UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
Commission File Number: 2-88927
FIRST KEYSTONE CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2249083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
111 West Front Street, Berwick, PA 18603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 752-3671
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date:
Common Stock, $2 Par Value, 977,909 shares as of June 30, 1997.
<PAGE>
PART I. - FINANCIAL INFORMATION
Item. 1 Financial Statements
<TABLE>
FIRST KEYSTONE CORPORATION
BALANCE SHEETS
(Unaudited)
<CAPTION>
(Amounts in thousands, except per share data)
June December
1997 1996
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,339 $ 5,147
Interest bearing deposits with banks 5,057 32
Available-for-sale securities carried
at estimated fair value 73,487 81,146
Investment securities, held to
maturity securities, estimated fair
value of $18,253 and $19,955 18,363 20,080
Loans, net of unearned income 146,699 133,261
Allowance for loan losses (2,302) (2,267)
Net loans $144,397 $130,994
Bank premises and equipment 3,371 2,881
Other real estate 0 46
Interest receivable 1,814 1,959
Other assets 383 272
Total Assets $253,211 $242,557
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 18,140 $ 17,805
Interest bearing 186,456 180,741
Total deposits $204,596 $198,546
Short-term borrowings 4,936 5,121
Long-term borrowings 13,000 10,000
Accrued expenses 1,227 1,128
Other liabilities 326 289
Total Liabilities $224,085 $215,084
STOCKHOLDERS' EQUITY
Common stock, par value
$2 per share $ 1,956 $ 1,778
Surplus 9,761 6,655
Retained earnings 16,217 17,890
Unrealized gain (loss) on
investment securities available
for sale, net of taxes 1,192 1,150
Total Stockholders' Equity $ 29,126 $ 27,473
Total Liabilities and
Stockholders' Equity $253,211 $242,557
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
1
<PAGE>
<TABLE>
FIRST KEYSTONE CORPORATION
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<CAPTION>
(Amounts in thousands except per share data)
1997 1996
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $3,159 $2,797
Interest and dividend income on
securities 1,516 1,563
Interest on deposits in banks 70 30
Total Interest Income $4,745 $4,390
INTEREST EXPENSE
Interest on deposits $2,029 $1,957
Interest on short-term borrowings 45 56
Interest on long-term borrowings 202 139
Total Interest Expense $2,276 $2,152
Net interest income $2,469 $2,238
Provision for loan losses 100 65
Net Interest Income After Provision
for Loan Losses $2,369 $2,173
OTHER INCOME
Service charges on deposit accounts $ 160 $ 141
Other non-interest income 120 137
Investment securities gains (losses)
net (7) (3)
Total Other Income $ 273 $ 275
OTHER EXPENSES
Salaries and employee benefits $ 613 $ 572
Net occupancy and fixed asset expense 207 181
Other non-interest expense 366 328
Total Other Expenses $1,186 $1,081
Income before income taxes $1,456 $1,367
Applicable income tax (benefit) 309 274
Net Income $1,147 $1,093
Net Income Per Weighted Share
Outstanding $ 1.17 $ 1.12
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
2
<PAGE>
<TABLE>
FIRST KEYSTONE CORPORATION
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<CAPTION>
(Amounts in thousands except per share data)
1997 1996
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $6,145 $5,598
Interest and dividend income on
securities 3,127 2,968
Interest on deposits in banks 81 77
Total Interest Income $9,353 $8,643
INTEREST EXPENSE
Interest on deposits $4,026 $3,912
Interest on short-term borrowings 123 105
Interest on long-term borrowings 364 264
Total Interest Expense $4,513 $4,281
Net interest income $4,840 $4,362
Provision for loan losses 150 90
Net Interest Income After Provision
for Loan Losses $4,690 $4,272
OTHER INCOME
Service charges on deposit accounts $ 306 $ 271
Other non-interest income 259 246
Investment securities gains (losses)
net (1) (2)
Total Other Income $ 564 $ 515
OTHER EXPENSES
Salaries and employee benefits $1,272 $1,189
Net occupancy and fixed asset expense 399 388
Other non-interest expense 730 659
Total Other Expenses $2,401 $2,236
Income before income taxes $2,853 $2,551
Applicable income tax (benefit) 583 490
Net Income $2,270 $2,061
Net Income Per Weighted Shares
Outstanding $ 2.32 $ 2.11
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
3
<PAGE>
<TABLE>
FIRST KEYSTONE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<CAPTION>
(Amounts in thousands)
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,270 $ 2,061
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision or loan losses 150 90
Provision for depreciation and
amortization 155 159
Premium amortization on investment
securities 60 88
Discount accretion on investment
securities (62) (42)
(Gain) loss on sales of investment
securities 1 2
Deferred income tax (benefit) (3) 43
(Gain) loss on sale of other real
estate owned (1) 0
(Increase) decrease in interest
receivable and other assets 34 (120)
Increase (decrease) in interest
payable, accrued expenses and
other liabilities 99 25
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 2,703 $ 2,306
INVESTING ACTIVITIES
Purchases of investment securities
available for sale $(10,945) $(35,035)
Proceeds from sales of investment
securities available for sale 16,885 15,579
Proceeds from maturities and
redemptions of investment
securities available for sale 2,358 2,984
Purchase of investment securities
held to maturity 0 (996)
Proceeds from maturities and
redemption of investment
securities held to maturity 1,165 1,998
Proceeds from sales of loans 0 65
Net (increase) decrease in loans (13,553) 1,314
Purchase of premises and equipment (645) (42)
Proceeds from sale of other real
estate owned 43 0
NET CASH USED BY INVESTING
ACTIVITIES $ (4,692) $(14,133)
FINANCING ACTIVITIES
Net increase (decrease) in
deposits $ 6,050 $ 5,719
Net increase (decrease) in
short-term borrowings (185) 4,953
Net increase (decrease)in
long-term borrowings 3,000 0
Cash dividends (659) (556)
NET CASH PROVIDED BY FINANCING
ACTIVITIES $ 8,206 $ 10,116
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENT $ 6,217 $ (1,711)
CASH AND CASH EQUIVALENTS, BEGINNING 5,179 6,620
CASH AND CASH EQUIVALENTS, ENDING $ 11,396 $ 4,909
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during period for
Interest $ 4,377 $ 4,352
Income Taxes 555 501
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
4
<PAGE>
FIRST KEYSTONE CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
Note 1.
The accounting and reporting policies of First Keystone
Corporation and Subsidiaries conform to generally accepted accounting
principles and to general practices within the banking industry.
These consolidated interim financial statements include the accounts
of First Keystone Corporation and its wholly owned subsidiary, The
First National Bank of Berwick. All significant inter-company
balances have been eliminated.
Note 2.
The accompanying consolidated interim financial statements are
unaudited. In management's opinion, the consolidated interim
financial statements reflect a fair presentation of the consolidated
financial position of First Keystone Corporation and Subsidiary, and
the results of their operations and their cash flows for the interim
periods presented. Further, the consolidated interim financial
statements reflect all adjustments, which are in the opinion of
management, necessary to present fairly the consolidated financial
condition and consolidated results of operations and cash flows for
the interim period presented and that all such adjustments to the
consolidated financial statements are of a normal recurring nature.
Note 3.
The results of operations for the six-month period ended June
30, 1997, are not necessarily indicative of the results to be expected
for the full year.
Note 4.
Net income per share of common stock for the interim periods is
based on the weighted average number of shares outstanding for each
period; 1997 and 1996 - 977,909 shares after giving effect to stock
dividends.
Note 5.
LOANS
Loans are stated at their outstanding principal balances, net of
any deferred fees or costs, unearned income, and the allowance for
loan losses. Interest on installment loans is recognized as income
over the term of each loan, generally, by the "actuarial method".
Interest on other loans is primarily recognized based upon the
principal amount outstanding. Loan origination fees and certain
direct loan origination costs have been deferred and the net amount
amortized using the interest method over the contractual life of the
related loans as an interest yield adjustment.
Non-Accrual Loans - Generally, a loan (including a loan impaired
under Statement of Financial Accounting Standards No. 114) is
classified as non-accrual, and the accrual of interest on such a loan
is discontinued when the contractual payment of principal or interest
has become 90 days past due or management has serious doubts about
further collectibility of principal or interest, even though the loan
currently is performing. A loan may remain on accrual status if it is
in the process of collection and is either guaranteed or well secured.
5
<PAGE>
When a loan is placed on non-accrual status, unpaid interest credited
to income in the current year is reversed and unpaid interest accrued
in prior years is charged against the allowance for credit losses.
Potential problem loans are identified by management as a part of its
loan review process.
Income recognition is in accordance with Statement of Financial
Accounting Standards No. 118. Certain non-accrual loans may continue
to perform, that is, payments are still being received. Generally,
the payments
are applied to principal. These loans remain under constant scrutiny
and if performance continues, interest income may be recorded on a
cash basis based on management's judgement as to collectibility of
principal.
Allowance for Loan Losses - The allowance for loan losses is
established through provisions for loan losses charged against income.
Loans deemed to be uncollectible are charged against the allowance for
loan losses, and subsequent recoveries, if any, are credited to the
allowance.
The Corporation adheres to the principles provided by Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan as amended by Statement of Financial
Accounting
Standards No. 118, "Accounting by creditors for Impairment of a Loan -
Income Recognition and Disclosure." Under these standards, the
allowance for loan losses related to loans that are identified for
evaluation in accordance with Statement No. 114 is based on discounted
cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans.
Statement No. 118 allows the continued
use of existing methods for income recognition on impaired loans and
amends disclosure requirements to require information about the
recorded investment in certain impaired loans and related income
recognition on those loans. The allowance for loan losses is
maintained at a level by management to be adequate to absorb estimated
potential loan losses. Management's periodic evaluation of the
adequacy of the allowance for loan losses is based on the
Corporation's past loan experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability
to repay (including the timing of future payments), the estimated
value of any underlying collateral, composition of the loan portfolio,
current economic conditions, and other relevant factors. this
evaluation is inherently subjective as it requires material estimates,
including the amounts and timing of future cash flows expected to be
received on impaired loans that may be susceptible to significant
change.
<TABLE>
<CAPTION>
The following table presents the changes in the allowance for
credit losses:
<S> <C>
Balance at January 1, 1997 $2,267
Provisions charged to operations 150
Loans charged off (141)
Recoveries 26
Balance at June 30, 1997 $2,302
</TABLE>
At June 30, 1997, the recorded investment in loans that are
considered to be impaired under Statement No. 114 was $43,151. No
additional charge to operations is required since the total allowance
for loan losses is estimated by management to be adequate to provide
for the loan loss allowance under Statement No. 114 as well as any
other potential loan losses.
Note 6.
On April 15, 1997, the Board of Directors declared a 10% stock
dividend payable May 16, 1997, to shareholders of record May 2, 1997.
The stock dividend was valued based on the market price of $37.00 per
share on May 2, 1997. A total of 88,762 shares were issued as a
result of the stock dividend with a total value of $3,289,844,
including cash in lieu of fractional shares.
6
<PAGE>
<TABLE>
<CAPTION>
(Amounts in thousands except Common Shares data)
Common Common
Shares Stock Surplus
<S> <C> <C> <C>
Balance at January 1, 1997 889,147 $1,778 $6,655
Net Income 0 0 0
10% stock dividend 88,762 178 3,106
Dividends paid in lieu of
fractional shares 0 0 0
Cash dividends - $.67 per
share 0 0 0
Change in unrealized gain
(loss) on investment
securities available
for sale 0 0 0
Balance at June 30, 1997 977,909 $1,956 $9,761
<CAPTION>
Net Unrealized
Gain (Loss)
on Investment
Securities
Retained Available
Earnings For Sale Total
<S> <C> <C> <C>
Balance at January 1, 1997 $17,890 $1,150 $27,473
Net Income 2,270 0 2,270
10% stock dividend (3,284) 0 0
Dividends paid in lieu of
fractional shares (6) 0 (6)
Cash dividends - $.67 per share (653) 0 (653)
Change in unrealized gain
(loss) on investment
securities available
for sale 0 42 42
Balance at June 30, 1997 $16,217 $1,192 $29,126
</TABLE>
Note 7.
As required on January 1, 1996, the Corporation adopted
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." The Statement requires
that long-lived assets and certain identifiable intangibles are
classified into two categories for the purpose of accounting for an
impairment of assets: those to be held and used and those to be
disposed of. Assets to be held and used must be reviewed whenever
events or changes in circumstances indicate that the carrying value
may not be recoverable. An impairment loss is indicated if the sum
of the expected future cash flows, undiscounted and without interest
charges, is less than the carrying amount of the assets. An
impairment loss must be recognized as the amount by which the carrying
amount of the asset exceeds the fair value of the asset so determined.
Implementation of this Statement did not have any effect on the
consolidated financial condition or results of operations of the
Corporation.
Note 8.
The consolidated interim financial statements have been prepared
in accordance with requirements of From 10-Q and therefore does not
include all the disclosures normally required by generally accepted
accounting principles, or those normally made in the Corporation's
annual 10-KSB filing. The reader of these consolidated interim
financial statements may wish to refer to the Corporation's annual
report or Form 10-KSB for the period ended December 31, 1996, filed
with the Securities and Exchange Commission.
7
<PAGE>
Item 2. First Keystone Corporation Management's Discussion and
Analysis of Financial Condition and
Results of Operation as of June 30, 1997
RESULTS OF OPERATIONS
First Keystone Corporation realized record earnings for the
second quarter of 1997 of $1,147,000, an increase of 5% over the
second quarter of 1996. Six months net income for the period ended
June 30, 1997, amounted to $2,270,000, an increase of 10% over the
$2,061,000 net income reported June 30, 1996. On a per share basis,
net income per share increased to $2.32 for the six months of 1997
compared to $2.11 for the first six months of 1996, while dividends
increased to $.67 per share up from $.56 in 1996.
Year-to-date net income annualized amounts to a return on
average common equity of 16.18% and a return on assets of 1.84%. For
the six months ended June 30, 1996, these measures were 16.28% and
1.78%, respectively on an annualized basis.
NET INTEREST INCOME
The major source of operating income for the Corporation is net
interest income, defined as interest income less interest expense. In
the second quarter of 1997 and year-to-date in 1997, interest income
has increased more than interest expense resulting in improved net
interest income. In the second quarter of 1997, interest income
amounted to $4,745,000, an increase of $355,000 or 8.1% over the
second quarter of 1996. Interest expense amounted to $2,276,000 in
the second quarter of 1997, an increase of $124,000, or 5.8% over the
second quarter of 1997. Accordingly, net interest income amounted to
$2,469,000 in the second quarter of 1997, an increase of $231,000, or
10.3% over the second quarter of 1996. Year-to-date for the six
months ended June 30, 1997, total interest income increased $710,000,
or 8.2% over the first six months of 1996. Total interest expense
increased $232,000, or 5.4% for the first six months of 1997 over
1996. This resulted in net interest income increasing $478,000, or
11% for the six months ended June 30, 1997, over 1996.
Our net interest margin for the quarter ended June 30, 1997, was
4.57% compared to 4.46% for the quarter ended June 30, 1996. For the
six months ended June 30, 1997, our net interest margin was 4.54%
compared to 4.41% for the first six months of 1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the quarter ended June 30,
1997, was $100,000 compared to $65,000 for the second quarter of 1996.
Year-to-date, the provision for loan losses increased to $150,000 in
1997 over the $90,000 provision for the period ended June 30, 1996.
The provision for possible loan losses was increased in 1997 to
cushion us against possible increased charge-offs associated with an
increase in loans of $20,678,000 from June 30, 1996, to June 30, 1997.
Net charge-offs totaled $115,000 for the six months ended June 30,
1997, as compared to $177,000 for the first six months of 1996. In
addition to the decrease in net charge-offs, our non-performing
assets, consisting of non-performing loans and foreclosed assets, was
$284,000 as of June 30, 1997, as compared to $324,000 as of June 30,
1996, representing .19% and .26%, respectively of loans net of
unearned income and foreclosed assets.
Loans past-due 90 days or more still accruing amounted to
$222,000 as of June 30, 1997, and $68,000 as of June 30, 1996. The
allowance for loan losses as a percentage of loans, net of unearned
interest was 1.57% as of June 30, 1997, and 1.53% as of June 30, 1996.
8
<PAGE>
NON-INTEREST INCOME
Total non-interest or other income was $273,000 for the quarter
ended June 30, 1997, as compared to $275,000 for the quarter ended
June 30, 1996. Excluding investment security gains and losses, non-
interest income was $280,000 for the second quarter of 1997, an
increase of $2,000 over the second quarter of 1996. For the six
months ended June 30, 1997, total non-interest income was $564,000, an
increase of $49,000, or 9.5% over the first six months of 1996.
Increased fees generated by our trust department was the primary
reason for the $49,000 year-to-date increase in non-interest income.
NON-INTEREST EXPENSES
Total non-interest, or other expenses, was $1,186,000 for the
quarter ended June 30, 1997, as compared to $1,081,000 for the quarter
ended June 30, 1996. The increase of $105,000 is comprised of salary
and benefits increasing $41,000, occupancy expense increasing $26,000,
and other non-interest expense increasing $38,000.
For the six months ended June 30, 1997, total non-interest
expense was $2,401,000, an increase of $165,000, or 7.4% over the
first six months of 1996. Expenses associated with employee (salaried
employee benefits) continues to be the largest category of non-
interest expenses. Salaries and benefits amount to 53.0% of total
non-interest expense for the six months ended June 30, 1997, as
compared to 53.2% for the first six months of 1996. Salaries and
benefits amounted to $1,272,000 for the six months ended June 30,
1997, an increase of $83,000, or 7.0% over the first six months of
1996. Net occupancy expense amounted to $399,000 for the six-months
ended June 30, 1997, an increase of $11,000, or 2.8% over 1996. Other
non-interest expenses amounted to $730,000 for the six months ended
June 30, 1997, an increase of $71,000, or 10.8% over the first six
months of 1996. Our overall non-interest expense of less than 2% of
average assets on an annualized basis for 1997 and 1996, places us
among the leaders of our peer financial institutions at controlling
total non-interest expense.
INCOME TAXES
Effective tax planning has helped produce favorable net income.
The effective total income tax rate was 21.2% for the second quarter
of 1997 as compared to 20% for the second quarter of 1996. For the
six months ended June 30, 1997, our tax liability amounted to $583,000
for an effective tax rate of 20.4% as compared to an effective tax
rate of 19.2% for the first six months of 1996. The increase in our
effective tax rate was due primarily to the limited opportunities to
purchase municipal (tax-free investments) securities at attractive
interest rates.
ANALYSIS OF FINANCIAL CONDITION
ASSETS
Total assets increased to $253,211,000 as of June 30, 1997, an
increase of $10,654,000, or 4.4% over year-end 1996. Total deposits
increased to $204,596,000 as of June 30, 1997, an increase of
$6,050,000, or 3.0% over year-end 1996.
The Corporation used borrowed funds to support asset growth not
provided by deposit growth. Long-term borrowing increased to
$13,000,000 as of June 30, 1997, up from $10,000,000 at December 31,
1996.
9
<PAGE>
EARNING ASSETS
Our primary earning asset, loan, net of unearned income
increased to $146,699 as of June 30, 1997, up $13,438,000, or 10.1%
since year-end 1996. The loan portfolio is well diversified and
increases in the portfolio have been primarily from increased
originations of real estate loans and commercial loans secured by real
estate.
With the substantial increase in loans, our investment portfolio
was reduced in size from December 31, 1996, to June 30, 1997. Held-
to-maturity securities amounted to $18,363,000 as of June 30, 1997, a
decrease of $1,717,000, or 8.6% since year-end 1996. Available-for-
sale securities amounted to $73,487,000 as of June 30, 1997, a
decrease of $7,659,000, or 9.4% from year-end 1996. Interest bearing
deposits with banks amounted to $5,057,000 as of June 30, 1997, up
from $32,000 as of December 31, 1996, as funds were kept short-term
for liquidity and in anticipation of funding loan commitments.
ALLOWANCE FOR LOAN LOSSES
Management performs a quarterly analysis to determine the
adequacy of the allowance for loan losses. The methodology in
determining adequacy incorporates specific and general allocations
together with a risk/loss analysis on various segments of the
portfolio according to an internal loan review process. Management
maintains its loan review and loan classification standards consistent
with those of its regulatory supervisory authority. Management feels,
considering the conservative portfolio composition, which is largely
composed of small retail loans (mortgages and installments) with
minimal classified assets, low delinquencies, and favorable loss
history, that the allowance for loan loss is adequate to cover
foreseeable future losses.
Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been disclosed under
Industry Guide 3 do not (i) represent or result from trends or
uncertainties which management reasonably expects will materially
impact future operating results, liquidity, or capital resources, or
(ii) represent material credits about which management is aware of any
information which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
The company was required to adopt Financial Accounting Standards
Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan" - Refer to Note 5 above for details.
NON-PERFORMING ASSETS
Non-performing assets consist of non-accrued and restricted
loans, together with foreclosed assets. As of June 30, 1997, total
non-performing assets were $284,000 as compared to $351,000 on
December 31, 1996. Non-performing assets to total loans and
foreclosed assets was .19% as of June 30, 1997, and .26% as of
December 31, 1996.
Loans past-due 90 days or more and still accruing amounted to
$222,000 as of June 30, 1997, as compared to $263,000 on December 31,
1996.
Interest income received on non-performing loans as of June 30,
1997, was $927 and $3,048 on December 31, 1996. Interest income,
which would have been recorded on these loans under the original terms
as of June 30, 1997, and 1996, was $10,792 and $18,261, respectively.
As of June 30, 1997 and December 31, 1996, there was no outstanding
commitments to advance additional funds with respect to these non-
performing loans.
10
<PAGE>
DEPOSITS AND OTHER BORROWED FUNDS
As indicated previously, deposit growth amounted to $6,050,000
as total deposits increased to $204,596,000 as of June 30, 1997, up
from $198,546,000 as of year-end 1996. During 1997, the Corporation
experienced the vast majority of its deposit growth in interest
bearing deposits, in particular, an increase in certificates of
deposit.
CAPITAL STRENGTH
Normal increases in capital are generated by net income, less
cash dividends paid out. Also, net unrealized gains on investment
securities available-for-sale increased shareholders' equity, or
capital by $1,192,000 as of June 30, 1997, and $1,150,000 as of
December 31, 1996.
Leverage ratio and risk based capital ratios remain very strong.
As of June 30, 1997, our leverage ratio was 11.71% as compared to
10.87% as of December 31, 1996. In addition, Tier 1 risk based
capital and total risk based capital ratio as of June 30, 1997, were
19.80% and 21.05%, respectively. The same ratios as of December 31,
1996, were 19.29% and 20.55%, respectively.
LIQUIDITY
The liquidity position of the Corporation remains adequate to
meet customer loan demand and deposit fluctuation. Managing liquidity
remains an important segment of asset liability management. Our
overall liquidity position is maintained by an active asset liability
management committee.
Management feels its current liquidity position is
satisfactorily given a very stable core deposit base which has
increased annually. Secondly, our loan payments and principal
paydowns on our mortgage backed securities provide and steady source
of funds. Also, short-term investments and maturing investment
securities represent additional sources of liquidity. Finally, short-
term borrowings are readily accessible at the Federal Reserve Bank
discount window, Atlantic Central Bankers Bank, or the Federal Home
Loan Bank.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Annual Meeting of Shareholders of First Keystone
Corporation held on Tuesday, April 15, 1997, at 9:00
a.m.
<TABLE>
<CAPTION>
Votes Votes
Directors Elected Votes For Against Withheld
<S> <C> <C> <C>
Budd L. Beyer 754,543 6,453 0
Frederick E. Crispin, Jr. 754,543 6,453 0
Robert J. Wise 754,514 6,482 0
<CAPTION>
Broker
Directors Elected Abstentions Non-Votes
<S> <C> <C>
Budd L. Beyer 0 0
Frederick E. Crispin, Jr. 0 0
Robert J. Wise 0 0
</TABLE>
Directors Continuing:
John Arndt, term expires in 1998
J. Gerald Bazewicz, term expires in 1998
Robert E. Bull, term expires in 1998
John L. Coates, term expires in 1999
Dudley P. Cooley, term expires in 1999
Stanley E. Oberrender, term expires in 1999
F. Stuart Straub, term expires in 1998
Matters Voted Upon:
Selection of J. H. Williams & Co., as auditors for the
Corporation. Votes For - 760,537
Votes Against - 48
Votes Withheld - 0
Abstentions - 411
Broker Non-Votes - 0
Item 5. Other Information
10% Stock Dividend - refer to Consolidated Notes to
Financial Statements Note 6 appearing on page 5 of
this Form 10-Q.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 Regulation S-K
Exhibit Number Description of Exhibit
3(i) Articles of Incorporation, as amended
(Incorporated by reference to Exhibit 3(i) to
Registrant's Annual Report of Form 10-KSB for
the year ended December 31, 1996.
3(ii) Bylaws, as amended (Incorporated by reference
to Exhibit 3(ii) to Registrant's Annual Report
on Form 10-KSB for the year ended
December 31, 1996.
10 Material Contracts
11 Statement RE: Computation of Earnings Per
Share.
27 Financial Data Schedule.
(b) The Registrant has filed no reports on Form 8-K
for this quarter.
13
<PAGE>
FIRST KEYSTONE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly cause this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIRST KEYSTONE CORPORATION
Registrant
August 13, 1997 /s/ J. Gerald Bazewicz
President and
Chief Executive Officer
(Principal Executive Officer)
August 13, 1997 /s/ David R. Saracino
Treasurer/Assistant Secretary
(Principal Accounting Officer)
14
<PAGE>
INDEX TO EXHIBITS
Exhibit Description Page
10 Material Contracts
Profit Sharing Plan Summary 16
Deferred Compensation 17
Other Executive Benefits
(Incorporated by reference to
Exhibit 99 (Page 9) of the
Corporation's Annual Report on
Form 10-KSB for the year ended
December 31, 1996)
Management Incentive Compensation Plan 18
11 Compensation of Earning Per Share 19
27 Financial Data Schedule
15
EXHIBIT 10
PROFIT SHARING PLAN
SUMMARY OF PLAN PROVISIONS
ACCOUNTING, EFFECTIVE DATE AND OTHER DATA
EMPLOYER'S NAME First National Bank of Berwick
ADDRESS 111 West Front Street, Berwick, PA 18603
BUSINESS
ORGANIZATION Corporation
EFFECTIVE DATE November 1, 1985
RESTATED DATE January 1, 1987
EMPLOYER
TAX YEAR END December 31
PLAN YEAR END December 31
EMPLOYER
IDENTIFICATION
NUMBER 24-0525403
PLAN NUMBER 002
DESCRIPTION OF
TRADE OR BUSINESS Banking
LIMITATION
YEAR END December 31
ELIGIBILITY
SERVICE
REQUIREMENT 1 year(s) of service.
MINIMUM AGE
REQUIREMENT The minimum age requirement is 21.
ELIGIBILITY FOR
EMPLOYER
CONTRIBUTIONS A participant shall be eligible to receive an
allocation of the employer contributions for a
plan year if the following conditions are met:
The participant must be employed on the last
day of the plan year.
The participant must complete 1,000 hours of
service during the plan year unless the plan
is top-heavy for such plan year.
16
<PAGE>
These requirements shall not apply if the
participant terminates employment due to
death, disability or retirement.
These requirements shall not apply to employer
contributions made pursuant to a salary
reduction agreement.
ENTRY DATES January 1, April 1, July 1, and October 1.
PLAN ENTRY An employee shall enter the plan on the plan
entry date following the date on which the
employee meets the eligibility requirements
of the plan.
DEFINITION OF COMPENSATION
Compensation shall mean W-2 earnings.
Compensation shall mean the amount which is
actually paid to the participant during the
plan year.
Compensation shall include employer
contributions made pursuant to a salary
reduction agreement which is not includible
in the gross income of the employee under
Sections 125, 402(a)(8), 402(h) or 403(b)
of the Code.
This definition of compensation shall be
effective as of January 1, 1987.
Compensation shall be taken into account for
the entire period in which the employee
becomes a participant.
ELECTIVE DEFERRALS
ELECTIVE
DEFERRALS A participant may elect to have his or her
compensation reduced up to 6 percent per year.
ELECTIONS Each year a participant may elect to commence
deferrals as of 1/1, 4/1, 7/1 and 10/1.
