<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal year ended October 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File No. 0-15486
MIKRON INSTRUMENT COMPANY, INC.
(Exact name of Registrant as specified in its charter)
New Jersey 22-1895668
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
445 West Main Street, Wyckoff, N.J. 07481
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201-891-7330
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
one-third cent par value per share.
_________________________
Indicated by check mark whether 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 Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
The aggregate market value of the voting stock held by non-affiliates
(1,827,250 shares) of the Registrant was $5,262,336 on January 19, 1996.
At January 19, 1996, the Registrant had 3,654,200 shares of common
stock, one-third cent par value per share, and warrants to purchase an
additional 400,000 shares of common stock, one-third cent par value, issued and
outstanding.
SPECIFIED DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable.
<PAGE> 2
PART I
Item 1. Business.
(a) General
Mikron Instrument Company, Inc. (the "Company") a New Jersey
corporation organized in 1969, develops, manufactures, markets and services
equipment and instruments for non-contact temperature measurement. The Company's
products are typically used to measure the temperature of moving objects, or
stationary objects in environments or situations where contact temperature
measurement would be difficult, hazardous or impracticable, and wherever rapid
temperature changes must be accurately tracked instantaneously. From inception
through 1978, the Company's predominant market was for hand-held infrared
thermometers for industrial quality control applications and maintenance. The
Company's market at present has diversified to include sales to laboratories and
original equipment manufacturers, both domestic and foreign, where "fixed"
infrared thermometers are incorporated as integral components of production
equipment.
The Company also manufactures high resolution thermal imaging under the
name of "Pyrovision", and manufactures and/or markets calibration sources and a
variety of accessories and optional equipment for its infrared thermometers.
"Pyrovision" is a trademark of the Company which has been registered with the
United States Patent and Trademark Office.
In addition to its own products, the Company also sells products under
its name that are manufactured by others. The Company has been appointed by a
Japanese firm as that firm's exclusive U.S. distributor of a high resolution
infrared thermal imaging system. (See discussion of NEC contract, page 4 below.)
(b) Description of Business
(i) Products.
Although the Company has developed a line of infrared thermometry
products for over 160 applications, all such products operate in essentially the
same way. All physical objects emit infrared radiation. The amount of such
radiation is a function of the surface temperature of each such object. The
Company's infrared thermometry products detect and measure such radiation,
convert it into an electrical signal and translate the signal into a temperature
reading of the target surface of the object, all without contact with the
object. The basic components of a Company infrared thermometer consist of a lens
and mirrors or a fiber optic assembly for focusing on the object, an infrared
detector head which converts the infrared radiation emitted from the surface of
the focused object into an electrical signal, electrical circuitry, a meter or
output indicator, and the housings for these components.
The different models in the Company's product line have each been
designed with different focusing methods, detectors, electrical circuitry,
indicators and housings so as to optimize performance under different
applications, sets of conditions or temperature ranges.
The Company sells two basic kinds of infrared thermometers: "portable"
units and "fixed" units. During the first ten years of the Company's operations,
most of its sales were of portable units. As the Company has matured, however,
product sales have become a mix of portable and fixed infrared thermometers and
calibration sources.
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The portable units are battery-powered with digital meters and are
hand-held for temperature measurement of target surfaces typically in a
laboratory or industrial facility. The price range of the Company's portable
units is between $1,375 and $5,000.
The fixed units are externally powered, have electrical outputs instead
of meters and are permanently incorporated as an integral component of a machine
or on a production line. The price range of the fixed units manufactured by the
Company is between $225 and $7,000.
In October of 1995, the Company introduced the Mikron Model M68L, a new
product line of fiber optic infrared sensors. This unit offers two high
temperature spectral response ranges and offers dual temperature ranges in each
unit. They are excellent for applications in the glass industry, induction
heating and in hazardous environments. Pricing starts at $1,990.
In October of 1995, the Mikron Model M9000 Pyrovision Thermal Imaging
system was formally introduced to the marketplace. This high temperature thermal
imaging system operates in the range of 600 degrees C to 2400 degrees C. Its
unique near infrared imaging, high speed and excellent spatial resolution offer
significant advantages over conventional imagers. Price range of this product is
between $25,000 and $50,000.
The Mikron TH3100 Series, also introduced in 1995, is a series of
thermal imagers offering modular construction and, thus broad flexibility for
customers. It operates in the temperature range of -50 degrees C to 2000 degrees
C. It complements the M9000 product line in low temperature applications,
allowing Mikron to have one of the most complete lines in the industry.
The Company has introduced a number of new products in the past few
years, and continues to expand existing product lines, that continue to
contribute to its sales. Examples include:
In 1994, the Company introduced the Mikron M100 IR-Man, a hand-held
series of non-contact infrared thermometers with precision laser sighting. The
M100 is used for measuring temperature quickly and from a distance of up to 33
feet at a temperature range of -50 degrees to 500 degrees Celsius. This
instrument was designed for convenience; its strongest advantages over
competitor models is its rechargeable batteries, low weight, better sub-zero
capability and an accuracy of 0.80% of reading. The price range of the M100
series is between $1,375 and $1,795. "IR-Man" is a trademark of the Company
which has been registered with the United States Patent and Trademark Office.
The Company also introduced the Mikron M50 Infracouple series in 1994.
The M50 is a low cost fixed unit used for moving and multiple target
measurement. It has a temperature range of 0 degrees to 300 degrees Celsius and
an accuracy of 1.5%. The price range of the M50 series is between $225 and $375.
The Mikron M380 Series of freezing point blackbody calibration sources
was introduced in 1993. It is used for setting and verifying the accuracy of
calibration of infrared equipment to national standards. The Company continues
to offer standard blackbody calibration sources as well as designing and
building custom engineered sources for specialized applications.
The Mikron Model M190, introduced in 1992, is a highly accurate process
instrument that can be easily interfaced with analog or digital data acquisition
systems. The Model M190-
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TS was introduced in 1995 as a transfer standard for calibration laboratories.
It allows laboratories and national standards laboratories to accurately
transfer the calibration of one blackbody source to another. It has been sold to
national standards laboratories around the world.
The Company also developed the Mikron-500 series of fixed units, which
are low-cost infrared sensors for original equipment manufacturer applications.
The price of the Mikron-500 series is $745 per unit.
The Company designs, assembles and/or markets accessories and optional
equipment for its infrared thermometers, such as lenses, fiber optic assemblies,
calibration equipment, mounts, protective jackets and cases, batteries, chargers
and camera adapters. The Company subcontracts the manufacture of almost all of
the components that go into its products.
The Company also services its products during and after the expiration
of the applicable warranty period, which is from one to two years, depending on
the model. These services also include re-calibration of instruments and
blackbody sources that are traceable to NIST. With the growing requirement for
traceable calibration throughout the industry, the company has expanded its
capacity in service.
NEC San-ei Instruments, Ltd.'s ("NEC") has appointed the company its
exclusive U. S. distributor in non-medical fields for a high sensitivity
infrared thermal imager. The Company's distributorship agreement with NEC
expires in August 1996. The thermal imager, which has been marketed in Japan for
several years, employs infrared radiation technology similar to that in the
Company's products but is connected to a display screen which is capable of
visually distinguishing subtle temperature differences in 64 colors. The
distributorship agreement contains, among other things, minimum purchase
requirements by the Company for each year of the term of the agreement. The
Company has failed to meet those minimum purchase requirements, and NEC has the
right to terminate the agreement on those grounds or convert it into a
non-exclusive distributorship agreement.
(ii) Principal Markets, Marketing and Customers
The Company's infrared thermometry products and accessories are used
industrially (i) in manufacturing processes to measure the process temperature
of metals, wood, plastics, paper, textiles, rubber, glass, ceramics, food and
chemicals, (ii) for maintenance purposes to check temperatures of kiln walls,
heat exchangers, boilers, engines, compressors, transmissions, bearings, gears,
pumps, steam lines and traps, transformers, electrical switch gear and heat loss
prevention; and (iii) for quality control to test the temperature and integrity
of electronic equipment, electrical components and circuitry, insulation, and
cooling and heating systems. The Company has initiated efforts to expand the
sales of its products into a variety of non-industrial industries including,
among others, scientific research laboratories.
The Company's products are sold through a network of approximately 85
independent sales representatives and distributors worldwide. The sales
activities of such sales representatives and distributors are coordinated by
five employees of the Company, who are also directly responsible for the balance
of the Company's sales. The Company promotes its products through printed
advertisements in selected industrial and trade journals. The Company also
promotes its products by participating in national and international trade
shows. In fiscal year 1995, the Company continued its marketing program by
maintaining promotional and sales campaigns to increase market awareness of the
use of non-contact thermometry devices.
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During each of its fiscal years 1994 and 1995, the Company had
approximately 1,000 customers, none of which accounted for more than 10% of its
sales. The Company estimates that it currently has an active customer base of
3,000 customers. The loss by the Company of any single customer would not have a
materially adverse effect on the Company.
The Company's backlog of unfilled orders totaled approximately $722,809
at October 31, 1994 and $948,964 at October 31, 1995. Most of the Company's
backlog at October 31, 1995 has been shipped. It is the Company's practice to
attempt to ship most orders within six weeks after the date they are received.
In fiscal 1995, approximately 20% of the Company's sales were to
customers outside of the United States, as compared to approximately 22% and 19%
in fiscal years 1994 and 1993 respectively. The Company has taken steps to
strengthen its sales outside the United States through appointment of sales
representatives, additional promotional activities and technical training of
representatives. As a significant portion of the business is done through known
accounts, in dollars, and the balance is sold on letter of credit terms, there
is little risk associated with this business. International exchange rates have
made exports from the United States more viable than in the past, and Mikron
intends to take advantage of this situation.
The Company has initiated a project to secure ISO9001 certification of
its Quality Assurance systems. This project, which encompasses all operating
aspects of the business, will bring the Company's quality systems and operating
systems a level of recognition from most domestic and international customers.
Certification is anticipated in June of 1996.
(iii) Competition
Infrared thermometry equipment and instruments similar to the Company's
products are currently available from other manufacturers, some of whom are
larger and have greater financial and technological resources than the Company.
The Company believes that its sales constitute approximately 4% of the worldwide
market for infrared thermometry products. The primary competitive factors with
respect to infrared thermometry products are accuracy, sensitivity, response
time, quality control and the availability of products which optimize
performance in specific applications, conditions and temperature ranges. In the
past two years there have been a number of new products and competitors entering
the low price hand held infrared thermometer market. The Company believes that
this trend will continue as this market grows. Higher capabilities at stable or
reduced pricing will be critical for process or fixed infrared systems in the
next few years. Strategic marketing and focus will be critical for growth within
these product lines.
(iv) Materials
The Company's manufacturing operations primarily involve the assembly,
testing, quality control and packaging of materials and components, which are
generally available in the marketplace from numerous suppliers and sources.
Materials and components necessary for the Company's manufacturing activities
have always been available in the past and the Company does not anticipate any
future shortages or unavailability in the supply of such materials and
components.
The Company attempts to maintain a sufficient inventory of materials
and components so as to be able to fill orders for its products within six weeks
after receipt of an order. Its inventory stock is closely monitored by computer,
which enables the Company to be consistent in its order response time and to
maintain its inventory at desired levels.
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(v) Research and Development
The Company's research and development activities are primarily
devoted to the development of new infrared thermometry products and the
adaptation and enhancement of existing products for new applications. The
Company expended $419,851 in fiscal year 1995 as compared with $366,215 and
$366,571 for research and development in its 1994 and 1993 fiscal years,
respectively. Such expenditures covered both research and development conducted
by the Company as well as the costs for contracted research and development.
The Company believes that its ability to maintain a technological edge
in infrared technology and to achieve early market entry with new infrared
thermometry products are critical factors to its business. Accordingly, it has
been increasing its research and development budget in recent years. The new
products introduced by the Company over the last several years (see "Products",
page 2 above) were a direct outgrowth of its research and development program.
(vi) Patents and Trademark
The Company owns two patents covering technology related to its
infrared thermometry products, and derives royalty payments from one of its
patents. Although neither of these patents is material to the Company's overall
business, the Company will litigate, and will take such other steps as it deems
necessary, to protect its rights in such patents. (See "Legal Proceedings", page
7 below.)
"Mikron" is a trademark of the Company which has been registered with
the United States Patent and Trademark Office.
(vii) Employees
As of October 31, 1995, the Company's staff was comprised of 60
persons, 57 of whom were full time and 3 of whom were part time. Of the total
number of employees, 8 are engaged in design engineering and research and
development, 28 in manufacturing and production, 9 in marketing and sales, 8 in
administration and finance, 2 in customer service and 5 in general office. None
of Company's employees are represented by unions. The Company has not
experienced any strikes or work stoppages and, in the opinion of the Company's
management, has good working relations with its employees.
(viii) Certain Contractual Arrangements
Effective April 15, 1992 Chori Co., Ltd. ("Chori") and Anritsu Meter
Company, Ltd. ("Anritsu"), both Japanese companies, together purchased 500,000
shares of Common Stock, at a price of $2.00 per share, and warrants to purchase
from the Company an additional 500,000 shares of Common Stock, also at a price
of $2.00 per share. The Company has or intends to use approximately (i) $500,000
of the initial proceeds for improvement of its manufacturing facilities, (ii)
$400,000 for research and development related to new infrared thermometers and
(iii) $100,000 for research and development on assemblies or housings for
infrared thermometers. The warrants expired before being exercised.
The Company also has a variety of agreements with Anritsu, Chori and an
affiliate of Chori, Chori of America, Inc. ("Chori-America") which includes the
transfer of certain technology, the cross-licensing of each other's technology,
the marketing of each other's
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products, and the collection of proceeds from the Company's foreign sales. (See
Item 13 - "Certain Relationships and Related Transactions", page 15 below.)
The Company has retained Barber & Bronson Incorporated, a broker-dealer
of Fort Lauderdale, Florida and one of the existing market makers in the
Company's Common Stock, ("Barber & Bronson"), its exclusive investment banker
until September 30, 1998. Under this agreement, Barber & Bronson will provide
the Company with standard investment banking and financial advisory services.
The Company will pay Barber & Bronson $1,000 per month and has issued to
certain principals of Barber & Bronson warrants to purchase 400,000 shares of
the Company's Common Stock, under this and a predecessor agreement, at prices
varying from $0.81 per share to $2.50 per share. The Agreement also provides
for additional compensation to Barber & Bronson in the event it, at the request
of the Company, provides additional services.
Item 2. Properties.
The Company leases an aggregate of 17,750 square feet of space in a
commercial building located at 445 West Main Street, Wyckoff, New Jersey under a
lease expiring on February 29, 1996. The Company paid $106,395 in rental
payments, together with $20,386 of reimbursed real estate taxes, during fiscal
year 1995. The rent under the lease increases five percent per year.
Approximately one-third of the leased premises is used by the Company for its
administrative, design, engineering and sales personnel and the balance is used
for its manufacturing operation, quality control testing, inventory storage,
servicing and repair, and shipping. Of such space, 4,000 square feet has been
sublet by the Company to subtenants. Sublease income during fiscal year 1995 was
approximately $33,500.
The Company is currently negotiating a five year operating lease
agreement for new manufacturing, warehouse and office facilities, with an
option to extend the lease for five additional years. The lease, which will
expire December 31, 2000, provides for rent to commence March 1, 1996 at a
fixed annual amount of approximately $183,100 payable in equal monthly
installments. In addition, the lease will also provide for the Company to pay
taxes, maintenance, insurance and other operating costs of the leased property.
The rent to be paid during the option period shall be fair market rental value
of the property as determined by an independent M.A.I. appraiser.
Item 3. Legal Proceedings.
In February, 1992, the Company instituted suit in the Federal District
Court for Eastern Pennsylvania against Land Instruments International Inc.
("Land"), Square D Company ("Square D"), and certain of their affiliates for
infringement of one of the Company's patents. Effective July 1, 1992, the
Company settled the Square D litigation on terms the Company believes are
favorable to the Company. The Square D settlement included (i) payment to the
Company of a royalty for sales of the patented products sold by Square D prior
to June 1, 1992, (ii) royalty payments to the Company for subsequent Square D
sales of patented products, and (iii) receipt by the Company of a paid up
license for two of Square D's patents.
Effective March 31, 1994, the Company settled the Land litigation on terms the
Company believes are favorable to the Company. The Land settlement included (i)
payment to the Company of a royalty for sales of the patented products sold by
Land in the United States prior to April 1, 1994, (ii) royalty payments to the
Company for Land sales of patented products in the United States after March 31,
1994; and (iii) a payment for damages.
There are no other pending material legal proceedings to which the
Company is a party or to which any of its properties is subject.
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Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
(a) Market Information.
The Company's Common Stock, is traded in the over-the-counter market
and quoted on NASDAQ under the symbol "MIKR." The following table sets forth the
high and low bid prices of the Company's fiscal years ended October 31, 1994,
and 1995 as reported by NASDAQ.
<TABLE>
<CAPTION>
Fiscal Year 1994
----------------
Low Bid High Bid
------- --------
<S> <C> <C>
First Quarter $0.68 $0.81
Second Quarter 0.81 1.75
Third Quarter 1.25 2.38
Fourth Quarter 1.25 2.50
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year 1994
----------------
Low Bid High Bid
------- --------
<S> <C> <C>
First Quarter $1.63 $2.50
Second Quarter 1.50 2.00
Third Quarter 1.63 2.38
Fourth Quarter 2.00 2.31
</TABLE>
On January 19, 1996, the closing bid and asked quotations reported by
NASDAQ for the Company's Common Stock were $2.63 and $3.13.
The over-the-counter market quotations set forth above represent prices
between dealers, do not include retail markups, commission or other adjustments,
and may not represent actual transactions.
(b) Holders
As of January 19, 1996, there were 72 holders of record of the
Company's Common Stock. The Company has been advised that there are more than
400 beneficial owners of the Common Stock.
(c) Dividends
The Company has never declared or paid any cash dividend. Under the
agreement with Chori and Anritsu (See "Certain Contractual Arrangements", page 6
above), the Company and Donald S. Michael, formerly the President and a Director
of the Company, and Keikhosrow
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Irani, currently the President and sole Director of the Company, respectively,
have obligated themselves to use their best efforts in good faith to conduct the
business operations of the Company in accordance with the business projections
the Company provided to Chori and Anritsu, and to cause the Company to generate
sufficient earnings and profits to enable the Company to declare dividends with
respect of the Company's issued and outstanding Common Stock, beginning April
16, 1995 and during the two (2) year period thereafter. Notwithstanding the
foregoing, dividends may be limited or withheld if the Board of Directors of the
Company determines that to do so would, in its reasonable business judgment, be
in the best interests of the Company. The Board had determined that the payment
of dividends for the foreseeable future is not appropriate.
Item 6. Selected Financial Data.
(Not Covered by Independent Accountant's Report)
The following selected financial data have been derived from the
Company's financial statements, which have been audited by Feldman Radin & Co.,
P.C., independent certified public accountants. The financial data should be
read in conjunction with the Company's financial statements and notes thereto,
which should be read in their entirety, included elsewhere in this Report.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected operating
results:
Net Sales $6,326,397 $5,457,422 $5,030,902 $4,967,289 $5,020,438
Earnings (Loss)
before provision
for taxes 196,338 162,064 (179,601) 56,176 188,125
Net earnings
(loss) 196,338 162,064 (179,601) 56,176 188,125
Net
earnings (loss)
per common
share .05 .04 (.05) .02 .06
Average number
of shares
outstanding 3,734,856 3,688,050 3,654,200 3,443,200 3,154,200
</TABLE>
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FISCAL YEAR ENDED OCTOBER 31
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Balance sheet
information
(at end of period):
<S> <C> <C> <C> <C> <C>
Working
Capital $3,277,774 $2,998,216 $2,838,622 $3,090,034 $2,171,753
Total Assets 4,356,343 3,775,556 3,532,603 3,654,480 2,529,513
Total
liabilities 930,686 546,903 466,014 408,290 257,400
Stockholders'
Equity 3,425,657 3,228,653 3,066,589 3,246,190 2,272,113
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the financial statements and notes thereto appearing
elsewhere herein.
