<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11994
CORNERSTONE NATURAL GAS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 74-1952257
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8080 N. CENTRAL EXPRESSWAY 75206
SUITE 1200 (Zip Code)
DALLAS, TEXAS
(Address of principal executive
offices)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 691-5536
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- -------------------------------------------------- --------------------------------------------------
<S> <C>
Common Stock, $0.10 par value per share American Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILINGS
REQUIREMENTS FOR THE PAST 90 DAYS. YES _X_ NO ____
INDICATE BY CHECK MARK WHETHER DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN THE PROXY STATEMENT INCORPORATED BY
REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K.
YES ___ NO _X_
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT. YES _X_ NO ____
AS OF MARCH 3, 1995, THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING WAS
12,515,959. THE AGGREGATE MARKET VALUE OF THE 6,983,603 SHARES OF COMMON STOCK
HELD BY NONAFFILIATES OF CORNERSTONE NATURAL GAS, INC. AS OF SUCH DATE WAS
APPROXIMATELY $15,713,107.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission on or before April 30, 1995, are incorporated
herein by reference into Part III of this Form 10-K.
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<PAGE>
TABLE OF CONTENTS TO FORM 10-K
PART I Page
------
1. Business......................................................... 1-5
2. Properties....................................................... 5-7
3. Legal Proceedings................................................ 7
4. Submission of Matters to a Vote of Security Holders.............. 7
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters.......................................................... 8
6. Selected Financial Data.......................................... 9
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 10-13
8. Financial Statements and Supplementary Data...................... 13-28
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................. 28
PART III
10. Directors and Executive Officers of the Registrant................ 29
11. Executive Compensation............................................ 29
12. Security Ownership of Certain Beneficial Owners and Management.... 29
13. Certain Relationships and Related Transactions.................... 29
PART IV
14. Exhibits, Financial Statement Schedules and Reports and Form 8-K.. 30-33
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Cornerstone Natural Gas, Inc., a Delaware corporation ("Cornerstone"), is
engaged in the business of natural gas pipeline and natural gas processing
operations. Natural gas pipeline operations include purchasing, gathering,
transporting and marketing of natural gas. Natural gas processing operations
include recovering and marketing natural gas liquids from natural gas and
treating natural gas by removing noncommercial components. Natural gas
processing operations also included refining condensate and crude oil into
various petroleum products through May 1, 1994, when the Company discontinued
its refining operations.
Cornerstone, its subsidiaries and affiliated companies are herein
collectively referred to as the "Company", unless the context otherwise
indicates. As used herein, "MCF" means thousand cubic feet, "MMCF" means
million cubic feet, "MMBTU" means million British Thermal Units, "NGLs" means
natural gas liquids, and "D" means per day.
Cornerstone was incorporated under the laws of Texas in 1977 as Endevco, Inc.
and was reincorporated under the laws of Delaware in May 1988. The Company's
principal administrative offices are located at 8080 North Central
Expressway, Suite 1200, Dallas, Texas 75206 and the telephone number is (214)
691-5536.
RECENT DEVELOPMENTS
Effective January 1, 1995, the Company acquired the Willow Springs and North
Lansing natural gas gathering systems (collectively known as "Willow
Springs") from Bayou South Gas Gathering Company, L.C., a Louisiana limited
liability company ("Bayou South"). These East Texas systems are located in
the Willow Springs and North Lansing fields of Gregg and Harrison Counties.
There has been significant drilling activity in these fields with more than
100 producing natural gas wells completed in the last two years. Several
producers in the area have forecasted this activity to continue.
Effective May 1, 1994, the Company sold its Claiborne refinery and
inventories to Arcadia Refining and Marketing Company, L.P ("Arcadia"). The
Company also signed a letter of intent to sell its Dubach refining assets to
an affiliate of Arcadia. A definitive agreement to sell such assets has not
been executed. With this sale, the Company has completed its plan to
discontinue refining operations and to focus on its core business of natural
gas gathering, processing and marketing.
The Company completed installation of cryogenic natural gas processing
facilities for its North Louisiana operations on March 31, 1994. These
facilities were previously located at the Company's Bear Wallow site in
Brazoria County, Texas. The facilities included two plants, one of which had
been idle since 1991. The Company also installed additional natural gas
compressors in order to increase the volume of natural gas which can be
delivered to the facilities for processing.
NATURAL GAS PIPELINE OPERATIONS
GENERAL. Management believes that it is essential to own natural gas
pipeline systems in order to compete in the natural gas industry. As such,
the Company completed the purchase of Willow Springs in January 1995. See
"Recent Developments". The Company will continue to pursue natural gas
pipeline projects.
Revenues from natural gas pipeline operations are generated in two ways.
First, natural gas is transported or purchased and sold using Company-owned
facilities, resulting in what are termed "System sales". Second, natural gas
is purchased and sold using only facilities owned by third parties, resulting
in what are termed "Off-system sales". The Company's natural gas pipeline
operations accounted for 64%, 53% and 49% of consolidated revenues in 1994,
1993 and 1992, respectively. The percentage of revenues from natural gas
pipeline operations has increased each of the last two years as the Company
reduced and eliminated its refining operations. For information about
revenues, operating earnings and identifiable assets, see Note 9 of "Notes to
Consolidated Financial Statements".
SYSTEM SALES. System sales accounted for 71%, 90% and 91% of natural gas
pipeline operations gross margin in 1994, 1993 and 1992, respectively. The
Company has two primary strategies for utilizing its facilities to generate
System sales. One is to aggregate supplies of natural gas connected to its
systems and deliver the natural gas to local markets or connecting pipelines.
The Company typically gathers natural gas at the wellhead or a central
gathering location. This natural gas is primarily owned by independent
producers, however, some is owned by major integrated oil companies. The
Company either transports for a fee or purchases the natural gas at the
wellhead and, if there is no local market, arranges transportation on the
intrastate and interstate pipelines and resells it to local distribution
companies ("LDCs"), utilities, commercial or industrial end-users or other
natural gas marketing companies.
1
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The Company's other strategy is to identify a utility or industrial end-user
whose natural gas is supplied from limited sources. As a result of the
limited competition, these end-users often pay a premium price for their
natural gas. Typically, the Company will enter into a long-term contract
(3-10 years) to construct a pipeline and supply all, or some agreed upon
minimum, of the end-user's natural gas needs. The Company generally shares a
portion of the price savings with the end-user. This allows the end-user to
pay less for its natural gas supply and the Company to recover its capital
expenditures over a relatively short period of time.
The Company generally purchases natural gas under contracts whose prices are
determined by prevailing market conditions. Natural gas is then sold at
higher prices under sales contracts with similar pricing terms. The Company
earns a margin equal to the difference between the natural gas purchase price
it pays the supplier and the sales price it receives from the purchaser. The
Company also offers services such as marketing, natural gas control, contract
administration and pipeline operations which are not usually available to
small producers.
OFF-SYSTEM SALES. In addition to marketing natural gas gathered and
transported through its systems, the Company purchases and sells natural gas
acquired from others utilizing only third-party systems. In such
transactions, the Company usually contracts on a short-term "best efforts"
basis with producers, pipelines or other suppliers. The Company then sells
to LDCs, utilities, commercial or industrial end-users or other natural gas
marketing companies. The volume of natural gas throughput for Off-system
sales can vary significantly from month to month. Off-system sales allow the
Company to respond quickly to changing market conditions particularly in peak
demand periods. Off-system sales also allow the Company to develop new
marketing relationships that can later be supplied by the Company's own
facilities.
NATURAL GAS SUPPLIES. The Company does not own any natural gas reserves.
However, the Company continually seeks new supplies of natural gas connected
to its systems, both to offset natural declines and to provide new supplies
to increase throughput. The Company purchases Off-system natural gas from a
variety of suppliers including independent producers, major integrated oil
companies and other natural gas marketing companies. With the advent of
"open access" on the interstate pipelines, the Company has an abundant source
of natural gas to supply its current markets.
HEDGING. The Company, on occasion, enters into swap agreements or futures
contracts to hedge the risks associated with fixed commitments and certain
anticipated transactions. The Company defers the change in the market value
of these contracts until such time as the hedge transaction is completed. At
December 31, 1994, the Company had open natural gas price swap agreements on
volumes of less than 2 MMCFD and no open futures contracts.
NATURAL GAS PROCESSING AND OPERATIONS
GENERAL. In 1994, the Company completed the relocation of two cryogenic
natural gas processing plants from Brazoria County, Texas to Lincoln Parish,
Louisiana to replace existing refrigerated lean oil facilities. These plants
are used in conjunction with the Company's approximately 492 miles of
gathering pipelines in North Louisiana.
The Company discontinued operations at one of its refineries in July 1993 and
sold the other refinery effective May 1, 1994. The Company's natural gas
processing and refining operations accounted for 36%, 47% and 51% of
consolidated revenues in 1994, 1993 and 1992, respectively. For more
information about revenues, operating earnings and identifiable assets, see
Note 9 of "Notes to Consolidated Financial Statements".
NATURAL GAS LIQUIDS EXTRACTION. The Company's natural gas liquids extraction
operations consist primarily of extracting NGLs such as propane, butanes and
natural gasoline from a natural gas stream. Gathering facilities collect
natural gas from producers' wells and transport it to a Company processing
plant where it is separated into NGLs and residue natural gas. The NGLs are
then fractionated into component products by the Company. Once fractionated,
NGLs are sold to end-users or wholesalers.
The Company historically has installed a natural gas processing plant in
areas where wells produce natural gas that either contains sufficient NGLs to
economically process or that requires processing to meet pipeline quality
standards. The value of the NGLs is generally greater if extracted than if
left in the natural gas stream. The Company typically will agree to install
a natural gas processing plant in exchange for a fee or a portion of the
proceeds from the NGLs extracted. The Company may also receive a portion of
the residue natural gas.
Generally, natural gas liquids extraction services have been performed
separately from the Company's natural gas pipeline operations. However, the
Company has fully integrated its gathering and processing facilities in North
Louisiana to provide a full range of services to the producers. The
Company's North Louisiana facilities are located in an area of known
2
<PAGE>
hydrocarbon production and Management believes that additional natural gas
and natural gas liquids reserves will be developed to offset normal
production declines in the area.
NATURAL GAS TREATING. Natural gas treating operations involve the treating
of unmarketable natural gas to remove impurities and thus make it marketable.
This service is generally performed for producers under contract, whereby
the Company agrees to install and operate a facility to remove noncommercial
components from natural gas dedicated to that facility. The services are
normally conducted under long-term contracts for a fixed fee, a per unit fee,
or a combination thereof. See "Properties - Natural Gas Processing and
Treating Facilities".
MARKETS AND MAJOR CUSTOMERS
NATURAL GAS PIPELINE OPERATIONS. During 1994 and 1993, the Company's sales
to Georgia Pacific Company accounted for 14% and 12% of consolidated
revenues, respectively. During 1992, the Company had no single customer from
its natural gas pipeline operations responsible for over 10% of
consolidated revenues.
NATURAL GAS PROCESSING OPERATIONS. The Company had no single customer from
its natural gas processing operations responsible for over 10% of
consolidated revenues in 1994, 1993 or 1992.
PRODUCT PRICES. During the three years ended December 31, 1994, the average
sales prices for natural gas and significant NGLs were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Natural gas sales ($/MMBTU):
System sales.................................. $1.78 $2.17 $1.80
Off-system sales.............................. $1.90 $2.24 $2.00
Average NGL prices ($/Gal):
Propane....................................... $0.31 $0.33 $0.32
Isobutane..................................... $0.36 $0.41 $0.45
Normal butane................................. $0.31 $0.32 $0.32
Natural gasoline.............................. $0.35 $0.45 $0.49
</TABLE>
Revenues from natural gas processing operations are directly affected by
fluctuations in NGLs and natural gas prices. Revenues from natural gas
pipeline operations sales contracts are generally interrelated with natural
gas purchase contracts in regards to terms and pricing. The Company's income
is generally derived from either a fixed spread or a fixed fee per unit of
natural gas. Although the margin between purchase and resale prices tends to
fluctuate with the increase or decrease in the sales price of natural gas,
such fluctuations are generally less severe and not necessarily directly
correlated with the changes in natural gas prices. All operations are
adversely affected by reduced volumes.
COMPETITION
The natural gas pipeline and natural gas processing industries are highly
competitive. In marketing natural gas, the Company has numerous competitors,
including marketing affiliates of major interstate pipelines, the major
integrated oil companies, and local and national natural gas gatherers,
brokers and marketers of widely varying sizes, financial resources and
experience. Many competitors, such as major oil companies, have capital
resources many times greater than those of the Company and control
substantial supplies of natural gas. Local utilities and distributors of
natural gas (some of which are customers of the Company) are, in some cases,
engaged directly, and through affiliates, in marketing activities that
compete with the Company.
The Company competes against other companies in the gathering, marketing and
transmission business for supplies of natural gas, for customers to whom to
sell its natural gas, and for availability of pipeline capacity. Competition
for natural gas supplies is primarily based on efficiency, reliability,
availability of transportation and ability to pay a satisfactory price for
the producer's natural gas. Competition for customers is primarily based
upon reliability of supply and price of deliverable natural gas. Some of the
Company's customers have the capability of using alternative fuels. In these
cases, the Company also competes against companies capable of providing
alternative fuels on the basis of price.
At December 31, 1994, the Company had net operating loss ("NOL")
carryforwards for income tax purposes of approximately $28.8 million. In
addition, the Company had unused investment tax credits of approximately $1.6
million available to offset future federal income tax liabilities.
Management expects these tax benefits to give the Company a competitive
advantage when bidding on new projects.
3
<PAGE>
GOVERNMENTAL REGULATION
GENERAL. The natural gas industry is regulated by federal, state and local
authorities. Legislation affecting the natural gas industry is under
constant review for amendment or expansion. Inasmuch as such laws and
regulations are frequently amended or reinterpreted, the Company is unable to
predict the future cost or impact of complying with such regulations. All of
these regulations have an impact on the Company and others in the natural gas
industry. Therefore, the Company does not believe that it is affected in a
significantly different manner than are its competitors.
NATURAL GAS SALES AND TRANSPORTATION. The transportation and sale for resale
of natural gas is subject to regulation by the Federal Energy Regulatory
Commission ("FERC") under the Natural Gas Act of 1938 ("NGA") and the Natural
Gas Policy Act of 1978 ("NGPA"). Commencing in 1985, the FERC promulgated a
series of orders and regulations adopting changes that significantly affect
the transportation and marketing of natural gas. These changes have been
intended to foster competition in the natural gas industry by, among other
things, inducing or mandating that interstate pipeline companies provide
nondiscriminatory transportation services to producers, distributors and
other shippers (so-called "open access" requirements).
In April 1992, the FERC issued Order 636, a complex regulation which has had,
and is expected to continue to have, a major impact on natural gas pipeline
operations, services and rates. Among other things, Order 636 requires each
interstate pipeline company to "unbundle" its traditional wholesale services
and create and make available on an open and nondiscriminatory basis numerous
constituent services (such as gathering services, storage services, firm and
interruptible transportation services, and stand-by sales services) and to
adopt a new rate making methodology to determine appropriate rates for those
services. To the extent the pipeline company or its sales affiliate makes
natural gas sales as a merchant in the future, it will do so in direct
competition with all other sellers pursuant to private contracts; however,
pipeline companies are not required to remain "merchants" of natural gas, and
many of the interstate pipeline companies have or will become "transporters
only." In this regard, access to markets through interstate pipelines is
critical to the marketing activities of the Company. The Company owns
pipeline gathering facilities in conjunction with certain of its field plants
and other facilities which perform transport functions which are exempt from
FERC jurisdiction. However, to the extent the Company provides
transportation services on behalf of interstate pipelines, it does so
pursuant to authority granted under Section 311 of the NGPA, and its rate for
providing services are subject to review by the Texas Railroad Commission.
Other pipeline and gathering facilities of the Company are either exempt from
regulation under the NGA and NGPA or are regulated by state agencies.
ENVIRONMENTAL AND SAFETY MATTERS. The Company's operations are subject to
various federal, state and local laws and regulations related to
environmental protection. These measures, which are implemented and enforced
principally by the United States Environmental Protection Agency ("EPA") and
similar state agencies, regulate, among other things, the management of
hazardous waste, the discharge of pollutants into the air and into the
surface and underground waters, the construction of new discharge sources,
and the remediation of sites associated with the release or threatened
release of hazardous substances.
In connection with the Dubach Gas Company facilities purchased from
Kerr-McGee in 1988, Kerr-McGee agreed to indemnify the Company for any
liability, claims, damages, costs, or duties of remediation resulting from
certain environmental claims prior to the purchase. The Willow Springs
System has similar environmental indemnities.
The operations of the Company are subject to the federal Clean Air Act
amendments enacted in late 1990. This will require most industrial
operations in the United States to incur future capital expenditures in order
to meet the air emission control standards that are to be developed and
implemented by the EPA and state environmental agencies during the next
decade.
Although the Company is in substantial compliance with applicable air
pollution laws, in anticipation of the passage of stricter air control
regulations, the Company is taking actions to substantially reduce its air
emissions.
The Company's operations are also subject to the requirements of the Federal
Occupational Safety and Health Act ("OSHA") and comparable state statutes.
The OSHA hazard communication standard, the EPA community right-to-know
regulations under Title III of the Federal Superfund Amendment and
Reauthorization Act and similar state statutes require that information be
organized and maintained about hazardous materials used or produced in the
operations.
4
<PAGE>
EMPLOYEES
At March 3, 1995, the Company had 88 full-time employees.
REORGANIZATION
On June 4, 1993, Endevco, Inc. and its subsidiaries ANGIC, Inc. (formerly
known as Cornerstone Natural Gas Company), Mississippi Fuel Company and
Endevco Taft Company (collectively, the "Debtors") filed voluntary petitions
for reorganization under Chapter 11 of the Bankruptcy Code with the United
States Bankruptcy Court for the Eastern District of Texas, Sherman Division
(the "Bankruptcy Court"). No other subsidiary of the Company was included in
the bankruptcy filing.
On September 29, 1993, the Bankruptcy Court confirmed the Debtor's First
Amended Joint Plan of Reorganization (the "Plan"), and the Plan was
consummated on November 2, 1993. For details about the Plan see Note 2 of
"Notes to Consolidated Financial Statements".
ITEM 2. PROPERTIES.
NATURAL GAS GATHERING AND TRANSMISSION SYSTEMS
The Company's gathering and transmission systems are located primarily in
Texas and Louisiana. The principal systems are the Port Hudson System, the
Mountain Creek System, the Elm Grove System, the East Texas System and the
Willow Springs System. Two other pipeline systems (the Dubach and Claiborne
Systems) are utilized in connection with the Company's natural gas processing
operations.
The Company acquired the Willow Springs System effective January 1, 1995.
The Willow Springs System consists of approximately 65 miles of pipeline and
has a capacity of approximately 70 MMCFD. The system's average daily volume
in January 1995 was approximately 20 MMCFD.
The Company completed construction and began initial deliveries through its
Port Hudson System in April 1993. This 5.0 mile pipeline system has a
capacity of 40 MMCFD and averaged 19 MMCFD in 1994. The maximum daily
delivery in 1994 was approximately 25 MMCF. The Company delivers natural gas
to an industrial end-user in East Baton Rouge Parish, Louisiana. The Company
receives natural gas through an interstate pipeline for redelivery.
The Company completed construction and began initial deliveries through its
Mountain Creek Pipeline System in November 1989. The Company owns 50% and is
the operator of this approximately 15.5 mile system located near Dallas,
Texas. This system has a capacity of approximately 225 MMCFD and averaged 42
MMCFD in 1994. The maximum daily delivery in 1994 was approxiamtely 120
MMCF. The system delivers natural gas to a plant owned by a local electric
company.
The Company completed construction and began initial deliveries through its
Elm Grove System in October 1990. This approximately 5.4 mile system receives
natural gas from a central gathering point and delivers it to a natural gas
processing plant in Bossier Parish, Louisiana. The capacity of this system
is approximately 20 MMCFD. Although this system only averaged 3 MMCFD in
1994, it is strategically located should new natural gas wells be drilled in
the area.
The East Texas System consists of two separate pipelines, the Nacogdoches
System and the Shelby County System. The East Texas System aggregates
approximately 84 miles of gathering and transmission lines in Nacogdoches and
Shelby Counties, Texas. This system has a capacity of 131 MMCFD and averaged
3 MMCFD in 1994. The system gathers natural gas from the wellhead and is
interconnected with four major pipelines (two intrastate and two interstate)
that serve the Gulf Coast and Midwest markets.
The Dubach System was acquired in connection with the Company's purchase of
the Dubach and Calhoun natural gas processing plants. The system consists of
approximately 302 miles of gathering lines. The Claiborne System was acquired
in August 1991 in connection with the Company's purchase of the Claiborne
natural gas processing plant and refinery. The system consists of
approximately 190 miles of gathering lines. The principal purpose of these
systems is to gather natural gas to be processed at the Company's North
Louisiana facilities. These systems averaged 69 MMCFD in 1994. The Company
generally retains a percentage of the products for gathering, treating and
processing the natural gas. The Company may also receive a percentage of the
residue natural gas. Residue natural gas at the tailgate of the Company's
plants is delivered to several interstate pipelines.
5
<PAGE>
The following table sets forth pertinent information with respect to the
Company's natural gas gathering and transmission systems at December 31, 1994:
<TABLE>
<CAPTION>
DAILY AVERAGE DAILY
GATHERING CAPACITY VOLUME OF
TRANSMISSION OF GAS GAS IN 1994 MILES OF
PIPELINE SYSTEMS (MMCF)(1) (MMCF) (1) PIPELINE (1)
---------------- ---------- ------------- ------------
<S> <C> <C> <C>
Dubach/Claiborne 190 69 492
East Texas 131 3 84
Elm Grove 20 3 5
Mountain Creek (2) 225 42 16
Port Hudson 40 19 5
Other N/A (3) 6 20
--- ---
TOTAL - 100% Interest 142 622
=== ===
TOTAL - Net Company Interest 121 614
=== ===
<FN>
(1) All capacity, volume, and mileage information is approximate. Amounts
shown are for the total system and have not been reduced to reflect the
Company's net ownership interest. All capacity information is subject to
increases or decreases depending on operating pressures and point of delivery
into or out of the system.
(2) The Company owns a 50% interest in the joint venture that owns the
Mountain Creek Pipeline.
(3) Capacity for these systems is not meaningful.
</TABLE>
NATURAL GAS PROCESSING AND TREATING FACILITIES
GENERAL. The Company's primary natural gas processing and treating
facilities are located in North Louisiana. The Company also has facilities in
Texas, Mississippi and Pennsylvania. Many of the facilities outside
Louisiana are underutilized or idle as a result of diminished deliverability
of the natural gas reserves behind the plants. Most of the idle or
underutilized facilities are skid mounted to facilitate relocation.
NORTH LOUISIANA FACILITIES. The Calhoun plant has the capacity to process 60
MMCFD of natural gas and averaged 27 MMCFD in 1994. The Calhoun plant is a
refrigerated lean oil plant that recovers natural gas liquids and delivers
them by pipeline to the Dubach facility for fractionation. The Calhoun plant
delivers residue natural gas into an interstate pipeline. The Company
relocated two cryogenic natural gas processing plants to North Louisiana and
began in April 1994 to process all the natural gas from its Dubach and
Claiborne gathering systems at these facilities. These plants processed an
average of 34 MMCFD. The Company gathered 8 MMCFD of natural gas that was not
processed. The Company also fractionates the NGLs into their component parts.
The Company discontinued operations at its Dubach refinery in July 1993 and
sold its Claiborne refinery effective May 1, 1994. The Company has two
treating plants in North Louisiana, its Cummings and Fandango plants, which
are used in conjunction with the Calhoun and Dubach facilities. The Fandango
plant is currently idle.
TEXAS. The Company is treating natural gas in Dewitt County, Texas at its
Gun Point III plant. This treating plant has a capacity of 53 MMCFD and
averaged 5 MMCFD in 1994. The Company owns all or part of two idle
cryogenic, one refrigerated lean oil, and two natural gas treating plants in
Texas.
OTHER. The Company owns a 50% interest in a cryogenic natural gas recovery
plant in Green County, Pennsylvania. This plant has an inlet capacity of 14
MMCFD and averaged 11 MMCFD in 1994. The Company receives a portion of the
NGLs as its fee for processing the natural gas. The Company also owns a
natural gas treating plant in Brandon, Mississippi. This treating plant has
a capacity of 17 MMCFD and averaged 11 MMCFD in 1994. The Company charges a
fee per MCF for this service.
6
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The following table sets forth pertinent information with respect to the
Company's significant operating natural gas processing and treating plants at
December 31, 1994:
<TABLE>
<CAPTION>
PLANT DAILY AVERAGE DAILY
CAPACITY OF GAS VOLUME IN
PLANT PLANT TYPE (MMCF)(1) 1994 (MMCF)(1)
----- ---------- --------------- --------------
<S> <C> <C> <C>
Brandon Treating 17 11
Gun Point III Treating 53 5
Tembec (2) Processing 14 11
Calhoun Processing 60 27
Dubach Processing 50 34
--- ---
TOTAL - 100% Interest 194 88
=== ===
TOTAL - Net Company Interest 187 83
=== ===
<FN>
(1) All capacity and volume information is approximate. Amounts shown are
for the total plant and have not been reduced to reflect the Company's net
ownership interest.
(2) The Company owns 50% of the Tembec Plant.
</TABLE>
ASSETS PLEDGED AS COLLATERAL
Virtually all of the Company's assets are pledged as collateral on various
loans. See Note 4 of "Notes to Consolidated Financial Statements".
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in certain legal actions and claims arising in the
ordinary course of their business. It is the opinion of management (based,
in part, on advice of legal counsel) that such litigation and claims will be
resolved without material effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matters during the fourth quarter of the
fiscal year covered by this Annual Report to a vote of security holders.
7
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The common stock of the Company, par value $.10 per share, is traded on the
American Stock Exchange under the symbol "CGA." Set forth below are the high
and low sales prices for the common stock.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1993
First Quarter................................. $ .75 $ .38
Second Quarter................................ 1.25 .50
Third Quarter................................. 1.56 .88
Fourth Quarter................................ 1.81 1.13
1994
First Quarter................................. 1.94 1.44
Second Quarter................................ 3.25 1.50
Third Quarter................................. 2.75 2.06
Fourth Quarter................................ 2.63 1.44
1995
First Quarter (through March 3,1995).......... 2.31 1.56
</TABLE>
On March 3, 1995, the closing price for the common stock, as reported by the
American Stock Exchange, was $2.25 per share.
As of March 3, 1995, there were 526 holders of record of common stock. The
Company believes that there are substantially more beneficial holders of
common stock.
The Company has not paid any cash dividends on its common stock and intends
to retain its earnings for use in operations and for expansion of its
business. In addition, the Company is prohibited from paying dividends under
the terms of its loan agreements. See Note 4 of "Notes to Consolidated
Financial Statements".
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial information for the years ended December 31,
1990 through 1994, is derived from the consolidated financial statements of
the Company for such years. The information should be read in conjunction
with the consolidated financial statements and the notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1994 1993(1) 1992 1991 1990
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues from continuing operations.... $106,406 $215,625 $244,696 $209,272 $200,042
Expenses............................... 104,955 220,043 245,695 207,994 195,416
Operating earnings (loss).............. 1,451 (4,418) (999) 1,278 4,626
Other expense.......................... (1,110) (2,094) (5,428) (3,232) (5,020)
Net earnings (loss).................... 315 (22,291) (5,630) (1,582) (338)
Preferred stock dividend requirements.. - (791) (1,900) (1,900) (1,900)
Net earnings (loss) applicable to
common stock.......................... 315 (23,082) (7,530) (3,482) (2,238)
Net earnings (loss) per share.......... .02 (2.66) (.97) (.46) (.29)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------
1994 1993(1) 1992 1991 1990
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets........................... $40,303 $46,446 $114,549 $120,960 $146,710
Net property, plant and equipment...... 21,089 22,652 78,386 83,044 102,811
Working capital deficit................ (6,606) (5,151) (39,924)(2) (3,995) (3,288)
Long-term debt......................... 6,898 7,768 5,659 39,927 59,096
Preferred stock plus accrued dividends
in arrears............................ - - 25,736 23,725 21,715
Stockholders' equity................... 11,869 11,554 12,159 19,548 22,785
<FN>
(1) On November 2, 1993, the Company consummated the Plan. See Note 2 of
"Notes to Consolidated Financial Statements".
(2) Includes $36,965,000 of debt and $5,546,000 of interest which was subject
to a Standstill and Forbearance Agreement with the former noteholders of
the Company.
</TABLE>
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. The Company's primary sources of capital in 1994 were working
capital provided by operations, proceeds from borrowings under its term loan
and revolving credit agreement and proceeds from the sale of refining assets.
WORKING CAPITAL. Working capital provided by operations was $3.0 million in
1994 compared to $1.3 million in 1993. The improvement in performance is
primarily the result of the Company returning its focus to its core business
of natural gas gathering, processing and marketing. The Company's primary
emphasis in 1994 was the installation of cryogenic natural gas processing
plants at the Company's North Louisiana facilities, the installation of
additional compression to increase the capacity of natural gas available at
these facilities and the discontinuation of the Company's refining operations.
The Company had a working capital deficit of $6.6 million at December 31,
1994. The Company has utilized its line of credit, in part, to fund capital
expenditures necessary for the modernization and expansion of its North
Louisiana operations. The Company intends to convert a portion of its line of
credit to long-term borrowing, to issue equity securities or to sell certain
assets in order to reduce the working capital deficit. If none of these
events occur, the Company expects that cash provided by operations combined
with amounts available under its line of credit will be sufficient to meet
its cash requirements in 1995.
INVESTING ACTIVITIES. The Company made capital expenditures of approximately
$3.8 million in 1994. Of this amount, $3.2 million was expended for
installing and expanding the cryogenic natural gas processing plants and
related compression in North Louisiana. The Company anticipates utilizing
some of its capital resources in 1995 to connect additional supplies of
natural gas to these facilities.
Effective May 1, 1994, the Company sold its Claiborne refinery and
inventories to Arcadia. The Company received net proceeds of $2.4 million in
cash, a $900,000 subordinated note, and retained a minority limited
partnership interest in Arcadia. The Company also entered into a letter of
intent to sell its Dubach refining assets to an affiliate of Arcadia for $1.0
million. A definitive agreement to sell such assets has not been executed.
The Company continues to pursue projects that would require long-term
borrowing. The Company believes that its current relationships with existing
lenders will allow borrowing capacity for future capital requirements.
However, there can be no assurance regarding the Company's ability to obtain
additional capital when needed on acceptable terms.
The Company is continuing to evaluate its remaining assets in regard to its
current strategic direction. As such, the Company is actively attempting to
redeploy existing idle assets into new projects.
FINANCING ACTIVITIES. Cash provided by financing activities was $1.5 million
in 1994. The Company expanded its revolving credit and term loan (the
"Senior Loan") effective September 30, 1994. The term portion of the Senior
Loan was increased by $817,000 to $5,000,000 with a straight-line
amortization which matures on September 30, 1999. Interest is payable at the
applicable prime rate plus two percent.
At December 31, 1994, the Company had borrowed $3.1 million under the
revolving credit portion of the Senior Loan and the financial institution had
issued, for the Company's benefit, approximately $1.9 million in standby
letters of credit for natural gas purchases. The Senior Loan allowed for up
to an aggregate of $6.0 million in letters of credit and working capital
loans. The Senior Loan was amended in March 1995 increasing this line to an
aggregate of $8.0 million (with a maximum of $4.0 million in working capital
loans).
NOL CARRYFORWARDS. At December 31, 1994, the Company had NOL carryforwards
for income tax purposes of approximately $28.8 million which, if not
utilized, will expire at various times from 2001 until 2009. In addition,
the Company has unused investment tax credits of approximately $1.6 million
available to offset future federal income tax liability. The Company
considers such carryforwards and tax credits to be potentially valuable
assets which may be used to shelter future taxable earnings from income
taxes. If a change of ownership as defined in Internal Revenue Code Section
382 occurs, utilization of the NOL carryforwards could be limited.
10
<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
GENERAL. The Company had earnings before depreciation, interest and taxes
("EBITD") of $4.2 million in 1994 which represented a 106% increase over the
EBITD of $2.0 million in 1993. The Company recorded this increased EBITD for
its first full year of operations since its plan of reorganization was
consummated on November 2, 1993. Management has been successful in returning
the Company's focus to its core business of natural gas gathering, processing
and marketing. As a result, operating earnings for the year were $1.5
million in 1994 compared to an operating loss of $4.4 million in 1993. Net
earnings were $315,000 ($0.02 per share) in 1994 compared to a net loss of
$23.1 million ($2.66 per share) in 1993.
NATURAL GAS PROCESSING OPERATIONS. The following table provides pertinent
information relating to the Company's natural gas processing operations.
<TABLE>
<CAPTION>
INCREASE
1994 1993 (DECREASE)
------- ------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Gross margin ................................ $10,171 $11,954 $(1,783)
EBITD ....................................... $ 4,222 $ 842 $ 3,380
(MMCFD)
Natural gas treated or processed ............ 98 112 (14)
(THOUSAND GALLONS PER DAY)
Liquid sales volumes ........................ 227 518 (291)
</TABLE>
The Company's natural gas processing operations provided 36% of the revenues
and 66% of the gross margin in 1994 compared to 47% of the revenues and 56%
of the gross margin in the prior year. However, natural gas processing
operations EBITD increased $3.4 million (401%). This was primarily the
result of the installation of cryogenic natural gas processing facilities at
the Company's North Louisiana operations and the cessation of all refining
operations. The cryogenic natural gas processing facilities have allowed the
Company to increase NGLs recovered, to reduce operating expenses and to lower
fuel costs. The Company received a portion of the NGLs which resulted in
increased earnings.
The Company sold its Claiborne condensate refinery effective May 1, 1994.
Revenues from refining operations were $16.2 million in 1994 compared to
$78.5 million in 1993. The Company's EBITD increased $2.0 million in 1994 as
a result of the cessation of refining operations.
NATURAL GAS PIPELINE OPERATIONS. Sales volumes for natural gas declined in
1994 as a result of the transfer in November 1993 of certain assets (the
"Transferred Assets") to the Company's former noteholders under its plan of
reorganization. See Note 2 of "Notes to Consolidated Financial Statements".
The following table provides pertinent information relating to the Company's
natural gas pipeline operations.
<TABLE>
<CAPTION>
INCREASE
1994 1993 (DECREASE)
------ ------ ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Gross margin ................................ $5,238 $9,322 $(4,084)
EBITD ....................................... $2,432 $4,566 $(2,134)
(MMCFD)
Natural gas sales ........................... 118 215 (97)
</TABLE>
The Company's natural gas pipeline operations provided 64% of the revenues
and 34% of the gross margin in 1994 compared to 53% of the revenues and 44%
of the gross margin in 1993. Natural gas pipeline operations EBITD decreased
$2.1 million (47%) in 1994. This was primarily the result of the loss of
earnings from the Transferred Assets. This decrease was partially offset by
increased earnings from the Company's Mountain Creek and Port Hudson Systems.
It was also partially offset by a refund from a major interstate pipeline
for transportation fees charged in excess of the final approved rate as
determined by the Federal Energy Regulatory Commission.
11
<PAGE>
Natural gas volumes declined 97 MMCFD in 1994. This was primarily caused by
the Transferred Assets which contributed 112 MMCFD in 1993. Off-system
volumes increased 1 MMCFD in 1994. However, they accounted for 56% of the
throughput and 29% of the gross margin in 1994, compared to 30% of the
throughput and 10% of the gross margin in 1993. With the acquisition of
Willow Springs, the Company expects to increase its percentage of facilities
throughput in 1995. Facilities throughput typically provides larger and more
stable margins.
GENERAL AND ADMINISTRATIVE EXPENSES. The Company's general and
administrative expenses decreased $1.1 million (17%) in 1994. This was the
result of cost reductions as part of the Plan as well as the sale of the
refineries.
OTHER INCOME (EXPENSE). Interest expense decreased in 1994 as a result of
the retirement of debt. The Company sold its interest in Three Rivers
Pipeline Company and Allegheny Energy Marketing Company (collectively
referred to as "Three Rivers") in January 1993. The Company recorded a gain
from the sale of its interest in Three Rivers of $611,000 in 1993.
REORGANIZATION ITEMS. The Company recorded a loss on the write downs and
disposition of property, plant and equipment of $20.3 million in 1993. This
included the Transferred Assets and other assets that were considered
impaired to the reorganized Company. The professional fees of $4.5 million
incurred for the reorganization included primarily legal fees, consultant
fees and bankruptcy costs.
EXTRAORDINARY ITEM. The Company recorded a $9.1 million gain in 1993 from
the extinguishment of debt in conjunction with the reorganization.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
GENERAL. The Company's operations were negatively impacted in 1993 by the
reorganization. The uncertainty related to the Company's financial condition
limited the Company's ability to purchase natural gas. Many suppliers
required prepayments or put restrictions on purchases which ultimately
resulted in an increase in the cost of natural gas to the Company. In
addition, average margins on refined products decreased in 1993 from 1992.
NATURAL GAS PROCESSING OPERATIONS. Gross margin from natural gas processing
operations contributed 56% of consolidated margin compared to 51% in the
prior year. Natural gas processing operations EBITD declined $1.4 million
(63%) in 1993. The decreased earnings was primarily the result of a decline
in margin per barrel sold. The Company discontinued operations at one of its
two condensate refineries in July 1993. The Company also consolidated the
usage of its North Louisiana facilities and was able to discontinue
operations at one of its two fractionating units in September 1993.
NATURAL GAS PIPELINE OPERATIONS. Sales volumes for natural gas declined in
1993 as the financial condition of the Company required curtailment of
certain business activities. The Company's natural gas pipeline operations
contributed 44% of total consolidated gross margin in 1993 compared to 49% in
the prior year. Natural gas pipeline operations EBITD declined $3.8 million
(46%) primarily as a result of a decrease in throughput of natural gas. As a
result of the Company's reorganization, it became increasingly difficult to
acquire supplies of natural gas. The Company utilized its supplies to ensure
that it fulfilled its commitments on all its term sales contracts. From the
limited supply, the Company was forced to curtail certain other marketing
activities. This particularly impacted the Transferred Assets. Throughput
on the Transferred Assets declined 63 MMCFD. The Company also experienced a
decline in throughput of approximately 7 MMCFD on its Mountain Creek System.
This was the result of maintenance performed on the power plant which is
supplied by the Mountain Creek System. The maintenance required the plant to
be taken off-line for three months. Additionally, this plant will have lower
utilization in the future as the utility has replaced some of its needs with
nuclear power. These declines in throughput were partially offset by the
addition of the Company's Port Hudson System which began operations in April
1993.
The Company's Off-system sales throughput declined 5 MMCFD (7%) in 1993.
Gross margin on these sales decreased approximately $378,000. This was
caused in part by an increase in the cost of supply relative to sales.
Additionally, higher natural gas prices during most of 1993 limited the
Company's ability to compete with utility tariffs in the northeast market
areas.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
declined $274,000 (4%) in 1993. This reflected specific Management efforts
to reduce overhead costs through consolidation and eliminations of functions
and staff reductions. The Company significantly reduced its office space and
reduced its use of outside professional services.
12
<PAGE>
OTHER INCOME (EXPENSE). Interest expense decreased $2.4 million (47%)
primarily as a result of the debt that was retired as part of the
reorganization. The Company sold its interest in Three Rivers in January
1993. The Company's share of losses from its interest in Three Rivers was
$555,000 in 1992. The Company recorded a gain from the sale of its interest
in Three Rivers of $611,000 in 1993.
REORGANIZATION ITEMS. The Company recorded a loss on the write downs and
disposition of property, plant and equipment of $20.3 million in 1993. This
included the Transferred Assets and other assets that were considered
impaired to the reorganized Company. The professional fees of $4.5 million
incurred for the reorganization included primarily legal fees, consultant
fees and bankruptcy costs.
EXTRAORDINARY ITEM. The Company recorded a $9.1 million gain in 1993 from the
extinguishment of debt in conjunction with the reorganization.
OTHER MATTERS
ACCOUNTING FOR INCOME TAXES. Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"). The adoption of FAS 109 changed the Company's method of
accounting for income taxes from the deferred method (APB 11) to an asset and
liability approach. Under APB 11, the Company has deferred the tax effects
of timing differences between financial reporting and taxable income. The
asset and liability approach requires the recognition of deferred tax
liabilities and assets for the expected future tax consequence of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities. Adoption of FAS 109 had no material impact on the Company's
financial position at January 1, 1993, or the results of its operations for
the year ended December 31, 1993.
EFFECTS OF CHANGING PRICES. Natural gas and NGLs prices have fluctuated
significantly over the last three years. The Company's natural gas pipeline
operations generally earn a margin which is the difference between the
revenues from the sale of natural gas over the purchase cost thereof. The
change in margin, although it has declined over the three year period, is
much less volatile than the change in product prices. The Company's natural
gas processing operations generally receive a portion of the products and or
natural gas as its fee for services. Therefore, product prices directly
impact these operations. This effect is somewhat offset as NGL prices tend
to move inversely to natural gas prices. Inflation has not had a significant
impact on operating expenses in the last three years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
CORNERSTONE NATURAL GAS, INC. AND SUBSIDIARIES
Report of Arthur Andersen LLP, Independent Public Accountants........... 14
Report of Ernst & Young LLP, Independent Public Accountants............. 15
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992....................................... 16
Consolidated Balance Sheets at December 31, 1994 and 1993............... 17
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992....................................... 18
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1994, 1993 and 1992................... 19
Notes to Consolidated Financial Statements.............................. 20-28
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Cornerstone Natural Gas, Inc.
We have audited the accompanying consolidated balance sheet of Cornerstone
Natural Gas, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1994, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cornerstone Natural Gas,
Inc. and subsidiaries as of December 31, 1994, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
February 17, 1995
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Cornerstone Natural Gas, Inc.
We have audited the accompanying consolidated balance sheet of Cornerstone
Natural Gas, Inc. and Subsidiaries (the "Company") at December 31, 1993, and
the related consolidated statements of operations, cash flows and changes in
stockholders' equity for each of the two years in the period ended December
31, 1993. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated 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 the Company at December 31, 1993, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1993, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Dallas, Texas
March 7, l994
15
<PAGE>
CORNERSTONE NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Revenues ........................................ $106,406,000 $215,625,000 $244,696,000
Expenses:
Cost of sales .................................. 90,997,000 194,349,000 216,236,000
Operating expenses ............................. 5,975,000 12,912,000 15,360,000
Depreciation and amortization .................. 2,733,000 6,451,000 7,494,000
General and administrative ..................... 5,250,000 6,331,000 6,605,000
------------ ------------ ------------
104,955,000 220,043,000 245,695,000
------------ ------------ ------------
Operating earnings (loss) ....................... 1,451,000 (4,418,000) (999,000)
------------ ------------ ------------
Other income (expense):
Interest income ................................ 79,000 103,000 242,000
Interest expense ............................... (1,284,000) (2,764,000) (5,191,000)
Equity in net earnings (losses) of
unconsolidated affiliates ..................... (11,000) (52,000) (407,000)
Other .......................................... 16,000 8,000 186,000
Gain (loss) on sale of assets, net ............. 90,000 611,000 (258,000)
------------ ------------ ------------
(1,110,000) (2,094,000) (5,428,000)
------------ ------------ ------------
Earnings (loss) before reorganization costs,
income taxes, and extraordinary item ........... 341,000 (6,512,000) (6,427,000)
Reorganization items:
Loss on disposition and write downs of
property, plant and equipment ................. - 20,274,000 -
Professional fees .............................. - 4,545,000 704,000
------------ ------------ ------------
- 24,819,000 704,000
------------ ------------ ------------
Earnings (loss) before income taxes and
extraordinary item ............................. 341,000 (31,331,000) (7,131,000)
Provision (benefit) for income taxes:
Current ........................................ 26,000 45,000 181,000
Deferred ....................................... - - (1,682,000)
------------ ------------ ------------
26,000 45,000 (1,501,000)
------------ ------------ ------------
Net earnings (loss) before extraordinary item ... 315,000 (31,376,000) (5,630,000)
Extraordinary item - gain on extinguishment
of debt ........................................ - 9,085,000 -
------------ ------------ ------------
Net earnings (loss) ............................. 315,000 (22,291,000) (5,630,000)
Preferred stock dividend requirements ........... - (791,000) (1,900,000)
------------ ------------ ------------
Net earnings (loss) applicable to common stock .. $ 315,000 $(23,082,000) $ (7,530,000)
============ ============ ============
Earnings (loss) per common and common
equivalent share:
Earnings (loss) before extraordinary item ...... $ .02 $ (3.71) $ (.97)
Extraordinary item ............................. - 1.05 -
------------ ------------ ------------
Net earnings (loss) ............................ $ .02 $ (2.66) $ (.97)
============ ============ ============
Weighted average common and common
equivalent shares outstanding .................. 14,467,000 8,691,000 7,758,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
16
<PAGE>
CORNERSTONE NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................... $ 655,000 $ 2,416,000
Accounts receivable ............................ 12,424,000 15,101,000
Inventory ...................................... 93,000 1,711,000
Other current assets ........................... 286,000 655,000
------------ ------------
Total current assets .......................... 13,458,000 19,883,000
Assets held for disposition ..................... 1,000,000 -
Property, plant and equipment, at cost .......... 54,632,000 54,457,000
Less: accumulated depreciation ................. (33,543,000) (31,805,000)
------------ ------------
Net property, plant and equipment .............. 21,089,000 22,652,000
Goodwill, net ................................... 3,676,000 3,793,000
Other assets .................................... 1,080,000 118,000
------------ ------------
$ 40,303,000 $ 46,446,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt ......... $ 4,857,000 $ 2,501,000
Accounts payable ............................... 14,993,000 22,097,000
Accrued interest payable ....................... 52,000 45,000
Income tax payable ............................. 162,000 185,000
Other current liabilities ...................... - 206,000
------------ ------------
Total current liabilities ..................... 20,064,000 25,034,000
Long-term debt .................................. 6,898,000 7,768,000
Other liabilities ............................... 1,472,000 2,090,000
Stockholders' equity:
Common stock, $.10 par value; 25,000,000 shares
authorized; 12,515,959 shares issued and
outstanding ................................... 1,252,000 1,252,000
Additional paid-in capital ..................... 51,298,000 51,298,000
Accumulated deficit ............................ (40,681,000) (40,996,000)
------------ ------------
Total stockholders' equity .................... 11,869,000 11,554,000
------------ ------------
$ 40,303,000 $ 46,446,000
============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
17
<PAGE>
CORNERSTONE NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings (loss) before extraordinary item...................... $ 315,000 $(31,376,000) $(5,630,000)
Non-cash items included in loss before extraordinary item:
Loss on disposition and write downs of property,
plant and equipment......................................... - 20,274,000 -
Interest compromised......................................... - 1,605,000 -
Depreciation and amortization................................ 2,733,000 6,451,000 7,494,000
Deferred income taxes........................................ - - (1,682,000)
Write off of project development costs....................... - - 95,000
Equity in net losses of unconsolidated affiliates............ 11,000 52,000 407,000
Loss (gain) on sale of assets, net........................... (90,000) (611,000) 258,000
Other........................................................ 30,000 402,000 221,000
Reorganization items......................................... - 4,545,000 -
----------- ------------ ------------
Working capital provided by operations before
reorganization items............................................ 2,999,000 1,342,000 1,163,000
Changes in operating assets or liabilities which provided
(used) cash during the period:
Decrease in accounts receivable................................ 2,676,000 4,760,000 2,881,000
Decrease in inventory.......................................... 1,619,000 1,940,000 501,000
(Increase) decrease in other current assets.................... 352,000 (10,000) 7,000
Increase (decrease) in accounts payable........................ (6,151,000) (3,152,000) 54,000
Increase (decrease) in accrued interest payable................ 7,000 (55,000) 3,828,000
Decrease in other current liabilities.......................... (230,000) (481,000) (368,000)
Increase (decrease) in other liabilities....................... (366,000) 848,000 -
----------- ------------ ------------
Cash provided by operations before reorganization items.......... 906,000 5,192,000 8,066,000
Cash used by reorganization items - professional fees............ (1,303,000) (2,165,000) -
----------- ------------ ------------
Cash provided (used) by operating activities..................... (397,000) 3,027,000 8,066,000
Cash flows from investing activities:
Proceeds from sale of assets................................... 1,063,000 851,000 181,000
Additions to property, plant and equipment..................... (3,825,000) (3,742,000) (3,160,000)
(Increase) decrease in investment in unconsolidated
subsidiaries.................................................. (87,000) 110,000 291,000
Other.......................................................... - 23,000 (279,000)
----------- ------------ ------------
Cash used by investing activities................................ (2,849,000) (2,758,000) (2,967,000)
Cash flows from financing activities:
Borrowings (reduction) of revolving debt....................... 3,050,000 (1,625,000) -
Additional borrowings under long-term debt..................... 817,000 5,800,000 -
Reduction of long-term debt.................................... (2,382,000) (5,071,000) (2,865,000)
Reorganization items:
Issuance of common stock and warrants........................ - 3,000,000 -
Retirement of long-term debt................................. - (6,731,000) -
Other.......................................................... - (108,000) 142,000
----------- ------------ ------------
Cash provided (used) by financing activities............... 1,485,000 (4,735,000) (2,723,000)
----------- ------------ ------------
Increase (decrease) in cash and cash equivalents................. (1,761,000) (4,466,000) 2,376,000
Cash and cash equivalents:
Beginning of period............................................ 2,416,000 6,882,000 4,506,000
----------- ------------ ----------
End of period.................................................. $ 655,000 $ 2,416,000 $6,882,000
=========== ============ ==========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest....................................................... $1,226,000 $ 1,042,000 $1,151,000
Income taxes................................................... $ 50,000 $ 34,000 $ 197,000
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
18
<PAGE>
CORNERSTONE NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT EQUITY
--------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1991 $ 769,000 $29,163,000 $(10,384,000) $ 19,548,000
Proceeds from issuance of common stock
to employee benefit plan..................... 20,000 121,000 - 141,000
Preferred stock dividend requirements......... - - (1,900,000) (1,900,000)
Net loss...................................... - - (5,630,000) (5,630,000)
---------- ----------- ------------ ------------
Balance at December 31, 1992.................. 789,000 29,284,000 (17,914,000) 12,159,000
---------- ----------- ------------ ------------
Reorganization items
Redemption of Series A Cumulative
Convertible Exchangeable Preferred Stock... - 19,448,000 - 19,448,000
Issuance of common stock and warrants....... 458,000 2,543,000 - 3,001,000
Proceeds from issuance of common stock to
employee benefit plan........................ 5,000 23,000 - 28,000
Preferred stock dividend requirements......... - - (791,000) (791,000)
Net loss...................................... - - (22,291,000) (22,291,000)
---------- ----------- ------------ ------------
Balance at December 31, 1993.................. 1,252,000 51,298,000 (40,996,000) 11,554,000
---------- ----------- ------------ ------------
Net earnings.................................. - - 315,000 315,000
---------- ----------- ------------ ------------
Balance at December 31, 1994.................. $1,252,000 $51,298,000 $(40,681,000) $ 11,869,000
========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
19
<PAGE>
CORNERSTONE NATURAL GAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL AND SIGNIFICANT ACCOUNTING POLICIES
(a) General and Principles of Consolidation
Cornerstone Natural Gas, Inc., a Delaware corporation
("Cornerstone"), is engaged in the business of natural gas pipeline
and natural gas processing operations. Natural gas pipeline
operations include purchasing, gathering, transporting and marketing
of natural gas. Natural gas processing operations include recovering
and marketing of natural gas liquids ("NGLs") from natural gas and
treating natural gas by removing noncommercial components. Natural
gas processing operations included refining condensate and crude oil
into various petroleum products until the Company discontinued its
refining operations.
The consolidated financial statements include the accounts of
Cornerstone and its wholly owned and majority-owned subsidiaries
(referred to collectively as the "Company"). The consolidated
financial statements of the Company also include its proportionate
share of the assets, liabilities, revenues and expenses of affiliated
partnerships and joint ventures if the Company owns at least a 50%
interest. Affiliates in which the Company owns less than a 50%
interest are accounted for using the equity method.
Certain reclassifications of prior years' financial information have
been made to conform to the current year presentation.
(b) Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
(c) Inventory
Inventory is stated at the lower of cost or market, determined by the
first in, first out method.
(d) Property, Plant and Equipment
Depreciation of property, plant and equipment is provided using the
straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Pipelines and pipeline rights-of-way.......................... 5-20
Natural gas liquids recovery, treating and refining plants.... 10-20
Equipment and other........................................... 3-15
</TABLE>
Most of the Company's natural gas liquids recovery and natural gas
treating plants are skid-mounted and moveable from one service
location to another. The cost of moving the plants between service
locations is capitalized and amortized using the straight-line method
over the life of the related service contract.
20
<PAGE>
(e) Goodwill
Goodwill represents the excess of the cost over the net assets of
businesses acquired and is amortized on a straight-line basis over
periods of twenty to forty years. Goodwill is presented net of
accumulated amortization of $613,233 and $496,419 at December 31,
1994 and 1993, respectively.
(f) Income Taxes
Deferred income taxes are computed using the liability method in
accordance with Statement of Financial Accounting Standards No. 109
("FAS 109"), and are provided for on all temporary differences between
the financial reporting basis and the tax basis of the Company's
assets and liabilities. As more fully described in Note 5, the
Company changed its method of accounting for income taxes from the
deferred method (APB 11) effective January 1, 1993.
(g) Earnings (Loss) per Common and Common Equivalent Share
Earnings (loss) per common and common equivalent share are based on
the weighted average number of shares outstanding during each year as
adjusted for outstanding stock options and warrants, if dilutive,
using the treasury stock method. Fully-diluted earnings per share for
all years are not presented because the effects are antidilutive.
(h) Concentrations of Credit Risk
The Company markets natural gas and refined products to utilities,
local distribution companies and industrial end-users. The Company
performs ongoing credit evaluations of its customers and if deemed
necessary, requires purchasers of the Company's products to prepay
or issue standby letters of credit as collateral. As an additional
safeguard against uncollectable receivables, the Company maintains
an insurance policy which covers most of its customers. Credit losses
are provided for in the consolidated financial statements and
consistently have been within Management's expectations.
The Company has cash deposits with various banks consisting
principally of demand deposits and time deposits. These deposits
generally have maturities of one year or less and bear minimal risk.
The Company has not experienced any losses on its cash deposits.
(i) Hedging
The Company, on occasion, enters into swap agreements or futures
contracts to hedge the risks associated with fixed commitments and
certain anticipated transactions. The Company defers the change in
the market value of these contracts until such time as the hedge
transaction is completed. At December 31, 1994, the Company had
open natural gas price swap agreements on volumes of less than 2 MMCFD
and no open futures contracts.
2. PLAN OF REORGANIZATION
On June 4, 1993, Endevco, Inc. and its subsidiaries, ANGIC, Inc.,
Mississippi Fuel Company and Endevco Taft Company (collectively, the
"Debtors") filed voluntary petitions for reorganization under Chapter 11
of the Bankruptcy Code with the United States Bankruptcy Court for the
Eastern District of Texas, Sherman Division (the "Bankruptcy Court").
On September 29, 1993, the Bankruptcy Court issued an order confirming the
Debtor's First Amended Joint Plan of Reorganization (the "Plan"). On
November 2, 1993, the following transactions resulted from the
consummation of the Plan:
(1) The Debtors paid approximately $2.1 million in cash and transferred
their Mississippi Fuel, Ada, Chalybeate Springs and Leaf River
gathering and pipeline systems along with certain contractual rights
owned by the Debtors to the holders of the Debtor's 9% Senior Notes,
11.7% Senior Notes and 11.5% Subordinated Convertible Debentures
(collectively, the "Noteholders"). The cash payments and transfer
of assets was in
21
<PAGE>
full satisfaction of all allowed claims of the Noteholders
(approximately $44.1 million of debt and accrued interest on the
financial records of the Debtors). The Company paid in full all
other creditors.
(2) The Debtors paid approximately $4.6 million in cash and issued
promissory notes in the aggregate of $2.5 million (the "Note")
to the holders (the "Preferred Stockholders") of the Company's
$9.50 Series A Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") in satisfaction of all allowed claims
(approximately $27.0 million on the financial records of the
Debtors, which included the liquidation value of the Preferred
Stock and all accrued and unpaid dividends thereon). The Note is
secured by a lien on the stock of all the subsidiaries of Cornerstone
and is guaranteed by its subsidiary, Cornerstone Pipeline Company.
Pursuant to the terms of the Note, the Company is prohibited from
paying dividends or repurchasing shares of its capital stock while
the Note is outstanding.
(3) All outstanding common stock, par value $.10 per share (the "Former
Common Stock"), of Endevco, Inc. was canceled and each holder thereof
was issued one share of the common stock of Cornerstone (the "New
Common Stock") for each share of Former Common Stock held. Holders
of the Former Common Stock received approximately 63% of the shares
of New Common Stock. All outstanding stock options were canceled.
(4) Pursuant to the First Amended Stock Purchase Agreement by and between
Ray Davis, Trustee (the "Purchaser") and Cornerstone dated May 28,
1993, Ray Davis and his assigns acquired 4,576,659 shares of New
Common Stock and warrants to acquire an additional 2,564,103 shares
of New Common Stock with an exercise price of $.78 per share. The
aggregate purchase price of such shares of New Common Stock and
warrants was $3.0 million. The purchased shares constituted
approximately 37% of the Company's issued and outstanding shares
of New Common Stock. The purchased shares and the warrants, if
exercised, would constitute approximately 47% of the fully diluted
capital stock of the Company.
(5) The Company entered into a term loan and revolving credit facility
(the "Senior Loan") with a financial institution. The term portion
of the Senior Loan was for $5.8 million and provided for monthly
principal and interest payments. The interest is calculated at the
applicable prime rate plus two percent. The revolving credit
facility allowed for working capital loans and standby letters of
credit up to an aggregate of $6.0 million. A portion of the proceeds
from the Senior Loan was used to retire the remaining debt associated
with the purchase of the original assets of Dubach as well as the
debt incurred when the assets of Claiborne Gasoline Company were
acquired.
(6) The Company amended its Certificate of Incorporation to (1) change
the Company's name to Cornerstone Natural Gas, Inc. and (2) provide
for certain restrictions on the transfer of New Common Stock.
The Company has accounted for all transactions related to the
reorganization proceedings in accordance with the Statement of
Position 90-7 of the American Institute of Certified Public
Accountants. In addition, certain other property and equipment
were written down as a result of the reorganization. These
transactions resulted in a loss on write downs and disposition
of property, plant and equipment of approximately $20.3 million
and an extraordinary gain from the settlement of debt of
approximately $9.1 million.
3. PROPERTY, PLANT, AND EQUIPMENT
A summary of property, plant, and equipment follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
---- ----
<S> <C> <C>
Pipeline and pipeline rights-of-way...... $19,962,000 $19,737,000
Natural gas liquids recovery, treating
and refining............................ 29,709,000 30,677,000
Equipment................................ 2,841,000 1,744,000
Other.................................... 2,120,000 2,299,000
----------- -----------
$54,632,000 $54,457,000
=========== ===========
</TABLE>
Interest cost capitalized during the construction of projects was $37,000
in 1994, $8,000 in 1993, and $26,000 in 1992.
22
<PAGE>
Effective May 1, 1994, the Company sold its Claiborne refinery and
inventories to Arcadia. The Company also entered into a letter of
intent to sell its Dubach refining assets to an affiliate of Arcadia for
$1.0 million. Although a definitive agreement to sell such assets has
not been executed, the assets covered by the letter of intent are
reflected as assets held for disposition on the accompanying balance sheet.
4. Long-Term Debt
A summary of debt follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
Term portion of Senior Loan (a).......... $4,750,000 $ 5,506,000
Revolving portion of Senior Loan (a)..... 3,050,000 -
Notes payable to former Preferred
Stockholders (b)........................ 2,000,000 2,500,000
Subordinated secured note payable (c).... 1,948,000 2,213,000
Other.................................... 7,000 50,000
---------- -----------
11,755,000 10,269,000
Less: Current installments............... 4,857,000 2,501,000
----------- -----------
Long-term debt........................... $ 6,898,000 $ 7,768,000
=========== ===========
</TABLE>
(a) In November 1993, the Company entered into the Senior Loan with a
financial institution. The term portion of the Senior Loan provided
for monthly principal and interest payments. The Company borrowed an
additional $817,00 on September 30, 1994. Interest is calculated at
the applicable prime rate plus two percent (10.5% at December 31,
1994). At December 31, 1994, the revolving credit facility allowed
for working capital loans and standby letters of credit up to an
aggregate of $6.0 million subject to a borrowing base, as defined,
with a commitment fee of .5% on the unused balance. Working capital
loans were approximately $3.1 million as of December 31, 1994, and
the financial institution had issued, for the Company's benefit,
approximately $1.9 million in standby letters of credit for natural
gas purchases. The revolving credit facility expires November 1995.