A participant may elect to terminate or modify
the amount of deferrals as of 1/1, 4/1, 7/1
and 10/1 of each year.
MATCHING
CONTRIBUTIONS The employer will make matching contributions
to the plan on behalf of all participants.
Matching contributions will be made on behalf
of each participant in the amount of 100
percent of the elective deferral made for
each plan year.
The maximum elective deferral the employer
shall match will not exceed 3% of the
participant's compensation.
Forfeitures of excess aggregate contributions
and forfeitures of any Nonqualified Matching
Contributions shall be used to reduce employer
contributions.
<PAGE>
Qualified matching contributions shall mean
matching contributions which are subject to
the distribution and nonforfeitability
requirements of Section 401(k) of the Code
when made.
QUALIFIED
NONELECTIVE
CONTRIBUTIONS The employer will make qualified nonelective
contributions to the plan.
The amount of such contributions for each plan
year shall be an amount determined by the
employer.
The allocation of qualified nonelective
contributions shall be made to the account of
all participants.
VOLUNTARY
NONDEDUCTIBLE
CONTRIBUTIONS A participant will not be allowed to make
nondeductible voluntary employee contributions.
HARDSHIP
WITHDRAWALS Hardship withdrawals of elective deferrals
shall be permitted.
EXCESS ELECTIVE
DEFERRALS A participant who claims excess elective
deferrals for the preceding taxable year must
submit his/her claim in writing to the plan
administrator by March 1.
VESTING
NONTOP-HEAVY
SCHEDULE Participant will be 100% vested upon entry into
the plan.
TOP-HEAVY
VESTING SCHEDULE The 100% immediate schedule will apply as of
the first day of the plan year for which the
plan is top-heavy.
NORMAL RETIREMENT AGE
The normal retirement age is 65.
SERVICE WITH PREVIOUS EMPLOYER
Service with a previous employer will not be
taken into account except to the extent
service is required to be given pursuant to
Code Section 414(a) and the regulations
thereunder.
ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES
BASIC
NONINTEGRATED
FORMULA Contributions will be allocated under a
nonintegrated formula.
<PAGE>
ADMINISTRATIVE ELECTIONS
PAYOUTS OF
SMALL ACCOUNT
BALANCES The employer will automatically make a total
distribution of the participant's vested
interest if it is $3,500 or less upon
retirement, termination of employment or
disability.
DISTRIBUTIONS AT
TERMINATION OF
EMPLOYMENT A participant may take a total distribution
of his/her vested account balance if he/she
terminates employment for reasons other than
death, disability or retirement.
HARDSHIP
WITHDRAWALS Hardship withdrawals shall be allowed under
this plan.
PARTICIPANT
LOANS Plan loans to a participant shall be allowed.
A minimum loan amount of $1,000 shall apply.
PARTICIPANT-
DIRECTED
INVESTMENTS Participant-directed investments shall not be
allowed under this plan.
ROLLOVERS Rollovers of funds by a participant from other
plans to this plan shall be allowed.
TRANSFERS Transfers of funds by a participant from other
plans to this plan shall be allowed.
CUSTODIAN
TRUSTEE First National Bank of Berwick
111 West Front Street
Berwick, PA 18603
<PAGE>
SUMMARY OF PLAN PROVISION ATTACHMENT
EMPLOYER NAME First National Bank of Berwick
PLAN NAME First National Bank of Berwick 401(k) Profit
Sharing Plan
EMPLOYER'S PHONE
NUMBER (717) 752-3671
TYPE OF PLAN
ADMINISTRATION Employer Provided
AGENT FOR SERVICE
OF LEGAL PROCESS Robert A. Bull Esquire
106 Market Street
Berwick, PA 18603
Legal process may also be served upon a plan trustee or the plan
administrator.
<PAGE>
BANKERS SYSTEMS, INC.
BASIC PLAN DOCUMENT 02
ARTICLE I Introduction
1.1 Adoption of Plan
The Employer shall adopt the Plan by executing the Bankers
Systems, Inc. Standard or Nonstandard Profit Sharing or Money Purchase
Adoption Agreements or by adopting the Bankers Systems Standard Profit
Sharing and Money Purchase Adoption Agreements as paired plans.
Execution of a Money Purchase Adoption Agreement shall mean that the
provisions of this basic plan document that relate to the money
purchase plan shall constitute the Plan. Execution of a Profit Sharing
Adoption Agreement shall mean that the provisions of this basic plan
document that relate to the profit sharing plan shall constitute the
Plan.
1.2 Purpose
The principal purposes of this Plan are to: (a) allow eligible
Employees and their Beneficiaries to share in the prosperity of the
Employer's business; in the event a Profit Sharing Adoption Agreement
is executed (b) promote a strong interest in the successful operation
of the Employer's business and to promote loyalty to the Employer; and
(c) provide eligible Employees and their Beneficiaries with the
opportunity to accumulate funds for their retirement.
1.3 Restatement
In the event this Plan is a restatement of another plan, as
signified by the completion of a date specified in Section A.4 of the
Adoption Agreement, Employees who terminate employment with the
Employer prior to the Restated Date shall be subject to the terms of
the plan in effect prior to its restatement, except as otherwise
provided herein. All other Employees shall be subject to the terms of
this Plan.
ARTICLE II Interpretation of Plan
2.1 Gender and Number
Except when otherwise indicated by the context, the masculine
gender shall include the feminine and neuter, and words used in the
singular shall include the plural whenever appropriate.
2.2 Titles to Sections
Titles to Articles and Sections are for general information
only, and the Plan shall not be construed by reference thereto.
2.3 Applicable Law
This Plan shall be construed and enforced in a manner that is
consistent with the Employee Retirement Income Security Act of 1974,
as amended, and the Internal Revenue Code of 1986, as amended. To the
extent state law has not been preempted by federal law, the laws of
the state of the Employer's principal place of business shall control.
2.4 Severability
In case any provision of this Plan shall be held illegal or
invalid for any reason, or would result in the denial of tax exempt
status for the Plan and trust, such provision shall not affect the
remaining provisions of the Plan and the Plan shall be construed and
enforced as if such provision had not been included herein during the
time for which such provision is held to be illegal, invalid or result
in the denial of tax exempt status.
2.5 Definitions
Whenever used in the Plan, the terms set out in Article III
shall have the meanings ascribed to them, unless otherwise expressly
provided herein, and when the defined meaning is intended, the term is
capitalized.
<PAGE>
ARTICLE III Definitions
3.1 Accumulated Profits
"Accumulated Profits" shall mean, in the case of an Employer
which is a corporation, Profits originating in prior Fiscal Years
which have been retained by the Employer.
3.2 Administrative Committee
"Administrative Committee" shall mean the committee appointed by
the Employer as provided in Section 15.3.
3.3 Adoption Agreement
"Adoption Agreement" shall mean the agreement executed by the
Employer and Trustee or Custodian for purposes of adopting the Plan
and setting forth those provisions of the Plan which relate to the
Employer's participation thereunder.
3.4 Affiliate
"Affiliate" shall mean an employer which is required to be
aggregated with such Employer under Sections 414(b), (c), (m) or (o)
of the Code.
3.5 Beneficiary
"Beneficiary" or "Beneficiaries" shall mean the person or
persons, natural or legal, entitled to receive any benefits from the
Plan which may become payable by reason of the death of the
Participant.
3.6 Break in Service
"Break in Service" shall mean a Computation Year during which an
Employee completes 500 or fewer Hours of Service.
3.7 Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
3.8 Compensation
As elected by the Employer in the Adoption Agreement,
"Compensation" will mean all of each Participant's (a) W-2 earnings or
(b) Compensation (as that term is defined in Section 415(c)(3) of the
Code). W-2 earnings shall mean the Wages, Tips, and Other Compensation
box on Form W-2, the information required to be reported under Section
6041 and 6051 of the Code. It is wages as defined in Section 3401(a)
and all other payments of compensation to an Employee by the Employer
(in the course of the Employer's trade or business) for which the
Employer is required to furnish the Employee a written statement under
Section 6041(d) and 6051(a)(3) of the Code. Compensation must be
determined without regard to any rules under Section 3401(a) that
limit the remuneration included in wages based on the nature or
location of the employment or the services performed. For any
self-employed individual covered under the Plan, Compensation will
mean Earned Income. Compensation shall include only that Compensation
which is actually paid to the Participant during the applicable
period. Except as provided elsewhere in this Plan, the applicable
period shall be the period elected by the Employer in the Adoption
Agreement. If the Employer makes no election, the applicable period
shall be the Plan Year.
Notwithstanding the above, if elected by the Employer in the
Adoption Agreement, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction agreement
and which is not includable in the gross income of the Employee under
Sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
For years beginning after December 31, 1988, and before January
1, 1994, the annual compensation of each participant taken into
account for determining all benefits provided under the Plan for any
determination period shall not exceed $200,000, as adjusted.
In addition to other applicable limitations set forth in the
plan, and notwithstanding any other provision of the plan to the
contrary, for plan years beginning on or after January 1, 1994, the
annual compensation of each employee taken into account under the plan
shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with section
401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not
exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12
<PAGE>
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any
reference in this plan to the limitation under section 401(a)(17) of
the Code shall mean the OBRA '93 annual compensation limit set forth
in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current
plan year, the compensation for that prior determination period is
subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose, for determination
periods beginning before the first day of the first plan year
beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
In determining the Compensation of a Participant for purposes of
this $150,000 limitation, the rules of Section 414(q)(6) of the Code
shall apply, except in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19 before the close of
the Plan Year.
If, as a result of the application of such rules the adjusted
$150,000 limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the Integration Level,
if this Plan provides for permitted disparity), the limitation shall
be prorated among the affected individuals in proportion to each such
individual's Compensation as determined under this Section prior to
the application of this limitation.
3.9 Computation Year
"Computation Year" shall mean, for purposes of determining
eligibility and break in service to participate in the Plan, a
consecutive 12-month period measured from the date an Employee first
completes an Hour of Service for the Employer or an Affiliate or an
anniversary of such date. For all other purposes, "Computation Year"
shall mean the Plan Year.
3.10 Custodian
"Custodian" shall mean the Financial Institution which has
executed this Plan as Custodian as provided in the Adoption Agreement,
and any successor Custodian.
3.11 Determination Date
"Determination Date" shall mean the last day of the preceding
Plan Year or, in the case of the first Plan Year of the Plan, the last
day of such Plan Year. In the event the Employer or an Affiliate
maintains another plan or plans in addition to this Plan,
"Determination Date" shall mean the determination dates of all such
plans which fall within the same calendar year as the Determination
Date for this Plan.
3.12 Disability
"Disability" or "Disabled" shall mean a medically determinable
physical or mental impairment which prevents an Employee from engaging
in any substantial gainful activity and which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months.
3.13 Earned Income
"Earned Income" means the net earnings from self-employment in
the trade or business with respect to which the Plan is established,
for which personal services of the individual are a material
income-producing factor. Net earnings will be determined without
regard to items not included in gross income and the deductions
allocable to such items. Net earnings are reduced by contributions by
the Employer to a qualified plan to the extent deductible under
Section 404 of the Code.
Net earnings shall be determined with regard to the deduction
allowed to the Employer by Section 164(f) of the Code for taxable
years beginning after December 31, 1989.
3.14 Effective Date
"Effective Date" shall mean the date the Plan is effective, as
provided in Section A.3 of the Adoption Agreement.
3.15 Employee
"Employee" shall mean any person employed by the Employer or an
Affiliate, including a Self-Employed individual. The term "Employee",
for purposes of this Plan only, shall also include a Leased Employee,
except to the extent described in Section 5.8. For purposes of this
Section, the term "Leased Employee" means any person
<PAGE>
other than a common law employee of the Employer or Affiliate who is
deemed to be an Employee of the Employer or Affiliate under Sections
414(n) or (o) of the Code.
3.16 Employee Rollover Account
"Employee Rollover Account" shall mean a sub-account established
as part of a Participant's Account for the purpose of identifying that
portion of a Participant's Account which is attributable to a tax-free
rollover from another qualified plan. The maintenance of such
sub-account is for accounting purposes only and segregation of the
assets of the Plan shall not be required.
3.17 Employee Transfer Account
"Employee Transfer Account" shall mean a sub-account established
as part of a Participant's Account for the purpose of identifying that
portion of the Participant's Account which is attributable to tax-free
transfers from the Trustee or Custodian of another qualified plan to
the Trustee or Custodian of this Plan. The maintenance of such
sub-account is for accounting purposes only and segregation of the
assets of the Plan shall not be required.
3.18 Employee Voluntary Contribution Account
"Employee Voluntary Contribution Account" shall mean a
sub-account established as part of a Participant's Account for the
purpose of identifying that portion of the Participant's Account which
is attributable to the Participant's own voluntary nondeductible
contributions. The maintenance of such sub-account is for accounting
purposes only and segregation of the assets of the Plan shall not be
required.
3.19 Employer
"Employer" shall mean the corporation, partnership or sole
proprietorship which has adopted this Plan, as described in Section
A.1 of the Adoption Agreement.
3.20 Highly Compensated Employee
The term "Highly Compensated Employee" includes highly
compensated active employees and highly compensated former employees.
A highly compensated active employee includes any Employee who
performs service for the Employer during the determination year and
who, during the look-back year: (a) received Compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (b) received Compensation from the Employer in excess of
$50,000 (as adjusted pursuant to Section 415(d) of the Code) and was a
member of the top-paid group for such year; or (c) was an officer of
the Employer and received Compensation during such year that is
greater than 50 percent of the dollar limitation in effect under
Section 415(b)(1)(A) of the Code. The term Highly Compensated Employee
also includes: (a) Employees who are both described in the preceding
sentence if the term "determination year" is substituted for the term
"look-back year" and the Employee is one of the 100 Employees who
received the most Compensation from the Employer during the
determination year; and (b) Employees who are 5-percent owners at any
time during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c)
above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a Highly
Compensated Employee.
For this purpose, the determination year shall be the Plan Year.
The look-back year shall be the twelve-month period immediately
preceding the determination year.
A highly compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or
after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back
year, a family member of either a 5-percent owner who is an active or
former employee or a Highly Compensated Employee who is one of the 10
most highly compensated employees ranked on the basis of Compensation
paid by the Employer during such year, then the family member and the
5-percent owner or top-ten Highly Compensated Employee shall be
aggregated. In such case, the family member and 5-percent owner or
top-ten Highly Compensated Employee shall be treated as a single
Employee receiving Compensation and Plan contributions or benefits
equal to the sum of such
<PAGE>
Compensation and contributions or benefits of the family member and
5-percent owner or top-ten Highly Compensated Employee. For purposes
of this Section, family member includes the spouse, lineal ascendants,
and descendants of the Employee or former employee and the spouses of
such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of Employees
in the top-paid group, the top 100 Employees, the number of Employees
treated as officers and the Compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.
3.21 Fiscal Year
"Fiscal Year" shall mean the Employer's fiscal year as described
in Section A.5 of the Adoption Agreement.
3.22 Fund
"Fund" shall mean the aggregate of the assets of the Plan held
by the Trustee or Custodian.
3.23 Hour of Service
"Hour of Service" shall mean:
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer or an
Affiliate. These hours shall be credited to the Employee for the
Computation Year or Years in which the duties are performed;
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer or an Affiliate on account of a period of
time during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence. No more than 501 Hours of Service
shall be credited under this paragraph for any single continuous
period (whether or not such period occurs in a single Computation
Year). Notwithstanding the foregoing, Hours of Service shall not be
credited on account of payments made under a plan maintained solely
for the purpose of complying with applicable workers' Compensation,
unemployment Compensation, or disability insurance laws nor shall
Hours of Service be credited on account of a payment which solely
reimburses an Employee for medical or medically-related expenses
incurred by the Employee.
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer or an
Affiliate. The same Hours of Service shall not be credited both under
paragraph (a) or paragraph (b) as the case may be, and under this
paragraph (c). These hours shall be credited to the Employee for the
Computation Year or Years to which the award or agreement pertains
rather than the Computation Year in which the award, agreement or
payment is made. Hours of Service will be credited for employment with
other members of an affiliated service group (under Section 414(m) of
the Code), a controlled group of corporations (under Section 414(b) of
the Code), or a group of trades or businesses under common control
(under Section 414(c) of the Code) of which the adopting Employer is a
member, and any other entity required to be aggregated with the
Employer pursuant to Section 414(o) of the Code and the regulations
thereunder. Hours of Service will also be credited for any individual
considered an Employee of this Plan under Section 414(n) or Section
414(o) of the Code and the regulations thereunder.
(d) Hours required to be credited for any period of service
with the armed forces of the United States which the Employee entered
from employment with the Employer or an Affiliate on account of
induction or enlistment under federal law, provided the Employee
returns to employment with the Employer (or Affiliate) within the
period prescribed by federal law during which his re-employment rights
are protected by law or, in the absence of such a law, within 90 days
from the date his release or discharge from military service is
available.
(e) For purposes of paragraphs (a) and (b), a payment shall be
deemed to be made by or due from the Employer or an Affiliate
regardless of whether such payment is made by or due from the Employer
or an Affiliate directly or indirectly through, among others, a trust
fund or insurer to which the Employer or an Affiliate contributes or
pays premiums, 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.
<PAGE>
(f) For purposes of paragraphs (b) and (c), in the case of an
Employee without a regular work schedule, Hours of Service shall be
credited based on a daily average of the Employee's Hours of Service
otherwise determined under paragraphs (a), (b) and (c) for the 12
months immediately preceding the date of determination, or during his
entire employment with the Employer or an Affiliate ending immediately
prior to the date of determination if employed by the Employer or an
Affiliate for less than 12 months.
(g) To the extent not otherwise provided herein, Hours under
this Section shall be calculated and credited pursuant to Sections
2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by reference.
(h) Hours of Service for a previous employer shall be included
to the extent designated in the Adoption Agreement; provided, however,
if the Employer maintains the plan of a predecessor employer, service
with such employer will be treated as service for the Employer.
(i) Hours of Service shall be determined by the Employer from
the records determined by it to accurately reflect this information.
(j) Solely for determining whether a Break in Service, as
defined in Section 3.6, for participation and vesting purposes has
occurred in a Computation Year, an individual who is absent from work
for maternity or paternity reasons shall receive credit for the Hours
of Service which would otherwise have been credited to such individual
but for such absence, or in any case in which such hours cannot be
determined, 8 Hours of Service per day of such absence. For purposes
of this subsection, an absence from work for maternity or paternity
reasons means an absence (i) by reason of pregnancy of the individual,
(ii) by reason of a birth of a child of the individual, (iii) by
reason of the placement of a child with the individual in connection
with the adoption of such child by such individual, or (iv) for
purposes of caring for such child for a period beginning immediately
following such birth or placement. The Hours of Service credited under
this subsection shall be credited in the Computation Year in which the
absence begins if the crediting is necessary to prevent a Break in
Service in that year, or in all other cases, in the following
Computation Year.
3.24 Integration Level
"Integration Level" shall mean the Compensation amount selected
in the Adoption Agreement by an Employer which has selected an
integrated formula in the Adoption Agreement.
3.25 Integration Percentage
"Integration Percentage" shall mean the percentage selected in
the Adoption Agreement by an Employer which has selected an integrated
formula in the Adoption Agreement.
3.26 Investment Manager
"Investment Manager" shall mean any fiduciary of the Plan, other
than a Named Fiduciary, who: (a) has the power to manage, acquire or
dispose of any assets of the Plan; (b) is registered as an investment
advisor under the Investment Advisor's Act of 1940, is a bank defined
in that Act, or is an insurance company qualified to perform services
described in (a) above under the laws of more than one state; (c) has
been appointed by the Employer as provided herein; and (d) has
acknowledged in writing that it is a fiduciary with respect to the
Plan.
3.27 Key Employee
"Key Employee" shall mean, as of any Determination Date, any
Employee or former Employee or his Beneficiary who, at any time during
the Plan Year (which includes the Determination Date) or during the
preceding four Plan Years (the "five-year testing period") is: (a) an
officer of the Employer or Affiliate, if such individual's annual
Compensation for one or more of the Plan Years during the five-year
testing period in which he is an officer exceeds 50% of the applicable
dollar limitation under Section 415(b)(1)(A) of the Code for the
calendar year in which such Plan Year ends; (b) one of the Employees
owning the ten largest percentage interests in the Employer or any
Affiliates, taking into account only those Employees whose annual
Compensation for one or more such Plan Years of ownership during the
five-year testing period exceeds the applicable dollar limitation
under Section 415(c)(1)(A) of the Code for the calendar year in which
such Plan Year ends and who during one or more such Plan Years in the
five-year testing period owns more than one-half percent (1/2%)
interest in the Employer or any Affiliate; (c) a more than
five-percent (5%) owner of the Employer or Affiliate; (d) or a more
than one-percent (1%) owner of the Employer or Affiliate whose annual
Compensation for one or more Plan Years of ownership during the
five-year testing period exceeds $150,000. Annual Compensation means
Compensation as defined in Section 415(c)(3) of the Code but including
amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the Employee's gross income under
Sections 125, 402(a)(8),
<PAGE>
402(h), or 403(b) of the Code. For purposes of determining whether an
officer should be considered a Key Employee, no more than 50 Employees
or if lesser, the greater of 3 or 10% of all Employees shall be
considered an officer. The 10% factor will apply to the greatest
number of Employees employed during the five-year testing period by
the Employer and any Affiliates. If the maximum number of officers
that must be counted is reached, the officers that shall be considered
Key Employees shall be those who had the largest Compensation for any
Plan Year in which he was an officer in the five-year testing period.
For purposes of determining who is one of the 10 largest owners of the
Employer or Affiliate, in the event two Employees have the same
percentage interest, the Employee having the greater Compensation for
any Plan Year of ownership in the five-year testing period shall be
considered to own the larger interest for a Plan Year. The
constructive ownership rules of Section 318 of the Code (or the
principles of that Section, in the case of an unincorporated Employer
or Affiliate) will apply to determine ownership in the Employer or
Affiliate to the extent provided in Section 416(i)(1) of the Code and
the regulations thereunder.
3.28 Leased Employee
"Leased Employee" means any person (other than an Employee of
the recipient) who pursuant to an agreement between the recipient and
any other person ("leasing organization") has performed services for
the recipient (or the recipient and related persons determined in
accordance with Section 414(n)(6) of the Code) on a substantially full
time basis for a period of at least one year, and such services are of
a type historically performed by employees in the business field of
the recipient Employer. Contributions or benefits provided a Leased
Employee by the leasing organization which are attributable to
services performed for the recipient Employer shall be treated as
provided by the recipient Employer.
A Leased Employee shall not be considered an Employee of the
recipient if: (i) such employee is covered by a money purchase pension
plan providing (1) a nonintegrated employer contribution rate of at
least 10 percent of Compensation, as defined in Section 415(c)(3) of
the Code, but including amounts contributed pursuant to a salary
reduction agreement which are excludable from the employee's gross
income under Section 125, Section 402(a)(8), Section 402(h) or Section
403(b) of the Code, (2) immediate participation, and (3) full and
immediate vesting; and (ii) leased Employees do not constitute more
than 20 percent of the recipient's nonhighly compensated workers.
3.29 Limitation Year
"Limitation Year" shall mean the 12-consecutive month period
designated in Section A.10 of the Adoption Agreement. All qualified
plans of the Employer and Affiliates shall utilize the same 12-month
period as the Limitation Year. If the Limitation Year is amended to a
different 12-consecutive month period, the new Limitation Year must
begin on a date which is within the Limitation Year in which the
amendment is made.
3.30 Named Fiduciaries
"Named Fiduciaries" shall mean the Employer and the Trustee.
3.31 Non-Key Employee
"Non-key Employee" shall mean any Employee, including a former
Key Employee, who does not fall within the definition of a "Key
Employee" under Section 3.27.
3.32 Normal Retirement Age
"Normal Retirement Age" shall mean the age designated in the
Adoption Agreement. In the event the Employer or Affiliate enforces a
mandatory retirement age consistent with applicable laws prohibiting
age discrimination, the Normal Retirement Age shall mean such
mandatory retirement age if that age is less than the age designated
in the Adoption Agreement.
3.33 Normal Retirement Date
"Normal Retirement Date" shall mean the first day of the month
after the Participant attains his Normal Retirement Age.
3.34 Owner-Employee
"Owner-Employee" shall mean a Self-Employed individual owning
more than 10% of either the capital or profits interest of the
Employer or an Affiliate, if the Employer or Affiliate is an
unincorporated business.
<PAGE>
3.35 Participant
"Participant" shall mean an Employee who has satisfied the
requirements for eligibility in the Plan and who has commenced
participation in the Plan. An Employee shall cease to be a Participant
when he or she is no longer eligible to receive allocations under the
Plan and he or she has received a total distribution of his or her
account balance.
3.36 Participant's Account
"Participant's Account" shall mean an account established to
identify the Participant's share of the Trust Fund. Maintenance of
such individual account is for accounting purposes only and
segregation of the assets of the Plan shall not be required.
3.37 Plan
"Plan" shall mean the plan of the Employer as incorporated in
this plan document and custodial account/trust agreement, including
any amendments hereto, and including the provisions of the Adoption
Agreement executed by the Employer.
3.38 Plan Anniversary
"Plan Anniversary" shall mean the annual anniversary of the
Effective Date or, if a Restated Date is designated in the Adoption
Agreement, the annual anniversary of the Restated Date.
3.39 Plan Valuation Date
"Plan Valuation Date" shall mean the last day of the Plan Year
and the last day of such additional and more frequent intervals as the
Employer may select for valuing Plan assets, charging Participants'
Account with distributions and allocating gains and losses. The
Employer, in its sole discretion, may elect to treat any date in the
Plan Year as a Plan Valuation Date if the Employer finds it necessary
or desirable in order for Participants' Accounts to fairly reflect
each Participant's interest in the Trust Fund.
3.40 Plan Year
"Plan Year" shall mean a consecutive twelve-month period as
specified in the Adoption Agreement.
3.41 Profits
"Profits" shall mean net income or net profits as determined by
the Employer from the Employer's or Affiliate's books of account in
accordance with its customary method of accounting, consistently
applied, before any deduction for federal or state income taxes or for
contributions hereunder.
3.42 Qualified Joint and Survivor Annuity
"Qualified Joint and Survivor Annuity" shall mean an annuity
payable for the life of the Participant with a survivor annuity
payable to his surviving spouse which is not less than 50% nor greater
than 100% of the amount of the annuity payable during the joint lives
of the Participant and such spouse. Unless the Participant elects
otherwise, the survivor annuity shall be 50% of the annuity payable
during the joint lives of the Participant and his surviving spouse.
3.43 Qualified Preretirement Survivor Annuity
"Qualified Preretirement Survivor Annuity" shall mean an annuity
for the life of the Participants' surviving spouse commencing on the
date the Participant would have attained his Normal Retirement Age
which shall be provided as described in Section 10.3.
3.44 Restated Date
"Restated Date" shall mean the date this Plan document is
effective as a replacement for a prior plan document, as specified in
Section A.4 of the Adoption Agreement.
3.45 Self-Employed Individual
"Self-Employed" shall mean an individual who is the sole
proprietor of the Employer or an adopting Affiliate or an individual
who is a partner in the Employer or an adopting Affiliate and who has
Earned Income from the Employer or an adopting Affiliate, or would
have Earned Income if the Employer or adopting Affiliate
<PAGE>
had a Profit. The term "Self-Employed" shall include any individual
who has been a Self-Employed individual during any prior Fiscal Year.
3.46 Shareholder Employee
"Shareholder Employee" shall mean an Employee or officer who
owns, or is considered to own within the meaning of Section 318(a)(1)
of the Code, more than 5% of the outstanding stock of the Employer or
adopting Affiliate for any Fiscal Year in which the Employer or
adopting Affiliate is a Subchapter S corporation.
3.47 Sponsor
"Sponsor" shall mean the entity which is identified in the
Adoption Agreement as the Sponsor of the Prototype Plan.
3.48 Top Heavy
"Top Heavy" shall mean a condition of the Plan whereby the Top
Heavy Ratio for the Plan, or the Top Heavy Ratio for the required or
permissive aggregation group of which the Plan is a part, exceeds 60%.
