
section 1.415-6(b)(7) which is incorporated herein by reference.
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<PAGE> 51
(b) "CODE SECTION 415 COMPENSATION" means for any Limitation Year,
at the discretion of Chemed, compensation from, the Employer which
meets any one of the following definitions:
(1) "TRADITIONAL CODE SECTION 415 COMPENSATION" which shall
mean the Participant's earned income, wages, salaries and fees for
professional services and other amounts received for personal
services actually rendered in the course of service with the
Employers (including, but not limited to, commissions paid to
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips and bonuses)
actually paid or includable in gross income for the Limitation
Year, together with the special amounts of compensation described
in Treasury Regulation section 1.415-2(d)(2)(ii)- (vi), actually
paid or made available during the Limitation Year, but excluding:
(A) employer contributions to a plan of deferred compensation which
are not included in the Participant's gross income for the taxable
year in which contributed or Employer contributions to a simplified
employee pension plan to the extent those contributions are
deductible by the Participant; (B) any distributions from a plan of
deferred compensation (except as permitted by Treasury Regulation
section 1.415-2(d)(3)(i)); (C) amounts realized from the sale,
exchange or other disposition of stock acquired under a qualified
stock option; (D) amounts realized from the exercise of a
nonqualified stock option or when restricted stock (or property)
held by the Participant either becomes freely transferable or is no
longer subject to a substantial risk of forfeiture; and (E) amounts
which receive special tax benefits (such as premiums for group term
life insurance that are not includable in the Participant's gross
income) or contributions made by the Employer (whether or not under
a salary reduction agreement) toward the purchase of an annuity
contract described in Code section 403(b) (whether or not the
contributions are excludable from the Participant's gross income).
(2) "FIT WITHHOLDING COMPENSATION" which shall mean the
Participant's wages from the Employers within the meaning of Code
section 3401(a), within the meaning of Treasury Regulation section
1.415- 2(d)(11)(ii).
(3) "REPORTED FORM W-2 COMPENSATION" which shall mean wages
from the Employers within the meaning of Code section 3401(a) and
all other payments of compensation to the Participant by his
Employer (in the course of the Employer's trade or business) for
which the Employer is required to furnish the Participant a written
statement under Code sections 6041(d), 6051(a) (3) and 6052, all
within the meaning of Treasury Regulation section
1-415-2(d)(11)(i).
Notwithstanding the foregoing:
VIII-2
<PAGE> 52
(A) the Code section 415 Compensation for a Participant
who is totally and permanently disabled (as defined for
purposes of Code section 415) is the Code section 415
Compensation the Participant would have received for the
Limitation Year if the Participant had been paid at the rate
of Code section 415 Compensation paid immediately before
becoming totally and permanently disabled. This imputed Code
section 415 Compensation for the disabled Participant may be
taken into account only if (i) the Participant is not a Highly
Compensated Employee and (ii) Employer contributions made on
behalf of the' Participant are fully vested and nonforfeitable
when made.
(B) For Plan Years beginning on and after January 1,
1998, Code section 415 Compensation shall include the
Participant's: (i) elective deferrals (as defined in Code
section 402(g)(3)) excludable from the Participant's gross
income under a plan maintained by an Employer or Affiliated
Company; and (ii) elective contributions excludable from the
Participant's gross income by reason of Code Section 125 or
457 under a plan maintained by an Employer or Affiliated
Company.
(c) "COMPANY CONTRIBUTIONS" means the Employer Contributions and
the Qualified Non-Elective Contributions under Article VII.
(d) "DEFINED BENEFIT PLAN FRACTION" means a fraction, with: (1) the
numerator being the Participant's Projected Annual Benefit (determined
as of the close of the Limitation Year in question) under the defined
benefit plans (whether or not terminated) maintained by the Employer;
and (2) the denominator being the lesser of (A) 125% of the dollar
limitation in effect under Code sections 415(b)(1)(A) and 415(d) for
the Limitation Year or (B) 140% of the Participant's Highest Average
Code section 415 Compensation, including any adjustments made under
Code section 415(b), for such Limitation Year.
Notwithstanding the foregoing, if the Participant participated, 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, then the denominator
of the Fraction will not be less than the product of 1.25 multiplied by
the sum of the Projected Annual Benefit the Participant accrued as of
the end of the last Limitation Year of the plans beginning before
January 1, 1987, disregarding any changes in the terms or conditions of
the plans after May 5, 1986. The preceding sentence applies only if
each defined benefit plan, and all defined benefit plans in the
aggregate, satisfied the requirements of Code section 415 as of the
last day of the Limitation Year of each defined benefit plan that began
in 1982.
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<PAGE> 53
(e) "DEFINED CONTRIBUTION PLAN FRACTION" means a fraction, with:
(1) the numerator being the sum of the Annual Additions to the
Participant's accounts in all defined contribution plans (whether or
not terminated) maintained by the Employer for the Limitation Year in
question and for 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 Annual Additions attributable to all
welfare benefit funds, as defined in Code section 419(e), and
individual medical accounts, as defined in Code section 415(1)(2),
maintained by the Employer; and (2) the denominator being the sum of
the lesser of the following amounts determined for the Limitation Year
in question and for each prior Year of Service with the Employer
(regardless of whether the Employer maintained a defined contribution
plan): (A) 125% of the dollar limitation in effect under Code section
415(c)(1)(A) for the Limitation Year; or (B) 140% of the Participant's
Code section 415 Compensation for the Limitation Year. The
determination of a Participant's Defined Contribution Fraction shall
also be subject to the following rules:
(1) If the Participant participated 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 Plan Fraction would otherwise exceed 1.0. An amount
equal to the product of (i) the excess of the sum of those
Fractions over 1.0, multiplied by (ii) the denominator of this
Fraction, will be permanently subtracted from the numerator of this
Fraction. This adjustment shall be calculated by using the end of
the last Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the plans
made after May 5, 1986, but using the Section 415 limitation
applicable to the first Limitation Year beginning on or after
January 1, 1987.
(2) For the purpose of determining the Defined Contribution
Plan Fraction for any Limitation Year ending after December 31,
1982, the Plan Administrator may elect, under Code section 415,
that the denominator for each Participant for all Limitation Years
ending before January 1, 1983 shall be equal to the product of: (A)
the Defined Contribution Plan Fraction denominator which would
apply for the last Limitation Year ending in 1982 if an election
hereunder were not made; multiplied by (B) a fraction, with (i) the
numerator being the lesser of (1) $51,875 or (II) 1.04 times 25% of
the Participant's Code section 415 Compensation for the Limitation
Year ending in 1981 and (ii) the denominator being the lesser of
(I) $41,500 or (II) 25% of the Participant's Code section 415
Compensation for the Limitation Year ending in 1981.
VIII-4
<PAGE> 54
This election applies only if the plan administrators of all
defined contribution plans maintained by the Employer also elect
to use this modified Defined Contribution Plan Fraction.
(3) If the Plan satisfied the applicable requirements of Code
section 415 for all Limitation Years beginning before January 1,
1987, an amount shall be subtracted from the numerator of the
Defined Contribution Plan Fraction (not exceeding such numerator)
as prescribed by the Secretary of the Treasury so that the sum of
the Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction does not exceed 1.0 for such Limitation Year.
(f) "EMPLOYER" means: (1) the Employers; (2) any Affiliated
Company, and (3) any other entity which would become an Affiliated
Company if, for purposes of applying Code sections 414(b) and 414(c),
the phrase "more than 50 percent" is substituted for the phrase "at
least 80%" each place it appears in Code section 1563(a)(1) (applicable
to parent subsidiary controlled groups).
(g) "EXCESS AMOUNTS" means the excess of the Participant's Annual
Additions for the limitation Year over the Participant's Maximum
Permissible Amount.
(h) "HIGHEST AVERAGE CODE SECTION 415 COMPENSATION" means the
average Code section 415 Compensation for the three consecutive Years
of Service with the Employer that produces the highest average. For
this purpose, a Year of Service with the Employer is the
12-consecutive-month period used to measure Code section 415
Compensation designated in the Plan.
(i) "LIMITATION YEAR" means the Plan Year. All qualified plans
maintained by the Employer must use the same Limitation Year. If the
Limitation Year is changed, the new Limitation Year must begin on a
date within the Limitation Year in which the change is made.
(j) "MAXIMUM PERMISSIBLE AMOUNT" means the lesser of: (1) $30,000
(or, effective for Plan Years beginning on and after January 1, 1995,
such greater amount pursuant to adjustments under Code section 415(d));
or (2) 25% of the Participant's Code section 415 Compensation for the
Limitation Year. The determination of a Participant's Maximum
Permissible Amount shall be subject to the following provisions (as
applicable):
(1) If a short Limitation Year is created because of a change
in the Limitation Year, the Maximum Permissible Amount will not
exceed the $30,000 dollar amount set forth in clause (1) above
multiplied by a fraction, with: (A) the numerator being the number
of months in the short Limitation Year; and (B) the denominator
being 12.
VIII-5
<PAGE> 55
(2) In computing the Maximum Permissible Amount for a
Participant, the Code section 415 Compensation limitation of clause
(2) above shall not apply to: (A) any contribution for medical
benefits (within the meaning of Code section 419A(f)(2)) after
separation from service which is otherwise treated as an Annual
Addition; or. (B) any amount representing a contribution to an
individual medical benefit account which is otherwise treated as an
Annual Addition under Code section 415(l)(1).
(k) "NET GAIN AND NET LOSS" means the increases and decreases
respectively in the value of the Accounts and each Investment Fund
between Valuation Dates, as defined in Article VI and as otherwise
provided in regulations prescribed by the Secretary of the Treasury.
(l) "PERMITTED EXCESS AMOUNT REASON" means that the Excess Amount
is attributable to: (1) the allocation of forfeitures; (2) a reasonable
error in estimating a Participant's Compensation or his Code section
415 Compensation; (3) a reasonable error in determining the amount of a
Participant's 401(k) Contributions or other elective deferrals (within
the meaning of Code section 402(g)(3)) that may be made with respect to
any Participant under the Code section 415 limits of this Article VIII;
or (4) under other limited facts and circumstances which the Secretary
of the Treasury finds justify the availability of the rules set forth
in this Article VIII with respect to Excess Amounts attributable to a
Permitted Excess Amount Reason.
(m) "PROJECTED ANNUAL BENEFIT" means the annual retirement benefit
(adjusted to an actuarial equivalent straight life annuity if the
benefit is expressed in a form other than a straight life annuity or a
qualified joint and survivor annuity) to which the Participant would be
entitled under the terms of the defined benefit plan (whether or not
terminated) on the assumptions that he continues his service until his
normal retirement date under the plan (or current age, if later), and
that his aggregate compensation continues at the same rate as is in
effect for the current Limitation Year and all other relevant factors
used to determine benefits under the defined benefit plan remain
constant for all future Limitation Years.
(n) "QUALIFIED BENEFIT PLAN" means a qualified retirement plan
under Code section 401(a), a welfare benefit fund as defined under Code
section 419(e) or an individual medical account as defined in Code
section 415(e)(2) which provided an Annual Addition.
8.2 LIMITATION IF A PARTICIPANT DOES NOT PARTICIPATE IN ANY OTHER PLAN.
(a) LIMITATION. If a Participant does not participate in, and has
never participated in, another Qualified Benefit Plan maintained by the
Employer, the amount of the Annual Additions which may be allocated to
the Participant's
VIII-6
<PAGE> 56
Accounts for any Limitation Year shall not exceed the Maximum
Permissible Amount or any other limitation contained in the Plan. If
the Plan contributions that would otherwise be credited or allocated
to the Participant's Accounts would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, then, in an
uniform and nondiscriminatory manner and consistent with Section
4.6(c), the amount contributed or allocated shall be reduced so that
the Annual Additions for the Limitation Year will equal the Maximum
Permissible Amount.
(b) CORRECTION OF EXCESS AMOUNTS. Otherwise, if there is an Excess
Amount, and such Excess Amount exists as a result of a Permitted Excess
Amount Reason, the Excess Amount shall be disposed in the manner
prescribed in Section 8.6 of the Plan.
8.3 LIMITATION IF A PARTICIPANT PARTICIPATES IN ANOTHER DEFINED
CONTRIBUTION PLAN.
(a) LIMITATION. This Section shall apply if, in addition to the
Plan, the Participant participates during any Limitation Year in
another Qualified Benefit Plan (other than a defined benefit pension or
annuity plan) maintained by the Employer. The Annual Additions which
may be allocated to a Participant' s Account under this Plan and such
other Qualified Benefit Plan for the Limitation Year shall not exceed
the Maximum Permissible Amount. If the Annual Additions with respect to
the Participant under the Plan and under such other Qualified Benefit
Plan that would otherwise be allocated to the Participant would cause
the Annual Additions for the Limitation Year to exceed the Maximum
Permissible Amount, then the amount contributed or allocated under this
Plan and such other Plan shall be reduced so that the Annual Additions
under all the Plans for the Limitation Year will equal the Maximum
Permissible Amount, all in the following manner (and in the order
specified):
(1) ESOP ALLOCATION. If the Participant participates in the
Chemed Corporation Employee Stock Ownership Plan-I, the Chemed
Corporation Employee Stock Ownership Plan-II, or any other employee
stock ownership plan described in Code section 4975(e)(7), then the
amount which would be allocated to the Participant under each such
individual ESOP Plan will be reduced as necessary for each such
ESOP Plan to comply with the special 1/3 rule of Code section
415(c)(6) (under which Participants who are Highly Compensated
Employees are allocated with no more than 1/3 of employer
contributions), with the foregoing reduction being applied in a
uniform and nondiscriminatory manner among all Participants who are
Highly Compensated Employees of each such ESOP Plan.
VIII-7
<PAGE> 57
(2) EMPLOYEE CONTRIBUTIONS. If after application of paragraph
(1) the Annual Additions under all the Plans still exceed the
Maximum Permissible Amount for a Participant, and if the
Participant participates in this Plan or another qualified
participant savings plan under Code section 401(a) or 401(k), then
the amount which would be contributed by the Participant which
represents Employee Contributions will be reduced under this Plan
or such other plan (at the election of the Employer) in the same
manner as provided in Section 8.6(b) of the Plan (relating to the
return of Employee Contributions). A Participant shall not receive
an Employer Contribution with respect to any Employee Contribution
reduced hereunder.
(3) PROFIT SHARING CONTRIBUTIONS. If after application of
paragraph (2) the Annual Additions under all the Plans still exceed
the Maximum Permissible Amount for a Participant, and if the
Participant participates in this Plan or another qualified
individual account balance plan under Code section 401(a) or
401(k), then the amount which would be contributed or allocated to
the Participant which represents profit sharing contributions will
be reduced to the extent necessary under this Plan or such other
plan (at the election of the Employer).
(4) EMPLOYER CONTRIBUTIONS. If after application of paragraph
(3) the Annual Additions under all the Plans still exceed the
Maximum Permissible Amount for a Participant, and if the
Participant participates in this Plan or another qualified
individual account balance plan under Code section 401(a) or
401(k), then the amount which would be contributed or allocated to
the Participant under this Plan which represents Employer
Contributions will be reduced to the extent necessary under this
Plan or such other plan (at the election of the Employer).
(b) ORDER OF TIME FOR EXCESS ANNUAL ADDITIONS. If a Participant's
Annual Addition under the Plan and such other Qualified Benefit Plans
would result in an Excess Amount for a Limitation Year, the Excess
Amount will be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a Qualified
Benefit Plan which is a welfare benefit fund or individual medical
account will be deemed to have been allocated first regardless of the
actual allocation date.
(c) ALLOCATION OF EXCESS ANNUAL ADDITIONS AMONG PLANS. Subject to
Section 8.6, if an Excess Amount was allocated to a Participant's
Accounts on an allocation date of this Plan which coincides with an
allocation date of another plan, the Excess Amount attributed to the
Plan will be the product of: (1) the total Excess Amounts allocated as
of that date; multiplied by (2) the ratio of (A) the Annual Additions
allocated to the
VIII-8
<PAGE> 58
Participant's Accounts for the Limitation Year as of that date under
the Plan, to (B) the total Annual Additions allocated to the
Participant's Accounts for the Limitation Year as of that date under
this and all the other qualified defined contribution plans.
(d) CORRECTION OF EXCESS AMOUNTS. Otherwise, if there is an Excess
Amount which is attributable to the Plan, and such Excess Amount is the
result of a Permitted Excess Amount Reason, the Excess Amount shall be
disposed in the manner prescribed in Section 8.6 of the Plan.
8.4 LIMITATION IF THE PARTICIPANT PARTICIPATES IN A DEFINED BENEFIT
PLAN.
(a) LIMITATION. If a Participant also participates in any Qualified
Benefit Plan which is a defined benefit plan maintained by the
Employer, then the sum of the Defined Contribution Plan Fraction and
the Defined Benefit Plan Fraction for any Limitation Year shall not
exceed 1.0. If the sum of Plan contributions that would otherwise be
credited to the Participant's Accounts would cause the Annual Additions
for the Limitation Year to exceed the Maximum Permissible Amount, then,
in an uniform and nondiscriminatory manner and consistent with Section
4.6(c), the amount contributed or allocated will be reduced so that the
Annual Addition for the Limitation Year will equal the Maximum
Permissible Amount.
(b) CORRECTION OF EXCESS AMOUNTS. Otherwise, if there is an Excess
Amount, and such Excess Amount exists as a result of a Permitted Excess
Amount Reason, the Excess Amount shall be disposed in the manner
prescribed in Section 8.6 of the Plan.
(c) COMBINES DB/DC 1.0 LIMITATION. If in any Limitation Year, after
application of paragraphs (a) and (b) above, the sum of a Participant's
Defined Contribution Plan Fraction and Defined Benefit Plan Fraction
would exceed 1.0, then the Participant's 401(k) Contributions and
Thrift Contributions shall be returned pursuant to Section 8.6 so that
the sum of the Participant's Defined Contribution Plan Fraction and the
Defined Benefit Plan Fraction will not exceed 1.0. If the sum of the
Participant' s Defined Contribution Plan Fraction and Defined Benefit
Plan Fraction exceeds 1.0 after the return described in the preceding
sentence, then the rate of accrual of benefits under the defined
benefit plan will be reduced so that the sum of the Participant's
Defined Contribution Plan Fraction and Defined Benefit Plan Fraction
will not exceed 1.0.
8.5 REQUIRED AGGREGATION OF PLANS. Consistent with Sections 8.2, 8.3
and 8.4 for purposes of applying the limitations of this Article, and except as
otherwise provided in Treasury Regulations sections 1.415-8(d)(2) and
1.415-7(h)(2) (relating to Code section 403(b) annuity contracts), all defined
benefit plans (whether or nor terminated) of an Employer are to be treated as
one
VIII-9
<PAGE> 59
defined benefit plan and all defined contribution plans (whether or not
terminated) of an Employer are to be treated as one defined contribution plan.
For purposes hereof and wherever used in this Article VIII, the term "defined
contribution plan" or "defined benefit plan" means a defined contribution plan
(within the meaning of Code section 414(i)) or a defined benefit plan (within
the meaning of Code section 414(j)), whichever applies, which is (a) a plan
described in Code section 401(a) which includes a trust which is exempt from tax
under Code section 501(a), (b) an annuity plan described in Code section 403(a),
(c) an annuity contract described in Code section 403(b), (d) an individual
retirement account described in Code section 408(a), (e) an individual
retirement annuity described in Code section 408(b) or (f) a simplified employee
pension described in Code section 408(k).
8.6 DISPOSITION OF EXCESS AMOUNTS. If for any Limitation Year there is
an Excess Amount with respect to the Participant under the Plan, or an Excess
Amount with respect to the Participant under this Plan and under another
Qualified Benefit Plan, then the Excess Amount under this Plan and such other
Plan shall be disposed of in the following manner (and in the order specified):
(a) ESOP ALLOCATION. If the Participant participates in the Chemed
Corporation Employee Stock Ownership Plan-I, the Chemed Corporation
Employee Stock Ownership Plan-II, or any other employee stock ownership
plan described in Code section 4975 (e)(7), then the portion of the
Excess Amount of the Participant which represents the amount allocated
to the Participant which exceeds the special 1/3 rule of Code section
415(c)(6) (under which Participants who are Highly Compensated
Employees are allocated with no more than 1/3 of employer
contributions) for each such ESOP Plan will be reallocated for the
same Limitation Year in a uniform and nondiscriminatory manner among
all other Participants of such ESOP Plan who are non-highly Compensated
Employees.
(b) EMPLOYEE CONTRIBUTIONS. If after application of subsection (a)
an Excess Amount still exists for a Participant, and if the Participant
participates in this Plan or another qualified participant savings plan
under Code section 401(a) or 401(k), then the portion of the Excess
Amount of the Participant which represents Employee Contributions will
be returned to the Participant (from this Plan or such other plan at
the election of the Employer) in the following manner (and in the order
specified):
(1) RETURN SUPPLEMENTAL EMPLOYEE CONTRIBUTIONS TO THRIFT
CONTRIBUTION ACCOUNT. If, after reallocating Employer
Contributions, an Excess Amount still exists, any Supplemental
Employee Contributions made by the Participant to his Thrift
Contribution Account that cause the Excess Amount shall be returned
to the Participant.
(2) RETURN SUPPLEMENTAL EMPLOYEE CONTRIBUTIONS TO 401(k)
CONTRIBUTION ACCOUNT. If, after returning the Supplemental Employee
Contributions to a Thrift Contribution Account, an Excess Amount
still
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exists, the Excess Amount consisting of Supplemental Employee
Contributions to the 401(k) Contribution Account shall be
returned to the Participant.
(3) RETURN BASIC EMPLOYEE CONTRIBUTIONS TO THRIFT CONTRIBUTION
ACCOUNT. If, after returning the Supplemental Employee
Contributions to a 401(k) Contribution Account, an Excess Amount
still exists, the Excess Amount consisting of Basic Employee
Contributions to a Thrift Contribution Account necessary to
eliminate the Excess Amount shall be returned to the Participant.
(4) RETURN BASIC EMPLOYEE CONTRIBUTIONS TO 401(k) CONTRIBUTION
ACCOUNT. If, after returning the Basic Employee Contributions to a
Thrift Contribution Account, an Excess Amount still exists, the
Excess Amount consisting of Basic Employee Contributions to a
401(k) Contribution Account necessary to eliminate the Excess
Amount shall be returned to the Participant.
Such returned Employee Contributions shall include gains
attributable to the Employee Contributions, but no losses thereon.
The return of the foregoing Employee Contributions shall comply
with the procedures of Rev. Proc. 92-93, 1992-2 C.B. 505 or any
subsequent applicable guidance issued by the Secretary of the
Treasury. Any forfeited Employer Contributions (as matching
contributions) arising from the return of Employee Contributions
hereunder (as so forfeited under Section 7.4 of the Plan) shall
reduce the Participant's Excess Amounts to be corrected hereunder.
(c) NONELECTIVE EMPLOYER CONTRIBUTIONS. If after application of
subsection (b) an Excess Amount still exists for a Participant, and if
the Participant participates in this Plan or another qualified
individual account balance plan under Code section 401(a) or 401(k),
then the portion of the Excess Amount of the Participant which
represents Nonelective Employer Contributions under this Plan or such
other plan (at the election of the Employer) will be held unallocated
in a suspense account until the next Limitation Year in which
Nonelective Employer Contributions could be allocated among
Participants' Nonelective Employer Contribution accounts. The Plan
Administrator in its sole discretion may then treat the excess
according to either one of the following provisions:
(1) The Excess Amount attributable to the affected Participant
will be used to reduce Nonelective Employer Contributions allocated
to his Nonelective Employer Contributions Account for that
Limitation Year (and succeeding Limitation Years, as is necessary).
If the Participant is not eligible to receive an allocation of
Nonelective Employer Contributions as
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of the last day of the Limitation Year in which the excess
occurs, then the excess will be allocated as of the last day of
the Limitation Year among the Nonelective Employer Contribution
accounts of all of the remaining Participants who are otherwise
eligible to receive an allocation of Nonelective Employer
Contributions. The excess shall reduce Nonelective Employer
Contributions on behalf of all of those remaining Participants
for that Limitation Year (and succeeding Limitation Years, if
necessary).
(2) The Excess Amount attributable to the affected Participant
will be allocated as of the last day of the Limitation Year among
the Nonelective Employer Contribution Accounts of all of the
remaining Participants who are otherwise eligible to receive an
allocation of Nonelective Employer Contributions. The excess shall
reduce Employer Contributions on behalf of all of those remaining
Participants for that Limitation Year (and succeeding Limitation
Years, if necessary).
8.7 LIMITATION ON SUBSEQUENT EMPLOYER CONTRIBUTIONS. Notwithstanding
any other provision of this Article, if a suspense account was in existence on
the first day of a Limitation Year as a result of the application of this
Article, all amounts in the suspense account must be allocated among the
Accounts of Participants in the manner prescribed in this Article before any
Employer Contributions, 401(k) Contributions or Thrift Contributions which would
constitute Annual Additions may be made for that Limitation Year.
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ARTICLE IX - CODE SECTION 416 TOP-HEAVY PROVISIONS
--------------------------------------------------
9.1 DEFINITIONS. For the purpose of this Article, the following terms
and phrases shall have the meanings as set forth therein:
(a) "AGGREGATE COMPENSATION" means Code section 415 Compensation as
defined in Article VIII.
(b) "COLLECTIVE BARGAINING AGREEMENT" means an agreement which the
Secretary of Labor finds to be a collective bargaining agreement
between employee representatives and one or more Employers if there is
evidence that retirement benefits were the subject of good faith
bargaining between the employee representatives and the Employer.
(c) "DETERMINATION DATE" means: (1) for any Plan Year after the
first Plan Year of the Plan, the last day of the preceding Plan Year;
and (2) for the first Plan Year of the Plan, the last day of that Plan
Year.
(d) "EMPLOYER" means the Employer and each Affiliated Company.
(e) "EMPLOYER CONTRIBUTIONS" means the sum of the 401(k)
Contributions, Employer Contributions and Company Qualified
Non-Elective Contributions.
(f) "KEY EMPLOYEE" means any Employee or former Employee (and his
Beneficiaries) who at any time during the Plan Year which contains the
Determination Date and any of the four preceding Plan Years is or was:
(1) an officer of the Employer having annual Aggregate Compensation
greater than 50% of the defined benefit dollar limitation in effect for
the Plan Year under Code section 415(b)(1)(A); (2) one of the ten
Employees having annual Aggregate Compensation greater than the dollar
limitation in effect under Code section 415(c)(1)(A) owning (or
considered as owning under Section 318 of Code) the largest interests
in the Employer; (3) a five percent owner of the Employer; or (4) a one
percent owner of the Employer having an annual Aggregate Compensation
of more than $150,000. The determination of who is a Key Employee shall
be made in accordance with Code section 416(i)(1) and the regulations
thereunder. For the purposes of computing an individual's ownership
interest in the Employer under paragraphs (2), (3) and (4), the
aggregation rules of Code sections 414(b), (c) and (m) shall be
disregarded.
(g) "PERMISSIVE AGGREGATION GROUP" means a group of plans which
includes: (1) all plans in the Required Aggregation Group; and (2) any
other plan or plans maintained by the Employer which the Employer
elects to aggregate and which, when considered with the Required
Aggregation Group, would continue to satisfy the requirements of Code
sections 401(a)(4) and 410.
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(h) "REQUIRED AGGREGATION GROUP" means a group of plans which
includes: (1) each plan of the Employer which is qualified under Code
section 401(a) and in which at least one Key Employee participates
(including any plan terminated during the five-year period ending on
the Determination Date); and (2) any other qualified plan of the
Employer which enables a plan described in paragraph (1) to meet the
requirements of Code sections 401(a)(4) or 410.