Management expects to renew this line under similar terms and
conditions. This facility was expanded to allow for the aggregate to
be increased to $8.0 million (with a $4.0 million limit on working
capital loans) effective March 1995. The Senior Loan is secured by
essentially all the assets of the Company and includes provisions
for mandatory prepayments of principal if the outstanding balance of
the term portion exceeds the financial institution's annual
engineering evaluation. The Senior Loan requires the Company to
maintain certain financial ratios, prohibits the Company from paying
dividends, and restricts capital expenditures.
(b) The Notes bear interest at 10% through December 1995 and 15%
thereafter. The Notes are secured by a lien on the stock of all the
subsidiaries of Cornerstone and are guaranteed by its subsidiary,
Cornerstone Pipeline Company. The Notes are due in varying annual
installments through December 31, 1997, and require quarterly
payments of interest during the term of the Notes. Pursuant to the
terms of the Notes, the Company is prohibited from paying dividends
or repurchasing shares of its capital stock.
(c) The note is secured by the pipeline facilities of the Mountain Creek
Joint Venture and bears interest at prime rate plus two percent
(10.5% at December 31, 1994). The loan is due in varying quarterly
installments which began January 1, 1990, with a balloon payment due
October 1, 1996. The Company intends to refinance this note prior to
the balloon payment.
23
<PAGE>
Aggregate maturities of long-term debt, for each of the five subsequent
fiscal years are as follows:
<TABLE>
<S> <C>
1995......................................... $ 4,857,000
1996......................................... 3,398,000
1997......................................... 1,750,000
1998......................................... 1,000,000
1999......................................... 750,000
-----------
$11,755,000
===========
</TABLE>
5. INCOME TAXES
The significant components of the provision (benefit) for income taxes are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
LIABILITY METHOD DEFERRED METHOD
1994 1993 1992
------- ------- ---------------
<S> <C> <C> <C>
Current......................... $26,000 $45,000 $ 181,000
Deferred........................ - - (1,682,000)
------- ------- -----------
$26,000 $45,000 $(1,501,000)
======= ======= ===========
</TABLE>
Effective January 1, 1993, the Company adopted the provisions of FAS 109
changing the method of accounting for income taxes. As permitted under the
new rules, prior years' financial statements have not been restated to
reflect the change. At January 1, 1993, there was no cumulative effect from
the adoption of FAS 109.
Deferred income taxes reflect the net tax effect of temporary differences
between the financial reporting carrying amounts of assets and liabilities
and income tax carrying amounts. The components of the Company's deferred
tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment................... $(2,817,000) $(2,240,000)
Deferred tax assets:
NOL carryforwards.............................. 9,804,000 9,842,000
Investment tax credit carryforwards............ 1,618,000 1,618,000
Alternative minimum tax credit carryforwards... 104,000 104,000
Accrued liabilities and other.................. 215,000 289,000
----------- -----------
11,741,000 11,853,000
Less valuation allowance......................... (8,924,000) (9,613,000)
----------- -----------
$ - $ -
=========== ===========
</TABLE>
The sources of deferred income taxes and the tax effect of each for the year
ended December 31, 1992, before the Company adopted FAS 109 were:
<TABLE>
<CAPTION>
1992
----------
<S> <C>
Excess tax depreciation over financial........... $ 598,000
Utilization of NOL carryforward.................. (2,096,000)
Gain on asset sales.............................. (124,000)
Deferred state income tax benefit................ (146,000)
Other............................................ 86,000
-----------
$(1,682,000)
===========
</TABLE>
24
<PAGE>
The provision (benefit) for income taxes differed from amounts computed at
the statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1994 1993 1992
------------ --------------- --------------
<S> <C> <C> <C>
Tax provision (benefit) at statutory rate................ $ 116,000 $ (10,653,000) $ (2,425,000)
State income taxes, net of federal benefit............... 17,000 29,000 48,000
Valuation allowance on NOL............................... (174,000) 10,491,000 820,000
Other.................................................... 67,000 178,000 56,000
------------ --------------- --------------
$ 26,000 $ 45,000 $ (1,501,000)
------------ --------------- --------------
------------ --------------- --------------
</TABLE>
The Company has NOL carryforwards of $28.8 million which, if not utilized,
will expire at various times from 2001 through 2009. In addition, the Company
has unused investment tax credits of approximately $1.6 million available to
offset future federal income tax liabilities. In general, the credits expire at
various times from 1996 through 2001, unless previously utilized. The respective
carryforwards are available to the Company in their full amounts unless a
"change of ownership", as defined in Internal Revenue Code Section 382, occurs.
If a change of ownership occurs, utilization of the NOL carryforwards could be
limited.
6. COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office space, equipment and automobiles under lease
obligations classified as operating leases. Rental expense under these leases
was approximately $869,000 in 1994, $1.7 million in 1993, and $2.1 million in
1992. At December 31, 1994, minimum future rental payments due under operating
leases were as follows:
<TABLE>
<S> <C>
1995............................................................. $ 74,000
1996............................................................. 424,000
1997............................................................. 20,000
</TABLE>
The Company is involved in certain other legal actions and claims arising in
the ordinary course of business. It is the opinion of Management (based, in
part, on advice of legal counsel) that such litigation and claims will be
resolved without material effect on the Company's financial position.
7. TRANSACTIONS WITH RELATED PARTIES
The Company is a party to an agreement with Energy Transfer I, Ltd. ("Energy
Transfer"). Mr. Kelcy L. Warren (President, Chief Operating Officer and
Director) is the sole shareholder of the general partner of Energy Transfer.
Messers. Ray C. Davis (Chief Executive Officer and Director), Warren and Ben H.
Cook (Director) are indirect limited partners in Energy Transfer. Under such
agreement, the Company receives a fixed fee to market natural gas and operate a
natural gas pipeline for Energy Transfer. The Company received $60,000 from
Energy Transfer in the year ended December 31, 1994, for management services.
Mr. James W. Bryant (Director) is a party to a consulting agreement with the
Company which he assigned to his company, Cardinal Resources, Inc. ("Cardinal").
Under the consulting agreement, which expires November 1, 1996, Cardinal is to
receive no less than $200,000 per year. Mr. Bryant and Cardinal are obligated
under the consulting agreement to present certain projects to the Company which
has a right of first refusal. If the Company elects to pursue a project
originated by Mr. Bryant or Cardinal, then additional compensation may be paid.
In January 1995, the Company modified the Agreement for a one year period. Under
the modified agreement, Cardinal must provide the services of an additional
consultant for $50,000.
The Company is also a party to a joint venture agreement with an affiliate
of Mr. Ted Collins, Jr. (Director). Under such joint venture agreement, the
Company and the affiliate of Mr. Collins each bear a portion of the costs for
developing projects in the natural gas business and have a right of first
refusal on such projects.
8. EMPLOYEE BENEFIT PLANS
Under the Plan (Note 2) all outstanding stock options were canceled. An
incentive stock option plan (the "Stock Plan") was approved by the Board of
Directors and the Stockholders in 1993. Under the Stock Plan, options to
25
<PAGE>
purchase up to 1,250,000 shares of the Company's authorized but unissued stock
can be granted to key employees through 2003. Options under the Stock Plan were
granted at an exercise price equal to 100% of the fair market value of the stock
on the date of the grant. The options are exercisable at a rate not to exceed
20% for each year of employment completed (however 100% may be exercised under a
change of control, as defined) after the date of grant and expire 10 years after
the date of grant.
The following is a summary of activity under the Stock Plan and all former
stock option plans for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ------------ --------------
<S> <C> <C> <C>
Outstanding at beginning of year....................................... 727,500 601,713 790,018
Granted during year.................................................... -- 727,500 75,000
Exercised or terminated during year.................................... -- (601,713) (263,305)
----------- ------------ --------------
Outstanding at end of year............................................. 727,500 727,500 601,713
----------- ------------ --------------
----------- ------------ --------------
Exercisable at end of year............................................. 145,500 -- 389,473
----------- ------------ --------------
----------- ------------ --------------
Per share price of exercisable options................................. $ 1.125 $ -- $ 1.63-$6.75
----------- ------------ --------------
----------- ------------ --------------
Per share price of grants during year.................................. $ -- $ 1.125 $ 1.63
----------- ------------ --------------
----------- ------------ --------------
Per share price of options exercised during year....................... $ none $ none $ none
----------- ------------ --------------
----------- ------------ --------------
</TABLE>
The Company instituted an Annual Incentive Compensation Plan ("Compensation
Plan") in 1994. The purpose of the Compensation Plan is to provide annual
incentive compensation to those officers and key employees who contribute
significantly to the growth and success of the Company; to attract and retain
individuals of outstanding ability; and to align the interests of those who hold
positions of major responsibility in the Company with the interests of Company
stockholders.
The Compensation Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee"). The Committee approves or modifies, as
appropriate, the recommendations of the Chief Executive Officer regarding
participants, size of awards, performance criteria and the recommended
performance targets. These recommendations are subject to the final approval of
the full Board of Directors. The Company paid approximately $492,000 in
incentive compensation in February 1995 accrued under the 1994 Compensation
Plan.
The Company maintains an employee savings plan ("Savings Plan") under
Section 401(k) of the Internal Revenue Code, which is available to all
employees who meet certain requirements. Under the Savings Plan, the
Company matched 100% of employees' contributions up to five percent (5%)
of the participant's compensation through 1993.
The Savings Plan was amended effective January 1, 1994, whereby the Company
matches 20% of the employees' contributions up to a maximum of five percent
(5%) of the participant's compensation. The Company may, at its discretion,
increase the matching percentage at year end and may match in New Common Stock
or cash. In February 1995, the Board of Directors voted to match 1994 contribu-
tions in cash and did not increase the matching percentage. The Company
recorded expense of $33,000, $250,000 and $193,000 for 1994, 1993 and 1992,
respectively, for its matching contribution.
The Company currently provides no post-employment benefits
26
<PAGE>
9. SEGMENT INFORMATION
Segment data as of and for the years ended December 31, 1994, 1993 and 1992,
follows:
<TABLE>
<CAPTION>
CORPORATE
GAS PIPELINE GAS PROCESSING GENERAL AND
OPERATIONS OPERATIONS ADMINISTRATIVE COMBINED
---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
1994:
Revenue from unaffiliated sources......... $ 68,564,000 $ 37,842,000 $ -- $ 106,406,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Cost of sales............................. 63,326,000 27,671,000 -- 90,997,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Depreciation and amortization............. 729,000 1,814,000 190,000 2,733,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Operating earnings (loss)................. 1,703,000 2,408,000 (2,660,000) 1,451,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Identifiable assets....................... 15,336,000 20,013,000 4,954,000 40,303,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Capital expenditures...................... 122,000 3,618,000 85,000 3,825,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
1993:
Revenue from unaffiliated sources......... $ 114,722,000 $ 100,903,000 $ -- $ 215,625,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Cost of sales............................. 105,400,000 88,949,000 -- 194,349,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Depreciation and amortization............. 4,281,000 1,976,000 194,000 6,451,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Operating earnings (loss)................. 285,000 (1,134,000) (3,569,000) (4,418,000)
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Identifiable assets....................... 16,554,000 25,383,000 4,509,000 46,446,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Capital expenditures...................... 1,913,000 1,800,000 29,000 3,742,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
1992:
Revenue from unaffiliated sources......... $ 120,978,000 $ 123,718,000 $ -- $ 244,696,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Cost of sales............................. 107,045,000 109,191,000 -- 216,236,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Depreciation and amortization............. 5,231,000 1,953,000 310,000 7,494,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Operating earnings (loss)................. 3,165,000 313,000 (4,477,000) (999,000)
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Identifiable assets....................... 75,649,000 30,294,000 8,606,000 114,549,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
Capital expenditures...................... 1,529,000 1,566,000 65,000 3,160,000
---------------- ---------------- -------------- ----------------
---------------- ---------------- -------------- ----------------
</TABLE>
27
<PAGE>
The Company believes that the loss of any single customer would not have a
material effect on the Company's financial statements. There were no customers
in 1992 that accounted for over 10% of consolidated revenues. Information
regarding sales to major customers by segment for the years ended December 31,
1994 and 1993 is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
GAS PIPELINE GAS PROCESSING CONSOLIDATED
OPERATIONS OPERATIONS REVENUES
-------------- ------------------- ---------------
<S> <C> <C> <C>
1994 Georgia Pacific........................... $ 14,631,000 -- 14%
1993 Georgia Pacific........................... $ 24,810,000 -- 12%
</TABLE>
10. SUBSEQUENT EVENTS
The Company purchased the Willow Springs System from Bayou South, effective
January 1, 1995. These systems are located in Gregg and Harrison Counties,
Texas. The systems consist of 65 miles of pipeline and have a capacity of
approximately 70 MMCFD.
In conjunction with this purchase, the Company amended its Senior Loan.
Under the amendment, the Company increased its borrowings by $4,000,000. The
additional principal is payable over five years in equal monthly installments
under the same terms as the original agreement. The amendment also provides for
incremental mandatory principal payments if certain throughput levels are
maintained.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Refer to the Company's Form 8-K dated May 13, 1994, which discusses the
change in the Company's accountants for the year ended December 31, 1994.
28
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this Item with respect to the directors is set
forth under "Election of Directors" in the Proxy Statement for the 1995 Annual
meeting of Stockholders filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, and is incorporated herein by reference.
The executive officers of the Registrant as of March 3, 1995, were as follows:
<TABLE>
<CAPTION>
NAME (AGE) POSITIONS, OFFICES WITH REGISTRANT AND EXPERIENCE
- ------------------------------- ------------------------------------------------------------------------------
<S> <C>
Ray C. Davis (53) Chairman of the Board and Chief Executive Officer of the Company since 1993;
President Capstone Capital Corp. since 1992; Chairman Capstone Partners, Inc.
1988-1994; Director and General Partner of Hydro Environmental Services, Inc.,
1989 to 1992; CEO of Healthco International, Inc., 1991 to 1992; Chairman of
HPSC, Inc., 1991 to 1992.
Kelcy L. Warren (39) President and Chief Operating Officer of the Company since 1993; President and
Chief Operating Officer, Endevco, Inc., 1990 to 1992; Executive Vice
President, Endevco, Inc., 1989 to 1990.
Robert L. Cavnar (41) Senior Vice President, Chief Financial Officer and Treasurer of the Company
since 1993; Vice President, Chief Financial Officer and Treasurer, Mountain
Gas Resources, Inc., 1990 to 1993; Manager Corporate Finance, Presidio Oil Company,
1989 to 1990;
Jim S. Holotik (42) Vice President of the Company since 1993; Vice President, Endevco Oil and Gas
Company and Endevco Pipeline Company since 1990.
Kelly J. Jameson (30) Vice President, Secretary and General Counsel of the Company since 1993; Vice
President and General Counsel, Odin Corporation, 1991 to 1993.
Richard W. Piacenti (40) Vice President and Controller of the Company since 1993; Controller of the Company,
1991 to 1993; Manager Gas Accounting of the Company, 1988 to 1991.
William P. Williams (57) Vice President of the Company since 1988.
</TABLE>
The above named persons bear no family relationship to each other. The officers
serve at the pleasure of the Board.
ITEMS 11, 12, AND 13.
Information called for in these items is set forth in the Company's
definitive Proxy Statement to be filed with the Commission on or before April
30, 1995, pursuant to Regulation 14A and is incorporated herein by reference.
29
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Consolidated Financial Statements.
Cornerstone Natural Gas, Inc. and Subsidiaries.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Arthur Andersen LLP, Independent Public Accountants.................................. 14
Report of Ernst & Young LLP, Independent Public Accountants.................................... 15
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1993 and 1992..... 16
Consolidated Balance Sheets at December 31, 1994 and 1993...................................... 17
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992..... 18
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31,
1994, 1993 and 1992.......................................................................... 19
Notes to Consolidated Financial Statements..................................................... 20-28
</TABLE>
(2) Consolidated Financial Statement Schedules.
No schedules have been included because they are not applicable or the
required information is shown in the consolidated financial statements or
notes thereto.
(3) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
- ---------- ---------------------------------------------------------------------------------------------------
<C> <S>
*3.1 By-Laws, as Amended and Restated August 9, 1994, currently in effect.
3.2 Restated Certificate of Incorporation of Cornerstone Natural Gas, Inc. (incorporated by reference
to Exhibit 2 filed January 10, 1994, Form 8-A).
+10.1 Cornerstone Natural Gas, Inc. 1993 Long-Term Incentive Plan (incorporated by reference to Exhibit
10.1 to December 31, 1993, Form 10-K).
+10.2 Amended and Restated Cornerstone Natural Gas, Inc. Employee Savings Plan effective July 1, 1991
(incorporated by reference to Exhibit 10.2 to December 31, 1993, Form 10-K).
*+10.3 Amended and Restated Cornerstone Natural Gas, Inc. Employee Savings Plan adopting the Bank of
Oklahoma, N.A. Defined Contribution Master Plan as of January 1, 1989.
10.4 Endevco, Inc. Employee Savings Trust (incorporated by reference to Exhibit 10.3 to Registration
Statement No. 2-85830).
10.5 Amendment Number 1 to the Endevco, Inc. Employee Savings Trust (incorporated by reference to
Exhibit 10.6 to December 31, 1991, Form 10-K).
10.6 Amendment Number 2 to the Endevco, Inc. Employee Savings Trust (incorporated by reference to
Exhibit 10.7 to December 31, 1991, Form 10-K).
10.7 Lease Agreement by and between Endevco, Inc. as Tenant and 8080 Central, Ltd. as Landlord, dated
January 11, l985, (incorporated by reference to Exhibit 10.65 to March 31, 1985, Form 10-Q).
</TABLE>
30
<PAGE>
<TABLE>
<C> <S>
10.8 Amendment to the Lease Agreement by and between Endevco, Inc. as Tenant and 8080 Central, Ltd. as
Landlord, dated April 24, l985, (incorporated by reference to Exhibit 10.14 to December 31, 1991,
Form 10-K).
10.9 Amendment to Lease Agreement by and between Endevco, Inc. as Tenant and 8080 Central, Ltd. as
Landlord, dated October 7, l985, (incorporated by reference to Exhibit 10.15 to December 31, 1991,
Form 10-K).
10.10 Amendment to Lease Agreement by and between Endevco, Inc. as Tenant and 8080 Central, Ltd. as
Landlord, dated October 13, l987, (incorporated by reference to Exhibit 10.16 to December 31, 1991,
Form 10-K).
10.11 Amendment to Lease Agreement by and between Endevco, Inc. as Tenant and 8080 Central, Ltd. as
Landlord, dated October 22, l988, (incorporated by reference to Exhibit 10.17 to December 31, 1991,
Form 10-K).
10.12 Modification and Ratification of Lease Agreement by and between Endevco, Inc. as Tenant and The
Prudential Insurance Company of America, as Landlord, dated February 24, l993, (incorporated by
reference to Exhibit 10.18 to December 31, 1992, Form 10-K).
10.13 Loan Agreement dated as of December 16, l988, by and between Dubach Gas Company and Endevco, Inc.
(incorporated by reference to Exhibit 2 to December 16, 1988, Form 8-K).
10.14 General Partnership Agreement of Mountain Creek Joint Venture dated as of March 7, l989, by and
between Western Natural Gas Company and Cornerstone Natural Gas Company (incorporated by reference
to Exhibit 10.79 to December 31, 1989, Form 10-K).
10.15 Pipeline Construction and Operating Agreement dated March 7, l989, by and between Cornerstone
Natural Gas Company and Mountain Creek Joint Venture (incorporated by reference to Exhibit 10.80 to
December 31, 1989, Form 10-K).
10.16 Loan Agreement dated September 28, l989, by and between Mountain Creek Joint Venture and Chrysler
Capital Corporation (incorporated by reference to Exhibit 10.82 to December 31, 1989, Form 10-K).
10.17 Participation Agreement dated July 17, l991, by and between Endevco and First Reserve Gas Storage
Inc. (incorporated by reference to Exhibit 10.88 to December 31,1991, Form 10-K).
10.18 Letter Agreement effective May 17, 1993, by and between Energy Transfer Corporation and Cornerstone
Natural Gas, Inc. (incorporated by reference to Exhibit 10.39 to December 31, 1993, Form 10-K).
10.19 Stock Purchase Agreement dated March 20, l993, by and between Endevco, Inc., and Ray Davis, Trustee
(incorporated by reference to Exhibit 10.136 to December 31, 1992, Form 10-K).
10.20 First Amended Stock Purchase Agreement dated May 28, 1993, by and between Endevco, Inc., and Ray
Davis, Trustee (incorporated by reference to Exhibit 10.1 to June 17, 1993, Form 8-K).
10.21 Form and Schedule of Warrants to Purchase Common Stock of Cornerstone Natural Gas, Inc.
(incorporated by reference to Exhibit 10.42 to December 31, 1993, Form 10-K).
10.22 Form and Schedule of Promissory Note dated November 2, 1993, between Cornerstone Natural Gas, Inc.
and Preferred Stockholders (incorporated by reference to Exhibit 10.43 to December 31, 1993, Form
10-K).
</TABLE>
31
<PAGE>
<TABLE>
<C> <S>
10.23 Revolving Credit and Term Loan Agreement between Cornerstone Natural Gas, Inc. et al, and Bank of
Oklahoma, National Association dated November 2, 1993, (incorporated by reference to Exhibit 10.3
to November 2, 1993, Form 8-K).
*10.24 First Amendment to Revolving Credit and Term Loan Agreement between Cornerstone Natural Gas, Inc.,
et al, and Bank of Oklahoma, National Association dated September 30, 1994.
*10.25 Second Amendment to Revolving Credit and Term Loan Agreement between Cornerstone Natural Gas, Inc.,
et al, and Bank of Oklahoma, National Association dated January 4, 1995.
10.26 Joint Venture Agreement between Cornerstone Natural Gas, Inc. and Merit Natural Gas Company dated
October 28, 1993 (incorporated by reference to Exhibit 10.45 to December 31, 1993, Form 10-K).
10.27 Consulting Agreement between Endevco, Inc. and James W. Bryant dated June 4, 1993 (incorporated by
reference to Exhibit 10.48 to December 31, 1993, Form 10-K).
*21.1 List of Subsidiaries.
*27.1 Financial Data Schedule.
</TABLE>
- ------------------------
*Filed Herewith.
+Denotes Management contract or compensatory plan
(b) Reports on Form 8-K.
(1) "Item 5. Other Important Events." was reported in a Current Report on
Form 8-K filed on January 20, 1995.
32
<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.
CORNERSTONE NATURAL GAS, INC.
By:/s/ RAY C. DAVIS
---------------------------------------
Ray C. Davis
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Date: March 14, l995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
CAPACITY IN
SIGNATURES WHICH SIGNED
- ------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
/s/ RAY C. DAVIS Chairman of the Board of Directors and Chief Executive
- ------------------------------- Officer
(Ray C. Davis) March 14, 1995
/s/ KELCY L. WARREN President, Chief Operating Officer and Director
- -------------------------------
(Kelcy L. Warren) March 14, 1995
/s/ ROBERT L. CAVNAR Senior Vice President and Chief Financial Officer
- -------------------------------
(Robert L. Cavnar) March 14, 1995
/s/ RICHARD W. PIACENTI Vice President and Controller
- -------------------------------
(Richard W. Piacenti) March 14, 1995
/s/ RICHARD D. BRANNON Director
- -------------------------------
(Richard D. Brannon) March 14, 1995
/s/ JAMES W. BRYANT Director
- -------------------------------
(James W. Bryant) March 14, 1995
/s/ TED COLLINS, JR. Director
- -------------------------------
(Ted Collins, Jr.) March 14, 1995
/s/ BEN H. COOK Director
- -------------------------------
(Ben H. Cook) March 14, 1995
/s/SCOTT G. HEAPE Director
- -------------------------------
(Scott G. Heape) March 14, 1995
/s/ DAVID S. HUNT Director
- -------------------------------
(David S. Hunt) March 14, 1995
/s/ W.J. MURRAY, JR. Director
- -------------------------------
(W.J. Murray, Jr.) March 14, 1995
/s/ C. ROBERT SLEDGE Director
- -------------------------------
(C. Robert Sledge) March 14, 1995
</TABLE>
33
<PAGE>
EXHIBIT 3.1
CORNERSTONE NATURAL GAS, INC.
BY-LAWS,
AMENDED AND RESTATED: AUGUST 9, 1994
ARTICLE 1: OFFICES
1.01 REGISTERED OFFICE. The registered office of the Corporation in the
State of Delaware and the Corporation's registered agent at such office shall be
such place and person as may from time to time be determined by the Board of
Directors of the Corporation and reflected in an appropriate filing with the
Secretary of State of Delaware.
1.02 OTHER OFFICES. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE 2: STOCKHOLDERS
2.01 PLACE OF MEETINGS. All meetings of the Stockholders shall be held
at such time and place, within or without the State of Delaware, as may be
designated for that purpose from time to time by the Board of Directors or the
President.
2.02 ANNUAL MEETING. An Annual Meeting of the Stockholders shall be held
each year on a day during the month of May, to be selected by the Board of
Directors. At the meeting, the Stockholders shall elect Directors and transact
such other business as may be properly brought before the meeting.
2.03 VOTING LIST. At least ten days before each meeting of Stockholders,
a complete list of the Stockholders entitled to vote at the meeting, arranged in
alphabetical order, with the address of each and the number of voting shares
held by each, shall be prepared by the officer or agent having charge of the
stock transfer books. The list, for a period of ten days prior to the meeting,
shall be kept on file at the registered office of the Corporation and shall be
subject to inspection by any Stockholder at any time during usual business
hours. The list shall also be produced and kept open at the time and place of
the meeting during the whole time thereof, and shall be subject to the
inspection of any Stockholder during the whole time of the meeting.
2.04 SPECIAL MEETINGS. Special meetings of the Stockholders, for any
purpose or purposes, unless otherwise prescribed by statute, the Certificate of
Incorporation, any resolution adopted by the Board of Directors providing for
the issuance of any class or series of stock having a preference over the Common
Stock of the Corporation as to dividends or redemption or upon liquidation or
winding up of the Corporation or these By-Laws, may be called by the President,
-1-
<PAGE>
Chairman of the Board or the Board of Directors. Business transacted at a
special meeting shall be confined to the subjects stated in the notice of the
meeting.
2.05 NOTICE. Written or printed notice stating the place, day and hour
of the meeting and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than sixty (60) days before the date of the meeting, either personally or by
mail, by or at the direction of the President, the Secretary or the office or
person calling the meeting, to each Stockholder of record entitled to vote at
the meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the Stockholder at his address
as it appears on the stock transfer books of the Corporation, with postage
thereon prepaid.
2.06 QUORUM. The holders of a majority of the shares issued and
outstanding entitled to vote, present in person or represented by proxy, shall
be requisite and shall constitute a quorum at all meetings of the Stockholders
for the transaction of business except as otherwise provided by statute, the
Certificate of Incorporation, any resolution adopted by the Board of Directors
providing for the issuance of any cash or series of stock having a preference
over the Common Stock of the Corporation as to dividends or redemption or upon
liquidation or winding up of the Corporation or these By-Laws. If, however,
such quorum shall not be present or represented at any meeting of the
Stockholders, the Stockholders entitled to vote, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time
until a quorum shall be present or represented. Notice of adjournment of a
meeting of Stockholders need not be given if the time and place to which it is
adjourned are announced at such meeting, unless the adjournment is for more than
30 days or, after adjournment, a new record date is fixed for the adjourned
meeting. At any such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
2.07 MAJORITY VOTE; WITHDRAWAL OF QUORUM. When a quorum is present at any
meeting, the vote of the holders of a majority of the shares having voting power
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one upon which, by express provision
of the statutes, the Certificate of Incorporation, any resolution or resolutions
adopted by the Board of Directors providing for the issuance of any class or
series of stock having a preference over the Common Stock of the Corporation as
to dividends or redemption or upon liquidation or winding up of the Corporation
or these By-Laws, a different vote is required, in which case such express
provision shall govern and control the decision of such question. The
Stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
Stockholders to leave less than a quorum.
2.08 METHOD OF VOTING. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, or the resolution or
resolutions adopted by the Board of Directors providing for the issuance of any
class or series of stock having a preference over the Common Stock of the
Corporation as to dividends or redemption or upon liquidation or winding up of
the Corporation, each Stockholder of record of any class or series of stock
having a preference over the Common Stock of the Corporation as to dividends or
redemption or upon the liquidation or winding up of the Corporation shall be
entitled at each meeting of Stockholders to such number of votes for each share
of such stock as may be fixed in the Certificate of Incorporation or in the
-2-
<PAGE>
resolution or resolutions adopted by the Board of Directors providing for the
issuance of such stock, and each Stockholder of record Stockholders is entitled
to one vote for each share of such stock, in each case, registered in such
Stockholder's name on the books of the Corporation:
(A) on the date fixed pursuant to Section 2.09 of Article 2 of
these By-Laws as a record date for the determination of Stockholders
entitled to notice of and to vote at meeting; or
(B) if no such record date shall have been so fixed, then at the
close of business on the next day preceding the date on which notice of
such meeting is given, or, if notice is waived, at the close of business on
the next day preceding the day on which the meeting is held.
At any meeting of the Stockholders, every Stockholder having the right to
vote may vote either in person, or by proxy executed in writing by the
Stockholder or by his duly authorized attorney-in-fact. A proxy shall become
invalid after three (3) years after the date of its execution, unless otherwise
provided in the proxy. Each proxy shall be filed with the Secretary of the
Corporation prior to or at the time of the meeting. Voting for Directors shall
be by plurality vote.
2.09 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order
that the Corporation may determine the Stockholders entitled to notice of or to
vote at any meeting of Stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 60 nor less than 10 days
before the date of such meeting. A determination of Stockholders entitled to
notice of or to vote at a meeting provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
2.10 WAIVER OF NOTICE. Any notice required by law or these By-Laws may
be waived by the person entitled to the notice by the execution of a written
waiver of such notice or by appearing at any meeting of Stockholders without
protest of or objection to the lack of notice to such person.
2.11 CONDUCT OF MEETING. At every meeting of the Stockholders, the
Chairman of the Board of Directors, the President, or in their absence, the Vice
President designated by the Chairman of the Board or the President or, in the
absence of such designation, a Chairman (who shall be one of the Vice
Presidents, if any is present) chosen by a majority in interest of the
Stockholders of the Corporation present in person or by proxy and entitled to
vote, shall act as Chairman. The Secretary of the Corporation, or in his
absence, an Assistant Secretary, shall act as Secretary of all meetings of the
Stockholders. In the absence at such meeting of the Secretary or Assistant
Secretary, the Chairman of the meeting may appoint another person to act as
Secretary of the meeting. The Chairman of the meeting shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts and things as are necessary or desirable for the proper conduct of the
meeting, including, without limitation, the establishment of procedures for the
maintenance of order and safety, limitations and the time allotted to questions
or comments on the affairs of the Corporation, restrictions on entry to such
meeting after the time prescribed for the commencement thereof, and the opening
and closing of the voting polls.
-3-
<PAGE>
2.12 INSPECTORS. Either the Board of Directors or, in the absence of a
designation of inspectors by the Board, the Chairman of any meeting of
Stockholders may, in its or such person's discretion, appoint two or more
inspectors to act at any meeting of Stockholders. Such inspectors shall perform
such duties as shall be specified by the Board or the Chairman of the meeting.
Inspectors need not be the Stockholders. No Director or nominee for the office
of Director shall be appointed such inspector.
ARTICLE 3: DIRECTORS
3.01 MANAGEMENT. The business and affairs of the Corporation shall be
managed by the Board of Directors who may exercise all such powers of the
Corporation and do all such lawful acts and things as are not (by statute or by
the Certificate of Incorporation or by these By-Laws) directed or required to be
exercised or done by the Stockholders. The Directors shall act only as a Board
and an individual Director shall have no power as such.
3.02 NUMBER; QUALIFICATION. Subject to any increases in the number of
Directors constituting the whole Board of Directors necessary to permit the
election of any directors by the holders of any class or series of stock having
a preference over the Common Stock of the Corporation as to dividends or
redemption or upon liquidation or winding up of the Corporation upon the
happening of any specified event described in the resolution or resolutions
adopted by the Board of Directors providing for the issuance of such class or
series. The Board of Directors shall consist of not less than seven (7) and not
more than twelve (12) Directors, none of whom need be Stockholders or residents
of any particular state. Subject to the foregoing, the exact number of
Directors sitting on the Board of Directors at any particular time shall be
established by a resolution of the Board of Directors.
3.03 CHANGES IN NUMBER. The number of Directors may be increased to a
number greater than twelve (12) or decreased to a number less than seven (7)
from time to time by amendment to the By-Laws but no decrease shall have the
effect of shortening the term of any incumbent Director. A Directorship to be
filled by reason of an increase in the number of Directors may be filled by the
Board of Directors for a term of office continuing until the next election of
one or more Directors by the Stockholders, or may be filled by election at any
annual or special meeting of the Stockholders called for that purpose.
Notwithstanding the foregoing provisions of this Section 3.03, if, at any time,
the holders of any class or series of stock having a preference over the Common
Stock of the Corporation as to dividends or redemption or upon liquidation or
winding up of the Corporation shall have a right to elect one or more Directors
of the Corporation as a result of the Corporation's failure to pay any required
divided or redemption payment or for any other reason, the number of Directors
constituting the whole Board of Directors shall be, without further action by
the Board, increased by such number of Directors which such holders shall be
entitled to elect and the terms and conditions under which such Directors shall
be elected shall, subject to the provisions of the Certificate of Incorporation
of the Corporation, be as set forth in the resolution or resolutions adopted by
the Board of Directors providing for the issuance of such stock.
3.04 ELECTION AND TERM OF OFFICE. Subject to the rights of the holders of
any class or series of stock having a preference over the Common Stock of the
Corporation as to dividends or redemption or upon liquidation or winding up of
the Corporation to elect one or more Directors of
-4-
<PAGE>
the Corporation in the manner set forth in the resolution or resolutions adopted
by the Board of Directors providing for the issuance of such stock, Directors
shall be elected annually by the Stockholders, except as provided in these By-
Laws at Section 3.03 and Section 3.05. Except for Directors elected by a class
or series of stock having a preference over the Common Stock of the Corporation
as to dividends or redemption or upon liquidation or winding up of the
Corporation, who shall have such terms of office as are provided in the
resolution or resolutions adopted by the Board of Directors providing for the
issuance of such stock, each Director shall hold office until his respective
successor is elected, or until his death, resignation or removal.
3.05 REMOVAL. Except for the removal of Directors who are elected by the
holders of a class or series of stock having a preference over the Common Stock
of the Corporation as to dividends or redemption or upon liquidation or winding
up of the Corporation, who shall, except as provided by law, only be removed
from office in the manner and for the reasons set forth in the resolution or
resolutions adopted by the Board of Directors providing for the issuance of such
class or series of stock, any or all of the Directors may be removed, either for
or without cause, at any meeting of Stockholders called expressly for that
purpose, by the affirmative vote, in person or by proxy, of the holders of a
majority of the shares then entitled to vote at an election of the Directors.
3.06 VACANCIES. Except for the filling of a vacancy of a Director elected
by the holders of shares of a class or series of stock having a preference over
the Common Stock of the Corporation as to dividends or redemption or upon
liquidation or winding up of the Corporation, which vacancy shall be filled in
the manner set forth in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such stock, any vacancy occurring in the
Board of Directors (by death, resignation, removal or otherwise) may be filled
by an affirmative vote of a majority of the remaining Directors though less than
a quorum of the Board of Directors. Such Director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office.
3.07 NOMINATION AND ELECTION OF DIRECTORS. Nominations for the election
of Directors may be made by the Board of Directors or by any Stockholder
entitled to vote for the election of Directors at a meeting may nominate persons
for election as Directors only if written notice as such Stockholder's intent to
make such nomination as given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not later than (i)
with respect to an election to be held at an annual meeting of Stockholders, 45
days in advance of such meeting, and (ii) with respect to an election to be held
at a special meeting of Stockholders for the election of Directors, at the close
of business on the fifth day following the day on which notice of such meeting
is first given to Stockholders. Each such notice shall set forth: (a) the name
and address of the Stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the Stockholder is
a holder of record of stock of the Corporation and entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understanding between the Stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the Stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would have
been required to be included in a Proxy Statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated,
or intended to be nominated, by the Board of Directors; and (e) the consent of
each nominee to serve as a Director of the Corporation if so elected. The
Chairman of the meeting may refuse to acknowledge the
-5-
<PAGE>
nomination of any person not made in accordance with the foregoing procedure.
Directors shall be elected by plurality vote. Notwithstanding the provisions of
this Section 3.07, if, at any time, the holders of any class or series of stock
having a preference over the Common Stock of the Corporation as to dividends or
redemption or upon liquidation or winding up of the Corporation shall have a
right to elect one or more Directors of the Corporation as a result of the
Corporation's failure to pay any required dividend or redemption payment or for
any other reason, the terms and conditions under which such Directors shall be
nominated and elected shall, subject to the provisions of the Certificate of
Incorporation of the Corporation, be as set forth in the resolution or
resolutions adopted by the Board of Directors providing for the issuance of such
stock. If such resolution or resolutions does not provide for a mechanism for
the nomination or election of Directors by the holders of such a class or series
of stock, such Directors shall be nominated and elected in the manner provided
in these By-Laws at Section 3.07.
3.08 PLACE OF MEETING. All meetings of the Board of Directors may be
held at the principal offices of the Corporation or at such place either within
or without the State of Delaware as may be designated from time to time by the
Board of Directors.
3.09 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held without notice immediately following each annual meeting of Stockholders of
this Corporation and at such time and place as shall from time to time be
determined by the Board of Directors. Notice of regular meetings need not be
given.
3.10 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called at any time by the President or any Director on three (3) days notice to
each Director, either personally or by mail or by telegram. Except as otherwise
expressly provided by statute, or by the Certificate of Incorporation, or by
these By-Laws, neither the business to be transacted at, nor the purpose of, any
special meeting need be specified in a notice or waiver of notice.
3.11 QUORUM; MAJORITY VOTE. At all meetings of the Board of Directors, a
majority of the number of Directors fixed by these By-Laws shall constitute a
quorum for the transaction of business. The act of a majority of the Directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors, except as otherwise specifically provided by statute, the
Certificate of Incorporation or by these By-Laws. If a quorum is not present at
a meeting of the Board of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
3.12 COMPENSATION. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director.
3.13 CONDUCT OF MEETINGS. The Board of Directors shall keep regular
minutes of its proceedings. The Chairman of the Board, or in his absence, any
Director selected by the Directors present, shall preside at meetings of the
Board of Directors. The Secretary of the Corporation, or in his absence, any
Director selected by the Directors present, shall act as Secretary at meetings
of the Board of Directors. The minutes shall be placed in the minute book of
the Corporation.
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3.14 ACTION WITHOUT MEETING. Any action required or permitted to be
taken at a meeting of the Board of Directors, or any committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or of any such
committee. Such consent shall have the same force and effect as a unanimous
vote at a meeting. The signed consent, or a signed copy, shall be placed in the
minute book.
3.15 PARTICIPATION IN MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any
one or more members of the Board of Directors, or any committee thereof, may
participate in any meeting of the Board or of any such committee by means of
conference, telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in the meeting shall constitute presence in person at such meeting.
ARTICLE 4: NOTICE
4.01 METHOD. Whenever the statute, Certificate of Incorporation or these
By-Laws, requires notice to be given to a Director or Stockholder, and no
provision is made as to how the notice shall be given, it shall not be construed
to mean personal notice, but any such notice may be given (a) in writing, by
mail, postage prepaid, addressed to the Director or Stockholder at the address
appearing on the books of the Corporation, or (b) in any other method permitted
by law. Any notice required or permitted to be given by mail shall be deemed
given at the time when the same is thus deposited in the United States mail.
4.02 WAIVER. Whenever, by statute, Certificate of Incorporation or these
By-Laws, notice is required to be given to a Stockholder or Director, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated in such notice, shall be equivalent to
the giving of such notice. Attendance of a Director or Stockholder at a meeting
shall constitute a waiver of notice of such meeting, except where a
Director or Stockholder attends for the express purpose of objection to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE 5: OFFICERS AND AGENTS
5.01 NUMBER; QUALIFICATION; ELECTION; TERM.
(A) The Corporation shall have:
(1) A Chief Executive Officer, a President, a Vice
President, a Secretary and Treasurer.
(2) Such other officers (including a Chairman of the Board
and additional Vice Presidents) and assistant officers and
agents as the Board of Directors may deem necessary.
(B) No officer or agent need be a Stockholder, a Director or a
resident of Delaware.
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(C) Officers shall be elected by the Board of Directors on the
expiration of an officer's term or whenever a vacancy exists. Officers may
be elected by the Board at any meeting.
(D) Unless otherwise specified by the Board at the time of
election or appointment, or in an employment contract approved by the
Board, each officer's and agent's term shall end at the first meeting of
the Board of Directors after the next annual meeting of Stockholders. He
shall serve until the end of his term or, if earlier, his death,
resignation or removal.
(E) Any two or more offices may be held by the same person.
5.02 REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever, in its judgment,
the best interests of the Corporation will be served thereby or by any committee
or superior officer upon whom such power may be conferred by the Board. Such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
5.03 VACANCIES. If the office of the Chief Executive Officer, President,
Vice President, Secretary, Treasurer, Assistant Secretary (if any), or Assistant
Treasurer (if any) become vacant by reason of death, resignation, removal, or
otherwise, the Board of Directors shall elect a successor who shall hold office
for the unexpired term, and until his successor is elected.
5.04 AUTHORITY. Officers and agents shall have such authority and
perform such duties in the management of the Corporation as are generally
ascribed to the respective offices provided in these By-Laws, or as may be
determined by resolution of the Board of Directors not inconsistent with these
By-Laws.
5.05 COMPENSATION. The compensation of officers and agents shall be
fixed from time to time by resolution of the Board of Directors.
5.06 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer as designated
by Board of Directors and may either be the Chairman of the Board or the
President, shall in general supervise and control all business and affairs of
the Corporation subject to the control of the Board of Directors. The Chief
Executive Officer may agree upon and execute any deeds, mortgages, bonds,
contracts, and other obligations in the name of the Corporation. In general,
the Chief Executive Officer shall perform all duties incident to the office of
Chief Executive Officer and such other duties as may be prescribed by the Board
of Directors from time to time.
5.07 PRESIDENT. In the absence of the Chief Executive Officer or in the
event of his death, inability, or refusal to act, the President shall perform
the duties of the Chief Executive Officer, and when so acting, shall have the
same powers of and be subject to all the restrictions upon the Chief Executive
Officer. In general he shall perform all the duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time.
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5.08 SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. The Senior Vice
President and Chief Financial Officer shall have responsibility for development
and administration of the corporation's financial plans and all financial
arrangements, its insurance programs, its cash deposits and short term
investments, its accounting policies, its federal and state tax returns. Such
officer shall also be responsible for the corporation's internal control
procedures and for its relationship with the financial community. Such Officer
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe or as the Chairman or President may
from time to time delegate. The Senior Vice President, unless otherwise
determined by the Board of Directors, shall, in the absence or disability of the
President, perform the duties and have the authority and exercise the powers of
the President.
5.09 VICE PRESIDENT. The Vice President's shall perform such duties and
have such authority and powers as the Board of Directors may from time to time
prescribe or as the Chairman or the President may from time to time delegate.
5.10 SECRETARY. The Secretary shall:
(A) Attend all meetings of the Board of Directors and all
meetings of the Stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose.
(B) Give, or cause to be given, notice of all meetings of the
Stockholders and special meetings of the Board of Directors.
(C) Keep in safe custody the seal of the Corporation (if any)
and, when authorized by the Board of Directors, affix the same to any
instrument requiring it and, when so affixed, it shall be attested by his
signature or by the signature of the treasurer or an Assistant Secretary.
(D) Be under the supervision of the Chairman or President and
perform such other duties and have such other authority and powers as the
Board of Directors may from time to time prescribe or as the President may
from time to time delegate.
(E) Keep, or cause to be kept, a share register showing the names
of the Stockholders and their addresses, the number, date of issue and
class of shares represented by each outstanding share certificate; and the
number and date of cancellation of each certificate surrendered for
cancellation.
5.11 ASSISTANT SECRETARY. The assistant secretaries in the order of
their seniority, unless otherwise determined by the Board of Directors, shall,
in the absence or disability of the Secretary, perform the duties and have the
authority and exercise the powers of the Secretary. They shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe or as the Chairman or President may from time to time
delegate.
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5.12 TREASURER. The treasurer shall:
(A) Have the custody of the corporate funds and securities and
shall keep full and accurate account of receipts and disbursements of the
Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors.
(B) Disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Chairman, President and Directors, at the regular
meetings of the Board, or whenever they may require it, an account of all
his transactions as treasurer and of the financial condition of the
Corporation.
(C) If required by the Board of Directors, give the Corporation a
bond in such form, in such sum, and with surety or sureties as shall be
satisfactory to the Board for the faithful performance of the duties of his
office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
(D) Perform such other duties and have such other authority and
powers as the Board of Directors may from time to time prescribe or as the
Chairman or President may from time to time delegate.
5.13 ASSISTANT TREASURER. The assistant treasurers in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the Treasurer, perform the duties and have the
authority and exercise the powers of the treasurer. They shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe or the Chairman or President may from time to time delegate.
ARTICLE 6: EXECUTION OF INSTRUMENTS
6.01 EXECUTION OF INSTRUMENTS. The Board of Directors may, in its
discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute any corporate instrument or
document, or to sign the corporate name without limitation, except where
otherwise provided by law, and such execution or signature shall be binding upon
the Corporation.
ARTICLE 7: CERTIFICATES AND STOCKHOLDERS
7.01 CERTIFICATES. Certificates in the form determined by the Board of
Directors shall be delivered representing all shares to which Stockholders are
entitled. Such certificates shall be consecutively numbered and shall be entered
in the books of the Corporation as they are issued. Each certificate shall
state on the face thereof the holder's name, the number and class of shares, the
par value of shares, or a statement that such shares are without par value, and
such other matters as may be required by law. Each certificate shall be signed
by the Chairman, Vice Chairman,
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President or any Vice President and the Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer, and may be sealed with the seal of the
Corporation or a facsimile thereof. Any or all such signatures may be
facsimiles if countersigned by a transfer agent or registrar. Although any
officer, transfer agent or registrar whose manual or facsimile signature is
affixed to such a certificate ceases to be such officer, transfer agent or
registrar before such certificate has been issued, it may nevertheless be issued
by the Corporation with the same affect as if such officer, transfer agent or
registrar were still such at the date of its issue.
7.02 ISSUANCE. Shares (both treasury and authorized but unissued) may be
issued for such consideration (not less than par value) and to such persons as
the Board of Directors may determine from time to time. Shares may not be
issued until the full amount of the consideration, fixed as provided by law, has
been received by the Corporation.
7.03 PAYMENT FOR SHARES.
(A) KIND. The consideration for the issuance of shares shall
consist of money paid, labor done (including services actually performed
for the Corporation), or property (tangible or intangible) actually
received. Neither promissory notes nor the promise of future services
shall constitute payment for shares.
(B) VALUATION. In the absence of fraud in the transaction, the
judgment of the Board of Directors as to the value of consideration
received shall be conclusive.
(C) EFFECT. When consideration, fixed as provided by law, has
been paid, the shares shall be deemed to have been issued and shall be
considered fully paid and nonassessable.
(D) ALLOCATION OF CONSIDERATION. The consideration received for
shares shall be allocated by the Board of Directors, in accordance with
law, between stated capital and capital surplus accounts.
7.04 SUBSCRIPTIONS. Unless otherwise provided in the subscription
agreement, subscriptions of shares, whether made before or after organization of
the Corporation, shall be paid in full at such time or in such installments and
at such times as shall be determined by the Board of Directors. Any call made
by the Board of Directors for payments on subscriptions shall be uniform as to
all shares of the same series, as the case may be in case of default in the
payment on any installment or call when payment is due as provided by law.
7.05 LIEN. For any indebtedness of a Stockholder to the Corporation, the
Corporation shall have a first and prior lien on all shares of its stock owned
by him and on all dividends or other distributions declared thereon.
7.06 LOST, STOLEN OR DESTROYED CERTIFICATES. Except as may otherwise be
agreed upon by the Corporation with any particular holder of shares of any class
or series of stock of the Corporation, the Corporation shall issue a new
certificate in place of any certificate for shares previously issued if the
registered owner of the certificate:
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(A) CLAIM. Makes proof in affidavit form that it has been lost,
destroyed or wrongfully taken; and
(B) TIMELY REQUEST. Requests for the issuance of a new
certificate before the Corporation has notice that the certificate has been
acquired by a purchaser for value in good faith and without notice of an
adverse claim; and
(C) BOND. Gives a bond in such form, and with such surety or
sureties, with fixed or open penalty, as the Corporation may direct, to
indemnify the Corporation (and its transfer agent and registrar, if any)
against any claim that may be made on account of the alleged loss,
destruction, or theft of the certificate; and
(D) OTHER REQUIREMENTS. Satisfies any other reasonable
requirements imposed by the Board of Directors.
When a certificate has been lost, apparently destroyed or wrongfully taken,
and the holder of record fails to notify the Corporation within a reasonable
time after he has notice of it, and the Corporation registers a transfer of the
shares represented by the certificates before receiving such notification, the
holder of record is precluded from making any claim against the Corporation for
the transfer or for a new certificate.
7.07 REGISTRATION OF TRANSFER. The Corporation shall register the
transfer of the certificate for shares presented to it for transfer if:
(A) ENDORSEMENT. The certificate is properly endorsed by the
registered owner or by his duly authorized attorney; and
(B) GUARANTY AND EFFECTIVENESS OF SIGNATURE. The signature of
such person has been guaranteed by a national banking association or member
of the New York Stock Exchange, and reasonable assurance is given that such
endorsement is effective; and
(C) ADVERSE CLAIMS. The Corporation has no notice of an adverse
claim or has discharged any duty to inquire into such a claim; and
(D) COLLECTION OF TAXES. Any applicable law relating to the
collection of taxes has been complied with.
7.08 REGISTERED OWNER. Prior to due presentment for registration of
transfer of a certificate for shares, the Corporation may treat the registered
owner as the person exclusively entitled to vote, to receive notices and
otherwise to exercise all the rights and powers of a Stockholder.
7.09 RESTRICTION ON TRANSFER. Any restrictions imposed by the
Corporation on the sale or other disposition of its shares and on the transfer
thereof must be copied at length or in summary form on the face, or so copied on
the back and referred to on the face, on each certificate representing shares to
which the restriction applies.
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ARTICLE 8. INDEMNIFICATION
8.01 THIRD PARTY ACTIONS. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation),
by reason of the fact that such person is or was a Director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceedings, had
reasonable cause to believe that his or her conduct was unlawful.
8.02 DERIVATIVE ACTIONS. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suite by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
Director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of Delaware or such
other court shall deem proper.
8.03 DETERMINATION OF INDEMNIFICATION. Any indemnification under Section
8.01 or 8.02 hereof (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in Section 8.01 or 8.02 hereof. Such determination shall be made (i) by
the Board of Directors by a majority vote of a quorum consisting of Directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
Directors so directs, by independent legal counsel in a written opinion, or
(iii) by the Stockholders.
8.04 RIGHT OF INDEMNIFICATION. Notwithstanding the other provisions of
this Article 8, to the extent that a Director, officer, employee or agent of the
Corporation has been successful on
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the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 8.01 or 8.02 hereof, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by such person in connection therewith.
8.05 RIGHT TO INDEMNIFICATION UPON APPLICATION; PROCEDURE OF APPLICATION;
ETC. Except as otherwise provided in the proviso to Section 8.02 hereof:
(A) Any indemnification under Section 8.01 or 8.02 hereof shall
be made no later than 45 days after receipt by the Corporation of the
written request of the Director, officer, employee or agent or former
Director, officer, employee or agent unless a determination is made within
said 45-day period in accordance with Section 8.03 hereof that such person
has not met the applicable standard of conduct set forth in Section 8.01 or
8.02 hereof.
(B) The right to indemnification under Section 8.01 or 8.02
hereof or advances under Section 8.06 hereof shall be enforceable by the
Director, officer, employee or agent or former Director, officer, employee
or agent in any court of competent jurisdiction. The burden of proving
that indemnification is not appropriate shall be on the Corporation.
Neither the absence of any prior determination that indemnification is
proper in the circumstances, nor a prior determination that indemnification
is not proper in the circumstances, shall be a defense to the action or
create a presumption that the Director, officer, employee or agent or
former Director, officer, employee or agent has not met the applicable
standard of conduct. The expenses (including attorney's fees and expenses)
incurred by the Director, officer, employee or agent or former Director,
officer, employee or agent in connection with successfully establishing his
right to indemnification, in whole or in part, in any such action (or in
any action or claim brought by him to recover under any insurance policy or
policies referred to in Section 8.09 hereof) shall also be indemnified by
the Corporation.
(C) If any person is entitled under any provision of this Article
8 to indemnification by the Corporation for some or a portion of expenses,
judgments, fines, penalties or amounts paid in settlement incurred by him,
but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify such person for the portion of such expenses,
judgments, fines, penalties and amounts to which he is entitled.
8.06 ADVANCEMENT OF EXPENSES. Expenses (including attorney's fees)
incurred in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding within 15 days after
request for such advance upon receipt of an undertaking by or on behalf of the
Director, officer, employee or agent to repay all amounts advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such person is not entitled to be indemnified by
the Corporation as authorized in this Article 8 or otherwise.
8.07 INDEMNIFICATION AND ADVANCEMENT OF EXPENSES NOT EXCLUSIVE. The
indemnification and advancement of expenses provided by, or granted pursuant to
the other Sections of this Article 8 shall not be deemed exclusive of any other
rights to which any person
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seeking indemnification may be entitled under any law, agreement, vote of
Stockholders or disinterested Directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office. All rights to indemnification under this Article 8 shall be deemed
to be provided by a contract between the Corporation and the Director, officer,
employee or agent who served in such capacity at any time while these By-Laws
and other relevant provisions of the Delaware General Corporation Law and other
applicable law, if any, are in effect. Any repeal or modification thereof shall
not affect any rights or obligations then existing.
8.08 INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the applicable provisions of
the Delaware General Corporation Law.
8.09 DEFINITIONS OF CERTAIN TERMS. For purposes of this Article 8,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its Directors, officers, employees or
agents, so that any person who is or was a Director, officer, employee or agent
of such constituent corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article 8 with
respect to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had continued.
For purposes of this Article 8, references to "other enterprise" shall
include employee benefit plans; references to "fines" shall include any excise
tax assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a Director, officer, employee or agent of the Corporation that
imposes duties on, or involves services by, such Director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
8.
For purposes of this Article 8, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
other enterprise, or on information supplied to him by the officers of the
Corporation or other enterprise in the course of their duties, or on the advice
of legal counsel for the Corporation or other enterprise or on information or
records given or reports made to the Corporation or other enterprise by an
independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Corporation or other enterprise. The
provisions of this Section 8.09 shall not be deemed to be exclusive or to limit
in any way the circumstances in which a person may be
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deemed to have met the applicable standard of conduct set forth in Sections 8.01
or 8.02 hereof, as the case may be.
8.10 CONTINUATION AND SUCCESSORS. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article 8 shall continue as
to any person who has ceased to be a Director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
ARTICLE 9: GENERAL PROVISIONS
9.01 DIVIDENDS AND RESERVES.
(A) DECLARATION AND PAYMENT. Subject to statute and the
Certificate of Incorporation, dividends may be declared by the Board of
Directors in cash, in property, or in shares of the Corporation. The
declaration and payment shall be at the discretion of the Board of
Directors.
(B) RECORD DATE. In order that the Corporation may determine the
Stockholders entitled to receive payment of any dividend or other
distribution, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and which record date shall not
be more than 60 days prior to such dividend or other distribution.
(C) RESERVES. By resolution, the Board of Directors may create
such reserve or reserves out of the surplus of the Corporation as the
Directors, from time to time, in their discretion, think proper to provide
for contingencies, or to equalize dividends, or to repair or maintain any
property of the Corporation, or for any other purpose they think beneficial
to the Corporation. The Directors may modify or abolish any such reserve
in the manner in which it was created.
9.02 BOOKS AND RECORDS. The corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of its
Stockholders and Board of Directors, and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its Stockholders, giving the names and addresses of all
Stockholders and the number and class of the shares held by each.
9.03 SEAL. The Corporation seal (if required) shall be in the style and
form impressed at the end of these By-Laws.
9.04 RESIGNATION. Any Director, officer or agent may resign by giving
written notice to the Board of Directors, or the Chairman, President, or the
Secretary. The resignation shall take effect at the time specified therein, or
immediately upon receipt if no time is specified therein. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
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9.05 AMENDMENT OF BY-LAWS. These By-Laws may be altered, amended, or
repealed at any meeting of the Board of Directors at which a quorum is present,
by the affirmative vote of a majority of the Directors present at such meeting,
provided notice of the proposed alteration, amendment or repeal is contained in
the notice of such meeting.
9.06 RECORD DATE. In order that the Corporation may determine the
Stockholders entitled to receive any allotment of any rights or the Stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall
not be more than 60 days prior to such action.
ARTICLE 10: COMMITTEES
10.01 COMMITTEES. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board of Directors, designate two
(2) or more of the Directors of the Corporation to constitute a committee or
committees for any purpose or purposes, which, to the extent provided in such
resolution or resolutions, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers that
may require it; provided, however, that the designation of any such committee
and the delegation thereto of authority shall not operate to relieve the Board
of Directors, or any member thereof, of any responsibility imposed upon it or
him by the Delaware General Corporation Act. Such committee or committees shall
have such name or names and conduct business in such areas and under such rules
and regulations as may be determined from time to time by resolution passed by a
majority of the whole Board of Directors. Each such committee shall keep
regular minutes of its meetings and shall report the same to the Board of
Directors when required. A majority of the members of any Committee or
committees shall constitute a quorum for the transaction of business, and the
act of majority of those present at any meeting at which a quorum is present
shall be the act of such committee.
-17-
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EXHIBIT 10.3
ADOPTION AGREEMENT #005
NONSTANDARDIZED CODE SECTION 401(K) PROFIT SHARING PLAN
The undersigned, CORNERSTONE NATURAL GAS, INC. ("Employer"), by executing
this Adoption Agreement, elects to become a participating Employer in
the BANK OF OKLAHOMA, N.A. Defined Contribution Master Plan (basic plan document
#01) by adopting the accompanying Plan and Trust in full as if the Employer were
a signatory to that Agreement. The Employer makes the following elections
granted under the provisions of the Master Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (CHOOSE
(a) OR (b))
[ ] (a) A discretionary Trustee. See Section 10.03[A] of the Plan.
[X] (b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan.
[NOTE: THE EMPLOYER MAY NOT ELECT OPTION (b) IF A CUSTODIAN EXECUTES THE
ADOPTION AGREEMENT.]
1.03 PLAN. The name of the Plan as adopted by the Employer is CORNERSTONE
NATURAL GAS, INC. EMPLOYEE SAVINGS PLAN.
1.07 EMPLOYEE. The following Employees are not eligible to participate in
the Plan: (CHOOSE (a) OR AT LEAST ONE OF (b) THROUGH (g))
[X] (a) No exclusions.
[ ] (b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [NOTE: IF THE EMPLOYER EXCLUDES UNION EMPLOYEES FROM THE PLAN, THE
EMPLOYER MUST BE ABLE TO PROVIDE EVIDENCE THAT RETIREMENT BENEFITS WERE
THE SUBJECT OF GOOD FAITH BARGAINING.]
[ ] (c) Nonresident aliens who do not receive any earned income (as defined
in Code SECTION 911(d)(2)) from the Employer which constitutes United
States source income (as defined in Code SECTION 861(a)(3)).
[ ] (d) Commission Salesmen.
[ ] (e) Any Employee compensated on a salaried basis.
[ ] (f) Any Employee compensated on an hourly basis.
[ ] (g) (SPECIFY)_____________________________________.
