SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995. OR
[ ] 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 0-11264
WESTERN WASTE INDUSTRIES
(Exact name of registrant as specified in its charter)
California 95-1946054
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21061 South Western Avenue
Torrance, California 90501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 328-0900
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
or 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 for Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
As of September 21, 1995 there were 14,649,469 shares of Western Waste
Industries Common Stock, no par value outstanding held by approximately
783
shareholders of record. The aggregate market value of Western Waste
Industries common stock held by non-affiliates as of September 21, 1995,
was approximately $200,509,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement to be filed
pursuant to Regulation 14A not later than 120 days after the end of the
fiscal year (June 30, 1995) are incorporated by reference in Part III.
Exhibit Index on page 57.
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PART I
------
Item 1. Business
GENERAL
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Western Waste Industries is a provider of integrated waste
services to commercial, industrial and residential customers.
These services consist of the collection, transfer and disposal
of solid waste in certain areas of California, Texas, Louisiana,
Florida, Colorado and Arkansas. The Company has 91 franchise
agreements. As part of its business, the Company operates six
landfills, three transfer stations and five recycling facilities.
The Company's operations are aligned, for management
oversight purposes, into two regions. Each region is further
divided into a number of divisions. Each region is headed by a
regional vice president responsible for the operating and
financial performance of that region. Regional responsibility
for local divisions is exercised by assisting with the develop-
ment and approval of each division's capital budget, the review
and implementation of profit, pricing and corporate development
goals and the monitoring of performance. Each division's
operation is a distinct, localized service business that is
managed, on a day-to-day basis, at the local level. The
Company's regions and operating locations are responsible, with
support and resources provided by the corporate office, for
compliance with all applicable rules and regulations.
The Company has a diversified customer base with no single
customer accounting for more than 10% of the Company's revenue in
any one of its last three fiscal years. During fiscal 1993, 1994
and 1995, contributions to revenue by state were as follows:
Contribution to Revenue
By State
Year Ended June 30,
------------------------
1993 1994 1995
---- ---- ----
California 64% 68% 68%
Texas/Arkansas 19 18 19
Florida 11 9 9
Colorado 3 3 3
Louisiana 3 2 1
---- ---- ----
100% 100% 100%
==== ==== ====
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Contributions to revenue by type for fiscal 1993, 1994, and 1995
were as follows:
Contribution to Revenue
by Type
Year Ended June 30,
------------------------
1993 1994 1995
---- ---- ----
Collection Services 86% 85% 83%
Landfill Operations 6 7 7
Transfer Stations 2 3 3
Recycling and Waste Diversion 4 4 6
Other 2 1 1
---- ---- ----
100% 100% 100%
==== ==== ====
COLLECTION SERVICES
-------------------
Contracts. Substantially all of the Company's residential,
and a certain portion of its commercial and industrial collection
services are performed under 91 municipal and regional authority
contracts. These contracts presently represent approximately 49%
of the Company's revenue. A contract is an agreement awarded by
a municipality or regional authority to provide collection and/or
recycling services to commercial and industrial or residential
customers in the jurisdiction.
These contracts are normally awarded following competitive
bidding, usually have terms of five or more years, and contain
renewal options. Such contracts provide for rate adjustments
including, but not limited to, increases in the consumer price
index and disposal cost increases. Payment for residential
services is generally received directly from the municipality or
authority.
Most of the remaining collection revenues are provided under
one to three year service agreements.
Commercial and Industrial. The Company provides collection
services to more than 71,000 commercial and industrial customer
locations, which accounted for approximately 55% of total fiscal
1995 revenue. Commercial and industrial collection services are
generally performed under agreements, and fees are determined by
such factors as collection frequency, type of equipment and
containers furnished, type and volume or weight of the waste
collected and the distance to the disposal site. 40% of
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commercial and industrial services are performed under municipal
and regional authority contracts.
The Company's commercial and industrial customers utilize
containers that range from one to 45 cubic yards in size. The
use of containers enables the Company to service most of its
commercial and industrial customers with collection vehicles
operated by a single employee. Stationary compactors, which
reduce the volume of the stored waste prior to collection, are
frequently installed by the Company on the premises of large
volume customers.
The Company has interstate industrial transportation
operations servicing primarily customers for the Company's Texas,
Louisiana and Arkansas industrial non-hazardous disposal sites.
The Company currently holds authority to transport waste in 21
states, mostly in the southern portion of the United States. The
Company believes that further development of its industrial
transportation capabilities in close coordination with its
disposal sites will strengthen its ability to provide fully
integrated industrial waste handling services.
Residential. During fiscal 1995, approximately 28% of total
revenue was derived from the collection and transportation of
residential refuse to a landfill or transfer station. The
Company serviced approximately 715,000 homes and other
residential dwelling units. Substantially all of the services
for homes and other residential units are performed under
exclusive franchise agreements granted by municipalities or
regional authorities. Fees are based primarily on market
factors, frequency and type of service, distance to processing or
disposal facilities and cost of processing or disposal.
Residential collection fees are normally paid by the
municipalities out of tax revenues, service charges or, in a
limited amount of cases, are paid directly by the residents
receiving the service to the Company.
LANDFILLS
---------
Landfill disposal continues to be a primary depository for
solid waste in North America. With the enactment of the Resource
Recovery and Conservation Act Subtitle D regulations, the impact
on landfill design, permitting and construction has increased
capital resources required to develop additional disposal
capacity. At the same time, the Company believes that
replacement of existing disposal capacity with more costly,
environmentally secure capacity will result generally in an
increase in the price of waste disposal.
The Company operates six disposal sites in California,
Texas, Louisiana and Florida. Certain of these sites have
expansion plans and additional sites are under development or in
construction. Of the six operating landfills, four are owned by
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the Company. None of the landfills are permitted to accept
hazardous waste, and the Company's policies and controls are
structured to comply with the permitted status. Disposal fees
received from third parties generated approximately 7% of fiscal
1995 revenue.
In Southern California, the Company owns and operates the
El Sobrante landfill which began receiving waste in July 1986.
Solid Waste Disposal Revenue Bonds were issued to finance its
development. The El Sobrante landfill operates under a joint
development agreement with the County of Riverside for an initial
term of 15 years with two successive five year renewal options.
At the present waste disposal rate, the site has an estimated
remaining life of approximately thirteen years. Commencing in
September 1992, the Company was allowed to import solid waste
collected outside of Riverside County to the El Sobrante Landfill
site. The amount of out-of-county waste is subject to certain
restrictions, and cannot exceed 1.8 million tons in total. In
March 1995, the Company received a permit to increase the daily
tonnage from 2,000 to 4,000 tons per day.
The Company acquired 1,220 acres contiguous to the existing
El Sobrante operating site with the intent of expanding landfill
operations. The Company has begun the permitting process for
this acreage which, if successful, would add 100 million tons of
disposal capacity to this site. In April 1991, the Company
signed a preliminary memorandum of understanding (MOU) with the
County of Riverside regarding this acreage. This MOU included a
provision for up to a 10,000 tons per day operation, and
increased the amount of out-of-county waste which the site may
accept. A preliminary Environmental Impact Report has been
prepared and commented on. The final Environmental Impact Report
has not been issued. There is no assurance that the expansion
project will be permitted.
In Texas, the Company leases and operates a 64-acre MSW
disposal site in Conroe for the City of Conroe. The lease term
is for the life of the site with a remaining projected life of
approximately one year.
Adjacent to the Conroe, Texas leased site, the Company
operates a special waste (non-hazardous industrial) landfill on a
100-acre tract owned by the Company and repermitted by the Texas
Water Commission in April 1992. The Company began receiving
waste under this permit in August 1992. Current estimates of the
operating life of the facility is in excess of 25 years. The
Company acquired an additional 78-acre tract in May 1989 with the
intention of utilizing it for future development. The Company
has been constructing a waste stabilization facility that will
increase the existing tank capacity from 11,000 gallons to
approximately 130,000 gallon capacity. This will enable the
Company to increase the market share for special waste.
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In 1990, the Company acquired a 90-acre landfill from the
City of New Boston, Texas, located 25 miles west of Texarkana.
The permit has been upgraded and the site is currently operating.
The life of this facility is estimated to exceed four years. The
Company is in the process of developing and submitting a permit
modification that will double the existing capacity of the
landfill and thereby increase the life to eight years.
In Florida, the Company operates a 65-acre site under
contract with the County of Nassau. The contract had an initial
term of two years through September 1989, and the Company
subsequently received a three year extension of the contract. In
1991, the Company negotiated a $14 million contract with the
County of Nassau, to construct and operate an additional 140-
acre landfill for an initial term of five years with a five year
extension option. Under the terms of the agreement, the Company
closed the existing 65-acre tract is constructing a new disposal
site. A portion of the new site has been in operation since
1993. In 1992, the Company negotiated a modification to the
construction contract to provide for an expansion of the site
airspace capacity. The construction project is scheduled for
completion in fiscal 1996.
In September 1990, the Company acquired a 240-acre waste
disposal facility in Livonia, Louisiana, approximately 22 miles
west of Baton Rouge. This facility, which is permitted to
receive municipal solid waste and special waste, began operations
in fiscal 1996. Within the site is a non-hazardous
oilfield waste disposal facility. This facility no longer
accepts waste and is in closure.
In Arkansas, the Company owns a 160-acre landfill in
Texarkana. The site, which stopped receiving waste in May 1993,
is filled to permit capacity and is being closed. The
application for a permit covering the remaining unfilled 40 acres
has been denied. The Company has entered into an agreement with
the State that will allow the Company to resubmit a permit
application covering the 40 acres. There is no assurance that the
expansion project will be permitted.
The Company has the right to acquire a 648-acre site for the
development of a municipal solid waste and special waste landfill
approximately five miles east of Lake Charles, Louisiana. The
permit application was denied by the Louisiana Department of
Environmental Quality and is currently the subject of appeal
through a state administrative proceeding.
The Company has entered into a joint development
arrangement with Gold Fields Mining, a wholly owned subsidiary of
Hanson PLC, and SP Environmental, a sister subsidiary of the
Southern Pacific Railroad for the purpose of developing a waste-
by-rail project called California RailFill Systems. The name was
recently changed from California InteRail. The parties are in
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the process of permitting a landfill in Imperial County,
California, which has an approximate capacity of 600 million
tons. The project has been approved by the Board of Supervisors
of Imperial County and the parties are in the process of applying
for various technical permits from certain agencies. As part of
this project, existing facilities owned by the Company, SP
Environmental, and others could be utilized and new facilities
will be developed on an as needed basis. Upon receipt of the
remaining permits the landfill could be operational as early as
1997.
In accordance with the Company's overall plan of corporate
development, other landfill sites are currently being evaluated
both in the Company's existing markets and new markets for joint
collection and disposal investment. Sites for certain projects
have been selected and preliminary engineering analyses are
currently underway. Normally, the permitting process for
landfill sites takes three to five years.
OPERATING LANDFILL SUMMARY
Permitted
Location Type(a) Acres
-------- ------- ---------
OWNED
Riverside, CA SW 160
Livonia, LA SW/SP 75
Conroe, TX SP 100
New Boston, TX SW 90
------
Total Owned 425
MANAGED
Callahan, FL SW 140
Conroe, TX SW 64
------
Total Managed 204
------
Total Operating 629
======
(a) Key: SW=Solid Waste
SP=Special (Industrial Non-Hazardous) Waste
TRANSFER STATIONS
-----------------
The Company owns or operates three transfer stations. A
transfer station is a facility conveniently located near
residential and commercial collection routes where solid waste is
received from collection vehicles and then transferred to and
compacted in large, specially constructed trailers for
transportation to disposal facilities. This procedure reduces
costs by improving utilization of collection personnel and
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equipment. The services of these facilities are provided to
private haulers, municipalities or counties. Fees are generally
based upon such considerations as market factors, the type and
volume or weight of the waste transferred, the extent of
recycling, the transport distance involved and the cost of
disposal.
The Company has a transfer station in Carson, California which
currently processes approximately 2,400 tons per day.
Approximately 84% of the tonnage delivered to this transfer
station is provided by the Company's collection operations with
the remainder received from municipalities which collect their
own residential refuse and from other refuse haulers. The
Company has applied for approval to increase the volume of waste
processed at the transfer station to 3,000 tons of solid waste
per day. This application is pending. There is no assurance
that the increase will be approved.
In March 1993, the Company was awarded a contract to operate
the Sunnyvale Materials Recovery and Transfer Station (SMART).
The service area for the station is the cities of Sunnyvale,
Mountain View, and Palo Alto, California. The initial term of
the contract is for seven years with an option to extend by the
City for up to an additional seven years. The operation began on
October 1, 1993.
The Company operates a transfer station adjacent to the
Company's Fresno operations. The transfer station, which
includes a commercial materials recycling building, is designed
to receive up to 2,500 tons per day of solid waste. The solid
waste permit currently allows up to 1,000 tons per day with a
green waste storage area.
RECYCLING/WASTE DIVERSION
-------------------------
The Company operates five recycling facilities in California,
one each in Redondo Beach, Chino, Carson, Sunnyvale, and San
Jose. Revenue related to these facilities accounted for
approximately 4%, 4% and 6% of total revenue in fiscal 1993, 1994
and 1995, respectively. Recycling involves the removal of
reusable materials from the waste stream for processing and sale
for use in various applications. The Company is assisting
certain communities, with which it has municipal contracts, in
implementing recycling programs, and has entered into long-term
recycling agreements with several communities in the Company's
markets. The Company is also involved in receiving, processing,
composting and end-market distribution of green and wood waste
material in California and Texas.
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OTHER ACTIVITIES
----------------
Western Waste is involved in certain other business activities,
relating to waste services, including construction support,
earth-moving, excavation contracting, and engineering and
consulting services. In addition, in fiscal 1993, 1994 and 1995,
the Company was involved in the construction of a new landfill
for Nassau County, Florida.
REGULATION
----------
The collection and disposal of solid waste, operation of
landfills and rendering of related environmental services are
subject to federal, state and local requirements which regulate
health, safety, the environment, zoning and land-use.
Operating permits are generally required for landfills and
certain collection vehicles, and these permits are subject to
revocation, modification and renewal. Federal, state and local
regulations vary, but generally govern disposal activities and
the location and use of facilities and also impose restrictions
to prohibit or minimize air and water pollution. In addition,
governmental authorities have the power to enforce compliance
with these regulations and to obtain injunctions or impose fines
in the case of violations, including criminal penalties. These
regulations are administered by the EPA and various other
federal, state and local environmental health and safety agencies
and authorities, including the Occupational Safety and Health
Administration of the U.S. Department of Labor.
In recent years, a number of communities have instituted "flow
control" requirements, which typically require that waste
collected within a particular area be deposited at a designated
facility. In May 1994, the U.S. Supreme Court ruled that a flow
control ordinance was inconsistent with the Commerce Clause of
the Constitution of the United States. A number of lower federal
courts have struck down similar measures. Congress recently
considered, but did not adopt, legislation that would have
partially overturned the Supreme Court's decision. The 1995
Congress may also examine bills that immunize particular
governmental actions (for example, flow control that results from
franchises or municipal contracts) from Commerce Clause scrutiny.
In the absence of federal legislation, certain local laws that
seek to direct waste flows to designated facilities may be
unenforceable.
Under the Clean Air Act, the EPA proposed regulations in May
1991 which would require extensive methane gas collection systems
to be installed at many of the Company's landfills. Although
these regulations are not expected to be finalized until the
end of 1995, the Company has proceeded to design, permit and
install gas extraction and control systems at many of its
facilities. The Company believes these systems substantially
comply with the proposed regulations under the Clean Air Act.
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The Company is also seeking operating and other applicable
permits for its activities and is pursuing a strategy of reducing
emissions from both mobile and stationary sources.
Implementation of certain provisions of the Clean Air Act will
result in additional stringent control for those areas of the
country that are placed in "nonattainment status".
Collection Services: In the solid waste collection phase,
regulation takes such forms as licensing of collection vehicles,
vehicle safety requirements, vehicle weight limitation and, in
certain localities, limitations on rates, area, time, frequency
of collection and transportation of waste to disposal sites.
Zoning and land use restrictions are encountered in the solid
waste transfer, resource recovery and disposal phases of the
Company's business. Air quality and noise pollution regulations
may also affect the Company's operations. Governmental
authorities have the power to enforce compliance, and violators
are subject to injunctions or fines, or both. Private
individuals may also have the right to sue to enforce compliance.
Safety standards under the Occupational Safety and Health Act are
also applicable.
Landfills: In 1980 the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund" or "CERCLA") was
issued. CERCLA addresses problems created by the release of
hazardous substances into the environment. CERCLA imposes
strict, joint and several liability on the present or former
operators of facilities which release hazardous substances into
the environment. Waste generators and transporters are also
strictly liable. It is possible that the EPA or others could
contend that at least some amounts of hazardous substances exist
in the Company's operating and closed disposal facilities. If
these sites ever experience environmental problems, there can be
no assurance that the Company will not face claims resulting in
liability.
In 1991, the EPA issued revisions to Subtitle D of the Resource
Conservation and Recovery Act of 1976 ("RCRA") which regulates
the handling, transportation and disposal of waste and requires
states to develop programs to ensure the safe disposal of waste.
These revisions affected comprehensive solid waste management
regulations, including location standards, facility design and
operating criteria, closure and post-closure requirements,
financial assurance standards, and groundwater monitoring and
corrective action standards which were not previously in place or
enforced at landfills. The Company believes that all Company
landfills meet or exceed compliance with these regulations. In
addition, the Company's planned landfill expansions will be
engineered to meet or exceed these requirements.
The Company has periodically undertaken, and may in the future
undertake or be required to implement and/or adhere to,
environmental guidelines at existing facilities, and to add
additional monitoring post-closure maintenance or corrective
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measures at closed waste disposal sites. The Company cannot
predict the financial impact, if any, of such matters on the
Company's operations.
During the ordinary course of its landfill operations, the
Company is, as are others in the industry, subject to
governmental enforcement proceedings and resulting fines or other
sanctions from such authorities regarding full compliance with
applicable environmental or health or safety regulations. The
Company believes that based on the results of management's review
of its operations, that it has taken appropriate charges and that
expense accruals have been provided by the Company for its share
of any of these potential liabilities.
Transportation Services: The Company's transportation of
hazardous waste consists of the hauling of solid material in
either individual sealed containers or in specially designed, and
licensed bins. The State of California licenses the bins and
trailers and the tractors are subject to the Southern California
Air Quality Management District's regulations in regard to local
enforcement of the Clean Air Act. The Clean Air Act provides for
the federal, state, and local regulation of the emission of air
pollutants. The Company's transporting operation has not been
subject to any requirement of the Clean Air Act other than the
required posting by the Southern California Air Quality
Management District in regard to smog alert requirements, which
is in effect for all of the Company's fleet and most other
companies in the same geographical area.
Summary: The Company believes that it is currently in
substantial compliance with all applicable federal, state and
local laws, permits, orders, and regulations. The Company
believes that there will probably be increased regulation and
legislation related to the waste management industry in the
future. The Company attempts to anticipate future regulatory,
political and legal developments that might affect its operations
and plans accordingly to remain in compliance with the regulatory
framework. The Company cannot predict the extent to which any
legislation or regulation that may be enacted or enforced in the
future may affect its operations particularly in the event that
regulations are applied retroactively.
CORPORATE DEVELOPMENT
---------------------
The Company's corporate development program emphasizes the
development of a broad range of waste services. These services
include collection, recycling, processing, composting, transfer
and disposal. This range enables the Company to compete for
business and expand current customer relationships.
Management envisions that this program will result in the
expansion of its landfill operations, further penetration of its
existing collection markets, and acquisitions which either
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complement its existing operations or allow it to expand into new
geographic markets.
Waste reduction legislation in California, Florida and
Louisiana, and contemplated in other states in which the Company
operates, is causing municipalities to rethink their waste
programs. The Company views recycling and other municipal waste
service reducti/on programs as the catalyst which will enable the
Company to expand its services to communities and customers it
currently does not serve and further cement relationships with
current customers.
Management believes that as local governmental budgets face
fiscal constraints, an increasing number of municipalities will
turn to private sector companies to meet their waste disposal
demands. The Company, in an effort to expand its customer base,
has therefore focused a significant amount of its marketing
efforts on obtaining additional municipal franchises to
supplement its existing 91 franchises.
The Company's acquisition activity has been focused on
collection companies either within or located near current
Western Waste operations. The Company has also acquired
companies to expand into new markets. Although the Company's
acquisition activity has decreased over the last two years, as
management has concentrated on controlling costs over that
period, the Company remains interested in acquisitions and
intends to increase acquisition activity in fiscal 1996. There
can be no assurance that the Company will be successful in making
these acquisitions.
BONDING AND INSURANCE
---------------------
In order to submit a bid or proposal to a governmental or
corporate entity to provide collection, hauling and disposal
services, the Company is often required to submit simultaneously
a bid bond or a letter of credit and, upon contract award,
provide a bond or letter of credit to secure its performance of
the contract. Management believes that its current bonding
coverage and borrowing capacity are adequate for its present
needs.
The Company has a risk management program whereby it retains
the liability, subject to maximum limits, for auto, general
liability, employee health and welfare benefits and workers'
compensation. The Company carries insurance coverage which
management considers sufficient to protect the assets and
operations of the Company, including excess umbrella and special
hazardous waste transportation coverage.
Management believes the self insured loss reserves of the
Company are adequate. The Company establishes reserves to cover
its estimated liabilities for unpaid loss and loss adjustment
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expenses related to claims reported before the balance sheet
date, claims incurred but not yet reported, and the expenses of
investigating and adjusting all claims incurred prior to the
balance sheet date. All estimated liabilities are net of
estimated salvage and subrogation recoveries and net of insurance
coverage above self-insurance retention levels.
The Company establishes self insured loss reserves based on
estimates of the ultimate cost of claims (including loss
adjustment expenses) which have been reported but not fully paid,
and of claims which have been incurred but not yet reported. The
length of time for which such costs must be estimated varies
depending on the coverage involved. Actual claim costs are
dependent upon such complex factors as inflation, changes in the
doctrines of legal liability and size of damage awards. Because
of the variables involved, the reserving process results in an
estimate rather than an exact calculation of liabilities.
Liabilities for self insured losses, including loss adjustment
expenses, are revalued periodically using a variety of actuarial
and statistical techniques for producing current estimates of
expected claim costs. Claim frequency and severity and other
social and economic factors are considered in the valuation
process. A provision for inflation in the calculation of future
claim costs is implicit since reliance is placed on both actual
historical data which reflect past inflation and on factors which
are judged to be appropriate additions to or modifiers of past
experience such as industry experience. Adjustments to
previously estimated liabilities in connection with establishing
self-insurance reserves are reflected in current operating
results in the period in which they are determined.
COMPETITION
-----------
The waste services industry is very competitive and requires
substantial labor and capital resources. The Company encounters
competition from large national waste management companies (WMX
Technologies, Inc.,Browning-Ferris Industries, Inc., Sanifill and
USA Waste Services, Inc.), smaller regional companies and
numerous local independent operators. The Company also competes
with municipalities and industrial facilities which provide their
own waste management services. Some of the Company's competitors
are much larger and have greater financial resources than the
Company. Competition in the Company's markets is based primarily
on service, reliability, and price.
The Company competes for landfill business on the basis of
tipping fees, geographical location, and quality of operations.
The Company's ability to obtain landfill business may be limited
by the fact that some major collection companies also own or
operate landfills, to which they send their waste. The Company
competes for collection accounts primarily on the basis of price
and the quality of its services. From time to time, competitors
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may reduce the price of their services in an effort to expand
market share.
EMPLOYEES
---------
The Company currently employs approximately 1,770 persons,
consisting of approximately 90 managers and executives,
approximately 1,110 persons employed in collection, transfer,
resource recovery and disposal activities, approximately 200
persons employed in equipment repair and maintenance, and
approximately 370 persons employed in sales, clerical, data
processing and other activities. Approximately 29% of the
Company's employees are represented by a union under collective
bargaining agreements. The Company did not experience a
significant work stoppage in any of the reporting periods covered
by this Form 10-K and believes its employee relations are good.
Item 2. Properties.
------- ----------
The principal fixed assets of the Company consist of vehicles
and equipment which include approximately 1,240 collection,
recycling, transfer and support vehicles, an estimated 1,030,000
storage containers, roll-off boxes and recycling bins, and
approximately 240 portable and stationary compactors.
Substantially all of the Company's buildings, truck yards,
trucks, etc. are owned by the Company rather than leased.
Company holdings include approximately 2,800 acres of real
property, including approximately 2,550 acres used or being
developed as landfills. It leases an additional 130 acres of
which 64 acres are for landfill. The total space of all
buildings utilized by the Company is approximately 545,000 square
feet.
The Company purchased certain general office facilities in
Torrance, California in December 1991. A portion of these
facilities is being used for the Company's corporate
headquarters. The remaining facilities are currently being
leased to outside parties.
Management believes that the Company's property and equipment
are adequate for its present business needs. The Company
intends, however, to continue to invest in additional property
and equipment for both expansion and replacement of existing
assets.
Item 3. Legal Proceedings.
------- -----------------
On or about October 13, 1993 the Company was served with a
class action lawsuit now entitled In re Western Waste Industries
------------------------------
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Securities Litigation, Case No. CV-93 6126 KN filed in the United
---------------------
States District Court for the Central District of California.
The complaint alleges that the Company violated federal
securities laws with regard to certain disclosures and
representations made by the Company and certain alleged omissions
on the part of the Company in connection with merger negotiations
between the Company and Browning-Ferris Industries ("BFI"). The
plaintiffs allege that they and all other persons or entities
that bought the stock of the Company during the period of
September 2, 1993 through October 7, 1993 suffered damages as a
result of changes in the market price of the Company's common
stock. The Company does not believe that it has violated any
laws with regard to the BFI matter and intends to vigorously
defend the lawsuit.
On or about August 9, 1994 a complaint was filed in
Rancho Disposal Services, Inc., et al. v. Western Waste
-------------------------------------------------------
Industries, et al., San Bernardino Superior Court Case No. SCB
------------------ 14473. The Complaint seeks damages and an
injunction for the alleged violation of California Business and
Professions Code Sections 17047, 17200, and 17500 and for
intentional interference with existing and prospective economic
relations. The complaint alleges that the Company does not hold
a validly issued permit to operate within a certain geographic
area in the County of San Bernardino and that the Company has
engaged in predatory pricing. The complaint also alleges that
the Company has violated a San Bernardino County ordinance by
engaging in discriminatory and non-uniform pricing of its refuse
hauling services. In addition to the injunction, the complaint
prays for three times the actual damages incurred by plaintiffs,
punitive and exemplary damages in the amount to be proven at the
time of trial, reasonable attorneys' fees and costs of suit. The
Company believes it has valid defenses to the allegations and
intends to vigorously defend the suit. The Company has filed a
cross-complaint against the plaintiffs for engaging in improper
pricing activities.
In July 1994, the Company reached an agreement to settle the
claims asserted against it in a lawsuit captioned County of
-----------------------------------------------------------
Los Angeles, et al. v. Browning-Ferris Industries, Inc., et al.,
---------------------------------------------------------------
Case No. 93-1807-WMS filed in the Los Angeles County Superior
Court. The complaint sought indemnification on behalf of the
County of Los Angeles for alleged damages resulting from hauling
waste from county garbage districts to the Operating Industries
Landfill. The settlement was within the range previously
accrued. The settlement includes a release by the EPA with
regard to the Operating Industries site.
In or about August 1994, the case of Adcock, et al. v.
-----------------
Page 15 of 191 <PAGE>
<PAGE>
Western Waste, et al. was filed in the United States District
---------------------
Court for the Western District of Arkansas, Case No. 94-4119.
This is an action originally filed by seven landowners who live
near a landfill previously operated by the Company in Miller
County, Arkansas. The landowners allege that the Company
unlawfully received hazardous waste and that the pollutants from
the waste received by the Company had contaminated their property
or threatened to contaminate their property in the future. The
landowners seek an unspecified amount of damages based on the
contamination or threat of contamination. In addition, the
landowners seek to recover damages based on the devaluation of
their property due to the "stigma" of being located near a
disposal site for hazardous waste. In addition, the landowners
also seek to recover damages based upon their fear of developing
adverse health effects. In July 1995, 135 additional plaintiffs
intervened and asserted claims similar to those raised by the
original plaintiffs. The Company and the other defendants have
denied that any unlawful disposal of waste took place at the
landfill. In or about June, 1995, the case of
Cross, et al. v. Western Waste Industries, et al. Miller County
------------------------------------------------
Circuit Court Case No. CIV 95-149-3 was filed. This is an action
by eight land owners who own property along a creek downstream
from the Company's Miller County landfill. Plaintiffs allege
that their property has been contaminated by releases of
hazardous substances from the landfill and other hazardous
substance disposal sites operated by the other defendants. The
Company believes it has valid defenses to these allegations and
is vigorously defending the action.
In late December, 1994 a lawsuit styled Babich, et al. v.
-----------------
Cadillac Fairview/California, Inc., et al. was filed in
-----------------------------------------
Los Angeles County Superior Court by 24 plaintiffs. Western is
among 19 named defendants. The complaint asserts causes of
action for nuisance and trespass seeking damages for personal
injuries and property damage. The complaint alleges that Western
owns a parcel of property, acquired from Cadillac Fairview/
California located in Torrance, California. The complaint
alleges that Montrose Chemical Corporation and others manu-
factured DDT on property at or adjacent to the property owned by
Western. The plaintiffs further allege that contaminants from
this property escaped to plaintiff's property, injured plaintiff
and damaged the value of plaintiff's property. On June 29, 1995,
this case was removed to the United States District Court. The
Company has filed an answer denying any liability. The Company
believes it has valid defenses to the allegations and intends to
vigorously contest the case and is contemplating filing a cross-
complaint once its investigation of the facts is completed.
Page 16 of 191 <PAGE>
<PAGE>
On or about February 2, 1995, a complaint was filed in a
taxpayer lawsuit entitled David Sarosi, et al. vs County of
---------------------------------
Riverside, et al., Riverside County Superior Court Case No.
-----------------
261315. The complaint does not name the Company as a defendant.
The plaintiffs allege that the County and the other defendants,
in connection with a contract with the Company, regarding the
operation and management of the El Sobrante Landfill (the
"Landfill") located within the County (the "Agreement"), engaged
in various improper actions, including the unlawful sale of
public property, wasting public funds, and making an
unconstitutional gift of public property and funds. The
complaint seeks an order voiding the Agreement and an injunction
ordering the defendants to pay to the County allegedly unlawful
revenues earned from th Landfill, to cease further dumping at the
Landfill of out-of-county waste, return of alleged windfall
profits and limiting dumping fees charged to incounty residents.
The complaint also seeks general damages of $10 million and
special and punitive damages, attorneys' fees and costs. The
Company believes the taxpayer suit is based upon erroneous
assumptions and that there are valid defenses available to the
County to each of the claims asserted in the complaint.
In addition to the above-described litigation, there are number
of claims and suits pending against the Company for alleged
damages to persons and property, alleged violation of certain
laws and for alleged liabilities arising out of matters occurring
during the normal operation of the waste services business. In
the opinion of management, the uninsured liability, if any, under
these claims and suits would not materially affect the financial
position or results of operations of the Company.
Environmental Proceedings
-------------------------
The Company strives to conduct its operations in compliance
with applicable laws and regulations, including environmental
rules and regulations, and has as its goal 100% compliance.
However, management believes that in the normal course of doing
business, companies in the waste disposal industry, including the
Company, are faced with governmental enforcement proceedings and
resulting fines or other sanctions and will likely be required to
pay civil penalties or to expend funds for remedial work on waste
disposal sites. The possibility always exists that such
expenditures could be substantial, which would have a negative
impact on earnings for a particular reporting period. Management
believes that the existence of these proceedings does not provide
an accurate reflection of the Company's operating policies,
procedures and capabilities, although the Company will have to
respond to those issues in filings required to be made in
jurisdictions which have enacted "fitness" statutes. In any
event, management of the Company believes that the ultimate
resolution of such proceedings will neither individually nor in
Page 17 of 191 <PAGE>
<PAGE>
the aggregate have a materially adverse effect upon the
consolidated financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of fiscal 1995, no matter was
submitted to a vote of the Company's security holders.
Page 18 of 191 <PAGE>
<PAGE>
PART II
-------
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Company's common stock is traded on the New York Stock
Exchange under the symbol "WW". The following table below sets
forth by quarter for the last two years the high and low sales
prices of the Company's common stock on the New York Stock
Exchange.
1994 1995
--------------- ---------------
High Low High Low
------- ------ ------- ------
Quarter ended September 30 22-1/2 9-5/8 20-5/8 17-3/8
Quarter ended December 31 19-3/4 10-3/8 18/5-8 13-3/8
Quarter ended March 31 16-1/2 13-3/8 17 14-7/8
Quarter ended June 30 20-1/2 13-5/8 20-5/8 15-3/8
The Company is limited with respect to the amount of cash
dividends which can be paid, by certain terms of its revolving
credit agreement.
No cash dividends have been paid to date by the Company. The
current policy of the Company is to retain earnings to provide
funds for the operation and expansion of its business. The
Company does not anticipate paying dividends in the foreseeable
future.
Page 19 of 191 <PAGE>
<PAGE>
Item 6. Selected Consolidated Financial Data.
The Selected Consolidated Financial Data presented below should
be read in conjunction with the accompanying Consolidated
Financial Statements of Western Waste Industries and the related
notes thereto and "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Western Waste Industries
Consolidated Five-Year Summary of Selected Financial Data
(In thousands, except for employee and per share data)
Year Ended June 30,
- ---------------------------------------------------
OPERATING RESULTS 1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
Revenue $199,820 $219,376 $231,205 $257,005 $270,941
Income (loss) from
operations 22,476 19,083 (14,562)<F**> 26,423 35,226
Interest expense, net (5,982) (3,379) ( 2,639) ( 3,035) ( 3,807)
Other nonoperating
income/(expense) 1,385 (11,444)<F*> 2,735 ( 767) ( 628)
Income (loss) before
income taxes 17,879 4,260 (14,466) 22,621 30,791
Net income (loss) 11,234 2,370 (10,116) 12,941 17,089
Net income (loss) per
share - primary .81 .17 (.73) .86 1.10
Average number of
shares outstanding 13,854 14,031 13,818 15,048 15,531
No cash dividends have been declared to date.
[FN]
<F*> Includes a $6,600 writedown related to G.I. Industries and a provision
of $4,050 related to a estimated loss on disposal of a division.
<F**> Includes $21,043 of special charges and other charges of: $6,000 related
to a estimated loss on a municipal contract, $4,000 related to increased
self-insurance loss reserves and $1,000 for other reserves.
Page 20 of 191 <PAGE> <PAGE>
At June 30,
OTHER FINANCIAL AND ---------------------------------------------------
STATISTICAL DATA 1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
Total assets $225,874 $248,509 $268,386 $284,681 $293,373
Property and
equipment, net 127,306 155,316 172,662 185,598 196,972
Total long-term debt 75,405 90,037 91,618 93,390 80,190
Shareholders' equity 116,004 122,556 122,421 139,177 160,221
Shareholders' equity
per share 8.37 8.73 8.86 9.25 10.32
Number of employees 1,580 1,670 1,610 1,730 1,770
The average number of shares outstanding and per share data have been restated
to reflect the two-for-one stock split which occurred in July 1990.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion reviews the Company's operations for
the three years ended June 30, 1995, and should be read in
conjunction with the Company's Consolidated Financial Statements
and related notes thereto and Selected Consolidated Financial
Data.
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED JUNE 30, 1995
-------------------------------------------------------------
1993 1994 1995
------ ----- -----
Revenue: 100.0% 100.0% 100.0%
Costs and Expenses:
Operating 81.2 74.7 72.4
Selling, general
& administrative 16.0 15.0 14.6
Special charges 9.1 - -
----- ----- -----
106.3 89.7 87.0
----- ----- -----
Income (loss) from
operations ( 6.3) 10.3 13.0
Net nonoperating
income (expense) - ( 1.5) ( 1.6)
----- ----- -----
Income (loss) before
income taxes ( 6.3) 8.8 11.4
Income taxes (benefit) ( 1.9) 3.8 5.1
----- ----- -----
Net Income ( 4.4%) 5.0% 6.3%
===== ===== =====
Page 21 of 191 <PAGE> <PAGE>
Revenue
-------
The increase in revenue over the last three fiscal years has
resulted from price increases, obtaining additional franchise
agreements, and expanding the customer base.
Components of the increases in revenue are as follows:
Year Ended June 30,
-------------------------
1993 1994 1995
----- ----- -----
Purchased assets . . . . . . . . . 2.8% .2% .1%
Price changes . . . . . . . . . - - 3.6
Volume changes . . . . . . . . . - - 1.7
Price and volume changes . . . . . 2.6 11.0 -
----- ----- -----
5.4% 11.2% 5.4%
===== ===== =====
The principal factors affecting the increased revenue growth
in fiscal 1994 were (i) the overall improvement in the economy
from the economic recession which had adversely affected many of
the Company's markets, particularly California, and, (ii) new
operations in San Jose and Sunnyvale, California.
In fiscal 1995 the Company obtained price increases in
certain collection markets and experienced market increases in
recycling prices. The recycling revenue increase, which
represents 25% of the revenue increase, resulted from 1995
average prices for recyclable materials being significantly
higher than the previous year's. While the Company does not
expect average prices to continue at these all-time high levels,
market analysts do not expect a return to historical low levels.
Since these prices are subject to changing market conditions, no
assurances can be given that recycling revenue will continue to
contribute to future revenue growth at the same rate as in 1995.
Costs of Operation
------------------
Operating expenses consist primarily of wages and benefits
for operating personnel, insurance costs, disposal site fees and
equipment operating costs. Operating costs decreased in fiscal
1994, as a percentage of revenue, due principally to (i) charges
incurred in fiscal 1993 of $6,000,000 related to a estimated loss
on a municipal contract and $4,000,000 related to increases in
self-insurance reserves (ii) increases in volume at the Companys'
landfill operations, including an increase in the volume of out-
of-county waste at El Sobrante landfill, which generally have
Page 22 of 191 <PAGE> <PAGE>
lower operating costs than waste collection operations and
(iii) revenue growth resulting from rate increases.
Operating costs decreased in fiscal 1995, as a percentage of
revenue, due primarily to (i) rate increases without comparative
increases in costs; and (ii) a reduction in the municipal
contract loss estimate originally established in fiscal 1993;
offset by (i) an impairment loss from greenwaste operations; and
(ii) an increase in dump fees.
On June 30, 1992, the Company entered into an agreement with
the City of San Jose, to provide refuse and recycling services,
for a term of six years, with service beginning July 1, 1993.