(a) Results of Operations
(i) Fiscal Year 1995 compared to Fiscal Year 1994
Net sales for the fiscal year ended October 31, 1995 were $6,326.397,
as compared to sales of $5,457,422 for the fiscal year ended October 31, 1994.
The increase was attributable to an increasingly aggressive sales effort. The
cost of goods as a percentage of net sales for the 1995 period was 42.7% as
compared to 47.6% for the comparable 1994 period. The decrease was principally
the result of an increasingly competitive market for the materials the Company
purchases and greater efficiency in production operations.
Selling, general and administrative expenses for the fiscal year ended
October 31, 1995 were $3,181,441 as compared to $2,670,156 for the same period
in 1994. The increase was due primarily to higher payroll and related employee
benefits, an increase in the reserve for doubtful debt, and higher advertising
and promotional costs.
Net income for the fiscal year ended October 31, 1995 was $196,338 as
compared to $162,064 for the same period in 1994. The increase was due primarily
to increase in sales and more efficient operations.
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(ii) Fiscal Year 1994 compared to Fiscal Year 1993
Net sales for the fiscal year ended October 31, 1994 were $5,457,422 as
compared to sales of $5,030,902 for the fiscal year ended October 31, 1993. The
increase in sales is due primarily to an improvement in the United States
economy and an increase in foreign sales. The cost of sales as a percentage for
the 1994 period was 47.6% as compared to 44.5% for the comparable 1993 period.
This increase is attributable to a write off of inventory due to shrinkage and
obsolescence.
Selling, general and administrative expenses for the fiscal year ended
October 31, 1994 were $2,670,156 as compared to $2,692,589 for the same period
in 1993. Although the Company increased its net sales in fiscal year 1994, it
nevertheless managed a slight reduction in selling and general and
administration expenses. This reflects management's continuing efforts to reduce
costs without adversely impacting the Company's marketing efforts.
The net income for the fiscal year ended 1994 was $162,064 as compared
to a net loss of $179,601 for the same period in 1993. This increase in net
income is a result of management's continuing emphasis on maximizing profits
and income derived from the successful conclusion of the Company's patent
litigation (See Item 3, Legal Proceedings, page 7 above).
(iii) Fiscal Year 1993 compared to Fiscal Year 1992
Net sales for the fiscal year ended October 31, 1993 were $5,030,902 as
compared to sales of $4,967,289 for the fiscal year ended October 31, 1992. The
relatively flat sales were attributable to continued customer concern over the
economy and the stiff competition the Company faces for its products. The cost
of sales as a percentage of net sales for the 1993 period was 44.5% as compared
to 45.6% for the comparable 1992 period. The decrease was principally a result
of incorporation of a better quality assurance program resulting in less labor
and material for a given quantity of product.
Selling, general and administrative expenses for the fiscal year ended
October 31, 1993 were $2,692,589 as compared to $2,413,557 for the same period
in 1992. The increase was due primarily to increased salaries, advertising,
travel and promotional expenses and legal expenses of the ongoing patent
litigation not charged against the income received from one of the original
defendants.
The net loss for the fiscal year ended October 31, 1993 was $179,601 as
compared to net income of $56,176 for the same period in 1992. The decrease was
due primarily to higher selling, general and administrative expenses and lower
prices for the Company's products.
Item 8. Financial Statements and Supplementary Data.
The Company's balance sheets at October 31, 1995 and 1994 and the
related statements of operations, stockholders' equity and statement of cash
flows for each of the fiscal years ended October 31, 1995, 1994 and 1993 and the
report of the independent certified public accountants thereon and financial
statement schedules required under Regulation S-X are submitted herein as a
separate section starting at Page F-1 following Item 14 of this Report.
Item 9. Disagreements on Accounting and Financial Disclosure.
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth the names and ages of each director and
executive officer of the Company and the positions held by each with the
Company.
<TABLE>
<CAPTION>
Name Age Positions
- ---- --- ---------
<S> <C> <C>
Keikhosrow Irani 59 President, Chief Executive Officer and
the sole Director
Douglas Frank 47 Vice President and Sales Manager
Alex Wu 50 Treasurer
Sydney V. Stoldt, Jr. 62 Secretary
</TABLE>
The Board of Directors of the Company is divided into three classes:
Class A directors, Class B directors and Class C directors. Mr. Irani, a Class A
director, was elected for a term expiring in 1989. Since there have been no
subsequent elections, Mr. Irani remains in office until his successor shall be
elected and duly qualified. There is, at present, no Class B or C directors. The
successors to Mr. Irani, when elected, will be elected for a three-year term.
Mr. Irani had an employment contract with the Company which expired December 31,
1995. (See Item 11. Executive Compensation, page 13 below). All officers
currently serve at the pleasure of the Board of Directors.
In addition to the individuals named above, Donald S. Michael, a
director of the Company until July 21, 1995 and its President and Chief
Executive Officer until August 31, 1995, continues as a part-time employee of
the Company and is expected to continue making significant contributions to the
Company. Mr. Michael has an employment agreement expiring August 31, 2000
which provides for compensation of $75,000 during the period September 1, 1995
to August 31, 1996, such compensation reducing by 20% per year thereafter. In
addition, the agreement prevents Mr. Michael from competing with the Company, or
disclosing any proprietary information, for which the Company has agreed to pay
him $150,000 in twelve quarterly payments of $12,500. The first quarterly
payment under this agreement was made on November 1, 1995.
No family relationship exists between any of the persons described
above.
Business Experience of Directors and Executive Officers.
The following information relates to the principal occupations and
business experience of Mr. Michael and of each director and executive officer of
the Company during the past five years.
Donald S. Michael is a founder of the Company and was its President
and a director from its organization in 1969 until 1995. Mr. Michael holds
the degree of Bachelor of Science in Mechanical Engineering from Georgia
Institute of Technology.
Keikhosrow Irani is a founder of the Company and was its Vice President
and a director
12
<PAGE> 13
since its organization in 1969. On August 31, 1995 he became the Company's
President and Chief Executive Officer and continues as the Company's only
Director. Mr. Irani holds the degree of Master of Science in Electrical
Engineering from the University of Missouri.
Douglas Frank joined the Company in July, 1995 and has been Vice
President and Sales Manager of the Company since August 31, 1995. Mr. Frank
holds BS and MBA degrees from Fairleigh Dickenson University. From 1986 to 1995
he was Vice President and General Manager of Thermo Electric Co. Inc., an
international temperature instrumentation company where he also had
responsibility for subsidiaries in Canada and Europe. He was Vice President of
Sales and Marketing for Thermo Electric from 1984 to 1986.
Alex Wu joined the Company in January, 1995 and has been its Treasurer
since August 31, 1995. Mr. Wu holds a BS - Accounting degree from Tom Koung
University of Taipei, Taiwan. From December, 1992 to August, 1994, he was the
general operations manager of a luggage importer and manufacturer. From 1988 to
1992, he was a sales representative and investment consultant to a commercial
real estate company.
Sydney V. Stoldt, Jr. served as a director of the Company from 1969
to 1988 and continues to serve as Secretary. Mr. Stoldt is a partner of the
New Jersey law firm of Stoldt & Horan, general counsel to the Company.
Item 11. Executive Compensation.
The following table sets forth information regarding all compensation
paid or accrued to all persons serving as the Company's chief executive officer,
and all other executive officers who earned more than $100,000 during any of the
Company's fiscal years ended October 31, 1995, October 31, 1994 and October 31,
1993:
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Fiscal
Principal Position Year Salary
- ------------------ ------ ------
<S> <C> <C>
Donald S. Michael, 1995 $107,599
formerly President, 1994 112,000
Chief Executive 1993 110,973
Officer and Director
Keikhosrow Irani, 1995 $112,008
Vice President and 1994 112,000
Director and, after 1993 110,973
August 31, 1995,
President and Chief
Executive Officer and
Sole Director
</TABLE>
In addition to salary, Messrs. Michael and Irani have Company paid life
insurance and incidental personal use of a Company-leased automobile. In each of
fiscal years 1993, 1994, and 1995, the aggregate value of these benefits for
each of these executives was less than 10%
13
<PAGE> 14
of their respective salaries.
The Company provides hospitalization, major medical and dental
insurance to all employees eligible under a group plan. Premium costs under such
group plan attributable to the officers named above are not included in the
table.
Messers Irani and Michael are entitled to four (4) weeks of annual paid
vacation. Mr. Michael's employment agreement also provide for disability income
equal to his base salary for up to six (6) months of disability and, in the
event of disability lasting beyond six (6) months or in the event of death of
Mr. Michael, the agreement requires a payment of his unpaid compensation over a
term of three years. If Mr. Michael retires during the term of this agreement,
the Company is required to pay to him 30% of his unpaid compensation over a term
of three years. Since August, 1992, the Company has provided $500,000 of life
insurance for each of Messrs. Michael and Irani.
On January 1, 1993, the Company adopted a 401(k) profit-sharing plan
qualified with the Internal Revenue Service under the Employee Retirement Income
Security Act of 1974 (ERISA) for substantially all full-time employees,
including the officers named in the foregoing table. None of these officers
participated in this plan during the fiscal years 1993, 1994 or 1995 and no
contributions were made by the Company into the plan on their behalf. The
Company's previous profit-sharing plan was merged into the new 401(k) plan
effective May 31, 1993. Neither the Company nor any of the officers named in the
foregoing table made contributions to that plan since before fiscal year 1991.
With the merger of the old plan into the new 401(k) plan, a portion of the
Company's contributions made to the old plan prior to fiscal year 1991 on behalf
of these officers accrued to their benefit and became vested.
Compensation Committee, Interlocks and Insider Participation. The
Company's Board of Directors does not have a separate compensation committee.
All matters of executive compensation are dealt with by the entire board.
Since July 21, 1995, Mr. Irani constitutes the entire board.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table presents, as of January 19, 1996, certain
information concerning ownership of the Company's Common Stock, by each person
who, to the knowledge of the Company, is the beneficial owner of more than five
(5%) percent of shares of such outstanding Common Stock and by all directors and
officers of the Company as a group:
<TABLE>
<CAPTION>
Name Beneficial Ownership Percent of Class
- ---- -------------------- ----------------
<S> <C> <C>
Steven N. Bronson (1) 1,118,060 (2) 28.1%
Long Term Growth Associates,
a Florida Limited Partnership (1) 800,000 (3) 21.9%
Keikhosrow Irani (4) 565,587 15.5%
Arthur L. Stern, III, Independent
Special Trustee of the
Donald S. and Jacqueline P. Michael
Charitable Remainder Trust (5) 400,000 (6) 10.9%
Chori Co., Ltd. (7) 350,000 9.6%
</TABLE>
14
<PAGE> 15
Continued:
<TABLE>
<CAPTION>
Name Beneficial Ownership Percent of Class
- ---- -------------------- ----------------
<S> <C> <C>
Sydney V. Stoldt, Jr. (8) 14,706 .4%
All directors and executive
officers as a group (4 persons) 580,293 15.9%
</TABLE>
(1) The address of Steven N. Bronson and Long Term Growth Associates is
2101 West Commercial Boulevard, Suite 1500, Fort Lauderdale, FL 33309.
(2) Based on information contained in a Schedule 13 D and four
Amendments to the Schedule 13 D received by the Company on December 5,
1995, Mr. Bronson owns of record 318,060 of the shares shown opposite
his name, representing warrants he holds to purchase shares of the
Company's Common Stock at various prices. The balance of the shares
showed as owned beneficially by him are 400,000 shares owned of record
by Long Term Growth Associates, of which he is principal, and 400,000
shares which Long Term Growth Associates has an option to purchase from
the Donald S. and Jacqueline P. Michael Charitable Remainder Trust.
(3) Based upon information contained in Amendment 4 to the Schedule 13
D referred to in Note 2 above, the shares shown owned beneficially by
this shareholder include 400,000 shares held of record and 400,000
shares which this shareholder has an option to purchase from the Donald
S. and Jacqueline P. Michael Charitable Remainder Trust.
(4) The address of this stockholder is 801 Pond Brook Road, Franklin
Lakes, New Jersey 07417.
(5) The address of this stockholder is c/o Katz, Kutter, Haigler,
Aderman, Marks & Bryant, P.C. 106 East College Avenue, Suite 1200,
Tallahassee, FL 32301.
(6) These shares are subject to the option referred to in Notes 2 and 3
above.
(7) The address of this stockholder is 4-7 Kawaramachi, 2-chome,
Chuo-ku, Osaka 541, Japan.
(8) The address of this stockholder is Stoldt & Horan, 401 Hackensack
Avenue, Hackensack, New Jersey 07601.
Item 13. Certain Relationships and Related Transactions.
As described under "Certain Contractual Arrangements" on page 6, the
Company has a variety of agreements with Chori, Anritsu and Chori-America. Chori
is an owner of more than five percent (5%) of the Common Stock. During fiscal
year 1995, the Company purchased approximately $138,300 of products from or
through Chori. The Company paid Chori and Chori-America approximately $8,000 and
$72,000, respectively, in commissions during fiscal year 1995. The Company
received $47,500 from Anritsu for engineering and support
15
<PAGE> 16
services rendered in fiscal year 1994.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1), (a)(2) See page F1 of this report for a list of financial statements
and financial statement schedules.
(a)(3) Exhibits required by Item 601 of Regulation S-K are listed
below.
Exhibit Number
--------------
3(a) The Certificate of Incorporation of the Company as amended
effective September 29, 1989, filed as Exhibit (3)-2 to
Registration No. 33-2653-NY under the Securities Act of 1933
(the "1933 Act"), is hereby incorporated by reference.
3(b) The Certificate of Incorporation of the Company as amended
effective October 13, 1989, filed as Exhibit (3)-3 to
Registration No. 33-2653-NY under the 1933 Act, is hereby
incorporated by reference.
4(a) Specimen of amended certificate representing the Company's
Common Stock, one-third cent per value, filed as Exhibit (4)-1
to Registration No. 33-2653-NY under the 1933 Act, is hereby
incorporated by reference.
4(b) Mikron Instrument Company, Inc. Common Stock Purchase Warrant,
dated as of April 15, 1992, held by Chori Co., Ltd. and
Anritsu Meter Company, Ltd., filed as Exhibit 10-E to the
Company's Form 8-K Report dated April 15, 1992, as amended in
an amendment dated July 10,1992, is hereby incorporated by
reference.
4(c) Mikron Instrument Company, Inc. Common Stock Purchase
Warrants, dated as of January 1, 1994, held by Barber &
Bronson Incorporated, filed as Exhibit 4(c) to the
Company's 10-K Report dated January 27, 1994 and is hereby
incorporated by reference.
10(a) Stock and Warrant Purchase Agreement among Mikron Instrument
Company, Inc., Chori Co. Ltd., and Anritsu Meter Company, Ltd.
dated as of December 20, 1991 (without exhibits), filed as
Exhibit 10-A to the Company's 8-K Report, dated April 15,
1992, as amended in an amendment dated July 10, 1992, is
hereby incorporated by reference.
10(b) Agency Agreement, dated as of April 15, 1992, between Mikron
Instrument Company, Inc. and Chori America, Inc., filed as
Exhibit 10-B to the Company's Form 8-K Report dated April 15,
1992, as amended in an amendment dated
16
<PAGE> 17
July 10, 1992, is hereby incorporated by reference.*
10(c) Marketing Agreement, dated as of April 15, 1992, among Mikron
Instrument Company, Chori Co., Ltd. and Anritsu Meter Company,
Ltd., filed as Exhibit 10-C to the Company's Form 8-K Report
dated April 15, 1992, as amended in an amendment dated July
10, 1992, is hereby incorporated by reference.*
10(d) License and Technical Assistance Agreement, dated as of April
15, 1992, between Mikron Instrument Company, Inc. and Anritsu
Meter Company, Ltd., filed as Exhibit 10-D to the Company's
Form 8-K Report dated April 15, 1992, as amended in an
amendment dated July 10, 1992, is hereby incorporated by
reference.*
10(e) Mikron Instrument Company, Inc. Profit Sharing Plan and Trust
Agreement, dated November 18, 1985, filed as Exhibit 10(g) to
Registration No. 33-2653-NY under the 1933 Act, and is hereby
incorporated by reference.
10(f) Mikron Instrument Company, Inc. Amended and Restated Profit
Sharing Plan and Trust Agreement, dated November 1, 1980,
filed as Exhibit 10 (g) to the Company's 10-K Report dated
January 28, 1991 and is hereby incorporated by reference.
10(g) Amended and Restated Employment Agreement between the Company
and Donald S. Michael, dated as of December 28, 1990, filed as
Exhibit 10 (h) to the Company's 10-K Report dated January 28,
1991 and is hereby incorporated by reference.
10(h) Amended and Restated Employment Agreement between the Company
and Keikhosrow Irani, dated as of December 28, 1990, filed as
Exhibit 10 (i) to the Company's 10-K Report dated January 28,
1991 and is hereby incorporated by reference.
10(i) Settlement Agreement dated as of July 1, 1992 between Mikron
Instrument Co., Inc. and Square D Company, filed as Exhibit 10
(i) to the Company's 10-K Report dated January 25, 1993 and is
hereby incorporated by reference.*
10(j) Mikron Instrument Company, Inc. 401(K) Profit-Sharing Plan
dated January 1, 1993, filed as Exhibit 10(j) to the
17
<PAGE> 18
Company's 10-K Report dated January 27, 1994 and is hereby
incorporated by reference.
10(k) Investment Banking Agreement dated as of January 1, 1994
between Mikron Instrument Company and Barber & Bronson
Incorporated, filed as Exhibit 10(k) to the Company's 10-K
Report dated January 27, 1994 and is hereby incorporated by
reference.
10(l) Settlement Agreement dated as of March 31, 1994 between Mikron
Instrument Company, Inc. and Land Instrument International,
Inc., filed as Exhibit 10 to the Company's 8-K Report dated
March 31, 1994, as awarded by an Amendment dated June 20,
1994, and is hereby incorporated by reference. *
10(m) Amended and Restated Employment Agreement and Covenant Not to
Compete between Mikron Instrument Company, Inc. and Donald S.
Michael dated as of July 24, 1995, filed as Exhibit 10 to the
Company's 8-K Report dated November 24, 1995 and is hereby
incorporated by reference.
10(n) Investment Banking Agreement dated as of October 1, 1995
between Mikron Instrument Company, Inc. and Barber & Bronson
Incorporated, filed as Exhibit 10 to the Company's 8-K Report
dated January 3, 1996 and is hereby incorporated by reference.
10(o) Mikron Instrument Company, Inc. 401(K) Profit-Sharing Plan, as
restated January 1, 1995.
(b) No reports on Form 8-K were filed by the Company during
the last quarter of the period covered by this Report.
* Portions of these Agreements have received confidential treatment from the
Securities and Exchange Commission.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, hereunto duly authorized:
MIKRON INSTRUMENT COMPANY
By: /s/ Keikhosrow Irani
--------------------------
Keikhosrow Irani
President and Chief Executive Officer
Date: January 22,1996
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
Company and in the capacities and on the dates indicated.
By: /s/ Keikhosrow Irani
--------------------------
Keikhosrow Irani
Director, President and Chief
Executive Officer
(Principal Executive Officer)
Date: January 22,1996
By: /s/ Alex Wu
--------------------------
Alex Wu
Treasurer
(Principal Financial and
Accounting Officer)
Date: January 22,1996
Supplemental Information To Be Furnished With Reports Filed Pursuant To Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
Not Applicable.
19
<PAGE> 20
MIKRON INSTRUMENT COMPANY, INC.
REPORT ON AUDIT OF FINANCIAL
STATEMENTS
YEARS ENDED OCTOBER 31, 1995, 1994, AND
1993
<PAGE> 21
MIKRON INSTRUMENT COMPANY, INC.
