<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the Transition period from _______________ to ______________
Commission File Number: 0-13821
ROTO-ROOTER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1078130
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2500 Chemed Center, 255 East Fifth Street, Cincinnati, Ohio 45202-4726
(Address of principal executive offices) (Zip Code)
(513) 762-6690
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1 Per Share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ____
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing price of said stock on the NASDAQ
National Market on March 20, 1995 ($26.50 per share), was $131,255,420.
At March 20, 1995, 5,086,328 shares of Roto-Rooter, Inc. Common Stock
(par value $1 per share) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
DOCUMENT WHERE INCORPORATED
-------- ------------------
<S> <C>
1994 Annual Report to Stockholders (Specified Portions) Parts I, II and IV
Proxy Statement for Annual Meeting Part III
to be held May 15, 1995.
</TABLE>
<PAGE> 2
ROTO-ROOTER, INC.
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I
Item 1. Business............................................. 1
Item 2. Properties........................................... 3
Item 3. Legal Proceedings.................................... 4
Item 4. Submission of Matters to a Vote of Security Holders.. 4
-- Executive Officers of the Registrant................. 5
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters................................. 6
Item 6. Selected Financial Data.............................. 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 6
Item 8. Financial Statements and Supplementary Data.......... 6
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 6
PART III
Item 10. Directors and Executive Officers of the Registrant... 7
Item 11. Executive Compensation............................... 7
Item 12. Security Ownership of Certain Beneficial Owners
and Management...................................... 7
Item 13. Certain Relationships and Related Transactions....... 7
PART IV
Item 14. Exhibits, Financial Statement Schedule and
Reports on Form 8-K................................. 7
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS.
GENERAL
Roto-Rooter, Inc. was incorporated in Delaware in 1983 as a wholly owned
subsidiary of Chemed Corporation, a Delaware corporation, and on August 31,
1984 succeeded to the business of Chemed's Roto-Rooter Group, the substantial
portion of which business Chemed acquired in 1980. As used herein, "Company"
and "Roto-Rooter" refers to Roto-Rooter, Inc. and its subsidiaries and "Chemed"
refers to Chemed Corporation and its subsidiaries.
In September 1984, the Company sold in a private placement 719,991 shares
of its common stock, par value $1 per share (the "Common Stock"), and in June
1985, Chemed sold in a public offering 1,100,000 shares of Common Stock.
Chemed owns 2,990,333 shares of Common Stock or approximately 59 percent of the
outstanding shares of Common Stock.
Roto-Rooter conducts its business in one business segment. All significant
revenues relate to providing repair and maintenance services to residential,
commercial, industrial and municipal customers through both company-owned and
franchised operations.
DESCRIPTION OF BUSINESS
Roto-Rooter is the nation's largest provider of sewer and drain cleaning
services. The Company provides sewer and drain cleaning and plumbing repair
and maintenance services through company-owned operations and franchised
operations located in all 50 states, Canada and Japan. The Company also
manufactures and purchases for resale sewer and drain cleaning equipment,
cable, and other products and accessories for its company-owned operations and
for sale to its independent franchisees. Roto-Rooter is one of the oldest
franchising businesses in the United States, having established its first
franchise in 1936. In August 1991, the Company and Chemed, respectively,
purchased 70% and 30% of Convenient Home Services, Inc., which changed its name
to Service America Systems, Inc. in July of 1994 ("Service America"). Service
America is engaged primarily in the air conditioning and appliance maintenance
and repair business in Florida primarily through the sale of service contracts
which generally cover a one-year period. In July 1993, Service America
completed the acquisition of all the outstanding shares of common stock of
Encore Service Systems, Inc. ("Encore"), which is also principally engaged in
the air conditioning and appliance maintenance and repair business through
service contracts in Florida and Arizona. As a percent of total operating
revenue, sewer and drain cleaning repair and maintenance services represent 31
percent, plumbing repair and maintenance services represent 22 percent, air
conditioning and appliance repair and maintenance services represent 37
percent, and all other classes represent 10 percent. Other information called
for by this item is included within Note 2 of the Notes to Consolidated
Financial Statements appearing on page 14 of the 1994 Annual Report to
Stockholders and is incorporated herein by reference.
PRODUCT AND MARKET DEVELOPMENT
Roto-Rooter engages in a continuing program for the development and
marketing of new products and services under the Roto-Rooter name.
Since 1981, the Company has developed and introduced four drain-care
products for residential and commercial use which are distributed principally
through the Roto-Rooter service technicians directly to residential customers
and commercial accounts.
Plumbing repair services were first introduced in a company-owned service
location in 1981. These services are provided primarily to residential and
commercial accounts
1
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by licensed plumbers who are Company employees. The Company has been able to
use its existing staff and facilities in the development of its plumbing repair
businesses. All company-owned operations are providing plumbing repair and
maintenance services to the markets they serve, except for some company-owned
contractor operations. The Company does not presently plan to enter the
plumbing contracting business for new construction.
Cleaning of large diameter pipes is an additional service provided to
industrial and municipal customers by several company-owned operations. The
types of pipes cleaned include sanitary and storm sewer pipes and pipes used
for industrial processes. These pipes are cleaned by a variety of methods
using mechanical equipment and high-pressure water jets. Although the drain
pipes in homes generally are four to six inches in diameter, the diameters of
pipes used in industrial and municipal systems are as large as six feet.
FRANCHISE AGREEMENTS
The Company maintains written franchise agreements with its independent
franchisees. The form of franchise agreement in general use by the Company
since early 1990 provides that the franchisee is licensed and franchised to
perform and sell services relating to sewer and drain cleaning under the
Roto-Rooter(R) and related trademarks and service marks in accordance with
specified methods, techniques, and standards only within a designated
geographic area. The franchisee is not permitted to use any of the Company's
marks in connection with the sale of any products or the performance of other
services except as expressly authorized by the Company. A franchisee is
required to actively and continuously advertise, promote, and sell sewer and
drain cleaning services under the Roto-Rooter(R) service mark; to maintain an
office and service facility only within his territory; and to comply at all
times with quality and service standards specified by the Company.
Generally, franchise agreements provide for a five-year term and, upon
expiration, each franchisee has the right to enter into a new franchise
agreement with Roto-Rooter upon the terms and conditions as are then being
offered by Roto-Rooter to other renewing franchisees. Under Roto-Rooter's
current franchising program, a new franchisee pays an initial franchise fee of
$3,000. Thereafter, each franchisee pays a monthly fee to Roto-Rooter which is
based upon the population within his territory.
The franchise agreement provides for a Base Monthly Franchise Fee according
to Roto-Rooter's current fee schedule which (i) is determined by the current
population in the territory, and (ii) is thereafter adjusted annually during
the term of the agreement to reflect increases or decreases in the Consumer
Price Index. This form of franchise agreement enables Roto-Rooter's franchise
fee income from continuing franchisees to increase in proportion to inflation
during the life of each agreement.
SERVICE MARKS AND TRADEMARKS
The Company regards its corporate name, service marks, and trademarks to be
important to its identification and of significant value in the conduct of the
business. The Company owns the following names, phrases, and designs which are
registered on the Principal Register of the United States Patent and Trademark
Office: "Roto-Rooter," the Roto-Rooter logo, and "And Away Go Troubles Down
the Drain."
The Company vigorously polices the uses and practices associated with its
service marks and trademarks. The Company is unaware of any ongoing
infringements which may have a material adverse effect on its overall business
or the validity of any such mark.
COMPETITION
All aspects of the sewer, drain, and pipe cleaning, and appliance and
plumbing repair and maintenance businesses are highly competitive. Competition
is, however, fragmented in most markets with local and regional firms providing
the primary
2
<PAGE> 5
competition. The principal methods of competition are advertising, range of
services provided, speed and quality of customer service, service guarantees,
and pricing.
SEASONALITY
Roto-Rooter's total operating revenues have minimal seasonality.
GOVERNMENT REGULATIONS
Roto-Rooter's franchising activities are subject to various federal and
state franchising laws and regulations, including the rules and regulations of
the Federal Trade Commission (the "FTC") regarding the offering or sale of
franchises. The rules and regulations of the FTC require that Roto-Rooter
provide all prospective franchisees with specific information regarding the
franchise program and Roto-Rooter in the form of a detailed franchise offering
circular. In addition, a number of states require Roto-Rooter to register its
franchise offering prior to offering or selling franchises in the state.
Various state laws also provide for certain rights in favor of franchisees,
including (i) limitations on the franchisor's ability to terminate a franchise
except for good cause, (ii) restrictions on the franchisor's ability to deny
renewal of a franchise, (iii) circumstances under which the franchisor may be
required to purchase certain inventory of franchisees when a franchise is
terminated or not renewed in violation of such laws, and (iv) provisions
relating to arbitration.
Roto-Rooter's operations are also subject to various federal, state, and
local laws and regulations regarding environmental matters and other aspects of
the operation of a sewer and drain cleaning and plumbing services business.
For certain other activities, such as septic tank pumping, Roto-Rooter is
subject to state and local environmental health and sanitation regulations.
Compliance with federal, state and local laws governing discharge of materials
into the environment have not had nor are expected to have a material effect
upon the operations of the Company. Roto-Rooter's ability to engage in the
plumbing repair business is also subject to certain limitations and
restrictions imposed by state and local licensing laws and regulations.
Service America's operations are regulated by the Florida and Arizona
Departments of Insurance. In accordance with certain Florida regulatory
requirements, Service America maintains cash and certificates of deposit with
the Department of Insurance and is also required to maintain additional
unencumbered resources. In addition, Service America's air conditioning and
appliance repair and maintenance business is also subject to certain
limitations imposed by state and local business laws and regulations.
Roto-Rooter, to the best of its knowledge, is currently in compliance in
all material respects with the laws and regulations affecting its operations.
While Roto-Rooter cannot currently predict the effect which any future
legislation, regulations, or interpretations may have upon its operations, it
does not anticipate any changes that would have a material adverse impact on
its operations.
EMPLOYEES
On December 31, 1994, Roto-Rooter had a total of 2,478 employees; 2,425
were located in the United States and 53 were located in Canada.
ITEM 2. PROPERTIES.
<TABLE>
The major facilities operated by Roto-Rooter are listed below:
<CAPTION>
Location Type Owned Leased
- ------------------- ----------------------- -------------- --------------
<S> <C> <C> <C>
Cincinnati, OH Office and service 19,000 sq. ft. 24,000 sq. ft.
facilities
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Location Type Owned Leased
- ------------------- ----------------------- -------------- --------------
West Des Moines, IA Office, manufacturing 29,000 sq. ft. --
and distribution center
facilities
Northeastern U.S. Office and service 42,000 sq. ft. 21,000 sq. ft.
Area (1) facilities
Central U.S. Area Office and service 36,000 sq. ft. 23,000 sq. ft.
(2) facilities
Mid-Atlantic U.S. Office and service 57,000 sq. ft. 87,000 sq. ft.
Area (3) facilities
Western U.S. Office and service 19,000 sq. ft. 38,000 sq. ft.
Area (4) facilities
Canada (5) Office and service -- 7,000 sq. ft.
facilities
_________________________
<FN>
(1) Comprising locations in Baltimore and Jessup, Maryland; Stoughton and
Woburn, Massachusetts; Stratford and Bloomfield, Connecticut; West Seneca,
West Hempstead, Bayside and Hawthorne, New York; and Cranston, Rhode
Island.
(2) Comprising locations in Atlanta, Georgia; Birmingham, Alabama; Charlotte,
North Carolina; Hilliard and Cleveland, Ohio; Memphis and Nashville,
Tennessee; Wilmerding, Pennsylvania; and St. Louis, Missouri.
(3) Comprising locations in Pennsauken and North Brunswick, New Jersey;
Jacksonville, Medley, Pompano Beach, Ft. Myers, St. Petersburg, Boca Raton,
Daytona Beach and Orlando, Florida; Virginia Beach and Fairfax, Virginia;
Levittown, Pennsylvania; Raleigh, North Carolina; and Newark, Delaware.
(4) Comprising locations in Houston and San Antonio, Texas; Addison, Elk Grove
Village and Posen, Illinois; Denver, Colorado; Honolulu, Hawaii;
Minneapolis, Minnesota; Tacoma, Washington; and Phoenix, Arizona.
(5) Comprising locations in Delta, British Columbia and Boucherville, Quebec.
</TABLE>
_________________________
All "owned" property is held in fee and is not subject to any major
encumbrance. "Leased" properties are occupied under rental agreements having
terms ranging up to eleven years and providing, in some instances, for payment
by Roto-Rooter of insurance, property taxes, and building operating expenses.
Roto-Rooter considers all of these facilities to be in good operating condition
and generally adequate for its present and currently anticipated needs.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
4
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EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
The executive officers of the Company are as follows:
<CAPTION>
Name Age Office First Elected
- ------------------ --- ------------------------------------- --------------
<S> <C> <C> <C>
Edward L. Hutton 75 Chairman December 30, 1983(1)
Kevin J. McNamara 41 Vice Chairman August 2, 1994(2)
William R. Griffin 51 President and Chief Executive May 13, 1985(3)
Officer
Douglas B. Harper 51 Executive Vice President May 18, 1992(4)
Patrick L. Johnson 41 Vice President December 30, 1983(5)
Brian A. Brumm 40 Vice President, Treasurer May 13, 1985(6)
and Chief Financial Officer
Lawrence J. Gillis 60 Vice President May 20, 1991(7)
<FN>
(1) Mr. E. L. Hutton is Chairman of the Company and, since November 1993, has
served as Chairman and Chief Executive Officer of Chemed. Previously, from
1970 to November 1993, he served as President and Chief Executive Officer.
He is the father of Mr. Thomas C. Hutton, a director of the Company.
(2) Mr. K. J. McNamara is Vice Chairman of the Company and is President of
Chemed and has held these positions since August 1994. From August 1986 to
August 1994, he served as Secretary and General Counsel of the Company.
Previously, he served as an Executive Vice President, Secretary and General
Counsel of Chemed from November 1993, August 1986 and August 1986 to August
1994, respectively. From May 1992 to November 1993, he held the position
of Vice Chairman of Chemed; and from August 1986 to May 1992, he served as
Vice President of Chemed.
(3) Mr. W. R. Griffin is President and Chief Executive Officer of the Company,
after having previously (May 1984-May 1985) served as its President. He is
also an Executive Vice President of Chemed and has held this position since
May 1991.
(4) Mr. D. B. Harper is the Executive Vice President of the Company, after
having previously (December 1983 - May 1992) served as Vice President.
Since October 1980, Mr. Harper has served as President of Roto-Rooter
Corporation, a subsidiary.
(5) Mr. P. L. Johnson is a Vice President of the Company and is also President
and Chief Executive Officer of Service America and has held these positions
since December 1983 and April 1993, respectively. Previously, from August
1991 to April 1993 he was Vice Chairman and Chief Executive Officer of
Service America. From September 1986 to September 1993 he also served as
Senior Vice President of Roto-Rooter Services Company. From January 1984
to September 1986, he was a Vice President of Roto-Rooter Services Company.
(6) Mr. B. A. Brumm is a Vice President and the Treasurer and Chief Financial
Officer of the Company and has held these positions since 1985.
(7) Mr. L. J. Gillis is a Vice President of the Company and has held this
position since May 20, 1991. Since October 1994, he has served as
President of Roto-Rooter Services Company. Previously, he served as its
Senior Vice President-Operations from February 1991 to October 1994. From
November 1983 to February 1991, he served as a Vice President of
Roto-Rooter Services Company.
</TABLE>
__________________________
Each executive officer holds office until the annual election at the next
annual organizational meeting of the Board of Directors of the Company which is
scheduled to be held on May 15, 1995.
5
<PAGE> 8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
<TABLE>
The Company's Common Stock (par value $1 per share) is included in the
NASDAQ Stock Market and is traded under the symbol ROTO. The range of the high
and low market prices for the Company's Common Stock and dividends paid per
share for each quarter of 1993 and of 1994 is set forth below.
<CAPTION>
CLOSING
Dividends Paid
High Low Per Share
------------------------------------------------------------------
<S> <C> <C> <C>
1994
------------------------------------------------------------------
First Quarter $32 $28 $.140
Second Quarter 32 24 .140
Third Quarter 26-1/2 22-1/2 .150
Fourth Quarter 25-3/4 19-1/2 .150
------------------------------------------------------------------
1993
------------------------------------------------------------------
First Quarter $25-1/2 $23-1/8 $.125
Second Quarter 25-1/2 23 .125
Third Quarter 29-1/2 23 .140
Fourth Quarter 30 27-1/2 .140
</TABLE>
Future dividends are necessarily dependent upon Roto-Rooter's earnings and
financial condition and other factors not presently determinable.
As of March 20, 1995, there were approximately 211 stockholders of record
of the Company's Common Stock. This number only includes stockholders of
record and does not include stockholders with shares beneficially held for
those in nominee name or within clearinghouse positions of brokers, banks or
other institutions. The Company believes its stockholders number more than
500.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item for the five years ended December
31, 1994 is set forth on pages 22 and 23 of the Company's 1994 Annual Report to
Stockholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information called for by this Item is set forth on pages 19 through
21 of the Company's 1994 Annual Report to Stockholders and is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the report thereon of
Price Waterhouse LLP dated January 30, 1995, appearing on pages 9 through 18 of
the Company's 1994 Annual Report to Stockholders and the Unaudited Quarterly
Financial Data appearing on page 18 of the Company's 1994 Annual Report to
Stockholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
6
<PAGE> 9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
<TABLE>
The Directors of the Company are:
<S> <C>
Edward L. Hutton Douglas B. Harper
William R. Griffin Will J. Hoekman
Brian A. Brumm Thomas C. Hutton
James A. Cunningham Patrick L. Johnson
Naomi C. Dallob Sandra E. Laney
Charles H. Erhart, Jr. Kevin J. McNamara
Neal Gilliatt Timothy S. O'Toole
Lawrence J. Gillis D. Walter Robbins, Jr.
J. Peter Grace Jerome E. Schnee
</TABLE>
The additional information required under this Item with respect to
directors and executive officers is set forth in the Company's 1995 Proxy
Statement and in Part I hereof under the caption "Executive Officers of the
Registrant" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth in the Company's 1995
Proxy Statement which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required under this Item is set forth in the Company's 1995
Proxy Statement which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item is set forth in the Company's 1995
Proxy Statement which is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
2. Exchange Agreement, dated August 31, 1984, between Chemed Corporation and Roto-Rooter, Inc.*
3.1 Certificate of Incorporation of Roto-Rooter, Inc.*
3.2 By-Laws of Roto-Rooter, Inc.*
10.1 Executive Salary Protection Plan of Roto-Rooter, Inc., as amended May 17, 1993.*,**
10.2 1984 Stock Incentive Plan of Roto-Rooter, Inc., as amended through May 20, 1991.*,**
10.3 1978 Stock Incentive Plan of Chemed Corporation, as amended through May 20, 1991.*,**
7
<PAGE> 10
10.4 1981 Stock Incentive Plan of Chemed Corporation, as amended through May 20, 1991.*,**
10.5 1983 Incentive Stock Option Plan of Chemed Corporation, as amended through May 20, 1991.*,**
10.6 1986 Stock Incentive Plan of Chemed Corporation, as amended through May 20, 1991.*,**
10.7 1988 Stock Incentive Plan of Chemed Corporation, as amended through May 20, 1991.*,**
10.8 Service America Systems, Inc. Retirement and Savings Plan.**
10.9 Roto-Rooter Management Company Deferred Compensation Plan.*,**
10.10 Amendment No. 1 to Roto-Rooter Management Company Deferred Compensation Plan, effective January 1, 1993.*,**
10.11 Roto-Rooter Management Company Deferred Compensation Plan No. 2, effective October 1, 1993.*,**
10.12 Roto-Rooter 1987 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.13 1990 Stock Incentive Plan of Roto-Rooter, as amended through May 20, 1991.*,**
10.14 1993 Stock Incentive Plan of Roto-Rooter, effective May 17, 1993.*,**
10.15 1991 Convenient Home Services Stock Option Plan.*,**
10.16 Convenient Home Services, Inc. Deferred Compensation Plan, effective January 1, 1994.*,**
10.17 1990 Standard Form of Roto-Rooter Franchise Agreement.*
10.18 1995 Standard Form of Roto-Rooter Franchise Agreement.
10.19 Employment Agreements with Executives.*,**
10.20 Amendment No. 4 to Employment Agreement with William R. Griffin.**
10.21 Amendment No. 4 to Employment Agreement with Douglas B. Harper. **
10.22 Amendment No. 4 to Employment Agreement with Lawrence Gillis.**
10.23 Amendment No. 4 to Employment Agreement with Patrick L. Johnson.**
10.24 Amendment No. 4 to Employment Agreement with Brian A. Brumm.**
10.25 License Agreement between Roto-Rooter Corporation and Roto-Rooter Services Company.*
10.26 Service America Deferred Compensation Plan.**
11. Computation of Per Share Earnings.
13. 1994 Annual Report to Stockholders.
21. Subsidiaries of Roto-Rooter, Inc.
23. Consent of Independent Accountants.
8
<PAGE> 11
24. Powers of Attorney.
27. Financial Data Schedule.
<FN>
* This exhibit is being filed by means of incorporation by reference
(see Index to Exhibits). Each other exhibit is being filed with this
report.
** Management contract or compensatory plan or arrangement.
</TABLE>
FINANCIAL STATEMENT SCHEDULE
See Index to Financial Statements and Financial Statement Schedule on
page S-1.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December
31, 1994.
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ROTO-ROOTER, INC.
March 28, 1995 By /s/ William R. Griffin
-----------------------------------
William R. Griffin
President and Chief
Executive Officer
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
------|
/s/ Edward L. Hutton Chairman and a Director |
- ---------------------- |
Edward L. Hutton |
|
|
|
/s/ William R. Griffin President and Chief Executive |
- ---------------------- Officer and a Director (Principal |
William R. Griffin Executive Officer) |
|
|
|
/s/ Brian A. Brumm Vice President, Treasurer | March 28, 1995
- ---------------------- and Chief Financial Officer |
Brian A. Brumm and a Director (Principal |
Financial and Accounting Officer) |
|
|
---| |
James A. Cunningham* Thomas C. Hutton* | |
Charles H. Erhart, Jr.* Patrick L. Johnson* | |
Neal Gilliatt* Sandra E. Laney* | |
Lawrence J. Gillis* Kevin J. McNamara* | |
J. Peter Grace* Timothy S. O'Toole* | |
Douglas B. Harper* D. Walter Robbins, Jr.* |- Directors |
Will J. Hoekman* Jerome E. Schnee* | |
---| ------|
- -----------------------
<FN>
* Naomi C. Dallob, General Counsel and Secretary of the Company, by
signing her name hereto signs this document on behalf of each of the
persons indicated above pursuant to powers of attorney duly executed
by such persons and filed with the Securities and Exchange Commission.
</TABLE>
March 28, 1995 /s/ Naomi C. Dallob
- ---------------------- ---------------------------------
Date Naomi C. Dallob
(Attorney-in-Fact and a Director)
10
<PAGE> 13
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
1992, 1993 AND 1994
<TABLE>
<CAPTION>
PAGE(S)
ROTO-ROOTER, INC. CONSOLIDATED FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<S> <C>
Report of Independent Accountants......................... 9 *
Consolidated Statement of Income.......................... 10 *
Consolidated Balance Sheet................................ 11 *
Consolidated Statement of Cash Flows...................... 12 *
Consolidated Statement of Stockholders' Equity............ 13 *
Notes to Consolidated Financial Statements................ 14-18*
Report of Independent Accountants on Financial Statement
Schedule................................................ S-2
Schedule VIII -- Valuation and Qualifying Accounts........ S-3
<FN>
*Indicates page numbers in the Roto-Rooter, Inc. 1994 Annual Report to
Stockholders.
</TABLE>
_________________________
The consolidated financial statements of Roto-Rooter, Inc. listed above,
appearing in the accompanying Roto-Rooter, Inc. 1994 Annual Report to
Stockholders, are incorporated herein by reference. The financial statement
schedule should be read in conjunction with the consolidated financial
statements listed above. Schedules not included have been omitted because they
are not applicable or the required information is shown in the financial
statements or notes thereto as listed above.
S-1
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Roto-Rooter, Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 30, 1995 appearing on page 9 of the 1994 Annual Report to
Stockholders of Roto-Rooter, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14 of
this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
January 30, 1995
S-2
<PAGE> 15
SCHEDULE VIII
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)
<TABLE>
=================================================================================================================================
<CAPTION>
Additions
Balance at Charged to Balance at
Beginning Costs and Deductions End of
Descriptions of Period Expenses (a) Period
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Qualifying Accounts Deducted
from Assets:
Allowance for Doubtful Accounts:
For the Year 1992 $470 $467 $(469) $468
==== ==== ====== ====
For the Year 1993 $468 $538 $(354) $652
==== ==== ====== ====
For the Year 1994 $652 $610 $(378) $884
==== ==== ====== ====
________________________
<FN>
(a) Deductions include accounts considered uncollectible or written off,
net of recoveries.
</TABLE>
S-3
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
------- ------------ -----------
<S> <C> <C> <C>
2. Exchange Agreement dated August 13, 1984 between S-1 2
Chemed Corporation and Roto-Rooter, Inc. Registration
No. 2-97456
5/2/85
3.1 Certificate of Incorporation of Roto-Rooter, Form 10-K 2
Inc. 3/27/92
3.2 By-Laws of Roto-Rooter, Inc. Form 10-K 3
3/27/93
10.1 Executive Salary Protection Plan of Roto-Rooter, Form 10-K 10.2
Inc., as amended May 17, 1993 3/30/94
10.2 1984 Stock Incentive Plan of Roto-Rooter, Inc., Form 10-K 6
as amended through May 20, 1991 3/27/92
10.3 1984 Stock Incentive Plan of Chemed Corporation, Form 10-K 8
as amended through May 20, 1991 3/27/92
10.4 1981 Stock Incentive Plan of Chemed Corporation, Form 10-K 9
as amended through May 20, 1991 3/27/92
10.5 1983 Incentive Stock Option Plan of Chemed Form 10-K 10
Corporation, as amended through May 20, 1991 3/27/92
10.6 1986 Stock Incentive Plan of Chemed Corporation, Form 10-K 11
as amended through May 20, 1991 3/27/92
10.7 1988 Stock Incentive Plan of Chemed Corporation, Form 10-K 12
as amended through May 20, 1991 3/27/92
10.8 Service America Systems, Inc. *
Retirement and Savings Plan
10.9 Roto-Rooter Management Company Deferred Form 10-K 14
Compensation Plan 3/24/88
10.10 Amendment No. 1 to Roto-Rooter Management Form 10-K 10.11
Company Deferred Compensation Plan, effective 3/30/94
January 1, 1993
</TABLE>
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number or
Incorporated by Reference
-------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
------- ------------ -----------
<S> <C> <C> <C>
10.11 Roto-Rooter Management Company Deferred Form 10-K 10.12
Compensation Plan, No. 2, effective October 1, 3/30/94
1993
10.12 1987 Stock Incentive Plan of Roto-Rooter, Inc., Form 10-K 14
as amended through May 20, 1991 3/27/92
10.13 1990 Stock Incentive Plan of Roto-Rooter, Inc., Form 10-K 15
as amended through May 20, 1991 3/27/92
10.14 1993 Stock Incentive Plan of Roto-Rooter, Inc., Form 10-K 10.15
effective May 17, 1993 3/30/94
10.15 1991 Convenient Home Services Stock Option Plan Form 10-K 18
3/25/93
10.16 Convenient Home Services, Inc. Deferred Form 10-K 10.17
Compensation Plan, effective January 1, 1994 3/30/94
10.17 1990 Standard Form of Roto-Rooter Franchise Form 10-K 17
Agreement 3/27/92
10.18 1995 Standard Form of Roto-Rooter Franchise *
Agreement
10.19 Employment Agreement with Executives Form 10-K 18
3/25/91
10.20 Amendment No. 4 to Employment Agreement with *
William R. Griffin
10.21 Amendment No. 4 to Employment Agreement with *
Douglas B. Harper
10.22 Amendment No. 4 to Employment Agreement with *
Lawrence Gillis
10.23 Amendment No. 4 to Employment Agreement with *
Patrick L. Johnson
10.24 Amendment No. 4 to Employment Agreement with *
Brian A. Brumm
10.25 License Agreement between Roto-Rooter Form 10-K 21
Corporation and Roto-Rooter Services Company 3/25/93
10.26 Service America Deferred Compensation Plan *
11. Statement re: Computation of Per Share Earnings *
</TABLE>
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number or
Incorporated by Reference
-------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
<S> <C> <C> <C>
13. 1994 Annual Report to Stockholders *
21. Subsidiaries of Roto-Rooter, Inc. *
23. Consent of Independent Accountants *
24. Powers of Attorney *
27. Financial Data Schedule *
_________________
<FN>
* Filed herewith
</TABLE>
<PAGE> 1
EXHIBIT 10.8
SERVICE AMERICA SYSTEMS, INC. RETIREMENT AND SAVINGS PLAN
<PAGE> 2
TABLE OF CONTENTS
Page
<TABLE>
<CAPTION>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
<S> <C>
1.1 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Additional Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Additional Payroll Reduction Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Adjustment Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Anniversary Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Basic Payroll Reduction Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.10 Break in Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.11 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Controlled Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Days of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 Employer Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 Entry Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.21 Five Percent Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 Investment Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 Leased Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 Normal Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.28 Participant Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 Payroll Reduction Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.31 Qualified Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.32 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.33 Service Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.34 Severance Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.35 Severance Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.36 Total and Permanent Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.37 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.38 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.39 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.40 Year of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE II ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
<S> <C>
2.1 ELIGIBILITY REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 REEMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 FORMER PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III LEAVES OF ABSENCE, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 LEAVES OF ABSENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 BASIC PAYROLL REDUCTION CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 ADDITIONAL PAYROLL REDUCTION CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 ELECTION REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 MATCHING CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 ADDITIONAL MATCHING CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 EMPLOYER CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 PAYMENT OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 ROLLOVER CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 VOLUNTARY PARTICIPANT CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 TRANSFERS FROM QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 ESTABLISHMENT OF ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 ALLOCATION OF PAYROLL REDUCTION CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3 ALLOCATION OF MATCHING CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 ALLOCATION OF ADDITIONAL MATCHING CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 ALLOCATION OF EMPLOYER CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 ALLOCATION OF PARTICIPANT CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 ALLOCATION OF FORFEITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 ALLOCATION OF EARNINGS OR LOSSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI LIMITATIONS ON CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 OVERALL LIMITATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 COMPENSATION LIMITATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 DEDUCTIBILITY LIMITATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 DOLLAR LIMITATION ON ELECTIVE DEFERRALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE VII NONDISCRIMINATION LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<S> <C>
7.1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2 ADP LIMITATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 ACP LIMITATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 SPECIAL DESIGNATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.5 SPECIAL ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VIII DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.2 DISABILITY BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.3 DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.4 TERMINATION OF EMPLOYMENT AND VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.5 FORM OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.6 TIME OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.7 LOCATION OF RECIPIENT UNKNOWN, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.8 LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.9 WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IX TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.1 TOP-HEAVY DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 SPECIAL TOP-HEAVY RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 ADJUSTMENTS IN THE OVERALL LIMITATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE X TRUST AND TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XI ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 POWERS AND RESPONSIBILITIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 ASSIGNMENT AND DESIGNATION OF ADMINISTRATIVE AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3 POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4 DUTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.5 RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.6 APPOINTMENT OF ADVISORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.7 INFORMATION FROM EMPLOYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.8 PAYMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.9 MAJORITY ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE XII CLAIM PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
<S> <C>
12.1 CLAIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.2 CLAIM DECISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.3 REQUEST FOR REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.4 REVIEW ON APPEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XIII AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.1 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.2 TERMINATION; DISCONTINUANCE OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XIV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.1 PARTICIPANTS' RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.2 SPENDTHRIFT CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.3 DELEGATION OF AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.4 DISTRIBUTION TO MINORS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.5 CONSTRUCTION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.6 GENDER AND NUMBER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.7 SEPARABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.8 MISTAKE, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.9 DIVERSION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.10 SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.11 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.12 QUALIFIED DOMESTIC RELATIONS ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.13 CERTAIN QUALIFICATION REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.14 WRITTEN EXPLANATION OF ROLLOVER TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XV DIRECT ROLLOVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1 ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
(iv)
<PAGE> 6
SERVICE AMERICA SYSTEMS, INC. RETIREMENT AND SAVINGS PLAN
PREAMBLE
1. Adoption of Plan by Amira Services, Inc.
---------------------------------------
Effective June 1, 1980, Sam and Bea Amira Services, Inc., now known as Amira
Services, Inc. ("Amira"), established a qualified Profit Sharing Plan and a
qualified Money Purchase Pension Plan and a related Trust Agreement to hold the
combined assets of both plans. Both Plans have been amended from time to time
since the original effective date. The board of directors of Amira on December
1, 1994, (a) amended and restated the Profit Sharing Plan and related Trust
Agreement effective January 1, 1989 by adopting the Service America Systems,
Inc. (formerly known as Convenient Home Services, Inc.) Retirement and Savings
Plan (this "Plan") and (b) merged the Money Purchase Pension Plan into this
Plan effective January 1, 1994 in compliance with Section 414(l) of the Code.
This Plan provides that all forfeitures shall be allocated among Participants
and therefore cannot be used to reduce Employer Contributions. Therefore, the
merger of Amira's Money Purchase Pension Plan into this Plan shall not create a
potential reversion to the Employer.
2. Adoption of Plan by Encore Service Systems, Inc.
-----------------------------------------------
On July 16, 1993, Convenient Home Services, Inc. (now known as Service
America Systems, Inc.) acquired Encore Service Systems, Inc. ("Encore").
Prior to July 16, 1993, Encore maintained as an adopting employer a plan
maintained by an affiliate corporation, The ARA Services, Inc. Retirement and
Savings Plan ("ARA Plan"). As a result of its acquisition on July 16, 1993,
Encore, through its board of directors, discontinued its participation as an
adopting employer of the ARA Plan and, effective September 1, 1989, adopted
this Plan and related Trust. The assets of the ARA Plan attributable to
Encore's participation therein have been transferred to this Plan in compliance
with Section 414(l) of the Code. Service with Encore prior to July 16, 1993
shall be counted hereunder for purposes of eligibility and vesting.
3. Adoption of Plan by Service America Systems, Inc.
------------------------------------------------
The board of directors of Service America Systems, Inc. (formerly known as
Convenient Home Services, Inc.) adopted this Plan and related Trust effective
January 1, 1994.