(i) "SUPER TOP-HEAVY PLAN" means the Plan for any Plan Year that it
is described in Section 9.2(b).
(j) "TOP-HEAVY PLAN" means the Plan for any Plan Year that it is
described in Section 9.2(a).
(k) "TOP-HEAVY RATIO" means a fraction, with: (1) the numerator
being the sum of (A) the account balances under the Plan and any
aggregated defined contribution plans (including any simplified
employee pension plan) of all Key Employees and (B) the present value
of accrued benefits under the aggregated defined benefit plans for all
Key Employees; and (2) the denominator being the sum of (A) the account
balances under the defined contribution plans for all Participants and
(B) the present value of accrued benefits under the defined benefit
plans for all Participants. The determination of the Plan's Top-Heavy
Ratio shall be subject to the following rules:
(1) Both the numerator and the denominator of the Top-Heavy
Ratio shall be adjusted for any distribution of any account balance
or any accrued benefit made in the five-year period ending on the
Determination Date, including distributions under a terminated plan
which, if it had not been terminated, would have been in the
Required Aggregation Group.
(2) The value of the account balances and, except as provided
in Code section 416 for the first and second years of a defined
benefit plan, the present value of accrued benefits shall be
determined as of the most recent Valuation Date that falls within
or ends with the 12-month period ending on the Determination Date.
(3) The account balances and accrued benefits of an individual
who is not a Key Employee but who was a Key Employee in a prior
Plan Year shall be disregarded.
(4) 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 Code section 416 and
regulations thereunder.
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(5) Qualified Voluntary Employee Contributions (as defined in
Code section 219(e)) will not be taken into account for purposes of
computing the Top-Heavy Ratio.
(6) When aggregating plans, the value of the account balances
and accrued benefits will be calculated with reference to the
determination dates that fall within the same calendar year.
(7) The present value of accrued benefits shall be computed as
if the Employee voluntarily terminated service as of the Valuation
Date. The present value shall be computed using the interest and
post-retirement mortality assumptions last used by the actuary of
the defined benefit plan to determine whether the defined benefit
plan was a Top- Heavy Plan. Assumptions as to future withdrawal or
future salary increases may not be used. Except in the case where
the defined benefit plan provides for a non-proportional subsidy,
the present value shall reflect a benefit payable commencing at
normal retirement age (or attained age, if later). Where the plan
provides for a non-proportional subsidy, the benefit shall be
assumed to commence at the age at which the benefit is most
valuable. If two or more defined benefit plans are included in the
Required Aggregation Group or Permissive Aggregation Group, all
such plans shall use the same actuarial assumptions to determine
present value.
(8) The account balances and accrued benefits of any individual
who has not performed any services for any Employer maintaining the
plan at any time during the 5-year period ending on the
Determination Date shall be disregarded.
(9) If the Employer or an Affiliated Company maintains, in
addition to this Plan, a defined benefit plan or target benefit
plan in which one or more Key Employees participate, or any other
plan on which such a defined or target benefit plan depends to meet
coverage and nondiscrimination requirements, then the accrued
benefit of any Employee other than a Key Employee shall be
determined under (i) the method, if any, that uniformly applies for
accrual purposes under all plans maintained by an Employer or
Affiliated Company, or (ii) if there is no such method, as if such
benefit accrued not more rapidly than the slowest accrual rate
permitted under the fractional accrual rate of Code section
411(b)(1)( C).
(l) "VALUATION DATE" means the last day of the Plan Year.
9.2 TOP-HEAVY AND SUPER TOP-HEAVY STATUS. For any Plan Year, the Plan
will be a Top-Heavy Plan or a Super Top-Heavy Plan determined as follows:
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(a) TOP-HEAVY PLAN. For any Plan Year the Plan will be a "Top-Heavy
Plan" if any of the following conditions exist: (1) the Plan is not
part of a Required Aggregation Group or Permissive Aggregation Group
and the Top-Heavy Ratio for the Plan exceeds 60%; (2) the Plan is part
of a Required Aggregation Group but not part of a Permissive
Aggregation Group and the Top-Heavy Ratio for the Required Aggregation
Group exceeds 60%; or (3) the Plan is part of a Required Aggregation
Group and part of a Permissive Aggregation Group and the Top- Heavy
Ratio for the Permissive Aggregation Group exceeds 60%.
(b) SUPER TOP-HEAVY PLAN. For any Plan Year the Plan will be a
"Super Top-Heavy Plan" if any of the following conditions exist: (1)
the Plan is not part of a Required Aggregation Group or Permissive
Aggregation Group and the Top-Heavy Ratio for the Plan exceeds 90%; (2)
the Plan is part of a Required Aggregation Group but not part of a
Permissive Aggregation Group and the Top- Heavy Ratio for the Required
Aggregation Group exceeds 90%; or (3) the Plan is part of a Required
Aggregation Group and part of a Permissive Aggregation Group and the
Top-Heavy Ratio for the Permissive Aggregation Group exceeds 90%.
9.3 MINIMUM CONTRIBUTION. 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: (i) three percent (3%) of the Participant's Aggregate
Compensation; or (ii) in the case where the Employer has no defined benefit plan
which designates the Plan to satisfy Code section 401, the largest percentage of
Employer Contributions and forfeitures, as a percentage of the Key Employee's
Code section 415 Compensation (as defined in Article VIII), allocated on behalf
of any Key Employee for that Plan Year. This minimum allocation shall be
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 smaller allocation, in the Plan Year because of the
Participant's failure to: (i) complete any service; (ii) make any mandatory
contributions, or 401(k) Contributions or Thrift Contributions, to the Plan; or
(iii) earn sufficient compensation otherwise required to receive an allocation.
(a) OFFSET OTHER CONTRIBUTIONS. If the Employer Contributions and
allocations otherwise provided by the Plan (other than (i) 401(k)
Contributions and (ii) Matching Contributions used for purposes of the
Code section 401(m) ACP Test under Article VII) are at least equal to
the minimum allocation required under the foregoing provisions of this
Section 9.3, then no additional Minimum allocation will be made for
Participants otherwise described in this Section 9.3 in
this Plan or in any other defined contribution plan maintained by the
Employer in which they participate. If such Employer Contributions and
allocations otherwise provided by the Plan are less than the minimum
required allocation, then: (i) the minimum required allocation will be
made in the Plan for Participants who do not participate in any other
defined contribution plan maintained by the Employer;
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and (ii) for Participants who also participate in any other defined
contribution plan maintained by the Employer, the aggregate Employer
Contributions and allocations otherwise provided by the Plan and the
other defined contribution plans will be increased so that they are
equal in the aggregate to the minimum required allocation under this
Section 9.3.
(b) DEFINED BENEFIT PLAN PARTICIPATION. If a Participant who is
otherwise entitled to a minimum required allocation under this Section
9.3 also participates in a defined benefit plan maintained by the
Employer that is a Top-Heavy Plan during that Plan Year, then the
minimum benefits and minimum allocations that would otherwise be
required in each Plan will not be duplicated. The minimum required
allocation will not be required if the defined benefit plan provides an
annual benefit for the Participant in the form of (or the actuarial
equivalent of) a single life annuity equal to the lesser of. (1) the
product of (A) two percent of the Participant's average compensation
for the five consecutive years in which the Participant had the highest
Aggregate Compensation and (B) his Years of Service during which the
plan was a Top-Heavy Plan; or (2) 20% of that average compensation.
(c) ADDITIONAL RULES. This Section 9.3 shall not apply to any
Participant who was not employed by the Employer on the last day of the
Plan Year. This Section 9.3 shall not apply to any Employee included in
a unit of employees covered by a Collective Bargaining Agreement.
9.4 MINIMUM VESTING. If the Plan becomes a Top-Heavy Plan or a Super
Top-Heavy Plan, the following minimum vesting schedule shall automatically apply
to the Plan:
YEARS OF SERVICE PERCENTAGE
---------------- ----------
Less than 2 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years 100%
The minimum vesting schedule applies to all benefits within the meaning of Code
section 411(a)(7), including benefits accrued before the effective date of Code
section 416 and benefits accrued before the Plan became a Top-Heavy Plan. No
reduction in vested benefits may occur in the event the Plan ceases to be a
Top-Heavy Plan for any Year. This Section 9.4 shall not apply to: (i) the
Account balances of any Employee who does not have an Hour of Service after the
Plan initially becomes a Top-Heavy Plan; this Employee's vested portion of his
Account will be determined without regard to
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this Section 9.4; or (ii) an Employee who is included in a unit of employees
covered by a Collective Bargaining Agreement.
9.5 MODIFICATION OF CODE SECTION 415 LIMITS. If Section 8.4 applies for
any Plan Year (concerning a Participant's participation in a defined benefit
plan) for which the Plan is a Top-Heavy Plan or Super Top-Heavy Plan, then the
limitations on contributions and benefits described in Article VIII shall be
modified as follows: (a) The definitions of Defined Contribution Plan Fraction
and Defined Benefit Plan Fraction in Article VIII are changed by substituting
"100%" for "125%"; and (b) the definition of the numerator of the Defined
Contribution Fraction set forth in Article VIII is changed by substituting
"$41,500" for "$51,875". Notwithstanding the foregoing, if, but for this
sentence, the foregoing provisions would begin to apply, the application of the
foregoing provisions of this Section will be suspended with respect to any
Participant so long as there are no: (i) Plan contributions or forfeitures
allocated to the Participant's Accounts; or (ii) accruals for the Participant
under the defined benefit plan.
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ARTICLE X - LOANS AND WITHDRAWALS
---------------------------------
10.1 WITHDRAWALS FROM THRIFT CONTRIBUTION ACCOUNTS. In accordance with
procedures established by the Plan Administrator, a Participant or Inactive
Participant may apply to the Plan Administrator for a withdrawal of amounts from
his Thrift Contribution Account at any time. For purposes of Plan administration
only, but not necessarily for determining a Participant's taxable income
resulting from Plan withdrawals, withdrawals from a Thrift Contribution Account
shall be made in the following manner:
(a) First, all or any part of a Participant's Supplemental
Employee Contributions credited to his Thrift Contribution Account
shall be withdrawn;
(b) Next, all or any part of the earnings attributable to his
Supplemental Employee Contributions to his Thrift Contribution Account
shall be withdrawn;
(c) Next, all or any part of his Basic Employee Contributions
credited to his Thrift Contribution Account shall be withdrawn; and
(d) Next, all or any part of the earnings on his Basic Employee
Contributions to his Thrift Contribution Account shall be withdrawn.
10.2 WITHDRAWALS FROM EMPLOYER CONTRIBUTION ACCOUNTS. A Participant or
Inactive Participant who has first withdrawn the entire value of his Thrift
Contribution Account may apply at any time to the Plan Administrator for a
withdrawal of all or any portion of the fully vested Employer Contributions
credited to his Employer Contribution Account; provided, however, that a
Participant may withdraw such accounts from his Nonelective Employer
Contribution Account only if he has been a Participant under the Plan for a
period of not less than three (3) years.
10.3 WITHDRAWALS FROM 401(k) CONTRIBUTION ACCOUNTS.
(a) GENERAL RULE. A Participant or Inactive Participant may apply
to the Plan Administrator for a withdrawal of amounts from his 401(k)
Contribution Account upon attaining Age 59 1/2 or if the withdrawal is
attributable to the Participant's hardship which meets the requirements
of subsection (b) below.
(b) HARDSHIP WITHDRAWALS FROM 401(k) CONTRIBUTION ACCOUNT.
(1) IN GENERAL. A Participant who requests a distribution as a
result of hardship must include with his application the reasons
for his request, and the Financial Hardship (from paragraph (3)
below). The Participant must demonstrate to the satisfaction of
the Plan Administrator that the withdrawal is necessary to
alleviate a Financial Hardship incurred by the Participant. The
Participant must have obtained all otherwise
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available withdrawals or distributions from the Plan, must have
no monies available in his Thrift Contribution Account and have
obtained all non-taxable loans (as determined by the Plan
Administrator) currently available under all plans maintained by
the Employer.
(2) PARTICIPANT CONTRIBUTION SUSPENSION. If the Plan
Administrator grants the Participant's hardship withdrawal, then:
(A) the Participant's authorization of Employee Contributions
automatically shall be suspended for 12 months following the date
of the receipt of the hardship withdrawal, as so provided in
Section 4.6(e), together with all elective contributions and
employee contributions under all qualified and non-qualified plans
of deferred compensation maintained by the Employer; and (2) the
Participant's Code section 402(g) limit for the calendar year
following the hardship withdrawal shall be reduced by the amount
of his 401(k) Contributions authorized for the calendar year of
the hardship withdrawal, as so provided in Section 4.6(e).
(3) FINANCIAL HARDSHIP. The term "Financial Hardship" shall
mean an immediate and heavy financial need of a Participant. A
financial need will not fail to qualify merely because it was
reasonably foreseeable or voluntarily incurred. A distribution is
deemed to be on account of an immediate and heavy financial need
of the Participant if the distribution is for any of the following
reasons:
(A) DEDUCTIBLE MEDICAL CARE. Expenses for medical care
described in Code section 213(d) previously incurred by the
Participant, the Participant's Spouse or any dependent (as
defined in Code section 152) of the Participant or necessary
for these persons to obtain medical care described in Code
section 213(d).
(B) PRINCIPAL RESIDENCE. Costs directly related to the
purchase of a principal residence for the Participant
(excluding mortgage payments).
(C) COLLEGE EDUCATION. Payment of tuition and related
educational fees for the next twelve (12) months of
post-secondary education for the Participant, his Spouse,
children or dependents (as defined in Code section 152).
(D) EVICTION/FORECLOSURE. Payments necessary to prevent
the eviction of the Participant from his principal residence
or the foreclosure on the mortgage on that residence.
(E) IRS AUTHORIZED. Any other deemed immediate and heavy
financial need promulgated by the Secretary of the Treasury
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pursuant to the authority granted by Treasury Regulation
section 1.401(k)-1(d)(2).
(4) MAXIMUM DISTRIBUTABLE AMOUNT. The Participant's hardship
withdrawal shall in any event not exceed either of the following
maximum amounts:
(A) FINANCIAL HARDSHIP ITSELF. The amount of the Financial
Hardship itself, as increased to include any amounts necessary
to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the withdrawal.
(B) EARNINGS WITHDRAWAL LIMITATION. The sum (less prior
withdrawals) of (A) the total of his 401(k) Contribution
Account determined as of December 31, 1988 (inclusive of
earnings); and (B) the exact amount of the Participant's
cumulative 401(k) Contributions made to the Plan on or after
January 1, 1989 (exclusive of earnings thereon); with the
result that no earnings on 401(k) Contributions made after
December 31, 1988 may be withdrawn.
10.4 EFFECTS OF WITHDRAWALS. This Section shall not apply to Plan Years
beginning on and after January 1, 1999.
(a) FORFEITURE ON WITHDRAWALS. Upon any withdrawal of Basic
Employee Contributions or vested Employer Contributions by a
Participant whose vested interest in his Accounts is less than 50%, the
Participant shall forfeit a percentage of the unvested Employer
Contributions credited to his Employer Contribution Account equal to
the percentage of his Basic Employee Contributions and/or vested
Employer Contributions so withdrawn. The determination of a
Participant's vested interest shall be made separately with respect to
each Plan Year.
(b) ALLOCATION OF FORFEITURES FROM WITHDRAWALS. Amounts forfeited
under Section 10.4(a) shall be allocated in accordance with Section
11.9(e)
(c) REINSTATEMENT OF FORFEITURES FROM WITHDRAWALS. In the event
that a Participant forfeits a percentage of the unvested Employer
Contributions credited to his Employer Contribution Account under
Section 10.4(a), he may reinstate the value of the Employer
Contributions that were forfeited by repaying in cash the total dollar
value of the actual distribution that resulted in the forfeiture (I.E.,
Basic Employee Contributions, Employer Contributions and earnings
thereon) previously made to him not later than the earlier to occur of
(i) the end of the five-year period beginning on the date of
withdrawal, or (ii) the last day of the Plan Year in which he first
completes five consecutive One Year Breaks in Service. A
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Participant shall not be permitted to repay Supplemental Employee
Contributions or earnings thereon which were withdrawn. The entire
amount repaid will be deemed to be Employee Contributions and will be
credited to the Participant's Thrift Contribution Account and may not
be designated a 401(k) Contribution. In the event of such a repayment,
the Participant's Accounts shall be credited as of the Valuation Date
coincident with or next following the date of repayment with all
amounts previously distributed to him attributable to his Basic
Employee Contributions (to the extent withdrawn and repaid) plus all
amounts attributable to Employer Contributions made on his behalf
prior to such withdrawal. Repayments shall be credited in reverse
order with the most recent withdrawal being the first repaid. The
amount of forfeitures required to be reinstated pursuant to this
Section 10.4(c) shall be obtained first from forfeitures of other
Participants or former Participants under Sections 10.4(a) and 11.9
and, if the amount of these forfeitures is insufficient, then from
additional Employer Contributions. However, a Participant may make
such repayments only if he is a Participant at the time of any
repayment.
10.5 WITHDRAWALS AFTER NORMAL RETIREMENT DATE. Notwithstanding the
provisions of Section 10.4, after a Participant's Normal Retirement Date, he may
make a withdrawal pursuant to Sections 10.1, 10.2 and 10.3 without incurring any
of the penalties set forth in Section 10.4.
10.6 PAYMENT OF WITHDRAWALS. Amounts withdrawn from a Participant's
Thrift Contribution Account and 401(k) Contribution Account shall be paid in
cash or, if the Participant so elects in writing, in cash and whole shares of
Chemed Stock, as soon as administratively possible following the Valuation Date
coincident with or next following receipt of a Participant's withdrawal request.
Amounts withdrawn from a Participant's Employer Contribution Account shall be
distributed in whole shares of Chemed Stock valued as of the applicable
Valuation Date with fractional shares to be valued as of the same Valuation Date
and paid in cash; provided, however, that if the number of shares of Chemed
Stock to be distributed is 100 shares or less, then the value of the shares to
be distributed determined as of the same Valuation Date may be paid in cash in a
single payment if requested by Participant. Effective January 1, 1993, a
Participant shall, to the extent provided in applicable Treasury Regulations,
have the right to receive his withdrawal in the form of direct rollover, as
provided in Section 14.6.
10.7 LOANS. Loans to Participants are permitted under the Plan and will
be subject to the terms and conditions set forth in the written loan policy.
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ARTICLE XI - BENEFIT PROVISIONS
-------------------------------
11.1 AMOUNT OF A PARTICIPANT'S INTEREST IN HIS ACCOUNTS.
(a) GENERAL RULE. The interest of a Participant, Inactive
Participant, Retired Participant or Disabled Participant in his
Accounts is the vested percentage of the value of his Accounts as of
the Valuation Date coincident with or immediately before the event that
entitles the Participant to his interest in his Accounts, adjusted for
Net Gains and Net Losses until the Valuation Date coincident with or
immediately before the date the amounts in his Accounts are paid to him
or his Beneficiary.
(b) VESTED PERCENTAGE IN EMPLOYEE CONTRIBUTION ACCOUNTS. A
Participant's interest in his 401(k) Contribution Account and Thrift
Contribution Account is nonforfeitable at all times (including
qualifying rollover contributions made to the Plan pursuant to Section
14.3).
(c) VESTED PERCENTAGE IN EMPLOYER CONTRIBUTION ACCOUNT.
(1) GENERAL RULE. Employer Contributions to a Participant's
Employer Contribution Account shall become nonforfeitable pursuant
to the following vesting schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE VESTED PERCENT
---------------- --------------
<S> <C>
0 years 0%
1 year 0%
2 years 0%
3 years 20%
4 years 40%
5 years 60%
6 years 80%
7 years 100%
</TABLE>
(2) NORMAL RETIREMENT DATE. Notwithstanding paragraph (1), a
Participant's interest in his Employer Contribution Account is
nonforfeitable on the earlier of (A) his Normal Retirement Date,
or (B) the day he reaches Age 65.
(3) EARLY RETIREMENT DATE. Notwithstanding paragraph (1), a
Participant's interest in his Employer Contribution Account is
nonforfeitable on his Early Retirement Date.
(4) TOTAL AND PERMANENT DISABILITY. Notwithstanding paragraph
(1), a Participant's interest in his Employer Contribution Account
is
XI-1
<PAGE> 73
nonforfeitable when he becomes Totally and Permanently Disabled
but only if he becomes Totally and Permanently Disabled while in
the service of the Employer.
(5) DEATH. Notwithstanding paragraph (1), a Participant' s
interest in his Employer Contribution Account is nonforfeitable if
he dies while in the service of the Employer.
11.2 NORMAL RETIREMENT. A Participant may retire upon his Normal
Retirement Date. At that time, his interest in his Accounts shall be paid to him
in accordance with the provisions of Article XII.
11.3 LATE RETIREMENT. A Participant may remain in the service of the
Employer after his Normal Retirement Date. In that event, he shall remain a
Participant until his Late Retirement Date. At that time his interest in his
Accounts shall be paid to him in accordance with the provisions of Article XII.
11.4 EARLY RETIREMENT. A Participant may retire on his Early Retirement
Date. At that time, his interest in his Accounts shall be paid to him in
accordance with the provisions of Article XII.
11.5 IN-SERVICE RETIREMENT. A Participant who has attained his Normal
Retirement Date shall be permitted while remaining an Employee to commence
receipt of his benefits hereunder pursuant to Article XII.
11.6 TOTAL AND PERMANENT DISABILITY. If a Participant becomes Totally
and Permanently Disabled while in the service of the Employer, his interest in
his Accounts shall be paid to him in accordance with the provisions of Article
XII.
11.7 DEATH. If a Participant should die while in the service of the
Employer, his interest in his Accounts shall be paid to or for the benefit of
his Beneficiary in accordance with the provisions of Article XII.
11.8 OTHER TERMINATION OF SERVICE. If a Participant's service with the
Employer should be terminated other than by retirement, death or Total and
Permanent Disability, then the Participant's vested interest in his Accounts
shall be paid to him in accordance with provisions of Article XII.
11.9 FORFEITURES.
(a) FIVE CONSECUTIVE ONE YEAR BREAKS IN SERVICE WHILE AN EMPLOYEE.
If a Participant or Inactive Participant incurs five consecutive One
Year Breaks in
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<PAGE> 74
Service for any reason other than retirement, death, termination of
service or Total and Permanent Disability, then the forfeitable
portion of the Participant's Employer Contribution Account shall be
forfeited and applied in the manner described in subsection (e) as of
the last day of the Plan Year in which the Participant incurred the
five consecutive One Year Breaks in Service.
(b) UPON TERMINATION OF SERVICE.
(1) NO DISTRIBUTION BEFORE FIVE CONSECUTIVE ONE YEAR BREAKS IN
SERVICE. If, under Section 11.8, a Participant (i) is not entitled
to a fully vested interest in his Employer Contribution Account,
and (ii) does not receive any portion of his vested interest in
his Employer Contribution Account before he incurs five
consecutive One Year Breaks in Service, then the forfeitable
portion of the Participant's Employer Contribution Account shall
be forfeited and applied in the manner described in subsection (e)
as of the last day of the Plan Year in which the Participant
incurred the five consecutive One Year Breaks in Service.
(2) DISTRIBUTION BEFORE FIVE CONSECUTIVE ONE YEAR BREAKS IN
SERVICE. If, under Section 11.8, a Participant (i) is not entitled
to a fully vested interest in his Employer Contribution Account,
and (ii) receives his vested interest in his Employer Contribution
Account before he incurs five consecutive One Year Breaks in
Service, then the forfeitable portion of the Participant's
Employer Contribution Account shall be forfeited and applied in
the manner described in subsection (e) during the Plan Year in
which the Participant receives the vested interest in his Employer
Contribution Account. For the purposes of this paragraph, if the
value of a Participant's vested interest in his Employer
Contribution Account balance is zero, the Participant shall be
deemed to have received a distribution of his vested interest in
his Employer Contribution Account balance upon his termination of
service.
(3) REINSTATEMENT OF FORFEITURES. If a Participant who
receives a distribution or is deemed to have received a
distribution described in subsection (b)(2) returns to the service
of the Employer and again becomes a Participant, then the
forfeited portion of the Participant's Employer Contribution
Account will be restored if the Participant repays to the Plan the
full amount of the distribution he received as a result of his
termination (with a Participant receiving a deemed distribution
having been considered to make a deemed repayment) on or before
the earlier of (i) the last day of the Plan Year in which the
Participant incurs five consecutive One Year Breaks in Service
following the date of distribution or (ii) the fifth anniversary
of the first date on which the former Participant is subsequently
reemployed as an Eligible Employee and otherwise becomes a
Participant of the Plan. A Participant, however, shall not be
XI-3
<PAGE> 75
permitted to repay Supplemental Employee Contributions or earnings
thereon. The entire amount repaid will be deemed to be Employee
Contributions and will be credited to the Participant's Thrift
Contribution Account and may not be designated a 401(k)
Contribution. Repayment shall be credited in reverse order with
the most recent distribution being the first repaid.
(c) UNCLAIMED BENEFITS. If a Participant or Beneficiary entitled
to a benefit from the Plan cannot be located within five years from the
date the payment of benefits would otherwise have begun, then the
benefit shall be forfeited and applied in the manner described in
subsection (e) as of the last day of the Plan Year in which the five
year period expires. If the Participant or Beneficiary is located after
that time, then within 60 days of that date the forfeited benefit shall
be reinstated; the forfeited benefit shall equal the amount to which
the Participant or Beneficiary was originally entitled.
(d) FORFEITURE ACCOUNT. Forfeitures shall be transferred to a
forfeiture account which shall participate in the allocation of Net
Gains and Net Losses and shall remain in the forfeiture account until
the application of the forfeitures under subsection (e).
(e) APPLICATION OF FORFEITURES. Forfeitures shall be applied first
to restore forfeited amounts required under Section 11.10 and
thereafter to reduce Employer Contributions.
11.10 ADDITIONAL EMPLOYER CONTRIBUTIONS TO RESTORE FORFEITED AMOUNTS.
If any portion of a Participant's benefit that was forfeited must be
subsequently restored, then the Employer shall contribute to the Plan the amount
that must be restored. This contribution shall be used to reinstate the
forfeited benefit.
11.11 CODA SEPARATION FROM SERVICE DISTRIBUTION LIMITATION. For
purposes of compliance with the distribution limitations of Code section
401(k)(2)(B), 401(k) Contribution Accounts shall not be distributable to a
Participant under this Article unless, in addition to termination of service,
the Participant also has incurred a separation from service (within the meaning
of Code section 401(k)(2)(B)(i)(1)).
(a) SEPARATION FROM SERVICE EXCEPTIONS. Notwithstanding the
foregoing limitation, 401(k) Contribution Accounts may be distributed
even if the Participant has not incurred a separation from service
pursuant to the following circumstances:
(1) SALE OF BUSINESS ASSETS. Distributions may occur upon the
disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Code
section 409(d)(2)) used in a trade or business of such corporation
if such corporation continues to
XI-4
<PAGE> 76
maintain this Plan after the disposition, but only with respect
to employees who continue employment with the corporation
acquiring such assets.
(2) SALE OF INTEREST IN SUBSIDIARY. Distributions may occur
upon the disposition by a corporation to an unrelated entity of
such corporation's interest in a subsidiary (within the meaning of
Code section 409(d)(3)) if such corporation continues to maintain
this Plan, but only with respect to employees who continue
employment with such subsidiary.
