<PAGE> 1
As filed with the Securities and Exchange Commission
on March 26, 1996
Registration No. 33-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------------------
TRIMEDYNE, INC.
---------------
(Exact name of registrant as specified in its charter)
Nevada 36-3094439
------ ----------
(State or other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
2801 Barranca Road
P.O. Box 57001
Irvine, California 92619-7001
- ------------------ ----------
(Address of Principal Executive Offices) (Zip Code)
Trimedyne, Inc. 1996 Incentive and Non-Qualified Stock Option Plan
Trimedyne, Inc. Retirement Savings Plan
Trimedyne, Inc. Employee Stock Purchase Plan
Peter T. Hyde Compensation Agreement
(Full Title of the Plans)
MARVIN P. LOEB, CHAIRMAN
TRIMEDYNE, INC.
2801 Barranca Road
Irvine, California 92619-7001
(Name and Address of Agent for Service)
(714) 559-5300
(Telephone number, including area code, of Agent of Service)
Copy to:
RICHARD F. HOROWITZ, ESQ.
IRVING ROTHSTEIN, ESQ.
<PAGE> 2
Heller, Horowitz & Feit, P.C.
292 Madison Avenue
New York, New York 10017
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2
<PAGE> 3
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Offering Aggregate Amount of
Securities to Amount to be Price Per Offering Registration
be Registered Registered(1) Share (2) Price (2) Fee
- ------------- ------------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 200,000 $7.875 $1,575,000 $ 543.06
" 50,000 7.875 393,750 135.77
" 300,000 7.875 2,362,500 814.59
" 18,560 7.875 146,160 (4)
" 20,000 7.875 157,500 54.31
TOTALS 588,560 4,634,910 1,547.72
</TABLE>
- ---------------
(1) Represents (i) 550,000 shares of Common Stock which have not yet been
issued under the Trimedyne, Inc. Retirement Savings Plan (200,000
shares), the Trimedyne, Inc. Employee Stock Pur- chase Plan (50,000
shares), the 1996 Incentive and Non-Quali- fied Stock Option Plan
(300,000 shares) (collectively, the "Plans"); (ii) the resale of up to
18,560 shares of Common Stock issued under the Plans to persons who may
be deemed affiliates of the Company; and (iii) 20,000 shares issued
pursuant to the Peter T. Hyde Compensation Agreement.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Calculated solely for purposes of determining the registration fee.
Proposed maximum offering price per share is estimated based upon the
closing sale price of the Company's Common Stock on March 15, 1996.
(4) No fee is payable pursuant to Rule 457(h)(3).
3
<PAGE> 4
TRIMEDYNE, INC.
A "REOFFER PROSPECTUS" PREPARED IN ACCORDANCE WITH THE REQUIREMENTS OF
FORM S-3 IS FILED HEREWITH PURSUANT TO GENERAL INSTRUCTION C TO FORM S-8.
Cross Reference Sheet Showing Location in Reoffer Prospectus of
Information Required Therein by Item 1 through 13 of Form S-3
<TABLE>
<CAPTION>
Caption or Location
Item Number and Caption in Reoffer Prospectus
----------------------- ---------------------
<S> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus......................................................... Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus.......................................... Cover Page;
Table of
Contents
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges............................................................ The Company;
Risk Factors
4. Use of Proceeds.................................................... Use of Proceeds
5. Determination of Offering Price.................................... Not Applicable
6. Dilution........................................................... Not Applicable
7. Selling Security Holders........................................... Selling
Security Holders
8. Plan of Distribution............................................... General
Information
9. Description of Securities to
be Registered...................................................... Description of
Securities
10. Interest of Named Experts
and Counsel........................................................ Experts
11. Material Changes................................................... Not Applicable
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Caption or Location
Item Number and Caption in Reoffer Prospectus
----------------------- ---------------------
<S> <C>
12. Incorporation of Certain Information
by Reference....................................................... Incorporation of
Certain Documents
by Reference
13. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities.................................................... Commission's
Policy on
Indemnification
for Securities
Act Liabilities
</TABLE>
5
<PAGE> 6
PROSPECTUS
TRIMEDYNE, INC.
18,560 SHARES OF COMMON STOCK, $.01 PAR VALUE
This Prospectus covers the proposed offer and sale by certain security
holders of Trimedyne, Inc. ("Trimedyne" or the "Company"), from time to time at
their discretion, at prevailing market prices, of up to 18,560 Shares of Common
Stock, $.01 par value, of the Company ("Common Stock") which shall be issued
under the Trimedyne, Inc. Retirement Savings Plan (the "401(k) Plan"); the
Trimedyne, Inc. Employee Stock Purchase Plan (the "ESOP Plan"); the Peter T.
Hyde Compensation Agreement (the "PTS Agreement") and upon the exercise of
options under the Company's 1996 Incentive and Non-Qualified Stock Option Plan
(the "96 Plan" and, collectively with the 401(k) Plan, the ESOP Plan and the PTS
Agreement, the "Plans") by participants who are or may be affiliates of the
Company, as defined in Rule 405 promulgated under the Securities Act of 1933, as
amended. The Company's Common Stock is traded in the NASDAQ-National Market
System (Symbol-"TMED"). The average of the last bid and asked prices on March
15, 1996 was $3.25. The net proceeds from Common Stock sold by the selling
security holders will inure entirely to their benefit and not to that of the
Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The selling security holders intend to sell the shares offered hereby
from time to time for their own respective accounts in the open market at the
prices prevailing therein or in individually negotiated transactions at such
prices as may be agreed upon. Although there are no current arrangements
therefor, commissions equal to or in excess of normal brokerage commissions may
be paid to brokerage firms in connection with such sales. Each selling security
holder will bear all expenses with respect to the offering of shares by him,
except the costs associated with registering his shares under the Act and under
any State blue sky or securities law and preparing and printing this Prospectus.
The Company will furnish to each person to whom this Prospectus is
delivered, upon written request, a copy of any or all of the documents referred
to by reference, other than exhibits to such documents unless such exhibits are
specifically incorporated herein by reference. Requests should be addressed to:
James L. Kelly, Trimedyne, Inc., 2801 Barranca Road, P.O. Box 57001, Irvine,
California 92619-7001 (714) 559-5300.
<PAGE> 7
(Continued on inside cover)
THE DATE OF THIS PROSPECTUS IS MARCH 26, 1996
2
<PAGE> 8
The Company has taken steps to register under the laws of California,
Illinois, New Jersey and New York, the Common Stock being sold by the selling
security holders. The laws of many states provide exemptions from registration
particularly for sales of securities by persons other than issuers, such as the
selling security holders herein, who do not have a control relationship with the
issuer, and for the subsequent resale of such securities by purchasers thereof.
Purchasers hereunder should consult with their broker and/or attorney to
determine whether applicable state laws permit such purchases and resales by
them.
This offering involves significant risks concerning the Company and its
business. (See "RISK FACTORS").
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OR AN OFFER TO BUY ANY OF THE SECURITIES TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, Washington, D.C. 20549, a Registration Statement on Form S-8 under
the Securities Act of 1933 with respect to the securities offered hereby (the
"Registration Statement"). This "Reoffer Prospectus" filed as part of the
Registration Statement does not contain all the information set forth in, or
annexed as exhibits to, the Registration Statement. For further information
pertaining to the securities offered hereby and the Company, reference is made
to the Registration Statement and the exhibits thereto. The Company is subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended. The Registration Statement and exhibits thereto, as well as reports,
proxy and information statements and other filed information, may be inspected
at the Headquarters Office of the Securities and Exchange Commission located at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at certain of the
Commission's regional offices at the following addresses: 7 World Trade Center,
New York, New York; and 500 West Madison Street, Chicago, IL 60661; Copies of
such material may be obtained from the Public Reference Section of the SEC, at
450 Fifth Street, N.W., Room 1024, Washington, D.C. at prescribed rates.
3
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
THE COMPANY............................................................................................. 4
THE OFFERING............................................................................................ 5
USE OF PROCEEDS......................................................................................... 5
RISK FACTORS............................................................................................ 5
SELLING SECURITY HOLDERS................................................................................ 8
DESCRIPTION OF SECURITIES............................................................................... 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................................................... 9
COMMISSION'S POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES.......................................................................... 10
LEGAL OPINIONS.......................................................................................... 11
EXPERTS ............................................................................................... 11
</TABLE>
4
<PAGE> 10
THE COMPANY
General
Trimedyne, Inc. ("Trimedyne" or the "Company") was organized under the
laws of the State of Nevada on May 1, 1980. The Company's principal offices are
located at 2801 Barranca Parkway, Irvine, California 92714 (Telephone:
714/559-5300). The following discussion summarizes certain portions of the
disclosure contained in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995, as amended (the "10-K Report"). For complete
disclosure concerning the Company and its financial condition, the investor is
referred to the 10-K Report.
Trimedyne is primarily engaged in the development, testing,
manufacturing and/or marketing of (a) Holmium "cold" lasers, and Nd:YAG
"thermal" lasers; and (b) proprietary, disposable fiber-optic devices (including
fibers, probes, needles and catheters) for use in urology, orthopedics, general
surgery, vascular surgery and other medical applications.
Prior to 1991, the Company marketed products primarily for the vascular
surgery market. In 1991, the Company expanded its laser and proprietary delivery
system technologies into selected "less invasive" surgical applications in
urology and orthopedics, where the Company's products are expected to have
significant advantages over conventional surgical devices. Laser energy can cut
or ablate tissue and simultaneously sterilize and cauterize the cut surfaces of
adjoining tissues, stopping bleeding. When scalpels are used in surgery,
bleeding must be stopped in a separate cauterization procedure using an
electrocautery or other device. In addition, laser energy can be transmitted
through tiny optical fibers inserted into body cavities through ducts or small
incisions, reducing bleeding and complications, shortening hospital stays (and
costs) and minimizing recuperation time.
The Company manufactures a broad array of proprietary, disposable
fiber-optic devices, including Spectraprobe(TM), Halocath(TM), Lateralase(TM),
Laserprobe(TM), Sidefire(TM), Switchable Tip(TM) and Taper Tip(TM) devices, some
of which contain proprietary temperature control systems, and a variety of
sculpted optical fibers. All of the above have been approved or cleared for sale
by the U.S. Food and Drug Administration ("FDA") for the applications described
herein.
In the near future, the Company plans to file for additional FDA
approvals to market its lasers and proprietary, disposable fiber-optic devices
in additional surgical applications and fields.
5
<PAGE> 11
A 90% owned subsidiary of the Company, Poly-Optical Products, Inc.
("Poly Optical"), manufactures plastic fiber-optic devices which are used in the
automotive, medical, aerospace, military and electronics fields. The Company is
engaged in discussions with several companies regarding the potential sale of
Poly Optical, which will enable the Company to concentrate on its core medical
products business.
A more extensive discussion of the Company's business is contained in
the Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1995.
The Company's Common Stock is traded on the NASDAQ National Market
System (Symbol "TMED"). The closing price of the Company's Common Stock on March
25, 1996 was $7.875.
THE OFFERING
This prospectus covers the proposed offer and sale by certain security
holders of Trimedyne, Inc. from time to time at their discretion of up to
296,060 Shares of Common Stock, $.01 par value, of the Company ("Common Stock")
at prevailing market prices. The Company's Common Stock is traded in the
NASDAQ-National Market System (Symbol -- "TMED"). The closing price of the
Company's Common stock on March 25, 1996 was $7.875.
USE OF PROCEEDS
The net proceeds from Common Stock sold by the selling security holders
will inure entirely to their benefit and not that of the Company.
RISK FACTORS
There is no assurance that the Company's future activities will be
successful. Moreover, there is no assurance that the Company's business will be
unaffected by newer technological developments, that the Company will be able to
develop or obtain licenses to new products that may be required for the Company
to successfully compete in its market areas, that the Company will continue to
satisfy regulatory requirements and obtain regulatory approvals to market new
products or that the Company will be able to adapt to changes in the economics
of the medical technology business in general and the laser and laser delivery
systems business in particular.
6
<PAGE> 12
An investment in the Common Stock offered hereby involves a high degree
of risk. The following factors should be considered carefully in evaluating the
Company and its business.
1. History of Losses. The Company sustained losses of $5,290,000 in
fiscal 1995, $2,265,000 in fiscal 1994, and $561,000 in fiscal 1993. At December
31, 1995, the Company had an accumulated deficit of $22,332,000. There can be no
assurance that the Company's future activities will be successful or profitable.
Potential investors should be aware of the risks, problems, delays, expenses and
difficulties encountered by companies developing new medical technologies,
especially in view of the significant competition that the Company has and will
continue to encounter.
2. Competitive Industry and Rapid Technological Changes. The Company is
engaged in an intensely competitive industry, and there can be no assurance that
it will be able to compete effectively or obtain and retain experienced
personnel. In recent years, the surgical and medical laser industry has been
characterized by rapid technological change. There is no assurance that the
Company's present products may not face technological obsolescence, that the
Company will be able to develop, acquire licenses for, or obtain regulatory
approvals to market, new products to keep pace with technological advances or
that the Company will be able to successfully market its products.
3. Reliance Upon Management. The Company is and will be substantially
dependent, for the foreseeable future, upon its Chairman of the Board and Chief
Executive Officer and its President and Chief Operating Officer. If the Company
were to lose the services of either of these persons for any significant period
of time, its business may be materially adversely affected.
4. Unspecified Acquisitions. The Company may engage in acquisitions of
other companies and businesses and may use its stock as consideration therefor.
This may result in a dilution of the percentage of the equity owned by the
purchasers of the Shares offered hereby. In addition, such acquisitions may
involve speculative and risky undertakings by the Company. Under Nevada law,
acquisitions do not require shareholder approval, except when accomplished by
merger or consolidation. The Company does not currently have any plans,
arrangements or understandings regarding future material business acquisitions.
5. Outstanding Options/Warrants. As of December 31, 1995, the Company
had granted to its officers, directors, key employees and consultants, stock
options to purchase 1,379,330 shares of its Common Stock under its stock option
plans and otherwise at an aver-
7
<PAGE> 13
age exercise price of $0.01 to $5.50 per share. If exercised, such options would
represent approximately 14.5% of the Company's total outstanding Common Stock.
As of June 30, 1995, Warrants to purchase 356,000 and 130,000 shares of
Common Stock at a weighted average exercise price of $10.31 and $11.86,
respectively, were outstanding. These warrants were issued in connection with
the securities offering which took place in 1992. If exercised, such warrants
would represent approximately 5% of the Company's outstanding stock.
6. No Dividends and None Anticipated. The Company has not paid any
dividends and does not contemplate or anticipate paying any dividends in the
foreseeable future.
7. Possible Issuance of Preferred Stock and Possible Adverse Effect on
Rights of Holders of Common Stock. The Company is authorized to issue 1,000,000
shares of Preferred Stock. No Preferred Stock has been issued, and the Company
has no present intention of issuing any preferred stock. The Board of Directors
has broad powers to fix the rights and terms of any Preferred Stock without
requiring shareholder approval. The issuance of Preferred Stock could have an
adverse effect on the rights of holders of the Company's Common Stock.
8. Current Registration Necessary. While the Company has agreed to make
such filings as are necessary to keep current the registration statement of
which this prospectus is a part, there can be no assurance that it can or will
do so, the failure of which may result in the Common Stock not being freely
marketable.
9. Extensive Government Regulation. The Company's business is subject
to extensive regulation by the FDA and comparable regulatory authorities of
foreign countries. Compliance with regulatory requirements and obtaining
approvals to test or market new medical devices is expensive and time consuming.
There is no assurance the Company will be able to meet all regulatory
requirements or obtain and maintain approvals to test and market any new
products.
10. Liability Exposure. The Company maintains an aggregate of
$6,000,000 of general liability insurance. There is no assurance the Company can
maintain such insurance in force at an acceptable cost or at all or that the
amount of such insurance will be sufficient to protect the Company's assets in
the event of claims by users of its products or others.
8
<PAGE> 14
11. Patent Uncertainty. There is no assurance the Company's patents
will be upheld if challenged in court, that the Company will be able to obtain
additional valid patents or that the Company's products may not infringe patents
owned by others, licenses to which may be unavailable to the Company.
12. Loss of Net Operating Loss Carryforwards in the Event of a Change
in Control. In the event there is a change in control of the Company, the
Company's net operating loss carry-forwards ("NOL's") for federal and state
income tax purposes totaling approximately $18,186,000 and $12,286,000 as of
December 31, 1995, which are currently available to offset future income, if
any, of the Company, could be jeopardized. In the event of a change of control,
the loss of such NOL's could affect the after-tax income of the Company.
SELLING SECURITY HOLDERS
An aggregate of up to 18,560 Shares of Common Stock is being offered
pursuant to this Prospectus by the persons whose names appear below (the
"Selling Shareholders") which may be issued under the Plans to persons who may
be deemed to be affiliates of the Company, as defined in Rule 405 promulgated
under the Securities Act of 1933, as amended. The table below sets forth with
respect to each selling security holder, (i) the nature of any position, office
or other material relationship he has had with the Company within the past three
years, (ii) the total amount of Shares of Common Stock beneficially owned by
such security holder prior to the offering, (iii) the amount which may be
offered for sale for the account of such security holder, in his discretion from
time to time pursuant to this Prospectus, and (iv) the amount and percentage of
the outstanding Common Stock which would be beneficially owned by such security
holder after sale of all of the securities offered by the selling security
holders pursuant to this Prospectus, if they are offered and sold, and assuming
that other Shares held by such parties are not sold.
9
<PAGE> 15
<TABLE>
<CAPTION>
Names and Shares Owned Shares Shares Owned
Relationship Before Offering Offered After Offering
- ------------ --------------- ------- ------------------
Amount Percent
------- -------
<S> <C> <C> <C> <C>
Peter T. Hyde, 131,830(1) 21,830 110,000 *
President, Chief
Operating Officer
and Director
Dean Crawford, 40,212(2) 3,472 36,740 *
V.P.-Operations
James L. Kelly, 29,225(3) 5,725 23,500 *
V.P.-Finance
Douglas Grief 35,945(4) 1,945 34,000 *
VP-Sales/Marketing
Richard Demmer 32,588(5) 5,588 27,000 *
VP-International Sales
</TABLE>
- ------------------------------
(1) Includes currently exercisable options to purchase 110,000 shares.
(2) Includes currently exercisable options to purchase 36,540 shares.
(3) Includes currently exercisable options to purchase 23,500 shares.
(4) Includes currently exercisable options to purchase 34,000 shares.
(5) Includes currently exercisable options to purchase 27,000 shares.
* Represents less than 1%.
DESCRIPTION OF SECURITIES
Common Stock
10
<PAGE> 16
The Common Stock being offered hereby by the Selling Shareholders is
fully described in the Company's Registration Statement on Form 8-A filed on
July 16, 1982 pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (See "Incorporation of Certain Documents by
Reference").
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995, filed pursuant to Section 13 of the Exchange Act.
(b) (i) The Company's Quarterly Report on Form 10-Q ("Form
10-Q") for the fiscal quarter ended December 31, 1995, filed pursuant to Section
13 of the Exchange Act.
(c) The description of the Common Stock contained in the
Company's Registration Statement on Form 8-A, filed on July 16, 1982 pursuant to
Section 12 of the Exchange Act.
In addition, all reports and other documents to be filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities offered hereby
then remaining unsold, shall be deemed to be a part hereof from the date of the
filing of each such report or document.
The Company will furnish to each person to whom this Prospectus is
delivered, upon written request, a copy of any or all of the documents referred
to by reference, other than exhibits to such documents unless such exhibits are
specifically incorporated herein by reference. Requests should be addressed to:
James L. Kelly, Trimedyne, Inc., 2801 Barranca Road, P.O. Box 57001, Irvine,
California 92619-7001 (714) 559-5300.
COMMISSION'S POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Article 12 of the Registrant's Certificate of Incorporation directs the
Registrant to provide in its bylaws for provisions relating to the
indemnification of directors and officers to the full extent permitted by law.
Section 78.751 of the Nevada Revised Statutes, as amended, authorizes the
Registrant to indemnify any
11
<PAGE> 17
director or officer under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
such person is a party by reason of being a director or officer of the
Registrant if it is determined that such person acted in accordance with the
applicable standard of conduct set forth in such statutory provisions.
The Registrant may also purchase and maintain insurance for the benefit
of any director or officer which may cover claims for which the Registrant could
not indemnify such person.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Company, or to
underwriters (or controlling persons thereof) of which an officer, partner, or
controlling person thereof is one of the foregoing pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by any such persons, in the successful
defense of any action, suit or proceeding) is asserted by any such persons in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
LEGAL OPINIONS
Legal matters in connection with the securities being offered hereby
have been passed upon for the Company by Heller, Horowitz & Feit, P.C., 292
Madison Avenue, New York, New York 10017. Heller, Horowitz & Feit, P.C. is
general securities and corporate counsel to the Company and represented it in
its initial public offering and in numerous matters since then. Mr. Richard F.
Horowitz, a member of such law firm is also a member of the Company's Board of
Directors.
12
<PAGE> 18
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995, filed pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(b) (i) The Company's Quarterly Report on Form 10-Q ("Form
10-Q") for the fiscal quarter ended December 31, 1995, filed pursuant to Section
13 of the Exchange Act.
(c) The description of the Common Stock contained in the
Company's Registration Statement on Form 8-A filed July 16, 1982 pursuant to
Section 12 of the Exchange Act.
In addition, all reports and other documents to be filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities offered hereby
then remaining unsold, shall be deemed to be incorporated by reference herein
and shall be deemed to be a part hereof from the date of the filing of each such
report or document.
Item 4. Description of Securities.
The Common Stock being offered hereby by (i) the Company under the
Plans and (ii) by certain affiliates of the Company upon resale of stock
acquired under the Plans, is fully described in the Company's Registration
Statement on Form 8-A, filed on July 16, 1982 pursuant to Section 12 of the
Exchange Act (See "Incorporation of Certain Documents by Reference").
Item 5. Interests of Named Experts and Counsel.
Mr. Richard F. Horowitz is a member of the firm of Heller, Horowitz &
Feit, P.C. which is general securities and corporate counsel to the Company and
is also a member of the Company's Board of Directors.
Item 6. Indemnification of Directors and Officers.
II-1
<PAGE> 19
Article 12 of the Registrant's Certificate of Incorporation directs the
Registrant to provide in its bylaws for provisions relating to the
indemnification of directors and officers to the full extent permitted by law.
Section 78.751 of the Nevada Revised Statutes, as amended, authorizes the
Registrant to indemnify any director or officer under certain prescribed
circumstances and subject to certain limitations against certain costs and
expenses, including attorneys' fees actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
being a director or officer of the Registrant if it is determined that such
person acted in accordance with the applicable standard of conduct set forth in
such statutory provisions.
The Registrant may also purchase and maintain insurance for the benefit
of any director or officer which may cover claims for which the Registrant could
not indemnify such person.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
4.1 Trimedyne, Inc. Retirement Savings Plan ("401(k)
Plan").
4.2 Trimedyne, Inc. Employee Stock Purchase Plan ("ESOP
Plan").
4.3 Trimedyne, Inc. 1996 Incentive and Non-Qualified
Stock Option Plan
4.4 Peter T. Hyde Compensation Agreement
5 Opinion of Counsel
23.1 Consent of Counsel (included in the Opinion of
Counsel filed as Exhibit No. 5).
23.2 Consent of Price Waterhouse.
II-2
<PAGE> 20
The Registrant undertakes that it either will submit (with respect to
the ESOP Plan) or has submitted (with respect to the 401(k) Plan) the Plan and
any amendments thereto to the Internal Revenue Service ("IRS") in a timely
manner and has made or will make, as appropriate, all changes required by the
IRS in order to qualify the Plan(s).
Item 9. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
Provided, however, that Paragraphs (a)(1)(i) and a(l)(ii) do
not apply if the Registration Statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 21
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on the 20th day of
March, 1996.
TRIMEDYNE, INC.
By: /s/ MARVIN P. LOEB
------------------------
Marvin P. Loeb
Chairman of the Board of
Directors
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ MARVIN P. LOEB Chairman of the
- -------------------------- Board of Directors March 20, 1996
Marvin P. Loeb
/s/ PETER T. HYDE President, Chief
- -------------------------- Operating Officer and
Peter T. Hyde Director March 20, 1996
/s/ DONALD BAKER Director March 20, 1996
- --------------------------
Donald Baker
/s/ BRUCE N. BARRON Director March 20, 1996
- --------------------------
Bruce N. Barron
/s/ RICHARD F. HOROWITZ Director March 20, 1996
- --------------------------
Richard F. Horowitz
/s/ JAMES L. KELLY Vice President - March 20, 1996
- -------------------------- Finance and Chief
James L. Kelly Financial and
Accounting Officer
</TABLE>
II-5
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
- ------- --------
<S> <C>
4.1 Trimedyne, Inc. Retirement Savings Plan.......................
4.2 Trimedyne, Inc. Employee Stock Purchase Plan..................
4.3 Trimedyne, Inc. 1996 Incentive and Non-Qualified
Stock Option Plan.............................................
4.4 Peter T. Hyde Compensation Agreement..........................
5 Opinion and Consent of Counsel................................
23.2 Consent of Independent Accountants............................
</TABLE>
<PAGE> 1
Exhibit 4.1
PENSION PROFESSIONALS, INC.
REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1.01 Actuarial Equivalent 1
1.02 Adoption Agreement 1
1.03 Anniversary Date 1
1.04 Break in Service 1
1.05 Code 1
1.06 Compensation 1
1.07 Defined Benefit Plan 2
1.08 Defined Contribution Plan 2
1.09 Earned Income 2
1.10 Effective Date 3
1.11 Employee 3
1.12 Employer 3
1.13 Entry Date 3
1.14 Highly Compensated Employee 3
1.15 Hour of Service 4
1.16 Joint and Survivor Annuity 5
1.17 Key Employee 5
1.18 Limitation Year 5
1.19 Net Profits 5
1.20 Normal Retirement Age 5
1.21 Owner-Employee 6
1.22 Paired Plans 6
1.23 Participant 6
1.24 Plan 6
1.25 Plan Administrator 6
1.26 Plan Year 6
1.27 Self-Employed Individual 6
1.28 Service 6
1.29 Shareholder Employee 6
1.30 Super Top-Heavy Plan 6
1.31 Taxable Wage Base 6
1.32 Top-Heavy Plan 6
1.33 Trust Fund 7
1.34 Trustee 7
1.35 Valuation Date 7
1.36 Year of Service 7
(a) Eligibility and Break in Service
(b) Vesting
(c) Benefit Accrual
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE II - ELIGIBILITY
2.01 Eligibility requirements 7
2.02 Immediate participation 8
2.03 Former Participants 8
2.04 Former Participants 8
2.05 Former Employees 8
2.06 Computation period 8
2.07 Break in Service 8
ARTICLE III - CONTRIBUTIONS
3.01 Employer intentions 9
3.02 Employer contributions 9
3.03 Administrative expenses 9
3.04 Contributions returned to Employer 9
3.05 Voluntary Employee contributions 10
3.06 Nondeductible Voluntary Contributions 10
3.07 Matching contributions 10
3.08 Separate account for deductible contributions 10
3.09 Rollover contributions 10
3.10 Forfeitures 11
3.11 Allocation date 11
3.12 Contributions for disabled Participants 11
3.13 Cash or Deferred Arrangement 11
ARTICLE IV - BENEFITS
4.01 Attainment of Normal Retirement Age 11
4.02 Late retirement 11
4.03 Disability retirement 12
4.04 Early Retirement 12
4.05 Normal Form of Benefit 12
4.06 Optional forms of benefit 12
4.07 Timing of distributions 12
4.08 Cash-out of benefits 13
4.09 Claims 14
4.10 Restrictions on immediate distributions 15
4.11 Hardship distributions 16
ARTICLE V - LIMITATIONS ON BENEFITS
5.01 Limitations if Participant only in this Plan 16
5.02 Estimating Compensation 17
5.03 Using actual Compensation 17
5.04 Disposal of excess amount 17
5.05 Limitations if Participant covered under another plan 17
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.06 Estimating Compensation 18
5.07 Using actual Compensation 18
5.08 Excess amount deemed last allocated Annual Additions 18
5.09 Excess amount of Participant covered under two plans 18
5.10 Disposal of excess amount 18
5.11 Participant covered under another plan not a Prototype 18
5.12 Paired plans 19
5.13 Terms defined 19
Annual Additions
Compensation
Defined Benefit Fraction
Defined Contribution Dollar Limitation
Defined Contribution Fraction
Employer
Excess Amount
Highest Average Compensation
Limitation Year
Regional or prototype plan
Maximum Permissible Amount
Projected Annual Benefit
ARTICLE VI - DEATH BENEFITS
6.01 Pre-retirement death benefit 22
6.02 Benefits payable to non-spouse 23
6.03 Beneficiary designation 23
6.04 Death of beneficiary 23
6.05 Purchase of insurance contracts 23
ARTICLE VII - TERMINATION OF EMPLOYMENT
7.01 Normal Retirement Age 23
7.02 Distribution of benefit 23
7.03 Forfeiture 24
7.04 Former Participant returns to employment 24
7.05 Amendment of vesting schedule 24
7.06 Breaks in Service 24
ARTICLE VIII - ADMINISTRATION
8.01 Plan Administrator 25
8.02 Advice of counsel 25
8.03 Plan Administrator to establish rules 25
8.04 Written instructions to Trustee 25
8.05 Preparing and filing returns and reports 25
8.06 Denial of claims 25
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IX - TRUSTEES AND TRUST FUND
9.01 Trustee shall hold assets 26
9.02 Trustee shall maintain records 26
9.03 Investment of Trust Fund 26
9.04 Pooled assets 26
9.05 Legal counsel 26
9.06 Trustee's reliance upon other Trustees 26
9.07 Expenses of Trust 27
9.08 Powers, rights and duties of Trustee 27
9.09 Trustee protected 28
9.10 Replacement/resignation of Trustee 28
9.11 Valuation of Participants' accounts 28
9.12 Former Participant's account 29
9.13 Investment Manager 29
ARTICLE X - INSURANCE CONTRACTS
10.01 Plan can purchase insurance 30
10.02 Limit on death benefit 30
10.03 Participant not insurable 30
10.04 Trustee will own contracts and pay out proceeds 30
10.05 Conversion of contracts 30
10.06 Annuity contracts must comply with Plan provisions 30
ARTICLE XI - AMENDMENT AND TERMINATION
11.01 Sponsor's right to amend 30
11.02 Employer may amend optional provisions 30
11.03 Employer's right to terminate Plan 31
11.04 No amendment may decrease benefits 31
ARTICLE XII - JOINT AND SURVIVOR ANNUITY REQUIREMENTS
12.01 Automatic benefit form 31
12.02 Automatic benefit form 31
12.03 Terms defined 32
(a) Election Period
(b) Earliest Retirement Age
(c) Qualified Election
(d) Qualified Joint and Survivor Annuity
(e) Spouse
(f) Annuity Starting Date
(g) Vested Account Balance
12.04 Notice requirements 33
12.05 Safe harbor rules 34
12.06 Transitional rules 35
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE XIII - TOP-HEAVY PROVISIONS
13.01 Definitions 37
(a) Compensation
(b) Determination Date
(c) Key Employee
(d) Permissive Aggregation Group
(e) Present Value
(f) Required Aggregation Group
(g) Top-Heavy Plan
(h) Top-Heavy Ratio
(i) Valuation Date
13.02 Top-Heavy vesting schedule 39
13.03 Minimum allocation 39
13.04 Minimum allocation 40
ARTICLE XIV - PAIRED PLAN PROVISIONS
14.01 When Plan is Top-Heavy 40
14.02 Integration 40
ARTICLE XV - MISCELLANEOUS
15.01 Assignment/alienation of benefits 40
15.02 Merger and consolidation 41
15.03 Plan not qualified 41
15.04 Diversion of Trust Corpus 41
15.05 Plan loans 41
15.06 Leased Employees 43
15.07 Owner-Employees 43
15.08 Plan not a contract of employment 44
15.09 Plan executed in parts 44
15.10 Fiduciaries must be responsible 44
15.11 Titles for information only 44
15.12 Contribution returned to Employer 44
15.13 If Plan fails to retain qualification 44
ARTICLE XVI - DISTRIBUTIONS
16.01 Limits on types of distributions 45
16.02 Determination of amount to be distributed (individual account) 45
16.03 Annuity purchased from insurance company 46
16.04 Death distribution provisions 46
16.05 Definitions 47
(a) Applicable Life Expectancy
(b) Designated Beneficiary
(c) Distribution Calendar Year
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
(d) Life Expectancy
(e) Participant's Benefit
(f) Required Beginning Date
16.06 Transitional rule 48
16.07 Distribution upon death 49
16.08 Special distribution rule 49
16.09 Revocation of beneficiary designation 49
16.10 Entire interest must be distributed 50
16.11 In-service distributions 50
16.12 Withdrawal of nondeductible voluntary contributions 50
ARTICLE XVII - CASH OR DEFERRED ARRANGEMENT
17.01 Elective Deferrals 50
17.02 Excess Elective Deferrals 50
17.03 Actual Deferral Percentage (ADP) 52
17.04 Excess Contributions 54
17.05 Recharacterization of Excess Contributions 55
17.06 Matching Contributions 55
17.07 Vesting of Matching Contributions 55
17.08 Qualified Matching Contributions 55
17.09 Limitations on Employee Contributions and Matching Contributions 55
17.10 Distributions of Excess Aggregate Contributions 58
17.11 Qualified Non-elective Contributions 59
17.12 Nonforfeitability and vesting 59
17.13 Distribution requirements 59
17.14 Hardship distributions 60
17.15 Top-Heavy requirements 61
ARTICLE XVIII - ROLLOVER PROVISIONS
18.01 Applies to all distributions 61
18.02 Definitions 61
</TABLE>
<PAGE> 7
PENSION PROFESSIONALS, INC.
REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST
The Sponsor hereby establishes the Prototype Defined Contribution Plan and Trust
for use by corporate and non-corporate employers who wish to provide retirement
and other related benefits for their employees and their beneficiaries subject
to the provisions and conditions set forth in this document.
ARTICLE I - DEFINITIONS
1.01 Actuarial Equivalent: A benefit having the same present value on the date
payment commences as another stated benefit. For purposes of establishing
actuarial equivalence, present value shall be determined by discounting all
future payments for interest and mortality on the basis specified in section
A-13.01 of the Adoption Agreement.
1.02 Adoption Agreement: The document attached hereto by which an Employer
elects to establish a qualified retirement plan and trust under the terms of
this Prototype Plan and Trust.
1.03 Anniversary Date: The first day of the Plan Year.
1.04 Break In Service: A 12-consecutive month period during which an Employee
fails to complete more than 500 Hours of Service.
1.05 Code: The Internal Revenue Code of 1986, including any amendments thereto.
1.06 Compensation: As elected by the Employer in the Adoption Agreement,
Compensation will mean all of each Participant's (a) W-2 earnings or (b)
Compensation [as that term is defined in Section 415 (c) (3) of the Code]. For
any Self-Employed Individual covered under the Plan, Compensation will mean
Earned Income. Compensation shall include only that Compensation which is
actually paid to the Participant during the applicable period. Except as
provided elsewhere in this Plan, the applicable period shall be the period
elected by the Employer in the Adoption Agreement. If the Employer makes no
election, the applicable period shall be the Plan Year.
Notwithstanding the above, if elected by the Employer in the Adoption Agreement,
Compensation shall include any amount which is contributed by the Employer
pursuant to a salary reduction agreement and which is not includable in the
gross income of the Employee under Sections 125, 402(a)(8), 402(h) or 403(b) of
the Code.
The annual Compensation of each Participant taken into account under the Plan
for any year shall not exceed $200,000, as adjusted by the Secretary at the same
time and in the same manner as under Section 415(d) of the Code. In determining
the Compensation of a Participant for purposes of this limitation, the rules of
Section 414(q) (6) of the Code shall apply, except in applying such rules, the
<PAGE> 8
term "family" shall include only the Spouse of the Participant and any lineal
descendants of the Participant who have not attained age 19 before the close of
the year. If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then (except for purposes of determining the portion of
Compensation up to the integration level if this Plan provides for permitted
disparity), the limitation shall be prorated among the affected individuals in
proportion to each such individual's compensation as determined under this
section prior to the application of this limitation.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
Compensation limit. The OBRA '93 annual Compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which Compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual Compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan years beginning on or after January 1, 1994, any reference in this Plan
to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93
annual Compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual Compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
Compensation limit is $150,000.
1.07 Defined Benefit Plan: A Plan under which a Participant's benefit is
determined by a formula contained in the Plan under which no individual accounts
are maintained for Participants.
1.08 Defined Contribution Plan: A Plan under which individual accounts are
maintained for each Participant to which all contributions, forfeitures,
investment income and gains or losses, and expenses are credited or deducted. A
Participant's benefit under such Plan is based solely on the fair market value
of his or her account balance.
1.09 Earned Income: Net earnings from self-employment in the trade or business
with respect to which the Plan is established, determined without regard to
items not included in gross income and deductions allocable to such items,
provided that personal services of the individual are a material
income-producing factor. Net Earnings shall be reduced by contributions made by
an Employer to a qualified plan to the extent deductible under Section 404 of
the Code. Net earnings shall be determined with regard to the deduction allowed
to the Employer by Section
<PAGE> 9
164(f) of the Code for taxable years beginning after December 31, 1989.
1.10 Effective Date: The date on which the Employer's retirement plan becomes
effective, as indicated in section A-1.10 of the Adoption Agreement. The
Restatement Effective Date is the date on which any amendment becomes effective.
1.11 Employee: Any person employed by the Employer (including Self-Employed
Individuals and partners), all Employees of a member of an affiliated service
group [as defined in Section 414(m) of the Code], Employees of a controlled
group of corporations [as defined in Section 414(b) of the Code], all Employees
of any incorporated or unincorporated trade or business which is under common
control [as defined in Section 414(c) of the Code], leased Employees [as defined
in Section 414(n) of the Code] and Employees included under Section 414(o) of
the Code. All such Employees shall be treated as employed by a single Employer.
1.12 Employer: The Self-Employed Individual, partnership, corporation or other
organization which adopts this Plan including any firm who succeeds the Employer
and adopts this Plan. The Employer that adopts this Plan, and all members of a
controlled group of corporations [as defined in Section 414(b) of the Code as
modified by Section 415(h)], all commonly controlled trades or businesses [as
defined in Section 414(c) as modified by Section 415(h)] or affiliated service
groups [as defined Section 414(m)] of which the adopting Employer is a part.
1.13 Entry Date: The date on which an Employee commences participation in the
Plan as determined by the Employer in the Adoption Agreement.
1.14 Highly Compensated Employee: shall include highly compensated active
Employees and highly compensated former Employees.
A Highly Compensated active Employee includes any Employee who performs Service
for the Employer during the Determination Year and who, during the look-back
year: (a) received Compensation from the Employer in excess of $75,000 [as
adjusted pursuant to Section 415(d) of the Code]; (b) received Compensation from
the Employer in excess of $50,000 [as adjusted pursuant to Section 415(d) of the
Code] and was a member of the top-paid group for such year; or (c) was an
officer of the Employer and received Compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also includes:
(d) Employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and the
Employee is one of the 100 Employees who received the most Compensation from the
Employer during the Determination Year; and (e) Employees who are 5 percent
owners at any time during the look-back year or Determination Year.
If no officer has satisfied the Compensation requirement of (c) above during
either a Determination Year or look-back year, the highest paid officer for such
year shall be treated as a Highly Compensated Employee.
For this purpose, the Determination Year shall be the Plan Year. The look-back
year shall be the twelve-month period immediately preceding the Determination
Year.
<PAGE> 10
A Highly Compensated former Employee includes any Employee who separated from
Service (or was deemed to have separated) prior to the Determination Year,
performs no Service for the Employer during the Determination Year, and was a
Highly Compensated active Employee for either the separation year or any
Determination Year ending on or after the Employee's 55th birthday.
If an Employee is, during a Determination Year or look-back year, a family
member of either a 5 percent owner who is an active or former Employee or a
Highly Compensated Employee who is one of the 10 most Highly Compensated
Employees ranked on the basis of Compensation paid by the Employer during such
year, then the family member and the 5 percent owner or top-ten Highly
Compensated Employee shall be aggregated. In such case, the family member and 5
percent owner or top-ten Highly Compensated Employee shall be treated as a
single Employee receiving Compensation and Plan contributions or benefits equal
to the sum of such Compensation and contributions or benefits of the family
member and 5 percent owner or top-ten Highly Compensated Employee. For purposes
of this section, family member includes the spouse, lineal ascendants and
descendants of the Employee or former Employee and the spouses of such lineal
ascendants and descendants.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top 100 Employees, the number of Employees treated as officers and the
Compensation that is considered, will be made in accordance with Section 414(q)
of the Code and the regulations thereunder.
1.15 Hour Of Service:
(a) Each hour for which an Employee is paid,or entitled to payment, for the
performance of duties for the Employer. These hours shall be credited to the
Employee for the computation period in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military duty or leave of absence. No more than 501 Hours of Service shall
be credited under this paragraph for any single continuous period (whether or
not such period occurs in a single computation period). Hours under this
paragraph shall be calculated and credited pursuant to Section 2530.200b-2 of
the Department of Labor Regulations which are incorporated herein by this
reference; and
(c) Each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service shall not
be credited both under paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). These hours shall be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
(d) Hours of Service shall be credited for employment with the Employer and for
employment for any period of time with other members of an affiliated service
<PAGE> 11
group [as defined in Section 414(m) of the Code], a controlled group of
corporations [as defined in Section 414(b) of the Code], or a group of trades or
businesses under common control [as defined in Section 414(c) of the Code] of
which the adopting Employer is a member and any other entity required to be
aggregated with the Employer pursuant to Code Section 414(o) and the regulations
thereunder. Hours of Service shall also be credited for any individual
considered an Employee for purposes of this Plan under Section 414(n) or Code
Section 414(o) of the Code and the regulations thereunder.
(e) Solely for purposes of determining whether a Break in Service, as defined in
section 1.06, for participation and vesting purposes has occurred in a
computation period, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such absence, or in any
case in which such hours cannot be determined, 8 Hours of Service per day of
such absence. For purposes of this paragraph, an absence from work for maternity
or paternity reasons means an absence by reason of the pregnancy of the
individual, by reason of a birth of a child of the individual, by reason of the
placement of a child with the individual in connection with the adoption of such
child by such individual, or for purposes of caring for such child for a period
beginning immediately following such birth or placement. The Hours of Service
credited under this paragraph shall be credited in the computation period in
which the absence begins if the crediting is necessary to prevent a Break in
Service in that period, or in all other cases, in the following computation
period.
(f) Hours of Service shall be determined on the basis of the method selected in
the Adoption Agreement.
1.16 Joint And Survivor Annuity: Joint and Survivor Annuity means an annuity for
the life of the Participant with a survivor annuity for the life of the
Participant's spouse which is not less than one-half nor greater than the amount
of the annuity payable during the joint lives of the Participant and the
Participant's spouse. The Joint and Survivor Annuity will be the Actuarial
Equivalent of the Normal Retirement Benefit. The percentage of the survivor
annuity under the Plan shall be 50% (unless a different percentage is elected by
the Employer in the Adoption Agreement).
1.17 Key Employee: Certain highly compensated Employees who are officers, owners
or partners of the Employer as defined at section 13.01(c) hereof.
1.18 Limitation Year: The calendar year or such other 12- consecutive month
period designated by the Employer in the Adoption Agreement for purposes of
determining the maximum annual addition to a Participant's account.
1.19 Net Profits: shall mean the current and accumulated earnings of the
Employer before Federal and state taxes and contributions to this and any other
qualified plan.
1.20 Normal Retirement Age: The age set by the Employer in the Adoption
Agreement at which a Participant may retire and receive his or her benefits
under the Plan. For funding purposes, Normal Retirement Date shall be the first
day of the month coincident with or following the date on which a Participant
attains Normal
<PAGE> 12
Retirement Age. If the Employer enforces a mandatory retirement age, the Normal
Retirement Age is the lesser of that mandatory age or the age specified in the
Adoption Agreement.
1.21 Owner-Employee: A sole proprietor or partner owning more than 10% of either
the capital or profits interest of the partnership.
1.22 Paired Plans: Two or more Plans maintained by the Sponsor designed so that
a single or any combination of Plans adopted by an Employer will meet the
anti-discrimination rules, the contribution and benefit limitations, and the
Top-Heavy provisions of the Code.
1.23 Participant: Any Employee who has met the eligibility requirements and is
participating in the Plan.
1.24 Plan: The Employer's retirement plan as embodied herein and in the Adoption
Agreement.
1.25 Plan Administrator: The Employer.
1.26 Plan Year: The 12-consecutive month period designated by the Employer in
the Adoption Agreement.
1.27 Self-Employed Individual: An individual who has Earned Income for the
taxable year from the trade or business for which the Plan is established
including an individual who would have had Earned Income but for the fact that
the trade or business had no Net Profits for the taxable year.
1.28 Service: The period of current or prior employment with the Employer. If
the Employer maintains a plan of a predecessor employer, Service for such
predecessor shall be treated as Service for the Employer. All Years of Service
with other members of a controlled group of corporations [as defined in Code
Section 414(b)], trades or businesses under common control [as defined in Code
Section 414(c)], or members of an affiliated service group [as defined in Code
Section 414(m)] shall be credited for purposes of determining an Employee's
eligibility to participate in this Plan.
1.29 Shareholder Employee: An Employee or Officer who owns [or is considered as
owning within the meaning of Section 318(a)(i) of the Code], on any day during
the taxable year of an electing small business (Subchapter S) corporation, more
than 5% of such corporation's outstanding stock.
1.30 Super Top-Heavy Plan: A Plan described at section 13.01(g) hereof under
which the Top-Heavy Ratio [as defined at section 13.01(h)] exceeds 90%.
1.31 Taxable Wage Base: shall be the maximum amount of earnings which may be
considered wages for such Plan Year under Section 3121 (a)(1) of the Internal
Revenue Code.
1.32 Top-Heavy Plan: A Plan described at section 13.01(g) hereof under which the
Top-Heavy Ratio [as defined at section 13.01(h)] exceeds 60%.
<PAGE> 13
1.33 Trust Fund: Any and all assets held under the Plan by the Trustee.
1.34 Trustee: The bank, organization or individual(s) designated by the Employer
in the Adoption Agreement and any successor Trustee.
1.35 Valuation Date: The last day of the Plan Year and any other date on which
the fair market value of Participant accounts accrued from Employee
contributions and investment earnings and gains and losses are determined in
accordance with section 9.11 hereof.
1.36 Year Of Service: A 12-consecutive month period during which an Employee has
not less than 1,000 Hours of Service.
(a) For purposes of determining Years of Service and Breaks in Service for
purposes of eligibility, the initial eligibility computation period is the 12-
consecutive month period beginning on the date the Employee first performs an
Hour of Service for the Employer (employment commencement date). The succeeding
12-consecutive month periods commence with the first Plan Year which commences
prior to the first anniversary of the Employee's employment commencement date
regardless of whether the Employee is entitled to be credited with 1,000 Hours
of Service during the initial eligibility computation period. An Employee who is
credited with 1,000 Hours of Service in both the initial eligibility computation
period and the first Plan Year which commences prior to the anniversary of the
Employee's initial eligibility computation period will be credited with two
Years of Service for purposes of eligibility to participate.
(b) For purposes of vesting a Year of Service shall be any 12 consecutive month
period (which may include periods prior to the Effective Date) during which the
Employee has completed at least one thousand (1,000) Hours of Service, except
for Years of Service excluded in the Adoption Agreement and shall be computed
under one of the methods selected in the Adoption Agreement.
(c) For purposes of benefit accrual a Year of Service shall be computed under
one of the methods selected in Adoption Agreement. All Participants who complete
one thousand (1,000) Hours of Service, but terminate employment before the end
of the Year shall receive credit for a full benefit accrual Year of Service.
Years of Service and Breaks in Service will be measured on the same eligibility
computation period.
For purposes of computing an Employee's nonforfeitable right to the account
balance derived from Employer contributions, Years of Service and Breaks in
Service will be measured by the Plan Year.
ARTICLE II - ELIGIBILITY
2.01 An Employee who is employed on the Effective Date of this Plan shall become
a Participant on the Effective Date or on the Entry Date nearest the date on
which the Employee satisfies the eligibility requirements set forth in the
Adoption Agreement. An Employee who is employed after the Effective Date shall
<PAGE> 14
become a Participant on the Entry Date nearest or next following (as selected in
the Adoption Agreement) the date on which the Employee satisfies the eligibility
requirements set forth in the Adoption Agreement.
2.02 In the event an Employee who is not a member of an eligible class of
employees becomes a member of an eligible class, such Employee will participate
immediately upon satisfying the minimum age and service requirements and would
have otherwise previously become a Participant.
2.03 A former Participant will become a Participant immediately upon returning
to the employ of the Employer if such former Participant has a nonforfeitable
(vested) right to all or a portion of the Accrued Benefit derived from Employer
contributions at the time of termination from Service.
2.04 A former Participant who did not have a nonforfeitable (vested) right to
any portion of the Accrued Benefit derived from Employer contributions at the
time of termination from Service shall be considered a new Employee, for
eligibility purposes, if the number of consecutive one (1) year Breaks in
Service equal or exceed the greater of five (5) or the aggregate number of Years
of Service before such one (1) year Breaks in Service. Such aggregate number of
Years of Service will not include any Years of Service disregarded under the
preceding sentence by reason of prior Breaks in Service.
If a Participant's Years of Service are disregarded pursuant to the preceding
paragraph, such Participant will be treated as a new Employee for eligibility
purposes. If a Participant's Years of Service may not be disregarded pursuant to
the preceding paragraph, such Participant shall continue to participate in the
Plan, or, if terminated, shall participate immediately upon reemployment.
2.05 Any former Employee who has never been a Participant and is re-employed
shall be eligible to participate subject to the provisions of Section 2.02.
2.06 For purposes of determining Years of Service and Breaks in Service for
purposes of eligibility, the 12-consecutive month period shall commence on the
date on which an Employee first performs an Hour of Service with the Employer
(employment commencement date).
The succeeding 12-consecutive month periods commence with the first Plan Year
which commences prior to the first anniversary of the Employee's employment
commencement date regardless of whether the Employee is entitled to be credited
with 1,000 Hours of Service during the initial eligibility computation period.
An Employee who is credited with 1,000 Hours of Service in both the initial
eligibility computation period and the first Plan Year which commences prior to
the first anniversary of the Employee's initial eligibility computation period
will be credited with two Years of Service for purposes of eligibility to
participate.
2.07 In the case of any Employee who has a one (1) year Break in Service, years
of eligibility Service before such break will not be taken into account until
the Employee has completed a Year of Service after returning to employment.
Such Year of Service will be measured by the 12-consecutive month period
<PAGE> 15
beginning on an Employee's reemployment commencement date and, if necessary,
Plan Years beginning with the Plan Year which includes the first anniversary of
the reemployment commencement date. The reemployment commencement date is the
first day on which the Employee is credited with an Hour of Service for the
performance of duties after the first eligibility computation period in which
the Employee incurs a one (1) year Break in Service.
If a Participant completes a Year of Service in accordance with this provision,
his or her participation will be reinstated as of the reemployment commencement
date.
ARTICLE III - CONTRIBUTIONS
3.01 For each Plan Year, the Employer will contribute to the Trust Fund such
amount as is determined in accordance with the provisions selected by the
Employer in section A-3.01 of the Adoption Agreement. If this is a money
purchase plan or a target benefit plan the Employer will be required to make
such contribution as necessary to satisfy minimum funding standards.
At all times, Employer contributions will be a uniform percentage of
Compensation, excluding Compensation in excess of the limitation under Section
401(a)(17).
3.02 In order to insure a deduction for such Plan Year, the total amount of
required contributions shall be made no later than the time prescribed by law
for filing the Employer's United States Income Tax Return for the fiscal year
which ends with or within such Plan Year, including extensions thereof. All
contributions made by the Employer shall be conditional upon their deductibility
by the Employer for income tax purposes; provided, however, that no
contributions shall be returned to the Employer except as provided in section
3.04 below and section 15.03.
3.03 In addition, the Employer shall pay all the administrative expenses of the
Plan and Trust fund, except if otherwise elected in the Adoption Agreement, so
long as the Plan and Trust remains in effect except that any expenses directly
relating to the investments of the Trust fund such as taxes, brokerage
commissions, registration charges, etc., shall be paid from Trust assets. In
the event that the Employer should fail to pay all or a part of such expenses,
the Trustee shall pay these expenses and charge the payment thereof against the
Trust Fund.
3.04 Notwithstanding any other provision of the Plan, contributions made by the
Employer may be returned to the Employer if:
(a) the contribution was made by reason of a mistake of fact; or
(b) the contribution was conditioned upon its deductibility by the Employer and
the deduction was disallowed; and
(c) the return to the Employer of the amount involved occurs within one (1) year
<PAGE> 16
of the mistaken payment of the contribution or the disallowance of the
deduction, as the case may be.