LEASED EMPLOYEES. Any Leased Employee treated as an Employee under Section 1.31
of the Plan, is: (CHOOSE (h) OR (i))
[X] (h) Not eligible to participate in the Plan.
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[ ] (i) Eligible to participate in the Plan, unless excluded by reason of an
exclusion classification elected under this Adoption Agreement Section
1.07.
RELATED EMPLOYERS. If any member of the Employer's related group (as defined in
Section 1.30 of the Plan) executes a Participation Agreement to this Adoption
Agreement, such member's Employees are eligible to participate in this Plan,
unless excluded by reason of an exclusion classification elected under this
Adoption Agreement Section 1.07. In addition: (CHOOSE (j) OR (k))
[X] (j) No other related group member's Employees are eligible to participate
in the Plan.
[ ] (k) The following nonparticipating related group member's Employees are
eligible to participate in the Plan unless excluded by reason of an
exclusion classification elected under this Adoption Agreement Section
1.07: .
1.12 COMPENSATION.
TREATMENT OF ELECTIVE CONTRIBUTIONS. (CHOOSE (a) OR (b))
[X] (a) "Compensation" includes elective contributions made by the Employer
on the Employee's behalf.
[ ] (b) "Compensation" does not include elective contributions.
MODIFICATIONS TO COMPENSATION DEFINITION. (CHOOSE (c) OR AT LEAST ONE OF (d)
THROUGH (j))
[ ] (c) No modifications other than as elected under Options (a) or (b).
[ ] (d) The Plan excludes Compensation in excess of $ .
[X] (e) In lieu of the definition in Section 1.12 of the Plan, Compensation
means any earnings reportable as W-2 wages for Federal income tax
withholding purposes, subject to any other election under this Adoption
Agreement Section 1.12.
[ ] (f) The Plan excludes bonuses.
[ ] (g) The Plan excludes overtime.
[ ] (h) The Plan excludes Commissions.
[ ] (i) Compensation will not include Compensation from a related employer
(as defined in Section 1.30 of the Plan) that has not executed a
Participation Agreement in this Plan unless, pursuant to Adoption
Agreement Section 1.07, the Employees of that related employer are
eligible to participate in this Plan.
[ ] (j) (SPECIFY)___________________________________.
If, for any Plan Year, the Plan uses permitted disparity in the contribution or
allocation formula elected under Article III, any election of Options (f), (g),
(h) or (j) is ineffective for such Plan Year with respect to any non-Highly
Compensated Employee.
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SPECIAL DEFINITION FOR MATCHING CONTRIBUTIONS. "Compensation" for purposes of
any matching contribution formula under Article III means: (CHOOSE (k) OR (l)
ONLY IF APPLICABLE)
[X] (k) Compensation as defined in this Adoption Agreement Section 1.12.
[ ] (l) (SPECIFY)_________________________________________.
SPECIAL DEFINITION FOR SALARY REDUCTION CONTRIBUTIONS. An Employee's salary
reduction agreement applies to his Compensation determined prior to the
reduction authorized by that salary reduction agreement, with the following
exceptions: (CHOOSE (m) OR AT LEAST ONE OF (n) OR (o), IF APPLICABLE)
[ ] (m) No exceptions.
[ ] (n) If the Employee makes elective contributions to another plan
maintained by the Employer, the Advisory Committee will determine the
amount of the Employee's salary reduction contribution for the withholding
period: (CHOOSE (1) OR (2))
[ ] (1) After the reduction for such period of elective contributions to
the other plan(s).
[ ] (2) Prior to the reduction for such period of elective contributions
to the other plan(s).
[X] (o) (SPECIFY) SALARY REDUCTION CONTRIBUTIONS SHALL NOT APPLY TO A BONUS
UNLESS THE PARTICIPANT MAKES A SEPARATE SALARY REDUCTION ELECTION
APPLICABLE TO THE BONUS.
1.17 PLAN YEAR/LIMITATION YEAR.
PLAN YEAR. Plan Year means: (CHOOSE (a) OR (b))
[X] (a) The 12 consecutive month period ending every DECEMBER 31.
[ ] (b) (SPECIFY)_________________________________________.
LIMITATION YEAR. The Limitation Year is: (CHOOSE (c) OR (d))
[X] (c) The Plan Year.
[ ] (d) The 12 consecutive month period ending every___.
1.18 EFFECTIVE DATE.
NEW PLAN. The "Effective Date" of the Plan is_________.
RESTATED PLAN. The restated Effective Date is JANUARY 1, 1989.
This Plan is a substitution and amendment of an existing retirement
plan(s) originally established JANUARY 1, 1983. [NOTE: SEE THE EFFECTIVE DATE
ADDENDUM.]
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is:
(CHOOSE (a) OR (b))
[X] (a) The actual method.
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[ ] (b) The equivalency method, except:
[ ] (1) No exceptions.
[ ] (2) The actual method applies for purposes of: (CHOOSE AT LEAST ONE)
[ ] (i) Participation under Article II.
[ ] (ii) Vesting under Article V.
[ ] (iii) Accrual of benefits under Section 3.06.
[NOTE: ON THE BLANK LINE, INSERT "DAILY," "WEEKLY," "SEMI-MONTHLY PAYROLL
PERIODS" OR "MONTHLY."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor
service the Plan must credit by reason of Section 1.29 of the Plan, the Plan
credits Service with the following predecessor employer(s): ENDEVCO, INC. .
Service with the designated predecessor employer(s) applies: (CHOOSE AT LEAST
ONE OF (a) OR (b); (c) IS AVAILABLE ONLY IN ADDITION TO (a) OR (b))
[X] (a) For purposes of participation under Article II.
[X] (b) For purposes of vesting under Article V.
[ ] (c) Except the following Service:____________________________.
[NOTE: IF THE PLAN DOES NOT CREDIT ANY PREDECESSOR SERVICE UNDER THIS PROVISION,
INSERT "N/A" IN THE FIRST BLANK LINE. THE EMPLOYER MAY ATTACH A SCHEDULE TO
THIS ADOPTION AGREEMENT, IN THE SAME FORMAT AS THIS SECTION 1.29, DESIGNATING
ADDITIONAL PREDECESSOR EMPLOYERS AND THE APPLICABLE SERVICE CREDITING
ELECTIONS.]
1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in the Plan
and also participates in a plan maintained by the leasing organization: (CHOOSE
(a) OR (b))
[N/A](a) The Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without taking into
account the Leased Employee's allocation, if any, under the leasing
organization's plan.
[ ] (b) The Advisory Committee will reduce a Leased Employee's allocation of
Employer nonelective contributions (other than designated qualified
nonelective contributions) under this Plan by the Leased Employee's
allocation under the leasing organization's plan, but only to the extent
that allocation is attributable to the Leased Employee's service provided
to the Employer. The leasing organization's plan:
[ ] (1) Must be a money purchase plan which would satisfy the definition
under Section 1.31 of a safe harbor plan, irrespective of whether the
safe harbor exception applies.
[ ] (2) Must satisfy the features and, if a defined benefit plan, the
method of reduction described in an addendum to this Adoption
Agreement, numbered 1.31.
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ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions: (CHOOSE (a) OR (b) OR BOTH; (c) IS
OPTIONAL AS AN ADDITIONAL ELECTION)
[ ] (a) Attainment of age___(SPECIFY AGE, NOT EXCEEDING 21).
[X] (b) Service requirement. (CHOOSE ONE OF (1) THROUGH (3))
[ ] (1) One Year of Service.
[X] (2) THREE (3) months (not exceeding 12) following the Employee's
Employment Commencement Date.
[ ] (3) One Hour of Service.
[ ] (c) Special requirements for non-401(k) portion of plan. (MAKE ELECTIONS
UNDER (1) AND UNDER (2))
(1) The requirements of this Option (c) apply to participation in:
(CHOOSE AT LEAST ONE OF (i) THROUGH (iii))
[ ] (i) The allocation of Employer nonelective contributions and
Participant forfeitures.
[ ] (ii) The allocation of Employer matching contributions
(including forfeitures allocated as matching contributions).
[ ] (iii) The allocation of Employer qualified nonelective
contributions.
(2) For participation in the allocations described in (1), the
eligibility conditions are: (CHOOSE AT LEAST ONE OF (i) THROUGH (iv))
[ ] (i) (one or two) Year(s) of Service, without an intervening
Break in Service (as described in Section 2.03(A) of the Plan) if
the requirement is two Years of Service.
[ ] (ii) __ months (not exceeding 24) following the Employee's
Employment Commencement Date.
[ ] (iii) One Hour of Service.
[ ] (iv) Attainment of age___(SPECIFY AGE, NOT EXCEEDING 21).
PLAN ENTRY DATE. "Plan Entry Date" means the Effective Date and: (CHOOSE (d),
(e) OR (f))
[ ] (d) Semi-annual Entry Dates. The first day of the Plan Year and the
first day of the seventh month of the Plan Year.
[ ] (e) The first day of the Plan Year.
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[X] (f) (SPECIFY ENTRY DATES) FIRST DAY OF ANY MONTH.
TIME OF PARTICIPATION. An Employee will become a Participant (and, if
applicable, will participate in the allocations described in Option (c)(1)),
unless excluded under Adoption Agreement Section 1.07, on the Plan Entry Date
(if employed on that date): (CHOOSE (g), (h) OR (i))
[X] (g) immediately following
[ ] (h) immediately preceding
[ ] (i) nearest
the date the Employee completes the eligibility conditions described in Options
(a) and (b) (or in Option (c)(2) if applicable) of this Adoption Agreement
Section 2.01. [NOTE: THE EMPLOYER MUST COORDINATE THE SELECTION OF (g), (h) OR
(i) WITH THE "PLAN ENTRY DATE" SELECTION IN (d), (e) OR (f). UNLESS OTHERWISE
EXCLUDED UNDER SECTION 1.07, THE EMPLOYEE MUST BECOME A PARTICIPANT BY THE
EARLIER OF: (1) THE FIRST DAY OF THE PLAN YEAR BEGINNING AFTER THE DATE THE
EMPLOYEE COMPLETES THE AGE AND SERVICE REQUIREMENTS OF CODE SECTION 410(A); OR
(2) 6 MONTHS AFTER THE DATE THE EMPLOYEE COMPLETES THOSE REQUIREMENTS.]
DUAL ELIGIBILITY. The eligibility conditions of this Section 2.01 apply to:
(CHOOSE (j) OR (k))
[X] (j) All Employees of the Employer, except: (CHOOSE (1) OR (2))
[X] (1) No exceptions.
[ ] (2) Employees who are Participants in the Plan as of the Effective
Date.
[ ] (k) Solely to an Employee employed by the Employer after__________. If the
Employee was employed by the Employer on or before the specified date, the
Employee will become a Participant: (CHOOSE (1), (2) OR (3))
[ ] (1) On the latest of the Effective Date, his Employment Commencement
Date or the date he attains age___(not to exceed 21).
[ ] (2) Under the eligibility conditions in effect under the Plan prior
to the restated Effective Date. If the restated Plan required more
than one Year of Service to participate, the eligibility condition
under this Option (2) for participation in the Code SECTION 401(k)
arrangement under this Plan is one Year of Service for Plan Years
beginning after December 31, 1988. [FOR RESTATED PLANS ONLY]
[ ] (3) (SPECIFY)___________________________________.
2.02 YEAR OF SERVICE - PARTICIPATION.
HOURS OF SERVICE. An Employee must complete: (CHOOSE (a) OR (b))
[X] (a) 1,000 Hours of Service
[ ] (b) __ Hours of Service
during an eligibility computation period to receive credit for a Year of
Service. [NOTE: THE HOURS OF SERVICE REQUIREMENT MAY NOT EXCEED 1,000.]
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ELIGIBILITY COMPUTATION PERIOD. After the initial eligibility computation
period described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (CHOOSE (c) OR (d))
[X] (c) The 12 consecutive month period beginning with each anniversary of an
Employee's Employment Commencement Date.
[ ] (d) The Plan Year, beginning with the Plan Year which includes the first
anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described
in Section 2.03(B) of the Plan: (CHOOSE (a) OR (b))
[X] (a) Does not apply to the Employer's Plan.
[ ] (b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE. The Plan: (CHOOSE (a) OR (b))
[X] (a) Does not permit an eligible Employee or a Participant to elect not to
participate.
[ ] (b) Does permit an eligible Employee or a Participant to elect not to
participate in accordance with Section 2.06 and with the following rules:
(COMPLETE (1), (2), (3) AND (4))
(1) An election is effective for a Plan Year if filed no later
than_______________.
(2) An election not to participate must be effective for at least__Plan
Year(s).
(3) Following a re-election to participate, the Employee or Participant:
[ ] (i) May not again elect not to participate for any subsequent Plan
Year.
[ ] (ii) May again elect not to participate, but not earlier than the
____Plan Year following the Plan Year in which the re-election
first was effective.
(4) (SPECIFY)_____________________________[INSERT "N/A" IF NO OTHER RULES
APPLY].
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ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
PART I. [OPTIONS (a) THROUGH (g)] AMOUNT OF EMPLOYER'S CONTRIBUTION. The
Employer's annual contribution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this Section
3.01. (CHOOSE ANY COMBINATION OF (a), (b), (c) AND (d), OR CHOOSE (e))
[X] (a) DEFERRAL CONTRIBUTIONS (CODE SECTION 401(k) ARRANGEMENT). (CHOOSE
(1) OR (2) OR BOTH)
[X] (1) Salary reduction arrangement. The Employer must contribute the
amount by which the Participants have reduced their Compensation for
the Plan Year, pursuant to their salary reduction agreements on file
with the Advisory Committee. A reference in the Plan to salary
reduction contributions is a reference to these amounts.
[ ] (2) Cash or deferred arrangement. The Employer will contribute on
behalf of each Participant the portion of the Participant's
proportionate share of the cash or deferred contribution which he
has not elected to receive in cash. See Section 14.02 of the Plan.
The Employer's cash or deferred contribution is the amount the
Employer may from time to time deem advisable which the Employer
designates as a cash or deferred contribution prior to making that
contribution to the Trust.
[X] (b) MATCHING CONTRIBUTIONS. The Employer will make matching
contributions in accordance with the formula(s) elected in Part II of this
Adoption Agreement Section 3.01.
[X] (c) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS. The Employer, in its
sole discretion, may contribute an amount which it designates as a
qualified nonelective contribution.
[X] (d) NONELECTIVE CONTRIBUTIONS. (CHOOSE ANY COMBINATION OF (1) THROUGH
(4))
[X] (1) Discretionary contribution. The amount (or additional amount)
the Employer may from time to time deem advisable.
[ ] (2) The amount (or additional amount) the Employer may from time to
time deem advisable, separately determined for each of the following
classifications of Participants: (CHOOSE (i) OR (ii))
[ ] (i) Non-Highly Compensated Employees and Highly Compensated
Employees.
[ ] (ii) (SPECIFY CLASSIFICATIONS)_____________________________.
Under this Option (2), the Advisory Committee will allocate the amount
contributed for each Participant classification in accordance with Part
II of Adoption Agreement Section 3.04, as if the Participants in that
classification were the only Participants in the Plan.
[ ] (3) ___% of the Compensation of all Participants under the Plan,
determined for the Employer's taxable year for which it makes the
contribution. [NOTE: THE PERCENTAGE SELECTED MAY NOT EXCEED 15%.]
[ ] (4) ___% of Net Profits but not more than $____.
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[ ] (e) FROZEN PLAN. This Plan is a frozen Plan effective___. The
Employer will not contribute to the Plan with respect to any period
following the stated date.
NET PROFITS. The Employer: (CHOOSE (f) OR (g))
[X] (f) Need not have Net Profits to make its annual contribution under this
Plan.
[ ] (g) Must have current or accumulated Net Profits exceeding $_____ to
make the following contributions: (CHOOSE AT LEAST ONE)
[ ] (1) Cash or deferred contributions described in Option (a)(2).
[ ] (2) Matching contributions described in Option (b), except:_______.
[ ] (3) Qualified nonelective contributions described in Option (c).
[ ] (4) Nonelective contributions described in Option (d).
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. The term "Net Profits" specifically
excludes N/A . [NOTE: ENTER "N/A" IF NO EXCLUSIONS APPLY.]
If the Employer requires Net Profits for matching contributions and the Employer
does not have sufficient Net Profits under Option (g), it will reduce the
matching contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this Adoption
Agreement, each participating member will determine Net Profits separately but
will not apply this reduction unless, after combining the separately determined
Net Profits, the aggregate Net Profits are insufficient to satisfy the matching
contribution liability. "Net Profits" includes both current and accumulated Net
Profits.
PART II. [OPTIONS (h) THROUGH (j)] MATCHING CONTRIBUTION FORMULA. [NOTE: IF
THE EMPLOYER ELECTED OPTION (b), COMPLETE OPTIONS (h), (i) AND (j).]
[X] (h) AMOUNT OF MATCHING CONTRIBUTIONS. For each Plan Year, the Employer's
matching contribution is: (CHOOSE ANY COMBINATION OF (1), (2), (3), (4)
AND (5))
[ ] (1) An amount equal to____% of each Participant's eligible
contributions for the Plan Year.
[ ] (2) An amount equal to___% of each Participant's first tier of
eligible contributions for the Plan Year, plus the following
matching percentage(s) for the following subsequent tiers of
eligible contributions for the Plan_______________________________.
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[X] (3) Discretionary formula.
[X] (i) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem advisable of
the Participant's eligible contributions for the Plan Year.
[ ] (ii) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem advisable of
each tier of the Participant's eligible contributions for the
Plan Year.
[ ] (4) An amount equal to the following percentage of each
Participant's eligible contributions for the Plan Year, based on the
Participant's Years of Service:
NUMBER OF YEARS OF SERVICE MATCHING PERCENTAGE
__ __
__ __
__ __
__ __
The Advisory Committee will apply this formula by determining Years
of Service as follows:_______________________________________.
[ ] (5) A Participant's matching contributions may not: (CHOOSE (i) OR
(ii))
[ ] (i) Exceed_____________________________________.
[ ] (ii) Be less than_______________________________.
RELATED EMPLOYERS. If two or more related employers (as defined in
Section 1.30) contribute to this Plan, the related employers may elect
different matching contribution formulas by attaching to the Adoption
Agreement a separately completed copy of this Part II. NOTE: SEPARATE
MATCHING CONTRIBUTION FORMULAS CREATE SEPARATE CURRENT BENEFIT STRUCTURES
THAT MUST SATISFY THE MINIMUM PARTICIPATION TEST OF CODE SECTION
401(a)(26).]
[X] (i) DEFINITION OF ELIGIBLE CONTRIBUTIONS. Subject to the requirements of
Option (j), the term "eligible contributions" means: (CHOOSE ANY
COMBINATION OF (1) THROUGH (3))
[X] (1) Salary reduction contributions.
[ ] (2) Cash or deferred contributions (including any part of the
Participant's proportionate share of the cash or deferred
contribution which the Employer defers without the Participant's
election).
[X] (3) Participant mandatory contributions, as designated in Adoption
Agreement Section 4.01. See Section 14.04 of the Plan.
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[X] (j) AMOUNT OF ELIGIBLE CONTRIBUTIONS TAKEN INTO ACCOUNT. When
determining a Participant's eligible contributions taken into account
under the matching contributions formula(s), the following rules apply:
(CHOOSE ANY COMBINATION OF (1) THROUGH (4))
[ ] (1) The Advisory Committee will take into account all eligible
contributions credited for the Plan Year.
[X] (2) The Advisory Committee will disregard eligible contributions
exceeding 5% OF THE PARTICIPANT'S COMPENSATION FOR THE PLAN YEAR .
[ ] (3) The Advisory Committee will treat as the first tier of eligible
contributions, an amount not exceeding:___________________________.
The subsequent tiers of eligible contributions are:_______________.
[ ] (4) (SPECIFY)_______________________________________.
PART III. [OPTIONS (k) AND (l)]. SPECIAL RULES FOR CODE SECTION 401(k)
ARRANGEMENT. (CHOOSE (k) OR (l), OR BOTH, AS APPLICABLE)
[X] (k) SALARY REDUCTION AGREEMENTS. The following rules and restrictions
apply to an Employee's salary reduction agreement: (MAKE A SELECTION UNDER
(1), (2), (3) AND (4))
(1) Limitation on amount. The Employee's salary reduction contributions:
(CHOOSE (i) OR AT LEAST ONE OF (ii) OR (iii))
[ ] (i) No maximum limitation other than as provided in the Plan.
[X] (ii) May not exceed 15% of Compensation for the Plan Year,
subject to the annual additions limitation described in Part 2 of
Article III and the 402(g) limitation described in Section 14.07
of the Plan.
[X] (iii) Based on percentages of Compensation must equal at least
1%.
(2) An Employee may revoke, on a prospective basis, a salary reduction
agreement: (CHOOSE (i), (ii), (iii) OR (iv))
[ ] (i) Once during any Plan Year but not later than______________
of the Plan Year.
[ ] (ii) As of any Plan Entry Date.
[ ] (iii) As of the first day of any month.
[X] (iv) (SPECIFY, BUT MUST BE AT LEAST ONCE PER PLAN YEAR) THE
NEXT REASONABLE PAY PERIOD.
(3) An Employee who revokes his salary reduction agreement may file a
new salary reduction agreement with an effective date: (CHOOSE (i), (ii),
(iii) OR (iv))
[ ] (i) No earlier than the first day of the next Plan Year.
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[ ] (ii) As of any subsequent Plan Entry Date.
[ ] (iii) As of the first day of any month subsequent to the month
in which he revoked an Agreement.
[X] (iv) (SPECIFY, BUT MUST BE AT LEAST ONCE PER PLAN YEAR FOLLOWING
THE PLAN YEAR OF REVOCATION) JANUARY 1 AND JULY 1 .
(4) A Participant may increase or may decrease, on a prospective basis,
his salary reduction percentage or dollar amount: (CHOOSE (i), (ii), (iii)
OR (iv))
[ ] (i) As of the beginning of each payroll period.
[ ] (ii) As of the first day of each month.
[ ] (iii) As of any Plan Entry Date.
[X] (iv) (SPECIFY, BUT MUST PERMIT AN INCREASE OR A DECREASE AT
LEAST ONCE PER PLAN YEAR) JANUARY 1 AND JULY 1 .
[ ] (l) CASH OR DEFERRED CONTRIBUTIONS. For each Plan Year for which the
Employer makes a designated cash or deferred contribution, a Participant
may elect to receive directly in cash not more than the following portion
(or, if less, the 402(g) limitation described in Section 14.07 of the
Plan) of his proportionate share of that cash or deferred contribution:
(CHOOSE (1) OR (2))
[ ] (1) All or any portion.
[ ] (2)__________________________%.
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions in accordance with Section 14.06 and
the elections under this Adoption Agreement Section 3.04.
PART I. [OPTIONS (a) THROUGH (d)]. SPECIAL ACCOUNTING ELECTIONS. (CHOOSE
WHICHEVER ELECTIONS ARE APPLICABLE TO THE EMPLOYER'S PLAN)
[X] (a) MATCHING CONTRIBUTIONS ACCOUNT. The Advisory Committee will allocate
matching contributions to a Participant's: (CHOOSE (1) OR (2); (3) IS
AVAILABLE ONLY IN ADDITION TO (1))
[X] (1) Regular Matching Contributions Account.
[ ] (2) Qualified Matching Contributions Account.
[ ] (3) Except, matching contributions under Option(s) of Adoption
Agreement Section 3.01 are allocable to the Qualified Matching
Contributions Account.
[X] (b) SPECIAL ALLOCATION DATES FOR SALARY REDUCTION CONTRIBUTIONS. The
Advisory Committee will allocate salary reduction contributions as of the
Accounting Date and as of the following additional allocation dates: LAST
DAY OF EACH MONTH.
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[X] (c) SPECIAL ALLOCATION DATES FOR MATCHING CONTRIBUTIONS. The Advisory
Committee will allocate matching contributions as of the Accounting Date
and as of the following additional allocation dates: NONE .
[X] (d) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS - DEFINITION OF
PARTICIPANT. For purposes of allocating the designated qualified
nonelective contribution, "Participant" means: (CHOOSE (1), (2) OR (3))
[ ] (1) All Participants.
[ ] (2) Participants who are non-Highly Compensated Employees for the
Plan Year.
[X] (3) (SPECIFY) NON-HIGHLY COMPENSATED EMPLOYEES WHO ARE EMPLOYED ON
THE LAST DAY OF THE PLAN YEAR.
PART II. METHOD OF ALLOCATION - NONELECTIVE CONTRIBUTION. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit each annual nonelective contribution (and Participant
forfeitures treated as nonelective contributions) to the Employer Contributions
Account of each Participant who satisfies the conditions of Section 3.06, in
accordance with the allocation method selected under this Section 3.04. If the
Employer elects Option (e)(2), Option (g)(2) or Option (h), for the first 3% of
Compensation allocated to all Participants, "Compensation" does not include any
exclusions elected under Adoption Agreement Section 1.12 (other than the
exclusion of elective contributions), and the Advisory Committee must take into
account the Participant's Compensation for the entire Plan Year. (CHOOSE AN
ALLOCATION METHOD UNDER (e), (f), (g) OR (h); (i) IS MANDATORY IF THE EMPLOYER
ELECTS (f), (g) OR (h); (j) IS OPTIONAL IN ADDITION TO ANY OTHER ELECTION.)
[X] (e) NONINTEGRATED ALLOCATION FORMULA. (CHOOSE (1) OR (2))
[X] (1) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all
Participants for the Plan Year.
[ ] (2) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all
Participants for the Plan Year. For purposes of this Option (2),
"Participant" means, in addition to a Participant who satisfies the
requirements of Section 3.06 for the Plan Year, any other
Participant entitled to a top heavy minimum allocation under Section
3.04(B), but such Participant's allocation will not exceed 3% of his
Compensation for the Plan Year.
[ ] (f) TWO-TIERED INTEGRATED ALLOCATION FORMULA - MAXIMUM DISPARITY. First,
the Advisory Committee will allocate the annual Employer nonelective
contributions in the same ratio that each Participant's Compensation plus
Excess Compensation for the Plan Year bears to the total Compensation plus
Excess Compensation of all Participants for the Plan Year. The allocation
under this paragraph, as a percentage of each Participant's Compensation
plus Excess Compensation, must not exceed the applicable percentage (5.7%,
5.4% or 4.3%) listed under the Maximum Disparity Table following Option
(i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for the
Plan Year.
13
<PAGE>
[ ] (g) THREE-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory
Committee will allocate the annual Employer nonelective contributions in
the same ratio that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for the Plan Year.
The allocation under this paragraph, as a percentage of each Participant's
Compensation may not exceed the applicable percentage (5.7%, 5.4% or 4.3%)
listed under the Maximum Disparity Table following Option (i). Solely for
purposes of the allocation in this first paragraph, "Participant" means,
in addition to a Participant who satisfies the requirements of Section
3.06 for the Plan Year: (CHOOSE (1) OR (2))
[ ] (1) No other Participant.
[ ] (2) Any other Participant entitled to a top heavy minimum allocation
under Section 3.04(B), but such Participant's allocation under this
Option (g) will not exceed 3% of his Compensation for the Plan Year.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of
all Participants for the Plan Year. The allocation under this paragraph,
as a percentage of each Participant's Excess Compensation, may not exceed
the allocation percentage in the first paragraph.
Finally, the Advisory Committee will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for the
Plan Year.
[ ] (h) FOUR-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory
Committee will allocate the annual Employer nonelective contributions in
the same ratio that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for the Plan Year, but
not exceeding 3% of each Participant's Compensation. Solely for purposes
of this first tier allocation, a "Participant" means, in addition to any
Participant who satisfies the requirements of Section 3.06 for the Plan
Year, any other Participant entitled to a top heavy minimum allocation
under Section 3.04(B) of the Plan.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of
all Participants for the Plan Year, but not exceeding 3% of each
Participant's Excess Compensation.
As a third tier allocation, the Advisory Committee will allocate the
annual Employer contributions in the same ratio that each Participant's
Compensation plus Excess Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all Participants for the Plan
Year. The allocation under this paragraph, as a percentage of each
Participant's Compensation plus Excess Compensation, must not exceed the
applicable percentage (2.7%, 2.4% or 1.3%) listed under the Maximum
Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for the
Plan Year.
14
<PAGE>
[ ] (i) EXCESS COMPENSATION. For purposes of Option (f), (g) or (h), "Excess
Compensation" means Compensation in excess of the following Integration
Level: (CHOOSE (1) OR (2))
[ ] (1) __% (not exceeding 100%) of the taxable wage base, as
determined under Section 230 of the Social Security Act, in effect on
the first day of the Plan Year: (CHOOSE ANY COMBINATION OF (i) AND
(ii) OR CHOOSE (iii))
[ ] (i) Rounded to_________________________(but not exceeding the
taxable wage base).
[ ] (ii) But not greater than $__.
[ ] (iii) Without any further adjustment or limitation.
[ ] (2) $_______[NOTE: NOT EXCEEDING THE TAXABLE WAGE BASE FOR THE
PLAN YEAR IN WHICH THIS ADOPTION AGREEMENT FIRST IS EFFECTIVE.]
MAXIMUM DISPARITY TABLE. For purposes of Options (f), (g) and (h), the
applicable percentage is:
<TABLE>
<CAPTION>
Integration Level (as Applicable Percentages for Applicable Percentages
Percentage Of Taxable Wage Base) Option (f) or Option (g) for Option (h)
- ------------------------------- ----------------------- ------------------
<S> <C> <C>
100% 5.7% 2.7%
More than 80% but less than 100% 5.4% 2.4%
More than 20% (but not less than $10,001)
and not more than 80% 4.3% 1.3%
20% (or $10,000, if greater) or less 5.7% 2.7%
</TABLE>
[ ] (j) ALLOCATION OFFSET. The Advisory Committee will reduce a
Participant's allocation otherwise made under Part II of this Section 3.04
by the Participant's allocation under the following qualified plan(s)
maintained by the Employer:
.
The Advisory Committee will determine this allocation reduction: (CHOOSE
(1) OR (2))
[ ] (1) By treating the term "nonelective contribution" as including all
amounts paid or accrued by the Employer during the Plan Year to the
qualified plan(s) referenced under this Option (j). If a Participant
under this Plan also participates in that other plan, the Advisory
Committee will treat the amount the Employer contributes for or
during a Plan Year on behalf of a particular Participant under such
other plan as an amount allocated under this Plan to that
Participant's Account for that Plan Year. The Advisory Committee will
make the computation of allocation required under the immediately
preceding sentence before making any allocation of nonelective
contributions under this Section 3.04.
[ ] (2) In accordance with the formula provided in an addendum to this
Adoption Agreement, numbered 3.04(j).
15
<PAGE>
TOP HEAVY MINIMUM ALLOCATION - METHOD OF COMPLIANCE. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B): (CHOOSE (k) OR (l))
[X] (k) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.
[ ] (l) The Employer will satisfy the top heavy minimum allocation under the
following plan(s) it maintains:_________________________________. However,
the Employer will make any necessary additional contribution to satisfy the
top heavy minimum allocation for an Employee covered only under this Plan
and not under the other plan(s) designated in this Option (l). See Section
3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan, the Employer may provide in an addendum
to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code Section 416.
RELATED EMPLOYERS. If two or more related employers (as defined in Section
1.30) contribute to this Plan, the Advisory Committee must allocate all Employer
nonelective contributions (and forfeitures treated as nonelective contributions)
to each Participant in the Plan, in accordance with the elections in this
Adoption Agreement Section 3.04: (CHOOSE (m) OR (n))
[X] (m) Without regard to which contributing related group member employs the
Participant.
[ ] (n) Only to the Participants directly employed by the contributing
Employer. If a Participant receives Compensation from more than one
contributing Employer, the Advisory Committee will determine the
allocations under this Adoption Agreement Section 3.04 by prorating among
the participating Employers the Participant's Compensation and, if
applicable, the Participant's Integration Level under Option (i).
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation
required under Sections 5.04 or 9.14, the Advisory Committee will allocate a
Participant forfeiture in accordance with Section 3.04: (CHOOSE (a) OR (b); (c)
AND (d) ARE OPTIONAL IN ADDITION TO (a) OR (b))
[ ] (a) As an Employer nonelective contribution for the Plan Year in which
the forfeiture occurs, as if the Participant forfeiture were an additional
nonelective contribution for that Plan Year.
[X] (b) To reduce the Employer matching contributions and nonelective
contributions for the Plan Year: (CHOOSE (1) OR (2))
[X] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which the forfeiture
occurs.
[X] (c) To the extent attributable to matching contributions: (CHOOSE (1),
(2) OR (3))
[X] (1) In the manner elected under Options (a) or (b).
[ ] (2) First to reduce Employer matching contributions for the Plan
Year: (CHOOSE (i) OR (ii))
[ ] (i) in which the forfeiture occurs,
16
<PAGE>
[ ] (ii) immediately following the Plan Year in which the
forfeiture occurs,
then as elected in Options (a) or (b).
[ ] (3) As a discretionary matching contribution for the Plan Year in
which the forfeiture occurs, in lieu of the manner elected under
Options (a) or (b).
[ ] (d) First to reduce the Plan's ordinary and necessary administrative
expenses for the Plan Year and then will allocate any remaining
forfeitures in the manner described in Options (a), (b) or (c), whichever
applies. If the Employer elects Option (c), the forfeitures used to
reduce Plan expenses: (CHOOSE (1) OR (2))
[ ] (1) relate proportionately to forfeitures described in Option (c) and
to forfeitures described in Options (a) or (b).
[ ] (2) relate first to forfeitures described in Option__.
ALLOCATION OF FORFEITED EXCESS AGGREGATE CONTRIBUTIONS. The Advisory Committee
will allocate any forfeited excess aggregate contributions (as described in
Section 14.09): (CHOOSE (e), (f) OR (g))
[ ] (e) To reduce Employer matching contributions for the Plan Year: (CHOOSE
(1) OR (2))
[ ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which the forfeiture
occurs.
[ ] (f) As Employer discretionary matching contributions for the Plan Year in
which forfeited, except the Advisory Committee will not allocate these
forfeitures to the Highly Compensated Employees who incurred the
forfeitures.
[X] (g) In accordance with Options (a) through (d), whichever applies, except
the Advisory Committee will not allocate these forfeitures under Option
(a) or under Option (c)(3) to the Highly Compensated Employees who
incurred the forfeitures.
3.06 ACCRUAL OF BENEFIT.
COMPENSATION TAKEN INTO ACCOUNT. For the Plan Year in which the Employee first
becomes a Participant, the Advisory Committee will determine the allocation of
any cash or deferred contribution, designated qualified nonelective contribution
or nonelective contribution by taking into account: (CHOOSE (a) OR (b))
[ ] (a) The Employee's Compensation for the entire Plan Year.
[X] (b) The Employee's Compensation for the portion of the Plan Year in which
the Employee actually is a Participant in the Plan.
17
<PAGE>
ACCRUAL REQUIREMENTS. Subject to the suspension of accrual requirements of
Section 3.06(E) of the Plan, to receive an allocation of cash or deferred
contributions, matching contributions, designated qualified nonelective
contributions, nonelective contributions and Participant forfeitures, if any,
for the Plan Year, a Participant must satisfy the conditions described in the
following elections: (CHOOSE (c) OR AT LEAST ONE OF (d) THROUGH (f))
[ ] (c) SAFE HARBOR RULE. If the Participant is employed by the Employer on
the last day of the Plan Year, the Participant must complete at least one
Hour of Service for that Plan Year. If the Participant is not employed by
the Employer on the last day of the Plan Year, the Participant must
complete at least 501 Hours of Service during the Plan Year.
[X] (d) HOURS OF SERVICE CONDITION. The Participant must complete the
following minimum number of Hours of Service during the Plan Year: (CHOOSE
AT LEAST ONE OF (1) THROUGH (5))
[ ] (1) 1,000 Hours of Service.
[X] (2) (SPECIFY, BUT THE NUMBER OF HOURS OF SERVICE MAY NOT EXCEED 1,000)
ONE .
[ ] (3) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of: (CHOOSE (i), (ii) OR
(iii))
[ ] (i) Death.
[ ] (ii) Disability.
[ ] (iii) Attainment of Normal Retirement Age in the current Plan
Year or in a prior Plan Year.
[ ] (4) __Hours of Service (not exceeding 1,000) if the Participant
terminates employment with the Employer during the Plan Year, subject
to any election in Option (3).
[ ] (5) No Hour of Service requirement for an allocation of the
following contributions:____________________________________________.
[X] (e) EMPLOYMENT CONDITION. The Participant must be employed by the
Employer on the last day of the Plan Year, irrespective of whether he
satisfies any Hours of Service condition under Option (d), with the
following exceptions: (CHOOSE (1) OR AT LEAST ONE OF (2) THROUGH (5))
[ ] (1) No exceptions.
[X] (2) Termination of employment because of death.
[X] (3) Termination of employment because of disability.
[X] (4) Termination of employment following attainment of Normal
Retirement Age.
[ ] (5) No employment condition for the following contributions:_________
_______________________________.
[ ] (f) (SPECIFY OTHER CONDITIONS, IF APPLICABLE):__________________________.
18
<PAGE>
SUSPENSION OF ACCRUAL REQUIREMENTS. The suspension of accrual requirements of
Section 3.06(E) of the Plan: (CHOOSE (g), (h) OR (i))
[X] (g) Applies to the Employer's Plan.
[ ] (h) Does not apply to the Employer's Plan.
[ ] (i) Applies in modified form to the Employer's Plan, as described in an
addendum to this Adoption Agreement, numbered Section 3.06(E).
SPECIAL ACCRUAL REQUIREMENTS FOR MATCHING CONTRIBUTIONS. If the Plan allocates
matching contributions on two or more allocation dates for a Plan Year, the
Advisory Committee, unless otherwise specified in Option (l), will apply any
Hours of Service condition by dividing the required Hours of Service on a
prorata basis to the allocation periods included in that Plan Year.
Furthermore, a Participant who satisfies the conditions described in this
Adoption Agreement Section 3.06 will receive an allocation of matching
contributions (and forfeitures treated as matching contributions) only if the
Participant satisfies the following additional condition(s): (CHOOSE (J) OR AT
LEAST ONE OF (k) OR (l))
[ ] (j) No additional conditions.
[ ] (k) The Participant is not a Highly Compensated Employee for the Plan
Year. This Option (k) applies to: (CHOOSE (1) OR (2))
[ ] (1) All matching contributions.
[ ] (2) Matching contributions described in Option(s)_________________of
Adoption Agreement Section 3.01.
[X] (l) (SPECIFY) MATCHING CONTRIBUTIONS ATTRIBUTABLE TO EXCESS DEFERRALS OR
EXCESS CONTRIBUTIONS WILL BE FORFEITED.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15
apply, the Excess Amount attributed to this Plan equals: (CHOOSE (a), (b) OR
(c))
[ ] (a) The product of:
(i) the total Excess Amount allocated as of such date (including any
amount which the Advisory Committee would have allocated but for the
limitations of Code Section 415), times
(ii) 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 Code Section 415).
[X] (b) The total Excess Amount.
[ ] (c) None of the Excess Amount.
19
<PAGE>
3.18 DEFINED BENEFIT PLAN LIMITATION.
APPLICATION OF LIMITATION. The limitation under Section 3.18 of the Plan:
(CHOOSE (a) OR (b))
[X] (a) Does not apply to the Employer's Plan because the Employer does not
maintain and never has maintained a defined benefit plan covering any
Participant in this Plan.
[ ] (b) Applies to the Employer's Plan. To the extent necessary to satisfy
the limitation under Section 3.18, the Employer will reduce: (CHOOSE (1)
OR (2))
[ ] (1) The Participant's projected annual benefit under the defined
benefit plan under which the Participant participates.
[ ] (2) Its contribution or allocation on behalf of the Participant to the
defined contribution plan under which the Participant participates and
then, if necessary, the Participant's projected annual benefit under
the defined benefit plan under which the Participant participates.
[NOTE: IF THE EMPLOYER SELECTS (a), THE REMAINING OPTIONS IN THIS SECTION 3.18
DO NOT APPLY TO THE EMPLOYER'S PLAN.]
COORDINATION WITH TOP HEAVY MINIMUM ALLOCATION. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications: (CHOOSE (c) OR AT LEAST ONE OF (d) OR (e))
[ ] (c) No modifications.
[ ] (d) For Non-Key Employees participating only in this Plan, the top heavy
minimum allocation is the minimum allocation described in Section 3.04(B)
determined by substituting % (not less than 4%) for "3%," except:
(CHOOSE (i) OR (ii))
[ ] (i) No exceptions.
[ ] (ii) Plan Years in which the top heavy ratio exceeds 90%.
[ ] (e) For Non-Key Employees also participating in the defined benefit plan,
the top heavy minimum is: (CHOOSE (1) OR (2))
[ ] (1) 5% of Compensation (as determined under Section 3.04(B) or the
Plan) irrespective of the contribution rate of any Key Employee,
except: (CHOOSE (i) OR (ii))
[ ] (i) No exceptions.
[ ] (ii) Substituting "7 1/2%" for "5%" if the top heavy ratio does
not exceed 90%.
[ ] (2) 0%. [NOTE: THE EMPLOYER MAY NOT SELECT THIS OPTION (2) UNLESS THE
DEFINED BENEFIT PLAN SATISFIES THE TOP HEAVY MINIMUM BENEFIT
REQUIREMENTS OF CODE SECTION 416 FOR THESE NON-KEY EMPLOYEES.]
ACTUARIAL ASSUMPTIONS FOR TOP HEAVY CALCULATION. To determine the top heavy
ratio, the Advisory Committee will use the following interest rate and mortality
assumptions to value accrued benefits under a defined benefit plan:_____________
____________________________________.
20
<PAGE>
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code Section
416, the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (CHOOSE (a) OR
(b); (c) IS AVAILABLE ONLY WITH (b))
[ ] (a) Does not permit Participant nondeductible contributions.
[X] (b) Permits Participant nondeductible contributions, pursuant to Section
14.04 of the Plan.
[X] (c) The following portion of the Participant's nondeductible
contributions for the Plan Year are mandatory contributions under Option
(i)(3) of Adoption Agreement Section 3.01: (CHOOSE (1) OR (2))
[ ] (1) The amount which is not less than:______________________________.
[X] (2) The amount which is not greater than: 5%.
ALLOCATION DATES. The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the following
additional allocation dates: (CHOOSE (d) OR (e))
[ ] (d) No other allocation dates.
[X] (e) (SPECIFY) LAST DAY OF EACH MONTH .
As of an allocation date, the Advisory Committee will credit all nondeductible
contributions made for the relevant allocation period. Unless otherwise
specified in (e), a nondeductible contribution relates to an allocation period
only if actually made to the Trust no later than 30 days after that allocation
period ends.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Mandatory Contributions Account, if any, prior to his Separation
from Service: (CHOOSE (a) OR AT LEAST ONE OF (b) THROUGH (d))
[ ] (a) No distribution options prior to Separation from Service.
[ ] (b) The same distribution options applicable to the Deferral
Contributions Account prior to the Participant's Separation from Service,
as elected in Adoption Agreement Section 6.03.
[X] (c) Until he retires, the Participant has a continuing election to
receive all or any portion of his Mandatory Contributions Account if:
(CHOOSE (1) OR AT LEAST ONE OF (2) THROUGH (4))
[X] (1) No conditions.
[ ] (2) The mandatory contributions have accumulated for at least _ Plan
Years since the Plan Year for which contributed.
21
<PAGE>
[ ] (3) The Participant suspends making nondeductible contributions for a
period of__months.
[ ] (4) (SPECIFY)______________________________________.
[X] (d) (SPECIFY) PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS MAY BE WITHDRAWN
ONCE IN ANY PLAN YEAR IN ACCORDANCE WITH SECTION 4.05.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is: (CHOOSE
(a) OR (b))
[X] (a) SIXTY-FIVE (65) [STATE AGE, BUT MAY NOT EXCEED AGE 65].
[ ] (b) The later of the date the Participant attains___years of age or
the___anniversary of the first day of the Plan Year in which the
Participant commenced participation in the Plan. [THE AGE SELECTED MAY
NOT EXCEED AGE 65 AND THE ANNIVERSARY SELECTED MAY NOT EXCEED THE 5TH.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section
5.02 of the Plan: (CHOOSE (a) OR CHOOSE ONE OR BOTH OF (b) AND (c))
[ ] (a) Does not apply.
[X] (b) Applies to death.
[X] (c) Applies to disability.
5.03 VESTING SCHEDULE.
DEFERRAL CONTRIBUTIONS ACCOUNT/QUALIFIED MATCHING CONTRIBUTIONS
ACCOUNT/QUALIFIED NONELECTIVE CONTRIBUTIONS ACCOUNT/MANDATORY CONTRIBUTIONS
ACCOUNT. A Participant has a 100% Nonforfeitable interest at all times in his
Deferral Contributions Account, his Qualified Matching Contributions Account,
his Qualified Nonelective Contributions Account and in his Mandatory
Contributions Account.
REGULAR MATCHING CONTRIBUTIONS ACCOUNT/EMPLOYER CONTRIBUTIONS ACCOUNT. With
respect to a Participant's Regular Matching Contributions Account and Employer
Contributions Account, the Employer elects the following vesting schedule:
(CHOOSE (a) OR (b); (c) AND (d) ARE AVAILABLE ONLY AS ADDITIONAL OPTIONS)
[ ] (a) Immediate vesting. 100% Nonforfeitable at all times. [NOTE: THE
EMPLOYER MUST ELECT OPTION (a) IF THE ELIGIBILITY CONDITIONS UNDER
ADOPTION AGREEMENT SECTION 2.01(c) REQUIRE 2 YEARS OF SERVICE OR MORE THAN
12 MONTHS OF EMPLOYMENT.]
[X] (b) Graduated Vesting Schedules.
22
<PAGE>
<TABLE>
<CAPTION>
TOP HEAVY SCHEDULE NON TOP HEAVY SCHEDULE
(MANDATORY) (OPTIONAL)
Years of Nonforfeitable Years of Nonforfeitable
Service Percentage Service Percentage
-------- -------------- -------- --------------
<S> <C> <C>
Less than 1 Less than 1
0% 0%
1 1
20% 20%
2 2
40% 40%
3 3
60% 60%
4 4
80% 80%
5 or more 5 or more
100% 100%
</TABLE>
[ ] (c) Special vesting election for Regular Matching Contributions Account.
In lieu of the election under Options (a) or (b), the Employer elects the
following vesting schedule for a Participant's Regular Matching
Contributions Account: (CHOOSE (1) OR (2))
[ ] (1) 100% Nonforfeitable at all times.
[ ] (2) In accordance with the vesting schedule described in the addendum
to this Adoption Agreement, numbered 5.03(c). [NOTE: IF THE EMPLOYER
ELECTS THIS OPTION (c)(2), THE ADDENDUM MUST DESIGNATE THE APPLICABLE
VESTING SCHEDULE(S) USING THE SAME FORMAT AS USED IN OPTION (b).]
[NOTE: UNDER OPTIONS (b) AND (c)(2), THE EMPLOYER MUST COMPLETE A TOP HEAVY
SCHEDULE WHICH SATISFIES CODE Section 416. THE EMPLOYER, AT ITS OPTION, MAY
COMPLETE A NON TOP HEAVY SCHEDULE. THE NON TOP HEAVY SCHEDULE MUST SATISFY CODE
Section 411(a)(2). ALSO SEE SECTION 7.05 OF THE PLAN.]
[ ] (d) The Top Heavy Schedule under Option (b) (and, if applicable, under
Option (c)(2)) applies: (CHOOSE (1) OR (2))
[ ] (1) Only in a Plan Year for which the Plan is top heavy.
[ ] (2) In the Plan Year for which the Plan first is top heavy and then
in
all subsequent Plan Years. [NOTE: THE EMPLOYER MAY NOT ELECT OPTION
(d) UNLESS IT HAS COMPLETED A NON TOP HEAVY SCHEDULE.]
MINIMUM VESTING. (CHOOSE (e) OR (f))
[X] (e) The Plan does not apply a minimum vesting rule.
[ ] (f) A Participant's Nonforfeitable Accrued Benefit will never be less than
the lesser of $___or his entire Accrued Benefit, even if the application of
a graduated vesting schedule under Options (b) or (c) would result in a
smaller Nonforfeitable Accrued Benefit.
23
<PAGE>
LIFE INSURANCE INVESTMENTS. The Participant's Accrued Benefit attributable to
insurance contracts purchased on his behalf under Article XI is: (CHOOSE (g) OR
(h))
[N/A](g) Subject to the vesting election under Options (a), (b) or (c).
[ ] (h) 100% Nonforfeitable at all times, irrespective of the vesting
election under Options (b) or (c)(2).
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/
RESTORATION OF FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in
Section 5.04(C) of the Plan: (CHOOSE (a) OR (b))
[ ] (a) Does not apply.
[X] (b) Will apply to determine the timing of forfeitures for 0% vested
Participants. A Participant is not a 0% vested Participant if he has a
Deferral Contributions Account.
5.06 YEAR OF SERVICE - VESTING.
VESTING COMPUTATION PERIOD. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods: (CHOOSE (a) OR (b))
[ ] (a) Plan Years.
[X] (b) Employment Years. An Employment Year is the 12 consecutive month
period measured from the Employee's Employment Commencement Date and each
successive 12 consecutive month period measured from each anniversary of
that Employment Commencement Date.
HOURS OF SERVICE. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (CHOOSE (c) OR (d))
[X] (c) 1,000 Hours of Service.
[ ] (d) __Hours of Service. [NOTE: THE HOURS OF SERVICE REQUIREMENT MAY
NOT EXCEED 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically
excludes the following Years of Service: (CHOOSE (a) OR AT LEAST ONE OF (b)
THROUGH (e))
[X] (a) None other than as specified in Section 5.08(a) of the Plan.
[ ] (b) Any Year of Service before the Participant attained the age of__.
Note: The age selected may not exceed age 18.]
[ ] (c) Any Year of Service during the period the Employer did not maintain
this Plan or a predecessor plan.
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<PAGE>
[ ] (d) Any Year of Service before a Break in Service if the number of
consecutive Breaks in Service equals or exceeds the greater of 5 or the
aggregate number of the Years of Service prior to the Break. This
exception applies only if the Participant is 0% vested in his Accrued
Benefit derived from Employer contributions at the time he has a Break in
Service. Furthermore, the aggregate number of Years of Service before a
Break in Service do not include any Years of Service not required to be
taken into account under this exception by reason of any prior Break in
Service.
[ ] (e) Any Year of Service earned prior to the effective date of ERISA if
the Plan would have disregarded that Year of Service on account of an
Employee's Separation from Service under a Plan provision in effect and
adopted before January 1, 1974.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
CODE Section 411(d)(6) PROTECTED BENEFITS. The elections under this Article VI
may not eliminate Code Section 411(d)(6) protected benefits. To the extent the
elections would eliminate a Code Section 411(d)(6) protected benefit, see
Section 13.02 of the Plan. Furthermore, if the elections liberalize the
optional forms of benefit under the Plan, the more liberal options apply on the
later of the adoption date or the Effective Date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
DISTRIBUTION DATE. A distribution date under the Plan means EACH BUSINESS DAY
OF THE PLAN YEAR . [NOTE: THE EMPLOYER MUST SPECIFY THE APPROPRIATE DATE(S).
THE SPECIFIED DISTRIBUTION DATES PRIMARILY ESTABLISH ANNUITY STARTING DATES AND
THE NOTICE AND CONSENT PERIODS PRESCRIBED BY THE PLAN. THE PLAN ALLOWS THE
TRUSTEE AN ADMINISTRATIVELY PRACTICABLE PERIOD OF TIME TO MAKE THE ACTUAL
DISTRIBUTION RELATING TO A PARTICULAR DISTRIBUTION DATE.]
NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. Subject to the limitations
of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (CHOOSE (a), (b), (c),
(d) OR (e))
[ ] (a) _____________________________________________of the___________________
Plan Year beginning after the Participant's Separation from Service.
[X] (b) AS SOON AS ADMINISTRATIVELY PRACTICABLE AFTER THE VALUATION DATE
following the Participant's Separation from Service.
[ ] (c) ____________________________________________________________of the Plan
Year after the Participant incurs__Break(s) in Service (as defined in
Article V).
[ ] (d) ____________________________________following the Participant's
attainment of Normal Retirement Age, but not earlier than______________days
following his Separation from Service.
[ ] (e) (SPECIFY)____________________________________________________________.
NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. See the elections under Section
6.03.
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DISABILITY. The distribution date, subject to Section 6.01(A)(3), is: (CHOOSE
(f), (g) OR (h))
[ ] (f) _____________________________________________________________ after the
Participant terminates employment because of disability.
[X] (g) The same as if the Participant had terminated employment without
disability.
[ ] (h) (SPECIFY) ___________________________________________________.
HARDSHIP. (CHOOSE (i) OR (j))
[X] (i) The Plan does not permit a hardship distribution to a Participant who
has separated from Service.
[ ] (j) The Plan permits a hardship distribution to a Participant who has
separated from Service in accordance with the hardship distribution policy
stated in: (CHOOSE (1), (2) OR (3))
[ ] (1) Section 6.01(A)(4) of the Plan.
[ ] (2) Section 14.11 of the Plan.
[ ] (3) The addendum to this Adoption Agreement, numbered Section 6.01.
DEFAULT ON A LOAN. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (CHOOSE (k), (l) OR (m))
[X] (k) Treats the default as a distributable event. The Trustee, at the
time of the default, will reduce the Participant's Nonforfeitable Accrued
Benefit by the lesser of the amount in default (plus accrued interest) or
the Plan's security interest in that Nonforfeitable Accrued Benefit. To
the extent the loan is attributable to the Participant's Deferral
Contributions Account, Qualified Matching Contributions Account or
Qualified Nonelective Contributions Account, the Trustee will not reduce
the Participant's Nonforfeitable Accrued Benefit unless the Participant
has separated from Service or unless the Participant has attained age 59
1/2.
[ ] (l) Does not treat the default as a distributable event. When an
otherwise distributable event first occurs pursuant to Section 6.01 or
Section 6.03 of the Plan, the Trustee will reduce the Participant's
Nonforfeitable Accrued Benefit by the lesser of the amount in default
(plus accrued interest) or the Plan's security interest in that
Nonforfeitable Accrued Benefit.
[ ] (m) (SPECIFY) ___________________________________________.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will
apply Section 6.02 of the Plan with the following modifications: (CHOOSE (a) OR
AT LEAST ONE OF (b), (c), (d) AND (e))
[ ] (a) No modifications.
[ ] (b) Except as required under Section 6.01 of the Plan, a lump sum
distribution is not available: __________________________________________.
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[ ] (c) An installment distribution: (CHOOSE (1) OR AT LEAST ONE OF (2) OR
(3))
[ ] (1) Is not available under the Plan.
[ ] (2) May not exceed the lesser of____years or the maximum period
permitted under Section 6.02.
[ ] (3) (SPECIFY)__________________________________________.
[ ] (d) The Plan permits the following annuity options:______________________.
Any Participant who elects a life annuity option is subject to the
requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See
Section 6.04(E). [NOTE: THE EMPLOYER MAY SPECIFY ADDITIONAL ANNUITY
OPTIONS IN AN ADDENDUM TO THIS ADOPTION AGREEMENT, NUMBERED 6.02(D).]
[X] (e) If the Plan invests in qualifying Employer securities, as described
in Section 10.03(F), a Participant eligible to elect distribution under
Section 6.03 may elect to receive that distribution in Employer securities
only in accordance with the provisions of the addendum to this Adoption
Agreement, numbered 6.02(e).
6.03 BENEFIT PAYMENT ELECTIONS.
PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit: (CHOOSE AT LEAST
ONE OF (a) THROUGH (c))
[ ] (a) As of any distribution date, but not earlier than_____________________
of the______Plan Year beginning after the Participant's Separation from
Service.
[X] (b) As of the following date(s): (CHOOSE AT LEAST ONE OF OPTIONS (1)
THROUGH (6))
[ ] (1) Any distribution date after the close of the Plan Year in which
the Participant attains Normal Retirement Age.
[ ] (2) Any distribution date following his Separation from Service with
the Employer.
[ ] (3) Any distribution date in the________Plan Year(s)
beginning after his Separation from Service.
[ ] (4) Any distribution date in the Plan Year after the Participant
incurs_____________Break(s) in Service (as defined in Article V).
[ ] (5) Any distribution date following attainment of age_____and
completion of at least___Years of Service (as defined in Article
V).
[X] (6) (SPECIFY) AS SOON AS ADMINISTRATIVELY PRACTICABLE AFTER THE
VALUATION DATE FOLLOWING A PARTICIPANT'S SEPARATION FROM SERVICE.
[ ] (c) (SPECIFY)_____________________________________________________________
________________________________________.
27
<PAGE>
The distribution events described in the election(s) made under Options
(a), (b) or (c) apply equally to all Accounts maintained for the Participant
unless otherwise specified in Option (c).
PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE - REGULAR MATCHING
CONTRIBUTIONS ACCOUNT AND EMPLOYER CONTRIBUTIONS ACCOUNT. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and Employer Contributions
Account prior to his Separation from Service: (CHOOSE (d) OR AT LEAST ONE OF (e)
THROUGH (h))
[ ] (d) No distribution options prior to Separation from Service.
[X] (e) Attainment of Specified Age. Until he retires, the Participant has a
continuing election to receive all or any portion of his Nonforfeitable
interest in these Accounts after he attains: (CHOOSE (1) OR (2))
[ ] (1) Normal Retirement Age.
[X] (2) 59 1/2 years of age and is at least 100% vested in these
Accounts.
[NOTE: IF THE PERCENTAGE IS LESS THAN 100%, SEE THE SPECIAL VESTING
FORMULA IN SECTION 5.03.]
[ ] (f) After a Participant has participated in the Plan for a period of not
less than___years and he is 100% vested in these Accounts, until he
retires, the Participant has a continuing election to receive all or any
portion of the Accounts. [NOTE: THE NUMBER IN THE BLANK SPACE MAY NOT BE
LESS THAN 5.]
[X] (g) Hardship. A Participant may elect a hardship distribution prior to
his Separation from Service in accordance with the hardship distribution
policy: (CHOOSE (1), (2) OR (3); (4) IS AVAILABLE ONLY AS AN ADDITIONAL
OPTION)
[ ] (1) Under Section 6.01(A)(4) of the Plan.
[X] (2) Under Section 14.11 of the Plan.
[ ] (3) Provided in the addendum to this Adoption Agreement, numbered
Section 6.03.
[X] (4) In no event may a Participant receive a hardship
distribution before he is at least 100% vested in these Accounts.
[NOTE: IF THE PERCENTAGE IN THE BLANK IS LESS THAN 100%, SEE THE
SPECIAL VESTING FORMULA IN SECTION 5.03.]
[ ] (h) (SPECIFY)_______________________________________________.
[NOTE: THE EMPLOYER MAY USE AN ADDENDUM, NUMBERED 6.03, TO PROVIDE ADDITIONAL
LANGUAGE AUTHORIZED BY OPTIONS (b)(6), (c), (g)(3) OR (h) OF THIS ADOPTION
AGREEMENT SECTION 6.03.]
PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE - DEFERRAL CONTRIBUTIONS
ACCOUNT, QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT AND QUALIFIED NONELECTIVE
CONTRIBUTIONS ACCOUNT. Subject to the restrictions of Article VI, the following
distribution options apply to a Participant's Deferral Contributions Account,
Qualified Matching Contributions Account and Qualified Nonelective Contributions
Account prior to his Separation from Service: (CHOOSE (i) OR AT LEAST ONE OF (j)
THROUGH (l))
[ ] (i) No distribution options prior to Separation from Service.
28
<PAGE>
[X] (j) Until he retires, the Participant has a continuing election to
receive all or any portion of these Accounts after he attains: (CHOOSE (1)
OR (2))
[ ] (1) The later of Normal Retirement Age or age 59 1/2.
[X] (2) Age 59 1/2 (at least 59 1/2).
[X] (k) Hardship. A Participant, prior to this Separation from Service, may
elect a hardship distribution from his Deferral Contributions Account in
accordance with the hardship distribution policy under Section 14.11 of
the Plan.
[ ] (l) (SPECIFY)___________________________________________________________.
[NOTE: OPTION (L) MAY NOT PERMIT IN SERVICE DISTRIBUTIONS PRIOR TO AGE 59
1/2 (OTHER THAN HARDSHIP) AND MAY NOT MODIFY THE HARDSHIP POLICY DESCRIBED
IN SECTION 14.11.]