(b) DISTRIBUTION CONDITIONS. Distributions under subsections
(a)(1) or (a)(2) above shall be conditioned on the following
requirements:
(1) THE SELLER MUST MAINTAIN THE PLAN. A distribution may be
made under subsections (a)(1) or (a)(2) only from a plan that the
seller continues to maintain after the disposition. This
requirement is satisfied only if the purchaser does not maintain
the plan after the disposition. A purchaser maintains the plan of
the seller if it adopts the plan or otherwise becomes an employer
whose employees accrue benefits under the plan. A purchaser also
maintains the plan if the plan is merged or consolidated with, or
any assets or liabilities are transferred from the plan to, a plan
maintained by the purchaser in a transaction subject to Code
section 414(l)(1). A purchaser is not treated as maintaining the
plan merely because a plan that it maintains accepts rollover
contributions of amounts distributed by the plan.
(2) EMPLOYEE CONTINUE EMPLOYMENT. A distribution may be made
under subsection (a)(1) or (a)(2) only to an employee who
continues employment with the purchaser of assets or with the
subsidiary, whichever is applicable.
(3) DISTRIBUTION CONNECTION WITH DISPOSITION. Elective
contributions may not be distributed under subsection (a)(1) or
(a)(2) except in connection with the disposition that results in
the employee's transfer to the purchaser. Whether a distribution
is made in connection with the disposition of assets or a
subsidiary depends on all of the facts and circumstances. Except
in unusual circumstances, however, a distribution will not be
treated as having been made in connection with a disposition
unless it was made by the end of the second calendar year after
the calendar year in which the disposition occurred.
(4) APPLICABLE DEFINITIONS. For purposes of subsection (a)(1),
the sale of "substantially all" the assets used in a trade or
business means the sale of at least 85 percent of the assets. For
purposes of subsection (a)(1) and (a)(2), an "unrelated" entity or
individual is one that is not
XI-5
<PAGE> 77
required to be aggregated with the seller under Code sections
414(b), (c), (m), or (o) after the sale or other disposition.
(c) LUMP SUM REQUIREMENT. After March 31, 1988, a distribution may
be made under subsection (a)(1) or (a)(2) only if it is a lump sum
distribution (as provided in Code section 402(d)(4), without regard to
subparagraphs (A)(i) through (iv), (B) and (H) thereof).
XI-6
<PAGE> 78
ARTICLE XII - METHODS OF PAYMENT
--------------------------------
12.1 JOINT AND SURVIVOR ANNUITY; PRERETIREMENT SURVIVOR ANNUITY. The
provisions of this Article are modified by the joint and survivor and
preretirement survivor annuity provisions of Article XIII.
12.2 METHODS OF PAYMENT.
(a) METHODS OF PAYMENT. Based upon the following captioned
circumstances applicable to a Participant, the Participant shall select
the method of payment from among the following methods:
NORMAL, EARLY, LATE OR IN-SERVICE RETIREMENT; TOTAL AND
PERMANENT DISABILITY.
(1) Single lump sum cash payment of the value of all or any
part of his Accounts in the Trust Fund valued as of the Valuation
Date coincident with or next following the date of such retirement
or Total and Permanent Disability; or
(2) Deferred lump sum cash payment of the value of all or any
part of his Accounts in the Trust Fund; or
(3) A transfer to any General Fund of all or any part of his
Employer Contribution Account and Employee Contribution Account
invested in the Chemed Stock Fund, Omnicare Stock Fund and/or any
General Fund valued as of the Valuation Date coincident with or
next following the date of such retirement or Total and Permanent
Disability and thereafter to elect distribution of his Accounts
(or any of them) in cash in approximately equal annual
installments over a period not exceeding that permitted by Section
12.2(b); or
(4) The purchase from an insurance company of an annuity
providing for monthly, quarterly or annual installments either (i)
for a fixed term of no fewer than ten years, but in no event over
a period exceeding that permitted by Section 12.2(b) or (ii) for
life with payments guaranteed for ten years or (iii) for life with
a 100% or 50% joint and survivor benefit with payments guaranteed
for ten years; or
(5) Any combination of (1), (2), (3) and/or (4) above; or
(6) Either (1), (2), (3) or (4) above, or any combination
thereof, plus a distribution of all whole shares of Chemed Stock
or Omnicare Stock allocated to his Employer Contribution Account
and/or Employee
XII-1
<PAGE> 79
Contribution Account as of the Valuation Date coincident with or
next following the date of such retirement or Total and Permanent
Disability, together with all uninvested cash or other funds
allocated or allocable to his Employer Contribution Account
and/or Employee Contribution Account as of such Valuation Date.
Fractional share interests shall be paid in cash as determined by
the Trustee based upon the generally prevailing market price of
Chemed Stock or Omnicare Stock as of such Valuation Date; or
(7) If the Participant fails to make an election pursuant to
Sections 12.2(a)(1) through (6), his distribution will be in form
of a single lump sum cash distribution of the full value of his
Accounts invested in the General Funds, together with a
distribution of all whole shares of Chemed Stock and Omnicare
Stock allocated to his Accounts (fractional shares to be valued as
of the applicable Valuation Date and paid in cash).
SEVERANCE WHILE INELIGIBLE FOR RETIREMENT.
Single lump sum payment following the Valuation Date coincident with or
next following the date of his severance of the value of his Accounts invested
in the General Funds adjusted for his Account's share of Net Gains and Net
Losses through the Valuation Date coincident with or immediately preceding the
date of distribution, together with a distribution of all vested whole shares of
Chemed Stock and Omnicare Stock allocated to his Accounts, fractional shares of
Chemed Stock and Omnicare Stock to be valued as of the applicable Valuation Date
and paid in cash. If, however, the aggregate number of shares of Chemed Stock
and Omnicare Stock allocated to a Participant's Accounts is 100 or less, then
the Participant may elect in writing to receive the value thereof (determined as
of the applicable Valuation Date) in cash.
(b) LIMITATIONS ON METHOD OF PAYMENT. Notwithstanding the
provisions of Section 12.2(a), the method of payment selected under the
Plan must satisfy these limitations:
(1) Unless the method of payment provides that payments will
be made to the Participant for his life and to his Spouse for so
long as the Participant's Spouse survives the Participant, the
method of payment must comply with the Minimum Distribution
Incidental Benefit (MDIB) rules of Treasury Regulation
1.401(a)(9)-2, as currently proposed or hereafter finalized by the
Secretary of the Treasury.
(2) The method of payment must not defer the beginning of
benefit payments beyond the Participant's "Required Beginning
Date."
(A) Effective for Plan Years beginning on and after
January 1, 1997, a Participant's Required Beginning Date is
the April 1 following the close of the calendar year in which
the
XII-2
<PAGE> 80
Participant attains age 70 1/2 if the Participant is a
more than five percent (5%) owner (as defined in Code section
416(i)(1)(B)(i)) with respect to the Plan Year ending in that
calendar year. For any other Participant, the Required
Beginning Date is the April 1 following the close of the
calendar year in which the Participant attains age 70 1/2, or,
if later, the April 1 following the close of the calendar year
in which the Participant terminates employment with the
Employer. A mandatory distribution at the Participant's
Required Beginning Date will be in a lump sum unless the
Participant, pursuant to the provisions of this Article, makes
a valid election to receive an alternative form of payment.
(B) A Participant upon attaining age 70 1/2, until he
retires, has a continuing election to receive all or any
portion of his Accounts. A Participant must make such an
election in the manner prescribed by the Plan Administrator.
(3) The method of payment must insure that benefits will be
distributed over the life of the Participant or over the lives of
the Participant and his Beneficiary, or over a period that does
not extend beyond the life expectancy of the Participant or the
life expectancy of the Participant and his Beneficiary.
(4) If the method of payment is a method other than a lump sum
distribution, then the amount distributed each year must be at
least equal to a fraction with this numerator and denominator:
(A) Numerator: The Participant's entire interest in his
Accounts.
(B) Denominator: The Participant's life expectancy or the
joint and last survivor expectancy of the Participant and his
Beneficiary.
(c) REQUIRED DISTRIBUTIONS IN THE EVENT A PARTICIPANT DIES BEFORE
RECEIVING HIS ENTIRE INTEREST IN THE PLAN. Notwithstanding the
provisions of Section 12.2(a):
(1) DISTRIBUTIONS BEGAN BEFORE DEATH. If (i) the distribution
of a Participant's interest in his Accounts has begun in
accordance with subsection (b) and (ii) the Participant dies
before his entire interest in his Accounts has been distributed to
him, then the remaining portion of his interest must be
distributed at least as rapidly as under the method of
distribution in effect on the date of the Participant's death.
XII-3
<PAGE> 81
(2) DISTRIBUTIONS DID NOT BEGIN BEFORE DEATH. If a Participant
dies before payment of his interest in his Accounts has begun in
accordance with subsection (b), his entire interest in his
Accounts will be distributed within five years of his death to his
Beneficiary.
(3) EXCEPTION TO FIVE-YEAR RULE. If any portion of a
Participant's interest in his Accounts is payable to (or for the
benefit of) a designated beneficiary (as defined under Treasury
Regulation section 1.401(a)(9)-1), that portion will be
distributed (in accordance with regulations prescribed by the
Secretary of Treasury or his delegate) over the life of the
Beneficiary (or over a period not extending beyond the life
expectancy of the Beneficiary), and the distribution will begin
not later than one year after the date of the Participant's death
or such later date as the Secretary of Treasury or his delegate
may by regulations prescribe. For the purposes of paragraph (2),
the portion referred to herein shall be treated as distributed on
the date on which the distributions begin.
(4) SPECIAL RULE FOR PARTICIPANT'S SPOUSE. If the Beneficiary
referred to in paragraph (3) is the Participant' s Spouse, then
the date on which the distribution must begin under paragraph (3)
may be deferred to the date on which the Participant would have
reached Age 70 1/2, and if the Spouse dies before distributions to
the Spouse begin, this subsection shall be applied as if the
Spouse were the Participant.
(5) CALCULATION OF PAYMENTS. Payments made under paragraphs
(3) and (4) shall be calculated by using the return multiples
contained in Section 1.72-9, Tables V and VI, of the Income Tax
Regulations. The Participant's Beneficiary may elect any optional
form of benefit of the Plan with respect to distributions which
did not begin before the death of the Participant, provided, the
time and amount of distribution under such elected optional
benefit form shall comply with the foregoing applicable
requirements of this subsection (c) hereof.
(d) LIFE EXPECTANCY. For the purpose of subsections (b) and (c),
the life expectancy of a Participant and his Spouse will not be
recalculated and, where applicable, life expectancy will be calculated
at the time distributions first begin and distributions for any
12-consecutive-month period shall be based on that life-expectancy
minus the number of completed 12-consecutive-month periods that have
elapsed since distributions first begin.
(e) TREATMENT OF PAYMENTS TO CHILDREN. Under regulations
prescribed by the Secretary of the Treasury or his delegate, for the
purpose of subsections (b) and (c), any amount paid to a child shall be
treated as if it had been paid to the Participant' s Spouse if the
amount will become payable to the Spouse when
XII-4
<PAGE> 82
the child reaches majority (or other designated event permitted under
regulations prescribed by the Secretary of the Treasury or his
delegate).
(f) $5,000 CASHOUT. Effective for Plan Years beginning on and
after January 1, 1998, in the event that the value of a Participant's
Accounts does not exceed $5,000, the Participant's Accounts shall be
distributed to the Participant in the form of a lump sum payment as
soon as administratively practicable following the Valuation Date which
coincides with or immediately follows the Participant's severance.
Notwithstanding the preceding sentence, if a Participant has begun to
receive distributions pursuant to an optional form of benefit under
which at least one scheduled periodic distribution has not yet been
made, and if the value of the Participant's Accounts, determined at the
time of the first distribution under such optional form of benefit,
exceeded $5,000, then the value of the Participant's Account is deemed
to continue to exceed such $5,000 limit.
12.3 INSTALLMENT DISTRIBUTIONS; DEFERRED LUMP SUM DISTRIBUTIONS.
(a) INSTALLMENT DISTRIBUTIONS. If the Participant chooses an
installment method of distribution, then the Participant must select a
payment period that does not extend beyond the period permitted by
Section 12.2(b). The amount of each installment shall be determined by
dividing the retired or disabled Participant's Account balance as of
the Valuation Date immediately preceding the applicable distribution
date by the number of installments remaining to be paid. Installment
payments will be adjusted for the Account's share of Net Gains and Net
Losses and will be paid to or for the benefit of the Participant or
Beneficiary. The Participant may elect to accelerate the payment of any
unpaid installments. If a former Participant receiving installment
payments dies prior to his receipt of the balance in his Account, the
remaining installments shall be paid to his Beneficiary.
(b) DEFERRED LUMP SUM DISTRIBUTIONS.
(1) RETIRED OR DISABLED PARTICIPANT OR PARTICIPANT TERMINATED
WHILE ELIGIBLE FOR RETIREMENT. A Retired Participant, Disabled
Participant or Participant whose employment with the Employer
terminates while eligible for retirement who elects a deferred
lump sum distribution of his Accounts (and such Accounts being
greater than $5,000) pursuant to Section 12.2(a) shall have his
Account adjusted as of each Valuation Date to reflect his
Account's share of Net Gains and Net Losses from the date of his
retirement, disability or severance through the Valuation Date
coincident with or immediately preceding the date of actual
distribution.
XII-5
<PAGE> 83
(2) PARTICIPANT TERMINATED WHILE INELIGIBLE FOR RETIREMENT. A
Participant whose employment with the Employer terminates while he
is ineligible for retirement who elects a deferred lump sum
distribution of his Accounts (and such Accounts being greater than
$5,000) pursuant to Section 12.2(a) shall have his Account
adjusted as of each Valuation Date to reflect his Accounfs share
of Net Gains and Net Losses from the date of his termination of
service through the Valuation Date coincident with or immediately
preceding the date of actual distribution.
12.4 DUTY TO PROVIDE FORMS AND PROOFS. Each Participant, Retired
Participant, Disabled Participant and Inactive Participant, each Participant
whose service with the Employer terminates and the Beneficiary of any such
Participant shall be required to complete such administrative forms and furnish
such proofs as shall be deemed necessary and appropriate by the Plan
Administrator for the purposes of administering this Plan.
12.5 DUTY TO PROVIDE MAILING ADDRESS. It shall be the duty of each
Retired or Disabled Participant, each Participant whose service with the
Employer terminates and the Beneficiary of any such Participant to keep on file
with the Plan Administrator a correct mailing address or to claim in person each
payment as it becomes due.
12.6 BENEFIT PAYMENTS IN THE EVENT OF INCAPACITY. If the Plan
Administrator finds that any Retired or Disabled Participant, any Participant
whose service with the Employer terminates or any Beneficiary of any such
Participant is unable to care for his affairs because of illness or injury or is
a minor, any payment due may be made to the Spouse, child, brother, sister or
parent of such a Participant or Beneficiary, for his benefit, unless a prior
claim shall have been made by a duly appointed guardian or other legal
representative.
12.7 DISTRIBUTIONS IN KIND. Except as otherwise provided in the Plan,
all distributions shall be made in cash. Any annuity contract that is
distributed must be nontransferable.
12.8 ASSIGNMENT OF BENEFITS. No benefit or interest of a Participant
available under the Plan shall be subject to assignment or alienation, either
voluntarily or involuntarily. The preceding sentence also applies to the
creation, assignment or recognition of a right to any benefit payable with
respect to a Participant under a domestic relations order, unless (i) the Plan
Administrator determines that the order is a qualified domestic relations order,
as defined in Code section 414(p) (a "Qualified Domestic Relations Order"), (ii)
the domestic relations order was entered before January 1, 1985 and payments of
benefits pursuant to the order began as of that date, even though the order is
not a Qualified Domestic Relations Order, or (iii) the domestic relations order
was entered before January 1, 1985 and payments of benefits pursuant to the
order did not begin as of that date, even though the order is not a Qualified
Domestic Relations Order, but only if permitted by the Plan Administrator. As
permitted
XII-6
<PAGE> 84
by Code section 414(p)(10), the Plan shall not be considered to violate the
distribution limitations of Code sections 401(a) and 401(k) by distribution to
an alternate payee under a Qualified Domestic Relations Order. The direct
rollover requirements of Section 14.6 shall apply to distributions under a
Qualified Domestic Relations Order to an alternate payee who is the Spouse or
former Spouse of a Participant, as provided under Section 14.6.
12.9 WHEN BENEFIT PAYMENTS BEGIN.
(a) GENERAL RULES. Unless otherwise elected by the Participant or
Beneficiary consistent with the provisions of the Plan, benefit
payments will begin on the dates permitted by this subsection.
(1) RETIRING PARTICIPANTS. In the case of benefits payable to
a Participant who retires on his Early, Normal or Late Retirement
Date or effects an In-Service Retirement, benefit payments will
begin as soon as practicable after the Participant's Early,
Normal, Late or In-Service Retirement Date.
(2) DISABLED PARTICIPANTS. In the case of benefits payable to
a Disabled Participant, benefit payments will begin as soon as
practicable after the date the Participant became Totally and
Permanently Disabled.
(3) BENEFITS PAYABLE TO BENEFICIARIES. In the case of benefits
payable to a Beneficiary, benefit payments will begin as soon as
practicable after the Participant's death, unless the Beneficiary
requests otherwise.
(4) TERMINATED PARTICIPANTS. In the case of benefits payable
to a Participant whose service ends under Section 11.8 after
satisfying any service requirement to retire at an Early
Retirement Date, benefit payments will begin by the first day of
the month that coincides with or is immediately after (i) the date
the Participant satisfies any age requirement to retire on an
Early Retirement Date, if the Participant so requests, or (ii) the
later to occur of the Participant's Normal Retirement Date or the
date he reaches Age 62. In the case of benefits payable to any
other Participant whose service ends under Section 11.8, benefit
payments will begin by the first day of the month that coincides
with or is immediately after the later to occur of the
Participant's Normal Retirement Date or the date he reaches Age
62.
(b) EARLIEST PAYMENT DATE FOR TERMINATED PARTICIPANTS. If a
Participant's service with the Employer ends under Section 11.8, then
benefit payments may begin before the Participant incurs five
consecutive One Year Breaks in Service if any of these conditions
apply:
XII-7
<PAGE> 85
(1) The value of the Participant's vested interest in his
Accounts is not greater than $5,000; or
(2) (A) The Participant requests the payment and either the
Participant has no Spouse or the pre-retirement survivor annuity
requirements of Article XIII do not apply to the Participant; or
(B) The Participant requests the payment and the
Participant's Spouse consents to the distribution in
accordance with the Qualified Election provisions of Article
XIII.
(c) REQUEST FOR DEFERRAL. A Retired Participant, Disabled
Participant, terminated Participant or Beneficiary may request in
writing that benefit payments commence after the times specified in
subsection (a) above. In such case, benefit payments will begin on the
date the Participant requests. While the Participant's Accounts remain
in the Plan pursuant to a request to defer payment, the Participant may
direct that all or any part of his Accounts invested in the Chemed
Stock Fund or Omnicare Stock Fund be transferred to a General Fund of
the Participant's choice.
(d) DELAY FOR ADMINISTRATIVE CONVENIENCE. For administrative
convenience, the Plan Administrator may delay the beginning of benefit
payments as long as is reasonably necessary, but, unless the
Participant otherwise requests, in no event later than the 60th day
after the latest of the close of the Plan Year in which (i) the
Participant attains Age 65, (ii) occurs the tenth anniversary of the
Plan Year the Participant began participating in the Plan, or (iii)
the Participant terminates his service with the Employer.
(e) ACCELERATED PAYMENTS. Upon written request of a Participant
receiving distribution of his Accounts under the Plan, the Plan
Administrator will accelerate the payment of the remaining balance of
the Participant' s Accounts.
(f) LIMITATION. Benefit payments must begin not later than the
date specified in Section 12.2(b).
12.10 TEFRA 242(b) ELECTION.
(a) GENERAL RULE. Notwithstanding the preceding requirements of
this Article, distributions on behalf of any Participant, including a
five percent (5%) owner, may be made in accordance with these
requirements (regardless of when the distribution begins): (1) the
distribution by the Plan is one which would not have disqualified the
Plan under Code section 401(a)(9) as in effect prior to its amendment
by the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"); (2)
the distribution is in accordance with a method of distribution
designated by the Participant whose interest in the Plan is being
distributed or, if the Participant
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has died, by a beneficiary of the Participant; (3) the designation was
in writing, was signed by the Participant or the beneficiary, and was
made before January 1, 1984; (4) the Participant had accrued a benefit
under the Plan as of December 31, 1983; and (5) the method of
distribution designated by the Participant or the beneficiary
specifies the time at which distribution will begin, the period over
which distributions will be made, and in the case of any distribution
upon the Participant's death, the beneficiaries of the Participant
listed in order of priority.
(b) DEATH. A distribution upon death will not be covered by this
transitional rule unless the information in the designation contains
the required information described in subsection (a) with respect to
the distributions to be made upon the death of the Participant.
(c) DISTRIBUTIONS BEGINNING BEFORE JANUARY 1, 1984. For any
distribution which began before January 1, 1984, but continues after
December 31, 1983, the Participant or beneficiary to whom the
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 requirement in subsections (a)(1) and
(a)(5).
(d) REVOCATION. If a designation is revoked, any subsequent
distribution must satisfy the requirements of Code section 401(a)(9),
as amended by TEFRA. 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 the 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).
12.11 PARTICIPANT NOTICE AND ELECTION REQUIREMENTS. The Participant's
distribution of his Accounts shall be conditioned upon the satisfaction of the
following Participant notice and election requirements (as applicable):
(a) NOTICE REQUIREMENTS. The Plan Administrator shall provide the
following notices and disclosures to the Participant:
(1) QJSA WRITTEN EXPLANATION. The Plan Administrator shall
provide the Participant, no less than 30 days and no more than 90
days before the Participant's Annuity Starting Date, the QJSA and
QPSA Notices prescribed by Section 13.5.
(2) ANNUITY FORMS DESCRIPTION. The Plan Administrator shall
provide the Participant, no less than 30 days and no more than 90
days before the Participant's Annuity Starting Date, an "Annuity
Forms Description" which shall provide the Participant with a
general description
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of the material features, and an explanation of the relative
values of, the Qualified Joint and Survivor Annuity, the
Qualified Preretirement Survivor Annuity and any alternate
annuity forms available under the Plan.
(3) EARLY COMMENCEMENT NOTICE. Upon a Plan Administrator's
receipt of a Participant's application for distribution of his
Accounts prior to his Normal Retirement Age, the Plan
Administrator shall provide the Participant, no less than 30 days
and no more than 90 days before the Participant's Annuity Starting
Date, an "Early Commencement Notice" which shall notify the
Participant of his right to defer commencement or payment of his
Accounts to his Normal Retirement Age and such other information
and in the manner prescribed by Treasury Regulation section
1.411(a)-11(c)(2).
(4) DIRECT ROLLOVER NOTICE. Either upon a Plan Administrator's
receipt of a Participant's application for distribution of his
Accounts or as soon as administratively practicable following the
Participant's termination of employment, the Plan Administrator
shall provide the Participant, no less than 30 days and no more
than 90 days before the Participant's Annuity Starting Date, a
"Direct Rollover Notice" which shall notify the Participant of his
right to make a Direct Rollover, and such notice shall contain
the information as prescribed in Code section 402(f) and
applicable Treasury Regulations thereunder.
(b) PARTICIPANT ELECTION REQUIREMENTS. The Participant's election
must meet the following requirements (as applicable):
(1) TIMELY RECEIPT OF NOTICES. The Participant must have
received, no less than 30 days and no more than 90 days before the
Participant's Annuity Starting Date, the Early Commencement Notice
(if applicable) and the Direct Rollover Notice prescribed under
subsection (a) above.
(2) ELECTION TIMING. The Participant's written election to
receive his Accounts must not be made before the Participant
receives the Early Commencement Notice (if applicable) and the
Direct Rollover Notice, nor more than 90 days before the
Participant's Annuity Starting Date.
(3) ANNUITY STARTING DATE TIMING. The Participant's Annuity
Starting Date must occur no sooner than 30 days after the date the
Participant received his Early Commencement Notice (if applicable)
and his Direct Rollover Notice (consistent with paragraph (1)
above).
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The Direct Rollover provisions of this Section also
shall apply to a Spouse Beneficiary for purposes of
distributions upon the death of a Participant.
(c) ANNUITY STARTING DATE. The term "Annuity Starting Date" shall
mean the date of payment or commencement of payment of a Participant's
Accounts under the Plan, as consistent with the meaning of the term
under Treasury Regulation section 1.401(a)-20, Q&A 10.
(d) PARTICIPANT WAIVER OF 30 DAY REQUIREMENT. Notwithstanding the
30 day waiting period requirement of this Section, a Participant, after
having received the Annuity Forms Description, Early Commencement
Notice and Direct Rollover Notice, may affirmatively elect a
distribution which is made (or, if applicable, commences) less than 30
days after such Description and Notices were provided to the
Participant, provided that the Plan Administrator provides information
to the Participant clearly indicating that, in accordance with such
Description and Notices, the Participant has a right to at least 30
days to consider whether to consent to the distribution, receive any
particular optional benefit form or make a Direct Rollover. For
purposes hereof, the Plan Administrator may substitute (if applicable)
the Annuity Starting Date for the date distribution is made or
commences. The foregoing 30 day waiver provision shall apply to
Participants with Annuity Starting Dates on or after January 1, 1997.
12.12 MERGED PLANS.
(a) APPLICABILITY. The provisions of this Section shall apply to
any plan merged into the Plan or any plan having transferred assets to
the Plan.
(b) OPTIONAL BENEFIT FORMS. All optional benefit forms of any such
merged or transferred plan shall be preserved under this Plan and
available to Participants and Beneficiaries for purposes of the
distribution of their Accounts under the Plan.
(c) PUT OPTION. If the Plan distributes shares of employer stock
previously held under an employee stock ownership plan or tax credit
employee stock ownership plan which are not readily tradeable on an
established securities market, the Plan shall provide the Participant
with a put option that complies with the requirements of Code section
409(h).
(d) ACCOUNT TRANSFERRED FROM MONEY PURCHASE PENSION PLAN.
Notwithstanding any provision of this Plan to the contrary, to the
extent that any optional form of benefit under this Plan permits a
distribution prior to the Employee's retirement, death, Total and
Permanent Disability, or severance from employment, and prior to Plan
termination, the optional form of benefit is not available with respect
to benefits attributable to assets (including the post-
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transfer earnings thereon) and liabilities that are transferred,
within the meaning of Code section 414(l), to this Plan from a money
purchase pension plan qualified under Code section 401(a) (other than
any portion of those assets and liabilities attributable to voluntary
Employee Contributions) including but not limited to the Chemed
Corporation General Retirement Plan.
(e) ACCOUNTS. Assets transferred to the Plan pursuant to a plan
merger shall be characterized and accounted for in the manner
prescribed by the Plan Administrator.
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ARTICLE XIII - QUALIFIED JOINT AND SURVIVOR AND
-----------------------------------------------
PRERETIREMENT SURVIVOR ANNUITIES
--------------------------------
13.1 APPLICABILITY. This Article shall take precedence over any
conflicting provision in the Plan.
13.2 DEFINITIONS. For purposes of this Article, unless the context
otherwise requires, the following words and phrases shall have the meanings
indicates:
(a) "ELECTION PERIOD" shall mean the period which begins on the
first day of the Plan Year in which the Participant reaches Age 35 and
ends on the date of the Participant's death. If a Participant's service
with the Employer terminates before the first day of the Plan Year in
which he reaches Age 35, then the Election Period shall begin on the
date of termination of service. A Participant who receives a written
explanation of the Qualified Preretirement Survivor Annuity in the
manner described in Section 13.5(b)(1) and who will not reach Age 35 as
of the last day of a Plan Year, may make a special Qualified Election
to waive the Qualified Preretirement Survivor Annuity for the period
beginning on the date of the Qualified Election and ending on the first
day of the Plan Year in which the Participant will reach Age 35. The
Qualified Election will automatically expire as of the first day of the
Plan Year in which the Participant reaches Age 35, and any subsequent
waiver of a Qualified Preretirement Survivor Annuity must be made by
another Qualified Election.