The amount which may be returned to the Employer is the excess of the amount
contributed over the amount that would have been contributed had there not
occurred the circumstances causing the excess. Earnings attributable to the
excess contributions may not be returned to the Employer, but losses thereto
shall reduce the amount to be so returned.
3.05 A separate account will be maintained by the Trustee for the nondeductible
Employee contributions of each Participant and shall be allocated a
proportionate share of the Trust Fund's income, losses, appreciation and
depreciation. A Participant shall always be 100% vested in his or her voluntary
non-deductible contributions. No suspension or forfeiture of any Employer
derived benefit under this Plan shall occur as a result of a Participant's
withdrawal of any Employee contributions.
3.06 If permitted by the Employer in the Adoption Agreement, a Participant may
make nondeductible voluntary contributions to the Plan provided that the total
of such voluntary contributions by a Participant to all plans maintained by the
Employer do not exceed the limits prescribed by Section 401(m) of the Code and
the regulations thereunder for the Plan Year.
The Plan may permit nondeductible voluntary contributions only if the sponsoring
organization (or regional prototype sponsor) (1) maintains records that enable
it to monitor adopting Employers' compliance with the requirements of Section
401(m) of the Code; (2) performs the Section 401(m) actual contribution
percentage (ACP) test for adopting Employers on an annual basis; and (3)
notifies adopting Employers if they are required to correct excess aggregate
contributions.
3.07 If the Plan permits nondeductible voluntary contributions to be made, the
Employer may make matching contributions, if so elected by the Employer in the
Adoption Agreement. Matching contributions may only be permitted if the
sponsoring organization (or regional prototype sponsor) (1) maintains records
that enable it to monitor adopting Employers' compliance with the requirements
of Section 401(m) of the Code; (2) performs the Section 401(m) actual
contribution percentage (ACP) test for adopting Employers on an annual basis;
and (3) notifies adopting Employers if they are required to correct excess
aggregate contributions.
3.08 The Plan Administrator will not accept deductible Employee contributions
which are made for a taxable year beginning after December 31, 1986.
Contributions made prior to that date will be maintained in a separate account
which will be nonforfeitable at all times. The account will share in the gains
and losses of the Trust fund in the same manner as described in section 9.03 of
the Plan. No part of the deductible voluntary contribution account will be used
to purchase life insurance. Subject to Article XII, Joint and Survivor Annuity
Requirements (if applicable), the participant may withdraw any part of the
deductible voluntary contribution account by making a written application to the
Plan Administrator.
3.09 If permitted by the Employer in the Adoption Agreement, a Participant may
<PAGE> 17
make a "rollover" contribution to this Plan and Trust of an amount that was
distributed to (or will be distributed) such Participant from another qualified
pension or profit-sharing plan, provided that such amount does not include any
amounts contributed by the Participant to the other plan. Such amount must meet
the requirements of a "lump sum distribution" as defined in Code Section
402(e)(4)(A), or be on account of plan termination or the complete
discontinuance of contributions in the case of a profit-sharing plan.
In addition, the amount distributed from the other plan must be transferred to
this Plan no later than sixty days after distribution is made from the other
plan and the amount transferred must be made in kind. The Trustee shall
establish a separate account for such rollover or transferred amount in the name
of the respective participant(s). A proportionate share of the earnings of the
Trust Fund shall be allocated to each account.
3.10 Forfeitures arising hereunder will be used to reduce Employer contributions
for the next Plan Year or will be allocated to the Participant's accounts as
determined by the Employer in section A-3.10 of the Adoption Agreement. No
forfeitures will occur solely as a result of an Employee's withdrawal of
Employee contributions.
3.11 Contributions shall be allocated and credited to Participant's accounts on
the last day of each Plan Year (valuation date) or at more frequent intervals as
determined by the Plan Administrator.
3.12 If elected by the Employer in section A-3.01 of the Adoption Agreement,
nonforfeitable contributions will be made to the Plan on behalf of each disabled
Participant who is not a highly compensated Employee [within the meaning of
Section 414(q) of the Code].
3.13 Cash or Deferred Arrangement [CODA - 401(k)] - If the Plan is a profit
sharing plan with a Cash or Deferred Arrangement (CODA), Participants are
permitted to make Elective Deferrals under the Plan. In addition, if elected by
the Employer in the Adoption Agreement, Participants may be entitled to receive
a portion of Employer Matching and Employer discretionary contributions
(Qualified Non-Elective Contributions). Provisions for the CODA are found in
Article XVII of the Plan and at A-17.01 in the Adoption Agreement (#005).
ARTICLE IV - BENEFITS
4.01 Notwithstanding the vesting schedule elected by the Employer in section
A-7.01 of the Adoption Agreement, upon the attainment of Normal Retirement Age a
Participant shall be one hundred percent (100%) vested in his or her account
balance.
4.02 Upon mutual agreement between the Participant and the Employer, such
Participant may continue his or her employment and participation in the Plan
beyond Normal Retirement Age, in which case no distribution will be made until
the Participant's actual retirement. Upon actual retirement, the Participant
will be entitled to receive the entire value of his or her account balance.
<PAGE> 18
4.03 In the event a Participant's employment is terminated because of total and
permanent disability, as defined below, such Participant shall be entitled to
receive a disability benefit as provided in the Adoption Agreement. Disability
means the inability to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment that can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months. The permanence and degree of such
impairment shall be supported by medical evidence.
4.04 If permitted by the Employer in the Adoption Agreement, a Participant may
take Early Retirement upon satisfying the requirements set forth in the Adoption
Agreement. Such Participant shall be entitled to receive that benefit as
indicated by the Employer in the Adoption Agreement. If a Participant separates
from Service before satisfying the age requirement for early retirement, but has
satisfied the Service requirement, such Participant will be eligible to receive
an Early Retirement benefit upon the attainment of the age set forth in the
Adoption Agreement.
4.05 Unless either a Joint and Survivor Annuity or an optional form of benefit
payment is elected by the Participant, the Normal Retirement benefit (normal
form of benefit) under a profit sharing plan shall be a single sum distribution.
Under all other plans the normal form of benefit shall be that benefit selected
by the Employer in section A-4.05 of the Adoption Agreement.
4.06 In lieu of the normal form of benefit distribution of a Participant's
vested account balance shall be made to or for the benefit of a Participant by
either of the following methods:
(a) single sum payment;
(b) a series of substantially equal annual or more frequent installments, with
or without a period certain (of 10 or 20 years) over a period of:
(i) If the Participant had made an effective election under Section 242(b)(2) of
TEFRA which has not been revoked, any period allowed by the Internal Revenue
Code and Regulations as in effect prior to TEFRA, or if longer, any period
permitted in (ii) below;
(ii) Otherwise, over a period not to exceed the greater of: (A) the
Participant's life expectancy or (B) the joint and last survivor life expectancy
of the Participant and his or her designated beneficiary (if such beneficiary is
an individual).
This section shall apply only if the Participant has effectively waived the
requirements of Article XII under the rules set forth in the provisions of said
article. Any request for an optional form of benefit payment must be made in
writing to the Plan Administrator.
4.07 Unless otherwise elected in the Adoption Agreement, distribution of
benefits will begin no later than the 60th day after the latest of the close of
the Plan Year in which:
<PAGE> 19
(a) the Participant attains age 65 (or Normal Retirement age, if earlier);
(b) occurs the 10th anniversary of the year in which the Participant commenced
Participation in the Plan; or,
(c) the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and spouse to
consent to a distribution while a benefit is immediately distributable, within
the meaning of section 4.10 of the Plan, shall be deemed to be an election to
defer commencement of payment of any benefit sufficient to satisfy this section.
4.08 If a Participant terminates Service, and the value of the Employee's vested
account balance derived from Employer and Employee contributions is not greater
than $3,500, the Employee will receive a distribution of the value of the entire
vested portion of such account balance and the nonvested portion will be treated
as a forfeiture. For purposes of this section, if the value of a Participant's
vested account balance is zero, the Participant shall be deemed to have received
a distribution of such vested account balance. A Participant's vested account
balance shall not include accumulated deductible Employee contributions within
the meaning of Section 72(o)(5)(B) of the Code for Plan Years beginning prior to
January 1, 1989.
If a Participant terminates Service, and elects, in accordance with the
requirements of section 4.10, to receive the value of the Participant's vested
account balance, the nonvested portion will be treated as a forfeiture. If the
Participant elects to have distributed less than the entire vested portion of
the account balance derived from Employer contributions, the part of the
nonvested portion that will be treated as a forfeiture is the total nonvested
portion multiplied by a fraction, the numerator of which is the amount of the
distribution attributable to Employer contributions and the denominator of which
is the total value of the vested Employer derived account balance.
If a Participant receives a distribution pursuant to this section and the
Participant resumes employment covered under this Plan, the Participant's
Employer-derived account balance will be restored to the amount on the date of
distribution if the Participant repays to the Plan the full amount attributable
to Employer contributions before the earlier of 5 years after the first date on
which the Participant is subsequently reemployed by the Employer, or the date
the Participant incurs 5 consecutive 1-year Breaks in Service following the date
of the distribution. If an Employee is deemed to receive a distribution pursuant
to this section, and the Employee resumes employment covered under this Plan
before the date the Participant incurs 5 consecutive 1-year Breaks in Service,
upon the reemployment of such Employee, the Employer-derived account balance of
the Employee will be restored to the amount on the date of such deemed
distribution.
Pursuant to a distribution made to a Participant under this section and the
subsequent repayment and restoration of such Participant's account balance,
permissible sources for such restoration of the account balance are: income or
gain to the Plan, forfeitures or Employer contributions. In order for the Plan
to remain qualified, the aggregate total of all account balances must correspond
to the assets in the Plan. Accordingly, there cannot be an unfunded account
balance.
<PAGE> 20
However, an account balance will not be deemed to be unfunded in the case of a
restoration if assets for the restored benefit are provided by the end of the
Plan Year following the Plan Year in which the repayment occurs.
If a distribution is made at a time when a Participant has a nonforfeitable
right to less than 100 percent of the account balance derived from Employer
contributions and the Participant may increase the nonforfeitable percentage in
the account:
(a) A separate account will be established for the Participant's interest in the
Plan as of the time of the distribution, and
(b) At any relevant time the Participant's nonforfeitable portion of the
separate account will be equal to an amount ("X") determined by the formula:
X = P [AB + (RxD)] - (RxD)
For purposes of applying the formula: P is the nonforfeitable percentage at the
relevant time, AB is the account balance at the relevant time, D is the amount
of the distribution, and R is the ratio of the account balance at the relevant
time to the account balance after distribution.
4.09 Claims: The Plan Administrator shall make each claim determination in a
uniform and non-discriminatory manner. In no case shall the Insurer be liable
for any claim determination made by the Plan Administrator. Insurer shall mean
any legal reserve life insurance company licensed to do business in one or more
states of the United States.
Within 90 days after the receipt of the claim by the Plan Administrator, the
Plan Administrator shall either grant the claim, deny the claim, or notify the
Participant, former Participant, or beneficiary, (hereafter "Claimant") that
special circumstances have required an extension of time for the processing of
the claim; such extension not to exceed 180 days from the original notice.
Within 30 days after denial of any benefit under the Plan, the Plan
Administrator shall give to the Claimant written notice by certified mail,
directed to his or her last address of record with the Plan Administrator, of
the denial of claim for benefits. The notice shall set forth the specific reason
for such denial, shall make specific reference to Plan provisions upon which the
denial is based, shall describe any additional material or information necessary
for the Claimant to perfect his or her claim and why such material is necessary,
and shall advise the Claimant that he or she may file a written appeal of the
determination with the Plan Administrator within 60 days after receipt of such
notice. In connection with such appeal, the Claimant or his or her duly
authorized representative may review pertinent documents and submit issues and
comments in writing. Failure of the Claimant to file a written appeal with the
Plan Administrator within the allowable 60-day period shall constitute an
irrevocable consent by the Claimant to the Plan Administrator's decision denying
the benefit claimed, and the Plan Administrator's written notice shall so state.
Within 60 days after the filing of the appeal, the Plan Administrator shall
notify the Claimant either as to the decision on the appeal or that special
<PAGE> 21
circumstances require an extension of time for processing; such extension not to
exceed 120 days from the date of the filing of the appeal. If neither the
decision nor a notice of extension is furnished within the 60-day period, the
claim shall be deemed to be denied on appeal.
All notices under this Article shall be written in a manner calculated to be
understood by Claimant.
4.10 Restrictions on Immediate Distributions
(a) If the value of a Participant's vested account balance derived from Employer
and Employee contributions exceeds (or at the time of any prior distribution
exceeded) $3,500, and the account balance is immediately distributable, the
Participant and the Participant's spouse (or where either the Participant or the
spouse has died, the survivor) must consent to any distribution of such account
balance. The consent of the Participant and the Participant's spouse shall be
obtained in writing within the 90-day period ending on the annuity starting
date. The annuity starting date is the first day of the first period for which
an amount is paid as an annuity or any other form. The Plan Administrator shall
notify the Participant and the Participant's spouse of the right to defer any
distribution until the Participant's account balance is no longer immediately
distributable. Such notification shall include a general description of the
material features, and an explanation of the relative values of, the optional
forms of benefit available under the Plan in a manner that would satisfy the
notice requirements of Section 417(a)(3), and shall be provided no less than 30
days and no more than 90 days prior to the annuity starting date.
Notwithstanding the foregoing, only the Participant need consent to the
commencement of a distribution in the form of a Qualified Joint and Survivor
Annuity while the account balance is immediately distributable. (Furthermore, if
payment in the form of a Qualified Joint and Survivor Annuity is not required
with respect to the Participant pursuant to Article XII of the Plan, only the
Participant need consent to the distribution of an account balance that is
immediately distributable.) Neither the consent of the Participant nor the
Participant's spouse shall be required to the extent that a distribution is
required to satisfy Section 401(a) (9) or Section 415 of the Code. In addition,
upon termination of this Plan if the Plan does not offer an annuity option
(purchased from a commercial provider), the Participant's account balance may,
without the Participant's consent, be distributed to the Participant or
transferred to another defined contribution plan (other than an employee stock
ownership plan as defined in Section 4975(e)(7) of the Code) within the same
controlled group.
An account balance is immediately distributable if any part of the account
balance could be distributed to the Participant (or surviving spouse) before the
Participant attains or would have attained if not deceased) the later of Normal
Retirement Age or age 62.
(b) For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first Plan Year
beginning after December 31, 1988, the Participant's vested account balance
shall not include amounts attributable to accumulated deductible Employee
contributions
<PAGE> 22
within the meaning of Section 72(o)(5)(B) of the Code.
4.11 If permitted by the Employer in the Adoption Agreement, a Participant who
has a one hundred percent (100%) nonforfeitable interest in his or her account
balance derived from Employer contributions and who is not a 5-percent owner may
request a hardship distribution of all or a portion of such account balance
before the attainment of age 59 1/2. The provisions of this section (4.11) do
not pertain to amounts that are held under a CODA or 401(k) plan. For rules
governing these amounts refer to Article XVII or Adoption Agreement #005. The
following are the only financial needs considered immediate and heavy for which
a hardship distribution will be permitted:
(a) deductible medical expenses [within the meaning of Section 213(d) of the
Code] of the Participant, the Participant's spouse, children or dependents;
(b) the purchase (excluding mortgage payments) of a principal residence for the
Participant;
(c) payment of tuition for the next quarter or semester of post-secondary
education for the Participant, the Participant's spouse, children or dependents;
or
(d) the need to prevent the eviction of the Participant from, or a foreclosure
on the mortgage of, the Participant's principal residence.
A distribution will be considered as necessary to satisfy an immediate and heavy
financial need of the Participant only if:
(e) The Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by the
Employer; and
(f) The distribution is not in excess of the amount of an immediate and heavy
financial need.
Hardship distributions will only be made to a Participant in a profit sharing
plan and shall be made on a uniform and consistent basis by the Employer. A
request for a hardship distribution requires the written consent of the
Participant's spouse as prescribed in Code Sections 401(a) (11) and 417.
ARTICLE V - LIMITATION ON ALLOCATIONS
5.01 If the Participant does not participate in, and has never participated in
another qualified plan maintained by the Employer or a welfare benefit fund, as
defined in Section 419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section 415(1)(2) of the Code,
maintained by the Employer, which provides an Annual Addition as defined in
section 5.13, the amount of Annual Additions which may be credited to the
Participant's account for any Limitation Year will not exceed the lesser of the
Maximum Permissible Amount, or any other limitation contained in this Plan. If
<PAGE> 23
the Employer contribution that would otherwise be contributed or allocated to
the Participant's account would cause the Annual Additions for the Limitation
Year to exceed the Maximum Permissible Amount, the amount contributed or
allocated will be reduced so that the Annual Additions for the Limitation Year
will equal the Maximum Permissible Amount.
5.02 Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible Amount for a
Participant on the basis of a reasonable estimation of the Participant's
Compensation for the Limitation Year, uniformly determined for all Participants
similarly situated.
5.03 As soon as is administratively feasible after the end of the Limitation
Year, the Maximum Permissible Amount for the Limitation Year will be determined
on the basis of the Participant's actual Compensation for the Limitation Year.
5.04 If pursuant to section 5.03 or as a result of the allocation of
forfeitures, there is an excess amount, the excess will be disposed of as
follows:
(a) Any nondeductible voluntary Employee contributions, to the extent they would
reduce the excess amount, will be returned to the Participant;
(b) If after the application of paragraph (a) an excess amount still exists, and
the Participant is covered by the Plan at the end of a Limitation Year, the
excess amount in the Participant's account will be used to reduce Employer
contributions for such Participant in the next Limitation Year, and each
succeeding Limitation Year, if necessary.
(c) If after the application of paragraph (a) an excess amount still exists, and
the Participant is not covered by the Plan at the end of a Limitation Year, the
excess amount will be held unallocated in a suspense account. The suspense
account will be applied to reduce future Employer contributions (including
allocation of any forfeitures) for all remaining Participants in the next
Limitation Year, and each succeeding Limitation Year if necessary;
(d) If a suspense account is in existence at any time during a Limitation Year
pursuant to this section, it will not participate in the allocation of the
Trust's investment gains and losses. If a suspense account is in existence at
any time during a particular Limitation Year, all amounts in the suspense
account must be allocated and reallocated to Participants' accounts before any
Employer contributions or any Employee contributions may be made to the Plan for
that Limitation Year. Excess amounts may not be distributed to Participants or
former Participants.
5.05 This section applies if, in addition to this Plan, the Participant is
covered under another qualified regional prototype defined contribution plan
maintained by the Employer, a welfare benefit fund, as defined in Section 419(e)
of the Code maintained by the Employer, or an individual medical account, as
defined in Section 415(1)(2) of the code, maintained by the Employer, which
provides an Annual Addition as defined in section 5.13, during any Limitation
Year. The Annual Additions which may be credited to a Participant's account
under this Plan for any such Limitation Year will not exceed the Maximum
Permissible
<PAGE> 24
Amount reduced by the Annual Additions credited to a Participant's account under
the other Plans and welfare benefit funds for the same Limitation Year. If the
Annual Additions with respect to the Participant under other defined
contribution plans and welfare benefit funds maintained by the Employer are less
than the Maximum Permissible Amount and the Employer contribution that would
otherwise be contributed or allocated to the Participant's account under this
Plan would cause the Annual Additions for the Limitation Year to exceed this
limitation, the amount contributed or allocated will be reduced so that the
Annual Additions under all such plans and funds for the Limitation Year will
equal the Maximum Permissible Amount. If the Annual Additions with respect to
the Participant under such other defined contribution plans and welfare benefit
funds in the aggregate are equal to or greater than the Maximum Permissible
Amount, no amount will be contributed or allocated to the Participant's account
under this Plan for the Limitation Year.
5.06 Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible Amount for a
Participant in the manner described in section 5.02.
5.07 As soon as is administratively feasible after the end of the Limitation
Year, the Maximum Permissible Amount for the Limitation Year will be determined
on the basis of the Participant's actual Compensation for the Limitation Year.
5.08 If, pursuant to section 5.07 or as a result of the allocation of
forfeitures, a Participant's Annual Additions under this Plan and such other
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 welfare benefit fund or individual medical
account will be deemed to have been allocated first regardless of the actual
allocation date.
5.09 If an excess amount was allocated to a Participant on a valuation date of
this Plan which coincides with an allocation date of another plan, the excess
amount attributed to this Plan will be the product of,
(a) the total excess amount allocated as of such date, times
(b) the ratio of (i) the Annual Additions allocated to the Participant for the
Limitation Year as of such date under this Plan to (ii) the total Annual
Additions allocated to the Participant for the Limitation Year as of such date
under this and all the other qualified Defined Contribution Plans.
5.10 Any excess amount attributed to this Plan will be disposed in the manner
described in section 5.04.
5.11 If the Participant is covered under another qualified Defined Contribution
Plan maintained by the Employer which is not a regional prototype plan, Annual
Additions which may be credited to the Participant's account under this Plan for
any Limitation Year will be limited in accordance with sections 5.05 through
5.10 as though the other plan were a regional prototype plan unless the Employer
provides other limitations in section A-5.01 of the Adoption Agreement.
<PAGE> 25
5.12 If the Employer maintains, or at any time maintained, a qualified Defined
Benefit Plan (other than paired plan #02001, 02002, 02003, 02004 or 02009)
covering any Participant in this Plan, the sum of the Participant's Defined
Benefit Plan Fraction and Defined Contribution Plan Fraction will not exceed 1.0
in any Limitation Year. The Annual Additions which may be credited to the
Participant's account under this Plan for any Limitation Year will be limited in
accordance with section A-5.01 of the Adoption Agreement.
5.13 Definitions.
(a) Annual Additions: The sum of the following amounts credited to a
Participant's account for the Limitation Year:
(i) Employer contributions, (ii) Employee contributions, (iii) forfeitures,
and (iv) amounts allocated, after March 31, 1984, to an individual medical
account, as defined in Section 415(1)(2) of the Code, which is part of a pension
or annuity plan maintained by the Employer are treated as Annual Additions to a
Defined Contribution Plan. Also amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending after such date, which
are attributable to post-retirement medical benefits, allocated to the separate
account of a Key Employee, as defined in Section 419A(d)(3) of the Code, under a
welfare benefit fund, as defined in Section 419(e) of the Code, maintained by
the Employer are treated as Annual Additions to a Defined Contribution Plan.
For this purpose, any excess amount applied under sections 5.04 or 5.10 in the
Limitation Year to reduce Employer contributions will be considered Annual
Additions for such Limitation Year.
(b) Compensation: A Participant's Earned Income, wages, salaries, and fees for
professional services and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the Plan
(including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses), and excluding the following:
(i) Employer contributions to a plan of deferred compensation which are not
includable in the Employee's gross income for the taxable year in which
contributed, or Employer contributions under a simplified employee pension plan
to the extent such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a non- qualified stock option, or
when restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and
(iv) other amounts which received special tax benefits, or contributions made by
the Employer (whether or not under a salary reduction agreement) towards the
<PAGE> 26
purchase of an annuity described in Section 403(b) of the Internal Revenue Code
(whether or not the amounts are actually excludable from the gross income of the
Employee).
For purposes of applying the limitations of this article, Compensation for a
Limitation Year is the Compensation actually paid or includable in gross income
during such Limitation Year.
Notwithstanding the preceding sentence, Compensation for a Participant in a
Defined Contribution Plan who is permanently and totally disabled [as defined in
Section 22(e)(3) of the Internal Revenue Code] is the Compensation such
Participant would have received for the Limitation Year if the Participant had
been paid at the rate of Compensation paid immediately before becoming
permanently and totally disabled; such imputed compensation for the disabled
Participant may be taken into account only if the Participant is not a highly
compensated Employee (as defined in Section 414(q) of the Code) and
contributions made on behalf of such Participant are nonforfeitable when made.
(c) Defined Benefit Fraction: A fraction, the numerator of which is the sum of
the Participant's projected annual benefits under all the Defined Benefit Plans
(whether or not terminated) maintained by the Employer, and the denominator of
which is the lesser of 125 percent of the dollar limitation determined for the
Limitation Year under Section 415(b) and (d) of the Code or 140 percent of the
Highest Average Compensation, including any adjustments under Section 415(b) of
the Code.
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first Limitation Year beginning after December 31, 1986, in one or
more Defined Benefit Plans maintained by the Employer which were in existence on
May 6, 1986, the denominator of this fraction will not be less than 125 percent
of the sum of the annual benefits under such plans which the Participant had
accrued as of the close of the last Limitation Year beginning before January 1,
1987, disregarding any changes in the terms and conditions of the Plan after May
5, 1986. The preceding sentence applies only if the Defined Benefit Plans
individually and in the aggregate satisfied the requirements of Section 415 for
all Limitation Years beginning before January 1, 1987.
(d) Defined Contribution Dollar Limitation: $30,000 or if greater, one-fourth of
the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code
as in effect for the Limitation Year.
(e) Defined Contribution Fraction: A fraction, the numerator of which is the sum
of the Annual Additions to the Participant's account under all the Defined
Contribution Plans (whether or not terminated) maintained by the Employer for
the current and all prior Limitation Years (including the Annual Additions
attributable to the Participant's nondeductible Employee contributions to all
Defined Benefit Plans, whether or not terminated, maintained by the Employer,
and the Annual Additions attributable to all welfare benefit funds, as defined
in Section 419(e) of the Code, and individual medical accounts, as defined in
Section 415(1)(2) of the Code, maintained by the Employer), and the denominator
of which is the sum of the maximum aggregate amounts for the current and all
prior Limitation Years of Service with the Employer (regardless of whether a
<PAGE> 27
Defined Contribution Plan was maintained by the Employer). The maximum aggregate
amount in any Limitation Year is the lesser of 125 percent of the dollar
limitation determined under Sections 415(b) and (d) of the Code in effect under
Section 415(c)(1)(A) of the Code or 35 percent of the Participant's Compensation
for such year.
If the Employee was a Participant as of the end of the first day of the first
Limitation Year beginning after December 31, 1986, in one or more Defined
Contribution Plans maintained by the Employer which were in existence on May 6,
1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment an amount equal to the product of (1)
the excess of the sum of the fractions over 1.0 times (2) the denominator of
this fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987.
The Annual Addition for any Limitation Year beginning before January 1, 1987,
shall not be recomputed to treat all Employee contributions as Annual Additions.
(f) Employer: For purposes of this article, Employer shall mean the Employer
that adopts this Plan, and all members of a controlled group of corporations [as
defined in Section 414(b) of the Code as modified by Section 415(h)], all
commonly controlled trades or businesses [as defined in Section 414(c) as
modified by Section 415(h] or affiliated service groups [as defined in Section
415(m)] of which the adopting Employer is a part, and any other entity required
to be aggregated with the Employer pursuant to regulations under Section 414(o)
of the Code.
