U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission file number 0-26016
PALMETTO BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
South Carolina 74-2235055
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 West Main Street, Laurens, South Carolina 29360
(Address of principal executive offices) (Zip Code)
Registrant's telephone number - (864) 984 - 4551
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $5.00 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of March 15, 1996. $32,817,080, based on the most recent sales
price of $40.00 per share. There is no established public trading market for the
shares. See Part II, Item 5.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. 1,004,980 as of
March 15, 1996.
Documents incorporated by reference and location in Form 10-K: Definitive
Proxy Statement for the 1996 Annual Meeting of Shareholders, Part III.
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PALMETTO BANCSHARES, INC.
AND SUBSIDIARIES
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits and Financial Statement Schedules and Reports on Form 8-K
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Part I
Item 1. Business
Palmetto Bancshares, Inc. ("Bancshares") is a bank holding company organized in
1982 under the laws of South Carolina. Through its wholly-owned subsidiary, The
Palmetto Bank (the "Bank"), and the Bank's wholly-owned subsidiary, Palmetto
Capital, Inc. ("Capital"), Bancshares engages in the general banking business in
the upstate South Carolina market of Laurens, Greenville, Spartanburg,
Greenwood, and Anderson counties. The Bank is a state, non-member bank which was
organized and chartered under South Carolina law in 1906. There are 21 full
service branch offices in addition to the headquarters located in Laurens, South
Carolina.
The Bank performs a full range of banking activities, including such services as
checking, savings, money market, and other time deposits of various types of
consumer and commercial depositors; loans for business, real estate, and
personal uses; safe deposit box rental and various electronic funds transfer
services. The Bank also offers both individual and commercial trust services
through an active trust department. Capital is a brokerage subsidiary of the
Bank, which offers customers stocks, treasury and municipal bonds, mutual funds
and insurance annuities, as well as college and retirement planning. The Bank's
Dealer Finance Department establishes relationships with Upstate automobile
dealers to provide customer financing of automobile purchases. In the later part
of 1995, the Bank started a mortgage banking operation to continue to meet a
broader range of their customer's financial service needs.
At December 31, 1995, Bancshares had total assets of $376,241,000 loans
outstanding of $255,187,000 and deposits of $329,659,000. This compares with
total assets of $312,143,000, loans outstanding of $215,408,000 and deposits of
$274,527,000, at December 31, 1994.
Competition
The upstate South Carolina market is a highly competitive banking market in
which all of the largest financial institutions in the state are represented.
The competition among the various financial institutions is based upon interest
rates offered on deposit accounts, interest rates charged on loans, credit and
service charges, the quality of service rendered and the convenience of banking
facilities. The Bank believes it has competed effectively in its market.
Interstate Banking
In 1986, South Carolina adopted legislation which permits banks and bank holding
companies in certain southern states to acquire banks in South Carolina to the
extent that such other states have reciprocal legislation applicable to South
Carolina banks and bank holding companies. The legislation resulted in a number
of the Bank's competitor banks being purchased by large, out-of-state bank
holding companies. Size gives the larger banks certain advantages in competing
for business from larger corporations. These advantages include higher lending
limits and the ability to offer services in other areas of South Carolina and
the region. As a result, the Bank does not generally attempt to compete for the
banking relationships of larger corporations, but concentrates its efforts on
small and medium-size businesses and individuals. The Bank believes it has
competed effectively in this market segment by offering quality, personalized
service. It is management's intention to remain a locally-based, independent,
South Carolina Bank.
Customers
The majority of the Bank's customers are individuals and small to medium-sized
businesses headquartered within its service area. The Bank is not dependent upon
a single or a very few customers, the loss of which would have a material
adverse effect on the Bank. No customer accounts for more than 5% of the Bank's
total deposits at any time. Management does not believe that the Bank's loan
portfolio is dependent on a single customer or group of customers concentrated
in a particular industry whose loss or insolvency would have a material adverse
effect on the Bank.
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Growth
In July 1995, the Bank added a new branch in North Anderson, South Carolina. The
Bank is leasing the premises. The North Anderson branch had deposits of $3.7
million at December 31, 1995. In October, the Bank relocated their 12 year-old
office on Howell Road in Greenville to East North Street with very favorable
customer response to date. In November 1995, the Bank successfully bid on three
First Union National Bank offices in Gaffney, Blacksburg and Ninety-Six. The
Bank expects the transaction to be completed during the second quarter of 1996,
adding approximately $60 million in deposits to the Bank. Management continually
reviews opportunities to expand in the upstate South Carolina market that it
believes to be in the best interest of the Bank and its customers.
Systems
In September 1995, the Bank successfully completed a conversion of their data
processing software. This will enable the Bank to deliver more sophisticated
user friendly financial services to their customers. The Bank incurred
conversion costs of approximately $1 million.
Employees
At December 31, 1995, the Bank had 207 full-time and 25 part-time employees,
none of whom are subject to a collective bargaining agreement. Management
believes its relationship with its employees is excellent.
Monetary Policy
The results of operations of Bancshares and the Bank are affected by credit
policies of monetary authorities, particularly the Federal Reserve. The
instruments of monetary policy employed by the Federal Reserve include open
market operations in U.S. Government securities, changes in the discount rate on
member bank borrowings, changes in reserve requirements against member bank
deposits and limitations on interest rates which member banks may pay on time
and savings deposits. In view of changing conditions in the national economy and
in the money markets, as well as the effect of action by monetary and fiscal
authorities, including the Federal Reserve, no prediction can be made as to
possible future changes in interest rates, deposit levels, loan demand or the
business and earnings of Bancshares and the Bank.
Regulatory Environment
General
Bancshares and its subsidiaries are extensively regulated under federal and
state law. To the extent that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions. Any change in applicable laws
may have a material effect on the business and prospects of Bancshares. The
operations of Bancshares may be affected by possible legislative and regulatory
changes and by the monetary policies of the United States.
Bancshares. As a bank holding company registered under the Bank Holding Company
Act of 1956, as amended (the "BHCA"), Bancshares is subject to regulation and
supervision by the Federal Reserve. Under the BHCA, Bancshares's activities and
those of its subsidiaries are limited to banking, managing or controlling banks,
furnishing services to or performing services for its subsidiaries or engaging
in any other activity that the Federal Reserve determines to be so closely
related to banking, managing or controlling banks as to be a proper incident
thereto. The BHCA also restricts the ability of Bancshares to acquire ownership
or control of more than 5% or the outstanding voting stock of banks or certain
other nonbanking businesses.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss exposure to the depositors
of such depository institutions and to the FDIC insurance funds in the event the
depository institution becomes in danger of defaulting or in default under its
obligations to repay deposits. For example, under current federal law, to reduce
the likelihood of
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receivership of an insured depository institution subsidiary, a bank holding
company is required to guarantee the compliance of any insured depository
institution subsidiary that may become "undercapitalized: with the terms of any
capital restoration plan filed by such subsidiary with its appropriate federal
banking agency up to the lesser of (i) an amount equal to 5% of the
institution's total assets at the time the institution became undercapitalized,
or (ii) the amount that is necessary (or would have been necessary) to bring the
institution into compliance with all applicable capital standards as of the time
the institution fails to comply with such capital restoration plan. Under a
policy of the Federal Reserve with respect to bank holding company operations, a
bank holding company is required to serve as a source of financial strength to
its subsidiary depository institutions and to commit resources to support such
institutions in circumstances where it might not do so absent such policy. The
Federal Reserve also has the authority under the BHCA to require a bank holding
company to terminate any activity or relinquish control of a nonbank subsidiary
(other than a nonbank subsidiary of a bank) upon the Federal Reserve's
determination that such activity or control constitutes a serious risk to the
financial soundness or stability of any subsidiary depository institution of the
bank holding company. Further, federal law grants federal bank regulatory
authorities additional discretion to require a bank holding company to divest
itself of any bank or nonbank subsidiary if the agency determines that
divestiture may aid the depository institution's financial condition.
Bancshares is subject to the obligations and restrictions described above.
However, management currently does not expect that any of those provisions will
have any material impact on its operations.
As a bank holding company registered under the South Carolina Bank Holding
Company Act, Bancshares also is subject to regulation by the State Board.
Bancshares must file with the State Board periodic reports with respect to its
financial condition and operations, management and intercompany relationships
between Bancshares and its subsidiaries.
The Bank. The Bank is a FDIC-insured, South Carolina-chartered banking
corporation and is subject to various statutory requirements and rules and
regulations promulgated and enforced primarily by the State Board and the FDIC.
These statutes, rules and regulations relate to insurance of deposits, required
reserves, allowable investments, loans, mergers, consolidations, issuance of
securities, payment of dividends, establishment of branches and other aspects of
the business of the Bank. The FDIC has broad authority to prohibit the Bank from
engaging in what it determines to be unsafe or unsound banking practices. In
addition, federal law imposes a number of restrictions on state-chartered,
FDIC-insured banks and their subsidiaries. These restrictions range from
prohibitions against engaging as a principal in certain activities to the
requirement of prior notification of branch closings. The Bank also is subject
to various other state and federal laws and regulations, including state usury
laws, laws relating to fiduciaries, consumer credit and equal credit and fair
credit reporting laws. The Bank is not a member of the Federal Reserve System.
Dividends. The holders of Bancshares common stock are entitled to receive
dividends when and if declared by the Board of Directors out of funds legally
available therefor. Bancshares is a legal entity separate and distinct from the
Bank and Palmetto Capital, Inc. and depends for its revenues on the payment of
dividends from the Bank. Current federal law would prohibit, except under
certain circumstances and with prior regulatory approval, an insured depository
institution, such as the Bank, from paying dividends or making any other capital
distribution if, after making the payment or distribution, the institution would
be considered "undercapitalized," as that term is defined in applicable
regulations. In addition, as a South Carolina-chartered bank, the Bank is
subject to legal limitations on the amount of dividends it is permitted to pay.
In particular, the Bank must receive the approval of the South Carolina
Commissioner of Banking prior to paying dividends to Bancshares.
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Capital Adequacy
Bancshares. The Federal Reserve has adopted risk-based capital guidelines for
bank holding companies. Under these guidelines, the minimum ratio of total
capital to risk-weighted assets (including certain off-balance sheet activities,
such as standby letters of credit) is 8%. At least half of the total capital is
required to be "Tier 1 capital," principally consisting of common shareholders'
equity, noncumulative preferred stock, a limited amount of cumulative perpetual
preferred stock and minority interest in the equity accounts of consolidated
subsidiaries, less certain goodwill items. The remainder (Tier 2 capital) may
consist of a limited amount of subordinated debt and intermediate-term preferred
stock, certain hybrid capital instruments and other debt securities, perpetual
preferred stock and a limited amount of the general loan loss allowance. In
addition to the risk-based capital guidelines, the Federal Reserve has adopted a
minimum Tier 1 (leverage) capital ratio under which a bank holding company must
maintain a minimum level of Tier 1 capital (as determined under applicable
rules) to average total consolidated assets of at least 3% in the case of bank
holding companies which have the highest regulatory examination ratios and are
not contemplating significant growth or expansion. All other bank holding
companies are required to maintain a ratio of at least 100 to 200 basis points
above the stated minimum. At December 31, 1995, Bancshares was in compliance
with both the risk-based capital guidelines and the minimum leverage capital
ratio.
The Bank. As a state-chartered, FDIC-insured institution which is not a member
of the Federal Reserve System, the Bank is subject to capital requirements
imposed by the FDIC. The FDIC requires state-chartered nonmember banks to comply
with risk-based capital standards substantially similar to those required by the
Federal Reserve, as described above. The FDIC also requires state-chartered
nonmember banks to maintain a minimum leverage ratio similar to that adopted by
the Federal Reserve. Under the FDIC's leverage capital requirement, state
nonmember banks that (a) receive the highest rating during the examination
process and (b) are not anticipating or experiencing any significant growth are
required to maintain a minimum leverage ratio of 3% of Tier 1 capital to total
assets; all other banks are required to maintain a minimum leverage ratio of not
less than 4%. As of December 31, 1995, the Bank was in compliance with both the
risk-based capital guidelines and the minimum leverage capital ratio.
Insurance
As an FDIC-insured institution, the Bank is subject to insurance assessments
imposed by the FDIC. Under current law, the insurance assessment to be paid by
insured institutions shall be as specified in a schedule required to be issued
by the FDIC that specifies, at semiannual intervals, target reserve ratios
designed to increase the FDIC insurance fund's reserve ratio to 1.25% of
estimated insured deposits (or such higher ratio as the FDIC may determine in
accordance with the statute) in 15 years. Further, the FDIC is authorized to
impose one or more special assessments in any amount deemed necessary to enable
repayment of amounts borrowed by the FDIC from the United States Department of
the Treasury (the "Treasury Department").
Effective January 1, 1993, the FDIC implemented a risk-based assessment
schedule, having assessments ranging from 0.23% to 0.31% of an institution's
average assessment base. The actual assessment to be paid by each FDIC-insured
institution is based on the institution's assessment risk classification, which
is determined based on whether the institution is considered "well capitalized,"
"adequately capitalized" or "undercapitalized," as such terms have been defined
in applicable federal regulations adopted to implement the prompt corrective
action provisions of FDICIA (see "Other Safety and Soundness Regulations --
Prompt Corrective Action" below), and whether such institution is considered by
its supervisory agency to be financially sound or to have supervisory concerns.
In August 1995, the FDIC approved a reduction in the insurance assessments for
Bank Insurance Fund ("BIF") deposits. This reduction decreased the Bank's
insurance assessment for BIF deposits from 0.26% to 0.04% of the average
assessment base. Effective January 1, 1996, the insurance assessment for the
Bank's BIF deposits was set at zero (although banks pay a $2,000 annual fee).
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Other Safety and Soundness Regulations
Prompt Corrective Action. Current law provides the federal banking agencies with
broad powers to take prompt corrective action to resolve problems of insured
depository institutions. The extent of these powers depends upon whether the
institutions in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly capitalized" or "critically
undercapitalized." Under uniform regulations defining such capital levels issued
by each of the federal banking agencies, a bank is considered "well capitalized"
if it has (i) a total risk-based capital ratio of 10% or greater, (ii) a Tier 1
risk-based capital ratio of 6% or greater, (iii) a leverage ratio of 5% or
greater, and (iv) is not subject to any order or written directive to meet and
maintain a specific capital level for any capital measure. An "adequately
capitalized" bank is defined as one that has (i) a total risk-based capital
ratio of 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or greater,
and (iii) a leverage ratio of 4% or greater (or 3% or greater in the case of a
bank with a composite CAMEL rating of 1). A bank is considered (A)
"undercapitalized" if it has (i) a total risk-based capital ratio of less than
8%, (ii) a Tier 1 risk-based capital ratio of less than 4% or (iii) a leverage
ratio of less than 4% (or 3% in the case of a bank with a composite CAMEL rating
of 1); (B) "significantly undercapitalized" if the bank has (i) a total
risk-based capital ratio of less than 6%, or (ii) a Tier 1 risk-based capital
ratio of less than 3%, or (iii) a leverage ratio of less than 3%; and (C)
"critically undercapitalized" if the bank has a ratio of tangible equity to
total assets equal to or less than 2%. Bancshares and the Bank each currently
meet the definition of well capitalized.
Brokered Deposits. Current federal law also regulates the acceptance of brokered
deposits by insured depository institutions to permit only a "well capitalized"
depository institution to accept brokered deposits without prior regulatory
approval. Under FDIC regulations, "well capitalized" insured depository
institutions may accept brokered deposits without restriction, "adequately
capitalized" insured depository institutions may accept brokered deposits with a
waiver from the FDIC (subject to certain restrictions on payments of interest
rates) while "undercapitalized" insured depository institutions may not accept
brokered deposits. The regulations provide that the definitions of "well
capitalized," "adequately capitalized" and "undercapitalized" are the same as
the definitions adopted by the agencies to implement the prompt corrective
action provisions of FDICIA (as described in the previous paragraph). Bancshares
does not believe that these regulations will have a material adverse effect on
its current operations.
Other FDICIA Regulations. To facilitate the early identification of problems,
FDICIA required the federal banking agencies to prescribe more stringent
reporting requirements. The FDIC final regulations implementing those
provisions, among other things, require that management report on the
institution's responsibility for preparing financial statements and establishing
and maintaining an internal control structure and procedures for financial
reporting and compliance with designated laws and regulations concerning safety
and soundness, and that independent auditors attest to and report separately on
assertions in management's reports concerning compliance with such laws and
regulations, using FDIC approved audit procedures.
Community Reinvestment Act
The Bank is subject to the requirements of the CRA. The CRA requires that
financial institutions have an affirmative and ongoing obligation to meet the
credit needs of their local communities, including low-income and
moderate-income neighborhoods, consistent with the safe and sound operation of
those institutions. Each financial institution's efforts in meeting community
credit needs are evaluated as part of the examination process pursuant to twelve
assessment factors. These factors are also considered in evaluating mergers,
acquisitions and applications to open a branch or facility. The Bank received an
"outstanding" rating in its most recent evaluation.
As a result of a Presidential initiative, each of the federal banking agencies
has issued a notice of proposed rulemaking that would replace the current CRA
assessment system with a new evaluation system that would rate institutions
based on their actual performance (rather than efforts) in meeting community
credit needs. Under the proposal, each institution would be evaluated based on
the degree to which it is providing loans (the lending test), branches and other
services (the service test) and investments to low-income and moderate-income
areas (the investment test). Under the lending
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test, as proposed, an institution would be evaluated on the basis of its market
share of reportable loans in low-income and moderate-income areas in comparison
to other lenders subject to CRA in its service area, and in comparison with the
institution's market share of reportable loans in other service areas. An
institution would be evaluated under the investment test based on the amount of
investments made that have had a demonstrable impact on low-income and
moderate-income areas or persons as compared to its risk-based capital. The
service test would evaluate a retail institution primarily based on the
percentage of its branches located in, or that are readily accessible to,
low-income and moderate-income areas. Each depository institution would have to
report to its federal supervisory agency and make available to the public data
on the geographic distribution of its loan applications, denials, originations
and purchases. Small institutions could elect to be evaluated under a
streamlined method that would not require them to report this data. All
institutions, however, would receive one of five ratings based on their
performance: Outstanding, High Satisfactory, Low Satisfactory, Needs to Improve
or Substantial Noncompliance. An institution that received a rating of
Substantial Noncompliance would be subject to enforcement action. Bancshares
currently is studying the proposal and determining whether the regulation, if
adopted, would require changes to the Bank's CRA action plans.
Transactions Between Bancshares, Its Subsidiaries and Affiliates
Bancshares' subsidiaries are subject to certain restrictions on extensions of
credit to executive officers, directors, principal shareholders or any related
interest of such persons. Extensions of credit (i) must be made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unaffiliated persons; and (ii) must
not involve more than the normal risk of repayment or present other unfavorable
features. Aggregate limitations on extensions of credit also may apply.
Bancshares' subsidiaries also are subject to certain lending limits and
restrictions on overdrafts to such persons.
Subsidiary banks of a bank holding company are subject to certain restrictions
imposed by the Federal Reserve Act on extensions of credit to the bank holding
company or its nonbank subsidiary, on investments in their securities and on the
use of their securities as collateral for loans to any borrower. Such
restrictions may limit Bancshares' ability to obtain funds from its bank
subsidiary for its cash needs, including funds for acquisitions, interest and
operating expenses.
In addition, under the BHCA and certain regulations of the Federal Reserve, a
bank holding company and its subsidiaries are prohibited from engaging in
certain tie-in arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services. For example, a subsidiary may not
generally require a customer to obtain other services from any other subsidiary
or Bancshares, and may not require the customer to promise not to obtain other
services from a competitor, as a condition to an extension of credit to the
customer.
Item 2. Properties
The corporate headquarters and main office of Bancshares and the Bank are
located in a facility at 101 West Main Street, Laurens, South Carolina which
also contains a three lane drive-in facility. The accounting, operations, data
processing, trust department, human resources, loan administration, internal
audit and marketing departments are located in a facility at 301 Hillcrest
Drive, Laurens, South Carolina.
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The Bank has twenty-one full-service branches in the Upstate region of South
Carolina in the following locations: Laurens (3), Duncan, Clinton, Greenwood
(2), Fountain Inn, Hodges, Simpsonville, Anderson (2), Greenville (4),
Pendleton, Spartanburg (3) and Inman.
The Bank also has automatic teller machines at its Church Street branch in
Laurens, Clinton, Fountain Inn, Simpsonville, Haywood Road (Greenville), Howell
Road (Greenville), Grove Road (Greenville), Fluor Daniel office complex
(Greenville), Blackstock Road (Spartanburg), Fernwood Drive (Spartanburg),
Duncan, Pendleton, Anderson and North Anderson branches. In addition, the Bank
owns five limited service branches in various retirement centers located in the
Upstate region of South Carolina.
The Bank owns all of its facilities except the following leased facilities,
which have annual rental expenses from $7,200 to $100,200:
East North Street, Haywood Road, East North Street at Howell Road offices -
Greenville
Spartan Centre, Blackstock Road, Fernwood Road offices - Spartanburg
Montague Street, South Main Street offices - Greenwood
North Main office - North Anderson
Offices range in size from branch locations of approximately 600 to 900 square
feet, to the headquarters location of approximately 8,000 square feet. The
Laurens Center (operations center) is 55,000 square feet. All facilities are
protected by alarm and security systems which meet or exceed regulatory
standards. Each facility is in good condition and capable of handling increased
volume.
The Laurens Center is currently undergoing additional renovations with estimated
costs of approximately $500,000.
All of the locations are considered suitable and adequate for their intended
purposes.
Item 3. Legal Proceedings
Although the Company is, from time to time, involved in various legal
proceedings in the normal course of business, there are no material pending
legal proceedings to which the Company or any subsidiary is a party, or to which
any of their property is subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1995.
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Part II
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
Common Stock Data
Set forth below is information concerning high and low sales prices by
quarter for each of the last two fiscal years and divided information for the
last two fiscal years. Bancshares' common stock is not traded on any established
public trading market. Bancshares' acts as its own transfer agent, and the
information concerning sales prices set forth below is derived from Bancshares'
stock transfer records. As of March 1, 1996, Bancshares' had 519 shareholders.
As of February 29, 1996, the most recent date on which shares of Bancshares'
common stock were sold, the sales price of Bancshares' common stock was $40.00
per share.
Sales Prices By Quarter
High Low
Fiscal Year 1995
First Quarter $38.00 $32.00
Second Quarter - no trades -
Third Quarter $40.00 $39.00
Fourth Quarter $40.00 $39.00
Fiscal Year 1994
First Quarter $31.00 $31.00
Second Quarter $32.00 $32.00
Third Quarter $32.00 $32.00
Fourth Quarter $35.00 $32.00
Dividends Paid Per Share
Fiscal Year 1995 Fiscal Year 1994
March 30 $.15 March 31 $.13
June 30 $.15 June 30 $.13
September 30 $.15 September 30 $.13
December 29 $.20 December 28 $.14
Bancshares expects that cash dividends will continue to be paid in the future.
The ability of Bancshares to pay dividends depends upon the amount of dividends
that is received from the Bank. Restrictions on the amount of dividends
available for payment to Bancshares are established by state regulatory
authorities for primary capital to assets ratios. The South Carolina Board of
Financial Institutions guideline suggests a ratio of at least seven percent
(7%). As of December 31, 1995, the Bank's primary capital to asset ratio was
8.33%. Current federal law would prohibit, except under certain circumstances
and with prior regulatory approval, an insured depository institution, such as
the Bank, from paying dividends or making any other capital distribution if,
after making the payment or distribution, the institution would be considered
"undercapitalized," as that term is defined in applicable regulations.
As of December 31, 1995, approximately $3,644,000 was available for payment of
dividends by the Bank. Prior approval of the Office of Commissioner of Banking,
State Board of Financial Institutions is required for any payment of dividends
by a state bank.
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Item 6. Selected Financial Data
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1994 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
For the Year
Total interest income $ 26,268 21,293 19,532 19,842 21,736
Total interest expense 10,842 7,208 6,666 8,025 11,296
Net interest income 15,426 14,085 12,866 11,817 10,440
Provision for loan losses 1,140 819 1,172 1,543 2,093
Total non-interest income 4,463 4,029 3,905 3,483 2,931
Total non-interest expense 13,900 13,625 12,179 10,900 9,272
Net income 3,602 2,760 2,532 2,129 1,546
Per Common Share(1)
Net income before cumulative
effect of change in
accounting method 3.59 2.76 2.57 2.12 1.54
Cumulative effect of change
in accounting for income taxes - - 0.05 - -
Net income 3.59 2.76 2.52 2.12 1.54
Cash dividends declared .65 .53 .48 .45 .40
Book value at year end 27.81 24.21 22.15 19.89 18.04
Average common shares
outstanding 1,003,440 1,000,230 1,006,479 1,006,494 1,006,136
At Year End
Total assets 376,241 312,143 286,267 262,750 247,335
Investment securities 83,404 63,909 65,887 59,478 59,265
Loans 255,187 215,408 191,491 171,964 167,103
Total deposits 329,659 274,527 249,976 226,883 211,592
Total shareholders' equity (2) 27,909 24,213 22,287 20,047 18,149
Total shareholders' equity 25,138 24,213 22,287 20,047 18,149
Common shares outstanding 1,004,980 1,004,484 1,003,884 1,007,784 1,006,184
Full-time equivalent employees 219 210 205 184 178
Average Balances
Assets 342,374 304,883 270,401 260,638 247,700
Investment securities 73,395 67,364 61,063 58,389 49,620
Loans 230,908 204,959 180,880 168,265 166,328
Deposits 329,777 264,785 239,237 223,215 211,868
Total shareholders' equity 26,142 22,868 21,208 19,304 17,608
Key ratios (1)
Return on average assets 1.05% 0.91% 0.91% 0.82% 0.63%
Return on average equity 13.78% 12.07% 11.94% 11.03% 8.78%
Primary capital to assets at year end 8.33% 8.64% 8.38% 8.35% 7.95%
Net interest margin 4.99% 5.09% 5.31% 5.20% 4.79%
Allowance for loan losses to total loans 1.45% 1.40% 1.25% 1.20% 1.00%
Nonperforming assets to total assets 0.20% 0.20% 0.19% 0.50% 1.23%
Net charge-offs to average loans 0.19% 0.10% 0.47% 0.68% 1.24%
</TABLE>
(1) Per share data and financial ratios are calculated using balances and shares
of total common stock outstanding excluding reclassification of ESOP stock
for $2,770,528.
(2) Excluding reclassification of ESOP stock for $2,770,528.
9
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto. The consolidated
financial~statements of Palmetto Bancshares, Inc. and subsidiaries (the
"Company"), represent account balances for Palmetto Bancshares, Inc., (the
"Parent"), and its wholly-owned subsidiary, The Palmetto Bank, (the "Bank"), and
the Bank's wholly-owned subsidiary, Palmetto Capital, Inc.
The Company's assets grew $64.1 million, or 20.5%, total loans grew $39.8
million, or 18.5% and deposits grew $55.1 million, or 20.1% in 1995 as a result
of growth in all geographic markets. Total assets grew by approximately $25.9
million, or~9.0%, total loans grew $23.9 million, or 12.5% and deposits grew
$24.6 million, or 9.8% in 1994.
Results of Operations
Three Years Ended December 31, 1995, 1994 and 1993
Net income for 1995 was $3.6 million, an increase of 30.5% from the $2.8~million
reported in 1994. Net income in 1994 increased 9.0% from the $2.5~million
reported in 1993. Net income per share was $3.59 in 1995, $2.76 in
1994, compared with $2.52 in 1993. Return on average assets was 1.05% in 1995,
compared with .91% in 1994 and 1993.
Net Interest Income
The Company's earnings are dependent to a large degree on its net
interest income, defined as the difference between gross interest and fees on
earning assets (primarily loans and investment securities), and interest paid on
deposits and borrowed funds. Net interest income is affected by the interest
rate earned or paid and by volume changes in loans, securities, deposits and
borrowed funds.
In 1995, net interest income was $15.4 million which represented a 9.5%
increase over the $14.1 million earned in 1994. In 1994, net interest income
increased $1.2 million or 9.5%, over the $12.9 million earned in 1993.
During 1995, the average yield on all interest-earning assets was 8.48% up from
7.93%, for both 1994 and 1993. The Bank's average effective rate paid on all
interest-bearing liabilities increased in 1995 to 4.07%, from 2.57% in 1994 and
2.61% in 1993. The Bank's net yield on interest-earning assets was 4.99%, 5.33%
and 5.31% in 1995, 1994 and 1993, respectively.
Interest and fees on loans increased $4.0 million from 1994 to 1995, and
increased $1.8 million from 1993 to 1994. Interest on investment
securities increased $759,000, or 20.5%, from 1994 to 1995 due primarily to a
$26.0 million increase in the investment securities portfolio balance. This
compares to an increase of $91,000, or 2.5%, from 1993 to 1994, due to higher
average balances in 1994 compared to 1993, offset by lower yields. Interest
income of federal funds sold increased $183,000, or 93%, from 1994 to 1995 due
to both higher average balances invested and higher yields earned. This compares
to a decrease of $178,000, or 48%, from 1993 to 1994 due to lower average
balances.
10
<PAGE>
Total interest expense increased 50% or $3.6 million from 1994 to 1995 and 18%
or $542,000 from 1993 to 1994. Due to a 20% increase in deposits and a 33%
increase in average rate paid, interest expense on deposits increased $3.2
million or 48% from 1994 to 1995. Interest expense on deposits increased
$375,000 or 5.9% from 1993 to 1994 due to a 10% growth in deposits offset by
decline in interest rates paid. The average rate paid on deposits was 3.39%,
2.55% and 2.67% in 1995, 1994 and 1993, respectively. Interest on securities
sold under agreements to repurchase increased $256,800, or 105% from 1994 to
1995 due to an increase in the average rate paid from 2.58% to 4.31%. This
compares to an increase of $85,000, or 54%, from 1993 to 1994, due to an
increase in the average rate paid from 1.55% to 2.58%. Interest on commercial
paper increased $169,000, or 98%, from 1994 to 1995 due to higher average
balances and an increase in the average rate paid from 2.72% to 4.28%. This
compares to an increase of $94,000, or 1.22%, from 1993 to 1994, due to higher
rates paid and higher average balances.
The Company's rate sensitive assets are those paying interest at variable
rates and those maturing within one year. Rate sensitive assets thus include
both loans and investment securities. Rate sensitive liabilities include
insured money market accounts, savings accounts, interest bearing transaction
accounts, time deposits and borrowings. The profitability of the Company is
influenced significantly by management's ability to control the relationship
between rate sensitive assets and liabilities.
At December 31, 1995, approximately 27% of the Company's earning assets could
be repriced within one year compared to approximately 95% of its interest
bearing liabilities. This compares to 28% and 71% in 1994 and 33% and 97% in
1993.
The Bank's policy is to minimize interest rate risk between interest bearing
assets and liabilities at various maturities. In adhering to this policy, it is
anticipated that the Bank's net interest margins will not be materially affected
by inflation and changing prices. Management will continue to monitor its asset
sensitive position in times of lower interest rates which might adversely effect
its net interest margin.
Provision For Loan Losses
The allowance for possible loan losses is established through charges to
expense in the form of a provision for loan losses. Loan losses and recoveries
are charged or credited directly to the allowance. The amount charged to
the provision for loan losses by the Bank is based on management's judgment as
to the amount required to maintain an allowance adequate to provide for
potential losses in the loan portfolio. The level of this allowance is dependent
upon the total amount of past due loans, general economic conditions and
management's assessment of potential losses.
At December 31, 1995, impaired and non-performing loans were $743,000, or 0.31%
of total loans. Non-performing loans for 1994 and 1993 were $636,000, or 0.30%,
and $500,000, or 0.29%, respectively. The provision for loan losses was
$1,140,000, $819,000 and $1,172,000, respectively, for the years ended December
31, 1995, 1994, and 1993. The provision in 1995 reflects replenishing the
allowance for loan losses for net chargeoffs of $457,000, plus raising the level
of the allowance in response to a 18% increase in total loans outstanding. The
allowance for loan losses totaled $3.7 million, $3.0 million and $2.4 million at
December 31, 1995, 1994 and 1993, respectively. Management increased the level
of the allowance for loan losses to total loans outstanding to 1.45% as of
December 31, 1995. This compares to 1.40% and 1.25% as of December 31, 1994 and
1993, respectively. Net charge-offs to average loans are 0.20% for 1995 as
compared to 0.10% for 1994 and 0.47% for 1993.
11
<PAGE>
Non-Interest Income
Non-interest income for 1995 increased by $433,000 or 10.8% over 1994,
as compared to an increase in 1994 of $124,000 or 3.18% over 1993. These
increases generally resulted from increased service charges on deposit accounts
as a result of increases in the volume of deposit relationships. Management
views deposit fee income as a critical influence on profitability. Periodic
monitoring of competitive fee schedules and examination of alternative
opportunities insure that the Company realizes the maximum contribution to
profits from this area.
Fees for trust services continued to increase in 1995 to $773,000 from $670,000
in 1994 and $621,000 in 1993 as a result of increased activity.
There were $93,000 and $13,000 of losses from sales of investment securities
realized during 1995 and 1994, respectively. These securities were sold in
response to rising interest rates and declining market value. In June 1993,
management responded to the anticipated increased loan demand and interest rate
changes by selling $5 million of U.S. Treasury securities from the investment
securities portfolio prior to the adoption of SFAS No. 115. This sale resulted
in an investment securities gain of $149,000. The remaining 1993
investment securities gains of $15,000 resulted in various bonds being called at
gains.
Non-Interest Expenses
Non-interest expenses totaled $13.9 million in 1995 as compared to $13.6 million
in 1994 and $12.2 in 1993. This represented a 2% increase from 1994 to 1995, and
a 12% increase from 1993 to 1994. The overall increases during 1994 and
1995 were due to growth in all geographic markets and expenses directly related
to the opening of additional branches and a new operations center. Salaries and
other personnel expense, which comprised 53% of total other operating expenses
for 1995, was up $58,000 or 1% over 1994. During 1994 and 1993, salaries and
other personnel expenses accounted for 54% and 55%, of total other operating
expenses, respectively.
Combined net occupancy and furniture and equipment expenses increased $148,000,
or 6.8% from 1994 to 1995, as compared to an increase of $328,000, or 18%, in
1994. These increases were due primarily to the support of the growth in retail
operations and the opening of the new corporate center.
Income Taxes
Income tax expense totaled $1.2 million in 1995 as compared to $910,000 in 1994
and $833,000 in 1993. In addition to the expense for 1993, $56,000 was recorded
as the result of the adoption of Financial Accounting Standards Board SFAS No.
109. The changes in income tax expense for all three years was due to changes in
taxable income for each respective year.
12
<PAGE>
Liquidity
The Company's liquidity position is dependent upon its debt servicing needs
and dividends declared. The Company's long-term debt to equity ratio was .0%,
.73% and 2.15% at December 31, 1995, 1994 and 1993, respectively.
As of December 31, 1995, the Company had no outstanding debt. In June 1995 the
Company paid the remaining outstanding balance of the note with Trust Company
Bank.
In December 1993 the final payment of $200,000 was paid on the debt of the
Employee Stock Ownership Trust. In addition, during 1991 the Company began
selling commercial paper as a alternative investment tool for its commercial
customers. The commercial paper is issued only in conjunction with the automated
sweep account customer agreement on deposits at the Bank level. At December 31,
1995, the Company had $6.2 million in commercial paper with a weighted average
rate of 3.30%, as compared to $6.9 million in 1994 with a weighted average of
3.10% and $5.2 million in 1993 with a weighted average rate of 1.32%.
The Company's liquidity needs are met through the payment of dividends from
the Bank. At December 31, 1995 the Bank had available retained earnings of $3.6
million for payment of dividends.
The Bank's liquidity is provided by its ability to attract deposits, the
maturity of its loan portfolio, the flexibility of its investment securities,
lines of credit from correspondent banks, and current earnings. Sufficient
liquidity must be available to meet continuing loan demand and deposit
withdrawal requirements. Competition for deposits is intense in the markets
served by the Bank. However, the Bank has been able to attract deposits as
needed through pricing adjustments and expansion of its geographic market area.
The deposit base is comprised of diversified customer deposits with no one
deposit or type of customer accounting for a significant portion. Therefore,
withdrawals are not expected to fluctuate from historical levels. The loan
portfolio of the Bank is a source of liquidity through maturities and repayments
by existing borrowers. The investment securities portfolio is a source of
liquidity through scheduled maturities and sales of securities. Approximately
65% of the securities portfolio was pledged to secure liabilities as of December
31, 1995, as compared to 64% at December 31, 1994. Management believes that
its sources of liquidity are adequate to meet operational needs. Additional
sources of short-term liquidity are existing lines of credit from correspondent
banks totaling $9 million, all of which are available. Loan demand has been
constant and loan origination's can be controlled through pricing decisions.
In November 1995, the FASB issued a guide to implementation of SFAS No. 115 on
accounting for certain investments in debt and equity securities which allows
for the one time transfer of certain investments classified as held for
investment to available for sale. The Company transferred investment securities
with an amortized cost of $29,106,899 and a related unrealized gain of $69,363
in the fourth quarter of 1995. This transfer will enable the Company to better
position its balance sheet for asset/liability management.
Effect of Inflation and Changing Prices
The consolidated financial statements and related financial data presented
herein have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars, without considering changes in relative
purchasing power over time due to inflation. Virtually all of the assets and
liabilities of the Bank are monetary in nature and, as a result, its operations
can be significantly affected by interest rate fluctuations as discussed
above. Therefore, inflation will affect the Bank only to the extent that
interest rates change and according to the Bank's sensitivity to such changes.
The Company attempts to manage the effects of inflation through its
asset/liability management as described above in "Net Interest Income."
13
<PAGE>
Accounting and Reporting Changes
In May 1993, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 114, Accounting by
Creditors for Impairment of a Loan, and subsequently amended by SFAS No. 118,
which became effective for the Company beginning January 1, 1995. This statement
requires the Company to consider a loan to be impaired if the Company believes
it is probable that it will be unable to collect all principal and interest due
according to the contractual terms of the loan. If a loan is impaired, the
Company is required to record a loan valuation allowance equal to the difference
between the present value of the estimated future cash flows discounted at the
loan's effective rate and the loan's carrying value. The adoption of the
Statements required no increase to the allowance for loan losses and had no
impact on net income in 1995.
SFAS No. 119, Disclosures about Derivative Financial Instruments and Fair Value
of Financial Instruments, was issued in late 1994 and is effective for fiscal
years ending after December 15, 1994, except for entities with less than $150
million in total assets. For those entities, this statement is effective for
fiscal years ending after December 15, 1995. SFAS No. 119 requires disclosure
about amounts, nature and terms of derivative financial instruments. It also
requires that a distinction be made between financial instruments held or issued
for trading purposes or issued for purposes other than trading. The adoption of
this statement did not have an impact on the Company as it does not own any
derivatives at this time.
In March, 1995, the FASB issued SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which is
effective for financial statements issued for fiscal years beginning after
December 15, 1995. SFAS No. 121 provides guidance for recognition and
measurement of impairment of long-lived assets, certain identifiable intangibles
and goodwill related both to assets to be held and used and assets to be
disposed of. This statement is not anticipated to have a material effect on the
Company.
In May, 1995, the FASB issued SFAS No. 122, Accounting for Mortgage Servicing
Rights, an Amendment of SFAS No. 65, which is effective prospectively for years
beginning after December 15, 1995. The statement requires the recognition of an
asset for the right to service mortgage loans for others, regardless of how
those rights were acquired (either purchased or originated). Further, it amends
SFAS No. 65 to require assessment of impairment based on fair value. The Company
recently commenced the origination and sale of mortgage loans. Currently, the
Company is pre-selling all mortgages and, based upon the Company's present
mortgage lending operation, does not anticipate that this statement will have a
material adverse effect on the Company.
In October, 1995, the FASB issued SFAS No. 123, Accounting for Stock Based
Compensation. This statement is effective for financial statements issued for
fiscal years beginning after December 15, 1995. SFAS No. 123 provides guidance
on the valuation of compensation costs arising from both fixed and performance
stock compensation plans. This statement is not expected to have a material
effect on the Company.
14
<PAGE>
Table 1
Distribution of Assets and Liabilities
(Dollars in Thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1995 1994 1994 1993 1993 1992 1992
-------------------------------------------------------------------------------
Average % of Average % of Average % of Average % of
-------------------------------------------------------------------------------
ASSETS Balance Total Balance Total Balance Total Balance Total
------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and due from banks $ 21,724 6.35% 16,629 5.45% 14,996 5.39% 13,175 5.05%
Federal funds sold 3,684 1.08 5,016 1.65 12,709 4.56 12,670 4.86
Taxable investment securities 47,618 13.91 44,500 14.60 40,018 14.37 38,353 14.72
Non-taxable investment securities 25,777 7.53 22,864 7.50 21,046 7.56 20,036 7.69
Loans, net of unearned discount 230,908 67.44 204,959 67.26 180,880 64.97 168,265 64.56
Less: allowance for loan losses (3,247) (0.95) (2,766) (0.91) (2,125) (0.76) (1,816) (0.70)
----------- --------- --------- ------- --------- ------- ---------- --------
Net loans 227,661 66.50 202,193 66.35 178,755 64.21 166,449 63.86
Premises and equipment, net 10,275 3.00 9,011 2.96 6,080 2.18 5,043 1.93
Goodwill 1,102 0.32 1,164 0.38 1,225 0.44 1,286 0.49
Other assets 4,533 1.27 3,506 1.15 3,572 1.28 3,626 1.39
----------- --------- --------- ------- --------- ------- ---------- --------
Total assets $ 342,374 100.00% 304,883 100.00 278,401 100.00% 260,638 100.00%
=========== ========= ========= ======= ========= ======= ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest-bearing deposits 46,731 13.65% 42,080 13.80% 34,594 12.43% 30,174 11.58%
Interest-bearing demand 97,804 28.57 100,708 33.03 87,298 31.36 82,289 31.57
Savings 21,518 6.28 23,305 7.64 23,156 8.32 28,649 10.99
Time 128,555 37.55 98,692 32.37 94,189 33.83 82,103 31.50
----------- --------- --------- ------- --------- ------- ---------- --------
Total deposits 294,608 86.05 264,785 86.85 239,237 85.93 223,215 85.64
Federal funds purchased and securities sold
under agreements to repurchase 12,020 3.51 8,964 2.94 10,239 3.68 9,075 3.48
Commercial paper 8,017 2.34 6,312 2.07 5,424 1.95 6,176 2.37
Debt of the Employee Stock Ownership Plan - - - - 200 0.07 400 0.15
Note payable to a bank 107 0.03 630 0.21 933 0.34 1,235 0.47
Other liabilities 1,480 0.43 1,324 0.43 1,160 0.42 1,233 0.47
----------- --------- --------- ------- --------- ------- ---------- --------
Total liabilities 316,232 92.36 282,015 92.50 257,193 92.38 241,334 92.59
Shareholders equity:
Common stock - $5.00 par value 5,054 1.48 5,001 1.64 5,042 1.81 5,039 1.93
Surplus 10,442 3.05 10,425 3.42 5,992 2.15 5,407 2.07
Retained earnings 10,615 3.10 7,724 2.53 10,430 3.75 9,258 3.55
Less debt in connection with funds used to
acquire company shares by Employee Stock
Ownership Plan - 0.00 - - (200) (0.07) (400) (0.15)
Less treasury stock (239) (0.07) (282) (0.09) (56) (0.02) - -
Unrealized gain (loss) on investment 270 0.08 - 0.00 - 0.00 - 0.00
securities ----------- --------- --------- ------- --------- ------- ---------- --------
Total shareholders' equity 26,142 7.64 22,868 7.50 21,208 7.62 19,304 7.41
----------- --------- --------- ------- --------- ------- ---------- --------
Total liabilities and shareholders' $ 342,374 100.00% 304,883 100.00% 278,401 100.00% 260,638 100.00%
equity =========== ========= ========= ======= ========= ======= ========== ========
</TABLE>
15
<PAGE>
INVESTMENT PORTFOLIO
The following table shows, as of December 31, 1995, 1994 and 1993, the book
value and market values of investments in obligations of (i) the U.S. Government
and its agencies, (ii) states, counties, and municipalities, and (iii)
mortgage-backed securities.
TABLE 2
Investment Portfolio
(Dollars in Thousands)
INVESTMENTS HELD TO MATURITY
<TABLE>
<CAPTION>
1995 1994 1993
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government agencies $ 15,033 15,176 30,537 29,908 32,548 33,162
State and municipals 22,593 23,183 24,168 23,999 21,170 22,571
Mortgage-backed securities 6,163 6,190 - - - -
Total $ 43,789 44,549 54,705 53,907 53,718 55,733
</TABLE>
INVESTMENTS AVAILABLE FOR SALE
<TABLE>
<CAPTION>
1995 1994 1993
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government agencies $ 29,996 30,686 9,467 9,204 11,988 12,169
State and municipals 8,584 8,929 - - - -
Total $ 38,580 39,615 9,467 9,204 11,988 12,169
</TABLE>
The following table indicates the maturities and respective yields by investment
category as of December 31, 1995. Yields on tax exempt securities are stated on
a tax equivalent basis using a federal tax rate of 34%.
TABLE 3
Investment Portfolio Maturity Schedule
(Dollars in Thousands)
December 31, 1995
INVESTMENTS HELD TO MATURITY
<TABLE>
<CAPTION>
Due After Due After
Due One Year Five Years
Within Through Through Due After
One Year Yield Five Years Yield Ten Years Yield Ten Years Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government
agencies $ - - 12,547 6.46% 8,650 7.23% - -
State and municipals - - - - 16,593 8.18 5,999 8,06
Total $ - - 12,547 6.46% 25,243 7.85% 5,999 8.06%
</TABLE>
16
<PAGE>
INVESTMENTS AVAILABLE FOR SALE
<TABLE>
<CAPTION>
Due After Due After
Due One Year Five Years
Within Through Through Due After
One Year Yield Five Years Yield Ten Years Yield Ten Years Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government agencies $ 6,358 6.99% 24,328 6.51% - - - -
State and municipals 1,167 12.07 7,762 9.31 - - - -
Total $ 7,525 7.78% 32,090 7.19% - - - -
</TABLE>
LOAN PORTFOLIO
Management of the Company believes that the loan portfolio is adequately
diversified. The table below summarizes loans by classification for the five
year period ended December 31, 1995.
TABLE 4
Loan Portfolio Composition
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 45,377 32,672 31,107 26,486 32,643
Real estate-construction 5,453 1,941 1,156 732 889
Real-estate-mortgage 149,017 134,789 121,884 113,442 101,488
Installment loans to individuals 55,340 46,006 37,344 31,304 32,083
Total $ 255,187 215,408 191,491 171,964 167,103
</TABLE>
Commercial loans are spread through numerous types of businesses with no
particular industry concentrations. Loans to individuals are made primarily to
finance consumer goods purchased. At December 31, 1995, total loans, net of
unearned discounts, were 74.9% of total earning assets. Loans secured by real
estate accounted for 60.5% of total loans as of December 31, 1995. Most of the
loans classified as real estate-mortgage are commercial loans where real estate
provides additional collateral.
The table below shows the amounts of loans at December 31, 1995, except for real
estate mortgage and installment loans to individuals, due to mature and
available for repricing within the time period stated.
TABLE 5
Maturities and Sensitivity of Loans
to Changes in Interest Rates
(Dollars in Thousands)
<TABLE>
<CAPTION>
After 1 Year
1 Year Through After 5
or Less Five Years Years Total
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 24,311 17,033 4,033 45,377
Real estate-construction 3,697 1,548 208 5,453
Total $ 28,008 18,581 4,241 50,830
</TABLE>
17
<PAGE>
The amounts of the preceding loans with a maturity over one year which have a
predetermined interest rate or a floating or adjustable interest rate are as
follows:
December 31, 1995
Predetermined interest rate $ 22,822
Floating or adjustable interest rate -
Total $ 22,822
Thirty-two percent of total loans are repricable within one year.
Non-accrual loans are those loans which management, through its continuing
evaluation of loans, has determined offer a more than normal risk of
collectability of future interest. Interest income on non-accrual loans is
recognized only as received. Interest on past due loans continues to accrue
until such time that the loans are either charged-off or placed in non-accrual
status. The non-accrual loan policy provides that it is the responsibility of
the chief credit officer to administer the placing of loans on non-accrual
status. Loans which become ninety days past due will be placed on non-accrual.
Loans on which bankruptcy notices are received will also be placed on
non-accrual. In addition, other loans on which repayment appears doubtful may be
placed on non-accrual at the discretion of the chief credit officer.
The following table sets forth, for each loan category, the amounts of total
loans 90 days or more past due and on non-accrual, the amounts of total loans 90
days or more past due and accruing, total loans outstanding, the percentage of
each type of loan 90 days or more past due and the amount of foregone interest
income for each of the five years for December 31, 1991 through December 31,
1995. In addition to the non-performing loans disclosed below, the Company had
$743,050 in impaired loans at December 31, 1995. During 1995, the average
recorded investment in impaired loans was approximately $545,357. Included in
the allowance for loan losses at December 31, 1995 is approximately $97,000
related to these impaired loans.