During the initial months of the contract, it became apparent
that the level of services required for the contract and related
costs of operation would be greater than originally envisioned.
This occurred, in part, due to factors outside of the control of
the Company. As a consequence, most of the increased cost could
not have been anticipated or estimated prior to the start of the
contract. The Company estimated that it would incur a loss of
$6,000,000 over the life of the contract, in order to satisfy the
service requirements of the contract and accordingly accrued that
amount in the fourth quarter of fiscal 1993. Through 1995 the
Company incurred $3,050,000 of the projected loss. As of June
30, 1995, the Company revised its estimate of the loss related to
the remaining contract period resulting in a reduction of the
accrual of approximately $950,000. This reduction was based
mainly on improved recycling market prices and operating margins.
The Company believes that the remaining $2,000,000 is adequate to
cover any future losses related to this contract.
In the fourth quarter of fiscal 1993, the Company performed
a detailed analysis of its self-insured loss liability,
considering the trend of increasing development of known claims,
along with the pattern shown by settlement payments. As a result
of this analysis, the Company increased its reserve for self-
insured losses by $4,000,000. The Company continues to monitor
trends on an on-going basis and performs a detailed actuarial
analysis during the fourth quarter of each year. The process of
estimating loss reserves is a difficult and complex exercise
involving many variables, uncertainties, and subjective
judgements, and therefore, there is no assurance that the
reserve balance will reduce the possibility of adverse reserve
developments in subsequent reporting periods.
During fiscal 1995 the Company experienced significant
competition in the greenwaste market resulting in a decrease in
price and volume and negative cashflow from operations. The
Company believes that this environment will continue in the
foreseeable future. Accordingly the Company evaluated the
ongoing value of the fixed assets, covenants, and goodwill
associated with its greenwaste operations. Based on this
evaluation, the Company determined that assets with a carrying
value of $4,473,000 were impaired and wrote them down by
Page 23 of 191 <PAGE> <PAGE>
approximately $1,242,000 to their fair value. The Company
obtained independent appraisals of its fixed assets in order to
determine fair value. The impairment loss is included in
Operating Expenses in the fiscal 1995 Consolidated Statement of
Operations.
Selling, General and Administrative Expenses
--------------------------------------------
Selling, general and administrative expenses, decreased as a
percentage of revenue in fiscal 1994 primarily as a result of the
Company's continuing effort to control costs and improve margins.
In early fiscal 1994, the Company reviewed the selling, general
and administrative expense levels as compared to the industry,
and subsequently set a goal to reduce these levels to 15%, which
was achieved.
Selling, general and administrative expenses, continued to
decrease as a percentage of revenue in fiscal 1995. Reductions
in fiscal 1995 were the result of (i) rate increases without
corresponding costs, and (ii) continued monitoring of expense
levels; offset by (i) increased legal costs related the G.I.
Industries bankruptcy, whereby the Company is seeking to recover
amounts previously written off, and other legal matters, and (ii)
the writedown of certain computer hardware and software, which is
being replaced. It was the Company's goal to reduce selling,
general and administrative expenses to below 14% in fiscal 1995.
Without the discretionary offsets noted above, these expenses
would have been 14% of revenue.
Special Charges
---------------
Special charges of $21,043,000 were included in fiscal year
1993's results of operations. The Company re-evaluated its
landfill activity in fiscal 1993, focusing on the economic
viability of landfill projects under development and closure and
post-closure requirements. As a result of revised projections,
estimates, and certain regulatory agency communications regarding
permitting activity in progress, the Company recorded special
charges in the third quarter of fiscal 1993 of (i) $10,143,000
related to reserves for certain landfill development projects and
(ii) $6,900,000 to establish additional reserves, above those
estimated to be required on an ongoing annual basis, for
potential future expenditures relating to the long-term
requirements for closure/post closure management of certain
Company landfills. Also as a part of the Company's review of
facilities and land requirements, the Company recorded a
$2,000,000 general reserve for property no longer needed for
operations and established a loss reserve of $2,000,000 for other
matters. The balance of the reserves related to (i) writeoffs
and landfill development projects and (ii) real property totaled
$3,600,000 and $1,800,000 respectively, as of June 30, 1995.
Page 24 of 191 <PAGE> <PAGE>
Company management believes that the these reserves remain
adequate as of June 30, 1995.
Non-Operating Income (Expense)
------------------------------
Interest expense increased $354,000 or 10.2% in fiscal 1994,
and $1,515,000 or 39.5% in fiscal 1995. The increase in interest
expense in fiscal 1994 was due primarily to higher average debt
levels while in 1995 the increase was due to increases in average
borrowing rates offset by lower average debt levels. Interest
rates on the Company's revolving credit agreement averaged 6.5%
for fiscal 1995 versus 5.0% for fiscal 1994. Total debt in
fiscal 1995 averaged approximately $90,000,000 as compared to
approximately $93,000,000 in fiscal 1994. The Company
capitalized interest costs of $1,151,000, $953,000 and $820,000
in fiscal 1993, 1994 and 1995, respectively, related to the
development of certain landfill and other construction projects.
Interest income increased $743,000 in fiscal 1995 as
compared to 1994 due primarily to the restricted cash discussed
in Liquidity and Capital Resources.
The Company recorded a gain of $2,800,000 in the third
quarter of fiscal 1993 related to the sale of the Company's
equity investment in common stock of Best Pak Disposal. This
gain is included in Other non-operating income (expense) in
fiscal 1993.
In connection with the Company's decision to dispose of a
truck body manufacturing division in fiscal 1992, the Company
recorded a provision of $4,050,000 to reflect the estimated loss
on disposition, including estimated future costs and operating
results. In fiscal 1995, the Company completed the disposal.
Income Taxes
------------
The effective income tax rates for fiscal 1993, 1994, and
1995 were 30%, 45% and 45%, respectively. The effective rate
for 1993 reflects a $86,000 reduction related to the change in
the federal corporate income tax rate from 34% to 35%,
retroactive to July 1, 1993 in accordance with the Revenue
Reconciliation Act of 1993. In fiscal 1994, the Company
recognized a benefit of $414,000 from the adoption of FASB 109.
The Company has a net deferred tax asset of $405,000 at June 30,
1995, all of which the Company has determined is realizable due
to available taxable income in the carryback period.
The Company's corporate tax returns are currently being
audited by the Internal Revenue Service (IRS) for fiscal years
1989 through 1993. In September 1995, the Company reached a
tentative settlement agreement with the IRS for fiscal years 1989
and 1990 and resolved certain other open issues for other years.
The Company will pay additional tax and interest of approximately
Page 25 of 191 <PAGE> <PAGE>
$2,200,000, which is within amounts previously accrued. Also, as
part of the settlement, the deductibility and amortization period
of certain intangibles were changed, which will result in the
deductibility of certain previously undeductible goodwill.
Net Income
----------
Net income increased $23,057,000 and $4,148,000 from fiscal
1993 to 1994 and 1994 to 1995. The increase in net income for
fiscal 1994 and 1995 reflects the factors discussed above.
FINANCIAL CONDITION
-------------------
Liquidity and Capital Resources
-------------------------------
The solid waste industry is capital intensive. The Company
has financed its operations and capital expenditures through cash
flow from operations, borrowings and issuances of common stock.
Cash provided by operations was $36,245,000 and $49,023,000 in
fiscal 1994 and 1995, respectively, while additions to debt
provided $15,028,000 and $18,675,000 in those fiscal years,
respectively. These funds have been used to purchase property
and equipment, to develop and expand new and existing landfill
sites, and to finance the Company's expansion of services.
At June 30, 1994 and 1995, working capital amounted to
$20,660,000 and $15,288,000, respectively. The current ratio was
1.5 to 1 at June 30, 1995 as compared to 1.6 to 1 a year earlier.
Trade receivables represent the largest portion of current assets
totaling $30,244,000 and $28,993,000 at June 30, 1994 and 1995,
respectively. Days sales in trade receivables were 37 days for
fiscal 1994 and 38 days for fiscal 1995. The allowance for
doubtful trade accounts as a percentage of trade receivables was
4.7% and 4.5% at the end of fiscal 1994 and fiscal 1995,
respectively.
The Company has an unsecured revolving credit agreement,
(the "Agreement") which provides for borrowings up to $100
million. The Agreement currently matures on June 1, 1997 and has
a $16.5 million quarterly commitment reduction commencing March
1, 1996. On or before the first day of October of each year, the
Company has the option to request an extension of the revolving
period and the termination date with the approval of its banks.
The Company is in the process of negotiating a new agreement and
therefore has not filed an extension request. At the Company's
option, borrowings under the Agreement bear interest at the
bank's prime rate and/or at the London Interbank Offered Rate
(LIBOR) plus .75% to 2.0%, (.75% at June 30, 1995), depending
upon certain ratios. Outstanding borrowings under the Agreement
Page 26 of 191 <PAGE> <PAGE>
were $44 million at June 30, 1995. The Agreement requires no
compensating balances. Under the terms of the Agreement, the
Company is subject to various debt covenants including
maintenance of certain financial ratios, and in addition, it
limits the amount of cash dividends.
During the second quarter of fiscal 1995, the Company
issued, through the California Pollution Control Financing
Authority, $24 million of tax exempt bonds (the "bonds") with a
floating rate (3.76% as of June 30, 1995) which is set weekly by
a remarketing agent. Simultaneously, as part of the overall tax
exempt bond financing, the Company entered into an interest rate
swap agreement with a major bank, with a term of five years. The
Company entered into this interest rate swap agreement to modify
the interest characteristics of this debt from a floating rate to
a fixed rate of 6.29%. The Company's objective with this swap
agreement is to minimize the impact of increases in interest-
rates over the term of the swap agreement. This represents
approximately 31% of outstanding floating rate debt. The Company
has not entered into any other interest rate swaps.
As of June 30, 1995, the Company had $6.4 million in
restricted cash. This cash, which is related to the California
Pollution Control Bonds discussed above, is held in custody by a
Trustee and is restricted as to withdrawal or use for qualified
fixed asset expenditures. The $6.4 million, is expected to be
received over the remainder of fiscal 1996 and is included with
Other Assets as of June 30, 1995. Based upon current cash flow
from operations and estimated capital expenditures, the Company
intends to use the receipt of the reimbursement proceeds to
reduce revolving credit agreement borrowings.
The Company's debt to equity ratio was .50 to 1.0 at
June 30, 1995 and .67 to 1.0 at June 30, 1994.
During the year ended June 30, 1995, the Company made
capital expenditures of approximately $36 million for property
and equipment. The Company estimates that total capital
expenditures for fiscal 1996 will be approximately $50 million.
The Company believes that cash provided by operations, and cash
available under its revolving credit agreement will be sufficient
for its capital expenditure requirements. In addition, the
Company is exploring various municipal contract opportunities.
As part of the Company's renewed acquisition program, several
potential acquisitions are being considered. Such acquisitions,
if completed, will be financed utilizing cash, debt or stock.
In April 1995, the Company filed a shelf registration
statement on Form S-4 covering 3,000,000 shares of common stock
with the Securities and Exchange Commission. The Registration
Statement became effective in May 1995. The shares may be issued
by the Company from time to time in connection with the
acquisition of solid waste businesses. The Company believes that
cash provided by operations, cash available under its revolving
Page 27 of 191 <PAGE> <PAGE>
credit agreement, and cash from other external sources will be
sufficient for its cash acquisition financing needs.
The following table summarizes the dollar amount of capital asset
additions by major category:
Year ended June 30,
------------------------------------------
1993 1994 1995
----------- ----------- -----------
Land $ 367,000 $ 233,000 $ 34,000
Landfill sites 11,278,000 6,125,000 10,968,000
Building and
leasehold improvements 7,202,000 7,098,000 5,785,000
Vehicles 15,640,000 14,743,000 10,617,000
Containers and other 9,230,000 7,257,000 8,965,000
----------- ----------- -----------
$43,717,000 $35,456,000 $36,369,000
=========== =========== ===========
Inflation
----------
Inflation has had a minimal impact on the Company's operations
for the periods referred to above as most of the Company's
collection operations are under contracts that provide for rate
adjustments based upon increases in the consumer price index.
These contracts reduce the Company's vulnerability to inflation.
However, in the case of rapid changes in certain costs, such as
fuel and disposal costs, rate increases may lag behind cost
increases.
Environmental Matters
---------------------
Closure and post-closure costs are accrued and charged to cost
of operations over the estimated remaining useful lives of landfill
facilities. These accruals are based on estimates from periodic
management reviews. The closure and post-closure requirements for
the Company's municipal solid waste landfills are established by
Subtitle D or the applicable states' adopted and EPA approved
Subtitle D implementation plan. In performing the review for each
facility, the Company analyzes actual costs incurred versus total
estimated costs, updates prior cost estimates to reflect current
regulatory requirement, and considers requirements of proposed
regulatory changes.
Closure and post-closure accruals consider final capping of
the site, site inspections, ground-water monitoring, leachate
management, methane gas control and recovery, and operation and
maintenance costs to be incurred during the period after the
facility closes.
Page 28 of 191 <PAGE> <PAGE>
The Company accounts for closure and post-closure accruals by
comparing the total estimated closure and post-closure cost with
the existing reserve. The difference is accrued and charged to cost
of operations as airspace is consumed.
Summarized closures and post-closure information is as follows
(note that the following information includes only acreage in which
the Company is liable for closure and post-closure costs);
CLOSURE AND POST-CLOSURE COSTS
------------------------------
Payments Accruals No. Of Cost
Thru At Future Permitted Per
6/30/95 6/30/95 Costs Total Acres Acre
--------- ---------- ---------- ----------- ----- -------
$5,017,000 $9,180,000 $23,130,000 $37,327,000 595 $62,734
Page 29 of 191 <PAGE> <PAGE>
Report of Independent Auditors
------------------------------
Board of Directors and Shareholders
Western Waste Industries
We have audited the accompanying consolidated balance sheets of
Western Waste Industries and subsidiaries as of June 30, 1994 and
1995 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in
the period ended June 30, 1995. Our audits also included the
financial statement schedule listed in the Index at Item 14(a).
These financial statements and the financial statement schedule are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the
financial statement schedule 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 consolidated
financial position of Western Waste Industries and subsidiaries at
June 30, 1994 and 1995, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended June 30, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in Note 8 to the consolidated financial statements, in
1994 the Company changed its method of accounting for income taxes,
and as discussed in Note 1 to the consoldiated financial
Page 30 of 191 <PAGE> <PAGE>
statements, in 1995 the Company changed its method of accounting
for impairment of long-lived assets.
/s/ ERNST & YOUNG LLP
Long Beach, California
August 25, 1995,
except for Note 8 as to which the date is,
September 12, 1995
Page 31 of 191 <PAGE> <PAGE>
Western Waste Industries
Consolidated Statement of Operations
Year Ended June 30,
-----------------------------------------
1993 1994 1995
------------ ------------ ------------
Revenue $231,205,000 $257,005,000 $270,941,000
------------ ------------ ------------
Costs and expenses:
Operating 187,648,000 192,099,000 196,235,000
Selling, general
and administrative 37,076,000 38,483,000 39,480,000
Special charges 21,043,000 - -
------------ ------------ ------------
Total costs and expenses 245,767,000 230,582,000 235,715,000
------------ ------------ ------------
Income (loss) from operations (14,562,000) 26,423,000 35,226,000
Nonoperating income (expense):
Interest income 841,000 799,000 1,542,000
Interest expense (3,480,000) (3,834,000) (5,349,000
Other 2,735,000 ( 767,000) ( 628,000)
------------ ----------- ------------
Net nonoperating
income (expense) 96,000 (3,802,000) (4,435,000)
------------ ----------- ------------
Income (loss) before income taxes
and cumulative effect of
accounting change (14,466,000) 22,621,000 30,791,000
Income taxes (benefit) ( 4,350,000) 10,094,000 13,702,000
------------ ----------- ------------
Income (loss) before cumulative
effect of accounting change (10,116,000) 12,527,000 17,089,000
Cumulative effect of
accounting change - 414,000 -
------------ ------------ ------------
Net income (loss) $(10,116,000) $ 12,941,000 $ 17,089,000
============ ============ ============
Earnings (loss) per common share:
Primary
Income (loss) before cumulative
effect of accounting change $ (.73) $ .83 $ 1.10
Cumulative effect of
accounting change - .03 -
------------ ------------ ------------
Net income (loss) $ (.73) $ .86 $ 1.10
============ ============ ============
Fully diluted
Income (loss) before cumulative
effect of accounting change $ (.73) $ .80 $ 1.10
Cumulative effect of
accounting change - .03 -
------------ ------------ ------------
Net income (loss) $ (.73) $ .83 $ 1.10
============ ============ ============
The accompanying notes are an integral part of these statements.
Page 32 of 191 <PAGE> <PAGE>
Western Waste Industries Consolidated Balance Sheet
June 30,
---------------------------
1994 1995
----------- ------------
Assets
Current assets:
Cash and short-term investments $ 9,935,000 $ 6,484,000
Receivables, less allowance of $1,611,000
in 1994, and $1,738,000 in 1995 31,367,000 29,596,000
Supplies 3,349,000 3,320,000
Prepaid expenses 2,842,000 3,762,000
Other current assets 1,323,000 199,000
Deferred income tax benefit 5,319,000 4,101,000
----------- ------------
Total current assets 54,135,000 47,462,000
Property and equipment, net 185,598,000 196,972,000
Purchased routes, net 9,410,000 7,340,000
Goodwill, net 21,818,000 19,994,000
Other assets 13,720,000 21,605,000
----------- ------------
$284,681,000 $293,373,000
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Current instalments of long-term debt $ 1,526,000 $ 1,308,000
Accounts payable 8,764,000 9,159,000
Accrued payroll and related costs 3,325,000 3,885,000
Other current liabilities 19,860,000 17,822,000
----------- ------------
Total current liabilities 33,475,000 32,174,000
Long-term debt, excluding current instalments 91,864,000 78,882,000
Other liabilities 17,218,000 18,400,000
Deferred income taxes 2,947,000 3,696,000
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock, no par value; 2,000,000
shares authorized; none issued or
outstanding -- --
Common stock, no par value; 50,000,000
shares authorized; issued and outstanding
14,333,612 shares in 1994 and 14,612,599
in 1995 75,659,000 79,614,000
Retained earnings 63,518,000 80,607,000
----------- ------------
Total shareholders' equity 139,177,000 160,221,000
----------- ------------
$284,681,000 $293,373,000
============ ============
The accompanying notes are an integral part of these statements.
Page 33 of 191 <PAGE> <PAGE>
Western Waste Industries Consolidated Statement of Shareholders' Equity
Common Stock
-------------------------- Retained
Shares Amount Earnings Total
----------- ----------- ----------- -----------
Balance at July 1,
1992 13,775,202 $61,934,000 $60,622,000 $122,556,000
Stock issued in
connection with:
401(k) plan 47,309 506,000 - 506,000
Stock option plans 44,050 449,000 - 449,000
Acquisitions - 8,955,000 71,000 9,026,000
Net Loss - - (10,116,000)
(10,116,000)
----------- ----------- ----------- ------------
Balance at
June 30, 1993 13,866,561 71,844,000 50,577,000 122,421,000
----------- ----------- ----------- ------------
Stock issued in
connection with:
401(k) plan 39,441 566,000 - 566,000
Stock option plans 284,610 4,219,000 - 4,219,000
Guaranteed value
commitments 240,000 - - -
Cancellation of stock (97,000) (970,000) -
(970,000)
Net Income - - 12,941,000 12,941,000
----------- ----------- ----------- ------------
Balance at
June 30, 1994 14,333,612 75,659,000 63,518,000 139,177,000
----------- ----------- ----------- ------------
Stock issued in
connection with:
401(k) plan 37,869 661,000 - 661,000
Stock option plans 241,118 3,294,000 - 3,294,000
Net Income - - 17,089,000 17,089,000
----------- ----------- ----------- ------------
Balance at
June 30, 1995 14,612,599 $79,614,000 $80,607,000 $160,221,000
=========== =========== =========== ============
The accompanying notes are an integral part of these statements.
Page 34 of 191 <PAGE> <PAGE>
Western Waste Industries Consolidated Statement of Cash Flows
YEAR ENDED JUNE 30,
1993 1994 1995
Operating Activities: ------------ ------------ ----------
Net income (loss) $(10,116,000) $12,941,000 $17,089,000
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 18,678,000 22,047,000 26,999,000
Bad debt expense 1,858,000 1,965,000 1,579,000
Uninsured claims 3,723,000 1,728,000 1,407,000
Employer portion-401(k) contribution 506,000 566,000 661,000
Deferred income taxes (8,976,000) 1,327,000 1,967,000
Loss on municipal contract 6,000,000 - (950,000)
Gain on sale of minority investment (2,829,000) - -
Cumulative effect of accounting change - (414,000)
Loss on disposition of assets 157,000 1,164,000 628,000
Special charges 21,043,000 - -
Changes in operating assets
and liabilities net of effects
of purchased businesses:
Decrease (increase) in receivables (1,882,000) (6,045,000) 1,162,000
Decrease (increase) in other assets 1,891,000 4,979,000 (2,429,000)
Increase (decrease) in
accounts payable 48,000 ( 171,000) 395,000
Increase (decrease) in
other liabilities 6,171,000 (3,842,000) 515,000
Net cash provided by ----------- ----------- --------
operating activities 36,272,000 36,245,000 49,023,000
Investing activities: ----------- ----------- -----------
Purchases of property and equipment (34,980,000) (44,293,000) (36,386,000)
Proceeds from sale of investments 7,000,000 - 200,000
Proceeds from disposition of assets 270,000 1,976,000 870,000
Net cash used in investing ----------- ----------- ----------
activities (27,710,000) (42,317,000) (34,316,000)
Financing activities: ----------- ---------- ----------
Proceeds from revolving lines of credit
and long-term borrowings, net of
restricted cash 13,515,000 15,028,000 18,675,000
Principal payments on debt (20,954,000) ( 4,574,000) (39,450,000)
Proceeds from sale of stock 419,000 3,294,000 2,617,000
Net cash provided (used) by ----------- ----------- ----------
financing activities ( 7,020,000) 13,748,000 (18,158,000)
Increase (decrease) in cash and ----------- ----------- ----------
short-term investments 1,542,000 7,676,000 (3,451,000)
Cash and short-term investments at
beginning of year 717,000 2,259,000 9,935,000
----------- ----------- ----------
Cash and short-term investments at end
of year $ 2,259,000 $ 9,935,000 $6,484,000
=========== =========== ==========
The accompanying notes are an integral part of these statements.
Page 35 of 191 <PAGE> <PAGE>
Western Waste Industries Notes to Consolidated Financial
Statements
June 30, 1995
Western Waste Industries is a integrated solid waste services
company, providing collection, recycling, composting and disposal
services for commercial, industrial and residential customers.
The Company operates as a single business segment.
Note 1 Summary of significant accounting policies:
--------------------------------------------------
Principles of consolidation-The consolidated financial statements
include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
Cash and short term investments-Short term investments generally
consist of highly liquid investments with a maturity of three
months or less.
Property and equipment-Property and equipment are recorded at
cost. Landfill sites and site improvements are carried at cost
and to the extent this exceeds estimated end use realizable
value, such excess is amortized over the remaining estimated
useful life of the site. Interest is capitalized in connection
with the construction of major facilities. The capitalized
interest is recorded as part of the asset to which it relates and
is amortized over the asset's useful life. In fiscal 1993, 1994
and 1995, respectively, $1,151,000, $953,000 and $820,000 of
interest cost was capitalized. Depreciation and amortization of
other property and equipment are provided for by using the
straight-line method over their estimated useful lives.
Leasehold improvements are amortized over the shorter of the life
of the improvement or the term of the lease.
Purchased routes-Purchased routes are amortized on a straight-
line basis over the contract periods or estimated service
periods, generally 10 years. Accumulated amortization at June
30, 1994 and 1995 was $16,640,000 and $18,414,000, respectively.
Impairment of long-lived assets-In the fourth quarter of fiscal
1995, the Company adopted FASB Statement No. 121 "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of". The Statement requires the Company to review
long-lived assets and certain identifiable intangibles to be held
and used for impairment whenever certain events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Under the Statement, if the sum of the
expected future undiscounted cash flows is less than the carrying
amount of the asset, an impairment loss is recognized. An
impairment loss is measured as the amount by which the carrying
amount exceeds the fair value of the assets (assets to be held
Page 36 of 191 <PAGE> <PAGE>
and used) or fair value less cost to sell (assets to be disposed
of).
Goodwill-Consideration paid in excess of the fair market value of
net assets acquired is recorded as goodwill and is generally
amortized on a straight-line basis over 40 years. During fiscal
1993 and 1994, the carrying value of goodwill was reviewed if
the facts and circumstances suggested that it may be impaired.
If this review indicates that goodwill will not be recoverable,
as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the Company's
carrying value of the goodwill is reduced by the estimated
shortfall of cash flows. In fiscal 1995, the Company accounted
for impairment as discussed above under "Impairment of Long-
Lived Assets". Accumulated amortization at June 30, 1994 and
1995 was $2,794,000 and $3,379,000, respectively.
Deferred bond issue costs-Expenses related to the issuance of
Pollution Control Revenue Bonds and Solid Waste Disposal Revenue
Bonds (see Note 7) are included in other assets and are amortized
over the life of the bonds using the straight-line method. At
June 30, 1994 and 1995, the unamortized portion of deferred bond
issue costs amounted to $286,000 and $714,000, respectively.
Closure and post-closure reserves-The Company will have material
financial obligations relating to closure and post-closure costs
of landfill facilities it operates or for which it is otherwise
responsible. While the precise amount of these future obligations
cannot be determined, the Company has estimated that total costs
for final closure of its existing facilities and post-closure
activities, will approximate $32,000,000. Closure and post-
closure accruals consider final capping of the site, site
inspections, ground-water monitoring, leachate management,
methane gas control and recovery, and operation and maintenance
costs to be incurred during the period after the facility closes.
Closure and post-closure costs are accrued and charged to cost of
operations over the estimated useful lives of such facilities.
These accruals are based on estimates from management reviews
performed periodically. The closure and post-closure requirements
for the Company's municipal solid waste landfills are established
by Subtitle D or the applicable states' adopted and EPA approved
Subtitle D implementation plan. In performing the review for each
facility, the Company analyzes actual costs incurred versus total
estimated costs, updates prior cost estimates to reflect current
regulatory requirement, and considers requirements of proposed
regulatory changes.
The Company accounts for closure and post-closure accruals
by comparing the total estimated closure and post-closure cost
with the existing reserve. The difference is accrued and charged
to cost of operations as airspace is consumed.
Page 37 of 191 <PAGE>
<PAGE>
The Company had closure and post-closure reserves as
follows:
June 30,
--------------------------
1994 1995
------------ ------------
Current portion included in
Other Current Liabilities $ 2,019,000 $ 2,636,000
Non-current portion included in
Other Liabilities 5,617,000 6,544,000
------------ ------------
$ 7,636,000 $ 9,180,000
============ ============
Marketable Securities-In May 1993, the FASB issued Statement
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities". The Statement requires the Company to report its
investment in marketable securities (see Note 5) at fair value,
with unrealized gains and losses reported in a separate component
of shareholders' equity. The Company adopted this statement in
fiscal 1995. The effect of this adoption was not material to the
financial position or results of operations of the Company.
Note 2 Special Charges
-----------------------
In fiscal 1993, the Company incurred special charges in the
amount of $21,043,000. These charges included principally
(i) writeoffs and reserves of $10,143,000 related to certain
landfill development projects (ii) a provision of $6,900,000 for
additional reserves for potential future expenditures relating to
the long-term requirements for closure/post closure management of
certain of the Company's landfills and (iii) a general reserve of
$4,000,000 for property no longer needed for operations and other
matters. The balance of the reserves related to (i) landfill
development projects and (ii) real property totaled $3,600,000
and $1,800,000 respectively, as of June 30, 1995. Company
management believes that the these reserves remain adequate as of
June 30, 1995.
Note 3 Acquisitions/Divestitures:
----------------------------------
In October 1990, the Company issued 300,000 shares of its
common stock in exchange for all the outstanding capital stock of
a waste collection company. This transaction, which was not
material to the Company's financial position or results of
operations when originally recorded in fiscal 1991, was accounted
for as a pooling-of-interests at that time. However, as a result
of new information, it was determined in fiscal 1993 that the
transaction would have been more properly recorded by using the
purchase method. Accordingly, the financial statements for the
Page 38 of 191 <PAGE> <PAGE>
year ended June 30, 1993 reflect this revision. As the effect
was not material, financial statements for prior years were not
restated. Total consideration paid for this acquisition was
$9,310,000 consisting of 300,000 shares of capital stock at a
guaranteed price of $30 per share and $310,000 in assumed debt in
excess of assets acquired. In exchange for this consideration,
the Company allocated $1,215,000 to purchased routes and
$8,095,000 to goodwill. As part of this transaction the Company
issued 240,000 shares of common stock in fiscal 1994 as
renumeration for a stock price guarantee.
In February 1993, the Company sold its equity investment in
the outstanding common stock of Best Pak Disposal resulting in a
gain of $2,800,000. The gain of $2,800,000 was included in
nonoperating income (expense)-other in the Consolidated Statement
of Operations for the year ended June 30, 1993. As part of the
fiscal 1993 transaction, the Company received 75,000 shares of
common stock of USA Waste Services, Inc., valued at $1,200,000.
In fiscal 1995, the Company exercised a put option on the shares
and received $1,200,000.
Note 4 Property and equipment:
-------------------------------
Property and equipment is composed of the following:
June 30,
------------------------
1994 1995
---------- ----------
Land $ 27,271,000 $ 27,533,000
Landfill sites 52,445,000 63,391,000
Buildings and leasehold improvements 40,080,000 44,633,000
Vehicles 74,854,000 75,682,000
Equipment and other 81,800,000 85,875,000
------------ ------------
276,450,000 297,114,000
Less accumulated depreciation
and amortization 90,852,000 100,142,000
------------ ------------
$185,598,000 $196,972,000
============ ============
Page 39 of 191 <PAGE> <PAGE>
Note 5 Other assets:
---------------------
Other non-current assets consist of the following:
June 30,
---------------------
1994 1995
----------- -----------
Marketable securities $ 2,260,000 $ 1,518,000
Secured note receivable 3,113,000 3,438,000
Joint development venture 3,073,000 3,602,000
Restricted cash - 6,416,000
Other 5,274,000 6,631,000
----------- -----------
$13,720,000 $21,605,000
=========== ===========
In fiscal 1992, the Company entered into a joint development
arrangement with two other companies, for the purpose of
developing a waste-by-rail project called California RailFill
Systems, formerly California InteRail. The project is in the
permitting stage and expects to receive solid waste from
throughout Southern California. The preliminary permitting cost
estimate is approximately $5,000,000 for each member of the joint
development team, of which the Company has expended $4,429,000
through June 30, 1995. The Company's investment in this venture
totaled $3,073,000 and $3,602,000 at June 30, 1994 and 1995,
respectively.
As of June 30, 1995, the Company had $6,416,000 in restricted
cash. This cash, which is related to the California Pollution
Control Bonds (see Note 7), is held in custody by a Trustee and
is restricted as to withdrawal or use for qualified fixed asset
expenditures.
During fiscal 1995 the Company experienced significant
competition in the greenwaste market resulting in a decrease in
price and volume and negative cashflow from operations. The
Company believes that this environment will continue in the
foreseeable future. Accordingly the Company evaluated the
ongoing value of the fixed assets, covenants, and goodwill
associated with its greenwaste operations. Based on this
evaluation, and in accordance with the adoption of FASB 121 (see
Note 1) the Company determined that assets with a carrying value
of approximately $4,473,000 were impaired and wrote them down by
approximately $1,242,000 to their fair value. The Company
obtained independent appraisals of its fixed assets in order to
determine fair value. The impairment loss is included in
Operating Expenses in the fiscal 1995 Consolidated Statement of
Operations.
Page 40 of 191 <PAGE> <PAGE>
Note 6 - Other current liabilities:
-----------------------------------
Other current liabilities consist of the following:
June 30,
----------------------
1994 1995
----------- -----------
Uninsured claims $ 6,698,000 $ 6,413,000
Closure and post-closure reserves 2,019,000 2,636,000
Reserve for loss on municipal contract 500,000 500,000
Other 10,643,000 8,273,000
----------- -----------
$19,860,000 $17,822,000
=========== ===========
The Company has a risk management program whereby it retains
the liability, subject to maximum limits, for auto, general
liability, employee health and welfare benefits and workers'
compensation. As required by law, the Company has pledged
certain marketable securities, (see Note 5) and has established a
letter of credit in the amount of $1,366,000 as of June 30, 1995,
to guarantee its workers' compensation obligations in California.
The Company establishes self insured losses and loss adjustment
expenses based on estimates of the ultimate cost of claims which
have been reported but not fully paid, and of claims which have
been incurred but not yet reported. The length of time for which
such costs must be estimated varies depending on the coverage
involved. Actual claim costs are dependent upon such complex
factors as inflation, changes in the doctrines of legal liability
and size of damage awards. Because of the variables involved,
the reserving process results in an estimate rather than an exact
calculation of liabilities.
The estimated liability for uninsured claims at June 30, 1995,
included in other current liabilities and other liabilities,
consists of the following:
Current Long-term Total
------- --------- ----------
Liability and property damage $2,482,000 $3,800,000 $ 6,282,000
Workers' compensation 2,931,000 3,085,000 6,016,000
Employee health and welfare 1,000,000 382,000 1,382,000
---------- ---------- ----------
$6,413,000 $7,267,000 $13,680,000
========== ========== ===========
Page 41 of 191 <PAGE> <PAGE>
Under its current risk management programs, the Company's maximum
liability per occurrence is listed below:
Auto and general liability $100,000
Workers' compensation $ 325,000 - $500,000
Employee health and welfare $ 75,000
Note 7 Long-term debt:
-----------------------
Long-term debt, which approximates market value, consists of the
following:
June 30,
-----------------------
1994 1995
---------- ----------
Notes payable to banks, unsecured $82,000,000 $44,000,000
Solid Waste Disposal Revenue Bonds,
Series 1994A - 24,000,000
Solid Waste Disposal Revenue Bonds 8,200,000 8,200,000
Pollution Control Revenue Bonds 1,489,000 1,133,000
Other notes payable, secured and unsecured 1,701,000 2,857,000
----------- -----------
Total long-term debt 93,390,000 80,190,000
Less current instalments 1,526,000 1,308,000
----------- -----------
Long-term debt, excluding current instalments $91,864,000 $78,882,000
=========== ===========
Aggregate principal amounts of long-term debt at June 30, 1995, including
capital leases, are due as follows:
Year Ended
June 30,
-----------
1996 $ 1,308,000
1997 44,990,000
1998 856,000
1999 828,000
2000 8,000
Thereafter 32,200,000
-----------
$80,190,000
===========
The Company's revolving line of credit (the "Agreement"),
which currently matures on June 1, 1997, permits borrowings up to
$100,000,000. At the Company's option, borrowings under the
Agreement bear interest at the bank's prime rate (8.75% at June 30,
1995), and/or at the London Interbank Offered Rate (LIBOR) plus .75
to 2.0 per cent, depending upon certain ratios. At June 30, 1995,
all borrowings were under the LIBOR option with rates ranging from
6.75% to 6.81% and averaging 6.79%. The Agreement has a $16.5
million quarterly commitment reduction commencing March 1, 1996. On
Page 42 of 191 <PAGE> <PAGE>
or before the first day of October of each year, the Company has the
option to request an extension of the revolving period and the
termination date with the approval of its banks. The Company is in
the process of negotiating a new agreement and therefore has not
filed the extension request. Under the terms of the Agreement, the
Company is subject to various debt covenants including maintenance of
certain financial ratios, and in addition, it limits the amount of
cash dividends.
During the second quarter of fiscal 1995 the Company issued,
through the California Pollution Control Financing Authority,
$24,000,000 of tax exempt bonds (the "Bonds") with a term of twelve
years. The Bonds are subject to a mandatory sinking fund redemption
of $4,000,000 each October 1, over the period of 2001 to 2006. The
proceeds of the financing are restricted to fund certain projects,
including purchases of equipment, located in California counties.
As part of this financing, the Company established an irrevocable
letter of credit for the principal amount of $24,000,000 plus 52 days
accrued interest on the bonds to guarantee repayment. The bonds bear
interest at a floating rate (3.76% as of June 30, 1995) which is set
weekly by a remarketing agent. Simultaneously with the issuance of
the Bonds, the Company entered into an interest rate swap agreement
with a major bank whereby the Company will pay a fixed rate of 6.29%
and the bank will pay the floating rate for a period of five years.
The Company records the fixed rate as interest expense.
Solid Waste Disposal Revenue Bonds issued by the California
Pollution Control Financing Authority are secured by a solid waste
landfill facility constructed with bond proceeds. The bonds, which
mature through 2000, bear interest at a floating rate set weekly
(4.375% at June 30, 1995) until conversion to a fixed rate, at the
option of the Company, for the remaining term of the bonds. As of
June 30, 1995, the Company has not exercised its option of conversion
to a fixed rate. The Company also has an option to redeem the bonds
prior to maturity at the redemption price ranging from 100% to 103%
depending on the redemption date. At June 30, 1995, the Company
established in the trustee's favor an irrevocable letter of credit
for the principal amount of $8,200,000 plus 123 days accrued interest
on the bonds to guarantee repayment.
Pollution Control Revenue Bonds issued by the California
Pollution Control Financing Authority are secured by a solid waste
disposal facility constructed with bond proceeds. Revenue from the
operation of the solid waste disposal facility is pledged to secure
repayment of the bonds. The Company is required to deposit into a
Reserve Fund an amount equal to three months' debt service (principal
and interest). The Reserve Fund balances at June 30, 1994 and 1995
were $546,000 and $588,000 respectively, and have been deducted from
bond principal outstanding. Bond repayment is guaranteed up to a
maximum of 80 percent by the Federal Small Business Administration.
The bonds bear interest at a rate from 5.4% to 6.0% and mature from
2000 to 2005.
Page 43 of 191 <PAGE> <PAGE>
At June 30, 1995, $33,000,000 of long-term debt was
collateralized by land, buildings and equipment with a carrying value
of $24,000,000. Interest paid during fiscal years 1993, 1994 and
1995 was $5,010,000, $4,652,000, and $5,790,000, respectively.
The fair value of the Company's long term debt calculated using
current rates offered to the Company for debt of the same remaining
maturities is not materially different from the amounts included in
the Consolidated Balance Sheet.