FINANCIAL STATEMENTS
INDEX
<TABLE>
<CAPTION>
Page
Number
--------
<S> <C>
INDEPENDENT AUDITORS' REPORT F - 2
FINANCIAL STATEMENTS:
Balance Sheet - October 31, 1995 and 1994 F - 3
Statement of Operations - Years ended
October 31, 1995, 1994 and 1993 F - 4
Statement of Stockholders' Equity - Years ended
October 31, 1995, 1994 and 1993 F - 5
Statement of Cash Flows - Years ended
October 31, 1995, 1994 and 1993 F - 6
Notes to Financial Statements F - 7-17
</TABLE>
All schedules are omitted because they are inapplicable, not required, or the
information is included elsewhere in the financial statements or notes thereto.
F-1
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
Board of Directors
Mikron Instrument Company, Inc.
Wyckoff, New Jersey
We have audited the accompanying balance sheet of Mikron Instrument
Company, Inc. as of October 31, 1995 and 1994 and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended October 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, the financial position of Mikron Instrument Company, Inc. as of October
31, 1995 and 1994 and the results of its operations and its cash flows for each
of the years in the three-year period ended October 31, 1995 in conformity with
generally accepted accounting principles.
Certified Public Accountants
New York, New York
December 12, 1995
F-2
<PAGE> 23
MIKRON INSTRUMENTS COMPANY, INC.
--------------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
October 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 463,832 $ 489,556
Investment securities 400,000 386,957
Trade accounts receivable, less allowance for
doubtful accounts of $107,000 and $54,000 1,146,121 968,108
Inventories 2,070,365 1,635,212
Prepaid expenses and other current assets 28,142 65,286
---------- ----------
TOTAL CURRENT ASSETS 4,108,460 3,545,119
PROPERTY AND EQUIPMENT, net 110,383 220,077
OTHER ASSETS 137,500 10,360
---------- ----------
$4,356,343 $3,775,556
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 780,686 $ 546,903
Current maturity of long-term liability 50,000 --
---------- ----------
TOTAL CURRENT LIABILITIES 830,686 546,903
---------- ----------
LONG-TERM LIABILITY 100,000 --
---------- ----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.003 par value;
authorized - 15,000,000 shares; issued and outstanding
3,654,200 shares in 1995 and 1994 12,181 12,181
Additional paid-in capital 3,151,831 3,151,165
Retained earnings 261,645 65,307
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,425,657 3,228,653
---------- ----------
$4,356,343 $3,775,556
========== ==========
</TABLE>
See notes to financial statements
F-3
<PAGE> 24
MIKRON INSTRUMENTS COMPANY, INC.
--------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Years Ended October 31,
-------------------------------------
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
REVENUES:
Net sales $6,326,397 $5,457,422 $ 5,030,902
Royalties 130,372 323,953 66,412
Investment income 43,200 13,487 20,354
---------- ---------- -----------
TOTAL REVENUES 6,499,969 5,794,862 5,117,668
---------- ---------- -----------
COSTS AND EXPENSES:
Cost of goods sold 2,702,339 2,596,427 2,238,109
Selling, general and administrative 3,181,441 2,670,156 2,692,589
Research and development 419,851 366,215 366,571
---------- ---------- -----------
TOTAL COSTS AND EXPENSES 6,303,631 5,632,798 5,297,269
---------- ---------- -----------
NET INCOME (LOSS) $ 196,338 $ 162,064 $ (179,601)
========== ========== ===========
NET INCOME (LOSS) PER SHARE $ 0.05 $ 0.04 $ (0.05)
========== ========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES 3,734,856 3,688,050 3,654,200
========== ========== ===========
</TABLE>
See notes to financial statements
F-4
<PAGE> 25
MIKRON INSTRUMENT COMPANY, INC.
------------------------------
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
------------------- Paid-In Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
--------- ------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Balance October 31, 1992 3,654,200 $12,181 $3,151,165 $ 82,844 $ 3,246,190
Net loss -- -- -- (179,601) (179,601)
--------- ------- ---------- --------- -----------
Balance October 31, 1993 3,654,200 12,181 3,151,165 (96,757) 3,066,589
Net income -- -- -- 162,064 162,064
--------- ------- ---------- --------- -----------
Balance October 31, 1994 3,654,200 12,181 3,151,165 65,307 3,228,653
Issuance of common stock warrants -- -- 666 -- 666
Net income -- -- -- 196,338 196,338
--------- ------- ---------- --------- -----------
Balance October 31, 1995 3,654,200 $12,181 $3,151,831 $ 261,645 $ 3,425,657
========= ======= ========== ========= ===========
</TABLE>
See notes to financial statements
F-5
<PAGE> 26
MIKRON INSTRUMENT COMPANY, INC.
-------------------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 196,338 $ 162,064 $(179,601)
--------- --------- ---------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation 136,447 66,467 50,727
Amortization 12,500 -- --
Unrealized holding loss on available-for-sale securities -- 13,850 4,800
Realized gain on available-for-sale securities (267) -- (228)
Changes in assets and liabilities:
Decrease in trade accounts receivable (178,013) (43,249) (9,275)
(Increase) decrease in inventories (435,153) 82,372 56,202
(Increase) in prepaid and other current assets 37,144 (20,601) (39,140)
Decrease in other assets 10,360 -- --
Increase in accounts payable and accrued liabilities 233,783 80,889 57,724
--------- --------- ---------
(183,199) 179,728 120,810
--------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 13,139 341,792 (58,791)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (26,753) (58,577) (122,538)
Proceeds from sale of available-for-sale securities 388,623 252,561 346,114
Purchases of available-for-sale securities (401,399) (70,872) (222,782)
Increase in Intangible Asset (150,000) -- --
Increase in Long-Term Liability 150,000 -- --
--------- --------- ---------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (39,529) 123,112 794
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock warrants 666 -- --
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 666 -- --
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (25,724) 464,904 (57,997)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 489,556 24,652 82,649
--------- --------- ---------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 463,832 $ 489,556 $ 24,652
========= ========= =========
</TABLE>
See notes to financial statements
F-6
<PAGE> 27
MIKRON INSTRUMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
Mikron Instrument Company, Inc. (the "Company") is engaged in designing
and manufacturing a broad range of infrared thermometers for sale to domestic
and foreign markets. The Company also sells a high sensitivity infrared thermal
imager under its name which is manufactured by a Japanese company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation. Certain items in prior years were
reclassified to conform with the current year's
classifications.
b. Cash and Cash Equivalents. Cash equivalents are carried at
cost, which approximates market. The Company considers all
highly liquid investments with a maturity date of three months
or less when purchased to be cash equivalents.
c. Investment Securities. Effective November 1, 1994, the Company
adopted Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity
Securities (FAS 115), which resulted in a change in the
accounting for debt and equity securities held for investment
purposes. Prior to November 1, 1994, the Company carried debt
and equity securities at the lower of cost or market value. In
accordance with FAS 115, the Company's debt and equity
securities are now considered as either held-to-maturity or
available-for-sale. Held-to-maturity securities represent those
securities that the Company has both the positive intent and
ability to hold to maturity and are carried at amortized cost.
Available-for-sale securities represent those securities that
do not meet the classification of held-to-maturity, are not
actively traded and are carried at fair value. Unrealized gains
and losses on these securities are excluded from earnings and
are reported as a separate component of stockholders' equity,
net of applicable taxes, until realized.
d. Inventories. Inventories are stated at the lower of cost
(first-in, first-out method) or market. Cost includes material
and conversion costs.
e. Property and Equipment. Property and equipment are stated at
cost. Depreciation and amortization, which includes the
amortization of leasehold improvements are computed principally
using straight-line depreciation over the estimated useful
lives of individual assets or the remaining terms of leases.
F-7
<PAGE> 28
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
f. Amortization of Covenant Not To Compete. The Covenant Not To
Compete is amortized on a straight-line basis over 36 months.
g. Revenues. Net sales are recognized at the time of shipment.
Royalties are recorded as earned in accordance with specific terms
of each license agreement.
h. Research and Development Costs. Research and development costs are
expensed as incurred.
I. Advertising costs. The costs of advertising are expensed as
incurred.
j. Earnings per share. Earnings per common and common equivalent
share is based upon the weighted average of common and common
equivalent shares outstanding during the period. The number of
common and common equivalent shares utilized in the per share
computations were 3,734,856, 3,688,050, and 3,654,200 for the
years ended October 31, 1995, 1994, and 1993.
2. INVESTMENT SECURITIES
The amortized cost and estimated fair value of the investment secuities
are as follows:
<TABLE>
<CAPTION>
October 31, 1995
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Held-to-maturity
Certificates of deposit $ 300,000 $ -- $ -- $ 300,000
Available-for-sale
Mutual funds 400,000 -- -- 400,000
--------- --------- ------ ---------
700,000 -- -- 700,000
Less cash equivalents (300,000) -- -- (300,000)
--------- --------- ------ ---------
Total investment securities $ 400,000 $ -- $ -- $ 400,000
========= ========= ====== =========
</TABLE>
F - 8
<PAGE> 29
2. INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
October 31, 1994
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Held-to-maturity
Certificates of deposit $ 424,124 $ - $ - $ 424,124
Available-for-sale
Money market fund 11,242 - - 11,242
Mutual funds 400,807 - (13,850) 386,957
--------- ---------- --------- ---------
836,173 - (13,850) 822,323
Less cash equivalents (435,366) - - (435,366)
--------- ---------- --------- ---------
Total investment securities $ 400,807 $ - $ (13,850) $ 386,957
========= ========== ========= =========
</TABLE>
Investment income consists of the following:
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Net realized gain from the sale of
marketable securities $ 267 $ - $ 228
Interest and dividend income 42,933 27,337 24,926
Net unrealized holding losses - (13,850) (4,800)
-------- -------- -------
$ 43,200 $ 13,487 $20,354
======== ======== =======
</TABLE>
F - 9
<PAGE> 30
3. INVENTORIES
The components of inventories are summarized as follows:
<TABLE>
<CAPTION>
October 31,
----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Materials and parts $1,134,598 $ 932,094
Work in process 650,047 417,976
Finished goods 285,720 285,142
---------- ----------
$2,070,365 $1,635,212
========== ==========
</TABLE>
Inventories secure any obligations under a bank line of credit.
4. PROPERTY AND EQUIPMENT
Property and equipment, net, consists of the following:
<TABLE>
<CAPTION>
October 31,
----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Machinery and equipment $ 678,602 $ 647,457
Leasehold improvements 117,001 121,612
---------- ----------
795,603 769,069
Less: accumulated depreciation (685,220) (548,992)
---------- ----------
$ 110,383 $ 220,077
========== ==========
</TABLE>
Property and equipment secure any obligations under a bank line of
credit.
5. EMPLOYEE BENEFIT PLAN
The Company sponsors a profit sharing 401(k) plan (as restated January
1, 1995) covering substantially all full-time employees, which
provides for Company matching of 30% of the participant's elective
deferral, but in no event greater than 1.5% of the participant's
compensation. The Company's matching expense for the plan was $12,046,
$16,598, and $11,346 for the years ended October 31, 1995, 1994 and
1993, respectively.
F - 10
<PAGE> 31
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
October 31,
------------------------
1995 1994
-------- --------
<S> <C> <C>
Trade accounts payable $515,835 $268,059
Accrued contingent legal fees (a) 80,963 96,862
Commissions 123,806 124,111
Accrued warranty costs 10,000 10,000
Accrued payroll 11,538 30,426
Payroll taxes 18,389 15,210
Other 20,155 2,235
-------- --------
$780,686 $546,903
======== ========
</TABLE>
(a) Contingent legal fees in connection with royalty litigation
settlements.
7. COMMITMENTS
Operating Leases
The Company leases its manufacturing, warehouse and office facilities
under the terms of an operating lease which expires on February 29,
1996. The lease generally provides for the Company to pay certain
operating costs of the leased property. Rent expense for the years
ended October 31, 1995, 1994, and 1993 was approximately $106,395 ,
$103,000 and $102,000, respectively, and was offset by sublease income
of approximately $33,900, $29,600, and $30,500, respectively. The
minimum future rental commitment under this operating lease through
expiration is approximately $32,100, net of sublease income of
approximately $5,100.
The Company is currently negotiating a five year operating lease
agreement for new manufacturing, warehouse and office facilities, with
an option to extend the lease for five additional years. The lease,
which will commence January 1, 1996 and expires December 31, 2000,
provides for rent to commence March 1, 1996 at a fixed annual amount
of approximately $183,100 payable in equal monthly installments. In
addition, the lease will provide for the Company to pay taxes,
maintenance, insurance and other operating costs of the leased
property. The rent to be paid during the option period shall be the
fair
F - 11
<PAGE> 32
7. COMMITMENTS (CONTINUED)
market rental value of the property as determined by an independent
M.A.I. appraiser. At October 31, 1995, the minimum future rental
commitments under the anticipated lease are as follows:
<TABLE>
<CAPTION>
Year Ending October 31,
-----------------------
<S> <C>
1996 $122,100
1997 183,100
1998 183,100
1999 183,100
2000 183,100
Thereafter 30,500
</TABLE>
Employment Contracts
The Company has entered into an employment agreement expiring August
31, 2000 with an employee/stockholder. The agreement provides for
aggregate compensation of $225,000 during the term of the agreement.
In the event of death or disability of the employee/stockholder, the
agreement calls for payments to the employee's estate, or beneficiary
of his unpaid compensation contemplated under the agreement in equal
annual installments over three years. If the employee/stockholder
retires during the term of the agreement, he shall receive 30% of the
unpaid compensation contemplated under the agreement in equal annual
installments over three years. The agreement contains provisions
intended to prevent the employee/stockholder from entering into any
form of competition with the Company or disclosing any proprietary
information for which the Company has agreed to the pay the
employee/stockholder $150,000 in twelve quarterly payments of $12,500.
The net covenant of $137,500 is included in other assets at October
31, 1995.
The Company has an employment agreement with an executive officer
expiring December 31, 1995. The agreement provides for compensation
of $112,000 for calendar year 1995. In the event of death or
disability of the executive officer, the agreement calls for payments
to the executive's estate, or beneficiary, 50% of the total amount of
the last three years salary in equal annual installments over three
years.
F-12
<PAGE> 33
7. COMMITMENTS (CONTINUED)
Investment Banking Agreement
On October 1, 1995 the Company entered into a three year agreement
with an investment banking firm to serve as the Company's financial
advisor as to any and all corporate finance matters or other corporate
business that the Company deems appropriate. The investment banking
firm's compensation will be $12,000 per year for three years, as well
as additional compensation of 5% with respect to transactions such as
mergers or acquisitions brought to the Company by the investment
banking firm. In addition, the Company granted the investment banking
firm warrants to purchase a total of 200,000 shares of the Company's
common stock with an exercise price of $2.50 per share for which the
investment banking firm paid the Company $666. The warrants expire on
September 30, 2000.
Credit Agreements
The Company has a commercial line of credit agreement with a bank
which provides a line of credit of up to $300,000 at the prime
interest rate. This agreement runs through January 31, 1996, and is
secured by all of the present and future accounts receivable,
inventory and fixed assets of the Company. The Company has no
borrowings under this line of credit at October 31, 1995. The Company
is currently negotiating with a bank for a new line of credit.
F-13
<PAGE> 34
8. STOCKHOLDERS' EQUITY
The following table summarizes warrants to purchase common stock
issued by the Company:
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------------------
Shares 1995 1994 1993
- ---------------------------------------------- -------- ------- -------
<S> <C> <C> <C>
Outstanding November 1, 1994,
1993 and 1992 700,000 500,000 500,000
Granted per share (a):
$2.50 in 1995 expiring
September 30, 2000 200,000
$0.81 to $1.50 expiring
December 31, 1998 200,000
Expired May 1995 (500,000)
-------- ------- -------
Outstanding October 31, 1995 400,000 700,000 500,000
======== ======= =======
</TABLE>
(a) Issued pursuant to Investment Banking Agreements.
F-14
<PAGE> 35
9. INCOME TAXES
Income statement presentation of the Company's Income Tax Provision
and Deferred Tax Assets and Liabilities are presented in accordance
with Financial Accounting Standards Board Statement 109, "Accounting
for Income Taxes." Deferred Tax Assets consist of the following:
<TABLE>
<CAPTION>
Year ended October 31,
-----------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net operating loss carryforwards $ 182,000 $ 210,000 $ --
Less: valuation allowance (182,000) (210,000) --
--------- --------- ---------
$ -- $ -- $ --
========= ========= =========
</TABLE>
Reconciliation of the provision for income taxes shown in the financial
statements and amounts computed by applying the Federal statutory
income tax rates are as follows:
<TABLE>
<CAPTION>
Year ended October 31,
-----------------------------------
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Net earnings (loss) before income
taxes $196,338 $162,064 $(179,601)
======== ======== =========
Provision (credit) for income taxes $ 79,000 $ 65,000 $ (72,000)
Operating loss for which no
benefits were provided -- -- 72,000
Benefit provided by net operating
loss carryforwards (79,000) (65,000) --
-------- -------- ---------
$ -- $ -- $ --
======== ======== =========
</TABLE>
Net operating loss carryforwards for Federal Income Tax purposes
amounted to approximately $438,000, $604,000 and $441,000 for the
years ended October 31, 1995, 1994 and 1993, respectively. These
Federal net operating loss carryforwards will expire between 2003 and
2008. Net operating loss carryforwards for state Corporation Income
Tax purposes amounted to approximately $355,000, $553,000 and $425,000
for the years
F-15
<PAGE> 36
9. INCOME TAXES (CONTINUED)
ended October 31, 1995, 1994 and 1993, respectively. These state
Corporation Income Tax net operating loss carryforwards will expire
between 2001 and 2008. Carryover of the Federal and State net
operating loss carryforwards are subject to limitations in the event
of a change of 50% or more of the corporate ownership, as defined for
tax purposes. If such a change were to occur, the Company's ability
to use the net operating loss carryforwards may be subject to certain
limitations.
10. ADVERTISING COSTS
Advertising costs amounted to approximately $341,000, $335,000 and
$403,000 for the years ended October 31, 1995, 1994, and 1993,
respectively.
11. RELATED PARTY TRANSACTIONS
The Company purchases certain of its products from a Japanese company
that is a stockholder. Purchases from this company, for the years
ended October 31, 1995, 1994, and 1993, were approximately $138,300,
$90,000, and $263,000, respectively. In addition, under the terms of
a distribution agreement, this company acts as the international sales
representative for all of the Company's products for which it earns a
6% commission. For the years ended October 31, 1995, 1994, and 1993,
this company was responsible for sales of approximately $303,300,
$79,000, and $302,000, respectively, and commissions paid to this
company were approximately $80,000, $60,000, and $36,000,
respectively.
Under the terms of a 1992 joint development agreement, the Company
jointly developed a product with a Japanese company that is a
stockholder. The Company was to be reimbursed 50% of the actual design
and development costs up to a maximum of $95,000. At October 31,
1994, the Company had an accounts receivable from this company of
$47,500 which was paid during 1995.
12. ROYALTIES
In 1992, the Company instituted suits in the Federal District Court
for Eastern Pennsylvania against two companies for infringement of one
of the Company's patents. The Company settled one case effective July
1, 1992, and one case effective March 31, 1994 on terms management
believes are favorable to the Company. The settlements included,
among other terms, payments to the Company of back royalties for sales
of the patented products sold, royalties to the Company for
prospective sales of patented products and a payment for damages by
one of the companies. For the years ended October 31, 1995, 1994, and
1993, the Company earned royalties of approximately $130,000,
$324,000, and $66,000, respectively.
F-16
<PAGE> 37
13. EXPORT SALES
For the years ended October 31, 1995, 1994 and 1993, approximately
$1,290,762 or 20%, $1,180,000 or 22%, and $948,000 or 19%,
respectively, of the Company's sales were to customers located outside
of the United States.