18
<PAGE>
TABLE 6
Nonperforming Loans
(Dollars in Thousands)
<TABLE>
<CAPTION>
90 Days Foregone
or More Interest
Past Due Percentage Income
and not on Total 90 Days From
Non- Non- Loans or More Non-
Accrual Accrual Outstanding Past Due Accrual
<S> <C> <C> <C> <C> <C>
December 31, 1995:
Commercial, financial and agricultural $ 146 - 45,377 0.32% 20
Real estate - construction - - 5,453 0.00 -
Real estate - mortgage 241 - 149,017 0.16 11
Installment loans to individuals 409 3 55,340 0.74 35
Total $ 796 3 255,187 0.31% 66
December 31, 1994:
Commercial, financial and agricultural 295 - 32,672 0.90 14
Real estate - construction - - 1,941 0.00 -
Real estate - mortgage - - 134,789 0.00 9
Installment loans to individuals 341 18 46,006 0.78 27
Total $ 636 18 215,408 0.30% 50
December 31, 1993:
Commercial, financial and agricultural 44 - 31,107 0.14 3
Real estate - construction - - 1,156 0.00 -
Real estate - mortgage 204 - 121,884 0.17 16
Installment loans to individuals 306 - 37,344 0.82 24
Total $ 554 - 191,491 0.29% 43
December 31, 1992:
Commercial, financial and agricultural 748 - 26,486 2.82 33
Real estate - construction - - 732 0.00 -
Real estate - mortgage - - 113,442 0.00 -
Installment loans to individuals 573 - 31,304 1.83 25
Total $ 1,321 - 171,964 0.77% 58
December 31, 1991:
Commercial, financial and agricultural 1,093 - 32,643 3.35 120
Real estate - construction - - 889 0.00 -
Real estate - mortgage 324 - 101,488 0.32 36
Installment loans to individuals 1,616 - 32,083 5.04 178
Total $ 3,033 - 167,103 1.82% 334
</TABLE>
19
<PAGE>
TABLE 7
Summary of Loan Loss and Recovery Experience
(Dollars in Thousands)
The allowance for loan losses is based on an in-depth analysis of the loan
portfolio. Specifically, included in that analysis are the following types of
loans: loans determined to be of a material amount, loans commented on by
regulatory authorities, loans which are past due more than 60 days and loans
which are in a non-accrual status. In addition, based on past experience, an
unallocated portion of the reserve is established which does not relate to any
specific loan or category of loans. Based on the above analysis, management
makes a provision for possible loan losses which will bring the allowance for
loan losses to an adequate level.
The following table summarizes the activity in the allowance for loan losses for
the years indicated:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Average loans, net of unearned discount $ 227,661 204,959 180,880 168,265 166,328
Allowance for loan losses:
Beginning balance $ 3,016 2,394 2,064 1,671 1,640
Additional allowance of acquired bank - - - - -
Add provision for loan losses 1,140 819 1,172 1,543 2,093
Loan charge-offs:
Commercial, financial and agricultural 262 100 521 663 1,298
Real estate - construction - - - - -
Real estate - mortgage 14 - - - -
Installment loans to individuals 337 357 469 679 855
Total loan charge-offs 613 457 990 1,342 2,153
Recoveries of loans previously charged-off:
Commercial, financial and agricultural 60 123 42 102 44
Real estate - construction - - - - -
Real estate - mortgage 33 - - - -
Installment loans to individuals 64 137 106 90 47
Total recoveries of loans previously charged off 157 260 148 192 91
Net charge-offs 456 197 842 1,150 2,062
Ending balance $ 3,700 3,016 2,394 2,064 1,671
Net charge-offs to average loans, net 0.20% 0.10% 0.47% 0.68% 1.24%
Allowance for loan losses to average
loans, net 1.63 1.47 1.32 1.23 1.00
Allowance for loan losses to total loans at
period-end 1.45 1.40 1.25 1.20 1.00
</TABLE>
Losses and recoveries are charged or credited to the allowance at the time
realized.
The following table summarizes the allocation of the allowance for loan losses
at December 31:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
% of % of % of % of % of
Total Total Total Total Total Total Total Total Total Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance applicable to:
Commercial,
financial and
agricultural$ 658 17.78% 457 15.15% 190 7.94% 1,020 49.42% 357 21.36%
Real estate -
construction 79 2.14 27 0.90 - - - - 2 0.12
Real estate -
mortgage 2,161 58.40 1,887 62.60 882 36.84 - - 963 57.63
Installment loans
to individuals 802 21.68 644 21.35 1,322 55.22 1,044 50.58 349 20.89
Total $ 3,700 100.00% 3,016 100.00% 2,394 100.00% 2,064 100.00% 1,671 100.00%
</TABLE>
20
<PAGE>
DEPOSITS
The following table presents average balances and average rates paid by category
of deposit for the years ended December 31, 1995, 1994 and 1993:
TABLE 8
Deposits
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
Average Average Average
Average Interest Rate Average Interest Rate Average Interest Rate
Balance Expense Paid Balance Expense Paid Balance Expense Paid
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest bearing
demand $ 46,731 - - $ 42,080 - - $ 34,594 - -
Interest-bearing
demand 100,236 2,480 2.47% 100,708 2,519 2.51% 87,298 2,108 2.41%
Savings 21,518 1,125 5.23 23,305 598 2.57% 23,156 675 2.92%
Time 128,555 6,382 4.96 98,692 3,634 3.68% 94,189 3,593 3.81%
Total deposits $ 297,040 9,987 3.36% $ 264,785 6,751 2.55% $ 239,237 6,376 2.67%
</TABLE>
The following table sets forth, by time remaining to maturity, domestic
certificates of deposit over $100,000 as of December 31, 1995, 1994 and 1993.
1995 1994 1993
Maturities:
3 months or less $17,598 3,609 2,993
3 through 6 months 11,722 10,828 10,466
6 through 12 months 6,512 6,608 8,913
Over 12 months 3,798 2,526 1,401
$39,630 23,571 23,773
The company has no foreign deposits.
21
<PAGE>
RETURN ON EQUITY AND ASSETS
The table below illustrates the return on average assets (net income divided by
average total assets), return on average equity (net income divided by average
equity), dividend payout ratio (dividends declared divided by net income), and
average equity to average assets ratio (average equity divided by average total
assets) for the years indicated:
TABLE 9
Return on Equity and Assets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Net income $ 3,602 $ 2,760 $ 2,532
Average shareholders' equity $ 26,142 $ 22,868 $ 21,208
Average total assets $ 342,374 $ 304,883 $ 278,401
Dividends declared $ 652 $ 530 $ 483
Dividends per share* $ 0.65 $ 0.53 $ 0.48
Net income per share* $ 3.59 $ 2.76 $ 2.52
Return on average assets 1.05% 0.91% 0.91%
Return on average equity 13.78% 12.07% 11.94%
Dividend payout ratio 18.10% 19.20% 19.08%
Average equity to average asset ratio 7.64% 7.50% 7.84%
</TABLE>
* Based on 1,003,440, 1,000,230 and 1,006,479 weighted average shares for 1995,
1994 and 1993, respectively.
22
<PAGE>
SHORT - TERM BORROWINGS
The following table sets forth certain information regarding short term
borrowings at December 31:
TABLE 10
Short-Term Borrowings
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Amount outstanding at year-end $ 7,546 5,252 7,021
Average amount outstanding during year 10,228 8,596 10,239
Maximum amount outstanding at any month end 11,680 9,551 13,940
Weighted average rate paid at year end 3.05% 2.85% 1.38%
Weighted average rate paid during the year 4.31% 2.58% 1.55%
FEDERAL FUNDS PURCHASED
Amount outstanding at year end $ 2,900 - -
Average amount outstanding during year 2,380 369 4
Maximum amount outstanding at any month end 3,000 - -
Weighted average rate at year end 5.50% - -
Weighted average rate paid during the year 5.68% 5.33% 3.06%
COMMERCIAL PAPER
Amount outstanding at year end $ 6,187 6,914 5,191
Average amount outstanding during year 8,017 6,312 5,424
Maximum amount outstanding at any month end 9,370 7,601 5,623
Weighted average rate paid at year end 3.30% 3.10% 1.32%
Weighted average rate paid during the year 4.28% 2.72% 1.43%
</TABLE>
RATE / VOLUME ANALYSIS
The following table includes, for the years ended December 31, 1995, 1994 and
1993 interest income on earning assets and related average yields, as well as
interest expense on liabilities and related average rates paid. Also shown are
the dollar amounts of change due to rate and volume variances. The effect of the
combination of rate and volume change has been divided equally between the rate
change and volume change.
23
<PAGE>
TABLE 11
Rate Volume Analysis
<TABLE>
<CAPTION>
1995
Average Income/ Volume Rate
Assets Balances Expense Yield Change Change
<S> <C> <C> <C> <C> <C>
Cash and due from banks $ 21,723,557
Federal funds sold 3,683,473 379,846 10.31% (94,788) 278,062
Taxable investment securities 47,617,846 3,123,646 6.56 37,873 743,900
Non-taxable investment securities 25,777,154 2,032,442 7.88 264,319 (299,410)
Loans, net of unearned discount 230,907,962 21,423,236 9.28 2,508,177 1,525,505
Less: allowance for loan losses (3,246,805)
Net loans 227,661,157
Premises an equipment, net 10,275,067
Goodwill 1,102,233
Other assets 4,533,021
--------------
Total assets $ 342,373,508
==============
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing demand $ 46,730,731 - - - -
Interest-bearing demand 97,803,638 2,479,455 2.54% (11,757) (27,687)
Savings 21,518,313 1,125,420 5.23 (69,633) 597,153
Time 128,554,854 6,382,228 4.96 1,291,091 1,457,229
Total deposits 294,607,536 9,987,103 3.39 953,413 2,282,982
Federal funds purchased and securities
old under agreement to repurchase 12,019,526 500,860 4.17 30,627 226,176
Commercial paper 8,017,222 340,712 4.25 54,700 114,077
Debt of the Employee Stock
Ownership Plan -
Note payable to a bank 107,136 13,389 12.50 (49,779) 21,977
Other liabilities 1,480,125
--------------
Total liabilities 316,231,545
Shareholders' equity:
Common stock - $5.00 par value 5,054,420
Surplus 10,442,083
Retained earnings 10,614,534
Less debt in connection with
Employee Stock Ownership
Plan -
Less treasury stock (238,727)
Unrealized gain (loss) on investment
securities 269,653
Total shareholders' equity 26,141,963
Total liabilities and
shareholders' equity $ 342,373,508
Average yield on all interest - earning assets 8.75%
Average effective rate paid on all interest-bearing liabilities 3.44%
Net yield on interest-earning assets 5.23%
</TABLE>
Yields on nontaxable securities are stated on a fully taxable equivalent basis,
assuming a federal tax rate of 34% for the three years reported on. The
adjustments made to convert to a fully taxable equivalent basis were $691,030,
$702,961, and $672,937 for 1995, 1994 and 1993, respectively.
The effect of foregone interest income as a result of loans on non-accrual was
not considered in the above analysis.
24
<PAGE>
<TABLE>
<CAPTION>
1994 1993
---------------------------------------------------------- ------------------------------------------------------------
Average Income/ Volume Rate Average Income/ Volume Rate
Balances Expense Yield Change Change Balances Expense Yield Change Change
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16,629,235 14,996,307
5,015,564 196,572 3,92% (264,220) 85,918 12,708,712 374,874 2.95% 1,220 (48,216)
44,500,029 2,341,872 5.26 247,250 (214,199) 40,017,677 2,308,821 5.77 105,412 (439,696)
22,864,228 2,067,533 9.04 167,724 (79,418) 21,045,789 1,979,227 9.40 96,332 (55,412)
204,958,651 17,389,554 8.48 2,055,905 (208,367) 180,880,379 15,542,016 8.59 1,122,953 (1,078,317)
(2,765,847) (2,125,355)
------------ -----------
202,192,804 178,755,024
9,010,820 6,080,154
1,163,548 1,224,862
3,506,736 3,572,873
------------ -----------
304,882,964 278,401,398
============ ===========
42,079,852 34,593,666
100,708,482 2,518,900 2.50% 329,649 80,717 87,298,552 2,108,534 2.42% 133,689 (429,681)
23,304,780 597,900 2.57 4,092 (81,119) 23,155,462 674,927 2,91 (194,936) (328,284)
98,691,592 3,633,909 3.68 168,757 (127,589) 94,189,274 3,592,741 3.81 528,105 (978,555)
------------ ----------- ------ ---------- ---------- ----------- ---------- ----- ---------- ----------
264,784,706 6,750,709 2.55% 666,124 (291,617) 239,236,954 6,376,202 2.67% 487,920 (1,757,582)
8,963,863 244,057 2.72 (27,254) 112,383 10,238,925 158,928 1.55 20,855 (46,272)
6,311,701 171,935 2.72 18,430 75,945 5,424,349 77,560 1.43 (12,589) (28,478)
- - 200,000 10,695 5.35 (10,910) (644)
630,209 41,191 6.54 (18,563) 6,247 932,709 53,507 5.74 (17,961) (4,350)
1,324,637 1,160,454
------------ -----------
282,015,116 257,193,391
5,001,150 5,041,720
10,425,483 5,992,378
7,723,615 10,430,128
- (200,000)
(282,400) (56,219)
- -
22,867,848 21,208,007
------------ -----------
304,882,964 278,401,398
============ ===========
7.93% 7.93%
2.57% 2.61%
5.33% 5.31%
</TABLE>
25
<PAGE>
TABLE 12
Interest Rate Sensitivity
(Dollars in Thousands)
<TABLE>
<CAPTION>
2 Days
to 3 3-6 6-12 1-5 Over
1 Day Months Months Months Years 5 Years Total
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Federal funds sold $ 2,097 - - - - - 2,097
Investment securities - 327 361 6,837 44,637 31,242 83,404
Total loans 47,402 14,978 8,193 11,684 139,542 33,387 255,186
Non-interest earnings asset - - - - - - 39,254
Total $ 49,499 15,305 8,554 18,521 184,179 64,629 379,941
Liabilities and Shareholders Equity
Demand deposits 53,330 - - - - - 53,330
Interest checking 60,932 - - - - - 60,932
Retail repurchase agreements 7,546 - - - - - 7,546
Insured money markets 42,114 - - - - - 42,114
Savings deposits 20,262 - - - - - 20,262
Time deposits over $100,000 - 17,598 11,722 6,512 3,798 - 39,630
Other time deposits - 40,031 42,400 19,539 11,421 - 113,391
Commercial paper 6,187 - - - - - 6,187
Federal funds purchased 2,900 - - - - - 2,900
Non-interest bearing liabilities
and shareholders' equity - - - - - - 33,649
Total $ 193,271 57,629 54,122 26,051 15,219 - 379,941
Interest rate sensitivity gap $ (143,772) (42,324) (45,568) (7,530) 168,960 64,629 -
Cumulative interest rate
sensitivity gap $ (143,772) (186,096) (231,664) (239,194) (70,234) (5,605) -
</TABLE>
26
<PAGE>
An important aspect of achieving satisfactory net interest income is the
composition and maturities of rate sensitive assets and liabilities. The
preceding table generally reflects that in periods of declining interest rates,
rate sensitive liabilities will reprice slightly slower than rate sensitive
assets, thus having a negative effect on net interest income. It must be
understood, however, that such an analysis is only a snapshot picture and does
not reflect the dynamics of the market place. Therefore, management reviews
simulated earnings statements on a monthly basis to more accurately anticipate
its sensitivity to changes in interest rates.
NON - INTEREST INCOME
Non-interest income increases have primarily resulted from increased volume and
selected fee increases in deposit accounts and trust services. Service charges
on deposit accounts were responsible for 56% of other operating income in 1995
and 1994 as compared to 52% in 1993. The following table sets forth the
components of other operating income:
TABLE 13
Non-Interest Income
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Service charges on deposit accounts $ 2,494 2,254 2,012
Fees for trust services 773 670 621
Investment securities gains (losses) (93) (13) 164
Other 1,289 1,118 1,108
Total non-interest income $ 4,463 4,029 3,905
</TABLE>
NON - INTEREST EXPENSES
Non-interest expense increases have primarily resulted from expenses associated
with the opening of additional branches and a new operations center. This
includes increased salary and other personnel expenses as a result of additional
staff and annual pay increases as well as increased depreciation expenses as a
result of additional buildings being purchased. Salaries and other personnel
expenses account for approximately 53% of total non-interest expenses in 1995 as
compared to 54% in 1994 and 1993.
The following table sets forth the components of non-interest expense:
TABLE 14
Non-Interest Expenses
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Salaries and other personnel expense $ 7,399 7,340 6,687
Net occupancy expense 1,219 1,126 892
Furniture and equipment expense 1,092 1,037 944
FDIC assessment 320 584 526
Postage and supplies expense 702 599 521
Advertising expense 570 556 515
Telephone expense 407 384 334
Other expense 2,191 1,999 1,760
Total non-interest expense $ 13,900 13,625 12,179
</TABLE>
27
<PAGE>
Item 8. Financial Statements and Supplementary Data
The response to this item is set forth in the financial statements appended to
this report. In addition, the table below sets forth selected unaudited
quarterly financial information.
TABLE 15
Selected Quarterly Financial Information
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1995
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Net interest income $ 3,633 3,725 3,874 4,194 15,426
Provision for loan losses 195 195 300 450 1,140
Non-interest income 987 1,067 1,123 1,285 4,462
Non-interest expense 3,446 3,377 3,311 3,766 13,900
Income taxes 275 305 340 326 1,246
Net income $ 704 915 1,046 937 3,602
Earnings per share $ 0.70 0.91 1.04 0.94 3.59
</TABLE>
<TABLE>
<CAPTION>
1994
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Net interest income $ 3,342 3,476 3,636 3,631 14,085
Provision for loan losses 285 270 105 159 819
Non-interest income 1,006 1,042 1,002 979 4,029
Non-interest expense 3,304 3,395 3,421 3,505 13,625
Income taxes 190 213 334 173 910
Net income $ 569 640 778 773 2,760
Earnings per share $ 0.57 0.64 0.78 0.77 2.76
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
28
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is set forth under the headings "Election
of Directors" and "Executive Officers" on pages 2 through 5 in the definitive
Proxy Statement of the Company filed in connection with its 1996 Annual Meeting
of the Shareholders, which information is incorporated herein by reference.
Item 11. Compensation of Directors and Officers
The information required by this item is set forth under the headings
"Compensation of Directors and Executive Officers", "Aggregated Option Exercises
in Last Fiscal Year and Year-end Option Values" and "Security Ownership of
Certain Beneficial Owners and Management" on pages 6 through 13 in the
definitive Proxy Statement of the Company filed in connection with its 1996
Annual Meeting of Shareholders, which information is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is set forth under the heading "Security
Ownership of Certain Beneficial Owners and Management" on pages 12 through 13 in
the definitive Proxy statement of the Company filed in connection with its 1996
Annual Meeting of Shareholders, which information is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
The information required by this item is set forth under the heading "Certain
Relationships and Related Transactions" on page 14 in the definitive Proxy
Statement of the Company filed in connection with its 1996 Annual Meeting of
Shareholders, which information is incorporated herein by reference.
29
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) The following are filed as a part of this report on Form 10-K.
Report of Independent Certified Public Accountant
Consolidated Statements of Financial Condition as of December 31,
1995 and 1994.
Consolidated Statements of Operations for the Years Ended December
31, 1995, 1994 and 1993.
Consolidated Statements of Changes in Shareholder's Equity for the
Years Ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the Years Ended December
31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
(2) Additional financial statement schedules furnished pursuant to the
requirements of Form 10-K
All other schedules have been omitted as the required information
is either inapplicable or included in the Notes to the
Consolidated Financial Statements.
(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
3.1.1 Articles of incorporation filed on May 13, 1982 in the office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 3 to the Company's Registration Statement on Form S-4, Commission File
No. 33-19367, filed with the Securities and Exchange Commission on December 30, 1987
3.1.2 Articles of Amendment filed on May 5, 1988 in the office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.1.2 to the Company's Registration Statement on Form S-8, Commission
File No. 33-51212, filed with the Securities and Exchange Commission on August 20, 1992
3.1.3 Articles of Amendment filed on January 26, 1989 in the office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.1.3 to the Company's Registration Statement on Form S-8, Commission
File No. 33-51212, filed with the Securities and Exchange Commission on August 20, 1992
3.1.4 Articles of Amendment filed on April 23, 1990 in the office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.1.4 to the Company's Registration Statement on Form S-8, Commission
File No. 33-51212, filed with the Securities and Exchange Commission on August 20, 1992
3.2 By-Laws: Incorporated by reference to Exhibit 3 to the Company's Registration Statement on Form S-4,
Commission File No. 33-19367, filed with the Securities and Exchange Commission
4.1.1 Articles of Incorporation of the Registrant: Included in Exhibits 3.1.1 - .4
4.2 Bylaws of the Registrant: Included in Exhibit 3.2
30
<PAGE>
4.3 Specimen Certificate for Common Stock: Incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8, Commission File No. 33-51212, filed with the Securities and
Exchange Commission on August 20, 1992
10.1* Palmetto Bancshares, Inc. Stock Option Plan: Incorporated by reference to Exhibit 10(a) to the Company's
Registration Statement on Form S-4, Commission File No. 33-19367, filed with the Securities and Exchange
Commission on December 30, 1987
10.2.1* The Palmetto Bank Employee Stock Ownership Plan and Trust
10.2.2* First Amendment to The Palmetto Bank Employee Stock Ownership Plan and Trust
10.2.3* Second Amendment to The Palmetto Bank Employee Stock Ownership Plan and Trust
10.2.4* Third Amendment to The Palmetto Bank Employee Stock Ownership Plan and Trust
10.3* The Palmetto Bank Pension Plan and Trust Agreement
10.4 Trust Company Bank Term Note: Incorporated by reference to Exhibit 10(c) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994
21.1 List of Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP to incorporation by reference to the Company's Registration Statement on
Form S-8
27.1 Financial Data Schedule
</TABLE>
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the three
months ended December 31, 1995.
(c) Exhibits required to be filed with this Form 10-K by Item 601 of
Regulation S-K are filed herewith or incorporated by reference herein.
(d) Certain additional financial statements.
Not Applicable.
31
<PAGE>
Appendix
Independent Auditors' Report
The Board of Directors
Palmetto Bancshares, Inc. and subsidiary:
We have audited the accompanying consolidated balance sheets of Palmetto
Bancshares, Inc. and subsidiary (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Palmetto Bancshares,
Inc. and subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in note 1, the Company changed its method of accounting for
investments to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities on December 31, 1993.
Greenville, South Carolina KPMG Peat Marwick LLP
February 2, 1996
F-1
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
<S> <C> <C>
Cash and due from banks $ 22,921,841 18,377,297
Federal funds sold (note 2) 2,096,752 3,218,599
Investment securities held to maturity (market values of $44,548,986
and $53,906,564 in 1995 and 1994, respectively) (note 3) 43,788,656 54,704,675
Investment securities available for sale (note 4) 39,615,105 9,204,219
Loans (notes 5 and 11) 255,186,659 215,408,319
Less allowance for loan losses (note 5) (3,700,216) (3,016,464)
Loans, net 251,486,443 212,391,855
Premises and equipment, net (notes 6 and 12) 10,709,912 9,599,864
Goodwill 1,071,575 1,132,890
Other assets 4,550,456 3,513,164
Total assets $ 376,240,740 312,142,563
Liabilities and Shareholders' Equity
Liabilities:
Deposits (note 7) :
Non-interest-bearing 53,330,131 46,307,878
Interest-bearing 276,329,352 228,218,905
Total deposits 329,659,483 274,526,783
Securities sold under agreements to repurchase (note 8) 7,545,710 5,251,901
Commercial paper (note 8) 6,186,855 6,914,000
Federal funds purchased (note 8) 2,900,000 -
Note payable to a bank - 478,959
Other liabilities 2,040,011 757,729
Total liabilities 348,332,059 287,929,372
ESOP stock subject to put/call option (note 10) 2,770,528 -
Shareholders' equity:
Common stock - $5.00 par value. Authorized 2,000,000 shares; issued
1,010,884 in 1995 and 1,010,184 in 1994; outstanding 1,004,980 in 1995
and 1,004,484 in 1994; (note 10) 5,054,420 5,050,920
Additional paid-in capital 10,442,083 10,433,133
Retained earnings 12,006,058 9,067,365
Treasury stock (5,904 and 5,700 shares in 1995 and
1994, respectively) (230,256) (176,700)
Unrealized gain (loss) on investment securities available for
sale, net of income taxes 636,376 (161,527)
ESOP stock subject to put/call option, 95,371 common
shares at $29.05 per share in 1995 (note 10) (2,770,528) -
Total shareholders' equity 25,138,153 24,213,191
Commitments and contingencies (notes 5, 10 and 12)
Total liabilities and shareholders' equity $ 376,240,740 312,142,563
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 21,423,236 17,389,554 15,542,016
Interest and dividends on investment securities available for sale 1,160,076 616,766 431,064
Interest and dividends on investment securities held to maturity:
U.S. Treasury and U.S. government agencies 1,880,723 1,725,106 1,877,757
State and municipal 1,274,237 1,364,572 1,306,290
Mortgage backed securities 150,022 - -
Interest on federal funds sold 379,846 196,572 374,874
Total interest income 26,268,140 21,292,570 19,532,001
Interest expense:
Interest on deposits (note 7) 9,987,103 6,750,709 6,376,202
Interest on securities sold under agreements to repurchase 500,860 244,057 158,928
Interest on commercial paper 340,712 171,935 77,560
Interest on note payable to a bank 13,389 41,191 53,507
Total interest expense 10,842,064 7,207,892 6,666,197
Net interest income 15,426,076 14,084,678 12,865,804
Provision for loan losses (note 5) 1,140,400 819,438 1,171,625
Net interest income after provision for loan losses 14,285,676 13,265,240 11,694,179
Non-interest income:
Service charges on deposit accounts 2,494,288 2,253,942 2,011,555
Fees for trust services 772,764 670,064 621,366
Investment securities gains (losses) (93,156) (13,404) 163,969
Merchant discount income 384,056 325,275 263,723
Other income 904,730 793,578 844,805
Total non-interest income 4,462,682 4,029,455 3,905,418
Non-interest expense:
Salaries and other personnel expense (note 10) 7,398,514 7,340,008 6,687,137
Net occupancy expense 1,218,842 1,126,096 891,860
Furniture and equipment expense 1,092,400 1,037,368 943,480
FDIC assessment 320,465 584,404 525,660
Postage and supplies expense 702,104 598,960 521,314
Advertising expense 570,372 556,030 515,001
Telephone expense 406,565 383,796 334,381
Other expense 2,191,099 1,998,247 1,759,787
Total non-interest expense 13,900,361 13,624,909 12,178,620
Income before income taxes 4,847,997 3,669,786 3,420,977
Income tax provision (note 9) 1,246,000 910,000 833,000
Net income before cumulative effect of change in accounting method 3,601,997 2,759,786 2,587,977
Cumulative effect of change in accounting for income taxes - - 56,000
Net income $ 3,601,997 2,759,786 2,531,977
Per share data:
Net income before cumulative effect of change in accounting method $ 3.59 2.76 2.57
Cumulative effect of change in accounting for income taxes - - .05
Net income $ 3.59 2.76 2.52
Cash dividends declared $ .65 .53 .48
Weighted average shares outstanding 1,003,440 1,000,230 1,006,479
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Debt of
Stock Capital Earnings ESOP
----- ------- -------- ----
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $ 5,038,920 5,406,733 9,801,200 (200,000)
Net income - - 2,531,977 -
Reduction of ESOP debt - - 200,000
Cash dividend declared - - (482,944) -
Issuance of 600 shares of common stock
in connection with stock option (note 9) 3,000 11,100 - -
Purchase of 4,500 shares treasury stock - - - -
Transfer to additional paid-in capital - 5,000,000 (5,000,000) -
Change in unrealized gain on investment
securities available for sale, net - - - -
------------- ------------- ------------- -----------
Balance at December 31, 1993 5,041,920 10,417,833 6,850,233 -
Net income - - 2,759,786 -
Cash dividend declared - - (529,784) -
Issuance of 1,800 shares in connection
with stock option (note 9) 9,000 15,300 - -
Purchase of 5,700 shares treasury stock - - - -
Sale of 4,500 shares treasury stock - - (12,870) -
Change in unrealized loss on investment
securities available for sale, net - - - -
------------- ------------- ------------- -----------
Balance at December 31, 1994 5,050,920 10,433,133 9,067,365 -
Net income - - 3,601,998 -
Cash dividend declared - - (652,189) -
Issuance of 700 shares in connection with
stock options 3,500 8,950 - -
Purchase of 5,904 shares treasury stock - - - -
Sale of 5,700 shares treasury stock - - (11,115) -
Change in unrealized gain on investment
securities available for sale, net - - - -
ESOP stock subject to put/call option - - - -
------------- ------------- ------------- -----------
Balance at December 31, 1995 $ 5,054,420 10,442,083 12,006,058 -
============= ============= ============= ===========
<CAPTION>
Unrealized
Gain (Loss)
on Investment Common
Securities Stock
Available Subject to
Treasury For Sale Net of Put/call
Stock Income Taxes Option Total
----- ------- -------- ----
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $ - - - 20,046,853
Net income - - - 2,531,977
Reduction of ESOP debt - - - 200,000
Cash dividend declared - - - (482,944)
Issuance of 600 shares of common stock
in connection with stock option (note 9) - - - 14,100
Purchase of 4,500 shares treasury stock (135,000) - - (135,000)
Transfer to additional paid-in capital - - - -
Change in unrealized gain on investment
securities available for sale, net - 111,762 - 111,762
----------- ------------ ------------- ------------
Balance at December 31, 1993 (135,000) 111,762 - 22,286,748
Net income - - - 2,759,786
Cash dividend declared - - - (529,784)
Issuance of 1,800 shares in connection
with stock option (note 9) - - - 24,300
Purchase of 5,700 shares treasury stock (176,700) - - (176,700)
Sale of 4,500 shares treasury stock 135,000 - - 122,130
Change in unrealized loss on investment
securities available for sale, net - (273,289) - (273,289)
----------- ------------ ------------- -------------
Balance at December 31, 1994 (176,700) (161,527) - 24,213,191
Net income - - - 3,601,997
Cash dividend declared - - - (652,189)
Issuance of 700 shares in connection with
stock options - - - 12,450
Purchase of 5,904 shares treasury stock (230,256) - - (230,256)
Sale of 5,700 shares treasury stock 176,700 - - 165,585
Change in unrealized gain on investment
securities available for sale, net - 797,903 - 797,903
ESOP stock subject to put/call option - - (2,770,528) (2,770,528)
----------- ------------ ------------- --------------
Balance at December 31, 1995 (230,256) 636,376 (2,770,528) 25,138,153
=========== ============ ============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,601,997 2,759,786 2,531,977
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of change in method of
accounting for income taxes - - 56,000
Net amortization of premium/discounts on securities 76,143 73,341 56,001
Loss (gain) on sale of investment securities 93,156 13,404 (163,969)
Provision for loan losses 1,140,400 819,438 1,171,625
Depreciation of premises and equipment 887,270 796,391 681,005
Gain on sale of premises and equipment - 2,018 -
Provision (credit) for deferred taxes (332,000) (113,000) (106,000)
Amortization of goodwill 61,315 61,315 61,314
Amortization of premium on core deposits 47,000 47,000 47,000
Change in other assets (705,292) (567,531) 1,085
Change in other liabilities, net 782,782 (6,991) 100,121
Net cash provided by operating activities 5,652,771 3,885,171 4,436,159
Cash flows from investing activities:
Net decrease in federal funds sold 1,121,847 1,806,401 5,900,000
Purchase of investment securities held to maturity (30,406,979) (11,529,480) (16,544,544)
Purchase of investment securities available for sale (21,604,693) (1,968,769) (4,991,797)
Proceeds from maturities of investment securities
held to maturity 11,929,340 11,932,553 10,158,021
Proceeds from sale of investment securities available for sale 21,715,569 3,013,058 5,258,329
Net increase in loans outstanding (40,234,988) (24,114,178) (20,367,860)
Proceeds from sale of premises and equipment - 10,000 10,400
Purchases of premises and equipment (1,997,318) (3,121,259) (2,512,953)
Net cash used in investing activities (59,477,222) (23,971,674) (23,090,404)
Cash flows from financing activities:
Net increase in transaction and savings accounts 9,801,537 11,525,636 23,637,417
Net increase (decrease) in certificates of deposits 45,284,163 12,978,057 (591,221)
Net increase (decrease) in securities sold under
agreements to repurchase 2,293,809 (1,768,706) (1,582,852)
Net increase (decrease) in commercial paper (727,145) 1,723,000 149,000
Increase in federal funds purchased 2,900,000 - -
Repayments on note payable to a bank (478,959) (302,500) (302,499)
Proceeds from issuance of common stock 12,450 24,300 14,100
Purchase of treasury stock (230,256) (176,700) (135,000)
Proceeds from sale of treasury stock 165,585 122,130 -
Dividends paid (652,189) (529,784) (482,944)
Net cash provided by financing activities 58,368,995 23,595,433 20,706,001
Net increase in cash and cash equivalents 4,544,544 3,508,930 2,051,756
Cash and cash equivalents at beginning of year 18,377,297 14,868,367 12,816,611
Cash and cash equivalents at end of year $ 22,921,841 18,377,297 14,868,367
</TABLE>
(Continued)
F-5
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Supplemental information:
Cash paid during the year for:
Interest expense $ 10,490,328 7,063,481 6,742,040
Income taxes $ 1,279,819 1,118,000 1,006,000
Supplemental schedule of non-cash investing and financing transactions:
Unrealized gain (loss) on investments
available for sale $ 1,034,757 (273,289) 111,762
Transfer of investments held to maturity to
available for sale $ 29,106,899 - 4,991,797
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Palmetto Bancshares, Inc. (the
"Company") conform to generally accepted accounting principles and to
general practices within the banking industry. The following is a
description of the more significant of these policies used in preparing
the consolidated financial statements.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Palmetto Bank (the Bank). Palmetto
Capital, Inc. a wholly owned subsidiary of Palmetto Bank, was
incorporated February 26, 1992. The corporation offers the brokerage of
stocks, bonds, mutual funds and unit investment trusts. The corporation
also offers advisory services and variable rate annuities. All
significant intercompany accounts and transactions have been eliminated
in consolidation.
Assets held by the Company or its subsidiary in a fiduciary or agency
capacity for customers are not included in the consolidated financial
statements as such items are not assets of the Company or its subsidiary.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks. Generally,
both cash and cash equivalents are considered to have maturities of three
months or less, and accordingly, the carrying amount of such instruments
is deemed to be a reasonable estimate of fair value. To comply with
Federal Reserve regulations, the Bank is required to maintain certain
average cash reserve balances. These compensating balances are $1,600,000
and $1,000,000 at December 31, 1995 and 1994, respectively.
Investment Securities
On May 31, 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting
for Certain Investments in Debt and Equity Securities. SFAS No. 115
addresses the accounting and reporting for investment in equity
securities that have readily determinable fair values - other than those
accounted for under the equity method or as investments in consolidated
subsidiaries - and all investments in debt securities. Under SFAS No.
115, investments are classified into three categories as follows: (1)
Held to Maturity - debt securities that the Company has the positive
intent and ability to hold to maturity, which are reported at amortized
cost: (2) Trading - debt and equity securities that are bought and held
principally for the purpose of selling them in the near term, which are
reported at fair value, with unrealized gains and losses included in
earnings: and (3) Available for Sale - debt and equity securities that
may be sold under certain conditions, which are reported at fair value,
with unrealized gains and losses excluded from earnings and reported as a
separate component of shareholders' equity, net of income taxes.
Although SFAS No. 115 was effective for fiscal years beginning after
December 15, 1993, entities were permitted to initially apply the
statement as of the end of a fiscal year for which annual financial
statements had not previously been issued. The Company adopted SFAS
No. 115 at December 31, 1993. The effect of the adoption of SFAS No. 115
was an increase in shareholders' equity of $111,762 at December 1993. The
Company does not have any trading securities.
(Continued)
F-7
<PAGE>
(1) Summary of Significant Accounting Policies, Continued
In November 1995, the FASB issued a guide to implementation of SFAS No.
115 on accounting for certain investments in debt and equity securities
which allows for the one time transfer of certain investments classified
as held for investment to available for sale. The Company transferred
investment securities with an amortized cost of $29,106,899 and a related
unrealized gain of $69,363 in the fourth quarter of 1995.
SFAS No. 115 allows for the sale of held to maturity securities if the
sale occurs within 90 days of the securities' maturity. The Bank sold
several held to maturity securities during the year that met this
criteria, and they are included with other maturities of held for
maturity investment securities in the accompanying consolidated
statements of cash flows.
Loans and Interest Income
Loans are carried at principal amounts outstanding reduced by unearned
discount. Interest income on all loans is recorded on an accrual basis.
The accrual of interest is generally discontinued on loans which become
90 days past due as to principal or interest. The accrual of interest on
some loans, however, may continue even though they are 90 days past due
if the loans are well secured, in the process of collection, and
management deems it appropriate.
The FASB has issued SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan," which requires that all creditors value all specifically
reviewed loans for which it is probable that the creditor will be unable
to collect all amounts due according to the terms of the loan agreement
at the loans fair value. Fair value may be determined based upon the
present value of expected cash flows, market price of the loan, if
available, or value of the underlying collateral. Expected cash flows are
required to be discounted at the loan's effective interest rate. SFAS No.
114 was amended by SFAS No. 118 to allow a creditor to use existing
methods for recognizing interest income on an impaired loan and by
requiring additional disclosures about how a creditor recognizes interest
income related to impaired loans. On January 1, 1995, the provisions of
SFAS Nos. 114 and 118 were adopted. The adoption of the Standards
required no increase to the allowance for loan losses and had no impact
on net income in 1995.
When the ultimate collectibility of an impaired loan's principal is in
doubt, wholly or partially, all cash receipts are applied to principal.
When this doubt does not exist, cash receipts are applied under the
contractual terms of the loan agreement first to principal and then to
interest income. Once the recorded principal balance has been reduced to
zero, future cash receipts are applied to interest income, to the extent
that any interest has been foregone. Further cash receipts are recorded
as recoveries of any amounts previously charged off.
Loan Fees and Costs
Non-refundable fees and certain related costs associated with originating
or acquiring loans are recognized over the life of the related loans as a
yield adjustment. Commitment fees associated with lending are deferred
and if the commitment is exercised, the fee is recognized over the life
of the related loan as a yield adjustment. If the commitment expires
unexercised the amount is recognized upon expiration of the commitment.
(Continued)
F-8
<PAGE>
(1) Summary of Significant Accounting Policies, Continued
Allowance for Loan Losses
Additions to the allowance for loan losses are based on management's
evaluation of the loan portfolio under current economic conditions, past
loan loss experience, and such other factors which, in management's
judgment, deserve recognition in estimating loan losses. Loans are
charged off when, in the opinion of management, they are deemed to be
uncollectible. Recognized losses are charged against the allowance, and
subsequent recoveries are added to the allowance. While management uses
the best information available to make evaluations, future adjustments to
the allowance may be necessary if economic conditions differ
substantially from the assumptions used in making the evaluation. The
allowance for loan losses is subject to periodic evaluation by various
regulatory authorities and may be subject to adjustment, based upon
information that is available to them at the time of their examination.
Premises and Equipment
Premises and equipment are reported at cost less accumulated depreciation
and amortization. Depreciation is recorded using the straight-line method
over the estimated useful life of the related asset as follows:
buildings, 12 to 39 years; and furniture and equipment, 5 to 12 years.
Amortization of leasehold improvements is recorded using the
straight-line method over the lesser of the estimated useful life of the
asset or the term of the lease. Maintenance and repairs are charged to
operating expense as incurred.
Foreclosed Properties
Property acquired through foreclosure is included in other assets and
amounted to $80,003 and $101,180, as of December 31, 1995 and 1994,
respectively. Such property is recorded at the lower of fair value minus
estimated selling costs or cost. Gains and losses on the sale of
foreclosed properties and write-downs resulting from periodic
reevaluation are charged to other operating expenses.
Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109 and has
reported the cumulative effect of that change in the method of accounting
for income taxes in the 1993 consolidated statement of operations. Under
the asset and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using the enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109,
the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.
Intangibles
Premium on deposits acquired is being amortized over 10 years using the
straight line method. Goodwill is being amortized over 25 years using the
straight-line method. The Company periodically assesses the
recoverability of these intangibles by evaluating whether the
amortization of the remaining balance can be recovered through projected
undiscounted future cash flows which are based on historical trends.
Net Income Per Share
Net income per share is based on the weighted average number of shares
outstanding. Outstanding stock options are common stock equivalents but
have no material dilutive effect on income per common share.
(Continued)
F-9
<PAGE>
(2) Federal Funds Sold
At December 31, 1995 and 1994, the Bank had $2,096,752 and 3,218,599,
respectively, outstanding in federal funds sold. The daily averages of
these outstanding agreements during 1995 and 1994 were $6,598,338 and
$5,015,564, respectively. The maximum amount of these outstanding
agreements at any month end during 1995 and 1994 were $10,385,430 and
$11,600,000, respectively. The securities underlying these agreements
were maintained in safekeeping by an authorized broker.
(3) Investment Securities Held to Maturity
The carrying and market values of investment securities held to maturity
as of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995
Carrying Unrealized Unrealized Market
Value Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government agencies $ 15,032,602 142,998 - 15,175,600
State and municipal 22,592,824 638,510 (47,954) 23,183,380
Mortgage-backed securities 6,163,230 38,395 (11,619) 6,190,006
Total $ 43,788,656 819,903 (59,573) 44,548,986
</TABLE>
<TABLE>
<CAPTION>
1994
Carrying Unrealized Unrealized Market
Value Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government agencies $ 30,536,734 20,946 (649,627) 29,908,053
State and municipal 24,167,941 322,282 (491,712) 23,998,511
Total $ 54,704,675 343,228 (1,141,339) 53,906,564
</TABLE>
The following is a maturity distribution of investment securities held to
maturity as of December 31 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year or less $ - - 9,952 9,905
Due after one year
through five years 12,547 12,652 28,103 27,712
Due after five years
through ten years 25,243 25,837 12,905 12,741
Due after ten years 5,999 6,060 3,745 3,549
$ 43,789 44,549 54,705 53,907
</TABLE>
(Continued)
F-10
<PAGE>
(4) Investment Securities Available for Sale
The carrying value and market values of investment securities available
for sale as of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and $ 29,995,691 691,613 (1,079) 30,686,225
U.S. Government
Agencies
State and Municipal 8,584,656 344,224 - 8,928,880
38,580,347 1,035,837 (1,079) 39,615,105
</TABLE>
<TABLE>
<CAPTION>
1994
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury $ 9,466,865 8,051 (270,697) 9,204,219
</TABLE>
During the years ended December 31, 1995 and 1994 the Company had
realized losses of $93,156 and $13,404, respectively, on the sale of
investment securities. During the year ended December 31, 1993 the
Company had realized gains of $163,969. Specific identification is the
basis on which cost was determined in computing realized gain or loss.
The following is a maturity distribution of investment securities
available for sale at December 31 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year or less $ 7,401 7,525 4,997 4,867
Due after one year through
five years 31,179 32,090 4,470 4,337
Total $ 38,580 39,615 9,467 9,204
</TABLE>
Investment securities held to maturity and available for sale with an
aggregate carrying value of approximately $53,694,000 and $40,144,000 at
December 31, 1995 and 1994, respectively, are pledged to secure public
deposits, securities sold under agreements to repurchase, and for other
purposes as required or permitted by law.
(Continued)
F-11
<PAGE>
(5) Loans
A summary of loans, by classification, as of December 31 follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commercial, financial and agricultural $ 45,377,386 32,672,103
Real estate - construction 5,452,663 1,940,631
Real estate - mortgage 149,017,139 134,788,527
Installment loans to individuals 55,339,471 46,007,058
$ 255,186,659 215,408,319
Non accrual loans included above $ 743,050 635,457
</TABLE>
The following is a summary of activity affecting the allowance for loan
losses for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year $ 3,016,464 2,393,638 2,063,573
Provision for loan losses 1,140,400 819,438 1,171,625
Loan recoveries 156,218 260,593 148,041
Loans charged-off (612,866) (457,205) (989,601)
Balance at end of year $ 3,700,216 3,016,464 2,393,638
</TABLE>
At December 31, 1995, impaired loans amounted to approximately $743,050.
During 1995, the average recorded investment in impaired loans was
approximately $545,357. Included in the allowance for loan losses at
December 31, 1995 is approximately $97,000 related to these impaired
loans.
The Bank makes contractual commitments to extend credit, which are
legally binding agreements to lend money to customers at predetermined
interest rates for a specific period of time. The Bank also provides
standby letters of credit which are issued on behalf of customers in
connection with contracts between the customers and third parties. Under
a standby letter of credit the Bank assures that the third party will not
suffer a loss if the customer fails to meet the contractual obligation.
The Bank applies the same credit standards used in the lending process
when extending these commitments, and periodically reassesses the
customers' creditworthiness through ongoing credit reviews.
At December 31, 1995, except for the fact that the majority of the loan
portfolio is located in the Bank's immediate market area, there were no
concentrations of loans in any type of industry, type of property, or to
one borrower.
(Continued)
F-12
<PAGE>
(5) Loans, Continued
The Bank had outstanding, unused loan commitments as of December 31, 1995
as follows:
<TABLE>
<CAPTION>
<S> <C>
Home equity loans $ 7,669,424
Credit cards 15,627,485
Commercial real estate development 7,385,130
Other unused lines of credit 5,394,381
$36,076,420
Standby letters of credit $ 1,903,172
</TABLE>
All unused loan commitments are at adjustable rates that fluctuate with
prime rate, or are at fixed rates which approximate market rates.
Current amounts listed are therefore determined to be their market value.
(6) Premises and Equipment, Net
A summary of premises and equipment, net, as of December 31 follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 1,792,519 1,792,519
Buildings and leasehold improvements 8,623,622 8,145,387
Furniture and equipment 7,493,914 6,066,894
Total 17,910,055 16,004,800
Less accumulated depreciation and amortization (7,200,143) (6,404,936)
Premises and equipment, net $ 10,709,912 9,599,864
</TABLE>
(7) Deposits
A summary of deposits, by type, as of December 31 follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Transaction accounts $ 114,380,010 106,367,423
Savings deposits 20,261,624 20,931,228
Insured money market accounts 42,113,681 40,669,164
Time deposits over $100,000 39,629,516 23,570,814
Other time deposits 113,392,152 83,152,654
Premium on deposits acquired (117,500) (164,500)
Total deposits $ 329,659,483 274,526,783
</TABLE>
Interest paid on time deposits of $100,000 or more amounted to
$1,683,014, $857,297, and $800,610 for the years ended December 31, 1995, 1994
and 1993, respectively.
(Continued)
F-13
<PAGE>
(8) Short-Term Borrowings
At December 31, 1995 and 1994, the Bank had $7,545,710 and $5,251,901,
respectively, in outstanding securities sold under agreements to
repurchase with weighted average interest rates of 3.05% and 2.85%,
respectively. These borrowings were collateralized by investment
securities with carrying values of $17,125,000 and $12,500,000,
respectively, which are maintained in safekeeping by an authorized
broker. The daily averages of these agreements outstanding during 1995
and 1994 were $10,228,473 and $8,596,00, respectively. The maximum amount
of these agreements outstanding at any month end during 1995 and 1994
were $11,679,919 and $9,551,000, respectively. The weighted average
interest rate on these borrowings was 4.31% and 2.58% for the years ended
December 31, 1995 and 1994, respectively.
During 1991 the Company began selling commercial paper as an alternative
investment tool for its commercial customers. Through a master note
arrangement between the Company and the Bank, Palmetto Master Notes are
issued as an alternative investment for commercial sweep accounts. These
master notes are unsecured but are backed by the full faith and credit of
the Company. The commercial paper of the Company is issued only in
conjunction with the automated sweep account customer agreement on
deposits at the Bank level. At December 31, 1995 and 1994, the Company
had $6,186,855 and $6,914,000, respectively, in commercial paper with
weighted average interest rates of 3.30% and 3.10%, respectively. The
daily averages of these borrowings outstanding during 1995 and 1994 were
$8,017,222 and $6,312,000, respectively. The maximum amount of these
borrowings outstanding at any month end during 1995 and 1994 were
$9,370,000 and $7,601,000, respectively. The weighted average interest
rate on these borrowings was 4.28% and 2.72% for the years ended December
31, 1995 and 1994, respectively.