The Company has used an interest-rate swap agreement to
effectively convert a portion of its floating rate debt to a fixed
rate basis, thus reducing the impact of interest-rate volatility on
future operations. Approximately 31% ($24,000,000) of the Company's
outstanding floating rate debt was subject to this interest-rate swap
agreement as of June 30, 1995.
Note 8 Income taxes:
---------------------
Effective July 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability
method required by FASB Statement No. 109, "Accounting for Income
Taxes". Under the liability method, deferred tax liabilities and
assets are determined based on the difference between financial
reporting and tax basis of assets and liabilities, using the enacted
tax rates in effect for the year in which the differences are
expected to reverse. Taxes previously accrued will be adjusted for
changes in tax rates as they become effective as opposed to when the
taxes were recorded. The cumulative effect of adopting Statement 109
was a $414,000 benefit to income. As permitted under the new rules,
prior year financial statements have not been restated.
Page 44 of 191 <PAGE> <PAGE>
Significant components of deferred tax assets and liabilities are as
follows:
1994 1995
----------- -----------
Deferred tax assets:
Self-insurance $ 4,572,000 $ 5,043,000
Reserve for:
Asset valuation 4,305,000 4,668,000
Landfill related costs 4,094,000 4,311,000
Loss on municipal contract 1,348,000 959,000
Litigation settlements 1,013,000 115,000
Disposal of a division 581,000 -
State taxes 595,000 802,000
Other, net 1,127,000 1,385,000
----------- -----------
Total deferred tax assets 17,635,000 17,283,000
Deferred tax liabilities:
Tax over book depreciation 11,935,000 13,121,000
Deferred gain on sale of asset 1,465,000 1,465,000
Prepaid expenses 490,000 495,000
Property taxes - 354,000
Other 1,373,000 1,443,000
----------- -----------
Total deferred tax liabilities 15,263,000 16,878,000
----------- -----------
Net deferred taxes $ 2,372,000 $ 405,000
=========== ===========
Income tax expense (benefit) consists of the following:
Year Ended June 30,
----------------------------------------------
Deferred Method Liability Method
--------------- --------------------------
1993 1994 1995
--------------- ----------- ----------
Current:
Federal $ 1,441,000 $ 7,085,000 $ 9,592,000
State 555,000 1,682,000 2,143,000
-------------- ---------- ---------
1,996,000 8,767,000 11,735,000
Deferred:
Federal (4,891,000) 1,174,000 1,710,000
State (1,455,000) 153,000 257,000
-------------- ----------- ---------
(6,346,000) 1,327,000 1,967,000
-------------- ----------- ---------
$(4,350,000) $10,094,000 $13,702,000
============== =========== ==========
Page 45 of 191 <PAGE> <PAGE>
The provision for deferred taxes, as of June 30, 1993 consists of the
following:
Accelerated depreciation for tax purposes $ 1,811,000
Change in allowance valuation of properties ( 820,000)
Reserve for:
Landfill related costs (2,992,000)
Loss on municipal contract (2,460,000)
Litigation settlements (1,230,000)
Disposal of a division 666,000
Change in estimated liability for uninsured claims (1,753,000)
Change in certain prepaid expenses 86,000
Equity investment income ( 260,000)
Other, net 606,000
-----------
$(6,346,000)
===========
A reconciliation of income tax expense (benefit) computed by
applying the statutory federal income tax rate to income (loss) before
taxes and reported tax expense is presented below:
Year Ended June 30,
-----------------------------------
1993 1994 1995
----------- ----------- -----------
Income tax computed at statutory
federal income tax rate $(4,918,000) $ 7,918,000 $10,777,000
State income taxes, net of
federal income tax benefit ( 594,000) 1,193,000 1,560,000
Provision for non-deductible
items 764,000 600,000 387,000
Amortization and other expenses not
deductible for tax purposes, net 398,000 383,000 978,000
----------- ----------- -----------
Income tax expense (benefit)
as reported $(4,350,000) $10,094,000 $13,702,000
=========== =========== ===========
Effective tax rate (30.1%) 44.6% 44.5%
=========== =========== ===========
The Company made income tax payments of $5,014,000, $5,995,000, and
$9,740,000 during fiscal years 1993, 1994 and 1995, respectively.
The Company's corporate tax returns are currently being audited by
the Internal Revenue Service (IRS) for fiscal years 1989 through 1993.
The IRS has proposed adjustments for these years, which the Company is
vigorously protesting, which neither alone nor together would have a
Page 46 of 191 <PAGE> <PAGE>
material effect on the Company's financial position or results of
operations, when resolved.
In September 1995, the Company entered into a settlement agreement
with the IRS for fiscal years 1989 and 1990 and resolved certain other
open issues for other years. The Company has paid additional tax and
interest of approximately $2,200,000, which is within amounts
previously accrued. Also, as part of the settlement, the deductibility
and amortization period of certain intangibles were changed, which
will result in the deductibility of certain previously undeductible
goodwill.
Note 9 Shareholders' equity:
Primary and fully diluted earnings per share are computed on the
basis of the weighted average number of shares outstanding plus the
common stock equivalents which would arise from the exercise of stock
options as follows:
Year Ended June 30,
------------------------------------
1993 1994 1995
---------- ---------- ----------
Primary 13,818,000 15,048,000 15,531,000
Fully diluted 13,818,000 15,525,000 15,531,000
The Company presently maintains three stock option plans affording
key employees and directors with the Company the right to purchase
shares of its common stock. At June 30, 1995, options were available
for future grants only under one of the plans, the Companys 1992 Stock
Option Plan. The options may be designated as incentive or non-
qualified in nature, at the discretion of the Compensation Committee of
the Board of Directors, though only employees are eligible to receive
incentive stock options. The Company has reserved 2,000,000 shares
under its Incentive Stock Option Plan (ISOP) and an additional
2,000,000 shares under its Non-Qualified Stock Option Plan. In
addition, the 1992 plan provides for the reserve of 2,000,000 shares
which are to be designated as either qualified or non-qualified. The
plans provide for the granting of options at a purchase price of at
least 100% of the fair market value on the date the options are
granted. Options are generally exercisable in instalments beginning
one year after the grant date.
The exercise of non-qualified stock options results in state and
federal income tax benefits to the Company related to the difference
between the market price at the date of exercise and the option price.
During fiscal 1993, 1994, and 1995, $30,000, $925,000, and $677,000,
respectively, was credited to common stock.
Page 47 of 191 <PAGE> <PAGE>
Information with respect to options granted under the plans is as
follows:
Non-qualified
ISOP Plan
------------ -----------
Outstanding at July 1, 1993 779,000 1,670,566
Issued -- 740,400
Canceled ( 20,561) ( 48,333)
Exercised (168,209) (116,401)
------------ -----------
Outstanding at June 30, 1994 590,230 2,246,232
Issued 291,500 270,000
Canceled ( 2,375) ( 23,432)
Exercised ( 42,530) (198,588)
Outstanding at June 30, 1995 836,825 2,294,212
------------ -----------
Exercisable at June 30, 1995 547,325 1,438,824
============ ============
Option price range $8.00-$22.00 $8.00-$20.00
Notes receivable of $154,000 due from employees for the purchase of
shares of the Company's common stock under stock option plans, have been
deducted from shareholders' equity at June 30, 1994.
During fiscal 1994, the Company accepted as settlement of a
receivable, 97,000 shares of common stock valued at $970,000. The shares
were canceled and returned to authorized but unissued status.
The Company issued 240,000 shares of common stock in fiscal 1994 as
renumeration for a stock price guarantee related to an acquisition which
took place in fiscal 1991 (See Note 3).
In April 1995, the Company filed a shelf registration statement on
Form S-4 covering 3,000,000 shares of common stock with the Securities
and Exchange Commission. The Registration Statement became effective in
May 1995.
Note 10 Commitments and other items:
-------------------------------------
The Company leases a portion of its equipment and facilities which
are classified as operating leases. Minimum rental commitments
(exclusive of property tax, insurance and maintenance) under all
non-cancelable operating leases are due at June 30, 1995, as follows:
1996 $ 2,016,000
1997 80,000
Page 48 of 191 <PAGE> <PAGE>
Included above is a lease with the Company's President for the
rental of one of the Company's buildings. The rental rate is, in
management's opinion, comparable to that which would have been entered
into with independent third parties.
Rental expense approximated $11,415,000, $10,156,000 and $7,018,000
for the fiscal years ended June 30, 1993, 1994 and 1995, respectively.
These amounts include rental payments to the President of approximately
$172,000, $161,000 and $175,000 for the fiscal years ended June 30, 1993,
1994 and 1995, respectively.
The Company has a 401(k) plan which generally covers all full time
salaried and clerical employees not represented by a bargaining
agreement. Eligible employees are allowed to contribute up to the
maximum allowed by law. At its discretion, the Company can match up to
50% of the amount contributed by employees. The Company's contributions
for 1993, 1994, and 1995, represented by issuance of Company common
stock, were $506,000 and $566,000, and $661,000, respectively.
In connection with the Company's decision to dispose of a truck body
manufacturing division in fiscal 1992, the Company recorded a provision
of $4,050,000 to reflect the estimated loss on disposition, including
estimated future costs and operating results. In fiscal 1995, the
Company completed the disposal.
On June 30, 1992, the Company entered into an agreement with the
City of San Jose, to provide refuse and recycling services, for a term of
six years, with service beginning July 1, 1993. During the initial
months of the contract, it became apparent that the level of services
required for the contract and related costs of operation would be greater
than originally envisioned. This occurred, in part, by factors outside
of the control of the Company. As a consequence, most of the increased
cost could not have been anticipated or estimated prior to the start of
the contract. The Company estimated that it would incur a loss of
$6,000,000 over the life of the contract, in order to satisfy the service
requirements of the contract and accordingly accrued that amount in
fiscal 1993. Through 1995 the Company incurred $3,050,000 of the
projected loss. As of June 30, 1995, the Company revised its estimate of
the loss related to the remaining contract period resulting in a
reduction of the accrual of approximately $950,000. This reduction was
based mainly on improved recycling market prices and operating margins.
The Company believes that the remaining $2,000,000 is adequate to cover
any future losses related to this contract.
Note 11 Litigation:
--------------------
The Company was served on October 13, 1993 with a class action
lawsuit. The complaint alleges that the Company violated federal
securities laws with regard to certain disclosures and representations
made by the Company and certain alleged omissions on the part of the
Page 49 of 191 <PAGE> <PAGE>
Company in connection with merger negotiations between the Company and
Browning-Ferris Industries ("BFI"). The plaintiffs allege that they and
all other persons or entities that bought the stock of the Company during
the period of September 2, 1993 through October 7, 1993 suffered damages
as a result of changes in the market price of the Company's common stock.
The Company does not believe that it has violated any laws with regard to
the BFI matter and intends to vigorously defend the lawsuit.
The Company was served on August 9, 1994 with a complaint filed by
certain refuse haulers in San Bernardino County alleging that the Company
violated certain California Business and Professions Code Sections and
also intentionally interfered with existing and prospective economic
relations. The complaint alleges that the Company does not hold a
validly issued permit to operate within a certain geographic area in the
County of San Bernardino and that the Company has engaged in a course of
conduct of predatory pricing. The complaint also alleges that the
Company has violated a San Bernardino County ordinance by engaging in
discriminatory and non-uniform pricing of its refuse hauling services.
In addition to the injunction, the complaint prays for three times the
actual damages incurred by plaintiffs, punitive and exemplary damages in
the amount to be proven at the time of trial, reasonable attorneys' fees
and costs of suit. The Company believes it has valid defenses to the
allegations and intends to vigorously defend the suit. The Company has
filed a cross-complaint against the plaintiffs for engaging in improper
pricing activities.
The Company was named by the County of Los Angeles in regard to an
indemnification action by the County for collection of alleged damages
resulting from hauling waste from County garbage districts to the
Operating Industries Landfill. The Company and some of its prior
subsidiaries hauled waste to the Operating Industries site for certain
defendant cities and also hauled waste through two defendant county
garbage districts in the County of Los Angeles. In July 1994, the
Company reached an agreement to settle the claims for the amount of
$3,600,000, and received insurance proceeds of $1,200,000 as of June 30,
1994. This amount fell within the range previously accrued. The
settlement includes a release by the EPA with regard to the Operating
Industries site.
In or about August 1994, a case was filed in the United States
District Court for the Western District of Arkansas. This is an action
originally filed by seven landowners who live near a landfill operated by
the Company in Miller County, Arkansas. The landowners allege that the
Company unlawfully received hazardous waste and that the pollutants from
the waste received by the Company had contaminated their property or
threatened to contaminate their property in the future. The landowners
seek an unspecified amount of damages based on the contamination or
threat of contamination. In addition, the landowners seek to recover
damages based on the devaluation of their property due to the "stigma" of
being located near a disposal site for hazardous waste. In addition, the
landowners also seek to recover damages based upon their fear of
developing adverse health effects. In July 1995, 135 additional
plaintiffs intervened and asserted claims similar to those raised by the
Page 50 of 191 <PAGE> <PAGE>
original plaintiffs. The Company and the other defendants have denied
that any unlawful disposal of waste took place at the landfill. In or
about June 1995, a case of was filed by eight land owners who own
property along a creek downstream from the Company's Miller County
landfill. Plaintiffs allege that their property has been contaminated by
releases of hazardous substances from the landfill and other hazardous
substance disposal sites operated by the other defendants. The Company
believes it has valid defenses to the allegations and is vigorously
defending the action.
In late December 1994, a lawsuit was filed in Los Angeles County
Superior Court by 24 plaintiffs. The Company is among 19 named
defendants. The complaint asserts causes of action for nuisance and
trespass seeking damages for personal injuries and property damage. The
complaint alleges that Western owns a parcel of property, acquired from
Cadillac Fairview/California located in Torrance, California. The
complaint alleges that Montrose Chemical Corporation and others
manufactured DDT on property at or adjacent to the property owned by
Western. The plaintiffs further allege that contaminants from this
property escaped to plaintiff's property, injured plaintiff and damaged
the value of plaintiff's property. On June 29, 1995, this case was
removed to the United States District Court. The Company has filed an
answer denying any liability. The Company believes it has valid defenses
to the allegations and intends to vigorously contest the case and is
contemplating filing a cross-complaint once its investigation of the
facts is completed.
On or about February 2, 1995, a complaint was filed in a taxpayer
lawsuit. The complaint does not name the Company as a defendant. The
plaintiffs allege that the County and the other defendants, in connection
with a contract with the Company, regarding the operation and management
of the El Sobrante Landfill (the "Landfill") located within the County
(the "Agreement"), engaged in various improper actions, including the
unlawful sale of public property, wasting public funds, and making an
unconstitutional gift of public property and funds. The complaint seeks
an order voiding the Agreement and an injunction ordering the defendants
to pay to the county allegedly unlawful revenues earned from th Landfill,
to cease further dumping at the Landfill of out-of-county waste, return
of alleged windfall profits and limiting dumping fees charged to incounty
residents. The complaint also seeks general damages of $10,000,000 and
special and punitive damages, attorneys' fees and costs. The Company
believes the taxpayer suit is based upon erroneous assumptions and that
there are valid defenses available to the County to each of the claims
asserted in the complaint.
In addition to the above, there are a number of claims and suits
pending against the Company for alleged damages to persons and property,
alleged violation of certain laws and for alleged liabilities arising out
of matters occurring during the normal operation of the waste management
business. In the opinion of management, the uninsured liability, if any,
under the aforementioned claims and suits would not materially affect the
financial position or results of operations of the Company.
Page 51 of 191 <PAGE> <PAGE>
UNAUDITED SELECTED QUARTERLY DATA
(dollars expressed in thousands,
except per share figures)
Income Net Income
from Net per
Revenue operations income share (primary)
------- ---------- ---------- ---------------
Fiscal 1994
First quarter $ 62,911 $ 5,201 $ 2,975<Fa $ .21<Fa>
Second quarter 63,323 5,906 2,836 .19
Third quarter 64,949 7,560 3,375 .22
Fourth quarter 65,822 7,756 3,755 .24
-------- -------- -------- ------
$257,005 $ 26,423 $ 12,941 $ .86
======== ========= ======== ======
Fiscal 1995
First quarter $ 67,147 $ 8,449 $ 4,078 $ .26
Second quarter 67,671 9,453 4,147 .27
Third quarter 67,638 8,816 4,339 .28
Fourth quarter 68,485 8,508 4,525 .29
------- -------- -------- ------
$270,941 $ 35,226 $ 17,089 $ 1.10
======= ======== ======== ======
[FN]
<Fa> Net income and net income per share for the first quarter of
fiscal 1994 includes a tax benefit of $414 or $.03 per share
related to the change in accounting for income taxes.
Page 52 of 191 <PAGE> <PAGE>
PART III
--------
Items 10, 11, 12 and 13 of Part III (except for certain
information required with respect to executive officers of the
Company which is set forth below) have been omitted from this report,
since the Company will file with the Securities and Exchange
Commission, not later than 120 days after the close of the fiscal
year, a proxy statement, pursuant to Regulation 14A, which involves
the election of directors. The information required by Items 10, 11,
12 and 13 of this report which will appear in the definitive proxy
statement is incorporated by reference into Part III of this report.
The executive officers of the Company are as follows:
Present Office
Name Age or Position <F1>
---- --- ------------------
Kosti Shirvanian<F2><F3> 65 Chairman of the Board of
Directors and President
Ramsey DiLibero <F3> 67 Chief Operating Officer, Director
Savey Tufenkian <F2><F3> 66 Executive Vice President,
Secretary and Treasurer;
Director
Lawrence F. McQuaide <F3> 47 Executive Vice President,
Finance
[FN]
<F1> Officers serve at the discretion of the Board of Directors.
<F2> Kosti Shirvanian is the brother of Savey Tufenkian.
<F3> Member, Management Committee. The Committee, composed of
certain officers and two outside board members, coordinates
Company operations.
Page 53 of 191 <PAGE> <PAGE>
Kosti Shirvanian founded the Company in 1955 as a sole
proprietorship. He became the Chairman of the Board and President
when the Company was incorporated in 1964.
Ramsey DiLibero joined the Company in 1993 as Chief Operating
Officer. Prior to joining the Company Mr. DiLibero served as Chief
Operating Officer of CECOS International, Inc. and Chief Executive
Officer of Browning-Ferris International, both subsidiaries of
Browning-Ferris Industries. Mr. DiLibero also served as Chief
Operating Officer of Waste Resources Corporation and SCA
Services, Inc.
Savey Tufenkian helped to establish the Company in 1955 and has
served as the Secretary and Treasurer of the Company since its
incorporation in 1964. In 1988 she was elected as Executive Vice
President, Secretary and Treasurer.
Lawrence F. McQuaide, certified public accountant, joined the
Company in 1984 as Vice President, Finance. In 1988 he was elected
as Executive Vice President, Finance. Prior to joining the Company,
Mr. McQuaide was a Senior Manager with Price Waterhouse where he had
served for eleven years.
Page 54 of 191 <PAGE> <PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) Financial Statement, Schedules and Exhibits.
1. Financial Statement (included in Item 8)
Reports of Independent Auditors
Consolidated Balance Sheet - June 30, 1994 and 1995
Consolidated Statement of Operations for the Three Years
Ended June 30, 1995
Consolidated Statement of Shareholders' Equity for the
Three Years Ended June 30, 1995
Consolidated Statement of Cash Flows for the Three
Years Ended June 30, 1995
Notes to Consolidated Financial Statements
2. Schedules.
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted since the required
information is not applicable or is included in the financial
statements or the notes thereto.
3. Exhibits
The exhibits to this Report are listed in the Exhibit Index
elsewhere herein.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
fourth quarter of the fiscal year ended June 30, 1995
Page 55 of 191 <PAGE> <PAGE>
SCHEDULE II
-----------
VALUATION AND QUALIYING ACCOUNTS
WESTERN WASTE INDUSTRIES
For the Three Years Ended June 30, 1995
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Balance Additions Deductions Balance
beginning Charged to from end of
of year Expense Allowances year
---------- ---------- ---------- ----------
1993 $1,377,000 $1,858,000 $1,881,000 $1,354,000
1994 1,354,000 1,965,000 1,708,000 1,611,000
1995 1,611,000 1,579,000 1,452,000 1,738,000
LANDFILL DEVELOPMENT RESERVE
Balance Additions Deductions Balance
beginning Charged to from end of
of year Expense Allowances year
---------- ---------- ---------- ----------
1993 0 4,000,000 0 4,000,000
1994 4,000,000 0 0 4,000,000
1995 4,000,000 0 435,000 3,565,000
REAL PROPERTY RESERVE
Balance Additions Deductions Balance
beginning Charged to from end of
of year Expense Allowances year
---------- ---------- ---------- ----------
1993 0 2,000,000 0 2,000,000
1994 2,000,000 0 206,000 1,794,000
1995 1,794,000 0 0 1,794,000
Page 56 of 191 <PAGE> <PAGE>
Exhibit Index
Exhibit
No. Description of Exhibit
------- ---------------------------------------
3.1 Articles of Incorporation of
registrant as presently in
effect. 62
3.2 By-laws of registrant as
presently in effect (Exhibit
3.2 to Form S-1 Registration
Statement No. 2-83121 and
incorporated herein by
reference.)
4.2 Specimen of Common Stock
Certificate (Exhibit 4.2 to
Form 10-K for the fiscal year
ended June 30, 1992 and
incorporated herein by
reference.)
10.1 Twenty-five Year Lease dated
May 1, 1968 between Kosti
Shirvanian and Marian
Shirvanian as lessors and
registrants as lessee, as
amended March 24, 1983 ("the
Lease") (Exhibit 10.1 to Form
S-1 Registration Statement
No. 2-83121 and incorporated
herein by reference.)
10.2 Second amendment to the
Lease. (Exhibit 10.2 to Form
10-K for the year ended June
30, 1994 and incorporated
herein by reference)
10.3 1983 Incentive Stock Option
Plan of Western Waste
Industries (Exhibit 10.6 to
Form S-1 Registration
Statement No. 2-83121 and
incorporated herein by
reference.)
10.4 Employee Stock Ownership Plan
and Employee Stock Ownership
Trust Agreement (Exhibit 10.7
to Form S-1 Registration
Statement No. 2-83121 and
Page 57 of 191 <PAGE> <PAGE>
incorporated herein by
reference.)
10.5 1983 Non-Qualified Stock
Option Plan (Exhibit 10.10 to
Form 10-K for the fiscal year
ended June 30, 1984 and
incorporated herein by
reference.)
10.6 Revolving Credit Agreement
dated as of November 19, 1992
among Western Waste
Industries, as Borrower and
Citicorp, USA, Inc., Bank of
America National Trust and
Savings Association, ABN AMRO
Bank, The Bank of Nova
Scotia, The First National
Bank of Boston, and BHF-Bank,
as Lenders, and Citicorp USA,
Inc. as Agent for Lenders
("the Revolving Credit
Agreement"). (Exhibit 10.1
to Form 10-Q for Quarter
Ended December 31, 1992 and
incorporated herein by
reference.)
10.7 First Amendment dated as of
June 28, 1993 to the
Revolving Credit Agreement
(Exhibit 10.9 to Form 10-Q
for Quarter Ended September
30, 1993 and incorporated
herein by reference.)
10.8 Second Amendment dated as of
October 14, 1993 to the
Revolving Credit Agreement
(Exhibit 10.10 to Form 10-Q
for Quarter Ended September
30, 1993 and incorporated
herein by reference.)
10.9 Third Amendment dated as of
February 25, 1995 to the
Revolving Credit Agreement
(Exhibit 10.11 to Form 10-Q
for Quarter Ended March 31,
1994 and incorporated herein
by reference.)
Page 58 of 191 <PAGE> <PAGE>
10.10 Western Waste Industries
401(k) Savings and Investment
Plan. (Exhibit 10.2 to Form
10-Q for Quarter Plan Ended
September 30, 1988 and
incorporated herein by
reference.)
10.11 1992 Stock Option Plan, as
amended (Exhibit 10.11 to
Form 10-K for the year ended
June 30, 1994 and
incorporated herein by
reference)
10.12 Amendment to 1992 Stock
Option Plan (Exhibit 10.12 to
Form 10-K for the year ended
June 30, 1994 and
incorporated herein by
reference)
10.13 Reimbursement Agreement
between Western Waste
Industries and California
Pollution Control Financing
Authority. (Exhibit 10.13 to
Form 10-Q for Quarter Ended
December 31, 1994 and
incorporated herein by
reference.)
10.15 Third amendment to the Lease. 76
10.16 Fourth amendment to the Lease. 78
10.17 Western Waste Industries
401(k) Savings and Investment
Plan, as amended, dated
December 15, 1994. 80
21.1 Subsidiaries of registrant
(Exhibit 22.1 to Form 10-K
for year ended June 30, 1993
and incorporated herein by
reference.)
23.1 Consent of independent 190
auditors.
27 Financial Data Schedule. 191
Page 59 of 191 <PAGE> <PAGE>
99.1 Amendment to 1983 Incentive
Stock Option and 1983 Non-
qualified Stock Option Plan
(undertakings to be
incorporated by reference
into Form S-8 Registration
Statement No. 33-9358)
Page 60 of 191 <PAGE> <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 in the City of Torrance, State of California, on the
27th day of September, 1995.
WESTERN WASTE INDUSTRIES
By: /s/ KOSTI SHIRVANIAN
-------------------------
Kosti Shirvanian
Chairman of the Board and
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signatures Title Date
---------- ----- ----
/s/ Kosti Shirvanian 9/27/95
____________________ Chairman of the Board
Kosti Shirvanian of Directors and President
(Principal Executive
Officer)
/s/ Ramsey G. DiLibero 9/27/95
____________________ Chief Operating Officer and
Ramsey G. DiLibero Director
/s/ Lawrence F. McQuaide 9/27/95
____________________ Executive Vice President,
Lawrence F. McQuaide Finance (Principal
Financial and Accounting
Officer)
/s/ Savey Tufenkian 9/27/95
____________________ Executive Vice President,
Savey Tufenkian Secretary-Treasurer and
Director
/s/ John W. Simmons 9/27/95
_____________________ Director
John W. Simmons
/s/ Harry S. Derbyshire 9/27/95
_____________________ Director
Harry S. Derbyshire
/s/ Dr. A. N. Mosich 9/27/95
_____________________ Director
Dr. A. N. Mosich
/s/ Michael C. Palmer 9/27/95
_____________________ Director
Michael C.Palmer
Page 61 of 191 <PAGE> <PAGE>
EXHIBIT 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
WESTERN WASTE INDUSTRIES
KOSTI SHIRVANIAN AND SAVEY TUFENKIAN certify that:
1. They are the president and the secretary,
respectively, of WESTERN WASTE INDUSTRIES, a California
corporation.
2. The articles of incorporation of this corporation are
amended and restated to read as follows:
ARTICLES OF INCORPORATION
OF
WESTERN WASTE INDUSTRIES
I
The name of this corporation is WESTERN WASTE INDUSTRIES.
II
The purpose of this corporation is to engage in any lawful
act or activity for which a corporation may be organized under
the General Corporation Law of California other than the
banking business, the trust company business or the practice of
a profession permitted to be incorporated by the California
Corporations Code.
III
This corporation is authorized to issue only one class of
shares of stock, designated "Common Stock," and the total
number of shares of Common Stock which this corporation is
authorized to issue is Fifteen Million (15,000,000). Upon the
amendment of this article as herein set forth, each outstanding
-1-
Page 62 of 191 <PAGE> <PAGE>
share of Common Stock shall be split up and converted into
four (4) shares of Common Stock.
IV
This corporation elects to be governed by all of the
provisions of the General Corporation Law effective January 1,
1977.
3. The foregoing amendment and restatement of Articles
of Incorporation has been duly approved by the board of
directors.
4. The foregoing amendment and restatement of Articles
of Incorporation has been duly approved by the required vote of
shareholders in accordance with Section 902 of the Corporations
Code. The total number of outstanding shares of the
corporation is 929,171. The number of shares voting in favor
of the amendment equaled or exceeded the vote required. The
percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this
certificate are true and correct of our own knowledge.
Date: April 5 , 1983 /s/ KOSTI SHIRVANIAN
--------------- -------------------------------
KOSTI SHIRVANIAN, President
/s/ SAVEY TUFENKIAN
-------------------------------
SAVEY TUFENKIAN, Secretary
-2-
Page 63 of 191 <PAGE> <PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
WESTERN WASTE INDUSTRIES
KOSTI SHIRVANIAN and SAVEY TUFENKIAN certify that:
1. They are the president and secretary,
respectively, of WESTERN WASTE INDUSTRIES, a California
corporation.
2. The Restated Articles of Incorporation of this
corporation are amended to add Articles V and VI as follows:
"V. The liability of the directors of this
corporation for monetary damages shall be
eliminated to the fullest extent
permissible under California law."
"VI. This corporation is authorized to
provide indemnification of agents (as
defined in Section 317 of the California
Corporations Code) for breach of duty to
this corporation and its shareholders
through bylaw provisions or through
agreements with the agents, or both, in
excess of the indemnification otherwise
permitted by Section 317 of the California
Corporations Code, subject to the limits on
such excess indemnification set forth in
Section 204 of the California Corporations
Code."
3. The foregoing amendment of the Restated Articles
of Incorporation has been duly approved by the board of
directors.
4. The foregoing amendment of the Restated Articles
of Incorporation has been duly approved by the required vote of
shareholders in accordance with Section 902 of the Corporations
Code. The total number of outstanding shares of the
corporation entitled to vote with respect to the foregoing
amendment of the Restated Articles of Incorporation was
4,946,892. The number of shares voting in favor of the
amendment equaled or exceeded the vote required. The
percentage vote required was more than 50%.
-3-
Page 64 of 191 <PAGE> <PAGE>
We further declare under penalty of perjury under the
laws of the State of California that the matters set forth in
this certificate are true and correct of our own knowledge.
Date: July 29, 1988.
--
/s/ KOSTI SHIRVANIAN
----------------------------
KOSTI SHIRVANIAN, President
/s/ SAVEY TUFENKIAN
SAVEY TUFENKIAN, Secretary
-4-
Page 65 of 191 <PAGE> <PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
WESTERN WASTE INDUSTRIES
Kosti Shirvanian and Savey Tufenkian certify that:
1. They are the President and the Secretary,
respectively, of Western Waste Industries, a California
corporation.
2. The outstanding shares of this corporation's Common
Stock are listed on the New York Stock Exchange.
3. Article III of the Restated Articles of Incorporation
of this corporation is amended to read as follows:
"III.
(a) This corporation is authorized to
issue two classes of shares, to be
designated Common Stock and Preferred
Stock, respectively. The corporation shall
have authority to issue 15,000,000 shares
of Common Stock and 2,000,000 shares of
Preferred Stock.
(b) The Preferred Stock may be used in any
number of series, as determined by the
Board of Directors. The Board may by
resolution fix the designation and number
of shares of any such series. The Board
may thereafter in the same manner increase
or decrease the number of shares of any
such series (but not below the number of
shares of that series then outstanding).
(c) The Board may determine, alter, or
revoke the rights, preferences, privileges,
and restrictions of any wholly unissued
class or series of shares."
4. An article designated "VII" is added to the Restated
Articles of Incorporation of this corporation to read as
follows:
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Page 66 of 191 <PAGE> <PAGE>
"VII.
No holder of any class of stock of this
corporation shall be entitled to cumulate
votes at any election of directors of this
corporation."
5. The foregoing amendments of the Restated Articles of
Incorporation of this corporation have been duly approved by
the Board of Directors.
6. The foregoing amendments of the Restated Articles of
Incorporation of this corporation have been duly approved by
the required vote of shareholders in accordance with
Section 902 of the Corporations Code. The total number of
outstanding shares of the corporation at the time the foregoing
amendments were approved by the shareholders was 13,237,039.
The number of shares voting in favor of the amendments equaled
or exceeded the vote required. The percentage vote required
was more than 50%.
We further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this
Certificate are true and correct of our own knowledge.
Dated this 1st of APRIL 1991.
---
/s/ KOSTI SHIRVANIAN
-------------------------------
Kosti Shirvanian, President
/s/ SAVEY TUFENKIAN
-------------------------------
Savey Tufenkian, Secretary
-6-
Page 67 of 191 <PAGE> <PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
WESTERN WASTE INDUSTRIES
Kosti Shirvanian and Savey Tufenkian certify that:
1. They are the President and the Secretary,
respectively, of Western Waste Industries, a California
corporation.
2. Article III of the Restated Articles of
Incorporation of this Corporation is amended to read as
follows:
"III
(a) This corporation is authorized to
issue two classes of shares, to be designated
Common Stock and Preferred Stock, respectively.
The corporation shall have authority to issue
50,000,000 shares of Common Stock and
2,000,000 shares of Preferred Stock.
(b) The Preferred Stock may be issued
in any number of series, as determined by the
Board of Directors. The Board may by resolution
fix the designation and number of shares of any
such series. The Board may thereafter in the
same manner increase or decrease the number of
shares of any such series (but not below the
number of shares of that series then
outstanding).
(c) The Board may determine, alter,
or revoke the rights, preferences, privileges,
and restrictions of any wholly unissued class or
series of shares."
3. The foregoing amendment of the Restated Articles
of Incorporation has been duly approved by the Board of
Directors.
4. The foregoing amendment of the Restated Articles
of Incorporation has been duly approved by the required vote of
shareholders in accordance with Section 902 of the California
Corporations Code. The total number of outstanding shares of
this corporation entitled to vote on the foregoing amendment
was 13,485,388. The number of shares voting in favor of the
-7-
Page 68 of 191 <PAGE> <PAGE>
amendment equaled or exceeded the vote required. The
percentage vote required was more than 50%.
We further declare under penalty of perjury under the
laws of the State of California that the matters set forth in
this certificate are true and correct of our own knowledge.
Dated this 25th day of September, 1991.
----
/s/ KOSTI SHIRVANIAN
---------------------------
KOSTI SHIRVANIAN, President
/s/ SAVEY TUFENKIAN
---------------------------
SAVEY TUFENKIAN, Secretary
-8-
Page 69 of 191 <PAGE> <PAGE>
AGREEMENT OF MERGER
-------------------
THIS AGREEMENT OF MERGER (this "Agreement"), is entered
into as of April _3_, 1992, by and between WESTERN WASTE
INDUSTRIES, a California corporation ("Western") and UNITED
PACIFIC CORPORATION, a California corporation ("United").
Western and United are sometimes collectively referred to
herein as the "Constituent Corporations." Western is sometimes
referred to herein as the "Surviving Corporation."
R E C I T A L S:
---------------
A. Western is a corporation duly organized and existing
under the laws of the State of California. As of the date
hereof, the authorized capital stock of Western consists of
50,000,000 shares of Common Stock, no par value (the "Western
Common Stock"), of which 13,594,953 shares are issued and
outstanding.
B. United is a corporation duly organized and existing
under the laws of the State of California. As of the date
hereof, the authorized capital stock of United consists of
100,000 shares of Common Stock, no par value (the United Common
Stock"), of which 100,000 shares are issued and outstanding.
C. The Constituent Corporations have entered into an
Agreement and Plan of Reorganization, dated as of April _3_,
1992, providing for the merger of United with and into Western
(the "Agreement and Plan of Reorganization"), which is intended
to be construed together with this Agreement in order to
effectuate their purposes.
NOW, THEREFORE, the parties hereto agree as follows:
I. TERMS AND CONDITIONS OF THE MERGER
-- ----------------------------------
1.1 MERGER. United shall be merged with and into Western
(the "Merger"), and Western will survive the Merger. As the
Surviving Corporation, Western will continue its corporate
existence under the laws of the State of California. The
separate existence and corporate organization of United, except
insofar as it may be continued by operation of law, will
terminate and cease following the Merger. The Merger will be
effective as of the date on which this Agreement is duly filed
with the Secretary of State of the State of California in
accordance with the California General Corporation Law (the
"Effective Date").
1.2 SUCCESSION. On the Effective Date, the separate
existence of United shall cease and Western shall succeed,
without other transfer, to all the rights, privileges, powers,
franchises and immunities and all property of United, and shall
-9-
Page 70 of 191 <PAGE> <PAGE>
be subject to all the obligations, debts and liabilities of
United in the same manner as if Western had itself incurred
them.
1.3 CONVERSION OF SHARES.
1.3.1 On the Effective Date, by virtue of the Merger
and without any further action on the pat of the Constituent
Corporations or their respective shareholders, each outstanding
share of United Common Stock shall be converted into 0.65 of a
fully paid and nonassessable share of Western Common Stock.
1.3.2 Each share of Western Common Stock outstanding
immediately prior to the Effective Date shall remain
outstanding without change by virtue of the Merger.
1.4 STOCK CERTIFICATES. On and after the Effective Date,
all of the outstanding certificates that prior to that time
represented shares of United Common Stock shall be deemed for
all purposes to evidence ownership of any to represent the
shares of Western Common Stock into which the shares of United
Common Stock represented by such certificates have been
converted as herein provided and shall be so registered on the
books and records of Western or its transfer agents. The
registered owner of any such outstanding share of United Common
Stock shall, until such certificate shall have been surrendered
for transfer or otherwise accounted for to Western or its
transfer agent, have and be entitled to exercise any voting and
other rights with respect to and, upon surrender of the United
Common Stock shall, receive any dividend and other
distributions declared with respect to the shares of Western
Common Stock evidenced by such outstanding certificate as
provided above.
1.5 TRANSFERS OF UNITED SHARES. If any shares of Western
Common Stock are to be issued in a name other than that in
which the certificate representing shares of United Common
Stock surrendered for exchange is registered, it shall be a
condition of such issuance that the certificate so surrendered
be properly endorsed or otherwise in proper form of transfer
and that the person requesting such transfer either pay to
Western any transfer or other taxes required by reason of the
issuance of shares of Western Common Stock to a person other
than the registered holder of the certificates surrendered or
establish to Western that such tax has been paid or is not
payable.
1.6 LEGENDS. All certificates evidencing shares of
Western Common Stock and to be issued to holders of United
Common Stock shall bear such legends as may in the opinion of
counsel to Western be necessary to comply with applicable
federal and state securities laws.
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Page 71 of 191 <PAGE> <PAGE>
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
--- -----------------------------------------
2.1 ARTICLES OF INCORPORATION. The Articles of
Incorporation of Western as in effect immediately prior to the
Effective Date shall remain the Articles of Incorporation of
the Surviving Corporations from and after the Effective Date.
2.2 BYLAWS. The Bylaws of Western as in effect
immediately prior to the Effective Date shall remain the Bylaws
of the Surviving Corporation from and after the Effective Date.
2.3 DIRECTORS AND OFFICERS. The directors and officers
of Western immediately prior to the Effective Date shall, from
and after the Effective Date, be and remain the directors and
officers of the Surviving Corporation until their respective
successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance
with the Articles of Incorporation and Bylaws of the Surviving
Corporation.