The required aggregation group shall include each qualified plan of
the Employer or an Affiliate in which at least one Key Employee
participates or has participated at any time during the 5-year period
ending on the Determination Date (regardless of whether the Plan has
terminated) and any other qualified plan of the Employer or Affiliate
which enables a plan in which at least one Key Employee participates
to meet the requirements of Sections 401(a)(4) or 410 of the Code. The
permissive aggregation group shall include the required aggregation
group plus any other plan or plans of the Employer or Affiliate which,
when considered as a group with the required aggregation group, would
continue to satisfy the requirements of Sections 401(a)(4) and 410 of
the Code.
3.49 Top Heavy Ratio
"Top Heavy Ratio" shall mean:
(a) If the Employer or an Affiliate maintains one or more
defined contributions plans (including any simplified employee pension
plan) and the Employer or Affiliate has not maintained any defined
benefit plan which during the 5-year period ending on the
Determination Date has or has had accrued benefits, the Top Heavy
Ratio for this Plan alone or for the required or permissive
aggregation group described in Section 3.48 is a fraction, the
numerator of which is the sum of the account balances of all Key
Employees as of the Determination Date, and the denominator of which
is the sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the Determination
Date), both computed in accordance with Section 416 of the Code and
the regulations thereunder. Both the numerator and denominator of the
Top Heavy Ratio are adjusted to reflect any contribution not actually
made as of the Determination Date, but which is required to be taken
into account on that date under Section 416 of the Code and the
regulations thereunder.
(b) If the Employer or an Affiliate maintains one or more
defined contribution plans (including any simplified employee pension
plan) and the Employer or Affiliate maintains or has maintained one or
more defined benefit plans which during the 5-year period ending on
the Determination Date has or has had any accrued benefits, the Top
Heavy Ratio for any required or permissive aggregation group described
in Section 3.48 is a fraction, the numerator of which is the sum of
account balances under the aggregated defined contribution plan or
plans for all Key Employees, determined in accordance with (a) above,
and the present value of accrued benefits under the aggregated defined
benefit plan or plans for all Key Employees as of the Determination
Date, and the denominator of which is the sum of the account balances
under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (a) above, and the present
value of accrued benefits under the defined benefit plan or plans for
all participants as of the Determination Date, all determined in
accordance with Section 416 of the Code and the regulations
thereunder. The accrued benefits under a defined benefit plan in both
the numerator and denominator of the Top Heavy Ratio are adjusted for
any distribution of an accrued benefit made in the five-year period
ending on the Determination Date.
(c) For purposes of (a) and (b) above, the value of account
balances and the present value of accrued benefits will be determined
as of the most recent valuation date that falls within or ends with
the 12-month period ending on the Determination Date, except as
provided in Section 416 of the Code and the regulations thereunder,
for the first and second Plan Years of a defined benefit plan. The
account balances and accrued benefits of a Participant, (i) who is not
a Key Employee but who was a Key Employee in a prior year, or (ii) who
has not been credited with at least one Hour of Service with any
employer maintaining the plan at any time during the 5-year period
ending on the Determination Date, will be disregarded. The present
value of a participant's accrued benefit under a defined benefit plan
shall be computed using a 5% interest assumption and the 1984 Unisex
Pension
<PAGE>
Mortality Table. The calculation of the Top Heavy Ratio, and the
extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Section 416 of the Code and
the regulations thereunder. Deductible employee contributions will not
be taken into account for purposes of computing the Top Heavy Ratio.
When aggregating plans, the value of account balances and accrued
benefits will be calculated with reference to the determination dates
that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee shall
be determined under (i) the method, if any, that uniformly applies for
accrual purposes under all defined benefit plans maintained by the
Employer, or (ii) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under
the fractional rule of Section 411(b)(1)(C) of the Code.
For purposes of this Section, "valuation date" shall mean the
Plan Valuation Date defined herein which falls on the last day of the
Plan Year when used with respect to this Plan. With respect to any
other plan of the Employer or an Affiliate, "valuation date" shall
mean the date on which contributions are credited and gains and losses
allocated under a defined contribution plan or the date used for
computing Plan costs for minimum funding purposes (regardless of
whether a valuation is performed for a year) under a defined benefit
plan.
3.50 Trustee
"Trustee" shall mean the corporate or individual Trustee or
Trustees who have executed this Plan and any successor Trustees duly
appointed as provided herein.
3.51 Vested Interest, Vesting or Vested
"Vested Interest", "Vesting" or "Vested" shall mean a right to a
Participant's Account which is nonforfeitable.
3.52 Year of Service
"Year of Service" shall mean a 12-consecutive month period in
which an Employee has 1,000 or more Hours of Service.
ARTICLE IV Eligibility
4.1 Initial Eligibility
An Employee shall begin participation in the Plan based upon the
provisions elected in the Adoption Agreement. An Employee who meets
the eligibility requirements but terminates employment prior to
entering the Plan shall not enter the Plan. The Plan shall have the
entry dates listed in the Adoption Agreement. Notwithstanding the
foregoing, an Employee who is in a unit of Employees covered under a
collective bargaining agreement between the Employer or Affiliate (or
its representatives) and Employee representatives if retirement
benefits were the subject of good faith bargaining shall not be
eligible to participate in the Plan unless such collective bargaining
agreement specifically provides for his participation herein and,
provided further, that Employees who are nonresident aliens with no
earned income from the Employer which constitutes income from sources
within the United States shall not be eligible to participate in the
Plan. For purposes of this Section, the term "Employee
representatives" does not include any organization more than half of
whose members are Employees who are owners, officers or executives of
the Employer or an Affiliate.
4.2 Special Participation Rules for Certain Employees
A Participant who terminates employment with the Employer or an
Affiliate and then later returns shall participate in the Plan
immediately on the date he returns. An Employee who has satisfied the
requirements of Section 4.1 and who terminates employment with the
Employer or an adopting Affiliate before commencing participation
shall participate: (a) on the entry date coincident with or
immediately following the date he is re-employed by the Employer or
such Affiliate if he returns to employment with the Employer or such
Affiliate on or before the entry date on which he would have commenced
participation in the Plan if he had not terminated employment; or (b)
immediately if the Employee returns to employment with the Employer or
adopting Affiliate after the entry date on which he would have
participated in the Plan if he had not terminated employment. An
Employee who is not a member of an eligible class of Employees and
subsequently becomes a member of an eligible class of Employees shall
commence participation in the Plan immediately if he has satisfied the
eligibility requirements described in the Adoption Agreement and would
have previously become a Participant if he had been in the eligible
class.
<PAGE>
4.3 Special Rule for Owner-Employees
If this Plan provides for contributions or benefits for one or
more Owner-Employees who control both the business for which this Plan
is established and one or more other trades or businesses, the plans
must, when aggregated as a single plan, satisfy Section 401(a) and (d)
for the Employees of this and all other trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses,
the employees of the other trades or businesses must be included in a
Plan which satisfies Sections 401(a) and (d) of the Code and which
provides contributions and benefits not less favorable than provided
for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans
of two or more trades or businesses which are not controlled and the
individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trades or business
which are controlled must be as favorable as those provided for him
under the most favorable plan of the trade or business which is not
controlled.
For purposes of this Section, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if
the Owner-Employee, or two or more Owner-Employees together: (a) own
the entire interest in an unincorporated trade or business; or (b) in
the case of a partnership, own more than 50 percent of either the
capital interest or the profits interest in the partnership.
For the purposes of this Section, an Owner-Employee, or two or
more Owner-Employees shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
4.4 Computing Years and Months of Service for Eligibility
Years of Service shall be credited to the applicable Computation
Year. Years of Service in the applicable Computation Years shall be
taken into account for purposes of determining if an Employee has
satisfied the eligibility requirements of Section 4.1. A Month of
Service shall be defined as a calendar month in which an Employee
completes at least one Hour of Service.
4.5 Administrative Requirements
As a condition of participation in the Plan, the Employer may
require an Employee to furnish such information as may be reasonably
required by the Employer, Trustee or Custodian for the maintenance of
records and proper Plan administration.
4.6 Effective Date
If this Plan is a restatement of a previously existing plan, the
provisions of this Plan shall become effective as of the later of the
Restated Date or the first day of the first Plan Year beginning after
December 31, 1988.
ARTICLE V Contributions and Allocations
5.1 Funding Policy for Plan Benefits
The benefits under this Plan shall be funded with contributions
by the Employer and its adopting Affiliates, if any, and voluntary
Employee contributions, rollover contributions and transfer
contributions to the extent permitted by the Adoption Agreement and
made by the Employees. If the Employer has adopted a Money Purchase
Adoption Agreement, Employer contributions shall be reduced by any
forfeitures if so elected in the Adoption Agreement. If the Employer
has adopted a Profit Sharing Adoption Agreement, forfeitures shall be
added to the Employer contributions. In the event Employees of an
Affiliate are Participants, the Affiliate shall make contributions to
the Plan on the same basis, expressed as a percentage of Compensation,
as the Employer, but only for such of its Employees as are
Participants in the Plan. Forfeitures arising with respect to an
Employee shall only be allocated to the Participant's Accounts of
those Employees who are employed by the same Employer or Affiliate as
the Employee who incurred the forfeiture. In the case of a money
purchase plan, if so elected, forfeitures shall reduce the
contributions only of the Employer or Affiliate for whom the Employee
who incurred the forfeiture was employed.
<PAGE>
5.2 Determination of Employer Contributions
If the Employer or any Affiliates execute a Profit Sharing
Adoption Agreement, the Employer and such Affiliates shall contribute
to the Fund for each Plan Year such amount as the Employer shall
determine in its sole discretion without regard to earnings and
Profits. In the event the Employer or any Affiliates execute a Money
Purchase Adoption Agreement, the Employer and such Affiliates shall
contribute to the Fund for each Plan Year the percentage of each
Participant's Compensation specified in the Adoption Agreement. In no
event shall the Employer or Affiliate contribute an amount such that
an allocation or contribution in excess of the maximum amount
permitted under Article VII would be made to any Participant. The
Employer and any adopting Affiliates may make their contribution at
any time during the Plan Year or within the time prescribed by law for
filing their respective federal income tax returns.
5.3 Allocation of Employer Contributions and Adjustments for
Gains and Losses
Once each Plan Valuation Date, the Employer shall:
(a) Charge each Participant's Account with any distributions
which have occurred since the last Plan Valuation Date;
(b) Value the Fund in a manner that reflects its current fair
market value;
(c) Allocate gains and losses of the Fund, exclusive of gains
and losses attributable to Participant-directed investments described
in Section 16.12 or 17.14, to each Participant's Account in the ratio
that the adjusted balance of each such Participant's Account since the
last Plan Valuation Date (excluding Participant-directed investments)
bears to the aggregate of all such Participant Accounts. For purposes
of this subsection, the "adjusted balance" of a Participant's Account
shall be the balance of the Participant's Account since the last Plan
Valuation Date, increased by any contributions to the Participant's
Account and decreased by any distributions. The account balance shall
also be adjusted by funds which become or cease to be
Participant-directed investments. These amounts shall be prorated
based upon the number of days since the last Plan Valuation Date.
Gains and losses attributable to Participant-directed investments, as
described in Section 16.12 or 17.14 shall be allocated separately to
the Participant's Account from which they are derived.
(d) If the Employer has executed a Profit Sharing Adoption
Agreement and a basic nonintegrated formula has been selected, credit
the Participant's Account of each Participant eligible for an Employer
contribution with contributions made by the Employer and Affiliate and
forfeitures in the ratio that each Participant's Compensation for the
Plan Year bears to the Compensation of all Participants for the Plan
Year, subject, however, to the provisions of Section 5.4 if
applicable.
(e) If the Plan is Top Heavy and the Employer has executed a
Profit Sharing Adoption Agreement and an integrated formula has been
selected, credit the Participant's Account for each Participant
eligible for an Employer contribution with contributions made by the
Employer and Affiliates and forfeitures as follows:
STEP ONE: Contributions and forfeitures will be allocated to
each Participant's Account in the ratio that each Participant's Total
Compensation bears to all Participant's Total Compensation, but not in
excess of 3%.
STEP TWO: Any contributions and forfeitures remaining after the
allocation in Step One will be allocated to each Participant's Account
in the ratio that each Participant's Compensation for the Plan Year in
excess of the Integration Level bears to the excess Compensation of
all Participants but not in excess of 3%.
STEP THREE: Any contributions and forfeitures remaining after
the allocation in Step Two will be allocated to each Participant's
Account in the ratio that the sum of each Participant's Total
Compensation and Compensation in excess of the Integration Level bears
to the sum of all Participant's Total Compensation and Compensation in
excess of the Integration Level, but not in excess of the
profit-sharing maximum disparity rate.
STEP FOUR: Any remaining Employer contributions or forfeitures
will be allocated to each Participant's Account in the ratio that each
Participant's Total Compensation for the Plan Year bears to all
Participants' Total Compensation.
The Integration Level shall be equal to the taxable wage base or
such lesser amount elected by the Employer in the Adoption Agreement.
The taxable wage base is the maximum amount of earnings which may be
considered wages for a year under Section 3121(a)(1) of the Code in
effect as of the beginning of the plan year.
Compensation shall mean Compensation as defined in Section 3.8
of the Plan.
The maximum disparity rate varies depending upon the Integration
Level chosen in the Adoption Agreement.
1) If the Integration Level is equal to the taxable wage base,
the maximum disparity rate is 2.7%.
2) If the Integration Level is equal to $10,000 or 20% of the
taxable wage base (if greater), the maximum disparity rate is 2.7%.
<PAGE>
3) If the Integration Level is more than 80% but less than 100%
of the taxable wage base, the maximum disparity rate is 2.4%.
4) If the Integration Level is not more than 80% of the taxable
wage base but greater than the amount described in (2) above, the
maximum disparity rate is 1.3%.
If the Plan is not Top Heavy, allocate contributions by
beginning at Step 3 and increasing the maximum disparity rate by 3%.
(f) If the Employer has executed a Money Purchase Adoption
Agreement and a nonintegrated contribution formula has been selected,
credit the Participant's Account for each Participant eligible for an
Employer contribution with contributions made by the Employer or
Affiliate, reduced by any forfeitures if so elected in the Adoption
Agreement, in an amount equal to the percentage of Compensation for
the Plan Year specified in the Adoption Agreement, subject, however,
to the provisions of Section 5.4 to the extent applicable.
(g) If the Employer has executed a Money Purchase Adoption
Agreement and an integrated contribution formula has been selected,
credit the Participant's Account for each Participant eligible for an
Employer contribution with contributions made by the Employer or
Affiliate reduced by only forfeitures, if so elected in the Adoption
Agreement in an amount equal to the percentage of Compensation for the
Plan Year specified in the Adoption Agreement. If the Employer has
elected to allocate forfeitures to Participant's accounts, any
forfeitures for the Plan Year shall be allocated to Participant's
accounts as described in Section 5.3(d) above. The maximum money
purchase disparity rate varies depending upon the Integration Level
chosen in the Adoption Agreement.
1) If the Integration Level is equal to the taxable wage base,
the maximum disparity rate is 5.7%.
2) If the Integration Level is equal to $10,000 or 20% of the
taxable wage base (if greater), the maximum disparity rate is 5.7%.
3) If the Integration Level is more than 80% but less than 100%
of the taxable wage base, the maximum disparity rate is 5.4%.
4) If the Integration Level is not more than 80% of the taxable
wage base but greater than the amount described in (2), above, the
maximum disparity rate is 4.3%.
5.4 Special Minimum Allocations and Contributions
In the event the Plan is Top Heavy for a Plan Year, the
following provisions shall apply for such Plan Year, notwithstanding
any contrary provisions in this plan:
(a) Any election in the Adoption Agreement limiting Employer
contributions to Participants with 1,000 or more Hours of Service for
the Plan Year shall not apply.
(b) If the Employer and any Affiliates do not maintain another
plan or plans in addition to this Plan, the Employer (or Affiliate)
contributions for each Participant eligible for an Employer
contribution, plus forfeitures if the Plan is a profit sharing plan,
shall be equal to 3% of his Compensation for the Plan Year or, if
less, the highest percentage of the first $150,000 of Compensation
allocated to a Key Employee. The minimum allocation is determined
without regard to any Social Security contribution or elective
deferrals or Employer matching contributions if such options are
available under the Plan.
(c) In the event the Employer or an Affiliate maintains any
other plan in addition to this Plan and if the other plan consists
solely of the Bankers Systems, Inc. Nonstandard Money Purchase or
Profit Sharing Plan (designated Plan 004-02 and 003-02 respectively)
or Bankers Systems, Inc. Standard Money Purchase or Profit Sharing
Plan (designated Plan 002-02 and 001-02 respectively) and a
Participant participates in both standard or nonstandard Plans, the
Employer contribution to the Participant's Account of a Participant
who is eligible for an Employer contribution in the Money Purchase
Plan shall be at least equal to the lesser of (i) 3% of his
Compensation or (ii) the percentage of the first $150,000 of
Compensation allocated under both the Profit Sharing and Money
Purchase Plans to the Participant's Accounts of the Key Employee whose
total allocation and contribution (expressed as a percentage of
Compensation) is the highest unless such contribution is otherwise
provided under the Plan without regard to this subsection. The minimum
allocation is determined without regard to any Social Security
contribution.
(d) In the event the Employer or an Affiliate maintains any
other plan in addition to this Plan and if such other plan or plans is
a defined contribution plan, and a Participant does not participate in
such other plan or plans, the allocation of Employer contributions and
forfeitures to the Participant's Account of a Participant who is
eligible for an Employer contribution shall in no event be less than
the amount described in Section 5.4(b) above.
(e) In the event the Employer or an Affiliate maintains any
other plan in addition to this Plan and if such other plan or plans is
a defined contribution plan in which a Participant also participates
other than a Bankers Systems Financial Services plan described in
subsection (c), the minimum allocation described in subsection (d)
<PAGE>
above shall be reduced by the allocation of Employer contributions and
forfeitures made to each other plan or plans in which the Participant
also participates.
(f) In the event the Employer or an Affiliate maintains any
other plan in addition to the Plan and if such other plan or plans
include a defined benefit plan in which a Participant does not
participate or if the defined benefit plan is not Top Heavy whether or
not the Participant participates in such a plan, a Participant who is
eligible for Employer contributions shall be entitled to an allocation
to his Participant's Account for Employer contributions and
forfeitures shall not be less than 3% of his Compensation, reduced by
any allocations to the Participant under any other defined
contribution plan maintained by the Employer or Affiliate in which the
Participant also participates.
(g) In the event the Employer or an Affiliate maintains any
other plan in addition to this Plan and if such other plan or plans
include a defined benefit plan in which the Participant also
participates and such defined benefit plan is also Top Heavy, the
allocation of Employer contributions and forfeitures to the
Participant's Account of any Participant who is eligible for Employer
contributions shall in no event be less than 5% of his Compensation,
reduced by the allocation to his account in any other defined
contribution plan described in this Section.
(h) Notwithstanding the provisions of subsections (c) through
(g), the Employer may provide in Section J. of the Adoption Agreement
a method of furnishing the minimum contributions and benefits required
by Code Section 416 in the case of multiple plans.
The amount of the minimum allocations described in this Section
shall be computed as of the Determination Date.
5.5 Voluntary Employee Contributions
If a Profit Sharing Plan is adopted and the CODA Section is
completed the Employer may elect in the Adoption Agreement to allow
the Participant to make nondeductible voluntary Employee
contributions. The voluntary Employee contributions shall not exceed
10% of the Participant's Compensation. This 10% limit shall be
cumulative, taking into account the Participant's aggregate
Compensation for all the Plan Years in which he has been a Participant
in the Plan. Voluntary Employee contributions shall also be subject to
the limitations of Section 6.9. The rules and procedures established
by the Employer, if any, may specify a method for remitting such
contributions, including payroll deduction. The rules and procedures
may be modified from time to time or rescinded. Qualified voluntary
Employee contributions, as defined in Section 219(e)(2) of the Code
shall be prohibited. No forfeiture of a Participant's nonvested
account balance will occur solely as a result of an Employee's
withdrawal of Employee contributions.
By making a voluntary contribution to the Plan, the Participant
agrees that he has not designated such contributions as a qualified
voluntary Employee contribution and will not claim a deduction from
his income tax for such contribution. Voluntary Employee contributions
shall be placed in the Employee's Voluntary Contribution Account.
5.6 Rollover Contributions
The Employer may elect in the Adoption Agreement to allow
Employees to make, and the Trustee or Custodian to accept, rollover
contributions from other qualified plans. Rollover contributions may
be accepted on behalf of an Employee notwithstanding that he is not
yet eligible to participate in the Plan. If an Employee makes a
rollover contribution to the Plan before he becomes a Participant, he
shall be treated as a Participant in all respects, except that he
shall not be entitled to an allocation of Employer contributions or
forfeitures nor may he make voluntary Employee contributions. The
rules and procedures established by the Employer, if any, may require
the Employee to furnish satisfactory evidence that any proposed
rollover to this Plan can properly be made under applicable provisions
of the Code.
5.7 Transfer Contributions
The Employer may elect in the Adoption Agreement to allow
Employees to make, and the Trustee or Custodian to accept, transfers
from other qualified plans. Transfer contributions may be accepted on
behalf of an Employee notwithstanding that he is not yet eligible to
participate in the Plan. If an Employee makes a transfer to the Plan
before he becomes a Participant, he shall be treated as a Participant
in all respects, except that he shall not be entitled to an allocation
of Employer contributions or forfeitures nor may he make voluntary
Employee contributions. The rules and procedures established by the
Employer, if any, may require the Employee to furnish satisfactory
evidence that any proposed transfer to this Plan can properly be made
under applicable provisions of the Code. If any transfer is made from
a plan which is subject to the Qualified Joint and Survivor Annuity
requirements of Section 9.2, the Employee Transfer Account shall be
divided into one or more sub-accounts to
<PAGE>
identify that portion of the Participant's Account which is subject to
the Qualified Joint and Survivor and Qualified Preretirement Annuity
requirements of the Plan.
5.8 Special Rule for Leased Employees
Contributions or benefits provided by a leasing organization
which are attributable to services performed for the Employer or an
adopting Affiliate shall be treated as provided by the Employer or
such Affiliate. No contributions need to be provided on behalf of a
leased employee if the leased employee is covered by the leasing
organization under a money purchase pension plan which provides: (a) a
nonintegrated Employer contributions rate of at least 10% of
Compensation; (b) immediate participation; and (c) full and immediate
vesting. The term "Leased Employee" shall have the meaning provided in
Section 3.28.
5.9 Waiver of Funding Standards
In the event the Employer executed a Money Purchase Plan
Adoption Agreement and obtains a waiver of the minimum funding
standards for any Plan Year, the Employer shall be considered to have
amended this Prototype Plan to create an individually designed plan
which must be submitted to the appropriate IRS Key District Office for
approval to attain continued reliance.
5.10 Effective Date
If this Plan is a restatement of a previously existing plan, the
provisions of Section 5.3 shall become effective as of the later of
the Restated Date or the first day of the first Plan Year beginning
after December 31, 1988.
ARTICLE VI Salary Deferral or Cash or Deferred Arrangement
6.1 Applicability
This Article shall apply if the Employer has chosen a cash or
deferred arrangement in the Profit Sharing Adoption Agreement.
6.2 Elective Deferrals
As provided in the CODA Section to the Profit Sharing Adoption
Agreement an Employee may elect to defer a portion of his or her
salary under a salary reduction agreement or elect to defer lump sum
payments under a cash or deferred arrangement. Amounts deferred by the
Participant shall be contributed to this Plan and allocated to the
Participant's Elective Deferral Account. The amount of such Elective
Deferrals shall be limited in accordance with the terms of the
Adoption Agreement and the provisions of this Article.
A Participant shall be allowed to begin, terminate, or amend a
deferral election in accordance with the terms set forth in the CODA
Section to the Adoption Agreement. Such election may not be made
retroactively. A Participant shall notify the Employer of such
election in the form and manner specified by the Plan Administrator.
6.3 Dollar Limit on Elective Deferrals
No Participant shall be permitted to have Elective Deferrals
made under this Plan, or any other qualified plan maintained by the
Employer, during any taxable year, in excess of the dollar limitations
contained in Section 402(g) of the Code in effect at the beginning of
such taxable year.
6.4 Distribution of Excess Elective Deferrals
Excess Elective Deferrals shall mean those Elective Deferrals
that are includible in a Participant's gross income under Section
402(g) of the Code to the extent such Participant's Elective Deferrals
for a taxable year exceed the dollar limitation under such Code
Section. Excess Elective Deferrals shall be treated as Annual
Additions under the Plan, unless such amounts are distributed no later
than the first April 15 following the close of the Participant's
taxable year.
A Participant may assign to this Plan any Excess Elective
Deferrals made during a taxable year of the Participant by notifying
the Plan Administrator on or before the date specified in the Adoption
Agreement of the amount of the Excess Elective Deferrals to be
assigned to the Plan. A Participant is deemed to notify the Plan
Administrator of any Excess Elective Deferrals that arise by taking
into account only those Elective Deferrals made to this Plan and any
other plans of this Employer.
<PAGE>
Notwithstanding any other provisions of the Plan, Excess
Elective Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 to any
Participant to whose account Excess Elective Deferrals were assigned
for the preceding year and who claims Excess Elective Deferrals for
such taxable year.
Determination of income or loss: Excess Elective Deferrals shall
be adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Elective Deferrals is the sum of:
(1) income or loss allocable to the Participant's Elective Deferral
account for the taxable year multiplied by a fraction, the numerator
of which is such Participant's Excess Elective Deferrals for the year
and the denominator is the Participant's Account balance attributable
to Elective Deferrals without regard to any income or loss occurring
during such taxable year; and (2) ten percent of the amount determined
under (1) multiplied by the number of whole calendar months between
the end of the Participant's taxable year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
6.5 Average Deferral Percentage Test
The Actual Deferral Percentage (hereinafter "ADP") for
Participants who are Highly Compensated Employees for each Plan Year
and the ADP for Participants who are Nonhighly Compensated Employees
for the same Plan Year must satisfy one of the following tests:
(a) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for Participants
who are Nonhighly Compensated Employees for the same Plan Year
multiplied by 1.25; or
(b) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for Participants
who are Nonhighly Compensated Employees for the same Plan Year
multiplied by 2.0, provided that the ADP for Participants who are
Highly Compensated Employees does not exceed the ADP for Participants
who are Nonhighly Compensated Employees by more than two (2)
percentage points.
(c) Special Rules:
(i) The ADP for any Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to have
Elective Deferrals (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Section 401(k) of
the Code, that are maintained by the Employer, shall be determined as
if such Elective Deferrals (and, if applicable, such Qualified
Nonelective Contributions or Qualified Matching Contributions, or
both) were made under a single arrangement. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements
that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a
single arrangement.
(ii) In the event that this Plan satisfies the
requirements of Section 401(k), 401(a)(4), or 410(b) of the Code only
if aggregated with one or more other plans, or if one or more other
plans satisfy the requirement of such Sections of the Code only if
aggregated with this plan, then this Section shall be applied by
determining the ADP of Employees as if all such plans were a single
plan. For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(k) of the Code only if they
have the same Plan Year.
(iii) For purposes of determining the ADP of a
Participant who is a 5-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Elective Deferrals (and
Qualified Nonelective Contributions, or Qualified Matching
Contributions, or both, if treated as Elective Deferrals for purposes
of the ADP test) and Compensation of such Participant shall include
the Elective Deferrals (and, if applicable, Qualified Nonelective
Contributions and Qualified Matching Contributions, or both) and
Compensation for the Plan Year of Family Members (as defined in
Section 414(q)(6) of the Code). Family Members, with respect to such
Highly Compensated Employees, shall be disregarded as separate
Employees in determining the ADP both for Participants who are
Nonhighly Compensated Employees and for Participants who are Highly
Compensated Employees.
(iv) For purposes of determining the ADP test, Elective
Deferrals, Qualified Nonelective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-month
period immediately following the Plan Year to which contributions
relate.
(v) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount of Qualified
Nonelective Contributions or Qualified Matching Contributions, or
both, used in such test.
(vi) The determination and treatment of the ADP amounts
of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
<PAGE>
(vii) For purposes of calculating Average Deferral
Percentages for purposes of the ADP Test, the Employer shall take
Qualified Matching Contributions and Qualified Nonelective
contributions into account in amounts necessary to meet the ADP Test.
The amount and type of contribution to include shall be determined by
the Employer.
