SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to ______________
Commission file number 0-12927
NATIONAL HOME HEALTH CARE CORP.
----------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Delaware 22-2981141
------------------------------ --------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
700 White Plains Road, Scarsdale, New York 10583
-----------------------------------------------------
(Address of Principal Executive Offices with Zip Code)
Registrant's Telephone Number Including Area Code: 914-722-9000
-------------
- --------------------------------------------------------------------------------
Former Name,Former Address and Former Fiscal Year, if Changed Since Last Report.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required 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 No
--- ---
APPLICABLE ON-Y TO CORPORATE ISSUERS:
The number of shares of common stock outstanding as of December 15, 1999 was
5,048,750.
<PAGE>
NATIONAL HOME HEALTH CARE CORP.
FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 31, 1999
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets as of October 31, 1999 and July 31,
1999 (unaudited) 3-4
Consolidated Statements of Operations for the three months
ended October 31, 1999 and October 31, 1998 (unaudited) 5
Consolidated Statements of Cash Flows for the three
months ended October 31, 1999 and October
31, 1998 (unaudited) 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
-2-
<PAGE>
<TABLE>
<CAPTION>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
October 31, 1999 July 31, 1999
---------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,633,000 $ 7,442,000
Investments 18,000 178,000
Accounts receivable-less allowance for doubtful accounts of
$378,000 at October 31, 1999
and $392,000 at July 31, 1999 10,799,000 10,459,000
Income taxes receivable ---- 110,000
Prepaid expenses and other assets 275,000 181,000
Deferred taxes 417,000 417,000
---------------- ----------------
Total current assets 20,142,000 18,787,000
Furniture, equipment and leasehold improvements, net 637,000 543,000
Excess of cost over fair value of net assets of businesses
acquired, net 5,260,000 5,334,000
Other intangible assets, net 1,170,000 1,239,000
Deposits and other assets 181,000 189,000
TOTAL $ 27,390,000 $ 26,092,000
================ ================
</TABLE>
(continued)
-3-
<PAGE>
<TABLE>
<CAPTION>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
October 31, 1999 July 31, 1999
---------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 1,056,000 $ 1,079,000
Estimated third-party payor settlements 18,000 ----
Income taxes payable 363,000 ----
---------------- ----------------
Total current liabilities 1,437,000 1,079,000
---------------- ----------------
Stockholders' equity:
Common stock, $.001 par value; authorized
20,000,000 shares, issued 6,228,746 shares 6,000 6,000
Additional paid-in capital 18,525,000 18,525,000
Retained earnings 9,274,000 8,183,000
---------------- ----------------
27,805,000 26,714,000
Less treasury stock (1,163,436 and 1,124,936 shares) at cost (1,852,000) (1,701,000)
---------------- ----------------
Total stockholders' equity 25,953,000 25,013,000
---------------- ----------------
TOTAL $ 27,390,000 $ 26,092,000
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
For the three months ended October 31,
--------------------------------------
1999 1998
---- ----
Net patient revenue $ 9,494,000 $ 9,205,000
----------- -----------
Operating expenses:
Cost of revenue 6,326,000 5,985,000
General and administrative 2,395,000 2,286,000
Amortization of intangibles 142,000 125,000
----------- -----------
Total operating expenses 8,863,000 8,396,000
----------- -----------
Income from operations 631,000 809,000
Other income (loss):
Interest income 85,000 119,000
Gain resulting from sale of subsidiary stock 943,000 --
(Loss) from equity investee -- (350,000)
----------- -----------
Income before taxes 1,659,000 578,000
Provision for income taxes 568,000 392,000
----------- -----------
NET INCOME $ 1,091,000 $ 186,000
=========== ===========
Net income per share:
Basic $ 0.21 $ 0.04
=========== ===========
Diluted $ 0.21 $ 0.04
=========== ===========
Weighted average shares outstanding:
Basic 5,081,774 5,198,491
Diluted 5,088,249 5,265,754
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
For the three months ended October 31,
--------------------------------------
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $1,091,000 $186,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 188,000 155,000
Gain resulting from sale of subsidiary stock (943,000) ----
Loss from equity investee ---- 350,000
Changes in:
Accounts receivable (340,000) (1,246,000)
Income taxes receivable/payable 473,000 308,000
Prepaid expenses and other assets (86,000) 41,000
Accounts payable, accrued expenses and other liabilities (23,000) 277,000
Estimated third party payor settlements 18,000 (27,000)
------------ -------------
Net cash provided by operating activities 378,000 44,000
----------- --------------
Cash flows from investing activities:
Proceeds from sale of subsidiary stock 943,000 ----
Proceeds of investments 160,000 ----
Purchase of property, plant and equipment (139,000) (37,000)
Purchase of assets of business ---- (1,913,000)
Purchase of Accredited Health Services, Inc., net of cash acquired ---- (1,680,000)
---------------- -------------
Net cash provided by (used in) investing activities 964,000 (3,630,000)
------------ ------------
Cash flows from financing activities:
Purchase of treasury shares (151,000) (12,000)
------------ --------------
Net cash (used in) financing activities (151,000) (12,000)
------------ --------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,191,000 (3,598,000)
Cash and cash equivalents-beginning of period 7,442,000 10,992,000
---------- ----------
CASH AND CASH EQUIVALENTS-END OF PERIOD 8,633,000 $7,394,000
========== ==========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Taxes $93,000 $83,000
Interest ---- ----
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended October 31,
1999 are not necessarily indicative of the results that may be expected for the
year ending July 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended July 31, 1999.
NOTE 2 - INITIAL PUBLIC OFFERING OF SUNSTAR HEALTHCARE, INC.
On May 21, 1996, the initial public offering of common stock by SunStar
Healthcare, Inc. ("SunStar") was consummated. SunStar, formerly a wholly owned
subsidiary of the Company, had comprised the Company's Florida outpatient
medical center operations. The Company currently owns approximately 24.9% of
SunStar and utilizes the equity method of accounting for its investment in
SunStar. As of October 31, 1999, the Company's carrying value of its investment
in SunStar is $0. During the quarter ended October 31, 1999, the Company sold
146,497 shares of SunStar with sales proceeds approximating $943,000.
NOTE 3 - ACQUISITIONS
On August 10, 1998, the Company, through its wholly owned subsidiary
Health Acquisition Corp. ("Health Acquisition"), acquired, for $1,943,000 in
cash, including acquisition costs of $8,000, certain assets of Bryan Employment
Agency, Inc., d/b/a Bryan Home Care Services ("Bryan Home Care"), a New York
licensed home health care company which provides home care services in
Westchester County, New York. The acquisition was accounted for as a purchase
and the cost was allocated as follows: $285,000 to personnel files, $285,000 to
patient files, $30,000 to furniture and equipment, $200,000 to covenant not to
compete and $1,143,000 to excess of cost over fair value of net assets of
businesses acquired. The purchase price was generated from internal funds. The
acquisition expanded the geographic presence of the Company and enabled Health
Acquisition to become a participating provider in the Westchester County
Department of Social Services Medicaid Program. Annual revenues for Bryan Home
Care approximated $5,700,000 in calendar 1997.
On October 30, 1998, the Company acquired all of the outstanding common
shares of Accredited Health Services, Inc. ("Accredited"). Accredited is a
licensed home health care
-7-
<PAGE>
company that provides home health aide services in Bergen, Hudson, Passaic,
Essex, Morris, Union, Somerset and Middlesex Counties, New Jersey. The purchase
price of approximately $1,949,000 in cash, including acquisition costs of
$85,000, was generated from internal funds. The acquisition was accounted for as
a purchase. The allocation of purchase price was as follows: $1,119,000 to total
current assets, $59,000 to furniture and equipment, $40,000 to other assets,
$550,000 to total current liabilities, $4,000 to other liabilities and
$1,285,000 to the excess of purchase price over the fair value of assets
acquired. Revenues from Accredited approximated $5,300,000 for the fiscal year
ended March 31, 1998.
On November 1, 1999, the Company acquired, through wholly owned
subsidiaries in Connecticut, certain assets of Optimum Care Services of
Connecticut, Inc., Optimum Home Health of Connecticut, Inc. and Optimum Home
Care of Connecticut, Inc., (the "Optimum Entities"). The assets were acquired
from a court-appointed Chapter 7 Trustee for a purchase price of $4,400,000 in
cash, which amount was generated from internal funds of the Company. The final
purchase price was determined through an auction process conducted at the United
States Bankruptcy Court for the District of Massachusetts. The assets acquired
included certain, but not all, machinery, equipment, intangibles and accounts
receivable. The acquisition represents the Company's opportunity to expand its
Connecticut operations into additional areas in the state. The Company is
operating the acquired assets under the Company's pre-existing subsidiary in
Connecticut, New England Home Care, Inc. ("New England"), and a recently formed
subsidiary, Connecticut Staffing Works Corp.
The Optimum Entities had been engaged in the business of providing home
health care, staffing and related services in Connecticut, including a Medicare
certified and licensed home health care agency and an affiliate providing
staffing services.
NOTE 4 - PER SHARE DATA
<TABLE>
<CAPTION>
October 31, 1999 October 31, 1998
--------------------------- --------------------------
Income Shares Income Shares
------ ------ ------ ------
Basic EPS:
<S> <C> <C> <C> <C>
Net Income $1,091,000 5,081,774 $186,000 5,198,491
Effective of dilutive securities -
common stock options 6,475 - 67,263
---------- --------- -------- ---------
Diluted EPS $1,091,000 5,088,249 $186,000 5,265,754
========== ========= ======== =========
</TABLE>
-8-
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis provides information which the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. This discussion
should be read in conjunction with the attached consolidated financial
statements and notes thereto, and with the Company's audited financial
statements and notes thereto for the fiscal year ended July 31, 1999.
This discussion contains forward-looking statements that are subject to
a number of known and unknown risks that, in addition to general economic,
competitive and other business conditions, could cause actual results,
performance and achievements to differ materially from those described or
implied in the forward-looking statements.
The Company is subject to significant external factors that could
significantly impact its business, including changes in Medicare and Medicaid
reimbursement, government fraud and abuse initiatives and other such factors
that are beyond the control of the Company. These factors, as well as future
changes in reimbursement, could cause future results to differ materially from
historical results.
The Balanced Budget Act of 1997, as amended (the "Act"), was signed
into law on August 5, 1997. Under the Act, for cost reports beginning on or
after October 1, 1997, Medicare-reimbursed home health agencies are currently
reimbursed under an interim payment system ("IPS") for a two-year period prior
to the implementation of a prospective payment system. Under IPS, home health
care providers are reimbursed the lower of (i) their actual costs, (ii) cost
limits based on 105% of median costs of freestanding home health agencies or
(iii) an agency-specific per patient cost limit, based on 98% of 1994 costs
adjusted for inflation. Prior to the implementation of IPS, Medicare reimbursed
providers on a reasonable cost basis subject to program-imposed cost per visit
limitations. The Act calls for payments to Medicare providers for cost reporting
periods beginning on or after October 1, 2000 to be made in accordance with a
prospective payment system to be established by the Secretary of the Department
of Health and Human Services.
The new IPS cost limits were applied to the Company's Connecticut-based
Medicare certified nursing agency for the cost reporting period beginning July
1, 1998. The Company determined that these new limits would reduce reimbursement
for the Medicare services it provides. Accordingly, in May 1998 the Company
combined its operations in Connecticut by merging its Medicare certified
subsidiary with its licensed agency subsidiary to increase operational
efficiencies.
The implementation of IPS has resulted in a decrease in revenues from
the Company's Medicare certified agency. In addition, the Company's operations
in New York and New Jersey are dependent upon referrals, primarily from Medicare
certified home health care agencies,
-9-
<PAGE>
whose reimbursement has been adversely affected. Accordingly, there can be no
assurance that the Company's future referrals will not result in reduced
reimbursement rates or reduced volume of business.
Results of Operations and Effects of Inflation
- ----------------------------------------------
For the three months ended October 31, 1999, net patient revenue
increased $289,000, or 3.1%, to $9,494,000 from $9,205,000 for the three months
ended October 31, 1998. This increase is attributable to the revenues generated
from the acquisition on October 31, 1998 of Accredited of $1,176,000 offset by
the decline in same source revenues of ($887,000), or (9.6%). Over the periods,
net patient revenue from Health Acquisition, the subsidiary providing home
health care services in the New York metropolitan area, decreased ($611,000), or
(9.3%), to $5,953,000 from $6,564,000. This decrease is attributable to the
continued decline in hours and, in some cases, a decrease in reimbursement rates
from the Medicare certified home health care agencies that Health Acquisition
contracts with, as a result of the implementation of IPS. Over the periods, net
patient revenue from New England, the subsidiary that is Medicare certified and
licensed in the state of Connecticut, decreased ($276,000), or (10.5%), to
$2,365,000 from $2,641,000. This decrease is attributable to the decline in
Medicare revenue of ($163,000), or (20%), and a decline in non-Medicare revenue
of ($113,000), or (6.4%). The decrease in both Medicare and non-Medicare revenue
is the result of the change in Medicare reimbursement from cost reimbursement to
IPS.
Cost of revenue as a percentage of net patient revenue increased to
66.6% for the three months ended October 31, 1999 from 65% for the three months
ended October 31, 1998. This increase is primarily attributable to the decreases
in certain reimbursement rates from other existing Medicare certified home
health care agencies that the Company contracts with, as a result of the change
in the Medicare reimbursement system.
General and administrative expenses increased $109,000, or 4.7%, to
$2,395,000 for the three months ended October 31, 1999 from $2,286,000 for the
three months ended October 31, 1998. This increase is attributable to the
additional general and administrative expenses incurred from the acquisition of
Accredited, offset by the decline in general and administrative expenses in both
Health Acquisition and New England. These declines are the result of reductions
in back office expenses to offset the decrease in revenue. As a percentage of
net patient revenue, general and administrative expenses increased to 25.2% for
the three months ended October 31, 1999 from 24.8% for the three months ended
October 31, 1998.
Amortization of intangibles increased to $142,000 for the three months
ended October 31, 1999 from $125,000 for the three months ended October 31,
1998. This increase is attributable to the acquisition of Accredited.
-10-
<PAGE>
As a result of the foregoing, income from operations decreased
($178,000), or (22%), to $631,000 for the three months ended October 31, 1999
from $809,000 for the three months ended October 31, 1998.
Interest income decreased (28.6%) to $85,000 for the three months ended
October 31, 1999 from $119,000 for the three months ended October 31, 1998. This
decrease is attributable to cash used in investing activities resulting from the
acquisitions of Bryan Home Care and Accredited.
During the three months ended October 31, 1999, the Company recorded a
gain from the sale of subsidiary stock in the amount of $943,000 resulting from
the sale of 146,497 shares of SunStar. As a result of these sales, the Company
owned approximately 25.5% of SunStar as of October 31, 1999. During the three
months ended October 31, 1998, the Company recorded a loss from equity investee
of ($350,000), representing the Company's share of the net loss reported by
SunStar for the same period.
The Company's effective tax rate decreased to 34.2% for the three
months ended October 31, 1999 from 67.8% for the three months ended October 31,
1998. This decrease is attributable to the Company's share of SunStar's net
loss, in which no income tax benefit was recorded for the three months ended
October 31, 1998. Excluding the gain on sale of subsidiary stock in the current
three month-period and the tax effect of loss from equity investee in the prior
period, the effective tax rate increased to 42.7% for the three months ended
October 31, 1999, as compared to 42.2% for the three months ended October 31,
1998.
The rate of inflation had no material effect on operations for the
three months ended October 31, 1999.
Financial Condition and Capital Resources
- -----------------------------------------
Current assets increased to $20,142,000 and current liabilities
increased to $1,437,000, respectively, at October 31, 1999. This resulted in an
increase in working capital of $997,000, from $17,708,000 at July 31, 1999 to
$18,705,000 at October 31, 1999. Cash and cash equivalents increased $1,191,000,
to $8,633,000 at October 31, 1999 from $7,442,000 at July 31, 1999. The increase
in both working capital and cash is primarily attributable to the proceeds of
$943,000 from the sale of SunStar stock during the quarter ended October 31,
1999.
On November 1, 1999, the Company acquired, through wholly owned
subsidiaries in Connecticut, certain assets of the Optimum Entities for a
purchase price of $4,400,000 in cash.
The Company provided net cash from operating activities of $378,000 for
the three months ended October 31, 1999 as compared to net cash provided from
operating activities of $44,000 for the three months ended October 31, 1998. The
increase in operating cash flow of $334,000 is attributable to the net changes
in current assets and current liabilities of $689,000,
-11-
<PAGE>
offset by the decline of ($355,000) in cash flow from operations over the
comparable period of 1998. Net cash provided by investing activities for the
three months ended October 31, 1999 reflects the proceeds from the sale of
subsidiary stock and proceeds of investments, offset by the purchase of
equipment. Net cash used in investing activities for the three months ended
October 31, 1998 reflects the acquisition made by the Company and the purchase
of equipment. Net cash used in financing activities for the three months ended
October 31, 1999 and October 31, 1998 reflects the purchase of treasury shares.
The Company has available a $2,000,000 secured line of credit with its
bank. In addition, a subsidiary of the Company has a secured line of credit. The
maximum amount that can be borrowed under the subsidiary's secured line of
credit may not exceed the lesser of eligible accounts receivable or $2,000,000.
Both credit facilities bear interest at the alternate base commercial lending
rate of the bank and expire January 31, 2000. At October 31, 1999, there was no
outstanding balances under either line of credit. The company is currently
considering increasing its credit facilities in light of the Company's reduced
working capital availability as a result of its recent acquisition of the
Optimum Entities.
The Company intends to meet its short and long term liquidity needs
with its current cash balances, cash flow from operations and available lines of
credit. The Company believes that its cash balances also will allow it to
continue to make acquisitions in the home health care field without affecting
its liquidity needs.
The Company has continued for an additional year its program to
repurchase its Common Stock. Purchases in the aggregate amount of up to
$1,000,000 in purchase price during the one-year extension would be made from
time to time in the open market and through privately negotiated transactions,
subject to general market and other conditions. The buyback program will be
financed out of existing cash or cash equivalents.
Year 2000 Compliance
- --------------------
The Year 2000 issue is the result of computer programs which were
written using two digits rather than four to define the applicable year. Certain
purchased systems used by the Company, and for which the Company does not
control the programming code, use two digits for the year. During the quarter
ended October 31, 1999, the systems used by Health Acquisition and Accredited
were replaced with new systems that better meet the information needs as they
expand and deal with the current operating environment. The Company believes
that these conversions will provide compliance with the requirements to handle
the Year 2000 issue with no significant operational concerns. The current system
utilized by New England is a relatively new operating system. The Company has
been advised by the system vendor that all required changes necessary to be
compliant with the year 2000 issue have been substantially completed. However,
there is no guarantee that the Company's expected results will be achieved. In
addition, actual results could differ materially from those expected results.
-12-
<PAGE>
The Company depends on receipt of payment for services from its payor
sources, most of which utilize computer software to process those payments. The
Company's primary payors include Medicare and Medicaid programs, insurance
companies, other certified home health agencies and long-term health care
provider programs. The Company has begun formal communications with its
significant payors to determine the extent to which the Company may be
vulnerable to those payors' failures to remediate their own year 2000 issues.
The Company is currently unable to predict what effect, if any, the year 2000
issue may have on the computer systems of those payors, or, in turn, on the
Company.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
Exhibit
Number Document
------ --------
10.1* Second Amendment to Employment Agreement dated as of
October 7, 1999 between the Registrant and Steven Fialkow.
10.2* The Registrant's Employee Savings and Stock
Investment Plan under Section 401(k) of the Internal
Revenue Code, effective as of January 1, 1999.
27.1* Financial Data Schedule.