III. MISCELLANEOUS
---- -------------
3.1 FURTHER ASSURANCES. From time to time, and when
required by Western or by its successors and assigns, there
shall be executed and delivered on behalf of United such deeds
and other instruments, and there shall be taken or caused to be
taken by it such further actions, as shall be appropriate or
necessary in order to vest or perfect, or to confirm of record
of otherwise, in Western the title to and possession of all the
property, interests, assets, rights, privileges, immunities,
powers, franchises and authority of United and otherwise to
carry out the purposes of this Agreement, and the directors and
officers of Western are fully authorized in the name and on
behalf of United or otherwise to take any and all such actions
and to execute and deliver any and all such deeds and other
instruments.
3.2 TERMINATION. At any time before the Effective Date,
this Agreement may be terminated and the Merger may be
abandoned by mutual consent of the Boards of Directors of the
Constituent Corporations, notwithstanding the approval of the
Merger by the shareholders of the Constituent Corporations, or
the consummation of the Merger may be deferred for a reasonable
period if, in the mutual opinion of the Boards of Directors of
the Constituent Corporations, such action would be in the best
interests of the Constituent Corporations. This Agreement
shall automatically terminate without any further action of the
Constituent Corporations upon the termination of the Agreement
and Plan of Reorganization.
-11-
Page 72 of 191 <PAGE> <PAGE>
3.3 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California.
IN WITNESS WHEREOF, this Agreement, having first been duly
approved by the Boards of Directors of the Constituent
Corporations, is hereby executed on behalf of each said
corporation and attested by their respective officers thereunto
duly authorized as of the date first above written.
WESTERN
-------
WESTERN WASTE INDUSTRIES,
a California corporation
By: /s/ MARK D. BOZAJIAN
--------------------------
EXECUTIVE VICE, PRESIDENT
By: /s/ SAVEY TUFENKIAN
--------------------------
SECRETARY
UNITED
UNITED PACIFIC CORPORATION,
a California corporation
By: /s/ LANCE B. JONES
-------------------------
Lance B. Jones, President
By: /s/ GUS K. FRANKLIN
-------------------------
Gus K. Franklin, Secretary
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Page 73 of 191 <PAGE> <PAGE>
CERTIFICATE OF APPROVAL
-----------------------
Lance B. Jones and Gus K. Franklin hereby certify that:
1. They are the President and the Secretary,
respectively, of United Pacific Corporation, a corporation
organized under the laws of the State of California (the
"Corporation").
2. The Corporation has only one class of shares,
designated as Common Stock. The total number of outstanding
shares of Common Stock of the Corporation is 100,000.
3. The principle terms of the Agreement of Merger in the
form attached hereto were approved by the Corporation by a vote
of a number of shares of Common Stock of the Corporation which
equaled or exceeded the vote required. The Common Stock was
the sole class outstanding and entitled to vote, and the
percentage vote required of such class was more than fifty
percent (50%).
We further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this
Certificate are true and correct of our own knowledge.
Executed at Gardena, California on April 3 , 1992.
---
/s/ LANCE B. JONES
--------------------------------
Lance B. Jones, President
/s/ GUS K. FRANKLIN
--------------------------------
Gus K. Franklin, Secretary
-13-
Page 74 of 191 <PAGE> <PAGE>
CERTIFICATE OF APPROVAL
SAVEY TUFENKIAN and MARK D. BOZAJIAN hereby certify
--------------------- ----------------------
that:
1. They are the Secretary and the Exec. V.P.,
respectively, of Western Waste Industries, a corporation
organized under the laws of the State of California (the
"Corporation").
2. The Corporation has only one class of shares,
designated as Common Stock. The total number of outstanding
shares of Common Stock of the Corporation is 13,594,953, none
of which was entitled to vote on the merger.
3. The Agreement of Merger in the form attached hereto
was entitled to be and was approved by the Board of Directors
of the Corporation alone under the provisions of Section 1201
of the General Corporation Law of the State of California.
We further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this
Certificate are true and correct of our own knowledge.
Executed at Gardena, California on April 3 , 1992.
---
/s/ MARK D. BOZAJIAN
-------------------------------
____________, President
/s/ SAVEY TUFENKIAN
-------------------------------
____________, Secretary
-14-
Page 75 of 191 <PAGE> <PAGE>
EXHIBIT 10.15
THIRD AMENDMENT TO LEASE
This Third Amendment to Lease ("Third Amendment"), dated as of
February 28, 1995, is entered into by and between KOSTI and
MARIAN SHIRVANIAN, husband and wife ("Lessor") and WESTERN
WASTE INDUSTRIES, a California corporation, formerly known as
"Western Refuse Hauling, Inc." ("Tenant").
Recitals
A. Lessor and Tenant entered into that certain Twenty-
Five (25) Year Lease ("Lease"), dated May 1, 1968, pursuant to
which Lessor leased to Tenant those premises in the County of
Los Angeles, State of California, described as: "Approximately
two and one- half acres known as 401 W. Francisco, together
with approximately one acre immediately adjacent to said
property abutting on Main St." The capitalized terms used and
not otherwise defined herein shall have the meaning set forth
for such terms in the Lease.
B. The Lease was amended on March 24, 1983 ("First Amend-
ment") to, among other things, increase the rental and to
provide for future rent adjustments.
C. The Lease was also amended on February 28, 1993,
("Second Amendment") to, among other things, increase the
rental and provide for future rent adjustments.
D. Lessor and Tenant now desire to amend the Lease as
hereinafter provided.
Amendment
NOW, THEREFORE, Lessor and Tenant agree as follows:
1. Expiration Date. That paragraph of the Second
Amendment modifying the expiration date of the Lease is hereby
deleted in its entirety and the following is substituted in
place thereof:
TO HAVE AND TO HOLD said premises, together with the
tenements, hereditaments, appurtenances and easements
thereunto belonging, at the rental and upon the terms,
conditions, covenants and agreements herein stated, for a
term commencing on the 1st day of June 1968, and ending
on the 31st day of August 1995, hereinafter called "said
term."
-1-
Page 76 of 191 <PAGE> <PAGE>
2. No Other Modification. Except as modified by this
Third Amendment, the Lease, as amended, remains in full force
and effect.
3. Miscellaneous. This Third Amendment shall bind, and
shall inure to the benefit of, the successors and assigns of
the parties. This document may be executed in counterparts
with the same force and effect as if the parties had executed
one instrument, and each such counterpart shall constitute an
original hereof. No provision of this Third Amendment that is
held to be inoperative, unenforceable, or invalid shall affect
the remaining provisions, and to this end all provisions hereof
are hereby declared to severable. Time is of the essence of
this Third Amendment. This Third Amendment shall be governed
by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this
Third Amendment to be duly executed as of the date first
written above.
"LESSOR"
/s/ KOSTI SHIRVANIAN
------------------------------------
Kosti Shirvanian
/s/ MARIAN SHIRVANIAN
-------------------------------------
Marian Shirvanian
"TENANT"
WESTERN WASTE INDUSTRIES
/s/ ARNIE ROTHLISBERGER
By: ----------------------------------
ARNIE ROTHLISBERGER
Vice President and General Counsel
Title
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Page 77 of 191 <PAGE> <PAGE>
EXHIBIT 10.16
FOURTH AMENDMENT TO LEASE
This Fourth Amendment to Lease ("Fourth Amendment"), dated as
of August 31, 1995, is entered into by and between KOSTI and
MARIAN SHIRVANIAN, husband and wife ("Lessor") and WESTERN
WASTE INDUSTRIES, a California corporation, formerly known as
"Western Refuse Hauling, Inc." ("Tenant").
Recitals
A. Lessor and Tenant entered into that certain Twenty-
Five (25) Year Lease ("Lease"), dated May 1, 1968, pursuant to
which Lessor leased to Tenant those premises in the County of
Los Angeles, State of California, described as: "Approximately
two and one-half acres known as 401 W. Francisco, together with
approximately one acre immediately adjacent to said property
abutting on Main St." The capitalized terms used and not
otherwise defined herein shall have the meaning set forth for
such terms in the Lease.
B. The Lease was amended on March 24, 1983 ("First Amend-
ment") to, among other things, increase the rental and to
provide for future rent adjustments.
C. The Lease was also amended on February 28, 1993,
("Second Amendment") to, among other things, increase the
rental and provide for future rent adjustments.
D. The Lease was subsequently amended on February 28, 1995
("Third Amendment") to extend the expiration date of the Lease.
E. Lessor and Tenant now desire to amend the Lease as
hereinafter provided.
Amendment
NOW, THEREFORE, Lessor and Tenant agree as follows:
1. Expiration Date. The Third Amendment to the Lease is
hereby deleted in its entirety and the following is substituted
in place thereof:
TO HAVE AND TO HOLD said premises, together with the
tenements, hereditaments, appurtenances and easements
thereunto belonging, at the rental and upon the terms,
conditions, covenants and agreements herein stated, for a
term commencing on the 1st day of June 1968, and ending
on the 28th day of February 1996, hereinafter called
"said term."
-1-
Page 78 of 191 <PAGE> <PAGE>
2. No Other Modification. Except as modified by this
Fourth Amendment, the Lease, as amended, remains in full force
and effect.
3. Miscellaneous. This Fourth Amendment shall bind, and
shall inure to the benefit of, the successors and assigns of
the parties. This document may be executed in counterparts
with the same force and effect as if the parties had executed
one instrument, and each such counterpart shall constitute an
original hereof. No provision of this Fourth Amendment that is
held to be inoperative, unenforceable, or invalid shall affect
the remaining provisions, and to this end all provisions hereof
are hereby declared to severable. Time is of the essence of
this Fourth Amendment. This Fourth Amendment shall be governed
by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this
Fourth Amendment to be duly executed as of the date first
written above.
"LESSOR"
/s/ Kosti Shirvanian
_________________________________
Kosti Shirvanian
/s/ Marian Shirvanian
_________________________________
Marian Shirvanian
"TENANT"
WESTERN WASTE INDUSTRIES
By: _____________________________
Vice President and General
Counsel
----------------------------
Title
-2-
Page 79 of 191 <PAGE> <PAGE>
EXHIBIT 10.17
Western Waste Industries 401(k) Savings and Investment Plan
Plan Cover Sheet
Page 80 of 191 <PAGE> <PAGE>
WESTERN WASTE INDUSTRIES 401(K) SAVINGS AND INVESTMENT PLAN
IMPORTANT NOTE
Neither Connecticut General Life Insurance Company nor any of
its employees can provide you with legal advice in connection
with the execution of this document. Prior to execution of
this document, you should consult your attorney on whether this
document is appropriate for you.
Page 81 of 191 <PAGE> <PAGE>
Table Of Contents
ARTICLE I Definitions . . . . . . . . . . . . . . . . 1
ARTICLE II Service . . . . . . . . . . . . . . . . . 16
ARTICLE III Eligibility, Enrollment and Participation 19
ARTICLE IV Contributions . . . . . . . . . . . . . . 21
ARTICLE V Limitations on Allocations . . . . . . . 32
ARTICLE VI Distribution of Benefits . . . . . . . . 39
ARTICLE VI-A Direct Rollovers . . . . . . . . . . . . 45
ARTICLE VII Retirement Benefits . . . . . . . . . . . 47
ARTICLE VIII Joint and Survivor Annuity Requirements . 48
ARTICLE IX Termination of Employment . . . . . . . . 53
ARTICLE X Withdrawals . . . . . . . . . . . . . . . 55
ARTICLE X-A Loans . . . . . . . . . . . . . . . . . . 58
ARTICLE XI Fiduciary Duties and Responsibilities . . 60
ARTICLE XII The Administrator . . . . . . . . . . . . 61
ARTICLE XIII Participants' Rights . . . . . . . . . . 63
ARTICLE XIV Amendment or Termination of the Plan . . 66
ARTICLE XV Substitution of Plans . . . . . . . . . . 68
ARTICLE XVI Miscellaneous . . . . . . . . . . . . . . 69
ARTICLE XVI-A Top-Heavy Provisions . . . . . . . . . . 71
ARTICLE XVII Trust Agreement . . . . . . . . . . . . . 76
October 31, 1994
Page 82 of 191 <PAGE> <PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 ACCRUED BENEFIT. The term Accrued Benefit means the
value on any applicable date of the Participant's
Account.
1.2 ACTIVE PARTICIPANT. The term Active Participant means
any Participant who (a) performs duties as an Employee
for the Employer, and (b) is not an Inactive
Participant.
1.3 ACTUAL CONTRIBUTION PERCENTAGE. The term Actual
Contribution Percentage means the average of the Actual
Contribution Ratios of a specified group computed to
the nearest one-hundredth of one percent.
1.4 ACTUAL CONTRIBUTION PERCENTAGE TEST.
(A) For each Plan Year, the Plan shall satisfy the
contribution percentage requirement described in
section 401(m)(2) of the Code and the regulations
thereunder, which are incorporated herein.
The Plan satisfies the Actual Contribution Percentage
Test if:
(1) The Actual Contribution Percentage for the group
of eligible Highly Compensated Employees is not
more than the Actual Contribution Percentage for
the group of all other eligible Employees
multiplied by 1.25; or
(2) The excess of the Actual Contribution Percentage
for the group of eligible Highly Compensated
Employees over the Actual Contribution Percentage
for the group of all other eligible Employees is
not more than two percentage points, and the
Actual Contribution Percentage for the group of
eligible Highly Compensated Employees is not more
than the Actual Contribution Percentage for the
group of all other eligible Employees multiplied
by two.
(B) Special Rules.
(1) Matching Contributions and Qualified Nonelective
Contributions will be considered for a Plan Year
only if allocated to the Employee's Account as of
any date within the Plan Year being tested and
only if made before the last day of the twelve
-1-
Page 83 of 191 <PAGE> <PAGE>
month period immediately following the Plan Year
to which such contributions relate.
(2) A Matching Contribution that is forfeited to
correct Excess Aggregate Contributions, or because
the contribution to which it relates is treated as
an Excess Contribution, Excess Deferral, or
Excess Aggregate Contribution, shall not be taken
into account for purposes of the Actual
Contribution Percentage Test.
(3) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Actual
Contribution Percentage Test, including records
showing the extent to which Qualified Nonelective
Contributions and Elective Deferral Contributions
are taken into account.
1.5 ACTUAL CONTRIBUTION RATIO.
(A) An Employee's Actual Contribution Ratio is the sum of
the Contribution Percentage Amounts allocated to the
Employee's Account for the Plan Year (including any
amounts required to be taken into account under
subparagraphs (B) (1) and (B) (2) of this section)
divided by the Employee's Compensation for the Plan
Year. If no Matching Contributions, Qualified
Nonelective Contributions, or Elective Deferral
Contributions are taken into account with respect to an
eligible Employee, the Actual Contribution Ratio of the
Employee is zero.
(B) Special Rules.
(1) In the event that this Plan is aggregated with one
or more plans for purposes of section 410(b) of
the Code (other than for purposes of the average
benefit percentage test), or if one or more other
plans satisfy the requirements of section 410(b)
of the Code (other than the average benefit
percentage test) only if aggregated with this
Plan, then this section shall be applied by
determining the Actual Contribution Ratios of
Employees as if all such plans were a single plan.
Plans may be aggregated only if they have the same
Plan Year.
(2) The Actual Contribution Ratio of a Highly
Compensated Employee who is eligible to
participate in more than one plan of the Employer
to which Matching Contributions are made shall be
calculated by treating all such plans in which the
Employee is eligible to participate as one plan.
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For Plan Years beginning after December 31, 1988,
if a Highly Compensated Employee participates in
two or more plans that have different plan years,
all plans ending with or within the same calendar
year shall be treated as a single plan. However,
plans that are not permitted to be aggregated
under Treasury Regulation section
1.401(m)-1(b)(3)(ii) shall not be aggregated for
purposes of this section.
(3) For purposes of determining the Actual
Contribution Ratio of a Participant who is a
5-percent owner or one of the ten most highly-paid
Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such
Participant shall include the Contribution
Percentage Amounts (including any amounts required
to be taken into account under subparagraphs
(B)(1) and (B)(2) of this section) and
Compensation for the Plan Year of all Family
Members.
If the Participant is required to be aggregated as
a member of more than one family group under the
Plan, all eligible Employees who are members of
those family groups that include that Employee are
aggregated as one family group.
Family Members, with respect to Highly Compensated
Employees, shall be disregarded as separate
Employees in determining the Actual Contribution
Ratio both for Participants who are Nonhighly
Compensated Employees and for Participants who are
Highly Compensated Employees.
(4) The determination and treatment of the Actual
Contribution Ratio amounts of any Participant
shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
1.6 ACTUAL DEFERRAL PERCENTAGE. The term Actual Deferral
Percentage means the average of the Actual Deferral
Ratios of a specified group, computed to the nearest
one-hundredth of one percent.
1.7 ACTUAL DEFERRAL PERCENTAGE TEST.
(A) For each Plan Year, the Plan shall satisfy the Actual
Deferral Percentage Test described in section 410(k)(3)
and the regulations thereunder, which are herein
incorporated by reference.
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The Plan satisfies the Actual Deferral Percentage Test
for a Plan Year only if:
(1) The Actual Deferral Percentage for the group of
eligible Highly Compensated Employees is not more
than the Actual Deferral Percentage for the group
of all other eligible Employees multiplied by
1.25; or
(2) The excess of the Actual Deferral Percentage for
the group of eligible Highly Compensated Employees
over the Actual Deferral Percentage for the group
of all other eligible Employees is not more than
two percentage points, and the Actual Deferral
Percentage for the group of eligible Highly
Compensated Employees is not more than the Average
Actual Deferral Percentage for the group of all
other eligible Employees multiplied by two.
(B) Special Rules.
(1) For purposes of determining the Actual Deferral
Percentage Test, Elective Deferral Contributions,
Qualified Nonelective Contributions, and Qualified
Matching Contributions must be allocated to the
Employee's Account as of a date within the Plan
Year being tested and must be made before the last
day of the twelve-month period immediately
following the Plan Year to which such
contributions relate.
(2) The Excess Deferrals of a Highly Compensated
Employee shall be taken into account for purposes
of the Actual Deferral Percentage Test.
Conversely, the Excess Deferrals of an Employee
who is a Nonhighly Compensated Employee shall not
be taken into account for purposes of the Actual
Deferral Percentage Test.
(3) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Actual Deferral
Percentage Test, including the extent to which
Qualified Nonelective Contributions and Qualified
Matching Contributions are taken into account.
1.8 ACTUAL DEFERRAL RATIO.
(A) An Employee's Actual Deferral Ratio for the Plan Year
is the sum of the Employee's Deferral Percentage
Amounts allocated to the Employee's Account for the
Plan Year (including any amounts required to be taken
into account under subparagraphs (B) (1) and (B) (2) of
this section), divided by the Employee's Compensation
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taken into account for the Plan Year. If an eligible
Employee makes no Elective Deferral Contributions, and
no Qualified Matching Contributions or Qualified
Nonelective Contributions are taken into account with
respect to the Employee, the Actual Deferral Ratio of
the Employee is zero.
(B) Special Rules.
(1) In the event that this Plan is aggregated with one
or more plans for purposes of section 410(b) of
the Code (other than for purposes of the average
benefit percentage test), or if one or more other
plans satisfy the requirements of section 410(b)
of the Code (other than the average benefit
percentage test) only if aggregated with this
Plan, then this section shall be applied by
determining the Actual Deferral Ratio of Employees
as if all such plans were a single plan. Plans
may be aggregated only if they have the same Plan
Year.
(2) The Actual Deferral Ratio of a Highly Compensated
Employee who is eligible to participate in more
than one cash or deferred arrangement (as
described in section 401(k) of the Code) of the
same Employer shall be calculated by treating all
the cash or deferred arrangements in which the
Employee is eligible to participate as one
arrangement. If the cash or deferred arrangements
that are treated as a single arrangement under the
preceding sentence are parts of plans that have
different Plan Years, the cash or deferred
arrangements are treated as a single arrangement
with respect to the Plan Years ending with or
within the same calendar year. However, plans
that are not permitted to be aggregated under
Treasury Regulation section
1.401(k)-1(b)(3)(ii)(B) are not aggregated for
purposes of this section.
(3) For purposes of determining the Actual Deferral
Ratio of a Participant who is a 5 percent owner or
one of the 10 most Highly Compensated Employees,
the Deferral Percentage Amounts and Compensation
of such Participant shall include the Deferral
Percentage Amounts (including any amounts required
to be taken into account under subparagraphs (B)
(1) and (B) (2) of this section) and Compensation
for the Plan Year of Family Members.
If an Employee is required to be aggregated as a
member of more than one family group under the
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Plan, all eligible Employees who are members of
those family groups that include that Employee are
aggregated as one family group.
Family Members, with respect to such Highly
Compensated Employees, shall be disregarded as
separate Employees in determining the Actual
Deferral Percentage both for Participants who are
Non-highly Compensated Employees and for
Participants who are Highly Compensated Employees.
(4) The determination and treatment of the Actual
Deferral Ratio amounts of any Participant shall
satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
1.9 ANNUITY. The term Annuity means a series of payments
made over a specified period of time which, for a fixed
annuity are, of equal, specified amounts, and for a
variable annuity increase or decrease to reflect
changes in investment performance of the underlying
portfolio.
1.10 ANNUITY STARTING DATE. The term Annuity Starting Date
means the first day of the first period for which an
amount is payable as an Annuity. In the case of a
benefit not payable in the form of an Annuity, the term
Annuity Starting Date means the first day on which all
events have occurred which entitle the Participant to
such benefit.
1.11 BENEFICIARY. The Participant's Spouse is the designated
Beneficiary of the Participant's entire Vested
Interest. However, each Participant shall have the
right to designate another Beneficiary and to specify
the form of death benefit the Beneficiary is to
receive, subject to the requirements of the "Qualified
Election" provisions of Article VIII, Joint and
Survivor Annuity Requirements. The Participant may
change the Beneficiary and/or the form of death benefit
at any time, subject to the requirements of the
"Qualified Election" provisions of Article VIII, Joint
and Survivor Annuity Requirements.
If any distribution hereunder is made to a Beneficiary in
the form of an Annuity, and if such Annuity provides for a
death benefit, then such Beneficiary shall also have the
right to designate a Beneficiary and to change that
Beneficiary from time to time. As an alternative to
receiving the benefit in the form of an Annuity, the
Beneficiary may elect to receive a single cash payment or
any other form of payment provided for in the Plan.
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If a Beneficiary has not been designated, or if a
Beneficiary designation or change of Beneficiary designation
does not meet the requirements of the "Qualified Election"
provisions of Article VIII, Joint and Survivor Annuity
Requirements, (including any designation made prior to
August 23, 1984 by a married Participant who has an Hour of
Service on or after August 23, 1984), or if no designated
Beneficiary survives the Participant, the Participant's
entire Vested Interest shall be distributed to the
Participant's Spouse, if living; otherwise in equal shares
to any surviving children of the Participant. In the event
none of the above named individuals survives the
Participant, the Participant's entire Vested Interest shall
be paid to the executor or administrator of the
Participant's estate.
1.12 BOARD OF DIRECTORS. The term Board of Directors means
the Employer's board of directors or other comparable
governing body.
1.13 CODE. The term Code means the Internal Revenue Code of
1986, as amended from time to time.
1.14 COMPENSATION.
(A) Except as otherwise provided in the Plan, the term
Compensation means wages within the meaning of section
3401(a) of the Code for the purposes of income tax
withholding at the source but determined without regard
to any rules that limit the remuneration included in
wages based on the nature or location of the employment
or the services performed (such as the exception for
agricultural labor in section 3401(a)(2) of the Code).
(B) Compensation shall include only that Compensation which
is actually paid to the Participant during the
determination period. Except as provided elsewhere in
the Plan, the determination period shall be the Plan
Year. However, for the Plan Year in which an Employee
begins participation in the Plan and the Plan Year in
which an Employee ends participation in the Plan, the
determination period is the portion of the Plan Year
during which the Employee is a Participant in the Plan.
(C) Compensation shall include any amount which is
contributed by the Employer pursuant to a salary
reduction agreement and which is not includible in the
gross income of the employee under sections 125,
402(e)(3), 402(h), or 403(b) of the Code; Compensation
deferred under an eligible deferred compensation plan
within the meaning of section 457(d) of the Code; and
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employee contributions described in section 414(h)(2)
of the Code that are picked up by the employing unit
and, thus, are treated as employer contributions.
(D) The annual Compensation of each Participant taken into
account for determining all benefits provided under the
Plan for any determination period shall not exceed
$200,000. This limitation shall be adjusted by the
Secretary of the Treasury at the time and in the same
manner as under section 415(d) of the Code, except that
the dollar increase in effect on January 1 of any
calendar year is effective for determination periods
beginning in such calendar year and the first
adjustment to the $200,000 limitation is effected on
January 1, 1990. If the period for determining
Compensation used in calculating an Employee's
allocation for a determination period is a short Plan
Year (i.e., shorter than 12 months), the annual
Compensation limit is an amount equal to the otherwise
applicable annual Compensation limit multiplied by a
fraction, the numerator of which is the number of
months in the short Plan Year, and the denominator of
which is 12.
In determining the Compensation of a Participant for
purposes of this limitation, the rules of section
414(q)(6) of the Code shall apply, except in applying
such rules, the term "family" shall include only the
Spouse of the Participant and any lineal descendants of
the Participant who have not attained age 19 before the
close of the year. If, as a result of the application
of such rules, the adjusted $200,000 limitation is
exceeded, then either the limitation shall be prorated
among the affected individuals in proportion to each
such individual's Compensation as determined under this
section prior to the application of this limitation, or
the limitation shall be allocated among the affected
individuals in an objective and nondiscriminatory
manner based on a reasonable, good faith interpretation
of section 401(a)(17) of the Code. The method chosen
in the preceding sentence shall be uniformly applied to
all affected individuals in a Plan Year and shall be
applied consistently from year to year.
If Compensation for any prior determination period is
taken into account in determining an Employee's
allocations or benefits for the current determination
period, the Compensation for such prior determination
period is subject to the applicable annual Compensation
limit in effect for that prior year. For this purpose,
for years beginning before January 1, 1990, the
applicable annual Compensation limit is $200,000.
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(E) In addition to other applicable limitations set forth
in the Plan, and notwithstanding any other provision of
the Plan to the contrary, for Plan Years beginning on
or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall
not exceed the OBRA '93 annual Compensation limit. The
OBRA '93 annual Compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost
of living in accordance with section 401(a)(17)(B) of
the Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding 12
months, over which Compensation is determined
(determination period) beginning in such calendar year.
If a determination period consists of fewer than 12
months, the OBRA '93 annual Compensation limit will be
multiplied by a fraction, the numerator of which is the
number of months in the determination period, and the
denominator of which is 12. For Plan Years beginning
on or after January 1, 1994, any reference in this Plan
to the limitation under section 401(a)(17) of the Code
shall mean the OBRA '93 annual Compensation limit set
forth in this provision. If Compensation for any prior
determination period is taken into account in
determining an employee's benefits accruing in the
current Plan Year, the Compensation for that prior
determination period is subject to the OBRA '93 annual
Compensation limit in effect for that prior
determination period. For this purpose, for
determination periods beginning before the first day of
the first Plan Year beginning on or after January 1,
1994, the OBRA '93 annual Compensation limit is
$150,000.
1.15 CONSIDERED NET PROFITS. The term Considered Net Profits
means the entire amount of the accumulated or current
operating profits (excluding capital gains from the
sale or involuntary conversion of capital or business
assets) of the Employer after all expenses and charges
other than (i) the contributions made by the Employer
to the Plan, and (ii) federal or state or local taxes
based upon or measured by income, as determined by the
Employer, either on an estimated basis or a final
basis, in accordance with the generally accepted
accounting principles used by the Employer. When the
amount of Considered Net Profits has been determined by
the Employer, and the contributions are made by the
Employer on the basis of such determination, for any
Plan Year, such determination and contribution shall be
final and conclusive and shall not be subject to change
because of any adjustments in income or expense which
may be required by the Internal Revenue Service or
otherwise. Such determination and contribution shall
not be open to question by any Participant either
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before or after the contributions by the Employer have
been made.
1.16 CONTRIBUTION PERCENTAGE AMOUNTS. The term Contribution
Percentage Amounts means the sum of the Matching
Contributions and Qualified Matching Contributions (to
the extent not taken into account for purposes of the
Actual Deferral Percentage Test) made under the Plan on
behalf of the Employee for the Plan Year. The term
Contribution Percentage Amounts also includes Qualified
Nonelective Contributions and Elective Deferral
Contributions treated as Matching Contributions and
taken into account in determining the Employee's Actual
Contribution Ratio for the Plan Year.
1.17 CONTRIBUTION PERIOD. The term Contribution Period means
that regular period specified by the Employer in
Article IV for which contributions shall be made.
1.18 DEFERRAL PERCENTAGE AMOUNTS. The term Deferral
Percentage Amounts means an Employee's Elective
Deferral Contributions for the Plan Year. The term
Deferral Percentage Amounts also includes Qualified
Nonelective Contributions and Qualified Matching
Contributions treated as Elective Deferral
Contributions and taken into account in determining the
Employee's Actual Deferral Ratio for the Plan Year.
1.19 DISABILITY. The term Disability means a Participant's
incapacity to engage in any substantial gainful
activity because of a medically determinable physical
or mental impairment which can be expected to result in
death, or to be of long, continued and indefinite
duration. Such determination of Disability shall be
made by the Administrator with the advice of competent
medical authority. All Participants in similar
circumstances will be treated alike.
1.20 DISABILITY RETIREMENT DATE. The term Disability
Retirement Date means the first day of the month after
the Plan Administrator has determined that a
Participant's incapacity is a Disability.
1.21 EARLY RETIREMENT DATE. The term Early Retirement Date
means the first day of the month coinciding with or
next following the date a Participant is separated from
Service with the Employer on or after the date he
attains age 55 and has 5 Years of Service for any
reason other than death or Disability, provided that on
such date the Participant has not attained his Normal
Retirement Age.
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1.22 EFFECTIVE DATE. The term Effective Date means January
1, 1989.
1.23 ELECTIVE DEFERRAL CONTRIBUTION. The term Elective
Deferral Contribution means any Employer Contribution
made to the Plan at the election of the Participant, in
lieu of cash compensation, and includes contributions
made pursuant to a Salary Deferral Agreement or other
deferral mechanism.
Solely for purposes of the dollar limitation specified in
section 402(g) of the Code, with respect to any taxable
year, a Participant's Elective Deferral Contributions are
the sum of all employer contributions made on behalf of such
Participant pursuant to an election to defer under any
qualified cash or deferred arrangement as described in
section 401(k) of the Code, any simplified employee pension
cash or deferred arrangement described in section
402(h)(1)(B) of the Code, any plan as described under
section 501(c)(18) of the Code, and any employer
contributions made on behalf of a Participant for the
purchase of a tax sheltered annuity contract under section
403(b) of the Code pursuant to a salary reduction agreement.
The term Elective Deferral Contribution shall not include
any deferrals properly distributed as excess annual
additions.
1.24 EMPLOYEE. The term Employee means an individual who
performs services for the Employer and who is either a
common law employee of the Employer or a self-employed
individual/owner employee treated as an Employee
pursuant to Code section 401(c)(1). The term Employee
also includes a Leased Employee who is treated as an
Employee of the Employer-recipient pursuant to the
provisions of Code section 414(n) or 414(o). For
purposes of determining the Highly Compensated
Employees, the Employer may elect, on a reasonable and
consistent basis, to treat such Leased Employees
covered by a plan described in Code section 414(n)(5)
as Employees.
1.25 EMPLOYEE CONTRIBUTIONS. The term Employee
Contributions means any contributions to the Plan or
any other plan that are designated or treated at the
time of contribution as after-tax Employee
Contributions and are allocated to a separate account
to which the attributable earnings and losses are
allocated. Such term includes Employee Contributions
applied to the purchase of life insurance policies.
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Such term does not include repayment of loans or buy-back of
benefits described in code section (411)(a)(7)(c) or
employee contributions transferred to this Plan.
1.26 EMPLOYER. The term Employer means Western Waste
Industries and any successor organization to such
Employer which elects to continue the Plan. In the
case of a group of employers which constitutes a
controlled group of corporations (as defined in Code
section 414(b)), or which constitutes trades or
businesses (whether or not incorporated) which are
under common control (as defined in Code section
414(c)), or which constitutes an affiliated service
group (as defined in Code section 414(m)), all such
employers shall be considered a single employer for
purposes of participation, vesting, Top-Heavy
provisions and determination of Highly Compensated
Employees.
1.27 EMPLOYER CONTRIBUTION. The term Employer Contribution
means any contribution made to the Plan by the Employer
on behalf of a Participant, other than a Rollover
Contribution or a mandatory or voluntary contribution
made to the Plan by the Employee that is treated at the
time of contribution as an after-tax employee
contribution.
1.28 ENTRY DATE. The term Entry Date means either the
Effective Date or the January 31, April 30, July 31, or
October 31 thereafter when an Employee who has
fulfilled the eligibility requirements commences
participation in the Plan.
Any Employee who has satisfied the maximum eligibility
requirements permissible under ERISA, shall be eligible to
commence participation in this Plan no later than the
earlier of (A) or (B) below, as applicable, provided that
the Employee has not separated from the Service of the
Employer:
(A) The first day of the first Plan Year beginning after
the date on which the Employee satisfied such
requirements; or
(B) The date six months after the date on which the
Employee satisfied such requirements.
If an Employee is not in the active Service of the Employer
as of his initial Entry Date, his subsequent Entry Date
shall be the date he returns to the active Service of the
Employer, provided he still meets the eligibility
requirements. If an Employee does not enroll as a
Participant as of his initial Entry Date, his subsequent
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Entry Date shall be the applicable Entry Date as specified
above when the Employee actually enrolls as a Participant.
1.29 ERISA. The term ERISA means the Employee Retirement
Income Security Act of 1974 (PL 93-406) as it may be
amended from time to time, and any regulations issued
pursuant thereto as such Act and such regulations
affect this Plan and Trust.
1.30 EXCESS AGGREGATE CONTRIBUTIONS.
(A) The term Excess Aggregate Contributions means, with
respect to any Plan Year, the excess of the aggregate
amount of the Contribution Percentage Amounts actually
made on behalf of Highly Compensated Employees for the
Plan Year (including any amounts required to be taken
into account under subparagraphs (B) (1) and (B) (2) of
Section 1.5 of the Plan), over the maximum amount of
contributions permitted under the Actual Contribution
Percentage Test. The amount of Excess Aggregate
Contributions for each Highly Compensated Employee is
determined by using the method described in paragraph
(B) of this section.
(B) The amount of Excess Aggregate Contributions for a
Highly Compensated Employee for a Plan Year is the
amount (if any) by which the Employee's Matching
Contributions must be reduced for the Employee's Actual
Contribution Ratio to equal the highest permitted
Actual Contribution Ratio under the Plan.
To calculate the highest permitted Actual Contribution
Ratio under the Plan, the Actual Contribution Ratio of
the Highly Compensated Employee with the highest Actual
Contribution Ratio is reduced by the amount required to
cause the Employee's Actual Contribution Ratio to equal
the ratio of the Highly Compensated Employee with the
next highest Actual Contribution Ratio. If a lesser
reduction would enable the Plan to satisfy the Actual
Contribution Percentage Test, only this lesser
reduction may be made. This process shall be repeated
until the Plan satisfies the Actual Contribution
Percentage Test. The highest Actual Contribution
Percentage Ratio remaining under the Plan after
leveling is the highest permitted Actual Contribution
Ratio.
For each Highly Compensated Employee, the amount of
Excess Aggregate Contributions for a Plan Year is equal
to the total Contribution Percentage Amounts (including
any amounts required to be taken into account under
subparagraphs (B) (1) and (B) (2) of Section 1.5 of the
Plan), minus the amount determined by multiplying the
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Employees's highest permitted Actual Contribution Ratio
(determined after application of this section) by the
compensation used in determining the ratio.
1.31 EXCESS CONTRIBUTION.
(A) The term Excess Contribution means, with respect to a
Plan Year, the excess of Deferral Percentage Amounts
made on behalf of eligible Highly Compensated Employees
for the Plan Year (including any amounts required to be
taken into account under subparagraphs (B) (1) and (B)
(2) of Section 1.8 of the Plan) over the maximum amount
of such contributions permitted under the Actual
Deferral Percentage Test for the Plan Year. The amount
of Excess Contributions for each Highly Compensated
Employee is determined by using the method described in
paragraph (B) of this section.
(B) The amount of Excess Contributions for a Highly
Compensated Employee for a Plan Year is the amount (if
any) by which the Employee's Elective Deferral
Contributions must be reduced for the Employee's Actual
Deferral Ratio to equal the highest permitted Actual
Deferral Ratio under the Plan.
To calculate the highest permitted Actual Deferral
Ratio under the Plan, the Actual Deferral Ratio of the
Highly Compensated Employee with the highest Actual
Deferral Ratio is reduced by the amount required to
cause the Employee's Actual Deferral Ratio to equal the
ratio of the Highly Compensated Employee with the next
highest Actual Deferral Ratio. If a lesser reduction
would enable the arrangement to satisfy the Actual
Deferral Percentage Test, only this lesser reduction
shall be made. This process shall be repeated until
the cash or deferred arrangement satisfies the Actual
Deferral Percentage Test. The highest Actual Deferral
Ratio remaining under the Plan after leveling is the
highest permitted Actual Deferral Ratio.
1.32 EXCESS DEFERRALS. The term Excess Deferrals means
those Elective Deferral Contributions that are
includible in a Participant's gross income under
section 402(g) of the Code to the extent such
Participant's Elective Deferral Contributions for a
taxable year exceed the dollar limitation under such
Code section.
1.33 FAIL-SAFE CONTRIBUTION. The term Fail-Safe Contribution
means a Nonelective Contribution, designated by the
Employer at the time of contribution as a Qualified
Nonelective Contribution, which is contributed to the
Plan solely for the purposes of satisfying either the
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Actual Deferral Percentage Test or the Actual
Contribution Percentage Test and is made in accordance
with the provisions of Article IV of this Plan.
1.34 FAMILY MEMBER. The term Family Member means, with
respect to any Employee, such Employee's Spouse and
lineal ascendants and descendants and the spouses of
such lineal ascendants and descendants.
1.35 FIDUCIARY. The term Fiduciary means any, or all, of
the following, as applicable:
(A) Any Person who exercises any discretionary authority or
control respecting the management of the Plan or its
assets; or
(B) Any Person who renders investment advice for a fee or
other compensation, direct or indirect, respecting any
monies or other property of the Plan or has authority
or responsibility to do so; or
(C) Any Person who has discretionary authority or
responsibility in the administration of the Plan; or
(D) Any Person who has been designated by a Named Fiduciary
pursuant to authority granted by the Plan, who acts to
carry out a fiduciary responsibility, subject to any
exceptions granted directly or indirectly by ERISA.