6.6 Distribution of Excess Contributions
"Excess Contributions" shall mean, with respect to any Plan
Year, the excess of:
(a) The aggregate amount of Employer contributions actually
taken into account in computing the ADP of Highly Compensated
Employees for such Plan Year, over
(b) The maximum amount of such contributions permitted by the
ADP test (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of the ADPs, beginning with the
highest of such percentages).
Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts are
distributed more than 2 1/2 months after the last day of the Plan Year
in which such excess amounts arose, a ten (10) percent excise tax will
be imposed on the Employer maintaining the Plan with respect to such
amounts. Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees. Excess
Contributions of Participants who are subject to the family member
aggregation rules shall be allocated among the family members in
proportion to the Elective Deferrals (and amounts treated as Elective
Deferrals) of each family member that is combined to determine the
combined ADP.
Excess Contributions (including the amounts recharacterized)
shall be treated as Annual Additions under the Plan.
Determination of Income or Loss: Excess Contributions shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Contributions is the sum of: (1)
income or loss allocable to the Participant's Elective Deferral
account (and, if applicable, the Qualified Nonelective Contribution
account or the Qualified Matching Contributions account or both) for
the Plan Year multiplied by a fraction, the numerator of which is such
Participant's Excess Contributions for the year and the denominator is
the Participant's account balance attributable to Elective Deferrals
(and Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, if any of such contributions are included in
the ADP test) without regard to any income or loss occurring during
such Plan Year; and (2) ten percent of the amount determined under (1)
multiplied by the number of whole calendar months between the end of
the Plan Year and the date of distribution, counting the month of
distribution if distribution occurs after the 15th of such month.
Accounting for Excess Contributions: Excess Contributions shall
be distributed from the Participant's Elective Deferral account and
Qualified Matching Contribution account (if applicable) in proportion
to the Participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the Plan Year.
Excess Contributions shall be distributed from the Participant's
Qualified Nonelective Contribution account only to the extent that
such Excess Contributions exceed the balance in the Participant's
Elective Deferral account and Qualified Matching Contribution account.
6.7 Recharacterization of Excess Contributions
A Participant may treat his or her Excess Contributions as an
amount distributed to the Participant and then contributed by the
Participant to the Plan. Recharacterized amounts will remain
nonforfeitable and subject to the same distribution requirements as
Elective Deferrals. Amounts may not be recharacterized by a Highly
Compensated Employee to the extent that such amount in combination
with other Employee Contributions made by that Employee would exceed
any stated limit under the Plan on Employee Contributions.
Recharacterization must occur no later than two and one-half months
after the last day of the Plan Year in which such Excess Contributions
arose and is deemed to occur no earlier than the date the last Highly
Compensated Employee is informed in writing of the amount
recharacterized and the consequences thereof. Recharacterized amounts
will be taxable to the Participant for the Participant's tax year in
which the Participant would have received them in cash.
<PAGE>
6.8 Matching Contributions
Matching Contributions will be made by the Employer to match
Elective Deferrals if such option is chosen in the CODA Section to the
Adoption Agreement. If Qualified Matching Contributions are elected,
those contributions are fully vested when made. If Nonqualified
Matching Contributions are elected, these contributions shall be
vested in accordance with the vesting provisions generally applicable
to Employer contributions. In any event, Matching Contributions shall
be fully vested at Normal Retirement Age, upon the complete or partial
termination of the profit-sharing plan, or upon the complete
discontinuance of Employer contributions.
Forfeitures of Matching Contributions, other than Excess
Aggregate Contributions, shall be allocated to Participants' Accounts
or used to reduce Employer matching contributions as described in the
CODA Section to the Adoption Agreement.
6.9 Limitations on Employee Contributions and Matching
Contributions
The Average Contribution Percentage (ACP) for Participants who
are Highly Compensated Employees for each Plan Year and the ACP for
Participants who are Nonhighly Compensated Employees for the same Plan
Year must satisfy one of the following tests:
(a) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for Participants
who are Nonhighly Compensated Employees for the same Plan Year
multiplied by 1.25; or
(b) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for Participants
who are Nonhighly Compensated Employees for the same Plan Year
multiplied by two (2), provided that the ACP for Participants who are
Highly Compensated Employees does not exceed the ACP for Participants
who are Nonhighly Compensated Employees by more than two (2)
percentage points.
Special Rules:
(1) Multiple Use: If 1 or more Highly Compensated Employees
participate in both a CODA and a plan subject to the ACP test
maintained by the Employer and the sum of the ADP and ACP of those
Highly Compensated Employees subject to either or both tests exceeds
the Aggregate Limit, then the ACP of those Highly Compensated
Employees who also participate in a CODA will be reduced (beginning
with such Highly Compensated Employee whose ACP is the highest) so
that the limit is not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage Amounts is reduced
shall be treated as an Excess Aggregate Contribution. The ADP and ACP
of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does
not occur if both the ADP and ACP of the Highly Compensated Employees
does not exceed 1.25 multiplied by the ADP or ACP of the Nonhighly
Compensated Employees.
(2) For purposes of this Section, the Contribution Percentage
for any Participant who is a Highly Compensated Employee and who is
eligible to have Contribution Percentage Amounts allocated to his or
her account under two or more plans described in Section 401(a) of the
Code, or arrangements described in Section 401(m) of the Code that are
maintained by the Employer, shall be determined as if the total of
such Contribution Percentage Amounts was made under each plan.
(3) In the event that this Plan satisfies the requirements of
Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other plans satisfy
the requirements of such Sections of the Code only if aggregated with
this Plan, then this Section shall be applied by determining the
Contribution Percentage of Employees as if all such plans were a
single plan. For Plan Years beginning after December 31, 1989, plans
may be aggregated in order to satisfy Section 401(m) of the Code only
if they have the same Plan Year.
(4) For purposes of determining the Contribution Percentage of
a Participant who is a five-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Contribution Percentage
Amounts and Compensation of such Participants shall include the
Contribution Percentage Amounts and Compensation for the Plan Year of
Family Members (as defined in Section 414(q)(6) of the Code). Family
Members, with respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the Contribution
Percentage both for Participants who are Nonhighly Compensated
Employees and for Participants who are Highly Compensated Employees.
(5) For purposes of determining the Contribution Percentage
test, Employee Contributions are considered to have been made in the
Plan Year in which contributed to the trust. Matching Contributions
and Qualified Nonelective Contributions will be considered made for a
Plan Year if made no later than the end of the twelve-month period
beginning on the day after the close of the Plan Year.
<PAGE>
(6) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the amount of Qualified
Nonelective Contributions or Qualified Matching Contributions, or
both, used in such test.
(7) The determination and treatment of the Contribution
Percentage of any Participant shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
6.10 Distribution of Excess Aggregate Contributions
Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss allocable
thereto, shall be forfeited, if forfeitable, or if not forfeitable,
distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Aggregate Contributions
were allocated for the preceding Plan Year. Excess Aggregate
Contributions of Participants who are subject to the family member
aggregation rules shall be allocated among the family members in
proportion to the Employee and Matching Contributions (or amounts
treated as Matching Contributions) of each family member that is
combined to determine the combined ACP. If such Excess Aggregate
Contributions are distributed more than 21/2 months after the last day
of the Plan Year in which such excess amounts arose, a ten (10)
percent excise tax will be imposed on the Employer maintaining the
Plan with respect to those amounts. Excess Aggregate Contributions
shall be treated as Annual Additions under the Plan.
"Excess Aggregate Contributions" shall mean, with respect to any
Plan Year, the excess of:
(a) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage
actually made on behalf of Highly Compensated Employees for such Plan
Year, over
(b) The maximum Contribution Percentage Amounts permitted by
the ACP test (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of their Contribution
Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining Excess
Elective Deferrals pursuant to Section 6.4 and then determining Excess
Contributions pursuant to Section 6.6.
Determination of Income or Loss: Excess Aggregate Contributions
shall be adjusted for any income or loss up to the date of
distribution. The income or loss allocable to Excess Aggregate
Contributions is the sum of: (1) income or loss allocable to the
Participant's Employee Contribution account, Matching Contribution
account (if any, and if all amounts therein are not used in the ADP
test) and, if applicable, Qualified Nonelective Contribution account
and Elective Deferral account for the Plan Year multiplied by a
fraction, the numerator of which is such Participant's Excess
Aggregate Contributions for the year and the denominator is the
Participant's Account balance(s) attributable to Contribution
Percentage Amounts without regard to any income or loss occurring
during such Plan Year; and (2) ten percent of the amount determined
under (1) multiplied by the number of whole calendar months between
the end of the Plan Year and the date of distribution, counting the
month of distribution if distribution occurs after the 15th of such
month.
Forfeitures of Excess Aggregate Contributions: Forfeitures of
Excess Aggregate Contributions may either be reallocated to the
accounts of Nonhighly Compensated Employees or applied to reduce
Employer contributions, as elected by the Employer in Section D.4 of
the Adoption Agreement.
Accounting for Excess Aggregate Contributions: Excess Aggregate
Contributions shall be forfeited, if forfeitable or distributed on a
pro-rata basis from the Participant's Employee Contribution account,
Matching Contribution account, and Qualified Matching Contribution
account (and, if applicable, the Participant's Qualified Nonelective
Contribution account or Elective Deferral account, or both).
6.11 Qualified Nonelective Contributions
The Employer may elect to make Qualified Nonelective
Contributions under the Plan on behalf of Employees as provided in the
Adoption Agreement.
In addition, in lieu of distributing Excess Contributions as provided
in Section 6.6 of the Plan, or Excess Aggregate Contributions as
provided in Section 6.10 of the Plan, and to the extent elected by the
Employer in the Adoption Agreement, the Employer may make Qualified
Nonelective Contributions on behalf of Nonhighly Compensated Employees
that are sufficient to satisfy either the Actual Deferral Percentage
test or the Average Contribution Percentage test, or both, pursuant to
regulations under the Code.
If Qualified Nonelective Contributions are made to the Plan,
these contributions shall be allocated to the accounts of all
Participants or only Nonhighly Compensated Participants (as elected in
the Adoption Agreement) in the ratio that each Participant's
Compensation bears to the total Compensation of all Participants
sharing in the forfeiture.
<PAGE>
6.12 Nonforfeitability
The Participant's accrued benefit derived from Elective
Deferrals, Qualified Nonelective Contributions, Employee
Contributions, and Qualified Matching Contributions is nonforfeitable.
Separate accounts for Elective Deferrals, Qualified Nonelective
Contributions, Employee Contributions, Matching Contributions, and
Qualified Matching Contributions will be maintained for each
Participant. Each account will be credited with the applicable
contributions and earnings thereon.
6.13 Limitations on Distributions
Elective Deferrals, Qualified Nonelective Contributions, and
Qualified Matching Contributions, and income allocable to each are not
distributable to a Participant or his or her beneficiary or
beneficiaries, in accordance with such Participant's or beneficiary or
beneficiaries election, earlier than upon separation from service,
death, or disability.
Such amounts may also be distributed upon:
(1) Termination of the Plan without the establishment of
another defined contribution plan.
(2) The disposition by a corporation to an unrelated
corporation of substantially all of the assets (within the meaning of
Section 409(d)(2) of the Code) used in a trade or business of such
corporation if such corporation continues to maintain this Plan after
the disposition, but only with respect to Employees who continue
employment with the corporation acquiring such assets.
(3) The disposition by a corporation to an unrelated entity of
such corporation's interest in a subsidiary (within the meaning of
Section 409(d)(3) of the Code) if such corporation continues to
maintain this Plan, but only with respect to Employees who continue
employment with such subsidiary.
(4) The attainment of age 59 1/2 in the case of a
profit-sharing plan.
(5) The hardship of the Participant as described in Section
6.14, if so elected in the CODA Section to the Adoption Agreement.
All distributions that may be made pursuant to one or more of
the foregoing distributable events are subject to the spousal and
Participant consent requirements (if applicable) contained in Sections
401(a)(11) and 417 of the Code.
6.14 Hardship Distributions
Distribution of Elective Deferrals (and any earnings credited to
a Participant's account as of the end of the last Plan Year ending
before July 1, 1989) may be made to a Participant in the event of
hardship. For the purposes of this Section, hardship is defined as an
immediate and heavy financial need of the Employee where such Employee
lacks other available resources. Hardship distributions are subject to
the spousal consent requirements contained in Sections 401(a)(11) and
417 of the Code.
Special Rules:
(1) The following are the only financial needs considered
immediate and heavy: expenses incurred or necessary for medical care,
described in Section 213(d) of the Code, of the Employee, the
Employee's spouse, children, or dependents; the purchase (excluding
mortgage payments) of a principal residence for the Employee; payment
of tuition and related educational fees for the next 12 months of
post-secondary education for the Employee, the Employee's spouse,
children or dependents; or the need to prevent the eviction of the
Employee from, or a foreclosure on the mortgage of, the Employee's
principal residence.
(2) A distribution will be considered as necessary to satisfy
an immediate and heavy financial need of the Employee only if:
(a) The Employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all plans
maintained by the Employer;
(b) All plans maintained by the Employer provide that the
Employee's Elective Deferrals (and Employee Contributions) will be
suspended for twelve months after the receipt of the hardship
distribution;
(c) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts necessary to pay
any federal, state or local income taxes or penalties reasonably
anticipated to result from the distribution); and
(d) All plans maintained by the Employer provide that the
Employee may not make Elective Deferrals for the Employee's taxable
year immediately following the taxable year of the hardship
distribution in excess of the applicable limit under Section 402(g) of
the Code for such taxable year less the amount of such Employee's
Elective Deferrals for the taxable year of the hardship distribution.
<PAGE>
6.15 Definitions
For purposes of this Article, the following definitions apply:
(a) "Elective Deferrals" shall mean any Employer contributions
made to the Plan at the election of the Participant, in lieu of cash
Compensation, and shall include contributions made pursuant to a
salary reduction agreement or other deferral mechanism. With respect
to any taxable year, a Participant's Elective Deferral is the sum of
all Employer contributions made on behalf of such Participant pursuant
to an election to defer under any qualified CODA as described in
Section 401(k) of the Code, any simplified employee pension cash or
deferred arrangement as described in Section 402(h)(1)(B), any
eligible deferred Compensation plan under Section 457, any plan as
described under Section 501(c)(18), and any Employer contributions
made on the behalf of a Participant for the purchase of an annuity
contract under Section 403(b) pursuant to a salary reduction
agreement. Elective Deferrals shall not include any deferrals properly
distributed as excess Annual Additions.
(b) "Qualified Matching Contributions" shall mean Matching
Contributions which are subject to the distribution and
nonforfeitability requirements under Section 401(k) of the Code when
made.
(c) "Qualified Nonelective Contributions" shall mean
contributions (other than Matching Contributions or Qualified Matching
Contributions) made by the Employer and allocated to Participants'
accounts that the Participants may not elect to receive in cash until
distributed from the Plan; that are nonforfeitable when made; and that
are distributable only in accordance with the distribution provisions
that are applicable to Elective Deferrals and Qualified Matching
Contributions.
(d) "Actual Deferral Percentage" shall mean, for a specified
group of Participants for a Plan Year, the average of the ratios
(calculated separately for each Participant in such group) of (1) the
amount of Employer contributions actually paid over to the trust on
behalf of such Participant for the Plan Year to (2) the Participant's
Compensation for such Plan Year (whether or not the Employee was a
Participant for the entire Plan Year). Employer contributions on
behalf of any Participant shall include: (1) any Elective Deferrals
made pursuant to the Participant's deferral election, including Excess
Elective Deferrals, but excluding Elective Deferrals that are taken
into account in the Contribution Percentage test (provided the ADP
test if satisfied both with and without exclusion of these Elective
Deferrals); and (2) at the election of the Employer, Qualified
Nonelective Contributions and Qualified Matching Contributions. For
purposes of computing Actual Deferral Percentages, an Employee who
would be a Participant but for the failure to make Elective Deferrals
shall be treated as a Participant on whose behalf no Elective
Deferrals are made.
(e) "Aggregate Limit" shall mean the sum of (i) 125 percent of
the greater of the ADP of the Nonhighly Compensated Employees for the
Plan Year or the ACP of Nonhighly Compensated Employees under the Plan
subject to Section 401(m) of the Code for the Plan Year beginning with
or within the Plan Year of the CODA and (ii) the lesser of 200% or two
plus the lesser of such ADP or ACP.
(f) "Average Contribution Percentage" shall mean the average of
the Contribution Percentages of the Eligible Participants in a group.
(g) "Contribution Percentage" shall mean the ratio (expressed
as a percentage) of the Participant's Contribution Percentage Amounts
to the Participant's Compensation for the Plan Year (whether or not
the Employee was a Participant for the entire Plan Year).
(h) "Contribution Percentage Amounts" shall mean the sum of the
Employee Contributions, Matching Contributions, and Qualified Matching
Contributions (to the extent not taken into account for purposes of
the ADP test) made under the Plan on behalf of the Participant for the
Plan Year. Such Contribution Percentage Amounts shall not include
Matching Contributions that are forfeited either to correct Excess
Aggregate Contributions or because the contributions to which they
relate are Excess Deferrals, Excess Contributions, or Excess Aggregate
Contributions. If the Employer elects to make Qualified Nonelective
contributions to the Plan, these Qualified Nonelective contributions
(to the extent not taken into account for the ADP test) shall be
included in an amount necessary to pass the Average Contribution
Percentage test and to meet the nondiscrimination requirements of
Section 401(a)(4) of the Code. The Employer also may elect to use
Elective Deferrals in the Contribution Percentage Amounts so long as
the ADP test is met before the Elective Deferrals are used in the ACP
test and continues to be met following the exclusion of those Elective
Deferrals that are used to meet the ACP test.
(i) "Eligible Participant" shall mean any Employee who is
eligible to make an Employee Contribution, or an Elective Deferral (if
the Employer takes such contributions into account in the calculation
of the Contribution Percentage), or to receive a Matching Contribution
(including forfeitures) or a Qualified Matching Contribution. If an
Employee Contribution is required as a condition of participation in
the Plan, any Employee who would be a Participant in the Plan if such
Employee made such a contribution shall be treated as an eligible
Participant on behalf of whom no Employee Contributions are made.
<PAGE>
(j) "Employee Contribution" shall mean any contribution made to
the Plan by or on behalf of a Participant that is included in the
Participant's gross income in the year in which made and that is
maintained under a separate account to which earnings and losses are
allocated.
(k) "Matching Contribution" shall mean an Employer contribution
made to this or any other defined contribution plan on behalf of a
Participant on account of an Employee Contribution made by such
Participant, or on account of a Participant's Elective Deferral, under
a plan maintained by the Employer.
ARTICLE VII Limitation on Allocations
7.1 Limitation
If a Participant does not participate in, and has never
participated in, another qualified plan or welfare benefit fund (as
defined in Section 419(e) of the Code) maintained by the Employer or
an Affiliate, or an individual medical account, (as defined in Section
415(l)(2) of the Code) maintained by the Employer, which provides an
Annual Addition as defined in Section 7.5, the amount of Annual
Additions which may be credited to a Participant's Account for any
Limitation Year shall not exceed the lesser of the Maximum Permissible
Amount or any other limitation contained in this Plan. If the Employer
contribution that would otherwise be contributed or allocated to a
Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated shall be reduced so that the Annual Additions
for the Limitation Year will equal the Maximum Permissible Amount.
Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible
Amount for a Participant on the basis of a reasonable estimation of
the Participant's Compensation for the Limitation Year, uniformly
determined for all Participants similarly situated. As soon as is
administratively feasible after the end of the Limitation Year, the
Maximum Permissible Amount for the Limitation Year will be determined
on the basis of the Participant's actual Compensation for the
Limitation Year.
7.2 Disposition of Excess Amount
If pursuant to Section 7.1 or as a result of the allocation of
forfeitures, there is an Excess Amount, the excess will be disposed of
as follows:
(a) Any Elective Deferrals (within the meaning of Section
402(g) of the Code) or nondeductible voluntary Employee contributions,
to the extent they would reduce the Excess Amount, will be returned to
the Participant;
(b) If after the application of paragraph (a) an Excess Amount
still exists, and the Participant is covered by the Plan at the end of
a Limitation Year, the Excess Amount in the Participant's Account will
be used to reduce Employer contributions (including any allocation of
forfeitures) for such Participant in the next Limitation Year, and
each succeeding Limitation Year if necessary;
(c) If after the application of paragraph (a) an Excess Amount
still exists, and the Participant is not covered by the Plan at the
end of a Limitation Year, the Excess Amount will be held unallocated
in a suspense account. The suspense account will be applied to reduce
future Employer contributions (including allocation of any
forfeitures) for all remaining Participants in the next Limitation
Year, and each succeeding Limitation Year if necessary.
(d) If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section, it will not participate in
the allocation of the Plan's investment gains and losses. If a
suspense account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be allocated
and reallocated to Participants' accounts before any Employer
contributions or any Employee contributions may be made to the Plan
for that Limitation Year. Excess amounts may not be distributed to
Participants or former Participants.
7.3 Limitation if Other Plans
If, in addition to this Plan, the Employer or Affiliate
maintains any other qualified Master or Prototype defined contribution
plan, welfare benefit fund (as defined in Section 419(e) of the Code),
or an individual medical account (as defined in Section 415(l)(2) of
the Code), which provides an Annual Addition as defined in Section
7.5, the amount of Annual Additions which may be credited to a
Participant's Account under this Plan for any Limitation Year will not
exceed the lesser of the Maximum Permissible Amount, reduced by the
Annual Additions credited to a Participant's Account under such other
plans, welfare benefit funds, or individual medical accounts for the
same Limitation Year, or any other limitation in this Plan. If the
Annual Additions with respect to the Participant under all other
qualified defined contribution plans and welfare benefit funds
maintained by the Employer or Affiliates are less than the Maximum
Permissible Amount and the contribution that would otherwise
<PAGE>
be allocated to the Participant's Account under this Plan would cause
the Annual Additions for the Limitation Year to exceed this
limitation, the amount allocated will be reduced so that the Annual
Additions under all such plans and funds for the Limitation Year will
equal the Maximum Permissible Amount. If the Annual Additions with
respect to the Participant under such other defined contribution plans
and welfare benefit funds in the aggregate are equal to or greater
than the Maximum Permissible Amount, no amount will be allocated to
the Participant's Account under this Plan for the Limitation Year.
Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible
Amount in the manner described in Section 7.1. As soon as is
administratively feasible after the end of the Limitation Year, the
Maximum Permissible Amount for the Limitation Year will be determined
on the basis of the Participant's actual Compensation for the
Limitation Year. If, pursuant to this Section, or as a result of
allocation of forfeitures, a Participant's Annual Additions under this
Plan and such other plans result in an Excess Amount, the Excess
Amount will be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a welfare
benefit fund or individual medical account will be deemed to have been
allocated first regardless of the actual allocation date. If an Excess
Amount was allocated to a Participant on a Valuation Date of this Plan
which coincides with a Valuation Date of another plan, the Excess
Amount attributed to this Plan will be the product of,
(a) the total Excess Amount allocated as of such date, times
(b) the ratio of (i) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under this Plan,
to (ii) the total Annual Additions allocated to the Participant for
the Limitation Year as of such date under this and all the other
qualified Master or Prototype defined contribution plans.
Any Excess Amount attributed to this Plan will be disposed in
the manner described in Section 7.2. If the Employer also maintains
another qualified plan in addition to this Plan and such other plan is
not a Master or Prototype Plan, Annual Additions which may be credited
to any Participant's Account under this Plan for any Limitation Year
will be limited in accordance with this Section as though such other
Plan was a Master or Prototype Plan unless the Employer provides other
limitations in the Adoption Agreement.
7.4 Limitations - Defined Benefit Plans
If the Employer maintains, or at any time maintained, a
qualified defined benefit plan which covered any Participant in this
Plan, the sum of the Participant's defined benefit plan fraction and
defined contribution plan fraction will not exceed 1.0 in any
Limitation Year. The Annual Additions credited to any such
Participant's Account under this Plan in any Limitation Year shall be
limited as provided in Section I of the Adoption Agreement.
7.5 Definitions
For purposes of this Article and Section I of the Adoption
Agreement only, the following terms shall have the meanings ascribed
to them:
(a) "Annual Additions" shall mean the sum of the following
amounts credited to a Participant's Account for the Limitation Year:
(i) Employer contributions;
(ii) Forfeitures; and
(iii) Employee contributions.
For this purpose, any Excess Amount applied under Section 6.2
and 7.2 in the Limitation Year to reduce Employer contributions will
be considered Annual Additions for such Limitation Year. Amounts
allocated for Limitation Years beginning after March 31, 1985 to an
individual medical account, as defined in Section 415(l)(1) of the
Code, which is part of a pension or annuity plan maintained by the
Employer or Affiliate, shall be treated as Annual Additions to a
defined contribution plan. In addition, amounts derived from
contributions paid or accrued after December 31, 1985, in taxable
years ending after such date, which are attributable to postretirement
medical benefits allocated to the separate account of a Key Employee,
(as defined in Section 419A(d)(3) of the Code), under a welfare
benefit fund (as defined in Section 419(e) of the Code), maintained by
the Employer or an Affiliate, are treated as Annual Additions to a
defined contribution plan.
(b) "Compensation" shall mean a Participant's earned income,
wages, salaries, and fees for professional services and other amounts
received for personal services actually rendered in the course of
employment with the Employer maintaining the Plan (including, but not
limited to, commissions paid salesmen, Compensation for services on
the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses), and excluding the following:
<PAGE>
(i) Employer contributions to a plan of deferred Compensation
which are not includible in the Employee's gross income for the
taxable year in which contributed, or Employer contributions under a
simplified employee pension plan to the extent such contributions are
deductible by the Employee, or any distributions from a plan of
deferred Compensation;
(ii) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity described in
Section 403(b) of the Code (whether or not the amounts are actually
excludable from the gross income of the Employee).
For purposes of applying the limitations of this Article,
Compensation for a Limitation Year is the Compensation actually paid
or includible in gross income during such Limitation Year.
Notwithstanding the preceding sentence, Compensation for a Participant
in a defined contribution plan who is permanently and totally disabled
(as defined in Section 22(e)(3) of the Code) is the Compensation such
Participant would have received for the Limitation Year if the
Participant had been paid at the rate of Compensation paid immediately
before becoming permanently and totally disabled. Such imputed
Compensation for the disabled Participant may be taken into account
only if the Participant is not a Highly Compensated Employee (as
defined in Section 414(q) of the Code) and contributions made on
behalf of such Participant are nonforfeitable when made.
(c) "Defined Benefit Fraction" shall mean a fraction, the
numerator of which is the sum of the Participant's annual benefit
under all the defined benefit plans (whether or not terminated)
maintained by the Employer or an Affiliate, and the denominator of
which is the lesser of 125% of the dollar limitation determined for
the Limitation Year under Sections 415(b) and (d) of the Code or 140%
of the highest average Compensation, including any adjustments under
Section 415(b) of the Code.
Notwithstanding the above, if the Participant was a Participant, as of
the first day of the first Limitation Year beginning after December
31, 1986, in one or more defined benefit plans maintained by the
Employer or Affiliate which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125% of the sum of
the Projected Annual Benefits under such plans which the Participant
had accrued as of the close of the last Limitation Year beginning
before January 1, 1987, disregarding any changes in the terms and
conditions of the Plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of Section 415 of the Code for
all Limitation Years beginning before January 1, 1987.
(d) "Defined Contribution Fraction" shall mean a fraction, the
numerator of which is the sum of the Annual Additions to the
Participant's Account under all the defined contribution plans
(whether or not terminated) maintained by the Employer for the current
and all prior Limitation Years, [including the Annual Additions
attributable to the Participant's nondeductible Employee contributions
to all defined benefit plans, whether or not terminated, maintained by
the Employer, and the Annual Additions attributable to all welfare
benefit funds maintained by the Employer or an Affiliate (as defined
in Section 419(e) of the Code), and individual medical accounts (as
defined in Section 415(l)(2) of the Code), maintained by the
Employer], and the denominator of which is the sum of the maximum
aggregate amounts for the current and all prior Limitation Years of
service with the Employer or Affiliate (regardless of whether a
defined contribution plan was maintained by the Employer or
Affiliate). The maximum aggregate amount in any Limitation Year is the
lesser of 125% of the dollar limitation determined under Sections
415(b) and (d) of the Code (in effect under Section 415(c)(1)(A) of
the Code) or 35% of the Participant's Compensation for such year.