(b) "EARLIEST RETIREMENT AGE" shall mean the Participant's Normal
Retirement Date (or, if sooner, his Early Retirement Date).
(c) "QUALIFIED ELECTION" shall mean a waiver by a Participant of a
Qualified Joint and Survivor Annuity or Qualified Preretirement
Survivor Annuity, which meets the following requirements: The waiver
described in paragraph (a) will not constitute a qualified election
unless the waiver designates a form of benefit payment which may not be
changed without the consent of the Spouse (unless the Spouse expressly
permits designations by the Participant without any further consent),
and unless the Participant's Spouse consents to the waiver in the
manner described in this paragraph. The Spouse must consent to the
waiver in writing. The waiver must designate a specific Beneficiary,
any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without the Spouse's consent (unless the Spouse's
consent expressly permits designations by the Participant without any
requirement of further consent by the Spouse). The Spouse's consent
acknowledges the effect of the waiver and is witnessed by a Plan
representative or a notary public. The consent requirements shall not
apply if it is established to the satisfaction of a Plan
representative that the consent may not be obtained because (i) there
is no Spouse, (ii) the Spouse cannot be located, or (iii) other
circumstances that the
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Secretary or his designate may prescribe by regulations. If a
Spouse consents to a waiver in the manner described in this paragraph
(c), then the Spouse may not subsequently revoke that consent. Any
consent by a Spouse (or establishment that the consent of the Spouse
cannot be obtained) is effective only with respect to that Spouse. A
consent that permits designations by the Participant without any
further consent by the Spouse must acknowledge that 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 those rights. A Participant may revoke his
waiver of a Qualified Preretirement Survivor Annuity or Qualified Joint
and Survivor Annuity without obtaining another consent from his Spouse
at any time before the beginning of Plan benefit payments. The number
of revocations shall not be limited.
(d) "QUALIFIED JOINT AND SURVIVOR ANNUITY".
(1) MARRIED PARTICIPANTS. For a married Participant,
"Qualified Joint and Survivor Annuity" shall mean an immediate
annuity for the life of a Participant with a survivor annuity for
the life of the Participant's Spouse equal to one-half the amount
of the annuity payable during the joint lives of the Participant
and his Spouse and which is the amount of benefit which may be
provided with the Participant's interest in his Accounts under
Article XI.
(2) UNMARRIED PARTICIPANTS. For an unmarried Participant,
"Qualified Joint and Survivor Annuity" shall mean an annuity for
the life of a Participant, ending at his death, which is the
amount of benefit which may be provided with the Participant's
interest in his Accounts under Article XI.
(e) "QUALIFIED PRERETIREMENT SURVIVOR ANNUITY" shall mean an
annuity for the life of a Participant's Spouse equal to the amount of
benefit which may be provided with the Participant's interest in his
Accounts under Article XI.
13.3 QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless (i) an optional form
of benefit is selected in accordance with a qualified election within the 90-day
period ending on the annuity starting date, or (ii) the Participant dies before
the annuity starting date, a Participant's interest in his Accounts under
Article XI will be paid in the form of a Qualified Joint and Survivor Annuity.
The Participant may elect to have such annuity distributed upon attainment of
his Earliest Retirement Age.
13.4 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Unless an optional form
of benefit has been selected within the Election Period in accordance with a
qualified election, if a Participant dies before the annuity starting date, then
the Participant's interest in his Accounts under Article XI shall be applied
toward the purchase of a
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<PAGE> 92
Qualified Preretirement Survivor Annuity. The Participant' s surviving Spouse
may elect to have such annuity distributed within a reasonable period after the
Participant's death. Unless inconsistent with the terms of a qualified election,
the Participant's surviving Spouse may elect any optional form of benefit of the
Plan in lieu of the Qualified Preretirement Survivor Annuity, provided the time
and amount of distribution under such elected optional benefit form shall comply
with the applicable requirements of Section 12.2(c) of the Plan relating to
minimum required distributions.
13.5 NOTICE REQUIREMENTS.
(a) QUALIFIED JOINT AND SURVIVOR ANNUITY. In the case of a
Qualified Joint and Survivor Annuity, the Plan Administrator shall
provide each Participant, not less than 30 days nor more than 90 days
prior to the annuity starting date, 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.
(b) QUALIFIED PRERETIREMENT SURVIVOR ANNUITY.
(1) NOTICE. In the case of a Qualified Preretirement Survivor
Annuity, the Plan Administrator shall provide each Participant,
within the applicable period, a written explanation of the
Qualified Preretirement Survivor Annuity in such terms and in the
manner comparable to the explanation described in subsection (a)
above.
(2) APPLICABLE PERIOD. For purposes of this Section, the term
"applicable period" shall mean, with respect to a Participant,
whichever of the following periods ends last: (A) the period
beginning with the first day of the Plan Year in which the
Participant attains Age 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains Age
35; (B) the two year period ending on the first anniversary of the
date he becomes a Participant; (C) the two year period ending on
the first anniversary of the date subsection (c) ceases to apply
to the Participant; (D) the two year period ending on the first
anniversary of the date Code section 401(a)(11) applies to the
Participant; and (E) for a Participant who separates from service
with the Employer before attaining Age 35, the two year period
ending on the first anniversary of the date of the Participant's
separation from service.
(c) SPECIAL RULE. The notices prescribed by this Section need not
be given if: (A) the Plan fully subsidizes the cost of the Qualified
Joint and Survivor Annuity and Qualified Preretirement Survivor
Annuity; (B) the Qualified Joint and Survivor Annuity and Qualified
Preretirement Survivor Annuity may not be waived; and (C) the
Participant may not elect any person other than his surviving
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Spouse (if any) as Beneficiary of the Qualified Joint and Survivor
Annuity and Qualified Preretirement Survivor Annuity. For the purposes
of this Section, the Plan "fully subsidizes" the costs of a benefit
if, under the Plan, the failure to waive the benefit by a Participant
would not result in a decrease in any Plan benefits with respect to
the Participant and would not result in a an increase in costs to the
Participant.
(d) PARTICIPANT WAIVER OF 30 DAY REQUIREMENT. Notwithstanding the
30 day waiting period requirement of this Section, a Participant, after
having received the QJSA Written Explanation and Annuity Forms
Description, may affirmatively elect a form of distribution (provided
the Participant's Spouse consents to that form of distribution) which
is made (or, if applicable, commences) less than 30 days after the QJSA
Written Explanation and Annuity Forms Description are provided to the
Participant, provided that the following requirements are met:
(1) The Plan Administrator provides information to the
Participant clearly indicating that, in accordance with the QJSA
Written Explanation and Annuity Forms Description, the Participant
has a right to at least 30 days to consider whether to waive the
QJSA and consent to a form of distribution other than a QJSA.
(2) The Participant is permitted to revoke any affirmative
distribution election at least until the Participant's Annuity
Starting Date or, if later, at any time prior to the expiration of
the 7-day period that begins on the day after the QJSA Written
Explanation and Annuity Forms Description are provided to the
Participant.
(3) The Participant's Annuity Starting Date is after the date
the QJSA Written Explanation and Annuity Forms Description are
provided to the Participant.
(4) The distribution in accordance with the affirmative
election is not made (or, if applicable, does not commence) before
the expiration of the 7-day period that begins on the day after
the QJSA Written Explanation and Annuity Forms Description are
provided to the Participant.
For purposes hereof, the Plan Administrator may substitute (if
applicable) the Annuity Starting Date for the date distribution is made
or commences. The foregoing 30 day waiver provision shall apply to
Participants with Annuity Starting Dates on or after January 1, 1997.
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ARTICLE XIV - PORTABILITY
-------------------------
14.1 TRANSFER TO QUALIFIED PLAN. In the event that a Participant
entitled to receive benefits under this Plan separates from the service of the
Employer and subsequently is employed by another corporation, including an
Affiliated Company, which has a pension or profit sharing plan qualified
pursuant to Code section 401(a), the Plan Administrator in its discretion may,
upon the Participant's written request, direct the Trustee to transfer said
Participant's vested benefits under this Plan directly to the Trustee of the
plan of the Participant's new employer if the following conditions are met: (a)
the Trustee of the other plan is authorized to accept the benefits under this
Plan; (b) the Participant's transferred assets shall be maintained in a separate
account in the other plan; and (c) the Participant's transferred assets shall
not be forfeitable or reduce in any way the obligation of the new employer.
14.2 TRANSFER TO INDIVIDUAL RETIREMENT ACCOUNT. In the event a
Participant who is entitled to receive benefits under this Plan as a result of
his termination of service with the Employer has established or establishes
pursuant to the applicable provisions of the Internal Revenue Code an individual
retirement account, the Plan Administrator in its discretion may, upon the
Participant's written request, direct the Trustee to transfer all of said
Participant's vested benefits under the Plan directly to the trustee of the
Participant's individual retirement account.
14.3 TRANSFER OR ROLLOVER FROM QUALIFIED PLANS. Subject to the consent
of the Plan Administrator, the Trustee of this Plan is authorized to accept
assets upon the terms and conditions analogous to those set forth in Section
14.1 above from a trustee of another qualified pension or profit sharing plan.
The Trustee is also authorized, subject to the consent of the Plan
Administrator, to accept a qualifying rollover contribution to the Plan by the
Employee (who will thereby become a Plan Participant if he was not already a
Participant). A "qualifying rollover contribution" means the contribution to the
Plan by an Employee of:
(a) A portion or all of a rollover amount (as defined in Code
section 402(a)(5), or as referred to in Code section 403(a)(4)),
provided that the portion, if any, of a rollover amount consisting of
employee contributions may not be contributed to the Plan and the
portion, if any, of such distribution consisting of property other than
money (or the proceeds thereof) must be contributed to the Plan; or
(b) A rollover contribution (as defined in Code section
408(d)(3)).
A qualifying rollover contribution to be made by an Employee
must be made to the Trustee, in care of the Plan Administrator, by not
later than the sixtieth (60th) day following the day on which the
Employee received the
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qualifying rollover distribution or rollover contribution is to be
made. The assets shall be allocated to a separate account established
and maintained on behalf of a Participant making a rollover
contribution.
14.4 RESTRICTED PARTICIPATION. For purposes of this Plan, a Participant
with respect to whom a transfer of benefits or a qualifying rollover
contribution is made in accordance with Section 14.3 shall not be eligible to
share in the allocation of Employer Contributions or forfeitures before becoming
a Participant for all purposes of this Plan in accordance with Sections 3.1 and
3.2.
14.5 DIRECT ROLLOVERS. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under this Section,
a Distributee may elect, at the time and in the manner prescribed by the 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. For purposes of this Section, the following terms shall be defined as
follows:
(a) "ELIGIBLE ROLLOVER DISTRIBUTION" means 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: (1) any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for 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; (2) any
distribution to the extent such distribution is required under Code
section 401(a)(9); and (3) the portion of any distribution that is not
includable in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities);
(3) effective for Plan Years beginning on and after January 1, 1999 (or
such later date as may be determined by the Plan Administrator in
accordance with Internal Revenue Service Notice 99-5, IRB 1999-3),
hardship distributions from 401(k) Contribution Accounts under Section
10.2.
(b) "ELIGIBLE RETIREMENT PLAN" means: (1) an individual retirement
account described in Code section 408(a); (2) an individual retirement
annuity described in Code section 408(b); (3) an annuity plan described
in Code section 403(a); or (4) a qualified trust described in Code
section 401(a) that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution
to the surviving Spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
(c) "DISTRIBUTEE" includes a Participant. In addition, the
Participant's surviving Spouse and the Participant's Spouse or former
Spouse who is the alternate payee under a qualified domestic relations
order, as defined in Code section 414(p), are Distributees with regard
to the interest of the Spouse or former Spouse.
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(d) "DIRECT ROLLOVER" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
The Plan Administrator may establish, from time to time, default
procedures whereby, in the event a Distributee does not elect the manner to
receive his distribution, the Plan shall make his distribution in the form of
either a check (net of applicable withholding) payable to the Distributee or a
Direct Rollover to an Eligible Retirement Plan (other than an annuity plan under
Code section 403(a) or a qualified trust under Code section 401(a)), provided
that the Plan Administrator has complied with all applicable notification
requirements of applicable Treasury Regulations.
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ARTICLE XV - PLAN ADMINISTRATION
--------------------------------
15.1 PLAN ADMINISTRATOR. The Board of Directors of Chemed shall appoint
three or more persons to be known as the Administrative Committee to administer
the Plan, keep records of individual Participant's Accounts and notify each
Participant of the amount of his Accounts not less frequently than annually.
15.2 TERM OF OFFICE. All members of the Administrative Committee shall
serve until their resignation or dismissal by the Board of Directors of Chemed
and vacancies shall be filled in the same manner as the original appointments.
The Board of Directors of Chemed may dismiss any member of the Administrative
Committee at any time with or without cause.
15.3 GENERAL DUTIES. Subject to the limitations of the Plan, the Plan
Administrator shall, from time to time, establish rules for the administration
of the Plan and the transaction of Plan business. The Plan Administrator shall
have the sole and absolute discretionary authority to construe and interpret the
Plan and shall determine all questions arising in the administration,
interpretation and application of the Plan.
15.4 RETENTION OF ADVISORS. The Plan Administrator may retain and, if
the Plan Administrator so determines, dismiss and replace, the services of such
counsel, accountants and other agents as it shall deem advisable.
15.5 DIRECTIONS TO THE TRUSTEES. The Plan Administrator shall direct
the Trustee in writing to make payments from the Trust Fund to Participants who
qualify for such payments. These written orders to the Trustee shall specify the
name of the Participant, his address and the amount and frequency of the
payments.
15.6 LIMITATION ON PLAN ADMINISTRATOR'S POWERS. In exercising any
discretionary or absolute authority under the terms of this Plan, the Plan
Administrator shall act in a consistent and nondiscriminatory manner as between
Participants, treating Participants in similar circumstances in a similar
fashion. In no event shall the Plan Administrator take any action that would
discriminate in favor of Participants who are Highly Compensated Employees, or
that would result in benefiting any such Participant at the expense of any other
Participant.
15.7 CLAIMS AND APPEAL PROCEDURE. According to procedures established
by the Plan Administrator, adequate notice in writing shall be provided to any
Participant or Beneficiary whose claim for benefits under the Plan has been
denied. The notice shall set forth the specific reason for the denial, shall be
written in a manner calculated to be understood by the claimant and, provided
that review is requested within 60 days after receipt by the claimant of written
notification of denial of his claim, shall afford a reasonable opportunity to
any claimant whose claim for benefits has been denied to a full and fair review
by the Plan Administrator of the decision denying the claim.
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15.8 DELEGATION OF DUTIES AND POWERS. The Plan Administrator may, but
is not obligated to, delegate all or any portion of its duties as Plan
Administrator. Notwithstanding the foregoing, the Plan Administrator shall at
all times (a) supervise the overall administration of the Plan and (b) determine
who shall render the services described in Section 15.4, and the terms and
conditions under which those services shall be rendered.
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ARTICLE XVI - AMENDMENTS AND TERMINATION
----------------------------------------
16.1 AMENDMENTS TO THE PLAN BY CHEMED. Chemed shall have the right to
alter or amend the Plan at any time in whole or in part, provided that no
amendment shall authorize or permit any part of the Trust Fund to be used or
diverted to any purpose other than the exclusive benefit of the Participants or
their Beneficiaries, nor shall any such amendment deprive any Participant of his
Account vested in him as determined under the Plan.
16.2 AMENDMENTS AFFECTING NONFORFEITABLE INTERESTS. Except to the
extent permitted under Code section 412(c)(8), no amendment to the Plan may
decrease a Participant's Account balances nor eliminate an optional form of
distribution with respect to benefits attributable to service before the
amendment. In addition, if the Plan's vesting schedule is amended, in the case
of an Employee who is a Participant as of the later of (i) the date the
amendment is adopted, or (ii) the date the amendment becomes effective, the
nonforfeitable percentage (determined as of that date) of the Participant' s
Account balance will not be less than the percentage computed under the Plan
without regard to the amendment.
16.3 CHANGE IN VESTING SCHEDULE. In the event that an amendment to the
Plan changes the portion of a Participant's Employer Contribution Account that
is nonforfeitable, or in the event the Plan is deemed amended by an automatic
change to or from the top-heavy vesting schedule, each Participant with at least
three Years of Service prior to the expiration of the Election Period described
below may elect to have his interest in his Employer Contribution Account
computed under the Plan without regard to that amendment or change if he is a
Participant at the time the election is made. The Election Period shall begin on
the date the amendment is adopted and shall end on the latest of: (a) 60 days
after the amendment is adopted; (b) 60 days after the amendment becomes
effective; or (c) 60 days after the Participant is issued written notice of the
amendment by the Employer or the Plan Administrator.
16.4 COMPLETE DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS. If a complete
discontinuance of contributions to the Plan by the Employer occurs, the rights
of affected Participants shall become vested and nonforfeitable, notwithstanding
any other provisions of this Plan, but in all other respects the Plan shall
continue in effect and be administered in accordance with the provisions of this
Plan.
16.5 TERMINATION OF PLAN; PROCEDURE ON TERMINATION.
XVI-1
<PAGE> 100
(a) RIGHT TO TERMINATE. Chemed shall have the right to terminate
or partially terminate this Plan at any time by delivery to the Trustee
of written notice of the termination. Upon a termination or partial
termination, notwithstanding any other provisions of this Plan, the
rights of all affected Participants under the Plan shall become vested
and nonforfeitable.
(b) PROCEDURE ON TERMINATION. Upon a termination or partial
termination of the Plan, Chemed may authorize any of the following
procedures with respect to affected Participants whose rights under the
Plan have become fully vested and nonforfeitable:
(1) The continued administration of the Plan and the Trust
Fund in accordance with the provisions of the Plan until the Trust
Fund has been liquidated or until Chemed directs (or delegates to
the Trustee the power to direct) the liquidation of the Trust Fund
as provided in paragraphs (2) or (3) of this subsection.
(2) The liquidation of the assets held in the Trust Fund and,
after paying or providing for all expenses, the payment, subject
to the terms of Articles XII and XIII, to each affected
Participant of his interest in his Accounts.
(3) The transfer of the assets of the Plan attributable to the
affected Participants to the trustee of another employee benefit
plan or plans for the benefit of a group of Employees of the
Employer or an Affiliated Company that includes the affected
Participants.
16.6 PLAN AMENDMENT PROCEDURES. Chemed shall follow the procedures
contained in this Section in exercising its right under this Article to amend
and terminate the Plan. The Board of Directors of Chemed shall approve and adopt
all amendments to the Plan. The Board of Directors of Chemed shall be permitted,
however, to delegate (by resolution) such foregoing authority to amend the Plan
to the Plan Administrator, the Benefit Committee or any officer of the Plan
Sponsor. All amendments to the Plan shall be executed by a proper officer of
Chemed. The Board of Directors of Chemed shall approve and adopt the termination
of the Plan.
16.7 WITHDRAWAL BY AN EMPLOYER. Any Affiliated Company may, with the
consent of Chemed, withdraw from the Plan at any time, and Chemed may, in its
discretion, at any time withdraw the authorization of any Affiliated Company to
participate in the Plan. In any of the foregoing events the affected
Participants shall cease to be Participants and the Plan Administrator shall
arrange for the withdrawal or segregation of the Accounts of the affected
Participants as of the date of the event, but not in excess of the amount
permitted under the applicable Treasury regulations. The Plan Administrator
shall have the full discretion as to the nature of the funds to be withdrawn or
segregated, and its valuation for that purpose shall be conclusive. Unless
XVI-2
<PAGE> 101
a retirement plan substantially similar in form to the Plan or such other form
as may be approved by the Internal Revenue Service under Code section 401(a) is
continued by the withdrawing Employer or its successor for its Employees, the
Plan shall be deemed to have terminated with respect to those Employees. The
Plan Administrator shall arrange for the disposition of such assets through
transfer to a successor trust, the purchase of annuities, or by any other means
it shall determine.
16.8 CODA PLAN TERMINATION DISTRIBUTION LIMITATION. For purposes of
compliance with the distribution limitations of Code section 401(k)(2)(B),
401(k) Contribution Accounts shall not be distributable to a Participant or his
Beneficiary on account of termination of the Plan unless the following
provisions are satisfied:
(a) GENERAL RULE. Distributions may occur upon the termination of
the Plan, but only without the establishment of another defined
contribution plan (as defined in Code section 414(i)), other than: (1)
an employee stock ownership plan (as defined in Code section 4975(e) or
409); or (2) a simplified employee pension plan as defined in Code
section 408(k), and as otherwise permitted under the remaining
provisions of this Section.
(b) SUCCESSOR PLAN. For purposes of applying the general rule
above, and as provided in applicable Treasury Regulations, a
distribution of 401(k) Contribution Accounts cannot occur on account of
termination of the Plan if the employer establishes or maintains a
successor plan. For purposes of this rule, a successor plan is any
other defined contribution plan maintained by the same employer.
However, if fewer than two percent of the employees who are eligible
under the plan that includes the cash or deferred arrangement at the
time of its termination are or were eligible under another defined
contribution plan at any time during the 24 month period beginning 12
months before the time of the termination, the other plan is not a
successor plan. A plan is a successor plan only if its exists at the
time the plan including the cash or deferred arrangement is terminated
or within the period ending 12 months after distribution of all assets
from the plan.
(c) LUMP SUM REQUIREMENT. A distribution may be made on account of
termination of the Plan only if it is a lump sum distribution (as
provided in Code section 402(d)(4), without regard to subparagraphs (A)
(i) through (iv), (B) and (H) thereof).
XVI-3
<PAGE> 102
ARTICLE XVII - MISCELLANEOUS
----------------------------
17.1 PLAN NOT CONTRACT OF EMPLOYMENT. Participation in the Plan shall
not give any Participant any right to be retained in the service of the Employer
or an Affiliated Company. The Employer and each Affiliated Company expressly
retain the right to hire and discharge any Employee or Participant at any time
with or without cause, as if this Plan had not been adopted. Any discharged
Participant shall have only the rights or interests in the Trust Fund as may be
specified in the Plan.
17.2 RECORDS OF THE EMPLOYER. The records of the Employer and each
Affiliated Company with respect to Age, Hours of Service, service, Years of
Service, One Year Breaks in Service, service history, Compensation, absences,
illnesses and all other relevant matters shall be conclusive for purposes of the
administration of this Plan.
17.3 GENDER AND NUMBER. Pronouns and other similar words used in the
masculine gender shall be read as the feminine gender where appropriate and the
singular form of words shall be read as the plural where appropriate.
17.4 HEADINGS. Any headings or subheadings in the Plan are inserted for
convenience of reference only and are to be ignored in the construction of any
provision of the Plan.
17.5 LAW GOVERNING. Except as otherwise required by law, the validity,
construction and administration of this Plan shall be determined under the laws
of the State of Ohio.
17.6 SUCCESSOR COMPANY. In the event of the merger, consolidation, sale
of assets, liquidation or other reorganization of Chemed, under circumstances in
which a successor shall continue and carry on all or a substantial part of the
business of Chemed and shall elect to continue this Plan, the successor shall be
substituted for Chemed under the terms and provisions of this Plan upon filing
its written election to that effect with Chemed, the Trustee and the Plan
Administrator.
17.7 MERGER OR CONSOLIDATION OF PLAN ASSETS. This Plan shall not merge
or consolidate with, or transfer its assets or liabilities to, any other plan
unless each Participant would (if the Plan then terminated) receive a benefit
immediately after the merger, consolidation or transfer which is equal to or
greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation or transfer (if the Plan had then terminated).
17.8 INDEMNIFICATION. The Employer may indemnify, through insurance or
otherwise, any one or more of the fiduciaries with respect to the Plan against
any
XVII-1
<PAGE> 103
claims, losses, expenses, damages or liabilities arising out of the performance
(or failure of performance) of their responsibilities under the Plan.
17.9 EXPENSES OF ADMINISTRATION. The Employer may, but does not
obligate itself to pay all or part of the expenses of administration of the
Plan, including the fees and expenses of the Trustee, the expenses of the Plan
Administrator and any other expenses incurred at the direction of the Plan
Administrator. To the extent that any of these expenses are not paid by the
Employer, these expenses shall be paid by the Trustee out of the Trust Fund;
provided, however, that no fees for services rendered as a fiduciary will be
paid from the Trust Fund to a fiduciary who is also a full-time Employee of an
Employer.
17.10 ALLOCATION OF FIDUCIARY RESPONSIBILITIES. The Employer shall be
responsible for the provision of factual data regarding Employees and
Participants, and making Employer contributions to the Plan. The Trustee shall
be responsible for the investment of the assets of the Trust Fund (except to the
extent that (a) the Plan Administrator exercises that responsibility or
delegates that responsibility to a different person or entity under the Trust
Agreement or (b) Participants or Beneficiaries exercise that responsibility),
and for the custody and valuation of assets of the Trust Fund. The Plan
Administrator shall have exclusive responsibility for the administration of the
Plan (except to the extent that those duties have been specifically allocated
otherwise pursuant to the Plan or this Section). Each fiduciary shall be
responsible only for the specific duties assigned to it in the Plan and this
Section and shall not be directly or indirectly responsible for the duties
assigned to another fiduciary. The Plan Administrator shall be deemed the
administrator and the named fiduciary for purposes of ERISA; provided, however,
that in the event the Plan Administrator delegates its responsibilities, the
person, persons or entity to whom those responsibilities are delegated shall be
deemed the administrator and the named fiduciary.
17.11 SEVERABILITY. In the event any provision of the Plan is held
illegal or invalid for any reason, the illegality or invalidity shall not affect
any other Plan provision. The Plan shall be construed and interpreted as if the
illegal or invalid provision never appeared in the Plan.
17.12 EXCLUSIVE BENEFIT.
(a) GENERAL RULE. All contributions made by the Employer are made
for the exclusive benefit of the Participants and their Beneficiaries.
Those contributions shall not be used for or diverted to purposes other
than for the exclusive benefit of the Participants and their
Beneficiaries (including the costs of maintaining and administering the
Plan and Trust Fund).
(b) REFUND TO THE EMPLOYER. Notwithstanding the provisions of
subsection (a), amounts contributed to the Trust Fund by the Employer
are entirely contingent upon their deductibility and shall, if
determined to be non-
XVII-2
<PAGE> 104
deductible, be refunded to the Employer to the extent that the refunds
do not, in themselves, deprive the Plan of its qualified status, under
the following circumstances and subject to the following limitations:
(1) To the extent that a Federal income tax deduction is
disallowed for any Employer contribution (other than any Employer
contributions allocable to the purchase of life insurance for a
self-employed individual), the Trustee shall, upon request of the
Employer, refund to the Employer the amount so disallowed within
one year of the date of the disallowance. All Employer
contributions under the Plan are expressly conditioned on their
deductibility for federal income tax purposes.
(2) In the case of an Employer contribution which is made in
whole or in part by reason of a mistake of fact (for example,
incorrect information as to the eligibility or Compensation of a
Participant, or a mathematical error), so much of the contribution
as is attributable to the mistake of fact shall be returned to the
Employer on demand upon presentation of evidence of the mistake of
fact to the Trustee. Demand and repayment must be completed within
one year after the payment of the Employer contribution to which
the mistake applies.
(c) CALCULATION OF REFUND. In the event that any refund is paid
to the Employer, the refund shall be made without interest and shall be
deducted from among the Employer Contribution Accounts of the
Participants as a Net Loss except to the extent that the amount of the
refund can be attributed to one or more specific Participants (as in
the case of certain mistakes of fact, etc.) in which case the amount of
the refund attributable to each Participant's Employer Contribution
Account shall be deducted directly from that Account.