At December 31, 1995 the Company had $2,900,000 outstanding in federal
funds purchased, with a weighted average interest rate of 5.5%. At
December 31, 1994, the Company had no outstanding federal funds
purchased. The daily averages of these borrowings outstanding during 1995
and 1994 were $2,380,316 and $369,000, respectively. The maximum amount
of these borrowings outstanding at any month end during 1995 was
$3,000,000. There were no outstanding balances at any month-end during
1994. The weighted average interest rate on these borrowings was 5.68%
and 5.33% for the years ended December 31, 1995 and 1994, respectively.
(9) Income Taxes
Components of income tax provision for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal $ 1,422,000 894,000 821,000
State 156,000 129,000 118,000
1,578,000 1,023,000 939,000
Deferred:
Federal (332,000) (113,000) (106,000)
State - - -
(332,000) (113,000) (106,000)
Total $ 1,246,000 910,000 833,000
</TABLE>
(Continued)
F-14
<PAGE>
(9) Income Taxes, Continued
The effective tax rates for the years ended December 31 vary from the
Federal statutory rates as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
U.S. Federal income tax rates 34.0% 34.0% 34.0%
Changes from statutory rates
resulting from:
Tax-exempt interest income (10.7) (13.4) (13.5)
Expenses not deductible for
tax purposes 1.0 1.0 1.0
State taxes, net of Federal
income tax benefit 2.1 2.3 2.3
Other (.7) .9 .5
Effective tax rates 25.7% 24.8% 24.3%
</TABLE>
Different accounting methods have been used for reporting income for
income tax and for financial reporting purposes. The tax provisions shown
in the financial statements relate to items of income or expense in those
statements and as a result may not be the amount paid for the period.
Deferred income taxes have been provided on such differences.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, are presented below.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Unrealized loss on securities available for sale $ - 101,119
Loan loss reserves 871,000 627,000
Total gross deferred tax assets 871,000 728,119
Less valuation allowance - -
Net deferred tax assets 871,000 728,119
Deferred tax liabilities:
Fixed assets, due to depreciation differences (277,000) (269,000)
Basis of intangible assets for financial reporting
purposes in excess of tax basis (42,000) (58,000)
Adjustment in change from cash to accrual
method of accounting for tax purposes - (73,000)
Unrealized gain on securities available for sale (398,382) -
Other (22,000) (29,000)
Total gross deferred tax liabilities (739,382) (429,000)
Net deferred tax asset $ 131,618 299,119
</TABLE>
(Continued)
F-15
<PAGE>
(9) Income Taxes, Continued
A portion of the change in the net deferred tax asset relates to the
unrealized gains and losses on securities available for sale. A current
period deferred tax expense related to the change in unrealized gain on
securities available for sale of $499,501 has been recorded directly to
shareholders equity. The rest of the change in the deferred tax asset
results from the current period deferred tax benefit of $332,000.
No valuation allowance for deferred tax assets has been established at
either December 31, 1995 or 1994. Because of taxes paid in carry back
periods it is management's belief that realization of the deferred
tax asset is more likely than not.
As discussed in note 1, the Company adopted Statement 109 as of January
1, 1993. The cumulative effect of this change in accounting for income
taxes of $56,000 was determined as of January 1, 1993 and is reported
separately in the consolidated statement of operations for the year ended
December 31, 1993.
Tax returns for 1992 and subsequent years are subject to examination by
the taxing authorities.
(10) Employee Benefit Plans
(a) The Bank has a noncontributory defined benefit pension plan which
covers all full-time employees who have at least twelve months
continuous service and have attained age 21. The plan is designed to
produce a designated retirement benefit and benefits are fully
vested at five years or more of service. No vesting occurs with less
than five years of service. The plan is trusteed and administered by
the Bank's Trust Department.
Contributions to the plan are made as required by the Employee
Retirement Income Security Act of 1974.
The following table details the funded status of the plan, the
amounts recognized in the Company's consolidated financial
statements, the components of pension expense, and the major
assumptions used in determining these amounts for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 1,889,979 1,375,849 1,279,585
Nonvested benefits 55,205 281,497 45,417
Accumulated benefit obligations $ 1,945,184 1,657,346 1,325,002
Projected benefit obligations for services
rendered to date 2,774,204 2,425,421 2,246,598
Plan assets at fair value, primarily listed
stocks and U.S. government securities 3,412,938 2,650,722 2,271,196
</TABLE>
(Continued)
F-16
<PAGE>
(10) Employee Benefit Plans, Continued
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Excess of assets over projected
benefit obligations 638,734 225,301 24,598
Unrecognized prior service cost 94,652 103,199 111,746
Unrecognized net loss (gain) from past
experience different from that assumed (65,572) 86,723 75,079
Unrecognized net asset being amortized
over the average remaining service
period of covered employees (180,980) (206,835) (232,690)
Prepaid (accrued) pension cost
included in other assets
(liabilities) $ 486,834 208,388 (21,267)
Components of pension expense:
Service cost 185,646 167,145 154,658
Interest cost 192,883 168,447 156,126
Return on plan assets (228,426) (195,479) (127,905)
Net amortization and deferral (17,308) (17,308) (51,803)
Pension expense $ 132,795 122,805 131,076
Major assumptions at year end:
Discount rate 8% 8% 8%
Rate of increase in compensation levels 5% 5% 5%
Expected long-term rate of return on
plan assets 8% 8% 8%
</TABLE>
(b) The Company has an Employee Stock Ownership Plan (ESOP) established
by its Board of Directors. The ESOP covers the same employees and
has the same vesting schedule as the pension plan. Based on profits,
the Company contributes annually to a trust created to acquire
shares of the Company's common stock for the exclusive benefit of
the participants. During 1985, the trust borrowed $1,000,000 from a
bank and acquired 86,960 shares of the Company's common stock, which
were pledged as collateral for the bank debt. This debt was repaid
in full by 1993. During 1994 and 1995 the Company contributed to the
ESOP common stock which had been previously repurchased as treasury
stock and accounted for these transactions in accordance with
Statement of Position 93-6. The Company recorded compensation
expense equal to the fair value of the shares contributed. The
charges to income for contributions to the ESOP for the years ended
December 31, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Principal payments on loan $ - - 200,000
Interest payments on loan - - 10,695
Repurchase of treasury stock
for ESOP 165,585 122,130 -
Dividends received by ESOP (29,467) (28,189) (6,430)
Contributions to ESOP $ 136,118 93,941 204,265
</TABLE>
(Continued)
F-17
<PAGE>
(10) Employee Benefit Plans, Continued
The stock in the ESOP Plan has a put and a call feature if the stock
is not "readily tradable on an established market". This term was
clarified in 1995 as a result of a private letter ruling, to mean
publicly listed on a national securities exchange. Since the
Company's stock is not listed on a national securities exchange the
shares in the ESOP Plan are subject to the put/call feature.
Accordingly, 95,371 shares of ESOP stock are now recorded outside
shareholders' equity at their fair value, which is determined by an
independent valuation.
(c) The Company has a stock option plan (option plan) for certain of its
officers and key employees. Under the terms of the option plan,
stock options are periodically granted to key personnel at a price
not less than the fair market value of the shares at the date of
grant. During the years ended December 31, 1995, 1994 and 1993,
respectively, options for 700, 1,800 and 600 shares were exercised.
Of the 700 stock options exercised in 1995, 400 were exercised at
$13.50 and 300 at $23.50.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Options outstanding, beginning of year 37,200 36,000 33,600
Options exercised (700) (1,800) (600)
Options granted 3,000 3,000 3,000
Options outstanding, end of year 39,500 37,200 36,000
</TABLE>
The stock options are exercisable upon grant date. The following
table outlines the stock options outstanding at December 31, 1995:
<TABLE>
<CAPTION>
Option
Grant Date Shares Price Expiration Date
<S> <C> <C> <C>
January 26, 1988 21,800 $13.50 December 31, 1997
January 12, 1989 3,000 16.50 December 31, 1998
January 14, 1992 2,700 23.50 December 31, 2001
July 14, 1992 3,000 23.50 December 31, 2001
January 1, 1993 3,000 24.75 December 31, 2002
January 11, 1994 3,000 27.14 December 31, 2003
January 17, 1995 3,000 29.05 December 31, 2004
39,500
</TABLE>
(Continued)
F-18
<PAGE>
(11) Related Party Transactions
Certain of the Company's directors and executive officers are also
customers of the Bank who, including their related interests, were
indebted to the Bank in the approximate amounts of $2,969,021 and
$3,806,387 at December 31, 1995 and 1994, respectively. From January 1
through December 31, 1995, these directors and executive officers and
their related interests borrowed $2,173,544 and repaid $3,010,910. In the
opinion of management, these loans do not involve more than the normal
risk of collectibility and do not present other unfavorable features.
(12) Commitments and Contingencies
On December 31, 1995, the Bank was obligated under a number of
noncancelable operating leases on certain property and equipment that
have initial terms of more than one year. The minimum scheduled payments
under these leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 363,206
1997 361,284
1998 277,004
1999 197,426
2000 116,944
Subsequent years 995,023
$2,310,887
</TABLE>
Rental expense was $335,870, $309,839 and $303,443 for the years ended
December 31, 1995, 1994, and 1993, respectively.
In the normal course of business, the Company and subsidiary are
periodically involved in litigation. In the opinion of the Company's
management none of these cases should have a material adverse effect on
the accompanying consolidated financial statements.
(13) Disclosures Regarding Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosure About
Fair Value of Financial Instruments (Statement 107), requires disclosure
of fair value information about financial instruments whether or not
recognized in the balance sheet, for which it is practicable to estimate
fair value. Fair value estimates are made as of a specific point in time
based on the characteristics of the financial instruments and the
relevant market information. Where available, quoted market prices are
used. In other cases, fair values are based on estimates using present
value or other valuation techniques. These techniques involve
uncertainties and are significantly affected by the assumptions used and
the judgements made regarding risk characteristics of various financial
instruments, discount rates, prepayments, estimates of future cash flows,
future expected loss experience and other factors. Changes in assumptions
could significantly affect these estimates. Derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many
cases, may or may not be realized in an immediate sale of the instrument.
(Continued)
F-19
<PAGE>
(13) Disclosures Regarding Fair Value of Financial Instruments, Continued
Under Statement 107, fair value estimates are based on existing financial
instruments without attempting to estimate the value of anticipated
future business and the value of the assets and liabilities that are not
financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The following describes the methods and assumptions used by the Company
in estimating the fair values of financial instruments:
(a) Cash and Due From Banks
The carrying value approximates fair value.
(b) Investment Securities Held to Maturity and Available For Sale
The fair value of investment securities are derived from quoted
market prices.
(c) Loans
The current value of variable-rate consumer and commercial loans or
consumer and commercial loans with remaining maturities of three
months or less approximates fair value. The fair value of fixed-rate
consumer and commercial loans with maturities greater than three
months are valued using a discounted cash flow analysis and assumes
the rate being offered on these types of loans by the Company at
December 31, 1995, approximates market.
For credit cards and lines of credit the carrying value approximates
fair value. No value has been placed on the underlying credit card
relationship rights.
Unused loan commitments are at adjustable rates which fluctuate with
the prime rate or are funded within ninety days. Current amounts are
considered to be their fair value.
(d) Deposits
Under Statement 107, the estimated fair value of deposits with no
stated maturity is equal to the carrying amount. The fair value of
time deposits is estimated by discounting contractual cash flows, by
applying interest rates currently being offered on the deposit
products. Under Statement 107, the fair value estimates for deposits
do not include the benefit that results from the low-cost funding
provided by the deposits liabilities as compared to the cost of
alternative forms of funding (deposit base intangibles).
(e) Securities Sold Under Agreements to Repurchase, Commercial Paper and
Federal Funds Sold and Federal Funds Purchased
The carrying amount approximates fair value due to the short-term
nature of these instruments.
(f) Note Payable to a Bank
The carrying amount on this borrowing approximates fair value as its
interest rate fluctuates with the prime rate.
(g) Other Assets and Other Liabilities
The carrying amount approximates fair value because of the
short-term nature of these instruments.
(Continued)
F-20
<PAGE>
(13) Disclosures Regarding Fair Value of Financial Instruments, Continued
The estimated fair values of the Company's financial instruments at
December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Cash and due from banks $ 22,921,841 22,921,841 18,377,297 18,377,297
Federal funds sold $ 2,096,752 2,096,752 3,218,599 3,218,599
Investment securities held to maturity $ 43,788,656 44,548,986 54,704,675 53,906,564
Investment securities available for sale $ 39,615,105 39,615,105 9,204,219 9,204,219
Loans:
Commercial mortgage 84,866,752 84,784,817 85,605,602 82,673,120
Commercial other 62,130,268 62,081,093 34,241,859 33,854,607
Installment mortgage 43,850,945 43,752,706 48,271,228 46,084,801
Installment other 64,338,694 64,210,076 47,289,630 45,946,082
$ 255,186,659 254,828,692 215,408,319 208,558,610
Deposits $ 329,659,483 330,450,035 274,526,783 274,962,236
Borrowings:
Securities sold under agreements
to repurchase $ 7,545,710 7,545,710 5,251,901 5,251,901
Commercial paper 6,186,855 6,186,855 6,914,000 6,914,000
Note payable to a bank - - 478,959 478,959
Federal funds purchased 2,900,000 2,900,000 - -
$ 16,632,565 16,632,565 12,644,860 12,644,860
</TABLE>
(Continued)
F-21
<PAGE>
(14) Palmetto Bancshares, Inc. (Parent Company)
The Company's principal source of income is dividends from the Bank.
Certain regulatory requirements restrict the amount of dividends which
the Bank can pay to the Company. At December 31, 1995, the Bank had
available retained earnings of approximately $3,644,000 for payment of
dividends.
The Company's principal asset is its investment in its bank subsidiary.
The Company's condensed statements of financial condition data as of
December 31, 1995 and 1994, and the related condensed statements of
operations data and cash flow data for the three-year period ended
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Financial Condition Data
Assets 1995 1994
<S> <C> <C>
Cash $ 170,230 125,293
Due from subsidiary 6,420,139 7,147,284
Investment in wholly-owned bank subsidiary 26,433,592 23,200,683
Goodwill 1,071,575 1,132,890
Total assets $34,095,536 31,606,150
Liabilities and Shareholders' Equity
Commercial paper 6,186,855 6,914,000
Note payable to a bank - 478,959
Total liabilities 6,186,855 7,392,959
ESOP stock subject to put/call 2,770,528 -
Shareholders' equity 25,138,153 24,213,191
Total liabilities and shareholders' equity $34,095,536 31,606,150
</TABLE>
<TABLE>
<CAPTION>
Operations Data
1995 1994 1993
<S> <C> <C> <C>
Interest income from commercial
paper $ 340,712 171,935 77,560
Dividends received from Bank 1,260,445 1,041,484 956,944
Equity in net income of subsidiary 2,435,006 1,837,684 1,710,480
Net operating expenses (434,166) (291,317) (213,007)
Net income $ 3,601,997 2,759,786 2,531,977
</TABLE>
(Continued)
F-22
<PAGE>
(14) Palmetto Bancshares, Inc. (Parent Company), Continued
Quarterly operating data for the years ended December 31 is summarized as
follows (In thousand, except for per share data):
Cash Flow Data
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,601,997 2,759,786 2,531,977
Decrease (increase) in due from
subsidiary 727,145 (1,723,000) (181,313)
Earnings retained by
wholly-owned subsidiary (2,435,006) (1,837,683) (1,678,167)
Net cash provided by
(used in) operating
activities 1,955,451 (739,582) 733,811
Amortization of goodwill 61,315 61,315 61,314
Cash flows from financing activities:
Net commercial paper (727,145) 1,723,000 149,000
Proceeds from issuance of
common stock 12,450 24,300 14,100
Purchase of treasury stock (230,256) (176,700) (135,000)
Sale of treasury stock 165,585 122,130 -
Payments on note payable to a
bank (478,959) (302,500) (302,499)
Dividends paid (652,189) (529,784) (482,944)
Net cash provided by (used
in) financing activities (1,910,514) 860,446 (757,343)
Net increase (decrease) in cash 44,937 120,864 (23,532)
Cash at beginning of year 125,293 4,429 27,961
Cash at end of year $ 170,230 125,293 4,429
</TABLE>
The Company has approximately $6 million in lines of credit from
correspondent banks to use as additional sources of short-term liquidity.
The interest rates on these lines fluctuate with the prime rate and are
payable on demand. At December 31, 1995 there were no balances drawn on
these lines of credit.
(Continued)
F-23
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(15) Quarterly Financial Data (Unaudited)
Quarterly operating data for the years ended December 31 is summarized as
follows (In thousands, except per share data):
<TABLE>
<CAPTION>
1995
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Net interest income $ 3,633 3,725 3,874 4,194 15,426
Provision for loan losses 195 195 300 450 1,140
Non-interest income 987 1,067 1,123 1,285 4,462
Non-interest expense 3,446 3,377 3,311 3,766 13,900
Income taxes 275 305 340 326 1,246
Net income $ 704 915 1,046 937 3,602
Net income per share $ .70 .91 1.04 .94 3.59
</TABLE>
<TABLE>
<CAPTION>
1994
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Net interest income $ 3,342 3,476 3,636 3,631 14,085
Provision for loan losses 285 270 105 159 819
Non-interest income 1,006 1,042 1,002 979 4,029
Non-interest expense 3,304 3,395 3,421 3,505 13,625
Income taxes 190 213 334 173 910
Net income 569 640 778 773 2,760
Net income per share $ 0.57 0.64 0.78 0.77 2.76
</TABLE>
F-24
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
10.2.1 The Palmetto Bank Employee Stock Ownership Plan and Trust
10.2.2 First Amendment to The Palmetto Bank Employee Stock Ownership Plan and Trust
10.2.3 Second Amendment to The Palmetto Bank Employee Stock Ownership Plan and Trust
10.2.4 Third Amendment to The Palmetto Bank Employee Stock Ownership Plan and Trust
10.2.3 The Palmetto Bank Pension Plan and Trust Agreement
21.1 List of Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP to incorporation by reference to the Company's
Registration Statement on Form S-8
27.1 Financial Data Schedule
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Palmetto Bancshares, Inc.
We consent to incorporation by reference in the registration statement on Form
S-8 (No.33-51212) of our report dated February 2, 1996, relating to the
consolidated balance sheets of Palmetto Bancshares and subsidiary (the
"Company") as of December 31, 1995 and 1994, and the related consolidated
statements of operations, changes in shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995, which report
appears in the December 31, 1995 Annual Report on Form 10-K of the Company. Our
report dated February 2, 1996, refers to the fact that the Company adopted the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," on December 31, 1993.
Greenville, South Carolina KPMG Peat Marwick LLP
March 31, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PALMETTO BANCSHARES, INC.
By:
/s/L. Leon Patterson
L. Leon Patterson
Chairman and Chief
Executive Officer
/s/Paul W. Stringer
Paul W. Stringer
President and Chief Accounting Officer
Date: March 12, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below and on the dates by the following persons on behalf of the
registrant and in the capacities indicated:
Signature Title Date
/s/L. Leon Patterson
L. Leon Patterson Director March 12, 1996
/s/Paul W. Stringer
Paul W. Stringer Director March 12, 1996
/s/James A. Cannon
James A. Cannon Director March 12, 1996
/s/W. Fred Davis, Jr.
W. Fred Davis, Jr. Director March 12, 1996
/s/Michael D. Glenn
Michael D. Glenn Director March 12, 1996
<PAGE>
Signature Title Date
/s/Russel B. Emerson
Russell B. Emerson Director March 12, 1996
/s/David P. George, Jr.
David P. George, Jr. Director March 12, 1996
/s/John T. Gramling, II
John T. Gramling, II Director March 12, 1996
/s/James M. Shoemaker, Jr.
James M. Shoemaker, Jr. Director March 12, 1996
J. David Wasson, Jr. Director March 12, 1996
/s/Francis L. Willis
Francis L. Willis Director March 12, 1996
THE PALMETTO BANK
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS 18
2.2 DETERMINATION OF TOP HEAVY STATUS 18
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER 22
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY 23
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES 24
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR 24
2.7 RECORDS AND REPORTS 26
2.8 APPOINTMENT OF ADVISERS 26
2.9 INFORMATION FROM EMPLOYER 26
2.10 PAYMENT OF EXPENSES 26
2.11 MAJORITY ACTIONS 26
2.12 CLAIMS PROCEDURE 27
2.13 CLAIMS REVIEW PROCEDURE 27
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY 28
3.2 APPLICATION FOR PARTICIPATION 28
3.3 EFFECTIVE DATE OF PARTICIPATION 28
3.4 DETERMINATION OF ELIGIBILITY 29
<PAGE>
3.5 TERMINATION OF ELIGIBILITY 29
3.6 OMISSION OF ELIGIBLE EMPLOYEE 29
3.7 INCLUSION OF INELIGIBLE EMPLOYEE 30
3.8 ELECTION NOT TO PARTICIPATE 30
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION 30
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION 31
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS 31
4.4 MAXIMUM ANNUAL ADDITIONS 38
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS 43
4.6 DIRECTED INVESTMENT ACCOUNT 44
ARTICLE V
FUNDING AND INVESTMENT POLICY
5.1 INVESTMENT POLICY 45
5.2 APPLICATION OF CASH 46
5.3 TRANSACTIONS INVOLVING COMPANY STOCK 46
5.4 LOANS TO THE TRUST 48
ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND 50
6.2 METHOD OF VALUATION 50
<PAGE>
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 DETERMINATION OF BENEFITS UPON RETIREMENT 50
7.2 DETERMINATION OF BENEFITS UPON DEATH 51
7.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY 52
7.4 DETERMINATION OF BENEFITS UPON TERMINATION 52
7.5 DISTRIBUTION OF BENEFITS 57
7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED 61
7.7 DISTRIBUTION FOR MINOR BENEFICIARY 62
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN 62
7.9 RIGHT OF FIRST REFUSALS 63
7.10 STOCK CERTIFICATE LEGEND 65
7.11 PUT OPTION 65
7.12 NONTERMINABLE PROTECTIONS AND RIGHTS 68
7.13 PRE-RETIREMENT DISTRIBUTION 68
7.14 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION 68
ARTICLE VIII
TRUSTEE
8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE 69
8.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE 69
8.3 OTHER POWERS OF THE TRUSTEE 70
8.4 VOTING COMPANY STOCK 73
8.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS 75
8.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES 76
8.7 ANNUAL REPORT OF THE TRUSTEE 76
8.8 AUDIT 77
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8.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE 77
8.10 TRANSFER OF INTEREST 79
8.11 DIRECT ROLLOVER 79
ARTICLE IX
AMENDMENT, TERMINATION AND MERGERS
9.1 AMENDMENT 80
9.2 TERMINATION 81
9.3 MERGER OR CONSOLIDATION 82
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS 82
10.2 ALIENATION 82
10.3 CONSTRUCTION OF PLAN 83
10.4 GENDER AND NUMBER 83
10.5 LEGAL ACTION 83
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS 83
10.7 BONDING 84
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE 84
10.9 INSURER'S PROTECTIVE CLAUSE 85
10.10 RECEIPT AND RELEASE FOR PAYMENTS 85
10.11 ACTION BY THE EMPLOYER 85
10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY 85
10.13 HEADINGS 86
10.14 APPROVAL BY INTERNAL REVENUE SERVICE 86
10.15 UNIFORMITY 87
<PAGE>
10.16 SECURITIES AND EXCHANGE COMMISSION APPROVAL 87
ARTICLE XI
PARTICIPATING EMPLOYERS
11.1 ADOPTION BY OTHER EMPLOYERS 87
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS 87
11.3 DESIGNATION OF AGENT 89
11.4 EMPLOYEE TRANSFERS 89
11.5 PARTICIPATING EMPLOYER'S CONTRIBUTION 89
11.6 AMENDMENT 89
11.7 DISCONTINUANCE OF PARTICIPATION 90
11.8 ADMINISTRATOR'S AUTHORITY 90
<PAGE>
THE PALMETTO BANK
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
THIS AGREEMENT, hereby made and entered into this 12th day of
April, 1994, by and between The Palmetto Bank (herein referred to as the
"Employer") and The Palmetto Bank (herein referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Employer heretofore established an Employee Stock
Ownership Plan and Trust effective January 1, 1985 (hereinafter called the
"Effective Date"), known as The Palmetto Bank Employee Stock Ownership Plan and
Trust (herein referred to as the "Plan") in recognition of the contribution made
to its successful operation by its employees and for the exclusive benefit of
its eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has the ability
to amend the Plan, provided the Trustee joins in such amendment if the
provisions of the Plan affecting the Trustee are amended; and
WHEREAS, contributions to the Plan will be made by the Employer and
such contributions made to the trust will be invested primarily in the capital
stock of the Employer;
NOW, THEREFORE, effective January 1, 1989, except as otherwise
provided, the Employer and the Trustee in accordance with the provisions of the
Plan pertaining to amendments thereof, hereby amend the Plan in its entirety and
restate the Plan to provide as follows:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
1.2 "Administrator" means the person or entity designated by the
Employer pursuant to Section 2.4 to administer the Plan on behalf of the
Employer.
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1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.4 "Aggregate Account" means, with respect to each Participant, the
value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions of
Section 2.2.
1.5 "Anniversary Date" means January 1.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
7.2 and 7.5.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
1.8 "Company Stock" means common stock issued by the Employer (or by a
corporation which is a member of the controlled group of corporations of which
the Employer is a member) which is readily tradeable on an established
securities market. If there is no common stock which meets the foregoing
requirement, the term "Company Stock" means common stock issued by the Employer
(or by a corporation which is a member of the same controlled group) having a
combination of voting power and dividend rights equal to or in excess of: (A)
that class of common stock of the Employer (or of any other such corporation)
having the greatest voting power, and (B) that class of common stock of the
Employer (or of any other such corporation) having the greatest dividend rights.
Noncallable preferred stock shall be deemed to be "Company Stock" if such stock
is convertible at any time into stock which constitutes "Company Stock"
hereunder and if such conversion is at a conversion price which (as of the date
of the acquisition by the Trust) is reasonable. For purposes of the preceding
sentence, pursuant to Regulations, preferred stock shall be treated as
noncallable if after the call there will be a reasonable opportunity for a
conversion which meets the requirements of the preceding sentence.
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1.9 "Company Stock Account" means the account of a Participant which is
credited with the shares of Company Stock purchased and paid for by the Trust
Fund or contributed to the Trust Fund.
1.10 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation
must be determined without regard to any rules under Code Section 3401(a) that
limit the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation
shall be made by:
(a) including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h), 403(b) or 457, and Employee
contributions described in Code Section 414(h)(2) that are treated
as Employer contributions.
For a Participant's initial year of participation, Compensation
shall be recognized for the entire Plan Year.
Compensation in excess of $200,000 shall be disregarded. Such
amount shall be adjusted at the same time and in such manner as permitted under
Code Section 415(d), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning with or within
such calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the Compensation limit
shall be an amount equal to the Compensation limit for the calendar year in
which the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12). In applying this
limitation, the family group of a Highly Compensated Participant who is subject
to the Family Member aggregation rules of Code Section 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, shall be treated as a single Participant, except that for this purpose
Family Members
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shall include only the affected Participant's spouse and any lineal descendants
who have not attained age nineteen (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 the limitation shall be prorated among the affected Family
Members in proportion to each such Family Member's Compensation prior to the
application of this limitation, or the limitation shall be adjusted in
accordance with any other method permitted by Regulation.
If, as a result of such rules, the maximum "annual addition" limit
of Section 4.4(a) would be exceeded for one or more of the affected Family
Members, the prorated Compensation of all affected Family Members shall be
adjusted to avoid or reduce any excess. The prorated Compensation of any
affected Family Member whose allocation would exceed the limit shall be adjusted
downward to the level needed to provide an allocation equal to such limit. The
prorated Compensation of affected Family Members not affected by such limit
shall then be adjusted upward on a pro rata basis not to exceed each such
affected Family Member's Compensation as determined prior to application of the
Family Member rule. The resulting allocation shall not exceed such individual's
maximum "annual addition" limit. If, after these adjustments, an "excess amount"
still results, such "excess amount" shall be disposed of in the manner described
in Section 4.5(a) pro rata among all affected Family Members.
For purposes of this Section, if the Plan is a plan described in
Code Section 413(c) or 414(f) (a plan maintained by more than one Employer),
the $200,000 limitation applies separately with respect to the Compensation of
any Participant from each Employer maintaining the Plan.
If, in connection with the adoption of this amendment and
restatement, the definition of Compensation has been modified, then, for Plan
Years prior to the Plan Year which includes the adoption date of this amendment
and restatement, Compensation means compensation determined pursuant to the Plan
then in effect.
For Plan Years beginning prior to January 1, 1989, the $200,000
limit (without regard to Family Member aggregation) shall apply only for Top
Heavy Plan Years and shall not be adjusted.
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1.11 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
1.12 "Current Obligations" means Trust obligations arising from
extension of credit to the Trust and payable in cash within (l) year from the
date an Employer contribution is due. With respect to the estates of decedents
who died prior to July 13, 1989, Trust obligations shall include the liability
for payment of taxes imposed by Code Section 2001, which liability is incurred
pursuant to Code Section 2210(b).
1.13 "Early Retirement Date" means the first day of the month (prior to
the Normal Retirement Date) coinciding with or following the date on which a
Participant or Former Participant attains age 55 and has completed at least 15
Years of Service with the Employer (Early Retirement Age). A Participant shall
become fully Vested upon satisfying this requirement if still employed at his
Early Retirement Age.
A Former Participant who terminates employment after satisfying the
service requirement for Early Retirement and who thereafter reaches the age
requirement contained herein shall be entitled to receive his benefits under
this Plan.
1.14 "Eligible Employee" means any Employee who is compensated on a
salary only basis.
Employees who are Leased Employees within the meaning of Code
Sections 414(n)(2) and 414(o)(2) shall not be eligible to participate in this
Plan.
Employees whose employment is governed by the terms of a
collective bargaining agreement between Employee representatives (within the
meaning of Code Section 7701(a)(46)) and the Employer under which retirement
benefits were the subject of good faith bargaining between the parties will not
be eligible to participate in this Plan unless such agreement expressly provides
for coverage in this Plan or two percent or more of the Employees of the
Employer who are covered pursuant to that agreement are professionals as defined
in Regulation 1.410(b)-9.
Employees of Affiliated Employers shall not be eligible to
participate in this Plan unless such Affiliated Employers have specifically
adopted this Plan in writing.
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1.15 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
1.16 "Employer" means The Palmetto Bank and any Participating Employer
(as defined in Section 11.1) which shall adopt this Plan; any successor which
shall maintain this Plan; and any predecessor which has maintained this Plan.
The Employer is a corporation with principal offices in the State of South
Carolina.
1.17 "ESOP" means an employee stock ownership plan that meets the
requirements of Code Section 4975(e)(7) and Regulation 54.4975-11.
1.18 "Exempt Loan" means a loan made to the Plan by a disqualified
person or a loan to the Plan which is guaranteed by a disqualified person and
which satisfies the requirements of Section 2550.408b-3 of the Department of
Labor Regulations, Section 54.4975-7(b) of the Treasury Regulations and Section
5.4 hereof.
1.19 "Family Member" means, with respect to an affected Participant,
such Participant's spouse and such Participant's lineal descendants and
ascendants and their spouses, all as described in Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
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1.21 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on January 1st of each year and ending the following December 3lst.
1.22 "Forfeiture" means that portion of a Participant's Account that is
not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Terminated Participant's Account, or
(b) the last day of the Plan Year in which the Participant
incurs five (5) consecutive l-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated
Participant shall be deemed to have received a distribution of his Vested
benefit upon his termination of employment. Restoration of such amounts shall
occur pursuant to Section 7.4(g)(2). In addition, the term Forfeiture shall also
include amounts deemed to be Forfeitures pursuant to any other provision of this
Plan.
1.23 "Former Participant" means a person who has been a Participant,
but who has ceased to be a Participant for any reason.
1.24 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415
Compensation" must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
If, in connection with the adoption of this amendment and
restatement, the definition of "415 Compensation" has been modified, then, for
Plan Years prior to the Plan Year which includes the adoption date of this
amendment and restatement, "415 Compensation" means compensation determined
pursuant to the Plan then in effect.
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1.25 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the
"determination year" or "look-back year" were "five percent
owners" as defined in Section 1.31(c).
(b) Employees who received "415 Compensation" during
the "look-back year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $50,000 and were
in the Top Paid Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were
officers of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) and
received "415 Compensation" during the "look-back year" from
the Employer greater than 50 percent of the limit in effect
under Code Section 415(b)(1)(A) for any such Plan Year. The
number of officers shall be limited to the lesser of (i) 50
employees; or (ii) the greater of 3 employees or 10 percent of
all employees. For the purpose of determining the number of
officers, Employees described in Section 1.51(a), (b), (c) and
(d) shall be excluded, but such Employees shall still be
considered for the purpose of identifying the particular
Employees who are officers. If the Employer does not have at
least one officer whose annual "415 Compensation" is in excess
of 50 percent of the Code Section 415(b)(1)(A) limit, then the
highest paid officer of the Employer will be treated as a Highly
Compensated Employee.
(e) Employees who are in the group consisting of the 100
Employees paid the greatest "415 Compensation" during the
"determination year" and are also described in (b), (c) or (d)
above when these paragraphs are modified to substitute
"determination year" for "look-back year."
The "look-back year" shall be the calendar year ending with or
within the Plan Year for which testing is being performed, and the
"determination year" (if applicable) shall be
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the period of time, if any, which extends beyond the "look-back year" and ends
on the last day of the Plan Year for which testing is being performed (the "lag
period"). If the "lag period" is less than twelve months long, the dollar
threshold amounts specified in (b), (c) and (d) above shall be prorated based
upon the number of months in the "lag period."
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h), 403(b) or 457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions. Additionally, the dollar
threshold amounts specified in (b) and (c) above shall be adjusted at such time
and in such manner as is provided in Regulations. In the case of such an
adjustment, the dollar limits which shall be applied are those for the calendar
year in which the "determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who
are non-resident aliens and who received no earned income (within the
meaning of Code Section 911(d)(2)) from the Employer constituting United States
source income within the meaning of Code Section 861(a)(3) shall not be treated
as Employees. Additionally, all Affiliated Employers shall be taken into account
as a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year."
1.26 "Highly Compensated Former Employee" means a former Employee who
had a separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
"determination year" after attaining age 55. Notwithstanding the foregoing, an
Employee who separated from service prior to 1987 will be treated as a Highly
Compensated Former Employee only if during the separation year (or year
preceding the separation year) or any year after the Employee attains age 55 (or
the last year ending before the Employee's 55th birthday), the Employee either
received "415 Compensation" in excess of $50,000 or was a "five percent owner."
For purposes of this Section, "determination year," "415
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Compensation" and "five percent owner" shall be determined in accordance with
Section 1.25. Highly Compensated Former Employees shall be treated as Highly
Compensated Employees. The method set forth in this Section for determining who
is a "Highly Compensated Former Employee" shall be applied on a uniform and
consistent basis for all purposes for which the Code Section 414(q) definition
is applicable.
1.27 "Highly Compensated Participant" means any Highly Compensated
Employee who is eligible to participate in the Plan.
l.28 "Hour of Service" means (l) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. These hours will 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.
The same Hours of Service shall not be credited both under (l) or (2), as the
case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of
Service are required to be credited to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period); (ii) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, on account of a
period during which no duties are performed is not required to be credited to
the Employee if such payment is made or due under a plan maintained solely for
the purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be
made by or due from the Employer regardless of whether such payment is made by
or due from the Employer directly, or indirectly through, among others, a trust
fund, or insurer, to which the Employer contributes or pays premiums and
regardless of
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whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of
determining a Year of Service, a year of participation for purposes of accrued
benefits, a l-Year Break in Service, and employment commencement date (or
reemployment commencement date). In addition, Hours of Service will be credited
for employment with other Affiliated Employers. The provisions of Department of
Labor regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
1.29 "Income" means the income or losses allocable to which amount
shall be allocated in the same manner as income or losses are allocated pursuant
to Section 4.3(d).
1.30 "Investment Manager" means an entity that (a) has the power to
manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.31 "Key Employee" means an Employee as defined in Code Section 416(i)
and the Regulations thereunder. Generally, any Employee or former Employee (as
well as each of his Beneficiaries) is considered a Key Employee if he, at any
time during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is
defined within the meaning of the Regulations under Code
Section 416) having annual "415 Compensation" greater than 50
percent of the amount in effect under Code Section 415(b)(1)(A)
for any such Plan Year.
(b) one of the ten employees having annual "415
Compensation" from the Employer for a Plan Year greater than the
dollar limitation in effect under Code Section 415(c)(1)(A) for the
calendar year in which such Plan Year ends and owning (or
considered as owning within the meaning of Code Section 318) both
more than one-half percent interest and the largest interests in
the Employer.
(c) a "five percent owner" of the Employer. "Five percent
owner" means any person who owns (or is
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considered as owning within the meaning of Code Section 318) more
than five percent (5%) of the outstanding stock of the Employer
or stock possessing more than five percent (5%) of the total
combined voting power of all stock of the Employer or, in the case
of an unincorporated business, any person who owns more than five
percent (5%) of the capital or profits interest in the Employer.
In determining percentage ownership hereunder, employers that would
otherwise be aggregated under Code Sections 414(b), (c), (m) and
(o) shall be treated as separate employers.
(d) a "one percent owner" of the Employer having an
annual "415 Compensation" from the Employer of more than
$150,000. "One percent owner" means any person who owns (or is
considered as owning within the meaning of Code Section 318)
more than one percent (1%) of the outstanding stock of the
Employer or stock possessing more than one percent (1%) of the
total combined voting power of all stock of the Employer or, in the
case of an unincorporated business, any person who owns more than
one percent (1%) of the capital or profits interest in the
Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c),
(m) and (o) shall be treated as separate employers. However, in
determining whether an individual has "415 Compensation" of more
than $150,000, "415 Compensation" from each employer required to
be aggregated under Code Sections 414(b), (c), (m) and (o) shall
be taken into account.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h), 403(b) or 457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
1.32 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
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1.33 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are 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:
(a) if such employee is covered by a money purchase
pension plan providing:
(1) a non-integrated employer contribution rate of at
least 10% of compensation, as defined in Code Section 415(c)(3),
but including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h), 403(b) or 457, and Employee
contributions described in Code Section 414(h)(2) that are
treated as Employer contributions:
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20%
of the recipient's non-highly compensated work force.
1.34 "Non-Highly Compensated Participant" means any Participant who
is neither a Highly Compensated Employee nor a Family Member.
1.35 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
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1.36 "Normal Retirement Age" means the Participant's 65th birthday. A
Participant shall become fully vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.37 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's Normal Retirement Age.
1.38 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a l-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and l-Year Breaks in Service shall be
measured on the same computation period.
"Authorized leave of absence" means an unpaid, temporary
cessation from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
A "maternity or paternity leave of absence" means, for Plan
Years beginning after December 31, 1984, an absence from work for any period by
reason of the Employee's pregnancy, birth of the Employee's child, placement of
a child with the Employee in connection with the adoption of such child, or any
absence for the purpose of caring for such child for a period immediately
following such birth or placement. For this purpose, Hours of Service shall be
credited for the computation period in which the absence from work begins, only
if credit therefore is necessary to prevent the Employee from incurring a 1-Year
Break in Service, or, in any other case, in the immediately following
computation period. The Hours of Service credited for a "maternity or paternity
leave of absence" shall be those which would normally have been credited but for
such absence, or, in any case in which the Administrator is unable to determine
such hours normally credited, eight (8) Hours of Service per day. The total
Hours of Service required to be credited for a "maternity or paternity leave of
absence" shall not exceed 501.
1.39 "Other Investments Account" means the account of a Participant
which is credited with his share of the net gain (or loss) of the Plan,
Forfeitures and Employer contributions in other than Company Stock and which is
debited with payments made to pay for Company Stock.
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1.40 "Participant" means any Eligible Employee who participates in the
Plan as provided in sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.41 "Participant's Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's contributions.
1.42 "Plan" means this instrument, including all amendments thereto.
1.43 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
1.44 "Regulation" means the Income Tax Regulations as promulgated by
the Secretary of the Treasury or his delegate, and as amended from time to time.
1.45 "Retired Participant" means a person who has been a Participant,
but who has become entitled to retirement benefits under the Plan.
1.46 "Retirement Date" means the date as of which a Participant retires
for reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early or Late Retirement Date
(see Section 7.1).
1.47 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.48 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than by death, Total
and Permanent Disability or retirement.
1.49 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.50 "Top Heavy Plan Year" means a Plan Year during which the Plan is a
Top Heavy Plan.
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1.51 "Top Paid Group" means the top 20 percent of Employees who
performed services for the Employer during the applicable year, ranked according
to the amount of "415 Compensation" (determined for this purpose in accordance
with Section 1.25) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. Employees who are non-resident aliens and who received no earned
income (within the meaning of Code Section 911(d)(2)) from the Employer
constituting United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, for the purpose of
determining the number of active Employees in any year, the following additional
Employees shall also be excluded; however, such Employees shall still be
considered for the purpose of identifying the particular Employees in the Top
Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours
per week;
(c) Employees who normally work less than six (6) months
during a year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the
Employer are covered under agreements the Secretary of Labor finds to be
collective bargaining agreements between Employee representatives and the
Employer, and the Plan covers only Employees who are not covered under such
agreements, then Employees covered by such agreements shall be excluded from
both the total number of active Employees as well as from the identification of
particular Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be
applied on a uniform and consistent basis for all purposes for which the Code
Section 414(q) definition is applicable.
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1.52 "Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing any gainful occupation and
which condition constitutes total disability under the federal Social Security
Acts.
1.53 "Trustee" means the person or entity named as trustee herein or
in any separate trust forming a part of this Plan, and any successors.
1.54 "Trust Fund" means the assets of the Plan and Trust as the same
shall exist from time to time.
1.55 "Unallocated Company Stock Suspense Account" means an account
containing Company Stock acquired with the proceeds of an Exempt Loan and which
has not been released from such account and allocated to the Participants'
Company Stock Accounts.
1.56 "Vested" means the nonforfeitable portion of any account
maintained on behalf of a Participant.
1.57 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least 1000
Hours of Service.
For purposes of eligibility for participation, the initial
computation period shall begin with the date on which the Employee first
performs an Hour of Service. The participation computation period beginning
after a l-Year Break in Service shall be measured from the date on which an
Employee again performs an Hour of Service. The participation computation period
shall shift to the Plan Year which includes the anniversary of the date on which
the Employee first performed an Hour of Service. An Employee who is credited
with the required Hours of Service in both the initial computation period (or
the computation period beginning after a l-Year Break in Service) and the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service, shall be credited with two (2) Years of Service
for purposes of eligibility to participate .
For vesting purposes, the computation period shall be the Plan
Year, including periods prior to the Effective Date of the Plan.
For all other purposes, the computation period shall be the
Plan Year.
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Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c). However,
in determining whether an Employee has completed a Year of Service for benefit
accrual purposes in the short Plan Year, the number of the Hours of Service
required shall be proportionately reduced based on the number of full months in
the short Plan Year.
Years of Service with Bank of Hodges shall be recognized for those
employees who were employed by the Bank of Hodges on July 5, 1988.
Years of Service with any Affiliated Employer shall be
recognized.
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the
special vesting requirements of Code Section 416(b) pursuant to Section 7.4 of
the Plan and the special minimum allocation requirements of Code Section 416(c)
pursuant to Section 4.3 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan
Year in which, as of the Determination Date, (l) the Present
Value of Accrued Benefits of Key Employees and (2) the sum of
the Aggregate Accounts of Key Employees under this Plan and
all plans of an Aggregation Group, exceeds sixty percent (60%)
of the Present Value of Accrued Benefits and the Aggregate
Accounts of all Key and Non-Key Employees under this Plan and
all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan
Year, but such Participant was a Key Employee for any prior
Plan Year, such Participant's Present Value of Accrued Benefit
and/or Aggregate Account balance shall not be taken into
account for purposes of determining whether this Plan is
a Top Heavy or Super Top Heavy Plan (or whether any
Aggregation Group which includes this Plan is a Top Heavy
Group). In addition, if a Participant or Former Participant
has not performed any services for any Employer maintaining
the
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Plan at any time during the five year period ending on the
Determination Date, any accrued benefit for such Participant
or Former Participant shall not be taken into account for the
purposes of determining whether this Plan is a Top Heavy or
Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any
Plan Year in which, as of the Determination Date, (l) the
Present Value of Accrued Benefits of Key Employees and (2) the
sum of the Aggregate Accounts of Key Employees under this Plan
and all plans of an Aggregation Group, exceeds ninety percent
(90%) of the Present Value of Accrued Benefits and the
Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate
Account as of the Determination Date is the sum of:
(1) his Participant's Account balance as of the most
recent valuation occurring within a twelve (12) month
period ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the
amount of any contributions actually made after the
valuation date but due on or before the Determination
Date, except for the first Plan Year when such
adjustment shall also reflect the amount of any
contributions made after the Determination Date that
are allocated as of a date in that first Plan Year.
(3) any Plan distributions made within the Plan Year
that includes the Determination Date or within the
four (4) preceding Plan Years. However, in the case
of distributions made after the valuation date and
prior to the Determination Date, such distributions
are not included as distributions for top heavy
purposes to the extent that such distributions are
already included in the Participant's Aggregate
Account balance as of the valuation date.
Notwithstanding anything herein to the contrary,
all distributions, including distributions made prior
to January 1, 1984, and distributions under a
terminated plan which if it had not been terminated
would have been required to be
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included in an Aggregation Group, will be counted.
Further, distributions from the Plan (including the
cash value of life insurance policies) of a
Participant's account balance because of death
shall be treated as a distribution for the purposes
of this paragraph.
(4) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax
deductible qualified voluntary employee contributions
shall not be considered to be a part of the
Participant's Aggregate Account balance.
(5) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both initiated
by the Employee and made from a plan maintained
by one employer to a plan maintained by another
employer), if this Plan provides the rollovers or
plan-to-plan transfers, it shall always consider
such rollovers or plan-to-plan transfers as a
distribution for the purposes of this Section. If
this Plan is the plan accepting such rollovers or
plan-to-plan transfers, it shall not consider such
rollovers or plan-to-plan transfers as part of the
Participant's Aggregate Account balance.
(6) with respect to related rollovers and
plan-to-plan transfers (ones either not initiated
by the Employee or made to a plan maintained by the
same employer), if this Plan provides the rollover
or plan-to-plan transfer, it shall not be counted as
a distribution for purposes of this Section. If this
Plan is the plan accepting such rollover
or plan-to-plan transfer, it shall consider such
rollover or plan-to-plan transfer as part of
the Participant's Aggregate Account balance,
irrespective of the date on which such rollover or
plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two
employers are to be treated as the same employer in
(5) and (6) above, all employers aggregated under
Code Section 414(b), (c), (m) and (o) are treated as
the same employer.
(d) "Aggregation Group" means either a Required
Aggregation Group or a Permissive Aggregation Group as
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hereinafter determined.
(1) Required Aggregation Group: In determining a
Required Aggregation Group hereunder, each plan of
the Employer in which a Key Employee is a participant
in the Plan Year containing the Determination Date or
any of the four preceding Plan Years, and each other
plan of the Employer which enables any plan in which
a Key Employee participates to meet the requirements
of Code Sections 401(a)(4) or 410, will be required
to be aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each
plan in the group will be considered a Top Heavy Plan
if the Required Aggregation Group is a Top Heavy
Group. No plan in the Required Aggregation Group will
be considered a Top Heavy Plan if the Required
Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may
also include any other plan not required to be
included in the Required Aggregation Group, provided
the resulting group, taken as a whole, would continue
to satisfy the provisions of Code Sections 401(a)(4)
and 410. Such group shall be known as a Permissive
Aggregation Group.
In the case of a Permissive Aggregation Group, only a
plan that is part of the Required Aggregation Group
will be considered a Top Heavy Plan if the Permissive
Aggregation Group is a Top Heavy Group. No plan in
the Permissive Aggregation Group will be considered a
Top Heavy Plan if the Permissive Aggregation Group is
not a Top Heavy Group.
(3) Only those plans of the Employer in which the
Determination Dates fall within the same calendar
year shall be aggregated in order to determine
whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated
plan of the Employer if it was maintained within the
last five (5) years ending on the Determination Date.
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(e) "Determination Date" means (a) the last day of
the preceding Plan Year, or (b) in the case of the first Plan
Year, the last day of such Plan Year.
(f) Present Value of Accrued Benefit: In the case of
a defined benefit plan, the Present Value of Accrued Benefit
for a Participant other than a Key Employee, shall be as
determined using the single accrual method used for all plans
of the Employer and Affiliated Employers, or if no such single
method exists, using a method which results in benefits
accruing not more rapidly than the slowest accrual rate
permitted under Code Section 411(b)(1)(C). The determination
of the Present Value of Accrued Benefit shall be determined as
of the most recent valuation date that falls within or ends
with the 12-month period ending on the Determination Date
except as provided in Code Section 416 and the Regulations
thereunder for the first and second plan years of a defined
benefit plan.