(g) Excess Amount: The excess of the Participant's Annual Additions for the
Limitation Year over the Maximum Permissible Amount.
(h) Highest Average Compensation: The average Compensation for the three
consecutive Years of Service with the Employer that produces the highest
average. A Year of Service with the Employer is the 12-consecutive month period
defined in section A-1.36 of the Adoption Agreement.
(i) Limitation Year: A calendar year, or the 12-consecutive month period elected
by the Employer in section A-1.18 of the Adoption Agreement. All qualified plans
maintained by the Employer must use the same Limitation Year. If the Limitation
Year is amended to a different 12-consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the amendment is
made.
(j) Regional Prototype Plan: A plan the form of which is the subject of a
favorable notification letter from the Internal Revenue Service.
(k) Maximum Permissible Amount: The maximum Annual Addition that may be
contributed or allocated to a Participant's account under the Plan for any
<PAGE> 28
Limitation Year shall not exceed the lesser of:
(i) the Defined Contribution Dollar Limitation, or
(ii) 25 percent of the Participant's Compensation for the Limitation Year.
The Compensation limitation referred to in (b) shall not apply to any
contribution for medical benefits [within the meaning of Section 401(h) or
Section 419A(f)(2) of the Code] which is otherwise treated as an Annual Addition
under Section 415(1)(l) or 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment changing the
Limitation Year to a different 12-consecutive month period, the Maximum
Permissible Amount will not exceed the defined contribution dollar limitation
multiplied by the following fraction:
Number of months in the short Limitation Year
12
(l) Projected Annual Benefit: The annual retirement benefit (adjusted to an
actuarially equivalent straight life annuity if such benefit is expressed in a
form other than a straight life annuity or Qualified Joint and Survivor Annuity)
to which the Participant would be entitled under the terms of the Plan assuming:
(i) the Participant will continue employment until Normal Retirement Age under
the Plan (or current age, if later), and
(ii) the Participant's Compensation for the current Limitation Year and all
other relevant factors used to determine benefit under the Plan will remain
constant for all future Limitation Years.
ARTICLE VI - DEATH BENEFITS
The provisions of this Article are subject to the provisions of Article XII -
Joint and Survivor Annuity Requirements.
6.01 If permitted by the Employer in the Adoption Agreement, the Plan shall
provide a pre-retirement death benefit for a Participant who dies before
retirement or commencement of benefits under the Plan.
If the Plan provides for the purchase of life insurance contracts in the
Adoption Agreement, the preretirement death benefit that is payable to the
Participant's surviving spouse shall consist of the proceeds of any life
insurance contract in effect on the life of the Participant, plus one hundred
percent (100%) of the value of his or her account balance as indicated in the
Adoption Agreement, less the cash value, if any, of the life insurance contract.
If the Plan does not provide for the purchase of life insurance contracts, the
pre-retirement death benefit that is payable to the Participant's surviving
spouse shall consist of that portion of such Participant's account balance as
<PAGE> 29
indicated in the Adoption Agreement.
6.02 In lieu of the death benefit being paid to a surviving spouse, a
Participant may elect to provide that the death benefit be payable to a
beneficiary other than the surviving spouse. If the Participant should die
without a surviving spouse then any death benefit shall be payable to a
contingent beneficiary.
6.03 A Participant has the right to designate a beneficiary to receive any death
benefit provided for under the Plan and to change that designation from time to
time. Furthermore, such beneficiary shall be able to elect to receive any death
benefits in any one or a combination of the optional payment forms provided.
Such designation must be made in writing to the Plan Administrator. If such
beneficiary is not the Participant's spouse, any change in the designation of a
beneficiary must be consented to, in writing, by the Participant's spouse.
6.04 If the beneficiary should die while in receipt of benefits hereunder, any
benefits payable shall be paid to the beneficiary's surviving children, if any,
or otherwise the estate of such deceased beneficiary.
6.05 The purchase of insurance contracts under the Plan shall be limited as
follows:
(a) Ordinary life - For purposes of these incidental insurance provisions,
ordinary life insurance contracts are contracts with both nondecreasing death
benefits and nonincreasing premiums. If such contracts are purchased, less than
one-half (1/2) of the aggregate Employer contributions allocated to any
Participant will be used to pay the premium attributable to them.
(b) Term and Universal Life - No more than one-quarter (1/4) of the aggregate
Employer contributions allocated to any Participant will be used to pay the
premiums on term life insurance contracts, universal life insurance contracts
and all other life insurance contracts which are not ordinary life.
(c) Combination - The sum of one-half (1/2) of the ordinary life insurance
premiums and all other life insurance premiums will not exceed one-quarter (1/4)
of the aggregate Employer contributions allocated to any Participant.
ARTICLE VII - TERMINATION OF EMPLOYMENT
7.01 Upon termination of employment for any reason other than disability, death
or retirement, a Participant shall be entitled to a nonforfeitable (vested)
interest in his or her account balance in accordance with the vesting schedule
selected in the Adoption Agreement. A Participant shall become 100 percent
vested in his or her account balance upon attaining Normal Retirement Age.
7.02 Upon termination of employment for any reason other than disability, death
or retirement, a Participant shall be entitled, subject to the provisions of
section 7.03 and Article IV, to a benefit in an amount equal to his or her
vested account balance plus the value of the Participant's voluntary
contributions, if any. Such benefit shall commence not later than 60 days after
the close of the
<PAGE> 30
Plan Year in which the terminated Participant attains Normal Retirement Age. The
benefits will be paid out as provided in section 4.07 and shall be in the form
provided for in section 4.06.
7.03 That portion of a terminated Participant's account balance which is not
vested (upon distribution) shall be forfeitable and shall be used to reduce
Employer contributions or will be allocated to the remaining Participants as is
indicated by the Employer in section A-3.10 of the Adoption Agreement. If a
benefit is forfeited because the Participant or beneficiary cannot be found,
such benefit shall be reinstated if a claim is made by the Participant or
beneficiary.
7.04 In the event that a former Participant without a nonforfeitable right to
his or her account balance should become eligible to participate in the Plan
after having terminated employment and incurring a Break in Service, such
Participant shall be credited with all pre-break and post-break Service for
purposes of determining the Participant's nonforfeitable (vested) interest. No
Participant shall be entitled to receive a benefit by application of this
section which would exceed the benefit such Participant would have received had
employment been continuous.
In the case of a Participant who has incurred a one (1) year Break in Service,
Years of Service before such break will not be taken into account until the
Participant has completed a Year of Service after such Break in Service.
7.05 No amendment of the vesting schedule shall directly or indirectly deprive a
Participant of his or her nonforfeitable rights to benefits accrued to the date
of the amendment. Further, if the vesting schedule of the Plan is amended, or
the Plan is amended in any way that directly or indirectly affects the
computation of any Participant's nonforfeitable benefit, (including a change to
or from a Top-Heavy vesting schedule), each Participant with at least three
Years of Service with the Employer may elect, within a reasonable period after
the adoption of the amendment, to have his or her nonforfeitable benefit
computed under the Plan without regard to such amendment. For Participants who
do not have at least one(1) Hour of Service in any Plan Year beginning after
December 31, 1988, the preceding sentence shall be applied by substituting "five
(5) Years of Service" for "three (3) Years of Service" where such language
appears. The period during which the election may be made shall commence with
the date the amendment is adopted and shall end on the later 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 Trustee.
7.06 In the case of a Participant who has 5 or more consecutive 1-year Breaks in
Service all Service after such Breaks in Service will be disregarded for the
purpose of vesting the Employer-derived account balance that accrued before such
Breaks in Service. Such Participant's pre-break Service will count in vesting
the post-break Employer-derived account balance only if either:
<PAGE> 31
(a) such Participant has any nonforfeitable interest in the account balance
attributable to Employer contributions at the time of separation from Service;
or
(b) upon returning to Service the number of consecutive 1-year Breaks in Service
is less than the number of Years of Service.
Separate accounts will be maintained for the Participant's pre-break and
post-break Employee-derived account balance. Both accounts will share in the
earnings and losses of the fund.
ARTICLE VIII - ADMINISTRATION
8.01 The Plan Administrator shall have such powers and duties as are necessary
for the proper administration of the Plan, including but not limited to the
power to make decisions with respect to the application and interpretation of
the Plan.
8.02 The Plan Administrator shall be entitled to rely on the advice or opinion
of any consultant, accountant or attorney and such persons may also act in their
respective professional capacities as advisors to the Employer.
8.03 Subject to the limitations contained in the Plan, the Plan Administrator
shall be empowered from time to time, at its discretion, to establish rules for
the transaction of its business and for the administration of the Plan.
8.04 The Plan Administrator shall provide written instructions to the Trustee
with respect to all payments which become due under the terms of the Plan and
shall direct the Trustee to make such payments from the Trust Fund. The Trustee
shall act and shall be fully protected in acting in accordance with such orders,
requests and instructions.
8.05 The Plan Administrator shall be responsible for filing any returns, reports
or documents with the various government agencies, such as the Internal Revenue
Service, as required by law or the regulations. In addition, the Plan
Administrator shall also be responsible for providing communication to Employees
and Participants, such as Summary Plan Descriptions and annual benefit
statements, as required by law or the regulations.
8.06 If, upon review of a request for benefits hereunder, the Plan Administrator
finds the Participant ineligible for such benefits, it shall inform the
Participant, in writing, of the reason or reasons for such denial. In the event
any Participant or beneficiary disagrees with the decision of the Plan
Administrator, the Plan Administrator must reconsider its decision based on the
facts and evidence presented by the Participant or beneficiary. Furthermore, the
Plan Administrator must provide, in writing, to any Participant or beneficiary
who disagrees with the amount of his or her benefit the method under which the
benefit computations were made.
<PAGE> 32
ARTICLE IX - TRUSTEES AND TRUST FUND
9.01 The Trustee shall receive, hold, invest, administer and distribute the
assets of the Trust Fund in accordance with the provisions of the Plan.
9.02 The Trustee shall maintain accurate and detailed records and accounts of
all transactions of the Plan, which shall be available for inspection or audit
during regular business hours.
9.03 Except as otherwise provided in the Plan, the income and profits of the
Trust Fund shall be accumulated and added to the principal of the Trust Fund and
invested and reinvested therewith as a single fund. The Trustee is authorized to
invest the assets of the Trust Fund in such bonds, notes, debentures, mortgages,
certificates, preferred or common stock or such other property, real or
personal, within the United States permitted under the provisions of ERISA. If
the Employer elects under section A-9.03 of the Adoption Agreement to permit
Participants to direct the investment of their accounts, each Participant shall
have the right to direct the Trustee with respect to the investment of his
account. Investment directions shall not be effective unless made in such manner
as may be prescribed by the Trustee. A Participant who directs the investment of
his or her account shall not by reason thereof be deemed a fiduciary with
respect to the Plan and the Trustee, Plan Administrator and other fiduciaries
shall not be liable for any losses resulting from the purchase, sale or
retention of any assets which are purchased, sold or retained at the direction
of a Participant. Once a Participant assumes direction of the investment of his
or her account, the Trustee shall not thereafter be responsible for the
investment of his or her account until the Participant notifies the Trustee, in
writing, that the Trustee is to assume investment responsibility for his or her
account. Income, expenses, gains and losses, realized and unrealized,
attributable to a Participant's investment direction shall not be considered in
adjusting the accounts of other Participants, but shall for purposes of such
section be credited to such Participant's account. The Trustee in its discretion
may hold in cash such portion of the Trust Fund as shall be reasonable under the
prevailing circumstances, pending investment or payment of expenses or
distribution of benefits. Such investments must be sufficiently diversified or
insured or otherwise guaranteed to minimize the risk of large losses.
9.04 Notwithstanding any other provisions of this Plan, all or part of the
assets may be invested in a collective investment trust which provides for the
pooling of the assets of qualified plans [under Code Sections 401(a)] provided
that such collective trust is exempt from tax under the Code or regulations
issued by the Internal Revenue Service.
9.05 The Trustee may consult with legal counsel, who may be counsel for the
Employer, in respect to any of its rights, duties or obligations under the Plan
and Trust Fund.
9.06 Where more than one individual Trustee is appointed, the right to make any
decision or undertake any action shall be a joint responsibility of all Trustees
except that the Employer may designate any one of the Trustees to act on behalf
of all of the Trustees in the execution of any documents affecting the Trust. No
<PAGE> 33
single Trustee shall be liable for any loss resulting from the acts or omissions
of another Trustee to whom specific responsibilities, obligations or duties have
been delegated by the Employer or by agreement among all of the Trustees, except
where a Trustee knowingly participates in or conceals a fiduciary breach of duty
of another Trustee or having knowledge of such breach, does not take reasonable
measures under the circumstances to remedy such breach, or enables another
Trustee to commit a breach by failure to carry out his or her own
responsibilities with the reasonable care, skill, prudence and diligence of
individuals familiar with such matters.
9.07 All reasonable costs, charges and expenses incurred by the Trustee in
connection with the administration of the Trust Fund and all reasonable costs,
charges and expenses incurred by the Plan Administrator in connection with the
administration of the Plan (including fees for legal services rendered to the
Trustee or Plan Administrator) shall be paid by the Employer, except if
otherwise elected in the Adoption Agreement. However, if such items are not paid
by the Employer then they shall be paid from the Trust Fund. The Trustee and
Plan Administrator may be paid such reasonable compensation as may be agreed
upon from time to time between the Employer, Trustee and Plan Administrator.
9.08 The Trustee shall have the following powers, rights and duties in addition
to those delegated to it elsewhere in the Plan or by law:
(a) To sell, convey, transfer, exchange, partition, mortgage, pledge or
otherwise deal with or dispose of any asset of the Trust Fund in such manner,
for such consideration and upon such terms and conditions as the Trustee, in its
discretion, shall determine;
(b) To retain, manage, invest, improve, operate and control any assets of the
Trust Fund;
(c) To employ such agents and counsel as may be reasonably necessary in
collecting, managing, administering, investing, distributing and protecting the
Trust Fund of the assets thereof and to pay them reasonable compensation;
(d) To settle, compromise or abandon all claims and demands in favor of or
against the Trust Fund;
(e) To organize and incorporate (or participate in the organization or
incorporation of) under the laws of any state, a corporation for the purpose of
acquiring and holding title to any property which the Trustee is authorized to
acquire for the Trust Fund and to exercise with respect thereto any of the
powers, rights and duties it has with respect to other assets of the Trust Fund;
(f) To cause title to the assets of the Trust Fund to be held in the name of the
Trustee, in bearer form so that title will pass by delivery or in any other
manner authorized by the laws of the State of Incorporation of the Trustee, if a
corporate trustee, or the state of residence, if an unincorporated trustee,
provided that the records of the Trustee shall indicate the true ownership of
such assets; and
(g) To exercise any of the powers and rights of an individual owner with respect
<PAGE> 34
to any property of the Trust Fund and to do all other acts in its judgment
necessary or desirable for the proper administration of the Trust Fund.
9.09 The Trustee shall be protected in acting upon any notice, direction,
certificate or other paper or document believed by the Trustee to be genuine and
to have been executed by a Participant or by the Employer or a duly authorized
person or persons representing the Employer.
9.10 The Trustee may resign at any time upon sixty days' notice, in writing, to
the Employer. The Trustee may be removed by the Employer at any time upon sixty
days' notice, in writing, to the Trustee. Upon such resignation or removal the
Employer shall appoint a successor Trustee who shall have the same powers and
duties as those conferred upon the Trustee hereunder.
9.11 The Trustee will maintain a separate account for each Employee to which
will be credited the Employer contributions and earnings thereon. As of each
Valuation Date the Trustee shall value each Participant's account as follows:
(a) As of each Valuation Date, or more frequently, any increases or decreases in
the fair market value of the Trust Fund since the last adjustment and all income
of the Trust Fund for such period shall be credited to or deducted from the
account balances of all Participants and former Participants in the ratio that
such account balance bears to all account balances.
(b) As of each Valuation Date the account balances of all Participants shall be
adjusted to reflect the effects of income, realized and unrealized gains and
losses and expenses.
(c) In order to determine the increase or decrease in the fair market value of
the Trust Fund, the market value of the Trust assets there shall be subtracted
therefrom:
(i) the amount of any Employer contributions which have been made to the Trust
Fund for that Plan Year; and
(ii) the amount of any benefits which are due but not yet paid; and
(iii) the part of any account balance that has been forfeited by a Participant
since the last day of the preceding Plan Year.
(d) Any dividends or credits earned on insurance contracts will be allocated to
the Participant's account derived from Employer contributions for whose benefit
the contract is held.
(e) After each account balance has been increased or decreased as provided
above, the amounts that have been forfeited since the preceding Valuation Date
shall be allocated as provided in section A-3.10 of the Adoption Agreement.
(f) Notwithstanding the above, separate accounts shall be maintained for a
Participant's pre-Service Break and post-Service Break account balances as
provided in Article VII.
<PAGE> 35
(g) Credits or deductions to a Participant's account balance shall be deemed to
have been made on the date to which they are related although actually
determined on some later date. Distributions to a Participant or beneficiary
shall be based on the Valuation Date coincident with or preceding the date of
payment.
9.12 Any portion of a former Participant's account which is retained in the
Trust Fund after his or her death or separation from Service may, upon
instructions from the Plan Administrator, be segregated in an interest-bearing
account and debited and credited only with income and charges attributable
directly to it.
9.13 The Employer may from time to time appoint one or more Investment Managers
to direct the investment and reinvestment of the Trust Fund. Such appointment
shall be in writing and shall be effective upon receipt by the Trustee of the
Investment Manager's written acceptance and acknowledgment that he or she is a
fiduciary with respect to the Plan and Trust. The Employer may revoke the
appointment of any Investment Manager by furnishing such Investment Manager and
the Trustee with written notice setting forth the effective date of such
revocation.
The Trustee shall comply with the directions of an Investment Manager regarding
the investment or reinvestment of the Trust Fund or such portion thereof as
shall be under management by the Investment Manager. Once an Investment Manager
has assumed direction of all or a portion of the Trust Fund, the Trustee shall
be under no duty to review any investment to be acquired, held or disposed of
pursuant to such directions, nor to make any recommendations with regard to the
acquisition, disposition or continued retention of any assets under management
by the Investment Manager. Until such time as the Trustee is notified, in
writing, by the Employer that the Trustee shall again assume exclusive authority
and discretion with regard to the portion of the Trust Fund previously under
management by the Investment Manager, the Trustee shall not have any
responsibility for investments which are managed by an Investment Manager and
shall not be liable for making or retaining any investments or for any failure
to invest in the absence of direction by an Investment Manager.
For purposes of this section, "investment manager" shall mean any fiduciary,
other than the Trustee or a named fiduciary [as defined in Section 402(a) (2) or
ERISA]:
(a) who is appointed by the Employer to manage, acquire, or dispose of all or
any portion of the Trust Fund;
(b) who is (i) registered as an investment advisor under the Investment Advisors
Act of 1940; (ii) is a bank, as defined in said Act; or (iii) is an insurance
company qualified to manage, acquire or dispose of all or any portion of the
Trust Fund under the laws of more than one State; and
(c) who has acknowledged, in writing, that he or she is a fiduciary with respect
to the Plan.
<PAGE> 36
ARTICLE X - INSURANCE CONTRACTS
10.01 If permitted by the Employer in the Adoption Agreement and agreed to by
the Trustee, the Plan Administrator may direct the Trustee to purchase life
insurance policies for Participants.
10.02 The amount of Employer contributions used to purchase insurance contracts
shall be limited as provided in section 6.05.
10.03 If a Participant is not insurable as a standard risk but may nevertheless
be eligible for insurance coverage at an extra rating the Plan Administrator, in
its discretion, may agree to pay the sub-standard rate required to obtain the
full amount of death benefit. The Plan Administrator shall treat all such
Participants in a similar situation on a uniform basis.
10.04 The Trustee shall apply for and will be the owner of any insurance
contract purchased under the terms of this Plan. The insurance contract(s) must
provide that proceeds will be payable to the Trustee, however the Trustee shall
be required to pay over all proceeds of the contract(s) to the Participant's
designated beneficiary in accordance with the distribution provisions of this
Plan. A Participant's spouse will be the designated beneficiary of the proceeds
in all circumstances unless a qualified election has been made in accordance
with Article XII, Joint and Survivor Annuity Requirements, if applicable. Under
no circumstances shall the Trust retain any part of the proceeds. In the event
of any conflict between the terms of this Plan and the terms of any insurance
contract purchased hereunder, the Plan provisions shall control.
10.05 Subject to Article XII, Joint and Survivor Annuity Requirements, the
contracts on a Participant's life will be converted to cash or an annuity or
distributed to the Participant upon commencement of benefits.
10.06 The terms of any annuity contract purchased and distributed by the Plan to
a Participant or spouse shall comply with the requirements of this Plan. Any
annuity contract distributed herefrom must be nontransferable.
ARTICLE XI - AMENDMENT AND TERMINATION
11.01 The regional prototype sponsor may amend any part of the Plan. For
purposes of sponsoring organization amendments, the mass submitter shall be
recognized as the agent of the sponsoring organization. If the sponsoring
organization does not adopt the amendments made by the mass submitter, it will
no longer be identical to or a minor modifier of the mass submitter plan.
11.02 The Employer may (a) change the choice of options in the Adoption
Agreement, (b) add overriding language in the Adoption Agreement when such
language is necessary to satisfy Section 415 or Section 416 of the Code because
of the required aggregation of multiple plans, and (c) add certain model
amendments published by the Internal Revenue Service which specifically provide
that their adoption will not cause the Plan to be treated as individually
<PAGE> 37
designed. An Employer that amends the Plan for any other reason, including a
waiver of the minimum funding requirement under Section 412(d) of the Code, will
no longer participate in this Master or Prototype plan and will be considered to
have an individually designed plan.
11.03 While it is the intention of the Employer adopting this Plan that it
should be permanent and continue to operate, the Employer reserves the right to
terminate the Plan and Trust, at any time, and at its discretion. In the event
of the termination or partial termination of the Plan the account balance of
each affected Participant will be nonforfeitable. In the case of a profit
sharing plan, in the event of a complete discontinuance of contributions under
the Plan, the account balance of each affected Participant will be
nonforfeitable.
11.04 No amendment to the Plan shall be effective to the extent that it has the
effect of decreasing a Participant's accrued benefit. Notwithstanding the
preceding sentence, a Participant's account balance may be reduced to the extent
permitted under Section 412(c)(8) of the Code. For purposes of this paragraph, a
plan amendment which has the effect of decreasing a Participant's account
balance or eliminating an optional form of benefit, with respect to benefits
attributable to Service before the amendment shall be treated as reducing an
accrued benefit. Furthermore, if the vesting schedule of a plan is amended, in
the case of an Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Employee's Employer-derived
accrued benefit will not be less than the percentage computed under the Plan
without regard to such amendment.
ARTICLE XII - JOINT AND SURVIVOR ANNUITY REQUIREMENTS
The provisions of this Article shall apply to any Participant who is credited
with at least one (1) Hour of Service with the Employer on or after August 23,
1984, and such other Participants as provided in Section 12.06.
12.01 Qualified Joint and Survivor Annuity.
(a) Unless an optional form of benefit is selected pursuant to a Qualified
Election within the 90-day period ending on the Annuity Starting Date, a married
Participant's Vested Account Balance will be paid in the form of a Qualified
Joint and Survivor Annuity and an unmarried Participant's vested account balance
will be paid in the form of a life annuity. The Participant may elect to have
such annuity distributed upon attainment of the earliest retirement age under
the Plan.
12.02 Qualified Preretirement Survivor Annuity.
(a) Unless an optional form of benefit has been selected within the Election
Period pursuant to a Qualified Election, if a Participant dies before the
Annuity Starting Date then the Participant's Vested Account Balance shall be
applied toward the purchase of an annuity for the life of the surviving Spouse.
The surviving Spouse may elect to have such annuity distributed within a
reasonable
<PAGE> 38
period after the Participant's death.
12.03 Definitions.
(a) Election Period: The period which begins on the first day of the Plan Year
in which the Participant attains age 35 and ends on the date of the
Participant's death. If a Participant separates from Service prior to the first
day of the Plan Year in which age 35 is attained, with respect to the account
balance as of the date of separation, the Election Period shall begin on the
date of separation.
Pre-age 35 waiver: A Participant who will not yet attain age 35 as of the end of
any current Plan Year may make a special Qualified Election to waive the
Qualified Preretirement Survivor Annuity for the period beginning on the date of
such election and ending on the first day of the Plan Year in which the
Participant will attain age 35. Such election shall not be valid unless the
Participant receives a written explanation of the Qualified Preretirement
Survivor Annuity in such terms as are comparable to the explanation required
under section 12.04(a). Qualified Preretirement Survivor Annuity coverage will
be automatically reinstated as of the first day of the Plan Year in which the
Participant attains age 35. Any new waiver on or after such date shall be
subject to the full requirements of this article.
(b) Earliest Retirement Age: The earliest date on which, under the Plan, the
Participant could elect to receive retirement benefits.
(c) Qualified Election: A waiver of a Qualified Joint and Survivor Annuity or a
Qualified Preretirement Survivor Annuity. Any waiver of a Qualified Joint and
Survivor Annuity or a Qualified Preretirement Survivor Annuity shall not be
effective unless:
(i) the Participant's Spouse consents in writing to the election;
(ii) the election designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be changed without
spousal consent (or the Spouse expressly permits designations by the Participant
without any further spousal consent);
(iii) the Spouse's consent acknowledges the effect of the election; and
(iv) the Spouse's consent is witnessed by a Plan representative or notary
public.
Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity
shall not be effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the Spouse expressly
permits designations by the Participant without any further spousal consent). If
it is established to the satisfaction of a Plan representative that there is no
spouse or that the spouse cannot be located, a waiver will be deemed a Qualified
Election.
Any consent by a Spouse obtained under this provision (or establishment that the
consent of a Spouse may not be obtained) shall be effective only with respect to
such Spouse. A consent that permits designations by the Participant without any
<PAGE> 39
requirement of further consent by such Spouse must acknowledge that the Spouse
has the right to limit consent to a specific beneficiary, and a specific form of
benefit where applicable, and that the Spouse voluntarily elects to relinquish
either or both of such rights. A revocation of a prior waiver may be made by a
Participant without the consent of the Spouse at any time before the
commencement of benefits. The number of revocations shall not be limited. No
consent obtained under this provision shall be valid unless the Participant has
received notice as provided in section 12.04 below.
(d) Qualified Joint And Survivor Annuity: An immediate annuity for the life of
the Participant with a survivor annuity for the life of the Spouse which is not
less than 50 percent and not more than 100 percent of the amount of the annuity
which is payable during the joint lives of the Participant and the Spouse and
which is the amount of benefit which can be purchased with the Participant's
Vested Account Balance. The percentage of the survivor annuity under the Plan
shall be 50% (unless a different percentage is elected by the Employer in the
Adoption Agreement.)