(d) LIMITATION ON REFUND.
(1) Notwithstanding any other provision of this Section, no
refund shall be made to the Employer which is specifically
chargeable to the Account(s) of any Participant(s) in excess of
100% of the amount in the Account nor shall a refund be made by
the Trustee of any funds, otherwise subject to refund, which have
been distributed to Participants or Beneficiaries. If these
distributions become refundable, the Employer shall have a claim
directly against the distributee to the extent of the refund to
which the Employer is entitled.
(2) All refunds under this Section shall be limited in amount,
circumstance and timing to the provisions of ERISA. No refund
shall be made if, solely on account of the refund, the Plan would
cease to be a qualified Plan under the Internal Revenue Code.
XVII-3
<PAGE> 105
17.13 QUALIFIED MILITARY SERVICE. Effective as of December 12, 1994,
notwithstanding any provision of the Plan to the contrary, contributions,
benefits and service credit with respect to qualified military service will be
provided in accordance with Code section 414(u).
Executed by a duly authorized representative of Chemed Corporation on
__________________, 1999.
CHEMED CORPORATION
By:
-----------------------------
XVII-4
<PAGE> 106
The following Affiliated Companies also participate in the Plan and
hereby consent to the adoption of the amendment and restatement of the Plan.
ROTO-ROOTER, INC.
By:
-------------------------
XVII-5
<PAGE> 107
APPENDIX A - PLAN AND EMPLOYER HISTORY
--------------------------------------
Effective July 1, 1971, Chemed Corporation, then a subsidiary of W.R.
Grace Co., established the Chemed Corporation Employees Savings and Investment
Plan (the "Plan").
Effective July 1, 1976, Chemed Corporation amended and restated the
Plan to comply with the Employee Retirement Income Security Act of 1974 (ERISA).
Effective March 10, 1982, W.R. Grace Co. divested Chemed Corporation
and Chemed Corporation became a publicly traded company.
Effective January 1, 1981, Chemed Corporation partially divested its
wholly-owned subsidiary, Omnicare, Inc., and Omnicare, Inc. became a publicly
traded company with Chemed Corporation owning approximately 30% of Omnicare,
Inc.
Effective January 1, 1985, Chemed Corporation amended and restated the
Plan to permit Participant elective deferral contributions and, effective August
1, 1985, to comply with the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA), the Deficit Reduction Act of 1984 (DEFRA) and the Retirement Equity Act
of 1984 (REA).
Effective from its inception in 1971, the Plan has made an Employer
Contribution in the form of a mandatory matching contribution to the Plan, and
such mandatory matching contribution has continued through the plan quarter
ended March 31, 1988.
Effective November 1, 1987, Chemed Corporation established the Chemed
Employee Stock Ownership Plan I and which, beginning effective January 1, 1988,
provided a matching contribution thereunder based on Basic Employee
Contributions under the Plan through March 31, 1993 (when the Chemed ESOP II
replaced the Chemed ESOP I in matching Basic Employee Contributions under the
Plan).
Effective August 1, 1988, Chemed Corporation established the Chemed
Employee Stock Ownership Plan Il and which, beginning effective April 1, 1993
(when the Chemed ESOP I ceased to match Basic Employee Contributions under the
Plan), provides a matching contribution thereunder based on Basic Employee
Contributions under the Plan.
Effective December 31, 1987, sales employees of Employing Units became
Eligible Employees of the Plan and plan accounts of affected sales employee
participants under the Chemed Corporation Sales Employees Thrift Plan were
transferred to the Plan effective January 1, 1988.
Effective April 2, 1991, Chemed Corporation divested DuBois Chemical,
Inc. to Diversey Corp. and, as a result of such divestiture, (i) Diversey Corp.
made certain contributions to the Plan for the remainder of the 1991 Plan Year
for the affected
A-1
<PAGE> 108
DuBois Chemical Participants and (ii) Accounts (which included Chemed Common
Stock) of such Participants were transferred from the Plan to the Diversey Corp.
Savings and Investment Plan effective January 1, 1992.
Effective June 30, 1991, Chemed Corporation caused Chemed common stock
from the Chemed ESOP-I and the Chemed ESOP-II to be transferred to the Plan
which was later transferred to the Diversey Corp. Savings and Investment Plan
effective January 1, 1992.
Effective December 22, 1992, Chemed Corporation acquired The Veratex
Group division from Omnicare, Inc. and, as a result of such acquisition, (i)
plan accounts of affected Veratex participants under the Omnicare Employees
Savings and Investment Plan and the Omnicare Employee Stock Ownership Plan
(which both included common stock of Omnicare, Inc.) were transferred to the
Plan effective January 1, 1993.
Effective September 17, 1996, Chemed Corporation acquired the remaining
outstanding stock of Roto-Rooter, Inc. which then became a wholly owned
subsidiary of Chemed Corporation.
Effective January 1, 1999, Chemed Corporation caused its General
Retirement Plan and the Roto-Rooter Retirement and Savings Plan to merge into
the Plan. Also effective January 1, 1999, the Plan was amended and restated in
its entirety, renamed the Chemed/Roto-Rooter Savings & Retirement Plan and
adopted by Roto-Rooter for the benefit of its eligible employees.
A-2
<PAGE> 109
APPENDIX B - SERVICE CREDIT
---------------------------
Service with the following companies will be credited under the Plan
for purposes of eligibility investing:
1. Caldwell Heating and Air Conditioning of Newnan, Inc.
2. Reliance Plumbing, Inc.
3. Extra Speedy Service, Inc.
4. Pete Edmiston Plumbing & Heating
5. Boyd Air Conditioning and Insulation Co.
6. ServiceAIR, Inc.
7. LaNois' Walrus Air Co., Inc.
8. D. Kilian, Inc.
9. Claymon Corp.
10. A-aachen Citywide Plumbing, Inc.
11. Cassidy Plumbing and Heating, Inc.
12. Diversified Mechanical Services, Inc.
13. A-1 Rootmaster, Inc.
14. Geoson, Inc. & Daniels-Dallaire, Inc.
15. Catons' Plumbing, Heating & Air Conditioning, Inc.
16. Environmental Pipe, Inc.
17. Dolfran, Inc. & Ridin Pipeline, Inc.
18. Roto-Rooter of Kitsap County, Inc.
19. Drain Masters RTP, Inc.
20. Starburst, Inc.
21. Sure Flow, Inc.
B-1
<PAGE> 1
EXHIBIT 10.26
FIRST AMENDMENT TO SPLIT DOLLAR AGREEMENT
This amendment made on this 1st day of June, 1998, by and
between Chemed Corporation (hereinafter referred to as the "Corporation") and
_______________ (hereinafter referred to as the "Employee").
RECITALS
1. The Corporation and the Employee entered into a Split
Dollar Agreement dated June 1, 1995 (the "Agreement").
2. Pursuant to Article 11 of the Agreement, the Corporation
and the Employee have the right to amend the Agreement.
3. The parties wish to amend the Agreement to include an
additional life insurance policy on the life of the Employee.
NOW, THEREFORE, the parties agree as follows:
A. Article 2.1 of the Agreement is hereby amended by
adding the following additional paragraph:
The Employee has applied to Phoenix Home Life Mutual Insurance
Company for another policy (which together with other policies under this
agreement are collectively referred to as the "Policy") in the initial face
amount of $_______ and which is more particularly described on Schedule A.
<PAGE> 2
B. The Corporation and the Employee hereby confirm and readopt
all other provisions of the Agreement.
IN WITNESS WHEREOF, the parties have executed this First
Amendment to the Agreement as of the date first written above.
CHEMED CORPORATION
By:
- ---------------------------- ---------------------------
Witness
By:
- ---------------------------- ---------------------------
Witness Employee/Insured
2
<PAGE> 3
SCHEDULE TO EXHIBIT 10.26
Policy Initial Policy
Insured Insurer Number Face Amount
- ----------------- ----------------- --------- ----------
Kevin J. McNamara Phoenix Home Life 2,745,675 585,396
President
Thomas C. Hutton Phoenix Home Life 2,748,193 271,285
Vice President
Timothy S. O'Toole Phoenix Home Life 2,743,884 393,576
Executive Vice
President &
Treasurer
Arthur V. Tucker Phoenix Home Life 2,747,874 135,240
Vice President &
Controller
<PAGE> 1
EXHIBIT 10.27 MR. DEVLIN
SPLIT DOLLAR AGREEMENT - II
This Agreement, made on June 1, 1998, by and between Chemed
Corporation ("the Corporation"), a Delaware corporation with offices at 2600
Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202, and Megan P. Devlin
("the Trustee"), as Trustee of the James H. Devlin Irrevocable Trust Agreement
of March 31, 1997 ("the Trust").
1. PREMISES
1.1 This Agreement replaces that Split Dollar
Agreement of June 1, 1995 between Veratex
Corporation and James H. Devlin. James H. Devlin
is an employee of the Corporation and has created
the Trust. The Trustee wishes to insure the life
of Mr. Devlin for the benefit and protection of
Mr. Devlin's family. The Corporation will help the
Trustee provide this insurance coverage by payment
of part of the premiums under a split dollar
arrangement, whereby the Trustee will be the owner
of a life insurance policy which will be
collaterally assigned to the Corporation as
security for amounts the Corporation will
contribute for the premium payments.
<PAGE> 2
2. APPLICATION FOR INSURANCE
2.1 The Trustee has applied to Phoenix Home Life
Mutual Insurance Company for an Executive Equity
Life Insurance Plan on the life of Mr. Devlin for
$1,489,390 and for an additional Executive Equity
Life Insurance Plan on his life for $131,560
(collectively "Policy").
3. POLICY OWNERSHIP
3.1 The Trustee shall own the Policy and may
exercise all rights of ownership with respect to
it, subject only to the security interest of the
Corporation as expressed in this Agreement and the
collateral assignment of the Policy to the
Corporation.
4. PAYMENT OF PREMIUMS
4.1 On or before the due date of each annual
premium on the Policy, the Corporation will pay to
Phoenix Home Life Mutual Insurance Company an
amount equal to the greater of 80 percent of the
annual premium or the annual premium less the cost
(calculated by application of Internal Revenue
Service Table PS-58) of the portion of the
insurance which the beneficiary or beneficiaries
named by Mr. Devlin or their
2
<PAGE> 3
transferee would be entitled to receive if Mr.
Devlin died during the policy year for which the
annual premium is paid.
4.2 On or before the due date of each annual
premium on the Policy, the Corporation will pay to
Phoenix Home Life Mutual Insurance Company, on
behalf of the Trustee, the remainder of the annual
premium. This payment will constitute compensation
to Mr. Devlin in the form of a bonus and will be
considered paid by the Trustee for purposes of the
Assignment (as defined in Article 5).
4.3 These premium advances by the Corporation
shall apply specifically to annual premiums due
under the Policy up to Mr. Devlin's age of 65.
However, additional premium advances may be made
by mutual agreement of the parties.
5. ASSIGNMENT OF POLICY
5.1 The Trustee shall collaterally assign the
Policy to the Corporation so as to reflect the
respective interests of the parties under this
Agreement, said collateral assignment
("Assignment") having been executed by the parties
on the date of this Split Dollar
3
<PAGE> 4
Agreement, and thus made a part of such Policy and
this Agreement.
6. USE OF DIVIDENDS
6.1 The dividends declared by Phoenix Home Life
Mutual Insurance Company on the Policy will be
used to purchase Option Term with the balance used
to purchase paid-up insurance.
6.2 The dividend option which is specified in
paragraph 6.1 of this Article will not be
terminated or changed without a conforming
amendment to this Agreement and unless such change
is done in accordance with the provisions of Part
D "Joint Rights" section of the Assignment.
7. SURRENDER OF POLICY
7.1 The Trustee shall have the sole and
exclusive right to surrender the Policy.
7.2 If the Policy is surrendered, the Trustee
shall direct the insurance company in writing
to draw a check payable to the Corporation in an
amount equal to the "Assignee's Cash Value
Rights", as defined within the provisions of
Part A "Definitions" section of the Assignment.
7.3 If there is a delay in the surrender of the
4
<PAGE> 5
Policy by either party to this Agreement, and if
such delay results in diminished policy values
being available to either party, neither party
to this Agreement shall hold the insurance company
liable for such diminution in Policy values.
8. DEATH CLAIMS
8.1 Upon the death of Mr. Devlin the Corporation
shall have an interest in the proceeds of the
Policy equal to the "Assignee's Death Benefit
Share", as defined within the provisions of Part A
"Definitions" section of the Assignment. The
balance of proceeds remaining shall be paid
directly by the insurance company to the
beneficiary or beneficiaries designated in the
Policy.
9. TERMINATION OF AGREEMENT
9.1 This Agreement shall terminate upon surrender
of the Policy by the Trustee or upon thirty (30)
days' written notice of termination given by
either party to the other by registered mail at
the party's last known address.
9.2 Prior to termination of this Agreement, the
Trustee shall direct the insurance company in
5
<PAGE> 6
writing to draw a check payable to the Corporation
for an amount equal to the "Assignee's Cash Value
Interest", as defined within the provisions of
Part A "Definitions" section of the Assignment.
Upon receipt of this amount, the Corporation shall
release the security interest of the Corporation
expressed in this Agreement and the Assignment.
10. SPECIAL PROVISIONS
The following provisions are part of this Plan and
are intended to meet the requirements of the
Employee Retirement Income Security Act of 1974:
10.01 - The named fiduciary: The Secretary
of the Company
10.02 - The funding policy under this Plan
is that all premiums on the Policy
be remitted to the Insurer when
due.
10.03 - Direct payment by the Insurer is
the basis of payment of benefits
under this Plan, with those
benefits in turn being based on
the payment of premiums as
provided in the Plan.
6
<PAGE> 7
10.04 - For claims procedure purposes, the
"Claims Manager" shall be the
Secretary of the Company.
(a) If for any reason a claim
for benefits under this Plan
is denied by the Company,
the Claims Manager shall
deliver to the claimant a
written explanation setting
forth the specific reasons
for the denial, pertinent
references to the Plan
section on which the denial
is based, such other data as
may be pertinent and
information on the
procedures to be followed by
the claimant in obtaining a
review of his claim, all
written in a manner
calculated to be understood
by the claimant. For this
purpose:
(1) The claimant's claim
shall be deemed
filed when presented
orally or
7
<PAGE> 8
in writing to the
Claims Manager.
(2) The Claims Manager's
explanation shall be
in writing delivered
to the claimant
within 90 days of
the date the claim
is filed.
(b) The claimant shall have 60
days following his/her
receipt of the denial of the
claim to file with the
Claims Manager a written
request for review of the
denial. For such review, the
claimant or his/her
representative may submit
pertinent documents and
written issues and comments.
(c) The Claims Manager shall
decide the issue on review
and furnish the claimant
with a copy within 60 days
of receipt of the claimant's
request for review of
his/her claim. The
8
<PAGE> 9
decision on review shall be
in writing and shall include
specific reasons for the
decision written in a manner
calculated to be understood
by the claimant, as well as
specific references to the
pertinent Plan provisions on
which the decision is based.
If a copy of the decision is
not so furnished to the
claimant within such 60
days, the claims shall be
deemed denied on review.
11. AMENDMENT AND BINDING EFFECT
11.1 This embodies all agreements by the parties
made with respect to the Policy. The Agreement
shall not be modified or amended except by a
writing signed by the parties. The Agreement shall
be binding upon the parties, their heirs, legal
representatives, successors and assigns.
12. GOVERNING LAW
12.1 This Agreement shall be subject to and shall
be construed under the laws of the State
9
<PAGE> 10
of Ohio.
Executed by the parties at Cincinnati, Ohio, as of ____________,
1998.
CHEMED CORPORATION
By: /s/ Naomi C. Dallob
- ----------------------------- -------------------------------
Witness Signature, Corporate Title
By: /s/ Megan P. Devlin
- ----------------------------- -------------------------------
Witness Trustee
10
<PAGE> 1
EXHIBIT 10.28 MS. LANEY
SPLIT DOLLAR AGREEMENT
This Agreement, made on June 1, 1998, by and between Chemed
Corporation ("the Corporation"), a Delaware corporation with offices at 2600
Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202, and The Fifth Third
Bank ("the Trustee"), as Trustee of the Irrevocable Trust U/A Sandra Laney dated
June 1, 1998 ("the Trust").
1. PREMISES
1.1 Sandra E. Laney is an employee of the
Corporation and has created the Trust. The Trustee
wishes to insure the life of Ms. Laney for the
benefit and protection of Ms. Laney's family. The
Corporation will help the Trustee provide this
insurance coverage by payment of part of the
premiums under a split dollar arrangement, whereby
the Trustee will be the owner of a life insurance
policy which will be collaterally assigned to the
Corporation as security for amounts the
Corporation will contribute for the premium
payments.
2. APPLICATION FOR INSURANCE
2.1 The Trustee has applied to Phoenix Home
Life Mutual Insurance Company for an Executive
<PAGE> 2
Equity Life Insurance Plan on the life of Ms.
Laney for $390,246 ("Policy").
3. POLICY OWNERSHIP
3.1 The Trustee shall own the Policy and may
exercise all rights of ownership with respect to
it, subject only to the security interest of the
Corporation as expressed in this Agreement and the
collateral assignment of the Policy to the
Corporation.
4. PAYMENT OF PREMIUMS
4.1 On or before the due date of each annual
premium on the Policy, the Corporation will pay to
Phoenix Home Life Mutual Insurance Company an
amount equal to the greater of 80 percent of the
annual premium or the annual premium less the cost
(calculated by application of Internal Revenue
Service Table PS-58) of the portion of the
insurance which the beneficiary or beneficiaries
named by Ms. Laney or their transferee would be
entitled to receive if Ms. Laney died during the
policy year for which the annual premium is paid.
4.2 On or before the due date of each annual
premium on the Policy, the Corporation will pay
2
<PAGE> 3
to Phoenix Home Life Mutual Insurance Company, on
behalf of the Trustee, the remainder of the annual
premium. This payment will constitute compensation
to Ms. Laney in the form of a bonus and will be
considered paid by the Trustee for purposes of the
Assignment (as defined in Article 5).
4.3 These premium advances by the Corporation
shall apply specifically to annual premiums due
under the Policy up to Ms. Laney's age of 65.
However, additional premium advances may be made
by mutual agreement of the parties.
5. ASSIGNMENT OF POLICY
5.1 The Trustee shall collaterally assign the
Policy to the Corporation so as to reflect the
respective interests of the parties under this
Agreement, said collateral assignment
("Assignment") having been executed by the parties
on the date of this Split Dollar Agreement, and
thus made a part of such Policy and this
Agreement.
6. USE OF DIVIDENDS
6.1 The dividends declared by Phoenix Home Life
Mutual Insurance Company on the Policy will be
3
<PAGE> 4
used to purchase Option Term with the balance used
to purchase paid-up insurance.
6.2 The dividend option which is specified in
paragraph 6.1 of this Article will not be
terminated or changed without a conforming
amendment to this Agreement and unless such change
is done in accordance with the provisions of Part
D "Joint Rights" section of the Assignment.
7. SURRENDER OF POLICY
7.1 The Trustee shall have the sole and
exclusive right to surrender the Policy.
7.2 If the Policy is surrendered, the Trustee
shall direct the insurance company in writing to
draw a check payable to the Corporation in an
amount equal to the "Assignee's Cash Value
Rights", as defined within the provisions of Part
A "Definitions" section of the Assignment.
7.3 If there is a delay in the surrender of the
Policy by either party to this Agreement, and if
such delay results in diminished policy values
being available to either party, neither party to
this Agreement shall hold the insurance company
liable for such diminution in Policy
4
<PAGE> 5
values.
8. DEATH CLAIMS
8.1 Upon the death of Ms. Laney the Corporation
shall have an interest in the proceeds of the
Policy equal to the "Assignee's Death Benefit
Share", as defined within the provisions of Part A
"Definitions" section of the Assignment. The
balance of proceeds remaining shall be paid
directly by the insurance company to the
beneficiary or beneficiaries designated in the
Policy.
9. TERMINATION OF AGREEMENT
9.1 This Agreement shall terminate upon surrender
of the Policy by the Trustee or upon thirty (30)
days' written notice of termination given by
either party to the other by registered mail at
the party's last known address. 9.2 Prior to
termination of this Agreement, the Trustee shall
direct the insurance company in writing to draw a
check payable to the Corporation for an amount
equal to the "Assignee's Cash Value Interest", as
defined within the provisions of Part A
"Definitions" section of the Assignment. Upon
receipt of this
5
<PAGE> 6
amount, the Corporation shall release the security
interest of the Corporation expressed in this
Agreement and the Assignment.
10. SPECIAL PROVISIONS
The following provisions are part of this Plan and
are intended to meet the requirements of the
Employee Retirement Income Security Act of 1974:
10.01 - The named fiduciary: The Secretary
of the Company
10.02 - The funding policy under this Plan
is that all premiums on the Policy
be remitted to the Insurer when
due.
10.03 - Direct payment by the Insurer is
the basis of payment of benefits
under this Plan, with those
benefits in turn being based on
the payment of premiums as
provided in the Plan.
10.04 - For claims procedure purposes, the
"Claims Manager" shall be the
Secretary of the Company.
(a) If for any reason a claim for
benefits under this Plan is
6
<PAGE> 7
denied by the Company, the
Claims Manager shall deliver
to the claimant a written
explanation setting forth the
specific reasons for the
denial, pertinent references
to the Plan section on which
the denial is based, such
other data as may be pertinent
and information on the
procedures to be followed by
the claimant in obtaining a
review of his claim, all
written in a manner calculated
to be understood by the
claimant. For this purpose:
(1) The claimant's claim
shall be deemed filed
when presented orally or
in writing to the Claims
Manager.
(2) The Claims Manager's
explanation shall be in
writing delivered to the
7
<PAGE> 8
claimant within 90 days
of the date the claim is
filed.
(b) The claimant shall have 60
days following his/her receipt
of the denial of the claim to
file with the Claims Manager a
written request for review of
the denial. For such review,
the claimant or his/her
representative may submit
pertinent documents and
written issues and comments.
(c) The Claims Manager shall
decide the issue on review and
furnish the claimant with a
copy within 60 days of receipt
of the claimant's request for
review of his/her claim. The
decision on review shall be in
writing and shall include
specific reasons for the
decision written in a manner
calculated to be understood by
8
<PAGE> 9
the claimant, as well as
specific references to the
pertinent Plan provisions on
which the decision is based.
If a copy of the decision is
not so furnished to the
claimant within such 60 days,
the claims shall be deemed
denied on review.
11. AMENDMENT AND BINDING EFFECT
11.1 This embodies all agreements by the parties
made with respect to the Policy. The Agreement
shall not be modified or amended except by a
writing signed by the parties. The Agreement shall
be binding upon the parties, their heirs, legal
representatives, successors and assigns.
12. GOVERNING LAW
12.1 This Agreement shall be subject to and shall
be construed under the laws of the State of Ohio.
Executed by the parties at Cincinnati, Ohio, as of _________,
1998.
9
<PAGE> 10
CHEMED CORPORATION
By: /s/ Naomi C. Dallob
- ---------------------------- ------------------------------
Witness Signature, Corporate Title
By: /s/ Sandra E. Laney
- ---------------------------- ------------------------------
Witness Trustee
10
<PAGE> 1
EXHIBIT 13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- -----------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1998 1997 Change
- -----------------------------------------------------------------------------------------------------
Continuing Operations
<S> <C> <C> <C>
Service Revenues and Sales ............................ $381,283,000 $341,729,000 12 %
Income Before Capital Gains and Acquisition Expenses .. $12,459,000 $9,425,000 32 %
Income Before Acquisition Expenses(a) ................. $20,404,000 $17,077,000 19 %
Income from Continuing Operations(a,b) ................ $19,909,000 $17,077,000 17 %
Net Income(a,b) ............................................ $19,909,000 $30,237,000(c) (34)%
Earnings Per Common Share
Income Before Capital Gains and Acquisition Expenses .. $1.24 $.95 31 %
Income Before Acquisition Expenses(a) ................. $2.03 $1.72 18 %
Income from Continuing Operations(a,b) ................ $1.98 $1.72 15 %
Net Income(a,b) ....................................... $1.98 $3.04(c) (35)%
Average Number of Shares Outstanding .................. 10,058,000 9,940,000 1 %
Dividends Per Share ........................................ $2.12 $2.09 1 %
Number of Shareholders ..................................... 5,271 5,365 (2)%
Number of Employees ........................................ 7,671 6,849 12 %
Return on Average Equity from Continuing Operations ........ 8.9% 7.8% 1.1 pts.
</TABLE>
(a) Amounts include aftertax gains from sales of investments of $7,945,000 or
$.79 per share in 1998 and $7,652,000 or $.77 per share in 1997.
(b) Amounts for 1998 include aftertax pooling-of-interests expenses of $495,000
or $.05 per share relating to two Roto-Rooter acquisitions.
(c) Amounts for 1997 include income from discontinued operations of $13,160,000
or $1.32 per share.
1
<PAGE> 2
FINANCIAL REVIEW
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Statement of Accounting Policies ......... 12
Consolidated Statement of Income ......... 13
Consolidated Balance Sheet ............... 14
Consolidated Statement of Cash Flows ..... 15
Consolidated Statement of Changes
in Stockholders' Equity ............... 16
Consolidated Statement
of Comprehensive Income ............... 16
Notes to Financial Statements ............ 17
Segment Data ............................. 26
Selected Financial Data .................. 28
Supplemental Revenue and Profit
Statistics by Business Segment ........ 30
Unaudited Summary
of Quarterly Results .................. 31
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ............. 32
</TABLE>
[PRICEWATERHOUSECOOPERS LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Chemed Corporation
In our opinion, the consolidated financial statements appearing on pages 12
through 27 of this report present fairly, in all material respects, the
financial position of Chemed Corporation and its subsidiaries ("the Company") at
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Cincinnati, Ohio
February 2, 1999
11
<PAGE> 3
STATEMENT OF ACCOUNTING POLICIES
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Chemed
Corporation and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated.
CASH EQUIVALENTS
Cash equivalents comprise short-term highly liquid investments that have been
purchased within three months of their date of maturity.
OTHER INVESTMENTS
Other investments are recorded at their estimated fair values. In calculating
realized gains and losses on the sales of investments, the
specific-identification method is used to determine the cost of investments
sold.
INVENTORIES
Inventories are stated at the lower of cost or market. For determining the
value of inventories, the first-in, first-out ("FIFO") method is used.
DEPRECIATION AND PROPERTIES AND EQUIPMENT
Depreciation of properties and equipment is computed using the straight-line
method over the estimated useful lives of the assets. Expenditures for
maintenance, repairs, renewals and betterments that do not materially prolong
the useful lives of the assets are expensed as incurred. The cost of property
retired or sold and the related accumulated depreciation are removed from the
accounts, and the resulting gain or loss is reflected currently in income.
INTANGIBLE ASSETS
Goodwill and identifiable intangible assets arise from purchase business
combinations and are amortized using the straight-line method over the estimated
useful lives of the assets, but not in excess of 40 years.
The lives of the Company's gross intangible assets at December 31, 1998,
were (in thousands):
1 - 10 years $ 4,382
11 - 30 years 3,077
31 - 40 years 188,714
The Company periodically makes an estimation and valuation of the future
benefits of its intangible assets based on key financial indicators. If the
projected undiscounted cash flows of a major business unit indicate that
goodwill or identifiable intangible assets have been impaired, a write-down to
fair value is made.