-----------------------------
*Filed herewith
(b) Reports on Form 8-K:
1. Form 8-K dated November 1, 1999, Item 2: Acquisition
by the Company of certain of the assets of Optimum
Care Services of Connecticut, Inc., Optimum Home
Health of Connecticut, Inc. and Optimum Home Health
Care of Connecticut, Inc.
-14-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NATIONAL HOME HEALTH CARE CORP.
Date: December 15, 1999 By: /s/ Robert P. Heller
------------------------------------------
Name: Robert P. Heller
Title: Vice President of Finance and Chief
Financial Officer
EXHIBIT 10.1
SECOND AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement, dated as of
October 7, 1999 (the "Amendment"), is by and between NATIONAL HOME HEALTH CARE
CORP., a Delaware corporation having an address at 700 White Plains Road,
Scarsdale, New York 10583 (the "Company") and STEVEN FIALKOW, an individual
having an address at 700 White Plains Road, Scarsdale, New York 10583 (the
"Employee").
WHEREAS, the Company and the Employee are parties to an
Employment Agreement dated as of November 1, 1997 (the "Agreement"), as amended
by a First Amendment thereto dated as of December 1, 1998 (the "First
Amendment"); and
WHEREAS, the Company and the Employee desire to amend the
Agreement in certain respects.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and conditions hereinafter set forth, the parties hereby agree
as follows:
1. Amendment to the Agreement. The Agreement hereby is further amended
--------------------------
effective as of the date hereof such that "$180,000" contained in Section 5(a)
therein pursuant to the First Amendment is changed to "$230,000."
2. Agreement to Continue as Amended. Except as modified and amended by
--------------------------------
the First Amendment and by this Amendment, the Agreement shall remain and
continue in full force and effect after the date hereof.
3. Applicable Law. This Amendment shall be negotiated and the
---------------
transactions contemplated hereby consummated and fully performed in the State of
New York and shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the conflicts of law rules thereof.
Nothing contained in this Amendment shall be construed so as to require the
commission of any act contrary to law, and whenever there is any conflict
between any provision of this Amendment and any statute, law, ordinance, order
or regulation, contrary to which the parties hereto have no legal right to
contract, the latter shall prevail, but in such event any provision of this
Amendment so affected shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements.
<PAGE>
4. Jurisdiction and Venue. It is hereby irrevocably agreed that all
----------------------
disputes or controversies between the Company and the Employee arising out of,
in connection with or relating to this Amendment shall be exclusively heard,
settled and determined by arbitration to be held in the City of New York, County
of New York, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association to be conducted before a single arbitrator, who shall be
either an attorney or retired judge licensed to practice law in the State of New
York. The parties also agree that judgment may be entered on the arbitrator's
award by any court having jurisdiction thereof and the parties consent to the
jurisdiction of any court located in the City of New York, County of New York
for this purpose.
5. Full Understanding. The Employee represents and agrees that he
-------------------
fully understands his right to discuss all aspects of this Amendment with his
private attorney; that to the extent, if any, that he desired, he availed
himself of this right; that he has carefully read and fully understands all of
the provisions of this Amendment; that he is competent to execute this
Amendment; that his agreement to execute this Amendment has not been obtained by
any duress, and that he freely and voluntarily enters into it; and that he has
read this document in its entirety and fully understands the meaning, intent and
consequences of this document which is that it constitutes an agreement of
employment.
6. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the date first above written.
NATIONAL HOME HEALTH CARE CORP.
By: /s/ Robert P. Heller
----------------------
Name: Robert P. Heller
Title: Executive Vice President of Finance and
Chief Financial Officer
/s/ Steven Fialkow
----------------------
STEVEN FIALKOW
EXHIBIT 10.2
NATIONAL HOME HEALTH CARE CORP.
SAVINGS AND STOCK INVESTMENT PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 "Account" or "Accrued Benefit"......................................1
(a) "Account A"....................................................1
(b) "Account B"....................................................1
(c) "Account C"....................................................1
1.2 "Act"...............................................................2
1.3 "Administrator".....................................................2
1.4 "Affiliated Employer"...............................................2
1.5 "Aggregate Account".................................................2
1.6 "Anniversary Date"..................................................2
1.7 "Beneficiary".......................................................2
1.8 "Code"..............................................................2
1.9 "Compensation"......................................................2
1.10 "Contract" or "Policy"..............................................3
1.11 "Deferred Compensation".............................................3
1.12 "Designated Investment Alternative".................................3
1.13 "Directed Investment Option"........................................3
1.14 "Early Retirement Date".............................................3
1.15 "Elective Contribution".............................................4
1.16 "Eligible Employee" means any Employee..............................4
1.17 "Employee"..........................................................4
1.18 "Employer"..........................................................4
1.19 "Excess Aggregate Contributions"....................................4
1.20 "Excess Contributions"..............................................4
1.21 "Excess Deferred Compensation"......................................5
1.22 "Fiduciary".........................................................5
1.23 "Fiscal Year".......................................................5
1.24 "Forfeiture"........................................................5
1.25 "Former Participant"................................................5
1.26 "415 Compensation"..................................................6
1.27 "414(s) Compensation"...............................................6
1.28 "Highly Compensated Employee".......................................6
1.29 "Highly Compensated Former Employee"................................7
1.30 "Highly Compensated Participant"....................................8
1.31 "Hour of Service"...................................................8
1.32 "Income"............................................................9
1.33 "Investment Manager"...............................................10
1.34 "Key Employee "....................................................10
1.35 "Late Retirement Date".............................................11
1.36 "Leased Employee"..................................................11
1.37 "Net Profit".......................................................12
1.38 "Non-Elective Contribution"........................................12
-i-
<PAGE>
TABLE OF CONTENTS (Cont'd)
1.39 "Non-Highly Compensated Participant"...............................12
1.40 "Non-Key Employee".................................................12
1.41 "Normal Retirement Age"............................................12
1.42 "Normal Retirement Date"...........................................12
1.43 "l-Year Break in Service"..........................................12
1.44 "Participant"......................................................13
1.45 "Participant Direction Procedure" .................................13
1.46 "Participant's Account"............................................13
1.47 "Participant's Combined Account"...................................13
(a) "Participant's Directed Account"..............................13
(b) "Participant's Non-Directed Account"..........................13
1.49 "Participant's Elective Account"...................................13
1.50 "Plan".............................................................13
1.51 "Plan Year"........................................................14
1.52 "Qualified Non-Elective Contribution"..............................14
1.53 "Regulation".......................................................14
1.54 "Retired Participant"..............................................14
1.55 "Retirement Date"..................................................14
1.56 "Super Top Heavy Plan".............................................14
1.57 "Terminated Participant"...........................................14
1.58 "Top Heavy Plan"...................................................14
1.59 "Top Heavy Plan Year" .............................................14
1.60 "Total and Permanent Disability"...................................14
1.61 "Trustee"..........................................................14
1.62 "Trust Fund".......................................................14
1.63 "USERRA"...........................................................14
1.64 "Valuation Date"...................................................15
1.65 "Vested"...........................................................15
1.66 "Year of Service"..................................................15
ARTICLE II
ADMINISTRATION
2.1 Powers and Responsibilities of the Employer........................15
2.2 Designation of Administrative Authority............................16
2.3 Powers and Duties of the Administrator.............................16
2.4 Records and Reports................................................18
2.5 Appointment of Advisers............................................18
2.6 Payment of Expenses................................................18
2.7 Claims Procedure...................................................18
2.8 Claims Review Procedure............................................18
-ii-
<PAGE>
TABLE OF CONTENTS (Cont'd)
ARTICLE III
ELIGIBILITY
3.1 Conditions of Eligibility..........................................19
3.2 Effective Date of Participation....................................19
3.3 Determination of Eligibility.......................................20
3.4 Termination of Eligibility.........................................20
3.5 Omission of Eligible Employee......................................20
3.6 Inclusion of Ineligible Employee...................................20
3.7 Election Not to Participate........................................21
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 Investment of Trust Funds..........................................21
4.2 Formula for Determining Employer Contribution......................21
4.3 Participant's Salary Reduction Election............................22
4.4 Time of Payment Of Employer Contribution...........................25
4.5 Allocation Of Contributions, Forfeitures And Earnings..............25
4.6 Actual Deferral Percentage Tests...................................28
4.7 Adjustment to Actual Deferral Percentage Tests.....................32
4.8 Actual Contribution Percentage Tests...............................33
4.9 Adjustment to Actual Contribution Percentage Tests.................37
4.10 Maximum Annual Additions...........................................39
4.11 Adjustment for Excessive Annual Additions..........................41
4.12 Directed Investment Account........................................41
ARTICLE V
VALUATIONS
5.1 Valuation of The Trust Fund........................................43
5.2 Method of Valuation................................................44
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 Determination Of Benefits Upon Retirement..........................44
6.2 Determination of Benefits Upon Death...............................44
6.3 Determination of Benefits in Event of Disability...................45
6.4 Determination of Benefits Upon Termination.........................45
6.5 Distribution of Benefits...........................................48
6.6 Distribution of Benefits Upon Death................................51
6.7 Time of Segregation or Distribution................................53
6.8 Distribution for Minor Beneficiary.................................53
-iii-
<PAGE>
TABLE OF CONTENTS (Cont'd)
6.9 Location of Participant or Beneficiary Unknown.....................53
6.10 Advance Distribution for Hardship..................................53
6.11 Qualified Domestic Relations Order Distribution....................55
6.12 Direct Rollover....................................................55
ARTICLE VII
AMENDMENT, TERMINATION, MERGERS AND LOANS
7.1 Amendment..........................................................56
7.2 Termination........................................................57
7.3 Merger or Consolidation............................................57
7.4 Loans to Participants..............................................58
ARTICLE VIII
TOP HEAVY
8.1 Top Heavy Plan Requirements........................................60
8.2 Determination of Top Heavy Status..................................60
ARTICLE IX
MISCELLANEOUS
9.1 Participant's Rights...............................................63
9.2 Alienation.........................................................63
9.3 Construction Of Plan...............................................64
9.4 Gender and Number..................................................64
9.5 Legal Action.......................................................64
9.6 Prohibition Against Diversion Of Funds.............................65
9.7 Bonding............................................................65
9.8 Employer's and Trustee's Protective Clause.........................65
9.9 Insurer's Protective Clause........................................66
9.10 Receipt and Release For Payments...................................66
9.11 Action by the Employer.............................................66
9.12 Named Fiduciaries and Allocation of Responsibility.................66
9.13 Headings...........................................................67
9.14 Approval by Internal Revenue Service...............................67
9.15 Uniformity.........................................................67
-iv-
<PAGE>
NATIONAL HOME HEALTH CARE CORP.
SAVINGS AND STOCK INVESTMENT PLAN
THIS PLAN, hereby adopted this thirtieth day of December,
1998, by National Home Health Care Corp. (herein referred to as the "Employer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Employer theretofore established a Profit Sharing
Plan effective March 1, 1986, (hereinafter called the "Effective Date") known as
National Home Health Care Corp. Savings and Stock Investment Plan (herein
referred to as the "Plan") in recognition of the contribution made to its
successful operation by its employees and for the exclusive benefit of its
eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has the
ability to amend the Plan, provided the Trustee joins in such amendment if the
provisions of the Plan affecting the Trustee are amended;
NOW, THEREFORE, effective January 1, 1999, except as otherwise
provided, the Employer in accordance with the provisions of the Plan pertaining
to amendments thereof, hereby amends the Plan in its entirety and restates the
Plan to provide as follows: ARTICLE I.........
DEFINITIONS
1.1 "Account" or "Accrued Benefit" means a Member's interest in
the assets of the Trust Fund as represented by the value of his Account A,
Account B and Account C, which values shall be determined as of any Valuation
Date.
(a) "Account A" means those assets attributable to a
Member's Tax Deferred Contributions, Qualified Matching3
Contributions, Qualified Non-Elective Contributions and pre April
1, 1997 Employer Matching Contributions.
(b) "Account B" means those assets attributable to the
Employer Matching Contributions made on or after April 1, 1997.
(c) "Account C" means those assets attributable to Employer
Discretionary Contributions.
-1-
<PAGE>
1.2 "Act" means the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
1.3 "Administrator" means the Employer unless another person or
entity has been designated by the Employer pursuant to Section 2.2 to administer
the Plan on behalf of the Employer.
1.4"Affiliated Employer" means any corporation which is a member
of a controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.5 "Aggregate Account" means, with respect to each Participant,
the value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions of
Section 8.2.
1.6 "Anniversary Date" means December 31st.
1.7 "Beneficiary" means the person to whom the share of a
deceased Participant's total account is payable, subject to the restrictions of
Sections 6.2 and 6.6.
1.8 "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
1.9 "Compensation" with respect to any Participant means such
Participant's wages for the Plan Year within the meaning of Code Section 3401(a)
(for the purposes of income tax withholding at the source) but determined
without regard to any rules that limit the remuneration included in wages based
on the nature or location of the employment or the services performed (such as
the exception for agricultural labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation
shall be made by:
(a) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and
Employee contributions described in Code Section 414(h)(2) that
are treated as Employer contributions.
For a Participant's initial year of participation,
Compensation shall be recognized for the entire Plan Year.
-2-
<PAGE>
Compensation in excess of $150,000 shall be disregarded. Such
amount shall be adjusted for increases in the cost of living in accordance with
Code Section 401(a)(17), except that the dollar increase in effect on January 1
of any calendar year shall be effective for the Plan Year beginning with or
within such calendar year. For any short Plan Year the Compensation limit shall
be an amount equal to the Compensation limit for the calendar year in which the
Plan Year begins multiplied by the ratio obtained by dividing the number of full
months in the short Plan Year by twelve (12).
If, in connection with the adoption of this amendment and
restatement, the definition of Compensation has been modified, then, for Plan
Years prior to the Plan Year which includes the adoption date of this amendment
and restatement, Compensation means compensation determined pursuant to the Plan
then in effect.
1.10 "Contract" or "Policy" means any life insurance policy,
retirement income or annuity policy or annuity contract (group or individual)
issued pursuant to the terms of the Plan.
1.11 "Deferred Compensation" with respect to any Participant
means the amount of the Participant's total Compensation which has been
contributed to the Plan in accordance with the Participant's deferral election
pursuant to Section 4.3 excluding any such amounts distributed as excess "annual
additions" pursuant to Section 4.11(a).
1.12 "Designated Investment Alternative" means a specific
investment identified by name by a Fiduciary as an available investment under
the Plan which may be acquired or disposed of by the Trustee pursuant to the
investment direction by a Participant.
1.13 "Directed Investment Option" means one or more of the
following:
(a) a Designated Investment Alternative.
(b) any other investment permitted by the Plan and the
Participant Direction Procedures and acquired or disposed of by
the Trustee pursuant to the investment direction of a
Participant.
1.14 "Early Retirement Date. This Plan does not provide
for a retirement date prior to Normal Retirement Date.
-3-
<PAGE>
1.15 "Elective Contribution" means the Employer contributions to
the Plan of Deferred Compensation excluding any such amounts distributed as
excess "annual additions" pursuant to Section 4.11(a). In addition, the Employer
matching contribution made pursuant to Section 4.2(b) which is used to satisfy
the "Actual Deferral Percentage " tests and any Employer Qualified Non-Elective
Contribution made pursuant to Section 4.7(b) which is used to satisfy the '"
Actual Deferral Percentage" tests shall be considered an Elective Contribution
for purposes of the Plan. Any contributions deemed to be Elective Contributions
(whether or not used to satisfy the "Actual Deferral Percentage" tests) shall be
subject to the requirements of Sections 4.3(b) and 4.3(c) and shall further be
required to satisfy the nondiscrimination requirements of Regulation
1.401(k)-l(b)(5), the provisions of which are specifically incorporated herein
by reference.
1.16 "Eligible Employee" means any Employee.
Employees whose employment is governed by the terms of a
collective bargaining agreement between Employee representatives (within the
meaning of Code Section 7701(a)(46)) and the Employer under which retirement
benefits were the subject of good faith bargaining between the parties will not
be eligible to participate in this Plan unless such agreement expressly provides
for: coverage in this Plan.
Employees of Affiliated Employers shall not be eligible to
participate in this Plan unless such Affiliated Employers have specifically
adopted this Plan in writing.
1.17 "Employee" means any person who is employed by the Employer
or Affiliated Employer. Employee shall include Leased Employees within the
meaning of Code Sections 414(n)(2) and 414(o)(2) unless such Leased Employees
are covered by a plan described in Code Section 414(n)(5) and such Leased
Employees do not constitute more than 20% of the recipient's non-highly
compensated work force.
1.18 "Employer" means National Home Health Care Corp. and any
successor which shall maintain this Plan; and any predecessor which has
maintained this Plan. The Employer is a corporation, with its corporate office
in the State of New York.
1.19 "Excess Aggregate Contributions" means, with respect to any
Plan Year, the excess of the aggregate amount of the Employer matching
contributions made pursuant to Section 4.2(b) (to the extent such matching
contributions are not used to satisfy the "Actual Deferral Percentage" tests)
and any qualified non-elective contributions or elective deferrals taken into
account pursuant to Section 4.8(c) on behalf of Highly Compensated Participants
for such Plan Year, over the maximum amount of such contributions permitted
under the limitations of Section 4.8(a).
1.20 "Excess Contributions" means, with respect to a Plan Year,
the excess of Elective Contributions used to satisfy the "Actual Deferral
Percentage" tests made on behalf of Highly Compensated Participants for the Plan
Year over the maximum amount of such contributions permitted under Section
4.6(a). Excess Contributions shall be treated as an "annual addition" pursuant
to Section 4.10(b).
-4-
<PAGE>
1.21 "Excess Deferred Compensation" means, with respect to any
taxable year of a Participant, the excess of the aggregate amount of such
Participant's Deferred Compensation and the elective deferrals pursuant to
Section 4.3(f) actually made on behalf of such Participant for such taxable
year, over the dollar limitation provided for in Code Section 402(g), which is
incorporated herein by reference. Excess Deferred Compensation shall be treated
as an "annual addition" pursuant to Section 4.10(b) when contributed to the Plan
unless distributed to the affected Participant not later than the first April
15th following the close of the Participant's taxable year. Additionally, for
purposes of Sections 8.2 and 4.5(f), Excess Deferred Compensation shall continue
to be treated as Employer contributions even if distributed pursuant to Section
4.3(f). However, Excess Deferred Compensation of Non-Highly Compensated
Participants is not taken into account for purposes of Section 4.6(a) to the
extent such Excess Deferred Compensation occurs pursuant to Section 4.3(d).
1.22 "Fiduciary" means any person who (a) exercises any
discretionary authority or discretionary control respecting management of the
Plan or exercises any authority or control respecting management or disposition
of its assets, (b) renders investment advice for a fee or other compensation,
direct or indirect, with respect to any monies or other property of the Plan or
has any authority or responsibility to do so, or (c) has any discretionary
authority or discretionary responsibility in the administration of the Plan,
including, but not limited to, the Trustee, the Employer and its representative
body, and the Administrator.
1.23 "Fiscal Year" means the Employer's accounting year of 12
months commencing on August 1st of each year and ending the following July 31st.
1.24 "Forfeiture" means that portion of a Participant's Account
that is not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Terminated Participant's Account, or
(b) the last day of the Plan Year in which the Participant
incurs five (5) consecutive l-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case
of a Terminated Participant whose Vested benefit is zero, such Terminated
Participant shall be deemed to have received a distribution of his Vested
benefit upon his termination of employment. Restoration of such amounts shall
occur pursuant to Section 6.4(g)(2). In addition, the term Forfeiture shall also
include amounts deemed to be Forfeitures pursuant to any other provision of this
Plan.