1.36 FORFEITURE. The term Forfeiture means the amount, if
any, by which the value of a Participant's Account
exceeds his Vested Interest following such
Participant's Termination of Employment, and at the
time specified in Section 9.1.
1.37 HIGHLY COMPENSATED EMPLOYEE. The term Highly
Compensated Employee means any Highly Compensated
Active Employee or Highly Compensated Former Employee
as further defined herein.
For purposes of the determination of Highly Compensated
Employees, the term Compensation means Compensation as
defined in Article V of the Plan, but includes the amount of
any elective contributions made by the Employer on the
Employee's behalf to a cafeteria plan established in
accordance with the provisions of Code section 125, a
qualified cash or deferred arrangement in accordance with
the provisions of Code section 402(e)(3), a simplified
employee pension plan in accordance with the provisions of
Code section 402(h), or a tax sheltered annuity plan
maintained in accordance with the provisions of Code section
403(b).
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A "Highly Compensated Active Employee" is any Employee who
performs services for the Employer during the current Plan
Year and who, during the current Plan Year or the 12-month
period immediately preceding such Plan Year:
(A) Owns (or is considered to own within the meaning of
section 318 of the Code, as modified by section
416(i)(1)(B)(iii) of the Code), more than 5% of the
outstanding stock of the Employer or stock possessing
more than 5% of the total combined voting power of all
stock of the Employer, or, if the Employer is other
than a corporation, owns more than 5% of the capital or
profits interest in the Employer. The determination of
5% ownership shall be made separately for each member
of a controlled group of corporations (as defined in
Code section 414(b)), or of a group of trades or
businesses (whether or not incorporated) that are under
common control (as defined in Code section 414(c)), or
of an affiliated service group (as defined in Code
section 414(m)); or
(B) Receives Compensation in excess of $75,000 multiplied
by the applicable cost-of-living adjustment factor
prescribed under Code section 415(d) and then prorated
in the case of a short Plan Year; or
(C) Receives Compensation in excess of $50,000, as adjusted
for cost-of-living increases in accordance with Code
section 415(d) and then prorated in the case of a short
Plan Year, and is in the top 20% of Employees ranked by
Compensation; or
(D) Is, at any time, an officer of the Employer and
receives Compensation in excess of 50% of the amount in
effect under Code section 415(b)(1)(A) for the
applicable period.
If no officer receives Compensation in excess of the
amount specified above, the highest paid officer for
the applicable period shall be a Highly Compensated
Employee.
In no event if there are more than 500 Employees, shall
more than 50 Employees or, if there are less than 500
Employees, shall the greater of three Employees or 10%
of all Employees, be taken into account as officers.
In determining both the top 20% of Employees ranked by
Compensation for purposes of paragraph (C) above, and
officers of the Employer for purposes of paragraph (D)
above, Employees who have not completed six months of
Service by the end of the applicable period, Employees who
normally work less than 17-1/2 hours per week, Employees who
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normally work less than six months during a year, Employees
who have not attained 21, and nonresident aliens who receive
no earned income from U.S. sources shall be excluded.
Also excluded under the above paragraph are Employees who
are covered by an agreement which the Secretary of Labor
finds to be a collective bargaining agreement. Such
Employees will be excluded only if retirement benefits were
the subject of good faith bargaining, 90% of the Employees
of the Employer are covered by the agreement, and the Plan
covers only Employees who are not covered by the agreement.
Notwithstanding the above provisions, an Employee, other
than a 5% owner as described in paragraph (A) above who was
not highly compensated during the 12-month period
immediately preceding the current Plan Year will not be
considered to be a Highly Compensated Employee in the
current Plan Year unless such Employee is one of the top 100
Employees ranked by Compensation for the current Plan Year.
A "Highly Compensated Former Employee" is any former
Employee who separated from Service with the Employer in a
Plan Year preceding the current Plan Year and was a Highly
Compensated Active Employee in either:
(A) the Plan Year in which his separation from Service
occurred; or
(B) any Plan Year ending on or after such former Employee's
55th birthday.
A former Employee is an Employee who performs no services
for the Employer during a Plan Year (for example, by reason
of a leave of absence).
1.38 INACTIVE PARTICIPANT. The term Inactive Participant
means any Participant who does not currently meet the
requirements to be an Active Participant due to a
suspension of the performance of duties for the
Employer.
In addition, a Participant who ceases to meet the
eligibility requirements in accordance with Section 3.1
shall be considered an Inactive Participant.
1.39 INSTALLMENT REFUND ANNUITY. The term Installment
Refund Annuity means an annuity which provides fixed
monthly payments for a period certain of not less than
three nor more than 15 years. If the Participant dies
before the period certain expires, the annuity will be
paid to the Participant's Beneficiary for the remainder
of the period certain. The period certain shall be
chosen by the Participant at the time the annuity is
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purchased, and the Installment Refund Annuity will be
the amount of benefit which can be purchased with the
Participant's Vested Interest. The Installment Refund
Annuity is not a life annuity and in no event shall the
period certain extend to a period which equals or
exceeds the life expectancy of the Participant.
1.40 JOINT AND SURVIVOR ANNUITY. The term Joint and
Survivor Annuity means an Annuity for the life of the
Participant with a survivor Annuity for the life of the
Participant's Spouse which is not less than one-half,
nor greater than, the amount of the Annuity payable
during the joint lives of the Participant and the
Participant's Spouse. The Joint and Survivor Annuity
will be the amount of benefit which can be purchased
with the Participant's vested account balance. In the
case of an unmarried Participant, Joint and Survivor
Annuity means an Annuity payable over the Participant's
life.
1.41 LATE RETIREMENT DATE. The term Late Retirement Date
means the first day of the month coinciding with or
next following the date a Participant is separated from
Service with the Employer after his Normal Retirement
Age, for any reason other than death.
1.42 LEASED EMPLOYEE. The term Leased Employee means any
person (other than an Employee of the recipient) who,
pursuant to an agreement between the recipient and any
other person ("leasing organization"), has performed
services for the recipient (or for the 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 recipient Employer.
1.43 MATCHING CONTRIBUTIONS. The term Matching
Contributions means contributions made by the Employer
to the Plan on behalf of a Participant on account of
either Elective Deferral Contributions, if any,
Employee Contributions, if any, or required
contributions, if any.
1.44 NAMED FIDUCIARY. The term Named Fiduciary means the
Plan Administrator, the Trustee and any other Fiduciary
designated in writing by the Employer, and any
successor thereto.
1.45 NONELECTIVE CONTRIBUTIONS. The term Nonelective
Contributions means contributions made by the Employer
(other than Matching Contributions) that the
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Participant may not elect to have paid in cash or other
benefits instead of being contributed to the Plan.
1.46 NONHIGHLY COMPENSATED EMPLOYEE. The term Nonhighly
Compensated Employee means an Employee who is not a
Highly Compensated Employee.
1.47 NORMAL RETIREMENT AGE. The term Normal Retirement Age
means the date the Participant attains age 65.
1.48 NORMAL RETIREMENT DATE. The term Normal Retirement Date
means the first day of the month coinciding with or
next following the date a Participant attains his
Normal Retirement Age.
1.49 PARTICIPANT. The term Participant means any Employee of
the Employer, who is or becomes eligible to participate
under this Plan in accordance with its provisions and
shall include an Active Participant and an Inactive
Participant.
1.50 PARTICIPANT'S ACCOUNT. The term Participant's Account
means the sum of the following sub-accounts held on
behalf of each Participant:
Elective Deferral Contributions, if any, and earnings
thereon.
Matching Contributions, if any, and earnings thereon.
Qualified Matching Contributions, if any, and earnings
thereon.
Nonelective Contributions, if any, and earnings
thereon.
Qualified Nonelective Contributions, if any, and
earnings thereon.
Rollover Contributions, if any, and earnings thereon.
A Participant's Account shall be invested in accordance with
the rules established by the Plan Administrator, which shall
be applied in a consistent and nondiscriminatory manner.
1.51 PARTICIPANT'S EMPLOYER STOCK ACCOUNT. The term
Participant's Employer Stock Account means that
portion, if any, of the Participant's Account which is
invested in shares of the Employer's stock. Such
Participant's Employer Stock Account shall be credited
with dividends paid, if any. Such Participant's
Employer Stock Account will be valued on the last day
of each month that the public exchange over which the
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Employer's stock is traded is open for unrestricted
trading.
Amounts which are to be invested in the Participant's
Employer Stock Account may be invested in any short-term
account prior to actual investment in the Participant's
Employer Stock Account.
The Trustee will vote the shares of the Employer's stock
invested in the Participant's Employer Stock Account. The
Trustee may request voting instructions from the
Participants, provided this is done in a consistent and
nondiscriminatory manner.
1.52 PERSON. The term Person means any natural person,
partnership, corporation, trust or estate.
1.53 PLAN. The term Plan means Western Waste Industries
401(k) Savings and Investment Plan, the terms of which
are set forth herein as it may be amended from time to
time.
1.54 PLAN ADMINISTRATOR. The terms Plan Administrator and
Administrator are used interchangeably throughout the
Plan and Trust and shall mean the Employer.
1.55 PLAN YEAR. The term Plan Year means the 12-month
period commencing on January 1 and ending on the
following December 31.
1.56 QUALIFIED MATCHING CONTRIBUTIONS. The term Qualified
Matching Contributions shall mean Matching
Contributions which are subject to the distribution and
nonforfeitability requirements under section 401(k) of
the Code when made.
1.57 QUALIFIED NONELECTIVE CONTRIBUTIONS. The term
Qualified Nonelective Contributions shall mean
Nonelective Contributions which are subject to the
distribution and nonforfeitability requirements under
section 401(k) of the Code when made.
1.58 ROLLOVER CONTRIBUTION. The term Rollover Contribution
means an amount representing all or part of a
distribution from a pension or profit-sharing plan
meeting the requirements of Code section 401(a) that is
eligible for rollover to this Plan in accordance with
the requirements set forth in Code section 402 or Code
section 408(d)(3), whichever is applicable.
1.59 SALARY DEFERRAL AGREEMENT. The term Salary Deferral
Agreement means an agreement between a Participant and
the Employer to defer the Participant's Compensation
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for the purpose of making Elective Deferral
Contributions to the Plan.
1.60 TERMINATION OF EMPLOYMENT. The term Termination of
Employment means a severance of the Employer-Employee
relationship which occurs prior to a Participant's
Normal Retirement Age for any reason other than Early
Retirement, Disability or death.
1.61 TRUST. The term Trust means the trust agreement entered
into by the Employer, the Administrator and the
Trustee, which trust agreement forms a part of, and
implements the provisions of this Plan.
1.62 TRUSTEE. The term Trustee means one or more individuals
collectively appointed and acting under the trust
agreement, and any successor thereto.
1.63 VESTED INTEREST. The term Vested Interest on any date
means the nonforfeitable right to an immediate or
deferred benefit in the amount which is equal to the
following:
(A) the value on that date of that portion of the
Participant's Account that is attributable to the
following contributions:
Elective Deferral Contributions, if any
Rollover Contributions, if any
Qualified Matching Contributions, if any
Qualified Nonelective Contributions, if any
(B) plus the value on that date of that portion of the
Participant's Account that is attributable to and
derived from:
Matching Contributions, if any
Nonelective Contributions, if any
Such contributions pursuant to Subsection (B), plus the
earnings thereon, shall be, at any relevant time, a
part of the Participant's Vested Interest equal to an
amount ("X") determined by the following formula:
X = P(AB + D) - D
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For the purposes of applying this formula:
P = The Participant's Vesting Percentage
at the relevant time.
AB = The account balance attributable
to such contributions, plus
the earnings thereon, at the
relevant time.
D = The amount of the distribution.
1.64 VESTING PERCENTAGE. The term Vesting Percentage means
the percentage used to determine a Participant's Vested
Interest in contributions made by the Employer, plus
the earnings thereon, credited to his Participant's
Account that are not 100% immediately vested. The
Vesting Percentage for each Participant shall be
determined in accordance with the following schedule
based on Years of Service with the Employer:
Months of Service Vesting Percentage
up to 12 mo. 20%
13 mo. - 24 mo. 40%
25 mo. - 36 mo. 60%
37 mo. - 48 mo. 80%
49 mo. - 60 mo. 100%
However, if an Active Participant dies prior to attaining his
Normal Retirement Age, his Vesting Percentage shall be 100%.
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ARTICLE II
SERVICE
----------
2.1 SERVICE. The term Service means active employment with
the Employer as an Employee. For purposes of
determining Service, employment with any company which
is under common control with the Employer as specified
in section 414 of the Internal Revenue Code shall be
treated as employment with the Employer.
2.2 ABSENCE FROM EMPLOYMENT. Absence from employment on
account of a leave of absence authorized by the
Employer pursuant to the Employer's established leave
policy will be counted as employment with the Employer
provided that such leave of absence is of not more than
two years' duration. Absence from employment on
account of active duty with the Armed Forces of the
United States will be counted as employment with the
Employer. If the Employee does not return to active
employment with the Employer, his Service will be
deemed to have ceased on the date the Administrator
receives notice that such Employee will not return to
the active Service of the Employer. The Employer's
leave policy shall be applied in a uniform and
nondiscriminatory manner to all Participants under
similar circumstances.
2.3 HOUR OF SERVICE. The term Hour of Service means a
period of Service during which an Employee shall be
credited with one Hour of Service as described in (A),
(B), (C), and (D) below:
(A) Each hour for which an Employee is directly or
indirectly paid, or entitled to payment, by the
Employer for the performance of duties. These hours
shall be credited to the Employee for the computation
period or periods in which the duties are performed;
and
(B) Each hour for which an Employee is directly or
indirectly paid, or entitled to payment, by the
Employer for reasons (such as vacation, sickness or
Disability) other than for the performance of duties.
Hours under this Subsection shall be calculated and
credited pursuant to section 2530.200b-2 of the
Department of Labor Regulations which are incorporated
herein by this reference; and
(C) Each hour for which back pay, irrespective of
mitigation of damages, has been either awarded or
agreed to by the Employer. These hours shall be
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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; and
(D) Each hour for which an Employee is on an authorized
unpaid leave (such as service with the Armed Forces,
jury duty, educational leave). These hours shall be
credited to the Employee for the computation period or
periods in which such authorized leave takes place.
However, no more than 501 hours shall be credited under
this subparagraph (D).
Hours of Service will be credited for employment with other
members of an affiliated service group (under Internal
Revenue Code section 414(m)), a controlled group of
corporations (under Internal Revenue Code section 414(b)),
or a group of trades or businesses under common control
(under Internal Revenue Code section 414(c)), of which the
adopting employer is a member. Hours of Service will also
be credited for any individual considered an Employee under
Internal Revenue Code section 414(n).
Solely for purposes of determining whether a One-Year Break
in Service, as defined in Section 2.4, for participation and
vesting purposes has occurred in a computation period, an
individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of
Service which would otherwise have been credited to such
individual but for such absence, or in any case in which
such hours cannot be determined, eight Hours of Service per
day of such absence. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means
an absence (1) by reason of the pregnancy of the individual,
(2) by reason of a birth of a child of the individual, (3)
by reason of the placement of a child with the individual in
connection with the adoption of such child by such
individual, or (4) for purposes of caring for such child for
a period beginning immediately following such birth or
placement. The Hours of Service credited under this
paragraph shall be credited (1) in the computation period in
which the absence begins if the crediting is necessary to
prevent a Break in Service in that period, or (2) in all
other cases, in the following computation period.
2.4 ONE-YEAR BREAK IN SERVICE. Except as provided below
regarding eligibility, the term One-Year Break in
Service means any Plan Year during which an Employee
fails to complete more than 500 Hours of Service.
2.5 DETERMINING VESTING PERCENTAGE. Vesting credit shall be
given for each Year of Service except those periods
specified in Section 2.7.
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If a Participant completes less than 1,000 Hours of Service
during a Plan Year while remaining in the Service of the
Employer, his Vesting Percentage shall not be increased for
such Plan Year. However, at such time as the Participant
again completes at least 1,000 Hours of Service in any
subsequent Plan Year, his Vesting Percentage shall then take
into account all Year(s) of Service with the Employer except
those specified in Section 2.7.
If an individual who ceases to be an Employee and is
subsequently rehired as an Employee enrolls (or re-enrolls)
in the Plan, upon his participation (or subsequent
participation) his Vesting Percentage shall then take into
account all Year(s) of Service except those specified in
Section 2.7.
2.6 YEAR(S) OF SERVICE. The term Year(s) of Service means
a 12-consecutive-month period during which an Employee
has completed at least 1,000 Hours of Service.
(A) Eligibility Computation Period.
For purposes of determining Years of Service and Breaks
in Service for eligibility, the
twelve-consecutive-month period shall begin with the
date on which an Employee's employment commenced and,
where additional periods are necessary, on succeeding
anniversaries of his employment commencement date. The
employment commencement date is the date on which the
Employee first performs an Hour of Service for the
Employer maintaining the Plan.
The eligibility requirement specified in Article III is
one or more full Years of Service. Such requirement
shall be met upon completion of at least 1,000 Hours of
Service for each Year of Service specified.
(B) Vesting Computation Period.
In computing Years of Service and Breaks in Service for
vesting, the 12-consecutive-month period shall be the
Plan Year. However, active participation as of the
last day of the Plan Year is not required in order for
a Participant to be credited with a Year of Service for
vesting purposes.
For purposes of the Vesting Computation Period, if any
Plan Year is less than 12-consecutive months, and if a
Participant would have been credited with a Year of
Service during the 12-consecutive-month period
beginning on the first day of the short Plan Year, then
the Participant will receive a Year of Service for the
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short Plan Year. The Participant receives credit for
an additional Year of Service if the Participant would
have been credited with a Year of Service for the Plan
Year immediately following the short Plan Year.
(C) Contribution Computation Period.
For purposes of determining a Participant's eligibility
to receive a contribution made by the Employer,
pursuant to Article IV, which is conditioned upon a
Year of Service requirement, the
twelve-consecutive-month period shall be any Plan Year
during which the Active Participant is credited with at
least 1,000 Hours of Service. However, when an
Employee first becomes a Participant or resumes active
participation in the Plan following a One-Year Break in
Service on a date other than the first day of the Plan
Year, all Hours of Service credited to the Participant
during that Plan Year, including those hours credited
prior to the date the Employee enrolls (or re-enrolls)
as an Active Participant in the Plan, shall be counted.
For purposes of the Contribution Computation Period, if
any Plan Year is less than 12 consecutive months, the
number of Hours of Service required to accrue a Year of
Service, in such short Plan Year, shall bear the same
ratio to 1000 as the number of days in the short Plan
Year bears to 365.
2.7 EXCLUDED YEARS OF SERVICE. In determining the Vesting
Percentage of an Employee, all Years of Service with
the Employer shall be taken into account except:
Plan Years during which a Participant did not complete
at least 1,000 Hours of Service.
2.8 PREDECESSOR ORGANIZATION SERVICE. For purposes of this
Article, Service with a predecessor organization of the
Employer shall be treated as Service with the Employer
in any case in which the Employer maintains the Plan of
such predecessor organization.
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ARTICLE III
ELIGIBILITY, ENROLLMENT AND PARTICIPATION
-----------------------------------------
3.1 ELIGIBILITY. Each Employee who was a Participant prior
to the Effective Date and who is in the Service of the
Employer on the Effective Date shall continue as a
Participant in the Plan. Each other Employee,
including a Leased Employee, shall be eligible to
become a Participant as of the Entry Date when he first
meets the following requirement(s):
90 days of employement with the Employer
Age 21
Not in a unit of Employees covered by an agreement
which the Secretary of Labor finds to be a collective
bargaining agreement between Employee representatives
and the Employer, if there is evidence that retirement
benefits were the subject of good faith bargaining
between such Employee representatives and the Employer,
unless the collective bargaining agreement provides for
coverage under this Plan.
3.2 ENROLLMENT AND PARTICIPATION. Each eligible Employee
may enroll as of his Entry Date by completing and
delivering to the Administrator an enrollment form and,
if applicable, a Salary Deferral Agreement. He will
then become a Participant as of his Entry Date.
3.3 RE-EMPLOYED EMPLOYEE. In the case of an individual who
ceases to be an Employee and is subsequently rehired as
an Employee, the following provisions shall apply in
determining his eligibility to again participate in the
Plan:
(A) If the Employee had met the eligibility requirement(s)
specified in Section 3.1 prior to his separation from
employment, he shall become an Active Participant in
the Plan as of the date he is re-employed, after
completing the applicable form(s), in accordance with
Section 3.2.
(B) If the Employee had not met the eligibility
requirement(s) specified in Section 3.1 prior to his
separation from employment, he shall be eligible to
participate in the Plan on the first Entry Date
following his fulfillment of such eligibility
requirement(s).
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For purposes of this Subsection, all Years of Service with
the Employer, including any Years of Service prior to any
Breaks in Service, shall be taken into account.
3.4 ELIGIBLE CLASS. In the event a Participant becomes
ineligible to participate because he is no longer a
member of an eligible class of Employees, such Employee
shall participate immediately upon his return to an
eligible class of Employees.
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 shall participate immediately if such Employee
has satisfied the minimum age and service requirements and
would have previously become a Participant had he been in
the eligible class.
3.5 WAIVER OF PARTICIPATION. Notwithstanding any provision
of the Plan to the contrary, any Employee in accordance
with the rules of the Plan may decline to become a
Participant or cease to be an Active Participant by
filing a written waiver of participation with the
Administrator in the manner he prescribes. Such waiver
must be filed prior to the date such Employee is
eligible to become a Participant, or in the case of an
Active Participant, in the last month of the Plan Year
immediately preceding the Plan Year for which he wishes
to cease being an Active Participant.
Any Employee who files such a waiver shall not become a
Participant, or if an Active Participant, shall elect to
cease to be such as of the first day of the succeeding Plan
Year; and such Employee shall not receive any additional
compensation or other sums by reason of his waiver of
participation.
Any such waiver may be rescinded by an Employee effective on
the first day of the first Plan Year following one or more
Plan Years commencing after the filing of such waiver in
which he was not an Active Participant, in which event he
shall become a Participant, or again become an Active
Participant, as the case may be, effective as of such date.
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ARTICLE IV
CONTRIBUTIONS
-------------
4.1 ELECTIVE DEFERRAL CONTRIBUTIONS. Each Active
Participant may enter into a written Salary Deferral
Agreement with the Employer in an amount equal to not
less than 1% nor more than 20% of his Compensation for
the Contribution Period. In consideration of such
agreement, the Employer will make a contribution for
each Contribution Period on behalf of the Participant
in an amount equal to the total amount by which the
Participant's Compensation from the Employer was
deferred during the Contribution Period pursuant to the
Salary Deferral Agreement then in effect. Elective
Deferral Contributions shall be paid by the Employer to
the Trust not less frequently than monthly, but in no
event later than 90 days following the date the amounts
were deferred. Notwithstanding the above stated
percentages, an Active Participant may, at any time,
elect to defer a portion of his Compensation in a
lump-sum amount not to exceed the limit specified in
Section 4.1(b).
Salary Deferral Agreements shall be governed by the
following provisions:
(A) Amounts contributed pursuant to a Salary Deferral
Agreement shall be 100% vested and non-forfeitable at
all times.
(B) No Participant shall be permitted to have Elective
Deferral Contributions made under this Plan, or any
other qualified plan maintained by the Employer, during
any taxable year, in excess of the dollar limitation
contained in section 402(g) of the Code in effect at
the beginning of the taxable year.
(C) Amounts contributed pursuant to a Salary Deferral
Agreement, which are not in excess of the limit
described in Subsection (B) above, shall be subject to
the Limitations on Allocations in accordance with
Article V. Elective Deferral Contributions that are in
excess of the limit described in Subsection (B) shall
also be subject to the Limitations on Allocations in
accordance with Article V.
(D) A Salary Deferral Agreement may be changed by a
Participant four times during the Plan Year, on January
31, April 30, July 31, and October 31, by filing
written notice thereof with the Administrator. Such
notice shall be effective, and the Salary Deferral
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Agreement shall be changed on the date specified in
such notice or as soon as administratively possible,
which date must be at least 15 days after such notice
is filed.
(E) Elective Deferral Contributions shall be subject to the
Actual Deferral Percentage Test limitations.
(F) Correction of Excess Contributions.
(1) If the Employer determines prior to the end of the
Plan Year that the Actual Deferral Percentage Test
may not be satisfied, the Employer may take the
corrective action specified in Section 4.12 of the
Plan.
(2) If, after the end of the Plan Year, the Employer
determines that the Plan will fail the Actual
Deferral Percentage Test, the Employer shall take
the corrective action specified in Section 4.14 or
Section 4.17 of the Plan, or a combination of such
corrective actions, in order to ensure that the
Plan does not fail the Actual Deferral Percentage
Test for the Plan Year being tested.
4.2 MATCHING CONTRIBUTIONS. The Employer shall make a
Matching Contribution out of Considered Net Profits in
an amount equal to $.50 for each $1.00 by which a
Participant defers his Compensation pursuant to a
Salary Deferral Agreement up to the maximum deferral
permitted by law, subject to the Limitations on
Allocations specified in Article V. If there are
insufficient Considered Net Profits of the Employer for
such Matching Contribution, the amount of such
contribution will be diminished to the amount that can
be made from the Employer's Considered Net Profits.
The Matching Contribution shall be paid to the Trust
not less frequently than monthly. Matching
Contributions shall be subject to the Actual
Contribution Percentage Test. The Employer may
designate at the time of contribution that all or a
portion of such Matching Contributions be treated as
Qualified Matching Contributions.
If the Employer determines prior to the end of the Plan Year
that the Actual Contribution Percentage Test may not be
satisfied, the Employer may take the corrective action
specified in Section 4.13 of the Plan.
If, after the end of the Plan Year, the Employer determines
that the Plan will fail the Actual Contribution Percentage
Test, the Employer shall take the corrective action
specified in Section 4.15 or Section 4.17 of the Plan, or a
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<PAGE>
combination of such corrective actions, in order to ensure
that the Plan does not fail the Actual Contribution
Percentage Test for the Plan Year being tested.
Such Matching Contribution shall be allocated as of the last
day of the Contribution Period for which such contribution
is made to each Participant who:
is an Active Participant as of any day of the
Contribution Period.
Matching Contributions may be made in the form of cash
and/or Employer Stock.
Notwithstanding the above provision, an allocation will be
made on behalf of a Participant who dies, retires, or
becomes disabled during the Contribution Period.
4.3 NONELECTIVE CONTRIBUTIONS. The Employer may make a
contribution under the Plan for any Plan Year of an
amount out of Considered Net Profits that the
Employer's Board of Directors shall determine by
resolution. Such resolution shall either specify a
fixed amount or specify a definite formula by which a
fixed amount can be determined.
The Employer may designate at the time of contribution that
all or a portion of such Nonelective Contribution be treated
as a Qualified Nonelective Contribution.
Nonelective Contributions may be made in the form of cash
and/or Employer Stock.
Such Nonelective Contribution shall be allocated as of the
last day of the Plan Year for which such contribution is
made to each Participant who:
has a Year of Service for contribution purposes, as
defined in Article II.
is an Active Participant as of the last day of the Plan
Year.
Notwithstanding the above provision, an allocation will be
made on behalf of a Participant who dies, retires, or
becomes disabled during the Plan Year.
For each Plan Year the contribution shall be allocated to
each Participant in the proportion that the Compensation
paid to each Participant during the Plan Year bears to the
Compensation paid to all such Participants, subject to the
Limitations on Allocations specified in Article V.
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The contribution as described above, for any Plan Year,
shall be paid to the Trust at the end of the Plan Year, or
as soon as possible on or after the last day of such Plan
Year, but in any event not later than the date which is
prescribed by law for filing the Employer's income tax
return, including any extension thereof.
4.4 FAIL-SAFE CONTRIBUTION. The Employer reserves the right
to make a discretionary Nonelective Contribution to the
Plan for any Plan Year, if the Employer determines that
such a contribution is necessary to ensure that either
the Actual Deferral Percentage Test or the Actual
Contribution Percentage Test will be satisfied for that
Plan Year. Such amount shall be designated by the
Employer at the time of contribution as a Qualified
Nonelective Contribution and shall be known as a
Fail-Safe Contribution.
The Fail-Safe Contribution shall be made on behalf of all
eligible non-Highly Compensated Employees who are
Participants and who are considered under the Actual
Deferral Percentage Test or the Actual Contribution
Percentage Test. This contribution shall be allocated to the
Participant's Account of each such Participant in an amount
equal to a fixed percentage of such Participant's
Compensation. The fixed percentage shall be equal to the
minimum fixed percentage necessary to be contributed by the
Employer on behalf of each eligible non-Highly Compensated
Employee who is a Participant so that the Actual Deferral
Percentage Test or the Actual Contribution Percentage Test
is satisfied.
The Fail-Safe Contribution for any Plan Year as determined
above shall be paid to the Trust at the end of the Plan
Year, or as soon as possible on or after the last day of
such Plan Year, but in no event later than the date which is
prescribed by law for filing the Employer's income tax
return, including any extensions thereof.
4.5 PROFITS NOT REQUIRED. Contributions to this Plan shall
not be precluded because the Employer does not have
Considered Net Profits. Notwithstanding the existence
of Considered Net Profits, the Employer may determine
in its sole discretion that it will make no
contributions for such Plan Year.
4.6 PAYMENT OF EXPENSES. The Employer may contribute to
the Plan the amount necessary, to pay any applicable
expense charges and administration charges. In lieu of
the Employer's contributing the amount necessary to pay
such charges, these expenses may be paid from the Trust
fund.
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4.7 ALLOCATION OF FORFEITURES. Forfeitures available for
reallocation in accordance with Section 9.3 shall be
considered as part of the Nonelective Contributions
made by the Employer as more fully described in this
Article IV.
4.8 CREDITING OF ELECTIVE DEFERRAL AND OTHER CONTRIBUTIONS.
Elective Deferral Contributions and other contributions
made by the Employer shall be credited to the
Participant Account of each Participant for whom such
contributions are made, in accordance with the
provisions of Article XIII.
4.9 ROLLOVER CONTRIBUTIONS. The Plan may receive Rollover
Contributions on behalf of a Participant. Receipt of a
Rollover Contribution shall be subject to the approval
of the Plan Administrator. Before approving the
receipt of a Rollover Contribution, the Plan
Administrator may request any documents or other
information from a Participant or opinions of counsel
which the Plan Administrator deems necessary to
establish that such amount is a Rollover Contribution.
Rollover Contributions shall be credited to the
Participant's Account and may be invested in any manner
authorized under the provisions of this Plan.
4.10 TRANSFERS. Without regard to the Limitations on
Allocations imposed under Article V, the Trustee may
receive, directly from another qualified pension or
profit-sharing plan meeting the requirements of
Internal Revenue Code section 401(a), all or part of
the entire amount distributable on behalf of a
Participant from such plan. Likewise, the Trustee may
receive Transfers representing the assets of any
predecessor plan.
Transfers may be invested in any manner authorized under the
provisions of this Plan.
4.11 SUSPENSION OF ELECTIVE DEFERRAL CONTRIBUTIONS. The
following provisions shall apply with respect to
suspension of Elective Deferral Contributions.
(A) Elective Suspension. An Active Participant may elect
to suspend his Salary Deferral Agreement for Elective
Deferral Contributions by filing a written notice
thereof with the Administrator at any time. The Salary
Deferral Agreement shall be suspended on the date
specified in such notice, which date must be at least
15 days after such notice is filed. The notice shall
specify the period for which such suspension shall be
effective. Such period may extend indefinitely.
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(B) Suspension for Leave. A Participant who is absent from
employment on account of an authorized leave of absence
or military leave shall have his Salary Deferral
Agreement suspended during such leave. Such suspension
of contributions shall be effective on the date payment
of Compensation by the Employer to him ceases, and
shall remain in effect until payment of Compensation is
resumed.
(C) Withdrawal Suspension. An Active Participant who elects
a withdrawal in accordance with Article X may have his
Salary Deferral Agreement suspended on the date such
election becomes effective. Such suspension shall
remain in effect for the number of months specified
therein.
(D) Non-Elective Suspension. An Active Participant who
ceases to meet the eligibility requirements as
specified in Section 3.1 but who remains in the employ
of the Employer, shall have his Salary Deferral
Agreement suspended, effective as of the date he
ceases to meet the eligibility requirements. Such
suspension shall remain in effect until he again meets
such eligibility requirements.
The Participant may elect to reactivate his Salary Deferral
Agreement for Elective Deferral Contributions by filing a
written notice thereof with the Plan Administrator. The
Salary Deferral Agreement shall be reactivated on the
January 1, April 1, July 1, or October 1 following the
expiration of the suspension period described above.
4.12 LIMITATION OF ELECTIVE DEFERRAL CONTRIBUTIONS. If the
Employer determines prior to the end of the Plan Year
that the Plan may not satisfy the Actual Deferral
Percentage Test for the Plan Year, the Employer may
require that the amount of Elective Deferral
Contributions being allocated to the accounts of Highly
Compensated Employees be reduced to the extent
necessary to prevent Excess Contributions from being
made to the Plan.
Although the Employer may reduce the amount of Elective
Deferral Contributions that may be allocated to the
Participant's Account of Highly Compensated Employees, the
affected Employees shall continue to participate in the
Plan. When the situation that resulted in the reduction of
Elective Deferral Contributions ceases to exist, the
Employer shall reinstate the amount of Elective Deferral
Contributions elected by the Participant in the Salary
Deferral Agreement to the fullest extent possible for all
affected Participants in a nondiscriminatory manner.
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4.13 LIMITATION OF MATCHING CONTRIBUTIONS. If the Employer
determines prior to the end of the Plan Year that the
Plan may not satisfy the Actual Contribution Percentage
Test for the Plan Year, the Employer may require that
the amount of Matching Contributions being allocated to
the Accounts of Highly Compensated Employees be reduced
to the extent necessary to prevent Excess Aggregate
Contributions from being made to the Plan.
4.14 CORRECTIVE DISTRIBUTION OF EXCESS CONTRIBUTIONS.
(A) The Employer may distribute Excess Contributions (and
income allocable thereto) to the appropriate Highly
Compensated Employee after the close of the Plan Year
in which the Excess Contribution arose and within 12
months after the close of that Plan Year.
(B) The income allocable to Excess Contributions is equal
to the sum of the allocable gain or loss for the Plan
Year and shall be determined as follows:
(1) The income allocable to Excess Contributions is
determined by multiplying the income for the Plan
Year allocable to Deferral Percentage Amounts by a
fraction. The numerator of the fraction is the
Excess Contributions attributable to the Employee
for the Plan Year. The denominator of the
fraction is equal to the sum of (A) the total
account balance of the Employee attributable to
Deferral Percentage Amounts as of the beginning of
the Plan Year, plus (B) the Employee's Deferral
Percentage Amounts for the Plan Year.
(2) The allocable gain or loss for the period between
the end of the Plan Year and the date of
distribution shall not be taken into consideration
when determining the income allocable to Excess
Contributions.
(C) The amount of Excess Contributions to be distributed
with respect to an Employee for a Plan Year shall be
reduced by Excess Deferrals previously distributed to
the Employee for the Employee's taxable year ending
with or within the Plan Year.
(D) The distribution of Excess Contributions made to the
Family Members of a family group that was combined for
purposes of determining a Highly Compensated Employee's
Actual Deferral Ratio shall be allocated among the
Family Members in proportion to the Elective Deferral
Contribution (including any amounts required to be
taken into account under subparagraphs (B) (1) and (B)
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(2) of Section 1.8 of the Plan) of each Family Member
that is combined to determine the Actual Deferral
Ratio.
(E) A corrective distribution of Excess Contributions (and
income) shall be made without regard to any Participant
or spousal consent or any notice otherwise required
under sections 411(a)(11) and 417 of the Code.
(F) Any Matching Contributions or Qualified Matching
Contributions that relate to the Excess Contribution
being distributed shall be forfeited. The Matching
Contribution so forfeited shall be in proportion to the
applicable Employee's vested and nonvested interest in
Matching Contributions under the Plan for the Plan Year
in which the Excess Contribution arose. Forfeitures of
Matching Contributions or Qualified Matching
Contributions that relate to Excess Contributions shall
be applied to reduce Employer contributions or pay Plan
expenses.
(G) In no case may the amount of Excess Contributions to be
distributed for a Plan Year with respect to any Highly
Compensated Employee exceed the amount of Elective
Deferral Contributions made on behalf of the Highly
Compensated Employee for the Plan Year.
(H) In the event of a complete termination of the Plan
during the Plan Year in which an Excess Contribution
arose, the corrective distribution must be made as soon
as administratively feasible after the date of the
termination of the Plan, but in no event later than 12
months after the date of termination.
(I) Any distribution of less than the entire amount of
Excess Contributions with respect to any Highly
Compensated Employee shall be treated as a pro-rata
distribution of Excess Contributions and allocable
income or loss.
4.15 CORRECTION OF EXCESS AGGREGATE CONTRIBUTIONS.
(A) Excess Aggregate Contributions may be corrected using
one of the methods described in subparagraphs (1) and
(2) below. The Employer shall elect the method of
correction to be used and shall apply such method to
the correction of the Excess Annual Contribution for
the Plan Year.
(1) Method 1:
(a) The Excess Aggregate Contribution (and
income) shall be forfeited, if forfeitable,
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or distributed on a pro-rata basis from the
Employee's Account attributable to
Contribution Percentage Amounts. The
distribution or forfeiture shall be made
after the close of the Plan Year in which the
Excess Aggregate Contribution arose and
within 12 months after the close of that Plan
Year. Whether an amount is distributed or
forfeited under this subparagraph (a) shall
be determined based on the rules set forth in
paragraph (B) of this section.
(2) Method 2:
(a) Any Matching Contributions (and Qualified
Matching Contributions, to the extent not
taken into account for purposes of the Actual
Deferral Percentage Test), and income
allocable thereto, shall be forfeited, if
forfeitable, or distributed to the
appropriate Highly Compensated Employee. The
distribution or forfeiture shall be made
after the close of the Plan Year in which the
Excess Aggregate Contribution arose and
within 12 months after the close of that Plan
Year. Whether an amount is forfeited or
distributed shall be determined under the
rules set forth in paragraph (B) of this
section.
(B) Determination of Distributable and Forfeitable Amounts.