(g) "Top Heavy Group" means an Aggregation Group
in which, as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key
Employees under all defined benefit plans included in
the group, and
(2) the Aggregate Accounts of Key Employees under all
defined contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and
remove the Trustee and the Administrator from time to time as
it deems necessary for the proper administration of the Plan
to assure that the Plan is being operated for the exclusive
benefit of the Participants and their Beneficiaries in
accordance with the terms of the Plan, the Code, and the Act.
(b) The Employer shall establish a "funding policy
and method," i.e., it shall determine whether the Plan has a
short run need for liquidity (e.g., to pay benefits) or
whether liquidity is a long run goal and investment growth
(and stability of same) is a more
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current need, or shall appoint a qualified person to do so.
The Employer or its delegate shall communicate such needs and
goals to the Trustee, who shall coordinate such Plan needs
with its investment policy. The communication of such a
"funding policy and method" shall not, however, constitute a
directive to the Trustee as to investment of the Trust Funds.
Such "funding policy and method" shall be consistent with the
objectives of this Plan and with the requirements of Title I
of the Act.
(c) The Employer shall periodically review the
performance of any Fiduciary or other person to whom duties
have been delegated or allocated by it under the provisions of
this Plan or pursuant to procedures established hereunder.
This requirement may be satisfied by formal periodic review by
the Employer or by a qualified person specifically designated
by the Employer, through day-to-day conduct and evaluation, or
through other appropriate ways.
(d) The Employer will furnish Plan Fiduciaries and
Participants with notices and information statements when
voting rights must be exercised pursuant to Section 8.4.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any
person, including, but not limited to, the Employees of the Employer, shall be
eligible to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or be removed by
the Employer by delivery of written notice of removal, to take effect at a date
specified therein, or upon delivery to the Administrator if no date is
specified.
The Employer, upon the resignation or removal of an
Administrator, shall promptly designate in writing a successor to this position.
If the Employer does not appoint an Administrator, the Employer will function as
the Administrator.
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2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer
and the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Administrator
shall administer the Plan in accordance with its terms and shall have the power
and discretion to construe the terms of the Plan and to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination by the Administrator shall be conclusive and
binding upon all persons. The Administrator may establish procedures, correct
any defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry out
the purpose of the Plan; provided, however, that any procedure, discretionary
act, interpretation or construction shall be done in a nondiscriminatory manner
based upon uniform principles consistently applied and shall be consistent with
the intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited to, the
following:
(a) the discretion to determine all questions
relating to the eligibility of Employees to participate or
remain a Participant hereunder and to receive benefits under
the Plan;
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(b) to compute, certify, and direct the Trustee with
respect to the amount and the kind of benefits to which any
Participant shall be entitled hereunder;
(c) to authorize and direct the Trustee with respect
to all nondiscretionary or otherwise directed disbursements
from the Trust;
(d) to maintain all necessary records for the
administration of the Plan;
(e) to interpret the provisions of the Plan and to
make and publish such rules for regulation of the Plan as are
consistent with the terms hereof;
(f) to determine the size and type of any Contract to
be purchased from any insurer, and to designate the insurer
from which such Contract shall be purchased;
(g) to compute and certify to the Employer and to the
Trustee from time to time the sums of money necessary or
desirable to be contributed to the Plan;
(h) to consult with the Employer and the Trustee
regarding the short and long-term liquidity needs of the Plan
in order that the Trustee can exercise any investment
discretion in a manner designed to accomplish specific
objectives;
(i) to establish and communicate to Participants a
procedure for allowing each Participant to direct the Trustee
as to the distribution of his Company Stock Account pursuant
to Section 4.6;
(j) to establish and communicate to Participants a
procedure and method to insure that each Participant will vote
Company Stock allocated to such Participant's Company Stock
Account pursuant to Section 8.4;
(k) to enter into a written agreement with regard to
the payment of federal estate tax pursuant to Code Section
2210(b);
(l) to assist any Participant regarding his rights,
benefits, or elections available under the Plan.
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2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and
shall keep all other books of account, records, and other data that may be
necessary for proper administration of the Plan and shall be responsible for
supplying all information and reports to the Internal Revenue Service,
Department of Labor, Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other persons as
the Administrator or the Trustee deems necessary or desirable in connection with
the administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the
Employer shall supply full and timely information to the Administrator on all
matters relating to the Compensation of all Participants, their Hours of
Service, their Years of Service, their retirement, death, disability, or
termination of employment, and such other pertinent facts as the Administrator
may require; and the Administrator shall advise the Trustee of such of the
foregoing facts as may be pertinent to the Trustee's duties under the Plan. The
Administrator may rely upon such information as is supplied by the Employer and
shall have no duty or responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust
Fund unless paid by the Employer. Such expenses shall include any expenses
incident to the functioning of the Administrator, including, but not limited to,
fees of accountants, counsel, and other specialists and their agents, and other
costs of administering the Plan. Until paid, the expenses shall constitute a
liability of the Trust Fund.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
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2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing
with the Administrator. Written notice of the disposition of a claim shall be
furnished to the claimant within 90 days after the application is filed. In the
event the claim is denied, the reasons for the denial shall be specifically set
forth in the notice in language calculated to be understood by the claimant,
pertinent provisions of the Plan shall be cited, and, where appropriate, an
explanation as to how the claimant can perfect the claim will be provided. In
addition, the claimant shall be furnished with an explanation of the Plan's
claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who
has been denied a benefit by a decision of the Administrator pursuant to Section
2.12 shall be entitled to request the Administrator to give further
consideration to his claim by filing with the Administrator (on a form which may
be obtained from the Administrator) a request for a hearing. Such request,
together with a written statement of the reasons why the claimant believes his
claim should be allowed, shall be filed with the Administrator no later than 60
days after receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for
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the decision and specific references to the pertinent Plan provisions on which
the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed one (1) Year of
Service and has attained age 21 shall be eligible to participate hereunder as of
the date he has satisfied such requirements. However, any Employee who was a
Participant in the Plan prior to the effective date of this amendment and
restatement shall continue to participate in the Plan. The Employer shall give
each prospective Eligible Employee written notice of his eligibility to
participate in the Plan prior to the close of the Plan Year in which he first
becomes an Eligible Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible
Employee shall make application to the Employer for participation in the Plan
and agree to the terms hereof. Upon the acceptance of any benefits under this
Plan, such Employee shall automatically be deemed to have made application and
shall be bound by the terms and conditions of the Plan and all amendments
hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as
of the earlier of the first day of the Plan Year or the first day of the seventh
month of such Plan Year coinciding with or next following the date such Employee
met the eligibility requirements of Section 3.1, provided said Employee was
still employed as of such date (or if not employed on such date, as of the date
of rehire if a l-Year Break in Service has not occurred).
In the event an Employee who is not a member of an eligible
class of Employees becomes a member of an eligible class, such Employee will
participate immediately if such Employee has satisfied the minimum age and
service requirements and would have otherwise previously become a Participant.
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3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each
Employee for participation in the Plan based upon information furnished by the
Employer. Such determination shall be conclusive and binding upon all persons,
as long as the same is made pursuant to the Plan and the Act. Such determination
shall be subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
classification of an Eligible Employee to an ineligible
Employee, such Former Participant shall continue to vest in
his interest in the Plan for each Year of Service completed
while a noneligible Employee, until such time as his
Participant's Account shall be forfeited or distributed
pursuant to the terms of the Plan. Additionally, his interest
in the Plan shall continue to share in the earnings of the
Trust Fund.
(b) In the event a Participant is no longer a member
of an eligible class of Employees and becomes ineligible to
participate but has not incurred a l-Year Break in Service,
such Employee will participate immediately upon returning to
an eligible class of Employees. If such Participant incurs a
l-Year Break in Service, eligibility will be determined under
the break in service rules of the Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
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3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously included and discovery of
such incorrect inclusion is not made until after a contribution for the year has
been made, the Employer shall not be entitled to recover the contribution made
with respect to the ineligible person regardless of whether or not a deduction
is allowable with respect to such contribution. In such event, the amount
contributed with respect to the ineligible person shall constitute a Forfeiture
for the Plan Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer,
elect voluntarily not to participate in the Plan. The election not to
participate must be communicated to the Employer, in writing, at least thirty
(30) days before the beginning of a Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
(a) For each Plan Year, the Employer shall contribute
to the Plan such amount as shall be determined by the
Employer.
(b) Notwithstanding the foregoing, however, the
Employer's contributions for any Plan Year shall not exceed
the maximum amount allowable as a deduction to the Employer
under the provisions of Code Section 404. All contributions by
the Employer shall be made in cash, Company Stock or in such
property as is acceptable to the Trustee.
(c) Except, however, to the extent necessary to
provide the top heavy minimum allocations, the Employer shall
make a contribution even if it exceeds the amount which is
deductible under Code Section 404.
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4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
Employer contributions will be paid in cash, Company Stock or
other property as the Employer may from time to time determine. Company Stock
and other property will be valued at their then fair market value. The Employer
shall pay to the Trustee its contribution to the Plan for each Plan Year within
the time prescribed by law, including extensions of time, for the filing of the
Employer's federal income tax return for the Fiscal Year.
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an
account in the name of each Participant to which the
Administrator shall credit as of each Anniversary Date all
amounts allocated to each such Participant as set forth
herein.
(b) The Employer shall provide the Administrator with
all information required by the Administrator to make a proper
allocation of the Employer's contributions for each Plan Year.
Within a reasonable period of time after the date of receipt
by the Administrator of such information, the Administrator
shall allocate such contribution to each Participant's Account
in the same proportion that each such Participant's
Compensation for the year bears to the total Compensation of
all Participants for such year.
Only Participants who have completed a Year of
Service during the Plan Year shall be eligible to share in the
discretionary contribution for the year.
(c) The Company Stock Account of each Participant
shall be credited as of each Anniversary Date with Forfeitures
of Company Stock and his allocable share of Company Stock
(including fractional shares) purchased and paid for by the
Plan or contributed in kind by the Employer. Stock dividends
on Company Stock held in his Company Stock Account shall be
credited to his Company Stock Account when paid. Cash
dividends on Company Stock held in his Company Stock Account
shall, in the sole discretion of the Administrator, either be
credited to his Other Investments Account when paid or be used
to repay an Exempt Loan; provided, however, that when cash
dividends are used to repay an Exempt Loan, Company Stock
shall be released from the Unallocated Company Stock Suspense
Account and allocated to the Participant's Company Stock
Account pursuant to Section
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4.3(e) and, provided further, that Company Stock allocated to
the Participant's Company Stock Account shall have a fair
market value not less than the amount of cash dividends which
would have been allocated to such Participant's Other
Investments Account for the year.
Company Stock acquired by the Plan with the proceeds
of an Exempt Loan shall only be allocated to each
Participant's Company Stock Account upon release from the
Unallocated Company Stock Suspense Account as provided in
Section 4.3(e) herein. Company Stock acquired with the
proceeds of an Exempt Loan shall be an asset of the Trust Fund
and maintained in the Unallocated Company Stock Suspense
Account.
(d) As of each Anniversary Date or other valuation
date, before the current valuation period allocation of
Employer contributions and Forfeitures, any earnings or losses
(net appreciation or net depreciation) of the Trust Fund shall
be allocated in the same proportion that each Participant's
and Former Participant's nonsegregated accounts (other than
each Participant's Company Stock Account) bear to the total of
all Participants' and Former Participants' nonsegregated
accounts (other than Participants' Company Stock Accounts) as
of such date.
Earnings or losses do not include the interest paid
under any installment contract for the purchase of Company
Stock by the Trust Fund or on any loan used by the Trust Fund
to purchase Company Stock, nor does it include income received
by the Trust Fund with respect to Company Stock acquired with
the proceeds of an Exempt Loan; all income received by the
Trust Fund from Company Stock acquired with the proceeds of an
Exempt Loan may, at the discretion of the Administrator, be
used to repay such loan.
(e) All Company Stock acquired by the Plan with the
proceeds of an Exempt Loan must be added to and maintained in
the Unallocated Company Stock Suspense Account. Such Company
Stock shall be released and withdrawn from that account as if
all Company Stock in that account were encumbered. For each
Plan Year during the duration of the loan, the number of
shares of Company Stock released shall equal the number of
encumbered shares held immediately before release for the
current Plan Year multiplied by a fraction, the
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numerator of which is the amount of principal and interest
paid for the Plan Year and the denominator of which is the sum
of the numerator plus the principal and interest to be paid
for all future Plan Years. As of each Anniversary Date, the
Plan must consistently allocate to each Participant's Account,
in the same manner as Employer discretionary contributions
pursuant to Section 4.1(a) are allocated, non-monetary units
(shares and fractional shares of Company Stock) representing
each Participant's interest in Company Stock withdrawn from
the Unallocated Company Stock Suspense Account. However,
Company Stock released from the Unallocated Company Stock
Suspense Account with cash dividends pursuant to Section
4.3(c) shall be allocated to each Participant's Company Stock
Account in the same proportion that each such Participant's
number of shares of Company Stock sharing in such cash
dividends bears to the total number of shares of all
Participants' Company Stock sharing in such cash dividends.
Income earned with respect to Company Stock in the Unallocated
Company Stock Suspense Account shall be used, at the
discretion of the Administrator, to repay the Exempt Loan used
to purchase such Company Stock. Company Stock released from
the Unallocated Company Stock Suspense Account with such
income, and any income which is not so used, shall be
allocated as of each Anniversary Date or other valuation date
in the same proportion that each Participant's and Former
Participant's nonsegregated accounts after the allocation of
any earnings or losses pursuant to Section 4.3(d) bear to the
total of all Participants' and Former Participants'
nonsegregated accounts after the allocation of any earnings or
losses pursuant to Section 4.3(d).
(f) As of each Anniversary Date any amounts which
became Forfeitures since the last Anniversary Date shall first
be made available to reinstate previously forfeited account
balances of Former Participants, if any, in accordance with
Section 7.4(g)(2). The remaining Forfeitures, if any, shall be
allocated among the Participants' Accounts of Participants
otherwise eligible to share in the allocation of discretionary
contributions in the same proportion that each such
Participant's Compensation for the year bears to the total
Compensation of all such Participants for the year.
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Provided, however, that in the event the allocation
of Forfeitures provided herein shall cause the "annual
addition" (as defined in Section 4.4) to any Participant's
Account to exceed the amount allowable by the Code, the excess
shall be reallocated in accordance with Section 4.5.
(g) For any Top Heavy Plan Year, Employees not
otherwise eligible to share in the allocation of contributions
and Forfeitures as provided above, shall receive the minimum
allocation provided for in Section 4.3(i) if eligible pursuant
to the provisions of Section 4.3(k).
(h) Notwithstanding the foregoing, Participants who
are not actively employed on the last day of the Plan Year due
to Retirement (Early, Normal or Late), Total and Permanent
Disability or death shall share in the allocation of
contributions and Forfeitures for that Plan Year.
(i) Minimum Allocations Required for Top Heavy Plan
Years: Notwithstanding the foregoing, for any Top Heavy Plan
Year, the sum of the Employer's contributions and Forfeitures
allocated to the Participant's Account of each Employee shall
be equal to at least three percent (3%) of such Employee's
"415 Compensation" (reduced by contributions and forfeitures,
if any, allocated to each Employee in any defined contribution
plan included with this plan in a Required Aggregation Group).
However, if (1) the sum of the Employer's contributions and
Forfeitures allocated to the Participant's Account of each Key
Employee for such Top Heavy Plan Year is less than three
percent (3%) of each Key Employee's "415 Compensation" and (2)
this Plan is not required to be included in an Aggregation
Group to enable a defined benefit plan to meet the
requirements of Code Section 401(a)(4) or 410, the sum of the
Employer's contributions and Forfeitures allocated to the
Participant's Account of each Employee shall be equal to the
largest percentage allocated to the Participant's Account of
any Key Employee.
However, no such minimum allocation shall be required
in this Plan for any Employee who participates in another
defined contribution plan subject to Code Section 412
providing such benefits included with this Plan in a Required
Aggregation Group.
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(j) For purposes of the minimum allocations set forth
above, the percentage allocated to the Participant's Account
of any Key Employee shall be equal to the ratio of the sum of
the Employer's contributions and Forfeitures allocated on
behalf of such Key Employee divided by the "415 Compensation"
for such Key Employee.
(k) For any Top Heavy Plan Year, the minimum
allocations set forth above shall be allocated to the
Participant's Account of all Employees who are Participants
and who are employed by the Employer on the last day of the
Plan Year, including Employees who have (1) failed to complete
a Year of Service; and (2) declined to make mandatory
contributions (if required) to the Plan.
(l) In lieu of the above, in any Plan Year in which
an Employee is a Participant in both this Plan and a defined
benefit pension plan included in a Required Aggregation Group
which is top heavy, the Employer shall not be required to
provide such Employee with both the full separate defined
benefit plan minimum benefit and the full separate defined
contribution plan minimum allocation.
Therefore, for any Plan Year when the Plan is a Top
Heavy Plan, an Employee who is participating in this Plan and
a defined benefit plan maintained by the Employer shall
receive a minimum monthly accrued benefit in the defined
benefit plan equal to the product of (1) one-twelfth (1/12th)
of "415 Compensation" averaged over the five (5) consecutive
"limitation years" (or actual "limitation years," if less)
which produce the highest average and (2) the lesser of (i)
two percent (2%) multiplied by years of service when the plan
is top heavy or (ii) twenty percent (20%). Further, the extra
minimum allocation (required by Section 4.4(n) to provide
higher limitations) shall not be provided.
(m) For the purposes of this Section, "415
Compensation" shall be limited to $200,000. Such amount shall
be adjusted at the same time and in the same manner as
permitted under Code Section 415(d), except that the dollar
increase in effect on January 1 of any calendar year shall be
effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000
limitation shall be
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effective on January 1, 1990. For any short Plan Year the "415
Compensation" limit shall be an amount equal to the "415
Compensation" limit for the calendar year in which the Plan
Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12).
However, for Plan Years beginning prior to January 1, 1989,
the $200,000 limit shall apply only for Top Heavy Plan Years
and shall not be adjusted.
(n) If a Former Participant is reemployed after five
(5) consecutive 1-Year Breaks in Service, then separate
accounts shall be maintained as follows:
(1) one account for nonforfeitable benefits
attributable to pre-break service; and
(2) one account representing his status in the Plan
attributable to post-break service.
(o) Notwithstanding anything to the contrary, for
Plan Years beginning after December 31, 1989, if this is a
Plan that would otherwise fail to meet the requirements of
Code Sections 401(a)(26), 410(b)(1) or 410(b)(2)(A)(i) and the
Regulations thereunder because Employer contributions would
not be allocated to a sufficient number or percentage of
Participants for a Plan Year, then the following rules shall
apply:
(1) The group of Participants eligible to share in
the Employer's contribution and Forfeitures for the
Plan Year shall be expanded to include the minimum
number of Participants who would not otherwise be
eligible as are necessary to satisfy the applicable
test specified above. The specific Participants who
shall become eligible under the terms of this
paragraph shall be those who are actively employed on
the last day of the Plan Year and, when compared to
similarly situated Participants, have completed the
greatest number of Hours of Service in the Plan Year.
(2) If after application of paragraph (l) above, the
applicable test is still not satisfied, then the
group of Participants eligible to share in the
Employer's contribution and Forfeitures for the Plan
Year shall be further expanded to include the minimum
number of Participants who are not actively employed
on the last day of the
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Plan Year as are necessary to satisfy the applicable
test. The specific Participants who shall become
eligible to share shall be those Participants, when
compared to similarly situated Participants, who have
completed the greatest number of Hours of Service in
the Plan Year before terminating employment.
(3) Nothing in this Section shall permit the
reduction of a Participant's accrued benefit.
Therefore any amounts that have previously been
allocated to Participants may not be reallocated to
satisfy these requirements. In such event, the
Employer shall make an additional contribution equal
to the amount such affected Participants would have
received had they been included in the allocations,
even if it exceeds the amount which would be
deductible under Code Section 404. Any adjustment to
the allocations pursuant to this paragraph shall be
considered a retroactive amendment adopted by the
last day of the Plan Year.
(4) Notwithstanding the foregoing, for any Top Heavy
Plan Year beginning after December 31, 1992, if the
plan would fail to satisfy Code Section 410(b) if the
coverage tests were applied by treating those
Participants whose only allocation would otherwise be
provided under the top heavy formula as if they were
not currently benefiting under the Plan, then, for
purposes of this Section 4.3(o), such Participants
shall be treated as not benefiting and shall
therefore be eligible to be included in the expanded
class of Participants who will share in the
allocation provided under the Plan's non top heavy
formula.
(p) For the purposes of this Section, if a Highly
Compensated Participant is a Participant under two or more
cash or deferred arrangements of the Employer or an Affiliated
Employer, all such cash or deferred arrangements shall be
treated as one cash or deferred arrangement for the purpose of
determining the actual deferral ratio with respect to such
Highly Compensated Participant. However, for Plan Years
beginning after December 31, 1988, no such aggregation of cash
or deferred arrangements is required.
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4.4 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual
additions" credited to a Participant's accounts for any "limitation
year" shall equal the lesser of: (1) $30,000 (or, if greater,
one-fourth of the dollar limitation in effect under Code Section
415(b)(1)(A)) or (2) twenty-five percent (25%) of the Participant's
"415 Compensation" for such "limitation year." For any short
"limitation year," the dollar limitation in (1) above shall be reduced
by a fraction, the numerator of which is the number of full months in
the short "limitation year" and the denominator of which is twelve
(12).
(b) For "limitation years" beginning prior to July 13, 1989,
the dollar amount provided for in paragraph (a)(1) above shall be
increased by the lesser of the dollar amount determined under paragraph
(a)(1) above or the amount of Company Stock contributed, or purchased
with cash contributed. The dollar amount shall be increased provided no
more than one-third of the Employer's contributions for the year are
allocated to Highly Compensated Participants. In applying this
limitation, the family group of a Highly Compensated Participant who is
subject to the Family Member aggregation rules of Code Section
414(q)(6) shall be determined pursuant to Regulations.
(c) For purposes of applying the limitations of Code Section
415, "annual additions" means the sum credited to a Participant's
accounts for any "limitation year" of (l) Employer contributions, (2)
Employee contributions for "limitation years" beginning after December
31, 1986, (3) forfeitures, (4) amounts allocated, after March 31, 1984,
to an individual medical account, as defined in Code Section 415(1)(2)
which is part of a pension or annuity plan maintained by the Employer
and (5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in paragraph (a)(2)
above shall not apply to: (1) any contribution for medical benefits
(within the meaning
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of Code Section 419A(f)(2)) after separation from service which is
otherwise treated as an "annual addition," or (2) any amount otherwise
treated as an "annual addition" under Code Section 415(1)(1).
(d) For purposes of applying the limitations of Code Section
415, the following are not "annual additions": (l) the transfer of
funds from one qualified plan to another and (2) provided no more than
one-third of the Employer contributions for the year are allocated to
Highly Compensated Participants, Forfeitures of Company Stock purchased
with the proceeds of an Exempt Loan and Employer contributions applied
to the payment of interest on an Exempt Loan. In addition, the
following are not Employee contributions for the purposes of Section
4.4(c)(2): (l) rollover contributions (as defined in Code Sections
402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3)); (2) repayments of loans
made to a Participant from the Plan; (3) repayments of distributions
received by an Employee pursuant to Code Section 411(a)(7)(B)
(cash-outs); (4) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(3)(D) (mandatory contributions); and
(5) Employee contributions to a simplified employee pension excludable
from gross income under Code Section 408(k)(6).
(e) For purposes of applying the limitations of Code Section
415, the "limitation year" shall be the Plan Year.
(f) The dollar limitation under Code Section 415(b)(1)(A)
stated in paragraph (a)(l) above shall be adjusted annually as provided
in Code Section 415(d) pursuant to the Regulations. The adjusted
limitation is effective as of January 1st of each calendar year and is
applicable to "limitation years" ending with or within that calendar
year.
(g) For the purpose of this Section, all qualified defined
benefit plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined benefit plan, and all
qualified defined contribution plans (whether terminated or not) ever
maintained by the Employer shall be treated as one defined contribution
plan.
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(h) For the purpose of this Section, if the Employer is a
member of a controlled group of corporations, trades or businesses
under common control (as defined by Code Section 1563(a) or Code
Section 414(b) and (c) as modified by Code Section 415(h)), is a member
of an affiliated service group (as defined by Code Section 414(m)), or
is a member of a group of entities required to be aggregated pursuant
to Regulations under Code Section 414(o), all Employees of such
Employers shall be considered to be employed by a single Employer.
(i) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, all Employers of a Participant who maintain this
Plan will be considered -to be a single Employer.
(j)(l) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan shall
equal the maximum "annual additions" for the "limitation year" minus
any "annual additions" previously credited to such Participant's
accounts during the "limitation year."
(2) If a Participant participates in both a defined
contribution plan subject to Code Section 412 and a defined
contribution plan not subject to Code Section 412 maintained
by the Employer which have the same Anniversary Date, "annual
additions" will be credited to the Participant's accounts
under the defined contribution plan subject to Code Section
412 prior to crediting "annual additions" to the Participant's
accounts under the defined contribution plan not subject to
Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained
by the employer which have the same Anniversary Date, the
maximum "annual additions" under this Plan shall equal the
product of (A) the maximum "annual additions" for the
"limitation year" minus any "annual additions" previously
credited under subparagraphs (1) or (2) above, multiplied by
(B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to
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such Participant's accounts under this Plan without regard to
the limitations of Code Section 415 and (ii) the denominator
of which is such "annual additions" for all plans described in
this subparagraph.
(k) If an Employee is (or has been) a Participant in one or
more defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any "limitation
year" may not exceed 1.0.
(l) The defined benefit plan fraction for any "limitation
year" is 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 Code Sections
415(b) and (d) or 140 percent of the highest average compensation,
including any adjustments under Code Section 415(b).
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 Code Section 415 for all "limitation years"
beginning before January 1, 1987.
(m) The defined contribution plan fraction for any "limitation
year" is 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
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benefit plans, whether or not terminated, maintained by the Employer,
and the annual additions attributable to all welfare benefit funds, as
defined in Code Section 419(e), and individual medical accounts, as
defined in Code Section 415(1)(2), maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts for
the current and all prior "limitation years" of service with the
Employer (regardless of whether a defined contribution plan was
maintained by the Employer). The maximum aggregate amount in any
"limitation year" is the lesser of 125 percent of the dollar limitation
determined under Code Sections 415(b) and (d) in effect under Code
Section 415(c)(1)(A) 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 Code
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.
(n) Notwithstanding the foregoing, for any
"limitation year" in which the Plan is a Top Heavy Plan, 100 percent
shall be substituted for 125 percent in Sections 4.4(l) and 4.4(m)
unless the extra minimum allocation is being provided pursuant to
Section 4.3. However, for any "limitation year" in which the Plan is a
Super Top Heavy Plan, 100 percent shall be substituted for 125 percent
in any event.
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(o) If the sum of the defined benefit plan fraction
and the defined contribution plan fraction shall exceed 1.0 in any
"limitation year" for any Participant in this Plan, the Administrator
shall limit, to the extent necessary, the "annual additions" to such
Participant's accounts for such "limitation year." If, after limiting
the "annual additions" to such Participant's accounts for the
"limitation year," the sum of the defined benefit plan fraction and the
defined contribution plan fraction still exceed 1.0, the Administrator
shall then adjust the numerator of the defined benefit plan fraction so
that the sum of both fractions shall not exceed 1.O in any "limitation
year" for such Participant.
(p) Notwithstanding anything contained in this
Section to the contrary, the limitations, adjustments and other
requirements prescribed in this Section shall at all times comply with
the provisions of Code Section 415 and the Regulations thereunder, the
terms of which are specifically incorporated herein by reference .
4 . 5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures,
a reasonable error in estimating a Participant's Compensation, a
reasonable error in determining the amount of elective deferrals
(within the meaning of Code Section 402 (g) (3) ) that may be made with
respect to any Participant under the limits of Section 4 . 4 or other
facts and circumstances to which Regulation 1.415-6(b) (6) shall be
applicable, the "annual additions" under this Plan would cause the
maximum "annual additions" to be exceeded for any Participant, the
Administrator shall (l) distribute any elective deferrals (within the
meaning of Code Section 402 (g) (3) ) or return any voluntary Employee
contributions credited for the "limitation year" to the extent that the
return would reduce the "excess amount" in the Participant's accounts
(2) hold any "excess amount" remaining after the return of any elective
deferrals or voluntary Employee contributions in a "Section 415
suspense account" (3) allocate and reallocate the "Section 415 suspense
account" in the next "limitation year" (and succeeding "limitation
years" if necessary) to all Participants in the Plan before any
Employer or Employee contributions which would constitute "annual
additions" are made to the Plan for such "limitation year" (4) reduce
Employer
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<PAGE>
contributions to the Plan for such " limitation year" by the amount of
the "Section 415 suspense account" allocated and reallocated during
such "limitation year."
(b) For purposes of this Article, "excess amount" for any
Participant for a " limitation year" shall mean the excess, if any, of
(1) the "annual additions" which would be credited to his account under
the terms of the Plan without regard to the limitations of Code Section
415 over ( 2 ) the maximum "annual additions" determined pursuant to
Section 4 . 4 .
(c) For purposes of this Section, "Section 415 suspense
account" shall mean an unallocated account equal to the sum of "excess
amounts" for all Participants in the Plan during the "limitation year."
The "Section 415 suspense account" shall not share in any earnings or
losses of the Trust Fund.
(d) The Plan may not distribute "excess amounts, " other than
voluntary Employee contributions, to Participants or Former
Participants.
4.6 DIRECTED INVESTMENT ACCOUNT
(a) Each "Qualified Participant", for Plan Years beginning
after December 31, 1986, may elect within ninety (90) days after the
close of each Plan Year during the "Qualified Election Period" to
direct the Trustee in writing as to the distribution in cash and/or
Company Stock of 25 percent of the total number of shares of Company
Stock acquired by or contributed to the Plan that have ever been
allocated to such "Qualified Participant's" Company Stock Account
(reduced by the number of shares of Company Stock previously
distributed in cash and/or Company Stock pursuant to a prior election).
In the case of the election year in which the Participant can make his
last election, the preceding sentence shall be applied by substituting
"50 percent" for "25 percent". If the "Qualified Participant" elects to
direct the Trustee as to the distribution of his Company Stock Account,
such direction shall be effective no later than 180 days after the
close of the Plan Year to which such direction applies. Any such
distribution of Company Stock shall be subject to Section 7.11.
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Notwithstanding the above, if the fair market value
(determined pursuant to Section 6.1 at the Plan valuation date
immediately preceding the first day on which a "Qualified Participant"
is eligible to make an election) of Company Stock acquired by or
contributed to the Plan and allocated to a "Qualified Participant's"
Company Stock Account is $500 or less, then such Company Stock shall
not be subject to this paragraph. For purposes of determining whether
the fair market value exceeds $500, Company Stock held in accounts of
all employee stock ownership plans (as defined in Code Section
4975(e)(7)) and tax credit employee stock ownership plans (as defined
in Code Section 409(a)) maintained by the Employer or any Affiliated
Employer shall be considered as held by the Plan.
(b) For the purposes of this Section the following definitions
shall apply:
(l) "Qualified Participant" means any Participant or Former
Participant who has completed ten (10) Plan Years of Service
as a Participant and has attained age 55.
(2) "Qualified Election Period" means the six (6) Plan Year
period beginning with the later of (i) the first Plan Year in
which the Participant first became a "Qualified Participant",
or (ii) the first Plan Year beginning after December 31, 1986.
ARTICLE V
FUNDING AND INVESTMENT POLICY
5.1 INVESTMENT POLICY
(a) The Plan is designed to invest primarily in Company Stock.
(b) With due regard to subparagraph (a) above, the
Administrator may also direct the Trustee to invest funds under the
Plan in other property described in the Trust or in life insurance
policies to the extent permitted by subparagraph (c) below, or the
Trustee may hold such funds in cash or cash equivalents.
(c) With due regard to subparagraph (a) above, the
Administrator may also direct the Trustee to invest
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funds under the Plan in insurance policies on the life of any "keyman"
Employee. The proceeds of a "keyman" insurance policy may not be used
for the repayment of any indebtedness owed by the Plan which is secured
by Company Stock. In the event any "keyman" insurance is purchased by
the Trustee, the premiums paid thereon during any Plan Year, net of any
policy dividends and increases in cash surrender values, shall be
treated as the cost of Plan investment and any death benefit or cash
surrender value received shall be treated as proceeds from an
investment of the Plan.
(d) The Plan may not obligate itself to acquire Company Stock
from a particular holder thereof at an indefinite time determined upon
the happening of an event such as the death of the holder.
(e) The Plan may not obligate itself to acquire Company Stock
under a put option binding upon the Plan. However, at the time a put
option is exercised, the Plan may be given an option to assume the
rights and obligations of the Employer under a put option binding upon
the Employer.
(f) All purchases of Company Stock shall be made at a price
which, in the judgment of the Administrator, does not exceed the fair
market value thereof. All sales of Company Stock shall be made at a
price which, in the judgment of the Administrator, is not less than the
fair market value thereof. The valuation rules set forth in Article VI
shall be applicable.
5.2 APPLICATION OF CASH
Employer contributions in cash and other cash received by the
Trust Fund shall first be applied to pay any Current Obligations of the Trust
Fund.
5.3 TRANSACTIONS INVOLVING COMPANY STOCK
(a) No portion of the Trust Fund attributable to (or
allocable in lieu of) Company Stock acquired by the Plan after
October 22, 1986 in a sale to which Code Section 1042 or, for
estates of decedents who died prior to December 20, 1989, Code
Section 2057 applies may accrue or be allocated directly or
indirectly under any plan maintained by the Employer meeting
the requirements of Code Section 401(a):
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(l) during the "Nonallocation Period", for the benefit of
(i) any taxpayer who makes an election under
Code Section 1042(a) with respect to Company
Stock or any decedent if the executor of the
estate of the decedent makes a qualified
sale to which Code Section 2057 applies,
(ii) any individual who is related to the
taxpayer or the decedent (within the meaning
of Code Section 267(b)), or
(2) for the benefit of any other person who owns (after application of
Code Section 318(a) applied without regard to the employee trust exception
in Code Section 318(a)(2)(B)(i)) more than 25 percent of
(i) any class of outstanding stock of the
Employer or Affiliated Employer which issued
such company Stock, or
(ii) the total value of any class of
outstanding stock of the Employer or
Affiliated Employer.
(b) Except, however, subparagraph (a)(l)(ii) above
shall not apply to lineal descendants of the taxpayer,
provided that the aggregate amount allocated to the benefit of
all such lineal descendants during the "Nonallocation Period"
does not exceed more than five (5) percent of the Company
Stock (or amounts allocated in lieu thereof) held by the Plan
which are attributable to a sale to the Plan by any person
related to such descendants (within the meaning of Code
Section 267(c)(4)) in a transaction to which Code Section 1042
or Code Section 2057 is applied.
(c) A person shall be treated as failing to meet the
stock ownership limitation under paragraph (a)(2) above if
such person fails such limitation:
(l) at any time during the one (l) year period ending
on the date of sale of Company Stock to the Plan, or
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(2) on the date as of which Company Stock is
allocated to Participants in the Plan.
(d) For purposes of this Section, "Nonallocation
Period", for Plan Years beginning after December 31, 1986,
means the period beginning on the date of the sale of the
Company Stock and ending on the later of:
(l) the date which is ten (10) years after the date
of sale, or
(2) the date of the Plan allocation attributable to
the final payment of the Exempt Loan incurred in
connection with such sale.
5.4 LOANS TO THE TRUST
(a) The Plan may borrow money for any lawful purpose,
provided the proceeds of an Exempt Loan are used within a
reasonable time after receipt only for any or all of the
following purposes:
(l) To acquire Company Stock.
(2) To repay such loan.
(3) To repay a prior Exempt Loan.
(b) All loans to the Trust which are made or
guaranteed by a disqualified person must satisfy all
requirements applicable to Exempt Loans including but not
limited to the following:
(l) The loan must be at a reasonable rate of
interest;
(2) Any collateral pledged to the creditor by the
Plan shall consist only of the Company Stock
purchased with the borrowed funds;
(3) Under the terms of the loan, any pledge of
Company Stock shall provide for the release of shares
so pledged on a pro-rata basis pursuant to Section
4.3(e);
(4) Under the terms of the loan, the creditor shall
have no recourse against the Plan except with respect
to such collateral, earnings attributable to such
collateral, Employer
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contributions (other than contributions of Company
Stock) that are made to meet Current Obligations and
earnings attributable to such contributions;
(5) The loan must be for a specific term and may not
be payable at the demand of any person, except in the
case of default;
(6) In the event of default upon an Exempt Loan, the
value of the Trust Fund transferred in satisfaction
of the Exempt Loan shall not exceed the amount of
default. If the lender is a disqualified person, an
Exempt Loan shall provide for a transfer of Trust
Funds upon default only upon and to the extent of the
failure of the Plan to meet the payment schedule of
the Exempt Loan;
(7) Exempt Loan payments during a Plan Year must not
exceed an amount equal to: (A) the sum, over all Plan
Years, of all contributions and cash dividends paid
by the Employer to the Plan with respect to such
Exempt Loan and earnings on such Employer
contributions and cash dividends, less (B) the sum of
the Exempt Loan payments in all preceding Plan Years.
A separate accounting shall be maintained for such
Employer contributions, cash dividends and earnings
until the Exempt Loan is repaid.
(c) For purposes of this Section, the term
"disqualified person" means a person who is a Fiduciary, a
person providing services to the Plan, an Employer any of
whose Employees are covered by the Plan, an employee
organization any of whose members are covered by the Plan, an
owner, direct or indirect, of 50% or more of the total
combined voting power of all classes of voting stock or of the
total value of all classes of the stock, or an officer,
director, 10% or more shareholder, or a highly compensated
Employee.
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ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each
Anniversary Date, and at such other date or dates deemed necessary by the
Administrator, herein called "valuation date," to determine the net worth of the
assets comprising the Trust Fund as it exists on the "valuation date." In
determining such net worth, the Trustee shall value the assets comprising the
Trust Fund at their fair market value as of the "valuation date" and shall
deduct all expenses for which the Trustee has not yet obtained reimbursement
from the Employer or the Trust Fund.
6.2 METHOD OF VALUATION
Valuations must be made in good faith and based on all
relevant factors for determining the fair market value of securities. In the
case of a transaction between a Plan and a disqualified person, value must be
determined as of the date of the transaction. For all other Plan purposes, value
must be determined as of the most recent "valuation date" under the Plan. An
independent appraisal will not in itself be a good faith determination of value
in the case of a transaction between the Plan and a disqualified person.
However, in other cases, a determination of fair market value based on at least
an annual appraisal independently arrived at by a person who customarily makes
such appraisals and who is independent of any party to the transaction will be
deemed to be a good faith determination of value. Company Stock not readily
tradeable on an established securities market shall be valued by an independent
appraiser meeting requirements similar to the requirements of the Regulations
prescribed under Code Section 170(a)(1).
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the
Employer and retire for the purposes hereof on his Normal Retirement Date or
Early Retirement Date. However, a Participant may postpone the termination of
his employment with the Employer to a later date, in which event the
participation of such Participant in the Plan, including the right to receive
allocations pursuant to Section 4.3, shall continue until his Late Retirement
Date. Upon a Participant's Retirement Date or attainment of his Normal
Retirement Date without termination of
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employment with the Employer, or as soon thereafter as is practicable, the
Trustee shall distribute all amounts credited to such Participant's Account in
accordance with Sections 7.5 and 7.6.
7.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his
Retirement Date or other termination of his employment, all
amounts credited to such Participant's Account shall become
fully Vested. If elected, distribution of the Participant's
Account shall commence not later than one (l) year after the
close of the Plan Year in which such Participant's death
occurs. The Administrator shall direct the Trustee, in
accordance with the provisions of Sections 7.5 and 7.6, to
distribute the value of the deceased Participant's accounts to
the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the
Administrator shall direct the Trustee, in accordance with the
provisions of Sections 7.5 and 7.6, to distribute any
remaining Vested amounts credited to the accounts of a
deceased Former Participant to such Former Participant's
Beneficiary.
(c) The Administrator may require such proper proof
of death and such evidence of the right of any person to
receive payment of the value of the account of a deceased
Participant or Former Participant as the Administrator may
deem desirable. The Administrator's determination of death and
of the right of any person to receive payment shall be
conclusive.
(d) The Beneficiary of the death benefit payable
pursuant to this Section shall be the Participant's spouse.
Except, however, the Participant may designate a Beneficiary
other than his spouse if:
(l) the spouse has waived the right to be the
Participant's Beneficiary, or
(2) the Participant is legally separated or has been
abandoned (within the meaning of local law) and the
Participant has a court order to such effect (and
there is no "qualified domestic relations order" as
defined in Code Section 414(p) which provides
otherwise), or
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(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a
Beneficiary shall be made on a form satisfactory to the
Administrator. A Participant may at any time revoke his
designation of a Beneficiary or change his Beneficiary by
filing written notice of such revocation or change with the
Administrator. However, the Participant's spouse must again
consent in writing to any change in Beneficiary unless the
original consent acknowledged that the spouse had the right to
limit consent-only to a specific Beneficiary and that the
spouse voluntarily elected to relinquish such right. In the
event no valid designation of Beneficiary exists at the time
of the Participant's death, the death benefit shall be payable
to his estate.
(e) Any consent by the Participant's spouse to waive
any rights to the death benefit must be in writing, must
acknowledge the effect of such waiver, and be witnessed by a
Plan representative or a notary public. Further, the spouse's
consent must be irrevocable and must acknowledge the specific
nonspouse Beneficiary.
7.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability
prior to his Retirement Date or other termination of his employment, all amounts
credited to such Participant's Account shall become fully Vested. In the event
of a Participant's Total and Permanent Disability, the Trustee, in accordance
with the provisions of Sections 7.5 and 7.6, shall distribute to such
Participant all amounts credited to such Participant's Account as though he had
retired. If such Participant elects, distribution shall commence not later than
one (l) year after the close of the Plan Year in which Total and Permanent
Disability occurs.
7.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with
or subsequent to the termination of a Participant's employment
for any reason other than death, Total and Permanent
Disability or retirement, the Administrator may direct the
Trustee to segregate the amount of the Vested portion of such
Terminated
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Participant's Account and invest the aggregate amount thereof
in a separate, federally insured savings account, certificate
of deposit, common or collective trust fund of a bank or a
deferred annuity. In the event the Vested portion of a
Participant's Account is not segregated, the amount shall
remain in a separate account for the Terminated Participant
and share in allocations pursuant to Section 4.3 until such
time as a distribution is made to the Terminated Participant.
If a portion of a Participant's Account is forfeited,
Company Stock allocated to the Participant's Company Stock
Account must be forfeited only after the Participant's Other
Investments Account has been depleted. If interest in more
than one class of Company Stock has been allocated to a
Participant's Account, the Participant must be treated as
forfeiting the same proportion of each such class.
Distribution of the funds due to a Terminated
Participant shall be made on the occurrence of an event which
would result in the distribution had the Terminated
Participant remained in the employ of the Employer (upon the
Participant's death, Total and Permanent Disability, Early or
Normal Retirement). However, at the election of the
Participant, the Administrator shall direct the Trustee to
cause the entire Vested portion of the Terminated
Participant's Account to be payable to such Terminated
Participant as soon as administratively feasible after the
anniversary date following termination of employment.
Distribution to a Participant shall not include any Company
Stock acquired with the proceeds of an Exempt Loan until the
close of the Plan Year in which such loan is repaid in full.
Any distribution under this paragraph shall be made in a
manner which is consistent with and satisfies the provisions
of Sections 7.5 and 7.6, including, but not limited to, all
notice and consent requirements of Code Section 411(a)(11) and
the Regulations thereunder.
If the value of a Terminated Participant's Vested
benefit derived from Employer and Employee contributions does
not exceed $3,500 and has never exceeded $3,500 at the time of
any prior distribution, the Administrator shall direct the
Trustee to cause the entire Vested benefit to be paid to such
Participant in a single lump sum.
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For purposes of this Section 7.4, if the
value of a Terminated Participant's Vested benefit is zero,
the Terminated Participant shall be deemed to have received a
distribution of such Vested benefit.
(b) The Vested portion of any Participant's Account
shall be a percentage of the total amount credited to his
Participant's Account determined on the basis of the
Participant's number of Years of Service according to the
following schedule:
Vesting Schedule
Years of Service Percentage
Less than 5 0%
5 100%
(c) Notwithstanding the vesting schedule provided for
in paragraph (b) above, for any Top Heavy Plan Year, the
Vested portion of the Participant's Account of any Participant
who has an Hour of Service after the Plan becomes top heavy
shall be a percentage of the total amount credited to his
Participant's Account determined on the basis of the
Participant's number of Years of Service according to the
following schedule:
Vesting Schedule
Years of Service Percentage
Less than 3 0%
3 100%
If in any subsequent Plan Year, the Plan ceases to be a Top
Heavy Plan, the Administrator shall revert to the vesting schedule in effect
before this Plan became a Top Heavy Plan. Any such reversion shall be treated as
a Plan amendment pursuant to the terms of the Plan.
(d) Notwithstanding the vesting schedule above, the
Vested percentage of a Participant's Account shall not be less
than the Vested percentage attained as of the later of the
effective date or adoption date of this amendment and
restatement.
(e) Notwithstanding the vesting schedule above, upon
the complete discontinuance of the Employer's contributions to
the Plan or upon any full or partial
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termination of the Plan, all amounts credited to the account
of any affected Participant shall become 100% Vested and shall
not thereafter be subject to Forfeiture.
(f) The computation of a Participant's nonforfeitable
percentage of his interest in the Plan shall not be reduced as
the result of any direct or indirect amendment to this Plan.
For this purpose, the Plan shall be treated as having been
amended if the Plan provides for an automatic change in
vesting due to a change in top heavy status. In the event that
the Plan is amended to change or modify any vesting schedule,
a Participant with at least three (3) Years of Service as of
the expiration date of the election period may elect to have
his nonforfeitable percentage computed under the Plan without
regard to such amendment. If a Participant fails to make such
election, then such Participant shall be subject to the new
vesting schedule. The Participant's election period shall
commence on the adoption date of the amendment and shall end
60 days after the latest of:
(l) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(g) (l) If any Former Participant shall be reemployed
by the Employer before a l-Year Break in Service occurs, he
shall continue to participate in the Plan in the same manner
as if such termination had not occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive l-Year Breaks in Service,
and such Former Participant had received, or was deemed to
have received, a distribution of his entire Vested interest
prior to his reemployment, his forfeited account shall be
reinstated only if he repays the full amount distributed to
him before the earlier of five (5) years after the first date
on which the Participant is subsequently reemployed by the
Employer or the close of the first period of five (5)
consecutive l-Year
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Breaks in Service commencing after the distribution, or in the
event of a deemed distribution, upon the reemployment of such
Former Participant. In the event the Former Participant does
repay the full amount distributed to him, or in the event of a
deemed distribution, the undistributed portion of the
Participant's Account must be restored in full, unadjusted by
any gains or losses occurring subsequent to the Anniversary
Date or other valuation date coinciding with or preceding his
termination. The source for such reinstatement shall first be
any Forfeitures occurring during the year. If such source is
insufficient, then the Employer shall contribute an amount
which is sufficient to restore any such forfeited Accounts
provided, however, that if a discretionary contribution is
made for such year, such contribution shall first be applied
to restore any such Accounts and the remainder shall be
allocated in accordance with Section 4.3.
(3) If any Former Participant is reemployed after a l-Year
Break in Service has occurred, Years of Service shall include
Years of Service prior to his l-Year Break in Service subject
to the following rules:
(i) If a Former Participant has a l-Year Break in
Service, his pre-break and post-break service shall
be used for computing Years of Service for
eligibility and for vesting purposes only after he
has been employed for one (l) Year of Service
following the date of his reemployment with the
Employer;
(ii) Any Former Participant who under the Plan does
not have a nonforfeitable right to any interest in
the Plan resulting from Employer contributions shall
lose credits otherwise allowable under (i) above if
his consecutive l-Year Breaks in Service equal or
exceed the greater of (A) five (5) or (B) the
aggregate number of his pre-break Years of Service;
(iii) After five (5) consecutive l-Year Breaks in
Service, a Former Participant's
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Vested Account balance attributable to pre-break
service shall not be increased as a result of post-break
service;
(iv) If a Former Participant who has not had his Years of
Service before a l-Year Break in Service disregarded pursuant
to (ii) above completes one (l) Year of Service for
eligibility purposes following his reemployment with the
Employer, he shall participate in the Plan retroactively from
his date of reemployment;
(v) If a Former Participant who has not had his Years of
Service before a l-Year Break in Service disregarded pursuant
to (ii) above completes a Year of Service (a l-Year Break in
Service previously occurred, but employment had not
terminated), he shall participate in the Plan retroactively
from the first day of the Plan Year during which he completes
one (l) Year of Service.