REVENUE RECOGNITION
Revenues received under prepaid contractual service agreements are recognized
on a straight-line basis over the life of the contract. All other service
revenues and sales are recognized when the services are provided or the products
are delivered.
COMPUTATION OF EARNINGS PER SHARE
Earnings per common share are computed using the weighted average number of
shares of capital stock outstanding. Diluted earnings per common share reflect
the dilutive impact of the Company's outstanding stock options and nonvested
stock awards.
EMPLOYEE STOCK OWNERSHIP PLANS
Contributions to the Company's Employee Stock Ownership Plans ("ESOP") are
based on established debt repayment schedules. Shares are allocated to
participants based on the principal and interest payments made during the
period. The Company's policy is to record its ESOP expense by applying the
transition rule under the level-principal amortization concept.
STOCK-BASED COMPENSATION PLANS
The Company uses Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, to account for stock-based compensation.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in prior years' financial statements and data have been
reclassified to conform to the 1998 presentation.
12
<PAGE> 4
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- ------------------------------------------------------------------------------------------------
(in thousands, except per share data)
For the Years Ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTINUING OPERATIONS
Service revenues and sales ......................... $ 381,283 $ 341,729 $ 301,213
--------- --------- ---------
Cost of services provided and goods sold ........... 237,148 212,647 182,773
General and administrative expenses ................ 80,145 76,047 70,223
Selling and marketing expenses ..................... 33,249 24,931 23,383
Depreciation ....................................... 10,649 8,622 7,353
Acquisition expenses (Note 2) ...................... 752 -- --
--------- --------- ---------
Total costs and expenses ........................ 361,943 322,247 283,732
--------- --------- ---------
Income from operations ............................. 19,340 19,482 17,481
Interest expense ................................... (6,793) (10,552) (8,267)
Other income--net (Note 4) ......................... 19,578 18,951 36,069
--------- --------- ---------
Income before income taxes and minority interest 32,125 27,881 45,283
Income taxes (Note 5) .............................. (12,216) (10,804) (17,202)
Minority interest in earnings of subsidiary (Note 2) -- -- (2,964)
--------- --------- ---------
Income from continuing operations .................. 19,909 17,077 25,117
DISCONTINUED OPERATIONS (Note 3) ......................... -- 13,160 7,211
--------- --------- ---------
NET INCOME ............................................... $ 19,909 $ 30,237 $ 32,328
========= ========== =========
EARNINGS PER COMMON SHARE
Income from continuing operations .................. $ 1.98 $ 1.72 $ 2.56
========= ========== =========
Net income ......................................... $ 1.98 $ 3.04 $ 3.30
========= ========== =========
Average number of shares outstanding ............... 10,058 9,940 9,801
========= ========== =========
DILUTED EARNINGS PER COMMON SHARE (Note 13)
Income from continuing operations .................. $ 1.97 $ 1.71 $ 2.54
========= ========== =========
Net income ......................................... $ 1.97 $ 3.02 $ 3.26
========= ========== =========
Average number of shares outstanding ............... 10,100 10,014 9,879
========= ========== =========
</TABLE>
- ------------------------
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
13
<PAGE> 5
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
December 31, 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (Note 6) ............................................... $ 41,358 $ 70,958
Accounts receivable less allowances of $3,601 (1997--$2,626) ..................... 45,260 42,142
Inventories of general merchandise and finished goods ............................ 9,828 8,743
Statutory deposits ............................................................... 16,698 16,137
Current portion of redeemable preferred stock (Note 12) .......................... -- 27,136
Current deferred income taxes (Note 5) ........................................... 6,807 8,076
Other current assets ............................................................. 4,680 4,276
--------- ---------
Total current assets .......................................................... 124,631 177,468
Other investments (Note 12) ......................................................... 55,778 40,406
Properties and equipment, at cost less accumulated depreciation (Note 7) ............ 61,721 53,089
Identifiable intangible assets less accumulated amortization of $5,369 (1997--$4,194) 12,960 13,645
Goodwill less accumulated amortization of $21,879 (1997--$17,677) ................... 155,965 143,003
Other assets ........................................................................ 18,649 21,227
--------- ---------
Total Assets ............................................................ $ 429,704 $ 448,838
========= =========
LIABILITIES
Current liabilities
Accounts payable ................................................................. $ 10,318 $ 8,774
Current portion of long-term debt (Note 8) ....................................... 4,393 5,313
Income taxes (Note 5) ............................................................ 12,563 12,460
Deferred contract revenue ........................................................ 26,571 25,489
Other current liabilities (Note 9) ............................................... 37,253 42,329
--------- ---------
Total current liabilities ..................................................... 91,098 94,365
Long-term debt (Note 8) ............................................................. 80,407 83,720
Other liabilities (Note 9) .......................................................... 34,843 42,633
--------- ---------
Total Liabilities ....................................................... 206,348 220,718
--------- ---------
STOCKHOLDERS' EQUITY
Capital stock--authorized 15,000,000 shares $1 par;
issued 13,605,481 shares (1997--13,019,722 shares) ............................... 13,605 13,020
Paid-in capital ..................................................................... 162,252 158,485
Retained earnings ................................................................... 146,961 148,680
Treasury stock--3,190,757 shares (1997--2,942,205 shares), at cost .................. (97,237) (88,063)
Unearned compensation (Note 10) ..................................................... (20,558) (23,959)
Accumulated other comprehensive income .............................................. 13,262 19,957
Deferred compensation payable in Company stock (Note 10) ............................ 5,071 --
--------- ---------
Total Stockholders' Equity .............................................. 223,356 228,120
--------- ---------
Commitments and contingencies (Notes 9 and 11)
Total Liabilities and Stockholders' Equity .............................. $ 429,704 $ 448,838
========= =========
</TABLE>
- ------------------
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
14
<PAGE> 6
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................ $ 19,909 $ 30,237 $ 32,328
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization ................................... 17,284 15,163 11,778
Gains on sales of investments ................................... (12,589) (12,235) (28,166)
Provision for deferred income taxes (Note 5) .................... 3,426 (1,820) (2,707)
Provision for uncollectible accounts receivable ................. 2,452 702 869
Discontinued operations (Note 3) ................................ -- (13,160) (7,211)
Minority interest in earnings of subsidiaries ................... -- -- 2,964
Changes in operating assets and liabilities, excluding amounts
acquired in business combinations:
Decrease/(increase) in accounts receivable ................ (3,848) (7,327) 162
Decrease/(increase) in statutory reserve requirements ..... (561) 3,825 (1,019)
Increase in inventories and other current assets .......... (938) (762) (914)
Increase/(decrease) in accounts payable, deferred
contract revenue and other current liabilities ......... (4,593) 2,209 6,327
Increase/(decrease) in income taxes (Note 5) .............. 475 7,565 (715)
Other--net ...................................................... (239) (650) (177)
--------- --------- ---------
Net cash provided by continuing operations ...................... 20,778 23,747 13,519
Net cash provided by discontinued operations .................... -- 9,699 23,123
--------- --------- ---------
Net cash provided by operating activities ....................... 20,778 33,446 36,642
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures .................................................. (21,997) (20,117) (10,988)
Proceeds from sales of investments .................................... 14,963 14,060 42,501
Business combinations, net of cash acquired (Note 2) .................. (14,843) (14,669) (9,668)
Net proceeds from discontinued operations (Note 3) .................... (5,607) 154,691 (2,140)
Purchase of Roto-Rooter minority interest ............................. (1,556) (2,734) (96,247)
Investing activities of discontinued operations ....................... -- (6,792) (8,148)
Other--net ............................................................ 3,794 1,514 306
--------- --------- ---------
Net cash provided/(used) by investing activities ................ (25,246) 125,953 (84,384)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ........................................................ (21,674) (21,000) (20,440)
Repayment of long-term debt (Note 8) .................................. (2,891) (96,487) (1,240)
Purchases of treasury stock ........................................... (399) -- (3,653)
Proceeds from issuance of long-term debt (Note 8) ..................... -- 35,000 85,000
Prepayment of ESOP debt (Note 10) ..................................... -- (16,201) --
Decrease in bank notes and loans payable .............................. -- (5,000) (20,000)
Other--net ............................................................ (168) 1,219 1,700
--------- --------- ---------
Net cash provided/(used) by financing activities ................ (25,132) (102,469) 41,367
--------- --------- ---------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ............................ (29,600) 56,930 (6,375)
Cash and cash equivalents at beginning of year .............................. 70,958 14,028 20,403
--------- --------- ---------
Cash and cash equivalents at end of year .................................... $ 41,358 $ 70,958 $ 14,028
========= ========= =========
</TABLE>
- ------------------------
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
15
<PAGE> 7
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------------------
(in thousands, except per share data)
Treasury
Capital Paid-in Retained Stock--
Stock Capital Earnings at Cost
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 .......... $ 12,598 $ 145,290 $ 127,141 $ (79,996)
Net income ............................ -- -- 32,328 --
Dividends paid ($2.08 per share) ...... -- -- (20,440) --
Other comprehensive income ............ -- -- -- --
Decrease in unearned
compensation (Note 10) ............. -- -- -- --
Reclassification of employee
benefit trust assets ............... -- -- -- 5,085
Purchases of treasury stock ........... -- -- -- (3,653)
Stock awards and exercise
of stock options (Note 14) ......... 170 5,382 -- (4,379)
Other ................................. -- (376) 233 --
--------- --------- --------- ---------
Balance at December 31, 1996 .... 12,768 150,296 139,262 (82,943)
Net income ............................ -- -- 30,237 --
Dividends paid ($2.09 per share) ...... -- -- (21,000) --
Other comprehensive income ............ -- -- -- --
Decrease in unearned
compensation (Note 10) ............. -- -- -- --
Stock awards and exercise
of stock options (Note 14) ......... 252 8,558 -- (5,120)
Other ................................. -- (369) 181 --
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1997 .... 13,020 158,485 148,680 (88,063)
NET INCOME ............................ -- -- 19,909 --
DIVIDENDS PAID ($2.12 PER SHARE) ...... -- -- (21,674) --
OTHER COMPREHENSIVE INCOME ............ -- -- -- --
DECREASE IN UNEARNED
COMPENSATION (NOTE 10) ............. -- -- -- --
RECLASSIFICATION OF EMPLOYEE BENEFIT
TRUST LIABILITIES/(ASSETS) (NOTE 10) -- -- -- (5,345)
STOCK AWARDS AND EXERCISE
OF STOCK OPTIONS (NOTE 14) ......... 118 4,266 -- (3,581)
POOLING OF INTERESTS (NOTE 2) ......... 469 200 (104) --
PURCHASES OF TREASURY STOCK ........... -- -- -- (399)
OTHER ................................. (2) (699) 150 151
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1998 .... $ 13,605 $ 162,252 $ 146,961 $ (97,237)
========= ========= ========= ===========
- --------------------------------------------------------------------------------------------
Deferred
Accumulated Compensation
Unearned Other Com- Payable in
Compen- prehensive Company
sation Income Stock Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 .......... $ (33,355) $ 36,979 $ -- $ 208,657
Net income ............................ -- -- -- 32,328
Dividends paid ($2.08 per share) ...... -- -- -- (20,440)
Other comprehensive income ............ -- (10,917) -- (10,917)
Decrease in unearned
compensation (Note 10) ............. 5,801 -- -- 5,801
Reclassification of employee
benefit trust assets ............... -- -- -- 5,085
Purchases of treasury stock ........... -- -- -- (3,653)
Stock awards and exercise
of stock options (Note 14) ......... -- -- -- 1,173
Other ................................. -- -- -- (143)
--------- --------- --------- ---------
Balance at December 31, 1996 .... (27,554) 26,062 -- 217,891
Net income ............................ -- -- -- 30,237
Dividends paid ($2.09 per share) ...... -- -- -- (21,000)
Other comprehensive income ............ -- (6,105) -- (6,105)
Decrease in unearned
compensation (Note 10) ............. 5,788 -- -- 5,788
Stock awards and exercise
of stock options (Note 14) ......... (2,193) -- -- 1,497
Other ................................. -- -- -- (188)
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1997 .... (23,959) 19,957 -- 228,120
NET INCOME ............................ -- -- -- 19,909
DIVIDENDS PAID ($2.12 PER SHARE) ...... -- -- -- (21,674)
OTHER COMPREHENSIVE INCOME ............ -- (6,695) -- (6,695)
DECREASE IN UNEARNED
COMPENSATION (NOTE 10) ............. 3,934 -- -- 3,934
RECLASSIFICATION OF EMPLOYEE BENEFIT
TRUST LIABILITIES/(ASSETS) (NOTE 10) -- -- 5,345 --
STOCK AWARDS AND EXERCISE
OF STOCK OPTIONS (NOTE 14) ......... (533) -- -- 270
POOLING OF INTERESTS (NOTE 2) ......... -- -- -- 565
PURCHASES OF TREASURY STOCK ........... -- -- -- (399)
OTHER ................................. -- -- (274) (674)
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1998 .... $ (20,558) $ 13,262 $ 5,071 $ 223,356
========= ========= ========= ===========
</TABLE>
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- -----------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income ............................................................ $ 19,909 $ 30,237 $ 32,328
-------- -------- --------
Other comprehensive income net of income tax:
Unrealized holding gains arising during the period .............. 1,250 1,547 6,814
Less reclassification adjustment for gains included in net income (7,945) (7,652) (17,731)
-------- -------- --------
Total ........................................................... (6,695) (6,105) (10,917)
-------- -------- --------
Comprehensive income .................................................. $ 13,214 $ 24,132 $ 21,411
======== ======== ========
</TABLE>
- ------------------------
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of these statements.
16
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
1. SEGMENTS AND NATURE OF THE BUSINESS
Chemed is a diversified public corporation with strategic positions in
plumbing, drain cleaning, and heating, ventilating and air conditioning ("HVAC")
services (Roto-Rooter); home healthcare services (Patient Care); and residential
appliance and air conditioning repair services (Service America). Relative
contributions to aftertax segment earnings were 65%, 21%, and 14% in 1998,
respectively.
The business segments are defined as follows:
- The Roto-Rooter segment includes the combined operations of the Roto-Rooter
Group ("Roto-Rooter"), a group of wholly owned businesses that provide
repair and maintenance services to residential and commercial accounts.
Such services include plumbing; sewer, drain and pipe cleaning; and HVAC
services. They are delivered through company-owned, contractor-operated and
franchised locations. Roto-Rooter also manufactures and sells products and
equipment used to provide such services.
- The Patient Care segment includes the consolidated operations of the wholly
owned businesses comprising the Patient Care Group ("Patient Care"), which
offers complete, professional home-healthcare services primarily in the New
York-New Jersey-Connecticut area. Services provided include skilled
nursing; home health aid; physical, speech, respiratory and occupational
therapies; medical social work; and nutrition.
- The Service America segment includes the consolidated operations of the
wholly owned businesses comprising the Service America Systems Group
("Service America"). The group provides HVAC and appliance repair and
maintenance services primarily to residential customers through service
contracts and retail sales. In addition, Service America sells air
conditioning equipment and duct cleaning services.
Substantially all of the Company's service revenues and sales from continuing
operations are generated from business within the United States. No single
customer's balance at December 31, 1998, accounted for more than 10% of the
Company's consolidated accounts receivable balance. In addition, substantially
all of Patient Care's accounts receivable at December 31, 1998 ($24.6 million),
is due from customers located in the northeastern United States.
Management closely monitors accounts receivable balances and has established
policies regarding the extension of credit and compliance therewith. The Patient
Care segment historically has experienced a relatively low level of losses on
the collection of its receivables.
Approximately 37% of Patient Care's net revenues are derived from services
provided directly to patients with coverage under the federal government's
Medicare program or under joint federal-and-state-sponsored Medicaid programs.
In addition, 43% of Patient Care's revenues arise from contracts with other
certified home-health agencies to provide services to recipients under these
entitlement programs.
Financial data by business segment shown on pages 26 and 27 of this annual
report are integral parts of these financial statements.
2. BUSINESS COMBINATIONS
During 1998, 16 purchase business combinations were completed within the
Roto-Rooter, Patient Care and Service America segments for aggregate purchase
prices of $18.6 million in cash and deferred payments. In addition, two
pooling-of-interests business combinations were completed within the Roto-Rooter
segment upon the issuance of 469,560 shares of Chemed Capital Stock.
During 1997, 12 purchase business combinations were completed within the
Patient Care and Roto-Rooter segments for aggregate purchase prices of $12.7
million in cash. Also, during 1996, six purchase business combinations were
completed within the Roto-Rooter and Patient Care segments for aggregate
purchase prices of $3.6 million in cash.
All of the aforementioned Roto-Rooter business combinations involved
operations primarily in the business of providing plumbing repair, HVAC and
drain cleaning services. All of the Patient Care acquisitions involved
operations primarily in the business of providing home healthcare services, and
the Service America acquisition provides HVAC and appliance repair and
maintenance services.
Effective September 1, 1996, the Company acquired all of the outstanding
shares of Roto-Rooter Inc. it did not already own (approximately 2,261,000
shares) for $41 per share in cash. As a result, the Company's ownership interest
in Roto-Rooter increased from 58% to 100%. The aggregate estimated purchase
price of $102,100,000, including acquisition-related expenses, represents a
premium of $67,900,000 (goodwill) over the fair value of the net assets
acquired.
17
<PAGE> 9
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
The unaudited pro forma results of operations, assuming purchase business
combinations completed in 1997 and 1998 were completed on January 1 of the
preceding year, are presented below (in thousands, except per share data):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Continuing operations:
Service revenues
and sales $394,130 $383,204 $331,687
Income from
continuing operations 20,446 20,197 26,259
Earnings per share 2.03 2.03 2.68
Diluted earnings
per share 2.02 2.02 2.65
</TABLE>
The results of business combinations completed in 1996, including the
acquisition of the Roto-Rooter minority interest, were not material to the
Company's results of operations.
The excess of the purchase price over the fair value of the net assets
acquired in purchase business combinations is classified as goodwill. A summary
of net assets acquired in purchase business combinations follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Working capital $ 1,038 $ 2,961 $ 4,292
Identifiable intangible
assets 485 1,105 246
Goodwill 17,294 11,449 3,243
Other assets and
liabilities--net (307) (827) 1,901
-------- -------- --------
Total net assets 18,510 14,688 9,682
Less--cash and
cash equivalents
acquired (767) (19) (14)
--present value
of deferred
payments (2,900) -- --
-------- -------- --------
Net cash used $14,843 $14,669 $ 9,668
======== ======== ========
</TABLE>
The combined impact of the two pooling-of-interests transactions on the
Company's historical consolidated financial statements was not material;
consequently, prior-period and current-year financial statements have not been
restated for these transactions. The results of operations of all business
combinations have been included in the Company's consolidated financial
statements from the effective date of each combination.
In connection with the pooling-of-interests transactions, the Company
incurred expenses aggregating $752,000 ($495,000 aftertax or $.05 per share).
3. DISCONTINUED OPERATIONS
Effective September 20, 1997, the Company sold all of the wholly owned
businesses comprising The Omnia Group ("Omnia") to Banta Corporation for $50.7
million in cash plus deferred payments with a present value of $1.5 million. The
Company recognized a loss of $19.2 million (net of income tax benefit of $1.2
million) on the sale of Omnia.
On September 30, 1997, Chemed's 81%-owned subsidiary, National Sanitary
Supply Company ("National"), was merged with TFBD Inc., a wholly owned
subsidiary of Unisource Worldwide Inc. ("Unisource"). In exchange for its
ownership interest in National, Chemed received $120.2 million in cash. In
addition, Unisource repaid approximately $18.1 million of intercompany
borrowings owed to Chemed by National. The Company recognized a gain of $28.7
million (net of income taxes of $32.4 million) on the sale of National.
Combined operating data related to Omnia and National are presented below (in
thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
Service revenues and sales $285,055 $382,604
========= =========
Income before income taxes $ 5,519 $ 12,102
Income taxes (2,169) (4,664)
Minority interest (281) (827)
--------- ---------
Net income $ 3,069 $ 6,611
========= =========
</TABLE>
Discontinued operations, as shown in the accompanying Consolidated Statement
of Income, comprise the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
Net gain on sale of operations
discontinued in 1997 $ 9,493 $ --
Income from operations
discontinued in 1997 3,069 6,611
Adjustments relating to the
settlement of tax issues arising
from the sale of operations
discontinued in 1994 598 --
Accrual adjustments
relating to operations
discontinued in 1991 -- 600
--------- ---------
Total discontinued operations $13,160 $ 7,211
--------- ---------
</TABLE>
18
<PAGE> 10
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
4. OTHER INCOME--NET
Other income--net comprises the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Gain on sales of
investments $12,589 $12,235 $28,166
Interest income 4,049 3,687 4,505
Dividend income 2,822 2,920 3,110
Other--net 118 109 288
-------- -------- --------
Total other income
--net $19,578 $18,951 $36,069
======== ======== ========
</TABLE>
5. INCOME TAXES
The provision for income taxes comprises the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Continuing operations:
Current
U.S. federal $ 7,457 $ 9,752 $ 17,927
U.S. state and local 1,213 1,985 1,826
Foreign 120 245 156
Deferred
U.S. federal 3,432 (971) (2,710)
Foreign (6) (207) 3
-------- -------- --------
Total $ 12,216 $ 10,804 $ 17,202
-------- -------- --------
Discontinued operations:
Current
U.S. federal $ 237 $ 26,853 $ 4,127
U.S. state and local -- 5,807 (265)
Deferred U.S. federal (237) (54) (136)
-------- -------- --------
Total $ -- $ 32,606 $ 3,726
======== ======== ========
</TABLE>
A summary of the significant temporary differences that give rise to deferred
income tax assets/(liabilities) follows (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
-------- -------
<S> <C> <C>
Accruals related to
discontinued operations $ 6,958 $ 8,005
Deferred compensation 4,598 4,577
Accrued insurance expense 4,491 4,903
Amortization of intangibles 1,827 2,441
Severance payments 1,562 2,123
Allowances for uncollectible
accounts receivable 1,264 559
Other 3,145 4,307
-------- -------
Gross deferred income
tax assets 23,845 26,915
-------- -------
Market valuation of investments (7,097) (10,743)
Accelerated tax depreciation (4,649) (4,572)
Cash to accrual adjustments (1,601) (1,470)
Other (1,756) (1,687)
-------- -------
Gross deferred income
tax liabilities (15,103) (18,472)
-------- -------
Net deferred income
tax assets $ 8,742 $ 8,443
======== =======
</TABLE>
Included in other assets at December 31, 1998, are deferred income tax assets
of $1,935,000 (December 31, 1997--$367,000). Based on the Company's history of
prior operating earnings and its expectations for future growth, management has
determined that the operating income of the Company will, more likely than not,
be sufficient to ensure the full realization of the deferred income tax assets.
The difference between the effective tax rate for continuing operations and
the statutory U.S. federal income tax rate is explained as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal
income tax rate 35.0% 35.0% 35.0%
Nondeductible amortization
of goodwill 4.2 5.0 2.1
State and local income taxes,
less federal income tax
benefit 2.4 4.6 2.6
Domestic dividend exclusion (2.2) (2.6) (1.6)
Tax benefit on dividends
paid to ESOPs (1.3) (2.6) (1.5)
Other--net (.1) (.6) 1.4
----- ---- ----
Effective tax rate 38.0% 38.8% 38.0%
===== ==== ====
</TABLE>
19
<PAGE> 11
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
Income taxes included in the components of other comprehensive income are as
follows (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Unrealized holding gains $ 673 $ 833 $ 3,669
Reclassification adjustment (4,644) (4,583) (10,435)
</TABLE>
The total amount of income taxes paid during the year ended December 31,
1998, was $8,069,000 (1997--$36,849,000; 1996--$26,513,000).
6. CASH EQUIVALENTS
Included in cash and cash equivalents at December 31, 1998, are cash
equivalents in the amount of $38,330,000 (1997--$69,479,000). The cash
equivalents at both dates consist of investments in various money market funds
and repurchase agreements yielding interest at a weighted average rate of 4.8%
in 1998 and 5.9% in 1997.
From time to time throughout the year, the Company invests its excess cash in
repurchase agreements directly with major commercial banks. The collateral is
not physically held by the Company, but the term of such repurchase agreements
is less than 10 days. Investments of significant amounts are spread among a
number of banks, and the amounts invested in each bank are varied constantly.
7. PROPERTIES AND EQUIPMENT
A summary of properties and equipment follows (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Land $ 2,243 $ 2,449
Buildings 16,205 16,033
Transportation equipment 30,246 25,138
Machinery and equipment 24,867 20,728
Furniture and fixtures 30,670 20,248
Projects under construction 1,940 4,672
--------- ---------
Total properties
and equipment 106,171 89,268
Less accumulated depreciation (44,450) (36,179)
--------- ---------
Net properties
and equipment $ 61,721 $ 53,089
========= =========
</TABLE>
8. LONG-TERM DEBT AND LINES OF CREDIT
A summary of the Company's long-term debt follows (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
--------- --------
<S> <C> <C>
Senior notes:
8.15%, due 2000 - 2004 $50,000 $50,000
7.31%, due 2005 - 2009 25,000 25,000
10.67%, due 1998 - 2003 5,000 6,000
Employee Stock Ownership
Plans loan guarantees:
7.50% (1997--7.17%),
due 1998 - 2000 2,494 5,565
Other 2,306 2,468
--------- --------
Subtotal 84,800 89,033
Less current portion (4,393) (5,313)
--------- --------
Long-term debt, less
current portion $80,407 $83,720
--------- --------
</TABLE>
REVOLVING CREDIT AGREEMENT AND LINES OF CREDIT
In June 1996, the Company entered into an amended revolving credit agreement
with Bank of America National Trust and Savings Association to borrow up to
$85,000,000 at any time during the five-year period ending June 20, 2001. Unpaid
principal is due on June 20, 2001. The interest rate is based on various
stipulated market rates of interest.
In addition, the Company had approximately $21,178,000 of unused short-term
lines of credit with various banks at December 31, 1998.
SENIOR NOTES
In March 1997, the Company borrowed $25,000,000 from several insurance
companies. Principal is repayable in five annual installments of $5,000,000
beginning on March 15, 2005, and bears interest at the rate of 7.31% per annum.
Interest is payable on March 15 and September 15 of each year.
In December 1992, the Company borrowed $50,000,000 from several insurance
companies. Principal is repayable in five annual installments of $10,000,000
beginning on December 15, 2000, and bears interest at the rate of 8.15% per
annum. Interest is payable on June 15 and December 15 of each year.
20
<PAGE> 12
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
In November 1988, the Company borrowed $31,000,000 from a consortium of
insurance companies. Of this amount, $21,000,000 was due and paid on November 1,
1993, and annual installments of $1,000,000 were due and paid November 1, 1994
through 1998. The remaining $5,000,000 bears interest at the rate of 10.67% with
annual principal payments of $1,000,000 due on November 1, 1999 through 2003.
Interest is payable on May 1 and November 1 of each year.
EMPLOYEE STOCK OWNERSHIP PLANS ("ESOPS")
LOAN GUARANTEES
The Company has guaranteed ESOP loans made by various institutional lenders.
Payments by the ESOPs, including both principal and interest, are to be made in
quarterly installments over the next two years, the final payments being due on
June 30, 2000. The loans, secured in part by the unallocated shares of the
Company's capital stock held by the ESOP trusts, currently bear interest at an
average annual rate of 7.50% (1997--7.17%). Such rates are subject to
adjustments for changes in interest rates of specified U.S. Treasury
obligations, U.S. federal statutory income tax rates and certain federal tax law
changes.
The market value of the unallocated shares of the Company's capital stock
held by the ESOPs at December 31, 1998, based on that day's closing price of
$33.50, was $12,608,000 as compared with aggregate loan guarantees of
$2,494,000.