For purposes of paragraph (A) of this section:
(1) An Excess Aggregate Contribution attributable to
vested Matching Contributions, Qualified Matching
Contributions (and, if applicable, Qualified
Nonelective Contributions and Elective Deferral
Contributions) shall be distributed to the
appropriate Highly Compensated Employee in
accordance with the terms of this section.
(2) An Excess Aggregate Contribution attributable to
an Employee's nonvested Matching Contributions
shall be forfeited in accordance with the terms of
this section.
(3) A Highly Compensated Employee's vested and
nonvested interest in Matching Contributions (and
income allocable thereto) attributable to Excess
Aggregate Contributions shall be based on the
proportion that represents the Employee's Vested
Interest in Matching Contributions under the Plan
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for the Plan Year in which the Excess Aggregate
Contribution arose.
(C) Forfeited Excess Aggregate Contributions. In
accordance with paragraph (B) of this section, the
amount that represents the Employee's nonvested
interest in Matching Contributions (and income), and is
attributable to Excess Aggregate Contributions, shall
be forfeited and, as such, shall be applied to reduce
Employer contributions or pay expenses.
(D) Income Allocable to Excess Aggregate Contributions.
For purposes of this section, the income allocable to
Excess Aggregate Contributions is equal to the sum of
the allocable gain or loss for the Plan Year, and shall
be determined as follows:
(1) The income allocable to Excess Aggregate
Contributions is determined by multiplying the
income for the Plan Year allocable to Contribution
Percentage Amounts by a fraction. The numerator
of the fraction is the Excess Aggregate
Contributions for the Employee for the Plan Year.
The denominator of the fraction is equal to the
sum of (A) the total account balance of the
Employee attributable to Contribution Percentage
Amounts as of the beginning of the Plan Year, plus
(B) the Contribution Percentage Amounts for the
Plan Year.
(2) The allocable gain or loss for the period between
the end of the Plan Year and the date of
correction shall not be taken into consideration
when determining the income allocable to Excess
Aggregate Contributions.
(E) The distribution of Excess Aggregate Contributions (and
income) made to Family Members of a family group that
was combined for purposes of determining a Highly
Compensated Employee's Actual Contribution Ratio shall
be allocated among Family Members in proportion to the
Contribution Percentage Amounts (including any amounts
required to be taken into account under subparagraphs
(B) (1) and (B) (2) of Section 1.5 of the Plan) of each
Family Member that are combined to determine the Actual
Contribution Ratio.
(F) In the event of a complete termination of the Plan
during the Plan Year in which an Excess Aggregate
Contribution arose, the corrective distribution or
forfeiture shall be made as soon as administratively
feasible after the date of termination of the Plan, but
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in no event later than 12 months after the date of
termination.
(G) If the entire account balance of a Highly Compensated
Employee is distributed during the Plan Year in which
the Excess Aggregate Contribution arose, the
distribution shall be deemed to have been a corrective
distribution of Excess Aggregate Contributions (and
income) to the extent that a corrective distribution
would otherwise have been required.
(H) Any distribution of less than the entire amount of
Excess Aggregate Contributions (and income) shall be
treated as a pro-rata distribution of Excess Aggregate
Contributions and allocable income or loss.
(I) In no case may the amount of Excess Aggregate
Contributions distributed to a Highly Compensated
Employee exceed the amount of Matching Contributions
made on behalf of the Highly Compensated Employee for
the Plan Year.
(J) A distribution of Excess Aggregate Contributions (and
income) shall be made under this section without regard
to any notice or consent otherwise required under
sections 411(a)(11) and 417 of the Code.
4.16 CORRECTIVE DISTRIBUTION OF EXCESS DEFERRALS.
Notwithstanding any other provision of the Plan, Excess
Deferrals, plus any income and minus any loss allocable
thereto, may be distributed to any Participant to whose
account Excess Deferrals were allocated for the
individual's taxable year. Such a corrective
distribution shall be made in accordance with this
section.
(A) Correction of Excess Deferrals After Taxable Year.
(1) Not later than the March 15 following the close of
a Participant's taxable year, the Participant may
notify the Plan of the amount of Excess Deferrals
received by the Plan during that taxable year.
The notification shall be in writing, shall
specify the Participant's Excess Deferrals, and
shall be accompanied by the Participant's written
statement that if such amounts are not
distributed, these amounts, when added to all
other Elective Deferral Contributions made on
behalf of the Participant during the taxable year,
shall exceed the dollar limitation specified in
section 402(g) of the Code.
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(2) The Participant is deemed to have notified the
Plan of Excess Deferrals if, not later than the
March 1 following the close of a Participant's
taxable year, the Employer notifies the Plan on
behalf of the Participant of the Excess Deferrals.
Such Excess Deferrals shall be calculated by
taking into account only Elective Deferral
Contributions under the Plan and any other plans
of the Employer.
(3) Not later than the April 15 following the close of
the taxable year, the Plan shall distribute to the
Participant the amount of Excess Deferrals
designated under subparagraphs (1) or (2) above.
(B) Correction of Excess Deferrals During the Taxable Year.
A Participant who has an Excess Deferral during a
taxable year may receive a corrective distribution
during the same year. Such a corrective distribution
shall be made if:
(1) The Participant designates the distribution as an
Excess Deferral. The designation shall be made in
the same manner as the notification described in
subparagraph (A) (1) of this section. The
Participant will be deemed to have designated the
distribution as an Excess Deferral if the Employer
makes the designation on behalf of the Participant
to the extent that the Participant has Excess
Deferrals for the taxable year calculated by
taking into account only Elective Deferral
Contributions to the Plan and other plans of the
Employer.
(2) The corrective distribution is made after the date
on which the Plan received the Excess Deferral.
(3) The Plan designates the distribution as a
distribution of Excess Deferrals.
(C) If the Participant provides the Employer with
satisfactory evidence and written notice to demonstrate
that all Elective Deferral Contributions by the
participant in this Plan and any other qualified plan
exceed the applicable limit under section 402(g) of the
Code for such individual's taxable year, then the Plan
Administrator may (but is not required to) distribute
sufficient Elective Deferral Contributions (not to
exceed the amount of Elective Deferral Contributions
actually contributed on behalf of the Participant to
this Plan during the Participant's taxable year) from
this Plan to allow the Participant to comply with the
applicable limit. The evidence provided by the
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<PAGE>
Participant must establish clearly the amount of Excess
Deferrals. The Participant must present this evidence
to the Plan Administrator by the March 1 following the
end of the calendar year in which the Excess Deferrals
occurred.
(D) Income Allocable to Excess Deferrals. The income
allocable to Excess Deferrals is equal to the sum of
allocable gain or loss for the taxable year of the
individual and shall be determined as follows:
(1) The gain or loss allocable to Excess Deferrals is
determined by multiplying the income for the
taxable year allocable to Elective Deferral
Contributions by a fraction. The numerator of the
fraction is the Excess Deferrals by the Employee
for the taxable year. The denominator of the
fraction is equal to the sum of:
(a) The total account balance of the Employee
attributable to Elective Deferral
Contributions as of the beginning of the Plan
Year, plus
(b) The Employee's Elective Deferral
Contributions for the taxable year.
(2) The income allocable to Excess Deferrals shall not
include the allocable gain or loss for the period
between the end of the taxable year and the date
of distribution.
(E) No Employee or Spousal Consent Required. A corrective
distribution of Excess Deferrals (and income) shall be
made without regard to any notice or consent otherwise
required under sections 411(a)(11) and 417 of the Code.
(F) Any Matching Contributions or Qualified Matching
Contributions that relate to the Excess Deferral being
distributed shall be forfeited. The Matching
Contribution so forfeited shall be in proportion to the
applicable Employee's vested and nonvested interest in
Matching Contributions under the Plan for the Plan Year
in which the Excess Deferral arose. Forfeitures of
Matching Contributions or Qualified Matching
Contributions that relate to Excess Deferrals shall be
applied to reduce Employer contributions or pay Plan
expenses.
4.17 QUALIFIED CONTRIBUTIONS. In lieu of distributing
Excess Contributions as provided in Section 4.14 of the
Plan, or Excess Aggregate Contributions as provided in
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Section 4.15 of the Plan, the Employer may take the
actions specified below in order to satisfy the Actual
Deferral Percentage Test or the Actual Contribution
Percentage Test, or both, pursuant to the regulations
under the Code.
(A) At the election of the Employer, Qualified Nonelective
Contributions or Qualified Matching Contributions, or
both, may be taken into account as Elective Deferral
Contributions for purposes of calculating the Actual
Deferral Ratio of a Participant.
The amount of Qualified Nonelective Contributions or
Qualified Matching Contributions made under the terms
of this Plan and taken into account as Elective
Deferral Contributions for purposes of calculating the
Actual Deferral Ratio, subject to such other
requirements as may be prescribed by the Secretary of
the Treasury, shall be such Qualified Nonelective
Contributions or Qualified Matching Contributions, or
both, that are needed to meet the Actual Deferral
Percentage Test.
(B) At the election of the Employer, Qualified Nonelective
Contributions or Elective Deferral Contributions, or
both, may be taken into account as Matching
Contributions for purposes of calculating the Actual
Contribution Ratio of a Participant.
The amount of Qualified Nonelective Contributions or
Elective Deferral Contributions made under the terms of
this Plan and taken into account for purposes of
calculating the Actual Contribution Ratio, subject to
such other requirements as may be prescribed by the
Secretary of the Treasury, shall be such Qualified
Nonelective Contributions or Elective Deferral
Contributions, or both, that are needed to meet the
Actual Contribution Percentage Test.
(C) Any Qualified Nonelective Contribution, Qualified
Matching Contribution, and Elective Deferral
Contribution taken into account under paragraphs (A) or
(B) must be allocated to the Employee's Account as of a
date within the Plan Year in which the Excess
Contribution or Excess Aggregate Contribution arose and
must be paid to the Plan no later than the 12-month
period immediately following the Plan Year to which the
contribution relates.
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4.18 MULTIPLE USE OF ALTERNATIVE LIMITATION.
(A) Multiple use of the alternative limitation occurs if
all of the conditions of this paragraph (A) are
satisfied:
(1) One or more Highly Compensated Employee of the
Employer are eligible employees in both a cash or
deferred arrangement subject to section 401(k) and
a plan maintained by the Employer subject to
section 401(m).
(2) The sum of the Actual Deferral Percentage of the
entire group of eligible Highly Compensated
Employees under the arrangement subject to section
401(k) and the Actual Contribution Percentage of
the entire group of eligible Highly Compensated
Employees under the Plan subject to section 401(m)
exceeds the aggregate limit of paragraph (C) of
this section.
(3) Actual Deferral Percentage of the entire group of
eligible Highly Compensated Employees under the
arrangement subject to section 401(k) exceeds the
amount described in section 401(k)(3)(A)(ii)(I).
(4) The Actual Contribution Percentage of the entire
group of eligible Highly Compensated Employees
under the arrangement subject to section 401(m)
exceeds the amount described in section
401(m)(2)(A)(i).
(B) For purposes of this section, the aggregate limit is
the greater of:
(1) The sum of-
(a) 1.25 times the greater of the relevant Actual
Deferral Percentage or the relevant Actual
Contribution Percentage, and
(b) Two percentage points plus the lesser of the
relevant Actual Deferral Percentage or the
relevant Actual Contribution Percentage. In
no event, however, may this amount exceed
twice the lesser of the relevant Actual
Deferral Percentage or the Actual
Contribution Percentage; or
(2) The sum of-
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(a) 1.25 times the lesser of the relevant Actual
Deferral Percentage or the relevant Actual
Contribution Percentage, and
(b) Two percentage points plus the greater of the
relevant Actual Deferral Percentage or the
relevant Actual Contribution Percentage. In
no event, however, may this amount exceed
twice the greater of the relevant Actual
Deferral Percentage or the relevant Actual
Contribution Percentage.
(C) For purposes of paragraph (B) of this section, the term
"relevant Actual Deferral Percentage" means the Actual
Deferral Percentage of the group of Nonhighly
Compensated Employees under the arrangement subject to
section 401(k) for the Plan Year, and the term
"relevant Actual Contribution Percentage" means the
Actual Contribution Percentage of the group of
Nonhighly Compensated Employees eligible under the Plan
subject to section 401(m) for the Plan Year beginning
with or within the Plan Year of the arrangement subject
to section 401(k).
(D) The Actual Deferral Percentage and Actual Contribution
Percentage of the group of eligible Highly Compensated
Employees are determined after use of Qualified
Nonelective Contributions and Qualified Matching
Contributions to meet the requirements of the Actual
Deferral Percentage Test and after use of Qualified
Nonelective Contributions and Elective Deferral
Contributions to meet the requirements of the Actual
Contribution Percentage Test. The Actual Deferral
Percentage and Actual Contribution Percentage of the
group of Highly Compensated Employees are determined
after any corrective distribution or forfeiture of
Excess Deferrals, Excess Contributions, or Excess
Aggregate Contributions and after recharacterization of
Excess Contributions required without regard to this
section. Only plans and arrangements maintained by the
Employer are taken into account under paragraph (B).
If the Employer maintains two or more cash or deferred
arrangements subject to section 401(k) that must be
mandatorily disaggregated pursuant to section
401(k)-1(g)(11)(iii) multiple use is tested separately
with respect to each plan.
(E) If multiple use of the alternative limit occurs with
respect to two or more plans or arrangements maintained
by the Employer, it shall be corrected by reducing the
Actual Contribution Percentage of Highly Compensated
Employees in the manner described in paragraph (F) of
this section. Instead of making this reduction, the
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<PAGE>
Employer may eliminate the multiple use of the
alternative limitation by making Qualified Nonelective
Contributions to the Plan.
(F) The amount of the reduction by which each Highly
Compensated Employee's Actual Contribution Ratio is
reduced shall be treated as an Excess Aggregate
Contribution. The Actual Contribution Percentage of
all Highly Compensated Employees under the plan subject
to reduction shall be reduced so that there is no
multiple use of the alternative limitation.
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ARTICLE V
LIMITATIONS ON ALLOCATIONS
--------------------------
5.1 LIMITATIONS ON ALLOCATIONS. Definitions - The
following definitions are atypical terms which refer
only to terms used in the Limitations on Allocations
Sections of this Article V.
(A) Annual Additions. The term Annual Additions shall mean
the sum of the following amounts allocated on behalf of
a Participant for a Limitation Year:
(1) all contributions made by the Employer which shall
include:
Elective Deferral Contributions, if any;
Matching Contributions, if any;
Qualified Matching Contributions, if any;
Nonelective Contributions, if any;
Qualified Nonelective Contributions, if any;
(2) all Forfeitures, if any;
(3) all Employee Contributions, if any.
For the purposes of this Article, Excess Amounts
reapplied under Section 5.2 (D) shall also be included
as Annual Additions. Also, for the purposes of this
Article, Employee Contributions are determined without
regard to deductible employee contributions within the
meaning of section 72(o)(5) of the Code.
Amounts allocated after March 31, 1984, to an
individual medical account, as defined in Internal
Revenue Code section 415(l)(1), which is part of a
defined benefit plan maintained by the Employer, are
treated as Annual Additions to a defined contribution
plan. Also, amounts derived from contributions paid or
accrued attributable to post-retirement medical
benefits allocated to the separate account of a key
employee, as defined in Internal Revenue Code section
419A(d)(3), under a welfare benefit fund, as defined in
Internal Revenue Code section 419(e), maintained by the
Employer, are treated as Annual Additions to a defined
contribution plan.
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Contributions do not fail to be Annual Additions merely
because they are Excess Deferrals, Excess Contributions
or Excess Aggregate Contributions or merely because
Excess Contributions or Excess Aggregate Contributions
are corrected through distribution or
recharacterization. Excess Deferrals that are
distributed in accordance with Section 4.16 of the Plan
are not Annual Additions.
Forfeited Matching Contributions that are forfeited
because the contributions to which they relate are
treated as Excess Aggregate Contributions, Excess
Contributions, or Excess Deferrals and that are
reallocated to the Participant Accounts of other
Participants for the Plan Year in which the forfeiture
occurs, are treated as Annual Additions for the
Participants to whose accounts they are reallocated and
for the Participants from whose accounts they are
forfeited.
(B) Compensation. The term Compensation means wages within
the meaning of section 3401(a) of the Code for the
purposes of income tax withholding at the source but
determined without regard to any rules that limit the
remuneration included in wages based on the nature or
location of the employment or the services performed
(such as the exception for agricultural labor in
section 3401(a)(2) of the Code).
For Limitation Years beginning after December 31, 1991,
for purposes of applying the limitations of this
article, Compensation for a Limitation Year is the
Compensation actually paid or made available during
such Limitation Year.
(C) Defined Contribution Dollar Limitation. The term
Defined Contribution Dollar Limitation shall mean
$30,000 or, if greater, one-fourth of the defined
benefit dollar limitation set forth in Internal Revenue
Code section 415(b)(1) as in effect for the Limitation
Year.
(D) Employer. The term Employer shall mean the Employer
that adopts this Plan. In the case of a group of
employers which constitutes a controlled group of
corporations (as defined in Internal Revenue Code
section 414(b) as modified by section 415(h)), or which
constitutes trades or business (whether or not
incorporated) which are under common control (as
defined in section 414(c) as modified by section
415(h)), or affiliated service groups (as defined in
section 414(m)) of which the adopting Employer is a
part, all such employers shall be considered a single
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Employer for purposes of applying the limitations of
this Article.
(E) Excess Amount. The term Excess Amount shall mean the
excess of the Participant's Annual Additions for the
Limitation Year over the Maximum Permissible Amount.
(F) Limitation Year. The term Limitation Year shall mean
the calendar year.
(G) Maximum Permissible Amount. The term Maximum
Permissible Amount shall mean the lesser of (1) the
Defined Contribution Dollar Limitation, or (2) 25% of
the Participant's Compensation for the Limitation Year.
If a short Limitation Year is created because of an
amendment changing the Limitation Year to a different
period of 12 consecutive months, the Maximum
Permissible Amount for the short Limitation Year will
be the lesser of (1) the Defined Contribution Dollar
Limitation multiplied by a fraction, the numerator of
which is the number of months in the short Limitation
Year, and the denominator of which is 12, or (2) 25% of
the Participant's Compensation for the short Limitation
Year.
5.2 LIMITATIONS ON ALLOCATIONS. If the Employer does not
maintain any qualified plan in addition to this Plan:
(A) The amount of Annual Additions which may be allocated
under this Plan on a Participant's behalf for a
Limitation Year shall not exceed the lesser of the
Maximum Permissible Amount or any other limitation
contained in this Plan.
(B) Prior to the determination of the Participant's actual
Compensation for a Limitation Year, the Maximum
Permissible Amount may be determined on the basis of
the Participant's estimated annual Compensation. Such
Compensation shall be determined on a reasonable basis
and shall be uniformly determined for all Participants
similarly situated. Any employer contributions based
on estimated annual Compensation shall be reduced by
any Excess Amounts carried over from prior years.
(C) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible Amount
for such Limitation Year shall be determined on the
basis of the Participant's actual Compensation for such
Limitation Year. In the event a Participant separates
from the Service of the Employer prior to the end of
the Limitation Year, the Maximum Permissible Amount for
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such Participant shall be determined prior to any
distribution of his Participant's Account on the basis
of his actual Compensation. Any Excess Amounts shall
be disposed of in accordance with Section 5.2 (D).
(D) If there is an Excess Amount with respect to a
Participant for a Limitation Year as a result of a
reasonable error in estimating the Participant's annual
compensation, an allocation of forfeitures, a
reasonable error in determining the amount of elective
deferrals (within the meaning of section 402(g)(3) of
the Code) that may be made with respect to any
individual under the limits of section 415 of the Code,
or under other limited facts and circumstances which
the commissioner finds justified, such Excess Amount
shall be disposed of as follows:
(1) If an Excess Amount exists, the Excess Amount in
the Participant's Account (excluding Elective
Deferral Contributions) shall be held unallocated
in a suspense account for the Limitation Year and
allocated and reallocated in the next Limitation
Year to all Participants in the Plan. The excess
amount must be used to reduce Employer
Contributions for the next Limitation Year (and
succeeding Limitation Years, as necessary) for all
of the Participants in the Plan. For purposes of
this subparagraph, the Excess Amount may not be
distributed to Participants or former
Participants.
(2) If, after the application of subparagraph (1) an
Excess Amount still exists, then the Participant's
Elective Deferral Contributions (including
earnings and losses thereon) allocated for the
Limitation Year shall be returned to the
Participant to the extent that an Excess Amount
exists. This distribution shall be made as soon
as administratively feasible after the Excess
Amount is determined. Any Elective Deferral
Contributions returned under this paragraph shall
be disregarded for purposes of the Actual Deferral
Percentage Test.
(3) Alternatively, the Plan Administrator may elect to
dispose of the Excess Amount by applying the
procedure in subparagraph (2) before applying the
procedure in subparagraph (1). If the Plan
Administrator makes this election, the Plan
Administrator must apply it uniformly to all
Participants in a Limitation Year.
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(4) If a suspense account is in existence at any time
during a Limitation Year pursuant to this section,
it will not participate in the allocation of
investment gains or losses. If a suspense account
is in existence at any time during a particular
Limitation Year, all amounts in the suspense
account must be allocated and reallocated to
Participants' Accounts before any Employer
Contributions which would constitute Annual
Additions may be made to the Plan for that
Limitation Year.
5.3 LIMITATIONS ON ALLOCATIONS. If the Employer maintains
one or more defined contribution plans in addition to
this Plan:
(A) The amount of Annual Additions which may be allocated
under this Plan on a Participant's behalf for a
Limitation Year, shall not exceed the lesser of:
(1) The Maximum Permissible Amount, reduced by the sum
of any Annual Additions allocated to the
Participant's Account for the same Limitation Year
under this Plan and such other defined
contribution plan; or
(2) Any other limitation contained in this Plan.
Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the amounts
referred to in Subsection (1) above may be determined
on the basis of the Participant's estimated annual
Compensation for such Limitation Year. Such estimated
annual Compensation shall be determined for all
Participants similarly situated.
Any contribution made by the Employer based on
estimated annual Compensation shall be reduced by any
Excess Amounts carried over from prior years, if
applicable.
(B) As soon as is administratively feasible after the end
of the Limitation Year, the amounts referred to in
Section 5.3 (A) shall be determined on the basis of the
Participant's actual Compensation for such Limitation
Year.
(C) If amounts are contributed to a Participant's Account
under this Plan on an allocation date which does not
coincide with the allocation date(s) for all such other
plans, and if a Participant's Annual Additions under
this Plan and all such other plans result in an Excess
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Amount, such Excess Amount shall be deemed to have
derived from those contributions last allocated.
(D) If an Excess Amount was allocated to a Participant on
an allocation date of this Plan which coincides with an
allocation date of another plan, the Excess Amount
attributable to this Plan will be the product of (1)
and (2) below:
(1) The total Excess Amount allocated as of such date
(including any amount which would have been
allocated but for the limitations of Internal
Revenue Code section 415).
(2) The ratio of (1) the amount allocated to the
Participant as of such date under this Plan,
divided by (2) the total amount allocated as of
such date under all qualified defined contribution
plans (determined without regard to the
limitations of Internal Revenue Code section 415).
(E) Any Excess Amounts attributed to this Plan shall be
disposed of as provided in Section 5.2 (D).
5.4 LIMITATIONS ON ALLOCATIONS. If the Employer maintains
a defined benefit plan in addition to this Plan:
(A) If an individual is a Participant at any time in both
this Plan and a defined benefit plan maintained by the
Employer, the sum of the Defined Benefit Plan Fraction
and the Defined Contribution Plan Fraction for any year
may not exceed 1.0. In the event that the sum of the
Defined Contribution Plan Fraction and the Defined
Benefit Plan Fraction exceeds 1.0, the Defined
Contribution Plan Fraction will be reduced until the
sum of the Defined Contribution Plan Fraction and the
Defined Benefit Plan Fraction does not exceed 1.0.
If an individual was a Participant in this Plan or in
any other defined contribution plan maintained by the
Employer which was in existence on July 1, 1982, the
numerator of the Defined Contribution Plan Fraction
will be adjusted if the sum of the Defined Contribution
Plan Fraction and the Defined Benefit Plan 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 the Defined
Contribution Plan Fraction, will be permanently
subtracted from the numerator of the Defined
Contribution Plan Fraction. The adjustment is
calculated using the Fractions as they would be
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computed as of the later of the end of the last
Limitation Year beginning before January 1, 1983, or
June 30, 1983. This adjustment also will be made if at
the end of the last Limitation Year beginning before
January 1, 1984, the sum of the Fractions exceeds 1.0
because of accruals or additions that were made before
the limitations of this Article became effective to any
plans of the Employer in existence on July 1, 1982.
In addition, if an individual was a Participant in this
Plan or in any other defined contribution plan
maintained by the Employer which was in existence on
May 6, 1986, the numerator of the Defined Contribution
Plan Fraction will be adjusted if the Employer's
defined benefit plan was also in existence on May 6,
1986, and the sum of the Defined Contribution Plan
Fraction and the Defined Benefit Plan 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 the Defined Contribution
Plan Fraction, will be permanently subtracted from the
numerator of the Defined Contribution Plan Fraction.
This 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. In
the event that a Participant's accrued benefit as of
December 31, 1986, under the defined benefit plan
exceeds the defined benefit dollar limitation set forth
in Internal Revenue Code section 415(b)(1), the amount
of that accrued benefit shall be used in both the
numerator and the denominator of the Defined Benefit
Plan Fraction in making this adjustment.
For purposes of this Section 5.4, all defined benefit
plans of the Employer, whether or not terminated, will
be treated as one defined benefit plan and all defined
contribution plans of the Employer, whether or not
terminated, will be treated as one defined contribution
plan.
(B) The Defined Benefit Plan Fraction for any year is a
fraction, the numerator of which is the Participant's
Projected Annual Benefit under the defined benefit plan
(determined as of the close of the Limitation Year),
and the denominator of which is the lesser of (1) or
(2) below:
(1) 1.25 times the dollar limitation in effect under
Internal Revenue Code section 415(b)(1)(A) on the
last day of the Limitation Year; or
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(2) 1.4 times the amount which may be taken into
account under Internal Revenue Code section
415(b)(1)(B) with respect to such Participant for
the Limitation Year.
Notwithstanding the above, if the Participant was a
participant in one or more defined benefit plans
maintained by the Employer which were in existence on
July 1, 1982, the denominator of the Defined Benefit
Plan Fraction will not be less than 125% of the sum of
the annual benefits under such plans which the
Participant had accrued as of the later of the end of
the last Limitation Year beginning before January 1,
1983 or June 30, 1983. The preceding sentence applies
only if the defined benefit plans individually and in
the aggregate satisfied the requirements of Internal
Revenue Code section 415 as in effect at the end of the
1982 Limitation Year.
(C) A Participant's Projected Annual Benefit is equal to
the annual benefit to which the Participant would be
entitled under the terms of the defined benefit plan
based upon the following assumptions:
(1) The Participant will continue employment until
reaching Normal Retirement Age as determined under
the terms of the plan (or current age, if that is
later);
(2) The Participant's Compensation for the Limitation
Year under consideration will remain the same
until the date the Participant attains the age
described in sub-division (1) of this
subparagraph; and
(3) All other relevant factors used to determine
benefits under the plan for the Limitation Year
under consideration will remain constant for all
future Limitation Years.
(D) 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
Accounts in such Limitation Year and for all prior
Limitation Years, and the denominator of which is the
lesser of (1) or (2) below for such Limitation Year and
for all prior Limitation Years of such Participant's
employment (assuming for this purpose, that Internal
Revenue Code section 415(c) had been in effect during
such prior Limitation Years):
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(1) 1.25 times the dollar limitation in effect under
Internal Revenue Code section 415(c)(1)(A) on the
last day of the Limitation Year; or
(2) 1.4 times the amount which may be taken into
account under Internal Revenue Code section
415(c)(1)(B) with respect to such Participant for
the Limitation Year.
For the purposes of determining these Limitations on
Allocations, any non-deductible employee contributions
made under a defined benefit plan will be considered to
be a separate defined contribution plan and will be
considered to be part of the Annual Additions for the
appropriate Limitation Year.
Annual Additions for any Limitation Year beginning
before January 1, 1987, shall not be recomputed to
treat all Employee Contributions as Annual Additions.
(E) Notwithstanding the foregoing, at the election of the
Plan Administrator, in computing the Defined
Contribution Plan Fraction with respect to any Plan
Year ending after December 31, 1982, the denominator
shall be an amount equal to the product of:
(1) The denominator of the Defined Contribution Plan
Fraction, computed in accordance with the rules in
effect for the Plan Year ending in 1982; and
(2) the transition fraction, which is a fraction
(a) the numerator of which is the lesser of:
(i) $51,875, or
(ii) 1.4 times 25% of the Compensation of the
Participant for the Plan Year ending in
1981, and
(b) the denominator of which is the lesser of:
(i) $41,500, or
(ii) 25% of the Compensation of the
Participant for the Plan Year ending in
1981.
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ARTICLE VI
DISTRIBUTION OF BENEFITS
------------------------
6.1 DISTRIBUTIONS IN GENERAL. Each Participant may elect,
with his Spouse's consent if required, a distribution
in the form of an Annuity, a single sum cash payment,
Employer stock, or a combination of the above. All
distributions are subject to the provisions of Article
VIII, Joint and Survivor Annuity Requirements.
Distributions of Employer stock are limited to the value of
the Participant's Employer Stock Account and shall be made
by the Trustee.
Once the 401(k) termination form has been received, it will
take up to six months for a Participant to receive all
distributions.
6.2 TIMING OF DISTRIBUTIONS. If the value of a
Participant's Vested Interest exceeds (or at the time
of any prior distribution exceeded) $3,500 and is
immediately distributable (as defined in Section 8.5),
the Participant and his Spouse, if required, must
consent to the distribution before it is made.
Instead of consenting to a distribution, the Participant may
make a written election to defer the distribution for a
specified period of time ending no later than the
Participant's Normal Retirement Age. Such election to defer
shall be irrevocable.
If the Participant and Spouse, if applicable, do not consent
to a distribution or if no election to defer is made within
90 days after receiving a written explanation of the
optional forms of benefit available pursuant to Income Tax
Regulation 1.411(a)(11), all benefits shall be deferred to,
and distribution shall be made as of the Participant's
Normal Retirement Age. The distribution will be made in the
form of a single sum cash payment (in the case of a
Participant's meeting the requirements of Section 8.1 (A))
or in accordance with Section 8.2 (in the case of a
Participant's not meeting the requirements of Section 8.1
(A)), unless the Participant elects another form of benefit
within the 90-day period prior to the date the distribution
is made.
A Participant whose actual retirement date is on or after
his Normal Retirement Age may not elect to defer
distribution of his benefit beyond the date of his actual
retirement.
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If the value of a Participant's Vested Interest is $3,500 or
less at the time it becomes payable, the distribution shall
be made in the form of a single sum cash payment and shall
be made upon such Participant's Termination of Employment.
Such a distribution may not be deferred.
Unless the Participant elects otherwise, the payment of
benefits under this Plan to the Participant shall begin not
later than the 60th day after the close of the Plan Year in
which the later of (A) or (B), below, occurs:
(A) the date on which the Participant attains his Normal
Retirement Age or age 62, if later; or
(B) the date on which the Participant terminates his
Service (including Termination of Employment, death or
Disability) with the Employer.
Notwithstanding the foregoing, the failure of a Participant
and Spouse, if required, to consent to a distribution while
a benefit is immediately distributable shall be deemed to be
an election to defer commencement of payment of any benefit
sufficient to satisfy the above paragraph.
6.3 DISTRIBUTION LIMITATION. Elective Deferral
Contributions, Qualified Nonelective Contributions and
Qualified Matching Contributions, and income allocable
to each, are not distributable to a Participant or a
Beneficiary, in accordance with such Participant's or
Beneficiary's election, earlier than upon the
Participant's Termination of Employment, death, or
disability.
Such amounts may also be distributed upon:
(A) Termination of the Plan without the establishment or
maintenance of a successor plan.
For purposes of this paragraph, a successor plan is any
other defined contribution plan maintained by the same
employer. However, if fewer than two percent of the
Employees who are eligible under the Plan at the time
of its termination are or were eligible under another
defined contribution plan at any time during the 24
month period beginning 12 months before the time of the
termination, the other plan is not a successor plan.
The term "defined contribution plan" means a plan that
is a defined contribution plan as defined in section
414(i) of the Code, but does not include an employee
stock ownership plan as defined in section 4975(e) or
409 of the Code or a simplified employee pension as
defined in section 408(k) of the Code. A plan is a
successor plan only if it exists at the time the Plan
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is terminated or within the period ending 12 months
after distribution of all assets from the Plan.
After March 31, 1988, a distribution may be made under
this paragraph only if it is a lump sum distribution.
The term "lump sum distribution" has the same meaning
provided in section 402(e)(4) of the Code, without
regard to subparagraphs (A)(i) through (iv), (B), and
(H) of that section.
(B) The disposition by the Employer to an unrelated
corporation of substantially all the assets (within the
meaning of section 409(b)(2) of the Code) used in the
trade or business of the Employer if the Employer
continues to maintain this Plan after the disposition.
However, a distribution may be made under this
paragraph only to an Employee who continues employment
with the corporation acquiring such assets.
In addition, this requirement is satisfied only if the
purchaser does not maintain the Plan after the
disposition. A purchaser maintains the plan of the
seller if it adopts the plan or otherwise becomes an
employer whose employees accrue benefits under the
Plan. A purchaser also maintains the Plan if the Plan
is merged or consolidated with, or any assets or
liabilities are transferred from the Plan to a plan
maintained by the purchaser in a transaction subject to
section 414(l)(1) of the Code. A purchaser is not
treated as maintaining the Plan merely because the Plan
that it maintains accepts rollover contributions of
amounts distributed by the Plan.
For purposes of this paragraph, the sale of
"substantially all" the assets used in a trade or
business means the sale of at least 85 percent of the
assets.
After March 31, 1988, a distribution may be made under
this paragraph only if it is a lump sum distribution.
The term "lump sum distribution" has the same meaning
provided in section 402(e)(4) of the Code, without
regard to subparagraphs (A)(i) through (iv), (B), and
(H) of that section.
(C) The disposition by the Employer to an unrelated entity
or individual of the Employer's interest in a
subsidiary (within the meaning of section 409(d)(3) of
the Code) if the Employer continues to maintain this
Plan. However, a distribution may be made under this
paragraph only to an Employee who continues employment
with such subsidiary.
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In addition, this requirement is satisfied only if the
purchaser does not maintain the Plan after the
disposition. A purchaser maintains the plan of the
seller if it adopts the plan or otherwise becomes an
employer whose employees accrue benefits under the
Plan. A purchaser also maintains the Plan if the Plan
is merged or consolidated with, or any assets or
liabilities are transferred from the Plan to a plan
maintained by the purchaser in a transaction subject to
section 414(l)(1) of the Code. A purchaser is not
treated as maintaining the Plan merely because the Plan
that it maintains accepts rollover contributions of
amounts distributed by the Plan.
After March 31, 1988, a distribution may be made under
this paragraph only if it is a lump sum distribution.
The term "lump sum distribution" has the same meaning
provided in section 402(e)(4) of the Code, without
regard to subparagraphs (A)(i) through (iv), (B), and
(H) of that section.
(D) In the case of Elective Deferral Contributions only,
the attainment of age 59-1/2, as described in Section
10.1 of the Plan.
(E) In the case of Elective Deferral Contributions only,
the hardship of the Participant, as described in
Section 10.2 of the Plan.
6.4 COMMENCEMENT OF DISTRIBUTIONS. Notwithstanding the
provisions of the preceding Timing of Distributions
Section, distributions to a Participant will commence
no later than the date determined in accordance with
the provisions of this Section.
Distribution to a Participant must commence no later than
the required beginning date. The first required beginning
date of a Participant is the first day of April of the
calendar year following the calendar year in which the
Participant attains age 70-1/2.
The required beginning date of a Participant who attains age
70-1/2 before January 1, 1988, shall be the first day of
April of the calendar year following the calendar year in
which the later of retirement or attainment of age 70-1/2
occurs, provided the Participant was not a 5% owner in the
Plan Year ending in the year in which the Participant
attained age 66-1/2 or any later Plan Year. A Participant
is treated as a 5% owner for purposes of this section if
such Participant is a 5% 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). The
required beginning date of a Participant who is a 5% owner
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<PAGE>
during any year beginning after December 31, 1979, is the
first day of April following the later of:
(A) the calendar year in which the Participant attained age
70-1/2, or
(B) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
5% owner, or the calendar year in which the Participant
retires.
Once distributions have begun to a 5% owner under this
section, they must continue to be distributed, even if the
Participant ceases to be a 5% owner in a subsequent year.
Distribution to such Participant must commence no later than
the first day of April following the calendar year in which
the Participant's Termination of Employment occurs.
If distribution to any Participant is made in other than a
single sum payment, the second payment shall be distributed
no later than the December 31 following the April 1 by which
the first payment was required to be distributed. Each
succeeding payment shall be distributed no later than each
December 31 thereafter.
6.5 DISTRIBUTION REQUIREMENTS.
(A) Except as otherwise provided in Article VIII, the
requirements of this Section shall apply to any
distribution of a Participant's Accrued Benefit.
(B) All distributions required under this Article shall be
determined and made in accordance with the Income Tax
Regulations under section 401(a)(9), including the
minimum distribution incidental benefit requirement of
section 1.401(a)(9)-2 of the regulations.
(C) Limits on Settlement Options. Distributions, if not
made in a lump sum, may only be made over one of the
following periods (or a combination thereof):
(1) the life of the Participant,
(2) the life of the Participant and a designated
Beneficiary,
(3) a period certain not extending beyond the life
expectancy of the Participant, or
(4) a period certain not extending beyond the joint
and last survivor expectancy of the Participant
and a designated Beneficiary.
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(D) Minimum Amounts to be Distributed.
(1) If the Participant's entire Vested Interest is to
be distributed in other than a lump sum, then the
amount to be distributed each year must be at
least an amount equal to the quotient obtained by
dividing the Participant's entire Vested Interest
by the life expectancy of the Participant or the
joint and last survivor expectancy of the
Participant and designated Beneficiary. Life
expectancy and joint and last survivor expectancy
are computed by the use of the return multiples
contained in section 1.72-9 of the Income Tax
Regulations. For purposes of this computation, a
Participant's life expectancy may be recalculated
no more frequently than annually; however, the
life expectancy of a Beneficiary other than the
Participant's Spouse may not be recalculated.
(2) If the Participant's Spouse is not the designated
Beneficiary, the method of distribution selected
must assure that at least 50% of the present value
of the amount available for distribution is paid
within the life expectancy of the Participant.