7.5 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election of the Participant (or
if no election has been made prior to the Participant's death, by his
Beneficiary), shall direct the Trustee to distribute to a Participant
or his Beneficiary any amount to which he is entitled under the Plan in
one lump-sum payment.
(b) Any distribution to a Participant who has a benefit which exceeds,
or has ever exceeded, $3,500 at the time of any prior distribution
shall require such Participant's consent if such distribution occurs
prior to the later of his Normal Retirement Age or age 62. With regard
to this required consent:
(l) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to
consent, it shall be deemed an election to defer the
distribution of any benefit. However, any election to defer
the receipt of benefits shall not apply with respect to
distributions which are required under Section 7.5(e)
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(2) Notice of the rights specified under this paragraph shall
be provided no less than 30 days and no more than 90 days
before the first day on which all events have occurred which
entitle the Participant to such benefit.
(3) Written consent of the Participant to the distribution
must not be made before the Participant receives the notice
and must not be made more than 90 days before the first day on
which all events have occurred which entitle the Participant
to such benefit.
(4) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent
to the distribution.
If a distribution is one to which Code Sections
401(a)(1l) and 417 do not apply, such distribution may
commence less than 30 days after the notice required under
Regulation 1.411(a)-11(c) is given, provided that (1) the
Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or
not to elect a distribution (and, if applicable, a particular
distribution option), and (2) the Participant, after receiving
the notice, affirmatively elects a distribution.
(c) Notwithstanding anything herein to the contrary, the
Administrator, in his sole discretion, may direct that cash dividends
on shares of Company Stock allocable to Participants' or Former
Participants' Company Stock Accounts be distributed to such
Participants or Former Participants within 90 days after the close of
the Plan Year in which the dividends are paid.
(d) Any part of a Participant's benefit which is retained in
the Plan after the Anniversary Date on which his participation ends
will continue to be treated as a Company Stock Account or as an Other
Investments Account (subject to Section 7.4(a)) as provided in Article
IV. However, neither account will be credited with any further Employer
contributions or Forfeitures.
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(e) Notwithstanding any provision in the Plan to the contrary,
the distribution of a Participant's benefits shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder (including
Regulation 1.401(a)(9)-2), the provisions of which are incorporated
herein by reference:
(l) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the later
of (i) the calendar year in which the Participant attains age
70 1/2 or (ii) the calendar year in which the Participant
retires, provided, however, that this clause (ii) shall not
apply in the case of a Participant who is a "five (5) percent
owner" at any time during the five (5) Plan Year period ending
in the calendar year in which he attains age 70 1/2 or, in the
case of a Participant who becomes a "five (5) percent owner"
during any subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be the April 1st
of the calendar year following the calendar year in which such
subsequent Plan Year ends. Notwithstandinq the foregoing,
clause (ii) above shall not apply to any Participant unless
the Participant had attained age 70 1/2 before January 1, 1988
and was not a "five (5) percent owner" at any time during the
Plan Year ending with or within the calendar year in which the
Participant attained age 66 1/2 or any subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
(f) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder. If it is
determined pursuant to Regulations that the distribution of a
Participant's interest has begun and the Participant dies before his
entire interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as
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under the method of distribution selected pursuant to Section 7.5 as of
his date of death. If a Participant dies before he has begun to receive
any distributions of his interest under the Plan or before
distributions are deemed to have begun pursuant to Regulations, then
his death benefit shall be distributed to his Beneficiaries by December
31st of the calendar year in which the fifth anniversary of his date of
death occurs.
(g) Except as limited by Sections 7.5 and 7.6, whenever the
Trustee is to make a distribution on or as of an Anniversary Date, the
distribution may be made on such date or as soon thereafter as is
practicable. However, unless a Former Participant elects in writing to
defer the receipt of benefits (such election may not result in a death
benefit that is more than incidental), the payment of benefits shall
occur not later than the 60th day after the close of the Plan Year in
which the latest of the following events occurs:
(l) the date on which the Participant attains the earlier of
age 65 or the Normal Retirement Age specified herein;
(2) the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or
(3) the date the Participant terminates his service with the
Employer.
(h) If a distribution is made at a time when a Participant is
not fully Vested in his Participant's Account (employment has not
terminated) and the Participant may increase the Vested percentage in
such account:
(l) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
(2) at any relevant time, the Participant's Vested portion of
the separate account shall be equal to an amount ("X")
determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
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For purposes of applying the formula: P is the Vested
percentage at the relevant time, AB is the account balance at the
relevant time, D is the amount of distribution, and R is the ratio of
the account balance at the relevant time to the account balance after
distribution.
7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED
(a) Distribution of a Participant's benefit may be made in
cash or Company Stock or both, provided, however, that if a Participant
or Beneficiary so demands, such benefit shall be distributed only in
the form of Company Stock. Prior to making a distribution of benefits,
the Administrator shall advise the Participant or his Beneficiary, in
writing, of the right to demand that benefits be distributed solely in
Company Stock.
(b) If a Participant or Beneficiary demands that benefits be
distributed solely in Company Stock, distribution of a Participant's
benefit will be made entirely in whole shares or other units of Company
Stock. Any balance in a Participant's Other Investments Account will be
applied to acquire for distribution the maximum number of whole shares
or other units of Company Stock at the then fair market value. Any
fractional unit value unexpended will be distributed in cash. If
Company Stock is not available for purchase by the Trustee, then the
Trustee shall hold such balance until Company Stock is acquired and
then make such distribution, subject to Sections 7.5(g) and 7.5(e).
(c) The Trustee will make distribution from the Trust only on
instructions from the Administrator.
(d) Notwithstanding anything contained herein to the contrary,
if the Employer's charter or by-laws restrict ownership of
substantially all shares of Comany Stock to Employees and the Trust
Fund, as described in Code Section 409(h)(2), the Administrator shall
distribute a Participant's Account entirely in cash without granting
the Participant the right to demand distribution in shares of Company
Stock.
(e) Except as otherwise provided herein, Company Stock
distributed by the Trustee may be restricted as to sale or transfer by
the by-laws or articles of incorporation of the Employer, provided
restrictions
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are applicable to all Company Stock of the same class. If a Participant
is required to offer the sale of his Company Stock to the Employer
before offering to sell his Company Stock to a third party, in no event
may the Employer pay a price less than that offered to the distributee
by another potential buyer making a bona fide offer and in no event
shall the Trustee pay a price less than the fair market value of the
Company Stock.
(f) If Company Stock acquired with the proceeds of an Exempt
Loan (described in Section 5.4 hereof) is available for distribution
and consists of more than one class, a Participant or his Beneficiary
must receive substantially the same proportion of each such class.
7.7 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored.
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7.9 RIGHT OF FIRST REFUSALS
(a) If any Participant, his Beneficiary or any other person to whom
shares of Company Stock are distributed from the Plan (the "Selling
Participant") shall, at any time, desire to sell some or all of such shares (the
"Offered Shares") to a third party (the "Third Party"), the Selling Participant
shall give written notice of such desire to the Employer and the Administrator,
which notice shall contain the number of shares offered for sale, the proposed
terms of the sale and the names and addresses of both the Selling Participant
and Third Party. Both the Trust Fund and the Employer shall each have the right
of first refusal for a period of fourteen (14) days from the date the Selling
Participant gives such written notice to the Employer and the Administrator
(such fourteen (14) day period to run concurrently against the Trust Fund and
the Employer) to acquire the Offered Shares. As between the Trust Fund and the
Employer, the Trust Fund shall have priority to acquire the shares pursuant to
the right of first refusal. The selling price and terms shal be the same as
offered by the Third Party.
(b) If the Trust Fund and the Employer do not exercise their right of
first refusal within the required fourteen (14) day period provided above, the
Selling Participant shall have the right, at any time following the expiration
of such fourteen (14) day period, to dispose of the Offered Shares to the Third
Party; provided, however, that (i) no disposition shall be made to the Third
Party on terms more favorable to the Third Party than those set forth in the
written notice delivered by the Selling Participant above, and (ii) if such
disposition shall not be made to a third party on the terms offered to the
Employer and the Trust Fund, the offered Shares shall again be subject to the
right of first refusal set forth above.
(c) The closinq pursuant to the exercise of the right of first refusal
under Section 7.9(a) above shall take place at such place agreed upon between
the Administrator and the Selling Participant, but not later than ten (10) days
after the Employer or the Trust Fund shall have notified the Selling Participant
of the exercise of the right of first refusal. At such closing, the Selling
Participant shall deliver certificates representing the Offered Shares duly
endorsed in blank for transfer, or with stock powers
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attached duly executed in blank with all required transfer tax stamps attached
or provided for, and the Employer or the Trust Fund shall deliver the purchase
price, or an appropriate portion thereof, to the Selling Participant.
(d) Except as provided in this paragraph (d), no Company Stock acquired
with the proceeds of an Exempt Loan complying with the requirements of Section
5.4 hereof shall be subject to a right of first refusal. Company Stock acquired
with the proceeds of an Exempt Loan, which is distributed to a Participant or
Beneficiary, shall be subject to the right of first refusal provided for in
paragraph (a) of this Section only so long as the Company Stock is not publicly
traded. The term "publicly traded" refers to a securities exchange registered
under Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) or that
is quoted on a system sponsored by a national securities association registered
under Section 15A(b) of the Securities Exchange Act (15 U.S.C. 780). In
addition, in the case of Company Stock which was acquired with the proceeds of a
loan described in Section 5.4, the selling price and other terms under the right
must not be less favorable to the seller than the greater of the value of the
security determined under Section 6.2, or the purchase price and other terms
offered by a buyer (other than the Employer or the Trust Fund), making a good
faith offer to purchase the security. The right of first refusal must lapse no
later than fourteen (14) days after the security holder gives notice to the
holder of the right that an offer by a third party to purchase the security has
been made. The right of first refusal shall comply with the provisions of
paragraphs (a), (b) and (c) of this Section, except to the extent those
provisions may conflict with the provisions of this paragraph.
(e) If Company Stock is distributed to a Participant or Beneficiary and
such security is not "publicly traded" as defined in Section 7.9(d) above, the
Trust Fund and the Employer shall have a call to purchase such security from
such former Participant or his Beneficiary at any time at the value of the
security determined under Section 6.2 above; provided, however, that this call
option, if not sooner exercised, shall lapse as to any securities at the time
that the Participant or Beneficiary shall give written notice of his desire to
sell such securities to a third
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party pursuant to Section 7.9(a) above, and the provisions of Sections
7.9(a)-(d) above shall govern thereafter.
(f) The closing pursuant to the exercise of the call option under
Section 7.9(e) above shall take place at such place agreed upon between the
Administrator and the Participant or Beneficiary, but not later than ten (10)
days after the Employer or the Trust Fund shall have notified the Participant or
Beneficiary of the exercise of the call right. At such closing, the Participant
or Beneficiary shall deliver certificates representing the security duly
endorsed in blank for transfer, or with stock powers attached duly executed in
blank with all required transfer tax stamps attached or provided for, and the
Employer or the Trust Fund shall deliver the purchase price to the Participant
or Beneficiary.
7.10 STOCK CERTIFICATE LEGEND
Certificates for shares distributed pursuant to the Plan shall contain
the following legend:
"The shares represented by this certificate are transferable only upon
compliance with the terms of THE PALMETTO BANK EMPLOYEE STOCK OWNERSHIP PLAN AND
TRUST effective as of January 1, 1989, which grants to The Palmetto Bank a right
of first refusal, a copy of said Plan being on file in the office of the
Company."
7.11 PUT OPTION
(a) If Company Stock which was not acquired with the proceeds of an
Exempt Loan is distributed to a Participant and such Company Stock is not
readily tradeable on an established securities market, a Participant has a right
to require the Employer to repurchase the Company Stock distributed to such
Participant under a fair valuation formula. Such Stock shall be subject to the
provisions of Section 7.11(c).
(b) Company Stock which is acquired with the proceeds of an Exempt Loan
and which is not publicly traded when distributed, or if it is subject to a
trading limitation when distributed, must be subject to a put option. For
purposes of this paragraph, a "trading limitation" on a Company Stock is a
restriction under any Federal or State securities law
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or any regulation thereunder, or an agreement (not prohibited by Section 7.12)
affecting the Company Stock which would make the Company Stock not as freely
tradeable as stock not subject to such restriction.
(c) The put option must be exercisable only by a Participant, by the
Participant's donees, or by a person (including an estate or its distributee) to
whom the Company Stock passes by reason of a Participant's death. (Under this
paragraph Participant or Former Participant means a Participant or Former
Participant and the beneficiaries of the Participant or Former Participant under
the Plan.) The put option must permit a Participant to put the Company Stock to
the Employer. Under no circumstances may the put option bind the Plan. However,
it shall grant the Plan an option to assume the rights and obligations of the
Employer at the time that the put option is exercised. If it is known at the
time a loan is made that Federal or State law will be violated by the Employer's
honoring such put option, the put option must permit the Company Stock to be
put, in a manner consistent with such law, to a third party (e.g., an affiliate
of the Employer or a shareholder other than the Plan) that has substantial net
worth at the time the loan is made and whose net worth is reasonably expected to
remain substantial.
The put option shall commence as of the day following the date the
Company Stock is distributed to the Former Participant and end 60 days
thereafter and if not exercised within such 60-day period, an additional 60-day
option shall commence on the first day of the fifth month of the Plan Year next
following the date the stock was distributed to the Former Participant (or such
other 60-day period as provided in regulations promulgated by the Secretary of
the Treasury). However, in the case of Company Stock that is publicly traded
without restrictions when distributed but ceases to be so traded within either
of the 60-day periods described herein after distribution, the Employer must
notify each holder of such Company Stock in writing on or before the tenth day
after the date the Company Stock ceases to be so traded that for the remainder
of the applicable 60-day period the Company Stock is subject to the put option.
The number of days between the tenth day and the date on which notice is
actually given, if later than the tenth day, must be added to the duration of
the put option. The notice must inform distributees of the term of the put
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options that they are to hold. The terms must satisfy the requirements of this
paragraph.
The put option is exercised by the holder notifying the Employer in
writing that the put option is being exercised; the notice shall state the name
and address of the holder and the number of shares to be sold. The period during
which a put option is exercisable does not include any time when a distributee
is unable to exercise it because the party bound by the put option is prohibited
from honoring it by applicable Federal or State law. The price at which a put
option must be exercisable is the value of the Company Stock determined in
accordance with Section 6.2. Payment under the put option involving a "Total
Distribution" shall be paid in substantially equal monthly, quarterly,
semiannual or annual installments over a period certain beginning not later than
thirty (30) days after the exercise of the put option and not extending beyond
(5) years. The deferral of payment is reasonable if adequate security and a
reasonable interest rate on the unpaid amounts are provided. The amount to be
paid under the put option involving installment distributions must be paid not
later than thirty (30) days after the exercise of the put option. Payment under
a put option must not be restricted by the provisions of a loan or any other
arrangement, including the terms of the Employer's articles of incorporation,
unless so required by applicable state law.
For purposes of this Section, "Total Distribution" means a distribution
to a Participant or his Beneficiary within one taxable year of the entire Vested
Participant's Account.
(d) An arrangement involving the Plan that creates a put option must
not provide for the issuance of put options other than as provided under this
Section. The Plan (and the Trust Fund) must not otherwise obligate itself to
acquire Company Stock from a particular holder thereof at an indefinite time
determined upon the happening of an event such as the death of the holder.
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7.12 NONTERMINABLE PROTECTIONS AND RIGHTS
No Company Stock, except as provided in Section 4.3(o) and Section 7.11
(b), acquired with the proceeds of a loan described in Section 5.4 hereof may be
sub ject to a put, call, or other option, or buy-sell or similar arrangement
when held by and when distributed from the Trust Fund, whether or not the Plan
is then an ESOP. The protections and rights granted in this Section are
nonterminable, and such protections and rights shall continue to exist under the
terms of this Plan so long as any Company Stock acquired with the proceeds of a
loan described in Section 5.4 hereof is held by the Trust Fund or by any
Participant or other person for whose benefit such protections and rights have
been created, and neither the repayment of such loan nor the failure of the Plan
to be an ESOP, nor an amendment of the Plan shall cause a termination of said
protections and rights.
7.13 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the age of 65 years,
the Administrator, at the election of the Participant, shall direct the Trustee
to distribute all or a portion of the amount then credited to the accounts
maintained on behalf of the Participant. However, no distribution from the
Participant's Account shall occur prior to 100% vesting. In the event that the
Administrator makes such a distribution, the Participant shall continue to be
eligible to participate in the Plan on the same basis as any other Employee. Any
distribution made pursuant to this Section shall be made in a manner consistent
with Sections 7.5 and 7.6, including, but not limited to, all notice and
consent requirements of Code Section 411(a) (11) and the Regulations thereunder.
7 .14 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant
in this Plan shal 1 be subject to the rights afforded to any "alternate payee"
under a "qualified domestic relations order. "Furthermore, a distribution to an
"alternate payee" shall be Permitted if such distribution is authorized by a
"qualified domestic relations order, " even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest retirement age" shall have the meaning
set forth under Code Section 414(p).
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ARTICLE VIII
TRUSTEE
8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of
responsibilities:
(a) Consistent with the "funding policy and method"
determined by the Employer, to invest, manage, and control the
Plan assets subject, however, to the direction of an
Investment Manager if the Trustee should appoint such-manager
as to all or a portion of the assets of the Plan;
(b) At the direction of the Administrator, to pay
benefits required under the Plan to be paid to Participants,
or, in the event of their death, to their Beneficiaries;
(c) To maintain records of receipts and disbursements
and furnish to the Employer and/or Administrator for each
Plan Year a written annual report per Section 8.7; and
(d) If there shall be more than one Trustee, they
shall act by a majority of their number, but may authorize
one or more of them to sign papers on their behalf.
8.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust
Fund to keep the Trust Fund invested without distinction
between principal and income and in such securities or
property, real or personal, wherever situated, as the Trustee
shall deem advisable, including, but not limited to, stocks,
common or preferred, bonds and other evidences of indebtedness
or ownership, and real estate or any interest therein. The
Trustee shall at all times in making investments of the Trust
Fund consider, among other factors, the short and long-term
financial needs of the Plan on the basis of information
furnished by the Employer. In making such investments, the
Trustee shall not be restricted to securities or other
property of the character expressly authorized by the
applicable law for trust investments; however, the Trustee
shall give due regard to any limitations imposed by the Code
or the Act so that at all times the Plan may qualify as an
Employee Stock
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Ownership Plan and Trust.
(b) The Trustee may employ a bank or trust company
pursuant to the terms of its usual and customary bank agency
agreement, under which the duties of such bank or trust
company shall be of a custodial, clerical and record-keeping
nature.
(c) The Trustee may from time to time with the
consent of the Employer transfer to a common, collective, or
pooled trust fund maintained by any corporate Trustee
hereunder, all or such part of the Trust Fund as the Trustee
may deem advisable, and such part or all of the Trust Fund so
transferred shall be subject to all the terms and provisions
of the common, collective, or pooled trust fund which
contemplate the commingling for investment purposes of such
trust assets with trust assets of other trusts. The Trustee
may, from time to time with the consent of the Employer,
withdraw from such common, collective, or pooled trust fund
all or such part of the Trust Fund as the Trustee may deem
advisable.
(d) In the event the Trustee invests any part of the
Trust Fund, pursuant to the directions of the Administrator,
in any shares of stock issued by the Employer, and the
Administrator thereafter directs the Trustee to dispose of
such investment, or any part thereof, under circumstances
which, in the opinion of counsel for the Trustee, require
registration of the securities under the Securities Act of
1933 and/or qualification of the securities under the Blue Sky
laws of any state or states, then the Employer at its own
expense, will take or cause to be taken any and all such
action as may be necessary or appropriate to effect such
registration and/or qualification.
8.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under
common law, statutory authority, including the Act, and other provisions of the
Plan, shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other property and to
retain the same. In conjunction with the purchase of securities, margin accounts
may be opened and maintained;
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(b) To sell, exchange, convey, transfer, grant
options to purchase, or otherwise dispose of any securities or
other property held by the Trustee, by private contract or at
public auction. No person dealing with the Trustee shall be
bound to see to the application of the purchase money or to
inquire into the validity, expediency, or propriety of any
such sale or other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other
securities; to give general or special proxies or powers of
attorney with or without power of substitution; to exercise
any conversion privileges, subscription rights or other
options, and to make any payments incidental thereto; to
oppose, or to consent to, or otherwise participate in,
corporate reorganizations or other changes affecting corporate
securities, and to delegate discretionary powers, and to pay
any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with
respect to stocks, bonds, securities, or other property;
(d) To cause any securities or other property to be
registered in the Trustee's own name or in the name of one or
more of the Trustee's nominees, and to hold any investments in
bearer form, but the books and records of the Trustee shall at
all times show that all such investments are part of the Trust
Fund;
(e) To borrow or raise money for the purposes of the
Plan in such amount, and upon such terms and conditions, as
the Trustee shall deem advisable; and for any sum so borrowed,
to issue a promissory note as Trustee, and to secure the
repayment thereof by pledging all, or any part, of the Trust
Fund; and no person lending money to the Trustee shall be
bound to see to the application of the money lent or to
inquire into the validity, expediency, or propriety of any
borrowing;
(f) To keep such portion of the Trust Fund in cash or
cash balances as the Trustee may, from time to time, deem to
be in the best interests of the Plan, without liability for
interest thereon;
(g) To accept and retain for such time as the Trustee
may deem advisable any securities or other property received
or acquired as Trustee hereunder,
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whether or not such securities or other property would
normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any
and all documents of transfer and conveyance and any and all
other instruments that may be necessary or appropriate to
carry out the powers herein granted;
(i) To settle, compromise, or submit to arbitration
any claims, debts, or damages due or owing to or from the
Plan, to commence or defend suits or legal or administrative
proceedings, and to represent the Plan in all suits and legal
and administrative proceedings;
(j) To employ suitable agents and counsel and to pay
their reasonable expenses and compensation, and such agent or
counsel may or may not be agent or counsel for the Employer;
(k) To apply for and procure from responsible
insurance companies, to be selected by the Administrator, as
an investment of the Trust Fund such annuity, or other
Contracts (on the life of any Participant) as the
Administrator shall deem proper; to exercise, at any time or
from time to time, whatever rights and privileges may be
granted under such annuity, or other Contracts; to collect,
receive, and settle for the proceeds of all such annuity or
other Contracts as and when entitled to do so under the
provisions thereof;
(l) To invest funds of the Trust in time deposits or
savings accounts bearing a reasonable rate of interest in the
Trustee's bank;
(m) To invest in Treasury Bills and other forms of
United States government obligations;
(n) To invest in shares of investment companies
registered under the Investment Company Act of 1940;
(o) To deposit monies in federally insured savings
accounts or certificates of deposit in banks or savings and
loan associations;
(p) To vote Company Stock as provided in Section 8.4;
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(q) To consent to or otherwise participate in
reorganizations, recapitalizations, consolidations, mergers
and similar transactions with respect to Company Stock or any
other securities and to pay any assessments or charges in
connection therewith;
(r) To deposit such Company Stock (but only if such
deposit does not violate the provisions of Section 8.4 hereof)
or other securities in any voting trust, or with any
protective or like committee, or with a trustee or with
depositories designated thereby;
(s) To sell or exercise any options, subscription
rights and conversion privileges and to make any payments
incidental thereto;
(t) To exercise any of the powers of an owner, with
respect to such Company Stock and other securities or other
property comprising the Trust Fund. The Administrator, with
the Trustee's approval, may authorize the Trustee to act on
any administrative matter or class of matters with respect to
which direction or instruction to the Trustee by the
Administrator is called for hereunder without specific
direction or other instruction from the Administrator;
(u) To sell, purchase and acquire put or call options
if the options are traded on and purchased through a national
securities exchange registered under the Securities Exchange
Act of 1934, as amended, or, if the options are not traded on
a national securities exchange, are guaranteed by a member
firm of the New York Stock Exchange;
(v) To do all such acts and exercise all such rights
and privileges, although not specifically mentioned herein, as
the Trustee may deem necessary to carry out the purposes of
the Plan.
8.4 VOTING COMPANY STOCK
The Trustee shall vote all Company Stock held by it as part of the Plan assets
at such time and in such manner as the Administrator shall direct. Provided,
however, that if any agreement entered into by the Trust provides for voting of
any shares of Company Stock pledged as security for any obligation of the Plan,
then such shares of Company Stock shall be voted in accordance with such
agreement. If the Administrator fails or refuses to give the Trustee timely
instructions as to how to vote
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any Company Stock as to which the Trustee otherwise has the right to vote, the
Trustee shall not exercise its power to vote such Company Stock and shall
consider the Administrator's failure or refusal to give timely instructions as
an exercise of the Administrator's rights and a directive to the Trustee not to
vote said Company Stock. The Trustee shall not vote Company Stock which a
Participant or Beneficiary fails to exercise pursuant to this Section.
Notwithstanding the foregoing, if the Employer has a registration-type
class of securities or, with respect to Company Stock acquired by, or
transferred to, the Plan in connection with a securities acquisition loan (as
defined in Code Section 133(b)) after July 10, 1989, each Participant or
Beneficiary shall be entitled to direct the Trustee as to the manner in which
the Company Stock which is entitled to vote and which is allocated to the
Company Stock Account of such Participant or Beneficiary is to be voted. If the
Employer does not have a registration-type class of securities, with respect to
Company Stock other than Company Stock acquired by, or transferred to, the Plan
in connection with a securities acquisition loan (as defined in Code Section
133(b)) after July 10, 1989, each Participant or Beneficiary in the Plan shall
be entitled to direct the Trustee as to the manner in which voting rights on
shares of Company Stock which are allocated to the Company Stock Account of such
Participant or Beneficiary are to be exercised with respect to any corporate
matter which involves the voting of such shares with respect to the approval or
disapproval of any corporate merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially all assets of
a trade or business, or such similar transaction as prescribed in Regulations.
For purposes of this Section the term "registration-type class of securities"
means: (A) a class of securities required to be registered under Section 12 of
the Securities Exchange Act of 1934; and (B) a class of securities which would
be required to be so registered except for the exemption from registration
provided in subsection (g)(2)(H) of such Section 12.
If the Employer does not have a registration-type class of securities and the
by-laws of the Employer require the Plan to vote an issue in a manner that
reflects a one-man, one-vote philosophy, each Participant or Beneficiary shall
be entitled to cast one vote on an issue and the Trustee shall vote the shares
held by the Plan in proportion to the results of the votes cast on the issue by
the Participants and Beneficiaries.
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8.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
(a) The Trustee shall make distributions from the
Trust Fund at such times and in such numbers of shares or
other units of Company Stock and amounts of cash to or for the
benefit of the person entitled thereto under the Plan as the
Administrator directs in writing. Any undistributed part of a
Participant's interest in his accounts shall be retained in
the Trust Fund until the Administrator directs its
distribution. Where distribution is directed in Company Stock,
the Trustee shall cause an appropriate certificate to be
issued to the person entitled thereto and mailed to the
address furnished it by the Administrator. Any portion of a
Participant's Account to be distributed in cash shall be paid
by the Trustee mailing its check to the same person at the
same address. If a dispute arises as to who is entitled to or
should receive any benefit or payment, the Trustee may
withhold or cause to be withheld such payment until the
dispute has been resolved.
(b) As directed by the Administrator, the Trustee
shall make payments out of the Trust Fund. Such directions or
instructions need not specify the purpose of the payments so
directed and the Trustee shall not be responsible in any way
respecting the purpose or propriety of such payments except as
mandated by the Act.
(c) In the event that any distribution or payment
directed by the Administrator shall be mailed by the Trustee
to the person specified in such direction at the latest
address of such person filed with the Administrator, and shall
be returned to the Trustee because such person cannot be
located at such address, the Trustee shall promptly notify the
Administrator of such return. Upon the expiration of sixty
(60) days after such notification, such direction shall become
void and unless and until a further direction by the
Administrator is received by the Trustee with respect to such
distribution or payment, the Trustee shall thereafter continue
to administer the Trust as if such direction had not been made
by the Administrator. The Trustee shall not be obligated to
search for or ascertain the whereabouts of any such person.
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8.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as
shall from time to time be agreed upon in writing by the Employer and the
Trustee. An individual serving as Trustee who already receives full-time pay
from the Employer shall not receive compensation from the Plan. In addition, the
Trustee shall be reimbursed for any reasonable expenses, including reasonable
counsel fees incurred by it as Trustee. Such compensation and expenses shall be
paid from the Trust Fund unless paid or advanced by the Employer. All taxes of
any kind and all kinds whatsoever that may be levied or assessed under existing
or future laws upon, or in respect of, the Trust Fund or the income thereof,
shall be paid from the Trust Fund.
8.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the
Anniversary Date or receipt of the Employer's contribution for each Plan Year,
the Trustee shall furnish to the Employer and Administrator a written statement
of account with respect to the Plan Year for which such contribution was made
setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund
upon sales or other disposition of the assets;
(c) the increase, or decrease, in the value of the
Trust Fund;
(d) all payments and distributions made from the
Trust Fund; and
(e) such further information as the Trustee and/or
Administrator deems appropriate. The Employer, forthwith upon
its receipt of each such statement of account, shall
acknowledge receipt thereof in writing and advise the Trustee
and/or Administrator of its approval or disapproval thereof.
Failure by the Employer to disapprove any such statement of
account within thirty (30) days after its receipt thereof
shall be deemed an approval thereof. The approval by the
Employer of any statement of account shall be binding as to
all matters embraced therein as between the Employer and the
Trustee to the same extent as if the account of the Trustee
had been settled by judgment or decree in an action for a
judicial settlement of its account in a court of competent
jurisdiction in which
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the Trustee, the Employer and all persons having or claiming
an interest in the Plan were parties; provided, however, that
nothing herein contained shall deprive the Trustee of its
right to have its accounts judicially settled if the Trustee
so desires.
8.8 AUDIT
(a) If an audit of the Plan's records shall be
required by the Act and the regulations thereunder for any
Plan Year, the Administrator shall direct the Trustee to
engage on behalf of all Participants an independent qualified
public accountant for that purpose. Such accountant shall,
after an audit of the books and records of the Plan in
accordance with generally accepted auditing standards, within
a reasonable period after the close of the Plan Year, furnish
to the Administrator and the Trustee a report of his audit
setting forth his opinion as to whether any statements,
schedules or lists that are required by Act Section 103 or the
Secretary of Labor to be filed with the Plan's annual report,
are presented fairly in conformity with generally accepted
accounting principles applied consistently. All auditing and
accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to
enable the Administrator to comply with Act Section 103 is
maintained by a bank, insurance company, or similar
institution, regulated and supervised and subject to periodic
examination by a state or federal agency, it shall transmit
and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one
hundred twenty (120) days after the end of the Plan Year or by
such other date as may be prescribed under regulations of the
Secretary of Labor.
8.9 RESIGNATlON, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering
to the Employer, at least thirty (30) days before its
effective date, a written notice of his resignation.
(b) The Employer may remove the Trustee by mailing by
registered or certified mail, addressed to
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such Trustee at his last known address, at least thirty (30)
days before its effective date, a written notice of his
removal.
(c) Upon the death, resignation, incapacity, or
removal of any Trustee, a successor may be appointed by the
Employer; and such successor, upon accepting such appointment
in writing and delivering same to the Employer, shall, without
further act, become vested with all the estate, rights,
powers, discretions, and duties of his predecessor with like
respect as if he were originally named as a Trustee herein.
Until such a successor is appointed, the remaining Trustee or
Trustees shall have full authority to act under the terms of
the Plan.
(d) The Employer may designate one or more successors
prior to the death, resignation, incapacity, or removal of a
Trustee. In the event a successor is so designated by the
Employer and accepts such designation, the successor shall,
without further act, become vested with all the estate,
rights, powers, discretions, and duties of his predecessor
with the like effect as if he were originally named as Trustee
herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as
such, he shall furnish to the Employer and Administrator a
written statement of account with respect to the portion of
the Plan Year during which he served as Trustee. This
statement shall be either (i) included as part of the annual
statement of account for the Plan Year required under Section
8.7 or (ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no
later than the due date of the annual statement of account for
the Plan Year. The procedures set forth in Section 8.7 for the
approval by the Employer of annual statements of account shall
apply to any special statement of account rendered hereunder
and approval by the Employer of any such special statement in
the manner provided in Section 8.7 shall have the same effect
upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have
any duty or responsibility to investigate the acts or
transactions of any predecessor who has rendered all
statements of account required by Section 8.7 and this
subparagraph.
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8.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan,
the Trustee at the direction of the Administrator shall transfer the Vested
interest, if any, of such Participant in his account to another trust forming
part of a pension, profit sharing or stock bonus plan maintained by such
Participant's new employer and represented by said employer in writing as
meeting the requirements of Code Section 401(a), provided that the trust to
which such transfers are made permits the transfer to be made.
8.11 DIRECT ROLLOVER
(a) This Section 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 Section, a distributee may
elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(b) For purposes of this Section the following
definitions shall apply:
(l) An eligible rollover distribution is any
distribution of all or any portion of the balance to
the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially
equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life
expectancies) of the distributee and the
distributee's designated beneficiary, or for a
specified period of ten years or more; any
distribution to the extent such distribution is
required under Code Section 401(a)(9); 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).
(2) An eligible retirement plan is an individual
retirement account described in Code Section 408(a),
an individual retirement annuity described in Code
Section 408(b), an annuity plan
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described in Code Section 403(a), or a qualified
trust described in Code Section 401(a), that accepts
the distributee's eligible rollover distribution.
However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account
or individual retirement annuity.
(3) A distributee includes an Employee or former
Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p), are
distributees with regard to the interest of the
spouse or former spouse.
(4) A direct rollover is a payment by the plan to the
eligible retirement plan specified by the
distributee.
ARTICLE IX
AMENDMENT, TERMINATION AND MERGERS
9.1 AMENDMENT
(a) The Employer shall have the right at any time to
amend the Plan, subject to the limitations of this Section.
However, any amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may only be
made with the Trustee's and Administrator's written consent.
Any such amendment shall become effective as provided therein
upon its execution. The Trustee shall not be required to
execute any such amendment unless the Trust provisions
contained herein are a part of the Plan and the amendment
affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it
authorizes or permits any part of the Trust Fund (other than
such part as is required to pay taxes and administration
expenses) to be used for or diverted to any purpose other than
for the exclusive benefit of the Participants or their
Beneficiaries or estates; or causes any reduction in the
amount credited to the account of any Participant; or causes
or permits any portion of the Trust Fund to revert to or
become property of the Employer.
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(c) Except as permitted by Regulations, no Plan
amendment or transaction having the effect of a Plan amendment
(such as a merger, plan transfer or similar transaction) shall
be effective to the extent it eliminates or reduces any
"Section 411(d)(6) protected benefit" or adds or modifies
conditions relating to "Section 411(d)(6) protected benefits"
the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to
benefits accrued as of the later of the adoption date or
effective date of the amendment. "Section 411(d)(6) protected
benefits" are benefits described in Code Section 411(d)(6)(A),
early retirement benefits and retirement-type subsidies, and
optional forms of benefit.
In addition, no such amendment shall have the effect of
terminating the protections and rights set forth in Section
7.12, unless such termination shall then be permitted under
the applicable provisions of the Code and Regulations; such a
termination is currently expressly prohibited by Regulation
54.4975-11(a)(3)(ii).
9.2 TERMINATION
(a) The Employer shall have the right at any time to
terminate the Plan by delivering to the Trustee and
Administrator written notice of such termination. Upon any
full or partial termination, all amounts credited to the
affected Participants' Accounts shall become 100% Vested as
provided in Section 7.4 and shall not thereafter be subject to
forfeiture, and all unallocated amounts shall be allocated to
the accounts of all Participants in accordance with the
provisions hereof.
(b) Upon the full termination of the Plan, the
Employer shall direct the distribution of the assets of the
Trust Fund to Participants in a manner which is consistent
with and satisfies the provisions of Sections 7.5 and 7.6.
Except as permitted by Regulations, the termination of the
Plan shall not result in the reduction of "Section 411(d)(6)
protected benefits" in accordance with Section 9.1(c).
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9.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its
assets and/or liabilities may be transferred to any other plan and trust only if
the benefits which would be received by a Participant of this Plan, in the event
of a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 9.1(c).
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between
the Employer and any Participant or to be a consideration or an inducement for
the employment of any Participant or Employee. Nothing contained in this Plan
shall be deemed to give any Participant or Employee the right to be retained in
the service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan
10.2 ALIENATION
(a) Subject to the exceptions provided below, no
benefit which shall be payable out of the Trust Fund to any
person (including a Participant or his Beneficiary) shall be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any
attempt to anticipate, alienate, sell, transfer, assign,
pledge, encumber, or charge the same shall be void; and no
such benefit shall in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements, or torts of
any such person, nor shall it be subject to attachment or
legal process for or against such person, and the same shall
not be recognized by the Trustee, except to such extent as may
be required by law.
(b) This provision shall not apply to a "qualified
domestic relations order" defined in Code Section 414(p), and
those other domestic relations
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orders permitted to be so treated by the Administrator under
the provisions of the Retirement Equity Act of 1984. The
Administrator shall establish a written procedure to determine
the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further,
to the extent provided under a "qualified domestic relations
order," a former spouse of a Participant shall be treated as
the spouse or surviving spouse for all purposes under the
Plan.
10.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according
to the Act and the laws of the State of South Carolina, other than its laws
respecting choice of law, to the extent not preempted by the Act.
10.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine
or neuter gender, they shall be construed as though they were also used in
another gender in all cases where they would so apply, and whenever any words
are used herein in the singular or plural form, they shall be construed as
though they were also used in the other form in all cases where they would so
apply.
10.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought
regarding the Trust and/or Plan established hereunder to which the Trustee or
the Administrator may be a party, and such claim, suit, or proceeding is
resolved in favor of the Trustee or Administrator, they shall be entitled to be
reimbursed from the Trust Fund for any and all costs, attorney's fees, and other
expenses pertaining thereto incurred by them for which they shall have become
liable.
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise
specifically permitted by law, it shall be impossible by
operation of the Plan or of the Trust, by termination of
either, by power of revocation or amendment, by the happening
of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund
maintained pursuant to the Plan or any funds contributed
thereto to be used for, or diverted to, purposes other than
the exclusive benefit of Participants, Retired Participants,
or their Beneficiaries.
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Beneficiaries.
(b) In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such
excessive contribution at any time within one (l) year
following the time of payment and the Trustees shall return
such amount to the Employer within the one (l) year period.
Earnings of the Plan attributable to the excess contributions
may not be returned to the Employer but any losses
attributable thereto must reduce the amount so returned.
10.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless
exempted by the Act and regulations thereunder, shall be bonded in an amount not
less than 10% of the amount of the funds such Fiduciary handles; provided,
however, that the minimum bond shall be $1,000 and the maximum bond, $500,000.
The amount of funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or class to be
covered and their predecessors, if any, during the preceding Plan Year, or if
there is no preceding Plan Year, then by the amount of the funds to be handled
during the then current year. The bond shall provide protection to the Plan
against any loss by reason of acts of fraud or dishonesty by the Fiduciary alone
or in connivance with others. The surety shall be a corporate surety company (as
such term is used in Act Section 412(a)(2)), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors,
shall be responsible for the validity of any Contract issued hereunder or for
the failure on the part of the insurer to make payments provided by any such
Contract, or for the action of any person which may delay payment or render a
Contract null and void or unenforceable in whole or in part.
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10.9 INSURER' S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have
any responsibility for the validity of this Plan or for the tax or legal aspects
of this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
10.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative,
Beneficiary, or to any guardian or committee appointed for such Participant or
Benefit in accordance with the provisions of the Plan, shall, to the extent
thereof, be in full satisfaction of all claims hereunder against the Trustee and
the Employer, either of whom may require such Participant, legal representative,
Benefit, guardian or committee, as a condition precedent to such payment, to
execute a receipt and release thereof in such form as shall be determined by the
Trustee or Employer.
10.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted
or required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (l) the Employer, (2)
the Administrator and (3) the Trustee. The named Fiduciaries shall have only
those specific powers, duties, responsibilities, and obligations as are
specifically given them under the Plan. In general, the Employer shall have the
sole responsibility for making the contributions provided for under Section 4.1;
and shall have the sole authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
sole responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets
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held under the Trust, except those assets, the management of which has been
assigned to an Investment Manager, who shall be solely responsible for the
management of the assets assigned to it, all as specifically provided in the
Plan. Each named Fiduciary warrants that any directions given, information
furnished, or action taken by it shall be in accordance with the provisions of
the Plan, authorizing or providing for such direction, information or action.
Furthermore, each named Fiduciary may rely upon any such direction, information
or action of another named Fiduciary as being proper under the Plan, and is not
required under the Plan to inquire into the propriety of any such direction,
information or action. It is intended under the Plan that each named Fiduciary
shall be responsible for the proper exercise of its own powers, duties,
responsibilities and obligations under the Plan. No named Fiduciary shall
guarantee the Trust Fund in any manner against investment loss or depreciation
in asset value. Any person or group may serve in more than one Fiduciary
capacity. In the furtherance of their responsibilities hereunder, the "named
Fiduciaries" shall be empowered to interpret the Plan and Trust and to resolve
ambiguities, inconsistencies and omissions, which findings shall be binding,
final and conclusive.
10.13 HEADINGS
The headings and subheadings of this Plan have been inserted
for convenience of reference and are to be ignored in any construction of the
provisions hereof.
10.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan
receives an adverse determination with respect to its initial
qualification, then the Plan may return such contributions to
the Employer within one year after such determination,
provided the application for the determination is made by the
time prescribed by law for filing the Employer's return for
the taxable year in which the Plan was adopted, or such later
date as the Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary,
except Sections 3.6, 3.7, and 4.1(c), any contribution by the
Employer to the Trust Fund is conditioned upon the
deductibility of the contribution by the Employer under the
Code and, to the extent any
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such deduction is disallowed, the Employer may, within one (l)
year following the disallowance of the deduction, demand
repayment of such disallowed contribution and the Trustee
shall return such contribution within one (l) year following
the disallowance. Earnings of the Plan attributable to the
excess contribution may not be returned to the Employer, but
any losses attributable thereto must reduce the amount so
returned.
10.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied
in a uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
10.16 SECURITIES AND EXCHANGE COMMISSION APPROVAL
The Employer may request an interpretative letter from the
Securities and Exchange Commission stating that the transfers of Company Stock
contemplated hereunder do not involve transactions requiring a registration of
such Company Stock under the Securities Act of 1933. In the event that a
favorable interpretative letter is not obtained, the Employer reserves the right
to amend the Plan and Trust retroactively to their Effective Dates in order to
obtain favorable interpretative letter or to terminate the Plan.
ARTICLE XI
PARTICIPATING EMPLOYERS
11.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any other corporation or entity, whether an affiliate or
subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be
required to use the same Trustee as provided in this Plan.
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(b) The Trustee may, but shall not be required to,
commingle, hold and invest as one Trust Fund all contributions
made by Participating Employers, as well as all increments
thereof. However, the assets of the Plan shall, on an ongoing
basis, be available to pay benefits to all Participants and
Beneficiaries under the Plan without regard to the Employer or
Participating Employer who contributed such assets.
(c) The transfer of any Participant from or to an
Employer participating in this Plan, whether he be an Employee
of the Employer or a Participating Employer, shall not affect
such Participant's rights under the Plan, and all amounts
credited to such Participant's Account as well as his
accumulated service time with the transferor or predecessor,
and his length of participation in the Plan, shall continue to
his credit.
(d) All rights and values forfeited by termination of
employment shall inure only to the benefit of the Participants
of the Employer or Participating Employer by which the
forfeiting Participant was employed, except if the Forfeiture
is for an Employee whose Employer is an Affiliated Employer,
then said Forfeiture shall be allocated to the Participants
employed by the Employer or Participating Employers who are
Affiliated Employers. Should an Employee of one ("First")
Employer be transferred to an associated ("Second") Employer
which is an Affiliated Employer, such transfer shall not cause
his account balance (generated while an Employee of "First"
Employer) in any manner, or by any amount to be forfeited.
Such Employee's Participant Account balance for all purposes
of the Plan, including length of service, shall be considered
as though he had always been employed by the "Second" Employer
and as such had received contributions, forfeitures, earnings
or losses, and appreciation or depreciation in value of assets
totaling the amount so transferred.
(e) Any expenses of the Trust which are to be paid by
the Employer or borne by the Trust Fund shall be paid by each
Participating Employer in the same proportion that the total
amount standing to the credit of all Participants employed by
such Employer bears to the total standing to the credit of all
Participants.
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11.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to
this Plan; provided, however, that with respect to all of its relations with the
Trustee and Administrator for the purpose of this Plan, each Participating
Employer shall be deemed to have designated irrevocably the Employer as its
agent. Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as related to
its adoption of the Plan.
11.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the Employee
involved shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such Employee in the same manner as
was the Participating Employer from whom the Employee was transferred.
11.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
Any contribution subject to allocation during each Plan Year
shall be allocated only among those Participants of the Employer or
Participating Employer making the contribution, except if the contribution is
made by an Affiliated Employer, in which event such contribution shall be
allocated among all Participants of all Participating Employers who are
Affiliated Employers in accordance with the provisions of this Plan. On the
basis of the information furnished by the Administrator, the Trustee shall keep
separate books and records concerning the affairs of each Participating Employer
hereunder and as to the accounts and credits of the Employees of each
Participating Employer. The Trustee may, but need not, register Contracts so as
to evidence that a particular Participating Employer is the interested Employer
hereunder, but in the event of an Employee transfer from one Participating
Employer to another, the employing Employer shall immediately notify the Trustee
thereof.
11.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there
shall be a Participating Employer hereunder shall only be by the written action
of each and every Participating Employer and with the consent of the Trustee
where such consent is necessary in accordance with the terms of this Plan.
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11.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue
or revoke its participation in the Plan. At the time of any such discontinuance
or revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustee. The Trustee shall thereafter
transfer, deliver and assign Contracts and other Trust Fund assets allocable to
the Participants of such Participating Employer to such new Trustee as shall
have been designated by such Participating Employer, in the event that it has
established a separate pension plan for its Employees, provided however, that no
such transfer shall be made if the result is the elimination or reduction of any
"Section 411(d)(6) protected benefits" in accordance with Section 9.1(c). If no
successor is designated, the Trustee shall retain such assets for the Employees
of said Participating Employer pursuant to the provisions of Article VII hereof.
In no such event shall any part of the corpus or income of the Trust as it
relates to such Participating Employer be used for or diverted to purposes other
than for the exclusive benefit of the Employees of such Participating Employer.
11.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all
necessary rules or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article.
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IN WITNESS WHEREOF, this Plan has been executed the day and year first above
written.
The Palmetto Bank
By /s/ L. Leon Patterson
----------------------------
EMPLOYER
The Palmetto Bank
By /s/ L. Leon Patterson
----------------------------
TRUSTEE CHAIR
ATTEST Teresa W. Knight
--------------------------
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EXHIBIT 10.2.2
FIRST AMENDMENT TO
THE PALMETTO BANK
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
BY THIS AGREEMENT, The Palmetto Bank Employee Stock
Ownership Plan and Trust (herein referred to as the "Plan") is
hereby amended as follows, effective as of January 1, 1994:
1. Section 1.10, Section 1.24 and the calculation of "415
Compensation" for the purpose of the minimum allocations
required for Top Heavy Plan Years, are amended by the addition
of the following paragraphs:
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 Code Section
401(a)(17)(B). 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 Code Section
401(a)(17) 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
<PAGE>
<PAGE>
2. Section 9.1 is amended by the addition of the following
paragraph:
(d) Any amendment to the Plan shall be adopted by
formal action of the Employer's board of directors and executed
by an officer authorized to act on behalf of the Employer.
IN WITNESS WHEREOF, this Amendment has been executed
this 12th day of April, 1994.
THE PALMETTO BANK
EMPLOYER:
By: /s/ Leon Patterson
Its: Chairman
PALMETTO CAPITAL, INC.
PARTICIPATING EMPLOYER:
By: /s/ Curtis A. Tyner
Its: Treasurer
THE PALMETTO BANK
TRUSTEE:
By: /s/ Leon Patterson
Its: Chairman
Attest: /s/ Teresa M. Crabtree
2
<PAGE>
EXHIBIT 10.2.3
SECOND AMENDMENT TO THE
THE PALMETTO BANK
EMPLOYEE STOCK OWNERSHIP PLAN
On the 12th day of April, 1994, The Palmetto Bank amended and
restated The Palmetto Bank Employee Stock Ownership Plan (the
"Plan") effective January 1, 1989.
WHEREAS, it is necessary to amend the Plan in order for the Plan to
obtain a favorable determination of the Internal Revenue Service as to its
status as a qualified Plan.
NOW, THEREFORE, said Plan is amended as follows:
Effective January 1, 1989, page 81 is hereby deleted in its entirety
and the attached revised page is substituted in lieu thereof.
IN WITNESS WHEREOF, this amendment to the Plan is, by the authority of
the Board of Directors of the Employer, executed on behalf of the Employer the
28th day of February, 1995.