4. Adoption of Plan by Encore Maintenance and Management, Inc.
----------------------------------------------------------
Encore Maintenance and Management, Inc. was incorporated on July 22, 1993.
Prior to such incorporation, this entity was operated as a division of Encore.
Effective July 22, 1993, the board of directors of Encore Maintenance and
Management, Inc. adopted this Plan. All employees of Encore's Maintenance and
Management division who were Participants in this Plan immediately prior to
July 22, 1993 shall continue as Participants and all service with Encore's
Maintenance and Management division shall be counted hereunder for eligibility
and vesting.
<PAGE> 7
Notwithstanding any other provision of the Plan to the contrary, a
Participant's vested interest in his accounts under this Plan on and after the
applicable effective date shall not be less than his vested interest in his
accounts on the day immediately preceding such effective date. In addition to
the provisions otherwise set forth in this Plan, the provisions in effect under
the Amira Profit Sharing Plan and Money Purchase Pension Plan and the ARA Plan
prior to this amendment and restatement, as set forth in Addendum A to the
Plan, shall continue in effect as if otherwise set forth in the Plan in the
manner and for the periods set forth in Addendum A.
<PAGE> 8
SERVICE AMERICA SYSTEMS, INC. RETIREMENT AND SAVINGS PLAN
The Plan created in accordance with the terms hereof shall be known as the
"Service America Systems, Inc. Retirement and Savings Plan" and is intended to
qualify as a profit-sharing plan with a cash or deferred arrangement under Code
Section 401 and the Regulations thereunder.
ARTICLE I
DEFINITIONS
1.1 "ACCOUNTS" means the bookkeeping accounts established and maintained for
each Participant under the Plan.
1.2 "ADDITIONAL MATCHING CONTRIBUTION" means the amount contributed by the
Employer in accordance with Section 4.5.
1.3 "ADDITIONAL PAYROLL REDUCTION CONTRIBUTION" means the amount contributed
by the Employer on behalf of a Participant pursuant to Section 4.2.
1.4 "ADJUSTMENT FACTOR" means the cost of living adjustment factor
prescribed under Code Section 415(d), as applied to such items and in such
manner as the Secretary of the Treasury shall provide.
1.5 "ADMINISTRATOR" means the Company or such other appointee designated by
the Company to serve as the administrator of the Plan.
1.6 "ANNIVERSARY DATE" means the last day of the Plan Year.
1.7 "BASIC PAYROLL REDUCTION CONTRIBUTION" means the amount contributed by
the Employer on behalf of a Participant pursuant to Section 4.1.
1.8 "BENEFICIARY" means the person or persons to whom a death benefit is
payable with respect to a deceased Participant under Section 8.3.
1.9 "BOARD" means the board of directors of the Company.
1.10 "BREAK IN SERVICE" means any Twelve (12) consecutive month Severance
Period.
Solely for purposes of determining whether a Break in Service has occurred,
if a person is absent from work for any period that begins during a Plan Year
beginning after December 31, 1984:
1
<PAGE> 9
(a) by reason of pregnancy of the individual,
(b) by reason of the birth of a child of the individual,
(c) by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or
(d) for purposes of caring for such child for a period beginning
immediately following such birth or placement,
and if such person's absence extends beyond the first anniversary of the
first day of such absence, then such person's Severance Date shall be deemed
to be the second anniversary of the first day of such absence (the period
between such first and second anniversaries shall be neither a Period of
Service nor a Period of Severance). Notwithstanding the foregoing, this
paragraph shall not apply unless the person timely furnishes the
Administrator with such information as it may reasonably require to establish
that the absence from work is for the reasons described herein and the number
of days of such absence.
1.11 "CODE" means the Internal Revenue Code of 1986, as amended.
1.12 "COMPANY" means Service America Systems, Inc.
1.13 "COMPENSATION" means, except as otherwise provided by this Section, the
total amount received by an Employee from the Employer during a Plan Year that
is considered "wages" as defined in Code Section 3401(a) for purposes of income
tax withholding at the source, but determined without regard to any rules that
limit the remuneration to be included in such wages based on the nature or
location of the employment or the services performed. Notwithstanding the
foregoing, for Plan Years beginning before January 1, 1991, Compensation shall
be determined under the provisions of the Plan as in effect immediately before
the adoption of this Plan. The Compensation taken into account for any Plan
Year shall not exceed the limitation set forth in Section 6.2.
1.14 "CONTROLLED GROUP" means the Company and all other entities required to
be aggregated with the Company under Code Section 414(b), (c), (m) or (o). For
purposes of Section 6.1, in determining which entities shall be aggregated
under Code Section 414(b) or (c), the modifications made by Code Section 415(h)
shall be applied.
1.15 "DAYS OF SERVICE" means the total number of days in a person's Service
Periods, whether or not such periods were completed consecutively. Days of
Service shall also include the number of days in any Severance Period in which:
(a) The Employee severs from service by reason of quit, discharge or
retirement and immediately prior to such quit, discharge or retirement was
not
2
<PAGE> 10
absent from service, but only if the Employee performs an Hour of Service
within Twelve (12) months after the date of such severance; or
(b) Notwithstanding (a), above, the Employee severs from service by
reason of quit, discharge or retirement during an absence from service of
Twelve (12) months or less for any reason other than a quit, discharge or
retirement, but only if the Employee performs an Hour of Service within
Twelve (12) months of the date on which the Employee was first absent from
service.
No day shall be counted more than once in determining Days of Service.
Notwithstanding the foregoing, a person's Days of Service shall not include
any Days of Service earned prior to a Break in Service if the person had no
nonforfeitable right to an accrued benefit derived from Employer contributions
under the Plan at the time the Break in Service occurred and either: (a) had
terminated employment before the first day of the first Plan Year beginning
after December 31, 1984, and as of such day, the number of days in the person's
Severance Period equals or exceeds his Days of Service, whether or not
consecutive, completed before such Severance Period; or (b) the number of days
in the person's Severance Period equals or exceeds the greater of (i) Five (5)
years or (ii) his Days of Service, whether or not consecutive, completed before
such Severance Period. In computing the aggregate number of Days of Service
prior to such Break in Service, Days of Service which could be disregarded
under the preceding sentence by reason of a prior Break in Service shall be
disregarded.
1.16 "EFFECTIVE DATE" means (a) January 1, 1989 with respect to Amira's
adoption of this Plan, (b) September 1, 1989 with respect to Encore's adoption
of this Plan, (c) January 1, 1994 with respect to the adoption of this Plan by
the Company and (d) July 22, 1993 with respect to the adoption of this Plan by
Encore Maintenance and Management, Inc. The provisions of this Plan shall be
effective on such dates, except as expressly provided otherwise herein.
1.17 "EMPLOYEE" means any individual employed by the Employer as an employee
and any Leased Employee performing services for the Employer, excluding: (a)
those individuals employed as class 4 and 5 employees at (i) Encore's
Management and Maintenance Division (as in existence prior to July 22, 1993) or
(ii) Encore Maintenance and Management, Inc. (as in existence on and after July
22, 1993) and (b) any member of a collective bargaining unit for whom either:
(i) a separate retirement plan has been established or is contributed to
pursuant to collective bargaining negotiations; or
(ii) no such separate plan has been established or is contributed to after
collective bargaining which has included discussion of retirement benefits,
unless such collective bargaining provided for coverage under this Plan.
3
<PAGE> 11
1.18 "EMPLOYER" means the Company and each other member of the Controlled
Group which, with the consent of the Company, has adopted the Plan.
1.19 "EMPLOYER CONTRIBUTION" means the amount contributed by the Employer in
accordance with Sections 4.4, 4.5 and 4.6.
1.20 "ENTRY DATE" means the first day of each calendar quarter.
1.21 "FIVE PERCENT OWNER" means any person who owns (or is considered as
owning within the meaning of Code Section 318) more than Five Percent (5%) of
the outstanding stock of any corporation in the Controlled Group or stock
possessing more than Five Percent (5%) of the total combined voting power of
all stock of any corporation in the Controlled Group or who owns more than Five
Percent (5%) of the capital or profits interest of any unincorporated entity in
the Controlled Group.
1.22 "HOUR OF SERVICE" means an hour for which a person is directly or
indirectly paid, or entitled to payment, by a Controlled Group member for the
performance of duties. In the event that a predecessor employer (within the
meaning of Code Section 414(a)) maintained this Plan, the foregoing rule shall
be applied as if a person's service for the predecessor were service for the
Employer. Hours of Service shall be credited to a Leased Employee by taking
into account all services for Controlled Group members, but only to the extent
such services are described in both paragraph (A) and paragraph (C) of Code
Section 414(n)(2).
1.23 "INVESTMENT FUND" means each investment fund made available by or
through the Administrator into which Plan assets are invested in accordance
with Section 5.9.
1.24 "LEASED EMPLOYEE" means any individual who is not an employee of a
Controlled Group member, but only if the individual provides services to a
recipient that is a Controlled Group member, pursuant to an agreement between
the recipient and any other person, on a substantially full- time basis for at
least One (1) year (taking into account services for Controlled Group members
and Related Entities) and such services are of a type which are historically
performed by employees in the business field of the recipient; provided,
however, that such individual shall not be treated as a Leased Employee if:
(a) the total number of individuals who would otherwise be considered Leased
Employees does not constitute more than Twenty Percent (20%) of the non-highly
compensated work force of the Controlled Group; and (b) such individual is
covered by a money purchase pension plan maintained by the leasing organization
which provides (i) a nonintegrated employer contribution for each participant
of at least Ten Percent (10%) of compensation, (ii) full and immediate vesting
and (iii) immediate participation for all employees of the leasing organization
(disregarding employees who perform substantially all of their services for the
leasing organization and employees whose annual compensation from the leasing
organization during the current plan year and each of the Three (3) prior plan
years is less than One Thousand Dollars ($1,000)). For purposes of the
preceding sentence, the term Related Entity shall mean the entities or persons
required to be aggregated with a Controlled Group member under Code Section
144(a)(3). The foregoing provisions of this Section shall be construed in
accordance with Code Section 414(n) and the Regulations thereunder and the term
Leased Employee shall include individuals required to be treated as such under
Code
4
<PAGE> 12
Section 414(o) and the Regulations thereunder. 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.
1.25 "MATCHING CONTRIBUTION" means the amount contributed by the Employer in
accordance with Sections 4.4 and 4.5.
1.26 "NORMAL RETIREMENT DATE" means the date the Participant attains age
Sixty-Five (65).
1.27 "PARTICIPANT" means any person who is eligible to participate in the
Plan under Article II.
1.28 "PARTICIPANT CONTRIBUTION" means the amount contributed by a Participant
on a voluntary after-tax basis in accordance with Section 4.9.
1.29 "PAYROLL REDUCTION CONTRIBUTION" means the amount contributed by the
Employer on behalf of a Participant pursuant to Sections 4.1 and 4.2.
1.30 "PLAN YEAR" means the calendar year; provided, however, that with
respect to Encore's participation in the Plan, for Plan Years beginning prior
to January 1, 1994, the Plan Year shall be the 12 month period beginning
October 1 and ending September 30 with a short Plan Year commencing October 1,
1993 and ending December 31, 1993.
1.31 "QUALIFIED PLAN" means any plan of a Controlled Group member qualified
under Code Section 401. For purposes of Article IX only, the term "Qualified
Plan" shall also include a simplified employee pension (as described in Code
Section 408(k)) contributed to by a Controlled Group member.
1.32 "REGULATIONS" means final Treasury Regulations, as modified by
subsequent Treasury Department or Internal Revenue Service pronouncements upon
which taxpayers may rely.
1.33 "SERVICE PERIOD" means the period of time commencing on the date on
which a person performs an Hour of Service and ending on the person's Severance
Date.
1.34 "SEVERANCE DATE" means the date on which the earliest of the following
occurs:
(a) A person quits, retires, is discharged or dies; or
(b) The First (1st) anniversary of the first date of a period in which
the person remains absent from service (with or without pay) for any reason
other than quit, retirement, discharge or death.
5
<PAGE> 13
1.35 "SEVERANCE PERIOD" means the period of time commencing on the day after
a person's Severance Date and ending on the day before the person next performs
an Hour of Service.
1.36 "TOTAL AND PERMANENT DISABILITY" means a medically determinable physical
or mental impairment of a Participant which renders him incapable of performing
his normal duties for the Employer and which can be expected to result in death
or to be of long, continued and indefinite duration. The disability of a
Participant shall be determined with the advice of a licensed physician chosen
by the Administrator. The determination shall be applied uniformly to all
Participants, and shall be conclusive and binding upon the Participant, the
Company, the Administrator and the Trustee.
1.37 "TRUST" means the trust created pursuant to Article X to hold the assets
of the Plan.
1.38 "TRUSTEE" means the person(s), entity or any successor(s) appointed
pursuant to Article X.
1.39 "VALUATION DATE" means the last day of each month, and such other
date or dates as the Administrator shall determine.
1.40 "YEAR OF SERVICE" means the years (and fractions thereof) of a person's
period of "service" on the day before the Effective Date determined under the
Plan as in effect on such day plus One (1) additional year for each Three
Hundred and Sixty-five (365) Days of Service completed after such day. A
person's Years of Service prior to a Break in Service shall be disregarded for
all purposes of the Plan unless and until he completes at least One (1) Year of
Service after such Break in Service.
ARTICLE II
ELIGIBILITY
2.1 ELIGIBILITY REQUIREMENTS. Each person who was a Participant on the day
before the Effective Date shall continue to be a Participant on the Effective
Date. On and after the Effective Date, each person who is an Employee shall
become a Participant hereunder on the Entry Date next following the date as of
which the Employee has completed at least One (1) Year of Service. If a person
is not an Employee when he satisfies the foregoing requirements, he shall not
become a Participant until he becomes an Employee.
2.2 REEMPLOYMENT. A former Participant who is reemployed with a Controlled
Group member shall become a Participant on the date he is reemployed as an
Employee.
2.3 FORMER PARTICIPANTS. A person shall cease to be a Participant and shall
become a former Participant when he is no longer an Employee and has no vested
Account balance under the Plan.
6
<PAGE> 14
ARTICLE III
LEAVES OF ABSENCE, ETC.
3.1 LEAVES OF ABSENCE. An Employee on an Employer-approved leave of absence
for which Hours of Service are not otherwise credited shall for all purposes of
the Plan be considered as having continued in the employment of the Employer
for the period (not to exceed Two (2) years) of such leave, provided that the
Employee returns to active employment with the Employer before or at the
expiration of such leave. Such approved leaves of absence shall be given on a
uniform, nondiscriminatory basis in similar fact situations.
So long as the Vietnam Era Veterans Readjustment Act of 1974 or any similar
law shall remain in force, providing for reemployment rights for all persons in
military service, as defined therein, an Employee who leaves the employment of
an Employer for military service in the Armed Forces of the United States, as
defined in such Act from time to time in force, shall, for all purposes of the
Plan, be considered as having been in the employment of the Employer with the
time of his service in the military credited to his service; provided that upon
such Employee being discharged from the military service of the United States
he applies for reemployment with the Employer and takes all other necessary
action to be entitled to, and to be otherwise eligible for, reemployment
rights, as provided by the Vietnam Era Veterans Readjustment Act of 1974, or
any similar law from time to time in force.
3.2 TRANSFERS. In the event that a Participant is transferred to employment
with a Controlled Group member which has not adopted the Plan or to employment
with the Employer in a status other than as an Employee or in the event that a
person is transferred from employment with a Controlled Group member which has
not adopted the Plan or from other employment with the Employer in a status
other than an Employee to employment with the Employer under circumstances
making such person an Employee, then the following provisions shall apply:
(a) Transfers to employment (i) with a Controlled Group member which has
not adopted the Plan or (ii) with the Employer not as an Employee shall not
be considered termination of employment with the Employer, and the terms of
the Plan shall apply to such transferred Participant, as modified by this
Section;
(b) Any employment with a Controlled Group member which has not adopted
the Plan or with the Employer not as an Employee shall be deemed to be
employment with the Employer;
(c) No amounts earned from a Controlled Group member at a time when it has
not adopted the Plan or from the Employer other than as an Employee shall
constitute Compensation hereunder;
(d) Termination of employment with a Controlled Group member which has not
adopted the Plan by a person entitled to benefits under this Plan (other than
to
7
<PAGE> 15
transfer to employment with another Controlled Group member) shall be
considered as termination of employment with the Employer; and
(e) All other terms and provisions of the Plan shall fully apply to such
person and to any benefits to which he may be entitled hereunder.
ARTICLE IV
CONTRIBUTIONS
4.1 BASIC PAYROLL REDUCTION CONTRIBUTIONS. A Participant may elect (in
increments acceptable to the Administrator) to have up to Six Percent (6%) of
his Compensation contributed to the Plan by the Employer as a Basic Payroll
Reduction Contribution. Subject to the limitations described in Articles VI
and VII, the Basic Payroll Reduction Contributions elected by a Participant
shall be deducted from the Participant's pay and paid by the Employer to the
Trustee.
4.2 ADDITIONAL PAYROLL REDUCTION CONTRIBUTIONS. A Participant who has
elected to have the maximum amount of his Compensation contributed to the Plan
as a Basic Payroll Reduction Contribution under Section 4.1 may elect (in
increments acceptable to the Administrator) to have up to an additional amount
of his Compensation contributed to the Plan by the Employer as an Additional
Payroll Reduction Contribution; provided, that the total Payroll Reduction
Contributions (both Additional and Basic) shall not exceed Fifteen Percent
(15%) of his Compensation. Subject to the limitations described in Articles VI
and VII, the Additional Payroll Reduction Contributions elected by a
Participant shall be deducted from the Participant's pay and paid by the
Employer to the Trustee.
4.3 ELECTION REQUIREMENTS. A Participant's election under this Article
shall be effective only if the Participant completes a form provided by the
Administrator and files such form with the Employer. Except as may be
otherwise permitted by the Administrator in a uniform and nondiscriminatory
manner: (a) a Participant's initial election must be filed with the Employer at
least Fifteen (15) days before the first day of the payroll period in which the
election is to take effect and shall remain in effect until changed or
suspended by the Participant in accordance with this Section; and (b) the first
day of any calendar quarter, a Participant may elect to suspend, change or
resume his Payroll Reduction Contributions by providing written notice to the
Employer on a form provided by the Administrator, not less than Fifteen (15)
days before the first day of the payroll period in which the election is to
take effect.
4.4 MATCHING CONTRIBUTIONS. The Employer shall make a Matching Contribution
as of the last day of each calendar quarter in an amount equal to Twenty-Five
Percent (25%) of the Basic Payroll Reduction Contribution made for each
Participant who is an "eligible Participant" within the meaning of Section 5.3;
provided, however, that effective for Plan Years beginning on and after January
1, 1995, the board of directors of Encore
8
<PAGE> 16
Maintenance and Management, Inc. shall determine, in its sole discretion, the
amount of the Matching Contribution, if any, for its Employees who participate
in the Plan.
4.5 ADDITIONAL MATCHING CONTRIBUTIONS. The Employer may contribute
Additional Matching Contributions for any individual Participant who is an
"eligible Participant" within the meaning of Section 5.3 for any Plan Year in
an amount equal to a percentage, determined by the Employer, in its discretion,
of the Basic Payroll Reduction Contribution made for such Participant.
4.6 EMPLOYER CONTRIBUTIONS. The Employer may make an Employer Contribution
for any Plan Year in an amount determined by the Board in its sole discretion.
4.7 PAYMENT OF CONTRIBUTIONS. Payroll Reduction Contributions shall be
paid to the Trustee by the Employer as soon as is administratively practicable,
but not later than Ninety (90) days following the date the amount would have
been paid to the Participant if the Participant had not made an election under
such Section. Other Employer Contributions for a Plan Year shall be paid to
the Trustee by the Employer not later than the time prescribed by law for
filing the Employer's federal income tax return for the taxable year of the
Employer with or within which such Plan Year ends.
4.8 ROLLOVER CONTRIBUTIONS. The Company may direct the Trustee to accept
from an Employee any cash or other assets the receipt of which would constitute
a rollover contribution (as defined in Code Section 408(d)(3)(A)(ii)), or an
eligible rollover distribution (as defined in Code Section 402(c)(4) which is
excludable from income under Code Section 402(c)(1). Such amounts shall at all
times be fully vested, and shall be kept as a separate Participant Contribution
Account. Unless accepted on a Valuation Date, the assets of such account will
be segregated from the other assets of the Plan until the Valuation Date next
following the date they are accepted, and thereafter will share in the
allocation of earnings and losses under Article V. Such amounts shall not be
considered as a contribution by a Participant for purposes of Section 6.1.
4.9 VOLUNTARY PARTICIPANT CONTRIBUTIONS. No voluntary after-tax
Participant contributions shall be permitted to be made to the Plan after
December 31, 1983.
4.10 TRANSFERS FROM QUALIFIED PLANS.
------------------------------
(a) With the consent of the Administrator, amounts may be transferred from
other Qualified Plans, provided that the trust from which such funds are
transferred permits the transfer to be made and the transfer will not
jeopardize the qualified status of the Plan or create adverse tax
consequences for the Employer. The amounts transferred shall be set up in a
separate subaccount of the Participant's Participant Contribution Account
(referred to as the "Transfer Account") which shall be fully vested at all
times and shall not be subject to forfeiture for any reason.
9
<PAGE> 17
(b) The Administrator may direct that Employee transfers made after a
Valuation Date be segregated into a separate account for each Participant
until such time as the allocations pursuant to this Plan have been made, at
which time they may remain segregated or be invested as part of the general
Trust fund, to be determined by the Administrator.
(c) Prior to accepting any transfers to which this Section applies, the
Administrator may require the Employee to establish that the amounts to be
transferred to this Plan meet the requirements of this Section and may also
require the Employee to provide an opinion of counsel satisfactory to the
Employer that the amounts to be transferred meet the requirements of this
Section.
(d) The Administrator may refuse to accept a transfer for any reason. If
a transfer would jeopardize to qualified status of the Plan for any reason
(including the complexities that may result by reason of Code Section
401(a)(4), 401(a)(11), 401(k), 411(d)(6) and/or 417) the Administrator shall
refuse the transfer unless the Plan can be and is amended to retain such
qualified status after the transfer.
ARTICLE V
ALLOCATIONS
5.1 ESTABLISHMENT OF ACCOUNTS. The Administrator shall establish and
maintain for each Participant, a Payroll Reduction Account, a Participant
Contribution Account, an Employer Contribution Account and a Special Account.
All Payroll Reduction Contributions made pursuant to an election made by a
Participant shall be credited to his Payroll Reduction Account. All rollover
contributions with respect to a Participant under Article IV and any voluntary
after-tax contributions made to the Plan by a Participant (at a time when such
contributions were permitted under the Plan) shall be credited to separate
subaccounts of his Participant Contribution Account. A Participant's Employer
Contribution Account shall consist of all Employer Contributions made on behalf
of a Participant (a) under The ARA Services, Inc. Retirement Savings Plan prior
to the applicable Effective Date, (b) under the Amira Services, Inc. Profit
Sharing Plan prior to the applicable Effective Date, (c) under the Amira
Services, Inc. Pension Plan through December 31, 1993 (which is merged into
this Plan effective January 1, 1994) and (d) pursuant to Sections 4.4, 4.5 and
4.6 (provided, however, that such contributions shall be credited to the
Participant's Special Account instead of his Employer Contribution Account to
the extent that a special designation is made with respect to the contribution
pursuant to Section 7.4 or to the extent otherwise determined by the Company).
5.2 ALLOCATION OF PAYROLL REDUCTION CONTRIBUTIONS. As of each Valuation
Date, the Administrator shall allocate all Payroll Reduction Contributions made
on behalf of a Participant since the preceding Valuation Date to the
Participant's Payroll Reduction Account.
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5.3 ALLOCATION OF MATCHING CONTRIBUTIONS. As of the last day of each
calendar quarter, the Administrator shall allocate all Matching Contributions
made pursuant to Section 4.4 as of the last day of the preceding calendar
quarter to the Employer Contribution Account or Special Account, as the case
may be, of each eligible Participant. The allocable share of each such
Participant shall be an amount equal to Twenty- Five Percent (25%) of the
applicable Basic Payroll Reduction Contribution made for such Participant. For
purposes of this Section, the term "eligible Participant" means a Participant
who is an Employee on the last day of the calendar quarter as of which the
allocation is to be made with a Payroll Reduction Contribution election in
effect on such date or who is designated as an eligible Participant for the
valuation period pursuant to Section 14.13.
5.4 ALLOCATION OF ADDITIONAL MATCHING CONTRIBUTIONS. As of each Anniversary
Date, the Administrator shall allocate all Additional Matching Contributions
made pursuant to Section 4.5 since the preceding Anniversary Date to the
Employer Contribution Account or Special Account, as the case may be, of each
Participant entitled to share in such Additional Matching Contributions. The
allocable share of each such Participant shall be an amount equal to the
percentage determined by the Employer as provided in Section 4.5 of the
applicable Basic Payroll Reduction Contribution made for such Participant.
Notwithstanding the foregoing, the Company, in its discretion, may designate
that the term "eligible Participant" (for a given Plan Year) shall be further
limited to "Non-Highly Compensated Participants" (as defined in Article VII)
who met the requirements described in the preceding sentence.
5.5 ALLOCATION OF EMPLOYER CONTRIBUTIONS. As of each Anniversary Date, the
Administrator shall allocate all Employer Contributions to the Employer
Contribution Account of each eligible Participant. For purposes of this
Section, the term "eligible Participant" means each Participant who is an
Employee on the Anniversary Date as of which the allocation is to be made or
who is designated as an eligible Participant for the Plan Year pursuant to
Section 14.13.
Notwithstanding the foregoing, the Company may, in its discretion, designate
with respect to some or all of the Employer Contribution for a given Plan Year,
that the term "eligible Participant" shall be further limited to "Non-Highly
Compensated Participants" (as defined in Article VII) who met the requirements
described in the preceding sentence. Except as provided otherwise in Section
7.5, Employer Contributions (including any forfeitures treated as Employer
Contributions under the Plan) shall be allocated to the Participants described
in the preceding sentence in the same proportion that each such Participant's
Compensation for the Plan Year bears to the total Compensation of all such
Participants for the Plan Year. If the Plan is part of a "Top-Heavy Group"
(under Article IX) for a Plan Year, a special contribution and allocation may
be required for such Plan Year pursuant to Section 9.2.
5.6 ALLOCATION OF PARTICIPANT CONTRIBUTIONS. As of each Valuation Date, all
Participant Contributions made by a Participant since the preceding Valuation
Date shall be allocated to his Participant Contribution Account.
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5.7 ALLOCATION OF FORFEITURES. As of each Anniversary Date, any forfeitures
occurring under Section 8.4 since the preceding Anniversary Date (excluding any
unallocated forfeitures used to restore prior forfeitures) shall be treated as
Employer contributions and shall be allocated as such under Section 5.5.
5.8 ALLOCATION OF EARNINGS OR LOSSES. As of each Valuation Date, net
appreciation or net depreciation in the fair market value of Plan assets since
the preceding Valuation Date shall be determined and allocated to the Accounts
of each Participant. The determination of such net appreciation or net
depreciation shall take into account appropriate adjustments for contributions,
loan payments and transfers to and distributions, withdrawals, loans and
transfers from such Plan assets during the valuation period. The allocation
shall be made by dividing the fair market value of each Investment Fund as of
the prior Valuation Date into the portion of the value of each Account invested
in such Investment Fund as of such date (taking into account for such purposes
amounts distributed, withdrawn, loaned, transferred or otherwise removed or
segregated on or after such date) and multiplying the quotient by the total
appreciation or depreciation in such Investment Fund to be allocated so as to
determine the share of each such Account. Solely for purposes of making
allocations under the preceding sentence, the value of each Participant's
Payroll Reduction Account as of the prior Valuation Date shall be deemed to
include One-Half (1/2) the amount of Payroll Reduction Contributions made for
the Participant during the period commencing on the day after such prior
Valuation Date and ending on the current Valuation Date, and aggregate fair
market value of the Trust as of the prior Valuation Date shall be deemed to
include One-Half (1/2) of the aggregate of such Payroll Reduction
Contributions.
5.9 INVESTMENTS.
-----------
Subject to procedures, conditions and limitations prescribed by the
Administrator:
(a) PARTICIPANT INVESTMENT DIRECTION. Each Participant may designate on a
form made available by the Administrator the portions (in increments
acceptable to the Administrator) of the amounts to be credited to his
Accounts which are to be invested among the Investment Funds. Any such
designation shall remain in effect until changed by the Participant pursuant
to Subsection (b) below. The Accounts of a Participant who fails to make a
designation shall be invested in the Investment Fund selected by the
Administrator for this purpose.
(b) CHANGES IN INVESTMENT DIRECTION. As of the first day of any calendar
quarter, a Participant may elect to change his designated Investment Fund
percentages under Subsection (a) above for contributions previously credited
and to be subsequently credited to the Accounts. Such changes shall be
subject to the requirement of Fifteen (15) days advance notice in writing of
the election to so change.
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ARTICLE VI
LIMITATIONS ON CONTRIBUTIONS
6.1 OVERALL LIMITATION. Notwithstanding any other Section of the Plan to
the contrary, the Annual Addition to an Employee's Accounts for a Plan Year
(which shall be the Plan's "limitation year") commencing on or after January 1,
1987 shall not exceed the lesser of:
- DOLLAR LIMIT. The greater of Thirty Thousand Dollars ($30,000) or
Twenty-Five Percent (25%) of the defined benefit dollar limitation set forth
in Code Section 415(b) as in effect for such Plan Year; or
- PERCENTAGE LIMIT. Twenty-Five Percent (25%) of the Employee's Section
415 Compensation for such Plan Year.
All Qualified Plans, terminated or not, shall be considered as one plan for
purposes of these limitations.
Notwithstanding the foregoing, the otherwise permissible allocations for any
Participant under this Plan may be reduced to the extent necessary, as
determined by the Administrator, to prevent disqualification of the Plan under
Code Section 415 which imposes the following additional limitations of the
benefits payable to Participants who also may be participating in another
Qualified Plan. If an individual is a Participant at any time in both a
defined benefit plan and a defined contribution plan maintained by a Controlled
Group member, the sum of the Defined Benefit Fraction and the Defined
Contribution Fraction for any Plan Year may not exceed 1.0.
If a Participant's Annual Addition for a Plan Year exceeds the maximum amount
permitted under the foregoing rules as a result of the allocation of
forfeitures, a reasonable error in estimating a Participant's compensation or
under the limited facts and circumstances which the Commissioner of the
Internal Revenue Service finds (by Regulation or otherwise) justify the
elimination of an excess Annual Addition, and if a corresponding adjustment is
not made in any other Qualified Plan, then the Participant's Annual Addition
for the Plan Year shall be reduced to the extent necessary in the following
manner and order:
- Payroll Reduction Contributions shall be returned to the Participant.
- Employer contributions (beginning with any matching contributions made
in connection with returned Payroll Reduction Contributions) under Article IV
shall be reallocated to other Participants in the same manner as Employer
Contributions are allocated under Article V.
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<PAGE> 21
- Employer contributions which cannot be reallocated under the above steps
shall be used to reduce Employer Contributions in the next Plan Year and in
succeeding Plan Years, as necessary.
For purposes of this Section and where specifically referenced in the Plan,
the following additional definitions shall apply:
(a) "ANNUAL ADDITION" means, for any Plan Year, the sum of the following
with respect to any Qualified Plan for such Plan Year:
(i) The Employee's allocable share of contributions from Controlled Group
members;
(ii) The Employee's contributions;
(iii) Forfeitures allocated to the Employee's Accounts;
(iv) Contributions allocated to the Employee's individual medical account,
as defined in Code Section 415(l)(2), under a defined benefit plan sponsored
by a Controlled Group member; and
(v) Any amounts contributed for post-retirement medical benefits or life
insurance benefits to an account established for the Employee under Code
Section 419A(d)(1);
provided, however, that: (a) the Annual Addition for any Plan Year beginning
before January 1, 1987 shall not be recomputed to treat all employee
contributions as Annual Additions; and (b) any amount treated as an Annual
Addition under clause (iv) or (v) above shall be disregarded in applying the
Percentage Limit of the first sentence of this Section 6.1.
(b) "DEFINED BENEFIT FRACTION" shall mean a fraction, the numerator of
which is the sum of the Participant's projected annual benefits under all the
defined benefit plans (whether or not terminated) maintained by Controlled
Group members, and the denominator of which is the lesser of One Hundred
Twenty-Five Percent (125%) of the dollar limitation determined for the
limitation year under Code Sections 415(b) and (d) or One Hundred Forty
Percent (140%) of the average Section 415 Compensation (as determined
pursuant to Code Section 415(b)(3)), including any adjustments under Code
Section 415(b). Notwithstanding the above, if the Participant was a
participant as of the first day of the first limitation year beginning after
December 31, 1986, in one or more defined benefit plans maintained by
Controlled Group members which were in existence on May 6, 1986, the
denominator of this fraction will not be less than the sum of the annual
benefits under such plans which the Participant had accrued as of the close
of the last limitation year beginning before January 1, 1987, disregarding
any changes in terms
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<PAGE> 22
and conditions of such plans after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Code Section 415 for all limitation years
beginning before January 1, 1987.
(c) "DEFINED CONTRIBUTION FRACTION" shall mean a fraction, the numerator
of which is the sum of the Annual Additions to the Participant's accounts
under all defined contribution plans (whether or not terminated) maintained
by a Controlled Group member 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 a Controlled Group member, and Annual Additions
attributable to all welfare benefit funds, as defined in Code Section 419(e)
and individual medical accounts, as defined in Code Section 415(1)(2),
maintained by a Controlled Group member), and the denominator of which is the
sum of the maximum aggregate amounts for the current and all prior limitation
years of service with a member of the Controlled Group (regardless of whether
a defined contribution plan was maintained by such member). The maximum
aggregate amount in any limitation year is the lesser of One Hundred
Twenty-Five Percent (125%) of the dollar limitation determined under Code
Sections 415(b) and (d) in effect under Code section 415(c)(1)(A) or
Thirty-Five Percent (35%) of the Participant's Section 415 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 a Controlled Group member which
were in existence on May 6, 1986, the numerator of the Defined Contribution
Fraction will be adjusted if the sum of such fraction and the Defined Benefit
Fraction would otherwise exceed One (1) 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 One (1) times (ii) the denominator of the Defined
Contribution Fraction, will be permanently subtracted from the numerator of
the Defined Contribution Fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last limitation year
beginning before January 1, 1987, and disregarding any changes in the terms
and conditions of such plans made after May 5, 1986, but using the Code
Section 415 limitation applicable to the first limitation year beginning on
or after January 1, 1987.