(e) Spouse (Surviving Spouse): The Spouse or surviving Spouse of the
Participant, provided that a former spouse will be treated as the Spouse or
surviving spouse and a current spouse will not be treated as the Spouse or
surviving spouse to the extent provided under a qualified domestic relations
order as described in Section 414(p) of the Code.
(f) Annuity Starting Date: The first day of the first period for which an amount
is paid as an annuity or any other form.
(g) Vested Account Balance: The aggregate value of the Participant's Vested
Account Balances derived from Employer and Employee contributions (including
roll-overs), whether vested before or upon death, including the proceeds of
insurance contracts, if any, on the Participant's life.
The provisions of this article shall apply to a Participant who is vested in
amounts attributable to Employer contributions, employee contributions (or both)
at the time of death or distribution.
12.04 Notice Requirements.
(a) In the case of a Qualified Joint and Survivor Annuity, the Plan
Administrator shall no less than 30 days and no more than 90 days prior to the
Annuity Starting Date provide each Participant a written explanation of: (i) the
terms and conditions of a Qualified Joint and Survivor Annuity; (ii) the right's
of a Participant's Spouse; (iii) the Participant's right to make and the effect
of an election to waive the Qualified Joint and Survivor Annuity form of
benefit; and (iv) the right to make, and the effect of, a revocation of a
previous election to waive the Qualified Joint and Survivor Annuity. If a
distribution is one to which Sections 401(a)(17) and 417 of the Code do not
apply, such distribution may commence less than 30 days after the notice
required under Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(i) the Plan Administrator clearly informs the Participant that the Participant
has a right to a period of at least 30 days after receiving the notice to
<PAGE> 40
consider the decision of whether or not to elect a distribution (and, if
applicable, a particular option), and
(ii) the Participant after receiving the notice, affirmatively elects a
distribution.
(b) In the case of a Qualified Preretirement Survivor Annuity as described in
Section 12.02 of this article, the Plan Administrator shall provide each
Participant within the applicable period for such Participant a written
explanation of the Qualified Preretirement Survivor Annuity in such terms and in
such manner as would be comparable to the explanation provided for meeting the
requirements of section 12.04(a) applicable to a Qualified Joint and Survivor
Annuity.
The applicable period for a Participant is whichever of the following periods
ends last: (i) the period beginning with the first day of the Plan Year 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 35; (ii) a reasonable
period ending after the individual becomes a Participant; (iii) a reasonable
period ending after this article first applies to the Participant; and (IV) a
reasonable period ending after section 12.04(c) ceases to apply to the
Participant. Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from Service in case of a Participant
who separates from Service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period ending
after the enumerated events described in (ii), (iii) and (iv) is the end of the
two year period beginning one year prior to the date the applicable event occurs
and ending one year after that date. In the case of a Participant who separates
from Service before the Plan Year in which age 35 is attained, notice shall be
provided within the two year period beginning one year prior to separation and
ending one year after separation. If such a Participant thereafter returns to
employment with the Employer, the applicable period for such Participant shall
be redetermined.
(c) Notwithstanding the other requirements of this section, the respective
notices prescribed by this section need not be given to a Participant if (1) the
Plan "fully subsidizes" the costs of a Qualified Joint and Survivor Annuity or
Qualified Preretirement Survivor Annuity, and (2) the Plan does not allow the
Participant to waive the Qualified Joint and Survivor Annuity or Qualified
Preretirement Survivor Annuity and does not allow a married Participant to
designate a nonspouse beneficiary. For purposes of this section, a Plan fully
subsidizes the costs of a benefit if no increase in cost or decrease in benefits
to the Participant may result from the Participant's failure to elect another
benefit.
12.05 Safe Harbor Rules.
(a) This section shall apply to a Participant in a profit-sharing plan and to
any distribution, made on or after the first day of the first Plan Year
beginning after December 31, 1988, from or under a separate account attributable
solely to accumulated deductible Employee Contributions, as defined in Section
72(o)(5)(B)
<PAGE> 41
of the Code, and maintained on behalf of a Participant in a money purchase
pension plan, (including a target benefit plan) if the following conditions are
satisfied: (i) the Participant does not or cannot elect payments in the form of
a life annuity; and (ii) on the death of a Participant, the Participant's Vested
Account Balance will be paid to the Participant's surviving Spouse, but if there
is no surviving Spouse, or if the surviving Spouse has consented in a manner
conforming to a Qualified Election, then to the Participant's designated
beneficiary. The surviving Spouse may elect to have distribution of the Vested
Account Balance commence within the 90-day period following the date of the
Participant's death. The account balance shall be adjusted for gains or losses
occurring after the Participant's death in accordance with the provisions of the
Plan governing the adjustment of account balances for other types of
distributions. This section shall not be operative with respect to a Participant
in a profit-sharing plan if the Plan is a direct or indirect transferee of a
defined benefit plan, money purchase plan, a target benefit plan, stock bonus,
or profit-sharing plan which is subject to the survivor annuity requirements of
Section 401(a)(11) and Section 417 of the Code. If this section is operative,
then the provisions of this article, other than section 12.06, shall be
inoperative.
(b) The Participant may waive the spousal death benefit described in this
section at any time provided that no such waiver shall be effective unless it
satisfies the conditions of Section 12.03(c) (other than the notification
requirement referred to therein) that would apply to the Participant's waiver of
the Qualified Preretirement Survivor Annuity.
(c) For purposes of this section, Vested Account Balance shall mean, in the case
of a money purchase pension plan or a target benefit plan, the Participant's
separate account balance attributable solely to accumulated deductible Employee
contributions within the meaning of Section 72(o)(5)(B) of the Code. In the case
of a profit-sharing plan, Vested Account Balance shall have the same meaning as
provided in section 12.03(g).
12.06 Transitional Rules.
(a) Any living Participant not receiving benefits on August 23, 1984, who would
otherwise not receive the benefits prescribed by the previous sections of this
article must be given the opportunity to elect to have the prior sections of
this article apply if such Participant is credited with at least one Hour of
Service under this Plan or a predecessor plan in a Plan Year beginning on or
after January 1, 1976, and such Participant had at least 10 years of vesting
service when he or she separated from Service.
(b) Any living Participant not receiving benefits on August 23, 1984, who was
credited with at least one Hour of Service under this Plan or a predecessor plan
on or after September 2, 1974, and who is not otherwise credited with any
Service in a Plan Year beginning on or after January 1, 1976, must be given the
opportunity to have his or her benefits paid in accordance with section 12.06(d)
of this article.
(c) The respective opportunities to elect [as described in section 12.06(a) and
(b) above] must be afforded to the appropriate Participants during the period
<PAGE> 42
commencing on August 23, 1984, and ending on the date benefits would otherwise
commence to said Participants.
(d) Any Participant who has elected pursuant to section 12.06(b) of this article
and any Participant who does not elect under section 12.06(a) or who meets the
requirements of section 12.06(a) except that such Participant does not have at
least 10 years of vesting service when he or she separates from Service, shall
have his or her benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a life annuity:
(i) Automatic Joint and Survivor Annuity. If benefits in the form of a life
annuity become payable to a married Participant who:
(A) begins to receive payments under the Plan on or after Normal Retirement Age;
or
(B) dies on or after Normal Retirement Age while still working for the Employer;
or
(C) begins to receive payments on or after the Qualified Early Retirement Age;
or
(D) separates from Service on or after attaining Normal Retirement Age (or the
Qualified Early Retirement Age) and after satisfying the eligibility
requirements for the payment of benefits under the Plan and therefore dies
before beginning to receive such benefits;
then such benefits will be received under this Plan in the form of a Qualified
Joint and Survivor Annuity, unless the Participant has elected otherwise during
the Election Period. The Election Period must begin at least 6 months before the
Participant attains Qualified Early Retirement Age and end not more than 90 days
before the commencement of benefits.
Any election hereunder will be in writing and may be changed by the Participant
at any time.
(ii) Election of early survivor annuity. A Participant who is employed after
attaining the Qualified Early Retirement Age will be given the opportunity to
elect, during the Election Period, to have a survivor annuity payable on death.
If the Participant elects the survivor annuity, payments under such annuity
must not be less than the payments which would have been made to the Spouse
under the Qualified Joint and Survivor Annuity if the Participant had retired on
the day before his or her death. Any election under this provision will be in
writing and may be changed by the Participant at any time. The election period
begins on the later of (A) the 90th day before the Participant attains the
qualified Early Retirement Age, or (B) the date on which participation begins,
and ends on the date the Participant terminates employment.
(iii) For purposes of this section:
(A) Qualified Early Retirement Age is the latest of:
(1) the earliest date, under the Plan, on which the Participant may elect to
<PAGE> 43
receive retirement benefits,
(2) the first day of the 120th month beginning before the Participant reaches
Normal Retirement Age, or
(3) the date the Participant begins participation.
(B) Qualified Joint and Survivor Annuity is an annuity for the life of the
Participant with a survivor annuity for the life of the Spouse as described in
section 12.03 (d) of this article.
ARTICLE XIII - TOP-HEAVY PROVISIONS
If the Plan is or becomes Top-Heavy in any Plan Year beginning after December
31, 1983, the provisions of this Article will supercede any conflicting
provisions in the Plan or Adoption Agreement.
13.01 Definitions. For purposes of the Top-Heavy provisions:
(a) Compensation: An Employee's total Compensation as defined in section 1.06
hereof up to a maximum of $200,000 [or such higher amount as determined under
Section 416(d) of the Code].
(b) Determination Date: For any Plan Year subsequent to the first Plan Year, the
last day of the preceding Plan Year. For the first Plan Year of the Plan, the
last day of that year.
(c) Key Employee: Any Employee or former Employee (and the beneficiaries of such
Employee) who at any time during the determination period was an officer of the
Employer if such individual's annual Compensation exceeds 50% of the dollar
limitation under Section 415(b)(1)(A) of the Code, an owner (or considered an
owner under Section 318 of the Code) of one of the ten largest interests in the
Employer if such individual's Compensation exceeds 100% of the dollar limitation
under Section 415(c)(1)(A) of the Code, a 5% owner of the Employer, or a 1%
owner of the Employer who has an annual Compensation of more than $150,000.
Annual Compensation means Compensation as defined in Section 415(c)(3) of the
Code, but including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludable from the Employee's gross income under
Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code.The
determination period is the Plan Year containing the Determination Date and the
four preceding Plan Years. The determination of who is a Key Employee will be
made in accordance with Section 416(i)(1) of the Code and the regulations
thereunder.
(d) Permissive Aggregation Group: The Required Aggregation Group of plans plus
any other plan or plans of the Employer which, when considered as a group with
the Required Aggregation Group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
(e) Present Value: When determining the Present Value of accrued benefits for
<PAGE> 44
purposes of the Top-Heavy Ratio, interest and mortality rates shall be
determined by the interest and mortality rates specified in section A-13.01 of
the Adoption Agreement.
(f) Required Aggregation Group: Each qualified plan of the Employer in which at
least one Key Employee participates or participated at any time during the
determination period (regardless of whether the Plan terminated), and any other
qualified plan of the Employer which enables a plan covering a Key Employee to
meet the requirements of Sections 401(a)(4) and 410 of the Code.
(g) Top-Heavy Plan: For any Plan Year beginning after December 31, 1983, the
Employer's Plan will be Top-Heavy if any of the following conditions exists:
(i) If the Top-Heavy Ratio for the employer's Plan exceeds 60% and the Plan is
not part of any Required Aggregation Group or Permissive Aggregation Group of
plans;
(ii) If the Employer's Plan is a part of a Required Aggregation Group of plans
(but which is not part of a Permissive Aggregation Group) and the Top-Heavy
Ratio for the group of plans exceeds 60%; or
(iii) If the Employer's Plan is a part of a Required Aggregation Group of plans
and part of a Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60%.
(h) Top-Heavy Ratio:
(i) If the Employer maintains one or more defined contribution plans (including
any Simplified Employee Pension Plan) and the Employer has not maintained any
defined benefit plan which during the 5-year period ending on the Determination
Date(s) has or has had Accrued Benefits, the Top-Heavy Ratio for this Plan alone
or for the Required or Permissive Aggregation Group as appropriate is a
fraction, the numerator of which is the sum of the account balances of all Key
Employees as of the Determination Date(s), (including any part of any account
balance distributed in the 5-year period ending on the Determination Date(s))
and the denominator of which is the sum of all account balances (including any
part of any account balance distributed in the 5-year period ending on the
Determination Date(s), both computed in accordance with Section 416 of the Code
and the regulations thereunder. Both the numerator and denominator of the
Top-Heavy Ratio are increased to reflect any contribution not actually made as
of the Determination Date, but which is required to be taken into account on
that date under Section 416 of the Code and the regulations thereunder.
(ii) If the Employer maintains one or more defined contribution plans (including
any Simplified Employee Pension Plan) and the Employer maintains or has
maintained one or more defined benefit plans which during the 5-year period
ending on the Determination Date(s) has or has had any Accrued Benefits, the
Top-Heavy Ratio for any Required or Permissive Aggregation Group as appropriate
is a fraction, the numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all Key Employees, determined
in accordance with (i) above, and the present value of Accrued Benefits under
the aggregated defined benefit plan or plans for all Key Employees as of the
<PAGE> 45
Determination Date(s) and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (i) above, and the Present Value of
Accrued Benefits under the defined benefit plan or plans for all Participants as
of the Determination Date(s), all determined in accordance with Section 416 of
the Code and the regulations thereunder. The Accrued Benefits under a defined
benefit plan in both the numerator and denominator of the Top-Heavy Ratio are
increased for any distribution of an Accrued Benefit made in the five-year
period ending on the Determination Date.
(iii) For purposes of (i) and (ii) above the value of account balances and the
Present Value of Accrued Benefits will be determined as of the most recent
Valuation Date that falls within or ends with the 12-month period ending on the
Determination Date, except as provided in Section 416 of the Code and the
regulations thereunder for the first and second Plan Years of a defined benefit
plan. The account balances and Accrued Benefits of a Participant (A) who is not
a Key Employee but who was a Key Employee in a prior year, or (B) who has not
been credited with at least one Hour of Service with any employer maintaining
the plan at any time during the 5-year period ending on the Determination Date
will be disregarded. The calculation of the Top- Heavy Ratio, and the extent to
which distributions, rollovers, and transfers are taken into account will be
made in accordance with Section 416 of the Code and the regulations thereunder.
Deductible Employee contributions will not be taken into account for purposes of
computing the Top-Heavy Ratio. When aggregating plans the value of account
balances and Accrued Benefits will be calculated with reference to the
Determination Dates that fall within the same calendar year. The Accrued Benefit
of a Participant other than a Key Employee shall be determined under (1) the
method, if any, that uniformly applies for accrual purposes under all defined
benefit plans maintained by the Employer, or (2) if there is no such method, as
if such benefit accrued not more rapidly than the slowest accrual rate permitted
under the fractional rule of Section 411(b)(1)(C) of the Code.
(i) Valuation Date: The day elected by the Employer in section A-13.01 of the
Adoption Agreement as of which account balances or Accrued Benefits are valued
for purposes of calculating the Top-Heavy Ratio.
13.02 For any Plan Year in which this Plan is Top-Heavy, the minimum vesting
schedule elected by, or deemed elected by, the Employer in the Adoption
Agreement will automatically apply to the Plan. The minimum vesting schedule
applies to all benefits within the meaning of Section 411(a)(7) of the Code
except those attributable to Employee contributions, including benefits accrued
before the effective date of Section 416 of the Code and benefits accrued before
the Plan became Top-Heavy. Further, no decrease in a Participant's
nonforfeitable percentage may occur in the event the Plan's status as Top-Heavy
changes for any Plan Year. However, this section does not apply to the account
balances of any Employee who does not have an Hour of Service after the Plan
initially becomes Top-Heavy and such Employee's account balance attributable to
Employer Contributions and forfeitures will be determined without regard to this
section.
13.03 Minimum Allocation
(a) Except as otherwise provided in (c) and (d) below, the Employer
contributions
<PAGE> 46
and forfeitures allocated on behalf of any Participant who is not a Key Employee
shall not be less than the lesser of three percent of such Participant's
Compensation or in the case where the Employer has no defined benefit plan which
designates this Plan to satisfy Section 401 of the Code, the largest percentage
of Employer contribution and forfeitures, as a percentage of the first $200,000
of the Key Employee's Compensation, allocated on behalf of any Key Employee for
that year. The minimum allocation is determined without regard to any Social
Security contribution. This minimum allocation shall be made even though, under
other Plan provisions, the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation for the year
because of (i) the Participant's failure to complete 1,000 Hours of Service (or
any equivalent provided in the Plan), or (ii) the Participant's failure to make
mandatory Employee contributions to the Plan, or (iii) Compensation less than a
stated amount.
(b) For purposes of computing the minimum allocation, compensation shall mean
Compensation as defined in Section 1.06 of the Plan.
(c) The provision in (a) above shall not apply to any Participant who was not
employed by the Employer on the last day of the Plan Year.
(d) The provision in (a) above shall not apply to any Participant to the extent
the Participant is covered under any other plan or plans of the Employer and
Employer has provided in section A-5.01 of the Adoption Agreement that the
minimum allocation or benefit requirement applicable to Top-Heavy plans will be
met in the other plan or plans.
13.04 The minimum allocation required [to the extent required to be
nonforfeitable under Section 416(b)] may not be forfeited under Section
411(a)(3)(B) or 411(a)(3)(D).
ARTICLE XIV - PAIRED PLAN PROVISIONS
The provisions of this article shall apply if the Employer adopts a set of the
Sponsor's paired plans.
14.01 For each Plan Year in which the paired plans are Top- Heavy, the Employer
will provide a minimum contribution equal to 3% of Compensation for each non-Key
Employee who is entitled to a minimum contribution under both paired defined
contribution plan #01001 and paired defined contribution plan #01002.
14.02 Only one of the paired plans may allow for permitted disparity.
ARTICLE XV - MISCELLANEOUS
15.01 No benefit or interest available hereunder will be subject to assignment
or alienation, either voluntarily or involuntarily. The preceding sentence shall
also apply to the creation, assignment, or recognition of a right to any benefit
<PAGE> 47
payable with respect to a Participant pursuant to a domestic relations order,
unless such order is determined to be a qualified domestic relations order, as
defined in Code Section 414(p), or any domestic relations order entered before
January 1, 1985.
15.02 In the event of a merger or consolidation with or a transfer of assets or
liabilities to any other plan each Participant will receive a benefit
immediately after such merger or consolidation or transfer (if the Plan then
terminated) which is at least equal to the benefit the Participant was entitled
to immediately before such merger or consolidation or transfer (if the Plan had
terminated).
15.03 In the event that the Commissioner of Internal Revenue determines that the
Plan is not initially qualified under the Internal Revenue Code, any
contribution made incident to that initial qualification by the Employer must be
returned to the Employer within one (1) year after the date the initial
qualification is denied, but only if the application for the qualification is
made by the time prescribed by law for filing the Employer's return for the
taxable year in which the Plan is adopted, or such later date as the Secretary
of the Treasury may prescribe.
15.04 The corpus or income of the Trust Fund may not be diverted to, or used
for, other than the exclusive benefit of the Participants or their
beneficiaries.
15.05 If permitted by the Employer in the Adoption Agreement, the Plan
Administrator, in its discretion, may authorize and direct the Trustee to grant
loans to Participants, secured by the interest of the Participant in his or her
Accrued Benefit under the Plan. Such loan shall be evidenced by a promissory
note and shall bear a reasonable rate of interest, which shall not be more than
that charged by commercial lenders in the area of the Employer's place of
business. Such loans shall be subject to the following:
(a) Loans shall be made available to all Participants and beneficiaries on a
reasonably equivalent basis.
(b) Loans shall not be made available to highly compensated Employees [as
defined in Section 414(q) of the Code] in an amount greater than the amount made
available to other Employees.
(c) Loans must be adequately secured and bear a reasonable interest rate.
(d) No Participant loan shall exceed the present value of the Participant's
vested Accrued Benefit.
(e) A Participant must obtain the consent of his or her spouse, if any, to the
use of the account balance as security for the loan. Spousal consent shall be
obtained no earlier than the beginning of the 90-day period that ends on the
date on which the loan is to be so secured. The consent must be in writing, must
acknowledge the effect of the loan, and must be witnessed by a Plan
representative or notary public. Such consent shall thereafter be binding with
respect to the consenting spouse or any subsequent spouse with respect to the
loan. A new consent shall be required if the account balance is used for
<PAGE> 48
renegotiation, extension, renewal, or other revision of the loan.
(f) In event of default, foreclosure on the note and attachment of security will
not occur until a distributable event occurs in the Plan.
(g) No loans will be made to any Shareholder-Employee or Owner-Employee. For
purposes of this requirement, a Shareholder-Employee means an Employee or
officer of an electing small business (subchapter S) corporation who owns [or is
considered as owning within the meaning of Section 318(a)(1) of the Code], on
any day during the taxable year of such corporation, more than 5% of the
outstanding stock.
(h) If a valid spousal consent has been obtained in accordance with (e), then,
notwithstanding any other provision of this Plan, the portion of the
Participant's vested account balance used as a security interest held by the
Plan by reason of loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's vested account
balance (determined without regard to the preceding sentence) is payable to the
surviving spouse, then the account balance shall be adjusted by first reducing
the vested account balance by the amount of the security used as repayment of
the loan, and then determining the benefit payable to the surviving spouse.
(i) No loan to any Participant or beneficiary can be made to the extent that
such loan when added to the outstanding balance of all other loans to the
Participant or beneficiary would exceed the lesser of (i) $50,000 reduced by the
excess (if any) of the highest outstanding balance of loans during the one year
period ending on the day before the loan is made, over the outstanding balance
of loans from the Plan on the date the loan is made, or (ii) one- half the
present value of the nonforfeitable account balance of the Participant or, if
greater, the total account balance up to $10,000. For the purpose of the above
limitation, all loans from all plans of the Employer and other members of a
group of employers described in Sections 414(b), 414(c), and 414(m) and (o) of
the Code are aggregated. Furthermore, any loan shall by its terms require that
repayment (principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond five years from
the date of the loan, unless such loan is used to acquire a dwelling unit which
within a reasonable time (determined at the time the loan is made) will be used
as the principal residence of the Participant. An assignment or pledge of any
portion of the Participant's interest in the Plan and a loan, pledge, or
assignment with respect to any insurance contract purchased under the Plan, will
be treated as a loan under this section.
(j) For purposes of this section, "reasonably equivalent basis" shall mean that
loans will be available to all Plan Participants and beneficiaries without
regard to any individual's race, color, religion, sex, age or national origin.
And in making loans, consideration will be given only to those factors which
would be considered in a normal commercial setting by an entity in the business
of making similar types of loans. Such factors will include the Participant's
creditworthiness and financial need.
<PAGE> 49
The Trustee will provide loan application forms to Participants who wish to
apply for loans from the Plan.
(k) A loan will be considered as being in default based on the same facts and
circumstances used by an entity in the business of making similar types of
loans.
In the event of default, the Participant's account balance shall be used to
satisfy the outstanding amount of the loan.
15.06 Any leased employee shall be treated as an employee of the recipient
employer; however, contributions or benefits provided by the leasing
organization which are attributable to the services performed for the recipient
employer shall be treated as provided by the recipient.
For purposes of this section, the term "leased employee" means any person (other
than an employee of the recipient) who, pursuant to an agreement between the
recipient and any other person ("leasing organization") has performed services
for the recipient or for the recipient and related persons [determined in
accordance with Section 414(n)(6) of the Code] on a substantially full-time
basis for a period of at least one (1) year and such services are of a type
historically performed by employees in the business field of the recipient
Employer. Contributions or benefits provided a leased employee by the leasing
organization which are attributable to services performed for the recipient
employer shall be treated as provided by the recipient employer.
A leased employee shall not be considered an Employee of the recipient if: (i)
such employee is covered by a money purchase pension plan providing: (1) a
nonintegrated employer contribution rate of at least 10 percent of Compensation,
as defined in Section 415(c)(3) of the Code, but including amounts contributed
pursuant to a salary reduction agreement which are from the Employee's gross
income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of
the Code, (2) immediate participation, and (3) full and immediate vesting; and
(ii) leased employees do not constitute more than 20 percent of the recipient's
non-highly compensated workforce.
15.07 If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan is established
and one or more other trades or businesses, this Plan and the plan established
for the other trades or businesses must, when looked at as a single Plan,
satisfy Sections 401(a) and (d) of the Code for the Employees of this and all
other trades or businesses. If the Plan provides contributions or benefits for
one or more Owner-Employees who control one or more other trades or businesses,
the employees of the other trades or businesses must be included in a Plan which
satisfies Sections 401(a) and (d) of the Code and which provides contributions
and benefits not less favorable than provided for Owner-Employees under this
Plan. If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual controls a
trade or business, then contributions or benefits of the employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or business
which is not controlled. For purposes of the preceding sentences, an
Owner-Employee, or two or more Owner-Employees, will be considered to control a
trade or business if
<PAGE> 50
the Owner-Employee, or two or more Owner-Employees together:
(a) own the entire interest in an unincorporated trade or business, or
(b) in the case of a partnership, own more than 50% of either the capital
interest or the profits interest in the partnership.
An Owner-Employee, or two or more Owner-Employees shall be treated as owning any
interest in a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
15.08 The Plan is not a contract of employment and participation in the Plan
will not give any Participant the right to be retained in the Employer's employ,
nor any right or claim to any benefit under the Plan, unless the right or claim
has specifically occurred under the Plan.
15.09 The Plan and Trust may be executed in two or more counterparts, any one of
which will be an original without reference to the others.
15.10 The Plan Administrator, Trustee and all other fiduciaries of the Plan
shall discharge their duties solely in the interest of Participants and their
beneficiaries and shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims.
15.11 The titles of articles, sections, subsections or Adoption Agreement items
are for general information only and neither this Plan nor the Adoption
Agreement shall be construed by reference thereto.
15.12 Any contribution made by the Employer because of a mistake of fact must be
returned to the Employer within one year of the contribution.
15.13 If the Employer's Plan fails to attain or retain qualification, such plan
will no longer participate in this regional prototype plan and will be
considered an individually designed plan.
ARTICLE XVI - DISTRIBUTIONS
Subject to Article XII - Joint and Survivor Annuity Requirements, the
requirements of this article shall apply to any distribution of a Participant's
interest and will take precedence over any inconsistent provisions of this Plan.
Unless otherwise specified, the provisions of this article apply to calendar
years beginning after December 31, 1984.