14. FOURTH QUARTER ADJUSTMENTS (UNAUDITED)
Fourth quarter adjustments included an increase in the accounts
receivable reserve of $54,000, an increase to inventory of $115,000
due to the omission of direct labor and overhead, an additional
advertising expense of $48,000, and additional depreciation of
$70,000.
F-17
<PAGE> 38
EXHIBIT INDEX
-------------
Exhibit Number Description
-------------- -----------
3(a) The Certificate of Incorporation of the Company as amended
effective September 29, 1989, filed as Exhibit (3)-2 to
Registration No. 33-2653-NY under the Securities Act of 1933
(the "1933 Act"), is hereby incorporated by reference.
3(b) The Certificate of Incorporation of the Company as amended
effective October 13, 1989, filed as Exhibit (3)-3 to
Registration No. 33-2653-NY under the 1933 Act, is hereby
incorporated by reference.
4(a) Specimen of amended certificate representing the Company's
Common Stock, one-third cent per value, filed as Exhibit (4)-1
to Registration No. 33-2653-NY under the 1933 Act, is hereby
incorporated by reference.
4(b) Mikron Instrument Company, Inc. Common Stock Purchase Warrant,
dated as of April 15, 1992, held by Chori Co., Ltd. and
Anritsu Meter Company, Ltd., filed as Exhibit 10-E to the
Company's Form 8-K Report dated April 15, 1992, as amended in
an amendment dated July 10,1992, is hereby incorporated by
reference.
4(c) Mikron Instrument Company, Inc. Common Stock Purchase
Warrants, dated as of January 1, 1994, held by Barber &
Bronson Incorporated, filed as Exhibit 4(c) to the
Company's 10-K Report dated January 27, 1994 and is hereby
incorporated by reference.
10(a) Stock and Warrant Purchase Agreement among Mikron Instrument
Company, Inc., Chori Co. Ltd., and Anritsu Meter Company, Ltd.
dated as of December 20, 1991 (without exhibits), filed as
Exhibit 10-A to the Company's 8-K Report, dated April 15,
1992, as amended in an amendment dated July 10, 1992, is
hereby incorporated by reference.
10(b) Agency Agreement, dated as of April 15, 1992, between Mikron
Instrument Company, Inc. and Chori America, Inc., filed as
Exhibit 10-B to the Company's Form 8-K Report dated April 15,
1992, as amended in an amendment dated
<PAGE> 39
July 10, 1992, is hereby incorporated by reference.*
10(c) Marketing Agreement, dated as of April 15, 1992, among Mikron
Instrument Company, Chori Co., Ltd. and Anritsu Meter Company,
Ltd., filed as Exhibit 10-C to the Company's Form 8-K Report
dated April 15, 1992, as amended in an amendment dated July
10, 1992, is hereby incorporated by reference.*
10(d) License and Technical Assistance Agreement, dated as of April
15, 1992, between Mikron Instrument Company, Inc. and Anritsu
Meter Company, Ltd., filed as Exhibit 10-D to the Company's
Form 8-K Report dated April 15, 1992, as amended in an
amendment dated July 10, 1992, is hereby incorporated by
reference.*
10(e) Mikron Instrument Company, Inc. Profit Sharing Plan and Trust
Agreement, dated November 18, 1985, filed as Exhibit 10(g) to
Registration No. 33-2653-NY under the 1933 Act, and is hereby
incorporated by reference.
10(f) Mikron Instrument Company, Inc. Amended and Restated Profit
Sharing Plan and Trust Agreement, dated November 1, 1980,
filed as Exhibit 10 (g) to the Company's 10-K Report dated
January 28, 1991 and is hereby incorporated by reference.
10(g) Amended and Restated Employment Agreement between the Company
and Donald S. Michael, dated as of December 28, 1990, filed as
Exhibit 10 (h) to the Company's 10-K Report dated January 28,
1991 and is hereby incorporated by reference.
10(h) Amended and Restated Employment Agreement between the Company
and Keikhosrow Irani, dated as of December 28, 1990, filed as
Exhibit 10 (i) to the Company's 10-K Report dated January 28,
1991 and is hereby incorporated by reference.
10(i) Settlement Agreement dated as of July 1, 1992 between Mikron
Instrument Co., Inc. and Square D Company, filed as Exhibit 10
(i) to the Company's 10-K Report dated January 25, 1993 and is
hereby incorporated by reference.*
10(j) Mikron Instrument Company, Inc. 401(K) Profit-Sharing Plan
dated January 1, 1993, filed as Exhibit 10(j) to the
<PAGE> 40
Company's 10-K Report dated January 27, 1994 and is hereby
incorporated by reference.
10(k) Investment Banking Agreement dated as of January 1, 1994
between Mikron Instrument Company and Barber & Bronson
Incorporated, filed as Exhibit 10(k) to the Company's 10-K
Report dated January 27, 1994 and is hereby incorporated by
reference.
10(l) Settlement Agreement dated as of March 31, 1994 between Mikron
Instrument Company, Inc. and Land Instrument International,
Inc., filed as Exhibit 10 to the Company's 8-K Report dated
March 31, 1994, as awarded by an Amendment dated June 20,
1994, and is hereby incorporated by reference. *
10(m) Amended and Restated Employment Agreement and Covenant Not to
Compete between Mikron Instrument Company, Inc. and Donald S.
Michael dated as of July 24, 1995, filed as Exhibit 10 to the
Company's 8-K Report dated November 24, 1995 and is hereby
incorporated by reference.
10(n) Investment Banking Agreement dated as of October 1, 1995
between Mikron Instrument Company, Inc. and Barber & Bronson
Incorporated, filed as Exhibit 10 to the Company's 8-K Report
dated January 3, 1996 and is hereby incorporated by reference.
10(o) Mikron Instrument Company, Inc. 401(K) Profit-Sharing Plan, as
restated January 1, 1995.
* Portions of these Agreements have received confidential treatment from the
Securities and Exchange Commission.
<PAGE> 1
THE GUARDIAN DEFINED CONTRIBUTION PROTOTYPE
ARTICLE I - DEFINITIONS
The following words and terms, as used in this Plan, shall have the
meanings set forth below.
1.01 Account
1.01 "Account" shall mean the record established and maintained for each
Participant to reflect his or her allocable portion of the Investment Fund
derived from any Elective Deferrals, any Employer contributions and any
mandatory contributions made by the Participant.
1.02 Accrued Benefit
1.02 "Accrued Benefit" shall mean the values of Policies issued on the
Participant's life plus the value of his or her Account as defined in Section
1.01, determined as of the most recent Valuation Date.
1.03 Actual Deferral Percentage (ADP)
1.03 "Actual Deferral Percentage" or "ADP" shall mean
(a) for a specified group of Participants for a Plan Year, the
average of the ratios, calculated separately for each Participant in such
group, of
(1) the amount of Employer contributions actually paid over to
the Trust on behalf of such Participant for the Plan Year to
(2) the Participant's Compensation for such Plan Year, whether or
not the Employee was a Participant for the entire Plan Year.
(b) Employer contributions on behalf of any Participant shall
include:
(1) any Elective Deferrals made pursuant to the Participant's
deferral election, including Excess Elective Deferrals of Highly Compensated
Employees, but excluding Excess Elective Deferrals of Non-Highly Compensated
Employees that arise solely from Elective Deferrals made under the Plan or plans
of the Employer; and
(2) at the election of the Employer, Qualified Non-elective
Contributions and Qualified Matching Contributions. For purposes of computing
Actual Deferral Percentages, an Employee who would be a Participant but for the
failure to make Elective Deferrals shall be treated as a Participant on whose
behalf no Elective Deferrals are made.
1.04 Actual Retirement Date
1.04 "Actual Retirement Date" shall mean the date the Employee actually
retires from employment by the Employer.
1.05 Adoption Agreement
1.05 "Adoption Agreement" shall mean the Adoption Agreement executed by the
Employer and the Committee named therein, attached hereto, and made a part
hereof as more fully set forth therein.
<PAGE> 2
1.06 Age
1.06 "Age" shall mean the Employee's Age at his or her nearest birthday.
1.07 Aggregate Limit
1.07 "Aggregate Limit" shall mean the sum of
(a) one hundred twenty five (125%) percent of the greater of the ADP
of the not Highly Compensated Employees for the Plan Year or the ACP of the not
Highly Compensated Employees under the Plan subject to section 401(m) of the
Code for the Plan Year beginning with or within the Plan Year of the cash or
deferred arrangement, and
(b) the lesser of two hundred (200%) percent or two plus the lesser
of such ADP or ACP.
"Lesser" is substituted for "greater" in (a) above and "greater" is
substituted for "lesser" after "two plus the" in (b) if it would result in
larger aggregate limits.
1.08 Anniversary Date
1.08 "Anniversary Date" shall mean the Effective Date and the first day of
each Plan Year thereafter.
1.09 Annual Additions
1.09 "Annual Additions" shall mean the sum of the Elective Deferrals, other
Employee contributions, Employer contributions and forfeitures allocated to a
Participant's Account during a Limitation Year.
1.10 Average Contribution Percentage (ACP)
1.10 "Average Contribution Percentage" or "ACP" shall mean the average,
expressed as a percentage, of the Contribution Percentages of the Eligible
Participants in a group.
1.11 Beneficiary
1.11 "Beneficiary" shall mean any person, estate, trust, or organization
entitled to receive a payment under the Plan on the death of a Participant.
1.12 Break in Service
1.12 "Break in Service" shall mean a twelve (12) consecutive month period
(the computation period) during which the Participant does not complete more
than five hundred (500) Hours of Service with the Employer. The computation
period shall be the twelve (12) consecutive month period which begins with the
Employee's first Hour of Service and each subsequent twelve (12) consecutive
month period measured from the anniversary of the day the Employee completes his
or her first Hour of Service.
1.13 Code
1.13 "Code" shall mean the Internal Revenue Code of 1986 as amended.
1.14 Committee
1.14 "Committee" shall mean the individual or individuals selected in the
<PAGE> 3
Adoption Agreement.
1.15 Compensation
1.15 "Compensation" shall mean Compensation as that term is defined in
Section 8.05(b) of the Plan, and shall only include the earnings of the
Participant which would appear as Wages, Tips or Other Compensation on a W-2
form or as Earned Income for the period selected in Item 4C.
1.16 Contribution Percentage
1.16 "Contribution Percentage" shall mean the ratio, expressed as a
percentage, of the Participant's Contribution Percentage Amounts to the
Participant's Compensation for the Plan Year, whether or not the Employee was a
Participant for the entire Plan Year.
1.17 Contribution Percentage Amounts
1.17 "Contribution Percentage Amounts" shall mean the sum of the Employee
Contributions, Matching Contributions and Qualified Matching Contributions, to
the extent not taken into account for purposes of the ADP test, under the Plan
on behalf of the Participant for the Plan Year. Such Contribution Percentage
Amounts shall not include Matching Contributions that are forfeited either to
correct Excess Aggregate Contributions or because the contributions to which
they relate are Excess Deferrals, Excess Contributions, or Excess Aggegate
Contributions. Such Contribution Percentage Amounts shall include forfeitures of
Excess Aggregate Contributions or Matching Contributions allocated to the
Participant's Account, which shall be taken into account in the Plan Year in
which such forfeiture is allocated. If so elected in Item 7D of the Adoption
Agreement, the Employer may include Qualified Non-elective Contributions in the
Contribution Percentage Amounts. The Employer may also elect,in Item 7E of the
Adoption Agreement, to use Elective Deferrals in the Contribution Percentage
Amounts so long as the ADP test is met before the Elective Deferrals are used in
the ACP test and continues to be met following the exclusion of those Elective
Deferrals that are used to meet the ACP test.
1.18 Determination Year
1.18 "Determination Year" shall mean the Plan Year.
1.19 Disability
1.19 "Disability" shall mean the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than twelve (12) months.
The permanence and degree of such impairment shall be supported by medical
evidence, and shall be determined in accordance with the procedure set forth in
Section 5.03.
1.20 Disability Date
1.20 "Disability Date" shall mean the date the Employee incurs a physical
or mental condition which, in the judgment of the Committee, based upon medical
reports and other evidence satisfactory to the Committee, presumably permanently
prevents an Employee from satisfactorily performing his or her usual duties for
the Employer or the duties of such other position or job which the Employer
makes available to him or her and for which such Employee is qualified by reason
of his or her training, education or experience.
<PAGE> 4
1.21 Distribution Date
1.21 "Distribution Date" shall mean the earliest of the Participant's
death, Disability, separation from service or attainment of Age fifty nine and
one-half (59 1/2).
1.22 Earned Income
1.22 "Earned Income" shall mean net earnings from self-employment in the
trade or business with respect to which the Plan is established, for which the
personal services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in gross income
and the deductions allocable to such items. Net earnings are reduced by
contributions by the Employer to a plan qualified under section 401(a) of the
Code to the extent deductible under section 404 of the Code. Net earnings shall
be determined with regard to the deduction allowed to the Taxpayer by section
164(f) of the Code for taxable years beginning after December 31, 1989.
1.23 Effective Date
1.23 "Effective Date" shall be as stated in Item 1 of the Adoption
Agreement.
1.24 Elective Deferrals
1.24 "Elective Deferrals" shall mean any Employer contribution made to the
Plan at the election of the Participant,in lieu of cash Compensation, and shall
include contributions made pursuant to a Salary Reduction Agreement. With
respect to any taxable year, a Participant's Salary Reduction Contribution is
the sum of all Employer contributions made on behalf of such Participant
pursuant to an election to defer under any qualified cash or deferred
arrangement as described in section 401(k) of the Code, any simplified employee
pension cash or deferred arrangement as described in section 402(h)(1)(B) of the
Code, any eligible deferred compensation plan under section 457 of the Code, any
plan as described under section 501(c)(18) of the Code, and any Employer
contributions made on behalf of a Participant for the purchase of an annuity
Policy under section 403(b) of the Code pursuant to a Salary Reduction
Agreement. Elective Deferrals shall not include any deferrals properly
distributed as excess Annual Additions.
1.25 Eligible Employee
1.25 "Eligible Employee" shall mean an Employee who satisfies the
requirements set forth in Item 2 of the Adoption Agreement. The term "Eligible
Employee" shall not include any Employee who is a member of a unit of Employees
covered by a collective bargaining agreement with an Employee representative if
the Employer and the Employee representative have engaged in good faith
bargaining for retirement benefits unless the Employer has elected to include
such Employees in Item 2A of the Adoption Agreement. In addition, the term
"Eligible Employee" shall not include Employees who are nonresident aliens
provided they receive no earned income from the Employer, within the meaning of
section 911(d)(2) of the Code, which constitutes income from sources within the
United States within the meaning of section 861(a)(3) of the Code, unless the
Employer has elected to include such Employees in Item 2A of the Adoption
Agreement. Finally, the term "Eligible Employee" shall not include any Employee
employed by an entity which does not adopt the Plan for its Employees.
1.26 Eligible Participant
<PAGE> 5
1.26 "Eligible Participant" shall mean any Employee who is eligible to make
an Employee Contribution, or an Elective Deferral, if the Employer takes such
contributions into account in the calculation of the Contribution Percentage, or
to receive a Matching Contribution, including forfeitures, or a Qualified
Matching Contribution. If an Employee Contribution is required as a condition of
participation in the Plan, any Employee who would be a Participant in the Plan
if such Employee made such a contribution shall be treated as an Eligible
Participant on behalf of whom no Employee Contributions are made.
1.27 Employee
1.27 "Employee" shall mean any Employee of an Employer maintaining the
Plan, as well as any Employee of any other employer required to be aggregated
with an Employer maintaining the Plan under sections 414(b), (c), (m) or (o) of
the Code. The term "Employee" shall also mean any Leased Employee deemed to be
an Employee of any Employer, including employers required to be aggregated with
the Employer maintaining the Plan, to the extent provided in sections 414(n) or
(o) of the Code.
1.28 Employee Contribution
1.28 "Employee Contribution" shall mean any contribution made to the Plan
by or on behalf of a Participant that is included in the Participant's gross
income in the year in which made and that is maintained under a separate account
to which earnings and losses are allocated.
1.29 Employer
1.29 "Employer" shall mean the Employer or Employers named in the Adoption
Agreement, or any successor by merger, purchase or otherwise that assumes the
obligations of this Plan. An Employer's adoption of this Plan shall not imply or
include its adoption by affiliates, subsidiaries, or any other employer or
employers unless such affiliates, subsidiaries, or other employer or employers
are named in the Adoption Agreement, in which event the provisions of Section
14.12 shall apply.
1.30 Entry Date
1.30 "Entry Date" shall mean the first day of the Plan Year.
1.31 Excess Aggregate Contributions
1.31 "Excess Aggregate Contributions" shall mean, with respect to any Plan
Year, the excess of:
(a) The aggregate Contribution Percentage Amounts taken into account
in computing the numerator of the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by the
Average Contribution Percentage test determined by reducing contributions made
on behalf of Highly Compensated Employees in order of their Contribution
Percentages beginning with the highest of such percentages.
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to Section 1.34 and then determining Excess Contributions
pursuant to Section 1.33.
<PAGE> 6
1.32 Excess Amount
1.32 "Excess Amount" shall mean an amount allocated to a Participant's
Account from Employer contributions which causes the total Annual Additions to
such Account to exceed the amount permitted under Section 8.01(b).
1.33 Excess Contributions
1.33 "Excess Contributions" shall mean, with respect to any Plan Year, the
excess of:
(a) The aggregate amount of Employer contributions actually taken into
account in computing the ADP of Highly Compensated Employees for such Plan Year,
over
(b) The maximum amount of such contributions permitted by the ADP
test, determined by reducing contributions made on behalf of Highly Compensated
Employees in order of the ADPs, beginning with the highest of such percentages.
1.34 Excess Elective Deferrals
1.34 "Excess Elective Deferrals" shall mean those Elective Deferrals that
are includible in a Participant's gross income under section 402(g) of the Code
to the extent such Participant's Elective Deferrals for a taxable year exceed
the dollar limitation under section 402(g) of the Code. Excess Elective
Deferrals shall be treated as Annual Additions under the Plan, unless such
amounts are distributed no later than the first April 15 following the close of
the Participant's taxable year. Excess Elective Deferrals shall be adjusted for
any income or loss up to the date of distribution. The income or loss allocable
to Excess Elective Deferrals is the sum of
(a) income or loss allocable to the Participant's Elective Deferral
account for the taxable year multiplied by a fraction, the numerator of which is
such Participant's Excess Elective Deferrals for the year and the denominator of
which is the Participant's Accrued Benefit attributable to Elective Deferrals
without regard to any income or loss occurring during such taxable year; and
(b) ten (10%) percent of the amount determined under Section 1.34(a)
multiplied by the number of whole calendar months between the end of the
Participant's taxable year and the date of distribution, counting the month of
distribution if distribution occurs after the fifteenth (15th) of such month.
1.35 Fully Insured Plan
1.35 "Fully Insured Plan" shall mean a Plan funded exclusively by the
purchase of individual insurance and/or annuity Policies. The provisions of
Section 3.07 shall apply to a Fully Insured Plan.
1.36 Gender
1.36 "Gender" shall mean that whenever the masculine gender is used, it
shall include the feminine gender unless the text indicates the contrary.
1.37 Hardship
1.37 "Hardship" shall mean an immediate and heavy financial need for funds
because of a hardship occasioned by illness, Disability or other demonstrable
emergency affecting the Participant or his immediate family as
<PAGE> 7
determined by the Committee on a uniform and nondiscriminatory basis and in
accordance with any Income Tax Regulations issued under section 401(k) of the
Code.