If the Employee was a Participant, as of the end of the first
day of the first Limitation Year beginning after December 31, 1986, in
one or more defined contribution plans maintained by the Employer or
Affiliate which were in existence on May 5, 1986, the numerator of
this fraction will be adjusted if the sum of this fraction and the
Defined Benefit Fraction would otherwise exceed 1.0 under the terms of
this plan. Under the adjustment, an amount equal to the product of (i)
the excess of the sum of the fractions over 1.0 times (ii) the
denominator of this fraction, will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the first day of
the first Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Section 415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987.
<PAGE>
The Annual Addition for any Limitation Year beginning before
January 1, 1987, shall not be recomputed to treat all employee
contributions as Annual Additions.
(e) "Employer" shall mean the Employer that adopts this Plan
and all members of a controlled group of corporations (as defined in
Section 414(b) of the Code as modified by Section 415(h)), all
commonly controlled trades or businesses (as defined in Section 414(c)
as modified by Section 415(h)) or Affiliated service groups (as
defined in Section 414(m)) of which the adopting Employer is a part,
and any other entity required to be aggregated with the Employer
pursuant to regulations under Section 414(o) of the Code.
(f) "Excess Amount" shall mean the excess of the Participant's
Annual Additions for the Limitation Year over the Maximum Permissible
Amount.
(g) "Highest Average Compensation" shall mean the average
Compensation for the three consecutive years of service with the
Employer that produces the highest average. A year of service with the
Employer is the 12-consecutive month period defined in Section 3.52.
(h) "Limitation Year" shall mean a calendar year, or the
12-consecutive month period elected by the Employer in Section A.10 of
the Adoption Agreement. All qualified plans maintained by the employer
must use the same Limitation Year. If the Limitation Year is amended
to a different 12-consecutive month period, the new Limitation Year
must begin on a date within the Limitation Year in which the amendment
is made.
(i) "Master" or "Prototype" plan shall mean a plan the form of
which is the subject of a favorable opinion letter from the Internal
Revenue Service.
(j) "Maximum Permissible Amount" shall mean the maximum Annual
Addition that may be contributed or allocated to a Participant's
Account under the Plan for any Limitation Year shall not exceed the
lesser of:
(i) the defined contribution dollar limitation, or
(ii) 25 percent of the Participant's Compensation for the
Limitation Year.
The Compensation limitation referred to in (b) shall not apply
to any contribution for medical benefits (within the meaning of
Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise
treated as an Annual Addition under Section 415(l)(1) or 419A(d)(2) of
the Code. If a short Limitation Year is created because of an
amendment changing the Limitation Year to a different 12-consecutive
month period, the Maximum Permissible Amount will not exceed the
defined contribution dollar limitation multiplied by the following
fraction: Number of months in the short Limitation Year divided by
12.
(k) "Defined Contribution Dollar Limitation" shall mean $30,000
or if greater, one-fourth of the defined benefit dollar limitation set
forth in Section 415(b)(1) of the Code as in effect for the Limitation
Year.
(l) "Projected Annual Benefit" shall mean the annual retirement
benefit (adjusted to an actuarially equivalent straight life annuity
if such benefit is expressed in a form other than a straight life
annuity or Qualified Joint and Survivor Annuity) to which the
Participant would be entitled under the terms of the Plan assuming:
(i) the Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if later), and
(ii) the Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine benefits under
the Plan will remain constant for all future Limitation Years.
ARTICLE VIII Retirement and Disability Benefits
8.1 Normal Retirement Date
A Participant who has attained the Normal Retirement Age
specified in the Adoption Agreement, shall be entitled to a
distribution of the value of his Participant's Account. Such
distribution shall be made at the time and in the manner described in
Articles X and XI.
8.2 Disability
A Participant who becomes Disabled shall have a 100% Vested
Interest in his Participant's Account and shall be entitled to a
distribution of his Participant's Account at the time and in the
manner described in Article IX. The Employer shall determine whether a
Participant is Disabled based on such evidence as it deems
appropriate. A determination of Disability by the Employer shall not
constitute any warranty or assurance by the Employer that a
distribution can be made to a Participant free from the penalty on
premature distributions described in Section 72(t) of the Code.
<PAGE>
8.3 Postponed Retirement
A Participant may elect to postpone his retirement beyond his
Normal Retirement Date, unless the Employer imposes a mandatory
retirement date consistent with applicable law. Distribution of the
Participant's Account shall be made at the time and in the manner
described in Article X.
ARTICLE IX Vesting and Termination of Employment
9.1 Participant's Vested Interest
A Participant shall always have a 100% Vested Interest in his
Employee Voluntary Contribution Account, Employee Rollover Account and
Employee Transfer Account. He shall also have a 100% Vested Interest
in his entire Participant's Account upon reaching his Normal
Retirement Age. Upon termination of employment for any reason other
than death, disability or retirement, a Participant shall have a
Vested Interest in that portion of his Participant's Account
attributable to Employer or Affiliate contributions in accordance with
the vesting schedule elected in the Adoption Agreement; provided,
however, that in the event that a nonstandardized plan is adopted
(Adoption Agreements 003 and 004) and the Plan becomes Top Heavy for
any Plan Year, the vesting schedule shall be as elected in Section D.3
or E.3 of the Adoption Agreement. The minimum vesting schedule applies
to all benefits within the meaning of Section 411(a)(7) of the Code
except those attributable to Employee contributions, including
benefits accrued before the effective date of Section 416 and benefits
accrued before the Plan becomes top-heavy. Further, no decrease in a
Participant's nonforfeitable percentage may occur in the event the
Plan's status as top-heavy changes for any Plan Year. However, this
Section does not apply to the account balances of any Employee who
does not have an Hour of Service after the Plan has initially become
top-heavy and such Employee's account balance attributable to Employer
contributions and forfeitures will be determined without regard to
this Section. In the event the Plan subsequently becomes Non-Top Heavy
after being Top Heavy, the vesting schedule selected in Section D.1 or
E.1 shall become the vesting schedule for the Plan, subject, however,
to the restrictions of Section 18.3 as it relates to amendments
affecting vesting.
9.2 Computing Years of Service for Vesting
An Employee who completes 1,000 or more Hours of Service during
the applicable Computation Year shall be credited with a Year of
Service for Vesting. All of a Participant's Years of Service for
Vesting shall be taken into account for the purpose of computing his
Vested Interest except that:
(a) Years of Service prior to age 18 (or age 22 for Plan Years
beginning before January 1, 1985) and prior to the Effective Date of
the Plan shall not be taken into account to the extent excluded in the
Adoption Agreement; and
(b) Years of Service after a period of 5 consecutive one-year
Breaks in Service shall not be required to be taken into account for
the purposes of determining a Participant's Vested Interest in that
portion of his Participant's Account in which he was not Vested which
accrued prior to such Breaks in Service, but both such pre-break and
post-break Years of Service shall be taken into account for the
purpose of computing the Participant's Vested Interest in that portion
of his Participant's Account which accrues after such Breaks in
Service. Both accounts will share in the earnings and losses of the
fund.
In the case of a Participant who does not have 5 consecutive
1-year Breaks in Service, both the pre-break and post-break service
will count in vesting both the pre-break and post-break
Employer-derived account balance.
9.3 Distribution of Vested Interest
If an Employee terminates service, and the value of the
Employee's vested account balance derived from Employer and Employee
contributions is not greater than $3,500, if the Employer so elects in
the Adoption Agreement, the Employee will receive a distribution of
the value of the entire vested portion of such account balance and the
nonvested portion will be treated as forfeiture. For purposes of this
Section, if the value of an Employee's vested account balance is zero,
the Employee shall be deemed to have received a distribution of such
vested account balance. A Participant's vested account balance shall
not include accumulated deductible Employee contributions within the
meaning of Section 72(o)(5)(B) of the Code for Plan Years beginning
prior to January 1, 1989.
If an Employee terminates service, and elects, in accordance
with the requirements of Articles X and XI, to receive the value of
the Employee's vested account balance, the nonvested portion will be
treated as a forfeiture.
<PAGE>
If the Employee elects to have distributed less than the entire
vested portion of the account balance derived from Employer
contributions, the part of the nonvested portion that will be treated
as a forfeiture is the total nonvested portion multiplied by a
fraction, the numerator of which is the amount of the distribution
attributable to Employer contributions and the denominator of which is
the total value of the vested Employer derived account balance.
If an Employee receives or is deemed to receive a distribution
pursuant to this Section and the Employee resumes employment covered
under this Plan, the Employee's Employer-derived account balance will
be restored to the amount on the date of distribution if the Employee
repays to the Plan the full amount of the distribution attributable to
Employer contributions before the earlier of 5 years after the first
date on which the Participant is subsequently reemployed by the
Employer, or the date the Participant incurs 5 consecutive 1-year
breaks in service following the date of the distribution. If an
Employee is deemed to receive a distribution pursuant to this Section,
and the Employee resumes employment covered under this Plan before the
date the Participant incurs 5 consecutive 1-year breaks in service,
upon the reemployment of such Employee, the Employer-derived account
balance of the Employee will be restored to the amount of the date of
such deemed distribution.
9.4 Declaration of Forfeitures
In addition to a case where a forfeiture arises under Section
9.3 as a result of a cash out, a forfeiture of the Participant's
nonvested interest in his Participant's Account shall also occur if
the Participant terminates employment with the Employer and all
Affiliates and incurs 5 consecutive 1-year Breaks in Service.
9.5 Effective Date
If this Plan is a restatement of a previously existing plan, the
vesting schedule chosen in the Adoption Agreement shall be effective
as of the later of the Restated Date or the first day of the first
Plan Year beginning after December 31, 1988.
ARTICLE X Joint and Survivor and Preretirement Survivor Annuity
Requirements
10.1 Application of Article
In the event this Article applies to the Plan, it shall take
precedence over all conflicting provisions. Without limiting the
generality of the foregoing, in the event this Article applies to this
Plan, it shall take precedence over any conflicting provision of
Articles VIII, IX, XI, XII and XIII. This Article will apply only if
this Plan is a money purchase pension plan, a target benefit plan or
this plan is determined to be a direct or indirect transferee of a
defined benefit plan, a money purchase pension plan (including a
target benefit plan), or a stock bonus plan or profit sharing plan, or
any other plan which is itself a direct or indirect transferee, where
the transferor plan provided for the payment of benefits in the form
of a life annuity to the Participant, provided the funds were
transferred to this Plan effective on or after January 1, 1985. If the
provisions of this Article are applicable, they shall apply to any
Participant who is credited with at least one Hour of Service on or
after August 23, 1984, and such other Participants as provided in
Section 10.7. If otherwise applicable, the provisions of this Article
shall apply only to the sub-account of the Employee Transfer Account
attributable to the transfers described in this Section. In the event
a separate subaccount has not been established, the provisions of this
Article shall apply to the entire Participant's Account of each
Participant who participated in the transferor plan.
10.2 Qualified Joint and Survivor Annuity
Unless an optional form of benefit is selected pursuant to a
Qualified Election within the 90-day period ending on the Annuity
Starting Date, a married Participant's Vested Interest in the portion
of his Participant's Account subject to this Article shall be paid in
the form of a Qualified Joint and Survivor Annuity. If a Participant
is not married, his Vested Account Balance shall be paid in the form
of a life annuity. The Participant may elect to have such annuity
distributed upon attainment of the earliest retirement age under the
Plan.
10.3 Qualified Preretirement Survivor Annuity
Unless an optional form of benefit has been selected pursuant to
a Qualified Election, if a Participant dies before the Annuity
Starting Date then the Participant's Vested Account Balance to the
extent subject to this Article shall be applied toward the purchase of
an annuity for the life of the Surviving Spouse, if any. The surviving
spouse may elect to have such annuity distributed within a reasonable
period after the Participant's death.
<PAGE>
10.4 Definitions
(a) "Earliest Retirement Age" shall mean the earliest date on
which, under the Plan, the Participant could elect to receive benefits
hereunder.
(b) "Election Period" shall mean the period which begins on the
first day of the Plan Year in which the Participant attains age 35 and
ends on the date of the Participant's death. If a Participant
separates from service prior to the first day of the Plan Year in
which age 35 is attained, with respect to the balance of the
Participant's Account as of the date of termination of employment, the
Election Period shall begin on the date of termination of employment.
A Participant who will not attain the age of 35 by the end of
any current Plan Year may make a special Qualified Election to waive
the Qualified Preretirement Survivor Annuity for the period beginning
on the date of the election and ending on the first day of the Plan
Year in which the Participant will attain age 35. This election shall
not be valid unless the Participant receives a notice similar to the
notice for Qualified Preretirement Survivor Annuities described in
Section 10.5. If a Participant makes this special Qualified Election
prior to age 35, Qualified Preretirement Survivor Annuity coverage
will be automatically reinstated as of the first day of the Plan Year
in which the Participant attains age 35. Any new waiver on or after
such date shall be subject to the full requirements of this Article.
(c) "Qualified Election" shall mean a waiver of a Qualified
Joint and Survivor Annuity or a Qualified Preretirement Survivor
Annuity. Any waiver of a Qualified Joint and Survivor Annuity or a
Qualified Preretirement Annuity shall not be effective unless: (i) the
Participant's spouse consents in writing to the election; (ii) the
election designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the Participant without any further spousal consent);
(iii) the spouse's consent acknowledges the effect of the election;
and (iv) the spouse's consent is witnessed by a Plan representative or
a notary public. Additionally, a Participant's waiver of the Qualified
Joint and Survivor Annuity shall not be effective unless the election
designates a form of benefit payment which may not be changed without
spousal consent (or the spouse expressly permits designations by the
Participant without any further spousal consent). If it is established
to the satisfaction of a Plan representative that such written consent
may not be obtained because there is no Spouse or that the Spouse
cannot be located, a waiver will be deemed a Qualified Election. Any
consent by a spouse obtained under this provision (or establishment
that the consent of the spouse may not be obtained) shall be effective
only with respect to such spouse. A consent that permits designations
by the Participant without any requirement of further consent by such
spouse must acknowledge that the spouse has the right to consent to a
specific beneficiary, and a specific form of benefit where applicable,
and that the spouse voluntarily elects to relinquish either or both of
such rights. A revocation of a prior waiver may be made by a
Participant without the consent of the Spouse at any time before the
commencement of benefits. The number of revocations shall not be
limited. No consent obtained under this provision shall be valid
unless the Participant has received notice as provided in Section 10.5
below.
(d) "Qualified Joint and Survivor Annuity" shall mean an
immediate annuity for the life of the Participant with a survivor
annuity for the life of the spouse which is not less than 50 percent
and not more than 100 percent of the amount of the annuity which is
payable during the joint lives of the Participant and the Spouse and
which is the amount of benefit which can be purchased with the
Participant's Vested Interest in the portion of his Participant's
Account which is subject to this Article. The percentage for the
survivor portion of the Qualified Joint and Survivor Annuity shall be
as elected by the Participant in writing during the Election Period.
If no such election is made, the percentage shall be 50%.
(e) "Spouse (Surviving Spouse)" shall mean the spouse or
surviving spouse of the Participant, provided that a former spouse
will be treated as the Spouse or the Surviving Spouse to the extent
provided under a qualified domestic relations order as described in
Section 414(p) of the Code.
(f) "Qualified Preretirement Survivor Annuity" shall mean a
life annuity payable to the Spouse on the Participant's death and
which is in an amount which can be purchased with the Participant's
Vested Account Balance which is subject to this Article.
(g) "Annuity Starting Date" shall mean the first day of the
first period for which an amount is paid as an annuity or any other
form.
(h) "Vested Account Balance" shall mean the aggregate value of
the Participant's vested account balances derived from Employer and
Employee contributions (including rollovers), whether vested before or
upon death, including the proceeds of insurance contracts, if any, on
the Participant's life. The provisions of this Article shall apply to
a Participant who is vested in amounts attributable to Employer
contributions, Employee contributions (or both) at the time of death
or distribution.
<PAGE>
10.5 Notice Requirements
In the case of a Qualified Joint and Survivor Annuity as
described in Section 10.2, the Employer shall no less than 30 days and
no more than 90 days prior to the Annuity Starting Date provide each
Participant, within a reasonable period prior to the commencement of
benefits, a written explanation of: (a) the terms and conditions of a
Qualified Joint and Survivor Annuity; (b) the Participant's right to
make and the effect of an election to waive the Qualified Joint and
Survivor Annuity form of benefit; (c) the rights of a Participant's
Spouse; and (d) the right to make, and the effect of, a revocation of
a previous election to waive the Qualified Joint and Survivor Annuity.
In the case of a Qualified Preretirement Survivor Annuity, as
described in Section 10.3, the Employer shall provide each Participant
within the applicable period, a written explanation of the Qualified
Preretirement Survivor Annuity in such terms and in such manner as
would be comparable to the explanation provided for meeting the
requirements of this Section applicable to a Qualified Joint and
Survivor Annuity. The applicable period for a Participant is whichever
of the following periods ends last: (i) the period beginning with the
first day of the Plan Year in which the Participant attains age 32 and
ending with the close of the Plan Year preceding the Plan Year in
which the Participant attains age 35; (ii) a reasonable period ending
after the individual becomes a Participant; (iii) a reasonable period
ending after this Article first applies to the Participant.
Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from service in the case of
a Participant who separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (ii) and (iii)
is the end of the two-year period beginning one year prior to the date
the applicable event occurs, and ending one year after that date. In
the case of a Participant who separates from service before the Plan
Year in which age 35 is attained, notice shall be provided within the
two-year period beginning one year prior to separation and ending one
year after separation. If such a Participant thereafter returns to
employment with the Employer, the applicable period for such
Participant shall be redetermined.
If a distribution is one to which sections 401(a)(11) and 417 of
the Internal Revenue Code do not apply, such distribution may commence
less than 30 days after the notice required under section
1.411(a)-11(c) of the Income Tax Regulations is given, provided that:
(a) The plan administrator clearly informs the participant that
the participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(b) The participant, after receiving the notice, affirmatively
elects a distribution.
10.6 Safe Harbor Rules
10.6.1 This Section shall apply to a Participant in a
profit-sharing plan, and to any distribution, made on or after the
first day of the first Plan Year beginning after December 31, 1988,
from or under a separate account attributable solely to accumulated
deductible Employee contributions, as defined in Section 72(o)(5)(B)
of the Code, and maintained on behalf of a Participant in a money
purchase pension plan, (including a target benefit plan) if the
following conditions are satisfied: (a) the Participant does not or
cannot elect payments in the form of a life annuity; and (b) on the
death of a Participant, the Participant's vested account balance will
be paid to the Participant's surviving spouse, but if there is no
surviving spouse, or if the surviving spouse has consented in a manner
conforming to a qualified election, then to the Participant's
designated beneficiary. The surviving spouse may elect to have
distribution of the vested account balance commence within the 90-day
period following the date of the Participant's death. The account
balance shall be adjusted for gains or losses occurring after the
Participant's death in accordance with the provisions of the Plan
governing the adjustment of account balances for other types of
distributions. This Section 10.6 shall not be operative with respect
to a Participant in a profit sharing plan if the plan is a direct or
indirect transferee of a defined benefit plan, money purchase plan, a
target benefit plan, stock bonus, or profit sharing plan which is
subject to the survivor annuity requirements of Section 401(a)(11) and
Section 417 of the Code. If this Section 10.6 is operative, then the
provisions of this Article, other than Section 10.7, shall be
inoperative.
10.6.2 The Participant may waive the spousal death benefit
described in this Section at any time provided that no such waiver
shall be effective unless it satisfies the conditions described in
Section 10.4(c) (other than the notification requirement) that would
apply to the Participant's waiver of the Qualified Preretirement
Survivor Annuity.
<PAGE>
10.6.3 For purposes of this Section 10.6, vested account
balance shall mean, in the case of a money purchase pension plan or a
target benefit plan, the Participant's separate account balance
attributable solely to accumulated deductible Employee contributions
within the meaning of Section 72(o)(5)(B) of the Code. In the case of
a profit sharing plan, vested account balance shall have the same
meaning as provided in Section 10.4(h).
10.7 Transitional Rules
Notwithstanding the general effective dates provided in this
Plan and this Article, the provisions of this Article shall also apply
to the Participants described in this Section.
(a) Any living Participant not receiving benefits on August 23,
1984, who would otherwise not receive the benefits prescribed by the
previous Sections of this Article must be given the opportunity to
elect to have the prior Sections of this Article apply if such
Participant is credited with at least one Hour of Service under this
Plan or a predecessor plan in a Plan Year beginning on or after
January 1, 1976, and such Participant had at least 10 years of vesting
service when he or she separated from service.
(b) Any living Participant not receiving benefits on August 23,
1984, who was credited with at least one Hour of Service under this
Plan, or a predecessor plan on or after September 2, 1974, and who is
not otherwise credited with any service in a Plan Year beginning on or
after January 1, 1976, must be given the opportunity to have his or
her benefits paid in accordance with subsection (d) of this Section.
(c) The respective opportunities to elect (as described in
subsections (a) and (b) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and
ending on the date benefits would otherwise commence to said
Participants.
(d) Any Participant who has elected pursuant to subsection (b)
of this Article and any Participant who does not elect under
subsection (a) or who meets the requirements of subsection (a) except
that such Participant does not have at least 10 Years of Service when
he separates from service, shall have his benefits distributed in
accordance with all of the following requirements if benefits would
have been payable in the form of a life annuity:
(i) Automatic joint and survivor annuity.
If benefits in the form of a life annuity become payable to a married
Participant who:
(1) begins to receive payments under the Plan on or after
Normal Retirement Age; or
(2) dies on or after Normal Retirement Age while still working
for the Employer; or
(3) begins to receive payments on or after the qualified early
retirement age; or
(4) separates from service on or after attaining Normal
Retirement Age (or the qualified early retirement age) and after
satisfying the eligibility requirements for the payment of benefits
under their Plan and thereafter dies before beginning to receive such
benefits; then such benefits will be received under this Plan in the
form of a Qualified Joint and Survivor Annuity, unless the Participant
has elected otherwise during the election period. The election period
must begin at least 6 months before the Participant attains qualified
early retirement age and end not more than 90 days before the
commencement of benefits. Any election hereunder will be in writing
and may be changed by the Participant at any time.
(ii) Election of early survivor annuity. A Participant who is
employed after attaining the qualified early retirement age will be
given the opportunity to elect, during the election period, to have a
survivor annuity payable on death. If the Participant elects the
survivor annuity, payments under such annuity must not be less than
the payments which would have been made to the spouse under the
Qualified Joint and Survivor Annuity if the Participant had retired on
the day before his death. Any election under this provision will be in
writing and may be changed by the Participant at any time. The
election period begins on the later of (1) the 90th day before the
Participant attains the qualified early retirement age, or (2) the
date on which participation begins, and ends on the date the
Participant terminates employment.
(iii) For purposes of this subsection (d);
(1) Qualified early retirement age is the latest of: (A) the
earliest date, under the Plan, on which the Participant may elect to
receive retirement benefits, (B) the first day of the 120th month
beginning before the Participant reaches Normal Retirement Age, or (C)
the date the Participant begins participation.
(2) Qualified Joint and Survivor Annuity is an annuity for the
life of the Participant with a survivor annuity for the life of the
Spouse as described in Section 10.4(c).
10.8 Cash Out for Small Amounts
If an Employee terminates service, and the value of the
Employee's vested account balance derived from Employer and Employee
contributions is not greater than $3,500, if the Employer so elects in
the Adoption Agreement, the Employee will receive a distribution of
the value of the entire vested portion of such account
<PAGE>
balance and the nonvested portion will be treated as a forfeiture. For
purposes of this Section, if the value of an Employee's vested account
balance is zero, the Employee shall be deemed to have received a
distribution of such vested account balance. A Participant's vested
account balance shall not include accumulated deductible Employee
contributions within the meaning of Section 72(o)(5)(B) of the Code
for Plan Years beginning prior to January 1, 1989.
If an Employee terminates service, and elects, in accordance
with the requirements of Section 10.4(c), to receive the value of the
Employee's vested account balance, the nonvested portion will be
treated as a forfeiture. If the Employee elects to have distributed
less than the entire vested portion of the account balance derived
from Employer contributions, the part of the nonvested portion that
will be treated as a forfeiture is the total nonvested portion
multiplied by a fraction, the numerator of which is the amount of the
distribution attributable to Employer contributions and the
denominator of which is the total value of the vested Employer-derived
account balance.
If an Employee receives or is deemed to receive a distribution
pursuant to this Section and the Employee resumes employment covered
under this Plan, the Employee's Employer-derived account balance will
be restored to the amount on the date of distribution if the Employee
repays to the Plan the full amount of the distribution attributable to
Employer contributions before the earlier of 5 years after the first
date on which the Participant is subsequently reemployed by the
Employer, or the date the Participant incurs 5 consecutive 1-year
breaks in service following the date of the distribution.
10.9 Requirements Relating to Life Insurance
If the provisions of this Article apply and life insurance has
been purchased for the Participant's benefit under the Plan, the
Trustee (or Employer in the case of a Plan which utilizes a Custodian)
shall, as owner of the policy, name a Beneficiary and select a
settlement option which provides for payment in the form of a
Qualified Joint and Survivor Annuity, as applicable, if payment in
such form is required by the provisions of this Article.
10.10 Purchase of Annuity Contracts
The Employer shall direct the Trustee or Custodian, whichever is
applicable, as to the purchase of any annuity contract under this
Article. The annuity contract shall be purchased from a legal reserve
life insurance company qualified to do business in the state where the
Plan is located. The Employer shall direct the purchase of an annuity
contract based on such considerations as the Employer, in its sole
discretion, and in a nondiscriminatory manner, deems appropriate.
10.11 Restrictions on Immediate Distributions
If the value of a Participant's vested account balance derived
from Employer and Employee contributions exceeds (or at the time of
any prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the Participant and the Participant's
Spouse (or where either the Participant or the Spouse has died, the
survivor) must consent to any distribution of such account balance.
The consent of the Participant and the Participant's Spouse shall be
obtained in writing within the 90-day period ending on the annuity
starting date. The annuity starting date is the first day of the first
period for which an amount is paid as an annuity or any other form.
The Plan Administrator shall notify the Participant and the
Participant's Spouse of the right to defer any distribution until the
Participant's account balance is no longer immediately distributable.
Such notification shall include a general description of the material
features, and an explanation of the relative values of, the optional
forms of benefit available under the Plan in a manner that would
satisfy the notice requirements of Section 417(a)(3) of the Code, and
shall be provided no less than 30 days and no more than 90 days prior
to the annuity starting date.
Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a Qualified Joint
and Survivor Annuity while the account balance is immediately
distributable. Furthermore, if payment in the form of a Qualified
Joint and Survivor Annuity is not required with respect to the
Participant pursuant to Section 10.1 of the Plan, only the Participant
need consent to the distribution of an account balance that is
immediately distributable. Neither the consent of the Participant nor
the Participant's Spouse shall be required to the extent that a
distribution is required to satisfy Section 401(a)(9) or Section 415
of the Code. In addition, upon termination of this Plan if the Plan
does not offer an annuity option (purchased from a commercial
provider), the Participant's account balance may, without the
Participant's consent, be distributed to the Participant or
transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the
Code) within the same controlled group.
<PAGE>
An account balance is immediately distributable if any part of
the account balance could be distributed to the Participant (or
surviving spouse) before the Participant attains (or would have
attained if not deceased) the later of Normal Retirement Age or age
62.
For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the
first Plan Year beginning after December 31, 1988, the Participant's
vested account balance shall not include amounts attributable to
accumulated deductible Employee contributions within the meaning of
Section 72(o)(5)(B) of the Code.
ARTICLE XI Manners of Distribution - Lifetime Payments
11.1 Applicability of This Article
Provisions of this Article relating to optional forms of benefit
shall apply to all plans unless the plan is a money purchase or target
benefit plan or if the provisions of Article X otherwise apply. The
provisions of this Article relating to optional forms of benefit shall
also apply if the provisions of Article X do apply but the Participant
has elected to waive the Qualified Joint and Survivor Annuity as
provided under Article X.
11.2 Optional Modes of Distribution
Upon a Participant's retirement, Disability or termination of
employment, he or she shall be entitled to elect to have the Vested
Interest in his Participant's Account paid to him in one of the
following ways:
(a) In a lump sum;
(b) In two or more annual installments;
(c) By the purchase by the Trustee or Custodian and
distribution of a single premium nontransferable annuity contract;
provided, however, that no annuity may be purchased which provides
benefits conditioned on the survival of any person; or
(d) A combination of the methods specified in subsections (a),
(b) and (c) above.