SALE OF TRADE OR BUSINESS/SUBSIDIARY. If the Employer sells substantially all
of the assets (within the meaning of Code Section 409(d)(2)) used in a trade or
business or sells a subsidiary (within the meaning of Code Section 409(d)(3)), a
Participant who continues employment with the acquiring corporation is eligible
for distribution from his Deferral Contributions Account, Qualified Matching
Contributions Account and Qualified Nonelective Contributions Account: (CHOOSE
(m) OR (n))
[ ] (m) Only as described in this Adoption Agreement Section 6.03 for
distributions prior to Separation from Service.
[X] (n) As if he has a Separation from Service. After March 31, 1988, a
distribution authorized solely by reason of this Option (n) must
constitute a lump sum distribution, determined in a manner consistent with
Code SECTION 401(k)(10) and the applicable Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
The annuity distribution requirements of Section 6.04: (CHOOSE (a) OR (b))
[X] (a) Apply only to a Participant described in Section 6.04(E) of the Plan
(relating to the profit sharing exception to the joint and survivor
requirements).
[ ] (b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than
a distribution from a segregated Account and other than a corrective
distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan)
occurs more than 90 days after the most recent valuation date, the distribution
will include interest at: (CHOOSE (a), (b) OR (c))
[X] (a) -0-% per annum. [NOTE: THE PERCENTAGE MAY EQUAL 0%.]
[ ] (b) The 90 day Treasury bill rate in effect at the beginning of the
current valuation period.
[ ] (c) (SPECIFY)_________________________________________________.
29
<PAGE>
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant
to Section 14.12, to determine the allocation of net income, gain or loss:
(COMPLETE ONLY THOSE ITEMS, IF ANY, WHICH ARE APPLICABLE TO THE EMPLOYER'S PLAN)
[X] (a) For salary reduction contributions, the Advisory Committee will:
(CHOOSE (1), (2), (3), (4) OR (5))
[X] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach described in Section 14.12.
[ ] (3) Use the weighted average method described in Section
14.12,
based on a_______________________weighting period.
[ ] (4) Treat as part of the relevant Account at the beginning of the
valuation period % of the salary reduction contributions:
(CHOOSE (I) OR (II))
[ ] (i) made during that valuation period.
[ ] (ii) made by the following specified time:__________________.
[ ] (5) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(a).
[X] (b) For matching contributions, the Advisory Committee will: (CHOOSE (1),
(2), (3) OR (4))
[X] (1) Apply Section 9.11 without modification.
[ ] (2) Use the weighted average method described in Section 14.12,
based on a__________________________weighting period.
[ ] (3) Treat as part of the relevant Account at the beginning of the
valuation period___% of the matching contributions allocated
during the valuation period.
[ ] (4) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(b).
[X] (c) For Participant nondeductible contributions, the Advisory Committee
will: (CHOOSE (1), (2), (3), (4) OR (5))
[X] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach described in Section 14.12.
[ ] (3) Use the weighted average method described in Section 14.12,
based on a___________________________weighting period.
[ ] (4) Treat as part of the relevant Account at the beginning of the
valuation period___% of the Participant nondeductible
contributions: (CHOOSE (i) OR (ii))
[ ] (i) made during that valuation period.
30
<PAGE>
[ ] (ii) made by the following specified time:___________________.
[ ] (5) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(c)
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.03 INVESTMENT POWERS. Pursuant to Section 10.03[F] of the Plan, the
aggregate investments in qualifying Employer securities and in qualifying
Employer real property: (CHOOSE (a) OR (b))
[ ] (a) May not exceed 10% of Plan assets.
[X] (b) May not exceed 100% of Plan assets. [NOTE: THE PERCENTAGE MAY NOT
EXCEED 100%.]
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the Trustee
must value the Trust Fund on the following valuation date(s): (CHOOSE (a) OR
(b))
[ ] (a) No other mandatory valuation dates.
[X] (b) (SPECIFY) THE LAST DAY OF EACH MONTH_______________________.
31
<PAGE>
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated Effective
Date specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (CHOOSE WHICHEVER ELECTIONS APPLY)
[ ] (a) COMPENSATION DEFINITION. The Compensation definition of Section 1.12
(other than the $200,000 limitation) is effective for Plan Years beginning
after_____________________. [NOTE: MAY NOT BE EFFECTIVE LATER THAN THE
FIRST DAY OF THE FIRST PLAN YEAR BEGINNING AFTER THE EMPLOYER EXECUTES
THIS ADOPTION AGREEMENT TO RESTATE THE PLAN FOR THE TAX REFORM ACT OF
1986, IF APPLICABLE.]
[X] (b) ELIGIBILITY CONDITIONS. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years beginning
after 12-31-94.
[ ] (c) SUSPENSION OF YEARS OF SERVICE. The suspension of Years of Service
rule elected under Adoption Agreement Section 2.03 is effective for Plan
Years beginning after________________.
[X] (d) CONTRIBUTION/ALLOCATION FORMULA. The contribution formula elected
under Adoption Agreement Section 3.01 and the method of allocation elected
under Adoption Agreement Section 3.04 is effective for Plan Years
beginning after 12-31-93.
[X] (e) ACCRUAL REQUIREMENTS. The accrual requirements of Section 3.06 are
effective for Plan Years beginning after 12-31-94.
[X] (f) EMPLOYMENT CONDITION. The employment condition of Section 3.06 is
effective for Plan Years beginning after 12-31-94.
[ ] (g) ELIMINATION OF NET PROFITS. The requirement for the Employer not to
have net profits to contribute to this Plan is effective for Plan Years
beginning after__________________. [NOTE: THE DATE SPECIFIED MAY NOT BE
EARLIER THAN DECEMBER 31, 1985.]
[ ] (h) VESTING SCHEDULE. The vesting schedule elected under Adoption
Agreement Section 5.03 is effective for Plan Years beginning after_______.
[ ] (i) ALLOCATION OF EARNINGS. The special allocation provisions elected
under Adoption Agreement Section 9.11 are effective for Plan Years
beginning after___________________.
[X] (j) (SPECIFY) Section 6.02(e) IS EFFECTIVE FOR PLAN YEARS BEGINNING
AFTER 12/31/93.
For Plan Years prior to the special Effective Date, the terms of the Plan
prior to its restatement under this Adoption Agreement will control for purposes
of the designated provisions. A special Effective Date may not result in the
delay of a Plan provision beyond the permissible Effective Date under any
applicable law requirements.
32
<PAGE>
EXECUTION PAGE
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this
Plan and Trust, and in witness of its agreement, the Employer by its duly
authorized officers, has executed this Adoption Agreement, and the Trustee
(and Custodian, if applicable) signified its acceptance, on this 15TH day
of FEBRUARY , 1995.
Name and EIN of Employer: CORNERSTONE NATURAL GAS, INC. EIN: 74-1952257
Signed: /S/ KELLY JAMESON
-------------------------------------------
Vice President
Name(s) of Trustee: ALLIANCE TRUST COMPANY
Signed: /S/ VALERIE M. BEHNKERE
-------------------------------------------
VICE PRESIDENT AND TRUST OFFICER
-------------------------------------------
Name of Custodian: N/A
Signed:
-------------------------------------------
[NOTE: A TRUSTEE IS MANDATORY, BUT A CUSTODIAN IS OPTIONAL. SEE SECTION 10.03
OF THE PLAN.]
PLAN NUMBER. The 3-digit plan number the Employer assigns to this Plan for
ERISA reporting purposes (Form 5500 Series) is: 001.
USE OF ADOPTION AGREEMENT. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
MASTER PLAN SPONSOR. The Master Plan Sponsor identified on the first page of
the basic plan document will notify all adopting employers of any amendment of
this Master Plan or of any abandonment or discontinuance by the Master Plan
Sponsor of its maintenance of this Master Plan. For inquiries regarding the
adoption of the Master Plan, the Master Plan Sponsor's intended meaning of any
plan provisions or the effect of the opinion letter issued to the Master Plan
Sponsor, please contact the Master Plan Sponsor at the following
address and telephone number: P.O. BOX 2300, TULSA, OKLAHOMA 74192 PHONE:
(918) 588-6573.
RELIANCE ON OPINION LETTER. The Employer may not rely on the Master Plan
Sponsor's opinion letter covering this Adoption Agreement. For reliance on the
Plan's qualification, the Employer must obtain a determination letter from the
applicable IRS Key District office.
33
<PAGE>
CORNERSTONE NATURAL GAS, INC. EMPLOYEE SAVINGS PLAN
CHECKLIST OF EMPLOYER ADMINISTRATIVE ELECTIONS
The Master Plan permits the adopting employer (or the advisory
committee) to make certain administrative elections not reflected in
the adoption agreement. This form lists those administrative
elections and provides a means of recording your decision.
1. SECTION 1.09 - Definition of highly compensated employee. The
plan permits the employer to make a calendar year election for
purposes of identifying highly compensated employees.
[X] The plan will use the calendar year election.
[ ] The plan will not use the calendar year election.
2. SECTION 1.12(B) - Nondiscrimination definition of compensation.
When testing discrimination under the plan, the plan permits the
employer to elect to "gross up" an employees compensation by the
amount of his elective contributions for the year.
[X] The plan will "gross up" compensation for elective
contributions.
[ ] The plan will exclude elective contributions.
[NOTE: This election solely is for purposes of testing
discrimination. The election does not affect the employer's election
under Option (a) or (b) of Adoption Agreement Section 1.12. The
elections under Adoption Agreement Section 1.12 apply to the
definition of compensation for purposes of making allocations of
employer contributions and participant forfeitures.]
3. SECTION 4.03. Rollover contributions.
[X] The plan accepts rollover contributions.
[ ] The plan does not accept rollover contributions.
4. SECTION 7.04. If your plan has a discretionary trustee, Section
7.04 authorizes the employer to enter into a written agreement
with the trustee permitting the employer to direct investments.
Legal counsel should assist you in this arrangement.
5. SECTION 8.10. If the trustee agrees, the plan authorizes
participant direction of investment. The adopting employer, the
advisory committee and the trustee should agree to the conditions
and limitations of participant direction of investment. Legal
counsel should assist you with this election.
[X] The plan will permit participant direction of investment.
[ ] The plan will not permit participant direction of investment.
6. SECTION 9.04. The plan authorizes the advisory committee to adopt
a written loan policy to permit participant loans.
[X] The plan will permit participant loans.
[ ] The plan will not permit participant loans.
7. SECTION 11.01. The plan may invest in life insurance on behalf of
a participant's account, subject to participant consent.
34
<PAGE>
[ ] The plan will invest in life insurance contracts.
[X] The plan will not invest in life insurance contracts.
* * * * * * * * * * * * * * *
<PAGE>
ADDENDUM 6.02(e) TO
ADOPTION AGREEMENT #005
NONSTANDARDIZED CODE Section 401(k) PROFIT SHARING PLAN
Additional Provisions Concerning
Qualifying Employer Securities
The following additional provisions concerning qualifying Employer
securities are included as part of the Adoption Agreement completed by the
Employer, Cornerstone Natural Gas, Inc., in accordance with Section 6.02(e) of
the Adoption Agreement:
(A) Common Stock as Qualifying Employer Securities. The investment options
in Section 10.03[F] of the Plan include the ability to invest in "qualifying
employer securities", as defined in section 407(d)(5) of ERISA, which
specifically includes the common stock of the Employer, Cornerstone Natural Gas,
Inc., (hereinafter referred to as "Common Stock"). The Trustee is expressly
authorized to invest so much of the Trust Fund (up to 100% thereof as provided
in Section 10.03 of the Adoption Agreement) in Common Stock as is necessary to
invest Employer Contribution Accounts in Common Stock in accordance with the
directions of the Employer, Participants and Advisory Committee under Section
10.03[A] of the Plan. All cash dividends, stock dividends and stock splits
received by the Trustee with respect to Company Stock previously credited to a
Participant's Account shall be credited to that Account upon receipt by the
Trustee. Purchases of Common Stock shall be on the open market, in a private
placement or from the Employer or a Participating Employer. In making purchases
of Common Stock on the open market, the Trustee shall exercise its discretion
with respect to the timing of such purchases and the determination of the
average price assigned to shares of Common Stock purchased over such period of
time as the Trustee deems appropriate. If the Trustee is an officer, director
or affiliate of the Employer, any purchase of Common Stock on the open market
shall be effected in accordance with provisions of Rule 10b-18 of the Securities
Exchange Act of 1934. For purposes of allocating to a Participant's Account
shares of Company Stock contributed to the Plan as an Employer Contribution, the
value of such Company Stock shall be the lesser of, as reported on the American
Stock Exchange or other national securities exchange
<PAGE>
registered with the United States Securities and Exchange Commission, (i) the
closing price of the Company Stock on the trading day immediately preceding the
date the Company Stock is contributed to the Plan, or (ii) the average of the
closing prices of the Company Stock for the 20 consecutive trading days
immediately preceding the date the Company Stock is contributed to the Plan.
For purposes of purchases by the Employer of shares of Company Stock from the
Plan, the value of such Company Stock shall be the greater of, as reported on
the American Stock Exchange or other national securities exchange registered
with the United States Securities and Exchange Commission, (i) the closing price
of the Company Stock on the trading day immediately preceding the date the
Company Stock is purchased from the Plan, or (ii) the average of the closing
prices of the Company Stock for the 20 consecutive trading days immediately
preceding the date the Company Stock is purchased from the Plan. No commissions
or other fees shall be payable with respect to any transaction with the
Employer. The Trustee shall not be required to allocate or designate particular
certificates for Company Stock to the respective Accounts but shall hold the
certificates for all Company Stock in trust in appropriate Accounts in
proportion to their respective interests. (B) Voting of Shares. The Trustee
shall vote all shares of Company Stock held by the Trust. Each Participant
shall be entitled to direct the Trustee as to the manner in which all voting
rights with respect to any Company Stock allocated to such Participant's Account
are to be exercised. For this purpose, the Plan Administrator shall notify or
cause to notified each Participant of each annual or special meeting of the
shareholders of the Plan Sponsor, and of any other occasion for the exercise of
voting rights by such shareholders, not later than the date prior to such
meeting or other occasion on which the Plan Sponsor notifies its other
shareholders. The notification shall include a copy of any proxy solicitation
material and any other information which the Plan Sponsor distributes to
shareholders regarding the exercise of voting rights, together with a form
requesting instructions as to how the Participant's voting rights are to be
exercised. All such instructions from Participants shall be promptly forwarded
to the Trustee. The Trustee shall vote
2
<PAGE>
all shares held by the Trust for which the Trustee timely receives instructions
from Participants in accordance with such instructions. The Trustee shall vote
all other shares of Company Stock held by the Trust in the same proportion as it
votes those shares for which Participants' instructions are timely received.
(C) Distribution of Accrued Benefits. Distributions from the Plan shall be
made in the form of a single sum payment. The portion of a Participant's Vested
Interest invested in whole shares of Company Stock shall be distributed in the
form of such stock or, if the Participant (or in the event of his death, his
Beneficiary) so elects, in cash. If the participant (or his Beneficiary) elects
that the portion of the Vested Interest invested in whole shares of Company
Stock be distributed in cash, then such shares shall be sold by the Trustee as
soon as practicable either in the open market or to the Employer and the
proceeds shall be included in such Participant's Accrued Benefit payable. In
making sales of Common Stock on the open market, the Trustee shall exercise its
discretion with respect to the timing of such sales. If Common Stock is sold to
the Employer or a Participating Employer, the sales price shall be determined in
the manner set forth in subsection A above for determine the price of Common
Stock purchased from the Employer or a Participating Employer. No commissions
or other fees shall be payable with respect to any transaction with the Employer
or a Participating Employer. The remainder of the Participant's Vested Interest
(including fractional shares of Company Stock) shall be distributed in cash.
Subject to such uniform and nondiscriminatory rules and procedures as may be
established from time to time by the Administrative Committee in its absolute
discretion, distributions and withdrawals from the Plan shall be made on the
basis of the balance of the Participant's Account as of the valuation date
prescribed in Section 10.14 preceding the date of the distribution or
withdrawal, plus the amount of any subsequently credited contributions. All
distributions are subject to the provisions of Article VI.
(D) Tender Offers for Common Stock. Upon commencement of a tender offer
for Common Stock, the Employer shall notify each Participant of such tender
offer. The Employer
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shall utilize its best efforts to distribute or cause to be distributed to each
Participant all such information as is distributed to holders of Common Stock in
connection with such tender offer and shall provide a means by which each
Participant can confidentially instruct the Trustee concerning the Common Stock
allocated to such Participant's Accounts. For this purpose, the number of
shares of Common Stock deemed "allocated" to any Participant's Accounts shall be
determined as of the most recent preceding allocation date of which allocation
to and adjustment of Accounts has been completed in accordance with Section
14.06 of the Plan. The Employer shall provide the Trustee with a copy of all
materials provided to Participants and shall certify to the Trustee that all
such materials have been mailed or otherwise sent to all Participants.
Each Participant shall have the right to instruct the Trustee as to the
manner in which the Trustee is to respond to the tender offer for any or all of
the Common Stock then allocated to such Participant's Accounts. Instructions
from a Participant to the Trustee concerning the tender of Common Stock shall be
communicated in writing or similar means. The Trustee shall respond to the
tender offer with respect to such Common Stock as instructed by the Participant.
The Trustee shall not tender Common Stock then allocated to a articipant's
Accounts for which it has received no instructions from the Participant.
The Trustee shall tender that number of shares of Common Stock not then
allocated to Participants' Accounts which is determined by multiplying the total
number of shares of Common Stock not then allocated to Participants' Accounts by
a fraction, the numerator of which is the number of shares of Common Stock then
allocated to Participants' Accounts for which the Trustee has received
instructions from Participants to tender (and such instructions have not been
withdrawn as of the date of determination) and the denominator of which is the
total number of shares of Common Stock then allocated to Participants' Accounts.
A Participant who has directed the Trustee to tender any or all of the
shares of Common Stock credited to such Participant's Accounts may, at any time
prior to the tender offer withdrawal deadline instruct the Trustee to withdraw,
and the Trustee shall withdraw, such shares
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from the tender offer prior to the tender offer withdrawal deadline. Prior to
such withdrawal deadline, if any Common Stock not credited to Participants'
Accounts has been tendered, the Trustee shall redetermine the number of shares
of Common Stock which would be tendered if the date of such withdrawal were the
date of determination as described in the immediately preceding paragraph, and
withdraw the number of shares of Common Stock not credited to Participants'
Accounts necessary to reduce the number of tendered shares of Common Stock not
credited to Participants' Accounts to the number so redetermined. A Participant
shall not be limited as to the number of instructions to tender or withdraw that
the Participant may give to the Trustee.
An instruction by a Participant to the Trustee to tender the shares of
Common Stock credited to such Participant's Accounts shall not be considered a
written election by the Participant to withdraw, or have distributed, any or all
of his Accounts which are subject to withdrawal. The Trustee shall advise the
Advisory Committee to credit, to the Participant's Accounts from which the
tendered shares were taken, the proceeds received by the Trustee in exchange for
the shares of Common Stock, if any, so tendered from each such Account.
Any instruction or other communication by a Participant to the Trustee
concerning any tender offer matter shall be held in confidence by the Trustee
and shall not be divulged to the Employer or to any officer or employee thereof
nor to any other person.
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BANK OF OKLAHOMA, N.A.
DEFINED CONTRIBUTION MASTER PLAN
AND
TRUST AGREEMENT
1
<PAGE>
TABLE OF CONTENTS
ALPHABETICAL LISTING OF DEFINITIONS . . . . . . . . . . . . v
ARTICLE I, DEFINITIONS
1.01 Employer . . . . . . . . . . . . . . . . . . . . 1.01
1.02 Trustee . . . . . . . . . . . . . . . . . . . . . 1.01
1.03 Plan . . . . . . . . . . . . . . . . . . . . . . 1.01
1.04 Adoption Agreement . . . . . . . . . . . . . . . 1.01
1.05 Plan Administrator . . . . . . . . . . . . . . . 1.02
1.06 Advisory Committee . . . . . . . . . . . . . . . 1.02
1.07 Employee . . . . . . . . . . . . . . . . . . . . 1.02
1.08 Self-Employed Individual/Owner-Employee . . . . . 1.02
1.09 Highly Compensated Employee . . . . . . . . . . . 1.02
1.10 Participant . . . . . . . . . . . . . . . . . . . 1.03
1.11 Beneficiary . . . . . . . . . . . . . . . . . . . 1.03
1.12 Compensation . . . . . . . . . . . . . . . . . . 1.03
1.13 Earned Income . . . . . . . . . . . . . . . . . . 1.05
1.14 Account . . . . . . . . . . . . . . . . . . . . . 1.05
1.15 Accrued Benefit . . . . . . . . . . . . . . . . . 1.05
1.16 Nonforfeitable . . . . . . . . . . . . . . . . . 1.05
1.17 Plan Year/Limitation Year . . . . . . . . . . . . 1.05
1.18 Effective Date . . . . . . . . . . . . . . . . . 1.05
1.19 Plan Entry Date . . . . . . . . . . . . . . . . . 1.05
1.20 Accounting Date . . . . . . . . . . . . . . . . . 1.05
1.21 Trust . . . . . . . . . . . . . . . . . . . . . . 1.05
1.22 Trust Fund . . . . . . . . . . . . . . . . . . . 1.05
1.23 Nontransferable Annuity . . . . . . . . . . . . . 1.05
1.24 ERISA . . . . . . . . . . . . . . . . . . . . . . 1.06
1.25 Code . . . . . . . . . . . . . . . . . . . . . . 1.06
1.26 Service . . . . . . . . . . . . . . . . . . . . . 1.06
1.27 Hour of Service . . . . . . . . . . . . . . . . . 1.06
1.28 Disability . . . . . . . . . . . . . . . . . . . 1.07
1.29 Service for Predecessor Employer . . . . . . . . 1.07
1.30 Related Employers . . . . . . . . . . . . . . . . 1.07
1.31 Leased Employees . . . . . . . . . . . . . . . . 1.08
1.32 Special Rules for Owner-Employers . . . . . . . . 1.08
1.33 Determination of Top Heavy Status . . . . . . . . 1.09
1.34 Paired Plans . . . . . . . . . . . . . . . . . . 1.10
ARTICLE II, EMPLOYEE PARTICIPANTS
2.01 Eligibility . . . . . . . . . . . . . . . . . . . 2.01
2.02 Year of Service - Participation . . . . . . . . . 2.01
2.03 Break in Service - Participation . . . . . . . . 2.01
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2.04 Participation upon Re-employment . . . . . . . . 2.02
2.05 Change in Employee Status . . . . . . . . . . . . 2.02
2.06 Election Not to Participate . . . . . . . . . . . 2.02
ARTICLE III, EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 Amount . . . . . . . . . . . . . . . . . . . . . 3.01
3.02 Determination of Contribution . . . . . . . . . . 3.01
3.03 Time of Payment of Contribution . . . . . . . . . 3.01
3.04 Contribution Allocation . . . . . . . . . . . . . 3.01
3.05 Forfeiture Allocation . . . . . . . . . . . . . . 3.03
3.06 Accrual of Benefit . . . . . . . . . . . . . . . 3.03
3.07 - 3.16 Limitations on Allocations . . . . . . . . 3.05
3.17 Special Allocation Limitation . . . . . . . . . . 3.07
3.18 Defined Benefit Plan Limitation . . . . . . . . . 3.07
3.19 Definitions - Article III . . . . . . . . . . . . 3.07
ARTICLE IV, PARTICIPANT CONTRIBUTIONS
4.01 Participant Nondeductible Contributions . . . . . 4.01
4.02 Participant Deductible Contributions . . . . . . 4.01
4.03 Participant Rollover Contributions . . . . . . . 4.01
4.04 Participant Contribution - Forfeitability . . . . 4.02
4.05 Participant Contribution - Withdrawal/Distribution 4.02
4.06 Participant Contribution - Accrued Benefit . . . 4.02
ARTICLE V, TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 Normal Retirement Age . . . . . . . . . . . . . . 5.01
5.02 Participant Disability or Death . . . . . . . . . 5.01
5.03 Vesting Schedule . . . . . . . . . . . . . . . . 5.01
5.04 Cash-Out Distributions to Partially-Vested
Participants/Restoration of Forfeited Accrued
Benefit 5.01 . . . . . . . . . . . . . . . . . . 5.04
5.05 Segregated Account for Repaid Amount . . . . . . 5.03
5.06 Year of Service - Vesting . . . . . . . . . . . . 5.03
5.07 Break in Service - Vesting . . . . . . . . . . . 5.03
5.08 Included Years of Service - Vesting . . . . . . . 5.03
5.09 Forfeiture Occurs . . . . . . . . . . . . . . . . 5.03
ARTICLE VI, TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 Time of Payment of Accrued Benefit . . . . . . . 6.01
6.02 Method of Payment of Accrued Benefit . . . . . . 6.03
6.03 Benefit Payment Elections . . . . . . . . . . . . 6.05
6.04 Annuity Distributions to Participants and
Surviving Spouses . . . . . . . . . . . . . . . . 6.06
6.05 Waiver Election - Qualified Joint and Survivor
Annuity . . . . . . . . . . . . . . . . . . . . . 6.07
6.06 Waiver Election - Preretirement Survivor Annuity. 6.08
6.07 Distributions Under Domestic Relations Orders . . 6.09
2
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ARTICLE VII, EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 Information to Committee . . . . . . . . . . . . 7.01
7.02 No Liability . . . . . . . . . . . . . . . . . . 7.01
7.03 Indemnity of Plan Administrator and Committee . . 7.01
7.04 Employer Direction of Investment . . . . . . . . 7.01
7.05 Amendment to Vesting Schedule . . . . . . . . . . 7.01
ARTICLE VIII, PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 Beneficiary Designation . . . . . . . . . . . . . 8.01
8.02 No Beneficiary Designation/Death of Beneficiary . 8.01
8.03 Personal Data to Committee . . . . . . . . . . . 8.02
8.04 Address for Notification . . . . . . . . . . . . 8.02
8.05 Assignment or Alienation . . . . . . . . . . . . 8.02
8.06 Notice of Change in Terms . . . . . . . . . . . . 8.02
8.07 Litigation Against the Trust . . . . . . . . . . 8.02
8.08 Information Available . . . . . . . . . . . . . . 8.02
8.09 Appeal Procedure for Denial of Benefits . . . . . 8.02
8.10 Participant Direction of Investment . . . . . . . 8.03
ARTICLE IX, ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
9.01 Members' Compensation, Expenses . . . . . . . . . 9.01
9.02 Term . . . . . . . . . . . . . . . . . . . . . . 9.01
9.03 Powers . . . . . . . . . . . . . . . . . . . . . 9.01
9.04 General . . . . . . . . . . . . . . . . . . . . . 9.01
9.05 Funding Policy . . . . . . . . . . . . . . . . . 9.02
9.06 Manner of Action . . . . . . . . . . . . . . . . 9.02
9.07 Authorized Representative . . . . . . . . . . . . 9.02
9.08 Interested Member . . . . . . . . . . . . . . . . 9.02
9.09 Individual Accounts . . . . . . . . . . . . . . . 9.02
9.10 Value of Participant's Accrued Benefit . . . . . 9.02
9.11 Allocation and Distribution of Net Income Gain or
Loss. . . . . . . . . . . . . . . . . . . . . . . 9.03
9.12 Individual Statement . . . . . . . . . . . . . . 9.03
9.13 Account Charged . . . . . . . . . . . . . . . . . 9.03
9.14 Unclaimed Account Procedure . . . . . . . . . . . 9.04
ARTICLE X, CUSTODIAN/TRUSTEE, POWERS AND DUTIES
10.01 Acceptance . . . . . . . . . . . . . . . . . . . 10.01
10.02 Receipt of Contributions . . . . . . . . . . . . 10.01
10.03 Investment Powers . . . . . . . . . . . . . . . . 10.01
10.04 Records and Statements . . . . . . . . . . . . . 10.05
10.05 Fees and Expenses from Fund . . . . . . . . . . . 10.06
10.06 Parties to Litigation . . . . . . . . . . . . . . 10.06
10.07 Professional Agents . . . . . . . . . . . . . . . 10.06
10.08 Distribution of Cash or Property . . . . . . . . 10.06
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10.09 Distribution Directions . . . . . . . . . . . . . 10.06
10.10 Third Party/Multiple Trustees . . . . . . . . . . 10.06
10.11 Resignation . . . . . . . . . . . . . . . . . . . 10.06
10.12 Removal . . . . . . . . . . . . . . . . . . . . . 10.07
10.13 Interim Duties and Successor Trustee . . . . . . 10.07
10.14 Valuation of Trust . . . . . . . . . . . . . . . 10.07
10.15 Limitation on Liability - If Investment Manager,
Ancillary Trustee or Independent Fiduciary . . . 10.07
10.16 Investment in Group Trust Fund . . . . . . . . . 10.07
10.17 Appointment of Ancillary Trustee or Independent
Fiduciary . . . . . . . . . . . . . . . . . . . . 10.08
ARTICLE XI, PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY
11.01 Insurance Benefit . . . . . . . . . . . . . . . . 11.01
11.02 Limitation on Life Insurance Protection . . . . . 11.01
11.03 Definitions . . . . . . . . . . . . . . . . . . . 11.02
11.04 Dividend Plan . . . . . . . . . . . . . . . . . . 11.02
11.05 Insurance Company Not a Party to Agreement . . . 11.02
11.06 Insurance Company Not Responsible for Trustee's
Actions . . . . . . . . . . . . . . . . . . . . . 11.03
11.07 Insurance Company Reliance on Trustee's Signature 11.03
11.08 Acquittance . . . . . . . . . . . . . . . . . . . 11.03
11.09 Duties of Insurance Company . . . . . . . . . . . 11.03
ARTICLE XII, MISCELLANEOUS
12.01 Evidence . . . . . . . . . . . . . . . . . . . . 12.01
12.02 No Responsibility for Employer Action . . . . . . 12.01
12.03 Fiduciaries Not Insurers . . . . . . . . . . . . 12.01
12.04 Waiver of Notice . . . . . . . . . . . . . . . . 12.01
12.05 Successors . . . . . . . . . . . . . . . . . . . 12.01
12.06 Word Usage . . . . . . . . . . . . . . . . . . . 12.01
12.07 State Law . . . . . . . . . . . . . . . . . . . . 12.01
12.08 Employer's Right to Participate . . . . . . . . . 12.01
12.09 Employment Not Guaranteed . . . . . . . . . . . . 12.02
ARTICLE XIII, EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
13.01 Exclusive Benefit . . . . . . . . . . . . . . . . 13.01
13.02 Amendment By Employer . . . . . . . . . . . . . . 13.01
13.03 Amendment By Master Plan Sponsor . . . . . . . . 13.02
13.04 Discontinuance . . . . . . . . . . . . . . . . . 13.02
13.05 Full Vesting on Termination . . . . . . . . . . . 13.02
13.06 Merger/Direct Transfer . . . . . . . . . . . . . 13.02
13.07 Termination . . . . . . . . . . . . . . . . . . . 13.03
ARTICLE XIV, CODE SECTION 401(K) & CODE SECTION 401(M) ARRANGEMENTS
14.01 Application . . . . . . . . . . . . . . . . . . . 14.01
14.02 Code Section 401(k) Arrangement . . . . . . . . . 14.01
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14.03 Definitions . . . . . . . . . . . . . . . . . . . 14.02
14.04 Matching Contributions/Employee Contributions . . 14.03
14.05 Time of Payment of Contributions . . . . . . . . 14.03
14.06 Special Allocation Provisions - Deferral
Contributions, Matching Contributions and
Qualified Nonelective Contributions . . . . . . . 14.04
14.07 Annual Elective Deferral Limitation . . . . . . . 14.05
14.08 Actual Deferral Percentage ("ADP") Test . . . . . 14.06
14.09 Nondiscrimination Rules for Employer Matching
Contributions and Participant Nondeductible
Contributions . . . . . . . . . . . . . . . . . . 14.07
14.10 Multiple Use Limitation . . . . . . . . . . . . . 14.09
14.11 Distribution Restrictions . . . . . . . . . . . . 14.10
14.12 Special Allocation Rules . . . . . . . . . . . . 14.11
ARTICLE A- APPENDIX TO BASIC PLAN DOCUMENT . . . . . . . A-1
ARTICLE B - APPENDIX TO BASIC PLAN DOCUMENT . . . . . . . B-1
5
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ALPHABETICAL LISTING OF DEFINITIONS
PLAN DEFINITION SECTION REFERENCE
(PAGE NUMBER)
100% Limitation . . . . . . . . . . . . . . . . . 3.19(l) (3.09)
Account . . . . . . . . . . . . . . . . . . . . . . . 1.14 (1.05)
Accounting Date . . . . . . . . . . . . . . . . . . . 1.20 (1.05)
Accrued Benefit . . . . . . . . . . . . . . . . . . . 1.15 (1.05)
Actual Deferral Percentage ("ADP") Test . . . . . . 14.08 (14.06)
Adoption Agreement . . . . . . . . . . . . . . . . . 1.04 (1.01)
Advisory Committee . . . . . . . . . . . . . . . . . 1.06 (1.02)
Annual Addition . . . . . . . . . . . . . . . . . 3.19(a) (3.07)
Average Contribution Percentage Test . . . . . . . 14.09 (14.07)
Beneficiary . . . . . . . . . . . . . . . . . . . . . 1.11 (1.03)
Break in Service for Eligibility Purposes . . . . . . 2.03 (2.01)
Break in Service for Vesting Purposes . . . . . . . . 5.07 (5.03)
Cash-out Distribution . . . . . . . . . . . . . . . . 5.04 (5.01)
Code . . . . . . . . . . . . . . . . . . . . . . . . 1.25 (1.06)
Code Section 411(d)(6) Protected Benefits . . . . . 13.02 (13.01)
Compensation . . . . . . . . . . . . . . . . . . . . 1.12 (1.03)
Compensation for Code Section 401(k) Purposes . 14.03(f) (14.02)
Compensation for Code Section 415 Purposes . . . 3.19(b) (3.07)
Compensation for Top Heavy Purposes . . . . . . 1.33(B)(3) (1.10)
Contract(s) . . . . . . . . . . . . . . . . . . 11.03(c) (11.02)
Custodian Designation . . . . . . . . . . . . . 10.03[B] (10.02)
Deemed Cash-out Rule . . . . . . . . . . . . . . 5.04(C) (5.02)
Deferral Contributions . . . . . . . . . . . . 14.03(g) (14.02)
Deferral Contributions Account . . . . . . . . . . 14.06 (14.04)
Defined Benefit Plan . . . . . . . . . . . . . . 3.19(i) (3.08)
Defined Benefit Plan Fraction . . . . . . . . . . 3.19(j) (3.08)
Defined Contribution Plan . . . . . . . . . . . . 3.19(h) (3.08)
Defined Contribution Plan Fraction . . . . . . . 3.19(k) (3.09)
Determination Date . . . . . . . . . . . . . . 1.33(B)(7) (1.10)
Disability . . . . . . . . . . . . . . . . . . . . . 1.28 (1.07)
Distribution Date . . . . . . . . . . . . . . . . . . 6.01 (6.01)
Distribution Restrictions . . . . . . . . . . . 14.03(m) (14.03)
Earned Income . . . . . . . . . . . . . . . . . . . . 1.13 (1.05)
Effective Date . . . . . . . . . . . . . . . . . . . 1.18 (1.05)
Elective Deferrals . . . . . . . . . . . . . . 14.03(h) (14.02)
Elective Transfer . . . . . . . . . . . . . . . 13.06(A) (13.02)
Eligible Employee . . . . . . . . . . . . . . . 14.03(c) (14.02)
Employee . . . . . . . . . . . . . . . . . . . . . . 1.07 (1.02)
6
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Employee Contributions . . . . . . . . . . . . 14.03(n) (14.03)
Employer . . . . . . . . . . . . . . . . . . . . . . 1.01 (1.01)
Employer Contribution Account . . . . . . . . . . . 14.06 (14.04)
Employer for Code Section 415 Purposes . . . . . 3.19(c) (3.08)
Employer for Top Heavy Purposes . . . . . . . . 1.33(B)(6) (1.10)
Employment Commencement Date . . . . . . . . . . . . 2.02 (2.01)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . 1.24 (1.06)
Excess Aggregate Contributions . . . . . . . . . . 14.09 (14.07)
Excess Amount . . . . . . . . . . . . . . . . . . 3.19(d) (3.08)
Excess Contributions . . . . . . . . . . . . . . . 14.08 (14.06)
Exempt Participant . . . . . . . . . . . . . . . . . 8.01 (8.01)
Forfeiture Break in Service . . . . . . . . . . . . . 5.08 (5.03)
Group Trust Fund . . . . . . . . . . . . . . . . . 10.16 (10.07)
Hardship . . . . . . . . . . . . . . . . . . . 6.01(A)(4) (6.02)
Hardship for Code Section 401(k) Purposes . . . . . 14.11 (14.10)
Highly Compensated Employee . . . . . . . . . . . . . 1.09 (1.02)
Highly Compensated Group . . . . . . . . . . . 14.03(d) (14.02)
Hour of Service . . . . . . . . . . . . . . . . . . . 1.27 (1.06)
Incidental Insurance Benefits . . . . . . . . . . . 11.01 (11.01)
Insurable Participant . . . . . . . . . . . . . 11.03(d) (11.02)
Investment Manager . . . . . . . . . . . . . . . 9.04(i) (9.01)
Issuing Insurance Company . . . . . . . . . . . 11.03(b) (11.02)
Joint and Survivor Annuity . . . . . . . . . . . 6.04(A) (6.06)
Key Employee . . . . . . . . . . . . . . . . . 1.33(B)(1) (1.10)
Leased Employees . . . . . . . . . . . . . . . . . . 1.31 (1.08)
Limitation Year . . . . . . . 1.17 and 3.19(e) (1.05) and (3.08)
Loan Policy . . . . . . . . . . . . . . . . . . . 9.04(A) (9.02)
Mandatory Contributions . . . . . . . . . . . . . . 14.04 (14.03)
Mandatory Contributions Account . . . . . . . . . . 14.04 (14.03)
Master or Prototype Plan . . . . . . . . . . . . 3.19(f) (3.08)
Matching Contributions . . . . . . . . . . . . 14.03(i) (14.03)
Maximum Permissible Amount . . . . . . . . . . . 3.19(g) (3.08)
Minimum Distribution Incidental Benefit (MDIB) . 6.02(A) (6.03)
Multiple Use Limitation . . . . . . . . . . . . . . 14.10 (14.09)
Named Fiduciary . . . . . . . . . . . . . . . . 10.03[D] (10.04)
Nonelective Contributions . . . . . . . . . . . 14.03(j) (14.03)
Nonforfeitable . . . . . . . . . . . . . . . . . . . 1.16 (1.05)
Nonhighly Compensated Employee . . . . . . . . 14.03(b) (14.02)
Nonhighly Compensated Group . . . . . . . . . . 14.03(e) (14.02)
Non-Key Employee . . . . . . . . . . . . . . . 1.33(B)(2) (1.10)
Nontransferable Annuity . . . . . . . . . . . . . . . 1.23 (1.05)
Normal Retirement Age . . . . . . . . . . . . . . . . 5.01 (5.01)
Owner-Employee . . . . . . . . . . . . . . . . . . . 1.08 (1.02)
Paired Plans . . . . . . . . . . . . . . . . . . . . 1.34 (1.10)
Participant . . . . . . . . . . . . . . . . . . . . . 1.10 (1.03)
7
<PAGE>
Participant Deductible Contributions . . . . . . . . 4.02 (4.01)
Participant Forfeiture . . . . . . . . . . . . . . . 3.05 (3.03)
Participant Loans . . . . . . . . . . . . . . . 10.03[E] (10.05)
Participant Nondeductible Contributions . . . . . . . 4.01 (4.01)
Permissive Aggregation Group . . . . . . . . . 1.33(B)(5) (1.10)
Plan . . . . . . . . . . . . . . . . . . . . . . . . 1.03 (1.01)
Plan Administrator . . . . . . . . . . . . . . . . . 1.05 (1.02)
Plan Entry Date . . . . . . . . . . . . . . . . . . . 1.19 (1.05)
Plan Year . . . . . . . . . . . . . . . . . . . . . . 1.17 (1.05)
Policy . . . . . . . . . . . . . . . . . . . . 11.03(a) (11.02)
Predecessor Employer . . . . . . . . . . . . . . . . 1.29 (1.07)
Preretirement Survivor Annuity . . . . . . . . . 6.04(B) (6.06)
Qualified Domestic Relations Order . . . . . . . . . 6.07 (6.09)
Qualified Matching Contributions . . . . . . . 14.03(k) (14.03)
Qualified Nonelective Contributions . . . . . . 14.03(l) (14.03)
Qualifying Employer Real Property . . . . . . . 10.03[F] (10.05)
Qualifying Employer Securities . . . . . . . . 10.03[F] (10.05)
Related Employers . . . . . . . . . . . . . . . . . . 1.30 (1.07)
Required Aggregation Group . . . . . . . . . . 1.33(B)(4) (1.10)
Required Beginning Date . . . . . . . . . . . . . 6.01(B) (6.02)
Rollover Contributions . . . . . . . . . . . . . . . 4.03 (4.01)
Self-Employed Individual . . . . . . . . . . . . . . 1.08 (1.02)
Service . . . . . . . . . . . . . . . . . . . . . . . 1.26 (1.06)
Term Life Insurance Contract . . . . . . . . . . . 11.03 (11.02)
Top Heavy Minimum Allocation . . . . . . . . . . 3.04(B) (3.01)
Top Heavy Ratio . . . . . . . . . . . . . . . . . . . 1.33 (1.09)
Trust . . . . . . . . . . . . . . . . . . . . . . . . 1.21 (1.05)
Trustee . . . . . . . . . . . . . . . . . . . . . . . 1.02 (1.01)
Trustee Designation . . . . . . . . . . . . . . 10.03[A] (10.01)
Trust Fund . . . . . . . . . . . . . . . . . . . . . 1.22 (1.05)
Weighted Average Allocation Method . . . . . . . . 14.12 (14.11)
Year of Service for Eligibility Purposes . . . . . . 2.02 (2.01)
Year of Service for Vesting Purposes . . . . . . . . 5.06 (5.03)
8
<PAGE>
BANK OF OKLAHOMA, N.A.
DEFINED CONTRIBUTION MASTER PLAN AND TRUST AGREEMENT
BASIC PLAN DOCUMENT # 01
BANK OF OKLAHOMA, N.A., in its capacity as Master Plan Sponsor, establishes
this Master Plan intended to conform to and qualify under Section 401 and
Section 501 of the Internal Revenue Code of 1986, as amended. An Employer
establishes a Plan and Trust under this Master Plan by executing an Adoption
Agreement. If the Employer adopts this Plan as a restated Plan in substitution
for, and in amendment of, an existing plan, the provisions of this Plan, as a
restated Plan, apply solely to an Employee whose employment with the Employer
terminates on or after the restated Effective Date of the Employer's Plan. If an
Employee's employment with the Employer terminates prior to the restated
Effective Date, that Employee is entitled to benefits under the Plan as the Plan
existed on the date of the Employee's termination of employment.
ARTICLE I
DEFINITIONS
1.01 "Employer" means each employer who adopts this Plan by executing an
Adoption Agreement.
1.02 "Trustee" means the person or persons who as Trustee execute the
Employer's Adoption Agreement, or any successor in office who in writing accepts
the position of Trustee. The Employer must designate in its Adoption Agreement
whether the Trustee will administer the Trust as a discretionary Trustee or as a
nondiscretionary Trustee. If a person acts as a discretionary Trustee, the
Employer also may appoint a Custodian. See Article X. If the Master Plan Sponsor
is a bank, savings and loan, credit union or similar financial institution, a
person other than the Master Plan Sponsor (or its affiliate) may not serve as
Trustee or as Custodian of the Employer's Plan without the written consent of
the Master Plan Sponsor.
1.03 "Plan" means the retirement plan established or continued by the
Employer in the form of this Agreement, including the Adoption Agreement under
which the Employer has elected to participate in this Master Plan. The Employer
must designate the name of the Plan in its Adoption Agreement. An Employer may
execute more than one Adoption Agreement offered under this Master Plan, each of
which will constitute a separate Plan and Trust established or continued by that
Employer. The Plan and the Trust created by each adopting Employer is a separate
Plan and a separate Trust, independent from the plan and the trust of any other
employer adopting this Master Plan. All section references within the Plan are
Plan section references unless the context clearly indicates otherwise.
1.04 "Adoption Agreement" means the document executed by each Employer
adopting this Master Plan. The terms of this Master Plan as modified by the
terms of an adopting Employer's Adoption Agreement constitute a separate Plan
and Trust to be construed as a single Agreement. Each elective provision of the
Adoption Agreement corresponds by section reference to the section of the Plan
which grants the election. Each Adoption Agreement offered under this Master
Plan is either a Nonstandardized Plan or a Standardized Plan, as identified in
the preamble to that Adoption Agreement.
1.1
<PAGE>
The provisions of this Master Plan apply equally to Nonstandardized Plans and to
Standardized Plans unless otherwise specified.
1.2
<PAGE>
1.05 "Plan Administrator" is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition to his
other duties, the Plan Administrator has full responsibility for compliance with
the reporting and disclosure rules under ERISA as respects this Agreement.
1.06 "Advisory Committee" means the Employer's Advisory Committee as from
time to time constituted.
1.07 "Employee" means any employee (including a Self-Employed Individual)
of the Employer. The Employer must specify in its Adoption Agreement any
Employee, or class of Employees, not eligible to participate in the Plan. If the
Employer elects to exclude collective bargaining employees, the exclusion
applies to any employee of the Employer included 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 one or more employers unless the
collective bargaining agreement requires the employee to be included within the
Plan. The term "employee representatives" does not include any organization more
than half the members of which are owners, officers, or executives of the
Employer.
1.08 "Self-Employed Individual/Owner-Employee." "Self-Employed Individual"
means an individual who has Earned Income (or who would have had Earned Income
but for the fact that the trade or business did not have net earnings) for the
taxable year from the trade or business for which the Plan is established.
"Owner-Employee" means a Self-Employed Individual who is the sole proprietor in
the case of a sole proprietorship. If the Employer is a partnership,
"Owner-Employee" means a Self-Employed Individual who is a partner and owns more
than 10% of either the capital or profits interest of the partnership.
1.09 "Highly Compensated Employee" means an Employee who, during the Plan
Year or during the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the constructive
ownership rules of Code SECTION 318, and applying the principles of Code
SECTION 318, for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the Commissioner of
Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the Commissioner of
Internal Revenue for the relevant year) and is part of the top-paid 20% group
of employees (based on Compensation for the relevant year); or
(d) has Compensation in excess of 50% of the dollar amount prescribed in Code
SECTION 415(b)(1)(A) (relating to defined benefit plans) and is an officer of
the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the Plan
Year but does not satisfy clause (b), (c) or (d) during the preceding 12-month
period and does not satisfy clause (a) in either period, the Employee is a
Highly Compensated Employee only if he is one of the 100 most highly compensated
Employees for the Plan Year. The number of officers taken into account under
clause (d) will not exceed the greater of 3 or 10% of the total number (after
application of the Code SECTION 414(q) exclusions) of Employees, but no more
than 50 officers. If no Employee satisfies the Compensation requirement in
clause (d) for the relevant year, the Advisory Committee will treat the highest
paid officer as satisfying clause (d) for that year.
1.3
<PAGE>
For purposes of this Section 1.09, "Compensation" means Compensation as
defined in Section 1.12, except any exclusions from Compensation elected in the
Employer's Adoption Agreement Section 1.12 do not apply, and Compensation must
include "elective contributions" (as defined in Section 1.12). The Advisory
Committee must make the determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of the top paid 20%
group, the top 100 paid Employees, the number of officers includible in clause
(d) and the relevant Compensation, consistent with Code SECTION 414(q) and
regulations issued under that Code section. The Employer may make a calendar
year election to determine the Highly Compensated Employees for the Plan Year,
as prescribed by Treasury regulations. A calendar year election must apply to
all plans and arrangements of the Employer. For purposes of applying any
nondiscrimination test required under the Plan or under the Code, in a manner
consistent with applicable Treasury regulations, the Advisory Committee will
treat a Highly Compensated Employee and all family members (a spouse, a lineal
ascendant or descendant, or a spouse of a lineal ascendant or descendant) as a
single Highly Compensated Employee, but only if the Highly Compensated
Employee is a more than 5% owner or is one of the 10 Highly Compensated
Employees with the greatest Compensation for the Plan Year. This aggregation
rule applies to a family member even if that family member is a Highly
Compensated Employee without family aggregation.
The term "Highly Compensated Employee" also includes any former Employee who
separated from Service (or has a deemed Separation from Service, as determined
under Treasury regulations) prior to the Plan Year, performs no Service for the
Employer during the Plan Year, and was a Highly Compensated Employee either for
the separation year or any Plan Year ending on or after his 55th birthday. If
the former Employee's Separation from Service occurred prior to January 1, 1987,
he is a Highly Compensated Employee only if he satisfied clause (a) of this
Section 1.09 or received Compensation in excess of $50,000 during: (1) the year
of his Separation from Service (or the prior year); or (2) any year ending after
his 54th birthday.
1.10 "Participant" is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Section 2.01.
1.11 "Beneficiary" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes entitled
to a benefit under the Plan remains a Beneficiary under the Plan until the
Trustee has fully distributed his benefit to him. A Beneficiary's right to (and
the Plan Administrator's, the Advisory Committee's or a Trustee's duty to
provide to the Beneficiary) information or data concerning the Plan does not
arise until he first becomes entitled to receive a benefit under the Plan.
1.4
<PAGE>
1.12 "Compensation" means, except as provided in the Employer's Adoption
Agreement, the Participant's Earned Income, wages, salaries, fees for
professional service and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the plan
(including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses). The Employer must elect in its Adoption Agreement
whether to include elective contributions in the definition of Compensation.
"Elective contributions" are amounts excludible from the Employee's gross income
under Code SECTION SECTION 125, 402(a)(8), 402(h) or 403(b), and contributed by
the Employer, at the Employee's election, to a Code SECTION 401(k) arrangement,
a Simplified Employee Pension, cafeteria plan or tax-sheltered annuity. The term
"Compensation" does not include:
(a) Employer contributions (other than "elective contributions," if includible
in the definition of Compensation under Section 1.12 of the Employer's
Adoption Agreement) to a plan of deferred compensation to the extent the
contributions are not included in the gross income of the Employee for the
taxable year in which contributed, on behalf of an Employee to a Simplified
Employee Pension Plan to the extent such contributions are excludible from the
Employee's gross income, and any distributions from a plan of deferred
compensation, regardless of whether such amounts are includible in the gross
income of the Employee when distributed.
(b) Amounts realized from the exercise of a non-qualified stock option, or
when restricted stock (or property) held by an Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture.
(c) Amounts realized from the sale, exchange or other disposition of stock
acquired under a stock option described in Part II, Subchapter D, Chapter 1 of
the Code.
(d) Other amounts which receive special tax benefits, such as premiums for
group term life insurance (but only to the extent that the premiums are not
includible in the gross income of the Employee), or contributions made by an
Employer (whether or not under a salary reduction agreement) towards the
purchase of an annuity contract described in Code SECTION 403(b) (whether or
not the contributions are excludible from the gross income of the Employee),
other than "elective contributions," if elected in the Employer's Adoption
Agreement.
Any reference in this Plan to Compensation is a reference to the definition in
this Section 1.12, unless the Plan reference specifies a modification to this
definition. The Advisory Committee will take into account only Compensation
actually paid for the relevant period. A Compensation payment includes
Compensation by the Employer through another person under the common paymaster
provisions in Code Sections 3121 and 3306.
(A) LIMITATIONS ON COMPENSATION.
(1) COMPENSATION DOLLAR LIMITATION. For any Plan Year beginning after December
31, 1988, the Advisory Committee must take into account only the first $200,000
(or beginning January 1, 1990, such larger amount as the Commissioner of
Internal Revenue may prescribe) of any Participant's Compensation. For any Plan
Year beginning prior to January 1, 1989, this $200,000 limitation (but not the
family aggregation requirement described in the next paragraph) applies only if
the Plan is top heavy for such Plan Year or operates as a deemed top heavy plan
for such Plan Year.
1.5
<PAGE>
(2) APPLICATION OF COMPENSATION LIMITATION TO CERTAIN FAMILY MEMBERS. The
$200,000 Compensation limitation applies to the combined Compensation of the
Employee and of any family member aggregated with the Employee under Section
1.09 who is either (i) the Employee's spouse; or (ii) the Employee's lineal
descendant under the age of 19. If, for a Plan Year, the combined Compensation
of the Employee and such family members who are Participants entitled to an
allocation for that Plan Year exceeds the $200,000 (or adjusted) limitation,
"Compensation" for each such Participant, for purposes of the contribution and
allocation provisions of Article III, means his Adjusted Compensation. Adjusted
Compensation is the amount which bears the same ratio to the $200,000 (or
adjusted) limitation as the affected Participant's Compensation (without regard
to the $200,000 Compensation limitation) bears to the combined Compensation of
all the affected Participants in the family unit. If the Plan uses permitted
disparity, the Advisory Committee must determine the integration level of each
affected family member Participant prior to the proration of the $200,000
Compensation limitation, but the combined integration level of the affected
Participants may not exceed $200,000 (or the adjusted limitation). The combined
Excess Compensation of the affected Participants in the family unit may not
exceed $200,000 (or the adjusted limitation) minus the affected Participants'
combined integration level (as determined under the preceding sentence). If the
combined Excess Compensation exceeds this limitation, the Advisory Committee
will prorate the Excess Compensation limitation among the affected Participants
in the family unit in proportion to each such individual's Adjusted Compensation
minus his integration level. If the Employer's Plan is a Nonstandardized Plan,
the Employer may elect to use a different method in determining the Adjusted
Compensation of the affected Participants by specifying that method in an
addendum to the Adoption Agreement, numbered Section 1.12.
(B) NONDISCRIMINATION. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, Compensation means
Compensation as defined in this Section 1.12, except: (1) the Employer may elect
to include or to exclude elective contributions, irrespective of the Employer's
election in its Adoption Agreement regarding elective contributions; and (2) the
Employer will not give effect to any elections made in the "modifications to
Compensation definition" section of Adoption Agreement Section 1.12. The
Employer's election described in clause (1) must be consistent and uniform with
respect to all Employees and all plans of the Employer for any particular Plan
Year. If the Employer's Plan is a Nonstandardized Plan, the Employer,
irrespective of clause (2), may elect to exclude from this nondiscrimination
definition of Compensation any items of Compensation excludible under Code
SECTION 414(s) and the applicable Treasury regulations, provided such adjusted
definition conforms to the nondiscrimination requirements of those regulations.
1.13 "Earned Income" means net earnings from self-employment in the trade
or business with respect to which the Employer has established the Plan,
provided personal services of the individual are a material income producing
factor. The Advisory Committee will determine net earnings without regard to
items excluded from gross income and the deductions allocable to those items.
The Advisory Committee will determine net earnings after the deduction allowed
to the Self-Employed Individual for all contributions made by the Employer to a
qualified plan and, for Plan Years beginning after December 31, 1989, the
deduction allowed to the Self-Employed under Code SECTION 164(f) for self-
employment taxes.
1.14 "Account" means the separate account(s) which the Advisory Committee
or the Trustee maintains for a Participant under the Employer's Plan.
1.15 "Accrued Benefit" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and Employee
contributions, if any.
1.6
<PAGE>
1.16 "Nonforfeitable" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's Accrued
Benefit.
1.17 "Plan Year" means the fiscal year of the Plan, the consecutive month
period specified in the Employer's Adoption Agreement. The Employer's Adoption
Agreement also must specify the "Limitation Year" applicable to the limitations
on allocations described in Article III. If the Employer maintains Paired Plans,
each Plan must have the same Plan Year.
1.18 "Effective Date" of this Plan is the date specified in the Employer's
Adoption Agreement.
1.19 "Plan Entry Date" means the date(s) specified in Section 2.01 of the
Employer's Adoption Agreement.
1.20 "Accounting Date" is the last day of an Employer's Plan Year. Unless
otherwise specified in the Plan, the Advisory Committee will make all Plan
allocations for a particular Plan Year as of the Accounting Date of that Plan
Year.
1.21 "Trust" means the separate Trust created under the Employer's Plan.
1.22 "Trust Fund" means all property of every kind held or acquired by the
Employer's Plan, other than incidental benefit insurance contracts.
1.23 "Nontransferable Annuity" means an annuity which by its terms provides
that it may not be sold, assigned, discounted, pledged as collateral for a loan
or security for the performance of an obligation or for any purpose to any
person other than the insurance company. If the Plan distributes an annuity
contract, the contract must be a Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.25 "Code" means the Internal Revenue Code of 1986, as amended.
1.26 "Service" means any period of time the Employee is in the employ of
the Employer, including any period the Employee is on an unpaid leave of absence
authorized by the Employer under a uniform, nondiscriminatory policy applicable
to all Employees. "Separation from Service" means the Employee no longer has an
employment relationship with the Employer maintaining this Plan.
1.27 "Hour of Service" means:
(a) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment, for the performance of duties. The Advisory Committee credits Hours
of Service under this paragraph (a) to the Employee for the computation period
in which the Employee performs the duties, irrespective of when paid;
(b) Each Hour of Service for back pay, irrespective of mitigation of damages,
to which the Employer has agreed or for which the Employee has received an
award. The Advisory Committee credits Hours of Service under this paragraph
(b) to the Employee for the computation period(s) to which the award or the
agreement pertains rather than for the computation period in which the award,
agreement or payment is made; and
1.7
<PAGE>
(c) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to payment
(irrespective of whether the employment relationship is terminated), for
reasons other than for the performance of duties during a computation period,
such as leave of absence, vacation, holiday, sick leave, illness, incapacity
(including disability), layoff, jury duty or military duty. The Advisory
Committee will credit no more than 501 Hours of Service under this paragraph
(c) to an Employee on account of any single continuous period during which the
Employee does not perform any duties (whether or not such period occurs during
a single computation period). The Advisory Committee credits Hours of Service
under this paragraph (c) in accordance with the rules of paragraphs (b) and
(c) of Labor Reg. Section 2530.200b-2, which the Plan, by this reference,
specifically incorporates in full within this paragraph (c).
The Advisory Committee will not credit an Hour of Service under more than one
of the above paragraphs. A computation period for purposes of this Section 1.27
is the Plan Year, Year of Service period, Break in Service period or other
period, as determined under the Plan provision for which the Advisory Committee
is measuring an Employee's Hours of Service. The Advisory Committee will resolve
any ambiguity with respect to the crediting of an Hour of Service in favor of
the Employee.
(A) METHOD OF CREDITING HOURS OF SERVICE. The Employer must elect in its
Adoption Agreement the method the Advisory Committee will use in crediting an
Employee with Hours of Service. For purposes of the Plan, "actual" method means
the determination of Hours of Service from records of hours worked and hours for
which the Employer makes payment or for which payment is due from the Employer.
If the Employer elects to apply an "equivalency" method, for each equivalency
period for which the Advisory Committee would credit the Employee with at least
one Hour of Service, the Advisory Committee will credit the Employee with: (i)
10 Hours of Service for a daily equivalency; (ii) 45 Hours of Service for a
weekly equivalency; (iii) 95 Hours of Service for a semimonthly payroll period
equivalency; and (iv) 190 Hours of Service for a monthly equivalency.
(B) MATERNITY/PATERNITY LEAVE. Solely for purposes of determining whether the
Employee incurs a Break in Service under any provision of this Plan, the
Advisory Committee must credit Hours of Service during an Employee's unpaid
absence period due to maternity or paternity leave. The Advisory Committee
considers an Employee on maternity or paternity leave if the Employee's absence
is due to the Employee's pregnancy, the birth of the Employee's child, the
placement with the Employee of an adopted child, or the care of the Employee's
child immediately following the child's birth or placement. The Advisory
Committee credits Hours of Service under this paragraph on the basis of the
number of Hours of Service the Employee would receive if he were paid during the
absence period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of 8 hours per day
during the absence period. The Advisory Committee will credit only the number
(not exceeding 501) of Hours of Service necessary to prevent an Employee's Break
in Service. The Advisory Committee credits all Hours of Service described in
this paragraph to the computation period in which the absence period begins or,
if the Employee does not need these Hours of Service to prevent a Break in
Service in the computation period in which his absence period begins, the
Advisory Committee credits these Hours of Service to the immediately following
computation period.