1.38 Highly Compensated Active Employee
1.38 "Highly Compensated Active Employee" shall mean any Employee who
performs service for the Employer during the Determination Year and who, during
the Look-Back Year:
(a) received Compensation from the Employer in excess of Seventy Five
Thousand ($75,000) Dollars, as adjusted pursuant to section 415(d) of the Code;
(b) received Compensation from the Employer in excess of Fifty
Thousand ($50,000) Dollars as adjusted pursuant to section 415(d) of the Code,
and was a member of the Top-Paid Group for such year; or
(c) was an officer of the Employer and received Compensation during
such year that is greater than fifty (50%) percent of the dollar limitation in
effect under section 415(b)(1)(A) of the Code. If no officer of the Employer
satisfies the Compensation requirement here set forth during either a
Determination Year or a Look-Back Year, the highest paid officer of the Employer
for such Year shall be treated as a Highly Compensated Employee.
The term "Highly Compensated Active Employee" shall also mean an Employee
who satisfies the definition of a Highly Compensated Employee under Section
1.38(a), (b) or (c) if the term "Determination Year" was substituted for the
term "Look-Back Year", provided he or she is one of the one hundred (100)
Employees who received the most Compensation from the Employer during the
Determination Year.
The term "Highly Compensated Active Employee" shall also mean a five (5%)
percent owner of the Employer at any time during the Look-Back Year or the
Determination Year.
1.39 Highly Compensated Employer
1.39 "Highly Compensated Employee" shall mean Highly Compensated Active
Employees and Highly Compensated Former Employees. If an Employee is, during a
Determination Year or Look-Back Year, a Family Member of either a five (5%)
percent owner who is an active or former Employee or a Highly Compensated
Employee who is one of the ten (10) most Highly Compensated Employees ranked on
the basis of Compensation paid by the Employer during such year, then the Family
Member and the five (5%) percent owner or top ten (10) Highly Compensated
Employee shall be aggregated. In such case, the Family Member and five (5%)
percent owner or top ten (10) Highly Compensated Employee shall be treated as a
single Employee receiving Compensation and plan contributions or benefits equal
to the sum of such Compensation and contributions or benefits of the Family
Member and five (5%) percent owner or top ten (10) Highly Compensated Employee.
For the purpose of this Section 1.39, the term "Family Member" includes the
spouse, lineal ascendants and descendants of the Employee or former Employee and
the spouses of such lineal ascendants and descendants. The determination of who
is a Highly Compensated Employee, including the determinations of the number and
identity of Employees in the Top-Paid Group, the top one hundred (100)
Employees, the number of Employees treated as officers and the Compensation that
is considered, will be made in accordance with section 414(q) of the Code and
the regulations thereunder.
1.40 Highly Compensated Former Employee
<PAGE> 8
1.40 "Highly Compensated Former Employee" shall mean an Employee who
separated from service or was deemed to have separated prior to the
Determination Year, performs no service for the Employer during the
Determination Year, and was a Highly Compensated Active Employee for either the
separation year or any Determination Year ending on or after the Employee's
fifty-fifth (55th) birthday.
1.41 Hour of Service
1.41 "Hour of Service" shall mean
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours shall be credited
to the Employee for the computation period or periods in which the duties are
performed; and
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including Disability), layoff,
jury duty, military duty or leave of absence. No more than five hundred one
(501) Hours of Service shall be credited under this subsection for any single
continuous period (whether or not such period occurs in a single computation
period). Hours under this subsection shall be calculated and credited pursuant
to sections 2530.200b-2(b) and (c) of the Department of Labor Regulations which
are incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under Section 1.41(a) or Section 1.41(b), as
the case may be, and under Section 1.41(c). These Hours shall be credited to the
Employee for the computation period or periods to which the award or agreement
pertains rather than the computation period to which the award, agreement or
payment is made.
(d) Each hour during which an individual is considered an Employee
under section 414(n) of the Code.
(e) Solely for purposes of determining whether a Break in Service for
participation and vesting purposes has occurred in a computation period, an
individual who is absent from work for maternity or paternity reasons shall
receive credit for the Hours of Service which would otherwise have been credited
to such individual but for such absence, or in any case in which such Hours
cannot be determined, eight (8) Hours of Service per day of such absence. For
purposes of this Section 1.41(e) an absence from work for maternity or paternity
reasons means an absence
(1) by reason of the pregnancy of the individual,
(2) by reason of a birth of a child of the individual,
(3) by reason of the placement of a child with the individual
in connection with the adoption of such child by such individual, or
(4) for purposes of caring for such child for a period beginning
immediately following such birth or placement. The Hours of Service credited
under this Section 1.41(e) shall be credited in the computation period in which
the absence begins if the crediting is necessary to prevent a Break in Service
in that period, or, in all other cases, in the following
<PAGE> 9
computation period.
(f) Hours of Service shall be determined on the basis of the method
selected in Item 3E of the Adoption Agreement.
(g) Hours of Service will be credited for employment with other
members of an affiliated service group under section 414(m) of the Code, a
controlled group of corporations under section 414(b) of the Code, or a group of
trades or businesses under common control under section 414(c) of the Code, of
which the adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to section 414(o) of the Code and the
regulations thereunder. Hours of Service will also be credited for any
individual considered an Employee for purposes of the Plan under section 414(n)
or section 414(o) of the Code and the regulations thereunder. Hours of Service
with an employer will not be credited to an Employee for periods of employment
prior to the date such employer was part of an affiliated service group,
controlled group of corporations, or a group of trades or businesses under
common control with a participating Employer, except to the extent elected in
Item 3E of the Adoption Agreement.
1.42 Insured Plan
1.42 "Insured Plan" shall mean a Plan under which life insurance or annuity
Policies are to be purchased in accordance with an election made in Item 13 of
the Adoption Agreement.
1.43 Insurer
1.43 "Insurer" shall mean the Guardian Life Insurance Company of America
and any of its subsidiaries.
1.44 Investment Fund
1.44 "Investment Fund" shall mean the assets of the Trust other than the
value of any Policies.
1.45 Leased Employee
1.45 "Leased Employee" shall mean any person, other than an Employee of the
recipient, who, pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one (1) year, and such services are of a type historically performed by
Employees in the business field of the recipient Employer.
A leased employee shall note be considered an employee of the recipient if:
(i) such employee is covered by a money purchase pension plan providing: (1) a
nonintegrated employer contribution rate of at least 10 percent of compensation,
as defined in section 415(c)(3) of the Code, but including amounts contributed
pursuant to a salary reduction agreement which are excludable from the
employee's gross income under section 125, section 402(a)(8), section 402(h) or
section 403(b) of the Code, (2) immediate participation, and (3) full and
immediate vesting; and (ii) leased employees do not constitute more than 20
percent of the recipient's nonhighly compensated workforce.
1.46 Look-Back Year
1.46 "Look-Back Year" shall mean the twelve (12) consecutive month period
<PAGE> 10
immediately preceding the Determination Year.
1.47 Matching Contribution
1.47 "Matching Contribution" shall mean an Employer contribution made to
this or any other defined contribution plan on behalf of a Participant, or on
account of a Participant's Elective Deferral, under a plan maintained by the
Employer.
1.48 Method of Funding
1.48 "Method of Funding" shall mean the method selected in Item 11 of the
Adoption Agreement.
1.49 Net Profits
1.49 "Net Profits" shall mean current and accumulated earnings of the
Employer before Federal and State taxes and contributions to this and any other
qualified plan.
1.50 Non-Qualified Employer Contributions
1.50 "Non-Qualified Employer Contribution" shall mean Employer
contributions which are not Qualified Employer Contributions.
1.51 Normal Retirement Age
1.51 "Normal Retirement Age" shall mean the Participant's Age nearest his
or her Normal Retirement Date. Under no circumstances shall the Normal
Retirement Age exceed any mandatory retirement age imposed on the Employee.
1.52 Normal Retirement Date
1.52 "Normal Retirement Date" shall mean the first day of the Plan Year in
which the Participant's Normal Retirement Age occurs, other than for Fully
Insured Plans. For Fully Insured Plans, the term "Normal Retirement Date" shall
mean the Policy anniversary date coincident with or next following the
Participant's Normal Retirement Age.
1.53 Owner-Employee
1.53 "Owner-Employee" shall mean a sole proprietor, or a partner who owns
more than ten (10%) percent of either the capital or profits interest of the
partnership.
1.54 Participant
1.54 "Participant" shall mean an Employee who is not excluded under Item 2
of the Adoption Agreement, has satisfied all the eligibility requirements as
stated in Item 3 of the Adoption Agreement and who has not declined to fulfill
any of the conditions required in Article II. The term "Participant" shall not
include any Employee who is a member of a unit of Employees covered by a
collective bargaining agreement with an Employee representative if the Employer
and the Employee representative have engaged in good faith bargaining for
retirement benefits unless the Employer has elected to include such Employees in
Item 2A of the Adoption Agreement. In addition, the term "Participant" shall not
include Employees who are nonresident aliens provided they receive no earned
income from the Employer, within the meaning of section 911(d)(2) of the Code,
which constitutes income from sources within the United States within the
meaning of section 861(a)(3) of the Code, unless the
<PAGE> 11
Employer has elected to include such Employees in Item 2A of the Adoption
Agreement.
1.55 Participation Commencement Date
1.55 "Participation Commencement Date" shall mean the day on which the
Participant commenced participation in the Plan.
1.56 Plan
1.56 "Plan" shall mean the provisions of the Guardian Defined Contribution
Plan and Trust Agreement as set forth herein, as modified by the Adoption
Agreement, and as applied to the adopting Employer named therein.
1.57 Plan Administrator
1.57 "Plan Administrator" shall mean the person or persons designated in
the Adoption Agreement. If no designation is made, the Plan Administrator shall
be the Committee. The Plan Administrator shall be the named Fiduciary and shall
have authority to the extent set forth herein to control and manage the
operation and administration of the Trust.
1.58 Plan Year
1.58 "Plan Year" shall mean the twelve (12) consecutive month period
designated by the Employer in Item 16 of the Adoption Agreement.
1.59 Policy
1.59 "Policy" shall mean a Retirement Income, Income Endowment, Whole Life
or Term Insurance Policy or an Annuity Policy issued by the Insurer.
1.60 Qualified Employer Contributions
1.60 "Qualified Employer Contributions" shall mean either Employer
discretionary contributions or Qualified Matching Contributions which are
subject to the distribution and nonforfeitability requirements under section
401(k) of the Code when made.
1.61 Qualified Joint and Survivor Annuity
1.61 "Qualified Joint and Survivor Annuity" shall mean an annuity for the
life of the Participant with a survivor annuity for the life of the Spouse which
is not less than one-half (1/2) or greater than the amount of the annuity
payable during the joint lives of the Participant and the Spouse. The Joint and
Survivor Annuity will be the amount of benefit which can be purchased with the
Participant's Accrued Benefit. The percentage of the survivor annuity under the
Plan shall be fifty (50%) percent unless a different percentage is elected by
the Employer in Item 19F of the Adoption Agreement.
1.62 Qualified Matching Contributions
1.62 "Qualified Matching Contributions" shall mean Matching Contributions
which are subject to the distribution and nonforfeitability requirements under
section 401(k) of the Code when made.
1.63 Qualified Non-Elective Contributions
1.63 "Qualified Non-elective Contributions" shall mean contributions,
<PAGE> 12
other than Matching Contributions or Qualified Matching Contributions, made by
the Employer and allocated to Participants' accounts that the Participants may
not elect to receive in cash until distributed from the Plan, that are
nonforfeitable when made, and that are distributable only in accordance with the
distribution provisions that are applicable to Elective Deferrals and Qualified
Matching Contributions.
1.64 Retired Participant
1.64 "Retired Participant" shall mean a former Participant who has retired
from the employ of the Employer.
1.65 Salary Reduction Agreement
1.65 "Salary Reduction Agreement" shall mean a legally binding agreement,
on a form prescribed by the Committee, whereby the Participant agrees to reduce
his or her annual Compensation during a Plan Year by a percentage he or she
selects, subject to the limitations of the Plan and applicable provisions of
law. The Committee shall establish such rules for the execution of the Salary
Reduction Agreement, including the time and manner of execution of the
Agreement, as it, in its sole discretion, shall determine are reasonable and
necessary for the proper operation of the Plan, unless the Employer has elected
to limit the Committee's discretion by making the appropriate elections in Item
7F of the Adoption Agreement.
1.66 Salary Reduction Contributions Percentage
1.66 "Salary Reduction Contributions Percentage" shall mean the percentage
of annual Compensation for a Plan Year selected by a Participant pursuant to the
terms of a Salary Reduction Agreement.
1.67 Self-Employed Individual
1.67 "Self-Employed Individual" shall mean an individual who has Earned
Income for the taxable year from the trade or business for which the Plan is
established. The term shall also mean an individual who would have had Earned
Income but for the fact that the trade or business had no Net Profits for the
taxable year.
1.68 Shareholder-Employee
1.68 "Shareholder-Employee" shall mean an Employee or officer of an
electing small business (S Corporation) corporation who owns, or is considered
as owning within the meaning of section 318(a)(1) of the Code, on any day during
the taxable year of such corporation more than five (5%) percent of the
outstanding stock of the corporation.
1.69 Sponsor
1.69 "Sponsor" shall mean the Guardian Life Insurance Company of America.
1.70 Taxable Wage Base
1.70 "Taxable Wage Base" is the maximum amount of earnings which may be
considered wages for such year under section 3121(a)(1) of the Internal Revenue
Code.
1.71 Top-Heavy Plan
1.71 (a) "Top-Heavy Plan" shall mean a Plan which in any Plan Year
<PAGE> 13
beginning after December 31, 1983, satisfies the following conditions:
(1) At least one Key Employee (as defined in Section 1.71(b))
was a Participant in the Plan or was entitled to contributions under the Plan on
the Determination Date; and
(2) (A) If the Top-Heavy Ratio for this Plan exceeds sixty (60%)
percent and this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group of plans; or
(B) If this Plan is part of a Required Aggregation Group of
plans, but which is not part of a Permissive Aggregation Group, and the
Top-Heavy Ratio for the group of Plans exceeds (60%) percent, or
(C) If this Plan is part of a Required Aggregation Group of
plans and part of a Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds sixty (60%) percent.
(3) Top-Heavy Ratio:
(A) If the Employer maintains one or more defined
contribution plans, including any simplified employee pension plan, and the
Employer has not maintained any defined benefit plan which during the five (5)
year period ending on the Determination Dates has or has had accrued benefits,
the Top-Heavy Ratio for this Plan alone or for the required or Permissive
Aggregation Group as appropriate is a fraction, the numerator of which is the
sum of the Accrued Benefits of all Key Employees as of the Determination Dates,
including any part of any Accrued Benefit distributed in the five (5) year
period ending on the Determination Dates, and the denominator of which is the
sum of all Accrued Benefits, including any part of any Accrued Benefit
distributed in the five (5) year period ending on the Determination Dates, both
computed in accordance with section 416 of the Code and the regulations
thereunder. Both the numerator and denominator of the Top-Heavy Ratio are
increased to reflect any contribution not actually made as of the Determination
Date, but which is required to be taken into account on that Date under section
416 of the Code and the regulations thereunder.
(B) If the Employer maintains one or more defined
contribution plans, including any simplified employee pension plan, and the
Employer maintains or has maintained one or more defined benefit plans which
during the five (5) year period ending on the Determination Dates has or has had
any accrued benefits, the Top-Heavy Ratio for any required or Permissive
Aggregation Group as appropriate is a fraction, the numerator of which is the
sum of Accrued Benefits under the aggregated defined contribution plan or plans
for all Key Employees determined in accordance with (A) above, and the present
value of accrued benefits for the aggregated defined benefit plan or plans for
all Key Employees as of the Determination Dates, and the denominator of which is
the sum of the Accrued Benefits under the aggregated defined contribution plan
or plans for all Participants, determined in accordance with (A) above, and the
present value of accrued benefits under the defined benefit plan or plans, for
all Participants as of the Determination Dates, all determined in accordance
with section 416 of the Code and the regulations thereunder. The accrued
benefits under a defined benefit plan in both the numerator and denominator of
the Top-Heavy Ratio are increased for any distribution of an accrued benefit
made in the five (5) year period ending on the Determination Date.
(C) For purposes of (A) and (B) above, the value of account
balances and the present value of Accrued Benefits will be determined as of the
most recent valuation date that falls within or ends with the twelve
<PAGE> 14
(12) month period ending on the Determination Date except as provided in section
416 of the Code and the regulations thereunder for the first and second Plan
Years of a defined benefit plan. The account balances and accrued benefits of a
Participant who (i) is not a Key Employee but who was a Key Employee in a prior
year or (ii) who has not been credited with at least one (1) Hour of Service
with any Employer maintaining the Plan at any time during the five (5) year
period ending on the Determination Date will be disregarded. The calculation of
the Top-Heavy Ratio, and the extent to which distributions, rollovers and
transfers are taken into account will be made in accordance with section 416 of
the Code and the regulations thereunder. Deductible Employee contributions will
not be taken into account for purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of account balances and accrued benefits will be
calculated with reference to the Determination Dates that fall within the same
calendar year. The Accrued Benefit of a Participant other than a Key Employee
shall be determined under (i) the method, if any, that uniformly applies for
accrual purposes under all defined benefit plans maintained by the Employer, or
(ii) if there is no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional rule of section
411(b)(1)(C) of the Code.
(D) Permissive Aggregation Group: The Required Aggregation
Group of plans plus any other plan or plans of the Employer which, when
considered as a group with the Required Aggregation Group, would continue to
satisfy the requirements of sections 401(a)(4) and 410 of the Code.
(E) Required Aggregation Group: (1) Each qualified plan of
the Employer in which at least one Key Employee participates or participated at
any time during the determination period, regardless of whether the plan
terminated, and (2) any other qualified plan of the Employer which enables a
plan described in (1) to meet the requirements of sections 401(a)(4) or 410 of
the Code.
(F) Determination Date: For any Plan Year subsequent to the
first Plan Year, the Determination Date shall be the last day of the preceding
Plan Year. For the first Plan Year, the Determination Date shall be the last day
of that Year.
(G) Valuation Date: The date elected by the Employer in Item
17B of the Adoption Agreement as of which account balances or accrued benefits
are valued for purposes of calculating the Top-Heavy Ratio.
(H) Present Value: Present value shall be based only on the
interest and mortality rates specified at Item 17A in the Adoption Agreement.
(b) For purposes of this Section 1.71, the term "Key Employee"
means:
(1) Any Employee or former Employee (and the Beneficiaries of
such Employee) who at any time during the determination period was an officer of
the Employer if such individual's Annual Compensation exceeds fifty (50%)
percent of the dollar limitation under section 415(b)(1)(A) of the Code,
(2) An owner (or considered an owner under section 318 of the
Code) of one of the ten (10) largest interests in the Employer if such
individual's Compensation exceeds one hundred (100%) percent of such dollar
limitation,
(3) a 5-percent owner of the Employer , or
<PAGE> 15
(4) a 1-percent owner of the Employer who has an Annual
Compensation of more than One Hundred Fifty Thousand ($150,000) Dollars.
Annual Compensation means Compensation as defined in section 415(c)(3) of the
Code, but including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludible from the Employee's gross income under
section 125, section 402(a)(8), section 402(h) or section 403(b) of the Code.
The determination period is the Plan Year containing the determination date and
the four (4) preceding Plan Years. The determination of who is a key Employee
shall be made in accordance with section 416(i)(1) of the Code and the
regulations thereunder.
(c) For purposes of determining ownership interest under Section
1.71(b) (2), (3) and (4), the rules of section 318 of the Code apply in a manner
similar to the way in which they apply for purposes of determining ownership in
a corporation. For noncorporate interests, capital or profits interest must be
substituted for stock.
(d) The Employer may, by a written election filed with the Trustee(s),
elect to have the accrued benefits under any other plan maintained by the
Employer taken into account provided the benefits provided under such other plan
to its participants are comparable to the benefits provided Participants in this
Plan.
(e) The determination as to whether the Plan is a Top-Heavy Plan for a
Plan Year must be made each year. However, the Employer may, by a writing to the
Trustee(s), determine that the Plan is to be treated as a Top-Heavy Plan for a
Plan Year without regard to the tests set forth in this Section 1.71.