COMPANY:
THE PALMETTO BANK
By: /s/ Leon Patterson
Its: Chairman & CEO
PARTICIPATING EMPLOYER:
PALMETTO CAPITAL, INC.
By: /s/ Paul W. Stringer
Its: Executive Vice President
TRUSTEE:
THE PALMETTO BANK
By: /s/ Leon Patterson
Its: Chairman & CEO
<PAGE>
[attachment]
(c) Except as permitted by Regulations, no Plan
amendment or transaction having the effect of a Plan amendment
(such as a merger, plan transfer or similar transaction) shall
be effective to the extent it eliminates or reduces any
"Section 411(d)(6) protected benefit" or adds or modifies
conditions relating to "Section 411(d)(6) protected benefits"
the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to
benefits accrued as of the later of the adoption date or
effective date of the amendment. "Section 411(d)(6) protected
benefits" are benefits described in Code Section 411(d)(6)(A),
early retirement benefits and retirement-type subsidies, and
optional forms of benefit.
In addition, no such amendment shall have the effect
of terminating the protections and rights set forth in Section
7.12, unless such termination shall then be permitted under
the applicable provisions of the Code and Regulations; such a
termination is currently expressly prohibited by Regulation
54.4975-11(a)(3)(ii).
9.2 TERMINATION
(a) The Employer shall have the right at any time to
terminate the Plan by delivering to the Trustee and
Administrator written notice of such termination. Upon any
full or partial termination, all amounts credited to the
affected Participants' Accounts shall become 100% Vested as
provided in Section 7.4 and shall not thereafter be subject to
forfeiture, and all unallocated amounts shall be allocated to
the accounts of all Participants in accordance with the
provisions hereof.
(b) Upon the full termination of the Plan, the
Employer shall direct the distribution of the assets of the
Trust Fund to Participants in a manner which is consistent
with and satisfies the provisions of Sections 7.5 and 7.6.
Except as permitted by Regulations, the termination of the
Plan shall not result in the reduction of "Section 411(d)(6)
protected benefits" in accordance with Section 9.1(c).
(c) Notwithstanding anything else herein, in the
event of a complete discontinuance of contributions, as
defined in Treas. Reg. ss. 1.411(d)-2(d), each Participant
shall become fully vested in his account balance.
81
<PAGE>
EXHIBIT 10.2.4
THIRD AMENDMENT TO
THE PALMETTO BANK
EMPLOYEE STOCK OWNERSHIP PLAN
On the 12th day of April, 1994, The Palmetto Bank amended and restated
The Palmetto Bank Employee Stock Ownership Plan (the "Plan"), effective January
1, 1989.
WHEREAS, it is necessary to amend the Plan to clarify the wording, to
conform the wording to the operation of the Plan and to correct a scrivener's
error.
NOW, THEREFORE, BE IT RESOLVED, that:
(1) For all Plan Years beginning on or after January 1, 1989, Section
4.3(b), paragraph 2, shall be deleted in its entirety and replaced with
the following:
Only Participants who are actively employed on the
last day of the Plan Year and who have completed a Year of
Service during the Plan Year shall be eligible to share in the
discretionary contribution for the year.
(2) For all Plan Years after January 1, 1989, the following shall be
added to the end of Section 4.3(d), paragraph one:
Notwithstanding the foregoing, Terminated
Participants' non-vested account balances shall be forfeited
prior to the allocation of earnings or losses.
(3) (A) FOR PLAN YEARS ENDED DECEMBER 31, 1989 THROUGH DECEMBER 31,
1993 ONLY, the last paragraph of Section 7.4(A) shall be deleted in its
entirety and replaced with the following:
For purposes of this Section 7.4, if the value of a
Terminated Participant's Vested benefit is zero, such
Terminated Participant shall have so much of his account as is
not vested or is not attributable to his voluntary
contributions, maintained in his account in a "forfeitable
status," and such amounts shall receive earnings and loss
allocations pursuant to Section 6.2 until it is redistributed
pursuant to this Section. No part of such Member's account
shall be forfeited prior to the time he has Five (5)
consecutive One Year Breaks in Service. If the Terminated
Participant does not return before he has Five (5) consecutive
One Year Breaks in Service, his account shall be closed and
his "forfeitable" amount, plus earnings and loss allocations,
shall be forfeited and reallocated pursuant to Section 4.3.
<PAGE>
(B) FOR PLAN YEARS COMMENCING ON OR AFTER JANUARY 1, 1994, the
last paragraph of Section 7.4(a), as stated in the April 12,
1994 Plan, shall be effective.
Dated as of the 1st day of January, 1989.
EMPLOYER:
THE PALMETTO BANK
By: /s/ Leon Patterson
Its:
PARTICIPATING EMPLOYER:
PALMETTO CAPITAL, INC.
By: /s/ Paul W. Stringer
Its:
TRUSTEE:
THE PALMETTO BANK
By: /s/ James M. Shoemaker
Its:
2
<PAGE>
EXHIBIT 10.3
THE PALMETTO BANK
PENSION PLAN
AND TRUST AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
INTRODUCTION Name and Date of Agreement 1
SECTION 1 Definitions 1
SECTION 2 Administration of Plan by Committee 20
SECTION 3 Eligibility and Participation 28
SECTION 4 Employer Contributions 31
SECTION 5 Top Heavy Provision and Administration 34
SECTION 6 Retirement Benefits 38
SECTION 7 Early Retirement 40
SECTION 8 Later Retirement 41
SECTION 9 Death Benefits 42
SECTION 10 Disability Benefits 43
SECTION 11 Termination of Employment 44
SECTION 12 Annuity Requirements 48
SECTION 13 Distribution Requirements 59
SECTION 14 Trustee 72
SECTION 15 Amendment and Termination of Plan 83
SECTION 16 Restrictions Upon Termination of
Contributions 87
SECTION 17 Limitation on Benefits 91
SECTION 18 Rollovers and Other Transfers 99
SECTION 19 Miscellaneous Provisions 101
SECTION 20 Voluntary Participant Contributions 103
</TABLE>
<PAGE>
THE PALMETTO BANK
PENSION PLAN
AND TRUST AGREEMENT
AGREEMENT made this 19th day of December, 1994, by and between THE
PALMETTO BANK, a bank organized and existing under the laws of the
State of South Carolina (hereinafter called "Employer"), and THE
PALMETTO BANK, as Trustee of the Trust herein created, (hereinafter
called "Trustee").
WHEREAS, Employer did establish a Pension Plan and Trust
Agreement on September 1, 1958 which was amended on December 1, 1972,
and amended and restated on December 9, 1975 and amended and restated
on January 23, 1985 and amended and restated on February 28, 1986
and amended on January 5, 1990, December 31, 1991 and April 14, 1992;
and
WHEREAS, it is now deemed
necessary to amend and restate said Pension Plan and Trust Agreement.
NOW, THEREFORE, Employer and Trustee mutually do covenant and agree to amend
and restate said Pension Plan and Trust Agreement by substituting in its
entirety the following:
SECTION 1 - Definitions
--------- -----------
When used herein, the following terms shall have the indicated meanings,
unless the context clearly indicates otherwise:
1.1 "Accrued Benefit" shall be the amount of retirement Annuity accrued as
of any given date with respect to a Participant which shall be equal to his
prospective retirement Annuity under the Plan at his Normal Retirement Date
as determined by the Retirement Benefits Section, multiplied by the ratio that
his total number of Years of Credited Service (not to exceed 35 Years
1
<PAGE>
of Credited Service) under the Plan and Trust as of such given date bears to the
total number of Years of Credited Service (not to exceed 35 Years of Credit
Service) under the Plan and Trust he will have if he lives and remains in the
employment of the Employer to his Normal Retirement Date; provided, however that
such fraction shall not exceed one (1).
1.2 "Actuarial Equivalent" shall mean a form of benefit differing in
time, period, or manner of payment from a specific benefit provided under the
Plan, but having the same value when computed using the 1971 GAM Mortality
Table-Male, at 7%, post-retirement, and the 1971 GAM Mortality Table-Male, at
7%, pre-retirement and with Beneficiaries set back zero (0) years.
Notwithstanding the preceding, if this Plan otherwise allows for payment of a
benefit in the form of a lump sum payment, then the present value of the vested
lump sum Accrued Benefit shall be calculated using an interest rate not greater
than the applicable interest rate and the 1971 GAM Mortality Table-Male with
Beneficiaries set back zero (0) years. For this purpose, the "applicable
interest rate" shall mean the interest rate which would be used as of the first
day of the Plan Year that contains the proposed distribution (or benefit
commencement date) by the Pension Benefit Guaranty Corporation for the purpose
of determining the present value of a lump sum distribution upon a distress
termination of a trusteed single employer plan. In the event this Section is
amended, the Actuarial Equivalent of a Participant's Accrued Benefit on or
after the date of change shall be the greater of (a) the Actuarial Equivalent of
the Accrued Benefit determined as of the date of change computed on the old
2
<PAGE>
basis, or (b) the Actuarial Equivalent of the total Accrued Benefit computed on
the new basis. If the vested Accrued Benefit using such rate is greater than
Twenty-Five Thousand ($25,000) Dollars, then such rate shall be limited to one
hundred twenty (120%) percent of the Pension Benefit Guaranty Corporation
applicable interest rate.
1.3 "Affiliated Employer" shall mean the Employer and any corporation
which is a member of a controlled group of corporations (as defined in Code
Section 414(b)) which includes the Employer; any trade or business (whether or
not incorporated) which is under common control (as defined in Code Section
414(c)) with the Employer; any organization (whether or not incorporated) which
is a member of an affiliated service group (as defined in Code Section 414(m))
which includes the Employer; and any other entity required to be aggregated with
the Employer pursuant to regulations under Code Section 414(o).
1.4 "Age" shall mean an Employee's age on his birthday last preceding
the date as of which the determination of his age is being made.
1.5 "Anniversary Date" shall mean January 1.
1.6 "Annuity" or "Annuity Contract" shall mean a series of
monthly payments over an applicable period of time. An Annuity Contract shall be
a qualified, nontransferable Annuity Contract and the terms of any Annuity
contract purchased and distributed by the Plan to a Participant, spouse or
Beneficiary shall comply with the requirements of this Plan.
1.7 "Authorized Leave of Absence" shall mean a temporary
cessation of active employment with the Employer pursuant to a
3
<PAGE>
nondiscriminatory policy, provided the cessation was approved by the Employer
and the Employee returns to work for the Employer not later than the expiration
of such approved cessation of employment.
1.8 "Beneficiary" or "Beneficiaries" shall mean such person or persons
or legal entity as may be designated by a Participant to receive benefits
hereunder after the Participant's death, or if the Participant fails to
designate a Beneficiary, then the estate of the Participant, except as otherwise
provided for in the Death Benefits Section and the Annuity Requirements Section
where the Participant's spouse is the required Beneficiary.
1.9 "Code" shall mean the Internal Revenue Code of 1986,
and any amendments thereto.
1.10 "Committee" shall mean the pension committee appointed
by the Employer pursuant to the Administration of Plan by Committee
Section.
1.11 "Compensation" shall mean the entire amount paid to an
Employee by the Employer during the Plan Year as earnings for personal
services reported on the Employee's Federal Income Tax Withholding
Statement (Form W-2), but excluding any benefits and credits under
this or any other employee benefit plan of the Employer. Notwithstanding
the preceding sentence, all Code Section 415 compensation during the
entire Limitation Year shall be taken into account for determining the
required minimum accrual of benefits for a Non-Key Employee if the
Plan is a Top Heavy Plan and the required minimum benefit has not been
other wise provided under Code Section 416(c). For Plan Years
beginning after December 31, 1988 and before January 1, 1994,
Compen-
4
<PAGE>
sation in excess of $200,000 Dollars shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted
under Code Section 415(d) and shall be pro-rated if the Plan Year is
less than twelve (12) full months. In determining the Compensation of
a Participant for purposes of the aforesaid limitation, the rules of
Code Section 414(q)(6) shall apply, except in applying such rules, the
term "family" shall include only the spouse of the Participant and any
lineal descendants of the Participant who have not attained age
nineteen (19) before the close of the Plan Year. For purposes of
determining Compensation under the integration level if this Plan has
an integrated allocation formula, the family aggregation rules in the
preceding sentence shall not apply. If this Plan has an integrated
allocation formula, then for purposes of testing under Code Section
401(1), compensation as defined in Code Section 414(s) shall be used.
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 Omnibus Budget
Reconciliation Act of 1993 ("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 twelve (12) months, over which
Compensation is determined ("determination period") beginning in such calendar
5
<PAGE>
year. If a determination period consists of fewer than twelve (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 twelve (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. Compensation shall include Employer
contributions made pursuant to a salary reduction agreement which are not
includible in the gross income of the Employee under Sections 125, 402(e)(3),
402(h) or 403(b) of the Internal Revenue Code.
1.12 "Determination Date" shall mean (a) the last day of the preceding
Plan Year, or (b) in the case of the first Plan Year, the last day of such Plan
Year.
1.13 "Disability" shall mean total and permanent physical or mental
incapacity of a Participant to perform the duties of his employment with the
Employer unless such physical or mental incapacity occurs as a result of the
willfulness or gross negli-
6
<PAGE>
gence of the Participant. Such incapacity shall be
established by a medical examination by a medical doctor selected or approved by
the Committee. A Participant must be eligible for Social Security disability
retirement in order for the Participant to be disabled under this Plan and
Trust. Disability payments under this Plan and Trust shall be payable only for
the time an Employee is eligible for and receiving disability payments under
the Social Security Act.
1.14 "Effective Date" of this amended and restated Plan and Trust shall
be January 1, 1987 except as provided below for the following special Effective
Dates:
(a) The benefit formula set forth in Section 6.3 is effec-
tive January 1, 1992.
(b) The requirements for Sections 11.5 and 13.2 are effe-
ctive January 1, 1989.
(c) The requirements for Sections 1.11 and 6.2 are effec-
tive January 1, 1992.
(d) The requirements for Section 1.1 are effective January
1, 1992.
(e) The vesting schedule set forth in Section 11.1 is
effective January 1, 1989.
(f) The requirements for Section 1.17 are effective January
1, 1994.
The Plan provision in effect prior to a special Effective Date above
for such provision shall control until such special Effective Date.
1.15 "Employee" shall mean any individual employed by the Employer
other than an independent contractor. Any Leased Employee, as defined in Code
Section 414(n)(2), shall be treated as an Employee of the Employer. The
preceding sentence shall not apply to any Leased Employees if such employees are
covered by a
7
<PAGE>
money purchase pension plan as described in Code Section 414(n)(5) providing (a)
a nonintegrated employer contribution rate of at least ten (10%) percent of
compensation as defined in Code Section 415(c)(3) but including amounts
contributed pursuant to a salary reduction agreement which are excludable from
the Employee's gross income under Code Sections 125, 402(a)(8), 402(h) or
403(b), (b) immediate participation, and (c) full and immediate vesting, and
such Leased Employees, with respect to services performed after December 31,
1986, do not constitute more than twenty (20%) percent of the Employer's
Non-Highly Compensated Employee work force.
1.16 "Employer" shall mean THE PALMETTO BANK and any subsidiary or
affiliated company authorized by THE PALMETTO BANK to adopt and participate in
this Plan and Trust.
1.17 "Final Average Monthly Compensation" shall mean the average of the
Participant's Compensation over the five (5) consecutive calendar year period
which produces the highest average preceding his determination date and further
divided by twelve (12); except that the "Final Average Monthly Compensation"
used in determining the benefits for an Employee who has not been a Participant
hereunder during such five (5) calendar year period shall be such Participant's
Compensation determined on an average monthly basis for the complete calendar
years during which he was a Participant hereunder.
1.18 "Five Percent Owner" shall mean any person who owns (or is
considered as owning within the meaning of Code Section 318) more than five (5%)
percent of the outstanding stock of the Employer or stock possessing more than
five (5%) percent of the
8
<PAGE>
total combined voting power of all stock of the Employer. In determining
percentage ownership hereunder, employers that would otherwise be aggregated
under Code Sections 414(b), (c), and (m) shall be treated as separate employers.
1.19 "Highly Compensated Employee" shall mean 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 Code Section 415(d)); (b) received compensation
from the Employer in excess of $50,000 (as adjusted pursuant to Code Section
415(d)) 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 fifty (50%) percent of the dollar limitation in effect under Code
Section 415(b)(1)(A). The term Highly Compensated Employee also includes: (i)
Employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and the
Employee is one of the 100 Employees who received the most compensation from the
Employer during the determination year; and (ii) Employees who are Five 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.
9
<PAGE>
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve (12) month period immediately preceding the
determination year. Top-paid group means the group consisting of the top 20% of
the Employees when ranked on the basis of compensation paid during such year.
A highly compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active Employee for either the
separation year or any determination year ending on or after the Employee's
fifty-fifth (55th) birthday.
If any Employee is, during the determination year or look-back year, a
family member of either a Five Percent Owner who is an active or former Employee
or a Highly Compensated Employee who is one of the ten (10) most Highly
Compensated Employees ranked on the basis of compensation paid by the Employer
during such year, then the family member and the Five Percent Owner or top- ten
Highly Compensated Employee shall be aggregated. In such case, the family member
and Five 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 Five 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.
10
<PAGE>
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 Code
Section 414(q) and the regulations thereunder.
In determining Highly Compensated Employees, Employers shall be
appropriately aggregated under Code Section 414(b), (c), (m) and (o).
With respect to an Employee who separated from service be fore January
1, 1987, such Employee will be included as a Highly Compensated Employee only if
the Employee was a Five Percent Owner or received compensation in excess of
$50,000 during (i) the Employee's separation year (or the year preceding such
separation year) or (ii) any year ending on or after such Employee's 55th
birthday (or the last year ending before such Employee's 55th birthday).
For purposes of this Section, compensation shall mean compensation
determined under Code Section 415(c)(3) without regard to Sections 125,
402(e)(3), 402(h)(1)(B) and in the case of Employer contributions made pursuant
to a salary reduction agreement, without regard to Code Section 403(b).
1.20 "Hour of Service" shall mean:
(a) each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer
during the applicable period.
(b) each hour for which an Employee is paid, or entitled to
payment, 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 or
11
<PAGE>
pregnancy), layoff, jury duty, military duty or Autho-
rized Leave of Absence. Notwithstanding the foregoing:
(i) no more than 501 Hours of Service will be credited to
an Employee on account of any single continuous
period during which no duties are performed (whether
or not such period occurs in a single Plan Year or
other period); and
(ii) no credit for an Hour of Service will be given for
which an Employee is directly or indirectly paid,
or entitled to payment, on account of a period
during which no duties were performed if such pay-
ment is made or due under a plan maintained solely
for the purpose of complying with applicable work
men's compensation or unemployment compensation or
disability insurance laws; and
(iii) no credit for an Hour of Service will be given for
payment which solely reimburses an Employee for
medical or medically related expenses incurred by the
Employee.
For purposes of this subsection, a payment shall be
deemed to be made by or due from the Employer, regardless of
whether such payment is made by, or due from the Employer,
directly or indirectly through, among others, a trust fund, or
insurer to which the Employer contributes or pays premiums,
and regardless of whether contributions made or due to the
trust fund, insurer or other entity are for the benefit of a
particular Employee or are on behalf of a group of Employees
in the aggregate.
(c) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer.
Crediting of Hours of Service for back pay awarded or agreed to with
respect to the periods described in (b) above shall be subject to the
limitations of that Subsection.
The same Hours of Service shall not be credited both under (a) or (b),
as the case may be, and under (c) above of this Section.
In the case of a payment which is made or due on account of a period
during which an Employee performs no duties, and which results in the crediting
of Hours of Service under (b) above of
12
<PAGE>
this Section, or in the case of an award or agreement for back pay, to the
extent that such award or agreement is made with respect to such a period
described in (b) above of this Section, the number of Hours of Service to be
credited shall be determined pursuant to applicable Labor Department
regulations.
The computation and crediting of Hours of Service shall be determined
pursuant to Department of Labor regulations section 2530.200b-2(b) and (c).
Nothing in this Section shall be construed as denying an Employee
credit for an Hour of Service if credit is required by separate federal law.
Military service shall mean service in the armed forces of the United
States if the Employer is required by applicable federal law to re-employ such
Employee and reinstate such Employee's rights and benefits.
Solely for purposes of determining whether a One-Year Break in Service
for participation and vesting purposes has occurred in a computation period for
Plan Years beginning after 1984, 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 of Service cannot be determined,
eight (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 (a) by reason of the pregnancy of the individual, (b) by reason of a
birth of a child of the individual, (c) by reason of the placement of a child
with the individual in connection with the adoption of such child by
13
<PAGE>
such individual, or (d) 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 (a) in the computation period in
which the absence be gins if the crediting is necessary to prevent a One-Year
Break in Service in that period, or (b) in all other cases, in the following
computation period.
An Hour of Service with an Affiliated Employer shall be credited as an
Hour of Service under this Plan. Hours of Service will also be credited for any
individual considered an Employee for purposes of this Plan under Code Section
414(n) or Code Section 414(o) and the regulations thereunder. If the Employer is
unable to determine the number of Hours of Service performed by an Employee from
its records, the Employer shall credit Hours of Service for such Employee on the
basis of weeks worked. An Employee will be credited with forty-five (45) Hours
of Service if such Employee would be credited with at least one (1) Hour of
Service during the week.
1.21 "Inactive Participant" shall mean any Employee or former Employee
who has ceased to accrue a benefit and on whose behalf an Accrued Benefit is
maintained under the Plan.
1.22 "Investment Manager" shall mean any party that (a) is either (i)
registered as an investment advisor under the Investment Advisors Act of 1940,
or (ii) a bank, or (iii) an insurance company; (b) acknowledges in writing that
it is a fiduciary with respect to the Plan; and (c) is granted the power to
manage, acquire, or dispose of any asset of the Plan.
14
<PAGE>
1.23 "Key Employee" shall mean any Employee or former Employee (and his
Beneficiaries) who, at any time during the Plan Year containing the
Determination Date or any of the preceding four (4) Plan Years, is or was:
(a) an officer of an Employer having annual compensation greater
than fifty (50%) percent of the amount in effect under Code
Section 415(b)(1)(A) for any such Plan Year;
(b) an owner (or considered an owner under Code Section 318) of
one of the ten largest interests in the Employer if such
individual's annual compensation exceeds one hundred (100%)
percent of the dollar limitation under Code Section
415(c)(1)(A);
(c) a "Five Percent Owner" of the Employer; or
(d) a "One Percent Owner" of the Employer having an annual
compensation from the Employer of more than $150,000.
Annual compensation means compensation as defined in Code Section
415(c)(3) but including amounts contributed by the Employer pursuant to a
salary reduction agreement which are excludible from the Employee's gross
income under Code Section 125, Code Section 402(a)(8), Code Section 402(h) or
Code Section 403(b) of the Code. The determination of who is a Key Employee will
be made in accordance with Code Section 416(i)(1) and the regulations
thereunder.
1.24 "Leased Employee" shall mean any person (other than a common law
Employee of the Employer) who pursuant to an agreement between the recipient and
any other person ("leasing organization") has performed services for the
recipient (or for the Employer and related persons determined in accordance with
Code Section 414(n)(6)) on a substantially full time basis for a period of at
least one year and such services are of a type historically performed by
Employees in the business field of the recipi-
15
<PAGE>
ent 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 be credited with service performed for an Affiliated
Employer.
1.25 "Limitation Year" shall be the twelve (12) consecutive month
period beginning on January 1 and ending on December 31.
1.26 "Named Fiduciary" shall be the Pension Committee.
1.27 "Non-Key Employee" means any Employee who is not a Key
Employee.
1.28 "Normal Annuity Form" shall be a single retirement Annuity for
life with sixty (60) guaranteed monthly payments. Such Normal Annuity Form shall
provide monthly payments to the Participant, the first payment becoming due on
such Participant's Normal Retirement Date, as defined herein, if he is then
living, and subsequent payments of a like amount monthly thereafter during the
lifetime of such Participant, terminating with the last payment due preceding
the death of such Participant; provided, however, that if the death of the
Participant shall occur after the first of such monthly payments and before the
guaranteed monthly payments have been made, the remaining guaranteed payments
will be paid to the Beneficiary authorized to receive such payments.
1.29 "Normal Retirement Age" shall mean the day on which the
Participant attains his sixty-fifth (65th) birthday.
1.30 "Normal Retirement Date" shall mean the first day of the calendar
month coinciding with or next following the Participant's Normal Retirement
Age.
16
<PAGE>
1.31 "One-Year Break in Service" shall mean the applicable computation
period during which an Employee has not completed more than 500 Hours of Service
with the Employer. An Authorized Leave of Absence shall not cause a One-Year
Break in Service. The applicable computation period shall mean the period or
periods used in the definition of Year of Service.
1.32 "Participant" shall mean any Employee of the Employer who has met
the eligibility requirements and participation requirements of this Plan, who
becomes a Participant in this Plan and who is entitled to accrue benefits in the
Plan and Trust pursuant to the terms hereof.
1.33 "Plan" shall mean the defined benefit pension plan of the Employer
as set forth in and by this document and all subsequent amendments thereto.
1.34 "Plan Administrator" shall be the Employer.
1.35 "Plan Name" shall be THE PALMETTO BANK PENSION PLAN.
1.36 "Plan Year" shall be the twelve (12) consecutive month
period beginning on January 1 and ending on December 31.
1.37 "Shareholder-Employee" shall mean a Participant who
owns more than five (5%) percent of the Employer's outstanding capital stock
interest during any year in which the Employer elects to be taxed as an "S"
corporation under the Code.
1.38 "Super Top Heavy Plan" shall mean, for Plan Years commencing
after December 31, 1983, that, as of the Determination Date, the sum of (a) the
Present Value of Accrued Benefits of Key Employees, and (b) the Aggregate
Accounts (as defined in the Top Heavy Provision and Administration Section) of
Key Employees under this Plan and all plans of an Aggregation Group, exceeds
17
<PAGE>
ninety (90%) percent of the Present Value of Accrued Benefits and the Aggregate
Accounts of all Participants under this Plan and all plans of an Aggregation
Group.
1.39 "Taxable Year" shall mean the twelve (12) consecutive month period
beginning on January 1 and ending on December 31.
1.40 "Top Heavy Group" shall mean an Aggregation Group in which, as of
the Determination Date, the sum of:
(a) the Present Value of Accrued Benefits of Key Employees
under all defined benefit plans included in the group,
and
(b) the Aggregate Accounts of Key Employees under all de-
fined contribution plans included in the group,
exceeds sixty (60%) percent of a similar sum determined for all
Participants.
1.41 "Top Heavy Plan" shall mean, for Plan Years commencing after
December 31, 1983, that, as of the Determination Date, the sum of (a) the
Present Value of Accrued Benefits of Key Employees under this Plan and (b) the
Aggregate Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds sixty (60%) percent of the Present Value of Accrued
Benefits and the Aggregate Accounts of all Participants under this Plan and all
plans of an Aggregation Group.
1.42 "Top Heavy Plan Year" shall mean that, for a particular Plan Year
commencing after December 31, 1983, the Plan is a Top Heavy Plan as defined
herein.
1.43 "Trust" as herein used shall mean the legal entity resulting from
the agreement between the Employer and the Trustee by which the contributions
hereunder shall be made, received, held, invested, reinvested and disbursed to
or for the benefit of
18
<PAGE>
the Participants or their Beneficiaries, or both, according to the terms of this
Plan.
1.44 "Trust Fund" shall mean all funds received by the Trustee,
together with all income, profits, gains, losses, or increments thereon.
1.45 "Trustee" shall mean a corporation, association, individual,
group of individuals, or any combination of them, or any successor or successors
who shall accept the designation and enter into the duties of Trustee as
specifically set forth in this Trust Agreement.
1.46 "Valuation Date" shall mean the Anniversary Date or any other date
as of which the Trustee makes any valuation of the Trust Fund and specifically
designates such date a Valuation Date.
1.47 "Year of Credited Service" shall mean each Year of Service for
accrual of benefits that the Employee completes. A Participant shall be credited
with a Year of Credited Service for accrual of benefits in this Plan if he
completes 1,000 Hours of Service as an Employee during a Plan Year, except as
otherwise specifically required herein.
1.48 "Year of Service" shall mean for purposes of
(a) eligibility to participate in this Plan, a period of
twelve consecutive months, as hereinafter set forth, during
which an Employee completes at least 1,000 Hours of Service.
The initial eligibility computation period to be taken into
account for this purpose shall be the twelve consecutive month
period commencing with the day on which the Employee first
performs an Hour of Service ("employment year"). The
eligibility computation period shall shift to the Plan Year.
The first Plan Year so used shall be the Plan Year which
includes the first anniversary of the day on which the
Employee first performs an Hour of Service. An Employee who is
credited with 1,000 Hours of Service in both the ini-
19
<PAGE>
tial 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 (2) Years of Service for purposes of
eligibility to participate.
(b) vesting in this Plan, a Plan Year during which an Employee
completes at least 1,000 Hours of Service.
(c) for all other purposes, a Plan Year during which an
Employee completes at least 1,000 Hours of Service.
A Year of Service with an Affiliated Employer and a predecessor
employer that maintained this Plan shall be credited as a Year of Service with
the Employer for purposes of vesting and eligibility to participate in this
Plan. Any employee of the Bank of Hodges who was an employee on July 5, 1988
which was the date Employer merged with the Bank of Hodges will be given credit
for Years of Service with the Bank of Hodges for eligibility to participate and
vesting in this Plan. No Years of Service with the Bank of Hodges shall be
credited for any other purpose.
SECTION 2 - Administration of Plan by Committee
--------- -----------------------------------
2.1 The Employer hereby delegates its administrative duties and
responsibilities in connection with the administration of this Plan to the
Committee who shall an individual or individuals designated by the Employer.
2.2 The Committee shall appoint a chairman and a secretary and may
appoint an acting chairman and an acting secretary. One person may hold more
than one position on the Committee.
2.3 The Committee shall hold meetings upon such notice, at such place
and at such times as they may from time to time deter mine. Notice of a meeting
shall not be required if waived in writing, or if all of the members are present
at the meeting. A majority of the members of the Committee at any time in office
20
<PAGE>
shall constitute a quorum. All resolutions or other actions taken by the
Committee at any meeting shall be by vote of a majority present at any such
meeting and entitled to vote. Resolutions may be adopted or other action taken
without a meeting upon written consent signed by all of the members.
2.4 The Committee shall maintain full and complete records of their
deliberations and decisions. The minutes of their proceedings shall be
conclusive proof of the facts of the operation of the Plan. Their records shall
contain all relevant data pertaining to individual Participants and their
rights under the Plan and in the Trust Fund.
2.5 The members of the Committee shall be bonded to the extent
required by law.
2.6 No fee or compensation shall be paid to any member for his services
as such, but any expenses properly incurred by the Committee shall be paid or
reimbursed by the Trust Fund unless voluntarily paid by Employer.
2.7 The Committee shall have the duty and complete authority to
interpret and construe the provisions of the Plan and this Agreement, and to
decide any dispute which may arise regarding the rights and benefits of any
Participant, his legal representatives or Beneficiaries, which determinations
shall apply uniformly to all persons similarly situated and shall be binding and
conclusive upon all interested persons. The Committee may adopt rules,
regulations or by-laws for use in the administration of the Plan, appoint agents
and compensate them, and, in general, direct the administration of this Plan.
Interpretation and administration of this Plan and Trust shall always be made
with
21
<PAGE>
the fundamental purpose that the Plan and Trust is a retirement plan qualified
under Code Section 401.
2.8 Any member of the Committee may resign at any time and may be
removed with or without cause by the Employer. The Employer may (but shall not
be required to) appoint a successor to fill any vacancy in the membership of the
Committee and shall notify Trustee of any such appointment.
2.9 The Committee or its designee shall, within a reason able time
preceding a Participant's Normal Retirement Date, consult and advise such
Participant concerning his benefits, options and rights under the Plan.
2.10 The Committee may correct errors and, so far as practicable and in
conformity with the Code and other applicable law and regulations, may adjust
any benefit or payment or credit accordingly.
2.11 The Committee shall determine the eligibility of Employees in
accordance with the provisions of this Plan from in formation furnished to it by
Employer in accordance with the request of the Committee.
2.12 On or about the date upon which Employer shall make payment of any
contribution under the Plan by payment to the Trustee, the Committee shall
deliver to the Trustee a schedule showing the names of the Participants,
Inactive Participants and Beneficiaries, the Compensation of each Participant
for the Plan Year, the amount of Employer contributions, the amount of each
Participant's contributions, if any, the names of the Inactive Participants
whose employment was terminated during the Plan Year with forfeitures, if any,
and such other information as shall be
22
<PAGE>
necessary for the Trustee to accrue benefits to the Participants (unless the
Trustee and Committee have agreed in writing that the Committee is responsible
for accruing benefits).
2.13 In any case involving the termination of employment of a
Participant or any question as to vested interest, the Commit tee shall
determine the percentage of vesting and shall communicate its determination to
the Trustee. If a terminated Participant's benefits are to be received or
invested in Annuity Con tracts, the Committee shall make proper application for
such an Annuity to an insurance company and shall direct the Trustee to purchase
said Annuity Contract and deliver it in accordance with the Committee's
instructions after taking into account the consent requirements of Code Section
401(a)(11), Code Section 417 and the Annuity Requirements Section.
2.14 The Committee shall be the agent for service of legal process.
2.15 The Committee is authorized to secure such legal, medical,
accounting, actuarial, or other consultant's advice, and to appoint qualified
appraisers of real, personal, or intangible property, and to pay their
reasonable expenses and compensation from the Trust Fund, unless the Employer
voluntarily makes such payments.
2.16 In the event and to the extent not insured against by any
insurance company, the Employer shall indemnify and hold harmless the Committee
members, their assistants and representatives from and against any and all
claims, demands, suits, losses, damages and any other liability arising from
their responsibilities in connection with the Plan or Trust, unless the
23
<PAGE>
same is determined to be due to gross negligence or willful misconduct.
2.17 A Participant, Inactive Participant or Beneficiary shall have the
right to file a claim, inquire if he has any right to benefits and the amounts
thereof, or appeal the denial of a claim.
A claim will be considered as having been filed when a writ ten
communication is made by the Participant or his authorized representative who
brings his claim request to the attention of the Plan Administrator or any
member of the Committee.
The Committee shall notify the claimant in writing within ninety (90)
days after receipt of the claim if the claim is wholly or partially denied. If
an extension of time beyond the initial ninety (90) day period for processing
the claim is required, written notice of the extension shall be provided the
claimant prior to the termination of the initial ninety (90) day period. In no
event shall the extension exceed a period of ninety (90) days from the end of
the initial period. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by which the Committee
expects to render a final decision.
Notice of a wholly or partially denied claim for benefits will be in
writing in a manner calculated to be understood by the claimant and shall
include:
(a) The reason or reasons for denial;
(b) Specific reference to the Plan provisions that apply in
the case;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an
24
<PAGE>
explanation of why such material or information is
necessary; and
(d) An explanation of the Plan's claim appeal procedure.
If a claim is denied, the claimant may file an appeal asking the
Committee to conduct a full and fair review of his claim. An appeal must be made
in writing no more than sixty (60) days after the claimant receives written
notice of the denial. The claimant may review any documents that apply to the
case and may also submit points of disagreement and other comments in writing
along with the appeal.
The decision of the Committee regarding the appeal shall be given to
the claimant in writing no later than sixty (60) days following receipt of the
appeal. However, if the Committee, in its sole discretion, grants a hearing, or
there are special circumstances involved, the decision will be given no later
than one-hundred twenty (120) days after receiving the appeal. If such an
extension of time for review is required because of special circumstances,
written notice of the extension shall be furnished to the claimant prior to the
commencement of the extension. The decision shall include specific reasons for
the decision, written in a manner calculated to be understood by the claimant,
as well as specific references to the pertinent Plan provisions on which the
decision is based.
2.18 The Committee from time to time may appoint one or more Investment
Managers to direct or approve all investments and reinvestments of the Trust
Fund, by written notice to the Trustee. However, until notified to the contrary
by the Committee, the Trustee is responsible for all investments and
reinvestments.
25
<PAGE>
After the Committee has notified the Trustee of its appointment of an Investment
Manager to direct or approve investments and reinvestments, the Investment
Manager then shall become responsible for any and all investments and
reinvestments made by it. The Trustee may rely upon the directions and
instructions of the Committee and Investment Manager without being in any way
liable or responsible for the consequences.
2.19 The Committee from time to time, either itself or through its duly
appointed agents, may direct or approve all in vestments and reinvestments of
the Trust Fund, by written notice to the Trustee. However, until notified to the
contrary by the Committee, the Trustee is responsible for all investments and
reinvestments. After the Committee has notified the Trustee of its intention to
direct or approve investments and reinvestments, the Committee then shall become
responsible for any and all investments and reinvestments made pursuant to such
direction or approval. The Trustee may rely upon the directions and instruc-
tions of the Committee without being in any way liable or responsible for the
consequences.
2.20 The Committee shall have the responsibility for developing a
funding policy for the Plan, if required, and shall communicate such funding
policy to the Trustee, or other Investment Manager, and shall see to it that
the funding policy is carried out.
2.21 If a Participant or a Beneficiary receives a qualifying rollover
distribution from the Plan, the Committee shall provide a written explanation to
the recipient (a) that the distribution will not be taxed currently to the
extent trans-
26
<PAGE>
ferred to another qualified plan or individual retirement account within sixty
(60) days after the date on which the recipient received the distribution, and
(b) of income averaging and capital gains provisions, if applicable. In the
case of a series of distributions the notice shall explain that the sixty (60)
day period does not begin to run until the last distribution is made.
2.22 If any person entitled to receive any benefit here under shall be
a minor child or incompetent person, but no legal representative has been
appointed for him or her, the Committee may, in its discretion, cause any
benefit otherwise payable to such person to be paid to the conservator, parent
or guardian or spouse of such person, or to the institution maintaining such
person, or to the individual having custody of such person, or may otherwise
cause the same to be applied for the benefit of such person in any manner which
the Committee may deem proper, without regard to the duty of any person to
support such minor or incompetent person, and without regard to any other funds
which may be available for the purpose, and, in the case of any payment made for
the benefit of such person in any of the manners just authorized, the receipt by
the person to whom the payment is made shall be in full discharge of all
liability under the Plan and Trust in respect of such payment. Deposit to the
credit of a Participant or Beneficiary in any bank, savings and loan or trust
company shall be deemed payment into the hands of such person.
2.23 Notwithstanding anything in this Plan and Trust to the contrary,
the Trustee and Committee may agree in writing that the Committee will perform
certain record keeping functions delegated
27
<PAGE>
to the Trustee herein and in such event the Trustee shall be fully relieved of
such duties.
SECTION 3 - Eligibility and Participation
--------- -----------------------------
3.1 Any salaried Employee who has completed one (1) Year of Service and
has attained the age of twenty-one (21) shall be eligible to participate in this
Plan as of the earlier of the January 1 or July 1 next following the date upon
which the Employee has completed the aforesaid service and age requirements,
provided such Employee is so employed on such January 1 or July 1. A Leased
Employee shall not be eligible to participate in this Plan. An hourly paid
Employee shall not be eligible to participate in this Plan. Any Employee who was
participating in this Plan on the day before the Effective Date of this amended
and restated Plan shall continue to participate in this Plan subject to the
other requirements herein. Any Employee who is included in a unit of Employees
covered by an agreement in which retirement benefits are the subject of good
faith bargaining between Employee representatives and the Employer shall not be
eligible to participate in this Plan.
3.2 Notwithstanding the positive statements herein as to eligibility,
participation in this Plan by an Employee shall be entirely voluntary on the
part of each Participant. An Employee shall automatically participate in this
Plan upon becoming eligible unless the Employee elects not to participate in
the Plan. The election not to participate must be in writing, signed by the
Employee, and delivered to the Committee before the Anniversary Date. An
Employee who elects not to participate may apply for participation not later
than thirty (30) days prior to any suc-
28
<PAGE>
ceeding Anniversary Date of the Plan and Trust, and upon meeting the other
requirements for participation, his participation shall commence as of the next
Anniversary Date after the application is made. Such Employee shall have the
same Normal Retirement Date as would have been the case if he had applied for
participation when first eligible. The benefits for any such Participant
applying for participation as of any Anniversary Date after the Anniversary
Date when first eligible shall be the benefits as determined in the
Retirement Benefits Section, multiplied by the ratio of the number of completed
Years of Service he will have under the Plan and Trust if he lives and
continues in the employment of the Employer until his Normal Retirement Date,
to the number of completed Years of Service he would have had under the
Plan and Trust had he become a Participant when first eligible.
3.3 For purposes of determining Years of Service for eligibility to
participate in this Plan, the following Years of Service with the Employer
shall not be taken into account:
(a) In the case of any Employee who has any One-Year Break in
Service, Years of Service before such break shall not be taken
into account until such Employee has completed one Year of
Service after such break, at which time the Employee shall
participate retroactively to the re-employment commencement
date; and
(b) For Plan Years beginning after 1984, in the case of an
Employee who does not have any non-forfeitable right to
the Accrued Benefit derived from Employer contribu-
tions, Years of Service before a period of consecutive
One-Year Breaks in Service will not be taken into
account in computing Years of Service for eligibility
to participate if the number of consecutive One-Year
Breaks in Service in such period equals or exceeds the
greater of five (5) or the aggregate number of Years of
Service. Such aggregate number of Years of Service
will not include any Years of Service disregarded under
the preceding sentence by reason of prior breaks in
service.
29
<PAGE>
In regard to (b) above, if the Employee's Years of Service are
disregarded, such Employee will be treated as a new Employee for eligibility
purposes. If the Employee's Years of Service may not be disregarded under (b),
such Employee shall continue to participate in this Plan, or, if terminated,
shall participate as provided in (a) above.
The benefits for such former Employee shall not include any benefits
previously distributed to him unless the former Employee returns them to this
Plan and Trust as provided for herein. The re-employment commencement date is
the first day on which the Employee is credited an Hour of Service for the
performance of duties after the first eligibility computation period in which
the Employee incurs a One-Year Break in Service.
3.4 If, in any Plan Year, any person who should not have been included
as a Participant in the Plan is erroneously included and discovery of such
incorrect inclusion is not made until after a contribution for the year has been
made, the appropriate Employer shall not be entitled to recover the contribution
made with respect to the ineligible person regardless of whether or not a
deduction is allowable with respect to such contribution. In such event, the
amount contributed with respect to the ineligible person shall constitute a
forfeiture for the Plan Year in which the discovery is made.
3.5 In the event a Participant is no longer a member of an eligible
class of Employees and becomes ineligible to participate but has not incurred a
One-Year Break in Service, such Employee will participate immediately upon
returning to an eligible class of Employees. If such Participant incurs a
One-Year Break in
30
<PAGE>
Service, eligibility to participate will be determined under the break in
service rules in this Plan. In the event an Employee who is not a member of the
eligible class of Employees becomes a member of the eligible class, such
Employee will participate immediately if such Employee has satisfied the
minimum age and service requirements and would have otherwise previously become
a Participant.
SECTION 4 - Employer Contributions
--------- ----------------------
4.1 The Employer shall pay over to the Trustee from time to time the
sums of money required to provide the benefits set forth in this Agreement.
Further, the Employer, at its option, may pay all or any part of the expenses
and fees of administration of this Trust. Any expenses or fees not paid by the
Employer shall be paid from the Trust Fund.
4.2 Subject to full funding limitations, the Employer shall contribute
as a minimum the normal costs of the Plan plus amortization of any past service
liabilities over no more than thirty (30) years. The Employer shall maintain
each year a minimum funding standard account for the purpose of determining
whether or not the Plan is meeting the funding requirements. The funding
standard account shall be charged in each Plan Year with the normal costs for
that Plan Year, and with the minimum amortization payment required for initial
past service costs and with increases in Plan liabilities, experience losses,
and waived contributions for each Plan Year. The account shall be credited in
each Plan Year for Employer contributions made for that Plan Year and with
amortized portions of Plan cost decreases resulting from Plan amendments and
experience gains, and with amounts of
31
<PAGE>
any waived contributions. If the account has a positive balance at the end of
the Plan Year (i.e., credits exceed charges), such balance will be credited with
interest (at the rate used to determine Plan costs). Therefore, the need for
future contributions to meet the minimum funding standards will be reduced to
the extent of the positive balance, plus the interest credit appearing at the
end of the Plan Year. On the other hand, if the account shows a deficit balance,
the deficiency is to be charged with interest (also at the rate used to
determine Plan costs). In the event the Employer would otherwise incur
substantial business hardship, and if application of the minimum funding
requirements would be adverse to Plan Participants in the aggregate, the
Internal Revenue Service upon application by the Employer may waive the
requirement of current payment of part or all of a Plan Year's contributions of
normal costs, and amounts needed to amortize past service liabilities and
experience losses. If waiver of funding is granted by the Internal Revenue
Service, the amount waived (plus interest) shall be amortized not less rapidly
than ratably (including interest) over fifteen (15) years, and no more than
three (3) waivers may be granted for any fifteen (15) consecutive years. Also,
the Secretary of Labor may extend the amortization period for an amortization of
past service costs up to an additional ten (10) years, on a showing of economic
hardship.
4.3 An enrolled actuary shall be retained by the Plan. Such actuary
shall prepare an actuarial statement as required by pertinent regulations of the
Department of Treasury and Department of Labor.
32
<PAGE>
4.4 The provisions of this Employer Contributions Section shall be
deemed the procedure for establishing and carrying out the funding policy and
method of this Plan. Such funding policy and method shall be consistent with the
objectives of this Plan and with the requirements of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
4.5 All contributions made to this Plan and Trust by the Employer are
expressly made upon the condition that such contributions are fully deductible
for income tax purposes unless the Employer otherwise specifies in writing.
Contributions made by the Employer to the Plan shall be made irrevocably and it
shall be impossible for the assets of the Plan to inure to the benefit of the
Employer or to be used in any manner other than for the exclusive purpose of
providing benefits to Participants, retired Participants, and Beneficiaries, and
for defraying reasonable expenses of administering the Plan; provided, however,
that,
(a) if the Plan does not initially qualify by the Internal Revenue
Service, then any contribution made to the Plan by the
Employer must be returned to the Employer within one (1) year
after the date of denial of qualification of the Plan;
(b) if a contribution is made by the Employer by a mistake
of fact, such contribution must be returned to the
Employer within one (1) year after the payment of the
contribution; or
(c) to the extent the deduction for a contribution under Code
Section 404 is disallowed, the contribution (to the extent
disallowed) must be returned to the Employer within one (1)
year after the disallowance of the deduction.
4.6 Unless otherwise specifically provided in this Plan and Trust, a
Participant must have a Year of Credited Service for
33
<PAGE>
accrual of benefits during a Plan Year in order to accrue benefits for such
Plan Year.
SECTION 5 - Top Heavy Provision and Administration
--------- --------------------------------------
5.1 For any Top Heavy Plan Year, the Plan hereby provides the
following:
(a) special vesting requirements of Code Section 416(b);
(b) special minimum accrual of benefits requirements of
Code Section 416(c); and
(c) special Compensation requirements of Code Section
416(d).
5.2 The Present Value of Accrued Benefit for a Participant in a defined
benefit plan shall be determined:
(a) As of the most recent "actuarial valuation date", which is the
most recent Valuation Date within a twelve (12) month period
ending on the Determination Date.
(b) For the first Plan Year, as if (i) the Participant terminated
service as of the Determination Date; or (ii) the Participant
terminated service as of the actuarial Valuation Date, but
taking into account the estimated Present Value of Accrued
Benefits as of the Determination Date.
(c) For any other Plan Year, as if the Participant termi-
nated service as of the actuarial valuation date.
(d) The actuarial valuation date shall be the same date used for
computing the defined benefit plan minimum funding costs,
regardless of whether a valuation is performed that Plan Year.
5.3 The calculation of a Participant's Present Value of Accrued Benefit
as of a Determination Date shall be the sum of:
(a) The Present Value of Accrued Benefit using the Actuar-
ial Equivalent assumptions in this Plan (including this
Plan's Actuarial Equivalent assumptions if this Plan
and one or more plans are in an Aggregation Group). If
an Aggregation Group includes two (2) or more defined
benefit plans, the same actuarial assumptions must be
used with respect to all such plans and must be speci-
fied in such plans. Proportional subsidies shall be
ignored when testing for a Top Heavy Plan. Non-propor-
tional subsidies as defined in Regulations 1.416-1
34
<PAGE>
shall be considered when testing for a Top Heavy Plan. For
purposes of determining whether the Plan is a Top Heavy Plan,
a Participant's Accrued Benefit (other than a Key Employee) in
a defined benefit plan will be determined under a uniform
accrual method which applies to all defined benefit plans
maintained by the Employer, or where there is no such method,
as if the benefit accrued not more rapidly than the slowest
rate of accrual permitted under the fractional accrual rule of
Code Section 411(b)(1)(C);
(b) Any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distri-
butions made after the Valuation Date and prior to the
Determination Date, such distributions are not included
as distributions for top heavy purposes to the extent
that such distributions are already included in the
Participant's Aggregate Account balance as of the Val-
uation Date. Notwithstanding anything herein to the
contrary, all distributions, including distributions
made prior to January 1, 1984, will be counted;
(c) Any Employee contributions, whether voluntary or manda-
tory. However, amounts attributable to tax deductible
qualified employee contributions shall not be consider-
ed to be a part of the Participant's Aggregate Account
balance;
(d) With respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employ-
ee and made from a plan maintained by one employer to a
plan maintained by another employer), if this Plan pro-
vides for rollovers or plan-to-plan transfers, it shall
always consider such rollovers or plan-to-plan trans-
fers as a distribution for purposes of this Section.