Notwithstanding an election by a Participant or the requirements
of Article X, the Employer may elect in the Adoption Agreement to
distribute the Participant's Vested Interest in his Participant's
Account in a lump sum if such Vested Interest is $3,500 or less and
the distribution is made before the payment of the Participant's
benefit begins. In the event the balance of the Participant's Account
attributable to Employer contributions exceeds $3,500, or the payment
of the Participant's benefit has commenced, the Employer may
distribute the Participant's Vested Interest in his Participant's
Account only with the written consent of the Participant and, in the
event the Plan is subject to the requirements of Article X, the
consent of his spouse, or where the Participant has died, the written
consent of the Beneficiary alone. If the Participant is not 100%
Vested in his Participant's Account, the distribution shall be subject
to the provisions of Section 9.3.
11.3 Commencement of Benefits
In the case of retirement or Disability, the Participant shall be
entitled to elect the date on which benefits are to be paid or
commence, subject to the provisions of this Section and Article XIV.
In the case of termination of employment for reasons other than death,
Disability or retirement, the payment of benefits may be deferred
until the Participant's Normal Retirement Date or his earlier death or
Disability if the Employer has so elected in the Adoption Agreement.
If a Participant separates from service before satisfying the
age requirement for early retirement, but has satisfied the service
requirement, the Participant will be entitled to elect an early
retirement benefit upon satisfaction of such age requirement.
11.4 Limitations on Commencement of Benefits
Unless the Participant elects otherwise, benefits shall commence
no later than 60 days after the close of the Plan Year in which the
latest of the following events occur: (a) the date the Participant
attains his Normal Retirement Age, (b) the tenth anniversary of the
Plan Year in which he commenced participation in the Plan, or (c) the
date he terminates employment with the Employer (and any Affiliates).
In the event a Participant's consent or, the consent of his spouse or
Beneficiary is necessary before a distribution can be made, the
failure to provide such consent shall be considered an election to
defer the commencement of benefits.
Regardless of an election by the Participant or the Employer,
the distribution of benefits must commence no later than the April 1
following the calendar year in which the Participant attains age 70
1/2 and the amount of each year's distribution must meet the
requirements of Article XIV.
<PAGE>
11.5 Cash or in Kind Distributions
All distributions under the Plan shall be in cash unless the
Employer determines to make and the Participant agrees to accept
distributions in kind. If in kind, the value of the assets distributed
shall be determined by the Employer in its sole discretion and shall
be valued at their fair market value on the date of distribution or as
near thereto as is practicable.
11.6 Election and Claim Procedure
Elections required or permitted to be made by a Participant or
Beneficiary shall follow the form and procedures prescribed by the
Employer. The Employer shall notify a Participant in writing within
(90) days of his written application for benefits of his eligibility
or noneligibility for benefits under the Plan. If the Employer
determines that a Participant is not eligible for benefits or full
benefits, the notice shall set forth (a) the specific reasons for such
denial, (b) a specific reference to the provision of the Plan on which
the denial is based, (c) a description of any additional information
or material necessary for the claimant to perfect his claim, and a
description of why it is needed, and (d) an explanation of the Plan's
claim review procedure and other appropriate information as to the
steps to be taken if the Participant wishes to have his claim
reviewed. If the Employer determines that there are special
circumstances requiring additional time to make a decision, the
Employer shall notify the Participant of the special circumstances and
the date by which a decision is expected to be made, and may extend
the time for up to an additional 90-day period. If a Participant is
determined by the Employer to be not eligible for benefits, or if the
Participant believes that he is entitled to greater or different
benefits, he shall have the opportunity to have his claim reviewed by
the Employer by filing a petition for review with the Employer within
(60) days after receipt by him of the notice issued by the Employer.
Said petition shall state the specific reasons the Participant
believes he is entitled to benefits or greater or different benefits.
Within (60) days after receipt by the Employer of said petition, the
Employer shall afford the Participant (and his counsel, if any) any
opportunity to present his position to the Employer orally or in
writing, and said Participant (or his counsel) shall have the right to
review the pertinent documents, and the Employer shall notify the
Participant of its decision in writing within said (60) day period,
stating specifically the basis of said decision written in a manner
calculated to be understood by the Participant and the specific
provisions of the Plan on which the decision is based. If, because of
the need for a hearing, the (60) day period is not sufficient, the
decision may be deferred for up to another (60) day period at the
election of the Employer, but notice of this deferral shall be given
to the Participant.
In the event of the death of a Participant, the same procedure
shall be applicable to his Beneficiaries.
11.7 Annuities
Any annuity contract distributed by the Plan under the
provisions of this Article or any other Articles shall be
nontransferable. The terms of any annuity contract purchased and
distributed by the Plan to a Participant or Spouse shall comply with
the requirements of this Plan.
11.8 Direct Rollovers
11.8.1 This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under
this Section, a distributee may elect at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover.
11.8.2 Definitions
(a) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the balance
to the credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
<PAGE>
(b) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of the Code,
an individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution. However, in the case
of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
(c) Distributee: A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations order,
as defined in Section 414(p) of the Code, are distributees with regard
to the interest of the spouse or former spouse.
(d) Direct rollover: A direct rollover is a payment by the Plan
to the eligible retirement plan specified by the distributee.
ARTICLE XII Death Benefits
12.1 Applicability of This Article
Provisions of this Article relating to designations of
Beneficiary and optional modes of distribution upon death shall apply
to all plans unless the plan is a money purchase or target benefit
plan or if the provisions of Article X otherwise apply. These
provisions shall also apply if the Qualified Preretirement Survivor
Annuity was waived by the Participant in accordance with Article X
prior to the date of death or by the Participant's Spouse after the
date of death.
12.2 Designation of Beneficiary
Subject to the provisions of Article X, distribution upon the
death of a Participant shall be made to the person or persons
designated in a written Beneficiary designation signed by the
Participant and filed with the Employer prior to the Participant's
death. The Beneficiary designation may be revoked or modified by
filing a new designation with the Employer any time before the
Participant's death. Notwithstanding the foregoing, in the case of a
Participant who has at least one Hour of Service on or after August
23, 1984, if the Participant is married on the date of his death, the
Participant's Spouse on the date of his death shall be the
Participant's Beneficiary (both under the Plan and under any life
insurance contracts held under the Plan for the Participant's
benefits) regardless of the designation made by the Participant,
unless such Spouse consents to any designation or revocation of a
designation which has the effect of naming someone other than such
Spouse as a Beneficiary. Such consent:
(a) Shall be in writing;
(b) Shall be signed by such Spouse;
(c) Shall acknowledge the effect of the designation made by the
Participant; and
(d) Shall be witnessed by a Plan representative or notary
public.
The consent of the Participant's Spouse, if required, shall
extend only to the specific Beneficiary or Beneficiaries and the
method of distribution described in the designation to which the
consent applies. If the Participant establishes to the satisfaction of
a Plan representative that such written consent cannot be obtained
because the Participant is not married or his Spouse cannot be
located, no such consent shall be required. Any consent obtained under
this Section shall not be valid with respect to any other spouse.
12.3 Optional Modes of Distribution Upon Death
Subject to Article X, if a Participant dies before benefits have
commenced, distribution of his entire Participant's Account, plus the
face value of any life insurance held for the Participant's benefit
which is in excess of such life insurance contract's cash value, shall
be made to his Beneficiary in one of the following ways:
(a) In a lump sum;
(b) In two or more annual installments;
(c) By the purchase by the Trustee or Custodian and
distribution of a single premium nontransferable annuity contract;
provided, however, that no annuity may be purchased which provides
benefits conditioned on the survival of any person; or
(d) A combination of the methods specified in subsections (a),
(b) and (c) above.
Notwithstanding an election by a Participant (or his
Beneficiary) or the requirements of Article X, the Employer may
distribute the balance of the Participant's Account in a lump sum if
benefits have not otherwise commenced and if the Participant's Vested
Interest in his Participant's Account is $3,500 or less. If such
Vested Interest is more than $3,500, or benefits have already
commenced, distribution in a lump sum may be made only with the
written consent of the Participant's Beneficiary.
<PAGE>
The election of a method of distribution shall be made by the
Participant in a written designation filed with the Employer before
his death in accordance with Section 10.4(c). If no written
designation is made by the Participant, the Beneficiary shall elect
the method of distribution.
12.4 Disclaimer by Beneficiary
A Beneficiary shall be entitled to disclaim all or any portion
of the distribution payable under this Article. In the event such a
disclaimer is made, the disclaimed amount shall be payable in the
manner specified in the Participant's Beneficiary designation or, if
not so specified, to the remaining Beneficiary or Beneficiaries as if
the disclaiming Beneficiary died on the date before the date of the
Participant's death. A Beneficiary who disclaims any distribution
shall not have any power of appointment over the amount disclaimed nor
any other power of any nature to direct or control the disposition of
the disclaimed amount.
ARTICLE XIII Withdrawals and Loans
13.1 Hardship Withdrawals
Upon the application of any Participant, if so elected in the
Adoption Agreement, the Employer in accordance with its uniform,
nondiscriminatory policy and based on the standards of this Section,
may permit such Participant to make a withdrawal of part of the amount
then credited to his Participant's Account. The provisions of this
Article shall not apply to Employee Deferrals, Qualified Nonelective
Contributions, Qualified Matching Contributions or the earnings on any
of these contributions. Withdrawal of these amounts shall be governed
by the terms of Section 6.14. In no event shall the amount of any
withdrawal exceed the amount which he would be entitled to receive if
he were to terminate employment with the Employer at the time of such
withdrawal. No hardship withdrawal shall be made under the provisions
of this Section unless the distribution is necessary in light of
immediate and heavy financial needs of the Participant. A distribution
based on hardship cannot exceed the amount required to meet the
immediate financial needs created by the hardship and the funds must
not be reasonably available from other resources of the Participant.
Any amount so distributed shall be deducted from such Participant's
Account. The Employer shall determine whether the standards for a
hardship withdrawal have been met based on such evidence as the
Employer deems appropriate. In the event a finding of hardship results
in a distribution of funds to a Participant who is a 5%-owner, the
Employer shall in no way be responsible for any penalty tax which may
result under Section 72(m)(5) of the Code.
13.2 Withdrawal of Voluntary Contributions
A Participant may withdraw his voluntary Employee contributions
by notifying the Employer in writing. The Participant may withdraw
such contributions, including the earnings thereon, at such intervals
as the Employer may prescribe. Unless otherwise permitted pursuant to
a policy established by the Employer, written notice of withdrawal
must be provided at least 30 days in advance of any Plan Anniversary.
Upon receipt of appropriate written notice, the Employer shall
instruct the Trustee or Custodian to withdraw the amount requested
from the Participant's Employee Voluntary Contribution Account.
13.3 Loans to Plan Participants
Upon the request of a Participant, if the Employer has so
elected in the Adoption Agreement, the Trustee may make a loan or
loans to the Participant from the Fund. Loans shall not be permitted
if the Plan is not Trusteed. The Plan Administrator shall make all
determinations regarding eligibility and terms regarding loans made to
Participants. The Plan Administrator may delegate this responsibility
to the Trustee or to the Administrative Committee. Any loan permitted
by the Plan Administrator shall meet the following requirements unless
the Employer designates otherwise in writing. Any changes to the terms
of this loan program shall be in writing and shall become a part of
this Plan and be included in the Summary Plan Description:
(a) Loans must be available to all Participants and
Beneficiaries who are parties-in-interest on a reasonably equivalent
basis.
(b) Loans shall not be made available to Highly Compensated
Employees (as defined in Section 414(q) of the Code) in an amount
greater than the amount made available to other Employees.
(c) Participant's may contact the Plan Administrator or the
Trustee to obtain the necessary forms to apply for a Plan loan.
(d) Loans shall be approved within the limitations described
herein, unless the Plan Administrator determines that the Participant
does not intend to or will be unable to repay the loan as specified in
the loan's terms and conditions.
<PAGE>
(e) Loans will be made without regard to the purpose for which
the loan proceeds will be used.
(f) The interest rate charged on the loan shall be determined
based upon the commercially available rate on similar loans with
similar terms.
(g) All loans shall be secured by 50% of the Participant's
vested account balance. No other collateral shall be accepted.
(h) No Participant loan shall exceed 50% of the present value
of the Participant's vested accrued benefit. A minimum loan amount
shall apply if so elected in the Adoption Agreement.
(i) A Participant must obtain the consent of his or her Spouse,
if any, for use of the account balance as security for the loan.
Spousal consent shall be obtained no earlier than the beginning of the
90-day period that ends on the date on which the loan is to be so
secured. The consent must be in writing, must acknowledge the effect
of the loan, and must be witnessed by a Plan representative or notary
public. Such consent shall thereafter be binding with respect to the
consenting Spouse or any subsequent spouse with respect to that loan.
A new consent shall be required if the account balance is used for
renegotiation, extension, renewal, or other revision of the loan.
(j) In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable event
occurs in the Plan.
(k) No loans will be made to any Shareholder-Employee or
Owner-Employee. For purposes of this requirement, a
Shareholder-Employee means an Employee or officer of an electing small
business (Subchapter S) corporation who owns (or is considered as
owning within the meaning of Section 318(a)(1) of the Code), on any
day during the taxable year of such corporation, more than 5% of the
outstanding stock of the corporation.
(l) Each Participant granted a loan under this Section shall be
furnished with a clear statement of the charges involved in the
transaction, including the dollar amount and annual interest rate of
the finance charge.
(m) A loan requested by a Participant shall, if granted, be
treated as a participant-directed investment.
If a valid spousal consent has been obtained in accordance with
(i), then, notwithstanding any other provision of this Plan, the
portion of the Participant's vested account balance used as a security
interest held by the Plan by reason of a loan outstanding to the
Participant shall be taken into account for purposes of determining
the amount of the account balance payable at the time of death or
distribution, but only if the reduction is used as repayment of the
loan. If less than 100% of the Participant's vested account balance
(determined without regard to the preceding sentence) is payable to
the surviving Spouse, then the account balance shall be adjusted by
first reducing the vested account balance by the amount of the
security used as the repayment of the loan, and then determining the
benefit payable to the surviving spouse.
No loan to any Participant or Beneficiary can be made to the
extent that such loan when added to the outstanding balance of all
other loans to the Participant or Beneficiary would exceed the lesser
of (a) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans during the one year period ending on the
day before the loan is made, over the outstanding balance of loans
from the Plan on the date the loan is made, or (b) One-half the
present value of the nonforfeitable accrued benefit of the
Participant. For the purpose of the above limitation, all loans from
all plans of the Employer and other members of a group of employers
described in Section 414(b), 414(c), and 414(m) of the Code are
aggregated. Furthermore, any loan shall by its terms require that
repayment (principal and interest) be amortized in level payments, not
less frequently than quarterly, over a period not extending beyond
five years from the date of the loan, unless such loan is used to
acquire a dwelling unit which within a reasonable time (determined at
the time the loan is made) will be used as the principal residence of
the Participant. An assignment or pledge of any portion of the
Participant's interest in the Plan and a loan, pledge, or assignment
with respect to any insurance contract purchased under the Plan, will
be treated as a loan under this paragraph.
13.4 Effective Date
If this Plan is a restatement of a previously existing plan,
Sections 13.3(g) and 13.3(h) shall be effective as of the later of the
Restated Date or the first day of the first Plan Year beginning after
December 31, 1989.
ARTICLE XIV Distribution Requirements
14.1 General Rule
14.1.1 Subject to Article X, Joint and Survivor Annuity
Requirements, the requirements of this Article shall apply to any
distribution or a Participant's interest and will take precedence over
any inconsistent provisions of this Plan. Unless otherwise specified,
the provisions of this Article apply to calendar years beginning after
December 31, 1984.
<PAGE>
14.1.2 All distributions required under this Article shall be
determined and made in accordance with the Proposed Regulations under
Section 401(a)(9), including the minimum distribution incidental
benefit requirement of Section 1.401(a)(9)-2 of the Proposed
Regulations.
14.2 Required Beginning Date
The entire interest of a Participant must be distributed or begin to
be distributed no later than the Participant's required beginning
date.
14.3 Limits on Distribution Periods
As of the first distribution calendar year, distributions, if not made
in a single-sum, may only be made over one of the following periods
(or a combination thereof):
(a) The life of the Participant,
(b) The life of the Participant and a designated Beneficiary,
(c) A period certain not extending beyond the life expectancy
of the Participant, or
(d) A period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated Beneficiary.
14.4 Determination of Amount to be Distributed Each Year
If the Participant's interest is to be distributed in other than
a single sum, the following minimum distribution rules shall apply on
or after the required beginning date:
14.4.1 Individual Account
(a) If a Participant's benefit is to be distributed over (i) a
period not extending beyond the life expectancy of the Participant or
the joint life and last survivor expectancy of the Participant and the
Participant's designated Beneficiary or (ii) a period not extending
beyond the life expectancy of the designated Beneficiary, the amount
required to be distributed for each calendar year, beginning with
distributions for the first distribution calendar year, must at least
equal the quotient obtained by dividing the Participant's benefit by
the applicable life expectancy.
(b) For calendar years beginning before January 1, 1989, if the
Participant's Spouse is not the designated Beneficiary, the method of
distribution selected must assure that at least 50% of the present
value of the amount available for distribution is paid within the life
expectancy of the Participant.
(c) For calendar years beginning after December 31, 1988, the
amount to be distributed each year, beginning with distributions for
the first distribution calendar year shall not be less than the
quotient obtained by dividing the Participant's benefit by the lesser
of (i) the applicable life expectancy or (ii) if the Participant's
Spouse is not the designated Beneficiary, the applicable divisor
determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2
of the Proposed Regulations. Distributions after the death of the
Participant shall be distributed using the applicable life expectancy
in Section 14.4.1(a) above as the relevant divisor without regard to
Proposed Regulations Section 1.401(a)(9)-2.
(d) The minimum distribution required for the Participant's
first distribution calendar year must be made on or before the
Participant's required beginning date. The minimum distribution for
other calendar years, including the minimum distribution for the
distribution calendar year in which the Employee's required beginning
date occurs, must be made on or before December 31 of that
distribution calendar year.
14.4.2 Other Forms
If the Participant's benefit is distributed in the form of an
annuity purchased from an insurance company, distributions thereunder
shall be made in accordance with the requirements of Section 401(a)(9)
of the Code and the Proposed Regulations thereunder.
14.5 Death Distribution Provisions
14.5.1 Distribution Beginning Before Death
If the Participant dies after distribution of his or her
interest has begun, the remaining portion of such interest will
continue to be distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
14.5.2 Distribution Beginning After Death
If the Participant dies before distribution of his or her
interest begins, distribution of the Participant's entire interest
shall be completed by December 31 of the calendar year containing the
fifth anniversary of the Participant's death except to the extent that
an election is made to receive distributions in accordance with (a) or
(b) below:
<PAGE>
(a) If any portion of the Participant's interest is payable to
a designated Beneficiary, distributions may be made over the life or
over a period certain not greater than the life expectancy of the
designated Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which the
Participant died;
(b) If the designated Beneficiary is the Participant's
surviving Spouse, the date distributions are required to begin in
accordance with (a) above shall not be earlier than the later of (i)
December 31 of the calendar year immediately following the calendar
year in which the Participant died and (ii) December 31 of the
calendar year in which the Participant would have attained age 70 1/2.
If the Participant has not made an election pursuant to this
Section 14.5.2 by the time of his or her death, the Participant's
designated Beneficiary must elect the method of distribution no later
than the earlier of (1) December 31 of the calendar year in which
distributions would be required to begin under this Section, or (2)
December 31 of the calendar year which contains the fifth anniversary
of the date of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does not
elect a method of distribution, distribution of the Participant's
entire interest must be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death.
14.5.3 For purposes of Section 14.5.2 above, if the surviving
Spouse dies after the Participant, but before payments to such Spouse
begin, the provisions of Section 14.5.2, with the exception of
paragraph (b) therein, shall be applied as if the surviving Spouse
were the Participant.
14.5.4 For purposes of this Section 14.5, any amount paid to a
child of the Participant will be treated as if it had been paid to the
surviving Spouse if the amount becomes payable to the surviving Spouse
when the child reaches the age of majority.
14.5.5 For the purposes of this Section 14.5, distribution of a
Participant's interest is considered to begin on the Participant's
required beginning date (or, if Section 14.5.3 above is applicable,
the date distribution is required to begin to the surviving Spouse
pursuant to Section 14.5.2 above). If distribution in the form of an
annuity irrevocably commences to the Participant before the required
beginning date, the date distribution is considered to begin is the
date distribution actually commences.
14.6 Definitions
14.6.1 Applicable Life Expectancy
The life expectancy (or joint and last survivor expectancy)
calculated using the attained age of the Participant (or designated
Beneficiary) as of the Participant's (or designated Beneficiary's)
birthday in the applicable calendar year reduced by one for each
calendar year which has elapsed since the date life expectancy was
first calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being
recalculated each succeeding calendar year.
14.6.2 Designated Beneficiary
The individual who is designated as the Beneficiary under the
Plan in accordance with Section 401(a)(9) of the Code and the
regulations thereunder.
14.6.3 Distribution Calendar Year
A calendar year for which a minimum distribution is required.
For distributions beginning before the Participant's death, the first
distribution calendar year is the calendar year immediately preceding
the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the
first distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section 14.5 above.
14.6.4 Life Expectancy
Life expectancy and joint and last survivor expectancy are
computed by use of the expected return multiples in Tables V and VI of
Section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or Spouse, in the
case of distributions described in Section 14.5.2(b) above) by the
time distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Participant (or Spouse) and shall apply to all subsequent years. The
life expectancy of a nonspouse Beneficiary may not be recalculated.
14.6.5 Participant's Benefit
(a) The account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar year
(valuation calendar year) increased by the amount of any contributions
or forfeitures allocated to the account balance as of dates in the
valuation calendar year after the valuation date and decreased by
distributions made in the valuation calendar year after the valuation
date.
<PAGE>
(b) Exception for second distribution calendar year. For
purposes of paragraph (a) above, if any portion of the minimum
distribution for the first distribution calendar year is made in the
second distribution calendar year on or before the required beginning
date, the amount of the minimum distribution made in the second
distribution calendar year shall be treated as if it had been made in
the immediately preceding distribution calendar year.
14.6.6 Required Beginning Date
(a) General rule. The required beginning date of a Participant
is the first day of April of the calendar year following the calendar
year in which the Participant attains age 70 1/2.
(b) Transitional rules. The required beginning date of a
Participant who attains age 70 1/2 before January 1, 1988, shall be
determined in accordance with (1) or (2) below:
(1) Non-5-percent owners.
The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year
following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
(2) 5-percent owners. The required beginning date of a
Participant who is a 5-percent owner during any year beginning after
December 31, 1979, is the first day of April following the later of
(i) the calendar year in which the Participant attains age 70 1/2, or
(ii) the earlier of the calendar year with or within which ends the
Plan Year in which the Participant becomes a 5-percent owner, or the
calendar year in which the Participant retires.
The required beginning date of a Participant who is not a
5-percent owner who attains age 70 1/2 during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
(c) 5-percent owner. A Participant is treated as a 5-percent
owner for purposes of this Section if such Participant is a 5-percent
owner as defined in Section 416(i) of the Code (determined in
accordance with Section 416 of the Code but without regard to whether
the plan is top-heavy) at any time during the Plan Year ending with or
within the calendar year in which such owner attains age 66 1/2 or any
subsequent Plan Year.
(d) Once distributions have begun to a 5-percent owner under
this Section, they must continue to be distributed even if the
Participant ceases to be a 5-percent owner in a subsequent year.
14.7 Transitional Rule
14.7.1 Notwithstanding the other requirements of this Article
and subject to the requirements of Article X, Joint and Survivor
Annuity Requirements, distribution on behalf of any Employee,
including a 5-percent owner, may be made in accordance with all of the
following requirements (regardless of when such distribution
commences):
(a) The distribution by the trust is one which would not have
disqualified such trust under Section 401(a)(9) of the Internal
Revenue Code as in effect prior to amendment by the Deficit Reduction
Act of 1984.
(b) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in the trust is
being distributed or, if the Employee is deceased, by a Beneficiary of
such Employee.
(c) Such designation was in writing, was signed by the Employee
or the Beneficiary, and was made before January 1, 1984.
(d) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(e) The method of distribution designated by the Employee or
the Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and in the
case of any distribution upon the Employee's death, the Beneficiaries
of the Employee listed in order of priority.
14.7.2 A distribution upon death will not be covered by this
transitional rule unless the information in the designation contains
the required information described above with respect to the
distributions to be made upon the death of the Employee.
14.7.3 For any distribution which commences before January 1,
1984, but continues after December 31, 1983, the Employee, or the
Beneficiary, to whom such distribution is being made, will be presumed
to have designated the method of distribution under which the
distribution is being made if the method of distribution was specified
in writing and the distribution satisfies the requirements in
subsection 14.7.1(a) and (e).
14.7.4 If a designation is revoked any subsequent distribution
must satisfy the requirements of Section 401(a)(9) of the Code and the
Proposed Regulations thereunder. If a designation is revoked
subsequent to the date distributions are required to begin, the trust
must distribute by the end of the calendar year following the calendar
year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed to
satisfy Section 401(a)(9) of the Code and the Proposed Regulations
thereunder, but for the Section 242(b)(2) election. For calendar years
beginning after December 31, 1988, such distributions must meet the
minimum distribution incidental benefit requirements in Section
1.401(a)(9)-2 of the Proposed Regulations. Any changes in the
designation will be considered to be a revocation of the designation.
However, the mere substitution or addition of another Beneficiary (one
not named in the designation) under the designation will not be
considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period
<PAGE>
over which distributions are to be made under the designation,
directly or indirectly (for example, by altering the relevant
measuring life). In the case in which an amount is transferred or
rolled over from one plan to another plan, the rules in Q&A J-2 and
Q&A J-3 of Proposed Regulation Section 1.401(a)(9) shall apply.
ARTICLE XV Administration
15.1 Plan Administrator
The Employer shall be the Plan administrator and shall be the
Named Fiduciary of the Plan, and as administrator shall administer the
Plan in accordance with its terms and shall have all powers necessary
to carry out its terms. The Plan Administrator shall, in its sole
discretion, interpret the provisions of the Plan.
15.2 Delegation
The Employer shall have the power to delegate specific fiduciary
duties and responsibilities, other than those of the Trustee or
Custodian with respect to the custody and control of the assets of the
Fund. Such delegations may be to officers, partners or other Employees
of the Employer or to other individuals or entities provided, however,
that no fiduciary duties or responsibilities may be delegated to the
Financial Institution unless the Financial Institution is serving as
Trustee hereunder. Any delegation by the Employer may, if specifically
stated, allow further delegations by the individual or entity to whom
the delegation has been made. Any delegation may be rescinded by the
Employer at any time.
15.3 Administrative Committee
The Employer, in the exercise of its power to delegate fiduciary
duties, may establish an Administrative Committee and appoint its
members to assist in the administration of the Plan. If so
established, the Administrative Committee shall be a Named Fiduciary
and, unless otherwise provided in a written resolution of the
Employer, shall have the power and responsibility to:
(a) Adopt rules and regulations not inconsistent with the
declared purposes and specific provision of the Plan for its
administration;
(b) Interpret and construe the provisions of the Plan;
(c) Determine from time to time the status of all Employees,
Participants and Beneficiaries for the purposes of the Plan;
(d) Determine the rights of Employees, Participants,
Beneficiaries to benefits under the Plan, the amount thereof and the
method and time or times of payment of the same; and
(e) Instruct the Trustee or Custodian as to the disbursement of
the assets of the Fund.
Any member of the Administrative Committee may resign by
delivering a written copy of his resignation to the Employer and may
be removed by written resolution of the Employer. Vacancies shall be
filled by the Employer. If an Administrative Committee is appointed as
provided herein, all references to the Employer in the Plan shall be
deemed to refer to the Administrative Committee to the extent of the
duties delegated.
15.4 Reports and Records
The Employer and those to whom the Employer has delegated
fiduciary duties shall keep records of all their proceedings and
actions, and shall maintain all such books of account, records and
other data as shall be necessary for the proper administration of the
Plan and to comply with applicable law.