1.72 Top-Heavy Year of Participation
1.72 "Top-Heavy Year of Participation" means any Year of Participation as
defined in Section 1.77 excluding Years of Participation ending in a Plan Year
beginning before January 1, 1984, and Years of Participation beginning in a Plan
Year during which the Plan is not a Top-Heavy Plan.
1.73 Top-Paid Group
1.73 "Top-Paid Group" shall mean those Employees of an Employer who are in
the group consisting of the top twenty (20%) percent of the Employer's Employees
when ranked on the basis of Compensation received from the Employer during such
year. For purposes of this definition, the following individuals are not
considered Employees for the year for which the determination is made:
(a) Employees who have not completed six (6) months of service with
the Employer by the end of such year; in the determination of whether or not an
Employee has completed six (6) months of service, the service completed by the
Employee in the immediately preceding year shall be included;
(b) Employees who normally work less than seventeen and one-half (17
1/2) hours per week; in making this determination, weeks during which the
Employee does not work for the Employer are not considered. Employees who work
more than seventeen and one-half (17 1/2) hours for more than fifty (50%)
percent of the weeks they worked during a year shall be deemed to normally work
more than seventeen and one-half (17 1/2) hours per week for such year, and
Employees who work less than seventeen and one-half (17 1/2) hours for more than
fifty (50%) percent of the weeks they worked during a year shall be deemed to
normally work less than seventeen and one-half (17 1/2) hours per week for such
year;
<PAGE> 16
(c) Employees who normally work not more than six (6) months during
any year;
(d) Employees who have not attained Age twenty-one (21);
(e) Except to the extent provided in Income Tax Regulations, Employees
who are members of a unit of Employees covered by a collective bargaining
agreement with an Employee representative;
(f) Nonresident aliens provided the Employee receives no earned income
from the Employer, within the meaning of section 911(d)(2) of the Code, which
constitutes income from sources within the United States within the meaning of
section 861(a)(3) of the Code.
1.74 Trust
1.74 "Trust" shall mean the Trust Agreement and those parts of the Adoption
Agreement designating the Trustee. The Trust for each Employer other than those
named in the same Adoption Agreement shall be separate and apart from the Trust
of any other Employer adopting this prototype.
1.75 Trustee
1.75 "Trustee" or "Trustees" shall mean the person or persons named as
Trustee in the Adoption Agreement and their duly appointed successors.
1.76 Uninsured Plan
1.76 "Uninsured Plan" shall mean a Plan funded solely by investments other
than life insurance or annuity Policies.
1.77 Year of Participation
1.77 "Year of Participation" shall mean a Plan Year during which a
Participant completes one thousand (1000) Hours of Service (five hundred (500)
Hours in a Standardized Plan), unless the Employer, in Item 15E of the Adoption
Agreement elects a different number of Hours of Service. If a Participant
completes less than the lesser of one thousand (1000) Hours of Service (five
hundred (500) Hours in a Standardized Plan) or the Hours of Service selected in
Item 3C of the Adoption Agreement during a Plan Year, the Participant shall
receive no accrual for such Plan Year, unless the failure of such a Participant
to accrue a benefit will cause the Plan to fail to satisfy the coverage rules of
section 410(b) of the Code or the minimum participation rules of section
401(a)(26) of the Code. To the extent required to satisfy the requirements of
section 410(b) or section 401(a)(26), Participants will accrue a benefit for a
Plan Year even if they fail to complete the requisite Hours of Service, starting
with the Participant with the highest number of Hours of Service and including
each successive Participant with the next highest number of Hours of Service
until the requirements of section 410(b) or section 401(a)(26) are met for the
Plan Year.
1.78 Year of Service
1.78 "Year of Service" shall mean the twelve (12) consecutive month period
(the computation period) during which the Employee completes at least one
thousand (1,000) Hours of Service, unless the Employer, in Item 3C of the
Adoption Agreement has selected a smaller number of Hours of Service, in which
event a Year of Service shall mean the computation period during which the
Employee completes such smaller number of Hours of Service. Where the
<PAGE> 17
Employer maintains the plan of a predecessor employer, service for such
predecessor employer shall be treated as service for the Employer except to the
extent excluded pursuant to an election in Item 3D of the Adoption Agreement.
(a) For purposes of eligibility, a Year of Service and Breaks in
Service shall be measured over a twelve (12) consecutive month computation
period measured from the date the Employee first performs an Hour of Service,
and from each anniversary thereof. The twelve (12) month measuring period shall
be the eligibility computation period.
(b) For purposes of vesting determinations, a Year of Service and
Breaks in Service shall be measured over the Plan Year unless the election in
Item 15D of the Adoption Agreement is made. Such measuring period shall be the
vesting computation period. In addition, Years of Service shall not be included
to the extent elected in Item 15C of the Adoption Agreement. For purposes of
computing an Employee's right to his or her Accrued Benefit, Years of Service
and Breaks in Service shall be measured on the same computation period.
(c) Years of Service prior to termination of employment shall not be
credited for any purpose under this Plan if termination of employment occurred
prior to the satisfaction of the eligibility requirements selected in Item 3 of
the Adoption Agreement.
(d) Years of Service shall in all cases include periods during which
the Employee is on leave of absence with the approval of or at the direction of
the Employer by reason of sickness, disability, maternity, death in the family,
or for educational purposes or other reasons agreed to by the Employer. Leaves
of absence shall also include periods of absence in connection with military
service during which the Employee's reemployment rights are legally protected.
Leaves of absence shall be granted on a uniform and nondiscriminatory basis. An
Employee shall not become a Participant during a leave of absence.
(e) The following Years of Service will be counted for participation
and vesting.
(1) Years of Service with a predecessor employer who maintained
the Plan.
(2) Years of Service with other members of an affiliated service
group, a controlled group of corporations or other trades or businesses under
common control, excluding Years of Service completed prior to the date an
employer was part of an affiliated service group, controlled group of
corporations or trades or businesses under common control with a participating
Employer, except to the extent elected in Item 3E of the Adoption Agreement.
(3) Years of Service while a Participant in a predecessor Plan.
(f) If elected in Item 3D of the Adoption Agreement, and the Plan is a
non-Standardized Plan, Years of Service as a sole proprietor or partner shall be
taken into account for all purposes under this Plan. Employees of the Employer,
other than a partner, shall be credited with their Years of Service for all
purposes under this Plan whether or not the election in Item 3D to consider such
service is made, to the extent otherwise required under the terms of the Plan.
<PAGE> 18
ARTICLE II - ELIGIBILITY
2.01 Eligibility to Participate
2.01 Each present and future Employee shall be eligible to become a
Participant pursuant to the provisions selected by the Employer in Items 2 and 3
of the Adoption Agreement.
(a) If dual entry dates are selected in Item 3C of the Adoption
Agreement, the Employee will participate on the earlier of the first day of the
Plan Year beginning after the date on which the Employee has met the minimum Age
and service requirements or six (6) months following the first day of such Plan
Year.
(b) If a single entry date is selected in Item 3C of the Adoption
Agreement, the first year of an Employee's participation will commence on the
first day of the Plan Year which is nearest to the date on which he or she
completes the eligibility requirements or the date selected in Item 3C of the
Adoption Agreement if the first day of the Plan Year is not selected in Item 3C.
However, if a fractional year (less than one (1) Year of Service) is elected,
the first year of an Employee's participation will commence on the first day of
the Plan Year following completion of the minimum Age and service requirements,
but not later than the first day of the first Plan Year preceding the date six
(6) months after the date on which the Employee first satisfies those
requirements.
(c) If an Employee satisfies the eligibility conditions on the date he
or she completes his or her first Hour of Service, the Employee shall enter the
Plan on the first day of the first Plan Year following the completion of his or
her first Hour of Service unless a different election is made by the Employer in
Item 3C of the Adoption Agreement.
2.02 Notification
2.02 Each Employee shall be notified by the Committee of the existence of
the Plan and of its principal provisions. In addition, each Employee shall be
advised of his or her right to participate.
2.03 Waiver of Benefits
2.03 In a Non-Standardized Plan, an eligible Employee who does not wish to
become a Participant or who declines to make any mandatory Employee
contributions must sign a waiver notice stating that he has been advised by the
Committee that a benefit is made available to the Employee and so knowing waives
the right to such benefit. Such waiver shall not preclude the Employee's
participation on the first day of a Plan Year next following receipt by the
Committee of the Employee's written rescission of such waiver and provided such
Employee meets the eligibility requirements in effect on the date of such
rescission. Benefits for an Employee who rescinds a waiver shall be those
otherwise set forth in this Plan. In no event shall an Employee who has waived a
contribution receive an increase in Compensation as a result of such waiver.
2.04 Policy Eligibility Requirements
2.04 If the Plan is an Insured Plan, in order to have a Policy issued on
his or her life, an eligible Employee must execute the required application form
or forms. He or she must make available to the Insurer such information as it
may require in connection with the issuance of any Policy within ninety (90)
days of the date on which he or she is notified of his or her
<PAGE> 19
eligibility.
If the Employee fails to perform all required acts, Employer contributions
for his or her benefit will be deposited in the Investment Fund and the death
benefits will be the amounts in the Participant's Account. A Policy may be
provided for such Participant on a later Anniversary Date when he or she does
comply with the conditions in the first paragraph of this Section 2.04.
2.05 Former Participant Eligibility
2.05 A former Participant who did not have a nonforfeitable right to any
portion of the Accrued Benefit derived from Employer contributions at the time
of termination from service will be considered a new Employee for eligibility
purposes, if the number of consecutive 1-year Breaks in Service equals or
exceeds the greater of five (5) or the aggregate number of Years of Service
before such Breaks in Service. If such former Participant's Years of Service
before termination from service may not be disregarded pursuant to the preceding
sentences, such former Participant shall participate in accordance with the
provisions of Section 2.08.
2.06 Years of Service for Eligibility
2.06 All Years of Service with the Employer are counted toward
eligibility, except
(a) if an Employee has a one (1) year Break in Service before
satisfying the Plan's requirement for eligibility, service before such Break in
Service will not be taken into account;
(b) in the case of a Participant who does not have any nonforfeitable
right to the Accrued Benefit derived from Employer contributions, Years of
Service before a period of consecutive 1-year Breaks in Service will not be
taken into account in computing eligibility service if the number of consecutive
one (1) year Breaks in Service in such period equals or exceeds the greater of
five (5) or the aggregate number of Years of Service. Such aggregate number of
Years of Service will not include any Years of Service disregarded under the
preceding sentence by reason of prior Breaks in Service. If a Participant's
Years of Service are disregarded pursuant to this Section 2.06(b), such
Participant will be treated as a new Employee for eligibility purposes. If a
Participant's Years of Service may not be disregarded pursuant to this Section
2.06(b), such Participant shall continue to participate in the Plan or, if
terminated, shall participate immediately upon reemployment.
2.07 Changes To and From Eligible Class
2.07 In the event a Participant becomes ineligible to participate because
he or she is no longer a member of an eligible class of Employees, but has not
incurred a Break in Service, such Employee shall participate immediately upon
his or her return to an eligible class of Employees. If such Participant incurs
a Break in Service, his or her eligibility to participate shall be determined
pursuant to the provisions of Section 2.05.
In the event an Employee who is not a member of the eligible class of
Employees becomes a member of the eligible class, such Employee shall
participate immediately if such Employee has satisfied the minimum Age and
service requirements and would have previously become a Participant had he or
she been in the eligible class.
<PAGE> 20
2.08 Service on Resumption of Employment
2.08 For non Standardized plans only in the case of any Participant who has
a 1-year Break in Service, Years of Service for eligibility purposes before such
Break will not be taken into account until the Participant has completed a Year
of Service after returning to employment.
Such Year of Service will be measured by the twelve (12) consecutive
month period beginning on an Employee's reemployment commencement date and, if
necessary, subsequent twelve (12) consecutive month periods beginning on
anniversaries of the reemployment commencement date.
The reemployment commencement date is the first day on which the
Employee is credited with an Hour of Service for the performance of duties after
the first eligibility computation period in which the Employee incurs a 1-year
Break in Service.
If a former Participant completes a Year of Service in accordance with
this Section 2.08, such Participant's participation will be reinstated as of the
reemployment commencement date.
2.09 Failsafe Coverage Rule
2.09 Notwithstanding any other provision in the Plan to the contrary, in
the event an Employee who was a Participant on the first day of a Plan Year does
not accrue a benefit for such Plan Year either because such Employee completed
fewer than one thousand (1000) Hours of Service but more than five hundred (500)
Hours of Service, or such other service requirement as the Employer may have
elected, or because the Employee was not employed on the last day of the Plan
Year, and if the Employee's lack of eligibility for an accrual would, but for
the provisions of this Section 2.10, cause the Plan to fail to satisfy the
requirements of either section 401(a)(26) and/or section 410(b) of the Code,
such Employee shall accrue a benefit on the same basis as any other Participant.
If more than one Employee is ineligible for an accrual as described, and the
Plan will satisfy the requirements of section 401(a)(26) and/or section 410(b)
of the Code if some but not all of such ineligible Employees are eligible for an
accrual, only that number of ineligible Employees necessary to permit the Plan
to satisfy the requirements of the cited sections shall be eligible for an
accrual. The ineligible Employees shall be ranked in accordance with their Hours
of Service for the Plan Year, and the Employees to receive an accrual shall be
those with the highest number of Hours of Service. In the event more than one
Employee has completed a specific number of Hours of Service, all such Employees
shall be eligible for an accrual if any one of them would be so eligible. This
provision is intended to prevent the Plan from losing its qualification under
section 401(a) of the Code merely because it fails to satisfy the minimum
participation rule of section 401(a)(26) or the minimum participation rules of
section 410(b) of the Code, and shall be interpreted accordingly. The provisions
of this Section 2.09 shall not apply to a Plan using an Adoption Agreement
labelled an "Easier Then Ever" Adoption Agreement.
ARTICLE III - POLICIES
3.01 Policies and Method of Funding
3.01 (a) If the Method of Funding is an Insured Plan, other than a Fully
Insured Plan, the benefits shall be provided by a Policy or Policies with an
Investment Fund. Such Policies shall be applied for by the Trustee at the
direction of the Committee on a nondiscriminatory basis upon applications
<PAGE> 21
signed by any one Trustee. Each Policy shall be a contract between the Trustee
and the Insurer.
(b) If the Method of Funding is a Fully Insured Plan, the benefits
under the Plan shall be provided by the purchase of a a Policy or Policies. Such
Policies shall be applied for by the Trustee at the direction of the Committee
on a nondiscriminatory basis upon applications signed by any one Trustee. Each
Policy shall be a contract between the Trustee and the Insurer.
(c) If the Method of Funding is an Uninsured Plan, the benefits under
the Plan shall be provided by deposits to an Investment Fund.
3.02 Policy Provisions
3.02 Each Policy shall provide for the following:
(a) The right to name and change the designation of Beneficiaries and
to select the settlement option or, in lieu thereof, to purchase a variable
annuity, shall be exercised by the Trustee, at the direction of the Committee,
subject, however, to the direction of the Participant, and the provisions of
Section 5.06. The Participant may be required to execute appropriate documents
directing Committee and the Trustee as to such provisions.
(b) All rights, options, and benefits provided by the Policy, or
permitted by the Insurer, shall be reserved to the Committee, which shall be
responsible for directing the Trustee concerning same. If there is more than one
Trustee, at the direction of the Committee any action may be exercised upon
signature of any one Trustee. The signature of the Participant shall not be
necessary for the exercise of any right except in accordance with the provisions
of the Plan.
(c) The Trustee shall apply for and will be the owner of any Policies
purchased under the terms of this Plan. The Policies must provide that proceeds
will be payable to the Trustees. However, the Trustees shall be required to pay
over all proceeds of the Policies to the Participant's designated Beneficiary in
accordance with and to the extent required under the distribution provisions of
the Plan. A Participant's Spouse will be the designated Beneficiary of the
proceeds in all circumstances unless a qualified election has been made in
accordance with Section 5.06, or an election is made in Item 12D of the Adoption
Agreement which guarantees that the Spouse will receive at least one-half (1/2)
of the total death benefit payable as a result of the death of the Participant.
Except to the extent elected under Item 13G of the Adoption Agreement as to key
man insurance, under no circumstances shall the Trust retain any part of the
proceeds of any life insurance Policy.
3.03 Application of Policy Credits
3.03 Any dividends or credits earned on insurance contracts will be
allocated to the Accrued Benefit of the Participant for whose benefit the Policy
is held.
3.04 Policy Purchase Nondiscriminatory
3.04 Except as to Policies purchased at the direction of the Participant or
as to key man insurance, all Policies purchased pursuant to the Plan must be
purchased in a nondiscriminatory manner. A Policy may contain a variable annuity
option and, if such option is part of a Policy, the Participant may elect that
all Retirement Benefits shall be paid in the form of a variable annuity. Any
annuity Policy distributed from the Plan must be
<PAGE> 22
nontransferable. Except to the extent elected by the Employer in Item 13E of the
Adoption Agreement, no Policy shall be issued on the life of a Participant until
the amount available for premium payment will produce a face amount of insurance
of at least Two Thousand ($2,000) Dollars.
3.05 Conflict Between Policy and Plan
3.05 Subject to Section 5.06(b), at the Actual Retirement Date of the
Participant, the Trustee, at the direction of the Committee, shall convert the
entire value of any Policy into cash or to provide periodic income so that no
portion of such value may be used to continue life insurance protection beyond
Actual Retirement Date, or shall distribute the Policy to the Participant, as
the Participant shall direct. If the Policy has no cash value, it shall be
distributed to the Participant.
3.06 Treatment of Policy at Retirement
3.06 In the event of any conflict between the provisions of the Plan and
the terms of any Policy, the Committee shall not direct the Trustee to exercise
any Policy rights which would be in conflict with the provisions of the Plan.
The terms of any annuity Policy purchased and distributed by the Plan to a
Participant or Spouse shall comply with the requirements of the Plan.
3.07 Minimum Policy Death Benefit
3.07 Except to the extent elected in Item 13B of the Adoption Agreement,
the aggregate life insurance premiums for each Participant must be limited as
follows:
(a) if whole life insurance Policies are used, the aggregate life
insurance premiums must be less than one-half (1/2) of the aggregate Employer
contributions and forfeitures allocated to the Participant's Accrued Benefit at
any particular time, without regard to Trust earnings, capital gains and losses;
(b) if term insurance or universal life insurance Policies are used,
the aggregate life insurance premiums must not exceed one-quarter (1/4) of the
aggregate Employer contributions and forfeitures allocated to the Participant's
Accrued Benefit at any particular time, without regard to Trust earnings,
capital gains and losses;
(c) if a combination of whole life Policies and term or universal
Policies is used, the sum of one-half (1/2) of the whole life insurance premiums
and all other life insurance premiums must not exceed one-quarter (1/4) of the
aggregate Employer contributions and forfeitures allocated to the Participant's
Accrued Benefit at any particular time, without regard to Trust earnings,
capital gains and losses.
Notwithstanding the foregoing, in a Profit Sharing Plan if elected in Item 13B
of the Adoption Agreement all amounts held in the Trust for a Participant for
more than two (2) years may be used to pay premiums on Policies on the
Participant's life, and the election set forth in Item 13B of the Adoption
Agreement shall apply to the cumulative Employer contributions made during the
last two (2) years only. If elected in Item 13B of the Adoption Agreement, all
amounts held in the Trust for a Participant who has completed at least five (5)
Years of Participation may be used to pay premiums on Policies on the
Participant's life.