All distributions required under this article shall be determined and made in
accordance with the proposed regulations under Section 401(a)(9) of the Code,
including the minimum distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed regulations.
<PAGE> 51
16.01 As of the first distribution calendar year, distributions, if not made in
a single-sum, may only be made over one of the following periods (or a
combination thereof):
(a) the life of the Participant;
(b) the life of the Participant and designated beneficiary;
(c) a period certain not extending beyond the life expectancy of the
Participant; or
(d) a period certain not extending beyond the joint and last survivor expectancy
of the Participant and a designated beneficiary.
16.02 Determination of amount to be distributed each year. If the Participant's
interest is to be distributed in other than a single sum, the following minimum
distribution rules shall apply on or after the Required Beginning Date:
Individual Account.
(a) If a Participant's benefit is to be distributed over
(i) a period not extending beyond the life expectancy of the Participant or the
joint life and last survivor expectancy of the Participant and the Participant's
designated beneficiary or
(ii) a period not extending beyond the life expectancy of the designated
beneficiary, the amount required to be distributed for each calendar year,
beginning with distributions for the first distribution calendar year, must at
least equal the quotient obtained by dividing the Participant's benefit by the
applicable life expectancy.
(b) For calendar years beginning before January 1, 1989, if the Participant's
spouse is not the designated beneficiary, the method of distribution selected
must assure that at least 50% of the present value of the amount available for
distribution is paid within the life expectancy of the Participant.
(c) For the calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first distribution
calendar year shall not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (i) the applicable life expectancy or
(ii) if the Participant's spouse is not the designated beneficiary, the
applicable divisor determined from the table set forth in Q&A-4 of Section
1.401(a)(9)-2 of the proposed regulations. Distributions after the death of the
Participant shall be distributed using the applicable life expectancy in section
16.05(a) below as the relevant divisor without regard to proposed regulations
Section 1.401(a)(9)-2.
(d) The minimum distribution required for the Participant's first distribution
calendar year must be made on or before the Participant's Required Beginning
Date. The minimum distribution for other calendar years, including the minimum
distribution for the distribution calendar year in which the Employee's Required
<PAGE> 52
Beginning Date occurs, must be made on or before December 31 of that
distribution calendar year.
16.03 If the Participant's benefit is distributed in the form of an annuity
purchased from an insurance company, distributions thereunder shall be made in
accordance with the requirements of Section 401(a)(9) of the Code and the
proposed regulations thereunder.
16.04 Death Distribution Provisions.
(a) Distribution beginning before death. If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
(b) Distribution beginning after death. If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death except to the extent
that an election is made to receive distributions in accordance with (i) or (ii)
below:
(i) if any portion of the Participant's interest is payable to a designated
beneficiary, distributions may be made over the life or over a period certain
not greater than the life expectancy of the designated beneficiary commencing on
or before December 31 of the calendar year immediately following the calendar
year in which the Participant died;
(ii) if the designated beneficiary is the Participant's surviving spouse, the
date distributions are required to begin in accordance with (i) above shall not
be earlier than the later of (A) December 31 of the calendar year immediately
following the calendar year in which the Participant died and (B) December 31 of
the calendar year in which the Participant would have attained age 70 1/2.
If the Participant has not made an election pursuant to this section by the time
of his or her death, the Participant's designated beneficiary must elect the
method of distribution no later than the earlier of (1) December 31 of the
calendar year in which distributions would be required to begin under this
section, or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the Participant has no
designated beneficiary, or if the designated beneficiary does not elect a method
of distribution, distribution of the Participant's entire interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
(c) For purposes of section 16.04(b) above, if the surviving spouse dies after
the Participant, but before payments to such spouse begin, the provisions of
section 16.04(b), with the exception of paragraph (ii) therein, shall be applied
as if the surviving spouse were the Participant.
(d) For purposes of this section 16.04, any amount paid to a child of the
Participant will be treated as if it had been paid to the surviving spouse if
the amount becomes payable to the surviving spouse when the child reaches the
age of majority.
<PAGE> 53
(e) For purposes of this section, distribution of a Participant's interest is
considered to begin on the Participant's required beginning date [or, if section
16.04(c) above is applicable, the date distribution is required to begin to the
surviving spouse pursuant to section 16.04(b) above]. If distribution in the
form of an annuity irrevocably commences to the Participant before the required
beginning date, the date distribution is considered to begin is the date
distribution actually commences.
16.05 Definitions
(a) Applicable Life Expectancy. The life expectancy (or joint and last survivor
expectancy) calculated using the attained age of the Participant (or designated
beneficiary) as of the Participant's (or designated beneficiary's) birthday in
the applicable calendar year reduced by one for each calendar year which has
elapsed since the date life expectancy was first calculated. If life expectancy
is being recalculated, the applicable life expectancy shall be the life
expectancy as so recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being recalculated such
succeeding calendar year.
(b) Designated Beneficiary. The individual who is designated as the beneficiary
under the Plan in accordance with section 401(a)(9) of the Code and the
regulations thereunder.
(c) Distribution Calendar Year. A calendar year for which a minimum distribution
is required. For distributions beginning before the Participant's death, the
first distribution calendar year is the calendar year immediately preceding the
calendar year which contains the Participant's required beginning date. For
distributions beginning after the Participant's death, the first distribution
calendar year is the calendar year in which distributions are required to begin
pursuant to section 16.04 above.
(d) Life Expectancy. Life expectancy and joint and last survivor expectancy are
computed by use of the expected return multiples in Tables V and VI of Section
1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or spouse, in the case of
distributions described in section 16.04(b)(ii) above) by the time distributions
are required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the Participant (or spouse) and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary may not
be recalculated.
(e) Participant's Benefit.
(i) The account balance as of the last Valuation Date in the calendar year
immediately preceding the distribution calendar year (valuation calendar year)
increased by the amount of any contributions or forfeitures allocated to the
account balance as of dates in the valuation calendar year after the valuation
date and decreased by distributions made in the valuation calendar year after
the Valuation Date.
<PAGE> 54
(ii) Exception for second distribution calendar year. For purposes of paragraph
(i) above, if any portion of the minimum distribution for the first distribution
calendar year is made in the second distribution calendar year on or before the
Required Beginning Date, the amount of the minimum distribution made in the
second distribution calendar year shall be treated as if it had been made in the
immediately preceding distribution calendar year.
(f) Required Beginning Date.
(i) General rule. The required beginning date of a Participant is the first day
of April of the calendar year following the calendar year in which the
Participant attains age 70 1/2.
(ii) Transitional rule. The required beginning date of a Participant who attains
age 70 1/2 before January 1, 1988, shall be determined in accordance with (A) or
(B) below:
(A) Non-5-percent owners. The required beginning date of a Participant who is
not a "5-percent owner" [as defined in (iii) below] is the first day of April of
the calendar year following the calendar year in which the later of retirement
or attainment of age 70 1/2 occurs.
(B) 5-percent owners. The required beginning date of a Participant who is a
5-percent owner during any year beginning after December 31, 1979, is the first
day of April following the later of:
(1) the calendar year in which the Participant attains age 70 1/2, or
(2) the earlier of the calendar year with or within which ends the Plan Year in
which the Participant becomes a 5-percent owner, or the calendar year in which
the Participant retires.
The required beginning date of a Participant who is not a 5-percent owner who
attains age 70 1/2 during 1988 and who has not retired as of January 1, 1989, is
April 1, 1990.
(iii) 5-percent owner. A Participant is treated as a 5-percent owner for
purposes of this section if such Participant is a 5-percent owner as defined in
Section 416(i) of the Code (determined in accordance with Section 416 but
without regard to whether the Plan is Top-Heavy) at any time during the Plan
Year ending with or within the calendar year in which such owner attains age 66
1/2 or any subsequent Plan Year.
(iv) Once distributions have begun to a 5-percent owner under this section, they
must continue to be distributed, even if the Participant ceases to be a
5-percent owner in a subsequent year.
Transitional Rule
16.06 Notwithstanding the other requirements of this article and subject to the
provisions of Article XII - Joint and Survivor Annuity Requirements,
distribution on behalf of any Employee, including a 5-percent owner, may be made
in accordance
<PAGE> 55
with all of the following requirements (regardless of when such distribution
commences):
(a) The distribution by the Trust Fund is one which would not have disqualified
such trust under Section 401(a)(9) of the Internal Revenue Code as in effect
prior to amendment by the Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a method of distribution designated
by the Employee whose interest in the Trust Fund is being distributed or, if the
Employee is deceased, by a beneficiary of such Employee.
(c) Such designation was in writing, was signed by the Employee or beneficiary,
and was made before January 1, 1984.
(d) The Employee had accrued a benefit under the Plan as of December 31, 1983.
(e) The method of distribution designated by the Employee or the beneficiary
specifies the time at which distribution will commence, the period over which
distributions will be made, and in the case of any distribution upon the
Employee's death, the beneficiaries of the Employee listed in order of priority.
16.07 A distribution upon death will not be covered by this transitional rule
unless the information in the designation contains the required information
described above with respect to the distributions to be made upon the death of
the employee.
16.08 For any distribution which commences before January 1, 1984, but continues
after December 31, 1983, the Employee, or the beneficiary, to whom such
distribution is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in sections 16.06(a) and (e) above.
16.09 If a designation is revoked, any subsequent distribution must satisfy the
requirements of Section 401(a)(9) of the Code and the proposed regulations
thereunder. If a designation is revoked subsequent to the date distributions are
required to begin, the Trust Fund must distribute by the end of the calendar
year following the calendar year in which the revocation occurs the total amount
not yet distributed which would have been required to have been distributed to
satisfy Section 401(a)(9) of the Code and the proposed regulations thereunder,
but for the Section 242(b)(2) election. For calendar years beginning after
December 31, 1988, such distributions must meet the minimum distribution
incidental benefit requirements in Section 1.401(a)(9)-2 of the proposed
regulations. Any changes in the designation will be considered to be a
revocation of the designation. However, the mere substitution or addition of
another beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions are
to be made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount is
transferred or rolled over from one plan to another plan, the rules in Q and A
J-2 and Q and A J-3 of Section 1.401(a)(9)-1 of the proposed regulations shall
apply.
<PAGE> 56
16.10 The entire interest of a Participant must be distributed or begin to be
distributed no later than the Participant's required beginning date.
16.11 If this is a profit sharing plan, a Participant with a minimum of five (5)
years of participation in this Plan and who has a 100% non-forfeitable interest
in his/her Employer contributions account balance, may request a one-time
distribution of his/her entire vested interest in the Plan upon the attainment
of age 59 1/2. Such distribution will be made as soon as administratively
possible and shall reflect the value of such Participant's account balance as of
the last Valuation Date. Such "in service" distribution shall require the
written consent of the Participant's spouse (if applicable).
16.12 A Participant may withdraw all or any part of the value of his/her
nondeductible voluntary contributions upon written request to the Plan
Administrator. A Participant who elects an in service withdrawal of his/her
nondeductible voluntary contributions shall not be permitted to make further
nondeductible voluntary contributions for a period of one year from the date of
the withdrawal. A request to withdraw such contributions must be consented to by
the Participant's spouse. The consent shall comply with the requirements of
section 11.04(c), but shall be deemed to meet any requirements contained in such
section relating to the consent of any subsequent spouse.
ARTICLE XVII - CASH OR DEFERRED ARRANGEMENT
If the Employer has elected, in the Adoption Agreement, to include a Cash or
Deferred Arrangement (CODA) as part of this Plan, then the following provisions
shall apply. Only a profit-sharing plan can include a CODA.
17.01 An Employee who is eligible to participate in the Cash or Deferred
Arrangement (CODA) may elect to have the Employer make payments either:
(a) as contributions to the Trust Fund under the Plan in accordance with a
salary reduction agreement, or some other deferral mechanism (as selected in the
Adoption Agreement); or
(b) to the Participant directly in cash.
Each Participant will have the opportunity to elect to defer a portion of his or
her Compensation as often as provided for in the Adoption Agreement. Such
election may not be made retroactively. A Participant's election to commence
Elective Deferrals shall remain in effect until modified or terminated.
No Participant shall be permitted to have Elective Deferrals made under this
Plan, or any other qualified plan maintained by the Employer, during any taxable
year, in excess of the dollar limitation contained in Section 402(g) of the Code
in effect at the beginning of such taxable year.
17.02 A Participant may assign to this Plan any Excess Elective Deferrals made
during a taxable year of the Participant by notifying the Plan Administrator on
or before the date specified in the Adoption Agreement of the amount of the
<PAGE> 57
Excess Elective Deferrals to be assigned to the Plan. A Participant is deemed to
notify the Plan Administrator of any Excess Elective Deferrals that arise by
taking into account only those Elective Deferrals made to this Plan and any
other plans of this Employer.
Notwithstanding any other provision of the Plan, Excess Elective Deferrals, plus
any income and minus any loss allocable thereto, shall be distributed no later
than April 15 to any Participant to whose account Excess Elective Deferrals were
assigned for the preceding year and who claims Excess Elective Deferrals for
such taxable year.
Definitions:
(a) "Elective Deferrals" shall mean any Employer contributions made to the Plan
at the election of the Participant, in lieu of cash Compensation, and shall
include contributions made pursuant to a salary reduction agreement or other
deferral mechanism. With respect to any taxable year, a Participant's Elective
Deferral is the sum of all Employer contributions made on behalf of such
Participant pursuant to an election to defer under any qualified CODA as
described in Section 401(k) of the Code, any simplified employee pension cash or
deferred arrangement as described in Section 402(h)(1)(B), any eligible deferred
compensation plan under Section 457, any plan as described under Section
501(c)(18), and any Employer contributions made on the behalf of a Participant
for the purchase of an annuity contract under Section 403(b) pursuant to a
salary reduction agreement. Elective Deferrals shall not include any deferrals
properly distributed as excess Annual Additions.
(b) "Excess Elective Deferrals" shall mean those Elective Deferrals that are
includable in a Participant's gross income under Section 402(g) of the code to
the extent such Participant's Elective Deferrals for a taxable year exceed the
dollar limitation under such Code section. Excess Elective Deferrals shall be
treated as Annual Additions under the Plan, unless such amounts are distributed
no later than the first April 15th following the close of the Participant's
taxable year.
Determination of income or loss: Excess Elective Deferrals shall be adjusted for
any income or loss up to the date of distribution. The income or loss allocable
to Excess Elective Deferrals is the sum of: (i) income or loss allocable to the
Participant's Elective Deferral account for the taxable year multiplied by a
fraction, the numerator of which is such Participant's Excess Elective Deferrals
for the year and the denominator is the Participant's account balance
attributable to Elective Deferrals without regard to any income or loss
occurring during such taxable year; and (ii) ten percent of the amount
determined under (i) multiplied by the number of whole calendar months between
the end of the Participant's taxable year and the date of distribution, counting
the month of distribution if distribution occurs after the 15th of such month.
Determination of income (simplified method): The income allocable to (i) excess
contributions; (ii) excess aggregate contributions; or (iii) excess deferrals is
equal to the sum of the allocable gain or loss for the Plan Year [(i) and (ii)]
or taxable year of the individual (iii) and the allocable gain or loss for the
period between the end of the Plan Year [(i) or (ii)] or taxable year (iii) and
<PAGE> 58
the date of distribution (the "gap period").
Such income is allocated to (i) excess contributions; (ii) excess aggregate
contributions; or (iii) excess deferrals by multiplying the income allocable to
(i) Employer contributions; (ii) Employee Contibutions, Matching Contributions;
or amounts treated as Matching Contributions; or (iii) Elective Deferrals by a
fraction. The numerator of which is the (i) Excess Contributions; (ii) Excess
Aggregate Contributions for the Plan Year; or (iii) Excess Deferrals for the
Employee's taxable year. The denominator of the fraction is equal to the sum
of:
(A) The total account balance of the Employee attributable to (i) Employer
Contributions; (ii) Employee Contributions, Matching Contributions or amounts
treated as Matching Contributions; or (iii) Elective Deferrals as of the
beginning of the Plan Year [(i) and (ii)] or Employee's taxable year (iii), plus
(B) The Employee's (i) Employer Contributions or (ii) Employee Contributions,
Matching Contributions or amounts treated as Matching Contributions for the Plan
Year or (iii) Elective Deferrals for the Employee's taxable year and the gap
period.
Safe harbor method of allocating gap period income: The income on (i) Excess
Contributions; (ii) Excess Aggregate Contributions; or (iii) Excess Deferrals
for the gap period is equal to 10 percent of the income allocable to (i) Excess
Contributions or (ii) Excess Aggregate Contributions for the Plan Year or (iii)
Excess Deferrals for the Employee's taxable year, as determined above,
multiplied by the number of calendar months that have elapsed since the end of
the Plan Year [(i) and (ii)] or taxable year (iii). For purposes of calculating
the number of calendar months that have elapsed under this method, a corrective
distribution that is made on or before the fifteenth day of the month is treated
as made on the last day of the preceding month. A distribution make after the
fifteenth day of the month is treated as made on the first day of the next
month.
17.03 The Actual Deferral Percentage (hereinafter "ADP") for Participants who
are Highly Compensated Employees for each Plan Year and the ADP for Participants
who are Non-highly Compensated Employees for the same Plan Year must satisfy one
of the following tests:
(a) The ADP for Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the ADP for Participants who are Non-highly Compensated
Employees for the same Plan Year multiplied by 1.25; or
(b) The ADP for Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the ADP for Participants who are Non-highly Compensated
Employees for the same Plan Year multiplied by 2.0, provided that the ADP for
Participants who are Highly Compensated Employees does not exceed the ADP for
Participants who are Non-highly Compensated Employees by more than two (2)
percentage points.
Special Rules:
(c) The ADP for any Participant who is a Highly Compensated Employee for the
Plan Year and who is eligible to have Elective Deferrals (and Qualified
Non-elective
<PAGE> 59
Contributions or Qualified Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Section 401(k) of the Code,
that are maintained by the Employer, shall be determined as if such Elective
Deferrals (and, if applicable, such Qualified Non-elective Contributions or
Qualified Matching Contributions, or both) were made under a single arrangement.
If a Highly Compensated Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
(d) In the event that this Plan satisfies the requirements of Sections 401(k),
401(a)(4), or 410(b) of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of such sections
of the Code only if aggregated with this Plan, then this section shall be
applied by determining the ADP of Employees as if all such plans were a single
plan. For Plan Years beginning after December 31, 1989, plans may be aggregated
in order to satisfy Section 401(k) of the Code only if they have the same Plan
Year.
(e) For purposes of determining the ADP of a Participant who is a 5-percent
owner or one of the ten most highly-paid Highly Compensated Employees, the
Elective Deferrals (and Qualified Non-elective Contributions or Qualified
Matching Contributions, or both, if treated as Elective Deferrals for purposes
of the ADP test) and Compensation of such Participant shall include the Elective
Deferrals (and, if applicable, Qualified Non-elective Contributions and
Qualified Matching Contributions, or both) and Compensation for the Plan Year of
Family Members (as defined in Section 414(q)(6) of the Code). Family Members,
with respect to such Highly Compensated Employees, shall be disregarded as
separate Employees in determining the ADP both for Participants who are
non-highly Compensated Employees and for Participants who are Highly Compensated
Employees.
(f) For purposes of determining the ADP test, Elective Deferrals, Qualified
Non-elective Contributions and Qualified Matching Contributions must be made
before the last day of the twelve-month period immediately following the Plan
Year to which contributions relate.
(g) The Employer shall maintain records sufficient to demonstrate satisfaction
of the ADP test and the amount of Qualified Non-elective Contributions or
Qualified Matching Contributions, or both, used in such test.
(h) The determination and treatment of the ADP amounts of any Participant shall
satisfy such other requirements as may be prescribed by the secretary of the
Treasury.
Definitions:
(i) "Actual Deferral Percentage" shall mean, for a specified group of
Participants for a Plan Year, the average of the ratios (calculated separately
for each Participant in such group) of (A) the amount of Employer contributions
actually paid over to the Trust on behalf of such Participant for the Plan Year
to (B) the Participant's Compensation for such Plan Year. Employer contributions
on behalf of any Participant shall include: (C) any Elective Deferrals made
<PAGE> 60
pursuant to the Participant's deferral election, (including Excess Elective
Deferrals of Highly Compensated Employees), but excluding (D) Excess Elective
Deferrals of NonHighly Compensated Employees that arise solely from Elective
Deferrals made under the Plan or plans of this Employer and (E) including
Elective Deferrals that are taken into account in the Contribution Percentage
test (provided the ADP test is satisfied both with and without exclusion of
these Elective Deferrals); and (F) at the election of the Employer, Qualified
Non-elective Contributions and Qualified Matching Contributions. For purposes of
computing Actual Deferral Percentages, an Employee who would be a Participant
but for the failure to make Elective Deferrals shall be treated as a Participant
on whose behalf no Elective Deferrals are made.
17.04 Notwithstanding any other provision of this Plan, Excess Contributions,
plus any income and minus any loss allocable thereto, shall be distributed no
later than the last day of each Plan Year to Participants to whose accounts such
Excess Contributions were allocated for the preceding Plan Year. If such excess
amounts are distributed more than 2 1/2 months after the last day of the Plan
Year in which such excess amounts arose, a ten (10) percent excise tax will be
imposed on the Employer maintaining the Plan with respect to such amounts. Such
distributions shall be made to Highly Compensated Employees on the basis of the
respective portions of the Excess Contributions attributable to each of such
Employees. Excess Contributions of Participants who are subject to the family
member aggregation rules shall be allocated among the family members in
proportion to the Elective Deferrals (and amounts treated as Elective Deferrals)
of each family member that is combined to determine the combined ADP.
Excess Contributions (including the amounts recharacterized) shall be treated as
annual additions under the Plan.
Determination of Income or Loss: Excess Contributions shall be adjusted for any
income or loss up to the date of distribution. The income or loss allocable to
Excess Contributions is the sum of: (a) income or loss allocable to the
Participant's Elective Deferral account (and, if applicable, the Qualified
Non-elective Contribution account or the Qualified Matching Contributions
account or both) for the Plan Year multiplied by a fraction, the numerator of
which is such Participant's Excess Contributions for the year and the
denominator is the Participant's account balance attributable to Elective
Deferrals (and Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if any of such contributions are included in the ADP
test) without regard to any income or loss occurring during such Plan Year; and
(b) ten percent of the amount determined under (a) multiplied by the number of
whole calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution occurs after
the 15th of such month.
Accounting for Excess Contributions: Excess Contributions shall be distributed
from the Participant's Elective Deferral account and Qualified Matching
Contribution account (if applicable) in proportion to the Participant's Elective
Deferrals and Qualified Matching Contributions (to the extent used in the ADP
test) for the Plan Year. Excess Contributions shall be distributed from the
Participant's Qualified Non-elective Contribution account only to the extent
that such Excess Contributions exceed the balance in the Participant's Elective
Deferral account and Qualified Matching Contributions account.
<PAGE> 61
Definition:
(c) "Excess Contributions" shall mean, with respect to any Plan Year, the excess
of:
(i) The aggregate amount of Employer contributions actually taken into account
in computing the ADP of Highly Compensated Employees for such Plan Year, over
(ii) The maximum amount of such contributions permitted by the ADP test
(determined by reducing contributions made on behalf of Highly Compensated
Employees in order of the ADP's beginning with the highest of such percentages).
17.05 A Participant may treat his or her Excess Contributions as an amount
distributed to the Participant and then contributed by the Participant to the
Plan. Recharacterized amounts will remain nonforfeitable and subject to the same
distribution requirements as Elective Deferrals. Amounts may not be
recharacterized by a Highly Compensated Employee to the extent that such amount
in combination with other Employee Contributions made by that Employee would
exceed any stated limit under the Plan on Employee Contributions.
Recharacterization must occur no later than two and one-half months after the
last day of the Plan Year in which such Excess Contributions arose and is deemed
to occur no earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the consequences thereof.
Recharacterized amounts will be taxable to the Participant for the Participant's
tax year in which the Participant would have received them in cash.
17.06 If elected by the Employer in the Adoption Agreement, the Employer will
make Matching Contributions to the Plan.
17.07 Matching Contributions shall be vested in accordance with section A-17.07
of the Adoption Agreement. In any event, Matching Contributions shall be fully
vested at Normal Retirement Age, upon the complete or partial termination of the
Profit Sharing Plan or upon the complete discontinuance of Employer
contributions.
Forfeitures of Matching Contributions, other than Excess Aggregate
Contributions, shall be made in accordance with section 7.03.
17.08 If elected by the Employer in the Adoption Agreement, the Employer will
make Qualified Matching Contributions to the Plan Qualified Matching
Contributions shall mean Matching Contributions which are subject to the
distribution and nonforfeitability requirements under Section 401(k) of the Code
when made.
17.09 The ACP for Participants who are Highly Compensated Employees for each
Plan Year and the ACP for Participants who are Non-highly Compensated Employees
for the same Plan Year must satisfy one of the following tests:
(a) The ACP for Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the ACP for Participants who are Non-highly Compensated
Employees for the same Plan Year multiplied by 1.25; or
<PAGE> 62
(b) The ACP for Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the ACP for Participants who are Non-highly Compensated
Employees for the same Plan Year multiplied by two (2), provided that the ACP
for Participants who are Highly Compensated Employees does not exceed the ACP
for Participants who are Non-highly Compensated Employees by more than two (2)
percentage points.
Special Rules:
(c) Multiple Use: If one or more Highly Compensated Employees participate in
both a CODA and a Plan subject to the ACP test maintained by the Employer and
the sum of the ADP and ACP of those Highly Compensated Employees subject to
either or both tests exceeds the Aggregate Limit, then the ACP of those Highly
Compensated Employees who also participate in a CODA will be reduced (beginning
with such Highly Compensated Employee whose ACP is the Highest) so that the
limit is not exceeded. The amount by which each Highly Compensated Employee's
Contribution Percentage Amounts is reduced shall be treated as an Excess
Aggregate Contribution. The ADP and ACP of the Highly Compensated Employees are
determined after any corrections required to meet the ADP and ACP tests.
Multiple use does not occur if both the ADP and ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and ACP of the Nonhighly
Compensated Employees.
(d) For purposes of this section, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his or her account under two or
more plans described in Section 401(a) of the Code, or arrangements described in
Section 401(k) of the Code that are maintained by the Employer, shall be
determined as if the total of such Contribution Percentage Amounts was made
under each plan. If a Highly Compensated Employee participates in two or more
cash or deferred arrangements ending with or within the same calendar year shall
be treated as a single arrangement. Notwithstanding the foregoing, certain plans
shall be treated as separate if mandatorily disaggregated under regulations
under Section 401(m) of the Code.