1.8
<PAGE>
1.28 "Disability" means the Participant, because of a physical or mental
disability, will be unable to perform the duties of his customary position of
employment (or is unable to engage in any substantial gainful activity) for an
indefinite period which the Advisory Committee considers will be of long
continued duration. A Participant also is disabled if he incurs the permanent
loss or loss of use of a member or function of the body, or is permanently
disfigured, and incurs a Separation from Service. The Plan considers a
Participant disabled on the date the Advisory Committee determines the
Participant satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this Section
1.28 in a nondiscriminatory, consistent and uniform manner. If the Employer's
Plan is a Nonstandardized Plan, the Employer may provide an alternate definition
of disability in an addendum to its Adoption Agreement, numbered Section 1.28.
1.29 SERVICE FOR PREDECESSOR EMPLOYER. If the Employer maintains the plan
of a predecessor employer, the Plan treats service of the Employee with the
predecessor employer as service with the Employer. If the Employer does not
maintain the plan of a predecessor employer, the Plan does not credit service
with the predecessor employer, unless the Employer identifies the predecessor in
its Adoption Agreement and specifies the purposes for which the Plan will credit
service with that predecessor employer.
1.30 RELATED EMPLOYERS. A related group is a controlled group of
corporations (as defined in Code Section 414(b)), trades or businesses (whether
or not incorporated) which are under common control (as defined in Code Section
414(c)) or an affiliated service group (as defined in Code Section 414(m) or in
Code Section 414(o)). If the Employer is a member of a related group, the term
"Employer" includes the related group members for purposes of crediting Hours of
Service, determining Years of Service and Breaks in Service under Articles II
and V, applying the Participation Test and the Coverage Test under Section
3.06(E), applying the limitations on allocations in Part 2 of Article III,
applying the top heavy rules and the minimum allocation requirements of Article
III, the definitions of Employee, Highly Compensated Employee, Compensation and
Leased Employee, and for any other purpose required by the applicable Code
section or by a Plan provision. However, an Employer may contribute to the Plan
only by being a signatory to the Execution Page of the Adoption Agreement or to
a Participation Agreement to the Employer's Adoption Agreement. If one or more
of the Employer's related group members become Participating Employers by
executing a Participation Agreement to the Employer's Adoption Agreement, the
term "Employer" includes the participating related group members for all
purposes of the Plan, and "Plan Administrator" means the Employer that is the
signatory to the Execution Page of the Adoption Agreement.
If the Employer's Plan is a Standardized Plan, all Employees of the Employer
or of any member of the Employer's related group, are eligible to participate in
the Plan, irrespective of whether the related group member directly employing
the Employee is a Participating Employer. If the Employer's Plan is a
Nonstandardized Plan, the Employer must specify in Section 1.07 of its Adoption
Agreement, whether the Employees of related group members that are not
Participating Employers are eligible to participate in the Plan. Under a
Nonstandardized Plan, the Employer may elect to exclude from the definition of
"Compensation" for allocation purposes any Compensation received from a related
employer that has not executed a Participation Agreement and whose Employees are
not eligible to participate in the Plan.
1.9
<PAGE>
1.31 LEASED EMPLOYEES. The Plan treats a Leased Employee as an Employee of the
Employer. A Leased Employee is an individual (who otherwise is not an Employee
of the Employer) who, pursuant to a leasing agreement between the Employer and
any other person, has performed services for the Employer (or for the Employer
and any persons related to the Employer within the meaning of Code Section
144(a)(3)) on a substantially full time basis for at least one year and who
performs services historically performed by employees in the Employer's business
field. If a Leased Employee is treated as an Employee by reason of this Section
1.31 of the Plan, "Compensation" includes Compensation from the leasing
organization which is attributable to services performed for the Employer.
(A) SAFE HARBOR PLAN EXCEPTION. The Plan does not treat a Leased Employee as an
Employee if the leasing organization covers the employee in a safe harbor plan
and, prior to application of this safe harbor plan exception, 20% or less of the
Employer's Employees (other than Highly Compensated Employees) are Leased
Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a nonintegrated
contribution formula equal to at least 10% of the employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective contributions
(as defined in Section 1.12).
(B) OTHER REQUIREMENTS. The Advisory Committee must apply this Section 1.31 in a
manner consistent with Code Sections 414(n) and 414(o) and the
regulations issued under those Code sections. The Employer must specify in the
Adoption Agreement the manner in which the Plan will determine the allocation of
Employer contributions and Participant forfeitures on behalf of a Participant if
the Participant is a Leased Employee covered by a plan maintained by the leasing
organization.
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES. The following special provisions and
restrictions apply to Owner-Employees:
(a) If the Plan provides contributions or benefits for an Owner-Employee or
for a group of Owner-Employees who controls the trade or business with respect
to which this Plan is established and the Owner-Employee or Owner-Employees
also control as Owner-Employees one or more other trades or businesses, plans
must exist or be established with respect to all the controlled trades or
businesses so that when the plans are combined they form a single plan which
satisfies the requirements of Code Section 401(a) and Code Section 401(d) with
respect to the employees of the controlled trades or businesses.
(b) The Plan excludes an Owner-Employee or group of Owner-Employees if the
Owner-Employee or group of Owner-Employees controls any other trade or
business, unless the employees of the other controlled trade or business
participate in a plan which satisfies the requirements of Code Section 401(a)
and Code Section 401(d). The other qualified plan must provide contributions
and benefits which are not less favorable than the contributions and benefits
provided for the Owner-Employee or group of Owner-Employees under this Plan,
or if an Owner-Employee is covered under another qualified plan as an
Owner-Employee, then the plan established with respect to the trade or
business he does control must provide contributions or benefits as favorable
as those provided under the most favorable plan of the trade or business he
does not control. If the exclusion of this paragraph (b) applies and the
Employer's Plan is a Standardized Plan, the Employer may not participate or
continue to participate in this Master Plan and the Employer's Plan becomes an
individually-designed plan for purposes of qualification reliance.
1.10
<PAGE>
(c) For purposes of paragraphs (a) and (b) of this Section 1.32, an
Owner-Employee or group of Owner-Employees controls a trade or business if the
Owner-Employee or Owner-Employees together (1) own the entire interest in an
unincorporated trade or business, or (2) in the case of a partnership, own
more than 50% of either the capital interest or the profits interest in the
partnership.
1.33 DETERMINATION OF TOP HEAVY STATUS. If this Plan is the only qualified
plan maintained by the Employer, the Plan is top heavy for a Plan Year if the
top heavy ratio as of the Determination Date exceeds 60%. The top heavy ratio is
a fraction, the numerator of which is the sum of the present value of Accrued
Benefits of all Key Employees as of the Determination Date and the denominator
of which is a similar sum determined for all Employees. The Advisory Committee
must include in the top heavy ratio, as part of the present value of Accrued
Benefits, any contribution not made as of the Determination Date but includible
under Code Section 416 and the applicable Treasury regulations, and
distributions made within the Determination Period. The Advisory Committee must
calculate the top heavy ratio by disregarding the Accrued Benefit (and
distributions, if any, of the Accrued Benefit) of any Non-Key Employee who was
formerly a Key Employee, and by disregarding the Accrued Benefit (including
distributions, if any, of the Accrued Benefit) of an individual who has not
received credit for at least one Hour of Service with the Employer during the
Determination Period. The Advisory Committee must calculate the top heavy ratio,
including the extent to which it must take into account distributions, rollovers
and transfers, in accordance with Code Section 416 and the regulations under
that Code section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), or maintained another such plan which now is terminated,
this Plan is top heavy only if it is part of the Required Aggregation Group, and
the top heavy ratio for the Required Aggregation Group and for the Permissive
Aggregation Group, if any, each exceeds 60%. The Advisory Committee will
calculate the top heavy ratio in the same manner as required by the first
paragraph of this Section 1.33, taking into account all plans within the
Aggregation Group. To the extent the Advisory Committee must take into account
distributions to a Participant, the Advisory Committee must include
distributions from a terminated plan which would have been part of the Required
Aggregation Group if it were in existence on the Determination Date. The
Advisory Committee will calculate the present value of accrued benefits under
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans, Code Section 416 and the
regulations under that Code section. If a Participant in a defined benefit plan
is a Non-Key Employee, the Advisory Committee will determine his accrued benefit
under the accrual method, if any, which is applicable uniformly to all defined
benefit plans maintained by the Employer or, if there is no uniform method, in
accordance with the slowest accrual rate permitted under the fractional rule
accrual method described in Code Section 411(b)(1)(C). If the Employer maintains
a defined benefit plan, the Employer must specify in Adoption Agreement Section
3.18 the actuarial assumptions (interest and mortality only) the Advisory
Committee will use to calculate the present value of benefits from a defined
benefit plan. If an aggregated plan does not have a valuation date coinciding
with the Determination Date, the Advisory Committee must value the Accrued
Benefits in the aggregated plan as of the most recent valuation date falling
within the twelve-month period ending on the Determination Date, except as Code
Section 416 and applicable Treasury regulations require for the first and second
plan year of a defined benefit plan. The Advisory Committee will calculate the
top heavy ratio with reference to the Determination Dates that fall within the
same calendar year.
1.11
<PAGE>
(A) STANDARDIZED PLAN. If the Employer's Plan is a Standardized Plan, the Plan
operates as a deemed top heavy plan in all Plan Years, except, if the
Standardized Plan includes a Code Section 401(k) arrangement, the Employer may
elect to apply the top heavy requirements only in Plan Years for which the Plan
actually is top heavy. Under a deemed top heavy plan, the Advisory Committee
need not determine whether the Plan actually is top heavy. However, if the
Employer, in Adoption Agreement Section 3.18, elects to override the 100%
limitation, the Advisory Committee will need to determine whether a deemed top
heavy Plan's top heavy ratio for a Plan Year exceeds 90%.
(B) DEFINITIONS. For purposes of applying the provisions of this Section 1.33:
(1) "Key Employee" means, as of any Determination Date, any Employee or former
Employee (or Beneficiary of such Employee) who, for any Plan Year in the
Determination Period: (i) has Compensation in excess of 50% of the dollar
amount prescribed in Code Section 415(b)(1)(A) (relating to defined benefit
plans) and is an officer of the Employer; (ii) has Compensation in excess of
the dollar amount prescribed in Code Section 415(c)(1)(A) (relating to defined
contribution plans) and is one of the Employees owning the ten largest
interests in the Employer; (iii) is a more than 5% owner of the Employer; or
(iv) is a more than 1% owner of the Employer and has Compensation of more than
$150,000. The constructive ownership rules of Code Section 318 (or the
principles of that section, in the case of an unincorporated Employer,) will
apply to determine ownership in the Employer. The number of officers taken
into account under clause (i) will not exceed the greater of 3 or 10% of the
total number (after application of the Code Section 414(q) exclusions) of
Employees, but no more than 50 officers. The Advisory Committee will make the
determination of who is a Key Employee in accordance with Code Section
416(i)(1) and the regulations under that Code section.
(2) "Non-Key Employee" is an employee who does not meet the definition of Key
Employee.
(3) "Compensation" means Compensation as determined under Section 1.09 for
purposes of identifying Highly Compensated Employees.
(4) "Required Aggregation Group" means: (i) each qualified plan of the
Employer in which at least one Key Employee participates at any time during
the Determination Period; and (ii) any other qualified plan of the Employer
which enables a plan described in clause (i) to meet the requirements of Code
Section 401(a)(4) or of Code Section 410.
(5) "Permissive Aggregation Group" is the Required Aggregation Group plus any
other qualified plans maintained by the Employer, but only if such group would
satisfy in the aggregate the requirements of Code Section 401(a)(4) and of
Code Section 410. The Advisory Committee will determine the Permissive
Aggregation Group.
(6) "Employer" means the Employer that adopts this Plan and any related
employers described in Section 1.30.
(7) "Determination Date" for any Plan Year is the Accounting Date of the
preceding Plan Year or, in the case of the first Plan Year of the Plan, the
Accounting Date of that Plan Year. The "Determination Period" is the 5 year
period ending on the Determination Date.
1.12
<PAGE>
1.34 "Paired Plans" means the Employer has adopted two Standardized Plan
Adoption Agreements offered with this Master Plan, one Adoption Agreement being
a Paired Profit Sharing Plan and one Adoption Agreement being a Paired Pension
Plan. A Paired Profit Sharing Plan may include a Code Section 401(k)
arrangement. A Paired Pension Plan must be a money purchase pension plan or a
target benefit pension plan. Paired Plans must be the subject of a favorable
opinion letter issued by the National Office of the Internal Revenue Service.
This Master Plan does not pair any of its Standardized Plan Adoption Agreements
with Standardized Plan Adoption Agreements under a defined benefit master plan.
* * * * * * * * * * * * * * *
1.13
<PAGE>
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY. Each Employee becomes a Participant in the Plan in
accordance with the participation option selected by the Employer in its
Adoption Agreement. If this Plan is a restated Plan, each Employee who was a
Participant in the Plan on the day before the Effective Date continues as a
Participant in the Plan, irrespective of whether he satisfies the participation
conditions in the restated Plan, unless otherwise provided in the Employer's
Adoption Agreement.
2.02 YEAR OF SERVICE - PARTICIPATION. For purposes of an Employee's
participation in the Plan under Adoption Agreement Section 2.01, the Plan takes
into account all of his Years of Service with the Employer, except as provided
in Section 2.03. "Year of Service" means an eligibility computation period
during which the Employee completes not less than the number of Hours of Service
specified in the Employer's Adoption Agreement. The initial eligibility
computation period is the first 12 consecutive month period measured from the
Employment Commencement Date. The Plan measures succeeding eligibility
computation periods in accordance with the option selected by the Employer in
its Adoption Agreement. If the Employer elects to measure subsequent periods on
a Plan Year basis, an Employee who receives credit for the required number of
Hours of Service during the initial eligibility computation period and during
the first applicable Plan Year will receive credit for two Years of Service
under Article II. "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service for the Employer. If the Employer
elects a service condition under Adoption Agreement Section 2.01 based on
months, the Plan does not apply any Hour of Service requirement after the
completion of the first Hour of Service.
2.03 BREAK IN SERVICE - PARTICIPATION. An Employee incurs a "Break in
Service" if during any 12 consecutive month period he does not complete more
than 500 Hours of Service with the Employer. The "12 consecutive month period"
under this Section 2.03 is the same 12 consecutive month period for which the
Plan measures "Years of Service" under Section 2.02.
(A) 2-YEAR ELIGIBILITY. If the Employer elects a 2 years of service condition
for eligibility purposes under Adoption Agreement Section 2.01, the Plan treats
an Employee who incurs a one year Break in Service and who has never become a
Participant as a new Employee on the date he first performs an Hour of Service
for the Employer after the Break in Service.
2.14
<PAGE>
(B) SUSPENSION OF YEARS OF SERVICE. The Employer must elect in its Adoption
Agreement whether a Participant will incur a suspension of Years of Service
after incurring a one year Break in Service. If this rule applies under the
Employer's Plan, the Plan disregards a Participant's Years of Service (as
defined in Section 2.02) earned prior to a Break in Service until the
Participant completes another Year of Service and the Plan suspends the
Participant's participation in the Plan. If the Participant completes a Year of
Service following his Break in Service, the Plan restores that Participant's
pre-Break Years of Service (and the Participant resumes active participation in
the Plan) retroactively to the first day of the computation period in which the
Participant earns the first post-Break Year of Service. The initial computation
period under this Section 2.03(B) is the 12 consecutive month period measured
from the date the Participant first receives credit for an Hour of Service
following the one year Break in Service period. The Plan measures any subsequent
periods, if necessary, in a manner consistent with the computation period
selection in Adoption Agreement Section 2.02. This Section 2.03(B) does not
affect a Participant's vesting credit under Article V and, during a suspension
period, the Participant's Account continues to share fully in Trust Fund
allocations under Section 9.11. Furthermore, this Section 2.03(B) will not
result in the restoration of any Year of Service disregarded under the Break in
Service rule of Section 2.03(A).
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment
with the Employer terminates will re-enter the Plan as a Participant on the date
of his re-employment, subject to the Break in Service rule, if applicable, under
Section 2.03(B). An Employee who satisfies the Plan's eligibility conditions but
who terminates employment with the Employer prior to becoming a Participant will
become a Participant on the later of the Plan Entry Date on which he would have
entered the Plan had he not terminated employment or the date of his
re-employment, subject to the Break in Service rule, if applicable, under
Section 2.03(B). Any Employee who terminates employment prior to satisfying the
Plan's eligibility conditions becomes a Participant in accordance with Adoption
Agreement Section 2.01.
2.05 CHANGE IN EMPLOYEE STATUS. If a Participant has not incurred a
Separation from Service but ceases to be eligible to participate in the Plan, by
reason of employment within an employment classification excluded by the
Employer under Adoption Agreement Section 1.07, the Advisory Committee must
treat the Participant as an Excluded Employee during the period such a
Participant is subject to the Adoption Agreement exclusion. The Advisory
Committee determines a Participant's sharing in the allocation of Employer
contributions and Participant forfeitures, if applicable, by disregarding his
Compensation paid by the Employer for services rendered in his capacity as an
Excluded Employee. However, during such period of exclusion, the Participant,
without regard to employment classification, continues to receive credit for
vesting under Article V for each included Year of Service and the Participant's
Account continues to share fully in Trust Fund allocations under Section 9.11.
If an Excluded Employee who is not a Participant becomes eligible to
participate in the Plan by reason of a change in employment classification, he
will participate in the Plan immediately if he has satisfied the eligibility
conditions of Section 2.01 and would have been a Participant had he not been an
Excluded Employee during his period of Service. Furthermore, the Plan takes into
account all of the Participant's included Years of Service with the Employer as
an Excluded Employee for purposes of vesting credit under Article V.
2.2
<PAGE>
2.06 ELECTION NOT TO PARTICIPATE. If the Employer's Plan is a Standardized
Plan, the Plan does not permit an otherwise eligible Employee nor any
Participant to elect not to participate in the Plan. If the Employer's Plan is a
Nonstandardized Plan, the Employer must specify in its Adoption Agreement
whether an Employee eligible to participate, or any present Participant, may
elect not to participate in the Plan. For an election to be effective for a
particular Plan Year, the Employee or Participant must file the election in
writing with the Plan Administrator not later than the time specified in the
Employer's Adoption Agreement. The Employer may not make a contribution under
the Plan for the Employee or for the Participant for the Plan Year for which the
election is effective, nor for any succeeding Plan Year, unless the Employee or
Participant re-elects to participate in the Plan. After an Employee's or
Participant's election not to participate has been effective for at least the
minimum period prescribed by the Employer's Adoption Agreement, the Employee or
Participant may re-elect to participate in the Plan for any Plan Year and
subsequent Plan Years. An Employee or Participant may re-elect to participate in
the Plan by filing his election in writing with the Plan Administrator not later
than the time specified in the Employer's Adoption Agreement. An Employee or
Participant who re-elects to participate may again elect not to participate only
as permitted in the Employer's Adoption Agreement. If an Employee is a Self-
Employed Individual, the Employee's election (except as permitted by Treasury
regulations without creating a Code Section 401(k) arrangement with respect to
that Self-Employed Individual) must be effective no later than the date the
Employee first would become a Participant in the Plan and the election is
irrevocable. The Plan Administrator must furnish an Employee or a Participant
any form required for purposes of an election under this Section 2.06. An
election timely filed is effective for the entire Plan Year.
A Participant who elects not to participate may not receive a distribution of
his Accrued Benefit attributable either to Employer or to Participant
contributions except as provided under Article IV or under Article VI. However,
for each Plan Year for which a Participant's election not to participate is
effective, the Participant's Account, if any, continues to share in Trust Fund
allocations under Article IX. Furthermore, the Employee or the Participant
receives vesting credit under Article V for each included Year of Service during
the period the election not to participate is effective.
* * * * * * * * * * * * * * *
2.3
<PAGE>
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS: SECTIONS 3.01
THROUGH 3.06
3.01 AMOUNT. For each Plan Year, the Employer contributes to the Trust the
amount determined by application of the contribution option selected by the
Employer in its Adoption Agreement. The Employer may not make a contribution to
the Trust for any Plan Year to the extent the contribution would exceed the
Participants' Maximum Permissible Amounts.
The Employer contributes to this Plan on the condition its contribution is not
due to a mistake of fact and the Revenue Service will not disallow the deduction
for its contribution. The Trustee, upon written request from the Employer, must
return to the Employer the amount of the Employer's contribution made by the
Employer by mistake of fact or the amount of the Employer's contribution
disallowed as a deduction under Code Section 404. The Trustee will not return
any portion of the Employer's contribution under the provisions of this
paragraph more than one year after:
(a) The Employer made the contribution by mistake of fact; or
(b) The disallowance of the contribution as a deduction, and then, only to the
extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to the
contribution, but the Trustee will decrease the Employer contribution returnable
for any losses attributable to it. The Trustee may require the Employer to
furnish it whatever evidence the Trustee deems necessary to enable the Trustee
to confirm the amount the Employer has requested be returned is properly
returnable under ERISA.
3.02 DETERMINATION OF CONTRIBUTION. The Employer, from its records,
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
3.03 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its contribution
for each Plan Year in one or more installments without interest. The Employer
must make its contribution to the Plan within the time prescribed by the Code or
applicable Treasury regulations. Subject to the consent of the Trustee, the
Employer may make its contribution in property rather than in cash, provided the
contribution of property is not a prohibited transaction under the Code or under
ERISA.
3.04 CONTRIBUTION ALLOCATION.
(A) METHOD OF ALLOCATION. The Employer must specify in its Adoption Agreement
the manner of allocating each annual Employer contribution to this Trust.
(B) TOP HEAVY MINIMUM ALLOCATION. The Plan must comply with the provisions of
this Section 3.04(B), subject to the elections in the Employer's Adoption
Agreement.
(1) TOP HEAVY MINIMUM ALLOCATION UNDER STANDARDIZED PLAN. Subject to the
Employer's election under Section 3.04(B)(3), the top heavy minimum
allocation requirement applies to a Standardized Plan for each Plan Year,
irrespective of whether the Plan is top heavy.
3.1
<PAGE>
(a) Each Participant employed by the Employer on the last day of the Plan
Year will receive a top heavy minimum allocation for that Plan Year. The
Employer may elect in Section 3.04 of its Adoption Agreement to apply this
paragraph (a) only to a Participant who is a Non-Key Employee.
(b) Subject to any overriding elections in Section 3.18 of the Employer's
Adoption Agreement, the top heavy minimum allocation is the lesser of 3%
of the Participant's Compensation for the Plan Year or the highest
contribution rate for the Plan Year made on behalf of any Participant for
the Plan Year. However, if the Employee participates in Paired Plans, the
top heavy minimum allocation is 3% of his Compensation. If, under Adoption
Agreement Section 3.04, the Employer elects to apply paragraph (a) only to
a Participant who is a Non-Key Employee, the Advisory Committee will
determine the "highest contribution rate" described in the first sentence
of this paragraph (b) by reference only to the contribution rates of
Participants who are Key Employees for the Plan Year.
(2) TOP HEAVY MINIMUM ALLOCATION UNDER NONSTANDARDIZED PLAN. The top heavy
minimum allocation requirement applies to a Nonstandardized Plan only in Plan
Years for which the Plan is top heavy. Except as provided in the Employer's
Adoption Agreement, if the Plan is top heavy in any Plan Year:
(a) Each Non-Key Employee who is a Participant and is employed by the
Employer on the last day of the Plan Year will receive a top heavy minimum
allocation for that Plan Year, irrespective of whether he satisfies the
Hours of Service condition under Section 3.06 of the Employer's Adoption
Agreement; and
(b) The top heavy minimum allocation is the lesser of 3% of the Non-Key
Employee's Compensation for the Plan Year or the highest contribution rate
for the Plan Year made on behalf of any Key Employee. However, if a
defined benefit plan maintained by the Employer which benefits a Key
Employee depends on this Plan to satisfy the antidiscrimination rules of
Code Section 401(a)(4) or the coverage rules of Code SECTION 410 (or
another plan benefiting the Key Employee so depends on such defined
benefit plan), the top heavy minimum allocation is 3% of the Non-Key
Employee's Compensation regardless of the contribution rate for the Key
Employees.
(3) SPECIAL ELECTION FOR STANDARDIZED CODE SECTION 401(K) PLAN. If the
Employer's Plan is a Standardized Code SECTION 401(k) Plan, the Employer may
elect in Adoption Agreement Section 3.04 to apply the top heavy minimum
allocation requirements of Section 3.04(B)(1) only for Plan Years in which the
Plan actually is a top heavy plan.
(4) SPECIAL DEFINITIONS. For purposes of this Section 3.04(B), the term
"Participant" includes any Employee otherwise eligible to participate in the
Plan but who is not a Participant because of his Compensation level or because
of his failure to make elective deferrals under a Code Section 401(k)
arrangement or because of his failure to make mandatory contributions. For
purposes of subparagraph (1)(b) or (2)(b), "Compensation" means Compensation as
defined in Section 1.12, except Compensation does not include elective
contributions, irrespective of whether the Employer has elected to include these
amounts in Section 1.12 of its Adoption Agreement, any exclusion selected in
Section 1.12 of the Adoption Agreement (other than the exclusion of elective
contributions) does not apply, and any modification to the definition of
Compensation in Section 3.06 does not apply.
3.2
<PAGE>
(5) DETERMINING CONTRIBUTION RATES. For purposes of this Section 3.04(B), a
Participant's contribution rate is the sum of all Employer contributions (not
including Employer contributions to Social Security) and forfeitures allocated
to the Participant's Account for the Plan Year divided by his Compensation for
the entire Plan Year. However, for purposes of satisfying a Participant's top
heavy minimum allocation in Plan Years beginning after December 31, 1988, the
Participant's contribution rate does not include any elective contributions
under a Code Section 401(k) arrangement nor any Employer matching contributions
allocated on the basis of those elective contributions or on the basis of
employee contributions, except a Nonstandardized Plan may include in the
contribution rate any matching contributions not necessary to satisfy the
nondiscrimination requirements of Code Section 401(k) or of Code Section 401(m).
If the Employee is a Participant in Paired Plans, the Advisory Committee will
consider the Paired Plans as a single Plan to determine a Participant's
contribution rate and to determine whether the Plans satisfy this top heavy
minimum allocation requirement. To determine a Participant's contribution rate
under a Nonstandardized Plan, the Advisory Committee must treat all qualified
top heavy defined contribution plans maintained by the Employer (or by any
related Employers described in Section 1.30) as a single plan.
(6) NO ALLOCATIONS. If, for a Plan Year, there are no allocations of Employer
contributions or forfeitures for any Participant (for purposes of Section 3.04
(B)(1)(b)) or for any Key Employee (for purposes of Section 3.04(B)(2)(b)), the
Plan does not require any top heavy minimum allocation for the Plan Year, unless
a top heavy minimum allocation applies because of the maintenance by the
Employer of more than one plan.
(7) ELECTION OF METHOD. The Employer must specify in its Adoption Agreement
the manner in which the Plan will satisfy the top heavy minimum allocation
requirement.
(a) If the Employer elects to make any necessary additional contribution to
this Plan, the Advisory Committee first will allocate the Employer
contributions (and Participant forfeitures, if any) for the Plan Year in
accordance with the provisions of Adoption Agreement Section 3.04. The
Employer then will contribute an additional amount for the Account of any
Participant entitled under this Section 3.04(B) to a top heavy minimum
allocation and whose contribution rate for the Plan Year, under this Plan and
any other plan aggregated under paragraph (5), is less than the top heavy
minimum allocation. The additional amount is the amount necessary to increase
the Participant's contribution rate to the top heavy minimum allocation. The
Advisory Committee will allocate the additional contribution to the Account of
the Participant on whose behalf the Employer makes the contribution.
(b) If the Employer elects to guarantee the top heavy minimum allocation under
another plan, this Plan does not provide the top heavy minimum allocation and
the Advisory Committee will allocate the annual Employer contributions (and
Participant forfeitures) under the Plan solely in accordance with the
allocation method selected under Adoption Agreement Section 3.04.
3.3
<PAGE>
3.05 FORFEITURE ALLOCATION. The amount of a Participant's Accrued Benefit
forfeited under the Plan is a Participant forfeiture. The Advisory Committee
will allocate Participant forfeitures in the manner specified by the Employer in
its Adoption Agreement. The Advisory Committee will continue to hold the
undistributed, non-vested portion of a terminated Participant's Accrued Benefit
in his Account solely for his benefit until a forfeiture occurs at the time
specified in Section 5.09 or if applicable, until the time specified in Section
9.14. Except as provided under Section 5.04, a Participant will not share in the
allocation of a forfeiture of any portion of his Accrued Benefit.
3.06 ACCRUAL OF BENEFIT. The Advisory Committee will determine the accrual
of benefit (Employer contributions and Participant forfeitures) on the basis of
the Plan Year in accordance with the Employer's elections in its Adoption
Agreement.
(A) COMPENSATION TAKEN INTO ACCOUNT. The Employer must specify in its Adoption
Agreement the Compensation the Advisory Committee is to take into account in
allocating an Employer contribution to a Participant's Account for the Plan Year
in which the Employee first becomes a Participant. For all other Plan Years, the
Advisory Committee will take into account only the Compensation determined for
the portion of the Plan Year in which the Employee actually is a Participant.
The Advisory Committee must take into account the Employee's entire Compensation
for the Plan Year to determine whether the Plan satisfies the top heavy minimum
allocation requirement of Section 3.04(B). The Employer, in an addendum to its
Adoption Agreement numbered 3.06(A), may elect to measure Compensation for the
Plan Year for allocation purposes on the basis of a specified period other than
the Plan Year.
(B) HOURS OF SERVICE REQUIREMENT. Subject to the applicable minimum allocation
requirement of Section 3.04, the Advisory Committee will not allocate any
portion of an Employer contribution for a Plan Year to any Participant's Account
if the Participant does not complete the applicable minimum Hours of Service
requirement specified in the Employer's Adoption Agreement.
(C) EMPLOYMENT REQUIREMENT. If the Employer's Plan is a Standardized Plan, a
Participant who, during a particular Plan Year, completes the accrual
requirements of Adoption Agreement Section 3.06 will share in the allocation of
Employer contributions for that Plan Year without regard to whether he is
employed by the Employer on the Accounting Date of that Plan Year. If the
Employer's Plan is a Nonstandardized Plan, the Employer must specify in its
Adoption Agreement whether the Participant will accrue a benefit if he is not
employed by the Employer on the Accounting Date of the Plan Year. If the
Employer's Plan is a money purchase plan or a target benefit plan, whether
Nonstandardized or Standardized, the Plan conditions benefit accrual on
employment with the Employer on the last day of the Plan Year for the Plan Year
in which the Employer terminates the Plan.
(D) OTHER REQUIREMENTS. If the Employer's Adoption Agreement includes options
for other requirements affecting the Participant's accrual of benefits under the
Plan, the Advisory Committee will apply this Section 3.06 in accordance with the
Employer's Adoption Agreement selections.
3.4
<PAGE>
(E) SUSPENSION OF ACCRUAL REQUIREMENTS UNDER NONSTANDARDIZED PLAN. If the
Employer's Plan is a Nonstandardized Plan, the Employer may elect in its
Adoption Agreement to suspend the accrual requirements elected under Adoption
Agreement Section 3.06 if, for any Plan Year beginning after December 31, 1989,
the Plan fails to satisfy the Participation Test or the Coverage Test. A Plan
satisfies the Participation Test if, on each day of the Plan Year, the number of
Employees who benefit under the Plan is at least equal to the lesser of 50 or
40% of the total number of Includible Employees as of such day. A Plan satisfies
the Coverage Test if, on the last day of each quarter of the Plan Year, the
number of Nonhighly Compensated Employees who benefit under the Plan is at least
equal to 70% of the total number of Includible Nonhighly Compensated Employees
as of such day. "Includible" Employees are all Employees other than: (1) those
Employees excluded from participating in the Plan for the entire Plan Year by
reason of the collective bargaining unit exclusion or the nonresident alien
exclusion under Adoption Agreement Section 1.07 or by reason of the
participation requirements of Sections 2.01 and 2.03; and (2) any Employee who
incurs a Separation from Service during the Plan Year and fails to complete at
least 501 Hours of Service for the Plan Year. A "Nonhighly Compensated Employee"
is an Employee who is not a Highly Compensated Employee and who is not a family
member aggregated with a Highly Compensated Employee pursuant to Section 1.09 of
the Plan.
For purposes of the Participation Test and the Coverage Test, an Employee is
benefiting under the Plan on a particular date if, under Adoption Agreement
Section 3.04, he is entitled to an allocation for the Plan Year. Under the
Participation Test, when determining whether an Employee is entitled to an
allocation under Adoption Agreement Section 3.04, the Advisory Committee will
disregard any allocation required solely by reason of the top heavy minimum
allocation, unless the top heavy minimum allocation is the only allocation made
under the Plan for the Plan Year.
If this Section 3.06(E) applies for a Plan Year, the Advisory Committee will
suspend the accrual requirements for the Includible Employees who are
Participants, beginning first with the Includible Employee(s) employed with the
Employer on the last day of the Plan Year, then the Includible Employee(s) who
have the latest Separation from Service during the Plan Year, and continuing to
suspend in descending order the accrual requirements for each Includible
Employee who incurred an earlier Separation from Service, from the latest to the
earliest Separation from Service date, until the Plan satisfies both the
Participation Test and the Coverage Test for the Plan Year. If two or more
Includible Employees have a Separation from Service on the same day, the
Advisory Committee will suspend the accrual requirements for all such Includible
Employees, irrespective of whether the Plan can satisfy the Participation Test
and the Coverage Test by accruing benefits for fewer than all such Includible
Employees. If the Plan suspends the accrual requirements for an Includible
Employee, that Employee will share in the allocation of Employer contributions
and Participant forfeitures, if any, without regard to the number of Hours of
Service he has earned for the Plan Year and without regard to whether he is
employed by the Employer on the last day of the Plan Year. If the Employer's
Plan includes Employer matching contributions subject to Code Section 401(m),
this suspension of accrual requirements applies separately to the Code Section
401(m) portion of the Plan, and the Advisory Committee will treat an Employee as
benefiting under that portion of the Plan if he is an Eligible Employee for
purposes of the Code Section 401(m) nondiscrimination test. The Employer may
modify the operation of this Section 3.06(E) by electing appropriate
modifications in Section 3.06 of its Adoption Agreement.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.07 THROUGH 3.19
[NOTE: Sections 3.07 through 3.10 apply only to Participants in this Plan who
do not participate, and who have never participated, in another qualified plan
or in a welfare benefit fund (as defined in Code Section 419(e)) maintained by
the Employer.]
3.5
<PAGE>
3.07 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation Year may not
exceed the Maximum Permissible Amount. If the amount the Employer otherwise
would contribute to the Participant's Account would cause the Annual Additions
for the Limitation Year to exceed the Maximum Permissible Amount, the Employer
will reduce the amount of its contribution so the Annual Additions for the
Limitation Year will equal the Maximum Permissible Amount. If an allocation of
Employer contributions, pursuant to Section 3.04, would result in an Excess
Amount (other than an Excess Amount resulting from the circumstances described
in Section 3.10) to the Participant's Account, the Advisory Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer contributions for the Plan Year in which the
Limitation Year ends. The Advisory Committee will make this reallocation on the
basis of the allocation method under the Plan as if the Participant whose
Account otherwise would receive the Excess Amount is not eligible for an
allocation of Employer contributions.
3.08 Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Advisory Committee may determine the Maximum
Permissible Amount on the basis of the Participant's estimated annual
Compensation for such Limitation Year. The Advisory Committee must make this
determination on a reasonable and uniform basis for all Participants similarly
situated. The Advisory Committee must reduce any Employer contributions
(including any allocation of forfeitures) based on estimated annual Compensation
by any Excess Amounts carried over from prior years.
3.09 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the Maximum Permissible
Amount for such Limitation Year on the basis of the Participant's actual
Compensation for such Limitation Year.
3.10 If, pursuant to Section 3.09, or because of the allocation of
forfeitures, there is an Excess Amount with respect to a Participant for a
Limitation Year, the Advisory Committee will dispose of such Excess Amount as
follows:
(a) The Advisory Committee will return any nondeductible voluntary Employee
contributions to the Participant to the extent the return would reduce the
Excess Amount.
(b) If, after the application of paragraph (a), an Excess Amount still exists,
and the Plan covers the Participant at the end of the Limitation Year, then
the Advisory Committee will use the Excess Amount(s) to reduce future Employer
contributions (including any allocation of forfeitures) under the Plan for the
next Limitation Year and for each succeeding Limitation Year, as is necessary,
for the Participant. If the Employer's Plan is a profit sharing plan, the
Participant may elect to limit his Compensation for allocation purposes to the
extent necessary to reduce his allocation for the Limitation Year to the
Maximum Permissible Amount and eliminate the Excess Amount.
(c) If, after the application of paragraph (a), an Excess Amount still exists,
and the Plan does not cover the Participant at the end of the Limitation Year,
then the Advisory Committee will hold the Excess Amount unallocated in a
suspense account. The Advisory Committee will apply the suspense account to
reduce Employer Contributions (including allocation of forfeitures) for all
remaining Participants in the next Limitation Year, and in each succeeding
Limitation Year if necessary. Neither the Employer nor any Employee may
contribute to the Plan for any Limitation Year in which the Plan is unable to
allocate fully a suspense account maintained pursuant to this paragraph (c).
3.6
<PAGE>
(d) The Advisory Committee will not distribute any Excess Amount(s) to
Participants or to former Participants.
[NOTE: Sections 3.11 through 3.16 apply only to Participants who, in addition
to this Plan, participate in one or more plans (including Paired Plans), all of
which are qualified Master or Prototype defined contribution plans or welfare
benefit funds (as defined in Code Section 419(e)) maintained by the Employer
during the Limitation Year.]
3.11 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation Year may not
exceed the Maximum Permissible Amount, reduced by the sum of any Annual
Additions allocated to the Participant's Accounts for the same Limitation Year
under this Plan and such other defined contribution plan. If the amount the
Employer otherwise would contribute to the Participant's Account under this Plan
would cause the Annual Additions for the Limitation Year to exceed this
limitation, the Employer will reduce the amount of its contribution so the
Annual Additions under all such plans for the Limitation Year will equal the
Maximum Permissible Amount. If an allocation of Employer contributions, pursuant
to Section 3.04, would result in an Excess Amount (other than an Excess Amount
resulting from the circumstances described in Section 3.10) to the Participant's
Account, the Advisory Committee will reallocate the Excess Amount to the
remaining Participants who are eligible for an allocation of Employer
contributions for the Plan Year in which the Limitation Year ends. The Advisory
Committee will make this reallocation on the basis of the allocation method
under the Plan as if the Participant whose Account otherwise would receive the
Excess Amount is not eligible for an allocation of Employer contributions.
3.12 Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the Advisory Committee may determine the amounts
referred to in 3.11 above on the basis of the Participant's estimated annual
Compensation for such Limitation Year. The Advisory Committee will make this
determination on a reasonable and uniform basis for all Participants similarly
situated. The Advisory Committee must reduce any Employer contribution
(including allocation of forfeitures) based on estimated annual Compensation by
any Excess Amounts carried over from prior years.
3.13 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the amounts referred to
in 3.11 on the basis of the Participant's actual Compensation for such
Limitation Year.
3.14 If pursuant to Section 3.13, or because of the allocation of
forfeitures, a Participant's Annual Additions under this Plan and all such other
plans result in an Excess Amount, such Excess Amount will consist of the Amounts
last allocated. The Advisory Committee will determine the Amounts last allocated
by treating the Annual Additions attributable to a welfare benefit fund as
allocated first, irrespective of the actual allocation date under the welfare
benefit fund.
3.15 The Employer must specify in its Adoption Agreement the Excess Amount
attributed to this Plan, if the Advisory Committee allocates an Excess Amount to
a Participant on an allocation date of this Plan which coincides with an
allocation date of another plan.
3.16 The Advisory Committee will dispose of any Excess Amounts attributed
to this Plan as provided in Section 3.10.
3.7
<PAGE>
[NOTE: Section 3.17 applies only to Participants who, in addition to this
Plan, participate in one or more qualified plans which are qualified defined
contribution plans other than a Master or Prototype plan maintained by the
Employer during the Limitation Year.]
3.17 SPECIAL ALLOCATION LIMITATION. The amount of Annual Additions which
the Advisory Committee may allocate under this Plan on behalf of any
Participant are limited in accordance with the provisions of Section 3.11
through 3.16, as though the other plan were a Master or Prototype plan, unless
the Employer provides other limitations in an addendum to the Adoption
Agreement, numbered Section 3.17.
3.18 DEFINED BENEFIT PLAN LIMITATION. If the Employer maintains a defined
benefit plan, or has ever maintained a defined benefit plan which the Employer
has terminated, then the sum of the defined benefit plan fraction and the
defined contribution plan fraction for any Participant for any Limitation Year
must not exceed 1.0. The Employer must provide in Adoption Agreement Section
3.18 the manner in which the Plan will satisfy this limitation. The Employer
also must provide in its Adoption Agreement Section 3.18 the manner in which the
Plan will satisfy the top heavy requirements of Code Section 416 after taking
into account the existence (or prior maintenance) of the defined benefit plan.
3.19 DEFINITIONS - ARTICLE III. For purposes of Article III, the following
terms mean:
(a) "Annual Addition" - The sum of the following amounts allocated on behalf
of a Participant for a Limitation Year, of (i) all Employer contributions;
(ii) all forfeitures; and (iii) all Employee contributions. Except to the
extent provided in Treasury regulations, Annual Additions include excess
contributions described in Code Section 401(k), excess aggregate contributions
described in Code Section 401(m) and excess deferrals described in Code
Section 402(g), irrespective of whether the plan distributes or forfeits such
excess amounts. Annual Additions also include Excess Amounts reapplied to
reduce Employer contributions under Section 3.10. Amounts allocated after
March 31, 1984, to an individual medical account (as defined in Code Section
415(l)(2)) included as part of a defined benefit plan maintained by the
Employer are Annual Additions. Furthermore, Annual Additions include
contributions paid or accrued after December 31, 1985, for taxable years
ending after December 31, 1985, attributable to post-retirement medical
benefits allocated to the separate account of a key employee (as defined in
Code Section 419A(d)(3)) under a welfare benefit fund (as defined in Code
Section 419(e)) maintained by the Employer.
(b) "Compensation" - For purposes of applying the limitations of Part 2 of
this Article III, "Compensation" means Compensation as defined in Section
1.12, except Compensation does not include elective contributions,
irrespective of whether the Employer has elected to include these amounts as
Compensation under Section 1.12 of its Adoption Agreement, and any exclusion
selected in Section 1.12 of the Adoption Agreement (other than the exclusion
of elective contributions) does not apply.
(c) "Employer" - The Employer that adopts this Plan and any related employers
described in Section 1.30. Solely for purposes of applying the limitations of
Part 2 of this Article III, the Advisory Committee will determine related
employers described in Section 1.30 by modifying Code Sections 414(b)
and (c) in accordance with Code Section 415(h).
(d) "Excess Amount" - The excess of the Participant's Annual Additions for the
Limitation Year over the Maximum Permissible Amount.
3.8
<PAGE>
(e) "Limitation Year" - The period selected by the Employer under Adoption
Agreement Section 1.17. All qualified plans of the Employer must use the same
Limitation Year. If the Employer amends the Limitation Year to a different 12
consecutive month period, the new Limitation Year must begin on a date within
the Limitation Year for which the Employer makes the amendment, creating a
short Limitation Year.
(f) "Master or Prototype Plan" - A plan the form of which is the subject of a
favorable notification letter or a favorable opinion letter from the Internal
Revenue Service.
(g) "Maximum Permissible Amount" - The lesser of (i) $30,000 (or, if greater,
one-fourth of the defined benefit dollar limitation under Code Section
415(b)(1)(A)), or (ii) 25% of the Participant's Compensation for the
Limitation Year. If there is a short Limitation Year because of a change in
Limitation Year, the Advisory Committee will multiply the $30,000 (or
adjusted) limitation by the following fraction:
NUMBER OF MONTHS IN THE SHORT LIMITATION YEAR
12
(h) "Defined contribution plan" - A retirement plan which provides for an
individual account for each participant and for benefits based solely on the
amount contributed to the participant's account, and any income, expenses,
gains and losses, and any forfeitures of accounts of other participants which
the plan may allocate to such participant's account. The Advisory Committee
must treat all defined contribution plans (whether or not terminated)
maintained by the Employer as a single plan. Solely for purposes of the
limitations of Part 2 of this Article III, the Advisory Committee will treat
employee contributions made to a defined benefit plan maintained by the
Employer as a separate defined contribution plan. The Advisory Committee also
will treat as a defined contribution plan an individual medical account (as
defined in Code Section 415(l)(2)) included as part of a defined benefit plan
maintained by the Employer and, for taxable years ending after December 31,
1985, a welfare benefit fund under Code SECTION 419(e) maintained by the
Employer to the extent there are post-retirement medical benefits allocated to
the separate account of a key employee (as defined in Code SECTION
419A(d)(3)).
(i) "Defined benefit plan" - A retirement plan which does not provide for
individual accounts for Employer contributions. The Advisory Committee must
treat all defined benefit plans (whether or not terminated) maintained by the
Employer as a single plan.
[NOTE: The definitions in paragraphs (j), (k) and (l) apply only if the
limitation described in Section 3.18 applies to the Employer's Plan.]
(j) "Defined benefit plan fraction" -
PROJECTED ANNUAL BENEFIT OF THE PARTICIPANT UNDER THE DEFINED BENEFIT PLAN(S)
The lesser of (i) 125% (subject to the "100% limitation" in paragraph (l)) of
the dollar limitation in effect under Code Section 415(b)(1)(A) for the
Limitation Year, or (ii) 140% of the Participant's average
Compensation for his high three (3) consecutive Years
of Service
3.9
<PAGE>
To determine the denominator of this fraction, the Advisory Committee will
make any adjustment required under Code Section 415(b) and will determine a
Year of Service, unless otherwise provided in an addendum to Adoption
Agreement Section 3.18, as a Plan Year in which the Employee completed at
least 1,000 Hours of Service. The "projected annual benefit" is the annual
retirement benefit (adjusted to an actuarially equivalent straight life
annuity if the plan expresses such benefit in a form other than a straight
life annuity or qualified joint and survivor annuity) of the Participant under
the terms of the defined benefit plan on the assumptions he continues
employment until his normal retirement age (or current age, if later) as
stated in the defined benefit plan, his compensation continues at the same
rate as in effect in the Limitation Year under consideration until the date of
his normal retirement age and all other relevant factors used to determine
benefits under the defined benefit plan remain constant as of the current
Limitation Year for all future Limitation Years.
CURRENT ACCRUED BENEFIT. If the Participant accrued benefits in one or
more defined benefit plans maintained by the Employer which were in existence
on May 6, 1986, the dollar limitation used in the denominator of this fraction
will not be less than the Participant's Current Accrued Benefit. A
Participant's Current Accrued Benefit is the sum of the annual benefits under
such defined benefit plans which the Participant had accrued as of the end of
the 1986 Limitation Year (the last Limitation Year beginning before January 1,
1987), determined without regard to any change in the terms or conditions of
the Plan made after May 5, 1986, and without regard to any cost of living
adjustment occurring after May 5, 1986. This Current Accrued Benefit rule
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Code Section 415 as in effect at the end of the
1986 Limitation Year.
(k) "Defined contribution plan fraction" -
The sum, as of the close of the Limitation Year, of the Annual Additions
TO THE PARTICIPANT'S ACCOUNT UNDER THE DEFINED CONTRIBUTION PLAN(S)
The sum of the lesser of the following amounts determined
for the Limitation Year and for each prior Year of Service with the Employer:(i)
125% (subject to the "100% limitation" in paragraph (l)) of the dollar
limitation in effect under Code Section 415(c)(1)(A) for the Limitation Year
(determined without regard to the special dollar limitations for employee stock
ownership plans), or (ii) 35% of the Participant's Compensation for the
Limitation Year
For purposes of determining the defined contribution plan fraction, the
Advisory Committee will not recompute Annual Additions in Limitation Years
beginning prior to January 1, 1987, to treat all Employee contributions as
Annual Additions. If the Plan satisfied Code Section 415 for Limitation Years
beginning prior to January 1, 1987, the Advisory Committee will redetermine
the defined contribution plan fraction and the defined benefit plan fraction
as of the end of the 1986 Limitation Year, in accordance with this Section
3.19. If the sum of the redetermined fractions exceeds 1.0, the Advisory
Committee will subtract permanently from the numerator of the defined
contribution plan fraction 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. In making the adjustment, the Advisory Committee
must disregard any accrued benefit under the defined benefit plan which is in
excess of the Current Accrued Benefit. This Plan continues any transitional
rules applicable to the determination of the defined contribution plan
fraction under the Employer's Plan as of the end of the 1986 Limitation Year.
3.10
<PAGE>
(l) "100% limitation." If the 100% limitation applies, the Advisory Committee
must determine the denominator of the defined benefit plan fraction and the
denominator of the defined contribution plan fraction by substituting 100% for
125%. If the Employer's Plan is a Standardized Plan, the 100% limitation
applies in all Limitation Years, subject to any override provisions under
Section 3.18 of the Employer's Adoption Agreement. If the Employer overrides
the 100% limitation under a Standardized Plan, the Employer must specify in
its Adoption Agreement the manner in which the Plan satisfies the extra
minimum benefit requirement of Code Section 416(h) and the 100% limitation
must continue to apply if the Plan's top heavy ratio exceeds 90%. If the
Employer's Plan is a Nonstandardized Plan, the 100% limitation applies only
if: (i) the Plan's top heavy ratio exceeds 90%; or (ii) the Plan's top heavy
ratio is greater than 60%, and the Employer does not elect in its Adoption
Agreement Section 3.18 to provide extra minimum benefits which satisfy Code
Section 416(h)(2).
* * * * * * * * * * * * * * *
3.11
<PAGE>
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. This Plan does not permit
Participant nondeductible contributions unless the Employer maintains its Plan
under a Code Section 401(k) Adoption Agreement. If the Employer does not
maintain its Plan under a Code Section 401(k) Adoption Agreement and, prior to
the adoption of this Master Plan, the Plan accepted Participant nondeductible
contributions for a Plan Year beginning after December 31, 1986, those
contributions must satisfy the requirements of Code Section 401(m). This Section
4.01 does not prohibit the Plan's acceptance of Participant nondeductible
contributions prior to the first Plan Year commencing after the Plan Year in
which the Employer adopts this Master Plan.
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS. A qualified Plan may not accept
Participant deductible contributions after April 15, 1987. If the Employer's
Plan includes Participant deductible contributions ("DECs") made prior to April
16, 1987, the Advisory Committee must maintain a separate accounting for the
Participant's Accrued Benefit attributable to DECs, including DECs which are
part of a rollover contribution described in Section 4.03. The Advisory
Committee will treat the accumulated DECs as part of the Participant's Accrued
Benefit for all purposes of the Plan, except for purposes of determining the top
heavy ratio under Section 1.33. The Advisory Committee may not use DECs to
purchase life insurance on the Participant's behalf.
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS. Any Participant, with the
Employer's written consent and after filing with the Trustee the form
prescribed by the Advisory Committee, may contribute cash or other property to
the Trust other than as a voluntary contribution if the contribution is a
"rollover contribution" which the Code permits an employee to transfer either
directly or indirectly from one qualified plan to another qualified plan. Before
accepting a rollover contribution, the Trustee may require an Employee to
furnish satisfactory evidence that the proposed transfer is in fact a "rollover
contribution" which the Code permits an employee to make to a qualified plan. A
rollover contribution is not an Annual Addition under Part 2 of Article III.
The Trustee will invest the rollover contribution in a segregated investment
Account for the Participant's sole benefit unless the Trustee (or the Named
Fiduciary, in the case of a nondiscretionary Trustee designation), in its sole
discretion, agrees to invest the rollover contribution as part of the Trust
Fund. The Trustee will not have any investment responsibility with respect to a
Participant's segregated rollover Account. The Participant, however, from time
to time, may direct the Trustee in writing as to the investment of his
segregated rollover Account in property, or property interests, of any kind,
real, personal or mixed; provided however, the Participant may not direct the
Trustee to make loans to his Employer. A Participant's segregated rollover
Account alone will bear any extraordinary expenses resulting from investments
made at the direction of the Participant. As of the Accounting Date (or other
valuation date) for each Plan Year, the Advisory Committee will allocate and
credit the net income (or net loss) from a Participant's segregated rollover
Account and the increase or decrease in the fair market value of the assets of a
segregated rollover Account solely to that Account. The Trustee is not liable
nor responsible for any loss resulting to any Beneficiary, nor to any
Participant, by reason of any sale or investment made or other action taken
pursuant to and in accordance with the direction of the Participant. In all
other respects, the Trustee will hold, administer and distribute a rollover
contribution in the same manner as any Employer contribution made to the Trust.
4.2
<PAGE>
An eligible Employee, prior to satisfying the Plan's eligibility conditions,
may make a rollover contribution to the Trust to the same extent and in the same
manner as a Participant. If an Employee makes a rollover contribution to the
Trust prior to satisfying the Plan's eligibility conditions, the Advisory
Committee and Trustee must treat the Employee as a Participant for all purposes
of the Plan except the Employee is not a Participant for purposes of sharing in
Employer contributions or Participant forfeitures under the Plan until he
actually becomes a Participant in the Plan. If the Employee has a Separation
from Service prior to becoming a Participant, the Trustee will distribute his
rollover contribution Account to him as if it were an Employer contribution
Account.
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY. A Participant's Accrued
Benefit is, at all times, 100% Nonforfeitable to the extent the value of his
Accrued Benefit is derived from his Participant contributions described in this
Article IV.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. A Participant,
by giving prior written notice to the Trustee, may withdraw all or any part of
the value of his Accrued Benefit derived from his Participant contributions
described in this Article IV. A distribution of Participant contributions must
comply with the joint and survivor requirements described in Article VI, if
those requirements apply to the Participant. A Participant may not exercise his
right to withdraw the value of his Accrued Benefit derived from his Participant
contributions more than once during any Plan Year. The Trustee, in accordance
with the direction of the Advisory Committee, will distribute a Participant's
unwithdrawn Accrued Benefit attributable to his Participant contributions in
accordance with the provisions of Article VI applicable to the distribution of
the Participant's Nonforfeitable Accrued Benefit.
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT. The Advisory Committee
must maintain a separate Account(s) in the name of each Participant to reflect
the Participant's Accrued Benefit under the Plan derived from his Participant
contributions. A Participant's Accrued Benefit derived from his Participant
contributions as of any applicable date is the balance of his separate
Participant contribution Account(s).
* * * * * * * * * * * * * * *
4.2
<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE. The Employer must define Normal Retirement Age
in its Adoption Agreement. A Participant's Accrued Benefit derived from Employer
contributions is 100% Nonforfeitable upon and after his attaining Normal
Retirement Age (if employed by the Employer on or after that date).
5.02 PARTICIPANT DISABILITY OR DEATH. The Employer may elect in its
Adoption Agreement to provide a Participant's Accrued Benefit derived from
Employer contributions will be 100% Nonforfeitable if the Participant's
Separation from Service is a result of his death or his disability.
5.03 VESTING SCHEDULE. Except as provided in Sections 5.01 and 5.02, for
each Year of Service, a Participant's Nonforfeitable percentage of his Accrued
Benefit derived from Employer contributions equals the percentage in the vesting
schedule completed by the Employer in its Adoption Agreement.
(A) ELECTION OF SPECIAL VESTING FORMULA. If the Trustee makes a distribution
(other than a cash-out distribution described in Section 5.04) to a partially-
vested Participant, and the Participant has not incurred a Forfeiture Break in
Service at the relevant time, the Advisory Committee will establish a separate
Account for the Participant's Accrued Benefit. At any relevant time following
the distribution, the Advisory Committee will determine the Participant's
Nonforfeitable Accrued Benefit derived from Employer contributions in
accordance with the following formula: P(AB + (R x D)) - (R x D).
To apply this formula, "P" is the Participant's current vesting percentage at
the relevant time, "AB" is the Participant's Employer-derived Accrued Benefit at
the relevant time, "R" is the ratio of "AB" to the Participant's Employer-
derived Accrued Benefit immediately following the earlier distribution and "D"
is the amount of the earlier distribution. If, under a restated Plan, the Plan
has made distribution to a partially-vested Participant prior to its restated
Effective Date and is unable to apply the cash-out provisions of Section 5.04 to
that prior distribution, this special vesting formula also applies to that
Participant's remaining Account. The Employer, in an addendum to its Adoption
Agreement, numbered Section 5.03, may elect to modify this formula to read as
follows: P(AB + D) - D.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/
RESTORATION OF FORFEITED ACCRUED BENEFIT. If, pursuant to Article VI, a
partially-vested Participant receives a cash-out distribution before he incurs a
Forfeiture Break in Service (as defined in Section 5.08), the cash-out
distribution will result in an immediate forfeiture of the nonvested portion of
the Participant's Accrued Benefit derived from Employer contributions. See
Section 5.09. A partially-vested Participant is a Participant whose
Nonforfeitable Percentage determined under Section 5.03 is less than 100%. A
cash-out distribution is a distribution of the entire present value of the
Participant's Nonforfeitable Accrued Benefit.
5.2
<PAGE>
(A) RESTORATION AND CONDITIONS UPON RESTORATION. A partially-vested Participant
who is re-employed by the Employer after receiving a cash-out distribution of
the Nonforfeitable percentage of his Accrued Benefit may repay the Trustee the
amount of the cash-out distribution attributable to Employer contributions,
unless the Participant no longer has a right to restoration by reason of the
conditions of this Section 5.04(A). If a partially-vested Participant makes the
cash-out distribution repayment, the Advisory Committee, subject to the
conditions of this Section 5.04(A), must restore his Accrued Benefit
attributable to Employer contributions to the same dollar amount as the dollar
amount of his Accrued Benefit on the Accounting Date, or other valuation date,
immediately preceding the date of the cash-out distribution, unadjusted for any
gains or losses occurring subsequent to that Accounting Date, or other valuation
date. Restoration of the Participant's Accrued Benefit includes restoration of
all Code Section 411(d)(6) protected benefits with respect to that restored
Accrued Benefit, in accordance with applicable Treasury regulations. The
Advisory Committee will not restore a re-employed Participant's Accrued Benefit
under this paragraph if:
(1) 5 years have elapsed since the Participant's first re-employment date with
the Employer following the cash-out distribution; or
(2) The Participant incurred a Forfeiture Break in Service (as defined in
Section 5.08). This condition also applies if the Participant makes repayment
within the Plan Year in which he incurs the Forfeiture Break in Service and
that Forfeiture Break in Service would result in a complete forfeiture of the
amount the Advisory Committee otherwise would restore.
(B) TIME AND METHOD OF RESTORATION. If neither of the two conditions preventing
restoration of the Participant's Accrued Benefit applies, the Advisory Committee
will restore the Participant's Accrued Benefit as of the Plan Year Accounting
Date coincident with or immediately following the repayment. To restore the
Participant's Accrued Benefit, the Advisory Committee, to the extent necessary,
will allocate to the Participant's Account:
(1) First, the amount, if any, of Participant forfeitures the Advisory
Committee would otherwise allocate under Section 3.05;
(2) Second, the amount, if any, of the Trust Fund net income or gain for the
Plan Year; and
(3) Third, the Employer contribution for the Plan Year to the extent made
under a discretionary formula.
In an addendum to its Adoption Agreement numbered 5.04(B), the Employer may
eliminate as a means of restoration any of the amounts described in clauses (1),
(2) and (3) or may change the order of priority of these amounts. To the extent
the amounts described in clauses (1), (2) and (3) are insufficient to enable the
Advisory Committee to make the required restoration, the Employer must
contribute, without regard to any requirement or condition of Section 3.01, the
additional amount necessary to enable the Advisory Committee to make the
required restoration. If, for a particular Plan Year, the Advisory Committee
must restore the Accrued Benefit of more than one re-employed Participant, then
the Advisory Committee will make the restoration allocations to each such
Participant's Account in the same proportion that a Participant's restored
amount for the Plan Year bears to the restored amount for the Plan Year of all
re-employed Participants. The Advisory Committee will not take into account any
allocation under this Section 5.04 in applying the limitation on allocations
under Part 2 of Article III.