3.08 Directed Investment in Policy
<PAGE> 23
3.08 If the Employer so elects in Item 13B of the Adoption Agreement, each
Participant may direct the investment of his Accrued Benefit in a life insurance
Policy on his or her life, or on the life of someone in whom the Participant has
an insurable interest. The amount which can be used to pay life insurance
premiums shall be measured as set forth in Section 3.07. In the event a life
insurance Policy on the life of someone other than the Participant is purchased
pursuant to this Section 3.08, and such other person shall die, the Participant
may withdraw the life insurance proceeds to the extent they exceed the cash
value of the Policy measured immediately prior to the death of such other
person.
3.09 Key Man Insurance
3.09 If the Employer has elected to permit the purchase of key man
insurance in Item 13G of the Adoption Agreement, to the extent the Committee so
directs, the Trustee shall purchase insurance on the life or lives of key
Employees of the Employer, whether or not such Employees are Participants in the
Plan. Such insurance shall be purchased as an investment of the Trust, and the
premium shall be charged to each Participant's Account in the same manner as
other expenses of the Trust. The cash value of such Policies shall be an asset
of the Trust and, upon the death of such key man, the Policy proceeds shall be
treated as a gain on an investment under the Trust.
ARTICLE IV - RETIREMENT AND DEATH BENEFITS
4.01 Entitlement to Retirement Benefits
4.01 Each Participant shall be entitled to receive his or her Accrued
Benefit on his Normal Retirement Date.
4.02 Top-Heavy Rules Apply
4.02 If the Plan is or becomes a Top-Heavy Plan in any Plan Year beginning
after December 31, 1983, the provisions of Sections 1.71, 6.08 and 7.01(c) shall
supersede any conflicting provisions in the Plan or Adoption Agreement.
4.03 Mandatory Commencement of Benefits
4.03 Benefits under the Plan shall commence, unless the Participant elects
otherwise, no later than the sixtieth (60th) day after the latest of the close
of the Plan Year in which:
(a) the Participant attained the earlier of Age sixty-five (65) or
the Plan's Normal Retirement Age;
(b) occurs the tenth (10th) anniversary of the year in which the
Participant commenced participation under the Plan; or
(c) the Participant terminates employment with the Employer.
The failure of a Participant and his or her spouse to consent to a
distribution while a benefit is immediately distributable, within the meaning of
Section 5.13 of the Plan shall be deemed to be an election to defer commencement
of payment of any benefit sufficient to satisfy the provisions of Section 4.03.
4.04 Manner of Benefit Payment
<PAGE> 24
4.04 The Participant's benefit shall be paid as provided in this Plan.
4.05 Increase or Decrease in Benefit
4.05 If the Compensation of a Participant has increased or decreased since
the last adjustment of the contribution for his benefit, or, if there has been
no previous adjustment since his entry into the Plan, the amount of
contributions to which he shall be considered entitled shall be increased or
reduced in accordance with the formula selected in Item 7B of the Adoption
Agreement. No increase in insurance benefit shall be provided until the first
day of a Plan Year in which such change in Compensation shall be sufficient,
upon the application of the formula selected in the Adoption Agreement, to
purchase a life insurance policy of at least one thousand ($1,000) dollars,
unless the Employer has made a different election in Item 13F of the Adoption
Agreement. Unless the Employer has made a different election in Item 13F of the
Adoption Agreement, no decrease in insurance benefit shall be effected until the
Anniversary Date after which the Compensation of a Participant has decreased for
two (2) successive Anniversary Dates since the last adjustment of his insurance
benefit unless such Participant's aggregate premium for life insurance exceeds
the percent of the contribution for the Participant as limited in Section 3.07.
4.06 Preretirement Death Benefit
4.06 A Participant shall be entitled to a preretirement death benefit as
elected in Item 12 of the Adoption Agreement.
4.07 Designation of Beneficiaries
4.07 Each Participant, subject to the provisions of Section 5.06, shall
have the right, at any time, to select the Beneficiary or Beneficiaries to
receive the benefits payable under the Plan by reason of his or her death. Each
Participant shall also have the right, subject to the provisions of Section
5.06, to select the mode or method of payment of such benefits to his or her
Beneficiary or Beneficiaries. Such designation and election shall be made by an
instrument in writing, upon such form or forms as may be provided by the
Committee. If the Participant fails to select the mode or method of payments,
then each Beneficiary shall select the mode or method of payment of his or her
benefit. Subject to the provisions of Section 5.06, designation of a Beneficiary
or Beneficiaries and the mode or method of payment may be changed by the
Participant by delivering written notice thereof to the Committee. The last such
designation received by the Committee shall revoke all prior designations.
4.08 Beneficiaries if No Designation Made
4.08 If a Participant shall fail to designate a Beneficiary as provided
above, or if all of the Beneficiaries so designated shall predecease the
Participant, such benefits shall be paid to the person or persons comprising the
first surviving class of the following classes:
(a) The Participant's widow or widower.
(b) The Participant's children and children of deceased children per
stirpes and not per capita.
(c) The Participant's parents.
(d) The Participant's brothers and sisters and nephews and nieces
<PAGE> 25
who are children of deceased brothers and sisters, per stirpes and not per
capita.
(e) The executors or administrators of such Participant's estate.
4.09 Limitations on Death Benefit Elections
4.09 No election shall be made by the Participant or the Committee, the
effect of which would be to have all or part of a Participant's Accrued Benefit
paid only to his designated Beneficiary after his or her death if such benefit
would otherwise have been payable during the Participant's lifetime. However,
subject to the Policy provisions, the Committee may select a single sum
settlement or any optional settlement, except the interest option, available for
payment of Accrued Benefits set forth in the Policy. No election shall be made
which provides that such benefits shall be payable over a period which exceeds
the period permitted under the provisions of Sections 5.07 and 5.08.
ARTICLE V - RETIREMENT
5.01 Full Vesting at Normal Retirement Age
5.01 As of his Normal Retirement Age, a Participant shall be fully vested
in his or her Accrued Benefit, and such vesting shall be nonforfeitable. In
addition, the Participant's Accrued Benefit derived from Elective Deferrals,
Qualified Non-elective Contributions, Employee Contributions, and Qualified
Matching Contributions is nonforfeitable. Separate accounts for Elective
Deferrals, Qualified Non-elective Contributions, Employee Contributions,
Matching Contributions, and Qualified Matching Contributions will be maintained
for each Participant. Each account will be credited with the applicable
contributions and earnings thereon.
5.02 Elective Deferrals at Disability
5.02 Except to the extent the Employer elects otherwise in Item 6B of the
Adoption Agreement, a Participant in a Plan which permits Elective Deferrals
shall receive the value of his Accrued Benefit upon his Disability Date. The
Committee shall take all necessary steps and execute all required documents to
make the benefits available upon such Disability Date. The benefit on the
Disability Date shall be such amount which can be provided by the value of the
Participant's Accrued Benefit.
5.03 Disability Vesting
5.03 If the Employer has elected in Item 6 of the Adoption Agreement to
fully vest a Participant who becomes disabled, and a Participant is disabled so
that he or she is no longer able to continue in the service of the Employer in
the same capacity, such Participant shall be fully vested in his or her Accrued
Benefit. The Committee, upon competent medical evidence, shall be the sole judge
of whether the Disability is such as to warrant such earlier vesting. The
Disability benefit shall be paid out at the same time and in the same manner as
is provided for the payment of benefits to a Participant who terminates
employment. Should the Committee refuse to judge a Participant to be disabled,
the Participant shall have the right to demand that the Committee request the
medical society in the county in which the Participant is employed to designate
one of its member physicians to examine such Participant, provided that the
Participant pays one-half (1/2) of all fees and expenses of such examination.
The report of such physician shall be final and binding on all parties. No
Participant shall be entitled to the benefit of this
<PAGE> 26
procedure more than once.
If elected by the Employer in Item 6C of the Adoption Agreement,
contributions will be made to the Plan on behalf of each disabled Participant
who is not a Highly Compensated Employee. The contribution made by the Employer
shall be based on the Compensation each Disabled Participant would have received
for the Limitation Year if the Participant had been paid at the rate of
Compensation paid immediately before he or she became Disabled. Such imputed
Compensation for the Disabled Participant may be taken into account only if the
Participant is not a Highly Compensated Employee, and contributions made on
behalf of such Participant will be nonforfeitable when made.
5.04 Employment After Normal Retirement Age
5.04 If a Participant shall, with the consent of the Employer (which
consent shall be reviewed annually and granted in a nondiscriminatory manner) or
as required by law, remain in the employ of the Employer after his or her Normal
Retirement Date, no distribution of his or her benefit shall be made unless the
appropriate election is made in Item 19A of the Adoption Agreement. If the
Employer elects to permit or require a distribution at the normal Retirement
Date, the Participant shall be entitled to a distribution at the Normal
Retirement Date in the same fashion as would apply if he or she actually retired
on such Date. Contributions and/or allocations shall continue for the
Participant's benefit and he or she shall continue as a full Participant under
the Plan until his or her actual retirement.
5.05 Policy Subject to Plan Terms
5.05 While payments are being made under any Policy, it shall remain
subject to the Plan and in the possession of the Trustee, unless the Committee
directs the Trustee, in the Committees sole discretion, to deliver such Policy
or Policies to a Retired Participant together with such endorsements and
restrictions including non-transferability as may be necessary to carry out the
purposes of the Plan.
5.06 Retirement Equity Act Provisions
5.06 (a) Subject to Section 5.06(b), the Participant may choose any method
of distribution of benefits available pursuant to the options selected in Item
20 of the Adoption Agreement. Each optional form of benefit provided under the
Plan must be made available to all Participants on a nondiscriminatory basis.
(b) The provisions of this Section 5.06(b) contain the requirements
with reference to joint and survivor annuities and preretirement survivor
annuities required by sections 401(a)(11) and 417 of the Code, and shall take
precedence over any conflicting provision in this Plan.
(1) The provisions of this Section 5.06(b) shall apply to any
Participant who is credited with at least one (1) Hour of Service with the
Employer on or after August 23, 1984, and such other Participants as provided in
Section 5.06(b)(7).
(2) Qualified Joint and Survivor Annuity. Unless an optional form
of benefit is selected pursuant to a qualified election within the 90-day period
ending on the Annuity Starting Date, a married Participant's vested Accrued
Benefit will be paid in the form of a Qualified Joint and Survivor Annuity and
an unmarried Participant's vested Accrued Benefit will be paid in the form of a
life annuity. The Participant may elect to have such annuity
<PAGE> 27
distributed upon attainment of the Earliest Retirement Age under the Plan.
(3) Qualified Preretirement Survivor Annuity.
(A) Unless an optional form of benefit has been selected
within the Election Period pursuant to a Qualified Election, if a Participant
dies before benefits have commenced then the Participant's vested Accrued
Benefit shall be applied toward the purchase of an annuity for the life of the
surviving Spouse. The surviving Spouse may elect to have such annuity
distributed within a reasonable period after the Participant's death. The
provisions of this Section 5.06(b)(3)(A) shall not apply if the Employer elects
in Item 19D of the Adoption Agreement to permit the Spouse to elect to receive
the value of the Qualified Preretirement Survivor Annuity in a lump sum.
(B) To the extent any part of the Participant's Accrued
Benefit is attributable to Employee Contributions, the portion of the
Participant's Accrued Benefit attributable to Employee contributions used to
purchase a life annuity for the surviving Spouse shall be that percentage of the
Accrued Benefit attributable to Employee contributions determined by dividing
the Accrued Benefit attributable to Employee contributions by the Participant's
Accrued Benefit.
(C) If permitted pursuant to the provisions of Item 19G of
the Adoption Agreement, the Spouse can elect to receive the vested Accrued
Benefit which would otherwise be used to purchase a life annuity for the Spouse
in the form of a lump sum.
(4) Definitions.
(A) Election Period: The period which begins on the first
day of the Plan Year in which the Participant attains Age thirty-five (35) and
ends on the date of the Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in which Age thirty-five (35) is
attained, with respect to the Accrued Benefit as of the date of separation, the
election period shall begin on the date of separation. A Participant who will
not yet attain Age thirty-five (35) as of the end of any current plan Year may
make a special qualified election to waive the Qualified Preretirement Survivor
Annuity for the period beginning on the date of such election and ending on the
first day of the Plan Year in which the Participant will attain Age thirty-five
(35). Such election shall not be valid unless the Participant receives a written
explanation of the Qualified Preretirement Survivor Annuity in such terms as are
comparable to the explanation required under Section 5.05(b)(5)(A). Qualified
Preretirement Survivor Annuity coverage will be automatically reinstated as of
the first day of the Plan Year in which the Participant attains Age thirty-five
(35). Any new waiver on or after such date shall be subject to the full
requirements of this Section 5.05(a).
(B) Earliest Retirement Age: The earliest date on which,
under the Plan, the Participant could elect to receive retirement benefits.
(C) Qualified Election: A waiver of a Qualified Joint and
Survivor Annuity or a Qualified Preretirement Survivor Annuity. Any waiver of
a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor
Annuity shall not be effective unless:
(i) the Participant's Spouse consents in writing to
the election;
<PAGE> 28
(ii) the election designates a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent, or the Spouse expressly permits
designations by the Participant without any further spousal consent;
(iii) the Spouse's consent acknowledges the effect of
the election; and
(iv) the Spouse's consent is witnessed by a Plan
representative or notary public.
Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity
shall not be effective unless the election designates a form of benefit payment
which may not be changed without spousal consent, or the Spouse expressly
permits designations by the Participant without any further spousal consent. If
it is established to the satisfaction of a Plan representative that there is no
Spouse or that the Spouse cannot be located, a waiver will be deemed a Qualified
Election.
Any consent by a Spouse obtained under Section 5.06(b)(4)(C), or the
establishment that the consent of a Spouse may not be obtained, shall be
effective only with respect to such Spouse. A consent that permits designations
by the Participant without any requirement of further consent by such Spouse
must acknowledge that the Spouse has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where applicable, and that the
Spouse voluntarily elects to relinquish either or both of such rights. A
revocation of a prior waiver may be made by a Participant without the consent of
the Spouse at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under Section 5.06(b)(4)
shall be valid unless the Participant has received notice as provided in Section
5.05(b)(5).
(D) Qualified Joint and Survivor Annuity: An immediate
annuity for the life of the Participant with a survivor annuity for the life of
the Spouse which is not less than fifty (50%) percent and not more than one
hundred (100%) percent of the amount of the annuity which is payable during the
joint lives of the Participant and the Spouse and which is the amount of benefit
which can be purchased with the Participant's vested Accrued Benefit. The
percentage of the survivor annuity under Plan shall be fifty (50%) percent,
unless a different percentage is elected in Item 12A of the Adoption Agreement.
(E) Spouse (Surviving Spouse): The Spouse or surviving
Spouse of the Participant, provided that a former spouse will be treated as the
Spouse or surviving Spouse and a current spouse will not be treated as the
Spouse or surviving Spouse to the extent provided under a qualified domestic
relations order as described in section 414(p) of the Code.
(F) Annuity Starting Date: The first day of the first
period for which an amount is paid as an annuity or any other form.
(G) Vested Accrued Benefit: The aggregate value of the
Participant's vested Accrued Benefit derived from Employer and Employee
contributions, including rollovers, whether vested before or upon death,
including the proceeds of insurance Policies, if any, on the Participant's
life. The provisions of this Section 5.06(b)(4)(G) shall apply to a Participant
who is vested in amounts attributable to Employer contributions, Employee
Contributions, or both, at the time of death or distribution.
(5) Notice Requirements.
<PAGE> 29
(A) In the case of a Qualified Joint and Survivor Annuity as
described in Section 5.06(b)(2), the Committee shall provide each Participant no
less than thirty (30) days and no more than ninety (90) days prior to the
Annuity Starting Date a written explanation of:
(i) the terms and conditions of a Qualified Joint and
Survivor Annuity;
(ii) the Participant's right to make and the effect of
an election to waive the Qualified Joint and Survivor Annuity form of benefit;
(iii) the rights of a Participant's Spouse; and
(iv) the right to make, and the effect of, a
revocation of a previous election to waive the Qualified Joint and Survivor
Annuity.
(B) In the case of a Qualified Preretirement Survivor
Annuity as described in Section 5.06(b)(3), the Committee shall provide each
Participant within the applicable period for such Participant a written
explanation of the Qualified Preretirement Survivor Annuity in such terms and in
such manner as would be comparable to the explanation provided for meeting the
requirements of Section 5.06(b)(5)(A) applicable to a Qualified Joint and
Survivor Annuity. The applicable period for a Participant is whichever of the
following periods ends last:
(i) the period beginning with the first day of the
Plan Year in which the Participant attains Age thirty-two (32) and ending with
the close of the Plan Year preceding the Plan Year in which the Participant
attains Age thirty-five (35);
(ii) a reasonable period ending after the individual
becomes a Participant;
(iii) a reasonable period ending after Section
5.06(b)(5)(C) ceases to apply to the Participant;
(iv) a reasonable period ending after Section 5.06(b)
first applies to the Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after separation of service to a
Participant who separates from service before attaining Age thirty-five (35).
For purposes of Section 5.06(b)(5)(B), a reasonable period ending after the
enumerated events described in (ii), (iii) and (iv) is the end of the two (2)
year period beginning one (1) year prior to the date the applicable event occurs
and ending one (1) year after that date. In the case of a Participant who
separates from service before the Plan Year in which he or she attains Age
thirty-five (35), notice shall be provided within the two (2) year period
beginning one (1) year prior to separation and ending one (1) year after
separation. If such a Participant thereafter returns to employment with the
Employer, the applicable period for such Participant shall be redetermined.
(C) Notwithstanding the other requirements of this Section
5.06 (b)(5), the respective notices prescribed by this Section 5.06(b)(5) need
not be given to a Participant if
(i) the Plan fully subsidizes the costs of a
Qualified Joint and Survivor Annuity or Qualified Preretirement Survivor
<PAGE> 30
Annuity, and
(ii) the Plan does not allow the Participant to waive
the Qualified Joint and Survivor Annuity or Qualified Preretirement Survivor
Annuity, as the case may be, and does not allow a married Participant to
designate a nonspouse Beneficiary.
For purposes of this Section 5.06(b)(5)(C), a Plan fully subsidizes the costs of
a benefit if under the Plan no increase in cost or decrease in benefits to the
Participant may result from the Participant's failure to elect another benefit.
Prior to the time the Plan allows the Participant to waive the Qualified
Preretirement Survivor Annuity, the Plan may not charge the Participant for the
cost of such benefit by reducing the Participant's benefits under the Plan or by
any other method.
(6) Safe harbor rules.
(A) This Section 5.06(b)(6) shall apply to a Participant in
a profit sharing Plan, and to any distribution, made on or after the first day
of the first Plan Year beginning after December 31, 1988, from or under a
separate account attributable solely to accumulated deductible Employee
contributions, as defined in section 72(o)(5)(B) of the Code, and maintained on
behalf of a Participant in a money purchase pension Plan, including a target
benefit Plan, if the Employer so elects in Item 7 of the Adoption Agreement. If
the Employer elects to have this Section 5.06(b)(6) apply, the following
conditions shall apply to the Plan:
(i) no Participant can elect payments in the form of
a life annuity; and
(ii) on the death of a Participant, the Participant's
vested Accrued Benefit will be paid to the Participant's Surviving Spouse, but
if there is no Surviving Spouse or if the Surviving Spouse has already consented
in a manner conforming to a Qualified Election, then to the Participant's
Designated Beneficiary. The surviving Spouse may elect to have distribution of
the vested Accrued Benefit commence within the ninety (90) day period following
the date of the Participant's death. The Accrued Benefit shall be adjusted for
gains or losses occurring after the Participant's death in accordance with the
provisions of the Plan governing the adjustment of Accrued Benefits for other
types of distributions. This Section 5.06(b)(6) shall not be operative with
respect to the Participant in a profit sharing Plan if the Plan is a direct or
indirect transferee of a defined benefit Plan, money purchase pension Plan,
including a target benefit Plan, a stock bonus, or profit sharing Plan which is
subject to the survivor annuity requirements of section 401(a)(11) and section
417 of the Code. In addition, this Section shall not apply unless the
Participant's spouse is the Beneficiary of any insurance on the Participant's
life purchased by Employer contributions or forfeitures allocated to the
Participant's Accrued Benefit. If this Section is operative, then except to the
extent otherwise provided in Section 5.06(b)(7), the other provisions of this
Section 5.06(b) shall be inoperative.