(d) "SECTION 415 COMPENSATION" means the Participant's compensation
received from all members of the Controlled Group during the Plan Year as
determined under Code Section 415 and the Regulations thereunder, determined
without regard to Section 6.2.
6.2 COMPENSATION LIMITATION.
(a) For Plan Years commencing after December 31, 1988, a Participant's
Compensation during any Plan Year in excess of Two Hundred Thousand Dollars
($200,000) (as adjusted by the Secretary of the Treasury using the Adjustment
Factor) shall be disregarded.
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(b) Except as may be provided otherwise by Regulations, the Compensation
limitation described in Subsection (a), above, shall be applied by
aggregating the Compensation of all Participants in an Immediate Family and
by treating members of such Immediate Family as a single Participant. For
purposes of this Subsection (b):
(i) an "Immediate Family" for a Plan Year shall be a group of
Participants that consists of a Key Family Member, the Key Family Member's
spouse and the Key Family Member's lineal descendants who have not attained
age Nineteen (19) before the close of the Plan Year; and
(ii) a person shall be a "Key Family Member" for a Plan Year only if the
person both is a "highly compensated employee" (within the meaning of Code
Section 414(q)) for such Plan Year and, during such Plan Year or the
immediately preceding Plan Year, is either: a Five Percent Owner; or in the
group consisting of the Ten (10) most highly compensated employees ranked on
the basis of "compensation" (within the meaning of Code Section 414(q)(7))
paid by Controlled Group members. In the event that an Immediate Family's
Compensation is limited by this Subsection (b), the amount of Compensation
taken into account for each Participant who is a member of the Immediate
Family shall, except as may be provided by Regulations, be determined by
multiplying the Participant's total Compensation (determined without regard
to this Section) for the Plan Year by a fraction, the numerator of which is
the dollar limitation described in Subsection (a), above, for the Plan Year
and the denominator of which is the total Compensation (determined without
regard to this Section) of all Participants in the Immediate Family for the
Plan Year.
6.3 DEDUCTIBILITY LIMITATION. The total amount contributed to the Plan by
the Employer for any taxable year of the Employer shall not exceed the greater
of: (a) Fifteen Percent (15%) of the total Compensation of all Participants
for such taxable year; and (b) the maximum amount deductible under Code Section
404 with respect to contributions made on account of such taxable year.
6.4 DOLLAR LIMITATION ON ELECTIVE DEFERRALS. For calendar years
beginning after December 31, 1986, the Elective Deferrals made on behalf of any
Participant during any calendar year to this Plan or to any other plan or
arrangement maintained by a Controlled Group member shall be limited so as not
to exceed the Dollar Limitation in effect for such calendar year. If the
Elective Deferrals of a Participant for a calendar year exceed the Dollar
Limitation in effect for such year, the Participant may file a claim with the
Administrator to have the Excess Deferral distributed to the Participant
together with Allocable Income or Loss. In order to be effective, the claim
must be submitted in writing to the Administrator no later than March 1 of the
calendar year following the calendar year during which the Participant made the
Excess Deferral and must specify the amount of such Excess Deferral.
Notwithstanding any other provision of the Plan to the contrary, the
Administrator may instruct the Trustee to distribute a Participant's Excess
Deferral, together with Allocable Income or Loss,
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<PAGE> 24
by reason of a claim submitted by a Participant in accordance with the
foregoing requirements or if the Administrator otherwise determines that such
Excess Deferral exists; provided, however, that no such distribution shall be
made later than April 15 of the calendar year following the calendar year
during which the Participant made the Excess Deferral.
For purposes of this Section, the following additional definitions shall
apply:
(a) "ALLOCABLE INCOME OR LOSS" shall equal the amount determined by
multiplying the income or loss allocable to the Participant's Payroll
Reduction Account for the calendar year during which the Excess Deferral was
made by a fraction, the numerator of which is the Excess Deferral and the
denominator of which is the balance in the Participant's Payroll Reduction
Account as of the last day of such calendar year, reduced by income or
increased by losses allocable to such Account with respect to such calendar
year.
(b) "DOLLAR LIMITATION" means the dollar limitation in effect under Code
Section 402(g) for the calendar year (as determined by the Secretary of the
Treasury using the Adjustment Factor).
(c) "ELECTIVE DEFERRALS" means the total amount of Payroll Reduction
Contributions made during a calendar year by a Participant pursuant to
Section IV and any amounts deferred by the Participant during such calendar
year under any other plan or arrangement meeting the requirement set forth in
Code Sections 401(k), 408(k) or 403(b). For purposes of determining the
calendar year during which Elective Deferrals are made, amounts shall be
treated as made during the calendar year in which the amounts would have been
included in the Participant's gross income for federal income tax purposes
but for the deferral. Notwithstanding the foregoing, deferred amounts
attributable to services performed in 1986 and described in Section
1105(c)(5) of the Tax Reform Act of 1986 shall not be subject to the Dollar
Limitation and shall not be treated as Elective Deferrals hereunder.
(d) "EXCESS DEFERRAL" means the amount by which the Participant's Elective
Deferrals for a calendar year exceed the Dollar Limitation in effect for such
year, reduced by any such amount that is distributed to the Participant or
recharacterized under Section 7.2 with respect to such year.
ARTICLE VII
NONDISCRIMINATION LIMITATIONS
7.1 DEFINITIONS. For purposes of this Article VII and where specifically
referenced in the Plan, the following additional definitions shall apply:
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(a) "ACTUAL CONTRIBUTION PERCENTAGE" or "ACP" means the average (expressed
as a percentage) of the Contribution Percentages of each Participant in the
specified group determined as of the end of the Plan Year.
(b) "ACTUAL DEFERRAL PERCENTAGE" or "ADP" means the average (expressed as
a percentage) of the Deferral Percentages of each Participant in the
specified group determined as of the end of the Plan Year.
(c) "CONTRIBUTION PERCENTAGE" means the ratio (expressed as a percentage)
that a Participant's Qualified Contributions during a Plan Year bears to the
Participant's Testing Compensation during such Plan Year. For purposes of
determining the Contribution Percentage of a Participant who is a Family
Group Participant, the Qualified Contributions and Testing Compensation of
such Participant shall include the Qualified Contributions and Testing
Compensation of Family Members of such Family Group Participant, and such
Family Members shall otherwise be disregarded in determining ACPs.
(d) "CONTROLLED GROUP EMPLOYEES" means Leased Employees and all other
individuals employed by a Controlled Group member.
(e) "DEFERRAL PERCENTAGE" means the ratio (expressed as a percentage) that
a Participant's Qualified Deferrals during a Plan Year bears to the
Participant's Testing Compensation during such Plan Year. For purposes of
determining the Deferral Percentage of a Participant who is a Family Group
Participant, the Qualified Deferrals and Testing Compensation of such
Participant shall include the Qualified Deferrals and Testing Compensation of
Family Members of such Family Group Participant and such Family Members shall
otherwise be disregarded in determining ADPs.
(f) "EXCESS ACP CONTRIBUTIONS" means the amount by which the Qualified
Contributions of a Highly Compensated Participant for a Plan Year exceed the
maximum amount permitted for such Plan Year as determined under Section 7.3.
(g) "EXCESS ADP CONTRIBUTIONS" means the amount by which the Qualified
Deferrals of a Highly Compensated Participant for a Plan Year exceed the
maximum amount permitted for such Plan Year as determined under Section 7.2.
(h) "FAMILY GROUP PARTICIPANT" means a Controlled Group Employee who is a
Participant and who, during the Plan Year for which the determination of such
status is made, was either: (i) a Five Percent Owner; or (ii) in the group
consisting of the Ten (10) Highly Compensated Employees paid the greatest
Testing Compensation during such Plan Year.
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(i) "FAMILY MEMBER" means those individuals who, on any day during the
Plan Year, are members of the group consisting of the Family Group
Participant's spouse, lineal ascendant and descendant, and the spouses of
such lineal ascendants and descendants.
(j) "HIGHLY COMPENSATED PARTICIPANT" means each Employee who is both a
Participant and a Highly Compensated Employee with respect to the Plan Year
(effective for Plan Years beginning after December 31, 1987 or such later
date permitted under Regulations, such term shall include any such person who
terminates employment during such Plan Year).
(k) "HIGHLY COMPENSATED EMPLOYEE" means each Controlled Group Employee
determined to be a "Highly Compensated Employee" under the following rules:
(i) A "Highly Compensated Employee" means each Controlled Group Employee
who at any time during the Plan Year in which the determination is to be
made or the preceding Plan Year:
(A) was a Five Percent Owner;
(B) received Testing Compensation in excess of Seventy-Five Thousand
Dollars ($75,000) (or such higher amount determined using the Adjustment
Factor);
(C) received Testing Compensation in excess of Fifty Thousand Dollars
($50,000) (or such higher amount determined using the Adjustment Factor)
and was among the Top-Paid Group of Employees for the Plan Year; or
(D) was an officer of a Controlled Group member and received Testing
Compensation greater than Fifty Percent (50%) of the defined benefit
limitation for the Plan Year under Code Section 415(b)(1)(A).
(ii) If any Controlled Group Employee who would otherwise be deemed to be
a "Highly Compensated Employee" during the current Plan Year by reason of
Subparagraph (i)(B), (C) or (D), above, was not a "Highly Compensated
Employee" for the prior Plan Year, the Controlled Group Employee will not be
included if (A) the employee is not among the highest paid (determined on
the basis of Testing Compensation) One Hundred (100) Controlled Group
Employees for the Plan Year in which determination is to be made and (B) the
Company did not elect to consider such Controlled Group Employees as Highly
Compensated Employees.
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(iii) For purposes of determining "Highly Compensated Employees" under
Subparagraph (i)(D), above, the following rules apply:
(A) the number of officers shall not exceed the lesser of (I) Fifty
(50), or (II) the greater of Three (3), or Ten Percent (10%) of the
Controlled Group Employees; and
(B) if, for a Plan Year, no officer of a member of the Controlled Group
is described in Subparagraph (i)(D), above, the highest paid officer of a
Controlled Group member for the Plan Year shall be treated as described in
such Subparagraph.
(iv) If a Controlled Group Employee is a Family Member, then for purposes
of this Subsection (k), such Controlled Group Employee shall not be
considered a Controlled Group Employee and the Testing Compensation paid to
such Controlled Group Employee shall be deemed to have been paid to the
Family Group Participant to which the Controlled Group Employee is so
related.
(v) An individual who is no longer employed by a Controlled Group member
shall be considered a "Highly Compensated Employee" if the individual was a
"Highly Compensated Employee" either (A) when the individual terminated
employment with the Controlled Group member or (B) at any time after
attaining age Fifty-Five (55).
(vi) Notwithstanding the foregoing, the Administrator may elect to
determine "Highly Compensated Employees" for Plan Years beginning in 1987
and 1988 under the transition rule set forth in Regulations promulgated
under Code Section 414(q), provided the requirements for such transition
rule are met. Further, the Administrator may elect to determine "Highly
Compensated Employees" under the "simplified method" set forth in Code
Section 414(q), provided the election requirements for such method are met.
(l) "INCOME OR LOSS" with respect to a Highly Compensated Participant's
Excess ACP Contributions or Excess ADP Contributions, as the case may be, for
a Plan Year shall equal the amount determined by multiplying the income or
loss allocable to the Participant's Account containing the Excess ACP
Contributions or Excess ADP Contributions, as the case may be, for such Plan
Year by a fraction, the numerator of which is the Excess ACP Contribution or
Excess ADP Contribution, as the case may be, and the denominator of which is
the balance in such Account as of the end of such Plan Year, reduced by
income or increased by losses allocable to such Account with respect to such
Plan Year.
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(m) "NON-HIGHLY COMPENSATED PARTICIPANT" means each Employee who is a
Participant but not a Highly Compensated Employee or a Family Member with
respect to the Plan Year (effective for Plan Years beginning after December
31, 1987 or such later date permitted under Regulations, such term shall
include any such person who terminates employment during such Plan Year).
(n) "TOP-PAID GROUP OF EMPLOYEES" shall mean the group consisting of the
top Twenty Percent (20%) of Controlled Group Employees when ranked on the
basis of Testing Compensation. The determination of the "Top-Paid Group of
Employees" shall be made on the last day of the Plan Year for which the
determination is to be made and Participants who terminate employment during
the Plan Year shall be considered. Except to the extent that the
Administrator elects to the contrary as described below, the following
Controlled Group Employees shall not be considered in determining the number
of Controlled Group Employees in the "Top-Paid Group of Employees":
(i) Controlled Group Employees who have not completed Six (6) months of
service with a Controlled Group member;
(ii) Controlled Group Employees who normally work for Controlled Group
members less than Seventeen and One-Half (17 1/2) Hours of Service per week;
(iii) Controlled Group Employees who normally work for Controlled Group
members less than or equal to Six (6) months per calendar year;
(iv) Controlled Group Employees who have not attained age Twenty-One (21);
(v) Except to the extent provided in Regulations, Controlled Group
Employees who are included in a unit of employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining agreement
between employee representatives and a Controlled Group member; and
(vi) Controlled Group Employees who are nonresident aliens and receive no
earned income within the meaning of Code Section 911(d)(2), from a
Controlled Group member from sources within the United States (as defined in
Code Section 861(a)(3)).
Notwithstanding the foregoing, the Administrator may elect to apply
Subsections (i), (ii), (iii), or (iv) by substituting a shorter period of
service, smaller number of hours or months, or lower age for the period of
service, number of hours or months, or age (as the case may be) than that
specified in such Subsections.
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(o) "QUALIFIED CONTRIBUTIONS" means, with respect to a Participant for a
Plan Year, the sum of the following contributions to the Plan for such Plan
Year:
(i) Matching Contributions and any other employer contributions which are
made on account of after-tax employee contributions or "elective deferrals"
(as defined in Code Section 402(g)(3));
(ii) After-tax employee contributions; and
(iii) Contributions treated as Qualified Contributions pursuant to a
special designation made by the Company under this Article.
In the event that this Plan satisfies the requirements of Code Section 410(b)
only if aggregated with one or more other plans, or if one or more other
plans satisfy the requirements of Code Section 410(b) only if aggregated with
this Plan, then the preceding sentence shall be applied as if this Plan and
all such other plans were a single plan. If a Highly Compensated Participant
is eligible to make contributions or to receive an allocation of
contributions of the types described in paragraphs (i), (ii) or (iii), above,
under any other plan maintained by a Controlled Group member, then: such
contributions shall be aggregated for purposes of determining the Highly
Compensated Participant's Qualified Contributions to this Plan to the extent
the contributions would be described in such paragraphs had the contributions
been actually made to this Plan; and if this Plan and such other Plan(s) have
different plan years, then such aggregation shall be made with respect to the
plan years that end with or within the same calendar year, effective for plan
years beginning after December 31, 1988.
(p) "QUALIFIED DEFERRALS" means, with respect to a Participant for a Plan
Year, the sum of the following contributions to the Plan for such Plan Year:
(i) Payroll Reduction Contributions and any other contributions with
respect to which the Participant may elect to have contributed by the
Company on his behalf or paid to him in cash; and
(ii) Contributions treated as Qualified Deferrals pursuant to a special
designation made by the Company under this Article.
In the event that this Plan satisfies the requirements of Code Section 410(b)
only if aggregated with one or more other plans, or if one or more other
plans satisfy the requirements of Code Section 410(b) only if aggregated with
this Plan, then the preceding sentence shall be applied as if this Plan and
all such other plans were a single plan. If a Highly Compensated Participant
is eligible to make contributions or to receive an allocation of
contributions of the types described in paragraphs (i) and (ii), above, under
any other plan maintained by a Controlled Group member, then: such
contributions shall be aggregated for purposes of determining the Highly
Compensated Participant's
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<PAGE> 30
Qualified Deferrals to this Plan to the extent the contributions would be
described in such paragraphs had the contributions been actually made to this
Plan; and if this Plan and such other Plan(s) have different plan years, then
such aggregation shall be made with respect to the plan years that end with
or within the same calendar year, effective for plan years beginning after
December 31, 1988. Qualified Deferrals shall be determined without regard to
the limitation set forth in Section 6.4. A Payroll Reduction Contribution
shall be taken into account for a Plan Year only if it: (a) relates to
Compensation that either would have been received by the Participant in such
Plan Year (but for the deferral election) or is attributable to services
performed by the Participant in such Plan Year and would have been received
by the Participant within Two and One-Half (2 1/2) months after the close of
the Plan Year (but for the deferral election); (b) it is allocated to the
Participant's Accounts as of a date within such Plan Year and is not
contingent on participation or performance of services after such date; and
(c) is actually paid to the Trust no later than Twelve (12) months after the
end of such Plan Year.
(q) "TESTING COMPENSATION" means the measure of an individual's
compensation from Controlled Group members which may be used for testing
purposes under Code Sections 401(k), 401(m), 414(q) and 414(s) and the
Regulations thereunder. To the extent permitted under such Code Sections and
Regulations, Testing Compensation may be measured in different manners for
different purposes and, to the extent required, the Employer shall designate
the method used for each purpose.
7.2 ADP LIMITATION.
--------------
(a) The ADP of the Highly Compensated Participant group for any Plan Year
beginning after December 31, 1986 shall not exceed the larger of the
percentages produced under Test 1 and Test 2, below.
TEST 1 -- The percentage determined by multiplying the ADP for the
Non-Highly Compensated Participant group for the Plan Year by 1.25.
TEST 2 -- The percentage equal to the least of: (i) the ADP of the
Non-Highly Compensated Participant group for the Plan Year multiplied by
2.00; (ii) the ADP of the Non-Highly Compensated Participant group for the
Plan Year plus two percentage points; and (iii) if Test 2 under Section 7.3
is also being utilized for such Plan Year, then such smaller percentage, if
any, as is required under Regulations pertaining to multiple use of this
Test 2 and Test 2 under Section 7.3.
Notwithstanding the foregoing provisions of this Section and pursuant to the
restructuring rules prescribed by Regulations issued under Code Section
401(a)(4) (or other Treasury Department or Internal Revenue Service
pronouncements upon which taxpayers may rely), the above ADP limitation may
be applied separately to different groups of Participants.
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<PAGE> 31
If the ADP of the Highly Compensated Participant group could or would
otherwise exceed the largest percentage determined above, the Administrator
shall take the steps described in paragraph (b) below.
(b) The Administrator may at any time limit the Payroll Reduction
Contributions of any Highly Compensated Participant if the Administrator
determines, in its sole discretion, that the limitation is necessary to
satisfy paragraph (a) above. If the ADP of the Highly Compensated
Participant group exceeds the largest percentage permitted under (a) above,
the Administrator shall reduce the Qualified Deferrals of Highly Compensated
Participants under a leveling method whereby the Qualified Deferrals of the
Highly Compensated Participant(s) with the highest Deferral Percentage are
reduced by the lesser of:
(i) the smallest amount that would enable the requirements of (a), above,
to be satisfied; or
(ii) the amount that would reduce the Deferral Percentage of such
Participant(s) to the Deferral Percentage of the Highly Compensated
Participant(s) with the next highest Deferral Percentage,
and the foregoing process shall be repeated through each successively lower
level of Highly Compensated Participant Deferral Percentages until the
requirements of (a), above, are satisfied. The amount of a Highly
Compensated Participant's reduction under the preceding sentence shall be his
Excess ADP Contributions.
The Excess ADP Contribution of each Highly Compensated Participant shall be
distributed to such Highly Compensated Participant (together with Income or
Loss) on or before the last day of the Plan Year next following the Plan Year
for which the Excess ADP Contribution was made; provided, however, that if
the Employer desires to avoid the Ten Percent (10%) excise tax imposed by
Code Section 4979, such distribution shall be made on or before the end of
the Two and One-Half (2 1/2) month period following the end of the Plan Year
for which the Excess ADP Contribution was made. Distributions under the
preceding sentence may be made irrespective of any other provision of the
Plan. In lieu of the distribution of an Excess ADP Contribution described
above, some or all of the Excess ADP Contribution may be recharacterized as a
fully vested and nonforfeitable after-tax Employee contribution, subject to
the following rules:
(i) recharacterization shall be deemed to have occurred on the date the
last Participant whose Excess ADP Contribution is to be recharacterized is
notified of the recharacterization and the resulting tax consequences;
provided, however, for Plan Years ending on or before August 8, 1988, such
recharacterization and notification may be postponed but not later than
October 24, 1988;
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<PAGE> 32
(ii) the amount of the recharacterization shall not exceed the amount of
the Participant's Payroll Reduction Contributions for the Plan Year and,
when added to the Participant's other after-tax contributions to the Plan,
do not exceed Ten Percent (10%) of the Participant's aggregate Compensation
since he became a Participant in the Plan;
(iii) recharacterized amounts shall be: (I) treated as voluntary
after-tax contributions for purposes of Code Section 401(a)(4) and
Regulation Section 1.401(k)-1(b); (II) treated as an Employer Contribution
for purposes of Article IX; and (III) for Plan Years ending after December
31, 1988, recharacterized amounts shall be subject to the special
distribution limitations of Code Section 401(k)(2) and (10); provided,
however, that recharacterized amounts relating to Plan Years ending on or
before October 24, 1988 shall not be subject to such special distribution
limitations; and
(iv) any Excess ADP Contribution recharacterized shall include Income or
Loss.
A Family Group Participant's Excess ADP Contributions shall be allocated
among each of the Family Group Participant's Family Members in proportion to
their Qualified Deferrals for the Plan Year and the distribution and/or
recharacterization provisions of this Subsection (b) shall be applied after
such allocation.
7.3 ACP LIMITATION.
--------------
(a) The ACP of the Highly Compensated Participant group for any Plan Year
beginning after December 31, 1986 shall not exceed the larger of the
percentages produced under Test 1 and Test 2, below.
TEST 1 -- the percentage determined by multiplying the ACP for the
Non-Highly Compensated Participant group for the Plan Year by 1.25.
TEST 2 -- the percentage equal to the least of: (i) the ACP of the
Non-Highly Compensated Participant group for the Plan Year multiplied by
2.00; (ii) the ACP of the Non-Highly Compensated Participant group for the
Plan Year plus two percentage points; and (iii) if Test 2 under Section 7.2
is also being utilized for such Plan Year, then such smaller percentage, if
any, as is required under Regulations pertaining to multiple use of this
Test 2 and Test 2 under 7.2.
Notwithstanding the foregoing provisions of this Section and pursuant to the
restructuring rules prescribed by Regulations issued under Code Section
401(a)(4) (or other Treasury Department or Internal Revenue Service
pronouncements upon which taxpayers may
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<PAGE> 33
rely), the above ACP limitation may be applied separately to different groups
of Participants.
If the ACP of the Highly Compensated Participant group would otherwise exceed
the largest percentage determined above, the Administrator shall take the
steps described in paragraph (b) below.
(b) If the ACP of the Highly Compensated Participant group exceeds the
largest percentage permitted under (a) above, the Administrator shall reduce
the Qualified Contributions of Highly Compensated Participants under a
leveling method whereby the Qualified Contributions of the Highly Compensated
Participant(s) with the highest Contribution Percentage are reduced by the
lesser of:
(i) the smallest amount that would enable the requirements of (a), above,
to be satisfied; or
(ii) the amount that would reduce the Contribution Percentage of such
Participant(s) to the Contribution Percentage of the Highly Compensated
Participant(s) with the next highest Contribution Percentage,
and the foregoing process shall be repeated through each successively lower
level of Highly Compensated Participant Contribution Percentages until the
requirements of (a), above, are satisfied. The amount of a Highly
Compensated Participant's reduction under the preceding sentence shall be his
Excess ACP Contribution.
The Administrator shall determine the vested and non-vested portion of each
Highly Compensated Participant's Excess ACP Contribution and shall allocate
Income or Loss proportionally between such portions. On or before the last
day of the Plan Year following the Plan Year for which the Excess ACP
Contribution was made, the Administrator shall cause the non-vested portion
of each Highly Compensated Participant's Excess ACP Contribution (together
with its proportionate share of Income or Loss) to be forfeited and
reallocated among Participants (other than Highly Compensated Participants
with Excess ACP Contributions for such Plan Year) in accordance with Article
V and shall distribute the vested portion of each Highly Compensated
Participant's Excess ACP Contribution (together with its proportionate share
of Income or Loss) to such Highly Compensated Participant. If the Employer
desires to avoid the Ten Percent (10%) excise tax imposed by Code Section
4979, the distributions and forfeitures described in the preceding sentence
shall be made on or before the end of the Two and One-Half (2 1/2) month
period following the end of the Plan Year for which the Excess ACP
Contribution was made. Distributions and forfeitures under this paragraph
(b) may be made irrespective of any other provision of the Plan. A Family
Group Participant's Excess ACP Contributions shall be allocated among and
distributed to or forfeited by (as the case may be) each of the Family Group
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<PAGE> 34
Participant's Family Members in proportion to their Qualified Contributions
for the Plan Year.
7.4 SPECIAL DESIGNATIONS. Subject to applicable rules set forth in
Regulations, the Company, for any Plan Year beginning after December 31, 1986,
may at any time make the following special designations with respect to
contributions allocable to all Participants or to contributions allocable to
Non-Highly Compensated Participants:
(a) The Company may designate that the contributions made pursuant to
Sections 4.4 and 4.5 for a Plan Year be treated as Qualified Deferrals for
purposes of Section 7.2 and any contributions so designated shall be
allocated to the Special Accounts of Participants in accordance with Article
V.
(b) The Company may designate that Payroll Reduction Contributions made
pursuant to Sections 4.1 and 4.2 for a Plan Year be treated as Qualified
Contributions for purposes of Section 7.3.
To the extent provided in Code Section 401(k) or 401(m) and Regulations
thereunder, contributions which are treated as Qualified Deferrals by reason of
the designation described in (a) above shall not be treated as Qualified
Contributions for purposes of Section 7.3.
7.5 SPECIAL ALLOCATIONS. Notwithstanding the allocation methodology set
forth in Section 5.4, the Company, for any Plan Year beginning after December
31, 1986, may designate that (as to all or some portion of) Employer
Contributions (including forfeitures treated as Employer Contributions under
the Plan) for a Plan Year shall be allocated to Non-Highly Compensated
Participants who meet the eligibility requirements described in the second
sentence of Section 5.4 in a manner such that:
(a) the Non-Highly Compensated Participant who meets such requirements
and has the least amount of Compensation for the Plan Year shall receive an
allocation of an amount equal to the lesser of: (i) such Participant's
Compensation multiplied by Ten Percent (10%); or (ii) the amount to be
allocated under this Section for the Plan Year; and
(b) the process described in (a), above, shall be repeated with as many
other Non-Highly Compensated Participants who meet such requirements
(proceeding to the Non-Highly Compensated Participant with the next lowest
Compensation and so on) until the amount to be allocated under this Section
has been fully allocated;
provided, however, that, if the amount to be allocated under this Section
cannot be fully allocated under the above methodology, any remaining amount
shall be allocated pursuant to Section 5.4.
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<PAGE> 35
ARTICLE VIII
DISTRIBUTIONS
8.1 RETIREMENT BENEFITS. A Participant who separates from employment with
the Employer on or after his Normal Retirement Date shall receive a
distribution of his Accounts in the form determined under Section 8.5
commencing at the time determined under Section 8.6. A distribution hereunder
shall be based on the value of the Participant's Accounts as of the last
Valuation Date before such distribution, adjusted for contributions,
withdrawals and loans made on behalf of the Participant after such Valuation
Date.
8.2 DISABILITY BENEFITS. A Participant who separates from employment with
the Employer on account of Total and Permanent Disability shall become fully
vested in his Accounts (if not already fully vested) and shall receive a
distribution in the form determined under Section 8.5 commencing as of the
Anniversary Date coinciding with or next following the Participant's Normal
Retirement Date; provided, however, that such Participant may, at any time
after his termination of employment, elect on a form provided by the
Administrator to have such distribution commence as soon as is practicable
after his election. A distribution hereunder shall be based on the value of
the Participant's Accounts as of the last Valuation Date before such
distribution, adjusted for contributions, withdrawals and loans made on behalf
of the Participant after such Valuation Date.
8.3 DEATH BENEFITS.
--------------
(a) DISTRIBUTION. Upon the death of a Participant while in the employment
of the Employer, the Participant's Accounts shall become fully vested (if not
already fully vested) and shall be distributed to the Participant's
Beneficiary in the form determined under Section 8.5 commencing at the time
determined under Section 8.6. Upon the death of a Participant after his
separation from employment with the Employer, the vested portion of the
Participant's Accounts shall be distributed to his Beneficiary in the form
determined under Section 8.5 commencing at the time determined under Section
8.6. A distribution hereunder shall be based on the value of the
Participant's Accounts as of the last Valuation Date before such
distribution, adjusted for contributions, withdrawals and loans made on
behalf of the Participant after such Valuation Date. No other death benefit
shall be payable under this Plan.
(b) BENEFICIARY. A Participant shall have the right to name and change
primary and contingent beneficiaries under the Plan on a form provided by the
Administrator. If upon the death of a Participant, the Participant has no
surviving spouse or the Participant's surviving spouse has consented or is
deemed to have consented to the designation of a Beneficiary in the manner
required by Subsection (c), below, the person or persons so designated shall
be the Participant's Beneficiary under the Plan. If upon the death of a
Participant, the Participant's spouse survives him and such spouse has not
consented and is not deemed to have consented to the designation of another
Beneficiary
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<PAGE> 36
in the manner required by Subsection (c), below, then such spouse shall be
the Participant's sole Beneficiary under the Plan (notwithstanding any
designation by the Participant to the contrary). In the event that a
Participant has no Beneficiary or no Beneficiary survives him, then the
amounts otherwise payable to the Participant's Beneficiary shall be paid to
the person in, or equally divided among all the persons in, the first of the
following successive preference Beneficiaries in which there shall be any
person surviving such Participant: (i) the Participant's spouse; (ii) the
Participant's children; and (iii) the Participant's estate.
(c) SPOUSAL CONSENT. For a married Participant dying on or after August
23, 1984, the designation of a Beneficiary pursuant to Subsection (b), above,
shall be effective only if: (i) the Participant's spouse consents to the
designation of a specific Beneficiary in writing or permits in writing the
Participant to designate any Beneficiary without further spousal consent;
(ii) such consent acknowledges the effect of such a designation; and (iii)
such consent is witnessed by a notary public or plan representative and is
filed with the Administrator. If a Participant's spouse cannot be located,
such spouse shall in the discretion of the Administrator be deemed to have
consented to the Participant's Beneficiary designation if the Participant
certifies on a form provided by the Administrator that such spouse cannot be
located.
8.4 TERMINATION OF EMPLOYMENT AND VESTING.
-------------------------------------
(a) DISTRIBUTION. A Participant who separates from employment with the
Employer other than on account of Total and Permanent Disability, and prior
to the earlier of his death or Normal Retirement Date, shall receive a
distribution of the vested portion of his Accounts (as determined under
Subsection (b) of this Section) in the form determined under Subsection (a)
of Section 8.5 commencing as of the Anniversary Date coinciding with or next
following the Participant's Normal Retirement Date. In lieu of the
distribution payable under the preceding sentence, such Participant may,
within Ninety (90) days after his termination of employment, elect to receive
a lump sum distribution of the vested portion of his Accounts as soon as is
practicable after such election.
Notwithstanding the foregoing, distributions shall be made in accordance with
Subsection (b) of Section 8.5, if applicable, with respect to any Participant
otherwise entitled to a distribution under this Section. A distribution
hereunder shall be based on the value of the Participant's Accounts as of the
last Valuation Date before such distribution, adjusted for contributions,
withdrawals and loans made on behalf of the Participant after such Valuation
Date. The Administrator may direct the Trustee to segregate the vested portion
of a terminated Participant's Accounts into a separate earmarked investment
account, in which case, such account shall be valued on a separate basis for
purposes of Article V.
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<PAGE> 37
(b) VESTING. A Participant's Payroll Reduction Account, Participant
Contribution Account and Special Account shall be fully vested and
nonforfeitable at all times. The portion of a Participant's Employer
Contribution Account which shall be vested and nonforfeitable shall be
determined in accordance with the following schedule (provided, however, that
with respect only to a Participant's Employer Contribution Account
attributable to participation in the Amira Services, Inc. Profit Sharing
and/or Pension Plans, the following schedule shall apply only for Plan Years
beginning after December 31, 1993 and only with respect to such Participants
credited with at least One (1) Hour of Service in a Plan Year commencing
after such date):
Years of Service Vesting Percentage
---------------- ------------------
Less than 3 0%
3 or more 100%
Notwithstanding the foregoing, (i) all Accounts of a Participant who attains
his Normal Retirement Date while employed by the Employer shall become fully
vested and nonforfeitable at such time and (ii) all Accounts of a Participant
who, while employed by the Employer, both has attained age Fifty-Five (55)
and has completed at least Ten (10) Years of Service shall become fully
vested and nonforfeitable at such time.
(c) FORFEITURES. The nonvested portion of the Employer Contribution
Account of a Participant whose employment with the Employer is terminated
other than on account of Total and Permanent Disability, and prior to the
earlier of his death or Normal Retirement Date, shall be forfeited as of the
date of such termination. Amounts so forfeited shall be allocated under
Article V. If a person who has suffered a forfeiture under the Plan is
reemployed after incurring Five (5) consecutive Breaks in Service (or One (1)
Break in Service incurred prior to the first Plan Year beginning after
December 31, 1984), such person shall have no right to restoration of the
amounts previously forfeited in connection with the person's previous
termination of employment. If a person who has suffered a forfeiture
hereunder is reemployed by the Employer prior to incurring Five (5)
consecutive Breaks in Service (and the person had not incurred One (1) Break
in Service prior to the first Plan Year beginning after December 31, 1984,
with respect to the amount so forfeited), such person shall receive a
restoration of the amount of his Account balance that was forfeited (without
adjustment for subsequent gains or losses) as follows:
(i) If such person had received distribution of his entire vested
interest under the Plan by the end of the second Plan Year following the
Plan Year in which his termination of employment occurred, restoration shall
be made under this Subsection (c) to his Employer Contribution Account, but
only if and when the full amount of the distribution is repaid to the Plan
by the person on or before the earlier of: the day before the Fifth (5th)
anniversary of the person's reemployment date; or the date as of which the
person has incurred Five (5)
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<PAGE> 38
consecutive Breaks in Service commencing after the distribution. If a person
receives a restoration under this clause (i), the amount repaid to the Plan
shall be credited to the respective Accounts of the person from which
distribution was made and vesting with respect to such person's Accounts
shall be determined under Subsection (b) above.