15.5 Establishment of Funding Policy
The Employer shall (a) establish a funding policy for the Plan
consistent with the needs of the Plan and in accordance with
applicable law and (b) communicate this policy to the Trustee or
Custodian and direct and supervise the Trustee's or Custodian's
actions to see that this policy is carried out. However, the Employer
may delegate this function in accordance with Section 15.2 to any
person or entity, including the Administrative Committee, if
established, or an Investment Manager. An Investment Manager shall be
charged with the power to direct the Trustee or Custodian as to the
management, acquisition or disposal of any or all assets of the Fund,
as designated in the delegation.
<PAGE>
15.6 Payment of Expenses
The Employer may pay all expenses of administering the Plan,
including but not limited to the Trustee's or Custodian's fees,
attorney fees and expenses incurred by persons or entities to whom
fiduciary duties have been delegated. If said expenses are not paid by
the Employer, they shall be a lien against and paid from the Fund,
except for the items the payment of which would constitute a
prohibited transaction.
15.7 Indemnification
To the extent permitted by law, the Employer shall indemnify the
members of the Administrative Committee, if created, individual
Trustees and others to whom the Employer has delegated fiduciary
duties who are either Employees, owners, officers or directors of the
Employer, against any and all claims, losses, damages, expenses and
liability arising from their responsibilities in connection with the
Plan which are not covered by insurance (without recourse) paid for by
the Employer, unless the same is determined to be due to gross
negligence or intentional misconduct.
ARTICLE XVI Fund and Trustee
16.1 Trustee
A Plan which is Trusteed shall be subject to the provisions of
this Article. A Plan which utilizes a Custodian shall not be subject
to the provisions of this Article but, instead, shall be subject to
the provisions of Article XVII. The Plan shall be Trusteed and all of
the assets of the Plan held in trust in the name of the Trustee if one
or more individuals or the Financial Institutions has executed the
Plan as Trustee as provided in the Adoption Agreement.
16.2 Trust Fund
All contributions received by the Trustee pursuant to the Plan,
together with all investments made therewith, the proceeds thereof,
and all earnings and accumulations thereon, and the part thereof from
time to time remaining, shall be held and administered by the Trustee,
in a fund referred to herein as the "Fund," in accordance with the
terms and provisions hereof.
16.3 Responsibility of the Trustee
The general responsibilities of the Trustee shall be as follows:
(a) Except as expressly otherwise provided herein, the Trustee
shall have exclusive authority and discretion to manage and control
the assets of the Plan held in the Fund.
(b) The Trustee shall hold, administer, invest and reinvest,
and disburse the Fund in accordance with the powers stated herein.
(c) The Trustee shall disburse moneys and other properties from
the Fund on direction of the Employer, pursuant to the provision of
the Plan at the time or times, to the payee or payees specified by the
Employer in directions to the Trustee in such form as the Trustee may
reasonably require. The Trustee shall be under no liability for any
distribution made by it pursuant to such directions and shall be under
no duty to make inquiry as to whether any distribution made by it
pursuant to any such direction is made pursuant to the provisions of
the Plan. The receipt of a distribution by the Payee shall constitute
a full acquittance to the Trustee.
(d) The Trustee shall have the responsibilities, if any,
expressly allocated to it by the Plan. Except as responsibilities may
be expressly so allocated, the Trustee in its capacity as such shall
have no responsibility or authority with respect to the operation and
administration of the Plan. However, if the Trustee is notified that
any action on its part is necessary or desirable and the Employer has
failed or is unable to furnish the Trustee with the necessary
instructions or information, the Trustee may take such action as it
deems necessary or desirable, consistent with the Plan, including,
without limitation action respecting interpretation of the Plan and
payment of benefits.
(e) If the Employer so elects, the Trustees' discretion to
manage and control the assets of the Plan held in the trust Fund or to
acquire or dispose of any such assets shall be subject to the
direction of the Employer. Should the Employer appoint an Investment
Manager to Manage any assets of the trust Fund, the Trustees' power to
manage and control or to acquire or dispose of such assets shall be
subject to the direction of the Investment Manager.
(f) At any time when there is more than one Trustee, the
Trustees shall act by majority vote.
<PAGE>
16.4 Compensation and Expenses
The Trustee shall be entitled to receive such reasonable
compensation for its services hereunder as may be agreed upon with the
Employer; provided, however, that no Employee who is a Trustee shall
receive compensation for services rendered as a Trustee. The Trustee
shall be entitled to reimbursement for all reasonable and necessary
costs, expenses, and disbursements incurred by it in the performance
of such services. Such compensation and reimbursements shall be paid
from the Fund if not paid directly by the Employer and shall
constitute a lien upon the Fund until paid.
16.5 Records and Accounting
The Trustee shall maintain such records as may be reasonably
necessary for the proper administration of the Fund. As soon as
reasonably practicable following a Plan Valuation Date of the Fund,
and as soon as reasonably practicable after the resignation or removal
of a Trustee has become effective, the Trustee shall file with the
Employer a written account setting forth all receipts, disbursements,
and other transactions effected by it during the Plan Year, or during
the part of the Plan Year to the date the resignation or removal is
effective, as the case may be, and shall certify the fair market value
of the assets of the Fund. The accounting shall also furnish the
Employer such other information as the Trustee may possess and as may
be necessary for the Employer to comply with the reporting
requirements of the Employee Retirement Income Security Act of 1974.
The Trustee shall have no duty to furnish information about the Fund
to any person except that expressly provided herein or as required by
law. Any accounting when approved by the Employer will be binding and
conclusive as to the Employer, Plan Participants and Beneficiaries,
and the Trustee will thereby be released and discharged from any
liability or accountability to the Employer, Plan Participants or
Beneficiaries with respect to matters set forth therein. Omission by
the Employer of any written objection to any specific item in any such
accounting within one hundred eighty days after its delivery will
constitute approval of the Account by the Employer. If there is a
disagreement between the Trustee and anyone as to any act or
transaction reported in an accounting, the Trustee shall have the
right to have its account settled by a court of competent
jurisdiction.
16.6 Record Retention
The Trustee shall retain its records relating to the Fund as
long as necessary for the proper administration thereof and at least
for any period required by the Employee Retirement Income Security Act
of 1974 or other applicable law.
16.7 Resignation and Removal of Trustee
(a) The Trustee may resign by giving the Employer thirty (30)
days' (or such shorter period as the Employer may approve in writing)
written notice of its resignation, such notice period to commence upon
the mailing thereof. The Employer shall thereupon appoint a successor
Trustee to assume the rights, powers and duties of the Trustee and
shall promptly give the Trustee written notice of the appointment of
such successor Trustee. The Trustee shall forthwith deliver to the
successor Trustee and as soon as possible thereafter account to the
successor Trustee for each and every Fund asset and any and all
records of the Fund that are in its possession or control.
(b) The Employer may remove the Trustee by giving the Trustee
thirty (30) days' (or such shorter period as the Trustee may approve
in writing) written notice of its removal, such notice period to
commence upon the receipt thereof by the Trustee, and which written
notice shall identify the successor Trustee appointed by the Employer
to assume the rights, powers and duties of the Trustee. The Trustee
shall forthwith deliver to the successor Trustee and as soon as
possible thereafter account to the successor Trustee for each and
every Fund asset and all records of the Fund that are in its
possession or control.
(c) A Custodian may serve as the successor to the Trustee
hereunder if, with respect to the Plan and the Custodian, the
requirements of Article XVII are satisfied.
16.8 Dealings of Others With Trustee
No person (corporate or individual) dealing with the Trustee
shall be required to see the application of any money paid or property
delivered to the Trustee or to determine whether the Trustee is acting
pursuant to any authority granted to it under the Plan.
<PAGE>
16.9 Trustee's Power to Protect Itself on Account of Taxes
The Trustee, as a condition to making a distribution of a
Participant's Account, may require the person or persons entitled to
receive a distribution in such event to furnish the Trustee with proof
of payment of all income, inheritance, estate, transfer, legacy and/or
succession taxes, and all other taxes of any different type or kind
that may be imposed under or by virtue of any state or federal statute
or law upon the payment, transfer, descent, or distribution of such
Account and for the payment of which the Trustee may, in its
judgement, be directly or indirectly liable. In lieu of the foregoing,
the Trustee unless prevented by law, may deduct, withhold and transmit
to the proper taxing authorities any such tax which it may be
permitted or required to deduct and withhold and the Account to be
distributed in such case shall be correspondingly reduced. In the
event any distribution is subject to Federal or State withholding
requirements the Trustee may require evidence that such withholding
requirements have been met or that a waiver thereof is available and
the conditions of the waiver have been satisfied.
16.10 Other Powers of Trustee
In extension, but not in limitation of the rights, powers and
discretions conferred upon the Trustee herein, the Trustee shall have
and may exercise from time to time in the management and custody of
the assets of the Fund and, for the purpose of distribution after the
termination thereof, and, for the purpose of distribution of
Participant's Accounts, without order or license of any court, any one
or more or all of the following rights, powers and discretions:
(a) To invest and reinvest the assets of the Fund with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of like
character and the like aims (and to the extent possible consistently
with the most recent funding policy method adopted by the Employer and
communicated to the Trustee) without limitation by any statute, rule
or law, or regulation of any governmental body prescribing or limiting
the investment of trust assets by corporate or individual Trustees, in
or to certain kinds, types, or classes of investments or prescribing
the portion of the Fund which may be invested in any one property or
kind, type, or class of investment. Specifically and without limiting
the generality of the foregoing, the Trustee may invest and reinvest
principal and accumulated income of the Fund in preferred and common
stocks of any kind or class of any corporation, including but not
limited to investment and small business investment companies of all
types; voting trust certificates; interest in investment trusts;
shares of mutual funds; interest in a common trust, variable demand
note or other type of pooled or collective fund operated by the
Trustee; bonds, notes and debentures, secured or unsecured; mortgages
on real or personal property; covered call options; deposits in a
commercial or savings bank or a savings and loan association including
savings accounts or time deposits in the Trustee if the Trustee (or a
Co-Trustee) is a bank or other Financial Institution; conditional
sales contracts; real estate and leases. The Plan may acquire and hold
up to 10% of the market value of its assets in securities issued by an
Employer. Investment of the entire Fund in common stocks shall be
deemed appropriate at any phase of the economic business cycle, but is
not, however, the purpose hereof to direct that the Fund shall be
invested either entirely or to any extent whatsoever in such common
stocks. The Trustee shall be entitled to commingle the accounts of
Participants and invest, reinvest, control and manage each of the same
in a common Fund, except to the extent the Employer permits
Participants to direct their own investments and such Participants
elect to do so.
(b) To sell, exchange or to otherwise dispose of any asset of
whatsoever character at any time held by the Trustee in trust
hereunder.
(c) To segregate any part or portion of the Fund for the
purpose of administration or distribution thereof and, in its sole
discretion, to hold the Fund uninvested whenever and for so long as,
in the Trustee's discretion, the same is likely to be required for
payment in cash of Participants' Accounts normally expected to be
distributed in the near future, or whenever, and for as long as market
conditions are uncertain, or for any other reason which, in the
Trustee's discretion, requires such action or makes such action
advisable.
(d) To retain and employ such attorneys, agents and servants as
may be necessary or desirable, in the opinion of the Trustee, in the
administration of the Fund, and to pay them such reasonable
Compensation for their services as may be agreed upon as an expense of
administration of the Fund, including power to employ and retain
counsel upon any matter of doubt as to the meaning of or
interpretation to be placed upon this Plan or any provisions thereof
with reference to any question arising in the administration of the
Fund or pertaining to the distribution thereof or pertaining to the
rights and liabilities of the Trustee hereunder or to the rights and
claims of Participants and Beneficiaries, and the Trustee, in any such
event, may act in reliance upon the advice, opinions, records,
statements, and computations of any attorneys and agents and on the
records, statements and computations
<PAGE>
of any servants so selected by it in good faith and shall be released
and exonerated of and from all liability to anyone in so doing (except
to the extent liability is imposed under the Employee Retirement
Income Security Act of 1974).
(e) To institute, prosecute, and maintain, or to defend, any
proceeding at law or in equity concerning the Plan or Fund or the
assets thereof or any claims thereof or any claims thereto, or the
interests of Participants and Beneficiaries hereunder at the sole cost
and expense of the Fund and/or at the sole cost and expense of the
Participant's Account that may be concerned therein or that may be
affected thereby as, in the Trustee's option, shall be fair and
equitable in each case, and to compromise, settle and adjust all
claims and liabilities asserted by or against the Trustee, on such
terms as the Trustee, in each such case, shall deem reasonable and
proper, but the Trustee shall be under no duty or obligation to
institute, prosecute, maintain or defend any suit, action or other
legal proceeding unless it shall be indemnified to its satisfaction
against all expenses and liabilities which it may sustain or
anticipate by reason thereof.
(f) To institute, participate, and join in any plan of
reorganization, readjustment, merger, or consolidation with respect to
the issuer of any securities held by the Trustee hereunder and to use
any other means of protecting and dealing with any of the assets of
the Fund which it believes reasonably necessary or proper and, in
general, to exercise each and every other power or right with respect
to each asset or investment held by it hereunder as individuals
generally have and enjoy with respect to their own assets and
investments, including power to vote upon any securities or other
assets having voting power which it may hold from time to time, and to
give proxies with respect thereto, with or without power of
substitution or revocation, and to deposit assets or investments with
any protective committee, or with Trustees or depositories designated
by any such committee or by any such Trustees or any court.
(g) In any matter of doubt affecting the meaning, purpose or
intent of any provision of this Plan, to determine such meaning,
purpose or intent; and the determination of the Trustee in any such
respect shall be binding and conclusive upon all persons interested
who may become interested in the Plan or the Fund.
(h) To require, as a condition to distribution of any
Participant's Account, proof of identity or of authority of the person
entitled to receive the same, including power to require reasonable
indemnification on that account as a condition precedent to its
obligation to make distributions hereunder.
(i) To collect, receive, receipt and give quittance for all
payments that may be or become due and payable on account of any asset
in trust hereunder which has not, by act of the Trustee taken pursuant
thereto, been made payable to others, and payment thereof by the
company issuing the same, or by the party obligated thereon, as the
case may be, when made to the Trustee hereunder or to any person or
persons designated by the Trustee, shall acquit, release and discharge
such company or obligated party from any and all liability on account
thereof.
(j) To determine from time to time, as required for the purpose
of distribution or for the purpose of allocating trust income or for
any other purposes of the Plan, the then value of the Fund and of the
Participant's Account of each Participant in the Fund, the Trustee, in
each such case, using and employing for that purpose the fair market
value of each of the assets constituting the Fund. Each such
determination so made by the Trustee in good faith shall be binding
and conclusive upon all persons interested or becoming interested in
the Plan or the Fund.
(k) To carry all investments of the Fund, or any part thereof,
in its own name or in the name of any nominee selected by it, without
designation of the trust capacity in which the same is held, but with
the same liability for any act or default of any such nominee as for
its own act or default; and to commingle and deposit cash of the Fund
in its own commercial department or savings department, or both.
(l) To grant an option or options for the sale or other
disposition of a trust asset, including the issuance of options for
the purchase of common stock held by the trust in return for the
receipt of a premium from the optionee (it being expressly intended
that said options may be in a form and in terms to permit their being
freely traded on an option exchange) and including the repurchase of
any such option granted, or in lieu thereof, the repurchase of an
option identical in terms to be the one issued.
(m) To have and to exercise such other and additional powers as
may be advisable or proper in its opinion for the effective,
economical and equitable administration of the Fund.
(n) The Trustee may cause all or any part of the Fund, without
limitation as to amount, to be commingled with the money of trusts
created by the Trustee or by others by causing such money to be
invested as a part of any or all of the funds created by said
declarations of trust and the Fund so added to any of said funds shall
be subject to all of the provisions of said declarations of trust as
the same may be amended from time to time so long as the terms of said
trust are not inconsistent with the terms and provisions of this Plan.
<PAGE>
In the event the Employer elects to direct the Trustee as to the
acquisition or disposal of the assets of the trust Fund, the Trustee
shall exercise the rights, powers and discretions conferred upon the
Trustee in this Section only as directed by the Employer. In the event
the Employer has appointed an Investment Manager to manage, acquire or
dispose of any assets of the trust Fund, then, notwithstanding the
rights, powers and discretions conferred upon the Trustee in this
Section, the Trustee shall be subject to the direction of the
Investment Manager with respect to the assets under management by the
Investment Manager and shall have no responsibility to determine
whether any such directions are proper, in accordance with the terms
of the Plan or are permitted under applicable law.
16.11 Purchase of Life Insurance
Without limiting the generality of Section 16.10, the Trustee
may invest the assets of the Fund in life insurance purchased from a
legal reserve life insurance company qualified to do business in the
state where the trust is located. Any purchase of life insurance shall
be only as directed by the Participant and shall be treated as a
Participant-directed investment described in Section 16.12. In the
event ordinary life insurance contracts are purchased, less than 50%
of the aggregate contributions by the Employer and Affiliates
allocated to the Participant may be used to pay premiums attributable
to such contracts. No more than 25% of the aggregate Employer and
Affiliate contributions allocated to the Participant may be used to
pay premiums on term life insurance contracts, universal life
contracts or any other life insurance contract, which is not ordinary
life. If a combination of ordinary life and other insurance contracts
are purchased on a Participant's life, the sum of 50% of the ordinary
life insurance premiums plus the premiums on all other life insurance
on the Participant's life purchased by the Trustee shall not exceed
25% of the aggregate Employer and Affiliate contributions allocated to
the Participant's Account. For purposes of this Section, an "ordinary
life" insurance contract shall mean a contract with both nondecreasing
death benefits and nonincreasing premiums. Any dividends or credits
earned on insurance contracts will be allocated to the Participant's
account derived from Employer contributions for whose benefit the
contract is held.
In the event insurance contracts are purchased by the Trustee
pursuant to this Section, a distribution payable for a reason other
than the Participant's death shall be made by converting the contract
to cash by surrendering it to the issuer or distributing the contract
to the Participant in satisfaction of that portion of the
Participant's Account which represents the value of the insurance
contract, as the Participant shall elect, subject, however, to the
provisions of Article X, if applicable. Any insurance contract so
distributed shall be endorsed as nontransferable. No life insurance
contract shall be converted into an annuity which provides payments
measured by an individual life, except as may be required by Article
X.
The Beneficiary designation and the settlement option selected
under any insurance contract shall be subject to the requirements of
Articles X and XII to the extent such provisions are applicable to the
Participant. As owner of the life insurance contract, the Trustee
shall name a Beneficiary and designate a method of distribution only
in a manner which meets the requirements of Articles X and XII to the
extent such Sections apply to the Participant. In the event of any
conflict between the terms of this Plan and the terms of any life
insurance contract, the terms of this Plan shall control.
16.12 Participant Direction of Investment
The Employer may elect in the Adoption Agreement to permit
Participants to direct the investment of their Participant's Accounts.
In the event the Employer elects to permit Participants to choose the
investments in which the assets of their accounts should be invested,
the Trustee shall be subject to the direction of such Participant. No
Participant shall thereby be considered a fiduciary and no person who
is otherwise a fiduciary shall be liable for any loss, which results
from such Participant's exercise of control. Notwithstanding the
foregoing, no Participant may direct that the assets in his account be
invested in any collectible, as that term is defined in Section 408 of
the Internal Revenue Code and regulations, so long as such Section
treats an investment in a collectible through a Participant-directed
account as a distribution from the Plan. A Participant shall direct an
investment in writing, which direction must be signed, shall describe
the investment sufficiently so that the Trustee may properly execute
the transaction and conform to such other conditions as the Trustee
may reasonably require. Upon the direction of an investment, the
Participant agrees to have any transaction costs charged to his
account. "Transaction costs" shall mean any fee or charge attributable
to the Participant's directed investment including, but not limited to
commissions, custodial fees or fees for professional services. The
purchase of a life insurance contract shall be treated as a
Participant-directed investment.
<PAGE>
16.13 Prohibited Transactions
Except as may be expressly permitted by law or allowed in a
Prohibited Transaction Exemption issued by the Department of Labor, no
Trustee or other fiduciary hereunder shall permit the Plan to engage,
directly or indirectly, in any of the following transactions with a
disqualified person (as defined in Section 4975 of the Code):
(a) A sale or exchange, or leasing, of any property between the
Plan and a disqualified person;
(b) The lending of money or other extension of credit between
the Plan and a disqualified person;
(c) The furnishing of goods, services or facilities between the
Plan and a disqualified person;
(d) A transfer to, or use by or for the benefit of, a
disqualified person of the income or assets of the Plan;
(e) An act by a disqualified person who is a fiduciary whereby
he deals with the income or assets of the Plan in his own interest or
for his own account; or
(f) The receipt of any consideration for his own personal
account by any disqualified person who is a fiduciary from any party
dealing with the Plan in connection with a transaction involving the
income or assets of the Plan.
16.14 Indemnity of Trustee
The Trustee shall be indemnified and held harmless by the
Employer from any and all liabilities, costs and expenses (including
legal expenses) arising out of any action taken by it pursuant to its
duties hereunder as fiduciary or in any other capacity with respect to
this Plan, whether imposed under the Employee Retirement Income
Security Act of 1974, or otherwise, unless such liability may arise
from the proven gross negligence, bad faith or criminal misconduct of
the Trustee.
ARTICLE XVII Fund and Custodian
17.1 Custodian
A Plan which utilizes a Custodian shall be subject to the
provisions of this Article. A Plan which is Trusteed shall be subject
to the provisions of Article XVI. The Plan assets shall be held by a
Custodian if the Financial Institution has executed the Plan as
Custodian as provided in the Adoption Agreement, except as provided in
Section 17.13 with respect to life insurance. The Plan may not utilize
a Custodian if the Employer or any Affiliate is a corporation.
17.2 Custodian Fund
All contributions received by the Custodian pursuant to the
Plan, together with all investments made therewith, the proceeds
thereof and all earnings and accumulations thereon, and the part
thereof from time to time remaining, shall be held by the Custodian in
the name of the Plan and for the benefit of each Participant and
Beneficiary hereunder, except as provided in Section 17.13. The
accounts for all Participants, plus any life insurance contracts held
for any Participants, shall collectively be referred to herein as the
"Fund".
17.3 Responsibilities of the Custodian
The general responsibilities of the Custodian shall be as
follows:
(a) The Custodian shall be the exclusive depository for the
Fund, except as provided in Section 17.13.
(b) The Custodian shall maintain an account in the name of each
Participant and Beneficiary, as directed by the Employer.
(c) The Custodian shall make disbursements from the Fund, as
directed by the Employer.
(d) The Custodian may prescribe the manner and method by which
the Employer gives it directions. The Custodian shall be under no
liability for any action taken at the direction of the Employer and
shall be under no duty to make inquiry as to whether any action taken
by it pursuant to such Employer if direction is pursuant to the
provisions of the Plan. The receipt of a payee who has received a
distribution shall constitute full acquittance of the Custodian.
(e) The Custodian shall only have those duties,
responsibilities and powers expressly allocated to it by the Plan.
Except as responsibilities may be expressly so allocated, the
Custodian in its capacity as such shall have no responsibility or
authority with respect to the operation and administration of the
Plan.
<PAGE>
17.4 Compensation and Expenses
The Custodian shall be entitled to receive such reasonable
compensation for its services hereunder as may be agreed upon with the
Employer. The Custodian shall be entitled to reimbursement for all
reasonable and necessary costs, expenses and disbursements incurred by
it in the performance of such services. Such compensation and
reimbursements shall be paid from the Fund if not paid directly by the
Employer and shall constitute a lien upon the Fund until paid.
17.5 Records and Accountings
The Custodian shall maintain such records as may be reasonably
necessary for the proper administration of the Fund as soon as
reasonably practicable following a Plan Valuation Date of the Fund,
and as soon as reasonably practicable after the resignation or removal
of a Trustee or Custodian has become effective, the Custodian shall
file with the Employer a written account setting forth all receipts,
disbursements and other transactions effected by it during the Plan
Year, or during the part of the Plan Year to the date the resignation
or removal is effective, as the case may be. The accounting shall also
furnish the Employer such other information as the Custodian may
possess and as may be necessary for the Employer to comply with
reporting requirements of the Employee Retirement Income Security Act
of 1974. The Custodian shall have no duty to furnish information about
the Fund to any person except as expressly provided herein or as
required by law. Any accounting when approved by the Employer will be
binding and conclusive as to the Employer, and the Custodian will
thereby be released and discharged from any liability or
accountability to the Employer with respect to matters set forth
therein. Omission by the Employer or any written objection to any
specific item in any such accounting within one hundred eighty days
after its delivery will constitute approval of the account by the
Employer. If there is a disagreement between the Custodian and anyone
as to any act or transaction reported in an accounting, the Custodian
shall have the right to have its account settled by a court of
competent jurisdiction.
17.6 Record Retention
The Custodian shall retain its records relating to the Fund as
long as necessary for the proper administration thereof and at least
for any period required by the Employee Retirement Income Security Act
of 1974 or other applicable law.
17.7 Resignation and Removal of Custodian
(a) The Custodian must at all times be either a bank (as that
term is defined in Section 401(d)(1) of the Code) or a person who has
demonstrated to the satisfaction of the Secretary of the Treasury that
the manner in which he will administer the Fund will be consistent
with the requirements of Section 401 of the Code.
(b) The Custodian may resign by giving the Employer thirty (30)
days (or such shorter period as the Employer may approve in writing)
written notice of its resignation by registered mail, such notice
period to commence upon the mailing thereof. The Employer shall
thereupon appoint a successor Custodian or Trustee to assume the
rights, powers and duties of the Custodian and shall promptly give the
Custodian written notice by registered mail of the appointment of such
successor Custodian or Trustee and as soon as possible thereafter
account to the successor for each and every Fund asset and any and all
records of the Fund that are in its possession or control.
(c) The Employer may remove the Custodian by giving the
Custodian thirty (30) days (or such shorter period as the Custodian
may approve in writing) written notice of its removal by registered
mail, such notice period to commence upon the receipt thereof by the
Custodian, and which written notice shall identify the successor
Custodian or Trustee appointed by the Employer to assume the rights,
powers and duties of the Custodian. The Custodian shall forthwith
deliver to the successor Custodian or Trustee and as soon as possible
thereafter account to the successor for each and every Fund asset and
all records of the Fund that are in its possession or control.
17.8 Changes in Organization of Custodian
If any corporation or association serving as Custodian hereunder
is merged with another corporation or association or is succeeded by
another corporation or association, through consolidation or
otherwise, the acquiring corporation or association shall thereupon
become Custodian hereunder. If any corporate Custodian acting
hereunder sells or transfers substantially all of its assets and
business to another corporation or association, the acquiring
corporation or association shall thereupon become Custodian hereunder.
When authorized by statute or court order, any corporation or
association serving as Custodian hereunder may permit itself to be
succeeded by another corporation or association Custodian hereunder.
In each case the acquiring corporation or association shall
<PAGE>
be Custodian of the Funds though specifically so named herein.
Notwithstanding the foregoing provisions of this Section, an acquiring
corporation or association shall become Custodian hereunder only if it
could be appointed as successor Custodian or funding medium pursuant
to Section 17.7.
17.9 Dealings of Others With Custodian
No person (corporate or individual) dealing with the Custodian
shall be required to see to the application of any money paid to the
Custodian or to determine whether the Custodian is acting pursuant to
any authority granted to it under the Plan.
17.10 Funding Policy
The Employer shall adopt a procedure and revise it from time to
time as it shall consider advisable, for establishing and carrying out
a funding policy and method consistent with the objectives of the Plan
and the requirements of the Employee Retirement Income Security Act of
1974. It shall advise the Custodian of the funding policy in effect
from time to time.
17.11 Custodian's Power to Protect Itself on Account of Taxes
The Custodian, as a condition to the making of distribution of a
Participant's Account, may require the person or persons entitled to
receive a distribution to furnish the Custodian with proof of payment
of all income, inheritance, estate, transfer, legacy and/or succession
taxes and all other taxes of any different type or kind that may be
imposed under or by virtue of any state or federal statute of law upon
the payment, transfer, descent, or distribution of such Account and
for the payment of which the Custodian may, in its judgement, be
directly or indirectly liable. In lieu of the foregoing, unless
prevented by law, the Custodian may deduct, withhold and transmit to
the proper taxing authorities any such tax which it may be permitted
or required to deduct and withhold and the account to be distributed
in such case shall be correspondingly reduced. In the event any
distribution is subject to Federal or State withholding requirements,
the Custodian may require evidence that such withholding requirements
have been met or that a waiver thereof is available and the conditions
of the waiver have been satisfied.