If this Plan is the plan accepting such rollovers or
plan-to-plan transfers, it shall not consider such
rollovers or plan-to-plan transfers accepted after
December 31, 1983 as part of the Participant's Aggre-
gate Account balance. However, rollovers or plan-to-
plan transfers accepted prior to January 1, 1984 shall
be considered as part of the Participant's Aggregate
Account balance; and
(e) With respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or
made to a plan maintained by the same employer), if
this Plan provides for rollovers or plan-to-plan trans-
fers, it shall not be counted as a distribution for
purposes of this Section. If this Plan is the plan
accepting such rollovers or plan-to-plan transfers, it
shall consider such rollovers or plan-to-plan transfers
as part of the Participant's Aggregate Account balance,
35
<PAGE>
irrespective of the date on which such rollover or
plan-to-plan transfer is accepted.
5.4 Aggregation Group shall mean either a Required Aggregation Group
or a Permissive Aggregation Group as hereinafter determined:
(a) In determining a Required Aggregation Group hereunder,
each plan of the Employer in which at least one Key
Employee participates, or participated at any time
during the determination period (regardless of whether
the plan has terminated), and each other plan of the
Employer which enables any plan in which a Key Employee
participates to meet the requirements of Code Sections
401(a)(4) or 410, will be required to be aggregated.
Such group shall be known as a Required Aggregation
Group.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top Heavy Plan if the Required
Aggregation Group is a Top Heavy Group. No plan in the
Required Aggregation Group will be considered a Top Heavy
Plan if the Required Aggregation Group is not a Top Heavy
Group.
(b) The Employer may also include any other plan not required to
be included in the Required Aggregation Group, provided the
resulting group, taken as a whole, would continue to satisfy
the provisions of Code Section 401(a)(4) and 410. Such group
shall be known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan
that is part of the Required Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy Group.
(c) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated
in order to determine whether such plans are Top Heavy Plans.
5.5 In the case of a defined contribution plan, a Participant's
Aggregate Account shall be as determined under the provisions of the applicable
defined contribution plan.
36
<PAGE>
5.6 Annual Compensation of each Employee taken into account during any
Top Heavy Plan Year shall not exceed the sum of Two Hundred Thousand ($200,000)
Dollars, or One Hundred Fifty Thou sand ($150,000) Dollars for Plan Years after
1983 (subject to an annual cost of living increase as determined by Treasury
regulations).
5.7 If any Participant is a Non-Key Employee for any Plan Year, but
such Participant was a Key Employee for any prior Plan Year, such Participant's
Present Value of Accrued Benefit or Aggregate Account balance shall not be taken
into account for purposes of determining whether this Plan is a Top Heavy Plan
(or whether any Aggregation Group which includes this Plan is a Top Heavy
Group). If a Participant has not performed services for any Employer maintaining
the Plan at any time during the five (5) year period ending on the Determination
Date, any Accrued Benefit for such Participant shall not be taken into account
for purposes of determining whether this Plan is a Top Heavy Plan.
5.8 "Aggregate Account" shall mean, with respect to each Participant,
the Actuarial Equivalent of the present value of a Participant's Accrued
Benefit, whether attributable to Employer or Employee contributions.
5.9 "One Percent Owner" shall mean any person who owns (or is
considered as owning within the meaning of Code Section 318) more than one (1%)
percent of the outstanding stock of the Employer or stock possessing more than
one (1%) percent of the total combined voting power of all stock of the
Employer. In determining percentage ownership hereunder, employers that would
37
<PAGE>
otherwise be aggregated under Code Sections 414(b), (c) and (m) shall be treated
as separate employers.
SECTION 6 - Retirement Benefits
--------- -------------------
6.1 The amount of retirement income of the Normal Annuity Form to which
each Participant shall be entitled commencing at Normal Retirement Date shall be
determined in accordance with the retirement income formula as set forth herein.
6.2 A Participant's Accrued Benefit during any Plan Year prior to the
time of his Normal Retirement Date will be deter mined on the basis of his Final
Average Monthly Compensation as of his date of termination of employment.
6.3 The monthly retirement Annuity of the Normal Annuity Form to which
a Participant shall be entitled upon the attainment of his Normal Retirement
Date shall be equal to one and fifteen one-hundredths (1.15%) percent of his
Final Average Monthly Compensation multiplied by his Years of Credited Service,
not to exceed thirty-five (35) Years of Credited Service, plus sixty-five
one-hundredths (0.65%) percent of his Final Average Monthly Compensation in
excess of current "covered compensation" (Table II), multiplied by his Years of
Credited Service, not to exceed thirty-five (35) Years of Credited Service.
Table II is incorporated herein and made a part hereof by reference. "Covered
compensation" means the average of the Social Security taxable wage bases for
the thirty-five (35) calendar years ending with the year an individual attains
his Social Security retirement age. A Participant's Accrued Benefit shall not be
less than his Accrued Benefit prior to the day before the effective date of this
amendment.
38
<PAGE>
6.4 Notwithstanding anything herein to the contrary, for any Top Heavy
Plan Year, the following minimum annual benefit accrual shall be provided for
each Non-Key Employee:
(a) The minimum Accrued Benefit with respect to the Employ-
er's contribution at any point in time shall equal at
least the product of a Non-Key Employee's "average com-
pensation" for the five (5) consecutive years when such
Non-Key Employee had the highest aggregate Compensation
from the Employer and the lesser of two (2%) percent
per Top Heavy Plan Year of Service, or twenty (20%)
percent. Each Non-Key Employee shall accrue a retire-
ment benefit equal to two (2%) percent of his "average
compensation" for each Top Heavy Plan Year. The com-
pensation required to be taken into account is the
greater of the Compensation defined in this Plan or the
compensation described in Code Section 415. Compensa-
tion received by a Non-Key Employee for non-Top Heavy
Plan Years shall be disregarded. For purposes of this
Plan, the two (2%) percent minimum annual retirement
benefit means a benefit payable annually in the form of
a single life Annuity (with no ancillary benefits) at
the Normal Retirement Age under the Plan.
(b) If a Key Employee is a Participant in both a defined
contribution plan and a defined benefit plan that are
both part of a Top Heavy Group, the defined contribu-
tion and the defined benefit fractions shall remain un-
changed provided each Non-Key Employee who is a Parti-
cipant receives an extra Accrued Benefit (in addition
to the minimum Accrued Benefit set forth above) equal
to not less than the lesser of (i) one (1%) percent of
such Non-Key Employee's "average compensation" multi
plied by his Years of Service, or (ii) ten (10%) per
cent of his "average compensation." This extra benefit
shall be determined in the same manner as the minimum
benefit set forth in this Section, and shall be provid-
ed for each Top Heavy Plan Year in which one or more
Key Employees is a Participant in both the defined
benefit and defined contribution plans.
(c) For any Top Heavy Plan Year, the minimum benefits set
forth above shall accrue to each Non-Key Employee who
has completed 1,000 Hours of Service (or the equiva-
lent) during the benefit accrual computation period,
including those Non-Key Employees who have completed
such 1,000 Hours of Service, but have been excluded
from participation or have accrued no benefit because
(i) such Non-Key Employee's compensation is less than a
stated amount, or (ii) such Non-Key Employee declined
to make mandatory contributions (if any) to the Plan.
(d) If a Non-Key Employee participates in both a defined benefit
plan and a defined contribution plan included in a Top Heavy
Aggregation Group, the Employer is not required to provide the
Non-Key Employee with both the
39
<PAGE>
full and separate minimum benefit and the full and
separate minimum contribution.
(e) If the Employer maintains another qualified plan and a Non-Key
Employee participates in this Plan and the other plan, then
this Plan shall first satisfy the minimum Top Heavy Plan
benefits required herein. If the other qualified plan is a
defined contribution plan, then three (3%) percent shall be
substituted for two (2%) percent in (a) above.
6.5 Adjustments shall be made each Anniversary Date in a Participant's
Accrued Benefit in accordance with this Retirement Benefits Section.
6.6 A Participant who completes 1,000 or more Hours of Service for
accrual of benefits, but terminates employment before the end of such year shall
accrue a benefit under the Plan.
6.7 Any retirement benefit at Normal Retirement Date under this Plan
shall be the Actuarial Equivalent of the Normal Annuity Form.
6.8 The normal retirement benefit at Normal Retirement Date under this
Plan shall be equal to the greater of the Plan's early retirement benefit (if
applicable) or the benefit at the Normal Retirement Age.
6.9 Payment of the retirement benefit at Normal Retirement Date to an
Inactive Participant is subject to the Annuity Requirements Section and
Distribution Requirements Section.
SECTION 7 - Early Retirement
--------- ----------------
7.1 A Participant may retire at any time within the ten (10) year
period immediately preceding Normal Retirement Date, provided such Participant
shall have attained the age of fifty- five (55) and completed fifteen (15) Years
of Service. The amount of retirement Annuity due at early retirement date shall
40
<PAGE>
be equal to the Participant's fully vested Accrued Benefit to date of such early
retirement reduced by one-fifteenth (1/15) for each of the first five years and
one-thirtieth (1/30) for each of the next five years by which the annuity
starting date precedes such Participant's Normal Retirement Date, and
actuarially reduced for each additional year. Fractional years shall be
calculated to the nearest month. A Participant who satisfies the service
requirement for early retirement pursuant to this Early Retirement Section, but
separated from service (with any nonforfeitable right to an Accrued Benefit)
before satisfying the age requirement for early retirement, shall be entitled
upon satisfaction of such age requirement to receive a benefit not less than the
benefit to which he would be entitled at the Normal Retirement Age after
application of the vesting schedule, actuarially reduced under regulations
prescribed by the Treasury Department. Payment of the retirement benefit at
early retirement to the Inactive Participant is subject to the Annuity
Requirements Section and the Distribution Requirements Section.
SECTION 8 - Later Retirement
--------- ----------------
8.1 A Participant may retire later than his Normal Retirement Date. A
Participant shall continue to accrue benefits after his Normal Retirement Age
while still employed with the Employer subject to the other terms and conditions
of this Plan. In such an event:
(a) A Participant's deferred retirement date shall be the first
day of the month following his last day of employment. The
amount of Annuity of a Normal Annuity Form to which the
Participant shall be entitled as of the date retirement
benefits commence shall be the Actuarial Equivalent of the
normal retirement benefit as of such date. The benefit
described herein shall be
41
<PAGE>
subject to the limitation in the Retirement Benefits Section.
In no event shall this benefit be less than the benefit
accrued to the deferred retirement date.
(b) In the event of the death of such Participant prior to the
time payment of his retirement benefits shall have commenced,
the death benefit to which he shall be entitled shall be
equal to the single sum actuarial value to date of death.
(c) The retirement Annuity payable hereunder at later retirement
or in the event of the Participant's death shall be subject to
the Annuity Requirements Section and the Distribution
Requirements Section.
(d) Notwithstanding the foregoing, a Participant who continues to
be employed with the Employer beyond his Normal Retirement
Date shall not be eligible to commence receiving his Accrued
Benefit until his termination of employment or attainment of
age 70 1/2, which ever occurs first.
SECTION 9 - Death Benefits
--------- --------------
9.1 If a Participant dies prior to his Normal Retirement Date, then no
benefit of any kind shall be payable from this Plan and Trust except for the
death benefit (if any) provided for in this Death Benefits Section. The amount
of the Participant's death benefit shall be the then vested present value of the
Participant's Accrued Benefit accrued to date of death. A Participant who dies
prior to being vested in his Accrued Benefit shall receive no death benefit or
other benefit under this Plan.
9.2 With respect to any death benefit hereunder, the Participant during
his lifetime shall have the right, which may be successively exercised by
written instrument filed with and received by the Committee prior to the
Participant's death and bearing the signature of at least one (1) witness, to
designate a Beneficiary or Beneficiaries, or to change his designated Benefi-
ciary; provided, however, that the primary designated Beneficiary of a married
Participant shall be the Participant's spouse unless
42
<PAGE>
the spouse has consented in writing to a non-spouse Beneficiary. Such consent
shall acknowledge the specific non-spouse beneficiary, including any class of
Beneficiaries or any contingent Beneficiaries. Such consent must be witnessed by
a Plan representative or a notary public. In the event the designated
Beneficiary or Beneficiaries are not living at the death of the Participant, or
if an unmarried Participant has not designated a Beneficiary, the death benefit
shall be payable to the Participant's estate. Payment of any death benefit
shall be made after taking into consideration the Annuity Requirements Section
and the Distribution Requirements Section.
SECTION 10 - Disability Benefits
---------- -------------------
10.1 A Participant whose employment with the Employer terminates prior
to his Normal Retirement Date because of Disability shall be entitled to his
Accrued Benefit as of his date of termination of employment, actuarially reduced
for early commencement and calculated in the same manner as an early retirement
benefit under Section 7; subject to the vesting schedule in Section 11.1. A
Participant who becomes disabled prior to being vested in his Accrued Benefit
shall receive no disability benefit or other benefit under this Plan. Payment of
the Disability benefit shall be made to the Inactive Participant subject to the
Annuity Requirements Section and the Distribution Requirements Section.
10.2 The Committee shall determine the existence or not of the
Participant's Disability and its finding and shall be conclusive for all
purposes of this Plan and Trust; except that, in its discretion, the Committee
may at any subsequent time or times
43
<PAGE>
review any former action it has taken with regard to the Disabil-
ity of any Participant.
SECTION 11 - Termination of Employment
---------- -------------------------
11.1 Except as otherwise specifically provided herein, upon termination
of employment, a Participant shall be entitled to the percentage vesting in his
Accrued Benefit resulting from Employer contributions as shown in the following
schedule:
Credited Vested
Years of Service Percentage
---------------- ----------
Less than 5 0%
5 or more 100%
11.2 Notwithstanding anything in this Plan and Trust to the contrary,
for any Top Heavy Plan Year, a Participant shall be entitled to the percentage
vesting of his Accrued Benefit resulting from Employer contributions as shown
in the following vesting schedule:
Credited Vested
Years of Service Percentage
---------------- ----------
Less than 3 None
3 or more 100%
If for each point on the above Top Heavy Plan vesting schedule, the
non-Top Heavy Plan vesting schedule in Section 11.1 is more favorable, then the
non-Top Heavy Plan vesting schedule shall apply at such point.
11.3 The vested portion of the Participant's Accrued Benefit shall be
paid as provided in the Annuity Requirements Section and the Distribution
Requirements Section. Except as otherwise provided herein, payment of such
vested portion of the Participant's Accrued Benefit may be deferred until the
Participant dies, or would have otherwise qualified for Normal Retirement
44
<PAGE>
Date (or early retirement date, if applicable) under the provisions of this
Plan. If such Accrued Benefit is paid to the Inactive Participant prior to his
attainment of Normal Retirement Date (or early retirement date if otherwise
permitted herein), the Accrued Benefit shall be actuarially reduced for early
commencement.
11.4 A Participant shall be fully vested in and have a nonforfeitable
right to his Accrued Benefit if he is employed with the Employer at his Normal
Retirement Age even though his Years of Service do not result in 100% vesting in
accordance with the above vesting schedules.
11.5 For purposes of crediting a Year of Service for vesting, all
Years of Service with the Employer shall be taken into account except as
follows:
(a) For Plan Years beginning before 1985, Years of Service
prior to any One-Year Break in Service if the Employee
was not vested in Employer contributions and the number
of consecutive One-Year Breaks in Service equals or
exceeds the aggregate number of Years of Service before
such break. Such aggregate number of Years of Service
before such break shall be deemed not to include any
Years of Service not required to be taken into account
by reason of any prior One-Year Break in Service;
(b) In the case of any Employee who has any One-Year Break in
Service, Years of Service before such break shall not be taken
into account until such Employee has completed one Year of
Service after such break, computed from the date of rehire,
at which time the one Year of Service waiting period shall
also be counted;
(c) In the case of a Participant who has five (5) or more
consecutive One-Year Breaks in Service, the Participant's
pre-break service will count in vesting of the Employer
provided Accrued Benefit only if either:
(i) such Participant has any non-forfeitable interest
in the Accrued Benefit attributable to Employer
contributions at the time of separation from ser-
vice; or
45
<PAGE>
(ii) upon returning to service with the Employer the
number of consecutive One-Year Breaks in Service is
less than the number of Years of Service.
Any Employee whose status changes from being excluded from
participation in this Plan to an Employee eligible to participate in this Plan
shall receive credit for vesting purposes for all Hours of Service and Years of
Service with the Employer whether covered or noncovered, subject to the
provisions of this Section.
11.6 The facts concerning the termination of a Participant's
employment shall be transmitted to the Committee and to the Trustee by written
statement from the Employer, and the Committee and the Trustee may accept such
statement as true, and neither the Committee nor the Trustee shall incur any
liability by reason of any action taken or omitted on the strength of such
statement.
11.7 Any and all forfeitures to the Trust under the provisions of this
Plan (including dividends and return of premiums because of termination of a
Participant's employment) shall be used by the Plan and Trust to reduce the
current costs or next succeeding contributions by the Employer. Forfeitures
shall in no way increase the benefits of any Participant.
11.8 For purposes of determining an Employee's Accrued Benefit derived
from Employer contributions under the Plan, service by an Employee shall be
disregarded with respect to which:
(a) the Employee receives a distribution of the present
value of his non-forfeitable benefit attributable to
such service at the time of such distribution;
(b) for Plan Years beginning before 1985, the Employee when
eligible for payment elects to receive such distribu-
tion;
46
<PAGE>
(c) for Plan Years beginning after 1984, the Employee with the
consent of his spouse, if any, when eligible for payment
elects to receive such distribution if the Actuarial
Equivalent of the present value of the distribution exceeds
$3,500;
(d) the distribution is made on termination of the Employ-
ee's participation in the Plan;
(e) the Employee has a right to repay such distribution as
provided in Section 13; and
(f) the Employee does not repay such distribution as pro-
vided in Section 13.
For purposes of this Section, if the present value of an Employee's
vested Accrued Benefit is zero, the Employee shall be deemed to have received a
distribution of such vested Accrued Benefit.
11.9 No amendment to the vesting schedule shall deprive a Participant
of his non-forfeitable right to benefits accrued to the date of the amendment,
or the date the amendment is effective, if later. 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 a Participant's non-forfeitable
percentage of his Accrued Benefit, or if the Plan is deemed amended by automatic
change to or from a Top Heavy Plan vesting schedule, each Participant with at
least three (3) Years of Service for vesting purposes (without any excluded
Years of Service) with the Employer may elect, within a reasonable period after
adoption of the amendment or change, to have his non-forfeitable percentage
computed under the Plan without regard to such amendment or change unless the
Participant's non-forfeitable percentage computed under the Plan, as amended, at
any time cannot be less than such percentage determined without regard to
47
<PAGE>
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 commences with the date the amendment is adopted and ends
on the later of:
(a) Sixty (60) days after the amendment is adopted;
(b) Sixty (60) days after the amendment becomes effective;
or
(c) Sixty (60) days after the Participant is issued written notice
of the amendment by the Employer or Plan Administrator.
No amendment to the vesting schedule shall reduce a Participant's then
vested percentage.
SECTION 12 - Annuity Requirements
---------- --------------------
12.1 The provisions of this Annuity Requirements Section shall take
precedence over any conflicting provision in this Plan and Trust Agreement and
the provisions of this Annuity Requirements Section shall apply to any
Participant who is credited with at least one Hour of Service with the Employer
on or after August 23, 1984, and to such other Participants as provided in
Section 12.10 herein below.
12.2 Unless an optional form of benefit is selected pursuant to a
qualified election within the ninety (90) day period ending on the annuity
starting date, an unmarried Participant's vested accrued benefit will be paid in
the form of an Annuity for the life of the Participant. Unless an optional form
of benefit is selected pursuant to a qualified election, within the ninety
48
<PAGE>
(90) day period ending on the annuity starting date, a married Participant's
vested accrued benefit will be paid in the form of a qualified joint and
survivor annuity. The Participant may elect to have such annuity distributed
upon attainment of the earliest retirement age under this Plan.
12.3 Unless an optional form of benefit has been selected with the
election period pursuant to a qualified election, if a married Participant dies
after the earliest retirement age, the Participant's surviving spouse, if any,
will receive a qualified pre-retirement survivor annuity. The qualified
pre-retirement survivor annuity is the same benefit that would be payable if the
Participant had retired with an immediate qualified joint and survivor annuity
on the day before the Participant's date of death. The surviving spouse may
elect to commence payment under such qualified pre-retirement survivor annuity
within a reason able period after the Participant's death. The actuarial value
of benefits which commence later than the date on which payments would have been
made to the surviving spouse under a qualified joint and survivor annuity in
accordance with this provisions shall be adjusted to reflect the delayed
payment.
Unless an optional form of benefit is selected within the election
period pursuant to a qualified election, if a Participant dies on or before the
earliest retirement age, the Participant's surviving spouse (if any) will
receive a qualified pre-retirement survivor annuity. The qualified
pre-retirement survivor annuity is the same benefit that would be payable if the
Participant had:
49
<PAGE>
(a) separated from service on the date of death (or date of
separation from service, if earlier),
(b) survived to the earliest retirement age,
(c) retired with an immediate qualified joint and survivor
annuity at the earliest retirement age, and
(d) died on the day after the earliest retirement age.
A surviving spouse will begin to receive payments at the earliest
retirement age. Benefits commencing after the earliest retirement age will be
the Actuarial Equivalent of the benefit to which the surviving spouse would have
been entitled if benefits had commenced at the earliest retirement age under an
immediate qualified joint and survivor annuity in accordance with the above.
If there is any remaining death benefit after providing the qualified
pre-retirement survivor annuity for the surviving spouse as required above in
this Section 12.3, then such death benefit shall be paid pursuant to the
Distribution Requirements Section to the surviving spouse. If at the time of the
Participant's death, there is either no surviving spouse, or the surviving
spouse has made the qualified election, and if the Participant is eligible for
a death benefit under the Death Benefits Section, then all of such death benefit
shall be paid to the Participant's designated Beneficiary pursuant to the
Distribution Requirements Section. Notwithstanding the preceding sentence, if
the death benefit is to be paid to the deceased Participant's spouse in the form
of a qualified pre-retirement survivor annuity and other forms of payment are
specifically permitted herein upon the Participant's death, then the deceased
Participant's spouse may irrevocably waive in writing payment of the
Participant's
50
<PAGE>
death benefit in the form of a qualified pre-retirement survivor annuity and
select another form of payment which is otherwise permitted in this Plan. Such
waiver must be made after the Participant's death and prior to the Trustee's
purchase (or first payment, as the case may be) of the qualified pre-retirement
survivor annuity.
12.4 When used in this Section, the following terms shall have the
indicated meanings:
(a) "Election period" shall mean the period which begins on
the first day of the Plan Year in which the Participant
attains age thirty-five (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 thirty-five (35) is attained, with respect to
the vested accrued benefit prior to the date of separa-
tion, the election period shall begin on the date of
separation.
A Participant who will not yet attain age thirty-five (35) as
of the end of any current Plan Year may make a special
qualified election to waive the qualified pre-retirement
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 thirty-five (35). Such
election will not be valid unless the Participant receives a
written explanation of the qualified pre-retirement survivor
annuity in such terms as are comparable to the explanation re-
quired under Section 12.5. Qualified pre-retirement survivor
annuity coverage will be automatically rein stated as of the
first day of the Plan Year in which the Participant attains
age thirty-five (35). Any new waiver on or after such date
shall be subject to the full requirements of this Section.
(b) "Earliest retirement age" shall mean the earliest date on
which, under the Plan, the Participant could elect to receive
retirement benefits.
(c) "Qualified election" shall mean a waiver of a qualified
joint and survivor annuity or a qualified pre-retire-
ment survivor annuity. Any waiver of a qualified joint
and survivor annuity or a qualified pre-retirement
survivor annuity shall not be effective unless: (i)
the Participant's spouse consents in writing to the
election; (ii) the election designates a specific
alternate Beneficiary, including any class of Benefi-
51
<PAGE>
ciaries 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 elec-
tion; 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 survi-
vor 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 express-
ly permits designations by the Participant without any
further spousal consent). If it is established to the
satisfaction of a Plan representative that there is no
spouse or that the spouse cannot be located, a waiver
will be deemed a qualified election. Any consent by a
spouse obtained under this provision (or establishment
that the consent of a spouse may not be obtained) shall
be effective only with respect to such spouse. A
consent that permits designations by the Participant
without any requirement of further consent by such
spouse must acknowledge that the spouse has the right
to limit consent to a specific Beneficiary, and a
specific form of benefit where applicable, and that the
spouse voluntarily elects to relinquish either or both
of such rights. A revocation of a prior waiver may be
made by a Participant without the consent of the spouse
at any time before the commencement of benefits. The
number of revocations shall not be limited. No consent
obtained under this provisions shall be valid unless
the Participant has received notice as provided in
Section 12.5.
(d) "Qualified joint and survivor annuity" shall mean an
immediate Annuity for the life of the Participant, with
a survivor Annuity for the life of the spouse which is
fifty (50%) percent of the amount of the Annuity which
is payable during the joint lives of the Participant
and the spouse, and which is the Actuarial Equivalent
of the Normal Annuity Form of benefit, or if greater,
any optional form of benefit.
(e) "Qualified pre-retirement survivor annuity" shall mean a
survivor Annuity for the life of the surviving spouse of the
Participant as defined in Section 12.3.
(f) "Spouse or surviving spouse" shall mean 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 Code Section 414(p).
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(g) "Annuity starting date" shall mean the first day of the
first period for which an amount is paid as an Annuity
or any other form. The Annuity starting date for
Disability benefits shall be the date such benefits
commence if the Disability benefit is not an auxiliary
benefit. An auxiliary benefit is a Disability benefit
which does not reduce the benefit payable at Normal
Retirement Age.
(h) "Vested accrued benefit" shall mean the value of the
Participant's Accrued Benefit to the extent vested
derived from Employer and Employee contributions (in-
cluding rollovers). The provisions of this Section
shall apply to a Participant who is vested in amounts
attributable to Employer contributions, Employee con-
tributions (or both) at the time of death or distribu-
tion.
12.5 In the case of a qualified joint and survivor annuity, the
Committee shall no less than thirty (30) days and no more than ninety (90) days
prior to the annuity starting date provide each Participant a written
explanation of (a) the terms and conditions of a qualified joint and survivor
annuity; (b) the Participant's right to make and the effect of an election to
waive the qualified joint and survivor annuity form of benefit; (c) the rights
of a Participant's spouse; (d) the right to make, and the effect of a revocation
of a previous election to waive the qualified joint and survivor annuity; and
(e) the relative values of the various optional forms of benefit under the Plan.
In the case of a qualified pre-retirement survivor annuity, the
Committee shall provide each Participant within the applicable period for such
Participant a written explanation of the qualified pre-retirement survivor
annuity in such terms and in such manner as would be comparable to the
explanation provided for meeting the requirements applicable to a qualified
joint and survivor annuity.
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The applicable period for a Participant is whichever of the following
periods ends last: (a) the period beginning with the first day of the Plan Year
in which the Participant attains age thirty-two (32) and ending with the close
of the Plan Year preceding the Plan Year in which the Participant attains age
thirty-five (35); (b) a reasonable period ending after the individual becomes a
Participant; (c) a reasonable period ending after Section 12.6 ceases to apply
to the Participant; (d) a reasonable period ending after this Section first
applies to the Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after separation from service in the
case of a Participant who separates from service before attaining age
thirty-five (35).
For purposes of applying the preceding Paragraph, a reasonable period
ending after the enumerated events described in (b), (c) and (d) is the end of
the two (2) year period beginning one (1) year prior to the date the applicable
event occurs, and ending one (1) year after that date. In the case of a Partici-
pant who separates from service before the Plan Year in which age thirty-five
(35) is attained, notice shall be provided within the two (2) year period
beginning one (1) year prior to separation and ending one (1) year after
separation. If such a Participant thereafter returns to employment with the
Employer, the applicable period for such Participant shall be redetermined.
12.6 Notwithstanding the other requirements of this Annuity
Requirements Section, the respective notices prescribed by this Section need not
be given to a Participant if the Plan fully subsidizes the costs of a qualified
joint and survivor annuity or
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qualified pre-retirement survivor annuity, and the Plan does not allow the
Participant to waive the qualified joint and survivor annuity or qualified
pre-retirement survivor annuity, and does not allow a married Participant to
designate a non-spouse Beneficiary. For purposes of this Section, a Plan fully
subsidizes the costs of a benefit if no increase in cost, or decrease in bene-
fits to the Participant may result from the Participant's failure to elect
another benefit. Prior to the time the Plan allows the Participant to waive the
qualified pre-retirement survivor annuity, the Plan may not charge the
Participant for the cost of such benefit by reducing the Participant's benefits
under the Plan or by any other method.
12.7 Neither the consent of the Participant nor the Participant's
spouse shall be required to the extent that a distribution is required to
satisfy Code Section 401(a)(9) or Code Section 415.
12.8 Notwithstanding anything in this Annuity Requirements Section to
the contrary, the Trustee shall distribute the Participant's Accrued Benefit in
a lump sum payment without the Participant's or his spouse's consent after
termination of employment provided that the Actuarial Equivalent of the present
value of the vested non-forfeitable portion of the Employee's Accrued Benefit
(including Employee contributions if the Plan otherwise specifically permits
such contributions) does not exceed $3,500 and such distribution occurs prior to
the annuity starting date. In all other events, written consent of the
Participant and the Participant's spouse shall be obtained not more than ninety
(90) days before the commencement of distribu-
55
<PAGE>
tion of any part of the Accrued Benefit and no distribution shall be
made prior to a Participant's death, Disability, if applicable,
attainment of Normal Retirement Date or early retirement, if applicable.
If the non-forfeitable portion of the Accrued Benefit exceeds $3,500,
then no distribution may be made to the surviving spouse in the form of
a qualified pre-retirement survivor annuity prior to the time the
deceased Participant's Accrued Benefit would have been immediately
distributable to the deceased Participant without the surviving
spouse's written consent. An Accrued Benefit is immediately
distributable if any part of the Accrued Benefit 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 sixty-two (62). Notwithstanding the foregoing, only the
Participant need consent to the commencement of a distribution in the
form of a joint and survivor annuity while the Accrued Benefit is
immediately distributable. Upon distribution, any non-vested portion
of the Employee's Accrued Benefit will be treated as a forfeiture.
The present value of the Accrued Benefit under this Section shall be
calculated: (a) by using an interest rate no greater than the lesser of
the Actuarial Equivalent rate specified in the Definitions Section or
the Pension Benefit Guaranty Corporation "applicable interest rate"
if the vested accrued benefit using such rate is not greater than
$25,000; and (b) by using an interest rate no greater than the lesser
of the rate specified in the Actuarial Equivalent definition or 120% of
the "applicable interest rate" if the vested accrued benefit
exceeds $25,000 as determined under (a), but in
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no event shall the present value calculated under clause (b) be less than
$25,000. For this purpose, the "applicable interest rate" shall mean the
interest rate which would be used as of the first day of the Plan Year that
contains the proposed distribution (or benefit commencement) date by the
Pension Benefit Guaranty Corporation for the purpose of determining the present
value of a lump sum distribution upon a distress termination of a trusteed
single employer plan.
12.9 In the event of a qualified domestic relations order (as described
in Code Section 414(p)), no distribution shall be made to the alternate payee
prior to the Participant's attainment of earliest retirement age. Nothing in
this Section regarding payment under a qualified domestic relations order shall
be construed or deemed to permit a Participant a right to receive distribution
at a time otherwise not permitted under this Plan nor does it permit the
alternate payee to receive a form of payment not permitted under the Plan.
12.10 The following transitional rules shall apply:
(a) Any living Participant not receiving benefits on August
23, 1984, who would otherwise not receive the benefits
prescribed by Sections 12.1 through 12.6, must be given the
opportunity to elect to have the prior Sections of this
Section 12 apply if such Participant is credited with at least
one Hour of Service under this Plan or a predecessor plan in a
Plan Year beginning on or after January 1, 1976, and such
Participant had at least ten (10) Years of Service for vesting
purposes when he separated from service, and benefits would be
payable in the form of a life Annuity.
(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 benefits paid in accordance with (d)
below.
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(c) The respective opportunities to elect (as described in (a) and
(b) above) must be afforded to the appropriate Participants
during the period commencing on August 23, 1984, and ending on
the date benefits would otherwise commence to said
Participants.
(d) Any Participant who has elected pursuant to (b) above,
and any Participant who does not elect under (a) above,
or who meets the requirements of (a) above except that
such Participant does not have at least 10 Years of
Service for vesting purposes when he separates from
service, shall have his benefits distributed in accord-
ance with all of the following requirements if benefits
would have been payable in the form of a life Annuity:
(i) If a benefit in the form of a life Annuity becomes
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 (if applica-
ble); 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 thereafter
dies before beginning to receive such
benefits;
then such benefits will be received under this Plan in the
form of a qualified joint and survivor annuity, unless the
Participant has elected otherwise during the election period.
The election period must begin at least six (6) months before
the Participant attains the qualified early retirement age and
end not more than ninety (90) days before the commencement of
benefits. Any election hereunder must be in writing and may be
changed by the Participant at any time.
(ii) 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 his 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 death. Any election made under this
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provision must be in writing and may be changed by
the Participant at any time. The election period
begins on the later of (A) the ninetieth (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 subsection (d):
(A) Qualified early retirement age is the latest
of:
(1) the earliest date under the Plan on
which the Participant may elect to re-
ceive retirement benefits;
(2) the first day of the one-hundred
twentieth (120th) month
beginning before the
Participant reaches Normal
Retirement Age; or
(3) the date the Participant begins parti-
cipation.
(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 hereinabove.
SECTION 13 - Distribution Requirements
---------- -------------------------
13.1 Except as otherwise provided in the Annuity Requirements Section,
the requirements of this Distribution Requirements Section shall apply to any
distribution of an Inactive Participant's Accrued Benefit (or active
Participant after attainment of age 70 1/2). Except as provided below, the
Trustee shall commence distribution of the Inactive Participant's (or active
Participant's after attainment of age 70 1/2) Accrued Benefit (to the extent
vested) as soon as reasonably practical after the Valuation Date coinciding with
or next following the Participant's termination of employment or attainment of
age 70 1/2, whichever occurs first; provided however (a) if the Participant's
termination of employment occurs as a result of death, Disabili-
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<PAGE>
ty, or after attainment of early retirement date or Normal Retirement Date the
Accrued Benefit shall be distributed as soon as reasonably practical following
the Participant's termination of employment; and (b) if the Actuarial Equivalent
of the present value of the vested non-forfeitable portion of the Inactive
Participant's Accrued Benefit (including both Employer and Employee
contributions, if applicable) exceeds $3,500, the Inactive Participant (or the
surviving spouse in the event of the Participant's death) must consent to any
such distribution if the distribution occurs prior to the Inactive Participant's
Normal Retirement Age or attainment of age sixty-two (62) if later than Normal
Retirement Age. Further, if the Actuarial Equivalent of the present value of the
vested non-forfeitable portion of the Inactive Participant's Accrued Benefit is
$3,500 or less, the Trustee shall distribute the Accrued Benefit without the
Participant's or his spouse's consent. If the Inactive Participant does not
initially consent to the distribution, the Inactive Participant's Accrued
Benefit shall not again be available for distribution until after the earlier
of the Inactive Participant's consent, death or Normal Retirement Date.
13.2 Subject to the Annuity Requirements Section, a Participant's
Accrued Benefit may only be distributed in one of the following forms of payment
as the Participant directs the Trustee after the Participant is otherwise
eligible for payment and each such form of payment shall be the Actuarial
Equivalent of the Normal Annuity Form.
(a) Normal Annuity Form
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(b) lump sum payment of the Accrued Benefit provided the
lump sum amount of the Accrued Benefit is less than
$10,000
(c) single Annuity for life with 120 guaranteed monthly
payments
(d) single Annuity for life (no period guaranteed)
(e) joint and 50% survivor Annuity (no period certain)
(f) joint and 100% survivor Annuity (no period certain)
(g) joint and 66 2/3% survivor Annuity (no period certain)
The Participant's Accrued Benefit if not distributed in a
single lump sum payment (if otherwise permitted above) must be distributed in
accordance with the Code and regulations beginning not later than the required
beginning date, over the life of such Participant or over the lives of such
Participant and a designated Beneficiary (or over a period not extending beyond
the life expectancy of such Participant or the life expectancy of such
Participant and a designated Beneficiary).
All distributions under this Distribution Requirements Section shall
comply with the requirements of Code Section 401(a)(9) and the regulations
thereunder including the minimum incidental benefit requirement of Regulation
1.401(a)(9)-2.
13.3 The entire interest of a Participant must be distributed or begin
to be distributed no later than the Participant's required beginning date. 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
there of):
(a) the life of the Participant,
(b) the life of the Participant and a designated Beneficia-
ry,
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<PAGE>
(c) a period certain not extending beyond the life expec-
tancy of the Participant, or
(d) a period certain not extending beyond the joint and
last survivor expectancy of the Participant and a
designated Beneficiary.
13.4 The determination of the amount to be distributed each
year shall be as follows:
(a) If the Participant's interest is to be paid in the form of
Annuity distributions under the Plan, payments under the
Annuity shall satisfy the following requirements:
(i) the Annuity distributions must be paid in periodic
payments made at intervals not longer than one (1)
year;
(ii) the distribution period must be over a life (or
lives) or over a period certain not longer than a
life expectancy (or joint life and last survivor
expectancy) described in Code Section
401(a)(9)(A)(ii) or Code Section 401(a)(9)(B)(iii),
whichever is applicable;
(iii) the life expectancy (or joint life and last survivor
expectancy) for purposes of determining the period
certain shall be determined without recalculation of
life expectancy;
(iv) once payments have begun over a period certain, the
period certain may not be lengthened even if the
period certain is shorter than the maximum permitted;
(v) payments must either be nonincreasing or increase
only as follows:
(A) with any percentage increase in a specified
and generally recognized cost-of-living in-
dex;
(B) to the extent of the reduction to the amount
of the Participant's payments to provide for
a survivor benefit upon death, but only if
the Beneficiary whose life was being used to
determine the distribution period described
in Section 13.3 above dies and the payments
continue otherwise in accordance with that
section over the life of the Participant;
(C) to provide cash refunds of employee
contributions upon the Participant's death;
or
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(D) because of an increase in benefits under the
Plan.
(vi) if the Annuity is a life Annuity (or a life Annu-
ity with a period certain not exceeding twenty
(20) years), the amount which must be distributed
on or before the Participant's required beginning
date (or, in the case of distributions after the
death of the Participant, the date distributions
are required to begin pursuant to Section 13.5
below) shall be the payment which is required for
one payment interval. The second payment need not
be made until the end of the next payment interval
even if that payment interval ends in the next
calendar year. Payment intervals are the periods
for which payments are received, e.g., bimonthly,
monthly, semi-annually, or annually.
If the Annuity is a period certain Annuity without a
life contingency (or is a life Annuity with a period certain
exceeding twenty (20) years) periodic payments for each
distribution calendar year shall be combined and treated as an
annual amount. The amount which must be distributed by the
Participant's required beginning date (or, in the case of
distributions after the death of the Participant, the date
distributions are required to begin pursuant to Section 13.5
below) is the annual amount for the first distribution
calendar year. The annual amount for other distribution
calendar years, including the annual amount for the calendar
year in which the Participant's required beginning date (or
the date distributions are required to begin pursuant to
Section 13.5 below) occurs, must be distributed on or before
December 31 of the calendar year for which the distribution is
required.
(b) Annuities purchased after December 31, 1988, are sub-
ject to the following additional conditions:
(i) Unless the Participant's spouse is the designated
beneficiary, if the Participant's interest is
being distributed in the form of a period certain
annuity without a life contingency, the period
certain as of the beginning of the first distribu-
tion calendar year may not exceed the applicable
period determined using the table set forth in Q&A
A-5 of Section 1.401(a)(9)-2 of the Proposed In-
come Tax Regulations.
(ii) If the Participant's interest is being distributed in
the form of a joint and survivor Annuity for the
joint lives of the Participant and a nonspouse
beneficiary, Annuity payments to be made on or after
the Participant's required beginning date to the
designated beneficiary after the Participant's
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death must not at any time exceed the applicable
percentage of the Annuity payment for such period
that would have been payable to the Participant using
the table set forth in Q&A A-6 of Section
1.401(a)(9)-2 of the Proposed Income Tax Regula-
tions.
(c) If payments under an Annuity which complies with sub
section (a) above begin prior to January 1, 1989, the
minimum distribution requirements in effect as of
July 27, 1987, shall apply to distributions from this
Plan, regardless of whether the Annuity form of payment
is irrevocable. This transitional rule also applies to
deferred Annuity contracts distributed to or owned by
the Employee prior to January 1, 1989, unless addition-
al contributions are made under the Plan by the Employ-
er with respect to such contract.
(d) If the form of distribution is an Annuity made in
accordance with this Section 13.4, any additional
benefits accruing to the Participant after his required
beginning date shall be distributed as a separate and
identifiable component of the Annuity beginning with
the first payment interval ending in the calendar year
immediately following the calendar year in which such
amount accrues.
(e) Any part of the Participant's interest which is in the form of
an individual account shall be distributed in a manner
satisfying the requirements of Section 401(a)(9) of the
Internal Revenue Code and the proposed regulations
thereunder.
13.5 The following death distribution provisions shall apply:
(a) If the Participant dies after distribution of his 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) If the Participant dies before distribution of his interest
begins, distribution of the Participant's entire interest
shall be completed by December 31 of the calendar year
containing the fifth (5th) 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 desig-
64
<PAGE>
nated 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 re-
quired to begin in accordance with (1) 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 seventy and
one-half (70 1/2).
If the Participant has not made an election pursuant
to this Section 13.5(b) 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 (A) December 31 of
the calendar year in which distributions would be required to
begin under this Section, or (B) December 31 of the calendar
year which contains the fifth (5th) 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 (5th) anniversary of the
Participant's death.
(c) For purposes of Section 13.5(b) above, if the surviving spouse
dies after the Participant, but before payments to such spouse
begin, the provisions of 13.5(b) with the exception of Section
13.5(b)(2) therein, shall be applied as if the surviving
spouse were the Participant.
(d) For purposes of this Section 13.5, 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.
For the purposes of this Section 13.5, distribution of a Participant's
interest is considered to begin on the Participant's required beginning date
(or, if Section 13.5(c) above is applicable, the date distribution is required
to begin to the surviving spouse pursuant to Section 13.5(b) above). If
distribution in the form of an Annuity irrevocably commences to the
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Participant before the required beginning date, the date distribution is
considered to begin is the date distribution actually commences.
13.6 For purposes of Sections 13.4 and 13.5, the following definitions
shall apply:
(a) "Designated beneficiary" means the individual who is
designated as the beneficiary under the Plan in accordance
with Section 401(a)(9) of the Internal Revenue Code and the
proposed regulations thereunder.
(b) "Distribution calendar year" means a calendar year for
which a minimum distribution is required. For distri-
butions 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 distri-
butions 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 13.5 above.
(c) "Life expectancy" means the life expectancy (or joint
and last survivor expectancy) calculated using the
attained age of the Participant (or designated benefi-
ciary) as of the Participant's (or designated benefici-
ary's) birthday in the applicable calendar year. The
applicable calendar year shall be the first distribu-
tion calendar year. If Annuity payments commence
before the required beginning date, the applicable
calendar year is the year such payments commence. 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.
(d) "Required beginning date" means:
(i) 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 seventy and one-half (70 1/2).
(ii) The required beginning date of a Participant who
attains age seventy and one-half (70 1/2) before
January 1, 1988, shall be determined in accordance
with (A) or (B) below:
(A) 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
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calendar year following the calendar year in
which the later of retirement or attainment
of age seventy and one-half (70 1/2) occurs.
(B) 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
seventy and one-half (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 seventy and one-half (70 1/2) during
1988 and who has not retired as of January 1, 1989, is April 1, 1990.
(iii) 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 sixty-six and one-half (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 dis-
tributed, even if the Participant ceases to be a
5-percent owner in a subsequent year.
13.7 This Section 13.7 applies to distributions made on or after
January 1, 1993. Notwithstanding any provision in this Plan and Trust to the
contrary that would otherwise limit a distributee's election under this Section,
a distributee may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a
direct rollover.
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When used in this Section 13.7, the following terms shall have the
indicated meanings:
(a) "Eligible rollover distribution" shall mean any distri-
bution of all or any portion of the Accrued Benefit 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 dis-
tributee and the distributee's designated Beneficiary,
or for a specified period of ten (10) years or more;
any distribution to the extent such distribution is
required under Code Section 401(a)(9); 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" shall mean an individual
retirement account described in Code Section 408(a), an
individual retirement annuity described in Code Section
408(b), an annuity plan described in Code Section
403(a), or a qualified trust described in Code Section
401(a), that accepts the distributee's eligible roll
over distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement
account or individual retirement annuity.
(c) "Distributee" includes 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 Code Section 414(p),
are distributees with regard to the interest of the spouse or
former spouse.
(d) "Direct rollover" shall mean a payment by the Plan to
the eligible retirement plan specified by the distribu-
tee.
13.8 Distribution of the Accrued Benefit to a Participant who is a Five
(5%) Percent Owner, and for Plan Years beginning after December 31, 1988, all
Participants, must commence no later than the first day of April following the
calendar year in which a Participant attains age seventy and one-half (70 1/2).
Except as otherwise provided in the preceding sentence, no distribution
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of an Employee's Accrued Benefit derived from Employer contributions shall be
made while the Employee is employed with the Employer. Further, unless the
Participant elects otherwise, payment of Accrued Benefits must begin not later
than the sixtieth (60th) day after the close of the Plan Year in which the
latest of the following events occur: (a) the Participant attains age sixty-five
(65) (or Normal Retirement Age, if earlier), (b) the occurrence of the tenth
(10th) anniversary of the year in which the Participant commences participation
in the Plan, or (c) the Participant terminates his service with the Employer.
13.9 If a Participant terminates employment with the Employer and
receives (or is deemed to receive) a distribution of his Accrued Benefit, then
such Participant shall forfeit amounts that are not non-forfeitable immediately
subsequent to such distribution. For purposes of this Section, if the present
value of an Employee's vested Accrued Benefit is zero (0), the Employee shall be
deemed to have received a distribution of such vested Accrued Benefit. The
Participant's vested Accrued Benefit shall not include accumulated deductible
Employee contributions within the meaning of Code Section 72(o)(5)(B) for Plan
Years beginning prior to January 1, 1989. However, if an Employee receives a
distribution pursuant to this Section and the Employee resumes covered
employment under the Plan, he shall have the right to restore his
Employer-derived Accrued Benefit (including all optional forms of benefit and
subsidies relating to such benefits) to the extent forfeited upon the repayment
to the Plan of the full amount of the distribution plus interest, compounded
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annually from the date of distribution at the rate determined for purposes of
Code Section 411(c)(2)(C). Such repayment must be made before the earlier of
five (5) years after the first date on which the Participant is subsequently
re-employed by the Employer, or the date the Participant incurs five (5)
consecutive One-Year Breaks in Service following the date of 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 five (5) consecutive One-Year Breaks in Service, upon the
re-employment of such Employee, the Employer-derived Accrued Benefit will be
restored to the amount of such Accrued Benefit on the date of the deemed
distribution.
13.10 Notwithstanding the other requirements of this Section and
subject to the Annuity Requirements Section, distribution on behalf of any
Employee, including a Five (5%) Percent Owner, may be made in accordance with
all of the following requirements (regardless of when such distribution
commences):
(a) The distribution by the Trust is one which would not have
disqualified such Trust under Code Section 401(a) (9), 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 Participant whose inter est in
the Trust is being distributed or, if the Participant is
deceased, by a Beneficiary of such Participant;
(c) Such designation was in writing, was signed by the
Participant or the Beneficiary, and was made before
January 1, 1984;
(d) The Participant had accrued a benefit under the Plan as
of December 31, 1983; and
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(e) The method of distribution designated by the Participant 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 Participant's
death, the Beneficiaries of the Participant listed in order
of priority.
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 Participant.
For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the Beneficiary, to whom
such distribution is being made, will be presumed to have designated the method
of distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subsections (a) and (e) above.