1.25 "Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any reason.
-5-
<PAGE>
1.26 "415 Compensation" with respect to any Participant means
such Participant's wages for the Plan Year within the meaning of Code Section
3401(a) (for the purposes of income tax withholding at the source) but
determined without regard to any rules that limit the remuneration included in
wages based on the nature or location of the employment or the services
performed (such as the exception for agricultural labor in Code Section
3401(a)(2)).
For Plan Years beginning after December 31, 1997, for purposes
of this Section, the determination of "415 Compensation" shall be made by
including amounts which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3), 402(h)(l)(B), 403(b) or 457(b),
and Employee contributions described in Code Section 414(h)(2) that are treated
as Employer contributions.
If, in connection with the adoption of this amendment and
restatement, the definition of "415 Compensation" has been modified, then, for
Plan Years prior to the Plan Year which includes the adoption date of this
amendment and restatement, "415 Compensation " means compensation determined
pursuant to the Plan then in effect.
1.27 "414(s) Compensation" with respect to any Participant means
such-Participant's "415 Compensation" paid during a Plan Year. The amount of
"414(s) Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(l)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $150,000 shall be
disregarded. Such amount shall be adjusted for increases in the cost of living
in accordance with Code Section 401(a)(17), except that the dollar increase in
effect on January 1 of any calendar year shall be effective for the Plan Year
beginning with or within such calendar year. For any short Plan Year the "414(s)
Compensation" limit shall be an amount equal to the "414(s) Compensation" limit
for the calendar year in which the Plan Year begins multiplied by the ratio
obtained by dividing the number of full months in the short Plan Year by twelve
(12).
If, in connection with the adoption of this amendment and
restatement, the definition of "414(s) Compensation" has been modified, then,
for Plan Years prior to the Plan Year which includes the adoption date of this
amendment and restatement, "414(s) Compensation" means compensation determined
pursuant to the Plan then in effect.
1.28 "Highly Compensated Employee" means, for Plan Years
beginning after December 31, 1996, an Employee described in Code Section 414(q)
and the Regulations thereunder, and generally means an Employee who performed
services for the Employer during the "determination year" and is in one or more
of the following groups:
-6-
<PAGE>
(a) Employees who at any time during the "determination
year" or "look-back year" were "five percent owners as defined in
Section 1.34(c).
(b) Employees who received "415 Compensation" 'during the
"look-back year " from the Employer in excess of $80,000.
(c) The "determination year" shall be the Plan Year for
which testing is being performed, and the "look-back year" shall
be the immediately preceding twelve-month period.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(l)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amount specified in (b) above shall be adjusted at such time
and in the same manner as under Code Section 415(d), except that the base period
shall be the calendar quarter ending September 30, 1996. In the case of such an
adjustment, the dollar limit which shall be applied is the limit for the
calendar year in which the "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees
who are non-resident aliens and who received no earned income (within the
meaning of Code Section 911(d)(2)) from the Employer constituting United States
source income within the meaning of Code Section 861(a)(3) shall not be treated
as Employees. Additionally, all Affiliated Employers shall be taken into account
as a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year."
1.29 "Highly Compensated Former Employee" means a former Employee
who had a separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
"determination year" after attaining age 55. Notwithstanding the foregoing, an
Employee who separated from service prior to 1987 will be treated as a Highly
Compensated Former Employee only if during the separation year (or year
preceding the separation year) or any year after the Employee attains age 55 (or
the last year ending before the Employee's 55th birthday), the Employee either
received "415 Compensation" in excess of $50,000 or was a "five percent owner."
For purposes of this Section, "determination year," "415 Compensation" and "five
percent owner" shall be determined in accordance with Section 1.28. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees.
The method set forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and consistent basis
for all purposes for which the Code Section 414(q) definition is applicable.
-7-
<PAGE>
1.30 "Highly Compensated Participant" means any Highly
Compensated Employee who is eligible to participate in the Plan.
1.31 "Hour of Service" means (1) each hour for which an Employee
is directly or indirectly compensated or entitled to compensation by the
Employer for the performance of duties (these hours will be credited to the
Employee for the computation period in which the duties are performed); (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the
employment-relationship has terminated) for reasons other than performance of
duties (such as vacation, holidays, sickness, jury duty, disability, lay-off,
military duty or leave of absence) during the applicable computation period
(these hours will be calculated and credited pursuant to Department of Labor
regulation 2530.200b-2 which is incorporated herein by reference); (3) each hour
for which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages (these hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made).
The same Hours of Service shall not be credited both under (1) or (2), as the
case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of
Service are required to be credited to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period); (ii) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, on account of a
period during which no duties are performed is not required to be credited to
the Employee if such payment is made or due under a plan maintained solely for
the purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be
made by or due from the Employer regardless of whether such payment is made by
or due from the Employer directly, or indirectly through, among others, a trust
fund, or insurer, to which the Employer contributes or pays premiums and
regardless of whether contributions made or due to the trust fund, insurer, or
other entity are for the benefit of particular Employees or are on, behalf of a
group of Employees in the aggregate.
For purposes of this Section, Hours of Service will be
credited for employment with other Affiliated Employers. The provisions of
Department of Labor regulations 2530.200b-2(b) and (c) are incorporated herein
by reference.
-8-
<PAGE>
1.32 "Income" means the income or losses allocable to "excess
amounts" which shall equal the allocable gain or loss for the applicable
computation period". The income allocable to "excess amounts" for the
"applicable computation period" is determined by multiplying the income for the
"applicable computation period" by a fraction. The numerator of the fraction is
the "excess amount" for the "applicable computation period." The denominator of
the fraction is the total "account balance" attributable to "Employer
contributions" as of the end of the "applicable computation period", reduced by
the gain allocable to such total amount for the "applicable computation period"
and increased by the loss allocable to such total amount for the "applicable
computation period". The provisions of this Section shall be applied:
(a) For purposes of Section 4.3(f), by substituting:
(1) Excess Deferred Compensation" for "excess amounts";
(2) "taxable year of the Participant" for "applicable
computation period";
(3) "Deferred Compensation" for "Employer
contributions"; and
(4) "Participant's Elective Account" for "account
balance."
(b) For purposes of Section 4.7(a), by substituting:
(1) "Excess Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation period";
(3) "Elective Contributions" for "Employer
contributions'"; and
(4) "Participant '8 Elective Account" for "account
balance."
(c) For purposes of Section 4.9(a), by substituting:
(1) "Excess Aggregate Contributions" for "excess
amounts";
(2) "Plan Year" for "applicable computation period";
(3) "Employer matching contributions made pursuant to
Section 4.2(b) (to the extent such matching contributions
are not used to satisfy the "Actual Deferral Percentage"
tests) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section
4.8(c)" for "Employer contributions"; and
(4) "Participant's Account" for "account balance."
-9-
<PAGE>
Income allocable to any distribution of Excess Deferred
Compensation on or before the last day of the taxable year of the Participant
shall be calculated from the first day of the taxable year of the Participant to
the date on which the distribution is made pursuant to either the "fractional
method" or the "safe harbor method." Under such "safe harbor method," allocable
Income for such period shall be deemed to equal ten percent (10%) of the Income
allocable to such Excess Deferred Compensation multiplied by the number of
calendar months in such period. For purposes of determining the number of
calendar months in such period, a distribution occurring on or before the
fifteenth day of the month shall be treated as having been made on the last day
of the preceding month and a distribution occurring after such fifteenth day
shall be treated as having been made on the first day of the next subsequent
month.
1.33 "Investment Manager" means an entity that (a) has the power
to manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.34 "Key Employee " means an Employee as defined in Code Section
416(i) and the Regulations thereunder. Generally, any Employee or former
Employee (as well as each of his Beneficiaries) is considered a Key Employee if
he, at any time during the Plan Year that contains the "Determination Date" or
any of the preceding four (4) Plan Years, has been included in one of the
following categories:
(a) an officer of the Employer (as that term is defined
within the meaning of the Regulations under Code Section
416) having annual "415 Compensation" greater than 50
percent of the amount in effect under Code Section
415(b)(l)(A) for any such Plan Year.
(b) one of the ten employees having annual "415
Compensation" from the Employer for a Plan Year greater than
the dollar limitation in effect under Code Section
415(c)(l)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning 10 within the
meaning of Code Section 318) both more than one-half percent
interest and the largest interests in the Employer.
(c) a "five percent owner" of the Employer. "Five
percent owner" means any person who owns (or is considered
as owning within the meaning of Code Section 318) more than
five percent (5%) of the outstanding stock of the Employer
or stock possessing more than five percent (5%) of the total
combined voting power of all stock of the Employer or, in
the case of an unincorporated business, any person who owns
more than five percent (5%) of the capital or profits
interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o)
shall be treated as separate employers.
(d) a "one percent owner" of the Employer having an
annual "415 Compensation" from the Employer of more than
$150,000. "One percent owner " means any person who owns (or
is considered as owning within the meaning of Code Section
-10-
<PAGE>
318) more than one percent (1%) of the outstanding stock of
the Employer or stock possessing more than one percent (1%)
of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any
person who owns more than one percent (1%) of the capital or
profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o)
shall be treated as separate employers. However, in
determining whether an individual has "415 Compensation" of
more than $150,000, "415 Compensation" from each employer
required to be aggregated under Code Sections 414(b), (c),
(m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(l)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
1.35 "Late Retirement Date" means the first day of the month
coinciding with or next following a Participant's actual Retirement Date after
having reached his Normal Retirement Date.
1.36 "Leased Employee" means, for Plan Years beginning after
December 31, 1996, any person (other than an Employee of the recipient) who
pursuant to an agreement between the recipient and any other person (" leasing
organization") has performed services for the recipient (or for the recipient
and related persons determined in accordance with Code Section 414(n)(6)) on a
substantially full time basis for a period of at least one year, and such
services are performed under primary direction or control by the recipient
employer. Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to services performed for the recipient
employer shall be treated as provided by the recipient employer. A Leased
Employee shall not be considered an Employee of the recipient:
(a) if such employee is covered by a money purchase pension plan
providing:
(1) a non-integrated employer contribution rate of at least
10% of compensation, as defined in Code Section 415(c)(3), but
including amounts which are contributed by the Employer pursuant
to a salary reduction agreement and which are not includible in
the gross income of the Participant under Code Sections 125,
402(e)(3), 402(h)(l)(B), 403(b) or 457(b), and Employee
contributions described in Code Section 414(h)(2) that are
treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
-11-
<PAGE>
(b) if Leased Employees do not constitute more than 20% the
recipient's non-highly compensated work force.
1.37 "Net Profit" means with respect to any Fiscal Year the
Employer's net income or profit for such Fiscal Year determined upon the basis
of the Employer's books of account in accordance with generally accepted
accounting principles, without any reduction for taxes based upon income, or for
contributions made by the Employer to this Plan.
1.38 "Non-Elective Contribution" means the Employer contributions
to the Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.3, matching contributions (which are
used in the "Actual Deferral Percentage " tests) made pursuant to Section 4.2(b)
and any Qualified Non-Elective Contribution used in the "Actual Deferral
Percentage" tests.
1.39 "Non-Highly Compensated Participant" means any Participant
who is not a Highly Compensated Employee. However, for the Plan Year prior to
the first Plan Year of this amendment and restatement, for the purposes of
Section 4.6(a) and Section 4.7, if the prior year testing method is used, a
Non-Highly Compensated Participant shall be determined using the definition of
highly compensated employee in effect for the preceding Plan Year.
1.40 "Non-Key Employee" means any Employee or former Employee
(and his Beneficiaries) who is not a Key Employee.
1.41 "Normal Retirement Age" means the Participant's 65th
birthday. A Participant shall become fully Vested in his Participant's Account
upon attaining his Normal Retirement Age.
1.42 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's Normal Retirement Age.
1.43 "l-Year Break in Service" means the applicable computation
period during which an Employee has not completed more than 500 Hours of Service
with the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a l-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and l-Year Breaks in Service shall be
measured on the same computation period.
"Authorized leave of absence" means an unpaid, temporary
cessation from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
A "maternity or paternity leave of absence" means, for Plan
Years beginning after December 31, 1984, an absence from work for any period by
reason of the Employee's pregnancy, birth of the Employee's child, placement of
a child with the Employee in connection with the adoption of such child, or any
absence for the purpose of caring for such child for a period immediately
following such birth or placement. For this purpose, Hours of Service shall be
-12-
<PAGE>
credited for the computation period in which the absence from work begins, only
if credit therefore is necessary to prevent the Employee from incurring a l-Year
Break in Service, in any other case, in the immediately following computation
period. The Hours of Service credited for a "maternity or paternity leave of
absence" shall be those which would normally have been credited but for such
absence, or, in any case in which the Administrator is unable to determine such
hours normally credited, eight (8) Hours of Service per day. The total Hours of
Service required to be credited for a "maternity or paternity leave of absence"
shall not exceed 501.
1.44 "Participant" means any Eligible Employee who participates
in the Plan and has not for any reason become ineligible to participate further
in the Plan.
1.45 "Participant Direction Procedure" means such instructions,
guidelines or policies, the terms of which are incorporated herein, as shall be
established pursuant to Section 4.12 and observed by the Administrator and
applied and provided to Participants who have Participant Directed Accounts.
1.46 "Participant's Account" means the account established and,
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer Non-Elective
Contributions.
A separate accounting shall be maintained with respect to that
portion of the Participant's Account attributable to Employer matching
contributions made pursuant to Section 4.2(b), Employer discretionary
contributions made pursuant to Section 4.2(c) and any Employer Qualified
Non-Elective Contributions.
1.47 "Participant's Combined Account" means the total aggregate
amount of each Participant's Elective Account and Participant's Account.
1.48 (a) "Participant's Directed Account" means that portion of a
Participant's interest in the Plan with respect to which the Participant has
directed the investment in accordance with the Participant Direction Procedure.
This portion is designated as Account A.
(b) "Participant's Non-Directed Account" means that portion
of the Participant's interest in the Plan with respect to which
the Trustee has directed the investment. This portion is
designated as Account B or Account C.
1.49 "Participant's Elective Account" means the account
established and maintained by the Administrator for each Participant with
respect to his total interest in the Plan and Trust resulting from the Employer
Elective Contributions used to satisfy the "Actual Deferral Percentage" tests. A
separate accounting shall be maintained with respect to that portion of the
Participant's Elective Account attributable to such Elective Contributions
pursuant to Section 4.3, Employer matching contributions made pursuant to
Section 4.2(b) and any Employer Qualified Non-Elective Contributions.
1.50 "Plan" means this instrument, including all amendments
thereto.
-13-
<PAGE>
1.51 "Plan Year" means the Plan's accounting year of twelve (12)
months commencing on January 1st of each year and ending the following December
31st.
1.52 "Qualified Non-Elective Contribution" means any Employer
contributions made pursuant to Section 4.7(b) and Section 4.9(f). Such
contributions shall be considered an Elective Contribution for the purposes of
the Plan and used to satisfy the "Actual Deferral Percentage" tests or the
"Actual Contribution Percentage" tests.
1.53 "Regulation" means the Income Tax Regulations as promulgated
by the Secretary of the Treasury or his delegate, and as amended from time to
time.
1.54 "Retired Participant" means a person who has been a
Participant, but who has become entitled to retirement benefits under the Plan.
1.55 "Retirement Date" means the date as of which a Participant
Disability retires for reasons other than Total and Permanent whether such
retirement occurs on a Participant's Normal Retirement Date or Late Retirement
Date (see Section 6.1).
1.56 "Super Top Heavy Plan" means a plan described in Section
8.2(b).
1.57 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than by death, Total
and Permanent Disability or retirement.
1.58 "Top Heavy Plan" means a plan described in Section 8.2(a).
1.59 "Top Heavy Plan Year" means a Plan Year during which the
Plan is a Top Heavy Plan.
1.60 "Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing his usual and customary
employment with the Employer. The disability of a Participant shall be
determined by a licensed physician chosen by the Administrator. The
determination shall be applied uniformly to all Participants.
1.61 "Trustee" means the person or entity named as trustee herein
or in any separate trust forming a part of this Plan, and any successors.
1.62 "Trust Fund" means the assets of the Plan and Trust as the
same shall exist from time to time.
1.63 "USERRA" means the Uniformed Services Employment and
Reemployment Rights Act of 1994. Notwithstanding any provision of this Plan to
the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Code Section
414(u).
-14-
<PAGE>
1.64 "Valuation Date" means the last day of each calendar quarter
and such other date or dates deemed necessary by the Administrator. The
Valuation Date may include any day during the Plan Year that the Trustee, any
transfer agent appointed by the Trustee or the Employer and any stock exchange
used by such agent are open for business.
1.65 "Vested" means the non-forfeitable portion of any account
maintained on behalf of a Participant.
1.66 "Year of Service" means the computation period of twelve
(12) consecutive months, herein set forth, during which an Employee has at least
1000 Hours of Service.
For vesting purposes, the computation periods shall be the Plan
Year, including periods prior to the Effective Date of the Plan.
The computation period shall be the Plan Year if not otherwise
set forth herein.
Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c).
Years of Service with Health Acquisition Corp., Nurse Care, Inc.,
New England Home Care, Inc., National HMO (New York), Inc., Accredited Health
Services, Inc. during the time a qualified plan was maintained shall be
recognized.
Years of Service with any Affiliated Employer shall be
recognized.
ARTICLE II
ADMINISTRATION
2.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) In addition to the general powers and responsibilities
otherwise provided for in this Plan, the Employer shall be
empowered to appoint and remove the Trustee and the Administrator
from time to time as it deems necessary for the proper
administration of the Plan to ensure that the Plan is being
operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code,
and the Act. The Employer may appoint counsel, specialists,
advisers, agents (including any nonfiduciary agent) and other
persons as the Employer deems necessary or desirable in
connection with the exercise of its fiduciary duties under this
Plan. The Employer may compensate such agents or advisers from
the assets of the Plan as fiduciary expenses (but not including
any business (settlor) expenses of the Employer), to the extent
not paid by the Employer.
-15-
<PAGE>
(b) The Employer may, by written agreement or designation,
appoint at its option an Investment Manager (qualified under the
Investment Company Act of 1940 as amended), investment adviser,
or other agent to provide direction to the Trustee with respect
to any or all of the Plan assets. Such appointment shall be given
by the Employer in writing in a form acceptable to the Trustee
and shall specifically identify the Plan assets with respect to
which the Investment Manager or other agent shall have authority
to direct the investment.
(c) The Employer shall establish a "funding policy and
method," i. e., it shall determine whether the Plan has a short
run need for liquidity (e. g., to pay benefits) or whether
liquidity is a long run goal and investment growth (and stability
of same) is a more current need, or shall appoint a qualified
person to do so. The Employer or its delegate shall communicate
such needs and goals to the Trustee, who shall coordinate such
Plan needs with its investment policy. The communication of such
a "funding policy and method" shall not, however, constitute a
directive to the Trustee as to investment of the Trust Funds.
Such "funding policy and method" shall be consistent with the
objectives of this Plan and with the requirements of Title I of
the Act.
(d) The Employer shall periodically review the performance
of any Fiduciary or other person to whom duties have been
delegated or allocated by it under the provisions of this Plan or
pursuant to procedures established hereunder. This requirement
may be satisfied by formal periodic review by the Employer or by
a qualified person specifically designated by the Employer,
through day-to-day conduct and evaluation, or through other
appropriate ways.
2.2 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall be the Administrator. The Employer may appoint
any person, including, but not limited to, the Employees of the Employer, to
perform the duties of the Administrator. Any person so appointed shall signify
his acceptance by filing written acceptance with the Employer. Upon the
resignation or removal of any individual performing the duties of the
Administrator, the Employer may designate a successor.