17.12 Investment of the Fund
The Custodian, as directed by the Employer, or in the event
Section 17.14 applies, as directed by a Participant, shall invest the
assets of each Participant's Account in the Fund only in one or a
combination of the following, except as provided in Section 17.13:
(a) A savings account in the Custodian;
(b) A time deposit in the Custodian.
Except for accounts having a specified date of maturity, the
Custodian shall have the sole right to amend prospectively the
governing terms and interest rates applicable to accounts, including
accounts theretofore selected by Participants and Beneficiaries, at
any time. As to accounts with fixed maturities, the Custodian may make
amendments to or discontinue such accounts as of any maturity date,
provided that amendments to conform with applicable law and
governmental rulings can be made at any time.
17.13 Purchase of Insurance
Assets of the Plan may be invested in life insurance purchased
from a legal reserve life insurance company qualified to do business
in the state where the Plan is located. Any purchase of life insurance
shall be only as directed by the Participant and shall be treated as a
Participant-directed investment described in Section 17.14. In the
event ordinary life insurance contracts are purchased, less than 50%
of the aggregate contributions by the Employer and Affiliates
allocated to the Participant may be used to pay premiums attributable
to such contracts. No more than 25% of the aggregate Employer and
Affiliate contributions allocated to the Participant may be used to
pay premiums on term life insurance contracts, universal life
contracts or any other life insurance contract which is not ordinary
life. If a combination of ordinary life and other insurance contracts
are purchased on a Participant's life, the sum of 50% of the ordinary
life insurance premiums plus the premiums on all other life insurance
on the Participant's life purchased by the Plan shall not exceed 25%
of the aggregate Employer and Affiliate contributions allocated to the
Participants Account. For purposes of this Section, an "ordinary life"
insurance contract shall mean a contract with both nondecreasing death
benefits and nonincreasing premiums. Any dividends or credits earned
on insurance contracts will be allocated to the Participant's account
derived from Employer contributions for whose benefit the contract is
held.
<PAGE>
Insurance contracts purchased hereunder shall be owned by the
Employer for the benefit of the Plan and the Participant for whom the
insurance is purchased. In the event a distribution becomes payable to
the Participant under the terms of the Plan other than by reason of
the Participant's death, the insurance contract shall be distributed
to the Participant in satisfaction of that portion of the
Participant's Account which represents the value of the insurance
contract, as the Participant shall elect, subject, however, to the
provisions of Article IX if applicable. Any insurance contract so
distributed shall be endorsed as nontransferable.
The Beneficiary designation and the settlement option selected
under any insurance contract shall be subject to the requirements of
Articles X and XII to the extent such Sections are applicable to the
Participant. As owner of the life insurance contract, the Employer
shall name a Beneficiary and designate a method of distribution only
in a manner which meets the requirements of Articles X and XII to the
extent such Sections apply to the Participant. In the event of any
conflict between the terms of this Plan and the terms of any life
insurance contract, the terms of this Plan shall control.
17.14 Investment Direction by Participants
In the event the Employer elects, in the Adoption Agreement, to
permit Participants to choose the investments in which the assets of
their Account should be invested, no Participant shall thereby be
considered a fiduciary and no person who is a fiduciary shall be
liable for any loss, or by reason of any breach, which results from
such Participant's exercise of control. The Participant's investment
direction shall be limited to the types of accounts and deposits
described in Section 17.12 and the selection of interest rates and
dates of maturity to the extent made available by the Custodian,
except as provided in Section 17.13. The purchase of a life insurance
contract shall be treated as a Participant-directed investment.
17.15 Prohibited Transactions
Except as may be expressly permitted by law, no Custodian or
fiduciary hereunder shall permit the Plan to engage, directly and
indirectly, in any of the following transactions with a disqualified
person (as defined in Section 4975 of the Code):
(a) A sale or exchange, or leasing, of any property between the
Plan and a disqualified person;
(b) The lending of money or other extension of credit between
the Plan and a disqualified person;
(c) The furnishing of goods, services or facilities between the
Plan and a disqualified person;
(d) A transfer to, or use by or for the benefit of, a
disqualified person of the income or assets of the Plan and in his own
interest or for his own account;
(e) An act by a disqualified person who is a fiduciary whereby
he deals with the income or assets of the Plan in his own interest or
for his own account; or
(f) The receipt of any consideration for his own personal
account by any disqualified person who is a fiduciary from any party
dealing with the Plan in connection with a transaction involving the
income or assets of the Plan.
17.16 Indemnity
The Custodian shall be indemnified and held harmless by the
Employer from any and all liabilities, costs and expenses (including
legal expenses) arising out of any action taken by it pursuant to its
duties hereunder or in any other capacity with respect to this Plan,
whether imposed under the Employee Retirement Income Security Act of
1974, or otherwise, unless such liability may arise from the proven
gross negligence, bad faith or criminal misconduct of the Custodian.
ARTICLE XVIII Amendment, Termination and Merger
18.1 Amendment by Employer
The Employer may (a) change the choice of options in the
Adoption Agreement, (b) add overriding language in the Adoption
Agreement when such language is necessary to satisfy Section 415 or
Section 416 of the Code because of the required aggregation of
multiple plans, and (c) add certain model amendments published by the
Internal Revenue Service which specifically provide that their
adoption will not cause the plan to be treated as
individually-designed. An Employer that amends the plan for any other
reason, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, will no longer participate in this master
or prototype plan and will be considered to have an
individually-designed plan.
<PAGE>
18.2 Amendment by Sponsor
The sponsoring organization may amend any part of the Plan. For
purposes of sponsoring organization amendments, the mass submitter
shall be recognized as the agent of the sponsoring organization. If
the sponsoring organization does not adopt the amendments made by the
mass submitter, it will no longer be identical to or a minor modifier
of the mass submitter plan.
18.3 Limitation on Amendments
Notwithstanding Section 18.1 and 18.2, no amendment by the
Employer or Sponsor nor any automatic change to or from a top heavy
vesting schedule shall:
(a) Either directly or indirectly have the effect of giving the
Employer any interest in any part of the corpus or income of the Trust
or cause any part of the Trust to be used for or diverted to purposes
other than for the exclusive benefit of Participants and their
Beneficiaries;
(b) Either directly or indirectly have the effect of changing
the computation of a Participant's Vested Interest, unless each
Participant having 3 or more Years of Service elects, after being
notified by the Employer in writing, to have his Vested Interest
computed under the Plan as amended. For Participants who do not have
at least 1 Hour of Service in any Plan Year beginning after December
31, 1988, the preceding sentence shall be applied by substituting "5
Years of Service" for "3 Years of Service" where such language
appears. Such election must be made within a time period beginning no
later than the date the amendment is adopted and ending no earlier
than the latest of the following dates: (i) 60 days after the
amendment is adopted, (ii) 60 days after amendment becomes effective;
or (iii) 60 days after the Participant is given written notice of the
amendment by the Employer. A Participant who fails to make an election
within the period provided shall be deemed to have assented to the
amendment.
(c) Either directly or indirectly reduce the balance of any
Participant's Account except to the extent permitted under Section
412(c)(8) of the Code.
(d) Eliminate an optional form of distribution under the Plan
described in the regulations under Section 411 of the Code; provided,
however, that an amendment may eliminate an optional form of
distribution if the amendment relates only to the portion of a
Participant's Account which accrues after the date of the amendment.
If the vesting schedule of a Plan is amended, in the case of an
Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such
Employee's Employer-derived accrued benefit will not be less than the
percentage determined under the Plan without regard to such amendment.
18.4 Termination of Plan
The Employer has established the Plan with a bona fide intention
and expectation that it will be able to make its contributions
indefinitely, but the Employer is not and shall not be under any
obligation or liability whatsoever to continue its contributions or to
maintain the Plan for any given length of time and may, in its sole
and absolute discretion, discontinue such contributions or terminate
the Plan at any time without any liability whatsoever for such
discontinuance or termination. Upon termination, partial termination
or a complete discontinuance of contributions to the Plan, all
affected Participants shall have a 100% Vested Interest in their
respective Participant's Accounts.
18.5 Merger
The Plan shall not be merged or consolidated with any other
plan, and no assets or liabilities of the Plan shall be transferred to
any other plan, unless each person having an interest in the Fund
would (if the Plan were then terminated) receive a benefit immediately
after the merger, consolidation or transfer which is equal to or
greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan
had then terminated).
18.6 Withdrawal by Sponsor or Failure to Qualify Under Code
The withdrawal of this Plan by the sponsor shall cause the
establishment of an individually-designed plan as provided in Section
18.1. If the Employer fails to obtain or retain qualified status of
the Plan and trust under Sections 401(a) and 501(a) of the Code, such
Employer shall immediately be considered to have withdrawn from this
prototype plan and established an individually-designed plan as
provided in Section 18.1.
<PAGE>
ARTICLE XIX Miscellaneous
19.1 No Guaranty of Employment
The adoption and maintenance of the Plan shall not be deemed to
be a contract between the Employer and any Employee. Nothing herein
contained shall be deemed to give any Employee the right to be
retained in the employ of the Employer or to interfere with the right
of the Employer to discharge any Employee at any time, nor shall it be
deemed to give the Employer the right to require any Employee to
remain in its employ, nor shall it interfere with the Employee's right
to terminate his employment at any time.
19.2 Spendthrift Provisions
Except as otherwise provided by law, benefits payable hereunder
and any interest of a Participant or Beneficiary in the trust shall
not be subject to assignment, transfer or anticipation or otherwise
alienable either by voluntary or involuntary act or by operation of
law, nor subject to attachment, execution, garnishment, levy,
sequestration or other seizure under any legal or equitable process.
The foregoing shall also apply to the creation, assignment or
recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order unless such order
is determined by the Employer to be a qualified domestic relations
order, as defined in Section 414(p) of the Code, or any domestic
relations order entered before January 1, 1985. This Section shall not
prohibit an assignment of a Participant's Account as security for a
loan from the Plan.
19.3 Conflict of Interest
If the Employer or any other person to whom fiduciary or
administrative authority has been delegated or redelegated hereunder
shall also be a Participant in this Plan, he shall have no authority
as such with respect to any matter specifically affecting his
individual interest hereunder, all such authority being reserved
exclusively to others empowered to act, to the exclusion of such
Participant, and such Participant shall act only in his individual
capacity in connection with any such matter, except to the extent no
other person or entity is empowered to act.
19.4 Disclaimers
Neither the Employer nor its owners, officers or directors in
any way guaranty the Fund against loss or depreciation, nor do they
guaranty the payment of any benefit or amount which may become due and
payable hereunder to any Participant or to any Beneficiary or to any
creditor of a Participant or a Beneficiary except to the extent
required by law. Each Participant, Beneficiary, or other person
entitled at any time to payments hereunder shall look solely to the
assets of the Fund for such payments or to the Participant's Account
distributed to any Participant or Beneficiary, as the case may be, for
such payments. In each case where a Participant's Account shall have
been distributed to a Participant or a Beneficiary or to the persons
entitled jointly to the receipt thereof and which propose to cover in
full the benefit hereunder, such Participant, or Beneficiary, or such
person or persons, as the case may be, shall have no further right or
interest in the other assets of the Fund.
19.5 Role of Sponsor
The Sponsor which makes this Plan available to the Employer
shall not be considered a party to the Plan, except to the extent that
a Sponsor which is a Financial Institution with trust powers under the
laws of its domicile or under federal law serves in the capacity of a
Trustee or a Financial Institution empowered to act as a Custodian
under the law of its domicile or under federal law serves in the
capacity of a Custodian and then only to the extent of its duties and
responsibilities as Trustee or Custodian, as the case may be, as
specifically set forth in this Plan. The Sponsor shall not be
responsible for the validity of this Plan under any law, the
availability of any tax benefits of adopting this Plan or any other
responsibilities not expressly assumed or allocated to it herein.
19.6 Exclusive Benefit
In no event shall any part of the trust assets be paid to or
become vested in the Employer, or be used for any purpose whatsoever
other than for the exclusive benefit of Participants and their
Beneficiaries, except that contributions of the Employer may be
returned if:
(a) The Commissioner of Internal Revenue determines that the
Plan is not initially qualified under the Internal Revenue Code, any
contribution made incident to that initial qualification by the
Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan is
adopted, or such later date as the Secretary of the Treasury may
prescribe;
<PAGE>
(b) The contribution was made due to a mistake of fact, the
contribution is returned within one year of the mistaken payment of
the contribution and the return satisfies the requirements of the last
paragraph of this Section; or
(c) The contribution was conditioned on its deductibility under
Section 404 of the Code, the deduction was disallowed under such
Section, the contribution is returned within one year of the
disallowance of the deduction and the return satisfies the last
paragraph of this Section.
The return of a contribution (or a portion of a contribution) to
the Employer satisfies the requirements of this paragraph if the
amount so returned (i) does not exceed the excess of the contribution
over the amount which would have been contributed if the Plan had not
been disqualified or the requalification denied or if there had been
no mistake of fact or error in determining the deduction, as the case
may be, (ii) does not include the net earnings attributable to such
excess contributions, (iii) is reduced by any net losses attributable
to the excess contribution, and (iv) does not reduce the account of
any Participant to less than such account would have been had the
returned contribution never been made.
<PAGE>
PROPOSED MINUTES OF ACTION OF THE
BOARD OF DIRECTORS OF
THE FIRST NATIONAL BANK OF BERWICK
THE UNDERSIGNED, being the Secretary of THE FIRST NATIONAL BANK
OF BERWICK, a national banking association located in Berwick,
Pennsylvania (the "Company"), does hereby record the following minutes
and resolutions by the Board of Directors (the "Board") on this 7th
day of January, 1997 in accordance with its charter.
SALARY CONTINUATION AGREEMENT
RECITALS:
1. The Board deems it to be in the best interest of the Company
to retain the services of J. Gerald Bazewicz, David Saracino
and Leslie Bodle (the "Executives"), key employees of the
Company. To encourage the Executives to continue their
employment with the Company, the Board believes it to be in
the best interests of the Company to enter into certain
salary continuation agreements with the Executives
(hereinafter to be referred to as the "Agreements").
2. The Agreements will not be subject to the qualification
requirements of Section 401(a) of the Internal Revenue Code,
therefore, the Agreements may discriminate to only provide
benefits for the Executives in their role as a select group
of top management and highly compensated employees of the
Company. The Agreements shall be subject to the disclosure
and claims procedures of Title I of the Employee Income
Security Act of 1974.
3. The Board has reviewed the Agreements and the insurance to be
purchased for financing of the Agreements to assess the
effect of the promised benefits on the Company's finances.
The Agreement provides the Executive with retirement income
as follows:
<TABLE>
<CAPTION>
Normal Monthly Duration of
Retirement Retirement Retirement
Name Age Benefit Benefit
<S> <C> <C> <C>
J. Gerald Bazewicz 60 $3,750.00 20 years
David Saracino 60 $2,333.33 20 years
Leslie Bodle 60 $1,750.00 20 years
</TABLE>
17
<PAGE>
4. The Agreements are being established to reward the Executives
for past and future services to the Company. The projected
benefit amounts are calculated to give the Executives
supplemental retirement income provided that the Executives
meet the requirements of the Agreements. The Board believes
the income benefit amounts are reasonable and consistent with
the compensation standards of Section 39 of the Federal
Deposit Insurance Company Improvement Act of 1991 and the
related implementing regulations. This determination was
made by estimating future salary increases and targeting a
supplemental benefit to bring each Executive's total
retirement income to 75% of final salary.
5. The Board has determined that it is in the best interests of
the Company to finance the supplemental retirement benefits
by purchasing life insurance. The Board selected Bank
Compensation Strategies Group ("BCS"), a benefits consulting
firm endorsed by the American Banking Association and many
other state bank associations to calculate cost projections
and choose life insurance appropriate to finance the
obligations.
6. The Board deems it to be in the best interests of the Company
to purchase term life insurance from among the following
insurers:
Insurer
West Coast Life Insurance Co.
The Mutual Group Life Insurance Company
Alexander Hamilton Life Insurance Co.
Transamerica Assurance Company
Chubb LifeAmerica
7. After consulting with BCS, the Board deems it to be in the
best interests of the Company to purchase term life insurance
policies from the following life insurance companies:
<TABLE>
<CAPTION>
First Year Face
Insured Insurer Premium Amount
<S> <C> <C> <C>
J. Gerald Bazewicz West Coast Life Insurance Co. $1,327.50 $500,000
David Saracino West Coast Life Insurance Co. $1,078.20 $300,000
Leslie Bodle Chubb LifeAmerica $3,068.00 $200,000
</TABLE>
The life insurance policies will be owned by and payable to
the Company. The purpose of the insurance is to cover the
contingent liability associated with the possible death of
the Executives prior to retirement.
<PAGE>
8. The insurers of the policies which were selected by the
Board, with the recommendation of BCS, have credit ratings
of:
<TABLE>
<CAPTION>
A.M. Best Standard & Poor's
Insurer Rating Rating
<S> <C> <C>
West Coast Life Insurance Co. A+ AA+<F1>
Chubb LifeAmerica A+ AA-
<FN>
<F1>
The Standard & Poor's rating for West Coast Life Insurance Co. is the
rating of its parent company, Nationwide Life Insurance Co. which is
based in Columbus, Ohio, and has total assets of $57 billion.
</FN>
</TABLE>
9. Generally Accepted Accounting Principles ("GAAP") shall be
used in carrying the obligations and the assets on the books
of the Company.
10. The Board has reviewed the requirements of OCC Bulletin 96-
51, Bank Purchases of Life Insurance with the projections and
analysis prepared by BCS. BCS and the Company's CPA have
been consulted. Thus the Board deems it in the best
interests of the Company to execute the Agreements and
purchase term life insurance.
NOW, THEREFORE, BE IT RESOLVED, that the Chief Executive Officer
or Secretary or any other appropriate officer of the Company is
authorized and directed to execute The First National Bank of Berwick
Salary Continuation Agreement, by and between the Company and J.
Gerald Bazewicz, The First National Bank of Berwick Salary
Continuation Agreement, by and between the Company and David Saracino,
and The First National Bank of Berwick Salary Continuation Agreement,
by and between the Company and Leslie Bodle.
FURTHER RESOLVED, that the Chief Executive Officer or the
Secretary, or any other appropriate officer of the Company, is hereby
authorized and directed to execute any and all documents necessary to
implement the Agreements.
FURTHER RESOLVED, that the Chief Executive Officer or the
Secretary, or any other appropriate officer of the Company, is hereby
authorized and directed to purchase term life insurance contemplated
by this Agreement, and which is discussed in these minutes, or any
such other life insurance that has been subject to the same due
diligence as discussed above.
/s/ John L. Coates
Secretary
<PAGE>
THE FIRST NATIONAL BANK
OF BERWICK
MANAGEMENT INCENTIVE COMPENSATION PLAN
CONTENTS
I. PURPOSE 1
II. GENERAL DESCRIPTION 2
III. PLAN ADMINISTRATION 3
IV. PLAN PARTICIPANTS 5
V. OPERATING RULES 6
VI. SUMMARY OF SUPPLEMENTARY PLAN DOCUMENTS 9
18
<PAGE>
I. PURPOSE
The purpose of the Management Incentive Compensation Plan is to
provide incentives and awards to top management employees who, through
high levels of performance, contribute to the success and
profitability of The First National Bank of Berwick. The Plan is
designed to support organizational objectives and financial goals, as
defined by the Bank's Strategic and Financial Plans, by making
available additional, variable, and contingent incentive compensation.
II. GENERAL DESCRIPTION
The Management Incentive Compensation Plan is based upon the
achievement of a required budget net income figure before any
incentive award "pool" is formed. The Plan specifies annual goals
that are consistent with those contained in the Strategic Business
Plan and the annual Profit Plan.
The calculation of share of profits to be distributed to the Plan
participants, and the incentive formulas, are constructed to provide
awards that are consistent with achieved profitability levels. The
incentive formulas insure a level of incentive award that will enable
The First National Bank to attract, retain, and motivate high-quality
management personnel and support continued growth and profitability.
The Management Incentive Compensation Plan is established to
augment regular salary and benefits programs already in existence.
The Plan is not meant to be a substitute for salary increases, but as
a supplement to salary, and, as stated earlier, as an incentive for
performance that contributes to outstanding levels of achievement.
III. PLAN ADMINISTRATION
Throughout this Plan document, reference to the actions and
authority of the Human Resource Committee of the Board of Directors
also presumes that the Committee will recommend, and the Board of
Directors will approve or disapprove, final disposition of all matters
pertaining to the administration of the Plan. The Committee, with
Board approval, has the responsibility to interpret, administer,
amend, or recommend suspension or termination of the Plan as
necessary. The recommendations of the Committee, as approved by
<PAGE>
the Board, affecting the construction, interpretation, and
administration of the Plan shall be final and binding on all parties,
including the Bank and its employees.
Matters before the Committee shall be decided upon a majority
vote of the Committee and recommended to the Board for final action.
Plan participants who are members of the Committee shall not be
entitled to vote on matters relating to the eligibility for and/or
determination of their own incentive compensation awards.
During the first quarter of each Plan Year, the Committee may
review and revise the operating rules. Performance measures and
awards based upon those measures, may be changed in order to emphasize
specific goals and objectives of the Plan. However, it is expected
that the Plan will require modification only when significant changes
in organization, goals, personnel, or performance occur. The Chief
Executive Officer shall inform the Committee of any proposed changes
to the operating rules.
Computation of incentive awards will be made by the Chief
Executive Officer in consultation with the Chairman of the Board.
Maintenance of participant payments and other related records shall be
the responsibility of the Bank's Human Resource Manager. Such
computations and records may be audited annually by the independent
auditors of the Bank prior to submission to the Committee and the
Board for review and approval.
Finally, the Committee, in the exercise of its discretion with
respect to the determination of the amount of the incentive plan pool
for any given Plan Year, may take into account the presence or absence
of nonrecurring or extraordinary items of income, gain, expense, or
loss, and any and all factors that, in its sole discretion, may deem
relevant.
Extraordinary occurrences may be excluded when calculating
performance results to insure that the best interests of the Bank are
protected and are not brought into conflict with the best interest of
plan participants.
<PAGE>
IV. PLAN PARTICIPANTS
Participation in the Management Incentive Plan at The First
National Bank of Berwick is limited to the executive management team.
This management team includes the following functional job titles:
A. Chief Executive Officer
B. Finance/Control Division Manager
C. Sales/Marketing Division Manager
D. Trust Services Division Manager
Plan participation by these four (4) individuals recognizes the
importance of this group to the Bank and the potential these officers
have to influence the achievement of financial and strategic
objectives.
The only additional eligibility requirement is that the manager
named to one of the four (4) positions noted above must have served in
the position the full twelve (12) months of the plan year in order to
be eligible.
V. OPERATING RULES
I. The Plan shall be effective as of April 1, 1988.
A. The Board of Directors of The First National Bank of
Berwick may amend, suspend, or terminate the Plan at any
time.
B. The Plan shall be administered by the Human Resource
Committee with assistance from Executive Management.
C. The Human Resource Committee shall adopt such rules and
regulations and shall make determinations and
interpretations of the Plan thereunder as it shall deem
appropriate. All such rules, regulations, and
determinations, as approved by the Board of Directors,
shall be conclusive and binding upon all parties.
D. Eligibility for participation in the Plan is based upon the
eligibility requirements as stated herein.
E. Supplementary Plan Documents relating to participants, the
targeted incentive plan pool, and other pertinent matters
will be prepared by the Committee, and approved by the
Board of Directors,
<PAGE>
during the first quarter of each Plan Year.
F. The incentive plan pool may be funded, within the
discretion of the Board of Directors, with the following to
be used as a general guideline:
Fund as a % of Budget
% of Budget Beyond Goal
Greater than 90% of budget 5%
up to 95% of budget
Greater than 95% of budget 10%
up to 100% of budget
In excess of budget 15%
G. Allocation of the plan pool will be made in accordance with
the guidelines shown in Section VI of this Plan document.
As noted in these guidelines, individual performance
standards must be met before an eligible participant will
receive all or part of his/her eligible portion of the
pool.
H. Within thirty (30) days following the end of the Plan Year,
or as soon as financial and operating results are known,
eligible participants will receive their appropriate
incentive plan payment. Unless otherwise determined and
approved by the Board of Directors, this payment will be
made in cash.
I. Basic Incentive Plan guidelines for any Plan Year shall be
reviewed with the participants at the beginning of each
Plan Year.
J. Partial payments under the Plan shall be administered as
follows:
1. Retirement: In the event of termination of employment
through retirement, the employee may, at the discretion
of the Committee, be considered to have earned one-
twelfth (1/12) of the annual incentive compensation
award of a particular year for each month of employment
in the Plan Year of his/her retirement.
2. Death: If a participant dies, the amount of the award
may be prorated for each month of employment during the
Plan Year at the discretion of the Committee, and paid
to the estate or designated beneficiary.
3. Termination for Reasons Other Than Death or Retirement:
In the event of termination of employment for reasons
other than death or retirement, the participant, at the
discretion of
<PAGE>
the Committee, will forfeit all unpaid incentive
awards.
K. No right or interest of any participant in the plan shall
be assignable or transferable, or subject to any lien,
directly, by operation of law, or otherwise, including
levy, garnishment, attachment, pledge, or bankruptcy,
except to a beneficiary upon the death of a participant as
herein provided.
L. An award under the Plan shall not confer any right on the
participant to continue in the employ of the bank, or limit
in any way the right of the bank to terminate the
participant's employment at any time. The receipt of an
award for any one year shall not guarantee an employee the
right to receive an award for any subsequent year.
M. The Bank shall have the right to deduct from all payments
under this Plan any federal or state taxes required by law
to be withheld with respect to such payments.
N. The Committee, with concurrence of the Board of Directors,
may terminate, amend, or modify this Plan at any time.
VI. SUMMARY OF SUPPLEMENTARY PLAN DOCUMENTS
A. Allocation of Incentive Plan Pool
Maximum %
Job Title of Pool
1. Chief Executive Officer 40%
2. Finance/Control Division Manager 30%
3. Trust Services Division Manager 15%
4. Sales/Marketing Division Manager 15%
EXHIBIT 11
FIRST KEYSTONE CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Quarter Ended June 30,
1997 1996
(Dollars in Thousands)
<S> <C> <C>
Primary
Net Income $ 1,147 $ 1,093
Shares<F1>
Weighted average number of
common shares outstanding 977,909 977,909
Adjustments - increases or
decreases None None
Weighted average number of
common shares outstanding
as adjusted 977,909 977,909
Primary earnings per common share $ 1.17 $ 1.12
Assuming full dilution
Net Income $ 1,147 $ 1,093
Shares<F1>
Weighted average number of
common shares outstanding 977,909 977,909
Adjustments - increases or
decreases None None
Weighted average number of
common shares outstanding
as adjusted 977,909 977,909
Earnings per common share
assuming full dilution $ 1.17 $ 1.12
<FN>
<F1>
Restated to reflect 10% stock dividends paid in 1996.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,339
<INT-BEARING-DEPOSITS> 5,057
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 73,487
<INVESTMENTS-CARRYING> 18,363
<INVESTMENTS-MARKET> 18,253
<LOANS> 146,699
<ALLOWANCE> 2,302
<TOTAL-ASSETS> 253,211
<DEPOSITS> 204,596
<SHORT-TERM> 4,936
<LIABILITIES-OTHER> 1,553
<LONG-TERM> 13,000
0
0
<COMMON> 1,956
<OTHER-SE> 27,170
<TOTAL-LIABILITIES-AND-EQUITY> 253,211
<INTEREST-LOAN> 6,145
<INTEREST-INVEST> 3,128
<INTEREST-OTHER> 81
<INTEREST-TOTAL> 9,353
<INTEREST-DEPOSIT> 4,026
<INTEREST-EXPENSE> 487
<INTEREST-INCOME-NET> 4,840
<LOAN-LOSSES> 150
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 2,401
<INCOME-PRETAX> 2,853
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,270
<EPS-PRIMARY> 2.32
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.57
<LOANS-NON> 247
<LOANS-PAST> 222
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1326
<ALLOWANCE-OPEN> 2267
<CHARGE-OFFS> 8
<RECOVERIES> 27
<ALLOWANCE-CLOSE> 2302
<ALLOWANCE-DOMESTIC> 2302
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 630
</TABLE>