5.5
<PAGE>
(C) 0% VESTED PARTICIPANT. The Employer must specify in its Adoption Agreement
whether the deemed cash-out rule applies to a 0% vested Participant. A 0% vested
Participant is a Participant whose Accrued Benefit derived from Employer
contributions is entirely forfeitable at the time of his Separation from
Service. If the Participant's Account is not entitled to an allocation of
Employer contributions for the Plan Year in which he has a Separation from
Service, the Advisory Committee will apply the deemed cash-out rule as if the 0%
vested Participant received a cash-out distribution on the date of the
Participant's Separation from Service. If the Participant's Account is entitled
to an allocation of Employer contributions or Participant forfeitures for the
Plan Year in which he has a Separation from Service, the Advisory Committee will
apply the deemed cash-out rule as if the 0% vested Participant received a cash-
out distribution on the first day of the first Plan Year beginning after his
Separation from Service. For purposes of applying the restoration provisions of
this Section 5.04, the Advisory Committee will treat the 0% vested Participant
as repaying his cash-out "distribution" on the first date of his re-employment
with the Employer. If the deemed cash-out rule does not apply to the Employer's
Plan, a 0% vested Participant will not incur a forfeiture until he incurs a
Forfeiture Break in Service.
5.05 SEGREGATED ACCOUNT FOR REPAID AMOUNT. Until the Advisory Committee
restores the Participant's Accrued Benefit, as described in Section 5.04, the
Trustee will invest the cash-out amount the Participant has repaid in a
segregated Account maintained solely for that Participant. The Trustee must
invest the amount in the Participant's segregated Account in Federally insured
interest bearing savings account(s) or time deposit(s) (or a combination of
both), or in other fixed income investments. Until commingled with the balance
of the Trust Fund on the date the Advisory Committee restores the Participant's
Accrued Benefit, the Participant's segregated Account remains a part of the
Trust, but it alone shares in any income it earns and it alone bears any expense
or loss it incurs. Unless the repayment qualifies as a rollover contribution,
the Advisory Committee will direct the Trustee to repay to the Participant as
soon as is administratively practicable the full amount of the Participant's
segregated Account if the Advisory Committee determines either of the conditions
of Section 5.04(A) prevents restoration as of the applicable Accounting Date,
notwithstanding the Participant's repayment.
5.06 YEAR OF SERVICE - VESTING. For purposes of vesting under Section
5.03, Year of Service means any 12-consecutive month period designated in the
Employer's Adoption Agreement during which an Employee completes not less than
the number of Hours of Service (not exceeding 1,000) specified in the Employer's
Adoption Agreement. A Year of Service includes any Year of Service earned prior
to the Effective Date of the Plan, except as provided in Section 5.08.
5.07 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
Participant incurs a "Break in Service" if during any vesting computation period
he does not complete more than 500 Hours of Service. If, pursuant to Section
5.06, the Plan does not require more than 500 Hours of Service to receive credit
for a Year of Service, a Participant incurs a Break in Service in a vesting
computation period in which he fails to complete a Year of Service.
5.5
<PAGE>
5.08 INCLUDED YEARS OF SERVICE - VESTING. For purposes of determining
"Years of Service" under Section 5.06, the Plan takes into account all Years of
Service an Employee completes with the Employer except:
(a) For the sole purpose of determining a Participant's Nonforfeitable
percentage of his Accrued Benefit derived from Employer contributions which
accrued for his benefit prior to a Forfeiture Break in Service, the Plan
disregards any Year of Service after the Participant first incurs a Forfeiture
Break in Service. The Participant incurs a Forfeiture Break in Service when he
incurs 5 consecutive Breaks in Service.
(b) The Plan disregards any Year of Service excluded under the Employer's
Adoption Agreement.
The Plan does not apply the Break in Service rule under Code Section
411(a)(6)(B). Therefore, an Employee need not complete a Year of Service after a
Break in Service before the Plan takes into account the Employee's otherwise
includible Years of Service under this Article V.
5.09 FORFEITURE OCCURS. A Participant's forfeiture, if any, of his Accrued
Benefit derived from Employer contributions occurs under the Plan on the earlier
of:
(a) The last day of the vesting computation period in which the Participant
first incurs a Forfeiture Break in Service; or
(b) The date the Participant receives a cash-out distribution.
The Advisory Committee determines the percentage of a Participant's Accrued
Benefit forfeiture, if any, under this Section 5.09 solely by reference to the
vesting schedule of Section 5.03. A Participant does not forfeit any portion of
his Accrued Benefit for any other reason or cause except as expressly provided
by this Section 5.09 or as provided under Section 9.14.
* * * * * * * * * * * * * * *
5.5
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ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to Section 6.03,
the Participant or the Beneficiary elects in writing to a different time or
method of payment, the Advisory Committee will direct the Trustee to commence
distribution of a Participant's Nonforfeitable Accrued Benefit in accordance
with this Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of the distribution to
the Participant, exceeds $3,500 and the Participant has not attained the later
of Normal Retirement Age or age 62. Furthermore, the Participant's spouse also
must consent, in writing, to any distribution, for which Section 6.04 requires
the spouse's consent. For all purposes of this Article VI, the term "annuity
starting date" means the first day of the first period for which the Plan pays
an amount as an annuity or in any other form. A distribution date under this
Article VI, unless otherwise specified within the Plan, is the date or dates the
Employer specifies in the Adoption Agreement, or as soon as administratively
practicable following that distribution date. For purposes of the consent
requirements under this Article VI, if the present value of the Participant's
Nonforfeitable Accrued Benefit, at the time of any distribution, exceeds $3,500,
the Advisory Committee must treat that present value as exceeding $3,500 for
purposes of all subsequent Plan distributions to the Participant.
(A) SEPARATION FROM SERVICE FOR A REASON OTHER THAN DEATH.
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. If the
Participant's Separation from Service is for any reason other than death, the
Advisory Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in a lump sum, on the distribution date the
Employer specifies in the Adoption Agreement, but in no event later than the
60th day following the close of the Plan Year in which the Participant attains
Normal Retirement Age. If the Participant has attained Normal Retirement Age at
the time of his Separation from Service, the distribution under this paragraph
will occur no later than the 60th day following the close of the Plan Year in
which the Participant's Separation from Service occurs.
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. If the
Participant's Separation from Service is for any reason other than death, the
Advisory Committee will direct the Trustee to commence distribution of the
Participant's Nonforfeitable Accrued Benefit in a form and at the time elected
by the Participant, pursuant to Section 6.03. In the absence of an election by
the Participant, the Advisory Committee will direct the Trustee to distribute
the Participant's Nonforfeitable Accrued Benefit in a lump sum (or, if
applicable, the normal annuity form of distribution required under Section
6.04), on the 60th day following the close of the Plan Year in which the latest
of the following events occurs: (a) the Participant attains Normal Retirement
Age; (b) the Participant attains age 62; or (c) the Participant's Separation
from Service.
(3) DISABILITY. If the Participant's Separation from Service is because of his
disability, the Advisory Committee will direct the Trustee to pay the
Participant's Nonforfeitable Accrued Benefit in lump sum, on the distribution
date the Employer specifies in the Adoption Agreement, subject to the notice and
consent requirements of this Article VI and subject to the applicable mandatory
commencement dates described in Paragraphs (1) and (2).
6.11
<PAGE>
(4) HARDSHIP. Prior to the time at which the Participant may receive
distribution under Paragraphs (1), (2) or (3), the Participant may request a
distribution from his Nonforfeitable Accrued Benefit in an amount necessary to
satisfy a hardship, if the Employer elects in the Adoption Agreement to permit
hardship distributions. Unless the Employer elects otherwise in the Adoption
Agreement, a hardship distribution must be on account of any of the following:
(a) medical expenses; (b) the purchase (excluding mortgage payments) of the
Participant's principal residence; (c) post-secondary education tuition, for the
next semester or quarter, for the Participant or for the Participant's spouse,
children or dependents; (d) to prevent the eviction of the Participant from his
principal residence or the foreclosure on the mortgage of the Participant's
principal residence; (e) funeral expenses of the Participant's family member; or
(f) the Participant's disability. A partially-vested Participant may not receive
a hardship distribution described in this Paragraph (A)(4) prior to incurring a
Forfeiture Break in Service, unless the hardship distribution is a cash-out
distribution (as defined in Article V). The Advisory Committee will direct the
Trustee to make the hardship distribution as soon as administratively
practicable after the Participant makes a valid request for the hardship
distribution.
(B) REQUIRED BEGINNING DATE. If any distribution commencement date described
under Paragraph (A) of this Section 6.01, either by Plan provision or by
Participant election (or nonelection), is later than the Participant's Required
Beginning Date, the Advisory Committee instead must direct the Trustee to make
distribution on the Participant's Required Beginning Date, subject to the
transitional election, if applicable, under Section 6.03(D). A Participant's
Required Beginning Date is the April 1 following the close of the calendar year
in which the Participant attains age 70 1/2. However, if the Participant, prior
to incurring a Separation from Service, attained age 70 1/2 by January 1, 1988,
and, for the five Plan Year period ending in the calendar year in which he
attained age 70 1/2 and for all subsequent years, the Participant was not a
more than 5% owner, the Required Beginning Date is the April 1 following the
close of the calendar year in which the Participant separates from Service or,
if earlier, the April 1 following the close of the calendar year in which the
Participant becomes a more than 5% owner. Furthermore, if a Participant who was
not a more than 5% owner attained age 70 1/2 during 1988 and did not incur a
Separation from Service prior to January 1, 1989, his Required Beginning Date
is April 1, 1990. A mandatory distribution at the Participant's Required
Beginning Date will be in lump sum (or, if applicable, the normal annuity form
of distribution required under Section 6.04) unless the Participant, pursuant
to the provisions of this Article VI, makes a valid election to receive an
alternative form of payment.
(C) DEATH OF THE PARTICIPANT. The Advisory Committee will direct the Trustee, in
accordance with this Section 6.01(C), to distribute to the Participant's
Beneficiary the Participant's Nonforfeitable Accrued Benefit remaining in the
Trust at the time of the Participant's death. Subject to the requirements of
Section 6.04, the Advisory Committee will determine the death benefit by
reducing the Participant's Nonforfeitable Accrued Benefit by any security
interest the Plan has against that Nonforfeitable Accrued Benefit by reason of
an outstanding Participant loan.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT DOES NOT EXCEED
$3,500. The Advisory Committee, subject to the requirements of Section 6.04,
must direct the Trustee to distribute the deceased Participant's Nonforfeitable
Accrued Benefit in a single sum, as soon as administratively practicable
following the Participant's death or, if later, the date on which the Advisory
Committee receives notification of or otherwise confirms the Participant's
death.
6.11
<PAGE>
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. The
Advisory Committee will direct the Trustee to distribute the deceased
Participant's Nonforfeitable Accrued Benefit at the time and in the form elected
by the Participant or, if applicable by the Beneficiary, as permitted under this
Article VI. In the absence of an election, subject to the requirements of
Section 6.04, the Advisory Committee will direct the Trustee to distribute the
Participant's undistributed Nonforfeitable Accrued Benefit in a lump sum on the
first distribution date following the close of the Plan Year in which the
Participant's death occurs or, if later, the first distribution date following
the date the Advisory Committee receives notification of or otherwise confirms
the Participant's death.
If the death benefit is payable in full to the Participant's surviving spouse,
the surviving spouse, in addition to the distribution options provided in this
Section 6.01(C), may elect distribution at any time or in any form (other than a
joint and survivor annuity) this Article VI would permit for a Participant.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. Subject to the annuity
distribution requirements, if any, prescribed by Section 6.04, and any
restrictions prescribed by Section 6.03, a Participant or Beneficiary may elect
distribution under one, or any combination, of the following methods: (a) by
payment in a lump sum; or (b) by payment in monthly, quarterly or annual
installments over a fixed reasonable period of time, not exceeding the life
expectancy of the Participant, or the joint life and last survivor expectancy of
the Participant and his Beneficiary. The Employer may elect in its Adoption
Agreement to modify the methods of payment available under this Section 6.02.
The distribution options permitted under this Section 6.02 are available only
if the present value of the Participant Nonforfeitable Accrued Benefit, at the
time of the distribution to the Participant, exceeds $3,500. To facilitate
installment payments under this Article VI, the Advisory Committee may direct
the Trustee to segregate all or any part of the Participant's Accrued Benefit in
a separate Account. The Trustee will invest the Participant's segregated Account
in Federally insured interest bearing savings account(s) or time deposit(s) (or
a combination of both), or in other fixed income investments. A segregated
Account remains a part of the Trust, but it alone shares in any income it earns,
and it alone bears any expense or loss it incurs. A Participant or Beneficiary
may elect to receive an installment distribution in the form of a
Nontransferable Annuity Contract. Under an installment distribution, the
Participant or Beneficiary, at any time, may elect to accelerate the payment of
all, or any portion, of the Participant's unpaid Nonforfeitable Accrued Benefit,
subject to the requirements of Section 6.04.
6.11
<PAGE>
(A) MINIMUM DISTRIBUTION REQUIREMENTS FOR PARTICIPANTS. The Advisory Committee
may not direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit, nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of payment which, as of the
Required Beginning Date, does not satisfy the minimum distribution requirements
under Code Section 401(a)(9) and the applicable Treasury regulations. The
minimum distribution for a calendar year equals the Participant's Nonforfeitable
Accrued Benefit as of the latest valuation date preceding the beginning of the
calendar year divided by the Participant's life expectancy or, if applicable,
the joint and last survivor expectancy of the Participant and his designated
Beneficiary (as determined under Article VIII, subject to the requirements of
the Code Section 401(a)(9) regulations). The Advisory Committee will increase
the Participant's Nonforfeitable Accrued Benefit, as determined on the relevant
valuation date, for contributions or forfeitures allocated after the valuation
date and by December 31 of the valuation calendar year, and will decrease the
valuation by distributions made after the valuation date and by December 31 of
the valuation calendar year. For purposes of this valuation, the Advisory
Committee will treat any portion of the minimum distribution for the first
distribution calendar year made after the close of that year as a distribution
occurring in that first distribution calendar year. In computing a minimum
distribution, the Advisory Committee must use the unisex life expectancy
multiples under Treas. Reg. Section 1.72-9. The Advisory Committee, only upon
the Participant's written request, will compute the minimum distribution for a
calendar year subsequent to the first calendar year for which the Plan requires
a minimum distribution by redetermining the applicable life expectancy. However,
the Advisory Committee may not redetermine the joint life and last survivor
expectancy of the Participant and a nonspouse designated Beneficiary in a manner
which takes into account any adjustment to a life expectancy other than the
Participant's life expectancy.
If the Participant's spouse is not his designated Beneficiary, a method of
payment to the Participant (whether by Participant election or by Advisory
Committee direction) may not provide more than incidental benefits to the
Beneficiary. For Plan Years beginning after December 31, 1988, the Plan must
satisfy the minimum distribution incidental benefit ("MDIB") requirement in the
Treasury regulations issued under Code Section 401(a)(9) for distributions made
on or after the Participant's Required Beginning Date and before the
Participant's death. To satisfy the MDIB requirement, the Advisory Committee
will compute the minimum distribution required by this Section 6.02(A) by
substituting the applicable MDIB divisor for the applicable life expectancy
factor, if the MDIB divisor is a lesser number. Following the Participant's
death, the Advisory Committee will compute the minimum distribution required by
this Section 6.02(A) solely on the basis of the applicable life expectancy
factor and will disregard the MDIB factor. For Plan Years beginning prior to
January 1, 1989, the Plan satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB requirement or if the
present value of the retirement benefits payable solely to the Participant is
greater than 50% of the present value of the total benefits payable to the
Participant and his Beneficiaries. The Advisory Committee must determine whether
benefits to the Beneficiary are incidental as of the date the Trustee is to
commence payment of the retirement benefits to the Participant, or as of any
date the Trustee redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar year is due by
the Participant's Required Beginning Date. The minimum distribution for each
subsequent distribution calendar year, including the calendar year in which the
Participant's Required Beginning Date occurs, is due by December 31 of that
year. If the Participant receives distribution in the form of a Nontransferable
Annuity Contract, the distribution satisfies this Section 6.02(A) if the
contract complies with the requirements of Code Section 401(a)(9) and the
applicable Treasury regulations.
6.11
<PAGE>
(B) MINIMUM DISTRIBUTION REQUIREMENTS FOR BENEFICIARIES. The method of
distribution to the Participant's Beneficiary must satisfy Code Section
401(a)(9) and the applicable Treasury regulations. If the Participant's death
occurs after his Required Beginning Date or, if earlier, the date the
Participant commences an irrevocable annuity pursuant to Section 6.04, the
method of payment to the Beneficiary must provide for completion of payment over
a period which does not exceed the payment period which had commenced for the
Participant. If the Participant's death occurs prior to his Required Beginning
Date, and the Participant had not commenced an irrevocable annuity pursuant to
Section 6.04, the method of payment to the Beneficiary, subject to Section 6.04,
must provide for completion of payment to the Beneficiary over a period not
exceeding: (i) 5 years after the date of the Participant's death; or (ii) if the
Beneficiary is a designated Beneficiary, the designated Beneficiary's life
expectancy. The Advisory Committee may not direct payment of the Participant's
Nonforfeitable Accrued Benefit over a period described in clause (ii) unless the
Trustee will commence payment to the designated Beneficiary no later than the
December 31 following the close of the calendar year in which the Participant's
death occurred or, if later, and the designated Beneficiary is the Participant's
surviving spouse, December 31 of the calendar year in which the Participant
would have attained age 70 1/2. If the Trustee will make distribution in
accordance with clause (ii), the minimum distribution for a calendar year
equals the Participant's Nonforfeitable Accrued Benefit as of the latest
valuation date preceding the beginning of the calendar year divided by the
designated Beneficiary's life expectancy. The Advisory Committee must use the
unisex life expectancy multiples under Treas. Reg. Section 1.72-9 for purposes
of applying this paragraph. The Advisory Committee, only upon the written
request of the Participant or of the Participant's surviving spouse, will
recalculate the life expectancy of the Participant's surviving spouse not more
frequently than annually, but may not recalculate the life expectancy of a
nonspouse designated Beneficiary after the Trustee commences payment to the
designated Beneficiary. The Advisory Committee will apply this paragraph by
treating any amount paid to the Participant's child, which becomes payable to
the Participant's surviving spouse upon the child's attaining the age of
majority, as paid to the Participant's surviving spouse. Upon the Beneficiary's
written request, the Advisory Committee must direct the Trustee to accelerate
payment of all, or any portion, of the Participant's unpaid Accrued Benefit, as
soon as administratively practicable following the effective date of that
request.
6.03 BENEFIT PAYMENT ELECTIONS. Not earlier than 90 days, but not later
than 30 days, before the Participant's annuity starting date, the Advisory
Committee must provide a benefit notice to a Participant who is eligible to make
an election under this Section 6.03. The benefit notice must explain the
optional forms of benefit in the Plan, including the material features and
relative values of those options, and the Participant's right to defer
distribution until he attains the later of Normal Retirement Age or age 62.
If a Participant or Beneficiary makes an election prescribed by this Section
6.03, the Advisory Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that election.
Any election under this Section 6.03 is subject to the requirements of Section
6.02 and of Section 6.04. The Participant or Beneficiary must make an election
under this Section 6.03 by filing his election with the Advisory Committee at
any time before the Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI.
6.11
<PAGE>
(A) PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. If the present value of
a Participant's Nonforfeitable Accrued Benefit exceeds $3,500, he may elect to
have the Trustee commence distribution as of any distribution date permitted
under the Employer's Adoption Agreement Section 6.03. The Participant may
reconsider an election at any time prior to the annuity starting date and elect
to commence distribution as of any other distribution date permitted under the
Employer's Adoption Agreement Section 6.03. If the Participant is partially-
vested in his Accrued Benefit, an election under this Paragraph (A) to
distribute prior to the Participant's incurring a Forfeiture Break in Service
(as defined in Section 5.08), must be in the form of a cash-out distribution (as
defined in Article V). A Participant may not receive a cash-out distribution if,
prior to the time the Trustee actually makes the cash-out distribution, the
Participant returns to employment with the Employer. Following his attainment of
Normal Retirement Age, a Participant who has separated from Service may elect
distribution as of any distribution date, irrespective of the elections under
Adoption Agreement Section 6.03.
(B) PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE. The Employer must
specify in its Adoption Agreement the distribution election rights, if any, a
Participant has prior to his Separation from Service. A Participant must make an
election under this Section 6.03(B) on a form prescribed by the Advisory
Committee at any time during the Plan Year for which his election is to be
effective. In his written election, the Participant must specify the percentage
or dollar amount he wishes the Trustee to distribute to him. The Participant's
election relates solely to the percentage or dollar amount specified in his
election form and his right to elect to receive an amount, if any, for a
particular Plan Year greater than the dollar amount or percentage specified in
his election form terminates on the Accounting Date. The Trustee must make a
distribution to a Participant in accordance with his election under this Section
6.03(B) within the 90 day period (or as soon as administratively practicable)
after the Participant files his written election with the Trustee. The Trustee
will distribute the balance of the Participant's Accrued Benefit not distributed
pursuant to his election(s) in accordance with the other distribution provisions
of this Plan.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased Participant's
Nonforfeitable Accrued Benefit exceeds $3,500, the Participant's Beneficiary may
elect to have the Trustee distribute the Participant's Nonforfeitable Accrued
Benefit in a form and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions designated in writing by
the Participant and not revoked as of his date of death.
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<PAGE>
(D) TRANSITIONAL ELECTIONS. Notwithstanding the provisions of Sections 6.01 and
6.02, if the Participant (or Beneficiary) signed a written distribution
designation prior to January 1, 1984, the Advisory Committee must distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that
designation, subject however, to the survivor requirements, if applicable, of
Sections 6.04, 6.05 and 6.06. This Section 6.03(D) does not apply to a pre-1984
distribution designation, and the Advisory Committee will not comply with that
designation, if any of the following applies: (1) the method of distribution
would have disqualified the Plan under Code Section 401(a)(9) as in effect on
December 31, 1983; (2) the Participant did not have an Accrued Benefit as of
December 31, 1983; (3) the distribution designation does not specify the timing
and form of the distribution and the death Beneficiaries (in order of priority);
(4) the substitution of a Beneficiary modifies the payment period of the
distribution; or, (5) the Participant (or Beneficiary) modifies or revokes the
distribution designation. In the event of a revocation, the Plan must
distribute, no later than December 31 of the calendar year following the year of
revocation, the amount which the Participant would have received under Section
6.02(A) if the distribution designation had not been in effect or, if the
Beneficiary revokes the distribution designation, the amount which the
Beneficiary would have received under Section 6.02(B) if the distribution
designation had not been in effect. The Advisory Committee will apply this
Section 6.03(D) to rollovers and transfers in accordance with Part J of the Code
Section 401(a)(9) Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
(A) JOINT AND SURVIVOR ANNUITY. The Advisory Committee must direct the
Trustee to distribute a married or unmarried Participant's Nonforfeitable
Accrued Benefit in the form of a qualified joint and survivor annuity, unless
the Participant makes a valid waiver election (described in Section 6.05) within
the 90 day period ending on the annuity starting date. If, as of the annuity
starting date, the Participant is married, a qualified joint and survivor
annuity is an immediate annuity which is purchasable with the Participant's
Nonforfeitable Accrued Benefit and which provides a life annuity for the
Participant and a survivor annuity payable for the remaining life of the
Participant's surviving spouse equal to 50% of the amount of the annuity payable
during the life of the Participant. If, as of the annuity starting date, the
Participant is not married, a qualified joint and survivor annuity is an
immediate life annuity for the Participant which is purchasable with the
Participant's Nonforfeitable Accrued Benefit. On or before the annuity starting
date, the Advisory Committee, without Participant or spousal consent, must
direct the Trustee to pay the Participant's Nonforfeitable Accrued Benefit in a
lump sum, in lieu of a qualified joint and survivor annuity, in accordance with
Section 6.01, if the Participant's Nonforfeitable Accrued Benefit is not greater
than $3,500. This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after August 22, 1984.
6.11
<PAGE>
(B) PRERETIREMENT SURVIVOR ANNUITY. If a married Participant dies prior to his
annuity starting date, the Advisory Committee will direct the Trustee to
distribute a portion of the Participant's Nonforfeitable Accrued Benefit to the
Participant's surviving spouse in the form of a preretirement survivor annuity,
unless the Participant has a valid waiver election (as described in Section
6.06) in effect, or unless the Participant and his spouse were not married
throughout the one year period ending on the date of his death. A preretirement
survivor annuity is an annuity which is purchasable with 50% of the
Participant's Nonforfeitable Accrued Benefit (determined as of the date of the
Participant's death) and which is payable for the life of the Participant's
surviving spouse. The value of the preretirement survivor annuity is
attributable to Employer contributions and to Employee contributions in the same
proportion as the Participant's Nonforfeitable Accrued Benefit is attributable
to those contributions. The portion of the Participant's Nonforfeitable Accrued
Benefit not payable under this paragraph is payable to the Participant's
Beneficiary, in accordance with the other provisions of this Article VI. If the
present value of the preretirement survivor annuity does not exceed $3,500, the
Advisory Committee, on or before the annuity starting date, must direct the
Trustee to make a lump sum distribution to the Participant's surviving spouse,
in lieu of a preretirement survivor annuity. This Section 6.04(B) applies only
to a Participant who dies after August 22, 1984, and either (i) completes at
least one Hour of Service with the Employer after August 22, 1984, or (ii)
separated from Service with at least 10 Years of Service (as defined in Section
5.06) and completed at least one Hour of Service with the Employer in a Plan
Year beginning after December 31, 1975.
(C) SURVIVING SPOUSE ELECTIONS. If the present value of the preretirement
survivor annuity exceeds $3,500, the Participant's surviving spouse may elect to
have the Trustee commence payment of the preretirement survivor annuity at any
time following the date of the Participant's death, but not later than the
mandatory distribution periods described in Section 6.02, and may elect any of
the forms of payment described in Section 6.02, in lieu of the preretirement
survivor annuity. In the absence of an election by the surviving spouse, the
Advisory Committee must direct the Trustee to distribute the preretirement
survivor annuity on the first distribution date following the close of the Plan
Year in which the latest of the following events occurs: (i) the Participant's
death; (ii) the date the Advisory Committee receives notification of or
otherwise confirms the Participant's death; (iii) the date the Participant would
have attained Normal Retirement Age; or (iv) the date the Participant would have
attained age 62.
(D) SPECIAL RULES. If the Participant has in effect a valid waiver election
regarding the qualified joint and survivor annuity or the preretirement survivor
annuity, the Advisory Committee must direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with Sections 6.01,
6.02 and 6.03. The Advisory Committee will reduce the Participant's
Nonforfeitable Accrued Benefit by any security interest (pursuant to any offset
rights authorized by Section 10.03[E]) held by the Plan by reason of a
Participant loan to determine the value of the Participant's Nonforfeitable
Accrued Benefit distributable in the form of a qualified joint and survivor
annuity or preretirement survivor annuity, provided any post-August 18, 1985,
loan satisfied the spousal consent requirement described in Section 10.03[E] of
the Plan. For purposes of applying this Article VI, the Advisory Committee
treats a former spouse as the Participant's spouse or surviving spouse to the
extent provided under a qualified domestic relations order described in Section
6.07. The provisions of this Section 6.04, and of Sections 6.05 and 6.06, apply
separately to the portion of the Participant's Nonforfeitable Accrued Benefit
subject to the qualified domestic relations order and to the portion of the
Participant's Nonforfeitable Accrued Benefit not subject to that order.
6.11
<PAGE>
(E) PROFIT SHARING PLAN ELECTION. If this Plan is a profit sharing plan, the
Employer must elect the extent to which the preceding provisions of Section 6.04
apply. If the Employer elects to apply this Section 6.04 only to a Participant
described in this Section 6.04(E), the preceding provisions of this Section 6.04
apply only to the following Participants: (1) a Participant as respects whom the
Plan is a direct or indirect transferee from a plan subject to the Code Section
417 requirements and the Plan received the transfer after December 31, 1984,
unless the transfer is an elective transfer described in Section 13.06; (2) a
Participant who elects a life annuity distribution (if Section 6.02 or Section
13.02 of the Plan requires the Plan to provide a life annuity distribution
option); and (3) a Participant whose benefits under a defined benefit plan
maintained by the Employer are offset by benefits provided under this Plan. If
the Employer elects to apply this Section 6.04 to all Participants, the
preceding provisions of this Section 6.04 apply to all Participants described in
the first two paragraphs of this Section 6.04, without regard to the limitations
of this Section 6.04(E). Sections 6.05 and 6.06 only apply to Participants to
whom the preceding provisions of this Section 6.04 apply.
6.05 WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY. Not earlier
than 90 days, but not later than 30 days, before the Participant's annuity
starting date, the Advisory Committee must provide the Participant a written
explanation of the terms and conditions of the qualified joint and survivor
annuity, the Participant's right to make, and the effect of, an election to
waive the joint and survivor form of benefit, the rights of the Participant's
spouse regarding the waiver election and the Participant's right to make, and
the effect of, a revocation of a waiver election. The Plan does not limit the
number of times the Participant may revoke a waiver of the qualified joint and
survivor annuity or make a new waiver during the election period.
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under the
qualified joint and survivor annuity), after the Participant has received the
written explanation described in this Section 6.05, has consented in writing to
the waiver election, the spouse's consent acknowledges the effect of the
election, and a notary public or the Plan Administrator (or his representative)
witnesses the spouse's consent, (b) the spouse consents to the alternate form of
payment designated by the Participant or to any change in that designated form
of payment, and (c) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary designation or
to any change in the Participant's Beneficiary designation. The spouse's consent
to a waiver of the qualified joint and survivor annuity is irrevocable, unless
the Participant revokes the waiver election. The spouse may execute a blanket
consent to any form of payment designation or to any Beneficiary designation
made by the Participant, if the spouse acknowledges the right to limit that
consent to a specific designation but, in writing, waives that right. The
consent requirements of this Section 6.05 apply to a former spouse of the
Participant, to the extent required under a qualified domestic relations order
described in Section 6.07.
The Advisory Committee will accept as valid a waiver election which does not
satisfy the spousal consent requirements if the Advisory Committee establishes
the Participant does not have a spouse, the Advisory Committee is not able to
locate the Participant's spouse, the Participant is legally separated or has
been abandoned (within the meaning of State law) and the Participant has a court
order to that effect, or other circumstances exist under which the Secretary of
the Treasury will excuse the consent requirement. If the Participant's spouse is
legally incompetent to give consent, the spouse's legal guardian (even if the
guardian is the Participant) may give consent.
6.11
<PAGE>
6.06 WAIVER ELECTION - PRERETIREMENT SURVIVOR ANNUITY. The Advisory
Committee must provide a written explanation of the preretirement survivor
annuity to each married Participant, within the following period which ends
last: (1) the period beginning on the first day of the Plan Year in which the
Participant attains age 32 and ending on the last day of the Plan Year in which
the Participant attains age 34; (2) a reasonable period after an Employee
becomes a Participant; (3) a reasonable period after the joint and survivor
rules become applicable to the Participant; or (4) a reasonable period after a
fully subsidized preretirement survivor annuity no longer satisfies the
requirements for a fully subsidized benefit. A reasonable period described in
clauses (2), (3) and (4) is the period beginning one year before and ending one
year after the applicable event. If the Participant separates from Service
before attaining age 35, clauses (1), (2), (3) and (4) do not apply and the
Advisory Committee must provide the written explanation within the period
beginning one year before and ending one year after the Separation from Service.
The written explanation must describe, in a manner consistent with Treasury
regulations, the terms and conditions of the preretirement survivor annuity
comparable to the explanation of the qualified joint and survivor annuity
required under Section 6.05. The Plan does not limit the number of times the
Participant may revoke a waiver of the preretirement survivor annuity or make a
new waiver during the election period.
A Participant's waiver election of the preretirement survivor annuity is not
valid unless (a) the Participant makes the waiver election no earlier than the
first day of the Plan Year in which he attains age 35 and (b) the Participant's
spouse (to whom the preretirement survivor annuity is payable) satisfies the
consent requirements described in Section 6.05, except the spouse need not
consent to the form of benefit payable to the designated Beneficiary. The
spouse's consent to the waiver of the preretirement survivor annuity is
irrevocable, unless the Participant revokes the waiver election. Irrespective of
the time of election requirement described in clause (a), if the Participant
separates from Service prior to the first day of the Plan Year in which he
attains age 35, the Advisory Committee will accept a waiver election as respects
the Participant's Accrued Benefit attributable to his Service prior to his
Separation from Service. Furthermore, if a Participant who has not separated
from Service makes a valid waiver election, except for the timing requirement of
clause (a), the Advisory Committee will accept that election as valid, but only
until the first day of the Plan Year in which the Participant attains age 35. A
waiver election described in this paragraph is not valid unless made after the
Participant has received the written explanation described in this Section 6.06.
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing contained
in this Plan prevents the Trustee, in accordance with the direction of the
Advisory Committee, from complying with the provisions of a qualified domestic
relations order (as defined in Code Section 414(p)). This Plan specifically
permits distribution to an alternate payee under a qualified domestic relations
order at any time, irrespective of whether the Participant has attained his
earliest retirement age (as defined under Code Section 414(p)) under the Plan. A
distribution to an alternate payee prior to the Participant's attainment of
earliest retirement age is available only if: (1) the order specifies
distribution at that time or permits an agreement between the Plan and the
alternate payee to authorize an earlier distribution; and (2) if the present
value of the alternate payee's benefits under the Plan exceeds $3,500, and the
order requires, the alternate payee consents to any distribution occurring prior
to the Participant's attainment of earliest retirement age. The Employer, in an
addendum to its Adoption Agreement numbered 6.07, may elect to limit
distribution to an alternate payee only when the Participant has attained his
earliest retirement age under the Plan. Nothing in this Section 6.07 gives a
Participant a right to receive distribution at a time otherwise not permitted
under the Plan nor does it permit the alternate payee to receive a form of
payment not otherwise permitted under the Plan.
6.11
<PAGE>
The Advisory Committee must establish reasonable procedures to determine the
qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Advisory Committee promptly will notify the Participant and
any alternate payee named in the order, in writing, of the receipt of the order
and the Plan's procedures for determining the qualified status of the order.
Within a reasonable period of time after receiving the domestic relations order,
the Advisory Committee must determine the qualified status of the order and must
notify the Participant and each alternate payee, in writing, of its
determination. The Advisory Committee must provide notice under this paragraph
by mailing to the individual's address specified in the domestic relations
order, or in a manner consistent with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is payable
during the period the Advisory Committee is making its determination of the
qualified status of the domestic relations order, the Advisory Committee must
make a separate accounting of the amounts payable. If the Advisory Committee
determines the order is a qualified domestic relations order within 18 months of
the date amounts first are payable following receipt of the order, the Advisory
Committee will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Advisory Committee does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee to
distribute the payable amounts in the manner the Plan would distribute if the
order did not exist and will apply the order prospectively if the Advisory
Committee later determines the order is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the qualified
domestic relations order, the Advisory Committee may direct the Trustee to
invest any partitioned amount in a segregated subaccount or separate account and
to invest the account in Federally insured, interest-bearing savings account(s)
or time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
The Trustee will make any payments or distributions required under this Section
6.07 by separate benefit checks or other separate distribution to the alternate
payee(s).
* * * * * * * * * * * * * * *
6.11
<PAGE>
ARTICLE VII
EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 INFORMATION TO COMMITTEE. The Employer must supply current
information to the Advisory Committee as to the name, date of birth, date of
employment, annual compensation, leaves of absence, Years of Service and date of
termination of employment of each Employee who is, or who will be eligible to
become, a Participant under the Plan, together with any other information which
the Advisory Committee considers necessary. The Employer's records as to the
current information the Employer furnishes to the Advisory Committee are
conclusive as to all persons.
7.02 NO LIABILITY. The Employer assumes no obligation or responsibility to
any of its Employees, Participants or Beneficiaries for any act of, or failure
to act, on the part of its Advisory Committee (unless the Employer is the
Advisory Committee), the Trustee, the Custodian, if any, or the Plan
Administrator (unless the Employer is the Plan Administrator).
7.03 INDEMNITY OF CERTAIN FIDUCIARIES. The Employer indemnifies and
saves harmless the Plan Administrator and the members of the Advisory Committee,
and each of them, from and against any and all loss resulting from liability to
which the Plan Administrator and the Advisory Committee, or the members of the
Advisory Committee, may be subjected by reason of any act or conduct (except
willful misconduct or gross negligence) in their official capacities in the
administration of this Trust or Plan or both, including all expenses reasonably
incurred in their defense, in case the Employer fails to provide such defense.
The indemnification provisions of this Section 7.03 do not relieve the Plan
Administrator or any Advisory Committee member from any liability he may have
under ERISA for breach of a fiduciary duty. Furthermore, the Plan Administrator
and the Advisory Committee members and the Employer may execute a letter
agreement further delineating the indemnification agreement of this Section
7.03, provided the letter agreement must be consistent with and does not violate
ERISA. The indemnification provisions of this Section 7.03 extend to the Trustee
(or to a Custodian, if any) solely to the extent provided by a letter agreement
executed by the Trustee (or Custodian) and the Employer.
7.04 EMPLOYER DIRECTION OF INVESTMENT. The Employer has the right to
direct the Trustee with respect to the investment and re-investment of assets
comprising the Trust Fund only if the Trustee consents in writing to permit such
direction. If the Trustee consents to Employer direction of investment, the
Trustee and the Employer must execute a letter agreement as a part of this Plan
containing such conditions, limitations and other provisions they deem
appropriate before the Trustee will follow any Employer direction as respects
the investment or re-investment of any part of the Trust Fund.
7.05 AMENDMENT TO VESTING SCHEDULE. Though the Employer reserves the right
to amend the vesting schedule at any time, the Advisory Committee will not
apply the amended vesting schedule to reduce the Nonforfeitable percentage of
any Participant's Accrued Benefit derived from Employer contributions
(determined as of the later of the date the Employer adopts the amendment, or
the date the amendment becomes effective) to a percentage less than the
Nonforfeitable percentage computed under the Plan without regard to the
amendment. An amended vesting schedule will apply to a Participant only if the
Participant receives credit for at least one Hour of Service after the new
schedule becomes effective.
7.2
<PAGE>
If the Employer makes a permissible amendment to the vesting schedule, each
Participant having at least 3 Years of Service with the Employer may elect to
have the percentage of his Nonforfeitable Accrued Benefit computed under the
Plan without regard to the amendment. For Plan Years beginning prior to January
1, 1989, the election described in the preceding sentence applies only to
Participants having at least 5 Years of Service with the Employer. The
Participant must file his election with the Advisory Committee within 60 days of
the latest of (a) the Employer's adoption of the amendment; (b) the effective
date of the amendment; or (c) his receipt of a copy of the amendment. The
Advisory Committee, as soon as practicable, must forward a true copy of any
amendment to the vesting schedule to each affected Participant, together with an
explanation of the effect of the amendment, the appropriate form upon which the
Participant may make an election to remain under the vesting schedule provided
under the Plan prior to the amendment and notice of the time within which the
Participant must make an election to remain under the prior vesting schedule.
The election described in this Section 7.05 does not apply to a Participant if
the amended vesting schedule provides for vesting at least as rapid at all times
as the vesting schedule in effect prior to the amendment. For purposes of this
Section 7.05, an amendment to the vesting schedule includes any Plan amendment
which directly or indirectly affects the computation of the Nonforfeitable
percentage of an Employee's rights to his Employer derived Accrued Benefit.
Furthermore, the Advisory Committee must treat any shift in the vesting
schedule, due to a change in the Plan's top heavy status, as an amendment to the
vesting schedule for purposes of this Section 7.05.
* * * * * * * * * * * * * * *
7.2
<PAGE>
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION. Any Participant may from time to time
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee will pay his Nonforfeitable Accrued Benefit (including any life
insurance proceeds payable to the Participant's Account) in the event of his
death and the Participant may designate the form and method of payment. The
Advisory Committee will prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the Advisory
Committee, the form effectively revokes all designations filed prior to that
date by the same Participant.
(A) COORDINATION WITH SURVIVOR REQUIREMENTS. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01 does not
impose any special spousal consent requirements on the Participant's Beneficiary
designation. However, in the absence of spousal consent (as required by Article
VI) to the Participant's Beneficiary designation: (1) any waiver of the joint
and survivor annuity or of the preretirement survivor annuity is not valid; and
(2) if the Participant dies prior to his annuity starting date, the
Participant's Beneficiary designation will apply only to the portion of the
death benefit which is not payable as a preretirement survivor annuity.
Regarding clause (2), if the Participant's surviving spouse is a primary
Beneficiary under the Participant's Beneficiary designation, the Trustee will
satisfy the spouse's interest in the Participant's death benefit first from the
portion which is payable as a preretirement survivor annuity.
(B) PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing plan, the
Beneficiary designation of a married Exempt Participant is not valid unless the
Participant's spouse consents (in a manner described in Section 6.05) to the
Beneficiary designation. An "Exempt Participant" is a Participant who is not
subject to the joint and survivor requirements of Article VI. The spousal
consent requirement in this paragraph does not apply if the Exempt Participant
and his spouse are not married throughout the one year period ending on the date
of the Participant's death, or if the Participant's spouse is the Participant's
sole primary Beneficiary.
8.02 NO BENEFICIARY DESIGNATION/DEATH OF BENEFICIARY. If a Participant
fails to name a Beneficiary in accordance with Section 8.01, or if the
Beneficiary named by a Participant predeceases him, then the Trustee will pay
the Participant's Nonforfeitable Accrued Benefit in accordance with Section 6.02
in the following order of priority, unless the Employer specifies a different
order of priority in an addendum to its Adoption Agreement, to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted children, in equal
shares;
(c) The Participant's surviving parents, in equal shares; or
(d) The Participant's estate.
8.4
<PAGE>
If the Beneficiary does not predecease the Participant, but dies prior to
distribution of the Participant's entire Nonforfeitable Accrued Benefit, the
Trustee will pay the remaining Nonforfeitable Accrued Benefit to the
Beneficiary's estate unless the Participant's Beneficiary designation provides
otherwise or unless the Employer provides otherwise in its Adoption Agreement.
If the Plan is a profit sharing plan, and the Plan includes Exempt Participants,
the Employer may not specify a different order of priority in the Adoption
Agreement unless the Participant's surviving spouse will be first in the
different order of priority. The Advisory Committee will direct the Trustee as
to the method and to whom the Trustee will make payment under this Section 8.02.
8.03 PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary of
a deceased Participant must furnish to the Advisory Committee such evidence,
data or information as the Advisory Committee considers necessary or desirable
for the purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition precedent that
each Participant will furnish promptly full, true and complete evidence, data
and information when requested by the Advisory Committee, provided the Advisory
Committee advises each Participant of the effect of his failure to comply with
its request.
8.04 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of a
deceased Participant must file with the Advisory Committee from time to time, in
writing, his post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or Beneficiary,
at his last post office address filed with the Advisory Committee, or as shown
on the records of the Employer, binds the Participant, or Beneficiary, for all
purposes of this Plan.
8.05 ASSIGNMENT OR ALIENATION. Subject to Code Section 414(p) relating to
qualified domestic relations orders, neither a Participant nor a Beneficiary may
anticipate, assign or alienate (either at law or in equity) any benefit provided
under the Plan, and the Trustee will not recognize any such anticipation,
assignment or alienation. Furthermore, a benefit under the Plan is not subject
to attachment, garnishment, levy, execution or other legal or equitable process.
8.06 NOTICE OF CHANGE IN TERMS. The Plan Administrator, within the time
prescribed by ERISA and the applicable regulations, must furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 LITIGATION AGAINST THE TRUST. A court of competent jurisdiction may
authorize any appropriate equitable relief to redress violations of ERISA or to
enforce any provisions of ERISA or the terms of the Plan. A fiduciary may
receive reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 INFORMATION AVAILABLE. Any Participant in the Plan or any Beneficiary
may examine copies of the Plan description, latest annual report, any
bargaining agreement, this Plan and Trust, contract or any other instrument
under which the Plan was established or is operated. The Plan Administrator will
maintain all of the items listed in this Section 8.08 in his office, or in such
other place or places as he may designate from time to time in order to comply
with the regulations issued under ERISA, for examination during reasonable
business hours. Upon the written request of a Participant or Beneficiary the
Plan Administrator must furnish him with a copy of any item listed in this
Section 8.08. The Plan Administrator may make a reasonable charge to the
requesting person for the copy so furnished.
8.4
<PAGE>
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. A Participant or a
Beneficiary ("Claimant") may file with the Advisory Committee a written claim
for benefits, if the Participant or Beneficiary determines the distribution
procedures of the Plan have not provided him his proper Nonforfeitable Accrued
Benefit. The Advisory Committee must render a decision on the claim within 60
days of the Claimant's written claim for benefits. The Plan Administrator must
provide adequate notice in writing to the Claimant whose claim for benefits
under the Plan the Advisory Committee has denied. The Plan Administrator's
notice to the Claimant must set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the Advisory
Committee based its denial;
(c) A description of any additional material and information needed for the
Claimant to perfect his claim and an explanation of why the material or
information is needed; and
(d) That any appeal the Claimant wishes to make of the adverse determination
must be in writing to the Advisory Committee within 75 days after receipt of
the Plan Administrator's notice of denial of benefits. The Plan
Administrator's notice must further advise the Claimant that his failure to
appeal the action to the Advisory Committee in writing within the 75-day
period will render the Advisory Committee's determination final, binding and
conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his duly
authorized representative, may submit, in writing, whatever issues and comments
he, or his duly authorized representative, feels are pertinent. The Claimant, or
his duly authorized representative, may review pertinent Plan documents. The
Advisory Committee will re-examine all facts related to the appeal and make a
final determination as to whether the denial of benefits is justified under the
circumstances. The Advisory Committee must advise the Claimant of its decision
within 60 days of the Claimant's written request for review, unless special
circumstances (such as a hearing) would make the rendering of a decision within
the 60-day limit unfeasible, but in no event may the Advisory Committee render a
decision respecting a denial for a claim for benefits later than 120 days after
its receipt of a request for review.
The Plan Administrator's notice of denial of benefits must identify the name
of each member of the Advisory Committee and the name and address of the
Advisory Committee member to whom the Claimant may forward his appeal.
8.10 PARTICIPANT DIRECTION OF INVESTMENT. A Participant has the right to
direct the Trustee with respect to the investment or re-investment of the assets
comprising the Participant's individual Account only if the Trustee consents in
writing to permit such direction. If the Trustee consents to Participant
direction of investment, the Trustee will accept direction from each Participant
on a written election form (or other written agreement), as a part of this Plan,
containing such conditions, limitations and other provisions the parties deem
appropriate. The Trustee or, with the Trustee's consent, the Advisory Committee,
may establish written procedures, incorporated specifically as part of this
Plan, relating to Participant direction of investment under this Section 8.10.
The Trustee will maintain a segregated investment Account to the extent a
Participant's Account is subject to Participant self-direction. The Trustee is
not liable for any loss, nor is the Trustee liable for any breach, resulting
from a Participant's direction of the investment of any part of his directed
Account.
8.4
<PAGE>
The Advisory Committee, to the extent provided in a written loan policy
adopted under Section 9.04, will treat a loan made to a Participant as a
Participant direction of investment under this Section 8.10. To the extent of
the loan outstanding at any time, the borrowing Participant's Account alone
shares in any interest paid on the loan, and it alone bears any expense or loss
it incurs in connection with the loan. The Trustee may retain any principal or
interest paid on the borrowing Participant's loan in an interest bearing
segregated Account on behalf of the borrowing Participant until the Trustee (or
the Named Fiduciary, in the case of a nondiscretionary Trustee) deems it
appropriate to add the amount paid to the Participant's separate Account under
the Plan.
If the Trustee consents to Participant direction of investment of his Account,
the Plan treats any post-December 31, 1981, investment by a Participant's
directed Account in collectibles (as defined by Code Section 408(m)) as a deemed
distribution to the Participant for Federal income tax purposes.
* * * * * * * * * * * * * * *
8.4
<PAGE>
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES. The Employer must appoint an Advisory
Committee to administer the Plan, the members of which may or may not be
Participants in the Plan, or which may be the Plan Administrator acting alone.
In the absence of an Advisory Committee appointment, the Plan Administrator
assumes the powers, duties and responsibilities of the Advisory Committee. The
members of the Advisory Committee will serve without compensation for services
as such, but the Employer will pay all expenses of the Advisory Committee,
except to the extent the Trust properly pays for such expenses, pursuant to
Article X.
9.02 TERM. Each member of the Advisory Committee serves until the
appointment of his successor.
9.03 POWERS. In case of a vacancy in the membership of the Advisory
Committee, the remaining members of the Advisory Committee may exercise any and
all of the powers, authority, duties and discretion conferred upon the Advisory
Committee pending the filling of the vacancy.
9.04 GENERAL. The Advisory Committee has the following powers and duties:
(a) To select a Secretary, who need not be a member of the Advisory Committee;
(b) To determine the rights of eligibility of an Employee to participate in
the Plan, the value of a Participant's Accrued Benefit and the Nonforfeitable
percentage of each Participant's Accrued Benefit;
(c) To adopt rules of procedure and regulations necessary for the proper and
efficient administration of the Plan provided the rules are not inconsistent
with the terms of this Agreement;
(d) To construe and enforce the terms of the Plan and the rules and
regulations it adopts, including interpretation of the Plan documents and
documents related to the Plan's operation;
(e) To direct the Trustee as respects the crediting and distribution of the
Trust;
(f) To review and render decisions respecting a claim for (or denial of a
claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may require
for tax or other purposes;
(h) To engage the service of agents whom it may deem advisable to assist it
with the performance of its duties;
(i) To engage the services of an Investment Manager or Managers (as defined in
ERISA Section 3(38)), each of whom will have full power and authority to
manage, acquire or dispose (or direct the Trustee with respect to acquisition
or disposition) of any Plan asset under its control;
9.5
<PAGE>
(j) To establish, in its sole discretion, a nondiscriminatory policy (see
Section 9.04(A)) which the Trustee must observe in making loans, if any, to
Participants and Beneficiaries; and
(k) To establish and maintain a funding standard account and to make credits
and charges to the account to the extent required by and in accordance with
the provisions of the Code.
The Advisory Committee must exercise all of its powers, duties and discretion
under the Plan in a uniform and nondiscriminatory manner.
(A) LOAN POLICY. If the Advisory Committee adopts a loan policy, pursuant to
paragraph (j), the loan policy must be a written document and must include: (1)
the identity of the person or positions authorized to administer the participant
loan program; (2) a procedure for applying for the loan; (3) the criteria for
approving or denying a loan; (4) the limitations, if any, on the types and
amounts of loans available; (5) the procedure for determining a reasonable rate
of interest; (6) the types of collateral which may secure the loan; and (7) the
events constituting default and the steps the Plan will take to preserve plan
assets in the event of default. This Section 9.04 specifically incorporates a
written loan policy as part of the Employer's Plan.
9.05 FUNDING POLICY. The Advisory Committee will review, not less often
than annually, all pertinent Employee information and Plan data in order to
establish the funding policy of the Plan and to determine the appropriate
methods of carrying out the Plan's objectives. The Advisory Committee must
communicate periodically, as it deems appropriate, to the Trustee and to any
Plan Investment Manager the Plan's short-term and long-term financial needs so
investment policy can be coordinated with Plan financial requirements.
9.06 MANNER OF ACTION. The decision of a majority of the members appointed
and qualified controls.
9.07 AUTHORIZED REPRESENTATIVE. The Advisory Committee may authorize
any one of its members, or its Secretary, to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters or
other documents. The Advisory Committee must evidence this authority by an
instrument signed by all members and filed with the Trustee.
9.08 INTERESTED MEMBER. No member of the Advisory Committee may decide or
determine any matter concerning the distribution, nature or method of settlement
of his own benefits under the Plan, except in exercising an election available
to that member in his capacity as a Participant, unless the Plan Administrator
is acting alone in the capacity of the Advisory Committee.
9.09 INDIVIDUAL ACCOUNTS. The Advisory Committee will maintain, or direct
the Trustee to maintain, a separate Account, or multiple Accounts, in the name
of each Participant to reflect the Participant's Accrued Benefit under the Plan.
If a Participant re-enters the Plan subsequent to his having a Forfeiture Break
in Service, the Advisory Committee, or the Trustee, must maintain a separate
Account for the Participant's pre-Forfeiture Break in Service Accrued Benefit
and a separate Account for his post-Forfeiture Break in Service Accrued Benefit,
unless the Participant's entire Accrued Benefit under the Plan is 100%
Nonforfeitable.
9.5
<PAGE>
The Advisory Committee will make its allocations, or request the Trustee to
make its allocations, to the Accounts of the Participants in accordance with the
provisions of Section 9.11. The Advisory Committee may direct the Trustee to
maintain a temporary segregated investment Account in the name of a Participant
to prevent a distortion of income, gain or loss allocations under Section 9.11.
The Advisory Committee must maintain records of its activities.
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each
Participant's Accrued Benefit consists of that proportion of the net worth (at
fair market value) of the Employer's Trust Fund which the net credit balance in
his Account (exclusive of the cash value of incidental benefit insurance
contracts) bears to the total net credit balance in the Accounts (exclusive of
the cash value of the incidental benefit insurance contracts) of all
Participants plus the cash surrender value of any incidental benefit insurance
contracts held by the Trustee on the Participant's life.
For purposes of a distribution under the Plan, the value of a Participant's
Accrued Benefit is its value as of the valuation date immediately preceding the
date of the distribution. Any distribution (other than a distribution from a
segregated Account) made to a Participant (or to his Beneficiary) more than 90
days after the most recent valuation date may include interest on the amount of
the distribution as an expense of the Trust Fund. The interest, if any, accrues
from such valuation date to the date of the distribution at the rate established
in the Employer's Adoption Agreement.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. A "valuation
date" under this Plan is each Accounting Date and each interim valuation date
determined under Section 10.14. As of each valuation date the Advisory Committee
must adjust Accounts to reflect net income, gain or loss since the last
valuation date. The valuation period is the period beginning the day after the
last valuation date and ending on the current valuation date.
(A) TRUST FUND ACCOUNTS. The allocation provisions of this paragraph apply to
all Participant Accounts other than segregated investment Accounts. The Advisory
Committee first will adjust the Participant Accounts, as those Accounts stood at
the beginning of the current valuation period, by reducing the Accounts for any
forfeitures arising under Section 5.09 or under Section 9.14, for amounts
charged during the valuation period to the Accounts in accordance with Section
9.13 (relating to distributions) and Section 11.01 (relating to insurance
premiums), and for the cash value of incidental benefit insurance contracts. The
Advisory Committee then, subject to the restoration allocation requirements of
Section 5.04 or of Section 9.14, will allocate the net income, gain or loss pro
rata to the adjusted Participant Accounts. The allocable net income, gain or
loss is the net income (or net loss), including the increase or decrease in the
fair market value of assets, since the last valuation date.
(B) SEGREGATED INVESTMENT ACCOUNTS. A segregated investment Account receives all
income it earns and bears all expense or loss it incurs. The Advisory Committee
will adopt uniform and nondiscriminatory procedures for determining income or
loss of a segregated investment Account in a manner which reasonably reflects
investment directions relating to pooled investments and investment directions
occurring during a valuation period. As of the valuation date, the Advisory
Committee must reduce a segregated Account for any forfeiture arising under
Section 5.09 after the Advisory Committee has made all other allocations,
changes or adjustments to the Account for the Plan Year.
9.5
<PAGE>
(C) ADDITIONAL RULES. An Excess Amount or suspense account described in Part 2
of Article III does not share in the allocation of net income, gain or loss
described in this Section 9.11. If the Employer maintains its Plan under a Code
Section 401(k) Adoption Agreement, the Employer may specify in its Adoption
Agreement alternate valuation provisions authorized by that Adoption Agreement.
This Section 9.11 applies solely to the allocation of net income, gain or loss
of the Trust. The Advisory Committee will allocate the Employer contributions
and Participant forfeitures, if any, in accordance with Article III.
9.12 INDIVIDUAL STATEMENT. As soon as practicable after the Accounting Date
of each Plan Year, but within the time prescribed by ERISA and the regulations
under ERISA, the Plan Administrator will deliver to each Participant (and to
each Beneficiary) a statement reflecting the condition of his Accrued Benefit in
the Trust as of that date and such other information ERISA requires be furnished
the Participant or Beneficiary. No Participant, except a member of the Advisory
Committee, has the right to inspect the records reflecting the Account of any
other Participant.
9.13 ACCOUNT CHARGED. The Advisory Committee will charge a Participant's
Account for all distributions made from that Account to the Participant, to his
Beneficiary or to an alternate payee. The Advisory Committee also will charge a
Participant's Account for any administrative expenses incurred by the Plan
directly related to that Account.
9.14 UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require either
the Trustee or the Advisory Committee to search for, or to ascertain the
whereabouts of, any Participant or Beneficiary. At the time the Participant's or
Beneficiary's benefit becomes distributable under Article VI, the Advisory
Committee, by certified or registered mail addressed to his last known address
of record with the Advisory Committee or the Employer, must notify any
Participant, or Beneficiary, that he is entitled to a distribution under this
Plan. The notice must quote the provisions of this Section 9.14 and otherwise
must comply with the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts known
in writing to the Advisory Committee within 6 months from the date of mailing of
the notice, the Advisory Committee will treat the Participant's or Beneficiary's
unclaimed payable Accrued Benefit as forfeited and will reallocate the unclaimed
payable Accrued Benefit in accordance with Section 3.05. A forfeiture under this
paragraph will occur at the end of the notice period or, if later, the earliest
date applicable Treasury regulations would permit the forfeiture. Pending
forfeiture, the Advisory Committee, following the expiration of the notice
period, may direct the Trustee to segregate the Nonforfeitable Accrued Benefit
in a segregated Account and to invest that segregated Account in Federally
insured interest bearing savings accounts or time deposits (or in a combination
of both), or in other fixed income investments.
9.5
<PAGE>
If a Participant or Beneficiary who has incurred a forfeiture of his Accrued
Benefit under the provisions of the first paragraph of this Section 9.14 makes a
claim, at any time, for his forfeited Accrued Benefit, the Advisory Committee
must restore the Participant's or Beneficiary's forfeited Accrued Benefit to the
same dollar amount as the dollar amount of the Accrued Benefit forfeited,
unadjusted for any gains or losses occurring subsequent to the date of the
forfeiture. The Advisory Committee will make the restoration during the Plan
Year in which the Participant or Beneficiary makes the claim, first from the
amount, if any, of Participant forfeitures the Advisory Committee otherwise
would allocate for the Plan Year, then from the amount, if any, of the Trust
Fund net income or gain for the Plan Year and then from the amount, or
additional amount, the Employer contributes to enable the Advisory Committee to
make the required restoration. The Advisory Committee must direct the Trustee to
distribute the Participant's or Beneficiary's restored Accrued Benefit to him
not later than 60 days after the close of the Plan Year in which the Advisory
Committee restores the forfeited Accrued Benefit. The forfeiture provisions of
this Section 9.14 apply solely to the Participant's or to the Beneficiary's
Accrued Benefit derived from Employer contributions.
* * * * * * * * * * * * * * *
9.5
<PAGE>
ARTICLE X
CUSTODIAN/TRUSTEE, POWERS AND DUTIES
10.01 ACCEPTANCE. The Trustee accepts the Trust created under the Plan and
agrees to perform the obligations imposed. The Trustee must provide bond for the
faithful performance of its duties under the Trust to the extent required by
ERISA.
10.02 RECEIPT OF CONTRIBUTIONS. The Trustee is accountable to the
Employer for the funds contributed to it by the Employer, but does not have any
duty to see that the contributions received comply with the provisions of the
Plan. The Trustee is not obliged to collect any contributions from the Employer,
nor is obliged to see that funds deposited with it are deposited according to
the provisions of the Plan.
10.03 INVESTMENT POWERS.
[A] DISCRETIONARY TRUSTEE DESIGNATION. If the Employer, in Adoption Agreement
Section 1.02, designates the Trustee to administer the Trust as a discretionary
Trustee, then the Trustee has full discretion and authority with regard to the
investment of the Trust Fund, except with respect to a Plan asset under the
control or direction of a properly appointed Investment Manager or with respect
to a Plan asset properly subject to Employer, Participant or Advisory Committee
direction of investment. The Trustee must coordinate its investment policy with
Plan financial needs as communicated to it by the Advisory Committee. The
Trustee is authorized and empowered, but not by way of limitation, with the
following powers, rights and duties:
(a) To invest any part or all of the Trust Fund in any common or preferred
stocks, open-end or closed-end mutual funds, put and call options traded on a
national exchange, United States retirement plan bonds, corporate bonds,
debentures, convertible debentures, commercial paper, U.S. Treasury bills,
U.S. Treasury notes and other direct or indirect obligations of the United
States Government or its agencies, improved or unimproved real estate situated
in the United States, limited partnerships, insurance contracts of any type,
mortgages, notes or other property of any kind, real or personal, to buy or
sell options on common stock on a nationally recognized exchange with or
without holding the underlying common stock, to buy and sell commodities,
commodity options and contracts for the future delivery of commodities, and to
make any other investments the Trustee deems appropriate, as a prudent man
would do under like circumstances with due regard for the purposes of this
Plan. Any investment made or retained by the Trustee in good faith is proper
but must be of a kind constituting a diversification considered by law
suitable for trust investments.