(3) For calendar years beginning after December 31,
1988, the amount to be distributed each year,
beginning with distributions for the first
distribution calendar year, shall not be less than
the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the
applicable life expectancy or (2) if the
Participant's Spouse is not the designated
Beneficiary, the applicable divisor determined
from the table set forth in Q&A-4 of section
1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the Participant
shall be distributed using the applicable life
expectancy in subsection (d)(1) above as the
relevant divisor without regard to regulations
section 1.401(a)(9)-2.
(4) The minimum distribution required for the
Participant's first distribution calendar year
must be made on or before the Participant's
required beginning date. The minimum distribution
for other calendar years, including the minimum
distribution for the distribution calendar year in
which the Employee's required beginning date
occurs, must be made on or before December 31 of
that distribution calendar year.
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6.6 NON-TRANSFERABLE. The Participant's right to any
Annuity payments, benefits, and refunds is not
transferable and shall be free from the claims of all
creditors to the fullest extent permitted by law.
6.7 DEATH DISTRIBUTION PROVISIONS. If the Participant dies
before distribution of his Vested Interest commences,
the following provisions shall apply:
(A) If a distribution is to be made to a Beneficiary other
than the Surviving Spouse:
(1) If the present value of the Participant's Vested
Interest exceeds (or at the time of any prior
distribution exceeded) $3,500, unless the
Beneficiary elects another form of distribution,
that portion of the Participant's Vested Interest
payable to the Beneficiary will be distributed in
the form of a single sum cash payment within a
reasonable period of time after the Plan
Administrator is notified of the Participant's
death.
(2) If the present value of the Participant's Vested
Interest is $3,500 or less at the time it becomes
payable, the distribution shall always be made in
the form of a single sum cash payment and shall be
paid within a reasonable period of time after the
Plan Administrator is notified of the
Participant's death.
(B) If the distribution is to be made to a Beneficiary who
is the Surviving Spouse, such distribution will be made
in accordance with the following:
(1) If the Participant had never elected a life
Annuity form of distribution under the Plan:
(a) If the present value of the Participant's
Vested Interest exceeds (or at the time of
any prior distribution exceeded) $3,500,
unless the surviving spouse elects another
form of distribution, that portion of the
Participant's Vested Interest payable to the
Surviving Spouse will be distributed in the
form of a single sum cash payment within a
reasonable period of time after the Plan
Administrator is notified of the
Participant's death.
(b) If the present value of the Participant's
Vested Interest payable to the Surviving
Spouse is $3,500 or less at the time it
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becomes payable, the distribution shall
always be made in the form of a single sum
cash payment and shall be made within a
reasonable period of time after the Plan
Administrator is notified of the
Participant's death.
(2) If the Participant had previously elected a life
Annuity form of distribution under the Plan:
(a) If the present value of the Participant's
Vested Interest exceeds (or at the time of
any prior distribution exceeded) $3,500 and
is immediately distributable (as defined in
Section 8.5), the Surviving Spouse must
consent to the distribution before it is
made. If the Surviving Spouse does not
consent to a distribution, all benefits shall
be deferred to a date that complies with the
terms of Section 6.8 (B).
The distribution shall be made in accordance
with the provisions of Section 8.3.
(b) If the present value of the Participant's
Vested Interest is $3,500 or less at the time
it becomes payable, the distribution shall
always be made in the form of a single sum
cash payment and shall be paid within a
reasonable period of time after the Plan
Administrator is notified of the
Participant's death.
6.8 DEATH DISTRIBUTION COMMENCEMENT DATE. Upon the death
of the Participant, the following distribution
provisions shall take effect:
(A) If the Participant dies after distribution of his
entire Vested Interest has commenced, the remaining
portion of such Vested Interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's
death.
In no event shall distribution of the Participant's
remaining Vested Interest be made in a lump sum after
the Participant's death unless such distribution is
consented to, in writing, by the Participant's
Surviving Spouse, if any.
(B) If the Participant dies before distribution of his
Vested Interest commences, the Participant's entire
Vested Interest will be distributed no later than five
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years after the Participant's death except to the
extent that an election is made to receive
distributions in accordance with (1) or (2) below:
(1) If any portion of the Participant's Vested
Interest is payable to a designated Beneficiary,
distributions may be made in substantially equal
installments over the life or life expectancy of
the designated Beneficiary (or over a period not
extending beyond the life expectancy of such
Beneficiary), commencing no later than one year
after the Participant's death;
(2) If the designated Beneficiary is the Participant's
Surviving Spouse, the date distributions are
required to begin in accordance with (1) above
shall not be earlier than the date on which the
Participant would have attained age 70-1/2.
However, the Surviving Spouse may elect, at any
time following the Participant's death, to defer
the date on which distributions will begin until
no later than the date on which the Participant
would have attained age 70-1/2 and, if the Spouse
dies before payments begin, subsequent
distributions shall be made as if the Spouse had
been the Participant.
(C) For purposes of (B) above, payments will be calculated
by use of the return multiples specified in section
1.72-9 of the Income Tax Regulations. Life expectancy
of a Surviving Spouse may be recalculated annually;
however, in the case of any other designated
Beneficiary, such life expectancy will be calculated at
the time payment first commences without further
recalculation.
(D) For purposes of this Section (Death Distribution
Commencement Date) 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.
6.9 ALTERNATE PAYEE SPECIAL DISTRIBUTION. Distributions
pursuant to Section 16.8 may be made without regard to
the age or employment status of the Participant.
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ARTICLE VI-A
DIRECT ROLLOVERS
----------------
6A.1 Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's
election under this Article, a Distributee may elect,
at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an Eligible
Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a
Direct Rollover, except as otherwise provided by the
Employer's administrative procedures as permitted by
regulations. In addition, a Distributee's election of
a Direct Rollover shall be subject to the following
requirements:
(A) If the Distributee elects to have only a portion of an
Eligible Rollover Distribution paid to an Eligible
Retirement Plan in a Direct Rollover, that portion must
be equal to at least $500.
(B) If the entire amount of a Distributee's Eligible
Rollover Distribution is $500 or less, the distribution
may not be divided. Instead, the entire amount must
either be paid to the Distributee or to an Eligible
Retirement Plan in a Direct Rollover.
(C) A Distributee may not elect a Direct Rollover if the
Distributee's Eligible Rollover Distributions during a
year are reasonably expected by the Plan Administrator
to total less than $200 (or any lower minimum amount
specified by the Plan Administrator).
(D) A Distributee may not elect a Direct Rollover of an
Offset Amount.
(E) A Distributee's election to make or not make a Direct
Rollover with respect to one payment in a series of
periodic payments shall apply to all subsequent
payments in the series, except that a Distributee shall
be permitted at any time to change, with respect to
subsequent payments in the series of periodic payments,
a previous election to make or not make a Direct
Rollover. A change of election shall be accomplished
by the Distributee notifying the Plan Administrator of
the change. Such notice must be in the form and manner
prescribed by the Plan Administrator.
6A.2 Definitions.
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(A) Direct Rollover: A Direct Rollover is a payment by the
plan to the Eligible Retirement Plan specified by the
Distributee.
(B) Distributee: A Distributee includes an Employee or
former Employee. In addition, the Employee's or former
Employee's Surviving Spouse and the Employee's or
former Employee's Spouse who is the alternate payee
under a qualified domestic relations order, as defined
in section 414(p) of the Code, are Distributees with
regard to the interest of the Spouse or former Spouse.
(C) Eligible Retirement Plan: An Eligible Retirement Plan
is an individual retirement account described in
section 408(a) of the code, an individual retirement
annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code,
or a qualified trust described in section 401(a) of the
Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible
Rollover Distribution to the Surviving Spouse, an
Eligible Retirement Plan is an individual retirement
account or an individual retirement annuity.
(D) Eligible Rollover Distribution: An Eligible Rollover
Distribution is any distribution of all or any portion
of the balance to the credit of the Distributee, except
that an Eligible Rollover Distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the Distributee and the
Distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution
to the extent such distribution is required under
section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
(E) Offset Amount: An Offset Amount is the amount by which
a Participant's Account is reduced to repay a loan from
the Plan (including the enforcement of the Plan's
security interest in the Participant's Account).
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ARTICLE VII
RETIREMENT BENEFITS
-------------------
7.1 NORMAL RETIREMENT. A Participant who attains his
Normal Retirement Age shall have a Vesting Percentage
of 100%. If a Participant retires from the active
Service of the Employer on his Normal Retirement Date,
he shall be entitled to receive a distribution of the
entire value of his Participant's Account as of his
Normal Retirement Date.
7.2 EARLY RETIREMENT. A Participant who retires from the
Service of the Employer on his Early Retirement Date
shall have a Vesting Percentage of 100% and shall be
entitled to receive a distribution of the entire value
of his Participant's Account as of his Early Retirement
Date.
7.3 LATE RETIREMENT. A Participant may continue in the
Service of the Employer after his Normal Retirement
Age, and in such event he shall retire on his Late
Retirement Date. Such Participant shall continue as a
Participant under this Plan until such Late Retirement
Date. The Participant shall have a Vesting Percentage
of 100% and shall be entitled to receive a distribution
of the entire value of his Participant's Account as of
his Late Retirement Date.
7.4 DISABILITY RETIREMENT. A Participant who retires from
the Service of the Employer on account of Disability
shall have a Vesting Percentage of 100% and shall be
entitled to receive a distribution of the entire value
of his Participant's Account as of his Disability
Retirement Date.
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ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
--------------------------------------
8.1 GENERAL. The provisions of this Article shall take
precedence over any conflicting provision in this Plan.
The provisions of this Article shall apply to any
Participant who is credited with at least one Hour of
Service with the Employer on or after August 23, 1984, and
such other Participants as provided in Section 8.7, unless:
(A) upon the death of the Participant the Participant's
entire Vested Interest will be paid to the
Participant's Surviving Spouse, but if there is no
Surviving Spouse, or, if the Surviving Spouse has
already consented in a manner conforming to a Qualified
Election, then to the Participant's designated
Beneficiary;
(B) the Participant does not elect payments in the form of
a Life Annuity and has not previously elected payments
in the form of a Life Annuity under the Plan, and
(C) as to the Participant, the Plan is not a direct or
indirect transferee of a defined benefit plan, money
purchase pension plan (including a target benefit
plan), stock bonus, or profit-sharing plan which would
otherwise provide for a Life Annuity form of payment to
the Participant.
8.2 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY.
Unless an optional form of benefit is selected pursuant
to a Qualified Election within the ninety-day period
ending on the first day on which all events have
occurred which entitle the Participant to a benefit, a
married Participant's Vested Interest will be paid in
the form of a Qualified Joint and Survivor Annuity.
An unmarried Participant will be provided a single Life
Annuity unless the Participant elects another form of
benefit during the applicable Election Period.
8.3 PAYMENT OF QUALIFIED PRERETIREMENT SURVIVOR ANNUITY.
Unless an optional form of benefit has been selected
within the Election Period pursuant to a Qualified
Election, if a married Participant dies before his
Annuity Starting Date, then the Participant's entire
Vested Interest, less the amount of any unpaid loan
balance outstanding under the terms of Article X-A,
shall be applied toward the purchase of an immediate
Annuity for the life of the Surviving Spouse. As an
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alternative to receiving the benefit in this form of an
Annuity, the Surviving Spouse may elect to receive a
single cash payment or any other form of payment
provided for in the Plan within a reasonable time after
the Participant's death.
8.4 DEFINITIONS.
(A) Election Period: The period which begins on the first
day of the Plan Year in which the Participant attains
age 35 and ends on the date of the Participant's death.
If a Participant separates from Service prior to the
first day of the Plan Year in which age 35 is attained,
with respect to the account balance as of the date of
separation, the Election Period shall begin on the date
of separation.
A Participant who has not attained age 35 as of the end
of a Plan Year, may make a special Qualified Election
to waive the Qualified Preretirement Survivor Annuity
for the period beginning on the date of such election
and ending on the first day of the Plan Year in which
the Participant will attain age 35. Such election
shall not be valid unless the Participant receives a
written explanation of the Qualified Preretirement
Survivor Annuity in such terms as are comparable to the
explanation required under Section 8.6 (A). Qualified
Preretirement Survivor Annuity coverage will be
automatically reinstated as of the first day of the
Plan Year in which the Participant attains age 35. Any
new waiver on or after such date shall be subject to
the full requirements of this Article.
(B) Qualified Election: A waiver of a Qualified Joint and
Survivor Annuity or a Qualified Preretirement Survivor
Annuity. Any waiver of a Qualified Joint and Survivor
Annuity or a Qualified Preretirement Survivor Annuity
shall not be effective unless: (a) the Participant's
Spouse consents in writing to the election; (b) the
election designates a specific Beneficiary, including
any class of Beneficiaries or any contingent
Beneficiaries, which may not be changed without spousal
consent (or the Spouse expressly permits designations
by the Participant without any further spousal
consent); (c) the Spouse's consent acknowledges the
effect of the election; and (d) the Spouse's consent is
witnessed by a Plan representative or notary public.
Additionally, a Participant's waiver of the Qualified
Joint and Survivor Annuity shall not be effective
unless the election designates a form of benefit
payment which may not be changed without spousal
consent (or the Spouse expressly permits designations
by the Participant without any further spousal
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consent). If it is established to the satisfaction of
a Plan representative that such written consent cannot
be obtained because:
(1) there is no Spouse;
(2) the Spouse cannot be located;
(3) 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;
(4) of other circumstances as the Secretary of the
Treasury may by regulations prescribe,
the Participant's election to waive coverage will be
considered a Qualified Election.
Any consent by a Spouse obtained under this provision
(or establishment that the consent of a Spouse may not
be obtained) shall be effective only with respect to
such Spouse. A consent that permits designations by
the Participant without any requirement of further
consent by such Spouse must acknowledge that the Spouse
has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where
applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A revocation
of a prior waiver may be made by a Participant without
the consent of the Spouse at any time before the
commencement of benefits. The number of revocations
shall not be limited. No consent obtained under this
provision shall be valid unless the Participant has
received notice as provided in Section 8.6 below.
(C) Qualified Joint and Survivor Annuity: An immediate
Annuity for the life of the Participant with a survivor
Annuity for the life of the Spouse which is not less
than 50% and not more than 100% of the amount of the
Annuity which is payable during the joint lives of the
Participant and the Spouse and which is the amount of
benefit which can be purchased with the Participant's
entire Vested Interest. If no survivor Annuity
percentage has been specified in an election, the
percentage payable to the Spouse will be 50%.
Notwithstanding the above paragraph, a Qualified Joint
and Survivor Annuity for an unmarried Participant shall
mean an Annuity for the life of the Participant.
(D) Qualified Preretirement Survivor Annuity: A survivor
Annuity for the life of the Spouse in the amount which
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can be purchased with the Participant's entire Vested
Interest.
(E) Spouse (Surviving Spouse): The Spouse or Surviving
Spouse of the Participant. A former Spouse may be
treated as the Spouse or Surviving Spouse to the extent
provided under a Qualified Domestic Relations Order as
described in Internal Revenue Code section 414(p).
8.5 CONSENT REQUIREMENTS. Only the Participant need
consent to the commencement of a distribution in the
form of a Qualified Joint and Survivor Annuity while
the account balance is immediately distributable.
Neither the consent of the Participant nor the
Participant's Spouse shall be required to the extent
that a distribution is required to satisfy section
401(a)(9) or section 415 of the Code. An account
balance is immediately distributable if any part of the
account balance could be distributed to the Participant
(or Surviving Spouse) before the Participant attains
(or would have attained if not deceased) the later of
Normal Retirement Age or age 62.
8.6 NOTICE REQUIREMENTS.
(A) In the case of a Qualified Joint and Survivor Annuity
as described in Section 8.4 (C), the Plan Administrator
shall, no less than 30 days and no more than 90 days
prior to the Annuity Starting Date, provide each
Participant with a written explanation of: (i) the
terms and conditions of a Qualified Joint and Survivor
Annuity; (ii) the Participant's right to make and the
effect of an election to waive the Qualified Joint and
Survivor Annuity form of benefit; (iii) the rights of a
Participant's Spouse; (iv) the right to make, and the
effect of, a revocation of a previous election to waive
the Qualified Joint and Survivor Annuity; (v) a general
description of the eligibility conditions and other
material features of the optional forms of benefit; and
(vi) sufficient additional information to explain the
relative values of the optional forms of benefit
available to them under this Plan.
(B) If a distribution is one to which sections 401(a)(11)
and 417 of the Code do not apply, such distribution may
commence less than 30 days after the notice required
provided that:
(1) the plan administrator clearly informs the
Participant that the Participant has a right to a
period of at least 30 days after receiving the
notice to consider the decision of whether or not
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to elect a distribution (and, if applicable, a
particular distribution option), and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
(C) In the case of a Qualified Preretirement Survivor
Annuity as described in Section 8.4 (D), the Plan
Administrator shall provide each Participant within the
period beginning on the first day of the Plan Year in
which the Participant attains age 32 and ending with
the close of the Plan Year preceding the Plan Year in
which the Participant attains age 35, a written
explanation of the Qualified Preretirement Survivor
Annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the
requirements of Section 8.6 (A) to a Qualified Joint
and Survivor Annuity.
If a Participant enters the Plan after the first day of
the Plan Year in which the Participant attained age 32,
the Plan Administrator shall provide notice no later
than the close of the second Plan Year succeeding the
entry of the Participant in the Plan.
If a Participant enters the Plan after he has attained
age 35, the Plan Administrator shall provide notice
within a reasonable period of time following the entry
of the Participant in the Plan.
If a Participant's Termination of Employment occurs
before the Participant attains age 35, the Plan
Administrator shall provide notice within one year of
such Termination of Employment.
8.7 TRANSITIONAL RULES.
(A) Any living Participant not receiving benefits on August
23, 1984, who would otherwise not receive the benefits
prescribed by the previous Sections of this Article
must be given the opportunity to elect to have the
prior Sections of this Article relating to the
Qualified Preretirement Survivor Annuity apply if such
Participant is credited with at least one Hour of
Service under this Plan or a predecessor plan in a Plan
Year beginning on or after January 1, 1976, and such
Participant had at least 10 Years of Service for
vesting purposes when he separated from Service.
(B) Any living Participant not receiving benefits on August
23, 1984, who was credited with at least one Hour of
Service under this Plan or a predecessor plan on or
after September 2, 1974, and who is not otherwise
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credited with any Service in a Plan Year beginning on
or after January 1, 1976, must be given the opportunity
to have his or her benefits paid in accordance with
Section 8.7 (D).
(C) The respective opportunities to elect (as described in
Sections 8.7 (A) and 8.7 (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 Section 8.7
(B) of this Article and any Participant who does not
elect under Section 8.7 (A) or who meets the
requirements of Section 8.7 (A) 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 accordance with
all of the following requirements if benefits would
have been payable in the form of a Life Annuity:
(1) Automatic Joint and Survivor Annuity. If benefits
in the form of a Life Annuity become payable to a
married Participant who:
(a) begins to receive payments under the Plan on
or after Normal Retirement Age; or
(b) dies on or after Normal Retirement Age while
still working for the Employer; or
(c) begins to receive payments on or after the
Qualified Early Retirement Age; or
(d) separates from Service on or after attaining
Normal Retirement Age (or the Qualified Early
Retirement Age) and after satisfying the
eligibility requirements for the payment of
benefits under the Plan and 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 months before the
Participant attains Qualified Early Retirement Age
and end not more than 90 days before the
commencement of benefits. Any election hereunder
will be in writing and may be changed by the
Participant at any time.
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(2) Election of Early Survivor Annuity: A Participant
who is employed after attaining the Qualified
Early Retirement Age will be given the opportunity
to elect, during the election period, to have a
survivor Annuity payable on death. If the
Participant elects the survivor Annuity, payments
under such Annuity must not be less than the
payments which would have been made to the Spouse
under the Qualified Joint and Survivor Annuity if
the Participant had retired on the day before his
or her death. Any election under this provision
will be in writing and may be changed by the
Participant at any time. The election period
begins on the later of (1) the 90th day before the
Participant attains the Qualified Early Retirement
Age, or (2) the date on which participation
begins, and ends on the date the Participant
terminates employment.
(3) For purposes of this Section 8.7 (D) :
(a) Qualified Early Retirement Age is the latest
of:
(i) the earliest date, under the Plan, on
which the Participant may elect to
receive retirement benefits; or
(ii) the first day of the 120th month
beginning before the Participant reaches
Normal Retirement Age; or
(iii) the date the Participant begins
participation.
(b) Qualified Joint and Survivor Annuity is an
Annuity for the life of the Participant with
a survivor Annuity for the life of the Spouse
as described in Section 8.4 (C).
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ARTICLE IX
TERMINATION OF EMPLOYMENT
-------------------------
9.1 DISTRIBUTION. As of a Participant's Termination of
Employment, he shall be entitled to receive a
distribution of his entire Vested Interest. Such
distribution shall be further subject to the terms and
conditions of Article VI.
If at the time of his Termination of Employment the
Participant's Vesting Percentage is not 100% and the
Participant does not take a distribution from the portion of
his Vested Interest subject to the Vesting Percentage, the
non-vested portion of his Participant's Account will become
a Forfeiture upon the date the Participant incurs five
consecutive One-Year Breaks in Service.
If at the time of his Termination of Employment the
Participant's Vesting Percentage is not 100% and such
Participant does take a distribution from the portion of his
Vested Interest subject to the Vesting Percentage, or if the
Participant's Vesting Percentage is 0%, the non-vested
portion of his Participant's Account will become a
Forfeiture upon the date such terminated Participant incurs
a One-Year Break in Service.
If the Participant, whose non-vested portion of his
Participant's Account became a Forfeiture in accordance with
the terms of the preceding paragraph, is later rehired by
the Employer and re-enrolls in the Plan before incurring
five consecutive One-Year Breaks in Service, then the amount
of the Forfeiture shall be restored by the Employer and
shall be included as part of that portion of his
Participant's Account subject to the Vesting Percentage.
In addition, such rehired Participant shall be entitled to
repay the portion of the distribution made at his
Termination of Employment that was derived from Employer
Contributions. The portion of the repayment that is
attributable to amounts that were subject to the Vesting
Percentage shall, upon repayment, be included as part of
that portion of his Participant's Account subject to the
Vesting Percentage and will no longer be considered a
distribution for purposes of determining the Participant's
Vested Interest. Such repayment must be made before the
Participant has incurred five consecutive One-Year Breaks in
Service following the date he received the distribution or
five years after the Participant is re-employed by the
Employer, whichever date is earlier.
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9.2 NO FURTHER RIGHTS OR INTEREST. A Participant shall
have no further interest in or any rights to any
portion of his Participant's Account that becomes a
Forfeiture due to his Termination of Employment once
the Participant incurs five consecutive One-Year Breaks
in Service in accordance with Article II.
9.3 APPLICATION OF FORFEITURES. Any Forfeiture arising in
accordance with the provisions of Section 9.1 shall be
credited and allocated to the Participants' Accounts in
the manner set forth in Section 4.7 for the
reallocation of Forfeitures.
The provisions of the preceding sentence notwithstanding, in
the event that a former Participant is rehired by the
Employer and the Employer is required by the provisions of
Section 9.1 of this Plan to restore the amount of a separate
account that had been created upon such Participant's prior
Termination of Employment and later forfeited, Forfeitures,
if any, will first be used to restore such separate account
to its value as of such Participant's prior Termination of
Employment date. In the event that the available Forfeitures
are not sufficient to make such restoration, the Employer
will make an additional contribution sufficient to make such
restoration.
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ARTICLE X
WITHDRAWALS
-----------
10.1 WITHDRAWAL AFTER AGE 59-1/2. A Participant who has
attained age 59-1/2, may elect to withdraw from his
Participant's Account, once every twelve consecutive
months, an amount which is equal to any whole
percentage (not exceeding 100%) of his Vested Interest
in his Participant's Account attributable to:
Elective Deferral Contributions, including earnings.
10.2 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP OF ELECTIVE
DEFERRAL CONTRIBUTIONS. Distributions of Elective
Deferral Contributions may be made to a Participant in
the event of a hardship. For purposes of this section,
a distribution is made on account of hardship only if
the distribution both is made on account of an
immediate and heavy financial need of the Employee and
is necessary to satisfy the financial need. In
addition, for Plan Years beginning after December 31,
1988 any distribution on account of hardship shall be
limited to the distributable amount described in
paragraph (C) of this section.
(A) Whether an Employee has an immediate and heavy
financial need shall be determined by the Plan
Administrator based on all relevant facts and
circumstances. An immediate and heavy financial need
shall be determined to exist if the Employee
establishes to the satisfaction of the Plan
Administrator that the need is a result of:
(1) Expenses for medical care described in section
213(d) of the Code previously incurred by the
Employee, the Employee's spouse, or any dependents
of the Employee (as defined in section 152 of the
Code) or necessary for these persons to obtain
medical care described in section 213(d) of the
Code;
(2) Payment of tuition and related educational fees
for the next 12 months of post-secondary education
for the Employee, his or her spouse, children or
dependents (as defined in section 152 of the
Code);
(3) Costs directly related to the purchase of a
principal residence for the Employee (excluding
mortgage payments);
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(4) Payments necessary to prevent the eviction of the
Employee from the Employee's principal residence
or foreclosure on the mortgage on that residence;
or
(5) Any other deemed immediate and heavy financial
need which the Internal Revenue Service may
designate.
The Employee shall have the burden of presenting to the
Plan Administrator written evidence sufficient to
demonstrate the existence of such need, and the Plan
Administrator shall not permit a distribution under
this section without first receiving such evidence.
(B) The Participant shall specify on the application for a
hardship withdrawal whether the Participant elects the
provision of (1) or (2) below to be used in determining
the necessity of the hardship.
(1) A distribution will be considered as necessary to
satisfy an immediate and heavy financial need of
the Employee only if all of the following
requirements are satisfied:
(a) The hardship distribution is not in excess of
the amount of the immediate and heavy
financial need of the Employee. The amount
of an immediate and heavy financial need may
include the amounts necessary to apply any
federal, state, or local income taxes or
penalties reasonably anticipated to result
from the distribution.
(b) The Employee had obtained all distributions,
other than hardship distributions, and all
nontaxable (at the time of the loan) loans
currently available under all plans
maintained by the Employer.
(c) The Employee is suspended from making
Elective Deferral Contributions to the Plan
for at least 12 months after receipt of the
hardship distribution In addition, the
Employee must be prohibited under the terms
of the plan or an otherwise enforceable
agreement from making Elective Deferral
Contributions and Employee Contributions to
all other plans maintained by the Employer
for at least 12 months after receipt of the
hardship distribution.
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For this purpose, the phrase "all other plans
of the Employer" means all qualified and
nonqualified plans of deferred compensation
maintained by the Employer. The phrase
includes a stock option, stock purchase, or
similar plan, or a cash or deferred
arrangement that is part of a cafeteria plan
within the meaning of section 125 of the
Code. However, it does not include the
mandatory employee contribution part of a
defined benefit plan. It also does not
include a health or welfare benefit plan,
including one that is part of a cafeteria
plan within the meaning of section 125 of the
Code.
(d) The Employee may not make Elective Deferral
Contributions to the Plan for the Employee's
taxable year immediately following the
taxable year of the hardship distribution in
excess of the applicable limit under section
402(g) of the Code for such taxable year less
the amount of such Employee's Elective
Deferral Contributions for the taxable year
of the hardship distribution. In addition,
all other plans maintained by the Employer
must limit the Employee's Elective Deferral
Contributions for the next taxable year to
the applicable limit under section 402(g) of
the Code for that year minus the Employee's
Elective Deferral Contributions for the year
of the hardship distribution.
(2) A distribution will be treated as necessary to
satisfy a financial need if the Employer relies
upon the Employee's written representation, unless
the Employer has actual knowledge to the contrary,
that the need cannot reasonably be relieved:
(a) Through reimbursement or compensation by
insurance or otherwise;
(b) By liquidation of the Employee's assets;
(c) By cessation of Elective Deferral
Contributions under the Plan; or
(d) By other distributions or nontaxable (at the
time of the loan) loans from plans maintained
by the Employer or by any other employer, or
by borrowing from commercial sources on
reasonable commercial terms in an amount
sufficient to satisfy the need.
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A need cannot reasonably be relieved by one of the
actions listed above if the effect would be to
increase the amount of the need.
The amount of an immediate and heavy financial
need may include any amounts necessary to pay any
federal, state, or local income taxes or penalties
reasonably anticipated to result from the
distribution.
(C) The distributable amount is equal to the Employee's
total Elective Deferral Contribution as of the date of
distribution, reduced by the amount of previous
distributions of Elective Deferral Contributions on
account of hardship. The Employee's total Elective
Deferral Contributions shall be increased by income
allocable to Elective Deferral Contributions. In the
case of income allocable to Elective Deferral
Contributions, the distributable amount may only
include amounts that were credited to the Employee's
Account as of December 31, 1988.
10.3 WITHDRAWAL OF ROLLOVER CONTRIBUTIONS. At any time, a
Participant may elect to withdraw from his
Participant's Account an amount up to 100% of the value
of that portion of his account attributable to his
Rollover Contributions as defined in Article IV. Such
an election shall become effective in accordance with
the Notification Section below.
10.4 NOTIFICATION. The Participant shall notify the
Administrator in writing of his election to make a
withdrawal under the preceding provisions of this
Article X. Any such election shall be effective as of
the date specified in such notice, which date must be
at least 15 days after such notice is filed. Payment
of the withdrawal shall be subject to the terms and
conditions of Article VI.
10.5 NON-REPAYMENT. Withdrawals made in accordance with this
Article X may not be repaid.
10.6 SPOUSAL CONSENT TO WITHDRAWAL. Prior to obtaining a
withdrawal in accordance with this Article X, a married
Participant must obtain spousal consent in accordance
with the provisions of Article VIII unless such
Participant meets the requirements set forth in
Sections 8.1 (A), (B) and (C).
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ARTICLE X-A
LOANS
-----------
10A.1 LOANS TO PARTICIPANTS. The Plan Administrator may make
a bona fide loan to a Participant, in an amount which,
when added to the outstanding balance of all other
loans to the Participant from all qualified plans of
the Employer, does not exceed the lesser of $50,000
reduced by the excess of the Participant's highest
outstanding loan balance during the 12 months preceding
the date on which the loan is made over the outstanding
loan balance on the date the new loan is made, or 50%
of the Participant's Vested Interest in his
Participant's Account. Loans may be taken from the
Participant's Vested Interest in his Participant's
Account attributable to Elective Deferral
Contributions. Notwithstanding any provisions in this
paragraph to the contrary, loans may not exceed a
Participant's Vested Interest attributable to these
specific types of contributions.
The loan shall be made under such terms, security interest,
and conditions as the Plan Administrator deems appropriate,
provided, however, that all loans granted hereunder:
(A) are available to all Participants and Beneficiaries,
who are parties-in-interest pursuant to section 3(14)
of ERISA, on a reasonably equivalent basis;
(B) are not made available to Highly Compensated Employees
on a basis greater than the basis made available to
other Employees;
(C) bear a reasonable rate of interest;
(D) are adequately secured;
(E) unless a Participant meets the requirements set forth
in Sections 8.1 (A), (B) and (C), are made only after a
Participant obtains the consent of his Spouse, if any,
to use his Participant's Account as security for the
loan. Spousal consent shall be obtained no earlier
than the beginning of the 90-day period that ends on
the date on which the loan is to be so secured. The
consent must be in writing, must acknowledge the effect
of the loan, and must be witnessed by a plan
representative or notary public. Such consent shall
thereafter be binding with respect to the consenting
Spouse or any subsequent Spouse with respect to that
loan. A new consent shall be required if the
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Participant's Account is used for renegotiation,
extension, renewal or other revision of the loan.
(F) are made in accordance with and subject to all of the
provisions of this Article.
10A.2 LOAN PROCEDURES. The Plan Administrator shall
establish a written set of procedures, set forth in the
summary plan description, by which all loans will be
administered. Such rules, which are incorporated herein
by reference, will include, but not be limited to, the
following:
(A) the person or persons authorized to administer the loan
program, identified by name or position;
(B) the loan application procedure;
(C) the basis for approving or denying loans;
(D) any limits on the types of loans permitted;
(E) the procedure for determining a "reasonable" interest
rate;
(F) acceptable collateral;
(G) default conditions; and
(H) steps which will be taken to preserve Plan assets in
the event of default.
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ARTICLE XI
FIDUCIARY DUTIES AND RESPONSIBILITIES
-------------------------------------
11.1 GENERAL FIDUCIARY STANDARD OF CONDUCT. Each Fiduciary
of the Plan shall discharge his duties hereunder solely
in the interest of the Participants and their
Beneficiaries and for the exclusive purpose of
providing benefits to Participants and their
Beneficiaries and defraying reasonable expenses of
administering the Plan. Each Fiduciary shall act with
the care, skill, prudence, and diligence under the
circumstances that a prudent man acting in a like
capacity and familiar with such matters would use in
conducting an enterprise of like character and with
like aims, in accordance with the documents and
instruments governing this Plan, insofar as such
documents and instruments are consistent with this
standard.
11.2 SERVICE IN MULTIPLE CAPACITIES. Any Person or group of
persons may serve in more than one fiduciary capacity
with respect to this Plan.
11.3 LIMITATIONS ON FIDUCIARY LIABILITY. Nothing in this
Plan shall be construed to prevent any Fiduciary from
receiving any benefit to which he may be entitled as a
Participant or Beneficiary in this Plan, so long as the
benefit is computed and paid on a basis which is
consistent with the terms of this Plan as applied to
all other Participants and Beneficiaries. Nor shall
this Plan be interpreted to prevent any Fiduciary from
receiving any reasonable compensation for services
rendered, or for the reimbursement of expenses properly
and actually incurred in the performance of his duties
with the Plan; except that no Person so serving who
already receives full-time pay from an Employer shall
receive compensation from this Plan, except for
reimbursement of expenses properly and actually
incurred.
11.4 INVESTMENT MANAGER. When an Investment Manager has
been appointed, he is required to acknowledge in
writing that he has undertaken a Fiduciary
responsibility with respect to the Plan.
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ARTICLE XII
THE ADMINISTRATOR
-----------------
12.1 DESIGNATION AND ACCEPTANCE. The Employer shall
designate a person or persons to serve as Administrator
under the Plan and such person, by joining in the
execution of this Plan and Trust Agreement accepts such
appointment and agrees to act in accordance with the
terms of the Plan.
12.2 DUTIES AND AUTHORITY. The Administrator shall
administer the Plan in a nondiscriminatory manner for
the exclusive benefit of Participants and their
Beneficiaries.
The Administrator shall perform all such duties as are
necessary to operate, administer, and manage the Plan in
accordance with the terms thereof, including but not limited
to the following:
(A) To determine all questions relating to a Participant's
coverage under the Plan;
(B) To maintain all necessary records for the
administration of the Plan;
(C) To compute and authorize the payment of retirement
income and other benefit payments to eligible
Participants and Beneficiaries;
(D) To interpret and construe the provisions of the Plan
and to make regulations which are not inconsistent with
the terms thereof; and
(E) To advise or assist Participants regarding any rights,
benefits, or elections available under the Plan.
The Administrator shall take all such actions as are
necessary to operate, administer, and manage the Plan as a
retirement program which is at all times in full compliance
with any law or regulation affecting this Plan.
The Administrator may allocate certain specified duties of
plan administration to an individual or group of individuals
who, with respect to such duties, shall have all reasonable
powers necessary or appropriate to accomplish them.
12.3 EXPENSES AND COMPENSATION. 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
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<PAGE>
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. However, the Employer may reimburse
the Trust fund for any administration expense incurred.
Any administration expense paid to the Trust fund as a
reimbursement shall not be considered an Employer
Contribution. Nothing shall prevent the Administrator
from receiving reasonable compensation for services
rendered in administering this Plan, unless the
Administrator already receives full-time pay from any
Employer adopting the Plan.
12.4 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 this Plan as the Administrator may
require.
12.5 ADMINISTRATIVE COMMITTEE; MULTIPLE SIGNATURES. In the
event that more than one person has been duly nominated
to serve on the Administrative Committee and has
signified in writing the acceptance of such
designation, the signature(s) of one or more persons
may be accepted by an interested party as conclusive
evidence that the Administrative Committee has duly
authorized the action therein set forth and as
representing the will of and binding upon the whole
Administrative Committee. No person receiving such
documents or written instructions and acting in good
faith and in reliance thereon shall be obliged to
ascertain the validity of such action under the terms
of this Plan and Trust. The Administrative Committee
shall act by a majority of its members at the time in
office and such action may be taken either by a vote at
a meeting or in writing without a meeting.
12.6 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. The
Administrator, or any member of the Administrative
Committee, may resign at any time by delivering to the
Employer a written notice of resignation, to take
effect at a date specified therein, which shall not be
less than 30 days after the delivery thereof, unless
such notice shall be waived.
The Administrator may be removed with or without cause by
the Employer by delivery of written notice of removal, to
take effect at a date specified therein, which shall be not
less than 30 days after delivery thereof, unless such notice
shall be waived.
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The Employer, upon receipt of or giving notice of the
resignation or removal of the Administrator, shall promptly
designate a successor Administrator who must signify
acceptance of this position in writing. In the event no
successor is appointed, the Board of Directors of the
Employer will function as the Administrative Committee until
a new Administrator has been appointed and has accepted such
appointment.
12.7 INVESTMENT MANAGER. The Administrator may appoint, in
writing, an Investment Manager or Managers to whom is
delegated the authority to manage, acquire, invest, or
dispose of all or any part of the Trust assets. With
regard to the assets entrusted to his care, the
Investment Manager shall provide written instructions
and directions to the Trustee, who shall in turn be
entitled to rely upon such written direction. This
appointment and delegation shall be evidenced by a
signed written agreement.
12.8 DELEGATION OF DUTIES. The Administrator shall have the
power, to the extent permitted by law, to delegate the
performance of such Fiduciary and non-Fiduciary duties,
responsibilities, and functions as the Administrator
shall deem advisable for the proper management and
administration of the Plan in the best interests of the
Participants and their Beneficiaries.
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ARTICLE XIII
PARTICIPANTS' RIGHTS
--------------------
13.1 GENERAL RIGHTS OF PARTICIPANTS AND BENEFICIARIES. The
Plan is established and the Trust assets are held for
the exclusive purpose of providing benefits for such
Employees and their Beneficiaries as have qualified to
participate under the terms of the Plan.
13.2 FILING A CLAIM FOR BENEFITS. A Participant or
Beneficiary or the Employer acting in his behalf, shall
notify the Administrator of a claim of benefits under
the Plan. Such request shall be in writing to the
Administrator and shall set forth the basis of such
claim and shall authorize the Administrator to conduct
such examinations as may be necessary to determine the
validity of the claim and to take such steps as may be
necessary to facilitate the payment of any benefits to
which the Participant or Beneficiary may be entitled
under the terms of the Plan.