(ii) If such person had not received distribution of his entire vested
interest under the Plan by the end of the second Plan Year following the
Plan Year in which his termination of employment had occurred, restoration
shall be made under this Subsection (c); provided, however, that if any
amount had been distributed to the person within such time period, the
restoration shall be made to a separate account and the vested portion of
such separate account from time to time shall be an amount ("X") determined
by the following formula:
X = P(AB + D) - D
For purposes of applying such formula: (P) is the vested percentage at the
relevant time; "AB" is the balance of the separate account at the relevant
time and; "D" is the amount distributed to the Participant from the Employer
Contribution Account upon termination. If a person receives a restoration
under this clause (ii), his regular Employer Contribution Account shall
contain any allocation made (but not including any restoration made under
this Subsection (c)) on his behalf after his reemployment and vesting with
respect to such Account shall be determined under Subsection (b) above.
Any restoration made under this Subsection (c) shall first be made out of any
unallocated forfeitures and, if such forfeitures are insufficient to restore
a person's account balance, the Employer shall contribute the amount
necessary to restore such person's account balance without regard to current
or accumulated profits or such restoration may be made out of unallocated
Trust earnings. Any repayment or restoration made pursuant to this
Subsection (c) shall not be considered an "Annual Addition" (within the
meaning of Section 6.1).
(d) VESTING AFTER WITHDRAWALS. If a withdrawal is made under Article VIII
from the Employer Contribution Account of a Participant who is not One
Hundred Percent (100%) vested at the time of such withdrawal, then the
Employer shall separately account for the portion of his Employer
Contribution Account that was not vested at the time of the withdrawal, and
the vested amount of such portion from time to time shall equal an amount
("X") determined under the following formula:
X = P(AB + D) - D
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<PAGE> 39
For purposes of applying such formula: "P" is the vested percentage at the
relevant time; "AB" is the account balance at the relevant time and; "D" is
the amount previously withdrawn by the Participant. If the Employer
Contribution Account of a person who received a withdrawal therefrom is
subsequently to receive an allocation of Employer contributions, the Employer
shall separately account for such contributions and vesting with respect to
such contributions shall be in accordance with Section 8.4(b), above.
8.5 FORM OF DISTRIBUTION.
(a) GENERAL. All distributions under the Plan shall be made in the form
of one lump sum cash payment; provided, however, that any distributions being
made with respect to a Participant who terminated employment prior to the
Effective Date (as may have been permitted under the terms of the prior Plan,
subject to the Administrator's discretion) shall be determined under the
terms of the Plan in effect at such termination.
(b) SMALL BENEFITS. If the vested portion of a Participant's Accounts is
Three Thousand Five Hundred Dollars ($3,500) or less at the time a
Participant terminates employment with the Employer (as well as at the time
distribution is made pursuant to this Subsection), such vested portion shall
be distributed to the Participant (or the Participant's Beneficiary if the
distribution is to be made after the Participant's death) in a lump sum cash
payment as soon as practicable after such termination of employment,
notwithstanding any other provision of the Plan and in lieu of all other
benefits and benefit forms under the Plan. For all purposes of the Plan, a
person with no vested Account balance as of termination of employment shall
be deemed to be fully cashed-out upon such termination of employment and
shall not obtain a vested interest in the Plan by reason of the subsequent
termination or partial termination of the Plan.
8.6 TIME OF DISTRIBUTION.
(a) NORMAL COMMENCEMENT OF DISTRIBUTIONS. Benefits under the Plan shall
become payable as of the earlier of: (i) the date a Participant or
Beneficiary becomes entitled to receive a distribution under this Article; or
(ii) the date or dates required under Subsection (b), (c) or (d) of this
Section. Actual payment of such benefits shall commence as soon as
practicable, but not later than the date or dates required under Subsection
(b), (c), or (d), below.
(b) REQUIRED COMMENCEMENT. The payment of benefits under the Plan to a
Participant shall have begun not later than the Sixtieth (60th) day after the
close of the Plan Year in which the latest of the following occurs:
(i) the date on which the Participant attains age Sixty-Five (65);
(ii) the Tenth (10th) anniversary of the date on which the Participant
commenced participation in the Plan;
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<PAGE> 40
(iii) the date as of which the Participant terminates employment with the
Employer; or
(iv) such later date as may be consented to by the Participant, if
otherwise permitted under the Plan.
(c) MINIMUM DISTRIBUTION. Notwithstanding any other provision of the Plan
to the contrary, the distribution of benefits to a Participant or Beneficiary
under the Plan shall commence no later than the applicable "Required
Beginning Date" (as defined below) and the entire amount to be so distributed
shall be distributed in a manner or over a period of time that satisfies the
minimum distribution requirements of Code Section 401(a)(9) and the
Regulations thereunder. For purposes of this Subsection (c), the term
"Required Beginning Date" means the April 1 of the calendar year next
following the calendar year in which the Participant attains age Seventy and
One-Half (70 1/2) or such later date permitted under Regulations and
distribution shall be made over a period not exceeding the lives of the
Participant and a Beneficiary or the joint life expectancy of the Participant
and Beneficiary, except that:
(i) if a Participant is not a Five Percent Owner at any time during the
Five (5) Plan Year period ending in the calendar year in which the
Participant attains age Seventy and One-Half (70 1/2) and the Participant
attains such age prior to January 1, 1988, then such Participant's Required
Beginning Date shall be no earlier than the April 1 of the calendar year
next following the calendar year in which the Participant terminates
employment with the Employer, except as provided in (iii) below;
(ii) if a Participant is not a Five Percent Owner in the calendar year in
which the Participant attains age Seventy and One-Half (70 1/2), the
Participant attains such age on or after January 1, 1988 but prior to
January 1, 1989, and the Participant has not retired by January 1, 1989,
then such Participant's Required Beginning Date shall be no earlier than
April 1, 1990;
(iii) if a Participant described in (i) above becomes a Five Percent
Owner after the Five (5) Plan Year period ending in the calendar year in
which the Participant attains age Seventy and One-Half (70 1/2), the
Participant's Required Beginning Date shall be no later than the April 1 of
the calendar year following the end of the Plan Year in which the
Participant becomes a Five Percent Owner;
(iv) if a Participant dies prior to the commencement of benefits under the
Plan and to the extent (v), below, does not apply, then all benefits payable
to or for the Participant's Beneficiary shall be paid not later than the end
of the calendar year which includes the Fifth (5th) anniversary of the
Participant's death;
33
<PAGE> 41
(v) if the Participant's Beneficiary with respect to any portion of the
Participant's benefit is the Participant's surviving spouse, then the
portion payable to the spouse shall be completely distributed over the life
of such spouse or over a period not extending beyond the life expectancy of
the spouse, commencing no later than the later of: (A) the end of the
calendar year next following the calendar year in which the Participant died
and (B) the end of the calendar year in which the Participant would have
attained age Seventy and One-Half (70 1/2) or, if the spouse dies before
receiving a distribution, the end of the calendar year in which the
surviving spouse would have attained such age; and
(vi) Notwithstanding (v), above, if a Participant dies after his Required
Beginning Date, the remaining benefits with respect to such Participant
shall be distributed at least as rapidly as under the required minimum
distribution method in effect at the time of his death.
Notwithstanding the foregoing, the provisions of this Subsection (c) shall
not apply with respect to any Participant who made a designation prior to
January 1, 1984 in accordance with Section 242(b)(2) of the Tax Equity and
Fiscal Responsibility Act of 1982 to the extent such designation remains in
effect.
(d) INCIDENTAL REQUIREMENT. Notwithstanding any other provision of
the Plan to the contrary, no form of benefit under the Plan (including
nonretirement type benefits) shall fail to satisfy the requirement that
benefits not provided for the primary purpose of providing retirement benefits
to the Participant must be incidental, as such requirement is set forth in
Regulations issued under Code Section 401(a)(9); provided, however, that the
requirement shall be applied under the rules interpreting Treasury Regulation
Section 1.401-1(b)(1)(i) for: (i) calendar years beginning before January 1,
1989; and (ii) any Participant who made a designation prior to January 1, 1984
in accordance with Section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982 to the extent such designation remains in effect,
but only if such rules would enable the requirement to be satisfied.
(e) NO RIGHT TO DEFER DISTRIBUTION. Nothing in
Subsections (b), (c) or (d) of this Section shall be construed to
permit a Participant or Beneficiary to defer distribution of Plan
benefits to a date later than the date as of which distribution is to
be made under Subsection (a) of this Section.
8.7 LOCATION OF RECIPIENT UNKNOWN, ETC.
(a) If it is not possible to make payment because the
Administrator cannot locate the recipient after reasonable efforts to
do so, or if the amount of a payment cannot be ascertained, a
retroactive payment may be made no later than Ninety (90) days after
the earliest date on which the amount can be ascertained or the
recipient is located, as the case may be, notwithstanding the
requirements of Section 8.6(a).
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(b) If the Administrator is unable to locate a person
entitled to receive a distribution from the Plan, the portion of the
Accounts to be used to provide such distribution may either: (i) be
completely or partially treated as a forfeiture under Article V on the
date One (1) year from the date the Administrator sends by certified
mail a notice concerning the benefits to such person at his last known
address or determines that there is no last known address; or (ii) be
transferred to a federally insured savings account at a financial
institution to be held in trust for the benefit of such person.
(c) If an account is forfeited under Section (b), above,
and the person otherwise entitled to the distribution subsequently
files a claim with the Administrator for such distribution prior to
the date such benefits would escheat or become unclaimed property
under applicable state law governing escheat or unclaimed property
procedures, the forfeited amount shall be restored (without regard to
the earnings or losses that would have been allocated) to the
appropriate Accounts. Such restoration shall first be taken out of
unallocated forfeitures and, to the extent insufficient, restoration
shall then be made through an Employer contribution or out of
unallocated Trust earnings.
8.8 LOANS. The Administrator, in accordance with its uniform
nondiscriminatory policy, may, in its discretion, direct the Trustee to make a
loan or loans to individuals specified in, and subject to, the document
entitled "Loan Procedures" attached to and made a part of this Plan. Effective
for loans made, renewed, renegotiated, modified or extended after December 31,
1986, all loans shall comply with the following terms and conditions:
(a) No loan shall be made to an individual if the
Administrator, in its sole discretion, determines that the
loan would constitute a prohibited transaction under Code
Section 4975, disqualify the Plan or result in a taxable
distribution to the individual receiving the loan.
(b) No new loan shall be made if immediately
after the new loan the unpaid balance of all loans by this
Plan and all other Qualified Plans to the person receiving the
loan would exceed the lesser of: (1) Fifty Thousand Dollars
($50,000), reduced by the excess (if any) of the highest
outstanding balance of all loans during the One (1) year
period ending on the day before the day the new loan is to be
made, over the outstanding balance of such loans immediately
prior to the making of the new loan; and (2) Fifty Percent
(50%) of the vested portion of the Participant's Accounts
under this Plan and all other Qualified Plans.
Notwithstanding the foregoing, the total amount of all loans
made under this Plan shall be limited as provided in the
document entitled "Loan Procedures" attached to and made a
part of this Plan.
(c) A fixed period for repayment of the loan not
in excess of Five (5) years shall be specified in the loan
agreement; provided, that if the loan is used to acquire any
dwelling unit which, within a reasonable time, is to be used
as the principal residence of the individual receiving the
loan (if the individual is a
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Participant), the specified repayment period may be
longer than Five (5) years. Loans to Employees shall be
repaid through payroll deductions. The loan repayment schedule
shall provide for substantially level amortization of the
principal and interest due under the loan with payments not
less frequently than quarterly; provided, that the entire
amount due on the loan may at any time be prepaid in one lump
sum. Except as may be provided otherwise by the "Loan
Procedures," upon a Participant's termination of employment,
the entire loan balance shall become due and payable
immediately and, to the extent not otherwise repaid, shall be
set off against any distribution due the Participant.
(d) Each loan shall be secured by assignment of
the individual's Accounts in the Plan and/or such other
collateral as determined by the Administrator, and by the
individual's collateral promissory note for the amount of the
loan, including interest thereon, payable to the order of the
Trustee. Any limitations on the assignment of Accounts for
purposes of securing loans shall be set forth in the document
entitled "Loan Procedures" attached to and made a part of this
Plan. Upon default of a loan, the Administrator's actions
shall be subject to applicable requirements of Code Section
401(k) and the Regulations thereunder.
(e) Each loan shall bear a reasonable rate of
interest equal to the rate of interest which the Administrator
determines in accordance with the provisions of the document
entitled "Loan Procedures" attached to and made a part of this
Plan.
(f) A loan shall be treated as a segregated
investment of an individual's Accounts. Such investment shall
be valued and allocated to the individual's Accounts and shall
be disregarded for purposes of Section 5.8.
(g) Within the Ninety (90) day period before any
loan is made to an individual, the individual must consent to
the possible reduction of his accrued benefit which may occur
by reason of default.
(h) Loans shall not be made available to "highly
compensated employees" (as defined in Code Section 414(q) in
an amount greater than the amount made available to other
employees except as may result from the operation of this
Section or the Loan Procedures or from the amount of an
individual's Account.
(i) A portion of one or more Investment Funds in
which the Participant's Accounts are invested shall be
liquidated to provide the proceeds for any loan to the
Participant. The amount of each such Investment Fund to be
liquidated shall be equal to the loan amount multiplied by the
percentage of the Participant's Accounts which are invested in
each such Investment Fund as of the
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Valuation Date as of which the loan is made or among such Investment
Funds as may be requested by the Participant and approved by the
Administrator. As the Participant's loan is repaid, the amount of the
repayment shall be invested in the Investment Funds according to the
Participant's designation under Section 5.9.
8.9 WITHDRAWALS WHILE EMPLOYED.
(a) WITHDRAWALS FROM PARTICIPANT CONTRIBUTION ACCOUNT. A
Participant who is employed by an Employer may elect in writing,
subject to the limitations and conditions prescribed in Section 8.9(d)
and (f), to make a withdrawal from his Participant Contribution
Account. Effective for Plan Years beginning on and after January 1,
1995, a Participant who makes a withdrawal hereunder shall not be
permitted to make any Participant Contributions to the Plan during the
six month period immediately following the date of such withdrawal.
(b) WITHDRAWALS FROM EMPLOYER CONTRIBUTION ACCOUNT. A
Participant who is employed by an Employer and who is determined by
the Administrator to have incurred a hardship as defined in Section
8.9(e), subject to the limitations and conditions prescribed in
Section 8.9(e) and (f) to make a withdrawal from his vested interest
in his Employer Contribution Account. The Employer Contribution
Account of a Participant who receives a withdrawal under this Section
8.9(b) shall vest in accordance with Section 8.4(d).
(c) WITHDRAWALS FROM PAYROLL REDUCTION ACCOUNT. A
Participant who is employed by an Employer and who has attained age 59
1/2 or is determined by the Administrator to have incurred a hardship
as defined in Section 8.9(e) may elect in writing, subject to the
limitations and conditions prescribed in Section 8.9(d) or (e),
whichever is applicable, and Section 8.9(f) to make a withdrawal from
his Payroll Reduction Account. The maximum amount that a Participant
may withdraw pursuant to this Section because of a hardship is the
balance of his Payroll Reduction Account, exclusive of any earnings
credited to such account as of the date that is after December 31,
1988.
(d) LIMITATIONS ON WITHDRAWALS OTHER THAN HARDSHIP WITHDRAWALS.
A Participant must file a written withdrawal application with the
Administrator such number of days prior to the date as of which it is to be
effective as the Administrator shall prescribe.
Withdrawals made pursuant to this Section, other than hardship
withdrawals, shall be subject to the following conditions and
limitations:
(i) Withdrawals may be made effective only as of the first
day of a month.
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(ii) A married Participant may not elect to
receive a withdrawal hereunder unless the Participant's spouse
consent to such election in the manner required under Section
8.3(c).
(iii) The Administrator may charge fees for
withdrawals made hereunder. Any additional fees charged by
the Administrator to effect any withdrawal hereunder shall be
separately accounted for and billed to the Participant making
the withdrawal.
(iv) Effective for Plan Years beginning prior to
January 1, 1995:
(1) a Participant who makes any withdrawal
hereunder shall not receive any
Employer Contributions pursuant to
Section 4.4, 4.5 or 4.6 for the Plan
Year in which such withdrawal is made.
(2) a Participant who makes any withdrawal
hereunder shall forfeit the entire
unvested portion of his Employer
Contribution Account.
(e) CONDITIONS AND LIMITATIONS ON HARDSHIP WITHDRAWALS.
A Participant must file a written application for a hardship
withdrawal with the Administrator such number of days prior to the
date as of which it is to be effective as the Administrator may
prescribe. Hardship withdrawals may be made effective only as of the
first day of a month. The Administrator shall grant a hardship
withdrawal only if it determines that the withdrawal is necessary to
meet an immediate and heavy financial need of the Participant. An
immediate and heavy financial need of the Participant means a
financial need on account of:
(i) expenses previously incurred by or necessary
to obtain for the Participant, the Participant's spouse, or
any dependent of the Participant (as defined in Section 152 of
the Code) medical care described in Section 213(d) of the
Code;
(ii) costs directly related to the purchase
(excluding mortgage payments) of a principal residence for the
Participant;
(iii) payment of tuition and related educational
fees for the next 12 months of post-secondary education for
the Participant, the Participant's spouse, or any dependent of
the Participant;
(iv) the need to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence; or
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(v) any other event authorized by the
Commissioner of Internal Revenue Service.
A distribution will be deemed to be necessary to satisfy an
immediate and heavy financial need of the Participant if (1) the
distribution is not in excess of the amount of the immediate and heavy
financial need of the Participant, (2) the Participant provides a
written certification to the Administrator and (3) the Participant has
obtained all distributions, other than hardship distributions, and all
nontaxable loans currently available under all Plans maintained by the
Employer. A Participant who has elected to have the provisions of
this subsection apply shall not be eligible to make Payroll Reduction
Contributions or Participant Contributions to any plan maintained by
the Employer (including both qualified and nonqualified deferred
compensation plans) until the beginning of the second Plan Year
following the Plan Year in which the hardship distribution is
received.
(f) ORDER OF WITHDRAWAL FROM A PARTICIPANT'S ACCOUNTS.
Distribution of a withdrawal amount shall be made from a Participant's
Accounts, to the extent necessary, in the following order:
(i) The balance of the Participant's after-tax
subaccount of his Participant Contribution Account
attributable to pre-1987 after-tax contributions for which
there has been a separate accounting, if any, shall be
distributed.
(ii) The remaining balance of the Participant's
after-tax subaccount of his Participant Contribution Account
shall be distributed.
(iii) The remaining balance of the Participant's
Participant Contribution Account, if any, shall be distributed.
(iv) The balance of the Participant's Employer
Contribution Account.
(v) The balance of the Participant's Payroll
Reduction Account shall be distributed, but if the
distribution is because of hardship, only to the extent
permitted under Section 8.9(e).
(g) COORDINATION WITH INVESTMENT FUNDS. To the extent a
withdrawal is to be made by a Participant under this Article, such
withdrawal shall be subject to such reasonable requirements as may be
established by the Trustee to effect the necessary liquidation of some
or all (as the case may be) of the Participant's interest in the
Investment Fund or Funds in an orderly manner and without adverse
effect on the other Participants' interests in the Investment Funds
including, if directed by the Administrator in a uniform and
nondiscriminatory manner, the requirement that the costs, expenses and
fees associated with such liquidation be charged against the Accounts
of the Participant receiving the withdrawal.
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ARTICLE IX
TOP-HEAVY PROVISIONS
9.1 TOP-HEAVY DEFINITIONS. For purposes of this Article, the following
definitions shall apply.
(a) "ACCRUED BENEFITS" means, for a person, "the present
value of accrued benefits" as that phrase is defined under Regulations
issued under Code Section 416, including any amount distributed to the
person during the Five (5) Plan Year period ending on the
Determination Date from a Qualified Plan that is in the aggregation
group being tested (the Required Aggregation Group or the Permissive
Aggregation Group, as the case may be) or from a terminated Qualified
Plan that would be in the aggregation group being tested if it had not
been terminated.
(b) "DETERMINATION DATE" means: (i) for any Plan Year
subsequent to the first Plan Year, the last day of the preceding Plan
Year; and (ii) for the first Plan Year, the last day of the first Plan
Year.
(c) "FORMER KEY EMPLOYEE" means any person presently or
formerly employed by a member of the Controlled Group (and the
Beneficiaries of such person) who during the Plan Year is not
classified as a Key Employee but who was classified as a Key Employee
in a previous Plan Year.
(d) "KEY EMPLOYEE" means any person presently or formerly
employed by a member of the Controlled Group (and the Beneficiaries of
such person) who is a "key employee" as that term is defined in Code
Section 416(i) and the Regulations thereunder; provided, however, that
for Plan Years commencing after December 31, 1984, a person who has
not performed services for a Controlled Group member at any time
during the Five (5) Plan Year period ending on the Determination Date
(and the Beneficiaries of such person) shall not be considered a Key
Employee.
(e) "NON-KEY EMPLOYEE" means any person presently or
formerly employed by a member of the Controlled Group (and the
Beneficiaries of such person) who is not a Key Employee or a Former
Key Employee; provided, however, that for Plan Years commencing after
December 31, 1984, a person who has not performed services for a
Controlled Group member at any time during the Five (5) Year period
ending on the Determination Date (and the Beneficiaries of such
person) shall not be considered a Non-Key Employee.
(f) "PERMISSIVE AGGREGATION GROUP" means each Qualified
Plan in the Required Aggregation Group plus each other Qualified Plan
which is not part of the Required Aggregation Group but which
satisfies the requirements of Sections 401(a)(4) and 410 of the Code
when considered together with the Required Aggregation Group.
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<PAGE> 48
(g) "REQUIRED AGGREGATION GROUP" means each Qualified
Plan in which a Key Employee participates during the Plan Year
containing the Determination Date or any of the Four (4) preceding
Plan Years and each other Qualified Plan which during this period
enables any Qualified Plan in which a Key Employee participates to
meet the requirements of Section 401(a)(4) or Section 410 of the Code.
(h) "SUPER TOP-HEAVY GROUP" means, for a Plan Year, the
Required Aggregation Group if, and only if, the sum of the Accrued
Benefits (valued as of the Determination Date for such Plan Year)
under all Qualified Plans in the Required Aggregation Group for Key
Employees exceeds Ninety Percent (90%) of the sum of the Accrued
Benefits (valued as of such Determination Date) under all Qualified
Plans in the Required Aggregation Group for all Key Employees and
Non-Key Employees; provided, however, that the Required Aggregation
Group will not be a Super Top-Heavy Group for a Plan Year if the sum
of the Accrued Benefits (valued as of the Determination Date for such
Plan Year) under all Qualified Plans in the Permissive Aggregation
Group for Key Employees does not exceed Ninety Percent (90%) of the
sum of the Accrued Benefits (valued as of such Determination Date)
under all Qualified Plans in the Permissive Aggregation Group for all
Key Employees and Non-Key Employees. If the Qualified Plans in the
Required or Permissive Aggregation Group have different Determination
Dates, the Accrued Benefits under each such Plan shall be calculated
separately, and the Accrued Benefits as of Determination Dates for
such Plans that fall within the same calendar year shall be
aggregated.
(i) "TOP-HEAVY GROUP" means, for a Plan Year, the
Required Aggregation Group if, and only if, the sum of the Accrued
Benefits (valued as of the Determination Date for such Plan Year)
under all Qualified Plans in the Required Aggregation Group for Key
Employees exceeds Sixty Percent (60%) of the sum of the Accrued
Benefits (valued as of such Determination Date) under all Qualified
Plans in the Required Aggregation Group for all Key Employees and
Non-Key Employees; provided, however, that the Required Aggregation
Group will not be a Top-Heavy Group for a Plan Year if the sum of the
Accrued Benefits (valued as of the Determination Date for such Plan
Year) under all Qualified Plans in the Permissive Aggregation Group
for Key Employees does not exceed Sixty Percent (60%) of the sum of
the Accrued Benefits (valued as of such Determination Date) under all
Qualified Plans in the Permissive Aggregation Group for all Key
Employees and Non-Key Employees. If the Qualified Plans in the
Required or Permissive Aggregation Group have different Determination
Dates, the Accrued Benefits under each such Plan shall be calculated
separately, and the Accrued Benefits as of Determination Dates for
such Plans that fall within the same calendar year shall be
aggregated.
9.2 SPECIAL TOP-HEAVY RULES. If for any Plan Year beginning after
December 31, 1988, the Plan is part of a Top-Heavy Group, then, effective as of
the first day of such Plan Year the following provisions shall apply to
Participants who accrue an Hour of Service during such Plan Year:
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<PAGE> 49
(a) A new Section is added to the end of Article V as
follows:
MINIMUM ALLOCATION IF PLAN IS PART OF TOP-HEAVY GROUP.
Notwithstanding the foregoing, for each Plan Year in which the
Plan is part of a Top-Heavy Group, the sum of the Employer
contributions and forfeitures allocated under the Plan to the
Account of each Non-Key Employee who is both a Participant and
Employee on the last day of such Plan Year shall be at least
equal to the lesser of Three Percent (3%) of such Non-Key
Employee's "compensation" (within the meaning of Code Section
416(c)(2)) for such Plan Year or the largest percentage of
"compensation" (within the meaning of Code Section 416(c)(2))
allocated to the Account of any Key Employee; provided,
however, that if for any Plan Year a Non-Key Employee is a
Participant in both this Plan and one or more defined
contribution plans, the Employer need not provide the minimum
allocation described in the preceding provisions of this
sentence for such Non-Key Employee if the Employer satisfies
the minimum allocation requirement of Code Section
416(c)(2)(B) for the Non-Key Employee in any of such other
defined contribution plans; and (b) if for any Plan Year a
Non-Key Employee is a Participant in both this Plan and one or
more defined benefit plans, the employer need not provide the
minimum allocation described in the preceding provisions of
this sentence to the extent the minimum benefit requirements
of Code Section 416(c) (and the Regulations thereunder) are
met by all the plans in the aggregate. Any additional
contribution required by this Section shall be made even if
such contribution exceeds the Employer's current and
accumulated net profits and shall be allocated so that, when
added to the other Employer contributions and forfeitures
allocated under the Plan to the eligible Non-Key Employees,
the above requirements are satisfied. For purposes of
determining the largest percentage of "compensation" (within
the meaning of Code Section 416(c)(2)) allocated to the
Account of any Key Employee, Payroll Reduction Contributions
made on behalf of the Key Employee shall be taken into
account. For purposes of determining the amount of Employer
contributions and forfeitures allocated to the Account of any
Non-Key Employee, Payroll Reduction Contributions made on
behalf of the Non-Key Employee and matching contributions (as
defined in Code Section 401(m)(4)) shall be disregarded.
9.3 ADJUSTMENTS IN THE OVERALL LIMITATION. If for any Plan
Year beginning after December 31, 1988, the Plan is part of a Super Top-Heavy
Group, or the Plan is part of a Top-Heavy Group and fails to provide an
allocation of Employer contributions and forfeitures on behalf of each Non-Key
Employee who is both a Participant and Employee on the last day of such Plan
Year equal to at least the lesser of Four Percent (4%) of each such Non-Key
Employee's Top-Heavy Compensation or the largest percentage of Top-Heavy
Compensation allocated on behalf of any Key Employee for the Plan Year, then,
effective as of
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<PAGE> 50
the first day of such Plan Year, "One Hundred Percent (100%)" shall be
substituted for "One Hundred Twenty-Five Percent (125%)" every place it appears
in Section 6.1; provided, however, that the One Hundred Twenty-Five Percent
(125%) fraction may continue to be used for an individual only if there are
both no further accruals for that individual under any defined benefit plan and
no further annual additions for that individual under any defined contribution
plan maintained by any member of the Controlled Group until the combined
fraction satisfies the rules of Code Section 415(e) using the One Hundred
Percent (100%) fraction for that individual.
ARTICLE X
TRUST AND TRUSTEE
The Company shall select a Trustee or insurance company to hold and
administer the assets of the Plan and shall enter into a trust agreement or
insurance contract with such Trustee or insurance company. The Company may
change the Trustee or insurance company from time to time subject to the terms
of the trust agreement or insurance contract.
ARTICLE XI
ADMINISTRATION
11.1 POWERS AND RESPONSIBILITIES OF THE COMPANY.
(a) The Company shall be empowered to appoint and remove
the Trustee and the Administrator from time to time as it deems
necessary for the proper administration of the Plan.
(b) The Company shall establish a funding policy and
method or shall appoint a qualified person to do so. The Company or
its delegate shall communicate such funding policy to the Trustee,
which shall coordinate such Plan needs within its investment policy.
The communication of such a funding policy and method shall not,
however, constitute a directive to the Trustee as to investment of the
Trust fund.
(c) The Company may, in its discretion, appoint one or
more investment managers to manage all or a designated portion of the
assets of the Plan. Any such investment manager shall be a person,
firm or corporation who is a registered investment advisor under the
Investment Advisors Act of 1940, a bank or insurance company; provided
that (i) the person or entity is given the power to manage, acquire or
dispose of Plan assets; and (ii) the person or entity acknowledges in
writing its fiduciary responsibility to the Plan. The Trustee shall
follow the directive of the investment
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<PAGE> 51
manager so appointed by the Company with respect to the portion of
Plan assets to which the appointment relates.
(d) The Company shall periodically review the performance
of any fiduciary or any other person to whom duties have been
delegated or allocated by it under the provisions of the Plan or
pursuant to procedures established hereunder.
11.2 ASSIGNMENT AND DESIGNATION OF ADMINISTRATIVE AUTHORITY.
(a) The Company shall be the Administrator of the Plan,
except to the extent the Company shall otherwise delegate
administrative authority to one or more persons. Any person to whom
administrative authority is delegated shall signify his acceptance by
filing written acceptance with the Company. Any person to whom
administrative authority is delegated may resign by delivering his
written resignation to the Company or be removed by the Company by
delivery of written notice of removal, to take effect at the dates
specified therein, or upon delivery to the person if no date is
specified.
(b) The Company, upon receipt of, or given notice of, the
resignation or removal of a person to whom administrative authority
has been delegated shall promptly designate in writing a successor to
such position. If the Company does not designate a successor, the
Company will be vested with such administrative authority.
(c) If the Company does not delegate its administrative
authority, it may appoint one or more persons to discharge the duties
of the Administrator, subject, however, to Board approval or
authorization. The Company may designate one or more of its officers
to sign papers on its behalf.
(d) To the extent that the Company delegates its
administrative authority, the responsibility of each person to whom
authority is delegated shall be specified and accepted in writing by
the Company and each such person. The Trustee thereafter shall accept
and rely upon documents executed by the appropriate person until such
time as the Company or such persons file with the Trustee a written
revocation of the responsibilities so delegated.
11.3 POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The
primary responsibility of the Administrator is to administer the Plan for the
exclusive benefit of Participants and their beneficiaries, subject to the
specific terms of the Plan. The Administrator shall administer the Plan in
accordance with its terms and shall have the discretionary power to determine
all questions arising in connection with the administration, interpretation,
and application of the Plan. Any such determination by the Administrator shall
be conclusive and binding upon all persons. The Administrator may correct any
defect, supply any information, or reconcile any inconsistency in such manner
and to such extent as shall be deemed necessary or advisable to carry out the
purpose of this Plan; provided, however, that any interpretation or
construction shall be made in a nondiscriminatory manner and shall be
consistent with the intent
44
<PAGE> 52
that this Plan shall continue to be a Qualified Plan. The Administrator shall
have all powers necessary or appropriate to accomplish its duties under the
Plan.
11.4 DUTIES. The Administrator shall be charged with the duties of
general administration of the Plan, including, but not limited to, the
following:
(a) to determine all questions relating the eligibility
of any employee to participate or remain a Participant hereunder;
(b) to compute, certify and direct the Trustee with
respect to the amount and kind of benefits to which any Participant
shall be entitled hereunder;
(c) to authorize and direct the Trustee with respect to
all nondiscretionary or otherwise directed disbursements from the
Trust;
(d) to maintain all necessary records for administration
of the Plan;
(e) to interpret any provision of the Plan and to make
and publish such rules or regulations for the Plan as are consistent
with the terms hereof;
(f) to determine the size and type of any contract to be
purchased from any insured and to designate the insurer from which
such contract shall be purchased;
(g) to compute and certify to the Company and the Trustee
from time to time the sums of money necessary or desirable to be
contributed to the Trust;
(h) to advise and consult with the Company and the
Trustee regarding the short and long term liquidity needs of the Plan
in order that the Trustee can exercise any investment discretion in
the manner designed to accomplish specific objectives;
(i) to advise, counsel, and assist any Participant
regarding his rights, benefits, or elections available under the Plan;
and
(j) in the event the Administrator, in its sole
discretion, deems it necessary or appropriate to do so, it may appoint
one or more persons to a committee to advise the Administrator on
matters pertaining to the Plan.
11.5 RECORDS AND REPORTS. The Administrator shall keep a record of
all actions taken and shall keep all other books of account, records, and other
data that may be necessary for proper administration of the Plan and shall be
responsible for supplying all information and reports to the Internal Revenue
Service, Department of Labor, Participants, beneficiaries and others as
required by law.
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<PAGE> 53
11.6 APPOINTMENT OF ADVISORS. The Administrator, or the Trustee
with the consent of the Administrator, may appoint counsel, specialists,
advisors and other persons as the Administrator or the Trustee deems necessary
or desirable in connection with the administration of the Plan.
11.7 INFORMATION FROM EMPLOYER. Each entity employing Employees
that are covered by this Plan, shall supply full and timely information to the
Administrator on all matters relating to compensation, hours of service, years
of service, retirement, death, disability, termination of employment and such
other pertinent facts as the Administrator may require. The Administrator
shall advise the Trustee of such of the foregoing facts as may be pertinent to
the Trustee's duties under the Plan. To the extent that the Administrator is a
person other than the Company, the Administrator may rely on such information
as is supplied by such entities and shall have no duty or responsibility to
verify such information.
11.8 PAYMENT OF EXPENSES. All expenses of administration may, at
the sole discretion of the Company, be paid by the Company. Such expenses
shall include any expenses incident to the functioning of the Administrator,
including, but not limited to, those of accountants, counsel and other
specialists, and other costs of administering the Plan. If not paid by the
Company, the expenses shall become a liability of the Trust fund.