OTHER
Other long-term debt has arisen from the assumption of loans in connection
with various acquisitions. Interest rates range from 6% to 9%, and the
obligations are due on various dates through 2007.
The following is a schedule by year of required long-term debt payments as of
December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1999 $ 4,393
2000 11,778
2001 11,202
2002 11,056
2003 11,059
After 2003 35,312
--------
Total long-term debt $84,800
========
</TABLE>
The various loan agreements contain certain covenants which could restrict
the amount of cash dividend payments, net rental payments, treasury stock
purchases and certain other transactions of the Company. The Company does not
anticipate that the restrictions imposed by the agreements will materially
restrict its future operations or ability to pay dividends.
The total amount of interest paid during the year ended December 31, 1998,
was $6,994,000 (1997--$9,949,000; 1996--$10,705,000). The total amount of
interest capitalized during the year ended December 31, 1998, was $616,000.
9. OTHER LIABILITIES
At December 31, 1998, other current liabilities included accrued insurance
liabilities of $12,600,000 and accrued wages of $5,408,000 (1997--$14,143,000
and $6,014,000, respectively).
Included in other liabilities at December 31, 1998, is an accrual of
$4,157,000 for the Company's estimated liability for potential environmental
cleanup and related costs arising from the sale of DuBois Chemicals Inc.
("DuBois"). The Company is contingently liable for additional DuBois-related
environmental cleanup and related costs up to a maximum of $16,890,000. On the
basis of a continuing evaluation of the Company's potential liability by the
Company's environmental adviser, management believes that it is not probable
this additional liability will be paid. Accordingly, no provision for this
contingent liability has been recorded. Although it is not presently possible to
project the timing of payments related to the Company's potential liability for
environmental costs, management believes that any adjustments to its recorded
liability will not materially adversely affect its financial position or results
of operations.
21
<PAGE> 13
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
10. PENSION AND RETIREMENT PLANS
Retirement obligations under various plans cover substantially all full-time
employees who meet age and/or service eligibility requirements. The major plans
providing retirement benefits to the Company's employees are defined
contribution plans.
The Company has established two ESOPs which purchased a total of $56,000,000
of the Company's capital stock. Until December 1997, the ESOPs were financed by
loans from banks and insurance companies, and payment was guaranteed by the
Company. Due to the sales of Omnia and National in 1997, the Company
restructured the ESOPs and internally financed approximately $16.2 million of
the $21.8 million of ESOP loans outstanding at December 31, 1997. Prior to
September 30, 1997, substantially all Chemed headquarters and Omnia employees
and substantially all employees of National not covered by collective bargaining
agreements were participants in the ESOPs. Beginning January 1, 1998, eligible
employees of Roto-Rooter began to participate in the ESOPs. Eligible employees
of Roto-Rooter and Patient Care are also covered by other defined contribution
plans.
Expenses charged to continuing operations for the Company's pension and
profit-sharing plans, ESOPs, excess benefit plans and other similar plans
comprise the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
ESOPs:
Interest expense $ 173 $ 336 $ 216
Compensation cost 1,038 1,426 1,527
Pension, profit-sharing
and other similar plans 3,098 3,152 3,216
------- ------ ------
Total $4,309 $4,914 $4,959
------- ------ ------
Dividends on ESOP shares
used for debt service $1,643 $2,570 $2,676
======= ====== ======
</TABLE>
At December 31, 1998, there were 356,915 allocated shares (December 31,
1997--754,629 shares) and 376,346 unallocated shares (December 31, 1997--452,281
shares) in the ESOP trusts.
The Company has an excess benefit plan for key employees whose participation
in the ESOPs is limited by ERISA rules. Benefits are determined based on
participation in the qualified ESOPs had these ERISA limitations not been in
effect. Prior to September 1, 1998, the value of these benefits was invested in
shares of the Company's stock and in mutual funds, which were held by grantor
trusts. Beginning September 1, 1998, current benefits are invested in only
mutual funds and participants are not permitted to diversify accumulated
benefits which have been invested in shares of the Company's stock. At December
31, 1998, the trusts' assets invested in shares of the Company's capital stock
are included in treasury stock and the corresponding liability is included in a
separate component of shareholders' equity. The assets of these excess benefit
plans and of Roto-Rooter and Service America excess benefits plans, all of which
are invested in various mutual funds, are included in other assets, and the
corresponding liabilities are included in other liabilities. At December 31,
1997, assets of the trusts invested in shares of the Company were included in
other assets and the corresponding liability was included in other liabilities.
At December 31, 1998, these trusts held 147,310 shares of the Company's stock
(December 31, 1997--151,489 shares).
11. LEASE ARRANGEMENTS
The Company, as lessee, has operating leases which cover its corporate office
headquarters; various plant, warehouse and office facilities; office equipment;
and transportation equipment. The remaining terms of these leases range from one
year to nine years, and in most cases, management expects that these leases will
be renewed or replaced by other leases in the normal course of business. All
major plants and warehouses and substantially all equipment are owned by the
Company.
The following is a summary of future minimum rental payments and sublease
rentals to be received under operating leases that have initial or remaining
noncancelable terms in excess of one year at December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1999 $ 8,747
2000 7,861
2001 6,547
2002 5,596
2003 5,054
After 2003 11,292
--------
Total minimum rental payments 45,097
Less minimum sublease rentals (6,120)
--------
Net minimum rental payments $38,977
========
</TABLE>
22
<PAGE> 14
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
Total rental expense incurred under operating leases for continuing
operations follows (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Total rental payments $9,540 $9,993 $8,690
Less sublease rentals (1,602) (2,426) (3,881)
------- ------ ------
Net rental expense $7,938 $7,567 $4,809
======= ====== ======
</TABLE>
12. FINANCIAL INSTRUMENTS
The following methods and assumptions are used in estimating the fair value
of each class of the Company's financial instruments:
- For cash and cash equivalents, accounts receivable, statutory deposits and
accounts payable, the carrying amount is a reasonable estimate of fair
value because of the liquidity and short-term nature of these instruments.
- For other investments and other assets, fair value is based upon quoted
market prices for these or similar securities, if available. Included in
other investments is the Company's investment in privately held Vitas
Healthcare Corporation ("Vitas"), which provides noncurative care to
chronically ill patients. Since it is not considered practicable to obtain
an appraisal of the value of Vitas Common Stock Purchase Warrants
("Warrants"), it has been assumed that the market value of the Warrants is
equal to book value at December 31, 1998, and December 31, 1997
($1,500,000). The value of the Vitas 9% Cumulative Preferred Stock
("Preferred") is based on the present value of the mandatory redemption
payments, using an interest rate of 9.0%, a rate which management believes
is reasonable in view of risk factors attendant to the investment. During
1998, the Company and Vitas agreed to extend the redemption date of the
Preferred to April 1, 2000.
- The fair value of the Company's long-term debt is estimated by discounting
the future cash outlays associated with each debt instrument using
interest rates currently available to the Company for debt issues with
similar terms and remaining maturities.
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
Carrying Fair
December 31, Amount Value
- ----------------------- --------- ---------
<S> <C> <C>
1998
Other investments(a) $55,778 $55,778
Long-term debt 84,800 90,058
1997
Other investments(a) $67,542 $67,542
Long-term debt 89,033 90,880
</TABLE>
(a) Amounts for 1998 include $27,243,000 representing the noncurrent portion
of the Preferred, which is recorded in other investments. Amounts for 1997
include $27,136,000, which was classified in current assets on the balance
sheet.
The Company has classified its investments in equity securities and certain
debt securities as either trading or available-for-sale. The trading category
includes those investments which are held principally for sale in the near term.
All other investments are classified in the available-for-sale category.
Investments included in cash equivalents are considered to be trading
securities, and all other investments are considered to be available-for-sale.
Disclosures regarding the Company's investments, all of which are equity
securities classified as available-for-sale, are summarized below (in
thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
-------- -------
<S> <C> <C>
Aggregate fair value $55,778 $67,542
Gross unrealized holding gains 20,466 30,705
Gross unrealized holding losses 60 --
Amortized cost 35,372 36,837
</TABLE>
The chart below summarizes information with respect to available-for-sale
securities sold during the period (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Proceeds from sale $14,963 $14,060 $42,501
Gross realized gains 12,857 12,248 28,188
Gross realized losses 268 13 22
</TABLE>
23
<PAGE> 15
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
13. EARNINGS PER SHARE
Diluted earnings per share were calculated as follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
Income from Continuing Operations Net Income
-------------------------------------- -------------------------------------
Income Shares Income Income Shares Income
For the Years Ended December 31, (Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
- -------------------------------- ---------- ------------- --------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
1998
EARNINGS $19,909 10,058 $1.98 $19,909 10,058 $1.98
====== ======
NONVESTED STOCK AWARDS -- 37 -- 37
DILUTIVE STOCK OPTIONS -- 5 -- 5
-------- -------- -------- --------
DILUTED EARNINGS $19,909 10,100 $1.97 $19,909 10,100 $1.97
======== ======== ====== ======== ======== ======
1997
Earnings $17,077 9,940 $1.72 $30,237 9,940 $3.04
====== ======
Nonvested stock awards -- 34 -- 34
Dilutive stock options -- 40 -- 40
Subsidiary stock options -- -- (10) --
-------- -------- -------- --------
Diluted earnings $17,077 10,014 $1.71 $30,227 10,014 $3.02
======== ======== ====== ======== ======== ======
1996
Earnings $25,117 9,801 $2.56 $32,328 9,801 $3.30
====== ======
Nonvested stock awards -- 19 -- 19
Dilutive stock options -- 59 -- 59
Subsidiary stock options (48) -- (99) --
-------- -------- -------- --------
Diluted earnings $25,069 9,879 $2.54 $32,229 9,879 $3.26
======== ======== ====== ======== ======== ======
</TABLE>
Earnings per share from discontinued operations were $1.32 and $.74 in 1997
and 1996, respectively. Similarly, diluted earnings per share from discontinued
operations were $1.31 and $.72, respectively.
During 1998, the following options, whose exercise prices were greater than
the average market price during the last six months of the year (and therefore
excluded from the computation of diluted earnings per share), were outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Number of Exercise
Grant Date Options Price
----------- ---------- --------
<S> <C> <C>
May 1997 196,063 $35.94
March 1998 179,600 39.13
May 1996 164,150 38.75
April 1998 14,000 40.53
May 1998 2,000 37.78
</TABLE>
During 1997, all stock options outstanding were dilutive at some time during
the year. During the last seven months of 1996 options to purchase shares of
capital stock at $38.75 per share were outstanding, but were excluded from the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the shares.
14. STOCK INCENTIVE PLANS
The Company has seven Stock Incentive Plans under which 2,650,000 shares of
Chemed Capital Stock are issued to key employees pursuant to the grant of stock
awards and/or options to purchase such shares. All options granted under these
plans provide for a purchase price equal to the market value of the stock at the
date of grant. The latest plan, covering 500,000 shares, was adopted in May
1997.
Under the plan adopted in 1983, both nonstatutory and incentive stock options
have been granted. Incentive stock options granted under the 1983 plan become
exercisable in full six months following the date of the grant; nonstatutory
options granted under the 1983 plan become exercisable in four annual
installments commencing six months after the date of grant.
The other plans are not qualified, restricted or incentive stock option plans
under the Internal Revenue Code. Options generally become exercisable six months
following the date of grant in either three or four equal annual installments.
24
<PAGE> 16
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
Data relating to the Company's stock issued to employees follow:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ------------------- -------------------
Number Number Number
of Average of Average of Average
Shares Price Shares Price Shares Price
------- ------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Stock options:
Outstanding at January 1 ............. 680,013 $34.93 644,025 $33.70 627,666 $31.05
Granted .............................. 199,250 39.23 212,800 35.94 180,900 38.74
Exercised ............................ (93,599) 32.43 (166,712) 31.45 (148,903) 28.61
Forfeited ............................ (13,663) 36.87 (10,100) 34.94 (14,888) 33.96
Expired .............................. -- -- -- -- (750) 36.38
------- -------- --------
Outstanding at December 31 ........... 772,001 36.31 680,013 34.93 644,025 33.70
======= ======== ========
Exercisable at December 31 ........... 482,746 35.29 369,279 34.03 320,467 32.34
======= ======== ========
Stock awards issued ..................... 25,039 39.65 86,149 35.48 20,791 39.63
======= ======== ========
</TABLE>
The weighted average contractual life of options outstanding at December 31,
1998, was 7.7 years. The range of exercise prices for these options was from
$21.94 to $40.53. At December 31, 1998, there were 118,317 shares available for
granting of stock options and awards.
Total compensation cost recognized for stock awards for continuing
operations, including awards granted by Roto-Rooter Inc. (58% owned prior to
September 1996), was $1,309,000 in 1998 (1997--$886,000; 1996--$1,106,000). The
shares of capital stock were issued to key employees and directors at no cost
and generally are restricted as to the transfer of ownership. Restrictions
covering between 7% and 33% of each holder's shares lapse annually.
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, requires the presentation of pro forma data assuming
all options granted after December 31, 1994, are recorded at fair value.
Summarized below are pro forma data developed by applying the Black-Scholes
valuation method to the Company's stock options (in thousands, except per share
data):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Pro forma results:
Net income $19,138 $29,802 $31,887
Earnings per share 1.90 3.00 3.25
Diluted earnings
per share 1.89 2.98 3.22
Per share average
fair value
of options granted 5.21 5.74 6.93
Assumptions:
Average risk-free
interest rate 5.6% 6.6% 6.5%
Expected volatility 19.0 21.4 22.3
Expected life of options 6 yrs. 6 yrs. 6 yrs.
</TABLE>
For the 1998 and 1997 computations, it was assumed that the annual dividend
will be increased $.01 per share per quarter in the fourth quarter of every
other year beginning in 1999. For the 1996 computations, it was assumed that the
dividend will be increased $.01 per share per quarter in the third quarter of
every other year beginning in 1997. These assumptions should not be construed to
be an indication of future dividend amounts to be paid.
In view of the fact that the fair value method of accounting is applied to
option grants only after 1994, the above pro forma data do not reflect the full
impact of applying such fair value method to all of Chemed's stock options.
25
<PAGE> 17
<TABLE>
<CAPTION>
SEGMENT DATA
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES BY TYPE OF SERVICE
Roto-Rooter
Plumbing repair and maintenance .................. $ 80,150 $ 59,986 $ 51,977
Sewer and drain cleaning ......................... 75,599 66,843 65,153
HVAC repair and maintenance ...................... 12,164 5,334 2,234
Industrial and municipal sewer and drain cleaning 10,527 9,028 8,258
Other products and services ...................... 13,610 12,692 12,541
--------- --------- ---------
Total Roto-Rooter .......................... 192,050 153,883 140,163
--------- --------- ---------
Patient Care
Home health aides ................................ 85,732 86,038 74,061
Registered nurses ................................ 16,151 18,114 10,848
Live-in aides .................................... 9,618 9,707 8,868
Other services ................................... 6,781 7,284 5,788
--------- --------- ---------
Total Patient Care ......................... 118,282 121,143 99,565
--------- --------- ---------
Service America
Repair service contracts ......................... 56,753 54,318 53,056
Demand repair services ........................... 14,198 12,385 8,429
--------- --------- ---------
Total Service America ...................... 70,951 66,703 61,485
--------- --------- ---------
Total service revenues and sales ..... $ 381,283 $ 341,729 $ 301,213
========= ========= =========
AFTERTAX EARNINGS BY SEGMENT(a)
Roto-Rooter ...................................... $ 10,530 $ 9,491 $ 8,002
Patient Care ..................................... 3,432 3,212 2,881
Service America .................................. 2,286 2,196 1,651
--------- --------- ---------
Total segment earnings ..................... 16,248 14,899 12,534
Corporate
Gains on sales of investments .............. 7,945 7,652 17,731
Overhead ................................... (4,955) (4,794) (4,682)
Net investing and financing income/(expense) 1,408 (1,482) (1,112)
Acquisition expenses ....................... (495) -- --
Discontinued operations .................... -- 13,160 7,211
Other ...................................... (242) 802 646
--------- --------- ---------
Net income ........................... $ 19,909 $ 30,237 $ 32,328
========= ========= =========
INTEREST INCOME
Roto-Rooter ...................................... $ 191 $ 24 $ 64
Patient Care ..................................... 13 48 --
Service America .................................. 1,126 1,029 881
--------- --------- ---------
Subtotal ................................... 1,330 1,101 945
Corporate ........................................ 2,913 2,687 3,578
Intercompany eliminations ........................ (194) (101) (18)
--------- --------- ---------
Total interest income ................ $ 4,049 $ 3,687 $ 4,505
========= ========= =========
</TABLE>
26
<PAGE> 18
<TABLE>
<CAPTION>
SEGMENT DATA (continued)
- ----------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST EXPENSE
Roto-Rooter ................................... $ 957 $ 145 $ 108
Patient Care .................................. 536 613 317
Service America ............................... -- -- --
--------- --------- ---------
Subtotal ................................ 1,493 758 425
Corporate ..................................... 6,759 10,351 8,159
Intercompany eliminations ..................... (1,459) (557) (317)
--------- --------- ---------
Total interest expense ............ $ 6,793 $ 10,552 $ 8,267
========= ========= =========
INCOME TAX PROVISION
Roto-Rooter ................................... $ 8,744 $ 7,684 $ 6,569
Patient Care .................................. 1,144 1,764 2,395
Service America ............................... 2,405 2,309 1,752
--------- --------- ---------
Subtotal ................................ 12,293 11,757 10,716
Corporate ..................................... (77) (953) 6,486
--------- --------- ---------
Total income tax provision ........ $ 12,216 $ 10,804 $ 17,202
========= ========= =========
IDENTIFIABLE ASSETS
Roto-Rooter ................................... $ 175,036 $ 148,352 $ 135,437
Patient Care .................................. 67,961 63,154 47,494
Service America ............................... 71,049 70,266 72,908
--------- --------- ---------
Total identifiable assets ............... 314,046 281,772 255,839
Corporate assets(b) ........................... 115,658 167,066 113,384
Discontinued operations ....................... -- -- 140,138
--------- --------- ---------
Total assets ...................... $ 429,704 $ 448,838 $ 509,361
========= ========= =========
ADDITIONS TO LONG-LIVED ASSETS(c)
Roto-Rooter ................................... $ 27,969 $ 16,965 $ 74,512
Patient Care .................................. 9,744 8,765 4,809
Service America ............................... 3,294 6,032 2,156
--------- --------- ---------
Subtotal ................................ 41,007 31,762 81,477
Corporate assets .............................. 506 2,262 1,584
--------- --------- ---------
Total additions ................... $ 41,513 $ 34,024 $ 83,061
========= ========= =========
DEPRECIATION AND AMORTIZATION(d)
Roto-Rooter ................................... $ 9,378 $ 7,387 $ 5,299
Patient Care .................................. 2,160 1,951 1,609
Service America ............................... 3,726 3,775 3,533
--------- --------- ---------
Subtotal ................................ 15,264 13,113 10,441
Corporate assets(b) ........................... 2,020 2,050 1,337
--------- --------- ---------
Total depreciation and amortization $ 17,284 $ 15,163 $ 11,778
========= ========= =========
</TABLE>
(a) Aftertax earnings represent the net income of the businesses, excluding
acquisition expenses.
(b) Corporate assets consist primarily of cash and cash equivalents, marketable
securities, properties and equipment and other investments.
(c) Long-lived assets include goodwill, identifiable intangible assets and
properties and equipment.
(d) Depreciation and amortization include amortization of goodwill, identifiable
intangible assets and other assets.
27
<PAGE> 19
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------------------
(in thousands, except per share data, employee numbers,
footnote data, ratios and percentages) 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
SUMMARY OF OPERATIONS
Continuing operations
Service revenues and sales ................................. $381,283 $341,729
Gross profit ............................................... 144,135 129,082
Depreciation ............................................... 10,649 8,622
Income from operations ..................................... 19,340 19,482
Income from continuing operations .......................... 19,909 17,077
Discontinued operations(a) .................................... -- 13,160
Cumulative effect of a change in accounting principle ......... -- --
Net income .................................................... 19,909 30,237
Earnings per common share:
Income from continuing operations .......................... $ 1.98 $ 1.72
Net income ................................................. 1.98 3.04
Average number of shares outstanding ....................... 10,058 9,940
Diluted earnings per common share:
Income from continuing operations .......................... $ 1.97 $ 1.71
Net income ................................................. 1.97 3.02
Average number of shares outstanding ....................... 10,100 10,014
Cash dividends per share ...................................... $ 2.12 $ 2.09
FINANCIAL POSITION--YEAR-END
Cash, cash equivalents and marketable securities .............. $ 41,358 $ 70,958
Working capital ............................................... 33,533 83,103
Properties and equipment, at cost less accumulated depreciation 61,721 53,089
Total assets .................................................. 429,704 448,838
Long-term debt ................................................ 80,407 83,720
Stockholders' equity .......................................... 223,356 228,120
Book value per share .......................................... $ 21.45 $ 22.64
Book value per share assuming dilution ........................ 21.36 22.54
OTHER STATISTICS--CONTINUING OPERATIONS
Net cash provided by continuing operations .................... $ 20,778 $ 23,747
Capital expenditures .......................................... 21,997 20,117
Number of employees(b) ........................................ 7,671 6,849
Number of service and sales representatives ................... 5,759 5,101
Dividend payout ratio(c) ...................................... 107.1% 68.8%
Debt to total capital ratio ................................... 27.5 28.1
Return on average equity(c) ................................... 8.9 13.8
Return on average total capital employed(c) ................... 7.7 9.9
Current ratio ................................................. 1.37 1.88
</TABLE>
- -----------------------
(a) Discontinued operations include National Sanitary Supply Company and The
Omnia Group, discontinued in 1997; accrual adjustments in 1997 related to
the gain on the sale of Omnicare Inc. ("Omnicare"); Omnicare, discontinued
in 1994; accrual adjustments from 1992 through 1996 related to the gain on
the sale of DuBois Chemicals Inc. ("DuBois"); DuBois, sold in 1991; and
adjustments to accruals in 1991 related to operations discontinued in
1986.
(b) Numbers reflect full-time-equivalent employees.
(c) These computations are based on net income and, with respect to return on
average capital employed, various related adjustments.
28
<PAGE> 20
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 301,213 $ 270,449 $ 240,994 $ 136,428 $ 104,688 $ 84,774
118,440 103,412 90,189 54,325 44,750 39,034
7,353 6,505 5,833 3,914 2,854 2,811
17,481 14,102 10,703 7,388 4,599 996
25,117 11,715 7,027 7,563 8,660 6,788
7,211 11,467 36,895 10,266 6,991 46,179
-- -- -- 1,651 -- --
32,328 23,182 43,922 19,480 15,651 52,967
$ 2.56 $ 1.19 $ .71 $ .78 $ .89 $ .68
3.30 2.36 4.47 2.00 1.60 5.27
9,801 9,830 9,830 9,756 9,783 10,043
$ 2.54 $ 1.18 $ .70 $ .76 $ .88 $ .67
3.26 2.33 4.42 1.97 1.59 5.27
9,879 9,898 9,907 9,824 9,838 10,055
$ 2.08 $ 2.06 $ 2.04 $ 2.01 $ 2.00 $ 1.97
$ 14,028 $ 30,497 $ 24,866 $ 20,133 $ 51,142 $ 82,994
8,996 7,159 (14,573) (29,070) 5,574 48,991
40,661 37,860 35,677 33,873 26,419 25,951
509,361 476,732 453,801 385,922 363,960 330,712
158,140 85,317 92,033 97,906 103,580 77,007
217,891 208,657 186,320 137,151 133,511 139,407
$ 21.89 $ 21.18 $ 18.89 $ 14.00 $ 13.68 $ 14.08
21.76 21.06 18.76 13.91 13.62 14.07
$ 13,519 $ 5,385 $ 13,378 $ 6,029 $ 8,583 $ 10,828
10,988 9,219 9,606 7,420 3,835 7,008
5,884 5,278 4,497 2,711 1,726 1,666
4,315 3,835 3,203 1,832 1,090 1,069
63.0% 87.3% 45.6% 101.0% 125.0% 37.4%
44.6 32.8 36.6 44.2 45.2 34.8
15.3 11.9 28.4 14.3 11.6 42.5
10.9 9.3 16.4 9.7 8.7 24.4
1.10 1.07 .86 .68 1.08 1.82
</TABLE>
29
<PAGE> 21
SUPPLEMENTAL REVENUE AND PROFIT STATISTICS BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands, except percentages and footnote data)
Continuing Operations
- --------------------------------------------------------------------------------------------------------------------------------
Roto- Patient Service
Rooter Care America Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERVICE REVENUES AND SALES
1998 ........................................... $192,050 $118,282 $ 70,951 $381,283
1997 ........................................... 153,883 121,143 66,703 341,729
1996 ........................................... 140,163 99,565 61,485 301,213
1995 ........................................... 121,999 90,727 57,723 270,449
1994 ........................................... 109,098 69,064 62,832 240,994
1993 ........................................... 95,555 -- 40,873 136,428
1992 ........................................... 86,185 -- 18,503 104,688
1991 ........................................... 79,217 -- 5,557 84,774
% OF TOTAL
1998 ........................................... 50% 31% 19% 100%
1991 ........................................... 93 -- 7 100
OPERATING PROFIT(A)
1998 ........................................... $ 19,244(b) $ 5,104 $ 3,491 $ 27,839
1997 ........................................... 17,256 5,541 3,443 26,240
1996 ........................................... 15,707 5,592 2,503 23,802
1995 ........................................... 13,134(c) 4,923 1,906 19,963
1994 ........................................... 12,071 2,772 3,061 17,904
1993 ........................................... 9,854 -- 3,708 13,562
1992 ........................................... 8,626 -- 1,841 10,467
1991 ........................................... 7,328 -- 581 7,909
% OF TOTAL
1998 ........................................... 69% 18% 13% 100%
1991 ........................................... 93 -- 7 100
</TABLE>
(a) Operating profit is total service revenues and sales less operating
expenses and includes 100% of all consolidated operations. In computing
operating profit, none of the following items has been added or deducted:
general corporate expenses, interest expense, and other income--net. Data
for 1991 through 1997 were restated to reflect a corporate overhead
allocation method consistent with the one used in 1998.
(b) Amount includes $752,000 of expenses incurred in connection with
pooling-of-interest business combinations in 1998.
(c) Amount includes nonrecurring charges of $538,000 incurred as a result of
discussions related to Chemed's proposal to acquire the 42% minority
interest in Roto-Rooter.