A decision by the Administrator shall be made promptly and
not later than 90 days after the Administrator's receipt of
the claim of benefits under the Plan, unless special
circumstances require an extension of the time for
processing, in which case a decision shall be rendered as
soon as possible, but not later than 180 days after the
initial receipt of the claim of benefits.
13.3 DENIAL OF CLAIM. Whenever a claim for benefits by any
Participant or Beneficiary has been denied by a Plan
Administrator, a written notice, prepared in a manner
calculated to be understood by the Participant, must be
provided, setting forth (1) the specific reasons for
the denial; (2) the specific reference to pertinent
Plan provisions on which the denial is based; (3) a
description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and (4) an explanation of the Plan's claim
review procedure.
13.4 REMEDIES AVAILABLE TO PARTICIPANTS. A Participant or
Beneficiary may (1) request a review by a Named
Fiduciary, other than the Administrator, upon written
application to the Plan; (2) review pertinent Plan
documents; and (3) submit issues and comments in
writing to a Named Fiduciary. A Participant or
Beneficiary shall have 60 days after receipt by the
claimant of written notification of a denial of a claim
to request a review of a denied claim.
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<PAGE>
A decision by a Named Fiduciary shall be made promptly and
not later than 60 days after the Named Fiduciary's receipt
of a request for review, unless special circumstances
require an extension of the time for processing, in which
case a decision shall be rendered as soon as possible, but
not later than 120 days after receipt of a request for
review. The decision on review by a Named Fiduciary shall
be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by
the claimant, and specific references to the pertinent Plan
provisions on which the decision is based.
A Participant or Beneficiary shall be entitled, either in
his own name or in conjunction with any other interested
parties, to bring such actions in law or equity or to
undertake such administrative actions or to seek such relief
as may be necessary or appropriate to compel the disclosure
of any required information, to enforce or protect his
rights, to recover present benefits due to him, or to
clarify his rights to future benefits under the Plan.
13.5 REINSTATEMENT OF BENEFIT. In the event any portion of
a distribution which is payable to a Participant or a
Beneficiary shall remain unpaid on account of the
inability of the Plan Administrator, after diligent
effort, to locate such Participant or Beneficiary, the
amount so distributable shall be treated as a
Forfeiture under the Plan. If a claim is made by the
Participant or Beneficiary for any benefit forfeited
under this section, such benefit shall be reinstated.
13.6 LIMITATION OF RIGHTS. Participation hereunder shall
not grant any Participant the right to be retained in
the Service of the Employer or any other rights or
interest in the Plan or Trust fund other than those
specifically herein set forth.
13.7 PARTICIPANT CONTRIBUTIONS. Each Participant, regardless
of his length of Service with the Employer, shall be
fully vested (100%) at all times in any portion of his
Participant's Account attributable to the following:
Rollover Contributions.
13.8 MERGERS OR TRANSFERS. In the case of any merger or
consolidation with or transfer of assets or liabilities
to any other qualified plan after September 2, 1974,
the following conditions must be met:
(A) The sum of the account balances in each plan shall
equal the fair market value (determined as of the date
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<PAGE>
of the merger or transfer as if the plans had then
terminated) of the entire plan assets.
(B) The assets of each plan shall be combined to form the
assets of the plan as merged (or transferred).
(C) Immediately after the merger (or transfer), each
Participant in the plan merged (or transferred) shall
have an account balance equal to the sum of the account
balances the Participant had in the plans immediately
prior to the merger (or transfer).
(D) Immediately after the merger (or transfer) each
Participant in the plan merged (or transferred) shall
be entitled to the same optional benefit forms as he
was entitled to immediately prior to the merger (or
transfer).
In the case of any merger or consolidation with or transfer
of assets or liabilities to any defined benefit plan after
September 2, 1974, one of the plans before such merger,
consolidation, or transfer shall be converted into the other
type of plan and either the rules described above,
applicable to the merger of two defined contribution plans,
or the rules applicable to the merger of two defined benefit
plans, as appropriate, shall be applied.
13.9 PARTICIPANT'S ACCOUNT AND VALUATION. A Participant's
Account shall be maintained on behalf of each
Participant until such account is distributed in
accordance with the terms of this Plan. At least once
per year, as of the last day of the Plan Year, each
Participant's Account shall be adjusted for any
earnings, gains, losses, contributions, withdrawals,
loans, and expenses, attributable to such Plan Year, in
order to obtain a new valuation of the Participant's
Account.
13.10 INVESTMENT OF CONTRIBUTIONS. Each Participant shall
have the exclusive authority to direct the investment
of contributions made to his Participant's Account. In
accordance with the procedures established by the Plan
Administrator, the Participant shall elect to have a
specified percentage invested in one or more investment
funds, as long as the designated percentage for each
fund is a whole number, and the sum of the percentages
allocated is equal to 100%. In addition, the
Participant may change such election on any normal
business day of the Insurance Company. All investment
changes are subject to the rules of the investment
fund(s) in which the Participant's Account is or is to
be invested.
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13.11 TRANSFERS BETWEEN INVESTMENT FUNDS. A Participant may
designate amounts invested pursuant to the section
above to be transferred between the investment funds on
any normal business day of the Insurance Company, in
accordance with the procedures established by the Plan
Administrator.
Notwithstanding the above, the transfer of amounts between
investment funds shall be subject to the rules of the
investment funds in which the Participant's Account is
invested or is to be invested.
The Participant's Account attributable to Matching and
Nonelective Contributions may not be transferred.
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ARTICLE XIV
AMENDMENT OR TERMINATION OF THE PLAN
------------------------------------
14.1 AMENDMENT OF PLAN. The Employer shall have the right
from time to time to modify or amend, in whole or in
part, any or all provisions of the Plan, provided that
a Board of Directors' resolution pursuant to such
modification or amendment shall first be adopted and
provided further that the modification or amendment is
signed by the Employer, the Administrator and the
Trustee. Upon any such modification or amendment the
Administrator and the Trustee shall be furnished a copy
thereof. No amendment shall deprive any Participant or
Beneficiary of any Vested Interest hereunder. Any
Participant having not less than three Years of Service
shall be permitted to elect, in writing, to have his
Vesting Percentage computed under the Plan without
regard to such amendment.
The period during which the election must be made by the
Participant shall begin no later than the date the Plan
Amendment is adopted and end no later than after the latest
of the following dates:
(A) The date which is 60 days after the day the amendment
is adopted; or
(B) The date which is 60 days after the day the amendment
becomes effective; or
(C) The date which is 60 days after the day the Participant
is issued written notice of the amendment by the
Employer or Administrator.
Such written election by a Participant shall be made to the
Administrator.
No amendment to the Plan shall decrease a Participant's
Account balance or eliminate an optional form of
distribution. Notwithstanding the preceding sentence, a
Participant's Account balance may be reduced to the extent
permitted under Internal Revenue Code section 412(c)(8).
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 the date it becomes effective.
14.2 CONDITIONS OF AMENDMENT. The Employer shall not make
any amendment which would cause the Plan to lose its
status as a qualified plan within the meaning of
section 401(a) of the Code.
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<PAGE>
14.3 TERMINATION OF THE PLAN. The Employer intends to
continue the Plan indefinitely for the benefit of its
Employees, but reserves the right to terminate the Plan
at any time by resolution of its Board of Directors.
Upon such termination, the liability of the Employer to
make contributions hereunder shall terminate.
14.4 FULL VESTING. Upon the termination or partial
termination of the Plan, or upon complete
discontinuance of Employer contributions, the rights of
all affected Participants in and to the amounts
credited to each such Participant's Account shall be
100% vested and nonforfeitable.
14.5 DISTRIBUTIONS UPON PLAN TERMINATION. If this Plan is
terminated and the Employer does not maintain or
establish another defined contribution plan, pursuant
to Code section 401(k)(10)(A)(i), each Participant
shall receive a total distribution, in the form of a
lump-sum distribution as defined in Code section
401(k)(10)(B)(ii), of his Participant's Account in
accordance with the terms and conditions of Article VI.
However, if this Plan is terminated and the Employer does
maintain or establish another defined contribution plan as
discussed in the above paragraph, or if the Plan is only
partially terminated, each Participant shall receive a total
distribution of his Participant's Account, excluding any
amounts attributable to Elective Deferral Contributions and
contributions made by the Employer designated as 401(k)
contributions in accordance with the terms and conditions of
Article VI. In such a situation, any amounts in a
Participant's Account attributable to Elective Deferral
Contributions and contributions made by the Employer
designated as 401(k) contributions may be distributed only
upon the occurrence of an event described in Article VI.
No Participant and/or spousal consent will be required for a
distribution where no successor plan exists. However, if
the Employer does maintain a successor plan, Participant
and/or spousal consent is required for a distribution
exceeding $3,500. The Participant's Account will be
transferred to such successor plan if the required consents
are not received.
14.6 APPLICATION OF FORFEITURES. Upon the termination of the
Plan, any Forfeitures which have not been applied as of
such termination to reduce the contribution made by the
Employer shall be credited on a pro rata basis to the
Participant's Account of the then Active Participants
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<PAGE>
in the same manner as the last contribution made by the
Employer under the Plan.
14.7 APPROVAL BY THE INTERNAL REVENUE SERVICE.
Notwithstanding any other provisions of this Plan, the
Employer's adoption of this Plan is subject to the
condition precedent that the Employer's Plan shall be
approved and qualified by the Internal Revenue Service
as meeting the requirements of section 401(a) of the
Internal Revenue Code and that the Trust established
hereunder shall be entitled to exemption under the
provisions of section 501(a). In the event the Plan
initially fails to qualify and the Internal Revenue
Service issues a final ruling that the Employer's Plan
or Trust fails to so qualify as of the Effective Date,
all liability of the Employer to make further
contributions hereunder shall cease. The Plan
Administrator, Trustee and any other Named Fiduciary
shall be notified immediately by the Employer, in
writing, of such failure to qualify. Upon such
notification, the value of the Participants' Accounts
shall be distributed in cash to the Employer, subject
to the terms and conditions of Article VI.
That portion of such distribution which is attributable to
Participant Contributions as specified in Section 13.7, if
any, shall be paid to the Participant, and the balance of
such distribution shall be paid to the Employer.
14.8 SUBSEQUENT UNFAVORABLE DETERMINATION. If the Employer
is notified subsequent to initial favorable
qualification that the Plan is no longer qualified
within the meaning of section 401(a) of the Internal
Revenue Code, or that the Trust is no longer entitled
to exemption under the provisions of section 501(a),
and if the Employer shall fail within a reasonable time
to make any necessary changes in order that the Plan
and/or Trust shall so qualify, the Participants'
Accounts shall be fully vested and nonforfeitable and
shall be disposed of as if the Plan had terminated, in
the manner set forth in this Article XIV.
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ARTICLE XV
SUBSTITUTION OF PLANS
---------------------
15.1 SUBSTITUTION OF PLANS. Subject to the provisions of
Section 13.8 the Employer may substitute an
individually designed plan or a master or prototype
plan for this Plan without terminating this Plan as
embodied herein and this shall be deemed to constitute
an amendment and restatement in its entirety of this
Plan as heretofore adopted by the Employer; provided,
however, that the Employer shall have certified to the
Trustee that this Plan is being continued on a restated
basis which meets the requirements of section 40l(a) of
the Internal Revenue Code and ERISA.
15.2 TRANSFER OF ASSETS. Upon 90 days written notification
from the Employer and the Trustee that a different plan
meeting the requirements set forth in Section 15.1
above has been executed and entered into by the
Administrator and the Employer, and after the Trustee
has been furnished the Employer's certification in
writing that the Employer intends to continue the Plan
as a qualified Plan under section 40l(a) of the
Internal Revenue Code and ERISA, assets which represent
the value of all Participant's Accounts may be
transferred in accordance with the instructions
received from or on behalf of the Employer. The
Trustee may rely fully on the representations or
directions of the Employer with respect to any such
transfer and shall be fully protected and discharged
with respect to any such transfer made in accordance
with such representations, instructions, or directions.
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ARTICLE XVI
MISCELLANEOUS
-------------
16.1 NON-REVERSION. This Plan has been established by the
Employer for the exclusive benefit of the Participants
and their Beneficiaries. Except as otherwise provided
in Sections 14.7, 16.7, and 16.8, under no
circumstances shall any funds contributed hereunder, at
any time, revert to or be used by the Employer, nor
shall any such funds or assets of any kind be used
other than for the benefit of the Participants or their
Beneficiaries.
16.2 GENDER AND NUMBER. When necessary to the meaning
hereof, and except when otherwise indicated by the
context, either the masculine or the neuter pronoun
shall be deemed to include the masculine, the feminine,
and the neuter, and the singular shall be deemed to
include the plural.
16.3 REFERENCE TO THE CODE AND ERISA. Any reference to any
section of the Internal Revenue Code, ERISA, or to any
other statute or law shall be deemed to include any
successor law of similar import.
16.4 GOVERNING LAW. The Plan and Trust shall be governed and
construed in accordance with the laws of the state
where the Trustee has its principal office if the
Trustee is a corporation or an association, otherwise
under the laws of the state where the Employer has its
principal office.
16.5 COMPLIANCE WITH THE CODE AND ERISA. This Plan is
intended to comply with all requirements for
qualification under the Internal Revenue Code and
ERISA, and if any provision hereof is subject to more
than one interpretation or any term used herein is
subject to more than one construction, such ambiguity
shall be resolved in favor of that interpretation or
construction which is consistent with the Plan being so
qualified. If any provision of the Plan is held
invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions,
and this Plan shall be construed and enforced as if
such provision had not been included.
16.6 NON-ALIENATION. It is a condition of the Plan, and all
rights of each Participant shall be subject thereto,
that no right or interest of any Participant in the
Plan shall be assignable or transferable in whole or in
part, either directly or by operation of law or
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otherwise, including, but without limitation,
execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner, and no right or
interest of any Participant in the Plan shall be liable
for or subject to any obligation or liability of such
Participant. The preceding sentence shall not preclude
the enforcement of a federal tax levy made pursuant to
section 6331 of the Code or the collection by the
United States on a judgement resulting from an unpaid
tax assessment.
16.7 CONTRIBUTION RECAPTURE. Notwithstanding any other
provisions of this Plan, (1) in the case of a
contribution which is made by an Employer by a mistake
of fact, Section 16.1 shall not prohibit the return of
such contribution to the Employer within one year after
the payment of the contribution, and (2) if a
contribution is conditioned upon the deductibility of
the contribution under section 404 of the Code, then,
to the extent the deduction is disallowed, Section 16.1
shall not prohibit the return to the Employer of such
contribution (to the extent disallowed) within one year
after the disallowance of the deduction. The amount
which may be returned to the Employer is the excess of
(1) the amount contributed over (2) the amount that
would have been contributed had there not occurred a
mistake of fact or a mistake in determining the
deduction. Earnings attributable to the excess
contribution may not be returned to the Employer, but
losses attributable thereto must reduce the amount to
be so returned. Furthermore, if the withdrawal of the
amount attributable to the mistaken contribution would
cause the balance of the individual account of any
Participant to be reduced to less than the balance
which would have been in the account had the mistaken
amount not been contributed, then the amount to be
returned to the Employer would have to be limited so as
to avoid such reduction.
16.8 QUALIFIED DOMESTIC RELATIONS ORDERS. Notwithstanding
any other provisions of this Plan, the Participant's
Account may be segregated and distributed pursuant to a
Qualified Domestic Relations Order within the meaning
of Internal Revenue Code section 414(p). The Plan
Administrator shall establish procedures for
determining if a Domestic Relations Order is qualified
within the meaning of section 414(p).
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ARTICLE XVI-A
TOP-HEAVY PROVISIONS
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16A.1 DEFINITIONS. The following definitions are atypical
terms used only in this Article XVI-A.
(A) Compensation. The term Compensation, whenever used in
this Article XVI-A, means Compensation as defined in
Article V of the Plan, but includes the amount of any
elective contributions made by the Employer on the
Employee's behalf to a cafeteria plan established in
accordance with the provisions of Code section 125, a
qualified cash or deferred arrangement in accordance
with the provisions of Code section 402(e)(3), a
simplified employee pension plan in accordance with the
provisions of Code section 402(h), or a tax sheltered
annuity plan maintained in accordance with the
provisions of Code section 403(b).
(B) Key Employee. The term Key Employee means any Employee
or former Employee (including deceased Employees) of
the Employer who at any time during the Plan Year or
the four preceding Plan Years was:
(1) An officer of the Employer, but in no event if
there are more than 500 Employees, shall more than
50 Employees be considered Key Employees. If
there are less than 500 Employees, in no event
shall the greater of three Employees or 10% of all
Employees, be taken into account under this
Subsection as Key Employees. If the number of
officers is limited by the terms of the preceding
sentence, the Employees with the highest
Compensation will be considered to be officers.
In no event shall an officer whose annual
Compensation is less than 50% of the dollar
limitation in effect under Code section
415(b)(1)(A) as adjusted from time to time, be a
Key Employee for any such Plan Year.
In making a determination under this Subsection,
Employees who have not completed six months of
Service by the end of the applicable Plan Year,
Employees who normally work less than 17-1/2 hours
per week, Employees who normally work less than
six months during a year, Employees who have not
attained 21, and nonresident aliens who receive no
earned income from U.S. sources, shall be
excluded.
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Also excluded under the above paragraph are
Employees who are covered by an agreement which
the Secretary of Labor finds to be a collective
bargaining agreement. Such Employees will be
excluded only if retirement benefits were the
subject of good faith bargaining, 90% of the
Employees of the Employer are covered by the
agreement, and the Plan covers only Employees who
are not covered by the agreement.
(2) One of the 10 Employees who has annual
Compensation greater than the amount in effect
under Internal Revenue Code section 415(c)(1)(A)
and who owns (or is considered to own within the
meaning of Internal Revenue Code section 318, as
modified by section 416(i)(1)(B)(iii)) both more
than 1/2% interest and the largest interest in the
Employer. If two or more Employees own equal
interests in the Employer, the ranking of
ownership share will be in descending order of
such Employees' Compensation. If the Employer is
other than a corporation, the term "interest" as
used herein shall refer to capital or profits
interest.
(3) An Employee who owns (or is considered to own
within the meaning of Internal Revenue Code
section 318, as modified by section
416(i)(1)(B)(iii)) more than 5% of the outstanding
stock of the Employer or stock possessing more
than 5% of the total combined voting power of all
stock of the Employer. If the Employer is other
than a corporation, an Employee who owns, or is
considered to own, more than 5% of the capital or
profits interest in the Employer. The
determination of 5% ownership shall be made
separately for each member of a controlled group
of corporations (as defined in Code section
414(b)), or of a group of trades or businesses
(whether or not incorporated) that are under
common control (as defined in Code section
414(c)), or of an affiliated service group (as
defined in Code section 414(m)).
(4) An Employee who owns (or is considered to own
within the meaning of Internal Revenue Code
section 318, as modified by section
416(i)(1)(B)(iii)) more than 1% of the outstanding
stock of the Employer or stock possessing more
than 1% of the total combined voting power of all
stock of the Employer, and whose annual
Compensation is more than $150,000. If the
Employer is other than a corporation, an Employee
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who owns, or is considered to own, more than 1% of
the capital or profits interest in the Employer,
and whose annual Compensation is more than
$150,000.
For the purposes of paragraphs (2), (3) and (4) above,
if an Employee's ownership interest changes during a
given Plan Year, his ownership interest for that Plan
Year is the largest interest owned at any time during
the Plan Year.
The Beneficiary of any deceased Employee who was a Key
Employee shall be considered a Key Employee for the
same period as the deceased Employee would have been so
considered.
(C) Non-Key Employee. The term Non-Key Employee means any
Employee or former Employee of the Employer who is not
a Key Employee. The Beneficiary of any deceased
Employee who is a Non-Key Employee shall be considered
a Non-Key Employee for the same period as the deceased
Employee would have been so considered.
(D) Determination Date. The term Determination Date means,
with respect to a Plan Year, the last day of the
preceding Plan Year, or, in the case of the first Plan
Year of a plan, the last day of the first Plan Year.
(E) Valuation Date. The term Valuation Date means, with
respect to a Plan Year, the last day of the preceding
Plan Year and is the date on which Account Balances are
valued for the purpose of determining the Plan's
Top-Heavy status.
(F) Account Balance. The term Account Balance means the
value of the Participant's Account standing to the
credit of a Participant, a former Participant, or the
Beneficiary of a former Participant, as the case may
be, as of the Valuation Date. Such Account Balance
shall include any contributions due as of the
Determination Date and all distributions made to the
Participant (or former Participant or Beneficiary, as
the case may be) during the Plan Year or the preceding
four Plan Years, except for distributions of Related
Rollovers. However, the Account Balance shall not
include any deductible Employee Contributions made
pursuant to Internal Revenue Code section 219 or
Unrelated Rollovers made to the Plan after December 31,
1983.
A Related Rollover is a Rollover Contribution or
Transfer that either was not initiated by the Employee
or was made to a plan maintained by the same Employer.
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An Unrelated Rollover is a Rollover Contribution or
Transfer that was initiated by the Employee and was
made from a plan maintained by one employer to a plan
maintained by another employer.
For purposes of this Subsection (F), the term Employer
shall include all employers that are required to be
aggregated in accordance with Internal Revenue Code
sections 414(b), (c) or (m).
(G) Required Aggregation Group. The term Required
Aggregation Group means all of the plans of the
Employer which cover a Key Employee, including any such
plan maintained by the Employer pursuant to the terms
of a collective bargaining agreement, and each other
plan of the Employer which enables any plan in which a
Key Employee participates to satisfy the requirements
of Internal Revenue Code sections 401(a)(4) or 410.
(H) Permissive Aggregation Group. The term Permissive
Aggregation Group means all of the plans of the
Employer which are included in the Required Aggregation
Group plus any plans of the Employer which provide
comparable benefits to the benefits provided by the
plans in the Required Aggregation Group and are not
included in the Required Aggregation Group, but which
satisfy the requirements of Internal Revenue Code
sections 401(a)(4) and 410 when considered together
with the Required Aggregation Group, including any plan
maintained by the Employer pursuant to a collective
bargaining agreement which does not include a Key
Employee.
(I) Top-Heavy Plan. The Plan is Top-Heavy if it meets the
requirements of Section 16A.2.
(J) Super Top-Heavy Plan. The Plan is Super Top-Heavy if
it meets the requirements of Section 16A.3.
(K) Terminated Plan. A plan shall be considered to be a
Terminated Plan if it:
(1) has been formally terminated;
(2) has ceased crediting service for benefit accruals
and vesting; or
(3) has been or is distributing all plan assets to
Participants (or Beneficiaries) as soon as
administratively possible.
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With the exception of the Minimum Employer Contribution
Requirements and the Minimum Vesting Requirements, the
Top-Heavy provisions of this Article XVI-A will apply
to any Terminated Plan which was maintained at any time
during the five years ending on the Determination Date.
(L) Frozen Plan. A plan shall be considered to be a Frozen
Plan if all benefit accruals have ceased but all assets
have not been distributed to Participants or
Beneficiaries. The Top-Heavy provisions of this
Article XVI-A will apply to any such Frozen Plan.
16A.2 TOP-HEAVY PLAN STATUS. This Plan shall be determined
to be Top-Heavy if, as of the Determination Date, the
aggregate of the Account Balances of Key Employees
exceeds 60% of the aggregate of the Account Balances of
all Employees covered by the Plan. The determination
of whether the Plan is Top-Heavy shall be made after
aggregating all plans in the Required Aggregation
Group, and after aggregating any other plans which are
in the Permissive Aggregation Group, if such permissive
aggregation thereby eliminates the Top-Heavy status of
any plan within such Required Aggregation Group.
In determining whether this Plan is Top-Heavy, the Account
Balance of a former Key Employee who is now a Non-Key
Employee will be disregarded. Likewise, for Plan Years
beginning after December 31, 1984, the Account Balance of
any Employee who has not performed an Hour of Service during
the five-year period ending on the Determination Date will
be excluded.
16A.3 SUPER TOP-HEAVY PLAN STATUS. This Plan shall be
determined to be Super Top-Heavy if, as of the
Determination Date, the Plan would meet the test
specified in Section 16A.2 above, if 90% were
substituted for 60% in each place where it appears.
The Plan may be permissively aggregated in order to
avoid being Super Top-Heavy.
16A.4 TOP-HEAVY REQUIREMENTS. Notwithstanding anything in
the Plan to the contrary, if the Plan is Top-Heavy with
respect to any Plan Year beginning after December 31,
1983, then the Plan shall meet the following
requirements for such Plan Year:
(A) Compensation Limit. The annual Compensation of each
Participant taken into account under the Plan shall not
exceed $150,000; however, such dollar limitation shall
be adjusted to take into account any adjustments made
by the Secretary of the Treasury or his delegate
pursuant to Internal Revenue Code section 416(d)(2).
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(B) Minimum Employer Contribution Requirements. A Minimum
Employer Contribution of 3% of each Eligible Employee's
Compensation will be made on behalf of each Eligible
Employee in the Plan.
If the actual Employer Contribution made or required to
be made for Key Employees is less than 3%, the Minimum
Employer Contribution required hereunder shall not
exceed the percentage contribution made for the Key
Employee for whom the percentage of Employer
Contributions and Forfeitures relative to the first
$150,000 of Compensation is the highest for the Plan
Year after taking into account contributions or
benefits under other qualified plans in the Plan's
Required Aggregation Group.
However, if a Participant in this Plan is also a
participant in a defined benefit plan maintained by the
Employer, such Participant shall receive the Top-Heavy
minimum benefit under the defined benefit plan in lieu
of the Minimum Employer Contribution described herein.
Such minimum benefit will be equal to the Participant's
average yearly Compensation during his five
highest-paid consecutive years, multiplied by the
lesser of 2% per Year of Service or 20%. Compensation
periods and Years of Service to be taken into account
in the calculation of this benefit shall be subject to
any limitations set forth in the defined benefit plan.
For any Limitation Year in which this Plan is Top-Heavy
but not Super Top-Heavy, the Minimum Employer
Contribution shall be increased to 4% of each Eligible
Employee's Compensation in order to preserve the use of
the factor 1.25 in the denominators of the fractions
described in Section 5.4 (B) (1) and Section 5.4 (D)
(1). A Participant who receives the Top-Heavy minimum
benefit in lieu of the Minimum Employer Contribution
shall receive an increased minimum benefit equal to the
Participant's average yearly Compensation during his
five highest-paid consecutive years, multiplied by the
lesser of 3% per Year of Service or 20% plus one
percentage point (to a maximum of 10 percentage points)
for each year that this Plan is maintained.
Compensation periods and Years of Service to be taken
into account in the calculation of this increased
minimum benefit shall be subject to any limitations set
forth in the defined benefit plan.
For any Limitation Year in which this Plan is Super
Top-Heavy, the factor of 1.25 in the denominators of
the fractions described in Sections 5.4 (B) (1) and
5.4 (D) (1) shall be reduced to 1.0. The Minimum
Employer Contribution payable in such years shall be 3%
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of each Eligible Employee's Compensation and the
defined benefit Top-Heavy minimum benefit shall be
average Compensation multiplied by the lesser of 2% per
Year of Service or 20%.
Eligible Employees are all Non-Key Employees who are
Participants in the Plan as of the last day of the Plan
Year regardless of whether they had completed 1,000
Hours of Service during the Plan Year. Also included
are Non-Key Employees who would have been Participants
as of the last day of the Plan Year except:
The Employee's Compensation was below a required
minimum level; or
The Employee chose not to make Elective Deferral
Contributions when he was eligible to do so.
Elective Deferral Contributions and Matching
Contributions made to Key Employees shall be taken into
account as Employer Contributions allocated to such Key
Employees when determining whether a lower Minimum
Employer Contribution is permissible for purposes of
this section. However, Elective Deferral Contributions
made by Non-Key Employees shall not be used towards
satisfying the Minimum Employer Contribution required
to be allocated to Non-Key Employees pursuant to this
section.
Matching Contributions made on behalf of Non-Key
Employees may, at the option of the Employer, be used
to satisfy the Minimum Employer Contribution
requirement. However, for Plan Years beginning after
December 31, 1988, to the extent that Matching
Contributions are used for this purpose, they shall not
be used to satisfy the Actual Contribution Percentage
Test.
(C) Minimum Vesting Requirements. The vesting provisions
set forth in the definition of Vesting Percentage in
Article I shall continue to apply whether or not the
Plan is a Top-Heavy Plan. Such vesting provisions
satisfy the requirements of section 416(b) of the
Internal Revenue Code, as applicable to Top-Heavy
Plans.
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ARTICLE XVII
TRUST AGREEMENT
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17.1 CREATION AND ACCEPTANCE OF TRUST. The Trustee, by
joining in the execution of the Plan and trust
agreement, accepts the Trust hereby created and agrees
to act in accordance with the express terms and
conditions herein stated.
17.2 TRUSTEE CAPACITY; CO-TRUSTEES. The Trustee may be a
bank, trust company or other corporation possessing
trust powers under applicable state or federal law or
one or more individuals or any combination thereof.
When two or more persons serve as Trustee, they are
specifically authorized, by a written agreement between
themselves, to allocate specific responsibilities,
obligations or duties among themselves. An original copy of
such written agreement is to be delivered to the
Administrator.
17.3 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR
TRUSTEE. Any Trustee may resign at any time by
delivering to the Administrator a written notice of
resignation, to take effect at a date specified
therein, which shall not be less than 30 days after the
delivery thereof, unless such notice shall be waived.
The Trustee may be removed with or without cause by the
Board of Directors by delivery of a written notice of
removal, to take effect at a date specified therein, which
shall not be less than 30 days after delivery thereof,
unless such notice shall be waived.
In the case of the resignation or removal of a Trustee, the
Trustee shall have the right to a settlement of its account,
which may be made, at the option of the Trustee, either (1)
by judicial settlement in an action instituted by the
Trustee in a court of competent jurisdiction, or (2) by
written agreement of settlement between the Trustee and the
Administrator.
Upon such settlement, all right, title and interest of such
Trustee in the assets of the Trust and all rights and
privileges under this Agreement theretofore vested in such
Trustee shall vest in the successor Trustee, and thereupon
all future liability of such Trustee shall terminate;
provided, however, that the Trustee shall execute,
acknowledge and deliver all documents and written
instruments which are necessary to transfer and convey the
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right, title and interest in the Trust assets, and all
rights and privileges to the successor Trustee.
The Board of Directors, upon receipt of notice of the
resignation or removal of the Trustee, shall promptly
designate a successor Trustee, whose appointment is subject
to acceptance of this Trust in writing and shall notify in
writing the insurance company of such successor Trustee.
17.4 TAXES, EXPENSES AND COMPENSATION OF TRUSTEE. The
Trustee shall deduct from and charge against the Trust
fund any taxes paid by it which may be imposed upon the
Trust fund or the income thereof or which the Trustee
is required to pay with respect to the interest of any
person therein.
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.
17.5 TRUSTEE ENTITLED TO CONSULTATION. The Trustee shall be
entitled to advice of counsel, which may be counsel for
the Plan or the Employer, in any case in which the
Trustee shall deem such advice necessary. With the
exception of those powers and duties specifically
allocated to the Trustee by the express terms of this
Plan, it shall not be the responsibility of the Trustee
to interpret the terms of the Plan or Trust and the
Trustee may request, and is entitled to receive
guidance and written direction from the Administrator
on any point requiring construction or interpretation
of the Plan documents.
17.6 RIGHTS, POWERS AND DUTIES OF TRUSTEE. The Trustee
shall have the following rights, powers, and duties:
(A) The Trustee shall be responsible for the safekeeping
and administering of the assets of this Plan and Trust
in accordance with the provisions of this Agreement and
any amendments thereto. The duties of the Trustee
under this Agreement shall be determined solely by the
express provisions of this Agreement and no further
duties or responsibility shall be implied. Subject to
the terms of this Plan and Trust, the Trustee shall be
fully protected and shall incur no liability in acting
in reliance upon the written instructions or directions
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of the Administrator or a duly designated Investment
Manager or any other Named Fiduciary.
(B) The Trustee shall have all powers necessary or
convenient for the orderly and efficient performance of
its duties hereunder, including but not limited to
those specified in this section. The Trustee may
appoint one or more administrative agents or contract
for the performance of such administrative and service
functions as it may deem necessary for the effective
installation and operation of the Plan and Trust.
(C) The Trustee shall have the power to collect and receive
any and all monies and other property due hereunder and
to give full discharge and acquittance therefor; to
settle, compromise or submit to arbitration any claims,
debits or damages due or owing to or from the Trust; to
commence or defend suits or legal proceedings wherever,
in its judgment, any interest of the Trust requires it;
and to represent the Trust in all suits or legal
proceedings in any court of law or equity or before any
other body or tribunal. It shall have the power
generally to do all acts, whether or not expressly
authorized, which the Trustee in the exercise of its
Fiduciary responsibility may deem necessary or
desirable for the protection of the Trust and the
assets thereof.
(D) The Trustee may temporarily hold cash balances and
shall be entitled to deposit any such funds received in
a bank account or bank accounts in the name of the
Trust in any bank or banks selected by the Trustee,
including the banking department of the Trustee,
pending disposition of such funds in accordance with
the Trust. Any such deposit may be made with or
without interest.
(E) The Trustee shall deal with any assets of this Trust
held or received under this Plan only in accordance
with the written directions from the Administrator.
The Trustee shall be under no duty to determine any
facts or the propriety of any action taken or omitted
by it in good faith pursuant to instructions from the
Administrator.
(F) If the whole or any part of the Trust shall become
liable for the payment of any estate, inheritance,
income or other tax which the Trustee shall be required
to pay, the Trustee shall have full power and authority
to pay such tax out of any monies or other property in
its hands for the account of the person whose interest
hereunder is so liable. Prior to making any payment,
the Trustee may require such releases or other
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documents from any lawful taxing authority as it shall
deem necessary. The Trustee shall not be liable for
any nonpayment of tax when it distributes an interest
hereunder on instructions from the Administrator.
(G) The Trustee shall keep a full, accurate and detailed
record of all transactions of the Trust which the
Administrator shall have the right to examine at any
time during the Trustee's regular business hours.
Following the close of the fiscal year of the Trust, or
as soon as practical thereafter, the Trustee shall
furnish the Administrator with a statement of account.
This account shall set forth all receipts,
disbursements and other transactions effected by the
Trustee during said year.
The Administrator shall promptly notify the Trustee in
writing of its approval or disapproval of the account.
The Administrator's failure to disapprove the account
within 60 days after receipt shall be considered an
approval. The approval by the Administrator shall be
binding as to all matters embraced in any statement to
the same extent as if the account of the Trustee had
been settled by judgment or decree of a court of
competent jurisdiction under which the Trustee,
Administrator, Employer and all persons having or
claiming any interest in the Trust were parties;
provided, however, that the Trustee may have its
account judicially settled if it so desires.
(H) If, at any time, there shall be a dispute as to the
person to whom payment or delivery of monies or
property should be made by the Trustee, or regarding
any action to be taken by the Trustee, the Trustee may
postpone such payment, delivery or action, retaining
the funds or property involved, until such dispute
shall have been resolved in a court of competent
jurisdiction or the Trustee shall have been indemnified
to its satisfaction or until it has received written
direction from the Administrator.
(I) Anything in this instrument to the contrary
notwithstanding, it shall be understood that the
Trustee shall have no duty or responsibility with
respect to the determination of matters pertaining to
the eligibility of any Employee to become or remain a
Participant hereunder, the amount of benefit to which
any Participant or Beneficiary shall be entitled
hereunder, all such responsibilities being vested in
the Administrator. The Trustee shall have no duty to
collect any contribution from the Employer and shall
not be concerned with the amount of any contribution
nor the application of the contribution formula.
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17.7 EVIDENCE OF TRUSTEE ACTION. In the event that the
Trustee is comprised of two or more Trustees, then
those Trustees may designate one such Trustee to
transmit all decisions of the Trustee and to sign all
necessary notices and other reports on behalf of the
Trustee. All notices and other reports bearing the
signature of the individual Trustee so designated shall
be deemed to bear the signatures of all the individual
Trustees and all parties dealing with the Trustee are
entitled to rely on any such notices and other reports
as authentic and as representing the action of the
Trustee.
17.8 INVESTMENT POLICY. This Plan has been established for
the sole purpose of providing benefits to the
Participants and their Beneficiaries. In determining
its investments hereunder, the Trustee shall take
account of the advice provided by the Administrator as
to funding policy and the short and long range needs of
the Plan based on the evident and probable requirements
of the Plan as to the time benefits shall be payable
and the requirements therefor.
17.9 PERIOD OF TRUST. If it shall be determined that the
applicable state law requires a limitation on the
period during which the Employer's Trust shall
continue, then such Trust shall not continue for a
period longer than 21 years following the death of the
last of those Participants including future
Participants who are living at the effective date
hereof. At least 180 days prior to the end of the
twenty-first year as described in the first sentence of
this Section, the Employer, the Administrator and the
Trustee shall provide for the establishment of a
successor trust and transfer of Plan assets to the
successor trustee. If the applicable state law
requires no such limitation, then this Section shall
not be operative.
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Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-70492) pertaining to the Western Waste
Industries 1992 Stock Option Plan and in the related Prospectus and
in the Registration Statement (Form S-8 No. 33-9358) pertaining to
the 1983 Incentive Stock Option Plan and the 1983 Non-Qualified Stock
Option Plan of Western Waste Industries and in the related Prospectus
and the Registration Statement (Form S-4 No. 33-58545) pertaining to
the registration of 3,000,000 common shares and in the related
Prospectus of our report dated August 25, 1995, except for Note 8 to
which the date is September 12, 1995 with respect to the consolidated
financial statements and schedule of Western Waste Industries
included in the Annual Report (Form 10-K) for the year ended June 30,
1995.
/s/ ERNST & YOUNG LLP
Long Beach, California
September 27, 1995
Page 190 of 191 <PAGE>
<PAGE>
WESTERN WASTE INDUSTRIES
21061 S. Western Avenue
Torrance, California 90501
(310) 328-0999
FAX: (310) 212-7094
September 27, 1995
Securities and Exchange Commission
Room 104
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
Pursuant to the requirements of the Securities exchange Act of 1934, we are
transmitting herewith the attached Form 10-K
A filing fee of $250.00 has been wired to the SEC Account at Mellon Bank.
Sincerely,
/s/ Madhu S. Chanini
- -----------------------
Madhu S. Chanini
Vice President
Corporate Controller
Page 191 of 191 <PAGE>
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