11.9 MAJORITY ACTIONS. To the extent that the same administrative
authority is possessed by or has been delegated to one or more persons, they
shall act by a majority of their number, but may authorize one or more of them
to sign all papers on their behalf.
ARTICLE XII
CLAIM PROCEDURE
12.1 CLAIM. A Participant, Beneficiary or other person who
believes that he is being denied a benefit to which he is entitled (hereinafter
referred to as "Claimant") may file a written request for such benefit with the
Administrator, setting forth his claim..
12.2 CLAIM DECISION. Upon receipt of a claim the Administrator
shall advise the Claimant that a reply will be forthcoming within Ninety (90)
days and shall in fact deliver such reply in writing within such period. The
Administrator may, however, extend the reply period for an additional Ninety
(90) days for reasonable cause. If the claim is denied in whole or in part,
the Administrator will adopt a written opinion using language calculated to be
understood by the Claimant setting forth:
(a) the specific reason or reasons for the denial;
(b) specific references to pertinent Plan provisions on
which the denial is based;
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<PAGE> 54
(c) a description of any additional material or
information necessary for the Claimant to perfect the claim and an
explanation why such material or such information is necessary;
(d) appropriate information as to the steps to be taken
if the Claimant wishes to submit the claim for review; and
(e) the time limits for requesting a review under Section
12.3 and a review under Section 12.4.
12.3 REQUEST FOR REVIEW. Within Sixty (60) days after the receipt
by the Claimant of the written opinion described above, the Claimant may
request in writing that the Review Committee review the determination of the
Administrator. The Claimant or his duly authorized representative may, but
need not, review the pertinent documents and submit issues and comments in
writing for consideration by the Review Committee. If the Claimant does not
request a review of the Administrator's determination within such Sixty (60)
day period, he shall be barred and estopped from challenging the
Administrator's determination.
12.4 REVIEW ON APPEAL. Within Sixty (60) days after the Review
Committee's receipt of a request for review, he will review the Committee's
determination. After considering all materials presented by the Claimant, the
Review Committee will render a written opinion, written in a manner calculated
to be understood by the Claimant, setting forth the specific reasons for the
decision and containing specific references to the pertinent Plan provisions on
which the decision is based. If special circumstances require that the Sixty
(60) day time period be extended, the Review Committee will so notify the
Claimant and will render the decision as soon as possible but not later than
One Hundred Twenty (120) days after receipt of the request for review. The
decision of the Review Committee shall be final and binding upon the Employer
and the Claimant.
ARTICLE XIII
AMENDMENT AND TERMINATION
13.1 AMENDMENT. The Board shall have the right at any time and
from time to time to amend, in whole or in part, any or all of the provisions
of the Plan. No such amendment, however, shall authorize or permit any part of
the assets of the Plan (other than such part as is required to pay taxes and
administration expenses of the Plan) to be used for or diverted to purposes
other than for the exclusive benefit of the Participants or their
beneficiaries; no such amendment shall cause any reduction in the amount
properly credited to any Participant's Accounts, eliminate or reduce an early
retirement benefit, retirement-type subsidy or optional form of benefit to the
extent Code Section 411(d)(6) and the Regulations thereunder would be violated
thereby, or cause or permit any portion of the assets of the Plan to revert to
or become the property of the Employer. In the event that the vesting schedule
contained in
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<PAGE> 55
Section 8.4(b) is amended, each Participant having at least Three (3) Years of
Service may elect, within a reasonable period of time after the adoption or, if
later, the effective date of the amendment, to have the balance of the
Participant's Employer Contribution Account (as of the adoption or, if later,
the effective date of the amendment) vest pursuant to the former vesting
schedule without regard to such amendment. Any amounts which are added to the
Participant's Employer Contribution Account as of any date after the adoption
or, if later, the effective date of the amendment, shall vest pursuant to the
vesting schedule provided by such amendment.
13.2 TERMINATION; DISCONTINUANCE OF CONTRIBUTIONS. The Board shall
have the right at any time to terminate this Plan. Each Employer's board of
director shall have the right at any time to discontinue its contributions
hereunder and to terminate the Plan with respect to Participants employed by
such Employer. Upon termination, partial termination, or complete
discontinuance of contributions (within the meaning of Code Section 411(d)(3)),
all Participants' Accounts (or, in the case of a partial termination, the
accounts of that particular group of Employees affected by such partial
termination) shall become fully vested, and shall not thereafter be subject to
forfeiture.
ARTICLE XIV
MISCELLANEOUS
14.1 PARTICIPANTS' RIGHTS. Neither the establishment of the Plan
hereby created, nor any modification thereof, nor the creation of any fund or
account, nor the payment of any benefits, shall be construed as giving to any
Participant or other person any legal or equitable right against the Employer,
any officer or Employee thereof, the Trustee or the Board except as herein
provided. Under no circumstances shall the terms of employment of any
Participant be modified or in any way affected hereby.
14.2 SPENDTHRIFT CLAUSE. No benefit or beneficial interest
provided under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, either
voluntary or involuntary, and any attempt to so alienate, anticipate, sell,
transfer, assign, pledge, encumber or charge the same shall be null and void.
No such benefit or beneficial interest shall be liable for or subject to the
debts, contracts, liabilities, engagements, or torts of any person to whom such
benefits or funds are or may be payable. Notwithstanding the foregoing, this
Section shall not be construed to prohibit a loan made in accordance with
Section 8.8.
14.3 DELEGATION OF AUTHORITY. Whenever the Employer or the
Company, under the terms of this Plan, is permitted or required to do or
perform any act or matter or thing, it may be done and performed by any officer
thereunto duly authorized by the Board.
14.4 DISTRIBUTION TO MINORS, ETC. In the event that any portion of
a Plan distribution becomes distributable under the terms hereof to a minor or
other person under legal
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disability (as determined by the laws of the jurisdiction in which he then
resides), the Administrator may direct that such distribution be made in any
one or more of the following ways, to be determined by the Administrator in its
discretion: (a) directly to said minor or other person, (b) to the legal
representative of such minor or other person, (c) to some relative or friend of
such minor or other person for his support or education, or (d) by itself
expending or arranging for the expenditure of the same for the support and
education of such minor or other person. Except as to (d) immediately above,
the Administrator shall not be required to see to the application of any such
distribution so made to any of said persons.
14.5 CONSTRUCTION OF PLAN. This Plan shall be construed according
to the laws of the state where the Company has its principal office and all
provisions of the Plan shall be administered according to the laws of such
state, except to the extent preempted by federal law.
14.6 GENDER AND NUMBER. Whenever any words are used herein in the
masculine gender, they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form, they shall be construed as though they
were also used in the plural form in all cases where they would so apply.
Headings of Sections and Subsections are inserted for convenience of reference,
constitute no part of the Plan and are not to be considered in the construction
hereof.
14.7 SEPARABILITY OF PROVISIONS. If any provision of this Plan
shall be for any reason invalid or unenforceable, the remaining provisions
shall nevertheless be carried into effect.
14.8 MISTAKE, ETC. All Employer contributions under this Plan are
made conditioned upon their deductibility for federal income tax purposes under
Code Section 404 and qualification of the Plan under Code Section 401. Amounts
contributed by the Employer shall be returned to the Employer from the Plan by
the Trustee under the following circumstances.
(a) If a contribution was made by the Employer by a
mistake of fact, the excess of the amount of such contribution over
the amount that would have been contributed had there been no mistake
of fact shall be returned to the Employer within One (1) year after
the payment of the contribution;
(b) If the Plan receives an adverse determination with
respect to its initial qualification under any requirement of Code
Section 401, a contribution made by the Employer shall be returned to
the Employer within One (1) year after the date of such determination,
provided application for such determination 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 prescribed by
the Secretary of the Treasury; and
(c) If the Employer makes a contribution which is not
deductible under Code Section 404, such contribution (but only to the
extent disallowed) shall be returned to the Employer within One (1)
year after the disallowance of the deduction.
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<PAGE> 57
Earnings attributable to the excess contribution shall not be returned to the
Employer, but losses attributable to such excess contribution shall be deducted
from the amount to be returned. In the event that (a), (b) or (c) applies, the
Employer may distribute any Payroll Reduction Contributions (less any losses)
to the Participants who elected to reduce their pay by such amounts.
14.9 DIVERSION OF ASSETS. Except as provided in Section 14.8, no
part of the assets of the Plan shall be used for, or diverted to, purposes
other than the exclusive benefit of Participants or their beneficiaries and the
Employer shall have no beneficial interest in the assets of the Plan or any
part thereof and no part of the assets of the Plan shall revert or be repaid to
the Employer, directly or indirectly.
14.10 SERVICE OF PROCESS. The president of the Company shall
constitute the Plan's agent for service of process.
14.11 MERGER. In the event of any merger or consolidation with, or
transfer of assets or liabilities to, any other plan, each Participant shall
(as if the Plan had 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).
14.12 QUALIFIED DOMESTIC RELATIONS ORDER. Notwithstanding
anything in this Plan to the contrary, the Trustee shall comply with the terms
of any "qualified domestic relations order" as that term is defined under
Section 414(p) of the Code, and the terms of such order will supersede any
inconsistent provisions of this Plan. Upon receipt by the Plan of a domestic
relations order, the Employer shall within Thirty (30) days review the domestic
relations order to determine whether the order is a "qualified domestic
relations order." If the Employer is unable to determine whether the order is
a "qualified domestic relations order," the Employer shall promptly submit the
order to legal counsel and request a written opinion regarding the qualified
status of the order. Upon receipt of a domestic relations order, the Employer
shall promptly notify the Employee whose benefit is affected by the order and
any other individual who might receive payment from the Plan under the terms of
the order of the receipt of the order and the Plan's procedures for determining
the qualified status of domestic relations orders. The Administrator shall
direct the Trustee to distribute any amounts required to be paid to an
alternate payee under a qualified domestic relations order. Such distribution
may commence at any time following the date on which the Administrator
determines the order to be a "qualified domestic relations order" and no order
shall fail to so qualify solely because the order required distribution to
commence prior to the time when distribution could otherwise be made to the
Participant named in the order. Such distribution shall reduce the
Participant's Accounts in such manner as determined by the Administrator.
14.13 CERTAIN QUALIFICATION REQUIREMENTS. As a means to satisfy
the requirements of Code Sections 401(a)(4), 401(a)(26) and/or 410(b) for any
Plan Year, the Company may designate that additional Participants shall be
considered as "eligible Participants"
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<PAGE> 58
for purposes of allocating any or all Employer contributions for such Plan Year
under Article V.
14.14 WRITTEN EXPLANATION OF ROLLOVER TREATMENT. The
Administrator shall, when making an eligible rollover distribution, as defined
in Code Section 402(c)(4), provide a written explanation to the recipient of
the following: (a) provisions under which the recipient may have the
distribution directly transferred to another eligible retirement plan, as
defined in Code Section 402(c)(8)(b); (b) provision which requires the
withholding of tax on the distribution if it is not directly transferred to
another eligible retirement plan; (c) provisions under which the distribution
will not be subject to tax if transferred to an eligible retirement plan within
Sixty (60) days after the date on which the recipient received the
distribution; and (d) if applicable, provisions for special tax treatment of
lump sum distributions or other special provisions under Code Section 402(e).
ARTICLE XV
DIRECT ROLLOVERS
15.1 ELECTION. This Article applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under this
Article, a Distributee may elect, at the time and in the manner prescribed by
the Plan Administrator, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover.
15.2 DEFINITIONS.
(a) "ELIGIBLE ROLLOVER DISTRIBUTION" means 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 includable in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
(b) "ELIGIBLE RETIREMENT PLAN" means 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
51
<PAGE> 59
case of an Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
(c) "DISTRIBUTEE" includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations order,
as defined in section 414(p) of the Code, are Distributees with regard
to the interest of the spouse or former spouse.
(d) "DIRECT ROLLOVER" means a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee."
IN WITNESS WHEREOF, the undersigned has executed this Plan as of this
______ day of __________________, 199__.
SERVICE AMERICA SYSTEMS, INC.
By:_________________________________
0127338.WP
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<PAGE> 60
CONSENT OF TRUSTEE
------------------
The undersigned Trustee hereby consents to this Plan.
SUN BANK, N.A.
By:_____________________________________
53
<PAGE> 61
LOAN PROCEDURES
Any loan to be provided under the Plan shall be made in accordance with
the applicable Plan section, Department of Labor ("DOL") Regulation 2550.408b-1
("DOL Regulation"), and this document. The contents of this document shall be
"a written document forming part of the plan" for purposes of the DOL
Regulation. The Company may amend this document at any time to insure that the
provisions of this document are consistent with applicable law. This "Loan
Procedures" document shall only apply, however, to loans granted or renewed
after October 18, 1989.
A. ELIGIBLE INDIVIDUALS.
A Participant or a Beneficiary who is a party-in-interest as defined in
Section 3(14) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (a "Party in Interest") is eligible to apply for a Plan loan.
The Administrator shall determine eligibility for purposes of Plan loans in a
uniform and nondiscriminatory manner.
B. LOAN PROCEDURES.
1. ADMINISTRATOR OF PROGRAM. The Company in its capacity as
Administrator of the Plan has appointed Plan Administrator (the "Loan
Administrator") to administer all Plan loans. All inquiries and requests for
Plan loan applications should be directed to such person or department.
2. APPLICATION FOR LOAN. Any individual eligible to apply to a
Plan loan should contact the Loan Administrator and obtain a copy of the Plan
loan application form. The completed form should be returned; the Loan
Administrator will determine whether the applicant has provided sufficient
information to determine a person's eligibility for a loan. The Loan
Administrator will contact an applicant if insufficient information has been
provided and shall request the additional information to be provided. Within a
reasonable period of time after receipt of all necessary information, the Loan
Administrator shall inform the applicant whether a loan will be granted, and if
so, the amount available for a loan. Loans will be approved or denied based on
factors that persons in the business of lending money for loans would consider
under similar circumstances.
3. AMOUNT OF LOAN. Notwithstanding any limitation on Plan loans
contained in this document or the Plan, the total amount of all loans made
under this Plan to an individual shall not exceed Fifty Percent (50%) of the
vested portion of such individual's Accounts under the Plan.
4. REASONABLE RATE OF INTEREST. The rate of interest on a Plan
loan will be based on a regular review of interest rates charged by persons in
the business of lending money for loans which would be made under similar
circumstances. Different rates of interest may be charged for different Plan
loans as a result of this review.
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5. SECURITY FOR PLAN LOANS. In addition to the execution of a
promissory note by the recipient of the Plan loan promising to repay such loan,
the Plan loan must be secured by collateral which the Plan can sell, dispose of
or foreclose upon to provide repayment of the loan if a default of repayment
occurs. The security for the loan shall be Fifty Percent (50%) of the
individual's vested Accounts in the Plan. In some cases, the Administrator
shall determine, in accordance with its uniform nondiscriminatory policy and
applicable law, the requirement of additional collateral, such as a person's
house, car or other material possessions, necessary to provide adequate
security.
6. REPAYMENT OF LOAN. Repayment of a Plan loan made to an
Employee shall be through payroll deductions. Repayment in all other cases
shall be made by a method to insure repayment of principal and interest due
under the loan not less frequently than quarterly.
7. EVENTS CONSTITUTING DEFAULT. The following are events
constituting default on the repayment of a Plan loan:
(a) Failure to make timely payments pursuant to the terms of
the loan;
(b) Failure to make the collateral securing the loan available
to the Administrator for inspection or any other reason;
(c) Failure to comply with any imposed requirements by the
Administrator in addition to those provided in this document, the DOL
Regulation or the Plan, which are in accordance with applicable law.
Upon default, the Loan Administrator may dispose of the collateral to
the extent necessary to prevent a loss to the Plan as a result of the default.
These steps may include but are not limited to: (i) selling the collateral to
provide funds to pay the outstanding balance principal and interest) due on
the loan; and/or (ii) instituting legal proceedings against the defaulting
party.
8. REPAYMENT UPON CERTAIN EVENTS. Upon the date the Participant
or Beneficiary ceases to be a Party in Interest, the entire loan balance shall
become due and payable immediately and, to the extent not otherwise repaid,
shall be set off against any distribution due the Participant.
9. MINIMUM LOAN AMOUNT. Applications for Plan loans of less than
$1,000 shall not be granted or approved.
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<PAGE> 63
ADDENDUM A
A. SPECIAL EFFECTIVE DATES AND PROVISIONS WITH RESPECT TO AMIRA'S ADOPTION
OF THE PLAN.
1. Effective for Plan Years January 1, 1989 through December 31,
1993, an Employee who has completed six (6) Months of Service
shall become a Participant effective as of the first day of the
Plan Year next following the date on which such Employee has
completed six (6) Months of Service. An Employee will be
deemed to have completed six (6) Months of Service if he is in
the employ of the Employer at any time six (6) months after his
Employment Commencement Date. Employment Commencement Date
shall be the first day that he is entitled to be credited with
an Hour of Service for the performance of duty.
2. The provisions of Sections 4.1 through 4.5 of this Plan (and
other related sections as the sense may require) shall be
effective only for Plan Years beginning on and after January 1,
1994; provided, however, that such provisions shall be
effective October 1, 1993 with respect to Amira's Ft. Myers
division Employees who were Employees of Encore Service
Systems, Inc. immediately prior to October 1, 1993.
3. The optional forms of payment as set forth in the attached
Exhibit I will continue to be available only with respect to a
Participant who was a Participant under either of the Amira
Services, Inc. Profit Sharing or Money Purchase Pension Plans
on any date prior to January 1, 1994.
4. For Plan Years beginning prior to January 1, 1994, the actual
hours method of computing service under the Plan shall be used.
5. Section 8.9(b) shall not apply to Employer Contribution
Accounts attributable to the Amira Money Purchase Pension Plan
which was merged into this Plan.
B. SPECIAL EFFECTIVE DATES AND PROVISIONS WITH RESPECT TO ENCORE'S
ADOPTION OF THE PLAN.
1. Effective for Plan Years October 1, 1989 through December 31,
1993, an Employee shall be eligible to participate in the Plan
as of the first day on which the Participant has completed one
(1) Year of Service.
2. Effective for Plan Years beginning prior to January 1, 1994,
Employer Contributions shall be invested as determined by the
Employer, but shall be invested primarily in ARA stock.
<PAGE> 64
EXHIBIT I
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided below, a Participant who is
married on the "annuity starting date" and who does not die before the
"annuity starting date" shall receive the value of all of his benefits in
the form of a joint and survivor annuity. The joint and survivor annuity is
an annuity that commences immediately and shall be equal in value to a
single life annuity. Such joint and survivor benefits following the
Participant's death shall continue to the spouse during the spouse's
lifetime at a rate equal to 50% of the rate at which such benefits were
payable to the Participant. This joint and 50% survivor annuity shall be
considered the designated qualified joint and survivor annuity and
automatic form of payment for the purposes of this Plan. However, the
Participant may elect to receive a smaller annuity benefit with
continuation of payments to the spouse at a rate of seventy-five percent
(75%) or one hundred percent (100%) of the rate payable to a Participant
during his lifetime, which alternative joint and survivor annuity shall be
equal in value to the automatic joint and 50% survivor annuity. An
unmarried Participant shall receive the value of his benefit in the form of
a life annuity. Such unmarried Participant, however, may elect in writing to
waive the life annuity. The election must comply with the provisions of this
Section as if it were an election to waive the joint and survivor annuity
by a married Participant, but without the spousal consent requirement. The
Participant may elect to have any annuity provided for in this Section
distributed upon the attainment of the "earliest retirement age" under the
Plan. The "earliest retirement age" is the earliest date on which, under
the Plan, the Participant could elect to receive retirement benefits.
(2) Any election to waive the joint and survivor annuity must be made
by the Participant in writing during the election period and be
consented to by the Participant's spouse. If the spouse is legally
incompetent to give consent, the spouse's legal guardian, even if such
guardian is the Participant, may give consent. Such election shall
designate a Beneficiary (or a form of benefits) that may not be changed
without spousal consent (unless the consent of the spouse
expressly permits designations by the Participant
<PAGE> 65
without the requirement of further consent by the spouse). Such
spouse's consent shall be irrevocable and must acknowledge the effect
of such election and be witnessed by a Plan representative or a notary
public. Such consent shall not be required if it is established to the
satisfaction of the Administrator that the required consent cannot be
obtained because there is no spouse, the spouse cannot be located, or
other circumstances that may be prescribed by Regulations. The election
made by the Participant and consented to by his spouse may be revoked
by the Participant in writing without the consent of the spouse at any
time during the election period. The number of revocations shall not be
limited. Any new election must comply with the requirements of this
paragraph. A former spouse's waiver shall not be binding on a
new spouse.
(3) The election period to waive the joint and survivor annuity shall
be the 90 day period ending on the "annuity starting date."
(4) For purposes of this Section, the "annuity starting date" means
the first day of the first period for which an amount is paid as an
annuity, or, in the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred which
entitle the Participant to such benefit.
(5) With regard to the election, the Administrator shall provide to
the Participant no less than 30 days and no more than 90 days before
the "annuity starting date" a written explanation of:
(i) the terms and conditions of the joint and survivor annuity, and
(ii) the Participant's right to make, and the effect of, an
election to waive the joint and survivor annuity, and
(iii) the right of the Participant's spouse to consent to any
election to waive the joint and survivor annuity, and
<PAGE> 66
(iv) the right of the Participant to revoke such election, and the
effect of such revocation.
(b) In the event a married Participant duly elects pursuant to
paragraph (a)(2) above not to receive his benefit in the form of a joint
and survivor annuity, or if such Participant is not married, in the form of
a life annuity, the Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a Participant or his
Beneficiary any amount to which he is entitled under the Plan in one
or more of the following methods:
(1) One lump-sum payment in cash;
(2) Payments over a period certain in monthly, quarterly, semiannual,
or annual cash installments. In order to provide such installment
payments, the Administrator may (A) segregate the aggregate amount
thereof in a separate, federally insured savings account, certificiate
of deposit in a bank or savings and loan association, money market
certificate or other liquid short-term security or (B) purchase a
nontransferable annuity contract for a term certain (with no life
contingencies) providing for such payment. The period over which such
payment is to be made shall not extend beyond the Participant's life
expectancy (or the life expectancy of the Participant and his
designated Beneficiary).
(3) Purchase of or providing an annuity. However, such annuity may not
be in any form that will provide for payments over a period extending
beyond either the life of the Participant (or the lives of the
Participant and his designated Beneficiary) or the life expectancy of
the Participant (or the life expectancy of the Participant and his
designated Beneficiary).
(c) The present value of a Participant's joint and survivor annuity
derived from Employer and Employee contributions (including accumulated
Qualified Voluntary Employee Contributions) may not be paid without his
written consent if the value exceeds, or has ever exceeded, $3,500 at the
time of any prior distribution. Further, the spouse of a Participant must
<PAGE> 67
consent in writing to any immediate distribution. If
the value of the Participant's benefit derived from
Employer and Employee contributions (including
accumulated Qualified Voluntary Employee Contributions)
does not exceed $3,500 and has never exceeded $3,500 at
the time of any prior distribution, the Administrator
may immediately distribute such benefit without such
Participant's consent. No distribution may be made
under the preceding sentence after the "annuity
starting date" unless the Participant and his spouse
consent in writing to such distribution. Any written
consent required under this paragraph must be obtained
not more than 90 days before commencement of the
distribution and shall be made in a manner consistent
with Section 6.5(a)2.
(d) Any distribution to a Participant who has a
benefit which exceeds, or has ever exceeded, $3,500 at
the time of any prior distribution shall require such
Participant's consent if such distribution commences
prior to the later of his Normal Retirement Age or age
62. With regard to this required consent:
(1) No consent shall be valid unless the
Participant has received a general description of
the material features and an explanation of the
relative values of the optional forms of benefit
available under the Plan that would satisfy the
notice requirements of Code Section 417.
(2) The Participant must be informed of his
right to defer receipt of the distribution. If a
Participant fails to consent, it shall be deemed
an election to defer the commencement of payment
of any benefit. However, any election to defer
the receipt of benefits shall not apply with
respect to distributions which are required under
Section 6.5(e).
(3) Notice of the rights specified under this
paragraph shall be provided no less than 30 days
and no more than 90 days before the "annuity
starting date".
(4) Written consent of the Participant to the
distribution must not be made before the
Participant receives the notice and must not be
made more than 90 days before the "annuity
starting date".
<PAGE> 68
(5) No consent shall be valid if a significant
detriment is imposed under the Plan on any
Participant who does not consent to the
distribution.
(e) Notwithstanding any provision in the Plan to
the contrary, the distribution of a Participant's
benefits made on or after January 1, 1985, whether
under the Plan or through the purchase of an annuity
contract, shall be made in accordance with the
following requirements and shall otherwise comply with
Code Section 401(a)(9) and the Regulations thereunder
(including Regulation 1.401(a)(9)-2), the provisions of
which are incorporated herein by reference:
(1) A Participant's benefits shall be
distributed to him not later than April Ist of
the calendar year following the later of (i) the
calendar year in which the Participant attains
age 70 1/2 or (ii) the calendar year in which the
Participant retires, provided, however, that this
clause (ii) shall not apply in the case of a
Participant who is a "five (5) percent owner" at
any time during the five (5) Plan Year period
ending in the calendar year in which he attains
age 70 1/2 or, in the case of a Participant who
becomes a "five (5) percent owner" during any
subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be
the April 1st of the calendar year following the
calendar year in which such subsequent Plan Year
ends. Alternatively, distributions to a
Participant must begin no later than the
applicable April 1st as determined under the
preceding sentence and must be made over the life
of the Participant (or the lives of the
Participant and the Participant's designated
Beneficiary) or the life expectancy of the
Participant (or the life expectancies of the
Participant and his designated Beneficiary) in
accordance with Regulations. Notwithstanding the
foregoing, clause (ii) above shall not apply to
any Participant unless the Participant had
attained age 70 1/2 before January 1, 1988 and
was not a "five (5) percent owner" at any time
during the Plan Year ending with or within the
calendar year in which the Participant attained
age 66 1/2 or any subsequent Plan Year.
<PAGE> 69
(2) Distributions to a Participant and his
Beneficiaries shall only be made in accordance
with the incidental death benefit requirements of
Code Section 401(a)(9)(G) and the Regulations
thereunder.
Additionally, for calendar years beginning before
1989, distributions may also be made under an
alternative method which provides that the then
present value of the payments to be made over the
period of the Participant's life expectancy
exceeds fifty percent (50%) of the then present
value of the total payments to be made to the
Participant and his Beneficiaries.
(f) For purposes of this Section, the life
expectancy of a Participant and a Participant's spouse
(other than in the case of a life annuity) shall not be
redetermined in accordance with Code Section
401(a)(9)(D). Life expectancy and joint and last
survivor expectancy shall be computed using the return
multiples in Tables V and VI of Regulation 1.72-9.
(g) Subject to the spouse's right of consent
afforded under the Plan, the restrictions imposed by
this Section shall not apply if a Participant has,
prior to January 1, 1984, made a written designation to
have his retirement benefit paid in an alternative
method acceptable under Code Section 401(a) as in
effect prior to the enactment of the Tax Equity and
Fiscal Responsibility Act of 1982.
(h) All annuity Contracts under this Plan shall
be non-transferable when distributed. Furthermore, the
terms of any annuity Contract purchased and distributed
to a Participant or spouse shall comply with all of the
requirements of the Plan.
(i) If a distribution is made at a time when a
Participant is not fully Vested in his Participant's
Account and the Participant may increase the Vested
percentage in such account:
(1) a separate account shall be established for
the Participant's interest in the Plan as of the
time of the distribution; and
(2) at any relevant time, the Participant's
Vested portion of the separate account shall be
<PAGE> 70
equal to an amount ("X") determined by the
formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the
Vested percentage at the relevant time, AB is the
account balance at the relevant time, D is the
amount of distribution, and R is the ratio of the
account balance at the relevant time to the
account balance after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below,
a Vested Participant who dies before the annuity
starting date and who has a surviving spouse shall have
his death benefit paid to his surviving spouse in the
form of a Pre-Retirement Survivor Annuity. The
Participant's spouse may direct that payment of the
Pre-Retirement Survivor Annuity commence within a
reasonable period after the Participant's death. If the
spouse does not so direct, payment of such benefit will
commence at the time the Participant would have
attained the later of his Normal Retirement Age or age
62. However, the spouse may elect a later commencement
date. Any distribution to the Participant's spouse
shall be subject to the rules specified in Section
6.6(g).
(b) Any election to waive the Pre-Retirement
Survivor Annuity before the Participant's death must be
made by the Participant in writing during the election
period and shall require the spouse's irrevocable
consent in the same manner provided for in Section
6.5(a)(2). Further, the spouse's consent must
acknowledge the specific nonspouse Beneficiary.
Notwithstanding the foregoing, the nonspouse
Beneficiary need not be acknowledged, provided the
consent of the spouse acknowledges that the spouse has
the right to limit consent only to a specific
Beneficiary and that the spouse voluntarily elects to
relinquish such right.
(c) The election period to waive the
Pre-Retirement Survivor Annuity shall begin on the
first day of the Plan Year in which the Participant
attains age 35 and end on the date of the Participant's
death. An earlier waiver (with spousal consent) may be
<PAGE> 71
made provided a written explanation of the
Pre-Retirement Survivor Annuity is given to the
Participant and such waiver becomes invalid at the
beginning of the Plan Year in which the Participant
turns age 35. In the event a Vested Participant
separates from service prior to the beginning of the
election period, the election period shall begin on the
date of such separation from service.
(d) With regard to the election, the
Administrator shall provide each Participant within the
applicable period, with respect to such Participant
(and consistent with Regulations), a written
explanation of the Pre-Retirement Survivor Annuity
containing comparable information to that required
pursuant to Section 6.5(a)(5). For the purposes of this
paragraph, the term "applicable period" means, with
respect to a Participant, whichever of the following
periods ends last:
(1) 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;
(2) A reasonable period after the individual
becomes a Participant. For this purpose, in the
case of an individual who becomes a Participant
after age 32, the explanation must be provided by
the end of the three-year period beginning with
the first day of the first Plan Year for which
the individual is a Participant;
(3) A reasonable period ending after the Plan no
longer fully subsidizes the cost of the
Pre-Retirement Survivor Annuity with respect to
the Participant;
(4) A reasonable period ending after Code
Section 401(a)(11) applies to the Participant; or
(5) A reasonable period after separation from
service in the case of a Participant who
separates before attaining age 35. For this
purpose, the Administrator must provide the
explanation beginning one year before the
separation from service and ending one year after
such separation.
<PAGE> 72
(e) If the value of the Pre-Retirement Survivor
Annuity derived from Employer and Employee
contributions (including accumulated Qualified
Voluntary Employee Contributions) does not exceed
$3,500 and has never exceeded $3,500 at the time of any
prior distribution, the Administrator shall direct the
immediate distribution of such amount to the
Participant's spouse. No distribution may be made under
the preceding sentence after the annuity starting date
unless the spouse consents in writing. If the value
exceeds, or has ever exceeded, $3,500 at the time of
any prior distribution, an immediate distribution of
the entire amount may be made to the surviving spouse,
provided such surviving spouse consents in writing to
such distribution. Any written consent required under
this paragraph must be obtained not more than 90 days
before commencement of the distribution and shall be
made in a manner consistent with Section 6.5(a)(2).
(f)(1) In the event the death benefit is not
paid in the form of a Pre-Retirement Survivor Annuity,
it shall be paid to the Participant's Beneficiary by
either of the following methods, as elected by the
Participant (or if no election has been made prior to
the Participant's death, by his Beneficiary), subject
to the rules specified in Section 6.6(g):
(i) one lump-sum payment in cash;
(ii) Payment in monthly, quarterly,
semi-annual, or annual cash installments
over a period to be determined by the
Participant or his Beneficiary. After
periodic installments commence, the
Beneficiary shall have the right to direct
the Trustee to reduce the period over which
such periodic installments shall be made,
and the Trustee shall adjust the cash amount
of such periodic installments accordingly.
(2) In the event the death benefit payable
pursuant to Section 6.2 is payable in
installments, then, upon the death of the
Participant, the Administrator may direct the
Trustee to segregate the death benefit into a
separate account, and the Trustee shall invest
such segregated account separately, and the funds
accumulated in such account shall be used for the
payment of the installments.
<PAGE> 73
(g) Notwithstanding any provision in the Plan to
the contrary, distributions upon the death of a
Participant made on or after January 1, 1985 shall be
made in accordance with the following requirements and
shall otherwise comply with Code Section 401(a)(9) and
the Regulations thereunder. If the death benefit is
paid in the form of a Pre-Retirement Survivor Annuity,
then distributions to the Participant's surviving
spouse must commence on or before the later of:
(1) December 31st of the calendar year immediately
following the calendar year in which the Participant
died; or (2) December 31st of the calendar year in
which the Participant would have attained age 70 1/2.
If it is determined pursuant to Regulations that the
distribution of a Participant's interest has begun and
the Participant dies before his entire interest has
been distributed to him, the remaining portion of such
interest shall be distributed at least as rapidly as
under the method of distribution selected pursuant to
Section 6.5 as of his date of death. If a Participant
dies before he has begun to receive any distributions
of his interest under the Plan or before distributions
are deemed to have begun pursuant to Regulations (and
distributions are not to be made in the form of a
Pre-Retirement Survivor Annuity), then his death
benefit shall be distributed to his Beneficiaries by
December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
(h) For purposes of this Section, the life
expectancy of a Participant and a Participant's spouse
(other than in the case of a life annuity) shall not be
redetermined in accordance with Code Section
401(a)(9)(D). Life expectancy and joint and last
survivor expectancy shall be computed using the return
multiples in Tables V and VI of Regulation 1.72-9.
(i) Subject to the spouse's right of consent
afforded under the Plan, the restrictions imposed by
this Section shall not apply if a Participant has,
prior to January 1, 1984, made a written designation to
have his death benefits paid in an alternative method
acceptable under Code Section 401(a) as in effect prior
to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982.
<PAGE> 1
Exhibit 10.18
No. _________________
FRANCHISE AGREEMENT made this _______ day of ________, 19___, effective
________________ 19___, between ROTO-ROOTER CORPORATION ("Company") of West
Des Moines, Iowa, and ___________________________________________ ("Franchisee")
of___________________________________________________________________________.