2.3 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer
the Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall administer
the Plan in accordance with its terms and shall have the power and discretion to
construe the terms of the Plan and to determine all questions arising in
connection with the administration, interpretation, and application of the Plan.
Any such determination by the Administrator shall be conclusive and binding upon
all persons. The Administrator may establish procedures, correct any defect,
supply any information, or reconcile any inconsistency in such manner and to
such extent as shall be deemed necessary or advisable to carry out the purpose
of the Plan; provided, however, that any procedure, discretionary act,
interpretation or construction shall be done in a nondiscriminatory manner based
-16-
<PAGE>
upon uniform principles consistently applied and shall be consistent with the
intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to
the eligibility of Employees to participate or remain a
Participant hereunder and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect
to the amount and the kind of benefits to which any Participant
shall be entitled hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the
Trust;
(d) to maintain all necessary records for the administration
of the Plan;
(e) to interpret the provisions of the Plan and to make and
publish such rules for regulation of the Plan as are consistent
with the terms hereof;
(f) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from
which such Contract shall be purchased;
(g) to compute and certify to the Employer and to the
Trustee from time to time the sums of money necessary or
desirable to be contributed to the Plan;
(h) to consult with the Employer and the Trustee regarding
the short and long-term liquidity needs of the Plan in order that
the Trustee can exercise any investment discretion in a manner
designed to accomplish specific objectives;
(i) to prepare and implement a procedure to notify Eligible
Employees that they may elect to have a portion of their
Compensation deferred or paid to them in cash;
(j) to act as the named Fiduciary responsible for
communications with Participants as needed to maintain Plan
compliance with ERISA Section 404(c), including but not limited
to the receipt and transmitting of Participant's directions as to
the-investment of their account(s) under the Plan and the
formulation of policies, rules, and procedures, pursuant to which
Participants may give investment instructions with respect to the
investment of their accounts;
-17-
<PAGE>
(k) to assist any Participant regarding his rights,
benefits, or elections available under the Plan.
2.4 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and
shall keep all other books of account, records, policies, and other data that
may be necessary for proper administration of the Plan and shall be responsible
for supplying all information and reports to the Internal Revenue Service,
Department of Labor, Participants, Beneficiaries and others as required by law.
2.5 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, agents (including
nonfiduciary agents) and other persons as the Administrator or the Trustee deems
necessary or desirable in connection with the administration of this Plan,
including but not limited to agents and advisers to assist with the
administration and management of the Plan, and thereby to provide, among such
other duties as the Administrator may appoint, assistance with maintaining Plan
records and the providing of investment information to the Plan's investment
fiduciaries and to Plan Participants.
2.6 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses incident
to the functioning of the Administrator, or any person or persons retained or
appointed by any Named Fiduciary incident to the exercise of their duties under
the Plan, including, but not limited to, fees of accountants, counsel,
Investment Managers, agents (including nonfiduciary agents) appointed for the
purpose of assisting the Administrator or the Trustee in carrying out the
instructions of Participants as to the directed investment of their accounts and
other specialists and their agents, and other costs of administering the Plan.
Until paid, the expenses shall constitute a liability of the Trust Fund.
2.7 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with
the Administrator. Written notice of the disposition of a claim shall be
furnished to the claimant within 90 days after the application is filed. In the
event the claim is denied, the reasons for the denial shall be specifically set
forth in the notice in language calculated to be understood by the claimant,
pertinent provisions of the Plan shall be cited, and, where appropriate, an
explanation as to how the claimant can perfect the claim will be provided. In
addition, the claimant shall be furnished with an explanation of the Plan's
claims review procedure.
2.8 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has
been denied a benefit by a decision of the Administrator pursuant to Section 2.7
shall be entitled to request the
-18-
<PAGE>
Administrator to give further consideration to his claim by filing with the
Administrator (on a form which may be obtained from the Administrator) a request
for a hearing. Such request, together with a written statement of the reasons
why the claimant believes his claim should be allowed, shall be filed with the
Administrator no later than 60 days after receipt of the written notification
provided for in Section 2.7. The Administrator shall then conduct a hearing
within the next 60 days, at which the claimant may be represented by an attorney
or any other representative of his choosing and at which the claimant shall have
an opportunity to submit written and oral evidence and arguments in support of
his claim. At the hearing (or prior thereto upon 5 business days written notice
to the Administrator) the claimant or his representative shall have an
opportunity to review all documents in the possession of the Administrator which
are pertinent to the claim at issue and its disallowance. Either the claimant or
the Administrator may cause a court reporter to attend the hearing and record
the proceedings. In such event, a complete written transcript of the proceedings
shall be furnished to both parties by the court reporter. The full expense of
any such court reporter and such transcripts shall be borne by the party causing
the court reporter to attend the hearing. A final decision as to the allowance
of the claim shall be made by the Administrator within 60 days of receipt of the
appeal (unless there has been an extension of 60 days due to special
circumstances, provided the delay and the special circumstances occasioning it
are communicated to the claimant within the 60 day period). Such communication
shall be written in a manner calculated to be understood by the claimant and
shall include specific reasons for the decision and specific references to the
pertinent Plan provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Effective January 1, 1999, any Eligible Employee who has
completed six (6) months of service and has attained age 21 shall be eligible to
participate hereunder as of the date he has satisfied such requirements.
However, any Employee who was a Participant in the Plan prior to the effective
date of this amendment and restatement shall continue to participate in the
Plan.
Notwithstanding the above, effective April 1, 1997, any Eligible
Employee who has completed one (1) year of service and has attained age 21 shall
be eligible to participate hereunder as of the date he has satisfied such
requirements.
Notwithstanding the above, any Eligible Employee who was employed
by the Company prior to April 1, 1997 is eligible to participate in the Plan
after attainment of age 18 and (6) months of service.
3.2 EFFECTIVE DATE OF PARTICIPATION
Effective April 1, 1997, an Eligible Employee shall become a
Participant effective as of the first day of each Plan Year quarter coinciding
with or next following the date such
-19-
<PAGE>
Employee met the eligibility requirements of Section 3.1, provided said Employee
was still employed as of such date, (as of the date of rehire if a l-Year Break
in Service has not occurred).
Notwithstanding the above, prior to April 1,1997, an Eligible
Employee became a Participant effective the January 1st or July 1st coinciding
with or next following the date such Employee met the eligibility requirements.
In the event an Employee who is not a member of an eligible class
of Employees becomes a member of an eligible class, such Employee will
participate at next entry date if such Employee has satisfied the minimum age
and service requirements and would have otherwise previously become a
Participant.
3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each
Employee for participation in the Plan based upon information furnished by the
Employer. Such determination shall be conclusive and binding upon all persons,
as long as the same is made pursuant to the Plan and the Act. Such determination
shall be subject to review per Section 2.8.
3.4 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
classification of an Eligible Employee to an ineligible Employee,
such Former Participant shall continue to vest in his interest in
the Plan for each Year of Service completed while a noneligible
Employee, until such time as his Participant's Account shall be
forfeited or distributed pursuant to the terms of the Plan.
Additionally, his interest in the Plan shall continue to share in
the earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an
eligible class of Employees and becomes ineligible to
participate, such Employee will participate immediately upon
returning to an eligible class of Employees.
3.5 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
3.6 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously included and discovery of
such incorrect inclusion is not
-20-
<PAGE>
made until after a contribution for the year has been made, the Employer shall
not be entitled to recover the contribution made with respect to the ineligible
person regardless of whether or not a deduction is allowable with respect to
such contribution. In such event, the amount contributed with respect to the
ineligible person shall constitute a Forfeiture (except for Deferred
Compensation which shall be distributed to the ineligible person) for the Plan
Year in which the discovery is made.
3.7 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate must
be communicated to the Employer, in writing, at least fifteen (15) days before
the beginning of a Plan entry date.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 INVESTMENT OF TRUST FUNDS
The investment of the Trust Fund shall be made in accordance with
the provisions of the Trust Agreement between the Trustee or Trustees and the
Employer, and to the extent provided herein, in accordance with the elections
made by the Participants in the Plan.
4.2 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction elections of
all Participants made pursuant to Section 4.3(a), which amount
shall be deemed an Employer Elective Contribution.
(b) Effective January 1, 1999, on behalf of each Participant
who is eligible to share in matching contributions for the Plan
Year, a matching contribution equal to 100% of the first 3% of
each such Participant's Deferred Compensation, plus 50% of the
next 2% of each such Participant's Deferred Compensation which
amount shall be deemed an Employer Elective Contribution.
Prior to January 1, 1999, for each Plan Year, the Employer
shall contribute on behalf of each Participant an amount equal to
100% of each such Participant's Deferred Compensation.
Except, however, in applying the matching percentage
specified above, only salary reductions up to 2.5% of annual
Compensation shall be considered.
(c) A discretionary amount out of its current or accumulated
Net Profits, which amount, if any, shall be deemed an Employer
Non-Elective Contribution.
-21-
<PAGE>
(d) Additionally, to the extent necessary, the Employer
shall contribute to the Plan the amount necessary to provide the
top heavy minimum contribution. All contributions by the Employer
shall be made in cash.
4.3 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 1% to 15% of
his Compensation which would have been received in the Plan Year,
but for the deferral election. A deferral election (or
modification of an earlier election) may not be made with respect
to Compensation which is currently available on or before the
date the Participant executed such election. For purposes of this
Section, Compensation shall be determined prior to any reductions
made pursuant to Code Sections 125, 402(e)(3), 402(h)(l)(B),
403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
(b) The amount by which Compensation is reduced shall be
that Participant's Deferred Compensation and be treated as an
Employer Elective Contribution and allocated to that
Participant's Elective Account.
(c) The balance in each Participant's Elective Account shall
be fully Vested at all times and shall not be subject to
Forfeiture for any reason.
(d) Notwithstanding anything in the Plan to the contrary,
amounts held in the Participant's Elective Account may not be
distributable (including any offset of loans) earlier than:
(1) a Participant's separation from service, Total and
Permanent Disability, or death;
(2) a Participant's attainment of age 59 l/2;
(3) the termination of the Plan without the
establishment or existence of a "successor plan," as that
term is described in Regulation 1.401(k)-l(d)(3);
(4) the date of disposition by the Employer to an
entity that is not an Affiliated Employer of substantially
all of the assets (within the meaning of Code Section
409(d)(2)) used in a trade or business of such corporation
if such corporation continues to maintain this Plan after
the disposition with respect to a Participant who continues
employment with the corporation acquiring such assets;
(5) the date of disposition by the Employer or an
Affiliated Employer who maintains the Plan of its interest
in a subsidiary (within the meaning of Code Section
409(d)(3)) to an entity which is not an Affiliated Employer
-22-
<PAGE>
but only with respect to a participant who continues
employment with such subsidiary; or
(6) the proven financial hardship of a Participant,
subject to the limitations of Section 6.10.
(e) For each Plan Year, a Participant's Deferred
Compensation made under this Plan and all other plans, contracts
or arrangements of the Employer maintaining this Plan shall not
exceed, during any taxable year of the Participant, the
limitation imposed by Code Section 402(g), as in effect at the
beginning of such taxable year. If such dollar limitation is
exceeded, a Participant will be deemed to have notified the
Administrator of such excess amount which shall be distributed in
a manner consistent with Section 4.3(f). The dollar limitation
shall be adjusted annually pursuant to the method provided in
Code Section 415(d) in accordance with Regulations.
(f) In the event a Participant has received a hardship
distribution from his Participant's Elective Account pursuant to
Section 6.10(c) or pursuant to Regulation 1.401(k)-l(d)(z)(iv)(B)
from any other plan maintained by the Employer, then such
Participant shall not be permitted to elect to have Deferred
Compensation contributed to the Plan on his behalf for a period
of twelve (12) months following the receipt of the distribution.
Furthermore, the dollar limitation under Code Section 402(g)
shall be reduced, with respect to the Participant's taxable year
following the taxable year in which the hardship distribution was
made, by the amount of such Participant's Deferred Compensation,
if any, pursuant to this Plan (and any other plan maintained by
the Employer) for the taxable year of the hardship distribution.
(g) If a Participant's Deferred Compensation under this Plan
together with any elective deferrals (as defined in Regulation
1.402(g)-l(b)) under another qualified cash or deferred
arrangement (as defined in Code Section 401(k)), a simplified
employee pension. (as defined in Code Section 408(k)), a salary
reduction arrangement (within the meaning of Code Section
3121(a)(5)(D)), a deferred compensation plan under Code Section
457(b), or a trust described in Code Section 501(c)(18)
cumulatively exceed the limitation imposed by Code Section 402(g)
(as adjusted annually in accordance with the method provided in
Code Section 415(d) pursuant to Regulations) for such
Participant's taxable year, the Participant may, not later than
March 1 following the close of the Participant's taxable year
notify the Administrator in writing of such excess and request
that his Deferred Compensation under this Plan be reduced by an
amount specified by the Participant. In such event, the
Administrator may direct the Trustee to distribute such excess
amount (and any Income allocable to such excess amount) to the
Participant not later than the first April 15th following the
close of the Participant's taxable year. Any distribution of less
than the entire amount of Excess Deferred Compensation and Income
shall be treated as a pro rata
-23-
<PAGE>
distribution of Excess Deferred Compensation and Income. The
amount distributed shall not exceed the Participant's Deferred
Compensation under the Plan for the taxable year (and any Income
allocable to such excess amount). Any distribution on or before
the last day of the Participant's taxable year must satisfy each
of the following conditions:
(1) the distribution must be made after the date on which
the Plan received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as
Excess Deferred Compensation; and
(3) the Plan must designate the distribution as a
distribution of Excess Deferred Compensation. Any distribution
made pursuant to this Section 4.3(f) shall be made first from
unmatched Deferred Compensation and, thereafter, from Deferred
Compensation which is matched. Matching contributions which
relate to such Deferred Compensation shall be forfeited.
(h) Notwithstanding Section 4.3(f) above, a Participant's Excess
Deferred Compensation shall be reduced, but not below zero, by any
distribution of Excess Contributions pursuant to Section 4.7(a) for
the Plan Year beginning with or within the taxable year of the
Participant.
(i) At Normal Retirement Date, or such other date when the
Participant shall be entitled to receive benefits, the fair market
value of the Participant's Elective Account shall be used to provide
additional benefits to the Participant or his Beneficiary.
(j) Employer Elective Contributions made pursuant to this Section
may be segregated into a separate account for each Participant in a
federally insured savings account, certificate of deposit in a bank or
savings and loan association, money market-certificate, or other
short-term debt security acceptable to the Trustee until such time as
the allocations pursuant to Section 4.5 have been made.
(k) The Employer and the Administrator shall implement the salary
reduction elections provided for herein in accordance with the
following:
(1) A Participant must make his initial salary deferral
election no later than fifteen (15) days prior to the next entry
date. If the Participant fails to make an initial salary deferral
election within such time, then such Participant may thereafter
make an election in accordance with the rules governing
modifications. The Participant shall make such an election by
entering into a written salary reduction agreement with the
-24-
<PAGE>
Employer and filing such agreement with the Administrator. Such
election shall initially be effective beginning with the pay
period following the acceptance of the salary reduction agreement
by the Administrator, shall not have retroactive effect and shall
remain in force until revoked.
(2) A Participant may modify a prior election during the
Plan Year and concurrently make a new election by filing a
written notice with the Administrator within fifteen (15) days
prior to the next entry date for which such modification is to be
effective. However, modifications to a salary deferral election
shall only be permitted quarterly, during election periods
established by the Administrator prior to the first day of each
Plan Year quarter. Any modification shall not have retroactive
effect and shall remain in force until revoked.
(3) A Participant may elect to prospectively revoke his
salary reduction agreement in its entirety at any time during the
Plan Year by providing the Administrator with fifteen (15) days
written notice of such revocation (or upon such shorter notice
period as may be acceptable to the Administrator). Such
revocation shall become effective as of the beginning of the
first pay period coincident with or next following the expiration
of the notice period. Furthermore, the termination of the
Participant's employment, or the cessation of participation for
any reason, shall be deemed to revoke any salary reduction
agreement then in effect, effective immediately following the
close of the pay period within which such termination or
cessation occurs.
4.4 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution
to the Plan for each Plan Year within the time prescribed by law, including
extensions of time, for the filing of the Employer federal income tax return for
the Fiscal Year.
However, Employer Elective Contributions accumulated through
payroll deductions shall be paid to the Trustee as of the earliest date on which
such contributions can reasonably be segregated from the Employer general
assets, but in any event within ninety (90) days from the date on which such
amounts would otherwise have been payable to the Participant in cash. The
provisions of Department of Labor regulations 2510.3-102 are incorporated herein
by reference. Furthermore, any additional Employer contributions which are
allocable to the Participant's Elective Account for a Plan Year shall be paid to
the Plan no later than the twelve-month period immediately following the close
of such Plan Year.
4.5 ALLOCATION OF CONTRIBUTIONS, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an
account in the name of each Participant to which the
Administrator shall credit as of each Valuation Date all amounts
allocated to each such Participant as set forth herein.
-25-
<PAGE>
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper
allocation of the Employer contributions for each Plan Year.
Within a reasonable period of time after the date of receipt by
the Administrator of such information, the Administrator shall
allocate such contribution as follows:
(1) With respect to the Employer Elective Contribution
made pursuant to Section 4.2(a), to each Participant's
Elective Account in an amount equal to each such
Participant's Deferred Compensation for the year.
This contribution will be made to Account (A).
(2) With respect to the Employer Elective Contribution
made pursuant to Section 4.2(b), to each Participant's
Elective Account when used to satisfy the "Actual Deferral
Percentage" tests or Participant's Account in accordance
with Section 4.2(b).
The matching contribution will be made to Account (B).
Any Participant actively employed during the Plan Year
shall be eligible to share in the matching contribution for
the Plan Year.
(3) With respect to the Employer Non-Elective
Contribution made pursuant to Section 4.2(c), to each
Participant's Account in the same proportion that each such
Participant's Compensation for the year bears to the total
Compensation of all Participants for such year.
This contribution will be made to Account (C).
Only Participants who are actively employed on the last
day of the Plan Year shall be eligible to share in the
discretionary contribution for the year.
(c) As of each Anniversary Date any amounts which became
Forfeitures since the last Anniversary Date shall first be made
available to reinstate previously forfeited account balances of Former
Participants, if any, in accordance with Section 6.4(g)(2). The
remaining Forfeitures, if any, shall be used to reduce the
contribution of the Employer hereunder for the Plan Year in which such
Forfeitures occur in the following manner:
(1) Forfeitures attributable to Employer matching
contributions made pursuant to Section 4.2(b) shall be used to
reduce the Employer contribution for the Plan Year in which such
Forfeitures occur.
-26-
<PAGE>
(2) Forfeitures attributable to Employer discretionary
contributions made pursuant to Section 4.2(c) shall be used to
reduce the Employer contribution for the Plan Year in which such
Forfeitures occur.
(d) For any Top Heavy Plan Year, Non-Key Employees not otherwise
eligible to share in the allocation of contributions as provided
above, shall receive the minimum allocation provided for in Section
4.5(f) if eligible pursuant to the provisions of Section 4.5(h).
(e) As of each Valuation Date, before allocation of one-half of
the Employer contributions for the entire Plan Year, any earnings or
losses (net appreciation or net depreciation) of the Trust Fund shall
be allocated in the same proportion that each Participant's and Former
Participant's nonsegregated accounts bear to the total of all
Participants' and Former Participants nonsegregated accounts as of
such date. Earnings or losses with respect to a Participant's Directed
Account shall be allocated in accordance with Section 4.12.