If a designation is revoked, any subsequent distribution must satisfy
the requirements of Code Section 401(a)(9) and the regulations thereunder. If a
designation is revoked subsequent to the date distributions are required to
begin, the Trust 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
Code Section 401(a)(9) and the regulations thereunder, but for the TEFRA 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 regulations. Any changes in the
designation will be considered to be a revocation
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of the designation, provided that the mere substitution or addition of another
Beneficiary (one not named in the designation) under the designation will not be
considered to be a revocation of the designation, so long as such substitution
or addition does not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example, by altering the
relevant measuring life). In the case in which an amount is transferred or
rolled over from one plan to another plan, the rules in Q&A J-2 and Q&A J-3 of
Treasury regulation 1.401(a)(9)-2 shall apply.
SECTION 14 - Trustee
---------- -------
14.1 The Trustee hereby accepts the Trust created hereunder and agrees
to carry out its duties and responsibilities here under. The Trustee shall serve
at the pleasure of the Employer. Whenever more than one Trustee serves
hereunder, the decision of a majority of the Trustees shall control, and any
documents, including checks, shall be valid if signed by a majority of the
Trustees, or such person or persons designated in writing by the Trustees.
14.2 Except as specifically provided for, all contributions voluntarily
paid by or in behalf of the Employer to the Trustee from time to time, and all
income and enhancement shall constitute and shall be held and administered by
the Trustee as a single Trust Fund.
14.3 Out of, and to the extent of funds made available for such
purposes by the Employer, and if required in this Plan and Trust, the Trustee is
authorized to purchase life insurance contracts on the lives of insurable
Participants and to pay the
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initial and renewal premiums thereon, and to establish a Trust Fund which,
together with the life insurance contracts, will provide the retirement benefits
under this Plan and Trust.
14.4 The Trustee shall invest and reinvest the Trust Fund and keep it
invested, without distinction between principal and income, and without
restriction to properties and securities authorized for investment by Trustees
under any present or future law in any and all common stocks, preferred stocks,
bonds, notes, debentures, mortgages, equipment trust certificates, options and
in such other property, real or personal, investments and securities of any
kind, class or character, (specifically including any kind or class of savings
accounts, statement account, certificates of deposit, or any other types of
deposits of the Employer if the Employer is a bank or savings and loan
association), as the Trustee may deem advisable and suitable, including, but not
limited to, qualifying Employer securities and qualifying Employer real
property, partnership interests and stock or securities in other companies, any
common trust fund, or funds maintained by the Trustee, insurance policies on the
lives of key Employees of the Employer payable on death to the trust as
beneficiary, and if otherwise provided for in the Death Benefits Section
insurance policies on the lives of Participants. The Trustee shall not acquire
or hold any qualifying Employer securities or qualifying Employer real property
if immediately after such acquisition the aggregate fair market value of
Employer securities or Employer real property exceeds ten (10%) percent of the
fair market value of the Plan assets. The Trustee, in its discretion may keep
such portion of the Trust Fund in cash or cash balances as the Trustee
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from time to time may deem to be in the best interests of the Plan and Trust
Fund. The Trustee is authorized to invest in any type of deposit of the Trustee
provided the Trustee is a bank or savings and loan association and the deposit
earns a reasonable rate of interest. If the Death Benefits Section otherwise
provides, the Trustee shall apply for and be the owner of the insurance
policies. The proceeds of the insurance policies shall be payable to the Trustee
to provide the benefits required in this Plan. In the case of any conflict
between the terms of this Plan and an insurance policy, then the Plan's
provisions shall control. The Trustee shall, in its discretion, either convert
the entire value of any life insurance contract at or before a Participant's
retirement into cash, or distribute the life insurance contract to the
Participant at retirement. In no event shall any life insurance be continued for
the benefit of a Participant after his retirement.
Notwithstanding anything in this Plan and Trust to the contrary, the
Employer specifically authorizes the Trustee to invest all or any portion of the
assets comprising the Trust Fund in any group trust fund which at the time of
the investment provides for the pooling of the assets of plans qualified under
Code Section 401(a). This authorization applies solely to a group trust fund
exempt from taxation under Code Section 501(a) and the trust agreement of which
satisfies the requirements of Internal Revenue Service Revenue Ruling 81-100.
The provisions of the group trust fund agreement, as amended from time to time,
are by this reference incorporated within this Plan and Trust. The provisions of
the group trust fund shall govern any invest-
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ment of Plan assets in that fund. The Employer shall specify in a resolution of
its governing body the group trust funds to which this authorization applies.
Furthermore, the Trustee, for collective investment purposes, may
combine into one (1) trust fund the Trust created under this Plan with the Trust
created under any other qualified retirement plan the Employer maintains.
However, the Trustee shall maintain separate records of account for the assets
of each Trust in order to reflect properly each Participant's Accrued Benefit
under the plan(s) in which he is a Participant.
14.5 In addition to the powers conferred by common law or by statute,
the Trustee is authorized and empowered:
(a) To sell, exchange, convey, transfer, or to otherwise dispose
of any property held by it by private contract or at public
auction, and no person dealing with the Trustee shall be bound
to see to the application of the purchase money or to inquire
into the validity, expediency, or propriety of any such sale
or other disposition;
(b) To vote upon any stocks, bonds, or other securities; to
give general or special proxies or powers of attorney
with or without power of substitution; to exercise any
conversion privileges, subscription rights, or other
options and to make any payments incidental thereto; to
consent to or otherwise participate in corporate reor-
ganizations or other changes affecting corporate secu-
rities and to delegate discretionary powers and to pay
any assessments or charges in connection therewith;
and, generally, to exercise any of the powers of an
owner with respect to stocks, bonds, securities or
other property held in the Trust Fund;
(c) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other
instruments that may be necessary or appropriate to carry out
the powers herein granted;
(d) To register any investment held in the Trust Fund in its own
name or in the name of a nominee and to hold any investment in
bearer form, but the books and re cords of the Trustee shall
at all times show that all such investments are part of the
Trust Fund;
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(e) To manage, administer, operate, lease for any number of
years, develop, improve, repair, alter, demolish, mort-
gage, pledge, grant options with respect to, partition,
build entire new structures on, abandon, foreclose, or
otherwise deal with any real property or interest
therein at any time held by it, including specifically,
qualifying Employer real property, using other Trust
assets for any of such purposes if deemed advisable;
(f) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation;
(g) To borrow or raise monies for the purposes of the Trust
and for any sum so borrowed to issue its promissory
note as Trustee and to secure the repayment thereof by
pledging all or any part of the Trust Fund including
life insurance policies, but nothing herein contained
shall obligate the Trustee to render itself liable
individually for the amount of any such borrowing; and
no person loaning money to the Trustee shall be bound
to see to the application of the money loaned or to
inquire into the validity, expediency, or propriety of
any such borrowing; and any borrowing against life
insurance policies shall be done on a prorata basis so
as to avoid discrimination; and
(h) To acquire real estate by purchase, exchange, or as the
result of any foreclosure, liquidation, or other sal-
vage of any investment previously made hereunder; to
hold such real estate in such manner and upon such
terms as the Trustee may deem advisable; and to manage,
operate, repair, improve, partition, mortgage, build
entire new structures on, or lease for any term of
years any such real estate or any other real estate
constituting a part of the Trust Fund, upon such terms
and conditions as the Trustee deems proper, using other
Trust assets for any of such purposes if deemed advis-
able.
14.6 Notwithstanding the broad powers granted to the Trustee, the
Trustee and Committee are prohibited from engaging in certain transactions with
a party-in-interest. Such transactions include engaging in (a) selling,
exchanging, or leasing property between the Plan and Trust and a
party-in-interest, except qualifying Employer securities or Employer real
property; (b) loaning or extending credit between the Plan and Trust and a
party-in-interest; (c) furnishing goods, services or facilities between
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the Plan and Trust and a party-in-interest; (d) transferring Plan and Trust
assets to a party-in-interest; (e) dealing with the income or assets of the Plan
and Trust for their own benefit; (f) receiving any consideration for their own
benefit from any party dealing with the Plan and Trust in connection with a
transaction involving Plan and Trust assets; or (g) acting in any transaction
(in any capacity) involving a Plan on behalf of a party whose interests are
adverse to the interests of the Plan and Trust, its Participants or
Beneficiaries.
14.7 The term "party in interest" means:
(a) any fiduciary (including, but not limited to, any
administrator, officer, Trustee, or custodian), counsel,
or employee of the Plan;
(b) a person providing services to the Plan;
(c) an Employer any of whose Employees are covered by the
Plan;
(d) an Employee organization any of whose members are
covered by the Plan;
(e) an owner, direct or indirect, of fifty (50%) percent or
more of--
(i) the combined voting power of all classes of stock
entitled to vote or the total value of shares of
all classes of stock of a corporation; or
(ii) the capital interest or profits interest of a
partnership; or
(iii) the beneficial interest of a trust or unincorporated
enterprise which is an Employer or an Employee
organization described in subparagraphs (c) or (d).
(f) a relative as defined herein of any individual described
in subparagraphs (a), (b), (c) or (e);
(g) a corporation, partnership, trust or estate of which
(or in which) fifty (50%) percent or more of--
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(i) the combined voting power of all classes of stock
entitled to vote, or the total value of shares of
all classes of stock of such corporation; or
(ii) the capital interest or profits interest of such
partnership; or
(iii) the beneficial interest of such trust or estate,
is owned, directly or indirectly, or held by persons
described in subparagraphs (a), (b), (c), (d) or (e);
(h) an officer, director (or an individual having powers or
responsibilities similar to those of officers or directors),
or a ten (10%) percent or more shareholder, or a highly
compensated employee (earning ten (10%) percent or more of the
yearly wages of an employer) of a person described in
subparagraphs (b), (c), (d), (e) or (g), or of the employee
benefit plan; or
(i) a ten (10%) percent or more (directly or indirectly in capital
or profits) partner or joint venturer of a person described in
subparagraphs (b), (c), (d), (e) or (g).
The term "relative" means a spouse, ancestor, lineal descendant, or spouse of
lineal descendant.
14.8 The Trustee shall keep accurate and detailed records of its
administration of the Trust Fund, which records shall be open to inspection at
all reasonable times by any person designated in writing by the Committee or
the Employer. Within ninety (90) days following the close of each Plan Year (and
at such other times as the Trustee shall determine in its sole discretion), the
Trustee shall value the Trust Fund as of the last day of such Plan Year, at the
current fair market value of the respective assets, but life insurance policies
(if any) shall be shown at their cash value as of the last preceding anniversary
date of the policies. As soon as practicable after making such valuation, but
not more than fifteen (15) days thereafter, the Trustee shall file with the
Committee a written report setting
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forth the valuation made and, in addition, setting forth all investments made,
together with disbursements and receipts and other transactions effected by it
during such Plan Year, and securities and investments held at the end of such
Plan Year, and the cost of each item as carried on the books of the Trustee.
14.9 If a corporate Trustee (other than the Employer) serves hereunder,
then the corporate Trustee shall be paid for its services rendered hereunder
compensation and other charges as agreed by the Employer and the Trustee, but if
no agreement is in effect then as stipulated in its regularly adopted schedules
of compensation in effect and applicable at the time of performance of such
services, together with all reasonable expenses incurred by the Trustee in and
about the execution of its duties hereunder, including counsel fees and
disbursements. Except as provided below, if a non-corporate Trustee serves
hereunder, then the non-corporate Trustee shall be entitled to such reasonable
compensation for services rendered by it as may from time to time be agreed upon
between the Employer and the non-corporate Trustee, together with all
reasonable expenses incurred by the non-corporate Trustee in and about the
execution of its duties hereunder, including counsel fees and disbursements.
Unless the Employer agrees to pay the Trustee for services rendered, such
compensation and expenses shall be charged against and paid out of the Trust
Fund. If the Employer advises the Trustee in writing of its determination to
make no further contributions to the Trust Fund, and the Employer decides not to
continue payment of the Trustee compensation and expenses, such compensation and
expenses of the Trustee shall be charged against and paid out of
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the Trust Fund, and a lien for the payment thereof shall be impressed upon any
cash, securities or other property held by the Trustee hereunder the same to be
charged pro rata against the Accrued Benefit of each Participant.
Notwithstanding anything herein to the contrary, no compensation shall be paid
to a fully paid Employee of the Employer or, if a corporation, to a member of
its Board of Directors, for serving as a fiduciary, but such person may be
reimbursed for expenses reasonably incurred.
14.10 The Trustee may consult with counsel, who may be counsel for the
Employer, in respect of any of its duties or obligations hereunder; and shall be
fully protected in acting or refraining from acting in accordance with the
advice of such counsel.
14.11 Any determination or action of the Employer pursuant to the
provisions of this Agreement shall be evidenced in writing duly executed by the
Employer and delivered to the Trustee. All authorizations, directions,
instructions, notices, or information given by the Committee to the Trustee
shall be in writing and signed in the name of the members of the Committee or by
such member or representative of the Committee as a majority of it shall specify
in writing. If the Trustee acts in accordance with authorizations, directions,
instructions, notices, or information given to it by the Employer or the
Committee, the Trustee shall be indemnified and held harmless by the Employer,
except for its own gross negligence or willful misconduct.
14.12 If neither the Employer nor the Committee gives authorizations,
directions, instructions, notices or information to the Trustee, the Trustee may
act without such authorization,
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directions, instructions, notices or information as it, in its sole discretion
deems advisable and appropriate in the circumstances for the carrying out of
the provisions of this Agreement.
14.13 The Trustee shall not be responsible for the adequacy of the
Trust Fund to meet and discharge any and all payments and liabilities under the
Plan. All persons dealing with the Trustee are released from inquiry into the
decision or authority of the Trustee to act, and from responsibility for the
application of any monies, securities or other property paid or delivered to the
Trustee. The Trustee shall not be obligated to pay interest on uninvested cash
balances.
14.14 The Trustee shall not be required to determine, or to make any
investigation to determine, the identity or mailing address of any person
entitled to benefits under this agreement, and shall have discharged its
obligation in that respect when it shall have sent checks or other papers by
ordinary mail to such persons and addresses as may be furnished to it by the
Committee.
14.15 The Trustee may be removed by the Employer by the delivery to the
Trustee of a written notice duly executed by the Employer to that effect. The
Trustee may resign as Trustee here under upon written notice to that effect,
delivered to the Employer. Any such removal or resignation shall become
effective 60 days from the date of delivery of the copy of such written notice
unless an earlier date is agreed upon by the Employer and the Trustee. In the
event of such removal or resignation (or in the event the office of Trustee
becomes vacant for any reason), a successor Trustee or Trustees shall be
appointed by the Employer and such successor Trustee or Trustees, upon accepting
such
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appointment by an instrument in writing delivered to the Employer, shall become
vested with all the duties, immunities, powers, privileges and rights as Trustee
hereunder as if it originally had been designated Trustee in this Agreement. No
successor Trustee shall be liable or responsible in any way for any acts or
defaults of any predecessor Trustee, but such successor Trustee shall be liable
only for its own acts and defaults with respect to property actually received by
it as such Trustee. The successor Trustee may accept the accounting rendered
and the assets and property delivered to it by the predecessor Trustee and shall
incur no liability or responsibility to any Participant or Beneficiary under
this Plan and Trust by reason of relying thereon. The Employer may designate as
many Trustees to serve hereunder as it shall from time to time determine. Upon
such appointment and acceptance, the replaced Trustee shall assign, endorse,
convey, deliver and transfer to the successor trustee all of the funds,
securities and other property then held by it under this Trust Agreement and
such records as may reasonably be required in order that the successor Trustee
may properly administer the Trust hereunder. In the event of such removal or
resignation of any Trustee hereunder, within sixty (60) days from the date of
such removal or resignation such Trustee shall file with the Employer and with
the Committee a statement and report of its accounts and proceedings covering
the period since the date of its last annual statement and report to date of
such removal or resignation.
14.16 In the event and to the extent not insured against by
any insurer pursuant to provisions of any applicable insurance
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policy, the Employer shall indemnify and hold harmless any individual Trustees,
their assistants and representatives, from any and all claims, demands, suits,
losses, damages, and any other liability arising from their responsibilities in
connection with this Plan or Trust, unless the same is determined to be due to
gross negligence or willful misconduct.
14.17 In the event an individual is sole Trustee of this Trust while a
beneficiary of this Trust, then the Employer shall appoint a Co-Trustee to serve
with the individual Trustee at any time before the individual Trustee becomes
the sole Beneficiary of the Trust if a merger would occur under state law.
SECTION 15 - Amendment and Termination of Plan
---------- ---------------------------------
15.1 The Board of Directors of the Employer may amend this Plan and
Trust at any time and from time to time. However, it is the intention of the
Employer and Trustee that this Plan and Trust shall always be a retirement plan
and trust qualified under Code Section 401, et. seq. and this Plan and Trust
shall be interpreted and administered accordingly. Except to the extent
permitted in Code Section 412(c)(8), no amendment to the Plan (including a
change in the actuarial basis for determining optional or early retirement
benefits, if any) shall be effective to the extent that it has the effect of
decreasing a Participant's Accrued Benefit. For purposes of this Section, a
Plan amendment which has the effect of (a) eliminating or reducing an early
retirement benefit, if applicable, (as defined in Treasury regulations) or a
retirement-type subsidy, or (b) eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment shall be
treated as reducing
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Accrued Benefits. In the case of a retirement-type subsidy, the preceding
sentence shall apply only with respect to a Participant who satisfies (either
before or after the amendment) the preamendment conditions for the subsidy. In
general, a retirement-type subsidy is a subsidy that continues after retirement,
but does not include a qualified disability benefit (including life insurance),
or a plant shutdown benefit (that does not continue after retirement age).
Furthermore, no amendment to the Plan shall have the effect of decreasing a
Participant's vested interest determined without regard to such amendment as of
the later of the date such amendment is adopted, or becomes effective. Any
amendment shall be in writing and shall be executed by an officer of the
Employer.
15.2 No change may be made in the Plan and Trust which shall vest in
the Employer, directly or indirectly, any control, interest, or ownership in any
of the present or subsequent assets or funds of the Trust, or in any of the
present or subsequent assets or funds set aside for Participants pursuant to
this Plan and Trust.
15.3 No part of the Trust Fund shall, by reason of any amendment, be
used for or directed to purposes other than for the exclusive benefit of
Participants and their Beneficiaries or for administration expenses of the Plan.
The corpus or income of the Trust may not be diverted to or used for other than
the exclusive benefit of the Participants and their Beneficiaries.
15.4 It is the present intention of the Employer to continue this Plan
indefinitely; however, the Board of Directors of the Employer reserves the right
to terminate this Plan, or to
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partially terminate this Plan, in which events the Accrued Benefits of all
affected Participants in the Trust Fund to the extent then funded shall vest
immediately and fully, without forfeiture. Any complete termination of this Plan
shall be in writing. Notice of the complete termination shall be given to each
Participant. In the event the Plan is terminated or partially terminated, the
Accrued Benefits of all affected Participants shall be distributed to them as
provided in the Annuity Requirements Section and Distribution Requirements
Section. Termination of the Plan by an Employer, including a partial
termination, shall be considered a termination of the Plan only with respect to
that particular Employer. Suspension of contributions on a temporary basis for
reasons of business deemed adequate by the Employer shall not be considered a
termination of the Plan.
15.5 In any event, the liabilities of the Employer to make
contributions under the Plan shall automatically terminate upon dissolution of
the Employer, upon its adjudication as a bankrupt, upon its making a general
assignment for the benefit of creditors or upon its merger or consolidation with
any other corporation or corporations, unless the Employer's liabilities to make
further contributions under the Plan are assumed by such other corporation or
corporations.
15.6 In the event of termination of the Employer's liabilities to make
further contributions under this Plan, such liabilities may be assumed by any
other corporation or business organization which employs a substantial number
of the Participants of the Plan. Such assumption of liabilities shall be
expressed in
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an agreement between such other corporation or business organization and
Employer which assumes such liabilities with respect to the Participants
employed by it. Any Participant under this Plan who does not become an employee
of such other corporation or other business organization shall have the rights
hereunder of an employee whose employment terminated by normal retirement.
15.7 In the event of any merger or consolidation with, or transfer of
assets or liabilities to, any other retirement plan of the Employer, its
affiliates, or of any other employer, each Participant in the Plan will (if the
Plan had then terminated) be entitled to a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit he
would have been entitled to immediately before the merger, consolidation, or
transfer (if the Plan had then terminated).
15.8 In the event of termination of this Plan and Trust, the Trustee,
subject to the requirements of the Code, shall allocate the assets in
accordance with the following provisions, subject, however, to the provisions
of the Retirement Benefits Section:
(a) If the assets are sufficient to satisfy all the Accrued
Benefits under the Plan, any life insurance contract or
contracts (if any) held for each Participant shall be
assigned, transferred and set over to each then living
Participant, and the funds in the Trust Fund shall be
applied to provide the retirement Annuities accrued to
date of termination of the Plan and Trust in excess of
the paid-up retirement Annuities made available under
any insurance contract or contracts so transferred.
All such Annuity contracts shall comply with the re-
quirements of Code Sections 401(a)(11) and 417. If,
after all liabilities of the Employer under this Plan
and Trust are satisfied, there is a balance remaining
in the Trust Fund, such balance shall be returned to
the Employer by the Trustee.
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(b) If the assets are not sufficient to satisfy all the Accrued
Benefits under the Plan, the assets will be allocated in the
following priorities:
(i) Refund any voluntary Employee contributions.
(ii) Refund any mandatory Employee contributions.
(iii) Allocated equally among the individuals in the
following subcategories:
(A) In the case of benefits in pay status three
(3) years prior to termination (at the
lowest pay level in that period and at the
lowest benefit level under the Plan during
the five (5) years prior to termination),
and
(B) In the case of benefits which would have
been in pay status three (3) years prior to
termination had the Participant been
retired (and had his benefits commenced then
at the lowest benefit level under the Plan
during the five (5) years prior to
termination).
(iv) All other guaranteed benefits up to the insurance
limitations (but irrespective of the limitation to
one $750 monthly benefit regardless of the number
of Plans in which the Employee participated) and
(on equal level of priority) benefits that would
be so guaranteed except for the special limitation
of coverage of a "substantial owner".
(v) All other (meaning uninsured) vested benefits.
(vi) All other benefits under the Plan.
15.9 The Employer shall report to the Pension Benefit Guaranty
Corporation after it knows or should have known that this Plan and Trust is
terminating or a complete discontinuance of contributions thereto has occurred.
SECTION 16 - Restrictions Upon Termination of Contributions
16.1 For Plan Years beginning before January 1, 1991, Employer
contributions on behalf of any of the twenty-five (25) highest paid Employees
at the time the Plan is established and whose anticipated annual benefit
exceeds $1,500 will be restrict-
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ed as provided in this Section 16.1 upon the occurrence of the following
conditions:
(a) The Plan is terminated within ten (10) years after its
establishment,
(b) The benefits of such highest paid Employee becomes
payable within ten (10) years after the establishment
of the Plan, or
(c) If Code Section 412 (without regard to Code Section 412(h)(2))
does not apply to this Plan, the benefits of such Employee
become payable after the Plan has been in effect for ten (10)
years, and the full current costs of the Plan for the first
ten (10) years have not been funded.
Employer contributions which may be used for the benefit of an Employee
described above shall not exceed the greater of $20,000, or twenty (20%) percent
of the first $50,000 of the Employee's Compensation multiplied by the number of
years between the date of the establishment of the Plan and:
(d) If (a) applies, the date of the termination of the
Plan,
(e) If (b) applies, the date the benefits become payable,
or
(f) If (c) applies, the date of the failure to meet the
full current costs.
If the Plan is amended so as to increase the benefit actually payable
in the event of the subsequent termination of the Plan, or the subsequent
discontinuance of contributions thereunder, then the provisions of the above
paragraphs shall be applied to the Plan as so changed as if it were a new Plan
established on the date of the change. The original group of twenty-five (25)
Employees (as described above) will continue to have the above limitations apply
as if the Plan had not been changed. The restrictions relating to the change of
Plan should apply to
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benefits or funds for each of the twenty-five (25) highest paid Employees on the
effective date of the change except that such restrictions need not apply with
respect to any Employee in this group for whom the normal annual pension or
Annuity provided by Employer contributions prior to that date and during the
ensuing ten (10) years, based on his rate of compensation on that date, could
not exceed $1,500.
The Employer contributions which may be used for the benefit of the new
group of twenty-five (25) Employees will be limited to the greater of:
(a) The Employer contributions (or funds attributable thereto)
which would have been applied to provide the benefits for the
Employee if the previous Plan had been continued without
change;
(b) $20,000; or
(c) The sum of (i) the Employer contributions (or funds
attributable thereto) which would have been applied to
provide benefits for the Employee under the previous
Plan if it had been terminated the day before the
effective date of change, and (ii) an amount computed
by multiplying the number of years for which the cur
rent costs of the Plan after that date are met by (A)
twenty (20%) percent of his annual Compensation, or (B)
$10,000, whichever is smaller.
Notwithstanding the above limitations, the following limitations will
apply if they would result in a greater amount of Employer contributions to be
used for the benefit of the restricted Employee:
(a) In the case of a substantial owner (as defined in
Section 4022(b)(5) of ERISA, a dollar amount which
equals the present value of the benefit guaranteed for
such Employer under Section 4022 of ERISA, or if the
Plan has not terminated, the present value of the
benefit that would be guaranteed if the Plan terminated
on the date the benefit commences, determined in accor-
dance with regulations of the Pension Benefit Guaranty
Corporation (PBGC); and
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(b) In the case of the other restricted Employees, a dollar amount
which equals the present value of the maximum benefit
described in Section 4022(b)(3)(B) of ERISA (determined on the
earlier of the date the Plan terminates or the date benefits
commence, and determined in accordance with regulations of
PBGC) without regard to any other limitations in Section 4022
of ERISA.
If, as of the date this Plan terminates, the value of Plan assets is
not less than the present value of all Accrued Benefits (whether or not
nonforfeitable) distributions of assets to each Participant equal to the present
value of that Participant's Accrued Benefit will not be discriminatory if the
formula for computing benefits as of the date of termination is not discrimi-
natory. All present values and the value of plan assets will be computed using
assumptions satisfying Section 4044 of ERISA.
16.2 In the event of Plan termination, the benefit of any Highly
Compensated active or former Employee is limited to a benefit that is
nondiscriminatory under Code Section 401(a)(4). For Plan Years beginning on or
after January 1, 1991, benefits distributed to any of the twenty-five (25) most
highly compensated active and former Highly Compensated Employees are
restricted such that the annual payments are no greater than an amount equal to
the payment that would be made on behalf of the Employee under a single life
Annuity that is the Actuarial Equivalent of the sum of the Employee's Accrued
Benefit and the Employee's other benefits under the Plan.
The preceding paragraph shall not apply if: (a) after payment of the
benefit to an Employee described in the preceding paragraph, the value of plan
assets equals or exceeds one hundred ten (110%) percent of the value of current
liabilities, as defined in Code Section 412(l)(7), or (b) the value of the
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benefits for an Employee described above is less than one (1%) percent of the
value of current liabilities. For purposes of this Section 16.2, benefit
includes loans in excess of the amount set forth in Code Section 72(p)(2)(A),
any periodic income, any withdrawal values payable to a living Employee, and any
death benefits not provided for by insurance on the Employee's life.
SECTION 17 - Limitation on Benefits
---------- ----------------------
17.1 This Section 17.1, except for (c) below, applies regardless of
whether any Participant is or has ever been a Participant in another qualified
plan maintained by the Employer. If any Participant is or has ever been a
Participant in another qualified plan maintained by the Employer, or a welfare
benefit fund, as defined in Code Section 419(e), maintained by the Employer, or
an individual medical account, as defined in Code Section 415(l)(2), maintained
by the Employer, or a simplified employee pension, as defined in Code Section
408(k), maintained by the Employer, that provides an annual addition as defined
below, Section 17.2 is also applicable to that Participant's benefits.
(a) The annual benefit otherwise payable to a Participant at any
time will not exceed the maximum permissible amount. If the
benefit the Participant would otherwise accrue in a Limitation
Year would produce an annual benefit in excess of the maximum
permissible amount, the rate of accrual will be reduced so
that the annual benefit will equal the maximum permissible
amount.
(b) If a Participant has made nondeductible Employee con-
tributions under the terms of this Plan, the amount of such
contributions is treated as an annual addition to a qualified
defined contribution plan, for purposes of Sections 17.1(a)
and 17.2 of this Section.
(c) The limitation in (a) above is deemed satisfied if the
annual benefit payable to a Participant is not more
than One Thousand ($1,000) Dollars multiplied by the
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Participant's number of Years of Service or parts thereof (not
to exceed ten (10)) with the Employer, and the Employer has
not at any time maintained a defined contribution plan, a
welfare benefit plan, or an individual medical account in
which such Participant participated.
17.2 This Section 17.2 applies if any Participant is covered, or has
ever been covered, by another Plan maintained by the Employer, including a
qualified plan, a welfare benefit fund, or an individual medical account, or a
simplified employee pension that provides an annual addition as described in
Section 17.3.
(a) If a Participant is, or has ever been, covered under more than
one defined benefit plan maintained by the Employer, the sum
of the Participant's annual benefits from all such Plans may
not exceed the maximum permissible amount.
(b) If the Employer maintains, or at any time maintained,
one or more qualified defined contribution plans cover-
ing any Participant in this Plan, a welfare benefit
fund, an individual medical account, or a simplified
employee pension, the sum of the Participant's defined
contribution fraction and defined benefit fraction will
not exceed 1.0 in any Limitation Year, and the annual
benefit otherwise payable to the Participant under this
Plan will be limited so as not to violate Code Section
415.
(c) In the case of an individual who was a Participant in
one or more defined benefit plans of the Employer as of
the first day of the first Limitation Year beginning
after December 31, 1986, the application of the limita-
tions of this Section 17 shall not cause the maximum
permissible amount for such individual under all such
defined benefit plans to be less than the individual's
current Accrued Benefit. The preceding sentence ap-
plies only if such defined benefit plans met the re-
quirements of Code Section 415 for all Limitation Years
beginning before January 1, 1987.
17.3 For purposes of this Section 17, the following definitions shall
apply:
(a) "Annual additions" means the sum of the following
amounts credited to a Participant's account for the
Limitation Year:
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(i) Employer contributions;
(ii) Employee contributions;
(iii) Forfeitures;
(iv) Amounts allocated after March 31, 1984, to an
individual medical account that is part of a pen-
sion or annuity plan maintained by the Employer
are treated as annual additions to a defined con-
tribution plan. Also, amounts derived from con-
tributions paid or accrued after December 31,
1985, in Taxable Years ending after such date that
are attributable to post-retirement medical bene-
fits allocated to the separate account of a key
employee (as defined in Section 419A(d)(3) of the
Internal Revenue Code) under a welfare benefit
fund are treated as annual additions to a defined
contribution plan; and
(v) Allocations under a simplified employee pension
plan.
(b) "Annual benefit" means a retirement benefit under the
Plan which is payable annually in the form of a
straight life annuity. Except as provided below, a
benefit payable in a form other than a straight life
annuity must be adjusted to an actuarially equivalent
straight life annuity before applying the limitations
of this Section. The interest rate assumption used to
determine actuarial equivalence will be the greater of
the interest rate specified in the definition of Actu-
arial Equivalence in this Plan or five (5%) percent.
The annual benefit does not include any benefits at-
tributable to Employee contributions or rollover con-
tributions, or the assets transferred from a qualified
plan that was not maintained by the Employer. No
actuarial adjustment to the benefit is required for (i)
the value of a qualified joint and survivor annuity,
(ii) the value of benefits that are not directly relat-
ed to retirement benefits (such as the qualified dis-
ability benefit, pre-retirement death benefits, and
post-retirement medical benefits), and (iii) the value
of post-retirement cost-of-living increases made in
accordance with Code Section 415(d) and Section 1.415-
3(c)(2)(iii) of the Regulations.
(c) "Compensation" means
Wages, salaries, and fees for professional services
and other amounts received (without regard to whether or not
an amount is paid in cash) for personal services actually
rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are
includable in gross income (in-
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cluding, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, and reimbursements, or other expense
allowances under a nonaccountable plan (as described in
1.62-2(c)), and excluding the following:
(i) Employer contributions to a plan of deferred com-
pensation which are not includible in the Employ-
ee'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 com-
pensation;
(ii) Amounts realized from the exercise of a nonqualified
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 purchase of an annuity contract described in
Section 403(b) of the Internal Revenue Code
(whether or not the contributions are actually
excludable from the gross income of the Employee).
For any self-employed individual compensation will mean earned income.
For Limitation Years beginning after December 31, 1991, for purposes of
applying the limitations of this Section, compensation for a
Limitation Year is the compensation actually paid or made available
during such Limitation Year.
(d) "Current accrued benefit" means a Participant's Accrued
Benefit under the Plan, determined as if the Partici-
pant had separated from service as of the close of the
last Limitation Year beginning before January 1, 1987,
when expressed as an annual benefit within the meaning
of Code Section 415(b)(2). In determining the amount
of a Participant's current Accrued Benefit, the follow-
ing shall be disregarded:
(i) any change in the terms and conditions of the Plan
after May 5, 1986; and
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(ii) any cost of living adjustments occurring after
May 5, 1986.
(e) "Defined benefit dollar limitation" means Ninety Thou
sand ($90,000) Dollars. Effective on January 1, 1988,
and each January thereafter, the Ninety Thousand
($90,000) Dollar limitation above will be automatically
adjusted by multiplying such limit by the cost of
living adjustment factor prescribed by the Secretary of
the Treasury under Code Section 415(d) in such manner
as the Secretary shall prescribe. The new limitation
will apply to Limitation Year ending within the calen-
dar year of the date of the adjustment.
(f) "Defined benefit fraction" means a fraction, the numer-
ator 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 one
hundred twenty-five (125%) percent of the dollar limi-
tation determined for the Limitation Year under Code
Sections 415(b) and (d) or one hundred forty (140%)
percent of the highest average compensation, including
any adjustments under Code Section 415(b).
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 one hundred twenty-five (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 plans after May 5,
1986. The preceding sentence applies only if the defined
benefit plans individually and in the aggregate satisfied the
requirements of Code Section 415 for all Limitation Years
beginning before January 1, 1987.
(g) "Defined contribution fraction" means 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) main-
tained by the Employer for the current and all prior
Limitation Years, (including the annual additions
attributable to the Participant's nondeductible Employ-
ee contributions to this and all other defined benefit
plans (whether or not terminated) maintained by the
Employer, and the annual additions attributable to all
welfare benefit funds or individual medical accounts
and simplified employee pensions maintained by the
Employer), and the denominator of which is the sum of
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the maximum aggregate amounts for the current and all prior
Limitation Years of Service with the Employer (regardless of
whether a defined contribution plan was maintained by the
Employer).
The maximum aggregate amount in any Limitation Year
is the lesser of one hundred twenty-five (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
thirty-five (35%) percent of the Participant's compensation
for such year.
If the Employee was a Participant as 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
trust, 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
plans made after May 5, 1986, but using the Section 415
limitation applicable to the first Limitation Year beginning
on or after January 1, 1987.
The annual addition for any Limitation Year begin-
ning before January 1, 1987, shall not be recomputed to treat
all Employee contributions as annual additions.
(h) "Employer" means 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 Code Section 415(h)), all commonly controlled trades
or business (as defined in Code Section 414(c) as
modified by Code Section 415(h)), or affiliated service
groups (as defined in Code Section 414(m)) of which the
adopting Employer is a part, and any other entity
required to be aggregated with the Employer pursuant to
Code Section 414(o).
(i) "Highest average compensation" means the average compensation
for the three (3) consecutive Years of Service with the
Employer that produces the highest aver age. A Year of Service
with the Employer is the Years of Service for accrual of
benefits.
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(j) "Limitation Year" means a calendar year, or the twelve
(12) consecutive month period in Section 1 of this
Plan. All qualified plans maintained by the Employer
must use the same Limitation Year. If the Limitation
Year is amended to a different twelve (12) consecutive
month period, the new Limitation Year must begin on a
date within the Limitation Year in which the amendment
is made.
(k) "Maximum permissible amount" means:
(i) The lesser of the defined benefit dollar limitation
or one hundred (100%) percent of the Participant's
highest average compensation.
(ii) If the Participant has less than ten (10) years of
participation with the Employer, the defined bene-
fit dollar limitation is reduced by one-tenth
(1/10th) for each year of participation (or part
thereof) less than ten (10). If the Participant
has less than ten (10) Years of Service with the
Employer, the compensation limitation is reduced
by one-tenth (1/10th) for each Year of Service (or
part thereof) less than ten (10). The adjustments
of this subsection (b) shall be applied in the
denominator of the defined benefit fraction based
upon Years of Service. Years of Service shall
include future years occurring before the Partic-
pant's Normal Retirement Age. Such future years
shall include the year which contains the date the
Participant reaches Normal Retirement Age, only if
it can be reasonably anticipated that the Partici-
pant will receive a Year of Service for such year.
(iii) If the annual benefit of the Participant commences
before the Participant's social security retirement
age, but on or after age sixty-two (62), the defined
benefit dollar limitation as reduced above, if
necessary, shall be determined as follows:
(A) If a Participant's social security retirement
age is sixty-five (65), the dollar limitation
for benefits commencing on or after age six-
ty-two (62) is determined by reducing the
defined benefit dollar limitation by five-
ninths (5/9ths) of one (1%) percent for each
month by which benefits commence before the
month in which the Participant attains age
sixty-five (65).
(B) If a Participant's social security
retirement age is greater than sixty-five
(65), the dollar limitation for benefits
commencing on or after age sixty-two (62) is
determined by
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reducing the defined benefit dollar limita-
tion by five-ninths (5/9ths) of one (1%)
percent for each of the first thirty-six
(36) months and five-twelfths (5/12ths) of
one (1%) percent for each of the additional
months (up to twenty-four (24) months) by
which benefit commence before the month of
the Participant's social security retirement
age.
(iv) If the annual benefit of the Participant commences
prior to age sixty-two (62), the defined benefit
dollar limitation shall be the actuarial equiva-
lent of an annual benefit beginning at age sixty-
two (62), as determined above, reduced for each
month by which benefits commence before the month
in which the Participant attains age sixty-two
(62). To determine actuarial equivalence, the
interest rate assumption is the greater of the
rate specified in the Actuarial Equivalent defini-
tion or five (5%) percent. Any decrease in the
defined benefit dollar limitation determined in
accordance with this provision (iv) shall not
reflect the mortality decrement to the extent that
benefits will not be forfeited upon the death of
the Participant.
(v) If the annual benefit of a Participant commences
after the Participant's social security retirement
age, the defined benefit dollar limitation as
reduced in (ii) above, if necessary, shall be
adjusted so that it is the actuarial equivalent of
an annual benefit of such dollar limitation begin-
ning at the Participant's social security retire
ment age. To determine actuarial equivalence, the
interest rate assumption used is the lesser of the
rate specified in the Actuarial Equivalent defini
tion or five (5%) percent.
(l) "Projected annual benefit" means the annual benefit as defined
in Section 17.3(b) 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 benefits under the Plan will remain
constant for all future Limitation Years.
(m) "Social security retirement age" means age sixty-five (65) in
the case of a Participant attaining age sixty-two (62) before
January 1, 2000 (i.e., born before
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January 1, 1938), age sixty-six (66) for a Participant
attaining age sixty-two (62) after December 31, 1999, and
before January 1, 2017 (i.e., born after December 31, 1937,
but before January 1, 1955), and age sixty-seven (67) for a
Participant attaining age sixty- two (62) after December 31,
2016 (i.e., born after December 31, 1954).
(n) "Year of participation" means the Participant shall be
credited with a year of participation (computed to
fractional parts of a year) for each accrual computa-
tion period for which the following conditions are met:
(1) the Participant is credited with at least the
number of Hours of Service (or period of service if the
elapsed time method is used) for benefit accrual pur-
poses, required under the terms of the Plan in order to
accrue a benefit for the accrual computation period,
and (2) the Participant is included as a Participant
under the eligibility provisions of the Plan for at
least one (1) day of the accrual computation period.
If these two conditions are met, the portion of a year
of participation credited to the Participant shall
equal the amount of benefit accrual service credited to
the Participant for such accrual computation period. A
Participant who is permanently and totally disabled
within the meaning of Section 415(c)(3)(C)(i) of the
Code for an accrual computation period shall receive a
year of participation with respect to that period. In
addition, for a Participant to receive a year of par-
ticipation (or part thereof) for an accrual computation
period, the Plan must be established no later than the
last day of such accrual computation period. In no
event will more than one (1) year of participation be
credited for any twelve (12) month period.
17.4 In the event the sum of a Participant's defined benefit
fraction and defined contribution fraction should exceed 1.0 for any limitation
year, then the following corrective measures shall be taken:
The defined contribution fraction shall be reduced.
SECTION 18 - Rollovers and Other Transfers
---------- -----------------------------
18.1 Any Employee may file a written petition with the Committee
requesting that the Trustee accept a rollover contribution from such Employee or
a direct transfer from another qualified plan or individual retirement account.
The Committee, in its
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sole discretion, shall determine whether or not such Employee shall be permitted
to make a rollover contribution or direct transfer to the Trust Fund. Any
written petition shall set forth the amount of the rollover amount, the nature
of the property in the rollover amount, and a statement, satisfactory to the
Commit tee, that such contribution constitutes a rollover amount as defined in
this Section. The Trustee shall hold any such contribution in a segregated
account for the Employee making such contribution. The Employee shall at all
times be one hundred (100%) percent fully vested in his rollover contribution
and any earnings credited thereon. The Trustee may invest and reinvest the
rollover amount with the general Trust Fund, in which case it shall share on a
pro-rata basis in any earnings, gains, profits, or losses, or the Trustee may
separately invest such rollover amount in a bank or savings and loan
association, in United States Treasury Bills or Bonds, or other fixed income
securities, or any combination thereof, as the Trustee shall decide, in which
case it shall not share in any earnings, gains, profits, or losses of the Trust
Fund. The Committee shall instruct the Trustee whether the rollover amount is
to be invested as part of the general Trust Fund. Any rollover or transfer shall
meet the requirements of Code Sections 402(a)(5)(E) and 411(d)(6).
18.2 The term rollover amount shall mean any rollover amount or
rollover contribution defined in (a) Code Section 402(a)(5) or Code Section
403(a)(4) relating to certain lump sum distributions from a trust or annuity
described in Code Section 401(a) or Code Section 403(a); or (b) Code Section
408(d)(3) relating to certain distributions from an Individual Retirement
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Account or an Individual Retirement Annuity; or (c) Code Section 409(b)(3)(C)
relating to certain distributions from a retirement bond.
18.3 The Trustee may, with the approval of the Committee, receive and
hold as part of the Trust Fund assets transferred directly from the trustee or
custodian of any other retirement plan which is qualified under Code Section
401, as amended or superseded, as evidenced by a current favorable determination
letter issued by the Commissioner of Internal Revenue or his proper delegate,
provided such transfer meets the requirements of Code Section 411(d)(6). The
assets received in such transfer shall be one hundred (100%) percent fully
vested and shall be held in a separate account for such Participants.
18.4 Any amount transferred or rolled over by an Employee to the Plan
under this Section 18 shall be used to provide additional benefits to such
Employee at the time benefits are otherwise payable under this Plan.
SECTION 19 - Miscellaneous Provisions
---------- ------------------------
19.1 The adoption and maintenance of this Plan and Trust shall not be
deemed to constitute a contract, expressed or implied, between the Employer and
any Employee or to be a consideration for, or inducement or condition of, the
employment of any person. Nothing herein contained shall be deemed to give any
Employee the right to be retained in the employ of the Employer or to interfere
with the right of the Employer to discharge any Employee at any time, nor shall
it give the Employer the right to require the Employee to remain in its employ.
Neither the Employer nor the Trustee or the Committee shall be responsible
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for the validity of any policies or for the failure on the part of any insurer
to make any payments or provide any benefit under any policy, or for the action
of any person or persons which may render any policy invalid or unenforceable.
Neither the Employer nor the Trustee shall be responsible for any inability to
perform or delay in performing any act occasioned by any restriction or
provisions of any policy, or imposed by any insurer or by any other person. In
case it becomes impossible for the Employer or the Trustee to perform any act
under this Trust, that act shall be performed which, in the judgment of the
Trustee, will most nearly carry out the intent and purpose of this Trust. All
parties to this Plan and Trust, or in any way interested herein, shall be bound
by any acts performed under such conditions.
19.2 The parties to this Plan and Trust, and all persons claiming any
interest whatsoever hereunder, agree to perform any and all acts and execute any
and all documents and papers which may be necessary or desirable for the
carrying out of this Plan and Trust or any of its provisions.
19.3 All legal questions pertaining to the Plan shall be determined in
accordance with the laws of the State of South Carolina, unless pre-empted under
Federal law.
19.4 Headings of Sections are included solely for convenience of
reference, and if there is any conflict between such headings and text, the text
shall control.
19.5 As used in this Plan and Trust, the masculine gender shall include
the feminine, and the singular shall include the plural, unless the context
clearly indicates otherwise.
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19.6 The right of any Participant or his Beneficiary to any benefit or
any payment herein or to any separate account or insurance contact shall not be
subject to voluntary or involuntary transfer, alienation or assignment, and
shall not be subject to attachment, execution, garnishment, or other legal or
equitable process. If such Participant or Beneficiary shall attempt to assign,
transfer, or dispose of such right, or if an attempt is made to subject such
right to attachment, execution, garnishment, or other legal or equitable
process, such attempt shall be null and void. The preceding sentence shall also
apply to the creation, assignment, or recognition of a right to any benefit pay
able 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 into
before January 1, 1985.
19.7 No provision of this Plan and Trust is purported to relieve any
fiduciary from liability for any responsibilities, obligations, or duties
imposed on such fiduciary by ERISA, including any amendments thereto.
19.8 In the event and to the extent not insured by any insurance
company pursuant to provisions of any applicable insurance policy, the Employer
shall indemnify and hold harmless any individual Trustees, their assistants and
representatives, from any and all claims, demands, suits, losses, damages, and
any other liability arising from their responsibilities in connection with this
Plan or Trust, unless the same is determined to be due to gross negligence or
willful misconduct.
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19.9 No loan shall be made from the Plan and Trust to any Participant
or Beneficiary.
SECTION 20 - Voluntary Participant Contributions
---------- -----------------------------------
20.1 A Participant shall not make, and the Trustee shall not accept,
voluntary Participant contributions in this Plan and Trust which are allocated
to a separate account. Any Employee contributions which were made for Plan Years
beginning after December 31, 1986, together with any matching contributions as
defined in Code Section 401(m), will be limited so as to meet the
nondiscrimination test of Code Section 401(m). If the Plan has any Employee
contributions, then a separate account shall be maintained by the Trustee for
the nondeductible voluntary Employee contributions of each Participant. The
assets of the Trust will be valued annually at fair market value as of the last
day of the Plan Year. On such date, the earnings and losses of the Trust
attributable to the accumulated nondeductible voluntary contributions will be
allocated to each Participant's nondeductible voluntary contributions account
in the ratio that such account balance bears to all such account balances.
Employee voluntary contributions (as adjusted for investment experience) shall
be nonforfeitable at all times.
IN WITNESS WHEREOF, the Employer, by its duly authorized officer, and
the Trustee, have caused this amended and restated Pension Plan and Trust
Agreement to be executed as of the day and year first above written.
104
<PAGE>
Witnesses to all signatures: THE PALMETTO BANK, Employer
/s/ Teresa W. Knight By: /s/ L. Leon Patterson
Its: Chairman and Chief Executive
Officer
THE PALMETTO BANK, Trustee
By: /s/ James M. Shoemaker, Jr.
Its: Compensation Chairman
105
<PAGE>
EXHIBIT 21
List of Subsidiaries of the Registrant
Name Jurisdiction of Organization
The Palmetto Bank South Carolina
Palmetto Capital, Inc.* South Carolina
* Wholly-owned indirect subsidiary
of the Registrant
1
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 22,922
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,097
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39,615
<INVESTMENTS-CARRYING> 43,789
<INVESTMENTS-MARKET> 44,549
<LOANS> 255,187
<ALLOWANCE> 3,700
<TOTAL-ASSETS> 376,241
<DEPOSITS> 329,659
<SHORT-TERM> 16,633
<LIABILITIES-OTHER> 2,040
<LONG-TERM> 0
0
0
<COMMON> 5,054
<OTHER-SE> 20,084
<TOTAL-LIABILITIES-AND-EQUITY> 376,241
<INTEREST-LOAN> 21,423
<INTEREST-INVEST> 4,465
<INTEREST-OTHER> 380
<INTEREST-TOTAL> 26,268
<INTEREST-DEPOSIT> 9,987
<INTEREST-EXPENSE> 10,842
<INTEREST-INCOME-NET> 15,426
<LOAN-LOSSES> 1,140
<SECURITIES-GAINS> (93,156)
<EXPENSE-OTHER> 13,900
<INCOME-PRETAX> 4,848
<INCOME-PRE-EXTRAORDINARY> 3,602
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,602
<EPS-PRIMARY> 3.59
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.99
<LOANS-NON> 743
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,016
<CHARGE-OFFS> 613
<RECOVERIES> 156
<ALLOWANCE-CLOSE> 3,700
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