(address)
WITNESSETH:
WHEREAS, Company has developed methods and techniques known as the
Roto-Rooter System for performing sewer, drain and pipe cleaning services and
for selling such services to the public (the "Roto-Rooter System"); and
WHEREAS, Company presently owns and has registered as a trademark and
service mark the Roto-Rooter emblem and the following marks: "Roto-Rooter",
"Razor Kleens", "There's Only One" and "And Away Go Troubles Down the Drain"
(the "Marks"); and
WHEREAS, Franchisee has represented to Company that Franchisee wishes
to use the Roto-Rooter System and the Marks in selling to the public and in
performing sewer, drain and pipe cleaning services only within the territory
described herein and that Franchisee will perform and sell sewer, drain and
pipe cleaning services within that territory to the satisfaction of Company
and in accordance with the standards of performance and other terms and
conditions set forth in this Agreement.
NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. LICENSE AND FRANCHISE
On the terms and subject to the conditions of this Agreement, Company
hereby grants to Franchisee, and Franchisee hereby accepts, a license and
franchise to use the Marks in connection with the advertising, performance and
sale of sewer, drain and pipe cleaning services ("Services") in accordance
with the methods and techniques disclosed by Company to Franchisee
(collectively, the "System") solely within the geographic market area
described in Paragraph 2 of this Agreement (the "Territory"). The Company
further grants to Franchisee, and Franchisee hereby accepts, a license and
franchise to utilize confidential, proprietary materials ("Confidential
Materials") in connection with the advertising and sale of sewer,drain and
pipe cleaning services under the Marks. These Confidential Materials shall
include video tapes, manuals, reports and any other information supplied by
Company to Franchisee, and identified as Confidential Materials, which relate
to the System and are intended to assist Franchisee in the promotion and
operation of its sewer, drain and pipe cleaning business. Franchisee may also,
but shall not be required to, use the Marks in connection with septic tank
cleaning services, plumbing repair services, pipe inspection services, and
such other services, if any, which the Company shall hereafter expressly
authorize in writing. To the extent such services are offered by Franchisee
under authority of Company, all such services shall be
-1-
<PAGE> 2
included with the definition of Services as set forth above and referred to
throughout this Agreement. During the term of this Agreement, Company agrees
that neither it nor its affiliate will grant an additional license or franchise
for the purpose of conducting sewer, drain and pipe cleaning services using
the Marks within the Territory, or perform Services identified by the Marks in
the Territory. The license and franchise granted herein applies only to the use
of the Marks in the solicitation and sale of the Services using the System
within the Territory and does not apply to any other service marks or any
trademark of Company or its affiliates or the use of any Marks in connection
with the sale of any other product or service. Company reserves all rights not
expressly licensed to Franchisee herein with respect to the Marks, the Services
or any products or any other trademarks or services, anywhere in the world,
including but not limited to the rights of Company and its affiliates to (i)
provide or license Services or any other services under different trademarks
and trade names; (ii) use the Marks to provide or license other services; and
(iii) develop, manufacture, license, distribute, market or sell products in any
channel of distribution under the Marks or different trademarks and trade
names, whether or not the products are the same or similar to products sold by
Franchisee.
2. FRANCHISE TERRITORY
The license and franchise described in Paragraph 1 of this Agreement
is granted to Franchisee on the condition that Franchisee will assume
responsibility for selling to the public and performing the Services using the
System identified by the Marks and only in the following described Territory:
(the "Territory") and on the condition that Franchisee will sell and perform
such Services in accordance with the terms and conditions set forth in this
Agreement.
As express conditions for the grant of this franchise, during the term
of this Agreement Franchisee shall:
(a) Actively and continuously advertise and promote within the Territory
the System and the Marks. Company reserves the right to direct Franchisee
to modify or discontinue advertisements that Company believes to present a
risk of misleading prospective customers as to the authorized service area
or authorized Services of Franchisee, and Franchisee shall promptly comply
with any such directive.
(b) Actively and continuously sell and solicit sales only within the
Territory of Services using the System in conjunction with and identified
by the Marks.
-2-
<PAGE> 3
Franchisee shall not render Services in conjunction with or identified by
the Marks at any location outside the Territory; provided that Franchisee
may perform Services in the Territory of another franchisee only as a
subcontractor to the other franchisee for a particular job which is billed
by the other franchisee.
(c) Render Services which are to be performed pursuant to the System.
(d) Maintain office and service facilities for use by Franchisee in
connection with the sale of Services. Franchisee shall notify Company of
the address, telephone and facsimile transmission number of each such
location established under this Agreement.
(e) Comply at all times with the service standards set forth in paragraph 6
of this Agreement.
3. TERM
This Agreement shall become effective on ______________, 19___, and
shall expire on ______________, 19___, unless terminated earlier under the
provisions of paragraphs 12 or 13 of this Agreement.
4. FRANCHISE AND LICENSE FEES
(a) For the franchise granted by this Agreement and the right to use
the System and the Marks, Company acknowledges receipt from Franchisee of an
initial fee of $__________________.
(b) Franchisee shall pay to Company at its offices in West Des
Moines, Iowa, in advance on the first day of each month a monthly franchise
fee (the "Monthly Franchise Fee"). Timely payment of the Monthly Franchise Fee
is a material condition to this Agreement. During the first 12 months of the
term of this Agreement the Monthly Franchise Fee shall be $____________ (the
"Base Monthly Franchise Fee"). Thereafter, the Monthly Franchise Fee shall be
an amount equal to the Base Monthly Franchise Fee adjusted in accordance with
the following formula.
Effective on each anniversary of this Agreement, Company will adjust
the Monthly Franchise Fee paid by Franchisee in proportion to the increase or
decrease in the U.S. Consumer Price Index For All Urban Consumers (U.S. All
City average; 1982-84 = 100) (the "Index") during the preceding calendar year.
Company shall make each adjustment computation by multiplying the
Base Monthly Franchise Fee by a fraction, the numerator of which is the Index
for December of the most recently completed calendar year and the denominator
of which is the Index for the month of December of the calendar year next
preceding the year in which this Agreement became effective. Each adjustment
shall be rounded up or down to the nearest figure evenly divisible by $5.00.
If an Index figure is not available before an applicable adjustment
date, Company will use an estimate of the Index until the official Index figure
becomes available.
-3-
<PAGE> 4
If the Index is discontinued or modified, the most nearly equivalent Index
published by the U.S. government will be used to compute the Monthly Franchise
Fee.
5. ASSISTANCE TO FRANCHISEES
During the term of this Agreement:
(a) Company shall provide to Franchisee those management, engineering
and research services, and advice concerning the System, the use and
display of the Marks, and Franchisee's operation of the business
operated hereunder which Company makes available to its franchisees
generally from time to time and provide advice and instructions to
Franchisee with respect to proper use of the System and the Marks.
(b) Company shall spend each year a total amount of not less than 15% of
the total monthly franchise fees it receives from all franchisees during
the preceding year for market research, for advertising and promotion of
the Marks and the Services on a national scale, and for the development
and production of advertising and promotional material to be available
to all franchisees in promoting sales of Services under the Marks.
6. SERVICE STANDARDS
Franchisee acknowledges that nationwide uniform standards of service
are vital to the protection of the System and the Marks and necessary to
assure that the public receives the kind and quality of service it associates
with the System and the Marks. Franchisee therefore agrees that it will fully
comply with each of the following requirements in all of its operations as a
Franchisee under this Agreement:
(a) Provide prompt and courteous service at all times during normal
working hours and, additionally, provide an emergency service that will
adequately meet the public need for such service within the Territory.
Company may establish and Franchisee shall honor performance standards
for operation of the franchised business, and rendering the Services to
customers. Company will consult its franchisees before promulgating
performance standards.
(b) Maintain reasonable standards of cleanliness. Keep all machines in
good working order and clean. Keep all service personnel in uniform and
easily identifiable as bona fide Roto-Rooter service personnel in
accordance with the then existing Mark identification policies of the
Company. All service vehicles shall be painted white or such other
color as specified by Company and all such vehicles must be kept neat
and clean and identified as Roto-Rooter service vehicles in accordance
with the then-existing Mark identification policies of Company.
(c) On every job, take all necessary precautions to protect furnishings,
interior and exterior walls, lawns, gardens, etc., and clean working
area thoroughly upon completion of the job.
(d) Whenever possible, offer and honor a guarantee for the Services
performed.
-4-
<PAGE> 5
(e) Conduct business in a manner which will reflect favorably at all times
on Company, its franchisees and its Marks and engage in no act or practice
with the intent or effect of disparaging or impairing the goodwill of any
of the Marks.
(f) Refrain from any misleading or unethical practice in performing,
soliciting or advertising Services rendered under this Agreement.
(g) Provide, upon request of Company in order to allow Company to monitor
the quality of services provided and the maintenance of service standards,
a listing of the names, addresses and telephone numbers of customers
served during a recent time period (not to exceed 30 days) specified by the
Company.
(h) Permit Company to enter Franchisee's premises and vehicles to inspect
them to assure compliance with the terms of this Agreement. Franchisee
shall cooperate and assist in any such inspection, and shall meet with
Company's representatives at Franchisee's principal place of business in
the Territory to review the results of inspections or other matters Company
wishes to discuss with Franchisee.
(i) Provide sales and advertising expenditure data as may be reasonably
requested including an annual report of sales of the franchised business.
Each year Franchisee shall submit to the Company by February 15 a
report of the sales of the franchised business for the preceding calendar
year. The first such report shall be submitted for the calendar year in
which the effective date of this Agreement falls. The report shall state
total sales for the franchised business and separate category sales for
sewer and drain cleaning, plumbing, and a category that includes all other
sales.
The report shall be verified by the Franchisee and signed by the
Franchisee or its authorized officer and shall be on a form prescribed by
the Company. Franchisee shall maintain its sales records in a manner that
permits the separate reporting categories to be reported and verified.
7. ADVERTISING BY FRANCHISEES
Franchisee acknowledges that regular and continuous local advertising
of the System and the Marks is vital to the success of a Roto-Rooter
franchise.
(a) Franchisee shall place advertisements or listings in the principal
telephone directories (including the Yellow Pages portion thereof) covering
and distributed in the Territory. In those instances where such telephone
directories are usually and customarily distributed both within and without
the Territory, all of Franchisee's advertisements therein shall specify
Franchisee's Territory in not less than eight point type size. Franchisee
shall not place advertisements or listings in telephone directories which
are usually and customarily distributed only outside the Territory.
(b) An "Agreement Year" is the 12 month period commencing on the effective
date of this Agreement and each successive 12 month period thereafter
commencing on the anniversary of the Agreement.
-5-
<PAGE> 6
(c) During each Agreement Year, Franchisee shall expend for advertising
conducted during such Agreement Year not less than the following minimum
amounts on media broadcasting or display costs for advertising the System
and the Marks on television, radio or outdoor billboards. Franchisee may
expend up to two thousand dollars ($2,000) of its minimum advertising
expenditure requirement each Agreement Year on advertising the System and
the Marks via direct mail, in newspapers or shoppers of general
distribution, on benches, in transit advertising and on stadium, ballpark
and race track signs. The formula used to compute the minimum amounts is
two and one-half cents (2.5 cents) per person for Agreement Years which
begin in 1995; two and six-tenths cents (2.6 cents) per person for
Agreement Years which begin in 1996; two and seven-tenths cents (2.7
cents) per person for Agreement Years which begin in 1997; two and
seven-tenths cents (2.7 cents) per person for Agreement Years which begin
in 1998; and two and eight-tenths cents (2.8 cents) per person for
Agreement Years which begin in 1999. Neither production or other costs,
nor expenditures for other forms of advertising may be applied to satisfy
these requirements:
<TABLE>
<CAPTION>
Agreement Years Which Minimum Expenditure
Begin in the Calendar Per Agreement
Year Set Forth Below Year
--------------------- -------------------
<S> <C>
1995 $_______
1996 $_______
1997 $_______
1998 $_______
1999 $_______
</TABLE>
(d) Franchisees with more than one Roto-Rooter sewer and drain cleaning
franchise may at their option combine the minimum advertising requirements
for their territories and allocate the expenditures among their territories
without regard to the minimum for any single territory. If Franchisee
chooses to combine the minimums, the total amount so expended must equal or
exceed the sum of the minimums for the combined territories.
If Franchisee desires to combine a territory for which no minimum has been
established, Company will establish a minimum for such territory using the
same method used under this Agreement to establish the minimum for the
Territory.
(e) If Franchisee does not expend the required minimum amounts in the manner
and amounts set forth in Paragraph 7(c) of this Agreement, Franchisee shall
within 14 days after the end of the applicable Agreement Year without
demand therefor remit to Company an amount equal to the difference between
the amount required to be expended and the amount actually expended. The
total amount so remitted shall be expended by Company in the manner and for
the advertising, research, promotional, development or production purposes
described in Paragraph 5(b) of this Agreement.
-6-
<PAGE> 7
(f) Franchisee shall submit at the times and in the manner prescribed by
Company, documentation satisfactory to Company that Franchisee has engaged
in the advertising and made the advertising expenditures required by this
Paragraph 7.
(g) Company reserves the right to approve in advance all advertising
(including programs, media, materials and content) of the System and Marks
and to establish rules, standards and procedures regarding the content,
form and manner of advertising the System and Marks. Nothing in this
Agreement entitles Company to interfere with Franchisee's independent
pricing discretion.
8. USE OF TRADEMARKS AND SERVICE MARKS
Franchisee shall use the Marks only in the manner or manners and
places prescribed or authorized by Company and only in connection with the
sale and performance of Services expressly authorized by Company in writing.
Franchisee shall promote and identify the Services in the Territory and only
in the Territory and shall not use the Marks in connection with the sale or
lease of unauthorized products or services.
Upon receipt of notice from Company that the Marks are being used in
an unauthorized manner, Franchisee shall immediately cease such unauthorized
use. Franchisee shall not alter or add to the form or content of said Marks
in any manner nor use the mark "Roto-Rooter" or any colorable imitation thereof
in any corporate or trade name. Upon receipt of prior written consent of
Company and fulfillment by Franchisee of other conditions as specified by
Company, Franchisee may include "Roto-Rooter" as part of a fictitious name
filing required by state law. Franchisee shall not file for or acquire any
registration (state or federal) for the Marks or any trademark or service mark
(or variation thereof) confusingly similar to the Marks. Company reserves the
right to alter or replace the principal identifying characteristics of the
franchised business, including the trade dress and principal trademark and
service mark identification of the Services and of the business franchised
hereunder, but will not withdraw the license to use the "Roto-Rooter" trademark
pursuant to this provision. Company will consult its franchisees before
implementing substantial changes in the trade dress of the System. Franchisee
shall implement such changes upon notice from Company. Franchisee shall
prominently identify itself in its offices and on its forms and advertisements
as an independent business operated under license from Company in such form and
content as Company may direct.
Franchisee shall advise Company, from time to time, of all uses by
others of names, symbols and devices comprising, consisting of, or similar to
the name "Roto-Rooter" or any of the Marks, including any variations or
colorable imitations thereof. Company shall solely determine whether such uses
are unauthorized uses and whether action should be commenced to curtail such
uses. All lawsuits and actions for trademark infringement or dilution and/or
unfair competition shall be brought only by Company; however, if requested by
Company, Franchisee shall consent to be joined as a party in any lawsuit or
action and lend his full cooperation and assistance in the preparation and
prosecution of such lawsuit or action. Company shall reimburse Franchisee for
all reasonable out-of-pocket expenses incurred by Franchisee at the request of
the Company in regard to the foregoing. Franchisee shall not institute any
legal action alleging infringement of Company's Marks. Franchisee is
specifically prohibited from charging other entities with infringement and from
initiating suit for infringement or dilution of Company's Marks.
-7-
<PAGE> 8
9. ROTO-ROOTER MACHINES
Company agrees to make available to Franchisee for purchase during
the term of this Agreement the current Roto-Rooter brand equipment and parts
line (the "Machines") as needed by Franchisee, at prices and upon terms of
sale then prevailing, for cash or upon such terms of credit, as Company shall
determine. Franchisee agrees that the Machines and the Marks associated with
the System will be used only in conjunction with the Services performed under
the terms of this Agreement.
10. FINANCIAL STANDARDS
Franchisee agrees, during and after the term of this Agreement, to
indemnify and hold Company, its parent corporation and their respective
officers, agents and employees harmless from and against all loss or damage,
liability, cost and expense arising in contract, tort or otherwise out of, in
connection with, in relation to, or as a result of a violation of this
Agreement by Franchisee and from all claims and damages, causes of action or
suits asserted by any third person, firm, corporation or government entity
caused by, resulting from or in any way arising or growing out of or in
connection with the operation of Franchisee's business which is the subject of
this Agreement or otherwise (including the use by Franchisee of the System,
the Marks, the Machines, or the operation of any other business conducted by
Franchisee).
11. INSURANCE
It is understood and agreed that the protection of the goodwill of
the System and the Marks and the financial security of Franchisee and Company
requires the existence of public liability insurance coverage for Franchisee.
Franchisee therefore shall procure and maintain in full force and effect
Commercial General Liability insurance coverage (including premises/operations
coverage, products/completed operations coverage and contractual liability
coverage) and comprehensive Motor Vehicle Liability insurance coverage
(including hired and non-owned motor vehicle coverage) in the name of
Franchisee, with Company named as an Additional Insured, at Franchisee's sole
cost and expense in no less than the following amounts:
Bodily Injury $500,000 each person
$500,000 each occurrence
Property Damage $250,000 each occurrence
or
A single limit policy $500,000 each occurrence
in the amount of no
less than
Franchisee shall furnish Company at any time upon Company's request
certificates evidencing such insurance containing an endorsement that the
policy may not be cancelled without thirty (30) days' advance written notice
to Company.
-8-
<PAGE> 9
12. TERMINATION BY FRANCHISEE
This Agreement may be terminated by Franchisee at any time during the
term of this Agreement by delivery of written notice of termination (which
shall be irrevocable) to Company sixty (60) days before the effective date of
such termination. If Franchisee abandons the franchise granted herein by
failing to conduct the business franchised hereunder for any continuous
period of 10 or more days (except as caused by strike, casualty or Acts of
God), this Agreement shall expire automatically by mutual consent on the tenth
day after Franchisee ceased or suspended operation. Immediately upon such
termination or expiration, Franchisee shall comply with the post-termination
or expiration provisions of Paragraph 13 of this Agreement.
13. TERMINATION BY COMPANY
To the extent permitted by law, this Agreement may be terminated by
Company for cause upon sixty (60) days' notice (or such longer period of
notice as shall be required by applicable law) to Franchisee as hereinafter
provided. Although not limited to such, any of the following acts of default by
Franchisee to the extent permitted by applicable law shall be cause for
termination of this Agreement by Company:
(a) If any monies payable by Franchisee to Company pursuant to this
Agreement or otherwise are not paid in full as and when due. In addition,
and to the extent permitted by law, Company shall have the right and option
to charge and Franchisee shall pay a delinquency fee on any sums not paid
when due at the rate of 1.5% per month on the unpaid balance due until paid
in full.
(b) If there shall be filed by or against Franchisee, in any court, a
petition in bankruptcy, or for reorganization or relief under any provision
of the Federal Bankruptcy Act, or if a receiver or trustee of the business
of the Franchisee is appointed, or if an attachment or writ is issued
against the Franchisee which affects the business of the Franchisee, and
such receivership, trusteeship, attachment or writ shall not be dissolved
or discharged within thirty (30) days from the date of filing thereof, or if
Franchisee shall be adjudicated bankrupt or insolvent or shall make an
assignment for the benefit of creditors.
(c) If Franchisee or its principal shareholder is convicted of any felony.
(d) If there is a lapse of insurance, or nonpayment of insurance premiums
therefor, as required in Paragraph 11 hereof.
(e) If Franchisee fails to use its best efforts in developing and promoting
the sales of Services in the Territory.
(f) If Franchisee makes or attempts to make a transfer, in violation of
Paragraph 14, of an interest in this Agreement or of an ownership interest
in Franchisee.
(g) If Franchisee should use or advertise any of the Marks except in
accordance with Company's prescribed methods of use or advertisement
thereof.
-9-
<PAGE> 10
(h) In the event Franchisee performs Services outside the Territory; except
that Franchisee may perform Services in the Territory of another franchisee
only as a subcontractor to the other franchisee for a particular job which
is billed by the other franchisee.
(i) If Franchisee defaults in the performance of any other provision of
this Agreement whether or not listed in this Paragraph 13.
Company shall notify Franchisee in writing of the acts or conduct
constituting cause for termination of this Agreement. Franchisee shall have
thirty (30) days after receipt of such notice to cure to the reasonable
satisfaction of Company any such default which, upon cure, shall have the
effect of voiding such notice of termination. In the event Franchisee is in
default hereunder and Company has previously delivered a notice of default to
Franchisee two (2) times in any consecutive six (6) month period, whether
cured or not, Company, in addition to any other rights or remedies it may have,
shall have the right and option to terminate this Agreement forthwith without
further notice to Franchisee. Notice of termination may be delivered together
with or at any time after a notice of default, subject to an applicable right
(if any) to cure the noted default(s). Notices under this Paragraph are
effective when sent in accordance with Paragraph 18.
Upon termination of this Agreement by Company pursuant to this Paragraph
13, Company shall repurchase from Franchisee at a fair market value at the time
of termination any unused cable, part, equipment and supplies (other than
expendable supplies such as stationery, invoices and business cards) which
Franchisee purchased from Company; provided, that Company may offset against
payment of such repurchase price any and all amounts owed by Franchisee to
Company. Immediately upon termination or expiration of this Agreement, either
under the provisions of this Paragraph or those of Paragraph 12, Franchisee
shall cease using the System and shall cease using or displaying the Marks and
shall discontinue any representation or suggestion, either directly or
indirectly, that it is or was formerly a franchisee or authorized user of the
System or the Marks. Franchisee shall also immediately cancel any fictitious
name filing using any of the Company's service marks or trademarks, including
the "Roto-Rooter" mark or any name or mark confusingly similar thereto. Upon
termination or expiration of this Agreement, Franchisee shall promptly remove
the Marks from the Machines and all other items of property in the possession
of Franchisee. If Franchisee disposes of a Machine, vehicle or other equipment
to anyone other than another Roto-Rooter franchisee, Franchisee shall remove
all Marks from the Machine before such disposition; if a Machine, vehicle
or other equipment is transferred to an employee for continued use in the
franchised business, Franchisee shall condition such transfer on the employee's
obligation to remove the Marks before making any further disposition thereof
(except to Franchisee or another Roto-Rooter franchisee).
14. ASSIGNMENT OF RIGHTS BY FRANCHISEE
(a) Franchisee shall not sell, assign, transfer, delegate, pledge, grant a
security interest in, or encumber this Agreement or any right or interest
herein or hereunder, or transfer or allow the direct or indirect transfer of
any ownership interest in Franchisee, or suffer or permit any such sale,
assignment, transfer or encumbrance to occur by operation of law, without the
prior written consent of
-10-
<PAGE> 11
Company. Franchisee shall not grant a lien or security interest in this
Agreement or any interest herein without Company's prior written consent, which
shall not be unreasonably withheld but may be conditioned upon Franchisee's
guarantee of the transferee's performance of this Agreement. Any sale,
transfer, assignment or encumbrance of this Agreement or of any rights herein
or hereunder, or in Franchisee except in accordance with the terms and
conditions as hereinafter provided, constitutes a breach of this Agreement and
shall permit Company to terminate this Agreement forthwith.
(b) On condition that Franchisee is not in default hereunder, Company
shall not unreasonably withhold or delay its written consent to a proposed
transfer governed by Paragraph 14(a).
(c) As an express condition to obtaining the written consent of Company,
Franchisee must furnish to Company:
(i) True and complete copies of the proposed sale, assignment, transfer,
delegation or other agreement, in the final and complete form in which it is
to be signed by both parties thereto, pursuant to which such sale,
assignment, transfer or encumbrance is proposed to be made.
(ii) Information concerning the proposed purchaser, assignee or transferee
which establishes to the satisfaction of Company that such party is
qualified and has the resources necessary to be a successful franchisee of
Company and has no legal or business interest that conflicts or potentially
conflicts with the interests of Company or the Roto-Rooter System. Company
will not disapprove a transfer to a plumber merely because the proposed
transferee is a plumber.
(iii) An agreement by the proposed purchaser, assignee or transferee, in
form and substance satisfactory to Company, under the terms of which the
proposed purchaser, assignee or transferee assumes all obligations of
Franchisee pursuant to Franchisee's outstanding service guarantees and
agrees to honor and fulfill all such guarantees for all customers involved.
(iv) A Release Agreement, on a form furnished by Company and signed by
Franchisee, under which Franchisee releases all claims which Franchisee may
then or in the future have against Company or its agents, employees or
licensees which arise out of or which result from this Agreement.
(v) An administrative fee in an amount equal to 1-1/2% of the total sale
price, but in no event less than $400 or more than $3,000. For purposes of
this paragraph, "total sale price "means the present value (discounted at
10% per annum) of all consideration exchanged including but not limited to
debt assumed, covenants not to compete, consulting agreements or the
equivalent for all of the assets transferred except interests in real
estate.
(vi) A counterpart to the Guaranty at the foot of this Agreement signed by
each principal shareholder of the new franchisee if it is a corporation.
-11-
<PAGE> 12
(d) Upon the death of Franchisee, or of a majority stockholder of
Franchisee if Franchisee is a corporation, all rights under this Agreement will
inure to the benefit of the person or persons who are entitled to receive a
distribution of all or a portion of Franchisee's (or such majority
stockholder's) rights under this Agreement pursuant to Franchisee's (or such
majority stockholder's) Last Will and Testament or, if Franchisee dies
intestate, pursuant to the laws of descent and distribution of the State
having primary jurisdiction over Franchisee's (or such majority stockholder's)
estate, such person or persons being hereinafter referred to as "heirs". The
heirs may then continue to operate the business contemplated in this Agreement
provided they meet the requirements of subparagraphs (b) and (c) above, or,
in the alternative, the heirs may sell, assign and transfer all of their
rights pursuant to this Agreement provided they comply with above provisions
relating to a sale, transfer or assignment of this Agreement by Franchisee.
The heirs must use their best efforts to conclude the probate or transfer this
Agreement.
15. RIGHT TO RENEW FRANCHISE
(a) On the expiration of this Agreement and provided Franchisee is
not then in default under the terms of this Agreement, Company shall offer
Franchisee the right to enter into a new franchise agreement with Company upon
the terms and conditions as then offered to other franchisees whose franchise
agreements are being renewed. Company further reserves the right to make
reasonable revisions of the terms of its future franchise agreements (including
renewals hereof) as it deems appropriate.
(b) The new franchise agreement will be mailed by Company to the last
known address of Franchisee by ordinary or such certified mail as Company may
determine, at least sixty (60) days prior to the expiration of this Agreement,
and Franchisee will have until the expiration date of this Agreement to
accept the new franchise agreement and return fully executed copies thereof to
Company.
16. OWNERSHIP, MANAGEMENT AND COVENANT NOT TO COMPETE
Company has entered into this Agreement in reliance upon the representation
of Franchisee that during the term of this Agreement the following persons
will be the owners and in active and full-time charge of the business of
Franchisee conducted pursuant to the terms of this Agreement:
Name and Address Ownership Percentage Title
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Franchisee expressly acknowledges and agrees that Company has developed
and established extensive goodwill in the System and the Marks and that in
order to protect such goodwill, together with the other legitimate business
interests of Company, Franchisee, including, if appropriate, each of its
owners as listed above, agrees that during the term of this Agreement he will
not, directly or indirectly,
-12-
<PAGE> 13
whether as an owner, sole proprietor, partner, stockholder, consultant,
employee, agent or otherwise, engage in, assist, or have any financial
interest in any other business entity which is engaged in the residential
sewer, drain and pipe cleaning services business within the Territory and, to
the extent permitted by law, within the counties (or parishes) in or adjacent
to such Territory.
17. COMPLIANCE WITH LAWS
Franchisee shall be solely responsible for the conduct of its business
and for compliance with all laws, statutes, ordinances, orders or codes of any
public or governmental authority pertaining to Franchisee and its business
operated pursuant hereto and for the payment of all taxes, permits, licenses
and registration fees and other charges or assessments arising out of the
establishment and operation of Franchisee's business.
18. NOTICE
Any notice given pursuant to this Agreement is effective and sufficient
(whether or not actually received) if in writing and personally delivered, or
deposited in the United States mail, registered or certified, postage prepaid,
or if by wire or cable, when placed with a telegraph or cable company for
transmission, or by facsimile or overnight express carriers, duly addressed as
follows:
If to Company: Roto-Rooter Corporation
300 Ashworth Road
West Des Moines, Iowa 50265
Attention: President
and a copy to: Chemed Corporation
2600 Chemed Center
Cincinnati, Ohio 45202-4726
Attention: Secretary
If to Franchisee:
At the address as set forth on Page One.
Any party may change the address to which notices are to be sent by
notifying the other party hereto in the manner as hereinabove provided.
19. SEVERABILITY
If any part or provision of this Agreement is held or declared invalid by a
court of competent jurisdiction, such holding or declaration shall affect only
that particular part or provision of this Agreement and all other parts or
provisions of this Agreement shall continue in full force and effect.
-13-
<PAGE> 14
20. GENERAL PROVISIONS
Headings in this Agreement are inserted solely for the purpose of
convenience of reference and are not to be construed as part of the Agreement.
This Agreement, when accepted in West Des Moines, Iowa, by an
authorized officer of Company, constitutes the entire Agreement and
understanding between the parties and no other representation, promise or
agreement, oral or otherwise, shall be of any force or effect.
This Agreement sets forth the entire agreement and understanding of
the parties in respect of the transactions contemplated hereby and supersedes
all prior agreements, arrangements and understandings related to the subject
matter hereof. No representation, promise, inducement or statement of intention
has been made by Company or Franchisee which is not embodied in this Agreement.
Neither Company nor Franchisee has relied upon, or shall be bound by or liable
for, any alleged representation, promise, inducement or statement of intention
not so set forth.
This Agreement may be assigned in its entirety by Company to its
parent corporation, any corporation affiliated with either Company or its
parent corporation or to any successor in interest to the business of Company.
All terms, covenants, representations, warranties and conditions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable
by, the parties hereto and their respective successors and permitted assigns.
The parties stand hereunder solely in the relationship of licensor
and licensee. The parties are not and shall not be regarded as fiduciaries and
this Agreement does not create any relationship of special trust and
confidence. Franchisee is not and shall not hold itself out as the agent,
employee or partner of the Company.
Subject to Paragraphs 12 and 13 above, this Agreement may be amended,
modified, superseded or cancelled and any of the terms, covenants,
representations, warranties or conditions hereof may be waived only by a
written instrument executed by both Company and Franchisee. The failure of
either party at any time or times to require performance of any provisions
hereof shall in no manner affect its right at a later time to enforce the
same. No waiver by either party of any condition or breach of any term,
covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach or
a waiver of any other condition or breach of any other term, covenant,
representation or warranty of this Agreement.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be
duly executed, all as of the day and year first above written.
ROTO-ROOTER CORPORATION
By _________________________________________
(Signature and Title) -- Authorized Officer
If Franchisee is an Individual:
Franchisee:
_______________________________
Name
If Franchisee is a Partnership:
Franchisee:
________________________________
Partner, jointly and severally
________________________________
Partner, jointly and severally
If Franchisee is a Corporation:
Franchisee:
________________________________
Name of Corporation
By______________________________
Authorized Officer
________________________________
Title
-15-
<PAGE> 16
GUARANTY
--------
To Be Executed By Principal Stockholder(s) If Franchisee Is a Corporation.
The undersigned, principal stockholder(s) of the above Franchisee, for
value received, hereby absolutely and unconditionally guarantee(s) full
performance and payment when due of all of Franchisee's obligations to Company
pursuant to the above Agreement.
___________________________________
___________________________________
___________________________________
-16-
<PAGE> 1
EXHIBIT 10.20
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT
---------------------------------------
AGREEMENT dated as of November 4, 1994 between William R. Griffin
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated November 1, 1990 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to amend the Employment
Agreement in certain respects.
NOW, THEREFORE, Employee and the Company mutually agree that the
Employment Agreement shall be amended, effective as of November 2, 1994 as
follows:
A. The date of October 31, 1998 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of October 31,
1999 is hereby substituted therefor.
B. The base salary amount of $266,000 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is hereby
deleted and the base salary amount of $291,000 per annum is hereby
substituted therefor.
Except as specifically amended by this Amendment No. 4 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
<PAGE> 2
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ William R. Griffin
-------------------------
W. R. Griffin
ROTO-ROOTER, INC.
/s/ Edward L. Hutton
-------------------------
Edward L. Hutton
/cgc
<PAGE> 1
EXHIBIT 10.21
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT
---------------------------------------
AGREEMENT dated as of November 4, 1994 between Douglas B. Harper
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated November 1, 1990 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to amend the Employment
Agreement in certain respects.
NOW, THEREFORE, Employee and the Company mutually agree that the
Employment Agreement shall be amended, effective as of November 2, 1994 as
follows:
A. The date of October 31, 1998 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of October 31,
1999 is hereby substituted therefor.
B. The base salary amount of $177,813 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is hereby
deleted and the base salary amount of $184,500 per annum is hereby
substituted therefor.
Except as specifically amended by this Amendment No. 4 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
<PAGE> 2
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ Douglas B. Harper
----------------------------
Douglas B. Harper
ROTO-ROOTER, INC.
/s/ W. R. Griffin
----------------------------
W. R. Griffin
/cgc
<PAGE> 1
EXHIBIT 10.22
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT
---------------------------------------
AGREEMENT dated as of November 4, 1994 between Lawrence J. Gillis
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated December 11, 1991 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to amend the Employment
Agreement in certain respects.
NOW, THEREFORE, Employee and the Company mutually agree that the
Employment Agreement shall be amended, effective as of November 2, 1994 as
follows:
A. The date of November 6, 1996 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of November 6,
1997 is hereby substituted therefor.
B. The base salary amount of $168,800 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is hereby
deleted and the base salary amount of $177,000 per annum is hereby
substituted therefor.
Except as specifically amended by this Amendment No. 4 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
<PAGE> 2
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ Lawrence J. Gillis
---------------------------
Lawrence J. Gillis
ROTO-ROOTER, INC.
/s/ W. R. Griffin
---------------------------
W. R. Griffin
/cgc
<PAGE> 1
EXHIBIT 10.23
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT
---------------------------------------
AGREEMENT dated as of November 4, 1994 between Patrick L. Johnson
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated November 1, 1990 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to amend the Employment
Agreement in certain respects.
NOW, THEREFORE, Employee and the Company mutually agree that the
Employment Agreement shall be amended, effective as of November 2, 1994 as
follows:
A. The date of October 31, 1996 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of October
31, 1997 is hereby substituted therefor.