(f) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of
the Employer contributions allocated to the Participant's Combined
Account of each Non-Key Employee shall be equal to at least three
percent (3%) of such Non-Key Employee's "415 Compensation" (reduced by
contributions and forfeitures, if any, allocated to each Non-Key
Employee in any defined contribution plan included with this plan in a
Required Aggregation Group). However, if (1) the sum of the Employer
contributions allocated to the Participant's Combined Account of each
Key Employee for such Top Heavy Plan Year is less than three percent
(3%) of each Key Employee's "415 Compensation" and (2) this Plan is
not required to be included in an Aggregation Group to enable a
defined benefit plan to meet the requirements of Code Section
401(a)(4) or 410, the sum of the Employer contributions allocated to
the Participant's Combined Account of each Non-Key Employee shall be
equal to the largest percentage allocated to the Participant's
Combined Account of any Key Employee. However, in determining whether
a Non-Key Employee has received the required minimum allocation, such
Non-Key Employee's Deferred Compensation and matching contributions
needed to satisfy the "Actual Deferral Percentage" tests pursuant to
Section 4.6(a) or the "Actual Contribution Percentage" tests pursuant
to Section 4.8(a) shall not be taken into account.
However, no such minimum allocation shall be required in this
Plan for any Non-Key Employee who participates in another defined
contribution plan subject to Code Section 412 included with this Plan
in a Required Aggregation Group.
(g) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Combined Account of any Key
-27-
<PAGE>
Employee shall be equal to the ratio of the sum of the Employer
contributions allocated on behalf of such Key Employee divided by the
"415 Compensation" for such Key Employee.
(h) For any Top Heavy Plan Year, the minimum allocations set
forth above shall be allocated to the Participant's Combined Account
of all Non-Key Employees who are Participants and who are employed by
the Employer on the last day of the Plan Year, including Non-Key
Employees who have (1) failed to complete a Year of Service; and (2)
declined to make mandatory contributions (if required) or, in the case
of a cash or deferred arrangement, elective contributions to the Plan.
(i) For the purposes of this Section, "415 Compensation" shall be
limited to $150,000. Such amount shall be adjusted for increases in
the cost of living in accordance with Code Section 401(a)(17), except
that the dollar increase in effect on January 1 of any calendar year
shall be effective for the Plan Year beginning with or within such
calendar year. For any short Plan Year the "415 Compensation" limit
shall be an amount equal to the "415 Compensation" limit for the
calendar year in which the Plan Year begins multiplied by the ratio
obtained by dividing the number of full months in the short Plan Year
by twelve (12).
(j) Notwithstanding anything herein to the contrary, Participants
who terminated employment for any reason during the Plan Year shall
share in the salary reduction contributions made by the Employer for
the year of termination without regard to the Hours of Service
credited.
(k) If a Former Participant is reemployed after five (5)
consecutive Year Breaks in Service, then separate accounts shall be
maintained as follows:
(1) one account for nonforfeitable benefits attributable to
pre-break service; and
(2) one account representing his status in the Plan
attributable to post-break service.
4.6 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year beginning
after December 31, 1996, the annual allocation derived from
Employer Elective Contributions to a Highly Compensated
Participant's Elective Account shall satisfy one of the following
tests:
(1) The "Actual Deferral Percentage" for the Highly
Compensated Participant group shall not be more than the
"Actual Deferral Percentage" of the Non-Highly Compensated
Participant Group
-28-
<PAGE>
(for the preceding Plan Year if the prior year testing
method is used to calculate the "Actual Deferral Percentage"
for the Non-Highly Compensated Participant group) multiplied
by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for
the Highly Compensated Participant group over the "Actual
Deferral Percentage" for the Non-Highly Compensated
Participant group (for the preceding Plan Year if the prior
year testing method is used to calculate the "Actual
Deferral Percentage" for the Non-Highly Compensated
Participant group) shall not be more than two percentage
points. Additionally, the "Actual Deferral Percentage" for
the Highly Compensated Participant group shall not exceed
the "Actual Deferral Percentage " for the Non-Highly
Compensated Participant group (for the preceding Plan Year
if the prior year testing method is used 1 to calculate the
"Actual Deferral Percentage" for the Non-Highly Compensated
Participant group) multiplied by 2. The provisions of Code
Section 401(k)(3) and Regulation 1.401(k)-l(b) are
incorporated herein by reference.
However, in order to prevent the multiple use of the
alternative method described in (2) above and in Code
Section 401(m)(9)(A), any Highly Compensated Participant
eligible to make elective deferrals pursuant to Section 4.3
and to make Employee contributions or to receive matching
contributions under this Plan or under any other plan
maintained by the Employer or an Affiliated Employer shall
have a combination of his Elective Contributions and
Employer matching contributions reduced pursuant to Section
4.7(a) and Regulation 1.401(m)-2, the provisions of which
are incorporated herein by reference.
(b) For the purposes of this Section "Actual Deferral
Percentage" means, with respect to the Highly Compensated
Participant group and Non-Highly Compensated Participant group
for a Plan Year, the average of the ratios, calculated separately
for each Participant in such group, of the amount of Employer
Elective Contributions allocated to each Participant's Elective
Account for such Plan Year, to such Participant's "414(s)
Compensation" for such Plan Year. The actual deferral ratio for
each Participant and the "Actual Deferral Percentage" for each
group shall be calculated to the nearest one-hundredth of one
percent. Employer Elective Contributions allocated to each
Non-Highly Compensated Participant's Elective Account shall be
reduced by Excess Deferred Compensation to the extent such excess
amounts are made under this Plan or any other plan maintained by
the Employer and by any matching contributions which relate to
such Excess Deferred Compensation.
Notwithstanding the above, if the prior year test method is
used to calculate the "Actual Deferral Percentage " for the
Non-Highly Compensated
-29-
<PAGE>
Participant group for the first Plan Year of this amendment and
restatement, the "Actual Deferral Percentage" for the Non-Highly
Compensated Participant group for the preceding Plan Year shall
be calculated pursuant to the provisions of the Plan then in
effect.
(c) For the purposes of Sections 4.6(a) and 4.7, a Highly
Compensated Participant and a Non-Highly Compensated Participant
shall include any Employee eligible to make a deferral election
pursuant to Section 4.3, whether or not such deferral election
was made or suspended pursuant to Section 4.3.
Notwithstanding the above, if the prior year testing method
is used to calculate the "Actual Deferral Percentage for the
Non-Highly Compensated Participant group for the first Plan Year
of this amendment and restatement, for purposes of Section 4.6(a)
and 4.7, a Non-Highly Compensated Participant shall include any
such Employee eligible to make a deferral election, whether or
not such deferral election was made or suspended, pursuant to the
provisions of the Plan in effect for the preceding Plan Year.
(d) If the Plan uses the prior year testing method, the
"Actual Deferral Percentage" for the Non-Highly Compensated
Participant group is determined without regard to changes in the
group of Non-Highly Compensated Participants who are eligible
under the Plan in the testing year. However, if the Plan results
from, or is otherwise affected by, a "Plan Coverage Change" that
becomes effective during the testing year, then the "Actual
Deferral Percentage" for the Non-Highly Compensated Participant
group for the prior year is the "Weighted Average Of The Actual
Deferral Percentages For The Prior Year Subgroups."
Notwithstanding the above, if ninety (90) percent or more of the
total number of Non-Highly Compensated Participants from all
"Prior Year Subgroups" are from a single "Prior Year Subgroup,
then in determining the "Actual Deferral Percentage" for the
Non-Highly Compensated Participants for the prior year, the
Employer may elect to use the "Actual Deferral Percentage" for
Non-Highly Compensated Participants for the prior year under
which that single "Prior Year Subgroup" was eligible, in lieu of
using the weighted averages. For purposes of this Section the
following definitions shall apply:
(1) "Plan Coverage Change" means a change in the group
or groups of eligible Participants on account of (i) the
establishment or amendment of a plan, (ii) a plan merger,
consolidation, or spinoff under Code Section 414(l), (iii) a
change in the way plans within the meaning of Code Section
414(l) are combined or separated for purposes of Regulation
1.401(k) - l(g)(11), or (iv) a combination of any of the
foregoing.
(2) "Prior Year Subgroup" means all Non-Highly
Compensated Participants for the prior year who, in the
prior year, were eligible Participants under a specific Code
Section 401(k) plan maintained by the
-30-
<PAGE>
Employer and who would have been eligible Participants in
the prior year under the plan tested if the plan coverage
change had first been effective as of the first day of the
prior 1 year instead of first being effective during the
testing year.
(3) "Weighted Average Of The Actual Deferral
Percentages For The Prior Year Subgroups" means the sum, for
all prior year subgroups, of the "Adjusted Actual Deferral
Percentages."
(4) "Adjusted Actual Deferral Percentage" with respect
to a prior year subgroup means the Actual Deferral
Percentage for Non-Highly Compensated Participants for the
prior year of the specific plan under which the members of
the prior year subgroup were eligible Participants,
multiplied by a fraction, the numerator of which is the
number of Non-Highly Compensated Participants in the prior
year subgroup and the denominator of which is the total
number of Non-Highly Compensated Participants in all prior
year subgroups.
(e) For the purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k), if two or more plans which include
cash or deferred arrangements are considered one plan for the
purposes of Code Section 401(a)(4) or 410(b) (other than Code
Section 418(b)(2)(A) (ii)), the cash or deferred arrangements
included in such plans shall be treated as one arrangement. In
addition, two or more cash or deferred arrangements may be
considered as a single arrangement for purposes of determining
whether or not such arrangements satisfy Code Sections 401(a)(4),
410(b) and 401(k). In such a case, the cash or deferred
arrangements included in such plans and the plans including such
arrangements shall be treated as one arrangement and as one plan
for purposes of this Section and Code Sections 401(a)(4), 410(b)
and 401(k). Plans may be aggregated under this paragraph (e) only
if they have the same plan year. Notwithstanding the above, for
Plan Years beginning after December 31, 1996, if two or more
plans which include cash or deferred arrangements are
permissively aggregated under Regulation 1.410(b)-7(d), all plans
permissively aggregated must use either the current year test
method or the prior year testing method for the testing year.
Notwithstanding the above, an employee stock ownership plan
described in Code Section 4975(e)(7) or 409 may not be combined
with this Plan for purposes of determining whether the employee
stock ownership plan or this Plan satisfies this Section and Code
Sections 401(a)(4), 410(b) and 401(k).
(f) For the purposes of this Section, if a Highly
Compensated Participant is a Participant under two or more cash
or deferred arrangements (other than a cash or, deferred
arrangement which is part of an employee stock ownership plan as
defined in Code Section 4975(e)(7) or 409) of the Employer or an
-31-
<PAGE>
Affiliated Employer, all such cash or deferred arrangements shall
be treated as one cash or deferred arrangement for the purpose of
determining the actual deferral ratio with respect to such Highly
Compensated Participant. However, if the cash or deferred
arrangements have different plan years, this paragraph shall be
applied by treating all cash or deferred arrangements ending with
or within the same calendar year as a single arrangement.
(g) For the purpose of this Section, when calculating the
"Actual Deferral Percentage" for the Non-Highly Compensated
Participant group, the current year testing method shall be used.
For the Plan Year beginning after December 31, 1997, the current
year testing method shall be used. Any change from the current
year testing method to the prior year testing method shall be
made pursuant to Internal Revenue Service Notice 98-1, Section
VII, the provisions of which are incorporated herein by
reference.
4.7 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event (or if it is anticipated) that the initial
allocations of the Employer Elective Contributions made pursuant to Section 4.5
do (or might) not satisfy one of the tests set forth in Section 4.6(a) for Plan
Years beginning after December 31, 1996, the Administrator shall adjust Excess
Contributions pursuant to the options set forth below:
(a) On or before the fifteenth day of the third month
following the end of each Plan Year, the Highly Compensated
Participant having the largest amount of Elective Contributions
shall have a portion of his Elective Contributions distributed to
him until the total amount of Excess Contributions has been
distributed, or until the amount of his Elective Contributions
equals the Elective Contributions of the Highly Compensated
Participant having the second largest amount of Elective
Contributions. This process shall continue until the total amount
of Excess Contributions has been distributed. In determining the
amount of Excess Contributions to be distributed with respect to
an affected Highly Compensated Participant as determined herein,
such amount shall be reduced pursuant to Section 4.3(f) by any
Excess Deferred Compensation previously distributed to such
affected Highly Compensated Participant for his taxable year
ending with or within such Plan Year and any forfeited matching
contributions which relate to such Excess Deferred Compensation.
(1) With respect to the distribution of Excess
Contributions pursuant to (a) above, such distribution:
(i) may be postponed but not later than the close
of the Plan Year following the Plan Year to which they are
allocable;
(ii) shall be made first from unmatched Deferred
Compensation and, thereafter, proportionately from Deferred
Compensation which is matched and matching contributions
-32-
<PAGE>
which relate to such Deferred Compensation, if used in the
"Actual Deferral Percentage" tests pursuant to Section 4.6;
(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as a
distribution of Excess Contributions (and Income).
(2) Any distribution of less than the entire
amount of Excess Contributions shall be treated as a pro
rata distribution of Excess Contributions and Income.
(3) Matching contributions which relate to Excess
Contributions shall be forfeited unless the related matching
contribution is distributed as an Excess Contribution
pursuant to (1) above or as an Excess Aggregate Contribution
pursuant to Section 4.9.
(b) Within twelve (12) months after the end of the Plan
Year, the Employer may make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated Participants in an
amount sufficient to satisfy (or to prevent an anticipated failure of)
one of the tests set forth in Section 4.6(a). Such contribution shall
be allocated to the Participant's Elective Account of each Non-Highly
Compensated Participant per capita.
However, if the prior year testing method is used, the
special Qualified Non-Elective Contribution shall be allocated in the
prior Plan Year to the Participant's Elective Account on behalf of
each Non-Highly Compensated Participant who was employed by the
Employer on the last day of the prior Plan Year per capita. Such
contribution shall be made by the Employer prior to the end of the
current Plan Year.
(c) If during a Plan Year the projected aggregate amount of
Elective Contributions to be allocated to all Highly Compensated
Participants under this Plan would, by, virtue of the tests set forth
in Section 4.6(a), cause the Plan to fail such tests, then the
Administrator may automatically reduce proportionately or in the order
provided in Section 4.7(a) each affected Highly Compensated
Participant's deferral election made pursuant to Section 4.3 by an
amount necessary to satisfy one of the tests set forth in Section
4.6(a).
4.8 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for Plan Years
beginning after December 31, 1996 for the Highly Compensated
Participant group shall not exceed the greater of:
-33-
<PAGE>
(1) 125 percent of such percentage for the Non-Highly
Compensated Participant group (for the preceding Plan Year if the
prior year testing method is used to calculate the "Actual
Contribution Percentage" for the Non-Highly Compensated Participant
group); or
(2) the lesser of 200 percent of such percentage for the
Non-Highly Compensated Participant group (for the preceding Plan Year
if the prior year testing method is used to calculate the "Actual
Contribution Percentage" for the Non-Highly Compensated Participant
group), or such percentage for the Non-Highly Compensated Participant
group (for the preceding Plan Year if the prior year testing method is
used to calculate the "Actual Contribution Percentage" for the
Non-Highly Compensated Participant group) plus 2 percentage points.
However, to prevent the multiple use of the alternative method
described in this paragraph and Code Section 401(m)(9)(A), any Highly
Compensated Participant eligible to make elective deferrals pursuant
to Section 4.3 or any other cash or deferred arrangement maintained by
the Employer or an Affiliated Employer and to make Employee
contributions or to receive matching contributions under this Plan or
under any plan maintained by the Employer or an Affiliated Employer
shall have a combination of his Elective Contributions and Employer
matching contributions reduced pursuant to Regulation 1.401(m)-2 and
Section 4.9(a). The provisions of Code Section 401(m) and Regulations
1.401(m)-l(b) and 1.401(m)-2 are incorporated herein by reference.
(b) For the purposes of this Section and Section 4.9, "Actual
Contribution Percentage" for a Plan Year means, with respect to the Highly
Compensated Participant group and Non-Highly Compensated Participant group (for
the preceding Plan Year if the prior year testing method is used to calculate
the "Actual Contribution Percentage" for the Non-Highly Compensated Participant
group), the average of the ratios (calculated separately for each Participant in
each group rounded to the nearest one-hundredth of one percent) of:
(1) the sum of Employer matching contributions made pursuant
to Section 4.2(b) (to the extent such matching contributions are not
used to satisfy the "Actual Deferral Percentage" tests) on behalf of
each such Participant for such Plan Year; to
(2) the Participant's "414(s) Compensation" for such Plan
Year.
(3) Notwithstanding the above, if the prior year testing
method is used to calculate the "Actual Contribution Percentage" for
the Non-Highly Compensated Participant group for the first Plan Year
of this amendment and restatement, for purposes of Section 4.8(a), the
"Actual Contribution Percentage" for the Non-Highly Compensated
Participant
-34-
<PAGE>
group for the preceding Plan Year shall be determined pursuant to the
provisions of the Plan then in effect.
(c) For purposes of determining the "Actual Contribution
Percentage", only Employer matching contributions contributed to the
Plan prior to the end of the succeeding Plan Year shall be considered.
In addition, the Administrator may elect to take into account, with
respect to Employees eligible to have Employer matching contributions
pursuant to Section 4.2(b) (to the extent such matching contributions
are not used to satisfy the "Actual Deferral Percentage" tests)
allocated to their accounts, elective deferrals (as defined in
Regulation 1.402(g)-l(b)) and qualified non-elective contributions (as
defined in Code Section 401(m)(4)(C)) contributed to any plan
maintained by the Employer. Such elective deferrals and qualified
non-elective contributions shall be treated as Employer matching
contributions subject to Regulation 1.401(m)-l(b)(5) which is
incorporated herein by reference. However, the Plan Year must be the
same as the plan year of the plan to which the elective deferrals and
the qualified non-elective contributions are made.
(d) For purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(m), if two or more plans of the Employer to
which matching contributions, Employee contributions, or both, are
made are treated as one plan for purposes of Code Sections 401(a)(4)
or 410(b) (other than the average benefits test under Code Section
410(b)(2)(A)(ii)), such plans shall be treated as one plan. In
addition, two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made may be
considered as a single plan for purposes of determining whether or not
such plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such
a case, the aggregated plans must satisfy this Section and Code
Sections 401(a)(4), 410(b) and 401(m) as though such aggregated plans
were a single plan. Plans may be aggregated under this paragraph (e)
only if they have the same plan year. Notwithstanding the above, for
Plan Years beginning after December 31, 1996, if two or more plans
which include cash or deferred arrangements are permissively
aggregated under Regulation 1.410(b)-7(d), all plans permissively
aggregated must use either the current year test method or the prior
year testing method for the testing year.
Notwithstanding the above, an employee stock ownership plan
described in Code Section 4975(e)(7) or 409 may not be aggregated with
this Plan for purposes of determining whether the employee stock
ownership plan or this Plan satisfies this Section and Code Sections
401(a)(4), 410(b) and 401(m).
(e) If a Highly Compensated Participant is a Participant
under two or more plans (other than an employee stock ownership plan
as defined in Code Section 4975(e)(7) or 409) which are maintained by
the Employer or an Affiliated Employer to which matching
contributions, Employee contributions, or both, are made, all such
contributions on behalf of such Highly Compensated Participant shall
-35-
<PAGE>
be aggregated for purposes of determining such Highly Compensated
Participant's actual contribution ratio. However, if the plans have
different plan years, this paragraph shall be applied by treating all
plans ending with or within the same calendar year as a single plan.
(f) For purposes of Sections 4.8(a) and 4.9, a Highly
Compensated Participant and Non-Highly Compensated Participant shall
include any Employee eligible to have Employer matching contributions
(whether or not a deferral election was made or suspended) or
voluntary employee contributions (whether or not voluntary employee
contributions are made) allocated to his account for the Plan Year.