(e) In the event that this Plan satisfies the requirements of Sections 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of such sections of the
Code only if aggregated with this Plan, then this section shall be applied by
determining the Contribution Percentage of Employees as if all such plans were a
single plan. For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(m) of the Code only if they have the
same Plan Year.
(f) For purposes of determining the Contribution percentage of a Participant who
is a five-percent owner of one of the ten most highly-paid Highly Compensated
Employees, the Contribution Percentage Amounts and Compensation of such
Participant shall include the Contribution Percentage Amounts and Compensation
for the Plan Year of Family Members [as defined in Section 414(q)(6) of the
Code]. Family Members, with respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the Contribution Percentage
both for Participants who are Non-highly Compensated Employees and for
Participants who are Highly Compensated Employees.
<PAGE> 63
(g) For purposes of determining the Contribution Percentage test, Employee
Contributions are considered to have been made in the Plan Year in which
contributed to the trust. Matching Contributions and Qualified Non-elective
Contributions will be considered made for a Plan Year if made no later than the
end of the twelve-month period beginning on the day after the close of the Plan
Year.
(h) The Employer shall maintain records sufficient to demonstrate satisfaction
of the ACP test and the amount of Qualified Non-elective Contributions or
Qualified Matching Contributions, or both, used in such test.
(i) The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
Definitions:
(j) "Aggregate Limit" shall mean the sum of (i) 125 percent of the greater of
the ADP of the Non-highly Compensated Employees for the Plan Year or the ACP of
Non-highly Compensated Employees under the plan subject to Code Section 401(m)
for the Plan Year beginning with or within the Plan Year of the CODA and (ii)
the lesser of 200% or two plus the lesser of such ADP or ACP.
(k) "Average Contribution Percentage" shall mean the average of the Contribution
Percentages of the Eligible Participants in a group.
(l) "Contribution Percentage" shall mean the ratio (expressed as a percentage)
of the Participant's Contribution Percentage Amounts to the Participant's
Compensation for the Plan Year (whether or not the Employee was a Participant
for the entire Plan Year).
(m) "Contribution Percentage Amounts" shall mean the sum of the Employee
Contributions, Matching Contributions, and Qualified Matching Contributions (to
the extent not taken into account for purposes of the ADP test) made under the
Plan on behalf of the Participant for the Plan Year. Such Contribution
Percentage Amounts shall not include Matching Contributions that are forfeited
either to correct Excess Aggregate Contributions or because the contributions to
which they relate are Excess Deferrals, Excess Contributions or Excess Aggregate
Contributions. If so elected in the Adoption Agreement the Employer may include
Qualified Non-elective Contributions in the Contribution Percentage Amounts.
The Employer also may elect to use Elective Deferrals in the Contribution
Percentage Amounts so long as the ADP test is met before the Elective Deferrals
are used in the ACP test and continues to be met following the exclusion of
those Elective Deferrals that are used to meet the ACP test.
(n) "Eligible Participant" shall mean any Employee who is eligible to make an
Employee Contribution, or an Elective Deferral (if the Employer takes such
contributions into account in the calculation of the Contribution Percentage),
or to receive a Matching Contribution (including forfeitures) or a Qualified
Matching Contribution. If an Employee Contribution is required as a condition of
participation in the Plan, any Employee who would be a Participant in the Plan
if
<PAGE> 64
such Employee made such a contribution shall be treated as an eligible
Participant on behalf of whom no Employee Contributions are made.
(o) "Employee Contribution" shall mean any contribution made to the Plan by or
on behalf of a Participant that is included in the Participant's gross income in
the year in which made and that is maintained under a separate account to which
earnings and losses are allocated.
(p) "Matching Contribution" shall mean an Employer contribution made to this or
any other Defined Contribution Plan on behalf of a Participant on account of a
Participant's Elective Deferral, under a plan maintained by the Employer.
17.10 Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall be
forfeited, if forfeitable, or if not forfeitable, distributed no later than the
last day of each Plan Year to Participants to whose accounts such Excess
Aggregate Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions of Participants who are subject to the family member
aggregation rules shall be allocated among the family members in proportion to
the Employee and Matching Contributions (or amounts treated as Matching
Contributions) of each family member that is combined to determine the combined
ACP. If such Excess Aggregate Contributions are distributed more than 2 1/2
months after the last day of the Plan Year in which such excess amounts arose, a
(10) percent excise tax will be imposed on the Employer maintaining the Plan
with respect to those amounts. Excess Aggregate Contributions shall be treated
as annual additions under the Plan.
Determination of Income or Loss: Excess Aggregate Contributions shall be
adjusted for any income or loss up to the date of distribution. The income or
loss allocable to Excess Aggregate Contributions is the sum of: (a) income or
loss allocable to the Participant's Employee Contribution account, Matching
Contribution account (if any, and if all amounts therein are not used in the ADP
test) and, if applicable, Qualified Non-elective Contribution account and
Elective Deferral account for the Plan Year multiplied by a fraction, the
numerator of which is such Participant's Excess Aggregate Contributions for the
year and the denominator is the Participant's account balance(s) attributable to
Contribution Percentage Amounts without regard to any income or loss occurring
during the Plan Year; and (b) ten percent of the amount determined under (a)
multiplied by the number of whole calendar months between the end of the Plan
Year and the date of distribution, counting the month of distribution if
distribution occurs after the 15th of such month.
Forfeitures of Excess Aggregate Contributions: Forfeitures of Excess Aggregate
Contributions may either by reallocated to the accounts of Non-highly
Compensated Employees or applied to reduce Employer contributions, as elected by
the Employer in section A- 3.10 of the Adoption Agreement.
Accounting for Excess Aggregate Contributions: Excess Aggregate Contributions
shall be forfeited, if forfeitable or distributed on a pro-rata basis from the
Participant's Employee Contribution account, Matching Contribution account, and
Qualified Matching Contribution account (and, if applicable, the Participant's
Qualified Non-elective Contribution account or Elective Deferral account, or
both).
<PAGE> 65
Definitions:
(c) "Excess Aggregate Contributions" shall mean, with respect to any Plan Year,
the excess of:
(i) The aggregate Contribution Percentage Amounts taken into account in
computing the numerator of the Contribution Percentage actually made on behalf
of Highly Compensated Employees for such Plan Year, over
(ii) the maximum Contribution Percentage Amounts permitted by the ACP test
(determined by reducing contributions made on behalf of Highly Compensated
Employees in order of their Contribution Percentages beginning with the highest
of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to section 17.02 and then determining Excess Contributions
pursuant to section 17.04.
17.11 (a) The Employer may elect to make Qualified Non-elective Contributions
under the Plan on behalf of Employees as provided in the adoption agreement.
(b) In addition, in lieu of distributing Excess Contributions as provided in
section 17.04 of the Plan, or Excess Aggregate Contributions as provided in
section 17.10 of the Plan, and to the extent elected by the Employer in the
Adoption Agreement, the Employer may make Qualified Non-elective Contributions
on behalf of Non-highly Compensated Employees that are sufficient to satisfy
either the Actual Deferral Percentage test or the Average Contribution
Percentage test, or both, pursuant to regulations under the Code.
Definition:
(c) "Qualified Non-elective Contributions" shall mean contributions (other than
Matching Contributions or Qualified Matching Contributions) made by the Employer
and allocated to Participants' accounts that the Participants may not elect to
receive in cash until distributed from the Plan; that are nonforfeitable when
made; and that are distributable only in accordance with the distribution
provisions that are applicable to Elective Deferrals and Qualified Matching
Contributions.
17.12 The Participant's accrued benefit derived from Elective Deferrals,
Qualified Non-elective Contributions, Employee Contributions, and Qualified
Matching Contributions is nonforfeitable. Separate accounts for Elective
Deferrals, Qualified Non-elective Contributions, Employee Contributions,
Matching Contributions, and Qualified Matching Contributions will be maintained
for each Participant. Each account will be credited with the applicable
contributions and earnings thereon.
17.13 Elective Deferrals, Qualified Non-elective Contributions, and Qualified
Matching Contributions, and income allocable to each are not distributable to a
Participant or his or her beneficiary or beneficiaries, in accordance with such
Participant's or beneficiary or beneficiaries election, earlier than upon
separation from service, death, or disability.
<PAGE> 66
Such amounts may also be distributed upon:
(a) Termination of the Plan without the establishment of another Defined
Contribution Plan, other than an employee stock ownership plan (as defined in
Section 4975 (e) or Section 409 of the Code) or a simplified employee pension
plan as defined in Section 408(k).
(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Section 409(d)(2) of the
Code) used in a trade or business of such corporation if such corporation
continues to maintain this Plan after the disposition, but only with respect to
Employees who continue employment with the corporation acquiring such assets.
(c) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary (within the meaning of Section 409(d)(3)
of the Code) if such corporation continues to maintain this Plan, but only with
respect to Employees who continue employment with such subsidiary.
(d) The attainment of age 59 1/2 in the case of a profit-sharing plan.
(e) The hardship of the Participant as described in section 17.14.
All distributions that may be made pursuant to one or more of the forgoing
distributable events are subject to the spousal and Participant consent
requirements (if applicable) contained in Sections 401(a)(11) and 417 of the
Code. In addition, distributions after March 31, 1988, that are triggered by any
of the first three events enumerated above must be made in a lump sum.
17.14 Distribution of Elective Deferrals (and any earnings credited to a
Participant's account as of the end of the last Plan Year ending before July 1,
1989) may be made to a Participant in the event of hardship. For the purpose of
this section, hardship is defined as an immediate and heavy financial need of
the Employee where such employee lacks other available resources. Hardship
distributions are subject to the spousal consent requirements contained in
Sections 401(a)(911) and 417 of the Code.
Special rules:
(a) The following are the only financial needs considered immediate and heavy:
deductible medical expenses [within the meaning of Section 213(d) of the Code]
of the Employee, the Employee's spouse, children, or dependents; the purchase
(excluding mortgage payments) of a principal residence for the Employee; payment
of tuition and related educational fees for the next 12 months of post-secondary
education for the Employee, the Employee's spouse, children or dependents; or
the need to prevent the eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
(b) A distribution will be considered as necessary to satisfy an immediate and
heavy financial need of the Employee only if:
(i) The Employee has obtained all distributions, other than hardship
distributions, and all non taxable loans under all plans maintained by the
Employer;
<PAGE> 67
(ii) All plans maintained by the Employer provide that the Employee's Elective
Deferrals (and Employee Contributions) will be suspended for twelve months after
the receipt of the hardship distributions;
(iii) The distribution is not in excess of the amount of an immediate and heavy
financial need (including amounts necessary to pay any federal, state or local
income taxes or penalties reasonably anticipated to result from the
distribution); and all plans maintained by the Employer provide that the
Employee may not make Elective Deferrals for the Employee's taxable year
immediately following the taxable year of the hardship distribution in excess of
the applicable limit under Section 402(g) of the Code for such taxable year less
the amount of such Employee's Elective Deferrals for the taxable year of the
hardship distribution.
17.15 Neither Elective Deferrals nor Matching Contributions may be taken into
account for the purpose of satisfying the minimum top-heavy contribution
requirement.
ARTICLE XVIII - ROLLOVER PROVISIONS
18.01 This Article applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a Distributee's election under this Article a Distributee may elect, at
the time and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the Distributee in a Direct Rollover.
18.02 Definitions
(a) Eligible Rollover distribution: An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated Beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to Employer
securities).
(b) Eligible Retirement Plan: An Eligible Retirement Plan is an individual
retirement account described in Section 408 (a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, and annuity plan
described in Section 403 (a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
<PAGE> 68
(c) Distributee: A Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
(d) Direct rollover: A Direct Rollover is a payment by the plan to the eligible
retirement plan specified by the Distributee.
<PAGE> 1
Exhibit 4.2
TRIMEDYNE, INC.
EMPLOYEE STOCK PURCHASE PLAN
This EMPLOYEE STOCK PURCHASE PLAN (the "Plan") is hereby established by
TRIMEDYNE, INC. (the "Company") effective April 1, 1996 (the "Effective Date").
ARTICLE I
PURPOSE OF THE PLAN
1.1 Purpose The Company has determined that it is in its best interests
to provide an incentive to attract and retain employees and to increase employee
morale by providing a program through which employees may acquire a proprietary
interest in the Company through the purchase of shares of the common stock of
the Company ("Company Stock"). The Plan is hereby established by the Company to
permit employees to subscribe for and purchase directly from the Company shares
of the Company Stock at a discount from the market price, and to pay the
purchase price in installments by payroll deductions. The Plan is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"). The provisions
of the Plan are to be construed in a manner consistent with the requirements of
Section 423 of the Code. The Plan is not intended to be an employee benefit plan
under the Employee Retirement Income Security Act of 1974, and therefore is not
required to comply with that Act.
ARTICLE II
DEFINITIONS
2.1 Compensation. "Compensation" means the amount indicated on the Form
W-2, including any elective deferrals with respect to a plan of the Company
qualified under either Section 125 or Section 401(a) of the Internal Revenue
Code of 1986, issued to an employee by the Company.
2.2 Employee. "Employee" means each person currently employed by the
Company or any of its operating subsidiaries on a full time basis (persons who
average at least thirty hours per week), any portion of whose income is subject
to withholding of income tax or for whom Social Security retirement
contributions are made by the Company and any person qualifying as a common law
employee of the Company.
2.3 Effective Date "Effective Date" means April 1, 1996.
2.4 5% Owner. "5% Owner" means an Employee who, immediately after the
grant of any rights under the Plan, would own Company Stock or hold outstanding
options to purchase Company Stock possessing 5% or more of the total combined
voting power of all classes of stock of the Company. For purposes of this
Section, the ownership attribution rules of Code Section 425(d) shall apply.
<PAGE> 2
2.5 Grant Date. "Grant Date" means the first day of each Offering
Period (January 1, April 1, July 1 and October 1) under the Plan.
2.6 Participant. "Participant" means an Employee who has satisfied the
eligibility requirements of Section 3.1 and has become a participant in the Plan
in accordance with Section 3.2.
2.7 Plan Year. "Plan Year" means the twelve consecutive month period
ending on December 31.
2.8 Offering Period. "Offering Period" means the three consecutive
month periods coinciding with the calendar quarter (January 1 through March 31,
April 1 through June 30, July 1 through September 30 and October 1 through
December 31) each Plan Year.
2.9 Purchase Date. "Purchase Date" means the last day of each Offering
Period (March 31, June 30, September 30 or December 31).
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Each Employee of the Company who has completed a year
of employment with the Company on the Effective Date may become a Participant in
the Plan on the Effective Date. All other Employees of the Company may become a
participant in the Plan on the Grant Date coincident with or next following his
completion of one year of employment with the Company.
3.2 Participation. An Employee who has satisfied the eligibility
requirements of Section 3.1 may become a Participant in the Plan upon his
completion and delivery to the Human Resources Department of the Company of a
subscription agreement provided by the Company ("the "Subscription Agreement")
authorizing payroll deductions. Payroll deductions for a Participant shall
commence on the Grant Date coincident with or next following the filing of the
Participant's Subscription Agreement and shall remain in effect until revoked by
the Participant by the filing of a notice of withdrawal from the Plan under
Article VIII or by the filing of a new Subscription Agreement providing for a
change in the Participant's payroll deduction rate under Section 5.2.
3.3 Special Rules. Under no circumstances shall:
(a) A 5% Owner be granted a right to purchase Company Stock under the
Plan; or
(b) A Participant be entitled to purchase Company Stock under the Plan
which, when aggregated with all other employee stock purchase plans of the
Company, exceeds an amount equal to the Aggregate Maximum. "Aggregate Maximum"
means an amount equal to $25,000 worth of Company Stock (determined using the
fair market value of such Company Stock at each applicable Grant Date) during
each Plan Year.
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ARTICLE IV
OFFERING PERIODS
4.1 Offering Periods. The initial grant of the right to purchase
Company Stock under the Plan shall commence on the Effective Date and terminate
on the next Purchase Date. Thereafter, the Plan shall provide for Offering
Periods commencing on each Grant Date and terminating on the next following
Purchase Date.
ARTICLE V
PAYROLL DEDUCTIONS
5.1 Participant Election. Upon the Subscription Agreement, each
Participant shall designate the amount of payroll deductions to be made from his
or her paycheck to purchase Company Stock under the Plan. The amount of payroll
deductions shall be designated in whole dollar amounts of Compensation, not to
exceed 15% of Compensation for any Plan Year. The amount so designated upon the
Subscription Agreement shall be effective as of the next Grant Date and shall
continue until terminated or altered in accordance with Section 5.2 below.
5.2 Changes in Election. A Participant may terminate participation in
the Plan at any time prior to the close of an Offering Period as provided in
Article VIII. A Participant may decrease the rate of payroll deductions at any
time during any Offering Period by completing and delivering to the Human
Resources Department of the Company a new Subscription Agreement setting forth
the desired change. A Participant may also terminate payroll deductions and have
accumulated deductions for the Offering Period applied to the purchase of
Company Stock as of the next Purchase Date by completing and delivering to the
Human Resources Department a new Subscription Agreement setting forth the
desired change. Any change under this Section shall become effective on the next
payroll period (to the extent practical under the Company's payroll practices)
following the delivery of the new Subscription Agreement.
5.3 Participant Accounts. The Company shall establish and maintain a
separate account ("Account") for each Participant. The amount of each
Participant's payroll deductions shall be credited to his Account. No interest
will be paid or allowed on amounts credited to a Participant's Account. All
payroll deductions received by the Company under the Plan are general corporate
assets of the Company and may be used by the Company for any corporate purpose.
The Company is not obligated to segregate such payroll deductions.
ARTICLE VI
GRANT OF PURCHASE RIGHTS
6.1 Right to Purchase Shares. On each Grant Date, each Participant
shall be granted a right to purchase at the price determined under Section 6.2
that number of shares and partial shares of Company Stock that can be purchased
or issued by the Company based upon that price with the
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amounts held in his Account. In the event that there are amounts held in a
Participant's Account that are not used to purchase Company Stock such amounts
shall remain in the Participant's Account and shall be eligible to purchase
Company Stock in any subsequent Offering Period.
6.2 Purchase Price. The purchase price for any Offering Period shall be
the lesser of:
(a) The average of the Bid and Ask Price of Company Stock on the Grant
Date; or
(b) The average of the Bid and Ask Price of Company Stock on the
Purchase Date.
6.3 Fair Market Value. "Fair Market Value" on any given date means the
value of one share of Company Stock, determined as follows:
(a) If the Company Stock is then listed or admitted to trading on the
NASDAQ National Market System or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the closing sale price on the date of
valuation on the NASDAQ National Market System or principal stock exchange on
which the Company Stock is then listed or admitted to trading, or, if no closing
sale price is quoted or no sale takes place on such day, then the Fair Market
Value shall be the closing sale price of the Company Stock on the NASDAQ
National Market System or such exchange on the next preceding day on which a
sale occurred.
(b) If the Company Stock is not then listed or admitted to trading on
the NASDAQ National Market System or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the average of the closing bid and asked
prices of the Company Stock in the over-the-counter market on the date of
valuation.
(c) If neither (a) nor (b) is applicable as of the date of valuation,
then the Fair Market Value shall be determined by the Administrator in good
faith using any reasonable method of evaluation, which determination shall be
conclusive and binding on all interested parties.
ARTICLE VII
PURCHASE OF STOCK
7.1 Purchase of Company Stock. Absent an election by the Participant to
terminate and have his or her Account returned, on each Purchase Date, the Plan
shall purchase on behalf of each Participant the maximum number of shares and
partial shares of Company Stock at the purchase price determined under Section
6.2 above as can be purchased with the amounts held in each Participant's
Account. In the event that there are amounts held in a Participant's Account
that are not used to purchase Company Stock, all such amounts shall be held in
the Participant's Account and carried forward to the next Offering Period.
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7.2 Delivery of Company Stock.
(a) Company Stock acquired under the Plan may either be issued directly
to Participants or may be issued to a contract administrator ("Administrator")
engaged by the Company to administer the Plan under Article IX. If the Company
Stock is issued in the name of the Administrator, all Company Stock so issued
("Plan Held Stock") shall be held in the name of the Administrator for the
benefit of the Plan. The Administrator shall maintain accounts for the benefit
of the Participants which shall reflect each Participant's interest in the Plan
Held Stock. Such accounts shall reflect the number of whole and partial shares
of Company Stock that are being held by the Administrator for the benefit of
each Participant.
(b) Any Participant may elect to have the Company Stock purchased under
the Plan from his or her Account be issued directly to the Participant. Any
election under this paragraph shall be on the forms provided by the Company and
shall be issued in accordance with paragraph (c) below.
(c) In the event that Company Stock under the Plan is issued directly
to a Participant, the Company will deliver to each Participant a stock
certificate or certificates issued in his name for the number of shares of
Company Stock purchased as soon as practicable after the Purchase Date. Where
Company Stock is issued under this paragraph, only full shares of stock will be
issued to a Participant. The time of issuance and delivery of shares may be
postponed for such period as may be necessary to comply with the registration
requirements under the Securities Act of 1933, as amended, the listing
requirements of any securities exchange on which the Company Stock may then be
listed, or the requirements under other laws or regulations applicable to the
issuance or sale of such shares.
ARTICLE VIII
WITHDRAWAL
8.1 In Service Withdrawals. At any time prior to the Purchase Date of
an Offering Period, any Participant may withdraw the amounts held in his Account
by executing and delivering to the Human Resources Department for the Company
written notice of withdrawal on the form provided by the Company. In such a
case, the entire balance of the Participant's Account shall be paid to the
Participant, without interest, as soon as is practicable. Under such
notification, that Participant shall cease to participate in the Plan for the
remainder of the Offering Period in which the notice is given. Any Employee who
has withdrawn under this Section shall be excluded from participation in the
Plan for the remainder of the Offering Period and the next succeeding Offering
Period, but may then be reinstated as a Participant for a subsequent Offering
Period by executing and delivering a new Subscription Agreement to the
Committee.
8.2 Termination of Employment.
(a) In the event that a Participant's employment with the Company
terminates for any
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reason, the Participant shall cease to participate in the Plan on the date of
termination. As soon as is practical following the date of termination, the
entire balance of the Participant's Account shall be paid to the Participant or
his beneficiary, without interest.
(b) A Participant may file a written designation of a beneficiary who
is to receive any shares of Company Stock purchased under the Plan or any cash
from the Participant's Account in the event of his or her death subsequent to a
Purchase Date, but prior to delivery of such shares and cash. In addition, a
Participant may file a written designation of a beneficiary who is to receive
any cash from the Participant's Account under the Plan in the event of his death
prior to a purchase Date under paragraph (a) above.
(c) Any beneficiary designation under paragraph (b) above may be
changed by the Participant at any time by written notice. In the event of the
death of a Participant, the Committee may rely upon the most recent beneficiary
designation it has on file as being the appropriate beneficiary. In the event of
the death of a Participant and no valid beneficiary designation exists or the
beneficiary as predeceased the Participant, the Committee shall deliver any cash
or shares of Company Stock to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been appointed to the
knowledge of the Committee, the Committee, in its sole discretion, may deliver
such shares of Company Stock or cash to the spouse or any one or more dependents
or relatives of the Participant, or if no spouse, dependent or relative is known
to the Committee, then to such other person as the Committee may designate.
ARTICLE IX
PLAN ADMINISTRATION
9.1 Plan Administration.
(a) Authority to control and manage the operation and administration of
the Plan shall be vested in the Board of Directors (the "Board") for the
Company, or a committee ("Committee") thereof. The Board or Committee shall have
all powers necessary to supervise the administration of the Plan and control its
operations.
(b) In addition to any powers and authority conferred on the Board or
Committee elsewhere in the Plan or by law, the Board or Committee shall have the
following powers and authority:
(i) To designate agents to carry out responsibilities relating to the
Plan;
(ii) To administer, interpret, construe and apply this Plan and to
answer all questions which may arise or which may be raised under this Plan by a
Participant, his beneficiary or any other person whatsoever;
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(iii) To establish rules and procedures from time to time for the
conduct of its business and for the administration and effectuation of its
responsibilities under the Plan; and
(iv) To perform or cause to be performed such further acts as it may
deem to be necessary, appropriate, or convenient for the operation of the Plan.
(c) Any action taken in good faith by the Board or Committee in the
exercise of authority conferred upon it by this Plan shall be conclusive and
binding upon a Participant and his beneficiaries. All discretionary powers
conferred upon the Board shall be absolute.
9.2 Limitation on Liability. No Employee of the Company nor member of
the Board or Committee shall be subject to any liability with respect to his
duties under the Plan unless the person acts fraudulently or in bad faith. To
the extent permitted by law, the Company shall indemnify each member of the
Board or Committee, and any other Employee of the Company with duties under the
Plan who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed proceeding, whether civil, criminal,
administrative, or investigative, by reason of the person's conduct in the
performance of his duties under the Plan.
ARTICLE X
COMPANY STOCK
10.1 Limitations on Purchase of Shares. The maximum number of shares of
Company Stock that shall be made available for sale under the Plan shall be
200,000 shares, subject to adjustment under Section 10.4 below. The shares of
Company Stock to be sold to Participants under the Plan will be either purchased
in broker's transactions in accordance with the requirements of federal
securities laws or issued by the Company. If the total number of shares of
Company Stock that would otherwise be issuable or purchasable pursuant to rights
granted pursuant to Section 6.1 of the Plan at the Purchase Date exceeds the
number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available in as uniform and equitable a
manner as is practicable. In such event, the Company shall give written notice
of such reduction of the number of shares to each participant affected thereby
and any unused payroll deductions shall be returned to such participant if
necessary.
10.2 Voting Company Stock. The Participant will have no interest or
voting right in shares to be purchased under Section 6.1 or the Plan until such
shares have been purchased.
10.3 Registration of Company Stock. Shares to be delivered to a
Participant under the Plan will be registered in the name of the Participant
unless designated otherwise by the Participant.
10.4 Changes in Capitalization of the Company. Subject to any required
action by the shareholders of the Company, the number of shares of Company Stock
covered by each right under the Plan which has not yet been exercised and the
number of shares of Company Stock which have been authorized for issuance under
the Plan but have not yet been placed under rights or which have
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been returned to the Plan upon the cancellation of a right, as well as the
Purchase Price per share of Company Stock covered by each right under the Plan
which has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Company Stock resulting
from a stock split, stock dividend, spin-off, reorganization, recapitalization,
merger, consolidation, exchange of shares or the like. Such adjustment shall be
made by the Board of Directors for the Company, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issue by the Company of shares of stock of any class, shall affect,
and no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Company Stock subject to any right granted hereunder.