B. The base salary amount of $154,800 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is
hereby deleted and the base salary amount of $160,500 per annum
is hereby substituted therefor.
Except as specifically amended by this Amendment No. 4 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
<PAGE> 2
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ Patrick L. Johnson
-------------------------
Patrick L. Johnson
ROTO-ROOTER, INC.
/s/ W. R. Griffin
-------------------------
W. R. Griffin
/cgc
<PAGE> 1
EXHIBIT 10.24
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of November 4, 1994 between Brian A. Brumm
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated November 1, 1990 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to amend the Employment
Agreement in certain respects.
NOW, THEREFORE, Employee and the Company mutually agree that the
Employment Agreement shall be amended, effective as of November 2, 1994 as
follows:
A. The date of October 31, 1996 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of October
31, 1997 is hereby substituted therefor.
B. The base salary amount of $105,500 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is
hereby deleted and the base salary amount of $111,000 per annum
is hereby substituted therefor.
Except as specifically amended by this Amendment No. 4 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
<PAGE> 2
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ Brian A. Brumm
-------------------------
Brian A. Brumm
ROTO-ROOTER, INC.
/s/ W. R. Griffin
-------------------------
W. R. Griffin
/cgc
<PAGE> 1
EXHIBIT 10.26
SERVICE AMERICA SYSTEMS, INC.
(FORMERLY CONVENIENT HOME SERVICES, INC.)
DEFERRED COMPENSATION PLAN
(EFFECTIVE JANUARY 1, 1994)
<PAGE> 2
The purpose of this Plan is to provide certain deferred compensation
benefits to a select group of management and highly compensated employees.
The Plan's benefits are not insured by the Pension Benefit Guaranty
Corporation. The Plan is intended to provide deferred compensation within the
scope of Sections 201(2), 301(a) (3) and 401(a) (1) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended. The Plan is intended to be
an unfunded arrangement for purposes of ERISA.
1
<PAGE> 3
SECTION 1. DEFINITIONS
1.1 "Account" or "Deferred Compensation Account" means the
bookkeeping account maintained for each Participant.
1.2 "Beneficiary" means the person or entity designated by a
Participant in a "Designation of Beneficiary" form prescribed by and filed with
the Committee for this Plan. A "Beneficiary" may include the Participant's
estate or a trust. A Participant may at any time change a designation of a
Beneficiary by filing a new Designation of Beneficiary form with the Employer.
If a Participant has not made an effective designation, or if a Beneficiary
does not survive the Participant, then "Beneficiary" means the Participant's
estate. In the event the Committee has any doubt as to the proper person or
entity entitled to receive payments under the Plan, then the Committee may
cause payments to be withheld until the matter is decided by a court of
competent jurisdiction.
1.3 "Board of Directors" means the Board of Directors of the
Company.
1.4 "Code" means the Internal Revenue Code of 1986, as amended.
1.5 "Committee" means the committee designated to administer the
Plan as described in Section 2. The Committee shall also be known as the
Benefit Plan Committee.
1.6 "Company" means Service America Systems, Inc. (formerly
Convenient Home Services, Inc.).
1.7 "Compensation" means, for purposes of this Plan, the amount of
compensation paid to an Employee during each calendar month computed in
accordance with the definition of "Compensation" as set forth in Exhibit A
attached hereto and made a part hereof.
1.8 "Deferred Compensation Benefits" means the benefits described
in this Plan.
1.9 "Deferred Compensation Plan" or "Plan" means this Service
American Systems, Inc. Deferred Compensation Plan (formerly Convenient Home
Services, Inc. Deferred Compensation Plan), as amended from time to time.
1.10 "Effective Date" means January 1, 1994.
1.11 "Eligible Employee" means a management or highly compensated
Employee designated by the Committee from time to time as eligible to
participate in the Plan. The Committee may revoke this designation at any
time.
2
<PAGE> 4
1.12 "Employee" means any person who is employed by the Employer.
1.13 "Employer" means the Company and any other entity which has
adopted this Plan with the authorization of the Company.
1.14 "Entry Date" means the first day of each calendar month.
1.15 "Participant" means each Eligible Employee who joins the Plan
and participates in the Plan.
1.16 "Permanent Disability" means an Employee's termination of
service with the Employer due to a physical or mental disability which
permanently disables the Employee from performing the customary duties of his
regular job with the Employer.
1.17 "Plan Year" means the twelve-month period ending on December
31.
1.18 "Related Company" means any other entity required to be
aggregated with the Company for a relevant purpose under Section 414 of the
Code.
1.19 "Retirement" means (a) normal retirement from employment with
the Employer at age 65; (b) early retirement from employment with the Employer
from age 55 to 65 with no fewer than 10 years of Service; or (c) postponed
retirement from employment with the Employer after age 65.
1.20 "Retirement and Savings Plan" means the Service American
Systems, Inc. (formerly Convenient Home Services, Inc. Retirement and Savings
Plan), as amended from time to time.
1.21 "Valuation Date" means the last business day of each month.
SECTION 2. ADMINISTRATION
2.1 PLAN ADMINISTRATOR. The Plan shall be administered by a
Committee whose members are designated from time to time by the Company. The
Committee shall consist of no fewer than three individuals.
2.2 DUTIES OF PLAN ADMINISTRATOR. The Committee may establish such
rules and regulations, not inconsistent with the provisions of the Plan, as it
deems necessary for the proper administration of the Plan, and may amend or
revoke any rule or regulations so established. The Committee may make such
determinations and interpretations under or in connection with the Plan as it
deems necessary or advisable. Subject to the provisions of Section 8.5 of this
Plan, all such rules, regulations, determinations and interpretations shall be
binding and conclusive
3
<PAGE> 5
upon the Company, the Employer, their shareholders, Employees, Participants,
and upon their respective legal representatives, beneficiaries, successors and
assigns and upon all other persons claiming under or through any of them.
2.3 METHOD OF ACTION. Any action required or permitted to be
taken by the Committee under this Plan may be taken in accordance with the
applicable provision(s) of the By-Laws of the Company.
SECTION 3. PARTICIPATION
3.1 GENERAL. Each Eligible Employee who becomes a Participant is
eligible to receive benefits under the Plan.
3.2 PARTICIPATION DATE. Each Eligible Employee on the Effective
Date shall become a Participant on the Effective Date. Each Employee who
thereafter becomes an Eligible Employee becomes a Participant on the Entry Date
that coincides with or immediately follows the date he becomes an Eligible
Employee.
3.3 CONTINUANCE OF PARTICIPATION. Each Participant's
participation in the Plan shall continue until the first to occur of the
following events:
(a) his death;
(b) his severance from employment;
(c) his Retirement;
(d) his Permanent Disability; or
(e) termination of the Plan.
SECTION 4. CONTRIBUTIONS
The Employer shall establish on its books of account a reserve fund
equal to the value of all Plan benefits currently accrued in favor of
Participants. The entire cost of this Plan shall be paid from the general
assets of the Employer. It is the intent of the Employer to so pay benefits
under the Plan as they become due; provided, however, that the Employer may, in
its sole discretion, establish or cause to be established a separate trust,
pursuant to a trust agreement, and a separate trust account for each
Participant and direct that some or all of a Participant's benefits under the
Plan be paid from the general assets of the Employer which are transferred to
such trust and held in such trust as property of the Employer subject to the
claims of the Employer's creditors until such time as benefit payments pursuant
to the Plan are made from such assets in accordance with such trust agreement.
Until any such payment is so made, neither the Plan nor any
4
<PAGE> 6
Participant or Beneficiary shall have any preferred claim on, or any beneficial
ownership interest in, such assets. No liability for the payment of benefits
under the Plan shall be imposed upon any officer, director, employee, or
stockholder of the Employer or Company.
SECTION 5. PARTICIPANT ACCOUNTS; INVESTMENTS
5.1 PARTICIPANT ACCOUNTS. The Committee will establish a separate
Account for each Participant. Each Participant's Account will be credited with
the annual benefit amount described in Sections 6.1, 6.2 and/or 6.3. The
Committee may also establish such Sub-Accounts as may be necessary to reflect
specific investments which are elected by a Participant pursuant to Section
5.3.
5.2 STATEMENTS OF PARTICIPANTS' ACCOUNTS. As soon as practicable
after the end of each calendar quarter, the Committee shall cause to be
delivered or mailed to each Participant a statement setting forth the status of
the Participant's Account as of the end of the calendar quarter.
5.3 INVESTMENTS. In the event general assets of the Employer are
transferred to a separate trust account for a Participant as permitted under
Section 4, such Participant may make an investment election in the manner and
form prescribed by the Committee directing the manner in which amounts
contained in such separate trust account shall be invested; provided, however,
that all such elections shall be subject to the approval of the Employer and
the Employer has the right to restrict such investment to certain designated
investment funds. The portion of a Participant's trust account, if any, which
is not invested pursuant to the Participant's investment election hereunder
shall be invested in the trust in a manner to be determined by the Employer.
The portion of a Participant's trust account which is invested pursuant to the
Participant's investment election hereunder shall be known as the Directed
Investment Trust Account, while the portion of a Participant's trust account
which is not invested pursuant to such an election shall be known as the
General Trust Account.
5.4 INVESTMENT EXPERIENCE. In addition to crediting each
Participant' s Account with the annual benefit amount described in Sections
6.1, 6.2 and/or 6.3, each such Account shall be adjusted each month as follows:
(a) The portion, if any, of a Participant's Account which
is not contained in a separate trust account, shall be credited monthly with
interest at a rate to be established by the Employer from time to time.
(b) The portion, if any, of a Participant's Account which
consists of the Directed Investment Trust Account shall be
5
<PAGE> 7
credited or debited with the investment earnings or investment losses, as the
case may be, specifically experienced by such directed investments.
(c) The portion, if any, of a Participant's Account which
consists of the General Trust Account shall be credited or debited with the
investment earnings or investment losses, as the case may be, experienced by
the trust investments (excluding those investments in all Directed Investment
Trust Accounts). Such investment earnings or losses shall be allocated in the
ratio that the Participant's General Trust Account bears to all General Trust
Accounts.
SECTION 6. ANNUAL BENEFIT AMOUNTS
6.1 Excess Benefits.
----------------
As of the last day of each month, there will be credited to the
Account of each Participant who is a Participant in the Retirement and Savings
Plan the amount by which all Employer contributions to the account (or
accounts) of the Participant for each month of each Plan Year commencing on or
after the Effective Date is less than the amount which would have been so
contributed by the Employer without regard to (a) the annual contribution
limitations as set forth in Section 415 of the Code and (b) the maximum annual
compensation considered under qualified retirement plans pursuant to Section
401(a)(17) of the Code.
6.2 Deferred Compensation Benefits.
-------------------------------
(a) As of the last day of each month, there will be
credited to the Account of each Participant described in subsection (b) an
amount equal to 6% of the Participant's Compensation, plus 5% of the
Participant's Compensation in excess of the maximum wage base under the Social
Security Act (determined as of the first day of the Plan Year).
(b) The amount described in subsection (a) will be
credited to the Accounts of Participants who are Participants on the last day
of the month or who lost their status as a Participant before the last day of
the month because of death, Permanent Disability or Retirement.
6.3 Elective Benefits.
------------------
(a) Each Participant in the Retirement and Savings Plan
whose contributions to such Plan are limited or reduced due to the limitations
set forth in Sections 401(k)(3) and/or 401(m) of the Code shall be entitled to
make a salary reduction election as described below. As of the last day of
each month, there will be credited to the Account of each such Participant an
amount pursuant to a salary reduction agreement executed by the Participant.
Such amount shall not exceed 15% of the Participant's Compensation, reduced by
any amount contributed to the Retirement and Savings Plan pursuant to a similar
salary reduction agreement executed by
6
<PAGE> 8
the Participant. In addition, the Employer shall make a matching contribution
in the same manner as provided for in the Retirement and Savings Plan, reduced
by any such matching contributions actually made to the Retirement and Savings
Plan; provided, however, that the maximum amount of matching contributions set
forth in the Retirement and Savings Plan shall apply in the aggregate to salary
reduction contributions under both the Retirement and Savings Plan and this
Plan.
(b) The election under subsection (a) shall be made on or
before the date of commencement of participation under the Plan. Such salary
reduction contributions shall commence with the first payment of compensation
made after the date on which such salary reduction election is effective. A
Participant may suspend all contributions pursuant to the election at any time.
6.4 Vesting.
--------
(a) A Participant will at all times have a fully vested
interest in amounts credited to his Account which are attributable to salary
reduction contributions made by such Participant pursuant to Section 6.3(a).
In addition, a Participant will have a fully vested interest in all amounts
credited to his Account hereunder upon Retirement, severance while eligible for
Retirement, Permanent Disability or upon death prior to Retirement or Permanent
Disability.
(b) If a Participant terminates his employment with the
Employer prior to his Retirement, Permanent Disability or death, amounts
credited to his Account (other than those amounts attributable to salary
reduction contributions made pursuant to Section 6.3(a)) shall be vested in
accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Vested Interest
---------------- ---------------
<S> <C>
Less than 3 0%
3 or more 100%
</TABLE>
Such Participant shall forfeit the unvested portion of his Account. All
amounts so forfeited shall revert to the credit of the Employer. A Participant
shall be credited with a year of service hereunder for each Plan Year during
which he completes at least 1,000 hours of service with the Employer.
SECTION 7. DISTRIBUTION OF BENEFITS
7.1 TIME OF PAYMENT. Upon termination (due to Retirement,
Permanent Disability, severance or death) of a Participant's employment with
the Employer, the Participant's Account established pursuant to the Plan shall
be valued as of the first Valuation Date thereafter and shall be paid to the
Participant, or in the event of his death, to his Beneficiary. Distribution to
a Participant or Beneficiary shall commence within 30 days after the
Participant's termination of employment.
7
<PAGE> 9
7.2 Form of Payments.
-----------------
(a) Deferred Compensation Benefits will be paid to the
Participant and/or his Beneficiary according to one of the following methods,
as elected by the Participant upon the commencement of his participation in the
Plan:
(1) A single lump sum payment.
(2) Monthly installments (not less than 12 nor
more than 120). The amount of each installment shall be determined by dividing
the Participant's Account balance as of the Valuation Date immediately
preceding the applicable installment payment date by the remaining number of
installment payments. Installment payments will be adjusted for the Account's
share of earnings or losses described in Section 5.4.
(b) If a Participant dies before receiving all of the
installment payments, then his Beneficiary will receive the remaining
installments.
7.3 WITHDRAWALS IN THE CASE OF UNFORESEEABLE EMERGENCIES.
Notwithstanding the preceding, a Participant may, during his employment with
the Employer, apply in the form and manner determined by the Committee to
withdraw any portion of his vested Account by reason of an unforeseeable
emergency. An unforeseeable emergency is a severe financial hardship to the
Participant resulting from a sudden and unexpected illness or accident of the
Participant or of a dependent (as defined in Section 152(a) of the Internal
Revenue Code of 1986, as amended) of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. Withdrawals hereunder shall not be made to the extent that such
hardship is or may be relieved through reimbursement or compensation by
insurance or otherwise, by liquidation of the Participant's assets, to the
extent the liquidation of such assets would not itself cause severe financial
hardship, or by cessation of deferrals under the Plan. Withdrawals of amounts
because of an unforeseeable emergency must only be permitted to the extent
reasonably needed to satisfy the emergency need.
SECTION 8. GENERAL PROVISIONS
8.1 Nothing in the Plan shall confer upon any Employee any right
to continue in the employ of the Employer, or shall affect the right of the
Employer to terminate the employment of any Employee with or without cause.
8.2 The Employer may make such provisions as it may deem
appropriate for the withholding of any taxes which the Employer determines it
is required to withhold in connection with any
8
<PAGE> 10
Deferred Compensation Benefit.
8.3 Nothing in the Plan is intended to be a substitute for, or
shall preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or fringe benefits to
Employees generally, or to any class or group of Employees, which the Employer
now has or may hereafter lawfully put into effect, including, without
limitation, any retirement, pension, thrift, group insurance, stock purchase,
stock bonus or stock option plan.
8.4 The Plan may be amended or terminated by the Company at any
time in whole or in part. Upon termination of the Plan, each Participant will
be entitled to a Deferred Compensation Benefit equal to the Deferred
Compensation Benefit to which the Participant would be entitled had he been
eligible for and retired on the date the Plan terminated. Participants and
Beneficiaries who, as of the date of Plan termination, are otherwise entitled
to receive Deferred Compensation Benefits but have not yet received them will
be entitled to receive those Deferred Compensation Benefits. The Deferred
Compensation Benefits described in this Section will be paid at the time the
Participant or Beneficiary would have been entitled to receive them if the Plan
had not terminated; provided, however, that the Employer may accelerate the
payment of all but not less than all of the Deferred Compensation Benefits
under the Plan, the payment of which would otherwise be deferred.
8.5 The Employer shall have all the powers and authorities as may
be necessary to carry out the provisions of the Plan, including the power and
authority to interpret and construe the provisions of the Plan, to make benefit
determinations and to resolve any disputes which arise under the Plan.
Whenever there is denied, whether in whole or in part, a claim for benefits
under the Plan filed by any person (herein referred to as the "Claimant"), the
Committee shall transmit a written notice of such decision to the Claimant,
which notice shall be written in a manner calculated to be understood by the
Claimant and shall contain a statement of the specific reasons for the denial
of the claim and a statement advising the Claimant that, within 60 days of the
date on which he receives such notice, he may obtain review of such decision in
accordance with the procedures hereinafter set forth. Within such 60-day
period, the Claimant or his authorized representative may request that the
claim denial be reviewed by the Company by filing with the Committee a written
request therefor, which request shall contain the following information:
(a) the date on which the Claimant's request was filed
with the Committee; provided, however, that the date on which the Claimant's
request for review was in fact filed with the Committee shall control in the
event that the date of the actual filing is later than the date stated by the
Claimant pursuant to this paragraph;
9
<PAGE> 11
(b) the specific portions of the denial of his claim
which the Claimant requests the Company to review;
(c) a statement by the Claimant setting forth the basis
upon which he believes the Company should reverse the previous denial of his
claim for benefits and accept his claim as made; and
(d) any written material (offered as exhibits) which the
Claimant desires the Company to examine in its consideration of his position as
stated pursuant to (c) above.
Within 60 days of the date determined pursuant to (a) above, the Company shall
conduct a full and fair review of the decision denying the Claimant's claim for
benefits. Within 60 days of the date of such hearing, the Company shall render
its written decision on review, written in a manner calculated to be understood
by the Claimant, specifying the reasons and Plan provisions upon which its
decision was based.
8.6 NONALIENATION OF DEFERRED COMPENSATION BENEFITS. No
Participant or Beneficiary shall encumber or dispose of his right to receive
any Deferred Compensation Benefits.
8.7 INTEREST OF PARTICIPANT. The obligation of the Employer to
pay Deferred Compensation Benefits merely constitutes the unsecured promise of
the Employer to make payments when due. No Participant or Beneficiary has any
security interest in, or a lien or prior claim upon, any Account or assets of
the Employer. No Plan provisions shall be construed so as to place any Account
or other asset in trust with the Employer for the benefit of a Participant, his
Beneficiary, or his estate.
8.8 CLAIMS OF OTHER PERSONS. The provisions of the Plan shall not
be construed as giving any person, firm or corporation any legal or equitable
right as against the Employer, its officers, employees, or directors, except
any rights specifically provided for in the Plan or created in accordance with
the terms of the Plan.
8.9 FORFEITURE. Any Participant, regardless of age, whose
employment with the Employer is terminated for theft or embezzlement of
Employer assets or for accepting bribes from suppliers, or who resigns during
the pendency or carrying out of an investigation which establishes such
conduct, shall forfeit all of his Plan benefits.
8.10 SEVERABILITY. The invalidity or unenforceability of any
particular provision of the Plan shall not affect any other Plan provision.
The Plan shall be construed in all respects as if the invalid or unenforceable
provision were omitted.
8.11 GENDER AND NUMBER. Masculine pronouns and similar words
10
<PAGE> 12
shall be read as the feminine gender where appropriate. The singular form of
words shall be read as plural where appropriate.
8.12 GOVERNING LAW. The Plan shall be governed and construed in
accordance with the laws of the State of Florida.
8.13 TRANSFERS OF ACCOUNTS. The Employer, in its sole discretion,
may direct that the Account of a Participant be directly transferred to any
other non-qualified deferred compensation plan and/or trust maintained by the
Company, Employer or a Related Company. The Employer, in its sole discretion,
may also accept the direct transfer from another non-qualified deferred
compensation plan and/or trust maintained by the Company, Employer or a Related
Company, any cash or other assets held in such plan and/or trust for the
benefit of an Employee. In the event of the acceptance of any such direct
transfer, such cash and/or other assets shall be held in an Account for the
benefit of such Employee.
11
<PAGE> 13
CERTIFICATE
-----------
The undersigned, Secretary of Convenient Home Services, Inc., hereby
certifies that the foregoing is a true and correct copy of the Convenient Home
Services, Inc. Deferred Compensation Plan adopted by the Board of Directors
effective as of January 1, 1994 and that the same is currently in full force
and effect.
Signed at Cincinnati, Ohio, as of this ___ day of
_____________________, 1994.
/s/ Brian A. Brumm
------------------------------
Brian A.Brumm, Secretary
- ---------------------
12
<PAGE> 14
EXHIBIT A
---------
"Compensation" means the total amount received by an Employee from
the Employer during a Plan Year that is considered "wages" as defined in Code
Section 3401(a) for purposes of income tax withholding at the source, but
determined without regard to any rules that limit the remuneration to be
included in such wages based on the nature or location of the employment or the
services performed.
13
<PAGE> 1
EXHIBIT 11
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
Computation of Per Share Earnings (a)
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
<S> <C> <C> <C>
Computation of Earnings per Common and 1992 1993 1994
Common Equivalent Share: -------- -------- --------
- ----------------------------------------
Reported Income before Minority Interest $6,857 $8,387 $9,015
Minority Interest 232 414 244
------ ------ ------
Net Income $6,625 $7,973 $8,771
====== ====== ======
Average Number of Shares Used to
Compute Earnings Per Common Share 4,994 5,027 5,066
Effect of Unexercised Stock Options 37 59 48
------ ------ ------
Average Number of Shares Used to Compute
Earnings Per Common and Common
Equivalent Share 5,031 5,086 5,114
====== ====== ======
Earnings Per Common and Common
Equivalent Share $ 1.32 $ 1.57 $ 1.72
====== ====== ======
Computation of Earnings Per Common Share
Assuming Full Dilution:
- ----------------------------------------
Reported Income before Minority Interest $6,857 $8,387 $9,015
Minority Interest 232 414 244
------ ------ ------
Net Income $6,625 $7,973 $8,771
====== ====== ======
Average Number of Shares Used to
Compute Earnings Per Common Share 4,994 5,027 5,066
Effect of Unexercised Stock Options 72 99 48
------ ------ ------
Average Number of Shares Used to Compute
Earnings Per Common Share Assuming
Full Dilution 5,066 5,126 5,114
====== ====== ======
Earnings Per Common Share Assuming
Full Dilution $ 1.31 $ 1.56 $ 1.72
====== ====== ======
<FN>
(a) This calculation is submitted in accordance with Regulation S-K, Item
601(b)(11), although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3% including
fractional cents per share.
</TABLE>
<PAGE> 1
Exhibit 13
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
10 Consolidated Statement
of Income
11 Consolidated Balance Sheet
12 Consolidated Statement of Cash Flows
13 Consolidated Statement of Stockholders' Equity
14 Notes to Consolidated Financial Statements
18 Unaudited Quarterly Financial Data
19 Management's Discussion and Analysis of
Financial Condition and Results of Operations
22 Selected Financial Data
PRICE WATERHOUSE LLP [PRICE WATERHOUSE LLP CORPORATION LOGO]
Report of Independent Accountants
To the Board of Directors and Stockholders of Roto-Rooter, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Roto-Rooter, Inc.
(a 59%-owned subsidiary of Chemed Corporation) and its subsidiaries at December
31, 1994 and 1993, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Cincinnati, Ohio
January 30, 1995
9
<PAGE> 2
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(amounts in thousands except per share data)
====================================================================================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Operating Revenues $171,930 $136,428 $104,688
-------- -------- --------
Cost of Services Provided and Products Sold 106,111 80,867 58,882
Selling, General and Administrative Expenses 42,625 36,021 30,722
Depreciation and Amortization 7,227 5,169 3,831
-------- -------- --------
Total Costs and Expenses 155,963 122,057 93,435
-------- -------- --------
Income from Operations 15,967 14,371 11,253
Interest Expense (764) (444) (313)
Other Income -- Net 526 431 818
-------- -------- --------
Income before Income Taxes and Minority Interest 15,729 14,358 11,758
Income Taxes (Note 10) 6,714 5,971 4,901
-------- -------- --------
Income before Minority Interest 9,015 8,387 6,857
Minority Interest 244 414 232
-------- -------- --------
NET INCOME $ 8,771 $ 7,973 $ 6,625
======== ======== ========
EARNINGS PER COMMON SHARE $ 1.73 $ 1.59 $ 1.33
======== ======== ========
Average Number of Shares Outstanding 5,066 5,027 4,994
======== ======== ========
<FN>
The Notes to Consolidated Financial Statements are an integral part of this statement.
</TABLE>
10
<PAGE> 3
<TABLE>
CONSOLIDATED BALANCE SHEET
(amounts in thousands except per share data)
====================================================================================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
December 31,
1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents (Note 1) $ 937 $ 5,754
Demand Deposits with Chemed Corporation (Note 11) 9,037 760
Accounts Receivable, Less Allowance (1994 -- $884; 1993 -- $652) 6,593 6,318
Inventories (Note 4) 7,163 6,780
Deferred Income Taxes 2,956 2,898
Prepaid Expenses and Other Current Assets (Note 6) 2,597 2,923
-------- --------
Total Current Assets 29,283 25,433
Property and Equipment, at Cost, Less Accumulated Depreciation (Note 7) 25,213 25,157
Intangible Assets, Less Accumulated Amortization (Note 13) 65,204 62,299
Statutory Deposits (Note 3) 14,408 13,176
Other Assets 3,275 2,892
-------- --------
Total Assets $137,383 $128,957
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 6,513 $ 8,542
Deferred Contract Revenue 22,631 23,848
Income Taxes (Note 10) 739 404
Other Current Liabilities (Note 9) 17,082 16,359
-------- --------
Total Current Liabilities 46,965 49,153
Deferred Income Taxes (Note 10) 2,234 2,865
Deferred Compensation and Other Noncurrent Liabilities 8,046 3,282
Long-Term Debt with Chemed Corporation (Note 8) 8,424 8,424
Minority Interest (Note 8) 3,967 3,723
-------- --------
Total Liabilities 69,636 67,447
-------- --------
Stockholders' Equity:
Preferred Stock -- Authorized 1,000,000 Shares, $1.00 Par Value (None Issued) -- --
Common Stock -- Authorized 10,000,000 Shares, $1.00 Par Value
(Issued 1994 -- 5,276,404 Shares; 1993 -- 5,236,297 Shares) 5,276 5,236
Paid-In Capital 24,290 23,537
Retained Earnings 42,918 37,086
Treasury Stock, at Cost (1994 -- 205,084 Shares; 1993 -- 190,812 Shares) (4,737) (4,349)
-------- --------
Total Stockholders' Equity 67,747 61,510
-------- --------
Total Liabilities and Stockholders' Equity $137,383 $128,957
======== ========
<FN>
The Notes to Consolidated Financial Statements are an integral part of this statement.
</TABLE>
11
<PAGE> 4
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands)
====================================================================================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Year Ended December 31,
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 8,771 $ 7,973 $ 6,625
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 7,227 5,169 3,831
Provision for Deferred Income Taxes (316) (574) (1,682)
Changes in Operating Assets and Liabilities
Excluding Amounts Acquired in Business Combinations:
Accounts Receivable (275) (913) (329)
Inventories (383) (1,116) 188
Prepaid Expenses and Other Current Assets 343 236 539
Accounts Payable (2,029) 3,093 (659)
Deferred Contract Revenue (1,217) (376) 1,220
Income Taxes 335 (1,466) 363
Other Current Liabilities 723 1,692 4,597
Increase in Statutory Reserve Requirements (1,232) (2,419) (511)
Other 559 1,224 870
------- ------- -------
Net Cash Provided by Operating Activities 12,506 12,523 15,052
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (6,214) (6,885) (3,698)
Business Combinations, Net of Cash Acquired (Note 8) (1,624) (20,011) (1,552)
Other 911 80 178
------- ------- -------
Net Cash Used for Investing Activities (6,927) (26,816) (5,072)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (2,939) (2,666) (2,398)
Proceeds from Issuance of Long-Term Debt -- 4,224 --
Minority Investment in Subsidiary -- 1,056 --
Demand Deposits with Chemed Corporation (8,277) 12,701 (6,050)
Other 820 215 1,305
------- ------- -------
Net Cash (Used for)/Provided by Financing Activities (10,396) 15,530 (7,143)
------- ------- -------
Net (Decrease)/Increase in Cash and Cash Equivalents (4,817) 1,237 2,837
Cash and Cash Equivalents at Beginning of Year 5,754 4,517 1,680
------- ------- -------
Cash and Cash Equivalents at End of Year $ 937 $ 5,754 $ 4,517
======= ======= =======
<FN>
The Notes to Consolidated Financial Statements are an integral part of this statement.
</TABLE>
12
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(amounts in thousands except per share data)
====================================================================================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $5,080 $20,418 $27,552 $ (2,020) $51,030
Net Income -- -- 6,625 -- 6,625
Dividends ($.48 per share) -- -- (2,398) -- (2,398)
Treasury Stock Purchased -- -- -- (628) (628)
Stock Awards and Exercise
of Stock Options (Note 5) 65 1,146 -- -- 1,211
------ ------- ------- -------- -------
Balance, December 31, 1992 5,145 21,564 31,779 (2,648) 55,840
Net Income -- -- 7,973 -- 7,973
Dividends ($.53 per share) -- -- (2,666) -- (2,666)
Treasury Stock Purchased -- -- -- (1,701) (1,701)
Stock Awards and Exercise
of Stock Options (Note 5) 91 1,973 -- -- 2,064
------ ------- ------- -------- -------
Balance, December 31, 1993 5,236 23,537 37,086 (4,349) 61,510
Net Income -- -- 8,771 -- 8,771
Dividends ($.58 per share) -- -- (2,939) -- (2,939)
Treasury Stock Purchased -- -- -- (388) (388)
Stock Awards and Exercise
of Stock Options (Note 5) 40 753 -- -- 793
------ ------- ------- -------- -------
Balance, December 31, 1994 $5,276 $24,290 $42,918 $ (4,737) $67,747
====== ======= ======= ======== =======
<FN>
The Notes to Consolidated Financial Statements are an integral part of this statement.
</TABLE>
13
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The accompanying consolidated financial statements present the financial
position and results of operations of Roto-Rooter, Inc. and all subsidiary
companies ("Roto-Rooter or Company"). All significant intercompany transactions
and balances have been eliminated.
Chemed Corporation ("Chemed") owned 59% of the Company's outstanding common
stock on December 31, 1994.
Cash and Cash Equivalents:
Cash and Cash Equivalents include cash on hand and short-term investments with
maturities of three months or less. These investments are stated at cost which
approximates market value.
Inventories:
Inventories are stated at the lower of cost or market. Cost is generally
determined using the first-in, first-out (FIFO) method.
Depreciation of Properties and Equipment:
Depreciation of properties and equipment is computed using the straight-line
method over the estimated useful lives of the assets. Expenditures for
maintenance, repairs, renewals and betterments that do not materially prolong
the useful lives of the assets are expensed. The cost of property retired or
sold and the related accumulated depreciation are removed from the accounts and
any resulting gain or loss is reflected currently in income.
Intangible Assets:
Intangible assets include specifically identifiable intangible assets arising
principally from business acquisitions accounted for as purchase transactions,
as well as the excess of cost over the fair value of tangible and identifiable
intangible assets acquired. These assets are amortized on a straight-line basis
over the periods to be benefited, which is currently estimated to be between 8
and 40 years.
The Company periodically makes an estimation and valuation of the future
benefits of its intangible assets based on key financial indicators. If the
projected undiscounted cash flows of a business unit indicate that any of the
intangible assets have been impaired, a write-down to fair value is made.
Revenue Recognition:
Revenue is recognized when services are provided or products are shipped.
Revenue arising from prepaid service contracts is recorded as deferred revenue
and amortized to income on a straight-line basis over the term of the contract.
Franchise fees, which are primarily ongoing fees, are recognized on a
monthly basis in accordance with the individual contracts. Initial franchise
fees are not material.
Earnings Per Common Share:
Earnings per common share in the accompanying Consolidated Statement of
Income have been computed based on the weighted average number of shares
outstanding in each year. Common stock equivalents are not material.
- --------------------------------------------------------------------------------
NOTE 2. SEGMENT INFORMATION
The Company operates in one business segment. All significant revenues
relate to providing repair and maintenance services to residential, commercial,
industrial and municipal customers through both company-owned and franchised
operations. The Company also manufactures and sells some of the equipment used
to provide such services.
Summarized below are operating revenues and direct costs which resulted
from services provided and products sold by the Company to its independently
owned franchised locations (amounts in thousands):
<TABLE>
<CAPTION>
For the Year Ended
December 31,
---------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Operating Revenues $7,171 $6,601 $5,984
====== ====== ======
Direct Costs $3,249 $2,942 $2,347
====== ====== ======
</TABLE>
The Company does not derive more than 1% of its operating revenues from any
individual foreign or domestic customer, government agency or from export
sales.
- --------------------------------------------------------------------------------
NOTE 3. STATUTORY DEPOSITS
In connection with the Company's service contract business and in accordance
with certain regulatory requirements, the Company maintains cash and
certificates of deposits with certain regulatory agencies. The Company is also
required to maintain additional unencumbered reserves. At December 31, 1994 and
1993, the Company was in compliance with these requirements.
- --------------------------------------------------------------------------------
NOTE 4. INVENTORIES
<TABLE>
A summary of inventories follows (amounts in thousands):
<CAPTION>
December 31,
-----------------------
1994 1993
------ ------
<S> <C> <C>
Raw Materials, Supplies and
General Merchandise $6,353 $6,036
In Process 29 51
Finished Goods 781 693
------ ------
Total Inventories $7,163 $6,780
====== ======
</TABLE>
14
<PAGE> 7
===============================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------------------------
NOTE 5. STOCK OPTIONS
The Company has four Stock Incentive Plans covering options to purchase up to
850,000 shares of its common stock. The latest plan, covering 250,000 shares,
was adopted in May 1993. Under these plans, Roto-Rooter Common Stock may be
issued to key employees pursuant to the grant of stock awards and/or options to
purchase such shares. Options are granted at a price equal to the market value
on the date of grant and become exercisable beginning one year following the
date of grant in four approximately equal annual installments. The changes in
outstanding stock options follow:
<TABLE>
<CAPTION>
1994 1993
------------------------ --------------------
NUMBER Number
OF AVG. of Avg.