Notwithstanding the above, if the prior year testing method
is used to calculate the "Actual Contribution Percentage " for the
Non-Highly Compensated Participant group for the first Plan Year of
this amendment and restatement, for the purposes of Section 4.8(a), a
Non-Highly Compensated Participant shall include any such Employee
eligible to have Employer matching contributions (whether or not a
deferral election was made or suspended) or voluntary employee
contributions (whether or not voluntary employee contributions are
made) allocated to his account for the preceding Plan Year pursuant to
the provisions of the Plan then in effect.
(g) If the Plan uses the prior year testing method, the
"Actual Contribution Percentage" for the Non-Highly Compensated
Participant group is determined without regard to changes in the group
of Non-Highly Compensated Participants who are eligible under the Plan
in the testing year. However, if the Plan results from, or is
otherwise affected by, a "Plan Coverage Change" that becomes effective
during the testing year, then the "Actual Contribution Percentage" for
the Non-Highly Compensated Participant group for the prior year is the
"Weighted Average Of The Actual Contribution Percentages For The Prior
Year Subgroups." Notwithstanding the above, if ninety (90) percent or
more of the total number of Non-Highly Compensated Participants from
all "Prior Year Subgroups" are from a single "Prior Year Subgroup,"
then in determining the "Actual Contribution Percentage" for the
Non-Highly Compensated Participants for the prior year, the Employer
may elect to use the "Actual Contribution Percentage I for Non-Highly
Compensated Participants for the prior year under which that single
"Prior Year Subgroup" was eligible, in lieu of using the weighted
averages. For purposes of this Section the following definitions shall
apply:
(1) "Plan Coverage Change" means a change in the group or
groups of eligible Participants on account of (i) the establishment or
amendment of a plan, (ii) a plan merger, consolidation, or spinoff
under Code Section 414(l), (iii) a change in the way plans within the
-36-
<PAGE>
meaning of Code Section 414(l) are combined or separated for purposes
of Regulation 1.401(k)-l(g)(II), or (iv) a combination of any of the
foregoing.
(2) "Prior Year Subgroup" means all Non-Highly Compensated
Participants for the prior year who, in the prior year, were eligible
Participants under a specific Code Section 401(m) plan maintained by
the Employer and who would have been eligible Participants in the
prior year under the plan tested if the plan coverage change had first
been effective as of the first day of the prior year instead of first
being effective during the testing year.
(3) "Weighted Average Of The Actual Contribution Percentages
For The Prior Year Subgroups" means the sum, for all prior year
subgroups, of the "Adjusted Actual Contribution Percentages."
(4) "Adjusted Actual Contribution Percentage" with respect
to a prior year subgroup means the Actual Contribution Percentage for
Non-Highly Compensated Participants for the prior year of the specific
plan under which the members of the prior year subgroup were eligible
Participants, multiplied by a fraction, the numerator of which is the
number of Non-Highly Compensated Participants in the prior year
subgroup and the denominator of which is the total number of
Non-Highly Compensated Participants in all prior year subgroups.
(h) For the purpose of this Section, when calculating the "Actual
Contribution Percentage" for the Non-Highly Compensated Participant
group, the current year testing method shall be used. Any change from
the current year testing method to the prior year testing method shall
be made pursuant to Internal Revenue Service Notice 98-1, Section VII,
the provisions of which are incorporated herein by reference.
4.9 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event (or if it is anticipated) that, for Plan Years
beginning after December 31, 1996, the "Actual Contribution
Percentage" for the Highly Compensated Participant group-exceeds (or
might exceed) the "Actual Contribution Percentage" for the Non-Highly
Compensated Participant group pursuant to Section 4.8(a), the
Administrator (on or before the fifteenth day of the third month
following the end of the Plan Year, but in no event later than the
close of the following Plan Year) shall direct the Trustee to
distribute to the Highly Compensated Participant having the largest
amount of contributions determined pursuant to, Section 4.8(b)(2), his
portion of such contributions (and Income allocable to such
contributions) until the total amount of Excess Aggregate
Contributions has been distributed, or until his remaining amount
equals the amount of contributions determined pursuant to Section
4.8(b)(2) of the Highly
-37-
<PAGE>
Compensated Participant having the second largest amount of
contributions. This process shall continue until the total amount of
Excess Aggregate Contributions has been distributed.
(b) Any distribution of less than the entire amount of Excess
Aggregate Contributions (and Income) shall be treated as a pro rata
distribution of Excess Aggregate Contributions and Income.
Distribution of Excess Aggregate Contributions shall be designated by
the Employer as a distribution of Excess Aggregate Contributions (and
Income).
(c) Excess Aggregate Contributions shall be treated as Employer
contributions for purposes of Code Sections 404 and 415 even if
distributed from the Plan.
(d) The determination of the amount of Excess Aggregate
Contributions with respect to any Plan Year shall be made after first
determining the Excess Contributions, if any, to be treated as
voluntary Employee contributions due to recharacterization for the
plan year of any other qualified cash or deferred arrangement (as
defined in Code Section 401(k)) maintained by the Employer that ends
with or within the Plan Year.
(e) If during a Plan Year the projected aggregate amount of
Employer matching contributions to be allocated to all Highly
Compensated Participants under his Plan would, by virtue of the tests
set forth in Section 4.8(a), cause the Plan to fail such tests, then
the Administrator may automatically reduce proportionately or in the
order provided in Section 4.9(a) each affected Highly Compensated
Participant's projected share of such contributions by an amount
necessary to satisfy one of the tests set forth in Section 4.8(a).
(f) Notwithstanding the above, within twelve (12) months after
the end of the Plan Year, the Employer may make a special Qualified
Non-Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy (or to prevent an
anticipated failure of) one of the tests set forth in Section 4.8(a).
Such contribution shall be allocated to the Participant's Account of
each Non-Highly Compensated Participant per capita. A separate
accounting of any special Qualified Non-Elective Contribution shall be
maintained in the Participant's Account.
However, if the prior year testing method is used, the special
Qualified Non-Elective Contribution shall be allocated in the prior
Plan Year to the Participant's Account on behalf of each Non-Highly
Compensated Participant who was employed by the Employer on the last
day of the prior Plan Year per capita. Such contribution shall be made
by the Employer prior to the end of the current Plan Year. A separate
accounting of any special Qualified Non-Elective Contributions shall
be maintained in the Participant's Account.
-38-
<PAGE>
4.10 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall
equal the lesser of: (1) $30,000 adjusted annually as provided in Code
Section 415(d) pursuant to the Regulations, or (2) twenty-five percent
(25%) of the Participant's "415 Compensation" for such "limitation
year." For any short "limitation year" the dollar limitation in (1)
above shall be reduced by a fraction, the numerator of which is the
number of full months in the short "limitation year" and the
denominator of which is twelve (12).
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts
for any "limitation year" of (1) Employer contributions, (2) Employee
contributions, (3) forfeitures, (4) amounts allocated, after March 31,
1984, to an individual medical account, as defined in Code Section
415(l)(2) which is part of a pension or annuity plan maintained by the
Employer and (5) amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such date,
which are attributable to post-retirement medical benefits allocated
to the separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in paragraph (a)(2)
above shall not apply to: (1) any contribution for medical benefits
(within the meaning of Code Section 419A(f)(2)) after separation from
service which is otherwise treated as an "annual addition," or (2) any
amount otherwise treated as an "annual addition" under Code Section
415(1)(l).
(c) For purposes of applying the limitations of Code Section 415,
the transfer of funds from one qualified plan to another is not an
"annual addition." In addition, the following are not Employee
contributions for the purposes of Section 4.10(b)(2): (1) rollover
contributions (as defined in Code Sections 402(e)(6), 483(a)(4),
403(b)(8) and 408(d)(3)); (2) repayments of loans made to a
Participant from the Plan; (3) repayments of distributions received by
an Employee pursuant to Code Section 411(a)(7)(B) (cash-outs); (4)
repayments of distributions received by an Employee pursuant to Code
Section 411(a)(3)(D) (mandatory contributions); and (5) Employee
contributions to a simplified employee pension excludable from gross
income under Code Section 408(k)(6).
(d) For purposes of applying the limitations of Code Section 415,
the "limitation year" shall be the Plan Year.
(e) For the purpose of this Section, all qualified defined
contribution plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined contribution plan.
-39-
<PAGE>
(f) For the purpose of this Section, if the Employer is a member
of a controlled group of corporations, trades or businesses under
common control (as defined by Code Section 1563(a) or Code Section
414(b) and (c) as modified by Code Section 415(h)), is a member of an
affiliated service group (as defined by Code Section 414(m)), or is a
member of a group of entities required to be aggregated pursuant to
Regulations under Code Section 414(o), all Employees of such Employers
shall be considered to be employed by a single Employer.
(g) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, each Employer who maintains this Plan will be
considered to be a separate Employer.
(h) (1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan
shall equal the maximum "annual additions" for the "limitation year"
minus any "annual additions" previously credited to such Participant's
accounts during the "limitation year."
(2) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution plan not
subject to Code Section 412 maintained by the Employer which have the
same Anniversary Date, "annual additions" will be credited to the
Participant's accounts under the defined contribution plan subject to
Code Section 412 prior to crediting "annual additions" to the
Participant's accounts under the defined contribution plan not subject
to Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the product of (A) the maximum
"annual additions" for the "limitation year" minus any "annual
additions" previously credited under subparagraphs (1)or (2) above,
multiplied by (B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's accounts
under this Plan without regard to the limitations of Code Section 415
and (ii) the denominator of which is such "annual additions" for all
plans described in this subparagraph.
(i) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements
prescribed in this Section shall at all times comply with the
provisions of Code Section 415 and the Regulations thereunder, the
terms of which are specifically incorporated herein by reference.
-40-
<PAGE>
4.11 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in estimating a
Participant's Compensation, a reasonable error in determining the
amount of elective deferrals (within the meaning of Code Section
402(g)(3)) that may be made with respect to any Participant under the
limits of Section 4.10 or other facts and circumstances to which
Regulation 1.415-6(b)(6) shall be applicable, the "annual additions"
under this Plan would cause the maximum "annual additions " to be
exceeded for any Participant, the Administrator shall (1) distribute
any elective deferrals (within the meaning of Code Section 402(g)(3))
or return any Employee contributions (whether voluntary or mandatory),
and for the distribution of gains attributable to those elective
deferrals and Employee contributions, to the extent that the
distribution or return would reduce the "excess amount" in the
Participant's accounts (2) hold any "excess amount" remaining after
the return of any elective deferrals or voluntary Employee
contributions in a "Section 415 suspense account" (3) use the "Section
415 suspense account" in the next "limitation years" (and succeeding
"limitation years" if necessary) to reduce Employer contributions for
that Participant if that Participant is covered by the Plan as of the
end of the "limitation year," or if the Participant is not so covered,
allocate and reallocate the "Section 415 suspense account" in the next
"limitation year" (and succeeding "limitation years" if necessary) to
all Participants in the Plan before any Employer or Employee
contributions which would constitute "annual additions" are made to
the Plan for such "limitation year" (4) reduce Employer contributions
to the Plan for such "limitation year " by the amount of the "Section
415 suspense account" allocated and reallocated during such
"limitation year."
(b) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any, of
(1) the "annual additions" which would be credited to his account
under the terms of the Plan without regard to the limitations of Code
Section 415 over (2) the maximum "annual additions" determined
pursuant to Section 4.10.
(c) For purposes of this Section, "Section 415 suspense account"
shall mean an unallocated account equal to the sum of "excess amounts"
for all Participants in the Plan during the "limitation year." The
"Section 415 suspense account" shall not share in any earnings or
losses of the Trust Fund.
4.12 DIRECTED INVESTMENT ACCOUNT
(a) As of each Valuation Date, all Participant Directed Accounts
shall be charged or credited with the net earnings, gains, losses and
expenses as well as any appreciation or depreciation in the market
value using publicly listed fair market values when available or
appropriate.
(1) To the extent that the assets in a Participant's
Directed Account are accounted for as pooled assets or
investments, the allocation
-41-
<PAGE>
of earnings, gains and losses of each Participant's Directed
Account shall be based upon the total amount of funds so
invested, in a manner proportionate to the Participant's share of
such pooled investment.
(2) To the extent that the assets in the Participant's Directed
Account are accounted for as segregated assets, the allocation of
earnings, gains and losses from such assets shall be made on a
separate and distinct basis.
(b) The Participant Direction Procedures shall provide an explanation
of the circumstances under which Participants and their Beneficiaries may
give investment instructions, including, but need not be limited to, the
following:
(1) the conveyance of instructions by the Participants and their
Beneficiaries to invest Participant Directed Accounts in Directed
Investments;
(2) the name, address and phone number of the Fiduciary (and, if
applicable, the person or persons designated by the Fiduciary to act
on its behalf) responsible for providing information to the
Participant or a Beneficiary upon request relating to the investments
in Directed Investments;
(3) applicable restrictions on transfers to and from any
Designated Investment Alternative;
(4) any restrictions on the exercise of voting, tender and
similar rights related to Directed Investment by the Participants or
their Beneficiaries;
(5) a description of any transaction fees and expenses which
affect the balances in Participant Directed Accounts in connection
with the purchase or sale of Directed Investments; and
(6) general procedures for the dissemination of investment and
other information relating to the Designated Investment Alternatives
as deemed necessary or appropriate, including but not limited to a
description of the following:
(7) the investment vehicles available under the Plan, including
specific information regarding any Designated Investment Alternative;
(i) any designated Investment Managers; and
-42-
<PAGE>
(ii) a description of the additional information which may
be obtained upon request from the Fiduciary designated to provide
such information.
(c) Any information regarding investments available under the
Plan, to the extent not required to be described in the Participant
Direction Procedures, may be provided to the Participant in one or
more written documents which are separate from the Participant
Direction Procedures and are not thereby incorporated by reference
into this Plan.
(d) The Administrator may, at its discretion, include in or
exclude by amendment or other action from the Participant Direction
Procedures such instructions, guidelines or policies as it deems
necessary or appropriate to ensure proper administration of the Plan,
and may interpret the same accordingly.
(e) Definition of Insider. For purposes of this Section 4.12,
"Insider" shall mean an officer, director or beneficial owner of more
than ten (10%) percent of the stock of the Company or any Employer, as
determined by the Company.
(f) Voluntary Suspension. In the case of any voluntary suspension
by an Insider pursuant to Section 4.2 of the Plan which results in the
cessation of any Tax-Deferred Contributions to the Employer Stock Fund
with respect to the Insider, the Insider may not elect to resume any
such contributions for a period of at least six (6) months following
the date of such suspension.
(g) Allocation of Contributions. In the case of a change in
investment direction with respect to future contributions pursuant to
the Participant Direction Procedures of the Plan by an Insider whose
current investment direction with respect to the Employer Stock Fund
is greater than 0%, if such change in investment direction results in
greater than 0% multiple with respect to the Employer Stock Fund, any
subsequent change in investment election resulting in greater than 0%
multiple with respect to the Employer Stock Fund shall not take effect
until a date which is at least six (6) months later than the effective
date of the preceding change.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Valuation
Date, to determine the net worth of the assets, comprising the Trust Fund as it
exists on the Valuation Date. In determining such net worth, the Trustee shall
value the assets comprising the Trust Fund at their fair market value as of the
Valuation Date and shall deduct all expenses for which the Trustee has not yet
obtained reimbursement from the Employer or the Trust Fund. The Trustee may
-43-
<PAGE>
update the value of any shares held in the Participant Directed Account by
reference to the number of shares held by that Participant, priced at the market
value as of the Valuation Date. As of each Valuation Date, before allocation of
one-half of the Employer contributions for the entire Plan Year and after
allocation of Forfeitures, any earnings or losses (net appreciation, or net
depreciation) of the Trust Fund shall be allocated in the same proportion that
each Participant's and Former Participant's nonsegregated accounts bear to the
total of all Participant's and Former Participant's nonsegreated accounts as of
such date. Earnings or losses with respect to a Participant's Directed Account
shall be allocated in accordance with Section 4.12.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the
Trust Fund which are listed on a registered stock exchange, the Administrator
shall direct the Trustee to value the same at bid price at the close of the
Valuation day. Any unlisted security held in the Trust Fund shall be valued at
its bid price next preceding the close of business on the Valuation Date, which
bid price shall be obtained from a registered broker or an investment banker. In
determining the fair market value of assets other than securities for which
trading or bid prices can be obtained, the Trustee may appraise such assets
itself, or in its discretion, employ one or more appraisers for that purpose and
rely on the values established by such appraiser or appraisers.
The Company Stock Fund shall be valued based on the bid price of
Company Stock reported in the consolidating trading prices for NASDAQ traded
securities on the last trading date on or prior to the Valuation Date.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer
and retire for the purposes hereof on his Normal Retirement Date. However, a
Participant may postpone the termination of his employment with the Employer to
a later date, in which event the participation of such Participant in the Plan,
including the right to receive allocations pursuant to Section 4.5, shall
continue until his Late Retirement Date. Upon a Participant's Retirement Date,
or as soon thereafter as is practicable, the Trustee shall distribute, at the
election of the Participant, all amounts credited to such Participant's Combined
Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement
Date or other termination of his employment, elected to
relinquish such right. In the event no valid designation
Participant's of Beneficiary exists at the time of the death, the
death benefit shall be payable to his estate.
(b) Any consent by the Participant's spouse to waive any
rights to the death benefit must be in writing, must acknowledge
the effect of such waiver,
-44-
<PAGE>
and be witnessed by a Plan representative or a notary public.
Further, the spouse's consent must be irrevocable and must
acknowledge the specific nonspouse Beneficiary.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability
prior to his Retirement Date or other termination of his employment, all amounts
credited to such Participant's Combined Account shall become fully Vested. In
the event of a Participant's Total and Permanent Disability, the Trustee, in
accordance with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) If a Participant's employment with the Employer is
terminated for any reason other than death, Total and Permanent
Disability or retirement, such Participant shall be entitled to
such benefits as are provided hereinafter pursuant to this
Section 6.4. Distribution of the funds due to a Terminated
Participant shall be made on the occurrence of an event which
would result in the distribution had the Terminated Participant
remained in the employ of the Employer (upon the Participant's
death, Total and Permanent Disability or Normal Retirement).
However, at the election of the Participant, the Administrator
shall direct the Trustee to cause the entire Vested portion of
the Terminated Participant's Combined Account to be payable to
such Terminated Participant on or after the Anniversary Date
coinciding with or next following termination of employment. Any
distribution under this paragraph shall be made in a manner which
is consistent with and satisfies the provisions of Section 6.5,
including, but not limited to, all notice and consent
requirements of Code Section 411(a)(ll) and the Regulations
thereunder.
(b) If the value of a Terminated Participant's Vested
benefit derived from Employer contributions does not exceed
$5,000 and employee and has never exceeded $5,000 at the time of
any prior distribution, the Administrator shall direct the
Trustee to cause the entire Vested benefit to be paid to such
Participant in a single lump sum.
(c) A Participant shall become fully Vested in his
Participant's Account attributable to Employer matching
contributions made pursuant to Section 4.2(b) immediately upon
entry into the Plan.
(d) The Vested portion of any Participant's Account
attributable to Employer discretionary contributions made
pursuant to Section 4.2(c) shall be a percentage of the total of
such amount credited to his Participant's Account determined on
the basis of the Participant's number of Years of Service
according to the following schedule:
-45-
<PAGE>
Vesting Schedule
Employer Discretionary Contributions
------------------------------------
Years of Service Percentage
---------------- ----------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 100%
(e) Notwithstanding the vesting schedule above, the Vested
percentage of a Participant's Account shall not be less than the
Vested percentage attained as of the later of the effective date
or adoption date of this amendment and restatement.