(b) To retain in cash so much of the Trust Fund as it may deem advisable to
satisfy liquidity needs of the Plan and to deposit any cash held in the Trust
Fund in a bank account at reasonable interest.
(c) To invest, if the Trustee is a bank or similar financial institution
supervised by the United States or by a State, in any type of deposit of the
Trustee (or of a bank related to the Trustee within the meaning of Code
Section 414(b)) at a reasonable rate of interest or in a common trust fund, as
described in Code Section 584, or in a collective investment fund, the
provisions of which govern the investment of such assets and which the Plan
incorporates by this reference, which the Trustee (or its affiliate, as
defined in Code Section 1504) maintains exclusively for the collective
investment of money contributed by the bank (or the affiliate) in its capacity
as trustee and which conforms to the rules of the Comptroller of the Currency.
10.9
<PAGE>
(d) To manage, sell, contract to sell, grant options to purchase, convey,
exchange, transfer, abandon, improve, repair, insure, lease for any term even
though commencing in the future or extending beyond the term of the Trust, and
otherwise deal with all property, real or personal, in such manner, for such
considerations and on such terms and conditions as the Trustee decides.
(e) To credit and distribute the Trust as directed by the Advisory Committee.
The Trustee is not obliged to inquire as to whether any payee or distributee
is entitled to any payment or whether the distribution is proper or within the
terms of the Plan, or as to the manner of making any payment or distribution.
The Trustee is accountable only to the Advisory Committee for any payment or
distribution made by it in good faith on the order or direction of the
Advisory Committee.
(f) To borrow money, to assume indebtedness, extend mortgages and encumber by
mortgage or pledge.
(g) To compromise, contest, arbitrate or abandon claims and demands, in its
discretion.
(h) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any voting
trusts, mergers, consolidations or liquidations, and to exercise or sell stock
subscriptions or conversion rights.
(i) To lease for oil, gas and other mineral purposes and to create mineral
severances by grant or reservation; to pool or unitize interests in oil, gas
and other minerals; and to enter into operating agreements and to execute
division and transfer orders.
(j) To hold any securities or other property in the name of the Trustee or its
nominee, with depositories or agent depositories or in another form as it may
deem best, with or without disclosing the trust relationship.
(k) To perform any and all other acts in its judgment necessary or appropriate
for the proper and advantageous management, investment and distribution of the
Trust.
(l) To retain any funds or property subject to any dispute without liability
for the payment of interest, and to decline to make payment or delivery of the
funds or property until final adjudication is made by a court of competent
jurisdiction.
(m) To file all tax returns required of the Trustee.
(n) To furnish to the Employer, the Plan Administrator and the Advisory
Committee an annual statement of account showing the condition of the Trust
Fund and all investments, receipts, disbursements and other transactions
effected by the Trustee during the Plan Year covered by the statement and also
stating the assets of the Trust held at the end of the Plan Year, which
accounts are conclusive on all persons, including the Employer, the Plan
Administrator and the Advisory Committee, except as to any act or transaction
concerning which the Employer, the Plan Administrator or the Advisory
Committee files with the Trustee written exceptions or objections within 90
days after the receipt of the accounts or for which ERISA authorizes a longer
period within which to object.
10.9
<PAGE>
(o) To begin, maintain or defend any litigation necessary in connection with
the administration of the Plan, except that the Trustee is not obliged or
required to do so unless indemnified to its satisfaction.
[B] NONDISCRETIONARY TRUSTEE DESIGNATION/APPOINTMENT OF CUSTODIAN. If the
Employer, in its Adoption Agreement Section 1.02, designates the Trustee to
administer the Trust as a nondiscretionary Trustee, then the Trustee will not
have any discretion or authority with regard to the investment of the Trust
Fund, but must act solely as a directed trustee of the funds contributed to it.
A nondiscretionary Trustee, as directed trustee of the funds held by it under
the Employer's Plan, is authorized and empowered, by way of limitation, with the
following powers, rights and duties, each of which the nondiscretionary Trustee
exercises solely as directed trustee in accordance with the written direction of
the Named Fiduciary (except to the extent a Plan asset is subject to the control
and management of a properly appointed Investment Manager or subject to Advisory
Committee or Participant direction of investment):
(a) To invest any part or all of the Trust Fund in any common or preferred
stocks, open-end or closed-end mutual funds, put and call options traded on a
national exchange, United States retirement plan bonds, corporate bonds,
debentures, convertible debentures, commercial paper, U.S. Treasury bills,
U.S. Treasury notes and other direct or indirect obligations of the United
States Government or its agencies, improved or unimproved real estate situated
in the United States, limited partnerships, insurance contracts of any type,
mortgages, notes or other property of any kind, real or personal, to buy or
sell options on common stock on a nationally recognized options exchange with
or without holding the underlying common stock, to buy and sell commodities,
commodity options and contracts for the future delivery of commodities, and to
make any other investments the Named Fiduciary deems appropriate.
(b) To retain in cash so much of the Trust Fund as the Named Fiduciary may
direct in writing to satisfy liquidity needs of the Plan and to deposit any
cash held in the Trust Fund in a bank account at reasonable interest,
including, specific authority to invest in any type of deposit of the Trustee
(or of a bank related to the Trustee within the meaning of Code Section
414(b)) at a reasonable rate of interest.
(c) To sell, contract to sell, grant options to purchase, convey, exchange,
transfer, abandon, improve, repair, insure, lease for any term even though
commencing in the future or extending beyond the term of the Trust, and
otherwise deal with all property, real or personal, in such manner, for such
considerations and on such terms and conditions as the Named Fiduciary directs
in writing.
(d) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any payee or
distributee is entitled to any payment or whether the distribution is proper
or within the terms of the Plan, or as to the manner of making any payment or
distribution. The Trustee is accountable only to the Advisory Committee for
any payment or distribution made by it in good faith on the order or direction
of the Advisory Committee.
(e) To borrow money, to assume indebtedness, extend mortgages and encumber by
mortgage or pledge.
(f) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any voting
trusts, mergers, consolidations or liquidations, and to exercise or sell stock
subscriptions or conversion rights, provided the exercise of any such powers
is in accordance with and at the written direction of the Named Fiduciary.
10.9
<PAGE>
(g) To lease for oil, gas and other mineral purposes and to create mineral
severances by grant or reservation; to pool or unitize interests in oil, gas
and other minerals; and to enter into operating agreements and to execute
division and transfer orders, provided the exercise of any such powers is in
accordance with and at the written direction of the Named Fiduciary.
(h) To hold any securities or other property in the name of the
nondiscretionary Trustee or its nominee, with depositories or agent
depositories or in another form as the Named Fiduciary may deem best, with or
without disclosing the custodial relationship.
(i) To retain any funds or property subject to any dispute without liability
for the payment of interest, and to decline to make payment or delivery of the
funds or property until a court of competent jurisdiction makes final
adjudication.
(j) To file all tax returns required of the Trustee.
(k) To furnish to the Named Fiduciary, the Employer, the Plan Administrator
and the Advisory Committee an annual statement of account showing the
condition of the Trust Fund and all investments, receipts, disbursements and
other transactions effected by the nondiscretionary Trustee during the Plan
Year covered by the statement and also stating the assets of the Trust held at
the end of the Plan Year, which accounts are conclusive on all persons,
including the Named Fiduciary, the Employer, the Plan Administrator and the
Advisory Committee, except as to any act or transaction concerning which the
Named Fiduciary, the Employer, the Plan Administrator or the Advisory
Committee files with the nondiscretionary Trustee written exceptions or
objections within 90 days after the receipt of the accounts or for which ERISA
authorizes a longer period within which to object.
(l) To begin, maintain or defend any litigation necessary in connection with
the administration of the Plan, except that the Trustee is not obliged or
required to do so unless indemnified to its satisfaction.
APPOINTMENT OF CUSTODIAN. The Employer may appoint a Custodian under the Plan,
the acceptance by the Custodian indicated on the execution page of the
Employer's Adoption Agreement. If the Employer appoints a Custodian, the
Employer's Plan must have a discretionary Trustee, as described in Section
10.03[A]. A Custodian has the same powers, rights and duties as a
nondiscretionary Trustee, as described in this Section 10.03[B]. The Custodian
accepts the terms of the Plan and Trust by executing the Employer's Adoption
Agreement. Any reference in the Plan to a Trustee also is a reference to a
Custodian where the context of the Plan dictates. A limitation of the Trustee's
liability by Plan provision also acts as a limitation of the Custodian's
liability. Any action taken by the Custodian at the discretionary Trustee's
direction satisfies any provision in the Plan referring to the Trustee's taking
that action.
MODIFICATION OF POWERS/LIMITED RESPONSIBILITY. The Employer and the Custodian
or nondiscretionary Trustee, by letter agreement, may limit the powers of the
Custodian or nondiscretionary Trustee to any combination of powers listed within
this Section 10.03[B]. If there is a Custodian or a nondiscretionary Trustee
under the Employer's Plan, then the Employer, in adopting this Plan acknowledges
the Custodian or nondiscretionary Trustee has no discretion with respect to the
investment or re-investment of the Trust Fund and that the Custodian or
nondiscretionary Trustee is acting solely as custodian or as directed trustee
with respect to the assets comprising the Trust Fund.
10.9
<PAGE>
[C] LIMITATION OF POWERS OF CERTAIN CUSTODIANS. If a Custodian is a bank which,
under its governing state law, does not possess trust powers, then paragraphs
(a), (c), (e), (f), (g) of Section 10.03[B], Section 10.16 and Article XI do not
apply to that bank and that bank only has the power and authority to exercise
the remaining powers, rights and duties under Section 10.03[B].
[D] NAMED FIDUCIARY/LIMITATION OF LIABILITY OF NONDISCRETIONARY TRUSTEE OR
CUSTODIAN. Under a nondiscretionary Trustee designation, the Named Fiduciary
under the Employer's Plan has the sole responsibility for the management and
control of the Employer's Trust Fund, except with respect to a Plan asset under
the control or direction of a properly appointed Investment Manager or with
respect to a Plan asset properly subject to Participant or Advisory Committee
direction of investment. If the Employer appoints a Custodian, the Named
Fiduciary is the discretionary Trustee. Under a nondiscretionary Trustee
designation, unless the Employer designates in writing another person or persons
to serve as Named Fiduciary, the Named Fiduciary under the Plan is the president
of a corporate Employer, the managing partner of a partnership Employer or the
sole proprietor, as appropriate. The Named Fiduciary will exercise its
management and control of the Trust Fund through its written direction to the
nondiscretionary Trustee or to the Custodian, whichever applies to the
Employer's Plan.
The nondiscretionary Trustee or Custodian has no duty to review or to make
recommendations regarding investments made at the written direction of the Named
Fiduciary. The nondiscretionary Trustee or Custodian must retain any investment
obtained at the written direction of the Named Fiduciary until further directed
in writing by the Named Fiduciary to dispose of such investment. The
nondiscretionary Trustee or Custodian is not liable in any manner or for any
reason for making, retaining or disposing of any investment pursuant to any
written direction described in this paragraph. Furthermore, the Employer agrees
to indemnify and to hold the nondiscretionary Trustee or Custodian harmless from
any damages, costs or expenses, including reasonable counsel fees, which the
nondiscretionary Trustee or Custodian may incur as a result of any claim
asserted against the nondiscretionary Trustee, the Custodian or the Trust
arising out of the nondiscretionary Trustee's or Custodian's compliance with any
written direction described in this paragraph.
10.9
<PAGE>
[E] PARTICIPANT LOANS. This Section 10.03[E] specifically authorizes the Trustee
to make loans on a nondiscriminatory basis to a Participant or to a Beneficiary
in accordance with the loan policy established by the Advisory Committee,
provided: (1) the loan policy satisfies the requirements of Section 9.04; (2)
loans are available to all Participants and Beneficiaries on a reasonably
equivalent basis and are not available in a greater amount for Highly
Compensated Employees than for other Employees; (3) any loan is adequately
secured and bears a reasonable rate of interest; (4) the loan provides for
repayment within a specified time; (5) the default provisions of the note
prohibit offset of the Participant's Nonforfeitable Accrued Benefit prior to the
time the Trustee otherwise would distribute the Participant's Nonforfeitable
Accrued Benefit; (6) the amount of the loan does not exceed (at the time the
Plan extends the loan) the present value of the Participant's Nonforfeitable
Accrued Benefit; and (7) the loan otherwise conforms to the exemption provided
by Code Section 4975(d)(1). If the joint and survivor requirements of Article VI
apply to the Participant, the Participant may not pledge any portion of his
Accrued Benefit as security for a loan made after August 18, 1985, unless,
within the 90 day period ending on the date the pledge becomes effective, the
Participant's spouse, if any, consents (in a manner described in Section 6.05
other than the requirement relating to the consent of a subsequent spouse) to
the security or, by separate consent, to an increase in the amount of security.
If the Employer is an unincorporated trade or business, a Participant who is an
Owner-Employee may not receive a loan from the Plan, unless he has obtained a
prohibited transaction exemption from the Department of Labor. If the Employer
is an "S Corporation," a Participant who is a shareholder-employee (an employee
or an officer) who, at any time during the Employer's taxable year, owns more
than 5%, either directly or by attribution under Code Section 318(a)(1), of the
Employer's outstanding stock may not receive a loan from the Plan, unless he has
obtained a prohibited transaction exemption from the Department of Labor. If the
Employer is not an unincorporated trade or business nor an "S Corporation," this
Section 10.03[E] does not impose any restrictions on the class of Participants
eligible for a loan from the Plan.
[F] INVESTMENT IN QUALIFYING EMPLOYER SECURITIES AND QUALIFYING EMPLOYER REAL
PROPERTY. The investment options in this Section 10.03[F] include the ability to
invest in qualifying Employer securities or qualifying Employer real property,
as defined in and as limited by ERISA. If the Employer's Plan is a
Nonstandardized profit sharing plan, it may elect in its Adoption Agreement to
permit the aggregate investments in qualifying Employer securities and in
qualifying Employer real property to exceed 10% of the value of Plan assets.
10.04 RECORDS AND STATEMENTS. The records of the Trustee pertaining to the
Plan must be open to the inspection of the Plan Administrator, the Advisory
Committee and the Employer at all reasonable times and may be audited from time
to time by any person or persons as the Employer, Plan Administrator or Advisory
Committee may specify in writing. The Trustee must furnish the Plan
Administrator or Advisory Committee with whatever information relating to the
Trust Fund the Plan Administrator or Advisory Committee considers necessary.
10.05 FEES AND EXPENSES FROM FUND. A Trustee or Custodian will receive
reasonable annual compensation as may be agreed upon from time to time between
the Employer and the Trustee or Custodian. No person who is receiving full pay
from the Employer may receive compensation for services as Trustee or as
Custodian. The Trustee will pay from the Trust Fund all fees and expenses
reasonably incurred by the Plan, to the extent such fees and expenses are for
the ordinary and necessary administration and operation of the Plan, unless the
Employer pays such fees and expenses. Any fee or expense paid, directly or
indirectly, by the Employer is not an Employer contribution to the Plan,
provided the fee or expense relates to the ordinary and necessary administration
of the Fund.
10.9
<PAGE>
10.06 PARTIES TO LITIGATION. Except as otherwise provided by ERISA, no
Participant or Beneficiary is a necessary party or is required to receive notice
of process in any court proceeding involving the Plan, the Trust Fund or any
fiduciary of the Plan. Any final judgment entered in any proceeding will be
conclusive upon the Employer, the Plan Administrator, the Advisory Committee,
the Trustee, Custodian, Participants and Beneficiaries.
10.07 PROFESSIONAL AGENTS. The Trustee may employ and pay from the
Trust Fund reasonable compensation to agents, attorneys, accountants and other
persons to advise the Trustee as in its opinion may be necessary. The Trustee
may delegate to any agent, attorney, accountant or other person selected by it
any non-Trustee power or duty vested in it by the Plan, and the Trustee may act
or refrain from acting on the advice or opinion of any agent, attorney,
accountant or other person so selected.
10.08 DISTRIBUTION OF CASH OR PROPERTY. The Trustee may make distribution
under the Plan in cash or property, or partly in each, at its fair market value
as determined by the Trustee. For purposes of a distribution to a Participant or
to a Participant's designated Beneficiary or surviving spouse, "property"
includes a Nontransferable Annuity Contract, provided the contract satisfies the
requirements of this Plan.
10.09 DISTRIBUTION DIRECTIONS. If no one claims a payment or distribution
made from the Trust, the Trustee must promptly notify the Advisory Committee
and then dispose of the payment in accordance with the subsequent direction of
the Advisory Committee.
10.10 THIRD PARTY/MULTIPLE TRUSTEES. No person dealing with the Trustee is
obligated to see to the proper application of any money paid or property
delivered to the Trustee, or to inquire whether the Trustee has acted pursuant
to any of the terms of the Plan. Each person dealing with the Trustee may act
upon any notice, request or representation in writing by the Trustee, or by the
Trustee's duly authorized agent, and is not liable to any person in so acting.
The certificate of the Trustee that it is acting in accordance with the Plan
will be conclusive in favor of any person relying on the certificate. If more
than two persons act as Trustee, a decision of the majority of such persons
controls with respect to any decision regarding the administration or investment
of the Trust Fund or of any portion of the Trust Fund with respect to which such
persons act as Trustee. However, the signature of only one Trustee is necessary
to effect any transaction on behalf of the Trust.
10.11 RESIGNATION. The Trustee or Custodian may resign its position at any
time by giving 30 days' written notice in advance to the Employer and to the
Advisory Committee. If the Employer fails to appoint a successor Trustee within
60 days of its receipt of the Trustee's written notice of resignation, the
Trustee will treat the Employer as having appointed itself as Trustee and as
having filed its acceptance of appointment with the former Trustee. The
Employer, in its sole discretion, may replace a Custodian. If the Employer does
not replace a Custodian, the discretionary Trustee will assume possession of
Plan assets held by the former Custodian.
10.12 REMOVAL. The Employer, by giving 30 days' written notice in advance to
the Trustee, may remove any Trustee or Custodian. In the event of the
resignation or removal of a Trustee, the Employer must appoint a successor
Trustee if it intends to continue the Plan. If two or more persons hold the
position of Trustee, in the event of the removal of one such person, during any
period the selection of a replacement is pending, or during any period such
person is unable to serve for any reason, the remaining person or persons will
act as the Trustee.
10.9
<PAGE>
10.13 INTERIM DUTIES AND SUCCESSOR TRUSTEE. Each successor Trustee succeeds
to the title to the Trust vested in his predecessor by accepting in writing his
appointment as successor Trustee and by filing the acceptance with the former
Trustee and the Advisory Committee without the signing or filing of any further
statement. The resigning or removed Trustee, upon receipt of acceptance in
writing of the Trust by the successor Trustee, must execute all documents and do
all acts necessary to vest the title of record in any successor Trustee. Each
successor Trustee has and enjoys all of the powers, both discretionary and
ministerial, conferred under this Agreement upon his predecessor. A successor
Trustee is not personally liable for any act or failure to act of any
predecessor Trustee, except as required under ERISA. With the approval of the
Employer and the Advisory Committee, a successor Trustee, with respect to the
Plan, may accept the account rendered and the property delivered to it by a
predecessor Trustee without incurring any liability or responsibility for so
doing.
10.14 VALUATION OF TRUST. The Trustee must value the Trust Fund as of each
Accounting Date to determine the fair market value of each Participant's Accrued
Benefit in the Trust. The Trustee also must value the Trust Fund on such other
valuation dates as directed in writing by the Advisory Committee or as required
by the Employer's Adoption Agreement.
10.15 LIMITATION ON LIABILITY - IF INVESTMENT MANAGER, ANCILLARY
TRUSTEE OR INDEPENDENT FIDUCIARY APPOINTED. The Trustee is not liable for
the acts or omissions of any Investment Manager the Advisory Committee may
appoint, nor is the Trustee under any obligation to invest or otherwise manage
any asset of the Plan which is subject to the management of a properly appointed
Investment Manager. The Advisory Committee, the Trustee and any properly
appointed Investment Manager may execute a letter agreement as a part of this
Plan delineating the duties, responsibilities and liabilities of the Investment
Manager with respect to any part of the Trust Fund under the control of the
Investment Manager.
The limitation on liability described in this Section 10.15 also applies to
the acts or omissions of any ancillary trustee or independent fiduciary properly
appointed under Section 10.17 of the Plan. However, if a discretionary Trustee,
pursuant to the delegation described in Section 10.17 of the Plan, appoints an
ancillary trustee, the discretionary Trustee is responsible for the periodic
review of the ancillary trustee's actions and must exercise its delegated
authority in accordance with the terms of the Plan and in a manner consistent
with ERISA. The Employer, the discretionary Trustee and an ancillary trustee may
execute a letter agreement as a part of this Plan delineating any
indemnification agreement between the parties.
10.16 INVESTMENT IN GROUP TRUST FUND. The Employer, by adopting this Plan,
specifically authorizes the Trustee to invest all or any portion of the assets
comprising the Trust Fund in any group trust fund which at the time of the
investment provides for the pooling of the assets of plans qualified under Code
Section 401(a). This authorization applies solely to a group trust fund exempt
from taxation under Code Section 501(a) and the trust agreement of which
satisfies the requirements of Revenue Ruling 81-100. The provisions of the group
trust fund agreement, as amended from time to time, are by this reference
incorporated within this Plan and Trust. The provisions of the group trust fund
will govern any investment of Plan assets in that fund. The Employer must
specify in an attachment to its adoption agreement the group trust fund(s) to
which this authorization applies. If the Trustee is acting as a nondiscretionary
Trustee, the investment in the group trust fund is available only in accordance
with a proper direction, by the Named Fiduciary, in accordance with Section
10.03[B]. Pursuant to paragraph (c) of Section 10.03[A] of the Plan, a Trustee
has the authority to invest in certain common trust funds and collective
investment funds without the need for the authorizing addendum described in this
Section 10.16.
10.9
<PAGE>
Furthermore, at the Employer's direction, the Trustee, for collective
investment purposes, may combine into one trust fund the Trust created under
this Plan with the Trust created under any other qualified retirement plan the
Employer maintains. However, the Trustee must maintain separate records of
account for the assets of each Trust in order to reflect properly each
Participant's Accrued Benefit under the plan(s) in which he is a Participant.
10.17 APPOINTMENT OF ANCILLARY TRUSTEE OR INDEPENDENT FIDUCIARY.
The Employer, in writing, may appoint any person in any State to act as
ancillary trustee with respect to a designated portion of the Trust Fund,
subject to the consent required under Section 1.02 if the Master Plan Sponsor is
a financial institution. An ancillary trustee must acknowledge in writing its
acceptance of the terms and conditions of its appointment as ancillary trustee
and its fiduciary status under ERISA. The ancillary trustee has the rights,
powers, duties and discretion as the Employer may delegate, subject to any
limitations or directions specified in the instrument evidencing appointment of
the ancillary trustee and to the terms of the Plan or of ERISA. The investment
powers delegated to the ancillary trustee may include any investment powers
available under Section 10.03 of the Plan including the right to invest any
portion of the assets of the Trust Fund in a common trust fund, as described in
Code Section 584, or in any collective investment fund, the provisions of which
govern the investment of such assets and which the Plan incorporates by this
reference, but only if the ancillary trustee is a bank or similar financial
institution supervised by the United States or by a State and the ancillary
trustee (or its affiliate, as defined in Code Section 1504) maintains the common
trust fund or collective investment fund exclusively for the collective
investment of money contributed by the ancillary trustee (or its affiliate) in a
trustee capacity and which conforms to the rules of the Comptroller of the
Currency. The Employer also may appoint as an ancillary trustee, the trustee of
any group trust fund designated for investment pursuant to the provisions of
Section 10.16 of the Plan.
The ancillary trustee may resign its position at any time by providing at
least 30 days' advance written notice to the Employer, unless the Employer
waives this notice requirement. The Employer, in writing, may remove an
ancillary trustee at any time. In the event of resignation or removal, the
Employer may appoint another ancillary trustee, return the assets to the control
and management of the Trustee or receive such assets in the capacity of
ancillary trustee. The Employer may delegate its responsibilities under this
Section 10.17 to a discretionary Trustee under the Plan, but not to a
nondiscretionary Trustee or to a Custodian, subject to the acceptance by the
discretionary Trustee of that delegation.
If the U.S. Department of Labor ("the Department") requires engagement of an
independent fiduciary to have control or management of all or a portion of the
Trust Fund, the Employer will appoint such independent fiduciary, as directed by
the Department. The independent fiduciary will have the duties, responsibilities
and powers prescribed by the Department and will exercise those duties,
responsibilities and powers in accordance with the terms, restrictions and
conditions established by the Department and, to the extent not inconsistent
with ERISA, the terms of the Plan. The independent fiduciary must accept its
appointment in writing and must acknowledge its status as a fiduciary of the
Plan.
* * * * * * * * * * * * * * *
10.9
<PAGE>
ARTICLE XI
PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY
11.01 INSURANCE BENEFIT. The Employer may elect to provide incidental life
insurance benefits for insurable Participants who consent to life insurance
benefits by signing the appropriate insurance company application form. The
Trustee will not purchase any incidental life insurance benefit for any
Participant prior to an allocation to the Participant's Account. At an insured
Participant's written direction, the Trustee will use all or any portion of the
Participant's nondeductible voluntary contributions, if any, to pay insurance
premiums covering the Participant's life. This Section 11.01 also authorizes the
purchase of life insurance, for the benefit of the Participant, on the life of a
family member of the Participant or on any person in whom the Participant has an
insurable interest. However, if the policy is on the joint lives of the
Participant and another person, the Trustee may not maintain that policy if that
other person predeceases the Participant.
The Employer will direct the Trustee as to the insurance company and insurance
agent through which the Trustee is to purchase the insurance contracts, the
amount of the coverage and the applicable dividend plan. Each application for a
policy, and the policies themselves, must designate the Trustee as sole owner,
with the right reserved to the Trustee to exercise any right or option contained
in the policies, subject to the terms and provisions of this Agreement. The
Trustee must be the named beneficiary for the Account of the insured
Participant. Proceeds of insurance contracts paid to the Participant's Account
under this Article XI are subject to the distribution requirements of Article V
and of Article VI. The Trustee will not retain any such proceeds for the benefit
of the Trust.
The Trustee will charge the premiums on any incidental benefit insurance
contract covering the life of a Participant against the Account of that
Participant. The Trustee will hold all incidental benefit insurance contracts
issued under the Plan as assets of the Trust created under the Plan.
(A) INCIDENTAL INSURANCE BENEFITS. The aggregate of life insurance premiums paid
for the benefit of a Participant, at all times, may not exceed the following
percentages of the aggregate of the Employer's contributions allocated to any
Participant's Account: (i) 49% in the case of the purchase of ordinary life
insurance contracts; or (ii) 25% in the case of the purchase of term life
insurance or universal life insurance contracts. If the Trustee purchases a
combination of ordinary life insurance contract(s) and term life insurance or
universal life insurance contract(s), then the sum of one-half of the premiums
paid for the ordinary life insurance contract(s) and the premiums paid for the
term life insurance or universal life insurance contract(s) may not exceed 25%
of the Employer contributions allocated to any Participant's Account.
(B) EXCEPTION FOR CERTAIN PROFIT SHARING PLANS. If the Employer's Plan is a
profit sharing plan, the incidental insurance benefits requirement does not
apply to the Plan if the Plan purchases life insurance benefits only from
Employer contributions accumulated in the Participant's Account for at least two
years (measured from the allocation date).
11.3
<PAGE>
11.02 LIMITATION ON LIFE INSURANCE PROTECTION. The Trustee will not
continue any life insurance protection for any Participant beyond his annuity
starting date (as defined in Article VI). If the Trustee holds any incidental
benefit insurance contract(s) for the benefit of a Participant when he
terminates his employment (other than by reason of death), the Trustee must
proceed as follows:
(a) If the entire cash value of the contract(s) is vested in the terminating
Participant, or if the contract(s) will have no cash value at the end of the
policy year in which termination of employment occurs, the Trustee will
transfer the contract(s) to the Participant endorsed so as to vest in the
transferee all right, title and interest to the contract(s), free and clear of
the Trust; subject however, to restrictions as to surrender or payment of
benefits as the issuing insurance company may permit and as the Advisory
Committee directs;
(b) If only part of the cash value of the contract(s) is vested in the
terminating Participant, the Trustee, to the extent the Participant's interest
in the cash value of the contract(s) is not vested, may adjust the
Participant's interest in the value of his Account attributable to Trust
assets other than incidental benefit insurance contracts and proceed as in
(a), or the Trustee must effect a loan from the issuing insurance company on
the sole security of the contract(s) for an amount equal to the difference
between the cash value of the contract(s) at the end of the policy year in
which termination of employment occurs and the amount of the cash value that
is vested in the terminating Participant, and the Trustee must transfer the
contract(s) endorsed so as to vest in the transferee all right, title and
interest to the contract(s), free and clear of the Trust; subject however, to
the restrictions as to surrender or payment of benefits as the issuing
insurance company may permit and the Advisory Committee directs;
(c) If no part of the cash value of the contract(s) is vested in the
terminating Participant, the Trustee must surrender the contract(s) for cash
proceeds as may be available.
In accordance with the written direction of the Advisory Committee, the
Trustee will make any transfer of contract(s) under this Section 11.02 on the
Participant's annuity starting date (or as soon as administratively practicable
after that date). The Trustee may not transfer any contract under this Section
11.02 which contains a method of payment not specifically authorized by Article
VI or which fails to comply with the joint and survivor annuity requirements, if
applicable, of Article VI. In this regard, the Trustee either must convert such
a contract to cash and distribute the cash instead of the contract, or before
making the transfer, require the issuing company to delete the unauthorized
method of payment option from the contract.
11.03 DEFINITIONS. For purposes of this Article XI:
(a) "Policy" means an ordinary life insurance contract or a term life
insurance contract issued by an insurer on the life of a Participant.
(b) "Issuing insurance company" is any life insurance company which has issued
a policy upon application by the Trustee under the terms of this Agreement.
(c) "Contract" or "Contracts" means a policy of insurance. In the event of any
conflict between the provisions of this Plan and the terms of any contract or
policy of insurance issued in accordance with this Article XI, the provisions
of the Plan control.
11.3
<PAGE>
(d) "Insurable Participant" means a Participant to whom an insurance company,
upon an application being submitted in accordance with the Plan, will issue
insurance coverage, either as a standard risk or as a risk in an extra
mortality classification.
11.04 DIVIDEND PLAN. The dividend plan is premium reduction unless the
Advisory Committee directs the Trustee to the contrary. The Trustee must use all
dividends for a contract to purchase insurance benefits or additional insurance
benefits for the Participant on whose life the insurance company has issued the
contract. Furthermore, the Trustee must arrange, where possible, for all
policies issued on the lives of Participants under the Plan to have the same
premium due date and all ordinary life insurance contracts to contain guaranteed
cash values with as uniform basic options as are possible to obtain. The term
"dividends" includes policy dividends, refunds of premiums and other credits.
11.05 INSURANCE COMPANY NOT A PARTY TO AGREEMENT. No insurance
company, solely in its capacity as an issuing insurance company, is a party to
this Agreement nor is the company responsible for its validity.
11.06 INSURANCE COMPANY NOT RESPONSIBLE FOR TRUSTEE'S ACTIONS.
No insurance company, solely in its capacity as an issuing insurance company,
need examine the terms of this Agreement nor is responsible for any action taken
by the Trustee.
11.07 INSURANCE COMPANY RELIANCE ON TRUSTEE'S SIGNATURE. For the
purpose of making application to an insurance company and in the exercise of any
right or option contained in any policy, the insurance company may rely upon the
signature of the Trustee and is saved harmless and completely discharged in
acting at the direction and authorization of the Trustee.
11.08 ACQUITTANCE. An insurance company is discharged from all liability for
any amount paid to the Trustee or paid in accordance with the direction of the
Trustee, and is not obliged to see to the distribution or further application of
any moneys it so pays.
11.09 DUTIES OF INSURANCE COMPANY. Each insurance company must keep such
records, make such identification of contracts, funds and accounts within funds,
and supply such information as may be necessary for the proper administration of
the Plan under which it is carrying insurance benefits.
NOTE: The provisions of this Article XI are not applicable, and the Plan may
not invest in insurance contracts, if a Custodian signatory to the Adoption
Agreement is a bank which has not acquired trust powers from its governing state
banking authority.
* * * * * * * * * * * * * * *
11.3
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.01 EVIDENCE. Anyone required to give evidence under the terms of the Plan
may do so by certificate, affidavit, document or other information which the
person to act in reliance may consider pertinent, reliable and genuine, and to
have been signed, made or presented by the proper party or parties. The Advisory
Committee and the Trustee are fully protected in acting and relying upon any
evidence described under the immediately preceding sentence.
12.02 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee
nor the Advisory Committee has any obligation or responsibility with respect to
any action required by the Plan to be taken by the Employer, any Participant or
eligible Employee, or for the failure of any of the above persons to act or make
any payment or contribution, or to otherwise provide any benefit contemplated
under this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the Plan, or to
determine the correctness of the amount of any Employer contribution. Neither
the Trustee nor the Advisory Committee need inquire into or be responsible for
any action or failure to act on the part of the others, or on the part of any
other person who has any responsibility regarding the management, administration
or operation of the Plan, whether by the express terms of the Plan or by a
separate agreement authorized by the Plan or by the applicable provisions of
ERISA. Any action required of a corporate Employer must be by its Board of
Directors or its designate.
12.03 FIDUCIARIES NOT INSURERS. The Trustee, the Advisory Committee, the
Plan Administrator and the Employer in no way guarantee the Trust Fund from loss
or depreciation. The Employer does not guarantee the payment of any money which
may be or becomes due to any person from the Trust Fund. The liability of the
Advisory Committee and the Trustee to make any payment from the Trust Fund at
any time and all times is limited to the then available assets of the Trust.
12.04 WAIVER OF NOTICE. Any person entitled to notice under the Plan may
waive the notice, unless the Code or Treasury regulations prescribe the notice
or ERISA specifically or impliedly prohibits such a waiver.
12.05 SUCCESSORS. The Plan is binding upon all persons entitled to benefits
under the Plan, their respective heirs and legal representatives, upon the
Employer, its successors and assigns, and upon the Trustee, the Advisory
Committee, the Plan Administrator and their successors.
12.06 WORD USAGE. Words used in the masculine also apply to the feminine
where applicable, and wherever the context of the Employer's Plan dictates, the
plural includes the singular and the singular includes the plural.
12.07 STATE LAW. The law of the state of the Employer's principal place of
business (unless otherwise designated in an addendum to the Employer's Adoption
Agreement) will determine all questions arising with respect to the provisions
of this Agreement except to the extent superseded by Federal law.
12.2
<PAGE>
12.08 EMPLOYER'S RIGHT TO PARTICIPATE. If the Employer's Plan fails to
qualify or to maintain qualification or if the Employer makes any amendment or
modification to a provision of this Plan (other than a proper completion of an
elective provision under the Adoption Agreement or the attachment of an addendum
authorized by the Plan or by the Adoption Agreement), the Employer may no longer
participate under this Master Plan. The Employer also may not participate (or
continue to participate) in this Master Plan if the Trustee or Custodian (or a
change in the Trustee or Custodian) does not satisfy the requirements of Section
1.02 of the Plan. If the Employer is not entitled to participate under this
Master Plan, the Employer's Plan is an individually-designed plan and the
reliance procedures specified in the applicable Adoption Agreement no longer
will apply.
12.09 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan, or with
respect to the establishment of the Trust, or any modification or amendment to
the Plan or Trust, or in the creation of any Account, or the payment of any
benefit, gives any Employee, Employee-Participant or any Beneficiary any right
to continue employment, any legal or equitable right against the Employer, or
Employee of the Employer, or against the Trustee, or its agents or employees, or
against the Plan Administrator, except as expressly provided by the Plan, the
Trust, ERISA or by a separate agreement.
* * * * * * * * * * * * * * *
12.2
<PAGE>
ARTICLE XIII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
13.01 EXCLUSIVE BENEFIT. Except as provided under Article III, the Employer
has no beneficial interest in any asset of the Trust and no part of any asset in
the Trust may ever revert to or be repaid to an Employer, either directly or
indirectly; nor, prior to the satisfaction of all liabilities with respect to
the Participants and their Beneficiaries under the Plan, may any part of the
corpus or income of the Trust Fund, or any asset of the Trust, be (at any time)
used for, or diverted to, purposes other than the exclusive benefit of the
Participants or their Beneficiaries. However, if the Commissioner of Internal
Revenue, upon the Employer's request for initial approval of this Plan,
determines the Trust created under the Plan is not a qualified trust exempt from
Federal income tax, then (and only then) the Trustee, upon written notice from
the Employer, will return the Employer's contributions (and increment
attributable to the contributions) to the Employer. The Trustee must make the
return of the Employer contribution under this Section 13.01 within one year of
a final disposition of the Employer's request for initial approval of the Plan.
The Employer's Plan and Trust will terminate upon the Trustee's return of the
Employer's contributions.
13.02 AMENDMENT BY EMPLOYER. The Employer has the right at any time and
from time to time:
(a) To amend the elective provisions of the Adoption Agreement in any manner
it deems necessary or advisable in order to qualify (or maintain qualification
of) this Plan and the Trust created under it under the provisions of Code
Section 401(a);
(b) To amend the Plan to allow the Plan to operate under a waiver of the
minimum funding requirement; and
(c) To amend this Agreement in any other manner.
No amendment may authorize or permit any of the Trust Fund (other than the
part which is required to pay taxes and administration expenses) to be used for
or diverted to purposes other than for the exclusive benefit of the Participants
or their Beneficiaries or estates. No amendment may cause or permit any portion
of the Trust Fund to revert to or become a property of the Employer. The
Employer also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the Advisory
Committee without the written consent of the affected Trustee, the Plan
Administrator or the affected member of the Advisory Committee. The Employer
must make all amendments in writing. Each amendment must state the date to which
it is either retroactively or prospectively effective. See Section 12.08 for the
effect of certain amendments adopted by the Employer.
13.5
<PAGE>
(A) CODE SECTION 411(D)(6) PROTECTED BENEFITS. An amendment (including the
adoption of this Plan as a restatement of an existing plan) may not decrease a
Participant's Accrued Benefit, except to the extent permitted under Code Section
412(c)(8), and may not reduce or eliminate Code Section 411(d)(6) protected
benefits determined immediately prior to the adoption date (or, if later, the
effective date) of the amendment. An amendment reduces or eliminates Code
Section 411(d)(6) protected benefits if the amendment has the effect of either
(1) eliminating or reducing an early retirement benefit or a retirement-type
subsidy (as defined in Treasury regulations), or (2) except as provided by
Treasury regulations, eliminating an optional form of benefit. The Advisory
Committee must disregard an amendment to the extent application of the amendment
would fail to satisfy this paragraph. If the Advisory Committee must disregard
an amendment because the amendment would violate clause (1) or clause (2), the
Advisory Committee must maintain a schedule of the early retirement option or
other optional forms of benefit the Plan must continue for the affected
Participants.
13.03 AMENDMENT BY MASTER PLAN SPONSOR. The Master Plan Sponsor (or PPD, as
agent of the Master Plan Sponsor), without the Employer's consent, may amend the
Plan and Trust, from time to time, in order to conform the Plan and Trust to any
requirement for qualification of the Plan and Trust under the Internal Revenue
Code. The Master Plan Sponsor may not amend the Plan in any manner which would
modify any election made by the Employer under the Plan without the Employer's
written consent. Furthermore, the Master Plan Sponsor may not amend the Plan in
any manner which would violate the proscription of Section 13.02. A Trustee does
not have the power to amend the Plan or Trust.
13.04 DISCONTINUANCE. The Employer has the right, at any time, to suspend or
discontinue its contributions under the Plan, and to terminate, at any time,
this Plan and the Trust created under this Agreement. The Plan will terminate
upon the first to occur of the following:
(a) The date terminated by action of the Employer;
(b) The dissolution or merger of the Employer, unless the successor makes
provision to continue the Plan, in which event the successor must substitute
itself as the Employer under this Plan. Any termination of the Plan resulting
from this paragraph (b) is not effective until compliance with any applicable
notice requirements under ERISA.
13.05 FULL VESTING ON TERMINATION. Upon either full or partial termination
of the Plan, or, if applicable, upon complete discontinuance of profit sharing
plan contributions to the Plan, an affected Participant's right to his Accrued
Benefit is 100% Nonforfeitable, irrespective of the Nonforfeitable percentage
which otherwise would apply under Article V.
13.06 MERGER/DIRECT TRANSFER. The Trustee may not consent to, or be a party
to, any merger or consolidation with another plan, or to a transfer of assets or
liabilities to another plan, unless immediately after the merger, consolidation
or transfer, the surviving Plan provides each Participant a benefit equal to or
greater than the benefit each Participant would have received had the Plan
terminated immediately before the merger or consolidation or transfer. The
Trustee possesses the specific authority to enter into merger agreements or
direct transfer of assets agreements with the trustees of other retirement plans
described in Code Section 401(a), including an elective transfer, and to accept
the direct transfer of plan assets, or to transfer plan assets, as a party to
any such agreement.
13.5
<PAGE>
The Trustee may accept a direct transfer of plan assets on behalf of an
Employee prior to the date the Employee satisfies the Plan's eligibility
conditions. If the Trustee accepts such a direct transfer of plan assets, the
Advisory Committee and Trustee must treat the Employee as a Participant for all
purposes of the Plan except the Employee is not a Participant for purposes of
sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan.
(A) ELECTIVE TRANSFERS. The Trustee, after August 9, 1988, may not consent to,
or be a party to a merger, consolidation or transfer of assets with a defined
benefit plan, except with respect to an elective transfer, or unless the
transferred benefits are in the form of paid-up individual annuity contracts
guaranteeing the payment of the transferred benefits in accordance with the
terms of the transferor plan and in a manner consistent with the Code and with
ERISA. The Trustee will hold, administer and distribute the transferred assets
as a part of the Trust Fund and the Trustee must maintain a separate Employer
contribution Account for the benefit of the Employee on whose behalf the Trustee
accepted the transfer in order to reflect the value of the transferred assets.
Unless a transfer of assets to this Plan is an elective transfer, the Plan will
preserve all Code Section 411(d)(6) protected benefits with respect to those
transferred assets, in the manner described in Section 13.02. A transfer is an
elective transfer if: (1) the transfer satisfies the first paragraph of this
Section 13.06; (2) the transfer is voluntary, under a fully informed election by
the Participant; (3) the Participant has an alternative that retains his Code
Section 411(d)(6) protected benefits (including an option to leave his benefit
in the transferor plan, if that plan is not terminating); (4) the transfer
satisfies the applicable spousal consent requirements of the Code; (5) the
transferor plan satisfies the joint and survivor notice requirements of the
Code, if the Participant's transferred benefit is subject to those requirements;
(6) the Participant has a right to immediate distribution from the transferor
plan, in lieu of the elective transfer; (7) the transferred benefit is at least
the greater of the single sum distribution provided by the transferor plan for
which the Participant is eligible or the present value of the Participant's
accrued benefit under the transferor plan payable at that plan's normal
retirement age; (8) the Participant has a 100% Nonforfeitable interest in the
transferred benefit; and (9) the transfer otherwise satisfies applicable
Treasury regulations. An elective transfer may occur between qualified plans of
any type. Any direct transfer of assets from a defined benefit plan after August
9, 1988, which does not satisfy the requirements of this paragraph will render
the Employer's Plan individually-designed. See Section 12.08.
(B) DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If the Plan receives a
direct transfer (by merger or otherwise) of elective contributions (or amounts
treated as elective contributions) under a Plan with a Code Section 401(k)
arrangement, the distribution restrictions of Code Sections 401(k)(2) and
(10) continue to apply to those transferred elective contributions.
13.07 TERMINATION.
(A) PROCEDURE. Upon termination of the Plan, the distribution provisions of
Article VI remain operative, with the following exceptions:
(1) if the present value of the Participant's Nonforfeitable Accrued Benefit
does not exceed $3,500, the Advisory Committee will direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit to him in lump sum
as soon as administratively practicable after the Plan terminates; and
(2) if the present value of the Participant's Nonforfeitable Accrued Benefit
exceeds $3,500, the Participant or the Beneficiary, in addition to the
distribution events permitted under Article VI, may elect to have the Trustee
commence distribution of his Nonforfeitable Accrued Benefit as soon as
administratively practicable after the Plan terminates.
13.5
<PAGE>
To liquidate the Trust, the Advisory Committee will purchase a deferred
annuity contract for each Participant which protects the Participant's
distribution rights under the Plan, if the Participant's Nonforfeitable Accrued
Benefit exceeds $3,500 and the Participant does not elect an immediate
distribution pursuant to Paragraph (2).
If the Employer's Plan is a profit sharing plan, in lieu of the preceding
provisions of this Section 13.07 and the distribution provisions of Article VI,
the Advisory Committee will direct the Trustee to distribute each Participant's
Nonforfeitable Accrued Benefit, in lump sum, as soon as administratively
practicable after the termination of the Plan, irrespective of the present value
of the Participant's Nonforfeitable Accrued Benefit and whether the Participant
consents to that distribution. This paragraph does not apply if: (1) the Plan
provides an annuity option; or (2) as of the period between the Plan termination
date and the final distribution of assets, the Employer maintains any other
defined contribution plan (other than an ESOP). The Employer, in an addendum to
its Adoption Agreement numbered 13.07, may elect not to have this paragraph
apply.
The Trust will continue until the Trustee in accordance with the direction of
the Advisory Committee has distributed all of the benefits under the Plan. On
each valuation date, the Advisory Committee will credit any part of a
Participant's Accrued Benefit retained in the Trust with its proportionate share
of the Trust's income, expenses, gains and losses, both realized and unrealized.
Upon termination of the Plan, the amount, if any, in a suspense account under
Article III will revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A resolution or amendment to
freeze all future benefit accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section 13.07.
(B) DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If the Employer's Plan
includes a Code Section 401(k) arrangement or if transferred assets described in
Section 13.06 are subject to the distribution restrictions of Code Sections
401(k)(2) and (10), the special distribution provisions of this Section
13.07 are subject to the restrictions of this paragraph. The portion of the
Participant's Nonforfeitable Accrued Benefit attributable to elective
contributions (or to amounts treated under the Code Section 401(k) arrangement
as elective contributions) is not distributable on account of Plan termination,
as described in this Section 13.07, unless: (a) the Participant otherwise is
entitled under the Plan to a distribution of that portion of his Nonforfeitable
Accrued Benefit; or (b) the Plan termination occurs without the establishment of
a successor plan. A successor plan under clause (b) is a defined contribution
plan (other than an ESOP) maintained by the Employer (or by a related employer)
at the time of the termination of the Plan or within the period ending twelve
months after the final distribution of assets. A distribution made after March
31, 1988, pursuant to clause (b), must be part of a lump sum distribution to the
Participant of his Nonforfeitable Accrued Benefit.
* * * * * * * * * * * * * * *
13.5
<PAGE>
ARTICLE XIV
CODE SECTION 401(K) AND CODE SECTION 401(M) ARRANGEMENTS
14.01 APPLICATION. This Article XIV applies to an Employer's Plan only if the
Employer is maintaining its Plan under a Code Section 401(k) Adoption Agreement.
14.02 CODE SECTION 401(K) ARRANGEMENT. The Employer will elect in Section 3.01
of its Adoption Agreement the terms of the Code Section 401(k) arrangement, if
any, under the Plan. If the Employer's Plan is a Standardized Plan, the Code
Section 401(k) arrangement must be a salary reduction arrangement. If the
Employer's Plan is a Nonstandardized Plan, the Code Section 401(k) arrangement
may be a salary reduction arrangement or a cash or deferred arrangement.
(A) SALARY REDUCTION ARRANGEMENT. If the Employer elects a salary reduction
arrangement, any Employee eligible to participate in the Plan may file a salary
reduction agreement with the Advisory Committee. The salary reduction agreement
may not be effective earlier than the following date which occurs last: (i) the
Employee's Plan Entry Date (or, in the case of a reemployed Employee, his
reparticipation date under Article II); (ii) the execution date of the
Employee's salary reduction agreement; (iii) the date the Employer adopts the
Code Section 401(k) arrangement by executing the Adoption Agreement; or (iv) the
effective date of the Code Section 401(k) arrangement, as specified in the
Employer's Adoption Agreement. Regarding clause (i), an Employee subject to the
Break in Service rule of Section 2.03(B) of the Plan may not enter into a salary
reduction agreement until the Employee has completed a sufficient number of
Hours of Service to receive credit for a Year of Service (as defined in Section
2.02) following his reemployment commencement date. A salary reduction agreement
must specify the amount of Compensation (as defined in Section 1.12) or
percentage of Compensation the Employee wishes to defer. The salary reduction
agreement will apply only to Compensation which becomes currently available to
the Employee after the effective date of the salary reduction agreement. The
Employer will apply a reduction election to all Compensation (and to increases
in such Compensation) unless the Employee specifies in his salary reduction
agreement to limit the election to certain Compensation. The Employer will
specify in Adoption Agreement Section 3.01 the rules and restrictions applicable
to the Employees salary reduction agreements.
(B) CASH OR DEFERRED ARRANGEMENT. If the Employer elects a cash or deferred
arrangement, a Participant may elect to make a cash election against his
proportionate share of the Employer's Cash or Deferred Contribution, in
accordance with the Employer's elections in Adoption Agreement Section 3.01. A
Participant's proportionate share of the Employer's Cash or Deferred
Contribution is the percentage of the total Cash or Deferred Contribution which
bears the same ratio that the Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for the Plan Year. For purposes of
determining each Participant's proportionate share of the Cash or Deferred
Contribution, a Participant's Compensation is his Compensation as determined
under Section 1.12 of the Plan (as modified by Section 3.06 for allocation
purposes), excluding any effect the proportionate share may have on the
Participant's Compensation for the Plan Year. The Advisory Committee will
determine the proportionate share prior to the Employer's actual contribution to
the Trust, to provide the Participants the opportunity to file cash elections.
The Employer will pay directly to the Participant the portion of his
proportionate share the Participant has elected to receive in cash.
(C) ELECTION NOT TO PARTICIPATE. A Participant's or Employee's election not to
participate, pursuant to Section 2.06, includes his right to enter into a salary
reduction agreement or to share in the allocation of a Cash or Deferred
Contribution, unless the Participant or Employee limits the effect of the
election to the non-401(k) portions of the Plan.
14.1
<PAGE>
14.03 DEFINITIONS. For purposes of this Article XIV:
(a) "Highly Compensated Employee" means an Eligible Employee who satisfies the
definition in Section 1.09 of the Plan. Family members aggregated as a
single Employee under Section 1.09 constitute a single Highly Compensated
Employee, whether a particular family member is a Highly Compensated
Employee or a Nonhighly Compensated Employee without the application
of family aggregation.
(b) "Nonhighly Compensated Employee" means an Eligible Employee who is not a
Highly Compensated Employee and who is not a family member treated as a
Highly Compensated Employee.
(c) "Eligible Employee" means, for purposes of the ADP test described in
Section 14.08, an Employee who is eligible to enter into a salary reduction
agreement for the Plan Year, irrespective of whether he actually enters
into such an agreement, and a Participant who is eligible for an allocation
of the Employer's Cash or Deferred Contribution for the Plan Year. For
purposes of the ACP test described in Section 14.09, an "Eligible Employee"
means a Participant who is eligible to receive an allocation of matching
contributions (or would be eligible if he made the type of contributions
necessary to receive an allocation of matching contributions) and a
Participant who is eligible to make nondeductible contributions,
irrespective of whether he actually makes nondeductible contributions. An
Employee continues to be an Eligible Employee during a period the Plan
suspends the Employee's right to make elective deferrals or nondeductible
contributions following a hardship distribution.
(d) "Highly Compensated Group" means the group of Eligible Employees who are
Highly Compensated Employees for the Plan Year.
(e) "Nonhighly Compensated Group" means the group of Eligible Employees who
are Nonhighly Compensated Employees for the Plan Year.
(f) "Compensation" means, except as specifically provided in this Article XIV,
Compensation as defined for nondiscrimination purposes in Section 1.12(B)
of the Plan. To compute an Employee's ADP or ACP, the Advisory Committee
may limit Compensation taken into account to Compensation received only for
the portion of the Plan Year in which the Employee was an Eligible Employee
and only for the portion of the Plan Year in which the Plan or the Code
Section 401(k) arrangement was in effect.
(g) "Deferral contributions" are Salary Reduction Contributions and Cash or
Deferred Contributions the Employer contributes to the Trust on behalf of
an Eligible Employee, irrespective of whether, in the case of Cash or
Deferred Contributions, the contribution is at the election of the
Employee. For Salary Reduction Contributions, the terms "deferral
contributions" and "elective deferrals" have the same meaning.
14.2
<PAGE>
(h) "Elective deferrals" are all Salary Reduction Contributions and that
portion of any Cash or Deferred Contribution which the Employer contributes
to the Trust at the election of an Eligible Employee. Any portion of a Cash
or Deferred Contribution contributed to the Trust because of the Employee's
failure to make a cash election is an elective deferral. However, any
portion of a Cash or Deferred Contribution over which the Employee does not
have a cash election is not an elective deferral. Elective deferrals do not
include amounts which have become currently available to the Employee prior
to the election nor amounts designated as nondeductible contributions at
the time of deferral or contribution.
(i) "Matching contributions" are contributions made by the Employer on account
of elective deferrals under a Code Section 401(k) arrangement or on account
of employee contributions. Matching contributions also include Participant
forfeitures allocated on account of such elective deferrals or employee
contributions.
(j) "Nonelective contributions" are contributions made by the Employer which
are not subject to a deferral election by an Employee and which are not
matching contributions.
(k) "Qualified matching contributions" are matching contributions which are
100% Nonforfeitable at all times and which are subject to the distribution
restrictions described in paragraph (m). Matching contributions are not
100% Nonforfeitable at all times if the Employee has a 100% Nonforfeitable
interest because of his Years of Service taken into account under a vesting
schedule. Any matching contributions allocated to a Participant's Qualified
Matching Contributions Account under the Plan automatically satisfy the
definition of qualified matching contributions.
(l) "Qualified nonelective contributions" are nonelective contributions which
are 100% Nonforfeitable at all times and which are subject to the
distribution restrictions described in paragraph (m). Nonelective
contributions are not 100% Nonforfeitable at all times if the Employee has
a 100% Nonforfeitable interest because of his Years of Service taken into
account under a vesting schedule. Any nonelective contributions allocated
to a Participant's Qualified Nonelective Contributions Account under the
Plan automatically satisfy the definition of qualified nonelective
contributions.
(m) "Distribution restrictions" means the Employee may not receive a
distribution of the specified contributions (nor earnings on those
contributions) except in the event of (1) the Participant's death,
disability, termination of employment or attainment of age 59 1/2, (2)
financial hardship satisfying the requirements of Code Section 401(k) and
the applicable Treasury regulations, (3) a plan termination, without
establishment of a successor defined contribution plan (other than an
ESOP), (4) a sale of substantially all of the assets (within the meaning of
Code Section 409(d)(2)) used in a trade or business, but only to an
employee who continues employment with the corporation acquiring those
assets, or (5) a sale by a corporation of its interest in a subsidiary
(within the meaning of Code Section 409(d)(3)), but only to an employee who
continues employment with the subsidiary. For Plan Years beginning after
December 31, 1988, a distribution on account of financial hardship, as
described in clause (2), may not include earnings on elective deferrals
credited as of a date later than December 31, 1988, and may not include
qualified matching contributions and qualified nonelective contributions,
nor any earnings on such contributions, credited after December 31, 1988. A
plan does not violate the distribution restrictions if, instead of the
December 31, 1988, date in the preceding sentence the plan specifies a date
not later than the end of the last Plan Year ending before July 1, 1989. A
distribution described in clauses
14.3
<PAGE>
(3), (4) or (5), if made after March 31, 1988, must be a lump sum
distribution, as required under Code Section 401(k)(10).
(n) "Employee contributions" are contributions made by a Participant on an
after-tax basis, whether voluntary or mandatory, and designated, at the
time of contribution, as an employee (or nondeductible) contribution.
Elective deferrals and deferral contributions are not employee
contributions. Participant nondeductible contributions, made pursuant to
Section 4.01 of the Plan, are employee contributions.
14.04 MATCHING CONTRIBUTIONS/EMPLOYEE CONTRIBUTIONS. The Employer
may elect in Adoption Agreement Section 3.01 to provide matching contributions.
The Employer also may elect in Adoption Agreement Section 4.01 to permit or to
require a Participant to make nondeductible contributions.
(A) MANDATORY CONTRIBUTIONS. Any Participant nondeductible contributions
eligible for matching contributions are mandatory contributions. The Advisory
Committee will maintain a separate accounting, pursuant to Section 4.06 of the
Plan, to reflect the Participant's Accrued Benefit derived from his mandatory
contributions. The Employer, under Adoption Agreement Section 4.05, may
prescribe special distribution restrictions which will apply to the Mandatory
Contributions Account prior to the Participant's Separation from Service.
Following his Separation from Service, the general distribution provisions of
Article VI apply to the distribution of the Participant's Mandatory
Contributions Account.
14.05 TIME OF PAYMENT OF CONTRIBUTIONS. The Employer must make Salary
Reduction Contributions to the Trust within an administratively reasonable
period of time after withholding the corresponding Compensation from the
Participant. Furthermore, the Employer must make Salary Reduction Contributions,
Cash or Deferred Contributions, Employer matching contributions (including
qualified Employer matching contributions) and qualified Employer nonelective
contributions no later than the time prescribed by the Code or by applicable
Treasury regulations. Salary Reduction Contributions and Cash or Deferred
Contributions are Employer contributions for all purposes under this Plan,
except to the extent the Code or Treasury regulations prohibit the use of these
contributions to satisfy the qualification requirements of the Code.
14.06 SPECIAL ALLOCATION PROVISIONS - DEFERRAL CONTRIBUTIONS,
MATCHING CONTRIBUTIONS AND QUALIFIED NONELECTIVE CONTRIBUTIONS. To
make allocations under the Plan, the Advisory Committee must establish a
Deferral Contributions Account, a Qualified Matching Contributions Account, a
Regular Matching Contributions Account, a Qualified Nonelective Contributions
Account and an Employer Contributions Account for each Participant.
(A) DEFERRAL CONTRIBUTIONS. The Advisory Committee will allocate to each
Participant's Deferral Contributions Account the amount of Deferral
Contributions the Employer makes to the Trust on behalf of the Participant. The
Advisory Committee will make this allocation as of the last day of each Plan
Year unless, in Adoption Agreement Section 3.04, the Employer elects more
frequent allocation dates for salary reduction contributions.
14.4
<PAGE>
(B) MATCHING CONTRIBUTIONS. The Employer must specify in its Adoption
Agreement whether the Advisory Committee will allocate matching contributions to
the Qualified Matching Contributions Account or to the Regular Matching
Contributions Account of each Participant. The Advisory Committee will make this
allocation as of the last day of each Plan Year unless, in Adoption Agreement
Section 3.04, the Employer elects more frequent allocation dates for matching
contributions.
(1) To the extent the Employer makes matching contributions under a fixed
matching contribution formula, the Advisory Committee will allocate the
matching contribution to the Account of the Participant on whose behalf the
Employer makes that contribution. A fixed matching contribution formula is
a formula under which the Employer contributes a certain percentage or
dollar amount on behalf of a Participant based on that Participant's
deferral contributions or nondeductible contributions eligible for a match,
as specified in Section 3.01 of the Employer's Adoption Agreement. The
Employer may contribute on a Participant's behalf under a specific matching
contribution formula only if the Participant satisfies the accrual
requirements for matching contributions specified in Section 3.06 of the
Employer's Adoption Agreement and only to the extent the matching
contribution does not exceed the Participant's annual additions limitation
in Part 2 of Article III.