SHARES PRICE Shares Price
------- ------- ------- ------
<S> <C> <C> <C> <C>
Options Outstanding
at Beginning
of Year 378,797 $20.86 296,208 $17.88
Options Granted 83,050 27.00 174,000 24.38
Options Exercised (23,861) 15.33 (90,736) 17.93
Options Terminated
or Cancelled (8,700) 24.91 (675) 16.31
------- -------
Options Outstanding
at End of Year 429,286 $22.27 378,797 $20.86
======= =======
</TABLE>
At December 31, 1994, options for 210,489 shares were exercisable and 37,852
(December 31, 1993--128,448) shares were available for granting of additional
stock options and stock awards.
During 1994, the Company granted stock awards covering 16,246 shares (1993--
800) under its Stock Incentive Plans. The shares of common stock were issued to
key employees at no cost and generally are restricted as to the transfer of
ownership. Restrictions covering one-third of each holder's shares lapse
annually, commencing one year after the date of grant.
NOTE 6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
At December 31, 1994, prepaid expenses and other current assets included
prepaid advertising expense of $1,817,000 (1993--$1,755,000).
NOTE 7. PROPERTY AND EQUIPMENT
<TABLE>
A summary of property and equipment follows (amounts in thousands):
<CAPTION>
December 31,
1994 1993
------- -------
<S> <C> <C>
Land $ 2,098 $ 2,238
Buildings 9,193 8,234
Machinery and Equipment 20,492 18,076
Furniture, Fixtures and Other 8,068 8,439
------- -------
Total Property and Equipment 39,851 36,987
Accumulated Depreciation (14,638) (11,830)
------- -------
Net Property and Equipment $25,213 $25,157
======= =======
</TABLE>
Depreciation expense for the year ended December 31, 1994 was $5,013,000
(1993--$3,465,000; 1992--$2,456,000).
The Company has operating leases which cover various plant, warehouse and
office facilities, office equipment, and plant and transportation equipment.
The remaining terms of these leases range from approximately one to 12 years
and, in most cases, management expects that these leases will be renewed or
replaced by other leases in the normal course of business.
The following is a schedule, by year, of future minimum rental payments
required under operating leases that have initial or remaining noncancellable
terms in excess of one year at December 31, 1994 (amounts in thousands):
<TABLE>
<S> <C>
1995 $1,641
1996 1,199
1997 756
1998 620
1999 530
Thereafter 3,143
------
Total $7,889
======
</TABLE>
Total rent expense for the year ended December 31, 1994 was $1,681,000
(1993--$1,368,000; 1992--$784,000).
15
<PAGE> 8
===============================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------------------------
NOTE 8. BUSINESS COMBINATIONS
During 1994, the Company acquired three independently owned Roto-Rooter
franchises in three separate purchase transactions. The aggregate purchase
price of these transactions was $1,624,000.
During 1993, the Company acquired seven independently owned Roto-Rooter
franchises in seven separate purchase transactions. The aggregate purchase
price of these acquisitions was $2,411,000.
In addition, on July 16, 1993, the Company, through its 70%-owned subsidiary,
Service America Systems, Inc. ("Service America"), acquired 100% of the
outstanding common shares of Encore Service Systems, Inc. ("Encore"), a Florida
corporation headquartered in Boca Raton, Florida. Encore primarily provides
residential air conditioning and appliance repair services through service
contracts in Florida and Arizona. The Company and Chemed funded the Encore
acquisition in a 70%-30% ratio.
The purchase price, including transaction-related expenses for the Encore
acquisition was $17,600,000 and was funded as follows (amounts in thousands):
<TABLE>
<S> <C>
Cash from the Company $12,320
Cash from Chemed 1,056
Long-Term Debt provided
by Chemed 4,224
-------
$17,600
=======
</TABLE>
Chemed's investment in Encore (through Service America) and its share of the
earnings of Service America subsequent to the acquisition are shown as minority
interest in these financial statements. Long-term debt to Chemed, which also
includes $4,200,000 from previous acquisitions, is payable to Chemed on January
1, 1996, although management expects the term of the debt will be extended. The
interest rate on the debt is fixed at 8.15%.
The purchase price paid by Service America for Encore under the terms of
the agreement was $17,000,000 in cash at closing, plus contingent payments
based upon achievement of certain sales and earnings levels during the 36 month
period following closing of this transaction (the maximum amount payable under
the contingent payments is $8,800,000). In addition, Service America granted the
seller a four-year warrant exercisable between 36 and 48 months after the date
of close to purchase 15% of the outstanding stock of Service America on a
fully-diluted basis. This warrant is exercisable only if the seller elects not
to take the contingent payments discussed above.
Based on Encore's results through December 31, 1994, the sales-based
contingent payment was earned in full. The present value of the $3,800,000
contingent payment due in July 1996 is $3,338,000. This amount was recorded in
both intangible assets (excess of cost over net assets acquired) and other
noncurrent liabilities. Because it was a non-cash transaction, this transaction
was not reflected in the Consolidated Statement of Cash Flows.
During 1992, the Company acquired four independently owned businesses in four
separate purchase transactions. The aggregate purchase price of these
acquisitions was $1,552,000.
All of the aforementioned business combinations were accounted for as
purchase transactions and have been included in the Consolidated Statement of
Income from the dates of acquisition. All of these acquired businesses are
primarily engaged in providing repair and maintenance services.
Summarized unaudited pro forma financial data, which assume that the
above-described business combinations were made at the beginning of the year
preceding the year of acquisition, follow (amounts in thousands except per
share data):
<TABLE>
<CAPTION>
For the Year Ended
December 31,
-------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Total Operating
Revenues $173,004 $161,062 $148,034
======== ======== ========
Net Income $ 8,860 $ 8,265 $ 7,245
======== ======== ========
Earnings per
Common Share $ 1.75 $ 1.64 $ 1.45
======== ======== ========
Average Shares
Outstanding 5,066 5,027 4,994
======== ======== ========
</TABLE>
Pro forma consolidated information is presented for informational purposes
only and does not purport to be indicative of results which would actually have
been obtained if the combinations had been in effect for the periods indicated
or which may be obtained in the future.
Assets acquired and liabilities assumed with respect to these acquisitions
have been recorded at their estimated
16
<PAGE> 9
===============================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------------------------
fair values at the date of acquisition. A summary of the allocation of the
purchase price of net assets acquired and liabilities assumed in business
combinations follows (amounts in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1994 1993 1992
------ ------- ------
<S> <C> <C> <C>
Intangible Assets $1,574 $23,552 $1,435
Working Capital 17 (12,918) 3
Properties, Equipment
and Other 33 4,571 114
Deferred Taxes -- (763) --
Other Assets (Primarily
Statutory Reserves) -- 6,275 --
------ ------- ------
1,624 20,717 1,552
Less: Cash and Cash
Equivalents Acquired -- (706) --
------ ------- ------
Total Net Assets $1,624 $20,011 $1,552
====== ======= ======
</TABLE>
- --------------------------------------------------------------------------------
NOTE 9. OTHER CURRENT LIABILITIES
At December 31, 1994, other current liabilities included accrued insurance of
$9,589,000 (1993--$9,596,000).
- --------------------------------------------------------------------------------
NOTE 10. INCOME TAXES
On January 1, 1993, the Company adopted Financial Accounting Standards No. 109
("FAS 109"), "Accounting for Income Taxes." FAS 109 was adopted on a
prospective basis.
The implementation of FAS 109 resulted in increases of $2,198,000 to both
current deferred tax assets and noncurrent deferred tax liabilities at January
1, 1993. The implementation did not have a material effect on the consolidated
Statement of Income for the year ended December 31, 1993.
The provision for income taxes comprises the following (amounts in thousands):
<TABLE>
<CAPTION>
For the Year Ended
December 31,
----------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Current
Federal $6,191 $5,894 $5,923
State and Local 839 651 660
Deferred (316) (574) (1,682)
------ ------ ------
Total Income Tax Provision $6,714 $5,971 $4,901
====== ====== ======
Income Taxes Paid $5,968 $7,131 $5,503
====== ====== ======
</TABLE>
<TABLE>
Deferred tax assets (liabilities) are comprised as follows (amounts in thousands):
<CAPTION>
December 31,
-----------------------
1994 1993
------ ------
<S> <C> <C>
Insurance $3,017 $3,047
Pensions 946 804
Bad Debts 315 222
Other 1,108 903
------ ------
Gross Deferred Tax Assets 5,386 4,976
------ ------
Depreciation (2,340) (2,242)
Intangibles (902) (1,399)
Advertising (956) (838)
Other (466) (464)
------ ------
Gross Deferred Tax Liabilities (4,664) (4,943)
------ ------
Net Deferred Tax Assets $ 722 $ 33
====== ======
</TABLE>
The change in deferred tax assets and liabilities includes the deferred
provision for income taxes and tax/book basis differences in acquired
businesses.
The difference between the statutory U.S. federal income tax rate and the
effective tax rate is explained as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31,
------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. Federal
Income Tax Rate 35.0% 34.0% 34.0%
Absence of Income Tax
Benefit on Intangibles
Amortization 4.7 3.8 3.7
State and Local Income
Taxes, Less Federal
Income Tax Benefit 3.5 3.0 3.7
Other Items -- Net (0.5) 0.8 0.3
---- ---- ----
Effective Tax Rate 42.7% 41.6% 41.7%
==== ==== ====
</TABLE>
17
<PAGE> 10
===============================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------------------------
NOTE 11. RELATED PARTY TRANSACTIONS
In addition to the transactions involving Chemed described in Note 8, the
Company conducts the following transactions with Chemed.
Roto-Rooter has an agreement with Chemed under which Roto-Rooter pays a
stipulated fee based on Chemed's cost for providing certain administrative,
financial, internal audit and legal services, and other staff functions to the
Company. The Company also rents space for its corporate headquarters from
Chemed. The method by which such fees and expenses are determined and allocated
is deemed reasonable by management. For the years ended December 31, 1994, 1993
and 1992, fees and expenses of $741,000, $616,000 and $616,000, respectively,
were paid to Chemed.
Roto-Rooter also has an agreement with Chemed under which funds in excess of
the Company's working capital requirements are deposited with Chemed. These
unsecured deposits earned interest at a rate determined on the basis of United
States Treasury Notes, and are payable upon demand. Advances made by Chemed to
the Company carry the same terms and interest rates as the Company's demand
deposits with Chemed. For the years ended December 31, 1994, 1993 and 1992,
interest income of $618,000, $540,000 and $622,000, respectively, was earned on
these deposits, while interest expense of $603,000, $351,000 and $218,000 was
incurred on advances from Chemed in 1994, 1993 and 1992.
NOTE 12. PENSIONS AND RETIREMENT PLANS
All employees of the Company who meet certain age and service requirements are
eligible to participate in the various contributory and noncontributory defined
contributions plans. Expenses of the Company related to pension and other
similar plans for the year ended December 31, 1994 were $1,700,000
(1993--$1,500,000; 1992--$1,196,000).
- --------------------------------------------------------------------------------
NOTE 13. INTANGIBLE ASSETS
<TABLE>
A summary of intangible assets follows (amounts in thousands):
<CAPTION>
December 31,
------------------------
1994 1993
------- -------
<S> <C> <C>
Excess of Cost over
Net Assets Acquired $61,675 $56,669
Tradename 7,100 7,100
Other Intangibles 6,800 6,800
------- -------
Total Intangibles 75,575 70,569
Accumulated Amortization (10,371) (8,270)
------- -------
Net Intangible Assets $65,204 $62,299
======= =======
</TABLE>
Amortization expense for the year ended December 31, 1994 was $2,214,000
(1993--$1,704,000; 1992--$1,375,000).
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
UNAUDITED QUARTERLY FINANCIAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Following is a summary of the Company's quarterly results of operations for 1994 and 1993 (amounts in thousands
except per share data):
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1994 First Quarter Second Quarter Third Quarter Fourth Quarter Total Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Operating Revenues $41,536 $41,900 $43,057 $45,437 $171,930
======= ======= ======= ======= ========
Gross Profit $15,590 $15,574 $16,686 $17,969 $ 65,819
======= ======= ======= ======= ========
Net Income $ 1,849 $ 1,906 $ 2,329 $ 2,687 $ 8,771
======= ======= ======= ======= ========
Earnings Per Common Share $ .37 $ .38 $ .46 $ .53 $ 1.73
======= ======= ======= ======= ========
Average Number of Shares Outstanding 5,055 5,068 5,069 5,071 5,066
======= ======= ======= ======= ========
- ------------------------------------------------------------------------------------------------------------------------------------
1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Operating Revenues $27,568 $28,833 $38,290 $41,737 $136,428
======= ======= ======= ======= ========
Gross Profit $12,031 $12,832 $14,552 $16,146 $ 55,561
======= ======= ======= ======= ========
Net Income $ 1,636 $ 1,860 $ 2,112 $ 2,365 $ 7,973
======= ======= ======= ======= ========
Earnings Per Common Share $ .33 $ .37 $ .42 $ .47 $ 1.59
======= ======= ======= ======= ========
Average Number of Shares Outstanding 5,018 5,020 5,029 5,042 5,027
======= ======= ======= ======= ========
</TABLE>
18
<PAGE> 11
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
====================================================================================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ------------------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The following table summarizes key items from the Consolidated Statement of Income.
<CAPTION>
Percentage of
Total Operating Revenues
------------------------
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income from Operations 9.3% 10.5% 10.7%
Pretax Income 9.1 10.5 11.2
Income Taxes-- Effective Rate 42.7 41.6 41.7
Net Income 5.1 5.8 6.3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1994 VS. 1993
In 1994, the Company's total operating revenues increased to $171,930,000 or
26.0% over 1993 revenues. The increase in operating revenues in 1994 was
primarily due to the acquisition of Encore Service Systems, Inc. ("Encore") by
Roto-Rooter's 70% owned subsidiary, Service America Systems, Inc. ("Service
America", previously Convenient Home Services, Inc.) and excellent sewer and
drain cleaning and plumbing revenue growth.
Excluding businesses acquired on or after January 1, 1993, total operating
revenues for 1994 would have been $131,588,000, or 13.6% above the comparable
revenues of $115,836,000 in 1993. Sewer and drain cleaning revenues increased
to $52,793,000, or 9.1% above the $48,384,000 reported in 1993. Plumbing
revenues grew to $37,048,000 in 1994, or 20.5% above the comparable 1993
revenues.
Roto-Rooter's operating profit margin decreased from 10.5% for the year ended
December 31, 1993, to 9.3% for the year ended December 31, 1994. There were
several items affecting Roto-Rooter's operating profit margin in 1994 when
compared with 1993. Favorably affecting Roto-Rooter's operating profit margin
was a decline in insurance costs from 4.4% of total operating revenues in 1993
to 2.9% of total operating revenues in 1994. Prior to 1993, Roto-Rooter had
experienced several years of rising insurance costs, as a percentage of total
operating revenues. As a result of an excellent safety record over the past few
years, the Company's insurance costs have declined, as a percentage of total
operating revenues, from 5.2% in 1992, to 4.4% in 1993 and to 2.9% in 1994.
Offsetting the lower insurance costs as a percent of total operating revenues
were (1) the Encore acquisition, which as expected, had lower margins than
those margins achieved in the Company's other repair and maintenance
businesses, and (2) higher material and labor costs as a percent of total
operating revenues.
The higher material usage costs resulted from higher material usage per
service call in the service contract business, and a changing sales mix to jobs
that have a higher material cost component. The higher material usage per
service call in the service contract business is being addressed in part by
enhancing the training of new service technicians in areas where reduced
materials could be used on service calls. In the service contract business,
material usage costs, as a percent of sales, were lower in the fourth quarter
of 1994 as compared with the first nine months of 1994.
The higher labor costs, as a percent of sales, resulted from expansion of the
service technician manpower in the Company's service contract business faster
than the rate of service contract growth (during the first two quarters of
1994) and expansion of the plumbing and drain cleaning labor forces for the
expected continued growth of these businesses. In addition, the Company has
made investments in labor in key areas of the business which are important to
future growth. These investments were primarily sales and training related.
The company was successful during the second half of 1994 in bringing manpower
levels in its service contract business in line with its service contract
growth. The trend of higher labor costs, as a percent of sales, is not expected
to continue in 1995.
The Company's effective income tax rate increased from 41.6% of pretax profit
in 1993 to 42.7% of pretax profit in 1994 due primarily as a result of
non-deductible intangibles amortization resulting from the Encore acquisition
and higher state income taxes.
Net Income increased from $7,973,000 in 1993 to $8,771,000 in 1994, an
increase of 10.0%. The increase in net income resulted primarily from solid
internal sales growth in combination with lower insurance costs as a percent of
total operating revenues.
19
<PAGE> 12
===============================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------------------------
Earnings per share increased 8.8% from $1.59 in 1993 to $1.73 in 1994. There
was no material change in the average number of shares outstanding in 1994 and
1993.
1993 VS. 1992
In 1993, the Company's total operating revenues increased to $136,428,000 or
30.3% over 1992 revenues. The increase in revenues in 1993 was primarily due to
the acquisition of Encore. Also contributing to Roto-Rooter's revenue growth in
1993 was excellent internal growth in the Company's core sewer and drain
cleaning business and its plumbing business. Excluding businesses acquired on
or after January 1, 1992, total operating revenues for 1993 would have been
$115,836,000, or 11.2% above the comparable revenues of $104,209,000 in 1992.
Sewer and drain cleaning revenues increased to $48,384,000 or 9.5% above the
$44,173,000 reported in 1992. Plumbing revenues grew to $30,749,000 in 1993, or
21.0% above the comparable 1992 revenues.
Roto-Rooter's operating profit margin decreased from 10.7% for the year ended
December 31, 1992, to 10.5% for the year ended December 31, 1993. This decline
in margin is the result of two offsetting factors. As mentioned in the 1994 vs.
1993 comparison, the favorable insurance trends, started in 1992, were
reflected in the decline of insurance costs as a percent of total operating
revenues from 5.2% in 1992 to 4.4% in 1993.
Offsetting the lower insurance costs as a percent of total operating
revenues were the operating results of the Encore acquisition. The Company's
operating profit margin declined 1.4 percentage points as the result of this
acquisition.
Other Income--Net decreased from 0.8% of operating revenues in 1992 to 0.3%
of operating revenues in 1993. There were two primary reasons for this decline.
In 1993, the Company's weighted average interest rate on interest-bearing
deposits was 4.1% as compared with 4.4% in 1992. Second, the Company wrote
down its investment in a business which refurbishes and neutralizes property
for sale. This write-down resulted in a 0.3 percentage point decline in Other
Income--Net as a percent of operating revenues in 1993 as compared with 1992.
Net income increased from $6,625,000 in 1992 to $7,973,000 in 1993, an
increase of 20.3%. The increase in net income resulted primarily from excellent
internal sales growth and lower insurance costs as a percent of sales.
Earnings per share increased 19.5% to $1.59 in 1993 as compared with $1.33
in 1992. There was no material change in the average number of shares
outstanding in 1993 and 1992.
INFLATION
The Company has generally been able to pass along cost increases to its
customers in the form of price increases. Consequently, inflation has not had,
nor is it expected to have, a material impact on the Company's results of
operations.
LIQUIDITY AND CAPITAL RESOURCES
During 1994, as noted on the Consolidated Statement of Cash Flows, the Company
generated $12,506,000 of cash from operating activities. This amount was well
in excess of the amounts needed to finance capital expenditures and dividends
of $6,214,000 and $2,939,000, respectively. After these uses, the Company
still had $3,353,000 of cash available for business acquisitions and other
uses.
At December 31, 1994 current liabilities exceeded current assets by
$17,682,000. This working capital deficit has been narrowed from the
$23,720,000 deficit at December 31, 1993. In addition, at December 31, 1994,
$22,631,000 of the current liabilities consist of deferred contract revenue
which will not require a comparable cash outlay. The Company's debt, as a
percentage of its stockholders' equity, has improved from 14.7% at December
31, 1993 to 13.7% at December 31, 1994. Management is confident that earnings
of the Company and other sources of liquidity will continue to be sufficient
to meet the Company's cash needs on an ongoing basis.
The following table illustrates Roto-Rooter's continuing ability to generate
cash from operations to finance its operating requirements (amounts in
thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net Cash Provided by
Operating Activities $12,506 $12,523 $15,052
Cash Used for:
Capital Expenditures (6,214) (6,885) (3,698)
Dividends (2,939) (2,666) (2,398)
------- ------- -------
Cash Available for
Business Acquisitions
and Other Uses $ 3,353 $ 2,972 $ 8,956
======= ======= =======
</TABLE>
For the years ended December 31, 1994, 1993 and 1992, the Company made net
cash payments in the amounts of $1,132,000, $14,731,000 and $1,552,000,
respectively, for business acquisitions. During the three-year period ended
December 31, 1994, the total cash generated and available for business
acquisitions and other uses of $15,281,000 was exceeded by the cash used for
business acquisitions of
20
<PAGE> 13
===============================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------------------------
$17,415,000 by $2,134,000. The excess of cash used for business acquisitions
over the amount of total cash generated and available for business acquisitions
and other uses was funded by cash and cash equivalents on hand, demand deposits
with Chemed Corporation, and long-term debt with Chemed. The Company believes
it can adequately meet its capital requirements for the continuation of the
growth of its present operations from its current cash position, working
capital generated by operations, and borrowings from Chemed and other parties.
Currently, the Company has not established independent banking relationships.
Management believes, however, that the Company would be able to obtain
independent bank credit should the need arise. Also, management believes the
public securities market would provide an additional source of financing.
Excess cash remitted to Chemed by the Company is reflected on the balance
sheet as a demand deposit. At December 31, 1994, the Company had $9,037,000 of
demand deposits with Chemed which are available for future financing needs.
Stockholders' equity at December 31, 1994, was $67,747,000 as compared with
$61,510,000 at December 31, 1993, an increase of $6,237,000. At December 31,
1994, the Company's total long-term debt was 13.4% of its stockholders'
equity. The Company has no long-term commitments which would have a
significant effect on its consolidated financial condition or the results of
its operations.
In November 1987, the Company's Board of Directors approved a program to
repurchase shares of Roto-Rooter common stock. At December 31, 1994, the
Company had authority from the Board of Directors to spend up to $2,258,000 for
the purchase of shares of Roto-Rooter common stock, subject to certain price
and other restrictions.
Under certain loan agreements and guarantees that Chemed had in place at
December 31, 1994, Chemed and Roto-Rooter, as a subsidiary of Chemed, are
subject to certain financial restrictions. Because of Chemed's control of
Roto-Rooter, these restrictions could limit Roto-Rooter's ability to incur debt
and to create liens on its properties. As of December 31, 1994, Chemed was
permitted to incur additional debt of $91,828,000, of which secured debt or
debt of subsidiaries could not be more than $36,143,000. Because of
Roto-Rooter's expectations with respect to its future financial needs, it is
not anticipated that these restrictions will have a material effect on the
Company.
REPORTING ON ADVERTISING COSTS
In December 1993, the Accounting Standards Executive Committee issued
Statement of Procedure ("S.O.P.") 93-7, "Reporting on Advertising Costs", which
requires that advertising costs, except costs of direct response advertising, be
expensed no later than the first time the advertising has taken place. Adoption
of this statement is required for fiscal years beginning after June 15, 1994.
Because substantially all of the Company's advertising costs relate to either
direct response advertising or are expensed as they are incurred, adoption of
S.O.P. 93-7 in 1995 will not materially impact the Company's results of
operations or financial position.
21
<PAGE> 14
<TABLE>
SELECTED FINANCIAL DATA
(amounts in thousands except per share data, number of employees, ratios and percentages)
====================================================================================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Operating Revenues $171,930 $136,428 $104,688 $84,774
======== ======== ========= =======
Depreciation and Amortization $ 7,227 $ 5,169 $ 3,831 $ 3,131
======== ======== ========= =======
Income before Cumulative Effect of
Changes in Accounting Principles $ 8,771 $ 7,973 $ 6,625 $ 5,880
======== ======== ========= =======
Net Income $ 8,771 $ 7,973 $ 6,625 $ 5,880
======== ======== ========= =======
Earnings Per Common Share before
Cumulative Effect of Changes in
Accounting Principles $ 1.73 $ 1.59 $ 1.33 $ 1.18
======== ======== ========= =======
Earnings Per Common Share $ 1.73 $ 1.59 $ 1.33 $ 1.18
======== ======== ========= =======
Average Number of Shares Outstanding 5,066 5,027 4,994 4,974
======== ======== ========= =======
Cash Dividends Per Common Share $ 0.58 $ 0.53 $ 0.48 $ 0.45
======== ======== ========= =======
BALANCE SHEET DATA:
Cash, Demand Deposits with
Chemed and Marketable Securities $ 9,974 $ 6,514 $ 17,978 $ 9,091
Working Capital (17,682) (23,720) (280) (3,648)
Intangible Assets--Net 65,204 62,299 40,911 41,111
Total Assets 137,383 128,957 93,522 83,345
Long-Term Debt 9,102 8,843 4,782 4,347
Stockholders' Equity 67,747 61,510 55,840 51,030
OTHER FINANCIAL INFORMATION:
Cash Provided by Operating Activities $ 12,506 $ 12,523 $ 15,052 $11,482
Cash Provided by Operating Activities
Per Dollar of Net Income $ 1.43 $ 1.57 $ 2.27 $ 1.95
Capital Expenditures 6,214 6,885 3,698 3,533
Current Ratio 0.62 0.52 0.99 0.84
Total Debt $ 9,314 $ 9,016 $ 5,081 $ 4,476
Total Debt to Equity Ratio 13.7% 14.7% 9.1% 8.8%
Book Value Per Share $ 13.36 $ 12.24 $ 11.18 $ 10.26
Effective Tax Rate 42.7% 41.6% 41.7% 37.8%
Return on Average Equity 13.6% 13.6% 12.4% 12.0%
Dividend Payout Ratio 33.5% 33.4% 36.2% 38.2%
Number of Employees 2,478 2,260 1,722 1,589
<FN>
(a) Net income includes $282,000 and earnings per share includes six cents per share aftertax gain resulting from two changes in
accounting principles effective January 1, 1988.
</TABLE>
22
<PAGE> 15
<TABLE>
SELECTED FINANCIAL DATA
(amounts in thousands except per share data, number of employees, ratios and percentages)
====================================================================================================================================
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1990 1989 1988 1987 1986 1985
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Operating Revenues $75,230 $66,842 $62,255 $55,233 $45,292 $36,306
======= ======= ======= ======= ======= =======
Depreciation and Amortization $ 2,811 $ 2,448 $ 2,314 $ 2,135 $ 1,765 $ 1,461
======= ======= ======= ======= ======= =======
Income before Cumulative Effect of
Changes in Accounting Principles $ 5,705 $ 5,623 $ 5,504 $ 4,516 $ 3,594 $ 3,122
======= ======= ======= ======= ======= =======
Net Income $ 5,705 $ 5,623 $ 5,786(a) $ 4,516 $ 3,594 $ 3,122
======= ======= ======= ======= ======= =======
Earnings Per Common Share before
Cumulative Effect of Changes in
Accounting Principles $ 1.15 $ 1.14 $ 1.13 $ 0.93 $ 0.74 $ 0.65
======= ======= ======= ======= ======= =======
Earnings Per Common Share $ 1.15 $ 1.14 $ 1.19(a) $ 0.93 $ 0.74 $ 0.65
======= ======= ======= ======= ======= =======
Average Number of Shares Outstanding 4,957 4,953 4,867 4,869 4,848 4,809
======= ======= ======= ======= ======= =======
Cash Dividends Per Common Share $ 0.42 $ 0.36 $ 0.29 $ 0.23 $ 0.19 $ 0.165
======= ======= ======= ======= ======= =======
BALANCE SHEET DATA:
Cash, Demand Deposits with
Chemed and Marketable
Securities $15,960 $12,395 $11,050 $ 6,037 $ 5,978 $ 1,364
Working Capital 13,821 12,074 10,192 6,989 5,233 6,207
Intangible Assets--Net 21,208 21,266 17,930 17,406 17,921 16,198
Total Assets 60,545 54,279 48,848 42,619 39,238 34,419
Long-Term Debt 488 207 162 233 307 373
Stockholders' Equity 46,954 43,389 38,808 33,766 30,827 27,520
OTHER FINANCIAL INFORMATION:
Cash Provided by Operating
Activities $10,641 $ 9,259 $10,520 $ 6,083 $ 5,526 $ 4,713
Cash Provided by Operating
Activities Per Dollar of
Net Income $ 1.87 $ 1.65 $ 1.82 $ 1.35 $ 1.54 $ 1.51
Capital Expenditures 3,623 2,650 3,086 3,658 3,854 2,702
Current Ratio 2.32 2.67 2.35 2.12 1.92 2.35
Total Debt $ 679 $ 518 $ 407 $ 496 $ 373 $ 440
Total Debt to Equity Ratio 1.4% 1.2% 1.0% 1.5% 1.2% 1.6%
Book Value Per Share $ 9.47 $ 8.75 $ 7.90 $ 6.96 $ 6.34 $ 5.72
Effective Tax Rate 37.9% 37.1% 38.1% 43.2% 49.8% 48.7%
Return on Average Equity 12.6% 13.7% 15.9% 14.0% 12.3% 11.9%
Dividend Payout Ratio 36.5% 31.7% 24.4% 24.8% 25.6% 25.4%
Number of Employees 1,286 1,212 1,070 986 853 645
</TABLE>
23
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF ROTO-ROOTER, INC.
The following is a list of subsidiaries of the Company as of
December 31, 1994. Each of the companies is incorporated under the laws of the
jurisdiction under which it is listed and, in the case of each United States
company, under the laws of the state following its name. The percentage given
for each company represents the percentage of voting securities of such company
owned by the Company or, where indicated, subsidiaries of the Company as at
December 31, 1994.
All of the companies listed below are included in the
consolidated financial statements as of December 31, 1994.
Amira Services, Inc. (Florida, 100% by Service America Systems, Inc.)
Encore Maintenance and Management, Inc. (Florida, 100% by Encore Service
Systems, Inc.)
Encore Services Systems, Inc. (Florida, 100% by Service America Systems, Inc.)
Nurotoco of Massachusetts, Inc. (Massachusetts, 100% by Roto-Rooter Services
Company)
Nurotoco of New Jersey, Inc. (Delaware, 80% by Roto-Rooter Services Company)
Roto-Rooter Canada, Ltd. (British Columbia, 100% by Roto-Rooter Services
Company)
Roto-Rooter Corporation (Iowa, 100% by Roto-Rooter, Inc.)
Roto-Rooter Development Company (Delaware, 100% by Roto-Rooter Corporation)
Roto-Rooter Management Company (Delaware, 100% by Roto-Rooter, Inc.)
Roto-Rooter Services Company (Iowa, 100% by Roto-Rooter, Inc.)
RR Plumbing Services Corporation (New York, 49% by Roto-Rooter Services
Company)
Service America Systems, Inc. (Florida, 70% by Roto-Rooter, Inc. and 30% by
Chemed)
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-20285) and
in the Registration Statements on Form S-8 (Nos. 33-1795, 33-20285, 33-46179
and 33-65246) of Roto-Rooter, Inc. of our report dated January 30, 1995
appearing on page 9 of the 1994 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page S-2 of this Form 10-K.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
March 28, 1995
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 14, 1995
/s/ James A. Cunningham
--------------------------
James A. Cunningham
<PAGE> 2
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 18, 1995
/s/ Charles H. Erhart, Jr.
-----------------------------
Charles H. Erhart, Jr.
<PAGE> 3
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 13, 1995
/s/ Neal Gilliatt
---------------------
Neal Gilliatt
<PAGE> 4
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 18, 1995
/s/ Lawrence J. Gillis
---------------------------
Lawrence J. Gillis
<PAGE> 5
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 1, 1995
/s/ J. Peter Grace
-----------------------
J. Peter Grace
<PAGE> 6
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 14, 1995
/s/ Douglas B. Harper
-------------------------
Douglas B. Harper
<PAGE> 7
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 13, 1995
/s/ Will J. Hoekman
------------------------
Will J. Hoekman
<PAGE> 8
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 17, 1995
/s/ Thomas C. Hutton
-------------------------
Thomas C. Hutton
<PAGE> 9
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 13, 1995
/s/ Patrick L. Johnson
--------------------------
Patrick L. Johnson
<PAGE> 10
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 20, 1995
/s/ Sandra E. Laney
-------------------------
Sandra E. Laney
<PAGE> 11
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 13, 1995
/s/ Kevin J. McNamara
--------------------------
Kevin J. McNamara
<PAGE> 12
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 14, 1995
/s/ Timothy S. O'Toole
--------------------------
Timothy S. O'Toole
<PAGE> 13
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 13, 1995
/s/ D. Walter Robbins, Jr.
-----------------------------
D. Walter Robbins, Jr.
<PAGE> 14
POWER OF ATTORNEY
-----------------
The undersigned director of ROTO-ROOTER, INC. ("Company") hereby appoints
EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 13, 1995
/s/ Jerome E. Schnee
------------------------
Jerome E. Schnee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-K
for the year ended December 31, 1994 for Roto-Rooter, Inc. and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000755548
<NAME> ROTO-ROOTER, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 937
<SECURITIES> 0
<RECEIVABLES> 7,477
<ALLOWANCES> (884)
<INVENTORY> 7,163
<CURRENT-ASSETS> 29,283
<PP&E> 39,851
<DEPRECIATION> (14,638)
<TOTAL-ASSETS> 137,383
<CURRENT-LIABILITIES> 46,965
<BONDS> 0
<COMMON> 5,276
0
0
<OTHER-SE> 62,471
<TOTAL-LIABILITY-AND-EQUITY> 137,383
<SALES> 171,930
<TOTAL-REVENUES> 171,930
<CGS> 106,111
<TOTAL-COSTS> 155,963
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 610
<INTEREST-EXPENSE> 764
<INCOME-PRETAX> 15,729
<INCOME-TAX> 6,714
<INCOME-CONTINUING> 15,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,771
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.73
</TABLE>