(f) Notwithstanding the vesting schedule above, upon the
complete discontinuance of the Employer contributions to the Plan
or upon any full or partial termination of the Plan, all amounts
credited to the account of any affected Participant shall become
100% Vested and shall not thereafter be subject to Forfeiture.
(g) The computation of a Participant's nonforfeitable
percentage of his interest in the Plan shall not be reduced as
the result of any direct or indirect amendment to this Plan. For
this purpose, the Plan shall be treated as having been amended if
the Plan provides for an automatic change in vesting due to a
change in top heavy status. In the event that the Plan is amended
to change or modify any vesting schedule, a Participant with at
least three (3) Years of Service as of the expiration date of the
election period may elect to have his nonforfeitable percentage
computed under the Plan without regard to such amendment. If a
Participant fails to make such election, then such Participant
shall be subject to the new vesting schedule. The Participant's
election period shall commence on the adoption date of the
amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of
the amendment from the Employer or Administrator.
-46-
<PAGE>
(h) (1) If any Former Participant shall be reemployed by the
Employer before a l-Year Break in Service occurs, he shall
continue to participate in the Plan in the same manner as if such
termination had not occurred.
(2) If any Former Participant shall be reemployed by
the Employer before five (5) consecutive l-Year Breaks in
Service, and such Former Participant had received, or was deemed
to have received, a distribution of his entire Vested interest
prior to his reemployment, his forfeited account shall be
reinstated only if he repays the full amount distributed to him
before the earlier of five (5) years after the first date on
which the Participant is subsequently reemployed by the Employer
or the close of the first period of five (5) consecutive l-Year
Breaks in Service commencing after the distribution, or in the
event of a deemed distribution, upon the reemployment of such
Former Participant. In the event the Former Participant does
repay the full amount distributed to him, or in the event of a
deemed distribution, the undistributed portion of the
Participant's Account must be restored in full, unadjusted by any
gains or losses occurring subsequent to the Valuation Date
coinciding with or preceding his termination. The source for such
reinstatement shall first be any Forfeitures occurring during the
year. If such source is insufficient, then the Employer shall
contribute an amount which is sufficient to restore any such
forfeited Accounts provided, however, that if a discretionary
contribution is made for such year pursuant to Section 4.2(c),
such contribution shall first be applied to restore any such
Accounts and the remainder shall be allocated in accordance with
Section 4.5.
(3) If any Former Participant is reemployed after a l-
Year Break in Service has occurred, Years of Service shall
include Years of Service prior to his l-Year Break in Service
subject to the following rules:
(i) If a Former Participant has a l-Year Break in
Service, his pre-break and post-break service shall be used
for computing Years of Service for eligibility and for
vesting purposes only after he has been employed for one (1)
Year of Service following the date of his reemployment with
the Employer;
(ii) Any Former Participant who under the Plan does not
have a nonforfeitable right to any interest in the Plan
resulting from Employer contributions shall lose credits
otherwise allowable under (i) above if his consecutive
l-Year Breaks in Service equal or exceed the greater of (A)
five (5) or (B) the aggregate number of his pre-break Years
of Service;
(iii) After five (5) consecutive l-Year Breaks in
Service, a Former Participant's Vested Account balance
attributable to pre-
-47-
<PAGE>
break service shall not be increased as a result of
post-break service;
(iv) If a Former Participant is reemployed by the
Employer, he shall participate in the Plan immediately on
his date of reemployment;
(v) If a Former Participant (a l-Year Break in Service
previously occurred, but employment had not terminated) is
credited with an Hour of Service after the first eligibility
computation period in which he incurs a l-Year Break in
Service, he shall participate in the Plan immediately.
(vi) In determining Years of Service for purposes of
vesting under the Plan, Years of Service prior to the
vesting computation period in which an Employee attained his
eighteenth birthday shall be excluded.
6.5 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a
Participant or his Beneficiary any amount to which he is entitled
under the Plan in one or more of the following methods:
(1) With respect to the value of each Participant's
Account prior to January 1, 1993, payments may be made in a
lump-sum payment in cash or Employer stock or over a period
certain in monthly, quarterly, semiannual, or annual cash
installments. In order to provide such installment payments,
the Administrator may (A) segregate the aggregate amount
thereof in a separate, federally insured savings account,
certificate of deposit in a bank or savings and loan
association, money market certificate or other liquid
short-term security or (B) purchase a nontransferable
annuity contract for a term certain (with no life
contingencies) providing for such payment. The period over
which such payment is to be made shall not extend beyond the
Participant's life expectancy (or the life expectancy of the
Participant and his designated Beneficiary).
(2) With respect to the value of a participants account
accumulated after December 31, 1992, all distributions shall
be made in cash other than the value of a Participant's
Account attributable to the Employer Stock fund.
(3) With respect to the value of a Participant's
Account accumulated after December 31, 1992 attributable to
the Employer Stock
-48-
<PAGE>
fund, such amount shall be paid in cash or Employer Stock,
as elected by the Participant in writing on a Prescribed
Form.
(b) Any distribution to a Participant who has a benefit
which exceeds, or has ever exceeded, $5,000 at the time of any
prior distribution shall require such Participant's consent if
such distribution commences prior to the later of his Normal
Retirement Age or age 62. With regard to this required consent:
(1) The Participant must be informed of his right to
defer receipt of the distribution. If a Participant fails to
consent, it shall be deemed an election to defer the
commencement of payment of any benefit. However, any
election to defer the receipt of benefits shall not apply
with respect to distributions which are required under
Section 6.5(c).
(2) Notice of the rights specified under this paragraph
shall be provided no less than 30 days and no more than 90
days before the date the distribution commences.
(3) Written consent of the Participant to the
distribution must not be made before the Participant
receives the notice and must not be made more than 90 days
before the date the distribution commences.
(4) No consent shall be valid if a significant
detriment is imposed under the Plan on any Participant who
does not consent to the distribution.
(5) Any such distribution may commence less than 30
days after the notice required under Regulation
1.411(a)-llT(c) is given, provided that: (1) the
Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable,
a particular distribution option), and (2) the Participant,
after receiving the notice, affirmatively elects a
distribution.
(c) Notwithstanding any provision in the Plan to the
contrary, for Plan Years beginning after December 31, 1996, the
distribution of a Participant's benefits shall be made in
accordance with the following requirements and shall otherwise
comply with Code Section 401(a)(9) and the Regulations thereunder
(including Regulation 1.401(a)(9)-2), the provisions of which are
incorporated herein by reference:
(1) A Participant's benefits shall be distributed or
must begin to be distributed to him not later than April 1st
of the calendar year following the later of (i) the calendar
year in which the Participant attains age 70 l/2 or (ii) the
calendar year in which the Participant retires, provided,
however, that this clause (ii) shall not apply in the case
of a Participant
-49-
<PAGE>
who is a "five (5) percent owner" at any time during the
five (5) Plan Year period ending in the calendar year in
which he attains age 70 l/2 or, in the case of a Participant
who becomes a "five (5) percent owner" during any subsequent
Plan Year, clause (ii) shall no longer apply and the
required beginning date shall be the April 1st of the
calendar year following the calendar year in which such
subsequent Plan Year ends. Such distributions shall be equal
to or greater than any required distribution.
Notwithstanding the foregoing, clause (ii) above shall not
apply to any Participant unless the Participant had attained
age 70 l/2 before January 1, 1988 and was not a "five (5)
percent owner" at any time during the Plan Year ending with
or within the calendar year in which the Participant
attained age 66 l/2 or any subsequent Plan Year.
However, any Participant who is not a "five (5) percent
owner" and who attains age 70 l/2 in or after a calendar
year that begins after the later of (i) December 31, 1998,
or (ii) the adoption date of this amendment and restatement,
provide that the adoption date is no later than the last day
of any remedial amendment period that applies to the Plan
for changes under the Small Business Job Protection Act of
1996, shall have his benefits distributed in accordance with
the first sentence of subparagraph (1) above.
Notwithstanding the foregoing, any Participant who is not a
"five (5) percent owner" shall continue receiving, or, if
applicable, be entitled to receive, benefit distributions
or, he may elect to defer benefit distributions until the
April 1st of the calendar year following the end of the
calendar year in which the Participant retires.
Alternatively, distributions to a Participant must
begin no later than the applicable April 1st as determined
under the preceding paragraph and must be made over a period
certain measured by the life expectancy of the Participant
(or the life expectancies of the Participant and his
designated Beneficiary) in accordance with Regulations.
(2) Distributions to a Participant and his
Beneficiaries shall only be made in accordance with the
incidental death benefit requirements of Code Section
401(a)(9)(G) and the Regulations thereunder.
(d) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse may, at the election of
the Participant or the Participant's spouse, be redetermined in
accordance with Regulations. The election, once made, shall be
irrevocable. If no election is made by the time distributions
must commence, then the life expectancy of the Participant and
the Participant's spouse shall not be subject to recalculation.
Life expectancy and joint and last survivor expectancy shall be
computed using the return multiples in Tables V and VI of
Regulation 1.72-9.
-50-
<PAGE>
(e) All annuity Contracts under this Plan shall be
non-transferable when distributed. Furthermore, the terms of any
annuity Contract purchased and distributed to a Participant or
spouse shall comply with all of the requirements of the Plan.
(f) If a distribution is made at a time when a Participant
is not fully Vested in his Participant's Account and the
Participant may increase the Vested percentage in such account:
(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
(2) at any relevant time, the Participant's Vested
portion of the separate account shall be equal to an amount
("X") determined by the formula:
X equals P(AB plus (R x D))-(R x D)
For purposes of applying the formula: P is the Vested
percentage at the relevant time, AB is the account balance
at the relevant time, D is the amount of distribution, and R
is the ratio of the account balance at the relevant time to
the account balance after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) The death benefit payable pursuant to Section 6.2 shall
be paid to the Participant's Beneficiary within a reasonable time
after the Participant's death by either of the following methods,
as elected by the Participant (or if no election has been made
prior to the Participant's death, by his Beneficiary) subject,
however, to the rules specified in Section 6.6(b):
(1) With respect to the value of each Participant's
Account prior to January 1, 1993, payments may be made in a
lump-sum payment cash or Employer stock or over a period
certain in monthly, quarterly, semiannual, or annual cash
installments. In order to provide such installment payments,
the Administrator may (A) segregate the aggregate amount
thereof in a separate, federally insured savings account,
certificate of deposit in a bank or savings and loan
association, money market certificate or other liquid
short-term security or (B) purchase a nontransferable
annuity contract for a term certain (with no life
contingencies) providing for such payment. The period over
which such payment is to be made shall not extend beyond the
Participant's life expectancy (or the life expectancy of the
Participant and his designated Beneficiary).
-51-
<PAGE>
(2) With respect to the value of a participants account
accumulated after December 31, 1992 all distributions shall
be made in cash other than the value of a Participant's
Account attributable to the Employer Stock Fund.
(3) With respect to the value of a Participant's
Account accumulated after December 31, 1992 attributable to
the Employer Stock Fund, such amount shall be paid in cash
or Employer Stock, as elected by the Participant in writing
on a Prescribed Form.
(4) In the event the death benefit payable pursuant to
Section 6.2 is payable in installments, then, upon the death
of the Participant, the Administrator may direct the Trustee
to segregate the death benefit into a 2 separate account,
and the Trustee shall invest such segregated account
separately, and the funds accumulated in such account shall
be used for the payment of the installments.
(b) Notwithstanding any provision in the Plan to the
contrary, distributions upon the death of a Participant shall be
made in accordance with the following requirements and shall
otherwise comply with Code Section 401(a)(9) and the Regulations
thereunder. To it is determined pursuant to Regulations that the
distribution of a Participant's interest has begun and the
Participant dies before his entire interest has been distributed
to him, the remaining portion of such interest shall be
distributed at least as rapidly as under the method of
distribution selected pursuant to Section 6.5 as of his date of
death. If a Participant dies before he has begun to receive any
distributions of his interest under the Plan or before
distributions are deemed to have begun pursuant to Regulations,
then his death benefit shall be distributed to his Beneficiaries
by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, in the event that the Participant's spouse
(determined as of the date of the Participant's death) is his
Beneficiary, then in lieu of the preceding rules, distributions
must be made over and must commence on or before the later of:
(1) December 31st of the calendar year immediately following the
calendar year in which the Participant died; or (2) December 31st
of the calendar year in which the Participant would have attained
age 70 l/2. If the surviving spouse dies before distributions to
such spouse begin, then the 5-year distribution requirement of
this Section shall apply as if the spouse was the Participant.
(c) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse may, at the election of
the Participant or the Participant's spouse, be redetermined in
accordance with Regulations. The election, once made, shall be
irrevocable. If no election is made by the time distributions
must commence, then the life expectancy of the Participant and
the Participant's spouse shall not be subject to recalculation.
Life expectancy and joint
-52-
<PAGE>
and last survivor expectancy shall be computed using the return
multiples in Tables V and VI of Regulation 1.72-9.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee
is to make a distribution or to commence a series of payments the distribution
or series of payments may be made or begun as soon as is practicable. However,
unless a Former Participant elects in writing to defer the receipt of benefits
(such election may not result in a death benefit that is more than incidental),
the payment of benefits shall begin not later than the 60th day after the close
of the Plan Year in which the latest of the following events occurs: (a) the
date on which the Participant attains the earlier of age 65 or the Normal
Retirement Age specified herein; (b) the 10th anniversary of the year in which
the Participant commenced participation in the Plan; or (c) the date the
Participant terminates his service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution
payable to a Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored
unadjusted for earnings or losses.
6.10 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant,
shall direct the Trustee to distribute to any Participant in any
one Plan Year up to the lesser of 100% of his Participant's
Elective Account and Participant's Account valued as of the last
Valuation Date or the amount necessary to satisfy the immediate
and heavy financial need of the Participant. Any distribution
made pursuant to this Section shall be deemed to be made as of
the first day of the Plan Year or, if later, the Valuation Date
immediately preceding the date of distribution, and the
Participant's Elective Account and Participant's Account shall be
reduced
-53-
<PAGE>
accordingly. Withdrawal under this Section shall be authorized
only if the distribution is on account of:
(1) Expenses for medical care described in Code Section
213(d) previously incurred by the Participant, his spouse,
or any of his dependents (as defined in Code Section 152) or
necessary for these persons to obtain medical care;
(2) The costs directly related to the purchase of a
principal residence for the Participant (excluding mortgage
payments);
(3) Payment of tuition, related educational fees, and
room and board expenses for the next twelve (12) months of
post-secondary education for the Participant, his spouse,
children, or dependents; or
(4) Payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on
the mortgage of the Participant's principal residence.
(b) No such distribution shall be made from the
Participant's Account until such Account has become fully Vested.
(c) No distribution shall be made pursuant to this Section
unless the Administrator, based upon the Participant's
representation and such other facts as are known to the
Administrator, determines that all of the following conditions
are satisfied:
(1) The distribution is not in excess of the amount of
the immediate and heavy financial need of the Participant.
The amount of the immediate and heavy financial need may
include any amounts necessary to pay any federal, state, or
local income taxes or penalties reasonably anticipated to
result from the distribution;
(2) The Participant has obtained all distributions,
other than hardship distributions, and all nontaxable (at
the time of the loan) loans currently available under all
plans maintained by the Employer;
(3) The Plan, and all other plans maintained by the
Employer, provide that the Participant's elective deferrals
and voluntary Employee contributions will be suspended for
at least twelve (12) months after receipt of the hardship
distribution or, the Participant, pursuant to a legally
enforceable agreement, will suspend his elective deferrals
and voluntary Employee contributions to the Plan and all
other plans maintained by the Employer for at least twelve
(12) months after receipt of the hardship distribution; and
-54-
<PAGE>
(4) The Plan, and all other plans maintained by the
Employer, provide that the Participant may not make elective
deferrals for the Participant's taxable year immediately
following the taxable year of the hardship distribution in
excess of the applicable limit under Code Section 402(g) for
such next taxable year less the amount of such Participant's
elective deferrals for the taxable year of the hardship
distribution.
(d) Notwithstanding the above, distributions from the
Participant's Elective Account pursuant to this Section shall be
limited, as of the date of distribution, to the Participant's
Elective Account as of the end of the last Plan Year ending
before July 1, 1989, plus the total Participant's Deferred
Compensation after such date, reduced by the amount of any
previous distributions pursuant to this Section.
(e) Any distribution made pursuant to this Section shall be
made in a manner which is consistent with and satisfies the
provisions of Section 6.5, including, but not limited to, all
notice and consent requirements of Code Section 411(a)(11) and
the Regulations thereunder.
6.11 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to any
"alternate payee" under a "qualified domestic relations order." Furthermore, a
distribution to an "alternate payee" shall be permitted if such distribution is
authorized by a "qualified domestic relations order," even if the affected
Participant has not separated from service and has not reached the "earliest
retirement age" under the Plan. For the purposes of this Section, "alternate
payee, " "qualified domestic relations order" and "earliest retirement age"
shall have the meaning set forth under Code Section 414(p).
6.12 DIRECT ROLLOVER
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election
under this Section, a distributee may elect, at the time and in
the manner prescribed by the Administrator, to have any portion
of an eligible rollover distribution that is equal to at least
$500 paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
(b) For purposes of this Section the following definitions
shall apply:
(1) 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
-55-
<PAGE>
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);
the portion of any other distribution that is not includible
in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer
securities); and any other distribution that is reasonably
expected to total less than $200 during a year.
(2) An eligible retirement plan is an individual
retirement account described in Code Section 408(a), an
individual retirement annuity described in Code Section
408(b), an annuity plan described in Code Section 403(a), or
a qualified trust described in Code Section 401(a), that
accepts the distributee's eligible rollover distribution.
However, in the case of-an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(3) A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in Code
Section 414(p), are distributees with regard to the interest
of the spouse or former spouse.
(4) A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
ARTICLE VII
AMENDMENT, TERMINATION, MERGERS AND LOANS
7.1 AMENDMENT
(a) The Employer shall have the right at any time to amend
the Plan, subject to the limitations of this Section. However,
any amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator, other than an
amendment to remove the Trustee or Administrator, may only be
made with the Trustee's and Administrator's written consent. Any
such amendment shall become effective as provided therein upon
its execution. The Trustee shall not be required to execute any
such amendment unless the Trust provisions contained herein are a
part of the Plan and the amendment affects the duties of the
Trustee hereunder.
(b) No amendment to the Plan shall be effective if it
authorizes or permits any part of the Trust Fund (other than such
part as is required to pay taxes and administration expenses) to
be used for or diverted to any purpose other than
-56-
<PAGE>
for the exclusive benefit of the Participants or their
Beneficiaries or estates; or causes any reduction in the amount
credited to the account of any Participant; or causes or permits
any portion of the Trust Fund to revert to or become property of
the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a
merger, plan transfer or similar transaction) shall be effective
to the extent it eliminates or reduces any "Section 411 (d)(6)
protected benefit" or adds or modifies conditions relating to
"Section 411(d)(6) protected benefits" the result of which is a
further restriction on such benefit unless such protected
benefits are preserved with respect to benefits accrued as of the
later of the adoption date or effective date of the amendment.
"Section 411(d)(6) protected benefits" are benefits described in
Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.
7.2 TERMINATION
(a) the Employer shall have the right at any time to
terminate the Plan by delivering to the Trustee and Administrator
written notice of such termination. Upon any full or partial
termination, all amounts credited to the affected Participants'
Combined Accounts shall become 100% Vested as provided in Section
6.4 and shall not thereafter be subject to forfeiture, and all
unallocated amounts shall be allocated to the accounts of all
Participants in accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer
shall direct the distribution of the assets of the Trust Fund to
Participants in a manner which is consistent with and satisfies
the provisions of Section 6.5. Distributions to a Participant
shall be made in cash or in property or through the purchase of
irrevocable nontransferable deferred commitments from an insurer.