(2) To the extent the Employer makes matching contributions under a
discretionary formula, the Advisory Committee will allocate the
discretionary matching contributions to the Account of each Participant who
satisfies the accrual requirements for matching contributions specified in
Section 3.06 of the Employer's Adoption Agreement. The allocation of
discretionary matching contributions to a Participant's Account is in the
same proportion that each Participant's eligible contributions bear to the
total eligible contributions of all Participants. If the discretionary
formula is a tiered formula, the Advisory Committee will make this
allocation separately with respect to each tier of eligible contributions,
allocating in such manner the amount of the matching contributions made
with respect to that tier. "Eligible contributions" are the Participant's
deferral contributions or nondeductible contributions eligible for an
allocation of matching contributions, as specified in Section 3.01 of the
Employer's Adoption Agreement.
If the matching contribution formula applies both to deferral contributions
and to Participant nondeductible contributions, the matching contributions apply
first to deferral contributions. Furthermore, the matching contribution formula
does not apply to deferral contributions that are excess deferrals under Section
14.07. For this purpose: (a) excess deferrals relate first to deferral
contributions for the Plan Year not otherwise eligible for a matching
contribution; and (2) if the Plan Year is not a calendar year, the excess
deferrals for a Plan Year are the last elective deferrals made for a calendar
year. Under a Standardized Plan, an Employee forfeits any matching contribution
attributable to an excess contribution or to an excess aggregate contribution,
unless distributed pursuant to Sections 14.08 or 14.09. Under a Nonstandardized
Plan, this forfeiture rule applies only if specified in Adoption Agreement
Section 3.06. The provisions of Section 3.05 govern the treatment of any
forfeiture described in this paragraph, and the Advisory Committee will compute
a Participant's ACP under 14.09 by disregarding the forfeiture.
(C) QUALIFIED NONELECTIVE CONTRIBUTIONS. If the Employer, at the time of
contribution, designates a contribution to be a qualified nonelective
contribution for the Plan Year, the Advisory Committee will allocate that
qualified nonelective contribution to the Qualified Nonelective Contributions
Account of each Participant eligible for an allocation of that designated
contribution, as specified in Section 3.04 of the Employer's Adoption Agreement.
The Advisory Committee will make the allocation to each eligible Participant's
Account in the same ratio that the Participant's Compensation for the Plan Year
bears to
14.5
<PAGE>
the total Compensation of all eligible Participants for the Plan Year.
The Advisory Committee will determine a Participant's Compensation in accordance
with the general definition of Compensation under Section 1.12 of the Plan, as
modified by the Employer in Sections 1.12 and 3.06 of its Adoption Agreement.
(D) NONELECTIVE CONTRIBUTIONS. To the extent the Employer makes nonelective
contributions for the Plan Year which, at the time of contribution, it does not
designate as qualified nonelective contributions, the Advisory Committee will
allocate those contributions in accordance with the elections under Section 3.04
of the Employer's Adoption Agreement. For purposes of the special
nondiscrimination tests described in Sections 14.08 and 14.09, the Advisory
Committee may treat nonelective contributions allocated under this paragraph as
qualified nonelective contributions, if the contributions otherwise satisfy the
definition of qualified nonelective contributions.
14.07 ANNUAL ELECTIVE DEFERRAL LIMITATION.
(A) ANNUAL ELECTIVE DEFERRAL LIMITATION. An Employee's elective deferrals for
a calendar year beginning after December 31, 1986, may not exceed the 402(g)
limitation. The 402(g) limitation is the greater of $7,000 or the adjusted
amount determined by the Secretary of the Treasury. If, pursuant to a salary
reduction agreement or pursuant to a cash or deferral election, the Employer
determines the Employee's elective deferrals to the Plan for a calendar year
would exceed the 402(g) limitation, the Employer will suspend the Employee's
salary reduction agreement, if any, until the following January 1 and pay in
cash the portion of a cash or deferral election which would result in the
Employee's elective deferrals for the calendar year exceeding the 402(g)
limitation. If the Advisory Committee determines an Employee's elective
deferrals already contributed to the Plan for a calendar year exceed the 402(g)
limitation, the Advisory Committee will distribute the amount in excess of the
402(g) limitation (the "excess deferral"), as adjusted for allocable income, no
later than April 15 of the following calendar year. If the Advisory Committee
distributes the excess deferral by the appropriate April 15, it may make the
distribution irrespective of any other provision under this Plan or under the
Code. The Advisory Committee will reduce the amount of excess deferrals for a
calendar year distributable to the Employee by the amount of excess
contributions (as determined in Section 14.08), if any, previously distributed
to the Employee for the Plan Year beginning in that calendar year.
If an Employee participates in another plan under which he makes elective
deferrals pursuant to a Code Section 401(k) arrangement, elective deferrals
under a Simplified Employee Pension, or salary reduction contributions to a tax-
sheltered annuity, irrespective of whether the Employer maintains the other
plan, he may provide the Advisory Committee a written claim for excess deferrals
made for a calendar year. The Employee must submit the claim no later than the
March 1 following the close of the particular calendar year and the claim must
specify the amount of the Employee's elective deferrals under this Plan which
are excess deferrals. If the Advisory Committee receives a timely claim, it will
distribute the excess deferral (as adjusted for allocable income) the Employee
has assigned to this Plan, in accordance with the distribution procedure
described in the immediately preceding paragraph.
(B) ALLOCABLE INCOME. For purposes of making a distribution of excess
deferrals pursuant to this Section 14.07, allocable income means net income or
net loss allocable to the excess deferrals for the calendar year in which the
Employee made the excess deferral, determined in a manner which is uniform,
nondiscriminatory and reasonably reflective of the manner used by the Plan to
allocate income to Participants' Accounts.
14.6
<PAGE>
14.08 ACTUAL DEFERRAL PERCENTAGE ("ADP") TEST. For each Plan Year, the
Advisory Committee must determine whether the Plan's Code Section 401(k)
arrangement satisfies either of the following ADP tests:
(i) The average ADP for the Highly Compensated Group does not exceed 1.25
times the average ADP of the Nonhighly Compensated Group; or
(ii) The average ADP for the Highly Compensated Group does not exceed the
average ADP for the Nonhighly Compensated Group by more than two
percentage points (or the lesser percentage permitted by the multiple
use limitation in Section 14.10) and the average ADP for the Highly
Compensated Group is not more than twice the average ADP for the
Nonhighly Compensated Group.
(A) CALCULATION OF ADP. The average ADP for a group is the average of the
separate ADPs calculated for each Eligible Employee who is a member of that
group. An Eligible Employee's ADP for a Plan Year is the ratio of the Eligible
Employee's deferral contributions for the Plan Year to the Employee's
Compensation for the Plan Year. For aggregated family members treated as a
single Highly Compensated Employee, the ADP of the family unit is the ADP
determined by combining the deferral contributions and Compensation of all
aggregated family members. A Nonhighly Compensated Employee's ADP does not
include elective deferrals made to this Plan or to any other Plan maintained by
the Employer, to the extent such elective deferrals exceed the 402(g) limitation
described in Section 14.07(A).
The Advisory Committee, in a manner consistent with Treasury regulations, may
determine the ADPs of the Eligible Employees by taking into account qualified
nonelective contributions or qualified matching contributions, or both, made to
this Plan or to any other qualified Plan maintained by the Employer. The
Advisory Committee may not include qualified nonelective contributions in the
ADP test unless the allocation of nonelective contributions is nondiscriminatory
when the Advisory Committee takes into account all nonelective contributions
(including the qualified nonelective contributions) and also when the Advisory
Committee takes into account only the nonelective contributions not used in
either the ADP test described in this Section 14.08 or the ACP test described in
Section 14.09. For Plan Years beginning after December 31, 1989, the Advisory
Committee may not include in the ADP test any qualified nonelective
contributions or qualified matching contributions under another qualified plan
unless that plan has the same plan year as this Plan. The Advisory Committee
must maintain records to demonstrate compliance with the ADP test, including the
extent to which the Plan used qualified nonelective contributions or qualified
matching contributions to satisfy the test.
For Plan Years beginning prior to January 1, 1992, the Advisory Committee may
elect to apply a separate ADP test to each component group under the Plan. Each
component group separately must satisfy the commonality requirement of the Code
Section 401(k) regulations and the minimum coverage requirements of Code Section
410(b). A component group consists of all the allocations and other benefits,
rights and features provided that group of Employees. An Employee may not be
part of more than one component group. The correction rules described in this
Section 14.08 apply separately to each component group.
(B) SPECIAL AGGREGATION RULE FOR HIGHLY COMPENSATED EMPLOYEES. To determine
the ADP of any Highly Compensated Employee, the deferral contributions taken
into account must include any elective deferrals made by the Highly Compensated
Employee under any other Code Section 401(k) arrangement maintained by the
Employer, unless the elective deferrals are to an ESOP. If the plans
14.7
<PAGE>
containing the Code Section 401(k) arrangements have different plan years, the
Advisory Committee will determine the combined deferral contributions on the
basis of the plan years ending in the same calendar year.
(C) AGGREGATION OF CERTAIN CODE SECTION 401(K) ARRANGEMENTS. If the Employer
treats two plans as a unit for coverage or nondiscrimination purposes, the
Employer must combine the Code Section 401(k) arrangements under such plans to
determine whether either plan satisfies the ADP test. This aggregation rule
applies to the ADP determination for all Eligible Employees, irrespective of
whether an Eligible Employee is a Highly Compensated Employee or a Nonhighly
Compensated Employee. For Plan Years beginning after December 31, 1989, an
aggregation of Code Section 401(k) arrangements under this paragraph does not
apply to plans which have different plan years and, for Plan Years beginning
after December 31, 1988, the Advisory Committee may not aggregate an ESOP (or
the ESOP portion of a plan) with a non-ESOP plan (or non-ESOP portion of a
plan).
(D) CHARACTERIZATION OF EXCESS CONTRIBUTIONS. If, pursuant to this Section
14.08, the Advisory Committee has elected to include qualified matching
contributions in the average ADP, the Advisory Committee will treat excess
contributions as attributable proportionately to deferral contributions and to
qualified matching contributions allocated on the basis of those deferral
contributions. If the total amount of a Highly Compensated Employee's excess
contributions for the Plan Year exceeds his deferral contributions or qualified
matching contributions for the Plan Year, the Advisory Committee will treat the
remaining portion of his excess contributions as attributable to qualified
nonelective contributions. The Advisory Committee will reduce the amount of
excess contributions for a Plan Year distributable to a Highly Compensated
Employee by the amount of excess deferrals (as determined in Section 14.07), if
any, previously distributed to that Employee for the Employee's taxable year
ending in that Plan Year.
(E) DISTRIBUTION OF EXCESS CONTRIBUTIONS. If the Advisory Committee determines
the Plan fails to satisfy the ADP test for a Plan Year, it must distribute the
excess contributions, as adjusted for allocable income, during the next Plan
Year. However, the Employer will incur an excise tax equal to 10% of the amount
of excess contributions for a Plan Year not distributed to the appropriate
Highly Compensated Employees during the first 2 1/2 months of that next Plan
Year. The excess contributions are the amount of deferral contributions made
by the Highly Compensated Employees which causes the Plan to fail to satisfy
the ADP test. The Advisory Committee will distribute to each Highly Compensated
Employee his respective share of the excess contributions. The Advisory
Committee will determine the respective shares of excess contributions by
starting with the Highly Compensated Employee(s) who has the greatest ADP,
reducing his ADP (but not below the next highest ADP), then, if necessary,
reducing the ADP of the Highly Compensated Employee(s) at the next highest ADP
level (including the ADP of the Highly Compensated Employee(s) whose ADP the
Advisory Committee already has reduced), and continuing in this manner until
the average ADP for the Highly Compensated Group satisfies the ADP test. If the
Highly Compensated Employee is part of an aggregated family group, the Advisory
Committee, in accordance with the applicable Treasury regulations, will
determine each aggregated family member's allocable share of the excess
contributions assigned to the family unit.
(F) ALLOCABLE INCOME. To determine the amount of the corrective distribution
required under this Section 14.08, the Advisory Committee must calculate the
allocable income for the Plan Year in which the excess contributions arose.
"Allocable income" means net income or net loss. To calculate allocable income
for the Plan Year, the Advisory Committee will use a uniform and
nondiscriminatory method which reasonably reflects the manner used by the Plan
to allocate income to Participants' Accounts.
14.8
<PAGE>
14.09 NONDISCRIMINATION RULES FOR EMPLOYER MATCHING CONTRIBUTIONS/PARTICIPANT
NONDEDUCTIBLE CONTRIBUTIONS. For Plan Years beginning after December 31, 1986,
the Advisory Committee must determine whether the annual Employer matching
contributions (other than qualified matching contributions used in the ADP under
Section 14.08), if any, and the Employee contributions, if any, satisfy either
of the following average contribution percentage ("ACP") tests:
(i) The ACP for the Highly Compensated Group does not exceed 1.25 times the
ACP of the Nonhighly Compensated Group; or
(ii) The ACP for the Highly Compensated Group does not exceed the ACP for
the Nonhighly Compensated Group by more than two percentage points (or
the lesser percentage permitted by the multiple use limitation in Section
14.10) and the ACP for the Highly Compensated Group is not more than
twice the ACP for the Nonhighly Compensated Group.
(A) CALCULATION OF ACP. The average contribution percentage for a group is the
average of the separate contribution percentages calculated for each Eligible
Employee who is a member of that group. An Eligible Employee's contribution
percentage for a Plan Year is the ratio of the Eligible Employee's aggregate
contributions for the Plan Year to the Employee's Compensation for the Plan
Year. "Aggregate contributions" are Employer matching contributions (other than
qualified matching contributions used in the ADP test under Section 14.08) and
employee contributions (as defined in Section 14.03). For aggregated family
members treated as a single Highly Compensated Employee, the contribution
percentage of the family unit is the contribution percentage determined by
combining the aggregate contributions and Compensation of all aggregated family
members.
The Advisory Committee, in a manner consistent with Treasury regulations, may
determine the contribution percentages of the Eligible Employees by taking into
account qualified nonelective contributions (other than qualified nonelective
contributions used in the ADP test under Section 14.08) or elective deferrals,
or both, made to this Plan or to any other qualified Plan maintained by the
Employer. The Advisory Committee may not include qualified nonelective
contributions in the ACP test unless the allocation of nonelective contributions
is nondiscriminatory when the Advisory Committee takes into account all
nonelective contributions (including the qualified nonelective contributions)
and also when the Advisory Committee takes into account only the nonelective
contributions not used in either the ADP test described in Section 14.08 or the
ACP test described in this Section 14.09. The Advisory Committee may not include
elective deferrals in the ACP test, unless the Plan which includes the elective
deferrals satisfies the ADP test both with and without the elective deferrals
included in this ACP test. For Plan Years beginning after December 31, 1989, the
Advisory Committee may not include in the ACP test any qualified nonelective
contributions or elective deferrals under another qualified plan unless that
plan has the same plan year as this Plan. The Advisory Committee must maintain
records to demonstrate compliance with the ACP test, including the extent to
which the Plan used qualified nonelective contributions or elective deferrals to
satisfy the test. For Plan Years beginning prior to January 1, 1992, the
component group testing rule permitted under Section 14.08(A) also applies to
the ACP test under this Section 14.09.
(B) SPECIAL AGGREGATION RULE FOR HIGHLY COMPENSATED EMPLOYEES. To determine
the contribution percentage of any Highly Compensated Employee, the aggregate
contributions taken into account must include any matching contributions (other
than qualified matching contributions used in the ADP test) and any Employee
contributions made on his behalf to any other plan maintained by the Employer,
unless the other plan is an ESOP. If the plans have different plan years, the
Advisory
14.9
<PAGE>
Committee will determine the combined aggregate contributions on the
basis of the plan years ending in the same calendar year.
(C) AGGREGATION OF CERTAIN PLANS. If the Employer treats two plans as a unit
for coverage or nondiscrimination purposes, the Employer must combine the plans
to determine whether either plan satisfies the ACP test. This aggregation rule
applies to the contribution percentage determination for all Eligible Employees,
irrespective of whether an Eligible Employee is a Highly Compensated Employee or
a Nonhighly Compensated Employee. For Plan Years beginning after December 31,
1989, an aggregation of plans under this paragraph does not apply to plans which
have different plan years and, for Plan Years beginning after December 31, 1988,
the Advisory Committee may not aggregate an ESOP (or the ESOP portion of a plan)
with a non-ESOP plan (or non-ESOP portion of a plan).
(D) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS. The Advisory Committee
will determine excess aggregate contributions after determining excess deferrals
under Section 14.07 and excess contributions under Section 14.08. If the
Advisory Committee determines the Plan fails to satisfy the ACP test for a Plan
Year, it must distribute the excess aggregate contributions, as adjusted for
allocable income, during the next Plan Year. However, the Employer will incur an
excise tax equal to 10% of the amount of excess aggregate contributions for a
Plan Year not distributed to the appropriate Highly Compensated Employees during
the first 2 1/2 months of that next Plan Year. The excess aggregate
contributions are the amount of aggregate contributions allocated on behalf of
the Highly Compensated Employees which causes the Plan to fail to satisfy the
ACP test. The Advisory Committee will distribute to each Highly Compensated
Employee his respective share of the excess aggregate contributions. The
Advisory Committee will determine the respective shares of excess aggregate
contributions by starting with the Highly Compensated Employee(s) who has the
greatest contribution percentage, reducing his contribution percentage (but
not below the next highest contribution percentage), then, if necessary,
reducing the contribution percentage of the Highly Compensated Employee(s) at
the next highest contribution percentage level (including the contribution
percentage of the Highly Compensated Employee(s) whose contribution percentage
the Advisory Committee already has reduced), and continuing in this manner
until the ACP for the Highly Compensated Group satisfies the ACP test. If the
Highly Compensated Employee is part of an aggregated family group, the Advisory
Committee, in accordance with the applicable Treasury regulations, will
determine each aggregated family member's allocable share of the excess
aggregate contributions assigned to the family unit.
(E) ALLOCABLE INCOME. To determine the amount of the corrective distribution
required under this Section 14.09, the Advisory Committee must calculate the
allocable income for the Plan Year in which the excess aggregate contributions
arose. "Allocable income" means net income or net loss. The Advisory Committee
will determine allocable income in the same manner as described in Section
14.08(F) for excess contributions.
(F) CHARACTERIZATION OF EXCESS AGGREGATE CONTRIBUTIONS. The Advisory Committee
will treat a Highly Compensated Employee's allocable share of excess aggregate
contributions in the following priority: (1) first as attributable to his
Employee contributions which are voluntary contributions, if any; (2) then as
matching contributions allocable with respect to excess contributions determined
under the ADP test described in Section 14.08; (3) then on a pro rata basis to
matching contributions and to the deferral contributions relating to those
matching contributions which the Advisory Committee has included in the ACP
test; (4) then on a pro rata basis to Employee contributions which are mandatory
contributions, if any, and to the matching contributions allocated on the basis
of those mandatory contributions; and (5) last to qualified nonelective
contributions used in the ACP test. To the extent the Highly Compensated
Employee's excess aggregate contributions are attributable to matching
contributions, and he is not
14.10
<PAGE>
100% vested in his Accrued Benefit attributable to matching contributions,
the Advisory Committee will distribute only the vested portion and forfeit
the nonvested portion. The vested portion of the Highly Compensated Employee's
excess aggregate contributions attributable to Employer matching contributions
is the total amount of such excess aggregate contributions (as adjusted for
allocable income) multiplied by his vested percentage (determined as of the
last day of the Plan Year for which the Employer made the matching
contribution). The Employer will specify in Adoption Agreement Section 3.05 the
manner in which the Plan will allocate forfeited excess aggregate
contributions.
14.10 MULTIPLE USE LIMITATION. For Plan Years beginning after December 31,
1988, if at least one Highly Compensated Employee is includible in the ADP test
under Section 14.08 and in the ACP test under Section 14.09, the sum of the
Highly Compensated Group's ADP and ACP may not exceed the multiple use
limitation.
The multiple use limitation is the sum of (i) and (ii):
(i) 125% of the greater of: (a) the ADP of the Nonhighly Compensated Group
under the Code Section 401(k) arrangement; or (b) the ACP of the
Nonhighly Compensated Group for the Plan Year beginning with or within
the Plan Year of the Code Section 401(k) arrangement.
(ii) 2% plus the lesser of (i)(a) or (i)(b), but no more than twice the
lesser of (i)(a) or (i)(b).
The Advisory Committee, in lieu of determining the multiple use limitation as
the sum of (i) and (ii), may elect to determine the multiple use limitation as
the sum of (iii) and (iv):
(iii) 125% of the lesser of: (a) the ADP of the Nonhighly Compensated Group
under the Code Section 401(k) arrangement; or (b) the ACP of the
Nonhighly Compensated Group for the Plan Year beginning with or within
the Plan Year of the Code Section 401(k) arrangement.
(iv) 2% plus the greater of (iii)(a) or (iii)(b), but no more than twice
the greater of (iii)(a) or (iii)(b).
The Advisory Committee will determine whether the Plan satisfies the multiple
use limitation after applying the ADP test under Section 14.08 and the ACP test
under Section 14.09 and after making any corrective distributions required by
those Sections. If, after applying this Section 14.10, the Advisory Committee
determines the Plan has failed to satisfy the multiple use limitation, the
Advisory Committee will correct the failure by treating the excess amount as
excess contributions under Section 14.08 or as excess aggregate contributions
under Section 14.09, as it determines in its sole discretion. This Section 14.10
does not apply unless, prior to application of the multiple use limitation, the
ADP and the ACP of the Highly Compensated Group each exceeds 125% of the
respective percentages for the Nonhighly Compensated Group.
14.11 DISTRIBUTION RESTRICTIONS. The Employer must elect in Section 6.03 the
Adoption Agreement the distribution events permitted under the Plan. The
distribution events applicable to the Participant's Deferral Contributions
Account, Qualified Nonelective Contributions Account and Qualified Matching
Contributions Account must satisfy the distribution restrictions described in
paragraph (m) of Section 14.03.
(A) HARDSHIP DISTRIBUTIONS FROM DEFERRAL CONTRIBUTIONS ACCOUNT. The Employer
must elect in Adoption Agreement Section 6.03 whether a Participant may receive
hardship distributions
14.11
<PAGE>
from his Deferral Contributions Account prior to the Participant's Separation
from Service. Hardship distributions from the Deferral Contributions Account
must satisfy the requirements of this Section 14.11. A hardship distribution
option may not apply to the Participant's Qualified Nonelective Contributions
Account or Qualified Matching Contributions Account, except as provided in
paragraph (3).
(1) DEFINITION OF HARDSHIP. A hardship distribution under this Section 14.11
must be on account of one or more of the following immediate and heavy financial
needs: (1) medical care described in Code Section 213(d) incurred by the
Participant, by the Participant's spouse, or by any of the Participant's
dependents, or necessary to obtain such medical care; (2) the purchase
(excluding mortgage payments) of a principal residence for the Participant; (3)
the payment of post-secondary education tuition and related educational fees,
for the next 12-month period, for the Participant, for the Participant's spouse,
or for any of the Participant's dependents (as defined in Code Section 152); (4)
to prevent the eviction of the Participant from his principal residence or the
foreclosure on the mortgage of the Participant's principal residence; or (5) any
need prescribed by the Revenue Service in a revenue ruling, notice or other
document of general applicability which satisfies the safe harbor definition of
hardship.
(2) RESTRICTIONS. The following restrictions apply to a Participant who
receives a hardship distribution: (a) the Participant may not make elective
deferrals or employee contributions to the Plan for the 12-month period
following the date of his hardship distribution; (b) the distribution is not in
excess of the amount of the immediate and heavy financial need (including any
amounts necessary to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution); (c) the Participant
must have obtained all distributions, other than hardship distributions, and all
nontaxable loans (determined at the time of the loan) currently available under
this Plan and all other qualified plans maintained by the Employer; and (d) the
Participant agrees to limit elective deferrals under this Plan and under any
other qualified Plan maintained by the Employer, for the Participant's taxable
year immediately following the taxable year of the hardship distribution, to the
402(g) limitation (as described in Section 14.07), reduced by the amount of the
Participant's elective deferrals made in the taxable year of the hardship
distribution. The suspension of elective deferrals and employee contributions
described in clause (a) also must apply to all other qualified plans and to all
nonqualified plans of deferred compensation maintained by the Employer, other
than any mandatory employee contribution portion of a defined benefit plan,
including stock option, stock purchase and other similar plans, but not
including health or welfare benefit plans (other than the cash or deferred
arrangement portion of a cafeteria plan).
(3) EARNINGS. For Plan Years beginning after December 31, 1988, a hardship
distribution under this Section 14.11 may not include earnings on an Employee's
elective deferrals credited after December 31, 1988. Qualified matching
contributions and qualified nonelective contributions, and any earnings on such
contributions, credited as of December 31, 1988, are subject to the hardship
withdrawal only if the Employer specifies in an addendum to this Section 14.11.
The addendum may modify the December 31, 1988, date for purposes of determining
credited amounts provided the date is not later than the end of the last Plan
Year ending before July 1, 1989.
(B) DISTRIBUTIONS AFTER SEPARATION FROM SERVICE. Following the Participant's
Separation from Service, the distribution events applicable to the Participant
apply equally to all of the Participant's Accounts, except as elected in Section
6.03 of the Employer's Adoption Agreement.
(C) CORRECTION OF ANNUAL ADDITIONS LIMITATION. If, as a result of a reasonable
error in determining the amount of elective deferrals an Employee may make
without violating the limitations of Part 2 of Article III, an Excess Amount
results, the Advisory Committee will return the Excess Amount (as adjusted for
allocable income) attributable to the elective deferrals. The Advisory Committee
will make this distribution before taking any corrective steps pursuant to
Section 3.10 or to Section 3.16.
14.12
<PAGE>
The Advisory Committee will disregard any elective deferrals returned under
this Section 14.11(C) for purposes of Sections 14.07, 14.08 and 14.09.
14.12 SPECIAL ALLOCATION RULES. If the Code Section 401(k) arrangement
provides for salary reduction contributions, if the Plan accepts Employee
contributions, pursuant to Adoption Agreement Section 4.01, or if the Plan
allocates matching contributions as of any date other than the last day of the
Plan Year, the Employer must elect in Adoption Agreement 9.11 whether any
special allocation provisions will apply under Section 9.11 of the Plan. For
purposes of the elections:
(a) A "segregated Account" direction means the Advisory Committee will
establish a segregated Account for the applicable contributions made on the
Participant's behalf during the Plan Year. The Trustee must invest the
segregated Account in Federally insured interest bearing savings account(s)
or time deposits, or a combination of both, or in any other fixed income
investments, unless otherwise specified in the Employer's Adoption
Agreement. As of the last day of each Plan Year (or, if earlier, an
allocation date coinciding with a valuation date described in Section
9.11), the Advisory Committee will reallocate the segregated Account to the
Participant's appropriate Account, in accordance with Section 3.04 or
Section 4.06, whichever applies to the contributions.
(b) A "weighted average allocation" method will treat a weighted portion of
the applicable contributions as if includible in the Participant's Account
as of the beginning of the valuation period. The weighted portion is a
fraction, the numerator of which is the number of months in the valuation
period, excluding each month in the valuation period which begins prior to
the contribution date of the applicable contributions, and the denominator
of which is the number of months in the valuation period. The Employer may
elect in its Adoption Agreement to substitute a weighting period other than
months for purposes of this weighted average allocation.
* * * * * * * * * * * * * * *
14.13
<PAGE>
ARTICLE A
APPENDIX TO PLAN AND TRUST AGREEMENT
This Article is necessary to comply with the Unemployment Compensation
Amendments Act of 1992 and is an integral part of the basic plan document.
Section 12.08 applies to any modification or amendment of this Article.
A-1. APPLICATIONS. This Article applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article, a distributee
may elect, at the time and in the manner prescribed by the Plan Administrator,
to have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
A-2. DEFINITIONS.
(a) "Eligible rollover distribution." An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under Code Section 401(a)(9); and the portion of any distribution that
is not includible in gross income (determined without regard to the exclusion of
net unrealized appreciation with respect to employer securities).
(b) "Eligible retirement plan." An eligible retirement plan is an individual
retirement account described in Code Section 408(a), an individual retirement
annuity described in Code Section 408(b), an annuity plan described in Code
Sections 403(a), or a qualified trust described in Code Section 401(a), that
accepts the distributee's eligible rollover distribution. However, in the case
of an eligible rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual retirement
annuity.
(c) "Distributee." A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code Section
414(p), are distributees with regard to the interest of the spouse or former
spouse.
(d) "Direct rollover." A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
14.1
<PAGE>
ARTICLE B
APPENDIX TO BASIC PLAN DOCUMENT
This Article is necessary to comply with the Omnibus Budget Reconciliation Act
of 1993 (OBRA '93) and is an integral part of the basic plan document. Section
12.08 applies to any modification or amendment of this Article.
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000 , as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this
plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into account in
determining an employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination period 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.
14.2
<PAGE>
EXHIBIT 10.24
FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING CREDIT AND TERM LOAN
AGREEMENT, dated as of September 30, 1994 ("Agreement"), is
entered into among CORNERSTONE NATURAL GAS, INC. (formerly
Endevco, Inc.), a Delaware corporation ("Cornerstone"), ENDEVCO
PRODUCING COMPANY, a Delaware corporation ("EPRC"), CORNERSTONE
GAS GATHERING COMPANY (formerly Cornerstone Pipeline Company), a
Delaware corporation ("CGGC"), DUBACH GAS COMPANY, a Texas
corporation ("Dubach"), CORNERSTONE GAS PROCESSING, INC.
(formerly Endevco Natural Gas Company), a Delaware corporation
("CGP"), CORNERSTONE GAS RESOURCES, INC. (formerly Endevco Oil
and Gas Company), a Delaware corporation ("CGR"), CORNERSTONE
PIPELINE COMPANY (formerly Endevco Pipeline Company), a Delaware
corporation ("CPC") and PENTEX PIPELINE COMPANY, a Texas
corporation ("PPC") (collectively the "Borrowers") and BANK OF
OKLAHOMA, NATIONAL ASSOCIATION, a national banking association
(the "Bank").
W I T N E S S E T H:
A. WHEREAS, the Borrowers have applied to the Bank for a
modification, restructure and extension of that certain
$5,800,000 Term Loan described and defined in the Revolving
Credit and Term Loan Agreement dated as of November 2, 1993 by
and among the Borrowers named above (including certain
predecessors' thereof) and the Bank (the "Original Credit
Agreement") by readvancing approximately $817,000.00 to Borrowers
and extending the maturity date thereof from October 31, 1998 to
September 30, 1999, which modified, restructured and extended
Term Loan is to be evidenced by Borrowers' joint and several
Replacement Term Note hereinafter described and defined; and
B. WHEREAS, the Bank is willing to modify, restructure and
extend the Term Loan to the Borrowers, subject to the terms,
conditions and provisions of the Original Credit Agreement, as
amended and modified by the provisions hereinafter set forth, all
of which are material to the Bank and without which the Bank
would not be willing to modify, restructure and extend the Term
Loan commitment described above.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, and other good and valuable
consideration, receipt of which is acknowledged by the parties
hereto, the parties agree as follows:
1. DEFINITIONS. The following definitions in Article I of
the Original Credit Agreement are hereby amended and modified as
follows:
<PAGE>
1.8 "CORNERSTONE MORTGAGE" shall have the
meaning assigned to that term in Article IV of the
Original Credit Agreement, as amended by that certain
First Amended Mortgage, Collateral Assignment and
Security Agreement Securing Future Advances from
Cornerstone to the Bank dated as of September 30,
1994.
1.9 "CORNERSTONE PLEDGE" shall have the meaning
assigned to that term in Article IV of the Original
Credit Agreement, as amended by that certain First
Amended Pledge Agreement from Cornerstone to the Bank
dated as of September 30, 1994.
1.14 "DUBACH MORTGAGE" shall have the meaning
assigned to that term in Article IV of the Original
Credit Agreement, as amended by that certain First
Amended Mortgage, Collateral Assignment, Security
Agreement Securing Future Advances from Dubach to the
Bank dated as of September 30, 1994.
1.16 "ENGC DEED OF TRUST" shall have the meaning
assigned to that term in Article IV of the Original
Credit Agreement, as amended by that certain First
Amended Deed of Trust, Security Agreement, Financing
Statement and Assignment (with Power of Sale) from CGP
to the Bank dated as of September 30, 1994.
1.18 "EPIC ASSIGNMENT" shall have the meaning
assigned to that term in Article IV of the Original
Credit Agreement, as amended by that certain First
Amended Collateral Assignment of Lessee's Interest in
Lease from CPC to the Bank dated as of September 30,
1994.
1.19 "EPIC DEED OF TRUST" shall have the meaning
assigned to that term in Article IV of the Original
Credit Agreement, as amended by that certain First
Amended Deed of Trust, Security Agreement, Financing
Statement and Assignment CPC to the Bank dated as of
September 30, 1994.
1.20 "EPIC MORTGAGE" shall have the meaning
assigned to that term in Article IV of the Original
Credit Agreement, as amended by that certain First
Amended Mortgage, Collateral Assignment and Security
Agreement Securing Future Advances from CPC to the
Bank dated as of September 30, 1994.
1.21 "EPIC PLEDGE" shall have the meaning
assigned to that term in Article IV of the Original
- 2 -
<PAGE>
Credit Agreement, as amended by that certain First Amended
Assignment, Pledge and Security Agreement from CPC to the Bank
dated as of September 30, 1994.
1.24 "ETC DEED OF TRUST" shall have the meaning
assigned to that term in Article IV of the Original
Credit Agreement, as amended by that certain First
Amended Deed of Trust, Security Agreement, Financing
Statement and Assignment from CGGC to the Trustee and
the Bank dated as of August 1, 1994, as further
amended by that certain Second Amended Deed of Trust,
Security Agreement, Financing Statement and Assignment
from CGGC to the Trustee and the Bank dated as of
September 30, 1994.
1.41 "NOTES" shall mean the Revolving Credit Note
and the Replacement Term Note.
1.56 "TERM LOAN" shall mean the loan made to the
Borrowers in the Original Credit Agreement described
in Section 3.1 thereof, as modified, restructured and
extended by the terms and provisions of paragraph 2 of
this First Amendment and as evidenced by the
Replacement Term Note more particularly described and
defined in paragraph 3 hereof.
1.57 "TERM NOTE" shall mean the Borrowers' joint
and several $5,000,000.00 Replacement Term Note in the
form of EXHIBIT A annexed to this First Amendment, to
be delivered to the order of the Bank pursuant to
paragraph 3 hereof, together with each and every
replacement, extension, renewal, modification,
substitution and change in form thereof which may be
from time to time and for any term or terms effected.
2. TERM LOAN. The Bank agrees, upon the terms subject to
the conditions set forth in the Original Credit Agreement and
herein, to modify, restructure and extend the current outstanding
principal balance of the Term Loan described and defined in the
Original Credit Agreement to the Borrowers in the increased
principal amount of $5,000,000.00. The Borrowers stipulate,
acknowledge and agree that the unpaid and outstanding principal
balance on the Term Loan described and defined in the Original
Credit Agreement is $4,183,000.00 as of the date hereof, after
application of the monthly principal installment due on September
30, 1994.
3. TERM NOTE. To evidence the Term Loan, as modified,
restructured and extended pursuant to the provisions of paragraph
2 above, the Borrowers shall execute and deliver to the order of
the Bank a Borrowers' joint and several replacement term note in
- 3 -
<PAGE>
the principal amount of $5,000,000.00, the form of which is
annexed hereto as EXHIBIT "A" and hereby made a part hereof
(hereinafter referred to as the "Replacement Term Note"). The
Replacement Term Note shall be dated as of the date hereof, shall
provide for fifty-nine (59) consecutive equal monthly principal
payments of $83,334 per month payable on the last day of each
calendar month commencing October 31, 1994 with the remaining
principal payable at final maturity on September 30, 1999. The
Replacement Term Note shall bear interest, payable monthly on the
last day of every month commencing October 31, 1994, and at final
maturity on September 30, 1999, on unpaid balances of principal
from time to time outstanding and on any past due interest at a
variable annual rate equal from day to day to the Applicable
Prime Rate therein defined plus two percentage points (2%), but
in no event at a rate greater than permitted by applicable law.
All payments received shall be applied first to accrued interest
and then to the outstanding principal amount owing on the
Replacement Term Note. The Borrowers may from time to time make
prepayments of principal, provided that interest on the amount
prepaid, accrued to the prepayment date, shall be paid on such
prepayment date. The Borrowers may not reborrow any amounts paid
or prepaid on the Replacement Term Note. All payments and
prepayments shall be made in lawful money of the United States of
America. Any payments or prepayments on the Replacement Term
Note received by the Bank after 12:00 noon (applicable current
time in Tulsa, Oklahoma) shall be deemed to have been made on the
next succeeding Business Day. All outstanding principal of and
unpaid accrued interest on the Replacement Term Note not
previously paid hereunder shall be due and payable at final
maturity on September 30, 1999, unless such maturity shall be
extended by the Bank in writing or accelerated pursuant to the
terms hereof. After maturity (whether by acceleration or
otherwise) the Replacement Term Note shall bear interest at the
Default Rate, payable on demand. Interest shall be calculated on
the basis of a year of 360 days but assessed for the actual
number of days elapsed in each accrual period.
4. MODIFICATION OF MANDATORY PREPAYMENT PROVISION. The
provisions of Section 3.6 of the Original Credit Agreement are
deleted in their entirety. No term loan facility fee, as contem-
plated by Section 3.4 of the Original Credit Agreement, shall be
due and owing by the Borrowers to the Bank on that portion of the
Term Loan being advanced to Borrowers concurrently herewith. The
only mandatory prepayment provisions pertaining to the Term Loan
are set forth in Section 6.34 of the Credit Agreement, as
described in paragraph 9 of this First Amendment.
5. COLLATERAL. The repayment of the Indebtedness shall
continue to be secured by all of the Collateral as more
particularly described and defined in Section 4.1 of the Original
Credit Agreement as more particularly described therein and in
the Security Instruments, including without limitation, the
Security
- 4 -
<PAGE>
Agreement as defined in Section 1.53 of the Original Credit
Agreement as encumbering the items and types of Collateral more
particularly described in Section 4.1 thereof as continuing and
continuous security for the Indebtedness. Borrowers hereby
incorporate by reference, ratify, confirm, continue and regrant
in favor of the Bank all of the security interests, liens and
pledges set forth or described in the Security Agreement and in
Article IV of the Original Credit Agreement, including the
priorities thereof, with the same force and effect as if fully
restated herein.
6. CONDITIONS PRECEDENT TO MODIFICATION, RESTRUCTURE AND
EXTENSION OF TERM LOAN. The obligation of the Bank to modify,
restructure and extend the Term Loan is subject to satisfaction
of all the following conditions on or prior to the date such
readvancement of such amounts as are necessary to increase the
outstanding principal balance of the Term Loan, as evidenced by
the Replacement Term Note to the sum of $5,000,000.00 occurs (the
"Funding Date") (in addition to the other terms and conditions
set forth in the Original Credit Agreement):
(a) REPLACEMENT TERM NOTE. The Borrower shall
have delivered the Replacement Term Note to the order
of the Bank, appropriately executed.
(b) BORROWERS' CERTIFICATES AND PROCEEDINGS. On
or before the Funding Date, each of the Borrowers
shall have delivered to the Bank a certificate
satisfactory to the Bank and its legal counsel,
including corporate resolutions, incumbency
certificates and articles and certificates of
incorporation and bylaws as may be required by the
Bank and its legal counsel.
(c) SECURITY INSTRUMENTS. The Borrower shall
have delivered to the Bank such supplemental and
amendment instruments to the Security Instruments more
particularly described and defined in the Original
Credit Agreement as are required by the Bank and its
legal counsel, including without limitation, the
amendments more particularly described in Sections
1.8, 1.9, 1.14, 1.16, 1.18, 1.19, 1.20, 1.21 and 1.24
in paragraph 1 hereof.
7. Section 6.18 of the Original Credit Agreement shall be
replaced in its entirety and replaced by the following:
"6.18 CURRENT RATIO. The Borrowers will not
permit Cornerstone's Current Ratio to be less than the
following at any time during the following fiscal
years thereof:
- 5 -
<PAGE>
Fiscal Year 1994 .55
Fiscal Year 1995 .65
Fiscal Years 1996 and
thereafter .75"
8. Section 6.19 of the Original Credit Agreement is
deleted in its entirety and replaced by the following:
"6.19 CAPITAL EXPENDITURES. The Borrowers agree
not to make any capital expenditure during any fiscal
year for the acquisition, construction, expansion or
improvements of capital assets (whether owned or
leased or otherwise) that, for all Borrowers,
aggregate in excess of (x) $4,000,000 during fiscal
year 1994 or (y) $1,000,000 for fiscal year 1995 or
any fiscal year thereafter."
9. Section 6.34 shall be added to the Original Credit
Agreement as follows:
"6.34 ANNUAL ENGINEERING EVALUATION/MANDATORY
PREPAYMENT OF REPLACEMENT TERM NOTE. The Bank shall
conduct an annual engineering evaluation of the Dubach
Gas Gathering/Processing operations (including the
Calhoun Plant, Dubach Connects, Dubach Refinery and
Refining Assets, North Louisiana Gathering System and
the Cryogenics Plant at Dubach) on or before August 31
of each year, commencing August 31, 1995, and to the
extent the outstanding balance of the Term Loan
exceeds forty percent (40%) of the amount of such
annual engineering evaluation by the Bank (discounted
present net worth at ten percent (10%)) (the "Maximum
Ratio") based upon and calculated pursuant to the
Bank's then current pricing parameters, policies and
standards, Borrowers shall make a mandatory principal
prepayment on the Replacement Term Note within fifteen
(15) days of Cornerstone's receipt of the Bank's
annual engineering evaluation and notice that the
Maximum Ratio has been exceeded, in such amount as is
necessary to reduce the outstanding principal balance
of the Replacement Term Note to an amount not greater
than the "Maximum Ratio" as described and defined
above."
10. ORIGINAL CREDIT AGREEMENT. The remaining terms, provi-
sions, covenants, warranties, representations and conditions of
the Original Credit Agreement are ratified, confirmed and
continued in full force and effect with the same effect as if
fully restated herein.
11. CORPORATE MERGERS, NAME CHANGES AND DISSOLUTIONS.
Cornerstone represents and warrants to the Bank that since the
- 6 -
<PAGE>
Closing Date of the Original Credit Agreement Endevco Taft
Company and Endevco Three Rivers Company have been dissolved and
no longer exist as corporate legal entities. Additionally, all
of the corporate assets of Endevco Taft Company have been
transferred to CGGC and Pentex Petroleum, Inc. has been merged
into CGP. The following Borrowers under the Original Credit
Agreement have changed their respective corporate names as
follows:
PRIOR CORPORATE NAME CURRENT CORPORATE NAME
Endevco Oil and Gas to Cornerstone Gas
Company Resources, Inc. (CGR)
Endevco Natural Gas to Cornerstone Gas Processing,
Company Inc. (CGP)
Cornerstone Pipeline to Cornerstone Gas Gathering
Company Company (CGGC)
Endevco Pipeline to Cornerstone Pipeline Company
Company (CPC)
12. COUNTERPARTS. This First Amendment may be executed in
any number of counterparts, all of which when taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this First
Amendment to be duly executed and delivered in Tulsa, Oklahoma,
effective as of the day and year first above written.
"Borrowers"
CORNERSTONE NATURAL GAS, INC.
By
-------------------------------
Robert L. Cavnar
Senior Vice President
ENDEVCO PRODUCING COMPANY
By
-------------------------------
Robert L. Cavnar
Senior Vice President
CORNERSTONE GAS GATHERING COMPANY,
formerly known as Cornerstone
Pipeline Company
- 7 -
<PAGE>
By
-------------------------------
Robert L. Cavnar
Senior Vice President
DUBACH GAS COMPANY
By
-------------------------------
Robert L. Cavnar
Senior Vice President
- 8 -
<PAGE>
CORNERSTONE GAS PROCESSING, INC.,
formerly known as Endevco Natural
Gas Company
By
-------------------------------
Robert L. Cavnar
Senior Vice President
CORNERSTONE GAS RESOURCES, INC.,
formerly known as Endevco Oil &
Gas Company
By
-------------------------------
Robert L. Cavnar
Senior Vice President
CORNERSTONE PIPELINE COMPANY,
formerly known as Endevco Pipeline
Company
By
--------------------------------
Robert L. Cavnar
Senior Vice President
PENTEX PIPELINE COMPANY
By
-------------------------------
Robert L. Cavnar
Senior Vice President
"Bank"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By
--------------------------------
Jack D. Brannon, Vice President
- 9 -
<PAGE>
EXHIBIT 10.25
SECOND AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated
as of January 4, 1995 ("Agreement"), is entered into among CORNERSTONE NATURAL
GAS, INC. (formerly Endevco, Inc.), a Delaware corporation ("Cornerstone"),
ENDEVCO PRODUCING COMPANY, a Delaware corporation ("EPRC"), CORNERSTONE GAS
GATHERING COMPANY (formerly Cornerstone Pipeline Company), a Delaware
corporation ("CGGC"), DUBACH GAS COMPANY, a Texas corporation ("Dubach"),
CORNERSTONE GAS PROCESSING, INC. (formerly Endevco Natural Gas Company), a
Delaware corporation ("CGP"), CORNERSTONE GAS RESOURCES, INC. (formerly Endevco
Oil and Gas Company), a Delaware corporation ("CGR"), CORNERSTONE PIPELINE
COMPANY (formerly Endevco Pipeline Company), a Delaware corporation ("CPC") and
PENTEX PIPELINE COMPANY, a Texas corporation ("PPC") (collectively the "Borrow-
ers") and BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking association
(the "Bank").
W I T N E S S E T H:
A. WHEREAS, the Borrowers have applied to the Bank for the funding of an
additional $4,000,000 term loan in addition to the existing Loans described and
defined in the Revolving Credit and Term Loan Agreement dated as of November 2,
1993 by and among the Borrowers named above (including certain predecessors'
thereof) and the Bank (the "Original Credit Agreement"), as amended by the First
Amendment to Revolving Credit and Term Loan Agreement dated as of September 30,
1994 (the "First Amendment"), which additional $4,000,000 term loan (the "Second
Term Loan") is to be evidenced by Borrowers' joint and several Second Term Note
hereinafter described and defined; and
B. WHEREAS, the Bank is willing to extend the Second Term Loan to the
Borrowers, subject to the terms, conditions and provisions of the Original
Credit Agreement and the First Amendment, as amended and modified by the
provisions hereinafter set forth, all of which are material to the Bank and
without which the Bank would not be willing to extend the Second Term Loan
commitment described above.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, receipt of which is
acknowledged by the parties hereto, the parties agree as follows:
1. DEFINITIONS. The following definitions in Article I of the Original
Credit Agreement, as previously amended by the First Amendment, are hereby
amended and modified or added as follows:
<PAGE>
1.9 "CORNERSTONE PLEDGE" shall have the meaning assigned to
that term in Article IV of the Original Credit Agreement, as amended
by that certain First Amendment to Pledge Agreement from Cornerstone
to the Bank dated as of September 30, 1994, as further amended by
that certain Second Amendment to Pledge Agreement from Cornerstone to
the Bank dated as of even date herewith.
1.16 "ENGC DEED OF TRUST" shall have the meaning assigned to
that term in Article IV of the Original Credit Agreement, as amended
by that certain First Amended Deed of Trust, Security Agreement,
Financing Statement and Assignment (with Power of Sale) from CGP to
the Bank from CGP to the Bank dated as of even date herewith.
1.18 "EPIC ASSIGNMENT" shall have the meaning assigned to that
term in Article IV of the Original Credit Agreement, as amended by
that certain First Amended Collateral Assignment of Lessee's Interest
in Lease from CPC to the Bank from CPC to the Bank dated as of even
date herewith.
1.19 "EPIC DEED OF TRUST" shall have the meaning assigned to
that term in Article IV of the Original Credit Agreement, as amended
by that certain First Amended Deed of Trust, Security Agreement,
Financing Statement and Assignment CPC to the Bank dated as of
September 30, 1994, as further amended by that certain Second Amended
Deed of Trust, Security Agreement, Financing Statement and Assignment
from CPC to the Bank dated as of even date herewith.
1.21 "EPIC PLEDGE" shall have the meaning assigned to that term
in Article IV of the Original Credit Agreement, as amended by that
certain First Amended Assignment, Pledge and Security Agreement from
CPC to the Bank from CPC to the Bank dated as of even date herewith.
1.24 "CGGC DEED OF TRUST" shall have the meaning assigned to
that term in Section 1.24 of the Original Credit Agreement, as
amended by that certain First Amended Deed of Trust, Security
Agreement, Financing Statement and Assignment from CGGC to the
Trustee and the Bank dated as of August 1, 1994, as further amended
by that certain Second Amended Deed of Trust, Security Agreement,
Financing Statement and Assignment from CGGC to the Trustee and the
Bank dated as of September 30,
- 2 -
<PAGE>
1994, as further amended by that certain Third Amended and Supplemental
Deed of Trust, Security Agreement, Financing Statement and Assignment from
CGGC to the Trustee and the Bank dated as of even date herewith.
1.41 "NOTES" shall mean the Revolving Credit Note, the
Replacement Term Note and the Second Term Note, together with each
and every replacement, extension, renewal, modification, substitution
and change in form thereof which may be from time to time and for any
term or terms effected.
1.45 "PPC DEED OF TRUST" shall have the meaning assigned to that
term in Section 1.45 of the Original Credit Agreement, as amended by
that certain First Amended Deed of Trust, Security Agreement,
Financing Statement and Assignment (with Power of Sale) from PPC to
the Bank dated as of even date herewith.
1.53 "SECURITY AGREEMENT" shall have the meaning assigned to
that term in Article V of the Original Credit Agreement, as amended
by that certain First Amendment to Security Agreement and Assignment
from the Borrowers to the Bank dated as of even date herewith.
1.56 "TERM LOANS" shall mean the term loans made to the
Borrowers (i) in the Original Credit Agreement described in Section
3.1 thereof, as modified, restructured and extended by the terms and
provisions of paragraph 2 of the First Amendment and as evidenced by
the Replacement Term Note more particularly described and defined in
paragraph 3 of the First Amendment and (ii) in the Second Amendment
as described in paragraph 2 of the Second Amendment and as evidenced
by the Second Term Note more particularly described and defined in
paragraph 3 thereof.
1.57 "TERM NOTES" shall mean the Borrowers' joint and several
Replacement Term Note and the Second Term Note, together with each
and every replacement, extension, renewal, modification, substitution
and change in form thereof which may be from time to time and for any
term or terms effected.
2. SECOND TERM LOAN. The Bank agrees, upon the terms subject to the
conditions set forth in the Original Credit Agreement and herein, to extend to
the Borrowers an additional term loan in the maximum principal amount of
$4,000,000.00 for the singular purpose of funding the purchase price of CGGC's
acquisition of the Willow Springs and North Lansing gas gathering systems and
related facilities situated in Gregg and Harrison Counties,
- 3 -
<PAGE>
Texas (collectively the "Texas Gathering Facilities") pursuant to the terms and
provisions of that certain Asset Purchase Agreement between Bayou South Gas
Gathering Company, L.C. ("Seller") and CGGC (the "Purchase Agreement").
3. SECOND TERM NOTE. To evidence the Second Term Loan, as funded
pursuant to the provisions of paragraph 2 above, the Borrowers shall execute and
deliver to the order of the Bank Borrowers' joint and several term note in the
principal amount of $4,000,000.00, the form of which is annexed hereto as
EXHIBIT "A" and hereby made a part hereof (hereinafter referred to as the
"Second Term Note"). The Second Term Note shall be dated as of the date hereof,
shall provide for fifty-nine (59) consecutive equal monthly minimum principal
payments of $66,667 per month payable on the last day of each calendar month
commencing January 31, 1995 with the remaining principal payable at final
maturity on December 31, 1999. The Second Term Note shall bear interest,
payable monthly on the last day of every month commencing January 31, 1995, and
at final maturity on December 31, 1999, on unpaid balances of principal from
time to time outstanding and on any past due interest at a variable annual rate
equal from day to day to the Applicable Prime Rate therein defined plus two
percentage points (2%), but in no event at a rate greater than permitted by
applicable law. All payments received shall be applied first to accrued
interest and then to the outstanding principal amount owing on the Second Term
Note. The Borrowers may from time to time make prepayments of principal,
provided that interest on the amount prepaid, accrued to the prepayment date,
shall be paid on such prepayment date. The Borrowers may not reborrow any
amounts paid or prepaid on the Second Term Note. All payments and prepayments
shall be made in lawful money of the United States of America. Any payments or
prepayments on the Second Term Note received by the Bank after 12:00 noon
(applicable current time in Tulsa, Oklahoma) shall be deemed to have been made
on the next succeeding Business Day. All outstanding principal of and unpaid
accrued interest on the Second Term Note not previously paid hereunder shall be
due and payable at final maturity on December 31, 1999, unless such maturity
shall be extended by the Bank in writing or accelerated pursuant to the terms
hereof. After maturity (whether by acceleration or otherwise) the Second Term
Note shall bear interest at the Default Rate, payable on demand. Interest shall
be calculated on the basis of a year of 360 days but assessed for the actual
number of days elapsed in each accrual period.
4. INCREMENTAL MANDATORY PRINCIPAL PAYMENTS/FACILITY FEE. An additional
incremental mandatory monthly principal payment shall be due on the Second Term
Note in an amount equal to $.02 per Texas Gathering Facilities transported MCF
on the incremental volume above 1,003,000 MCF (MCF being defined as 1,000 cubic
feet of natural gas) per month and payable on the last day of the next
- 4 -
<PAGE>
successive calendar month, commencing February 28, 1995. At least five (5) days
prior to the due date of each incremental monthly principal payment, Cornerstone
and CGGC shall submit to the Bank the incremental monthly principal payment
report and certification in the form annexed hereto as EXHIBIT "B". A 0.75%
term loan facility fee in the amount of $30,000 shall be due and owing by the
Borrowers to the Bank on the Second Term Loan, which facility fee shall be
payable concurrent with such funding of the Second Term Loan.
5. COLLATERAL. The repayment of the Indebtedness (including the Second
Term Loan) shall continue to be secured by all of the Collateral as more
particularly described and defined in paragraph 6(c) hereof below and in the
Original Credit Agreement as more particularly described therein and in the
Security Instruments, including without limitation, the Security Agreement
encumbering the items and types of Collateral more particularly described in
Section 4.1 thereof as continuing and continuous security for all of the
Indebtedness and all security described in the Third Amended and Supplemental
Deed of Trust, Security Agreement, Financing Statement and Assignment from CGGC
to the Trustee and the Bank as more particularly described in Section 1.24
hereof and/or in the First Amendment to Security Agreement and Assignment as
more particularly described in Section 1.53 hereof. Borrowers hereby
incorporate by reference, ratify, confirm, continue and regrant in favor of the
Bank all of the security interests, liens and pledges set forth or described in
the Security Agreement and in Article IV of the Original Credit Agreement,
including the priorities thereof, with the same force and effect as if fully
restated herein.
6. CONDITIONS PRECEDENT TO EXTENSION OF SECOND TERM LOAN. The obligation
of the Bank to extend the Second Term Loan is subject to satisfaction of all the
following conditions on or prior to the date such advancement of the Second Term
Loan, as evidenced by the Second Term Note, in the maximum sum of $4,000,000.00
occurs (the "Funding Date") (in addition to the other terms and conditions set
forth in the Original Credit Agreement):
(a) SECOND TERM NOTE. The Borrower shall have delivered the
Second Term Note to the order of the Bank, appropriately executed.
(b) BORROWERS' CERTIFICATES AND PROCEEDINGS. On or before the
Funding Date, each of the Borrowers shall have delivered to the Bank
a certificate satisfactory to the Bank and its legal counsel,
including corporate resolutions, incumbency certificates and articles
and certificates of incorporation and bylaws as may be required by
the Bank and its legal counsel.
- 5 -
<PAGE>
(c) SECURITY INSTRUMENTS. The Borrower shall have delivered to
the Bank the Third Amended and Supplemental CGGC Deed of Trust, the
First Amendment to Security Agreement and such supplemental and
amendment instruments to the Security Instruments more particularly
described and defined in the Original Credit Agreement and the First
Amendment as are required by the Bank and its legal counsel,
including without limitation, the amendments more particularly
described in Sections 1.9, 1.16, 1.18, 1.19, 1.20, 1.24 and 1.45 in
paragraph 1 hereof, and applicable UCC financing statements.
(d) OPINION OF COUNSEL. The Bank shall have received from
Borrowers' counsel, Schlanger, Mills, Mayer and Grossberg a favorable
closing opinion satisfactory in form and substance to the Bank and
its counsel.
(e) CLOSING OF ACQUISITION OF TEXAS GATHERING FACILITIES. The
acquisition of the Texas Gathering Facilities pursuant to the terms
and provisions of the Purchase Agreement shall have been consummated
prior to or concurrent with the Funding Date in form, content and
manner acceptable to the Bank in all respects, including (without
limitation) resolution of any and all contractual issues between
Seller and Arkla Incorporated and the Bank shall have received
satisfactory evidence thereof, including, without limitation, release
of record of all existing deeds of trust, mortgages, financing
statements or other liens against the Texas Gathering Facilities or
contracts pertaining thereto and the Bank's review of such title
opinions, title reports, landman reports and/or other title searches
or data as may be required by the Bank and its legal counsel.
7. ORIGINAL CREDIT AGREEMENT. The remaining terms, provisions,
covenants, warranties, representations and conditions of the Original Credit
Agreement, as previously amended by the First Amendment, are ratified, confirmed
and continued in full force and effect with the same effect as if fully restated
herein.
8. COUNTERPARTS. This First Amendment may be executed in any number of
counterparts, all of which when taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to be
duly executed and delivered by the Borrowers to
- 6 -
<PAGE>
the Bank in Tulsa, Oklahoma, effective as of the day and year first above
written.
"Borrowers"
CORNERSTONE NATURAL GAS, INC.
By
-------------------------------
Robert L. Cavnar
Senior Vice President
- 7 -
<PAGE>
ENDEVCO PRODUCING COMPANY
By
-------------------------------
Robert L. Cavnar
Senior Vice President
CORNERSTONE GAS GATHERING COMPANY,
formerly known as Cornerstone
Pipeline Company
By
--------------------------------
Robert L. Cavnar
Senior Vice President
DUBACH GAS COMPANY
By
--------------------------------
Robert L. Cavnar
Senior Vice President
CORNERSTONE GAS PROCESSING, INC.,
formerly known as Endevco Natural
Gas Company
By
--------------------------------
Robert L. Cavnar
Senior Vice President
CORNERSTONE GAS RESOURCES, INC.,
formerly known as Endevco Oil &
Gas Company
By
--------------------------------
Robert L. Cavnar
Senior Vice President
- 8 -
<PAGE>
CORNERSTONE PIPELINE COMPANY,
formerly known as Endevco Pipeline
Company
By
--------------------------------
Robert L. Cavnar
Senior Vice President
PENTEX PIPELINE COMPANY
By
--------------------------------
Robert L. Cavnar
Senior Vice President
"Bank"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By
---------------------------------
Jack D. Brannon, Vice President
- 9 -
<PAGE>
EXHIBIT 21.1
CORNERSTONE NATURAL GAS, INC.
SCHEDULE OF CORPORATE ENTITIES
STATE OF
ENTITY INCORPORATION
- ------ -------------
Cornerstone Natural Gas, Inc. Delaware
Wholly-owned Subsidiaries of Cornerstone Natural Gas, Inc.:
1. Cornerstone Gas Resources, Inc. Delaware
2. Cornerstone Gas Processing, Inc. Delaware
3. Cornerstone Gas Gathering Company Delaware
4. Cornerstone Pipeline Company Delaware
5. Dubach Gas Company Texas
6. Endevco Producing Company Delaware
7. Pentex Pipeline Company Texas
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 655,000
<SECURITIES> 0
<RECEIVABLES> 12,424,000
<ALLOWANCES> 0
<INVENTORY> 93,000
<CURRENT-ASSETS> 13,458,000
<PP&E> 54,632,000
<DEPRECIATION> 33,543,000
<TOTAL-ASSETS> 40,303,000
<CURRENT-LIABILITIES> 20,064,000
<BONDS> 0
<COMMON> 1,252,000
0
0
<OTHER-SE> 10,617,000
<TOTAL-LIABILITY-AND-EQUITY> 40,303,000
<SALES> 106,406,000
<TOTAL-REVENUES> 106,591,000
<CGS> 99,705,000
<TOTAL-COSTS> 104,955,000
<OTHER-EXPENSES> 11,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,284,000
<INCOME-PRETAX> 341,000
<INCOME-TAX> 26,000
<INCOME-CONTINUING> 315,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 315,000
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