30
<PAGE> 22
<TABLE>
<CAPTION>
UNAUDITED SUMMARY OF QUARTERLY RESULTS
Chemed Corporation and Subsidiary Companies
- ----------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
First Second Third Fourth Total
1998 Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total service revenues and sales.......... $ 88,412 $ 94,943 $ 96,517 $ 101,411 $ 381,283
========= ========= ========= ========= =========
Gross profit ............................. $ 32,536 $ 36,582 $ 36,695 $ 38,322 $ 144,135
========= ========= ========= ========= =========
Income from operations ................... $ 3,745 $ 5,246 $ 5,891 $ 4,458 $ 19,340
Interest expense ......................... (1,758) (1,841) (1,798) (1,396) (6,793)
Other income--net ........................ 8,333 5,612 3,691 1,942 19,578
--------- --------- --------- --------- ---------
Income before income taxes ............ 10,320 9,017 7,784 5,004 32,125
Income taxes ............................. (4,069) (3,451) (3,092) (1,604) (12,216)
--------- --------- --------- --------- ---------
Net Income ............................... $ 6,251 $ 5,566 $ 4,692 $ 3,400 $ 19,909
========= ========= ========= ========= =========
Earnings per Common Share
Net Income ............................ $ .63 $ .56 $ .47 $ .33 $ 1.98
========= ========= ========= ========= =========
Average Number of Shares Outstanding .. 9,989 10,005 10,003 10,231 10,058
========= ========= ========= ========= =========
Diluted Earnings per Common Share
Net Income ............................ $ .62 $ .55 $ .47 $ .33 $ 1.97
========= ========= ========= ========= =========
Average Number of Shares Outstanding .. 10,090 10,057 10,032 10,274 10,100
========= ========= ========= ========= =========
1997
- ----------------------------------------------------------------------------------------------------------
Continuing Operations
Total service revenues and sales ... $ 77,657 $ 86,019 $ 87,434 $ 90,619 $ 341,729
========= ========= ========= ========= =========
Gross profit ....................... $ 29,634 $ 31,735 $ 33,131 $ 34,582 $ 129,082
========= ========= ========= ========= =========
Income from operations ............. $ 4,217 $ 4,617 $ 5,226 $ 5,422 $ 19,482
Interest expense ................... (2,637) (2,915) (2,924) (2,076) (10,552)
Other income--net .................. 10,392 4,482 1,298 2,779 18,951
--------- --------- --------- --------- ---------
Income before income taxes ...... 11,972 6,184 3,600 6,125 27,881
Income taxes ....................... (4,595) (2,240) (1,494) (2,475) (10,804)
--------- --------- --------- --------- ---------
Income from continuing operations .. 7,377 3,944 2,106 3,650 17,077
Discontinued Operations .................. 1,110 2,348 9,702 -- 13,160
--------- --------- --------- --------- ---------
Net Income ............................... $ 8,487 $ 6,292 $ 11,808 $ 3,650 $ 30,237
========= ========= ========= ========= =========
Earnings Per Common Share
Income from continuing operations .. $ .74 $ .40 $ .21 $ .37 $ 1.72
========= ========= ========= ========= =========
Net income ......................... $ .85 $ .63 $ 1.19 $ .37 $ 3.04
========= ========= ========= ========= =========
Average number of shares outstanding 9,928 9,930 9,937 9,965 9,940
========= ========= ========= ========= =========
Diluted Earnings Per Common Share
Income from continuing operations .. $ .74 $ .39 $ .21 $ .36 $ 1.71
========= ========= ========= ========= =========
Net income ......................... $ .85 $ .63 $ 1.18 $ .36 $ 3.02
========= ========= ========= ========= =========
Average number of shares outstanding 9,990 9,988 10,023 10,081 10,014
========= ========= ========= ========= =========
</TABLE>
31
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Significant factors affecting the Company's consolidated cash flows during
1998 and financial position at December 31, 1998, include the following:
- Capital expenditures totaled $22.0 million;
- Operations generated cash of $20.8 million;
- Sales of investments generated cash proceeds of $15.0 million; and
- The Company used $14.8 million of cash to finance purchase business
combinations.
The ratio of total debt to total capital was approximately 28% at the end of
both 1998 and 1997. The Company's current ratio was 1.4 at December 31, 1998, as
compared with 1.9 at December 31, 1997. This decline is attributable primarily
to the reclassification of the Company's investment in redeemable preferred
stock ($27.1 million) from current assets to noncurrent assets during 1998 and
the expenditure of $14.8 million of cash on business combinations during the
year.
The Company had $106.2 million of unused lines of credit with various banks
at December 31, 1998.
CASH FLOW
The Company's cash flows for 1998 and 1997 are summarized as follows (in
millions):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------
1998 1997
------- -------
<S> <C> <C>
Cash from continuing operations $ 20.8 $ 23.8
Proceeds from sales of investments 15.0 14.1
Cash dividends (21.7) (21.0)
------- -------
Cash provided after cash dividends 14.1 16.9
Capital expenditures (22.0) (20.1)
Business combinations (14.8) (14.7)
Net proceeds/(uses) from
discontinued operations (5.6) 154.7
Repayment of long-term debt
(excluding ESOP debt obligations) (2.9) (66.5)
Retirement of ESOP debt -- (16.2)
Net operating, investing and
financing activities of
discontinued operations -- 3.5
Other--net 1.6 (.7)
------- -------
Increase/(decrease) in cash
and cash equivalents $(29.6) $ 56.9
------- -------
</TABLE>
For 1998, the cash provided by operations and sales of investments, less cash
dividend payments, was $14.1 million as compared with $16.9 million in 1997.
This excess was available to assist in funding the Company's capital expenditure
requirements. The capital expenditures during the past two years have been
higher than historical levels, and it is projected that the level of capital
expenditures in 1999 and later years will decline into the range of $13 million
to $16 million annually. The increase in recent years was due to Service
America's purchase of an office/warehouse facility in 1997 and
larger-than-normal expenditures on service trucks by Roto-Rooter in 1998.
Based on recent cash flow and earnings projections, it is expected that cash
flow from operations will continue to be supplemented by sales of investments in
1999 (and to a lesser extent in later years) to fund the dividend and ordinary
capital expenditure requirements of the Company's operations. Management views
the Company's investment portfolio as a potential source of cash during the
interim period in which the Company's dividend exceeds its core earnings from
continuing operations (i.e., excluding gains on sales of investments).
Unrealized aftertax gains on the Company's available-for-sale investments
amounted to $13.3 million at December 31, 1998 ($20.0 million at December 31,
1997). In February 1999, the Board of Directors declared a quarterly dividend of
$.53 per share of capital stock, payable in March 1999 (the same rate paid in
the first quarter of 1998). The dividend rate is set each quarter with a
long-term perspective, taking into consideration the Company's financial
position, earnings and cash flow, as well as interest rates, market conditions
and other economic factors.
COMMITMENTS AND CONTINGENCIES
In connection with the sale of DuBois Chemicals Inc. ("DuBois"), the Company
provided allowances and accruals relating to several long-term costs, including
income tax matters, lease commitments and environmental costs. In the aggregate,
the Company believes these allowances and accruals are adequate as of December
31, 1998.
Based on an updated assessment of Chemed's environmental-related liability
under the DuBois sale agreement, Chemed's adviser has estimated Chemed's
liability to be $4.2 million. As of December 31, 1998, the Company is
contingently liable for additional cleanup and related costs up to a maximum of
$16.9 million, for which no provision has been recorded.
32
<PAGE> 24
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
The Company's various loan agreements and guarantees of indebtedness contain
certain restrictive covenants; however, management believes that such covenants
will not adversely affect the operations of the Company. Under the most
restrictive of these covenants, the Company projects the amount of additional
debt that it can incur will range from $30 million to $70 million during 1999.
Since 1991, the Company has carried an investment in the mandatorily
redeemable preferred stock ($27 million par value) of Vitas Healthcare
Corporation ("Vitas"), a privately held provider of hospice services to the
terminally ill. During 1998, Vitas and the Company agreed to extend the
redemption date on the preferred stock to April 1, 2000, to facilitate Vitas'
long-term financing alternatives. Vitas has recorded increased operating profits
and net income during its two most recent fiscal years. Also during 1998, Vitas
made payments of all preferred dividends in arrears ($1.2 million at December
31, 1997) with the result that, as of December 31, 1998, all preferred dividends
due and payable have been paid by Vitas. The preferred dividend due January 15,
1999 ($1.2 million), was paid in January 1999. On the basis of information
currently available, management believes its investment in Vitas is fully
recoverable and that no impairment exists.
It is management's opinion that the Company has no long-range commitments
that would have a significant impact on its liquidity, financial condition or
the results of its operations. Due to the nature of the environmental
liabilities, it is not possible to forecast the timing of the cash payments for
these potential liabilities. Based on the Company's available credit lines,
sources of borrowing and liquid investments, management believes its sources of
capital and liquidity are satisfactory for the Company's needs for the
foreseeable future.
RESULTS OF OPERATIONS
Set forth below by business segment are the growth in service revenues and
sales and the aftertax earnings margin:
<TABLE>
<CAPTION>
Percent Increase/(Decrease)
in Service Revenues and Sales
-----------------------------
1998 1997
vs. 1997 vs. 1996
-------- --------
<S> <C> <C>
Roto-Rooter 25% 10%
Patient Care (2) 22
Service America 6 8
Total 12 13
</TABLE>
<TABLE>
<CAPTION>
Aftertax Earnings
as a Percent of
Service Revenues and Sales
(Aftertax Margin)
------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Roto-Rooter 5.5% 6.2% 5.7%
Patient Care 2.9 2.7 2.9
Service America 3.2 3.3 2.7
Total 4.3 4.4 4.2
</TABLE>
1998 VERSUS 1997
The Roto-Rooter segment recorded service revenues and sales of $192,050,000
during 1998, an increase of 25% versus revenues of $153,883,000 in 1997. This
growth was attributable primarily to revenue increases of 34% and 13%,
respectively, in Roto-Rooter's plumbing and sewer and drain cleaning businesses
for 1998. Excluding businesses acquired in 1997 and 1998, this segment's total
revenues for 1998 increased 10% versus revenues recorded in 1997. Roto-Rooter
recorded an 11% increase in aftertax earnings for 1998 versus 1997, despite a
decline in its aftertax margin from 6.2% in 1997 to 5.5% in 1998. This margin
decline is due primarily to a lower gross margin in 1998, partially offset by
lower general and administrative expenses as a percentage of total revenues. The
lower gross margin is due primarily to a shift in product mix to plumbing repair
and HVAC services.
33
<PAGE> 25
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
Revenues of the Patient Care segment declined 2% from $121,143,000 in 1997 to
$118,282,000 in 1998. Excluding the revenues of businesses acquired in 1997 and
1998, revenues for 1998 declined 8% versus revenues for 1997. These revenue
declines were anticipated and were attributable primarily to the implementation
of the Medicare provisions of the Balanced Budget Act of 1997. Good expense
control nearly offset the decline in Patient Care's gross margin and thus
contributed to the 7% increase in Patient Care's aftertax earnings for 1998. In
addition, a favorable income tax adjustment relating to the settlement of
certain state tax issues in 1998 aided in increasing Patient Care's aftertax
margin from 2.7% in 1997 to 2.9% in 1998.
The Service America segment recorded total revenues of $70,951,000 during
1998, an increase of 6% versus revenues of $66,703,000 recorded in 1997.
Aftertax earnings for 1998 increased 4% versus aftertax earnings for 1997. The
aftertax margin of this segment was 3.2% in 1998 as compared with 3.3% in 1997.
Income from operations declined from $19,482,000 in 1997 to $19,340,000 in
1998, primarily as a result of incurring $752,000 of acquisition expenses in
connection with pooling-of-interests transactions in 1998.
Interest expense for 1998 totaled $6,793,000, a decline of $3,759,000 versus
expense of $10,552,000 recorded in 1997, largely as a result of the reduction of
the Company's long-term debt.
Other income increased from $18,951,000 in 1997 to $19,578,000 in 1998,
primarily as a result of higher gains on the sales of investments combined with
higher interest income in 1998.
The Company's effective income tax rate was 38.0% in 1998 as compared with
38.8% in 1997.
Income from continuing operations increased from $17,077,000 ($1.72 per
share) in 1997 to $19,909,000 ($1.98 per share) in 1998. Excluding acquisition
expenses in 1998 ($495,000, or $.05 per share) and realized investment gains
($7,945,000 in 1998 and $7,652,000 in 1997), income from continuing operations
increased 32% from $9,425,000 in 1997 ($.95 per share) to $12,459,000 ($1.24 per
share) in 1998.
Net income for 1998 was $19,909,000 ($1.98 per share) and included
acquisition expenses of $495,000 ($.05 per share). Net income for 1997 was
$30,237,000 ($3.04 per share) and included $13,160,000 ($1.32 per share) from
discontinued operations (primarily related to Omnia and National).
1997 VERSUS 1996
The Roto-Rooter segment recorded service revenues and sales of $153,883,000
during 1997, an increase of 10% versus revenues of $140,163,000 in 1996. This
growth was attributable primarily to revenue increases of 15% and 3%,
respectively, in Roto-Rooter's plumbing and sewer and drain cleaning businesses
for the 1997 period. Aftertax earnings for 1997 increased 19% versus earnings in
1996 as Roto-Rooter's aftertax margin increased from 5.7% in 1996 to 6.2% in
1997. This margin increase was due largely to a decline in general and
administrative expenses as a percent of revenues in 1997 versus 1996.
Revenues of the Patient Care segment increased 22% from $99,565,000 in 1996
to $121,143,000 in 1997. Excluding the revenues of Priority Care, acquired
effective April 1, 1997, revenues for 1997 increased 5% versus 1996. Aftertax
earnings of Patient Care increased 11% in 1997 versus earnings for 1996. The
aftertax margin of this segment declined from 2.9% in 1996 to 2.7% in 1997,
primarily due to a reduction in gross margins as a result of market pricing
pressures.
The Service America segment recorded total revenues of $66,703,000 during
1997, an increase of 8% versus revenues of $61,485,000 for 1996. Service
America's aftertax earnings increased 33% in 1997 versus 1996, largely as the
result of lower general and administrative expenses as a percent of revenues and
improved pricing on service contracts.
Income from operations increased from $17,481,000 in 1996 to $19,482,000 in
1997, primarily as a result of operating profit increases in the Roto-Rooter and
Service America segments.
Interest expense for 1997 totaled $10,552,000, an increase of $2,285,000
versus expense of $8,267,000 recorded in 1996. This increase was attributable to
additional debt incurred to finance Chemed's purchase of the Roto-Rooter
minority interest in September 1996. Most of this debt was retired in September
1997 with the proceeds from the sales of Omnia and National.
Other income declined from $36,069,000 in 1996 to $18,951,000 in 1997,
primarily as a result of lower gains on the sales of investments in 1997.
The Company's effective income tax rate was 38.8% in 1997 as compared with
38.0% in 1996. The increase is primarily attributable to an increase in
nondeductible goodwill amortization and state and local income taxes.
Minority interest in earnings of the subsidiary declined from $2,964,000 in
1996 to nil in 1997, as the result of the purchase of the Roto-Rooter minority
interest in 1996.
34
<PAGE> 26
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
Income from continuing operations declined from $25,117,000 ($2.56 per share)
in 1996 to $17,077,000 ($1.72 per share) in 1997. Excluding realized investment
gains ($7,652,000 in 1997 and $17,731,000 in 1996), income from continuing
operations increased 28% from $7,386,000 in 1996 ($.75 per share) to $9,425,000
($.95 per share) in 1997.
Net income for 1997 was $30,237,000 ($3.04 per share) and included
discontinued operations of $13,160,000 (primarily the operating results and the
net gain on the sales of Omnia and National). Net income for 1996 was
$32,328,000 ($3.30 per share) and included $7,211,000 from discontinued
operations (primarily the operating results of Omnia and National).
YEAR 2000
The Company's Year 2000 ("Y2K") Project ("Project") is addressing the issue
of computer systems and hardware being unable to distinguish between the years
1900 and 2000.
Mission-critical systems of the Roto-Rooter and Service America segments are
currently Y2K-ready, as is the majority of Patient Care's internal systems. It
is anticipated that the remainder of Patient Care's systems will be Y2K-ready by
the end of the third quarter of 1999. Systems currently not Y2K-ready are being
upgraded or replaced by software developed in-house and, in some instances, by
installing upgrades of off-the-shelf software. Critical systems at the Company's
administrative headquarters are believed to be Y2K-ready. Verification of that
readiness will be performed during the first half of 1999.
Through the end of 1998, expenditures for the Project are estimated to have
been less than $100,000, and it is anticipated that expenditures for 1999 will
be in the range of $100,000 to $200,000.
As a part of the Project, Patient Care and Service America are contacting
major trading partners to ascertain that their systems are Y2K-ready or will be
ready within an acceptable time frame. Due to the service-oriented, retail
nature of its business, Roto-Rooter is not contacting trading partners, but is
responding to its vendors' requests for information regarding Y2K-readiness.
Patient Care is beginning its evaluation of its trading partners' readiness,
and not all significant partners have been contacted or have responded.
Approximately 80% of Patient Care's revenues are either directly or indirectly
dependent upon the electronic processing of Medicare and Medicaid claims through
fiscal intermediaries of the Health Care Financing Administration ("HCFA").
Patient Care and the Medicare intermediaries have modified their systems to be
Y2K-ready and those systems are now in use. During 1998, Medicaid intermediaries
orally represented to management that their systems will be Y2K-ready prior to
January 1, 2000. Medicaid-related revenues accounted for $26.1 million of
Patient Care's revenues in 1998.
Should the Medicaid fiscal intermediaries, HCFA or Patient Care's major
customers fail to become Y2K-ready on a timely basis, Patient Care could
experience a significant slowing of the processing and payment of a substantial
portion of its revenues.
To date, the Company is in the beginning stages of developing a formalized
contingency plan to continue operating should it experience the failure of
systems due to Y2K issues or should major trading partners experience such a
failure. Contingency plans currently include the manual and/or semi-manual
processing of transactions. The need for a more detailed, formalized plan will
be evaluated later in the year when an updated evaluation of Y2K-readiness is
available.
While the Company currently anticipates its mission-critical systems will
continue to operate after December 31, 1999, there can be no assurance that the
failure of systems outside its control or immediate sphere of influence will not
materially impact its operations.
REGULATORY ENVIRONMENT
Healthcare reform legislation enacted by Congress challenges healthcare
providers to provide quality services while facing mounting pressure to contain
costs associated with entitlement programs funded by the federal government.
Patient Care is adapting to the demands of this regulatory environment by
eliminating certain high-cost programs and by leveraging its existing
infrastructure to increase productivity.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
REGARDING FORWARD-LOOKING INFORMATION
This report contains forward-looking statements subject to certain risks and
uncertainties that could cause actual results to differ materially from these
statements and trends. Such factors include, but are not limited to: projected
capital expenditure levels; sales of investments; contingent environmental
liability; the state of Y2K-readiness of the Company and its key trading
partners; the ability of the Patient Care operation to successfully implement
remaining Y2K changes to its internal systems; and the successful development of
a Y2K contingency plan, if needed. Prospective information is based on
management's current expectations which can become inaccurate. The Company's
ability to deal with the unknown outcomes of these events may affect the
reliability of its projections of Y2K-readiness and other financial matters.
35
<PAGE> 27
CORPORATE OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
CORPORATE OFFICERS
EDWARD L. HUTTON
Chairman &
Chief Executive Officer
KEVIN J. MCNAMARA
President
TIMOTHY S. O'TOOLE
Executive Vice President
& Treasurer
PAUL C. VOET
Executive Vice President
SANDRA E. LANEY
Senior Vice President & Chief Administrative Officer
ARTHUR V. TUCKER, JR.
Vice President & Controller
NAOMI C. DALLOB
Vice President & Secretary
JAMES H. DEVLIN
Vice President
LAWRENCE J. GILLIS
Vice President
THOMAS C. HUTTON
Vice President
DAVID J. LOHBECK
Vice President
JOHN M. MOUNT
Vice President
DAVID G. SPARKS
Vice President
JANELLE M. JESSIE
Assistant Vice President
ANTHONY D. VAMVAS III
Assistant Vice President
PAULA W. KITTNER
Assistant Treasurer
MARK W. STEPHENS
Assistant Treasurer
MARIANNE LAMEY
Assistant Controller
LAURA A. VOLKER
Assistant Controller
JOYCE A. LAWRENCE
Assistant Secretary
- --------------------------------------------------------------------------------
DIRECTORS
EDWARD L. HUTTON
Chairman &
Chief Executive Officer
of Chemed Corporation
KEVIN J. MCNAMARA
President
of Chemed Corporation
JAMES H. DEVLIN
Vice President
of Chemed Corporation
CHARLES H. ERHART, JR.
Former President of
W.R. Grace & Co. (retired)
JOEL F. GEMUNDER
President of Omnicare Inc.
LAWRENCE J. GILLIS
Vice President of Chemed
Corporation; Chairman
of Chemed's Roto-Rooter
Group
PATRICK P. GRACE
President
of MLP Capital Inc.
THOMAS C. HUTTON
Vice President
of Chemed Corporation
WALTER L. KREBS
Senior Vice President
& Chief Financial Officer of
Service America Systems Inc.
SANDRA E. LANEY
Senior Vice President &
Chief Administrative Officer
of Chemed Corporation
JOHN M. MOUNT
Vice President of Chemed
Corporation; President &
Chief Executive Officer of
Service America Systems Inc.
TIMOTHY S. O'TOOLE
Executive Vice President &
Treasurer of Chemed
Corporation; Chairman &
Chief Executive Officer
of Patient Care Inc.
DONALD E. SAUNDERS
President of the DuBois
Division of DiverseyLever Inc.
PAUL C. VOET
Executive Vice President
of Chemed Corporation
GEORGE J. WALSH III
Corporate & Real Estate
Partner, Gould & Wilkie
(Law Firm, New York, N.Y.)
DIRECTORS EMERITI
Neal Gilliatt
Herman B Wells
[PICTURE]
IN MEMORIAM
D. WALTER ROBBINS, JR.
1919 - 1998
We were deeply saddened by the death on September 8, 1998, of D. Walter
Robbins, Jr., who served Chemed as a director since the company was founded in
1971. Additionally, he served as a director of Roto-Rooter Inc. from 1985 to
1996, National Sanitary Supply Company from 1991 to 1997, and Omnicare Inc.
since 1981.
Mr. Robbins played a vital leadership role in the founding of Chemed and its
related companies. The Chemed companies lost a major pillar of support and a
valuable friend.
He retired as Vice Chairman of W.R. Grace & Co. (Grace) in 1987 after a long
and distinguished career. He was instrumental in building Chemed as a subsidiary
within Grace. When Grace spun off Chemed in 1982, Mr. Robbins continued to share
his business acumen by providing guidance to Chemed's board as a director.
Mr. Robbins was, indeed, a great man. His entire life was devoted to his work
and his family. He cut a wide swath in his lifetime and helped make the world a
better place in which to live. We shall all miss his wise counsel, his good
humor, and comradeship.
36
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CHEMED CORPORATION
The following is a list of subsidiaries of the Company as of December
31, 1998. Other subsidiaries which have been omitted from the list would not,
when considered in the aggregate, constitute a significant subsidiary. Each of
the companies is incorporated under the laws of the state following its name.
The percentage given for each company represents the percentage of voting
securities of such company owned by the Company or, where indicated,
subsidiaries of the Company as at December 31, 1998.
All of the majority owned companies listed below are included in the
consolidated financial statements as of December 31, 1998.
ACD, Inc. (Florida, 100% by Starburst, Inc.)
AJJ, Inc. (Florida, 100% by Starburst, Inc.)
ARR, Enterprises, Inc. (Texas, 100% by Starburst, Inc.)
Cadre Computer Resources, Inc. (Delaware, 100%)
Catons' Plumbing, Heating & Air Conditioning, Inc. (Maryland, 100%
by Roto-Rooter Services Company)
Complete Plumbing Services, Inc. (New York, 49% by Roto-Rooter
Services Company; included within the consolidated financial
statements as a consolidated subsidiary)
Dell Healthcare, Inc. (Illinois, 100% by Patient Care, Inc.)
Elder Care Solutions, Inc. (Kentucky, 100% by Patient Care, Inc.)
Jet Resource, Inc. (Delaware, 100%)
National Home Care, Inc. (New York, 100% by Patient Care, Inc.)
Nurotoco of Massachusetts, Inc. (Massachusetts, 100% by Roto-Rooter
Services Company)
Nurotoco of New Jersey, Inc. (Delaware, 80% by Roto-Rooter Services
Company)
OCR Holding Company (Nevada, 100%)
OCR Michigan, Inc. (Delaware, 100% by OCR Holding Company)
OnCall Craftsmen, Inc. (Ohio, 100% by Roto-Rooter Services Company)
Patient Care, Inc. (Delaware, 100%)
Patient Care Medical Services, Inc. (New Jersey, 100% by Patient
Care, Inc.)
Patient Care Medical Services, Inc. (Ohio, 100% by Patient
Care, Inc.)
Priority Care, Inc. (Connecticut, 100% by Patient Care, Inc.)
Roto-Rooter Canada, Ltd. (British Columbia, 100% by Roto-Rooter
Services Company)
Roto-Rooter Corporation (Iowa, 100% by Roto-Rooter, Inc.)
Roto-Rooter Development Company (Delaware, 100% by Roto-Rooter
Corporation)
Roto-Rooter, Inc. (Delaware, 100%)
Roto-Rooter Management Company (Delaware, 100% by Roto-Rooter, Inc.)
Roto-Rooter Services Company (Iowa, 100% by Roto-Rooter, Inc.)
RR Plumbing Services Corporation (New York, 49% by Roto-Rooter
Services Company; included within the consolidated financial
statements as a consolidated subsidiary)
R.R. UK, Inc. (Delaware, 100% by Roto-Rooter, Inc.)
Service America Network, Inc. (Florida, 100% by Service America
Systems, Inc.)
Service America Systems, Inc. (Florida, 100% by Chemed Corporation)
Starburst, Inc. (Texas, 100% by Roto-Rooter Services Company)
Sure-Flow, Inc. (California, 100% by Roto-Rooter Services Company)
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-28594, 33-9549, 2-87202, 2-80712, 33-65244,
33-61063 and 333-34525) of Chemed Corporation of our report dated February 2,
1999 appearing on page 11 of the 1998 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page S-2 of this Form 10-K.
/s/ PricewaterhouseCoopers
- --------------------------
PricewaterhouseCoopers
Cincinnati, Ohio
March 25, 1999
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1999
/s/ James H. Devlin
---------------------------
James H. Devlin
<PAGE> 2
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1999
/s/ Charles H. Erhart, Jr.
---------------------------
Charles H. Erhart, Jr.
<PAGE> 3
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 19, 1999
/s/ Lawrence J. Gillis
---------------------------
Lawrence J. Gillis
<PAGE> 4
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1999
/s/ Patrick P. Grace
---------------------------
Patrick P. Grace
<PAGE> 5
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 18, 1999
/s/ Thomas C. Hutton
---------------------------
Thomas C. Hutton
<PAGE> 6
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1999
/s/ Walter L. Krebs
---------------------------
Walter L. Krebs
<PAGE> 7
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as her
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 13, 1999
/s/ Sandra E. Laney
---------------------------
Sandra E. Laney
<PAGE> 8
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 10, 1999
/s/ Kevin J. McNamara
---------------------------
Kevin J. McNamara
<PAGE> 9
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1999
/s/ John M. Mount
---------------------------
John M. Mount
<PAGE> 10
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1999
/s/ Donald E. Saunders
---------------------------
Donald E. Saunders
<PAGE> 11
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 10, 1999
/s/ Paul C. Voet
---------------------------
Paul C. Voet
<PAGE> 12
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company")
hereby appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1999
/s/ George J. Walsh III
---------------------------
George J. Walsh III
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K OF CHEMED
CORPORATION FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000019584
<NAME> CHEMED CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 41,358
<SECURITIES> 0
<RECEIVABLES> 48,861
<ALLOWANCES> (3,601)
<INVENTORY> 9,828
<CURRENT-ASSETS> 124,631
<PP&E> 106,171
<DEPRECIATION> (44,450)
<TOTAL-ASSETS> 429,704
<CURRENT-LIABILITIES> 91,098
<BONDS> 80,407
0
0
<COMMON> 13,605
<OTHER-SE> 209,751
<TOTAL-LIABILITY-AND-EQUITY> 429,704
<SALES> 0
<TOTAL-REVENUES> 381,283
<CGS> 0
<TOTAL-COSTS> 237,148
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,452
<INTEREST-EXPENSE> 6,793
<INCOME-PRETAX> 32,125
<INCOME-TAX> 12,216
<INCOME-CONTINUING> 19,909
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,909
<EPS-PRIMARY> 1.98
<EPS-DILUTED> 1.97
</TABLE>