Except as permitted by Regulations, the termination of the Plan
shall not result in the reduction of "Section 411(d)(6) protected
benefits" in accordance with Section 7.1(c).
7.3 MERGER OR CONSOLIDATION
This Plan may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 7.1(c).
-57-
<PAGE>
7.4 LOANS TO PARTICIPANTS
(a) The Trustee may, in the Trustee's discretion, make loans
to Participants and Beneficiaries under the following
circumstances: (1) loans shall be made available to all
Participants and Beneficiaries on a reasonably equivalent basis;
(2) loans shall not be made available to Highly Compensated
Employees in an amount greater than the amount made available to
other Participants and Beneficiaries; (3) loans shall bear a
reasonable rate of interest; (4) loans shall be adequately
secured; and (5) shall provide for repayment over a reasonable
period of time.
(b) Loans made pursuant to this Section (when added to the
outstanding balance of all other loans made by the Plan to the
Participant) shall be limited to the lesser of:
(1) $50,000 reduced by the excess (if any) of the
highest outstanding balance of loans from the Plan to the
Participant during the one year period ending on the day
before the date on which such loan is made, over the
outstanding balance of loans from the Plan to the
Participant on the date on which such loan was made, or
(2) one-half (l/2) of the present value of the
non-forfeitable accrued benefit of the Participant under the
Plan.
For purposes of this limit, all plans of the Employer shall
be considered one plan. Additionally, with respect to any loan
made prior to January 1, 1987, the $50,000 limit specified in (1)
above shall be unreduced.
(c) Loans shall provide for level amortization with payments
to be made not less frequently than quarterly over a period not
to exceed five (5) years. However, loans used to acquire any
dwelling unit which, within a reasonable time, is to be used
(determined at the time the loan is made) as a principal
residence of the Participant shall provide for periodic repayment
over a reasonable period of time that may exceed five (5) years.
For this purpose, a principal residence has the same meaning as a
principal residence under Code Section 1034. Notwithstanding the
foregoing, loans made prior to January 1, 1987 which are used to
acquire, construct, reconstruct or substantially rehabilitate any
dwelling unit which, within a reasonable period of time is to be
used (determined at the time the loan is made) as a principal
residence of the Participant or a member of his family (within
the meaning of Code Section 267(c)(4)) may provide for periodic
repayment over a reasonable period of time that may exceed five
(5) years. Additionally, loans made prior to January 1, 1987, may
provide for periodic payments which are made less frequently than
quarterly and which do not necessarily result in level
amortization. Loan repayments will be suspended under this Plan
as permitted under Code Section 414(u)(4).
-58-
<PAGE>
(d) Any loans-granted or renewed on or after the last day of
the first Plan Year beginning after December 31, 1988 shall be
made pursuant to a Participant loan program. Such loan program
shall be established in writing and must include, but need not be
limited to, the following:
(1) the identity of the person or positions authorized
to administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or
denied;
(4) limitations, if any, on the types and amounts of
loans offered;
(5) the procedure under the program for determining a
reasonable rate of interest;
(6) the types of collateral which may secure a
Participant loan; and
(7) the events constituting default and the steps that
will be taken to preserve Plan assets.
(8) Such Participant loan program shall be contained in
a separate written document which, when properly executed,
is hereby incorporated by reference and made a part of the
Plan. Furthermore, such Participant loan program may be
modified or amended in writing from time to time without the
necessity of amending this Section.
(e) No loans shall be made that would constitute prohibited
transactions, as that term is defined in Section 406 of ERISA and
Section 4975 of the Code, unless than exemption for the loan has
been obtained pursuant to Section 408 of ERISA.
(f) Notwithstanding any other provision of Section 7.4, any
amounts invested in Company Stock that are not eligible to be
reinvested in other Investment Funds are also not available as
payment to a Participant as loan proceeds.
-59-
<PAGE>
ARTICLE VIII
TOP HEAVY
8.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special
vesting requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan
and the special minimum allocation requirements of Code Section 416(c) pursuant
to Section 4.5 of the Plan.
8.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in
which, as of the Determination Date, the Present Value of Accrued
Benefits of Key Employees and (2) the sum of the Aggregate
Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds sixty percent (60%) of the Present
Value of Accrued Benefits and the Aggregate Accounts of all Key
and Non-Key Employees under this Plan and all plans of an
Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year,
but such Participant was a Key Employee for any prior Plan Year,
such Participant's Present Value of Accrued Benefit and/or
Aggregate Account balance shall not be taken into account for
purposes of determining whether this Plan is a Top Heavy or Super
Top Heavy Plan (or whether any Aggregation Group which includes
this Plan is a Top Heavy Group). In addition, if a Participant or
Former Participant has not performed any services for any
Employer maintaining the Plan at any time during the five year
period ending on the Determination Date, any accrued benefit for
such Participant or Former Participant shall not be taken into
account for the purposes of determining whether this Plan is a
Top Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan
Year in which, as of the Determination Date, (1) the Present
Value of Accrued Benefits of Key Employees and (2) the sum of the
Aggregate Accounts of Key Employees under this Plan and all plans
of an Aggregation Group, exceeds ninety percent (90%) of the
Present Value of Accrued Benefits and the Aggregate Accounts of
all Key and Non-Key Employees under this Plan and all plans of an
Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as
of the Determination Date is the sum of:
(1) his Participant's Combined Account balance as of
the most recent valuation occurring within a twelve (12)
month period ending on the Determination Date;
-60-
<PAGE>
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of
any contributions actually made after the Valuation Date but
due on or before the Determination Date, except for the
first Plan Year when such adjustment shall also reflect the
amount of any contributions made after the Determination
Date that are allocated as of a date in that first Plan
Year.
(3) any Plan distributions made within the Plan Year
that includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distributions
made after the Valuation Date and prior to the Determination
Date, such distributions are not included as distributions
for top heavy purposes to the extent that such distributions
are already included in the Participant's Aggregate Account
balance as of the Valuation Date. Notwithstanding anything
herein to the contrary, all distributions, including
distributions under a terminated plan which if it had not
been terminated would have been required to be included in
an Aggregation Group, will be counted. Further,
distributions from the Plan (including the cash value of
life insurance policies) of a Participant's account balance
because of death shall be treated as a distribution for the
purposes of this paragraph.
(4) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax deductible
qualified voluntary employee contributions shall not be
considered to be a part of the Participant's Aggregate
Account balance.
(5) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both initiated by the
Employee and made from a plan maintained by one employer to
a plan maintained by another employer), if this Plan
provides the rollovers or plan-to-plan transfers, it shall
always consider such rollovers or plan-to-plan transfers as
a distribution for the purposes of this Section. If this
Plan is the plan accepting such rollovers or plan-to-plan
transfers, it shall not consider such rollovers or
plan-to-plan transfers as part of the Participant's
Aggregate Account balance.
(6) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made
to a plan maintained by the same employer), if this Plan
provides the rollover or plan-to-plan transfer, it shall not
be counted as a distribution for purposes of this Section.
If this Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such rollover or
plan-to-plan transfer as part of the Participant's Aggregate
Account balance, irrespective of the date on which such
rollover or plan-to-plan transfer is accepted.
-61-
<PAGE>
(7) For the purposes of determining whether two
employers are to be treated as the same employer in (5) and
(6) above, all employers aggregated under Code Section
414(b), (c), (m) and (o) are treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation
Group or a Permissive Aggregation Group as hereinafter
determined.
(1) Required Aggregation Group: In determining a
Required Aggregation Group hereunder, each plan of the
Employer in which a Key Employee is a participant in the
Plan Year containing the Determination Date or any of the
four preceding Plan Years, and each other plan of the
Employer which enables any plan in which a Key Employee
participates to meet the requirements of Code Sections
401(a)(4) or 410, will be required to be aggregated. Such
group shall be known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan
in the group will be considered a Top Heavy Plan if the
Required Aggregation Group is a Top Heavy Group. No plan in
the Required Aggregation Group will be considered a Top
Heavy Plan if the Required Aggregation Group is not a Top
Heavy Group.
(2) Permissive Aggregation Group: The Employer may also
include any other plan not required to be included in the
Required Aggregation Group, provided the resulting group,
taken as a whole, would continue to satisfy the provisions
of Code Sections 401(a)(4) and 410. Such group shall be
known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a
plan that is part of the Required Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which the
Determination Dates fall within the same calendar year shall
be aggregated in order to determine whether such plans are
Top Heavy Plans.
(4) An Aggregation Group shall include any terminated
plan of the Employer if it was maintained within the last
five (5) years ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the
preceding Plan Year, or (b) in the case of the first Plan Year,
the last day of such Plan Year.
-62-
<PAGE>
(f) Present Value of Accrued Benefit: In the case of a
defined benefit plan, the Present Value of Accrued Benefit for a
Participant other than a Key Employee, shall be as determined
using the single accrual method used for all plans of the
Employer and Affiliated Employers, or if no such single method
exists, using a method which results in benefits accruing not
more rapidly than the slowest accrual rate permitted under Code
Section 411(b)(l)(C). The determination of the Present Value of
Accrued Benefit shall be determined as of the most recent
Valuation Date that falls within or ends with the l2-month period
ending on the Determination Date except as provided in Code
Section 416 and the Regulations thereunder for the first and
second plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which,
as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key
Employees under all defined benefit plans included in the
group, and
(2) the Aggregate Accounts of Key Employees under all
defined contribution plans included in the group, exceeds
sixty percent (60%) of a similar sum determined for all
Participants.
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between
the Employer and any Participant or to be a consideration or an inducement for
the employment of any Participant or Employee. Nothing contained in this Plan
shall be deemed to give any Participant or Employee the right to be retained in
the service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit
which shall be payable out of the Trust Fund to any person
(including a Participant or his-Beneficiary) shall be subject in
any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber,
or charge the same shall be void; and no such benefit shall in
any manner be liable for, or subject to, the debts, contracts,
liabilities, engagements, or torts of any such person, nor shall
it be subject to attachment or legal process for or against such
person, and the
-63-
<PAGE>
same shall not be recognized by the Trustee, except to such
extent as may be required by law.
(b) This provision shall not apply to the extent a
Participant or Beneficiary is indebted to the Plan, as a result
of a loan from the Plan. At the time a distribution is to be made
to or for a Participant's or Beneficiary's benefit, such
proportion of the amount distributed as shall equal such loan
indebtedness shall be paid by the Trustee to the Trustee or the
Administrator, at the direction of the Administrator, to apply
against or discharge such loan indebtedness. Prior to making a
payment, however, the Participant or Beneficiary must be given
written notice by the Administrator that such loan indebtedness
is to be so paid in whole or part from his Participant's Combined
Account. If the Participant or Beneficiary does not agree that
the loan indebtedness is a valid claim against his Vested
Participant's Combined Account, he shall be entitled to a review
of the validity of the claim in accordance with procedures
provided in Sections 2.7 and 2.8.
(c) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act
of 1984. The Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and
to administer distributions under such qualified orders. Further,
to the extent provided under a "qualified domestic relations
order," a former spouse of a Participant shall be treated as the
spouse or surviving spouse for all purposes under the Plan.
9.3 CONSTRUCTION OF PLAN
This Plan shall be construed and enforced according to the Act
and the laws of the State of New York, other than its laws respecting choice of
law, to the extent not preempted by the Act.
9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or
neuter gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply.
9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding
the Trust and/or Plan established hereunder to which the Trustee, the Employer
or the Administrator may be a party, and such claim, suit, or proceeding is
resolved in favor of the Trustee, the Employer or the Administrator, they shall
be entitled to be reimbursed from the Trust Fund for any and all costs,
-64-
<PAGE>
attorney's fees, and other expenses pertaining thereto incurred by them for
which they shall have become liable.
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically
permitted by law, it shall be impossible by operation of the Plan
or of the Trust, by termination of either, by power of revocation
or amendment, by the happening of any contingency, by collateral
arrangement or by any other means, for any part of the corpus or
income of any trust fund maintained pursuant to the Plan or any
funds contributed thereto to be used for, or diverted to,
purposes other than the exclusive benefit of Participants,
Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the time
of payment and the Trustees shall return such amount to the
Employer within the one (1) year period. Earnings of the Plan
attributable to the excess contributions may not be returned to
the Employer but any losses attributable thereto must reduce the
amount so returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless
exempted by the Act and regulations thereunder, shall be bonded in an amount not
less than 10% of the amount of the funds such Fiduciary handles; provided,
however, that the minimum bond shall be $1,000 and the maximum bond, $500,000.
The amount of funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or class to be
covered and their predecessors, if any, during the preceding Plan Year, or if
there is no preceding Plan Year, then by the amount of the funds to be handled
during the then current year. The bond shall provide protection to the Plan
against any loss by reason of acts of fraud or dishonesty by the Fiduciary alone
or in connivance with others. The surety shall be a corporate surety company (as
such term is used in Act Section 412(a)(2)), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer, the Administrator, nor the Trustee, nor
their successors shall be responsible for the validity of any Contract issued
hereunder or for the failure on the part of the insurer to make payments
provided by any such Contract, or for the action of any person which may delay
payment or render a Contract null and void or unenforceable in whole or in part.
-65-
<PAGE>
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have
any responsibility for the validity of this Plan or for the tax or legal aspects
of this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not, be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative,
Beneficiary, or to any guardian or committee appointed for such Participant or
Beneficiary in accordance with the provisions of the Plan, shall, to the extent
thereof, be in full satisfaction of all claims hereunder against the Trustee and
the Employer, either of whom may require such Participant, legal representative,
Beneficiary, guardian or committee, as a condition precedent to such payment, to
execute a receipt and release thereof in such form as shall be determined by the
Trustee or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2)
the Administrator and (3) the Trustee. The named Fiduciaries shall have only
those specific powers, duties, responsibilities, and obligations as are
specifically given them under the Plan or as accepted by or assigned to them
pursuant to any procedure provided under the Plan, including but not limited to
any agreement allocating or delegating their responsibilities, the terms of
which are incorporated herein by reference. In general, unless otherwise
indicated herein or pursuant to such agreements, the Employer shall have the
duties specified in Article II hereof, as the same may be allocated or delegated
thereunder, including but not limited to the responsibility for making the
contributions provided for under Section 4.2; and shall have the authority to
appoint and remove the Trustee and the Administrator; to formulate the Plan's
"funding policy and method"; and to amend or terminate, in whole or in part, the
Plan. The Administrator shall have the responsibility for the administration of
the Plan, including but not limited to the items specified in Article II of the
Plan, as the same may be allocated or delegated thereunder. The Administrator
shall act as the named. Fiduciary responsible for communicating with the
Participant according to the Participant Direction Procedures. The Trustee shall
have the responsibility of management and control of the assets held under the
Trust, except to the extent directed pursuant to Article II or with respect to
those assets, the management of which has been assigned to an Investment
Manager, who shall be solely responsible for the management of the assets
-66-
<PAGE>
assigned to it, all as specifically provided in the Plan and any agreement with
the Trustee. Each named Fiduciary warrants that any directions given,
information furnished, or action taken by it shall be in accordance with the
provisions of the Plan, authorizing or providing for such direction, information
or action. Furthermore, each named Fiduciary may rely upon any such direction,
information or action of another named Fiduciary as being proper under the Plan,
and is not required under the Plan to inquire into the propriety of any such
direction, information or action. It is intended under the Plan that each named
Fiduciary shall be. responsible for the proper exercise of its own powers,
duties, responsibilities and obligations under the Plan as specified or
allocated herein. No named Fiduciary shall guarantee the Trust Fund in any
manner against investment loss or depreciation in asset value. Any person or
group may serve in more than one Fiduciary capacity. In the furtherance of their
responsibilities hereunder, the "named Fiduciaries" shall be empowered to
interpret the Plan and Trust and to resolve ambiguities, inconsistencies and
omissions, which findings shall be binding, final and conclusive.
9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan
receives an adverse determination with respect to its initial
qualification, then the Plan may return such contributions to the
Employer within one year after such determination, provided the
application for the determination is made by the time prescribed
by law for filing the Employer's return for the taxable year in
which the Plan was adopted, or such later date as the Secretary
of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except
Sections 3.5, 3.6, and 4.2(d), any contribution by the Employer
to the Trust Fund is conditioned upon the deductibility of the
contribution by the Employer under the Code and, to the extent
any such deduction is disallowed, the Employer may, within one
(1) year following the disallowance of the deduction, demand
repayment of such disallowed contribution and the Trustee shall
return such contribution within one (1) year following the
disallowance. Earnings of the Plan attributable to the excess
contribution may not be returned to the Employer, but any losses
attributable thereto must reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
-67-
<PAGE>
IN WITNESS WHEREOF, this Plan has been executed the day and
year above written.
NATIONAL HOME HEALTH CARE
CORP.
By: /s/ Steven Fialkow
-------------------------
EMPLOYER
/s/ Robert Heller
-------------------------
TRUSTEE
-68-
<PAGE>
EXHIBIT A
PARTICIPATING EMPLOYERS IN THE PLAN
As of January 1, 1999, National Home Health Care Corp. and the
following entities are Employers participating in the Plan on behalf of their
respective employees:
Health Acquisitions Corp.
New England Home Care, Inc.
National HMO (New York), Inc.
Accredited Health Services, Inc
<PAGE>
EXHIBIT B
NATIONAL HOME HEALTH CARE CORP.
SAVINGS AND STOCK INVESTMENT TRUST
AS AMENDED & RESTATED
EFFECTIVE JANUARY 1, 1999
<PAGE>
EXHIBIT C
VOTING OF EMPLOYER STOCK
The Employer will make forms available to each Participant to
instruct the Trustee with regard to the voting of any shares of Employer Stock
held in the Participant's Account. The Trustee will vote such shares only as
directed by the Participant. If a Participant fails to give timely directions as
to the voting of shares of Employer Stock held in a Participant's Account or if
any shares held by the Trustees are not allocated to Participants, the Trustee
will vote such shares in the same proportion as he votes the shares for which
the Trustee receives directions. The Employer shall use its best efforts to
timely distribute to each Participant such information as is distributed to
other shareholders of the Employer in connection with any such vote.
<PAGE>
EXHIBIT D
TENDER OR EXCHANGE OFFER OF COMPANY STOCK
Each Participant shall have the right to direct the Employer in
writing as to the manner in which to regard a tender or exchange offer with
respect to any shares of Employer Stock held in that Participant's Account. If
the Employer does not receive timely directions from a Participant as to the
manner in which to respond to such a tender or exchange offer with respect to
any shares of Employer Stock held in the Participant's Account, then the
Employer shall not tender or exchange any such shares. The Employer shall use
its best efforts to timely distribute to each Participant such information as is
distributed.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 8,633,000
<SECURITIES> 18,000
<RECEIVABLES> 11,177,000
<ALLOWANCES> (378,000)
<INVENTORY> 0
<CURRENT-ASSETS> 20,142,000
<PP&E> 1,456,000
<DEPRECIATION> (819,000)
<TOTAL-ASSETS> 27,390,000
<CURRENT-LIABILITIES> 1,437,000
<BONDS> 0
0
0
<COMMON> 6,000
<OTHER-SE> 27,384,000
<TOTAL-LIABILITY-AND-EQUITY> 27,390,000
<SALES> 9,494,000
<TOTAL-REVENUES> 9,494,000
<CGS> 0
<TOTAL-COSTS> 8,863,000
<OTHER-EXPENSES> (1,028,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,659,000
<INCOME-TAX> 568,000
<INCOME-CONTINUING> 1,091,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 1,091,000
<NET-INCOME> 0
<EPS-BASIC> .21
<EPS-DILUTED> .21
</TABLE>