10.5 Merger of Company. In the event that the Company at any time
proposes to merge into, consolidate with or to enter into any other
reorganization pursuant to which the Company is not the surviving entity
(including the sale of substantially all of its assets or a "reverse" merger in
which the Company is the surviving entity), the Plan shall terminate, unless
provision is made in writing in connection with such transaction for the
continuance of the Plan and for the assumption of rights theretofore granted, or
the substitution for such rights of new rights covering the shares of a
successor corporation, with appropriate adjustments as to number and kind of
shares and prices, in which event the Plan and the rights theretofore granted or
the new rights substituted therefor, shall continue in the manner and under the
terms so provided. If such provision is not made in such transaction for the
continuance of the Plan and the assumption of rights theretofore granted or the
substitution for such rights of new rights covering the shares of a successor
corporation, then the Board of Directors or its committee shall cause written
notice of the proposed transaction to be given to the persons holding rights not
less than 10 days prior to the anticipated effective date of the proposed
transaction, and, concurrent with the effective date of the proposed
transaction, such rights shall be exercised automatically in accordance with
Section 7.1 as if such effective date were a Purchase Date of the applicable
Offering Period unless a Participant withdraws from the Plan as provided in
Section 8.1.
ARTICLE XI
MISCELLANEOUS MATTERS
11.1 Amendment and Termination. The Plan shall terminate on December 31, 2005.
Since future conditions affecting the Company cannot be anticipated or foreseen,
the Company reserves the right to amend, modify, or terminate the Plan at any
time. Upon termination of the Plan, all benefits shall become payable
immediately. Notwithstanding the foregoing, no such amendment or termination
shall affect rights previously granted nor may an amendment make any change in
any rights previously granted which adversely affects the rights of any
Participant. In addition, no amendment may be made without prior approval of the
shareholders of the Company if such amendment would:
(a) Increase the number of shares of Company Stock that may be issued
under the Plan;
(b) Materially modify the requirements as to eligibility for
participation in the Plan; or
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(c) Materially increase the benefits which accrue to Participants under
the Plan.
11.2 Shareholder Approval. Continuance of the Plan and the
effectiveness of any right granted hereunder shall be subject to approval by the
shareholders of the Company, within twelve months before or after the date the
Plan is adopted by the Board.
11.3 Benefits Not Alienable. Benefits under the Plan may not be
assigned or alienated, whether voluntarily or involuntarily. Any attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Article VIII.
11.4 No Enlargement of Employee Rights. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Employee or to be
consideration for, or an inducement to, or a condition of, the employment of any
Employee. Nothing contained in the Plan shall be deemed to give the right to any
Employee to be retained in the employ of the Company or to interfere with the
right of the Company to discharge any Employee at any time.
11.5 Governing Law. To the extent not preempted by Federal law, all
legal questions pertaining to the Plan shall be determined in accordance with
the laws of the State of California.
11.6 Non-business Days. When any act under the Plan is required to be
performed on a day that falls on a Saturday, Sunday or legal holiday, that act
shall be performed on the next succeeding day which is not a Saturday, Sunday or
legal holiday. Notwithstanding the above, Fair Market Value shall be determined
in accordance with Section 6.3.
11.7 Compliance With Securities Laws. Notwithstanding any provision of
the Plan, the Committee shall administer the Plan in such a way to insure that
the Plan at all times complies with any requirements of Federal Securities Laws.
For example, affiliates may be required to make irrevocable elections in
accordance with the rules set forth under Section 16b-3 of the Securities
Exchange Act of 1934.
IN WITNESS WHEREOF, Trimedyne, Inc. has caused this instrument to
become effective as of April 1, 1996.
TRIMEDYNE, INC.
By:
--------------------------
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Exhibit 4.3
APPENDIX A
1995 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSE
This Incentive and Non-Qualified Stock Option Plan (the "Plan") is
intended to encourage stock ownership of Trimedyne, Inc., a Nevada Corporation
(the "Corporation") by officers, directors, consultants and employees of the
Corporation and any subsidiary corporations (the "Subsidiaries"), as defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"), so
that they may acquire or increase their proprietary interest in the success of
the Corporation and Subsidiaries, and to encourage them to remain in the employ
of, or maintain their relationship with, the Corporation and/or the
Subsidiaries. It is further intended that options issued pursuant to this Plan
shall constitute either "incentive stock options" within the meaning of Section
422 of the Code ("Incentive Stock Options") or non-qualified stock options, the
tax consequences of which are governed by Section 83 of the Code ("Non-Qualified
Stock Options"), as designated at the time of grant. Any option granted pursuant
to this Plan which for any reason fails to qualify as an Incentive Stock Option
shall be deemed to have been granted as an option not qualified under Section
422 of the Code. The Corporation intends this Plan to enable it to issue
Non-Qualified Stock Options, with terms similar in most respects to Incentive
Stock Options. Non-Qualified Stock Options may be granted independently of
Incentive Stock Options.
2. ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"). Each member on the Committee
shall by a "disinterested person" within the meaning of Rule 16b-3 as
promulgated under the Securities Exchange Act of 1934, as amended (the "1934
Act"). Such Committee shall consist of not less than two members of the
Corporation's Board of Directors. The Board of Directors may from time to time
remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors. The
Committee shall select one of its members as Chairman, and shall hold meetings
at such times and places as it may determine. A majority of the Committee at
which a quorum is present, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall by the valid acts of the
Committee. The Committee shall from time to time at its discretion determine (i)
those officers, directors, consultants and employees (including key and non-key)
who shall be granted options; (ii) the number of shares of stock to be optioned
to each; and (iii) regardless of the express provisions of the Plan, the terms
of all options so granted. Other than "formula awards" granted pursuant to
Article 5(k), no director while a member of the Committee shall be eligible to
receive an option under the Plan.
The interpretation and construction by the Committee of any provisions
of the Plan or of any option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
If at any time no Committee shall be in office, the Board shall perform
the functions of the Committee provided that each member of the Board is a
"disinterested person."
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3. ELIGIBILITY
The person who shall be eligible to receive Incentive Stock Options
shall be such officers and employees (whether or not they are directors) of the
Corporation or its Subsidiaries as the Committee shall select from time to time.
Non-employee directors, consultants and others, who have a relationship with the
Corporation or its Subsidiaries which the Committee considers beneficial to the
Corporation may only receive Non-Qualified Stock Options. Officers and employees
may also receive Non-Qualified Stock Options. An optionee may hold more than one
option, but only on the terms and subject to the restrictions hereafter set
forth. Members of the Committee, and members of the Board of Directors if there
is no Committee, shall only be eligible to receive grants under the Plan
pursuant to Article 5(k).
4. STOCK
The stock subject to the options to be granted hereunder shall be an
aggregate of 500,000 shares of the Corporation's authorized by unissued or
reacquired $.01 par value common stock, hereafter called "Common Stock." The
aggregate fair market value (determined at the time the option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time in any calendar year by an optionee under this Plan or any
other plan of the Corporation, a parent of the Corporation (if any) or
Subsidiaries, shall no exceed $100,000 (or such other amount as may then be
permissible under Section 422 of the Code). Any option granted and exercisable
in excess of such amount shall be treated as a Non-Qualified Stock Option with
respect to such excess. For the purpose of the immediately preceding sentence,
options that are not qualified as Incentive Stock Options by reason of such
excess shall be deemed to relate first to the most recently granted options. The
limitations established by each of the preceding sentences shall be subject to
adjustment as provided in Article 5(g) of the Plan.
In the event any outstanding option under the Plan for any reason
expires, lapses or is otherwise terminated, the shares of Common Stock allocable
to the unexercised portion of such option may again become the subject of an
option granted under the Plan.
5. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by the
Committee and shall by evidenced by agreements in such form as the Committee
shall from time to time approve, which agreements shall comply with and be
subject to the following terms and conditions.
(a) Number of Shares.
Each option shall state the total number of shares to which it
pertains.
(b) Option Price.
Each option shall state the option price, which, in the case of an
Incentive Stock Option, shall be not less than 100% of the fair market value of
the shares of Common Stock of the Corporation on the date of the granting of the
option. Notwithstanding the preceding sentence, in the case of an individual,
who immediately before the grant of an option, owns (including constructive
ownership pursuant to Section 424(d) of the Code) more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation or
its parent (if any) or any of the Subsidiaries ("10% Stockholder"), the purchase
price per share of Common Stock under each such option shall not be less than
110% of the fair market value per share of stock at the time of the grant of the
option. At or prior to the time an option is granted, the Committee shall fix
the term of such option which, notwithstanding Section 5(d) of the Plan, shall
not be more than ten years
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from the date of the grant of the option in the case of persons other than 10%
Stockholders, and five years from the date of grant of the option for 10%
Stockholders. The foregoing restrictions shall not apply to grantors of
Non-Qualified Stock Options. In the event that the Committee takes no action to
fix the term of an option granted to such an individual, such option shall
contain a provision that it shall expire ten years from the date of grant. For
purposes of this paragraph, the parent of the Corporation shall be any
corporation, which with respect to the Corporation, is a parent corporation
pursuant to Section 424(e) of the Code; and the Subsidiaries of the Corporation
shall be all corporations which, with respect to the Corporation, are subsidiary
corporations pursuant to Section 424(f) of the Code. During such time as the
Common Stock is not listed upon an established stock exchange the fair market
value per share shall be the mean between the closing "bid" and "ask" prices of
the Common Stock in the New York over-the-counter market on the day the option
is granted, as reported by the National Association of Securities Dealers, Inc.
If the stock is listed upon an established stock exchange or exchanges, such
fair market value shall be deemed to be the highest closing price of the Common
Stock on such stock exchange or exchanges on the day the option is granted or if
no sale of the Corporation's Common Stock shall have been made on any stock
exchange that day, on the next preceding day on which there was a sale of such
stock. If there is no established market for the stock, the fair market value
shall be determined by the most recent prior private sale price of the Common
Stock. Subject to the foregoing the Committee in fixing the option price shall
have full authority and discretion so long as they shall act in good faith.
(c) Medium and Time of Payment.
The option price shall be payable in United States dollars upon the
exercise of the option and may be paid in cash, check or in shares of Common
Stock of the Corporation, based upon the fair market value of those shares as
determined under Article 5(b) of the Plan.
(d) Term and Exercise of Options.
No Incentive Stock Option shall be exercisable either in whole or in
part prior to twelve months from the date it is granted. Subject to the right of
cumulation provided for in this subdivision, each option, other than Formula
Options, shall be exercisable as to not more than one-fifth of the total number
of shares granted thereby during each twelve-month period during which the
optionee remains continuously an employee or consultant of the Corporation,
commencing twelve months from the date of the granting of the option.
Notwithstanding the limitations of the first two sentences of this subparagraph,
the Committee, in its discretion, may waive such vesting requirements, and each
option shall also be otherwise exercisable pursuant to the terms of each option
agreement as determined by the Committee. To the extent that the option is not
exercised in any period, the number of shares as to which the option is
exercisable shall accumulate and be exercisable, in whole or in part, in any
subsequent period by not later than ten years (or five (5) years in the case of
a 10% Stockholder) from the date the option is granted. No option shall be
exercisable after the expiration of ten years (or five (5) years in the case of
a 10% Stockholder) from the date it is granted or three months after termination
of employment, except as provided for herein in the event of death or permanent
and total disability (as defined below) of the optionee. Upon exercise, the
option must be exercised for a minimum number of one hundred (100) shares,
unless the number of shares for which the option is exercisable at such time
shall be less than one hundred (100) shares in which case the minimum number of
shares exercisable shall be the total amount for which the option is
exercisable.
(e) Termination of Employment Except Death.
In the event that an optionee shall cease to be employed by the
Corporation or Subsidiaries for any reason other than his death and shall be no
longer in the employ of any of them, subject to the condition that no
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option shall be exercisable after the expiration of ten years (or five (5) years
in the case of a 10% Stockholder) from the date it is granted, such optionee
shall have the right to exercise the option at any time within three months
(twelve months in the case of the "permanent and total disability" of the
optionee as defined in Section 22(e)(3) of the Code) after such termination of
employment to the extend his right to exercise such option had accrued pursuant
to Article 5(d) of the Plan and had not previously been exercised at the date of
such termination. Subject to Treasury Regulation 1.421-7, whether authorized
leave of absence for military or governmental services shall constitute
termination of employment, for the purpose of the Plan, shall be determined by
the Committee, which determination, unless overruled by the Board of Directors,
shall be final and conclusive. (As used in this Plan, the terms "employ" and
"employment" shall be deemed to refer to employment of the optionee by the
Corporation and any of its Subsidiaries and the continuation of such service
and/or employment in none of such capacities.)
(f) Death of Optionee and Transfer of Option.
During the lifetime of the optionee, the option shall be exercisable
only by him and shall not be assignable or transferable by him, and no other
person shall acquire any rights therein. Options granted hereunder shall not be
transferable except by will or by the laws of descent and distribution. In the
event of the death of an optionee, no option shall be exercised unless such
optionee had been an employee of the Corporation or any Subsidiary for a period
of six (6) months following the date of grant thereof. If the optionee shall die
while in the employ of the Corporation or a Subsidiary or within a period of
three months after the termination of his employment with the Corporation or any
Subsidiary and shall not have fully exercised the option, an option may be
exercised, subject to the condition that no option shall be exercisable after
the expiration of ten years from the date it is granted, to the extent that the
optionee's right to exercise such option had accrued pursuant to Article 5(d) of
the Plan at the time of his death and had not previously been exercised, at any
time within one year after the optionee's death, by the executors or
administrators of the optionee or by any person or persons who shall have
acquired the option directly from the optionee by bequest or inheritance.
(g) Changes in Capitalization.
Subject to any required action be the stockholders, the number of
shares of Common Stock covered by each outstanding option, and the price per
share thereof set forth in each such option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock of
the Corporation by reason of any Common Stock dividend or Common Stock split or
reverse stock split, recapitalization (including, without limitation, the
payment of an extraordinary cash dividend), the issuance of stock rights,
merger, consolidation, combination, exchange of shares, spin-off, distribution
of assets to stockholders, or other similar corporate change. In its discretion,
the Committee may also adjust the number of shares of Common Stock covered by
each outstanding option in the event of the sale or other disposition or
distribution by the corporation of all or a portion of its assets.
Subject to any required actions by the stockholders, if the Corporation
shall be the surviving corporation in any merger or consolidation, each
outstanding option shall pertain to and apply to the securities to which a
holder of the number of shares of Common Stock subject to the option would have
been entitled. A dissolution or liquidation of the Corporation or a merger or
consolidation in which the Corporation is not the surviving corporation, shall
cause each outstanding option to terminate, provided that each optionee shall,
in such event, have the right immediately prior to such dissolution or
liquidation, or merger or consolidation in which the Corporation is not the
surviving corporation, to exercise his option in whole or in part without regard
to the installment provisions of Article 5(d) of the Plan.
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In the event of a change in the Common Stock of the Corporation as
currently constituted, which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any such change shall be deemed
to be the Common Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall by made by the Committee,
whose determination in that respect shall be final, binding and conclusive,
provided that each Incentive Stock Option granted pursuant to this Plan shall
not be adjusted in a manner that causes such option to fail to continue to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
Except as hereinbefore expressly provided in this Article 5(g), the
optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger or consolidation or spin-off of assets
or stock of any class, or securities convertible into shares of stock of any
class, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any way
the right or power of the Corporation to make adjustments, reclassification,
reorganizations or changes of its capital of business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(h) Rights as Stockholder or Employee.
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any shares covered by his option until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Article 5(g) hereof. The Plan is not a contract of employment, and the terms of
employment of any optionee or the relationship of any non-employee consultant
with the Corporation shall not be affected in any way be the Plan shall not be
construed as conferring any legal rights upon any optionee for a continuation of
employment, nor shall it interfere with the right of the Corporation or any
Subsidiary to discharge any optionee and to treat him without regard to the
effect which such treatment might have upon him as an optionee.
(i) Modification, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of the
Plan, including but limited to Article 5(d), the Committee may modify, extend or
renew outstanding options granted under the Plan or accept the surrender of
outstanding options (to the extent not theretofore exercised) and authorize the
granting to the new options in substitution therefor (to the extent not
theretofore exercised). The Committee shall not, however, modify any outstanding
options so as to specify a lower price. Notwithstanding the foregoing, however,
no modification of an option shall, without the consent of the optionee, alter
or impair any rights or obligations under any option theretofore granted under
the Plan.
(j) Investment Purpose and Qualification of Shares.
Each option under the Plan shall be granted on the condition that the
purchases of stock thereunder shall be for investment purposes, and not with a
view to resale or distribution except that in the event the stock
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subject to such option is registered under the Securities Act of 1933, as
amended, or in the event a resale of such stock without such registration would
otherwise be permissible, such condition shall be inoperative if in the opinion
of counsel for the Corporation such condition is not required under the
Securities Act of 1933 or any other applicable law, regulation, or rule of any
governmental agency.
The Corporation shall seek such authority as may lawfully be required
to offer and sell the shares covered by an option in each jurisdiction in which
an optionee resides. However, nothing herein shall require the Corporation to
register under the Securities Act of 1933 either the Plan, options granted
thereunder or any securities issued or issuable pursuant to any option granted
under the Plan. If such authority is not obtained for any reason, the
Corporation shall not be obligated (and shall be relieved of any liability for
failure) to issue and sell any securities which may be exercisable pursuant to
any option granted hereunder until and unless such authority is obtained.
(k) Formula Awards to Committee Members.
Each director appointed to the Committee shall be granted Non-Qualified
Stock Options for 30,000 shares of Common Stock on the day such Committee member
is so appointed and thereafter further grants of Non-Qualified Stock Options for
30,000 shares of Common Stock on the third anniversary of the grant of such
Committee member's most recent prior grant under this Article 5(k); provided,
however, that the grant to newly appointed Committee members shall be reduced on
an option-for-option basis by the amount of any option grants accepted by such
appointee from the Company within the prior 24 month period (the "Formula
Options".) The Formula Options granted to such Committee member shall have an
exercise price per share equal to the fair market value of a share of Common
Stock on the date of grant. Each Formula Option granted under this Article 5(k)
shall become exercisable in three equal installments on each of the first three
anniversaries of the date of grant. Each portion of each Formula Option granted
under this Article 5(k) shall be exercisable for ten years after the date of
grant. Upon termination of a director's membership on the Board, other than due
to such director's death or "permanent and total disability," any Formula
Options which are then exercisable may be exercised by such director at any time
prior to the expiration of such option's term or within three (3) months (twelve
months in the case of death or "permanent and total disability") following such
cessation of membership, whichever period is shorter. The exercise price for
each Formula Option granted pursuant to this Article 5(k) is payable in the
forms prescribed in Article 5(c). The terms and provisions of the Plan,
including specifically but without limitation the first sentence of Article
5(g), shall also apply to the grant and exercise of Formula Options, to the
extent such other provisions do not contradict the express provisions of this
Article 5(k) and further provided that no provision of this Plan shall be
construed as applying to this Article 5(k) if the application of such provision
would have the effect of a recipient of Formula Options to not be a
"disinterested person."
(i) Other Provisions.
The option agreements authorized under the Plan shall from time to time
and from option to option contain such other provisions, including, without
limitation, restrictions upon the exercise of the option, as the Committee shall
deem advisable in each case. Any such option agreement shall contain such
limitations and restrictions upon the exercise of the option as shall by
necessary, in the case of Incentive Stock Options, in order that such option
will be an Incentive Stock Option or to conform to any change in law.
6. CORPORATION LOANS
The Corporation may make nonrecourse, collateralized loans to employees
for the purpose of exercising options, with such loans to be made to employees
of the Corporation or the Subsidiaries who are then and who
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<PAGE> 7
remain in good standing, said loans bearing interest at a rate to be determined
by the Committee, but in no event at a rate of interest less than the Federal
interest rate applicable under Section 7872 of the Code. Such loans shall be in
such amounts as may from time to time be required to enable said employees to
exercise options granted under the Plan, to the extent that such loans are
permitted by law and to the extend that such options are then exercisable, and
shall be secured by the shares being purchased. Such loans shall, however,
terminate and be due and payable (including interest) thirty days after the last
day of the employment of any employee or, if earlier, upon the disposition by
the employee of the shares purchased with the proceeds of such loans.
7. RELOAD OPTIONS
Without in any way limiting the authority of the Committee to make
grants hereunder, and in order to induce officers and other key employees to
retain ownership of shares of stock in the Company, the Committee shall have the
authority (but not an obligation) to include within any option agreement a
provision entitling the optionee to a further option (a "Reload Option") in the
event the optionee exercises the option evidenced by the option agreement, in
whole or in part, by surrendering other shares of stock of the Company in
accordance with this Plan and terms and conditions of the option agreement. Any
such Reload Option shall be for number of shares of stock equal to the number of
surrendered shares of stock, shall become exercisable in the event the purchased
shares of stock are held for a minimum period of time established by the
Committee, and shall be subject to such other terms and conditions as the
Committee may determine. Reload options shall only be available to Committee
members exercising Formula Options received pursuant to Article 5(k), if the
Corporation shall receive an opinion of counsel that the grant of Reload Options
to such Committee member will not cause such Committee member to lose his status
as a "disinterested director" within the meaning of Rule 16b-3 promulgated under
the 1934 Act, in which event the Reload Options shall be held for six months
before they may be exercised.
8. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of ten years from the date the Plan is adopted, of the date the Plan is
approved by the stockholders, whichever is earlier.
9. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party be reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgement in any such
action, suit or proceeding; provided that within 60 days after institution of
any such action, suit or proceeding a Committee member shall in writing offer
the Corporation the opportunity, at its own expense, to handle and defend the
same. The foregoing right of indemnification shall be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Corporation's Articles of Incorporation or By-Laws, by
contract, as a matter of law, or otherwise.
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10. AMENDMENT OF THE PLAN
The Board of Directors of the Corporation may, insofar as permitted by
law, from time to time, with respect to any shares at the time not subject to
options, suspend or discontinue the Plan or revise or amend it in any respect
whatsoever except that, without approval of the stockholders, no such revision
or amendment shall change the number of shares subject to the Plan in a material
amount, change the designation of the class of employees eligible to receive
options, decrease the price at which options may be granted, remove the
administration of the Plan from the Committee, or render any member of the
Committee eligible to receive and option under the Plan, other than Formula
Options, while serving thereon. Furthermore, the Plan, as to Incentive Stock
Options, may not, without approval of the stockholders, be amended in any manner
that will cause such options issued under it to fail to meet the requirements of
Incentive Stock Options as defined in Section 422 of the Code, and further
provided that neither the Board of Directors nor the Committee may amend,
suspend, modify, or terminate the Plan so as to alter or impair any grantee's
right under any option theretofore granted under the Plan. The above
notwithstanding, the provisions of Article 5(k) shall not be amended more than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, or the rules thereunder.
Further, any and/or all provisions of this Plan may be revised and/or deleted,
if the Board of Directors, acting upon the advice of Counsel, determines that
the securities laws and/or tax laws then in effect no longer require the
inclusion of such provisions.
11. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Common Stock
pursuant to options will be used for general corporate purposes.
12. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee
to exercise such option.
13. APPROVAL OF STOCKHOLDERS
This Plan is subject to approval by the holders of a majority of the
outstanding shares of Common Stock of the Corporation, which approval must occur
within the period beginning twelve months before or ending twelve months after
the date the Plan is adopted by the Board of Directors. In the period following
the adoption of this Plan by the Board of Directors but prior to obtaining
approval by the stockholders, the Committee may grant options hereunder, subject
to obtaining stockholder approval of the Plan.
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EXHIBIT 4.4
PETER T. HYDE COMPENSATION AGREEMENT
THIS AGREEMENT, dated as of July 10, 1995, is between TRIMEDYNE,
INC., a Nevada corporation with offices at 2801 Barranca Road, Irvine,
California 92714 (the "Company"), and PETER T. HYDE, residing at 21455
Silvertree Lane, Trabuco Canyon, CA 92679 ("Hyde").
1. NOW, THEREFORE, in consideration of the promises and respective
covenants and agreements herein below set forth, the parties agree as follows:
1. The Company hereby agrees to issue to Hyde without cost 20,000
shares of its Common Stock as additional compensation.
2. Hyde agrees that, upon the issuance of the shares, all
compensation due as of July 10, 1995 has been received.
3. Each of the parties hereto agrees, upon the request of the other,
to execute, acknowledge and deliver all such further deeds, assignments,
transfers, conveyances, powers of attorney, documents, instruments and
assurances as may be required to effect the transaction herein contemplated.
4. It is the intent and purpose of the parties to this Agreement
to document that the issuance of the shares and the acquisition thereof by
Hyde are pursuant to a written plan of compensation.
5. This agreement sets forth the entire understanding between the
parties concerning the subject matter hereof. This agreement may not be
modified, except in writing, executed by both parties, and shall be construed,
governed and enforced in accordance with the laws of the State of California.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this agreement as of the date specified above.
TRIMEDYNE, INC.
By:
------------------------
Marvin P. Loeb, Chairman
------------------------
Peter T. Hyde
<PAGE> 1
Exhibit 5
[HELLER, HOROWITZ & FEIT, P.C. LETTERHEAD]
March 22, 1996
Trimedyne, Inc.
2801 Barranca Road
Irvine, California 92619
Attention: Peter T. Hyde
President
Gentlemen:
As counsel for your Company, we have examined your certificate of
incorporation, by-laws, and such other corporate records, documents and
proceedings and such questions of laws we have deemed relevant for the purpose
of this opinion.
We have also, as such counsel, examined the Registration Statement (the
"Registration Statement") of your Company on Form S-8, covering the
registration under the Securities Act of 1933, as amended, of up to 866,060
Shares of Common Stock, $0.01 par value, of the Company ("Common Stock").
Our review has also included the exhibits and form of prospectus for
the issuance of such securities (the "Prospectus") filed with the Registration
Statement.
On the basis of such examination, we are of the opinion that:
1. The Company is a corporation duly authorized and validly existing
and in good standing under the laws of the State of Delaware, with corporate
power to conduct the business which it conducts, as described in the
Registration Statement.
2. The Company has an authorized capitalization of 15,000,000 shares
of Common Stock and 1,000,000 shares of Preferred Stock.
<PAGE> 2
Trimedyne, Inc.
March 22, 1996
Page 2
3. The Common Stock has been duly and validly authorized and, upon the
issuance thereof, will be duly and validly issued as fully paid and
non-assessable shares of Common Stock.
We hereby consent to the use of our name in the Registration Statement
and Prospectus and we also consent to the filing of this opinion as an exhibit
thereto.
Very truly yours,
/s/ HELLER, HOROWITZ & FEIT, P.C.
-----------------------------------
HELLER, HOROWITZ & FEIT, P.C.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-8 of our report dated
December 14, 1995 appearing on page F-2 of the Trimedyne, Inc. Annual Report on
Form 10-K for the year ended September 30, 1995. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Costa Mesa, California
March 23, 1996