(B) The Participant may waive the spousal death benefit
described in this Section 5.06(b)(6) at any time provided that no such waiver
shall be effective unless it satisfies the conditions described in Section
5.06(b)(4)(C), other than the notification requirement referred to therein, that
would apply to the Participant's waiver of the Qualified Preretirement Survivor
Annuity.
(C) For purposes of this Section 5.06(b)(6), vested Accrued
Benefit shall mean, in the case of a money purchase pension Plan or a
<PAGE> 31
target benefit Plan, the Participant's separate account balance attributable
solely to accumulated deductible Employee contributions within the meaning of
section 72(o)(5)(B) of the Code. In the case of a profit sharing Plan, vested
Accrued Benefits shall have the same meaning as in Section 5.06(b)(4)(G).
(7) Transitional Rules.
(A) Any living Participant not receiving benefits on August
23, 1984, who would otherwise not receive the benefits prescribed by the
previous provisions of this Section 5.06(b) must be given the opportunity to
elect to have the prior provisions of this Section 5.06(b) apply if such
Participant is credited with at least one (1) Hour of Service under this Plan or
a predecessor Plan in a Plan Year beginning on or after January 1, 1976, and
such Participant had at least ten (10) Years of vesting Service when he
separated from service.
(B) Any living Participant not receiving benefits on August
23, 1984, who was credited with at least one (1) Hour of Service under this Plan
or a predecessor plan on or after September 2, 1974, and who is not otherwise
credited with any service in a Plan Year beginning on or after January 1, 1976,
must be given the opportunity to have his benefits paid in accordance with
Section 5.06(b)(7)(D).
(C) The respective opportunities to elect, as described in
Sections 5.06(b)(7)(A) or (B) above, must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and ending on the
date benefits would otherwise commence to said Participants.
(D) Any Participant who has elected pursuant to Section
5.06(b)(7)(B) and any Participant who does not elect under Section 5.06(b)(7)(A)
or who meets the requirements of Section 5.06(b)(7)(A) except that such
Participant does not have at least ten (10) Years of vesting Service when he
separates from service, shall have his benefits distributed in accordance with
all of the following requirements if benefits would have been payable in the
form of a life annuity:
(i) Automatic Joint and Survivor Annuity. If benefits
in the form of a life annuity become payable to a married Participant who:
(a) begins to receive payments under the Plan on
or after Normal Retirement Age; or
(b) dies on or after Normal Retirement Age while
still working for the Employer; or
(c) begins to receive payments on or after the
Qualified Early Retirement Age; or
(d) separates from service on or after attaining
Normal Retirement Age or the Qualified Early Retirement Age and after satisfying
the eligibility requirements for the payment of benefits under the Plan and
thereafter dies before beginning to receive such benefits;
then such benefits will be received under this plan in the form of a Qualified
Joint and Survivor Annuity, unless the Participant has elected otherwise during
the election period. The election period must begin at least six (6) months
before the Participant attains Qualified Early Retirement Age and end not more
than ninety (90) days before the commencement of benefits. Any election
hereunder will be in writing and may be changed by the Participant at any time.
<PAGE> 32
(ii) Election of early survivor annuity:
A Participant who is employed after attaining the Qualified Early Retirement Age
will be given the opportunity to elect, during the election period, to have a
survivor annuity payable on death. If the Participant elects the survivor
annuity, payments under such annuity must not be less than the payments which
would have been made to the spouse under the Qualified Joint and Survivor
Annuity if the Participant had retired on the day before his death. Any election
under this provision will be in writing and may be changed by the Participant at
any time. The election period begins on the later of (1) the ninetieth (90th)
day before the Participant attains the Qualified Early Retirement Age, or (2)
the date on which participation begins, and ends on the date the Participant
terminates employment.
(iii) For purposes of this Section 5.06(b)(7)(D)
(a) Qualified Early Retirement Age is the latest
of
(I) the earliest date, under the Plan, on
which the Participant may elect to receive retirement benefits,
(II) the first day of the one hundred
twentieth (120th) month beginning before the Participant reaches Normal
Retirement Age, or
(III) the date the Participant begins
participation.
(b) Qualified Joint and Survivor Annuity is an
annuity for the life of the Participant with a survivor annuity for the life of
the Spouse as described in Section 5.06(b)(4)(D).
5.07 Lifetime Distribution Requirements
5.07 (a) Subject to Section 5.06(b) the requirements of this Section 5.07
and Section 5.08 shall apply to any distribution of a Participant's interest and
will take precedence over any inconsistent provisions of this Plan. Unless
otherwise specified, the provisions of this Section 5.07 and Section 5.08 apply
to calendar years beginning after December 31, 1984.
(b) All distributions required under Section 5.07 and Section 5.08
shall be determined and made in accordance with the Income Tax Regulations
proposed under section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of section 1.401(a)(9)-2 of such proposed
Regulations.
(c) The entire interest of a Participant must be distributed or begin
to be distributed no later than the Participant's required beginning date.
(d) Limits on Distribution Periods: As of the first distribution
calendar year, distributions, if not made in a single sum, may only be made
over one of the following periods (or a combination thereof):
(1) the life of the Participant,
(2) the life of the Participant and a Designated Beneficiary,
<PAGE> 33
(3) a period certain not extending beyond the life expectancy
of the Participant, or
(4) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Designated Beneficiary.
(e) Determination of Amount to be Distributed Each Year. If the
Participant's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the Required
Beginning Date:
(1) Individual Account.
(A) If a Participant's benefit is to be distributed over
(i) a period not extending beyond the life expectancy
of the Participant or the joint life and last survivor expectancy of the
Participant and the Participant's Designated Beneficiary, or
(ii) a period not extending beyond the life expectancy
of the Designated Beneficiary,
the amount required to be distributed for each calendar year, beginning with
distributions for the first Distribution Calendar Year, must at least equal the
quotient obtained by dividing the Participant's benefit by the applicable life
expectancy.
(B) For calendar years beginning before January 1, 1989, if
the Participant's Spouse is not the Designated Beneficiary, the method of
distribution selected must assure that at least fifty (50%) percent of the
present value of the amount available for distribution is paid within the life
expectancy of the Participant.
(C) For calendar years beginning after December 31, 1988,
the amount to be distributed each year, beginning with distributions for the
first Distribution Calendar Year shall not be less than the quotient obtained by
dividing the Participant's benefit by the lesser of
(i) the applicable life expectancy, or
(ii) if the Participant's Spouse is not the Designated
Beneficiary, the applicable divisor determined from the table set forth in Q&A-4
of section 1.401(a)(9)-2 of the proposed Income Tax Regulations. Distributions
after the death of the Participant shall be distributed using the applicable
life expectancy in Section 5.07(e)(1) as the relevant divisor without regard to
section 1.401(a)(9)-2 of the proposed Income Tax Regulations.
(D) The minimum distribution required for the Participant's
first Distribution Calendar Year must be made on or before the Participant's
Required Beginning Date. The minimum distribution for other calendar years,
including the minimum distribution for the Distribution Calendar Year in which
the Employee's Required Beginning Date occurs, must be made on or before
December 31 of that Distribution Calendar Year.
(2) Other Forms. If the Participant's benefit is distributed in
the form of an annuity purchased from an insurance company, distributions
thereunder shall be made in accordance with the requirements of section
401(a)(9) of the Code and the regulations thereunder.
<PAGE> 34
5.08 Death Distribution Provisions
5.08 Death Distribution Provisions
(a) Distribution beginning before death. If the Participant dies after
distribution of his interest has begun, the remaining portion of such interest
will continue to be distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
(b) Distribution beginning after death. If the Participant dies before
distribution of his interest begins, distribution of the Participant's entire
interest shall be completed by December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death except to the extent that an
election is made to receive distributions in accordance with (1) or (2) below:
(1) if any portion of the Participant's interest is payable to a
Designated Beneficiary, distributions may be made over the life or over a period
certain not greater than the life expectancy of the Designated Beneficiary
commencing on or before December 31 of the calendar year immediately following
the calendar year in which the Participant died;
(2) if the Designated Beneficiary is the Participant's surviving
Spouse, the date distributions are required to begin in accordance with Section
5.08(b)(1) shall not be earlier than the the later of
(A) December 31 of the calendar year immediately following
the calendar year in which the Participant died, and
(B) December 31 of the calendar year in which the
Participant would have attained Age seventy and one-half (70 1/2).
If the Participant has not made an election pursuant to this Section 5.08(b)(2)
by the time of his or her death, the Participant's Designated Beneficiary must
elect the method of distribution no later than the earlier of
(i) December 31 of the calendar year in which
distributions would be required to begin under this Section 5.08(b)(2), or
(ii) December 31 of the calendar year which contains
the fifth (5th) anniversary of the date of death of the Participant.
If the Participant has no Designated Beneficiary, or if the Designated
Beneficiary does not elect a method of distribution, distribution of the
Participant's entire interest must be completed by December 31 of the calendar
year containing the fifth (5th) anniversary of the Participant's death.
(c) For purposes of Section 5.08(b)(2), if the surviving Spouse dies
after the Participant, but before payments to such Spouse begin, the provisions
of Section 5.08(b)(2) with the exception of Section 5.08(b)(2)(B) shall be
applied as if the surviving Spouse were the Participant.
(d) For purposes of Section 5.08, any amount paid to a child of the
Participant will be treated as if it had been paid to the surviving Spouse if
the amount becomes payable to the surviving Spouse when the child reaches the
Age of majority.
(e) For the purposes of Section 5.08, distribution of a Participant's
interest is considered to begin on the Participant's Required Beginning Date or,
if Section 5.08(b)(3) is applicable, the date distribution
<PAGE> 35
is required to begin to the surviving Spouse pursuant to Section 5.08(b)(2). If
distribution in the form of an annuity described in Section 5.07(e)(2)
irrevocably commences to the Participant before the Required Beginning Date, the
date distribution is considered to begin is the date distribution actually
commences.
5.09 Definitions
5.09 Definitions:
(a) Applicable Life Expectancy. The life expectancy , or joint and
last survivor expectancy, calculated using the attained Age of the Participant
or Designated Beneficiary as of the Participant's or Designated Beneficiary's
birthday in the applicable calendar year reduced by one (1) for each calendar
year which has elapsed since the date life expectancy was first calculated. If
life expectancy is being recalculated, the applicable life expectancy shall be
the life expectancy as so recalculated. The applicable calendar year shall be
the first Distribution Calendar Year, and if life expectancy is being
recalculated such succeeding calendar year.
(b) Designated Beneficiary. The individual or entity designated as the
Beneficiary under the Plan in accordance with section 401(a)(9) of the Code and
the regulations thereunder. If the Participant does not designate a Beneficiary,
the Designated Beneficiary shall be determined in accordance with Section 4.08.
(c) Distribution Calendar Year. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's Required Beginning
Date. For distributions beginning after the Participant's death, the first
Distribution Calendar Year is the calendar year in which distributions are
required to begin pursuant to Section 5.08.
(d) Life Expectancy. Life expectancy and joint and last survivor
expectancy are computed by use of the expected return multiples in Tables V and
VI of section 1.72-9 of the Income Tax Regulations. Unless otherwise elected by
the Participant (or Spouse, in the case of distributions described in Section
5.08(b)(2)) by the time distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to the
Participant or Spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse Beneficiary may not be recalculated.
(e) Participant's benefit.
(1) The Accrued Benefit as of the last Valuation Date in the
calendar year immediately preceding the Distribution Calendar Year (the
Valuation Calendar Year) increased by the amount of any contributions or
forfeitures allocated to the Accrued Benefit as of dates in the Valuation
Calendar Year after the Valuation Date and decreased by distributions made in
the Valuation Calendar Year after the Valuation Date.
(2) Exception for second Distribution Calendar Year. For purposes
of Section 5.09(e)(1), if any portion of the minimum distribution for the first
Distribution Calendar Year is made in the second Distribution Calendar Year on
or before the Required Beginning Date, the amount of the minimum distribution
made in the second Distribution Calendar Year shall be treated as if it had been
made in the immediately preceding Distribution Calendar Year.
<PAGE> 36
(f) Required Beginning Date.
(1) General Rule. The Required Beginning Date of a Participant is
the first day of April of the calendar year following the calendar year in which
the Participant attains Age seventy and one-half (70 1/2).
(2) Transitional Rule. The Required Beginning Date of a
Participant who attains Age seventy and one-half (70 1/2) before January 1,
1988, shall be determined in accordance with (A) or (B) below:
(A) Non-5 percent owners. The Required Beginning Date of a
Participant who is not a 5 percent owner as defined in Section 5.06(g)(5)(C), is
the first day of April of the calendar year following the calendar year in which
the later of retirement or attainment of Age seventy and one-half (70 1/2)
occurs.
(B) 5 percent owners. The Required Beginning Date of a
Participant who is a 5 percent owner during any year beginning after December
31, 1979, is the first day of "April following the later of:
(i) the calendar year in which the Participant
attains Age seventy and one-half (70 1/2), or
(ii) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant becomes a 5 percent owner, or
the calendar year in which the Participant retires.
(iii) The Required Beginning Date of a Participant who
is not a 5 percent owner, who attains Age seventy and one-half (70 1/2) during
1988 and who has not retired as of January 1, 1989, is April 1, 1990.
(C) 5 percent owner. A Participant is treated as a 5 percent
owner for purposes of Section 5.09(f) if such Participant is a 5 percent owner
as defined in section 416(i) of the Code, determined in accordance with section
416 but without regard to whether or not the Plan is a Top-Heavy Plan, at any
time during the Plan Year ending with or within the calendar year in which such
owner attains Age sixty six and one-half (66 1/2) or any subsequent Plan Year.
(D) Once distributions have begun to a 5 percent owner under
Section 5.06(f), they must continue to be distributed even if the Participant
ceases to be a 5 percent owner in a subsequent year.
5.10 Election Under Section 242(b)(2) of TEFRA
5.10 Notwithstanding the provisions of Sections 5.07, 5.08 and 5.09 and
subject to the requirements of Section 5.06(b), distribution on behalf of any
Employee, including a 5-percent owner, may be made in accordance with all of the
following requirements, regardless of when such distribution commences:
(a) The distribution by the Trust is one which would not have
disqualified such Trust under section 401(a)(9) of the Code as in effect prior
to amendment by the Deficit Reduction Act of 1984;
(b) The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the Trust is being distributed or,
if the Employee is deceased, by a Beneficiary of such Employee;
(c) Such designation was in writing, was signed by the Employee or
<PAGE> 37
Beneficiary, and was made before January 1, 1984;
(d) The Employee had accrued a benefit under the Plan as of December
31, 1983; and
(e) The method of distribution designated by the Employee or the
Beneficiary specifies the form of the distribution, the time at which
distribution will commence, the period over which distributions will be made,
and in the case of distribution upon the Employee's death, the beneficiaries of
the Employee listed in order of priority. The method of distribution selected
must assure that at least fifty (50%) percent of the present value of the amount
available for distribution is paid within the life expectancy of the
Participant.
A distribution upon death will not be covered by this transitional rule
unless the information in the designation contains the required information
described above with respect to the distributions to be made upon the death of
the Employee.
For any distribution which commences before January 1, 1984, but continues
after December 31, 1983, the Employee, or the Beneficiary, to whom such
distribution is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subsections (a) through (e) above.
If a designation is revoked, the subsequent distribution must satisfy the
requirements of section 401(a)(9) of the Code and the regulations thereunder.
Any changes in the designation will be considered to be a revocation of the
designation. If a designation is revoked subsequent to the date distributions
are required to begin, the Trust must distribute by the end of the calendar year
following the calendar year in which the revocation occurs the total amount not
yet distributed which would have been required to have been distributed to
satisfy section 401(a)(9) of the Code and the regulations thereunder, but for
the section 242(b)(2) election. For calendar years beginning after December 31,
1988, such distributions must meet the minimum distribution incidental benefit
requirements in section 1.401(a)(9)-2 of the proposed Income Tax Regulations.
Any changes in the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of a Beneficiary not
named in the designation under the designation will not be considered to be a
revocation of the designation so long as such substitution or addition does not
alter the period over which distributions are to be made under the designation,
directly or indirectly, as, for example, by altering the relevant measuring
life. In the case in which an amount is transferred or rolled over from one plan
to another plan, the rules in Q&A J-2 and Q&A J-3 shall apply.
5.11 Time When Benefits Payable
5.11 Benefits will be paid only on death, disability, termination of the
Plan, termination of employment or at Normal Retirement Age.
5.12 Rollovers and Transfers
5.12 (a) If the Employer so elects in Item 21 of the Adoption Agreement, an
Employee who was a participant in any other plan qualified under section 401(a)
of the Internal Revenue Code may request the Committee to direct the Trustee to
accept amounts to which he or she is entitled from such other plan from the
fiduciary of the other plan, either as a direct transfer from such other Plan or
as a rollover from such other Plan or an individual retirement
<PAGE> 38
account which consists only of amounts distributed from a plan qualified under
section 401(a) of the Code. Such amounts may be transferred in the form of cash
or kind, including any Policies, and shall be the Participant's "rollover
account". Before accepting such transfer or rollover, the Committee may require
the Employee to furnish satisfactory evidence that the proposed transfer is in
fact a transfer or distribution, either directly or indirectly, from a qualified
plan. Any amounts which the Committee directs the Trustee to accept shall not be
added to the Accrued Benefit of the Employee but shall be separately accounted
for. The Employee shall have a fully vested nonforfeitable interest in the value
of the accepted amount as adjusted for gains and losses, and such amounts shall
be distributed to the Employee at the same time and in the same manner as his or
her Accrued Benefit is distributed. If at any point the Committee determines
that the amount transferred or rolled over does not consist in its entirety of
amounts previously held in a plan qualified under section 401(a) of the Code
plus earnings thereon, the Committee shall immediately direct the Trustee to
return the interest of the Employee in such amounts to the person or plan from
which it was received.
(b) An Employee, prior to satisfying the Plan's eligibility
conditions, may arrange a transfer from another plan or make a rollover
contribution to the Trust to the same extent and in the same manner as a
Participant. If an Employee arranges such a transfer or makes a rollover
contribution to the Trust prior to satisfying the Plan's eligibility conditions,
the Trustee shall treat the Employee as a Participant for all purposes of the
Plan except the Employee may not accrue a benefit under the Plan until such
Employee actually becomes a Participant in the Plan. If the Employee terminates
employment prior to becoming a Participant, the Trustee shall distribute such
Employee's rollover account to such Employee as if it were attributable to
Employer contributions.
(c) If the Employer so elects in Item 21B of the Adoption Agreement, a
Participant may direct the Trustee as to the investments to be made with his or
her rollover account, including the purchase of insurance or annuity Policies.
If all or a portion of the Participant's rollover account is invested at the
direction of the Participant, to the extent of such direction the account shall
consist of the assets in which such investment was directed.
(d) A Participant who is entitled to a distribution under the Plan,
may direct the Committee to direct the Trustee to have his or her distribution
transferred to the fiduciary of any other plan qualified under section 401(a) of
the Code in which he or she is a Participant.
5.13 Consent Requirements for Distributions
5.13 (a) If the value of a Participant's vested Accrued Benefit derived
from Employer and Employee contributions exceeds, or at the time of any prior
distribution exceeded, Three Thousand Five Hundred ($3,500) Dollars, and the
Accrued Benefit is immediately distributable, the Participant and the
Participant's Spouse, or where either the Participant or the Spouse has died,
the survivor, must consent to any distribution of such Accrued Benefit. The
consent of the Participant and the Participant's Spouse shall be obtained in
writing within the ninety (90) day period ending on the Annuity Starting Date.
The Annuity Starting Date is the first day of the first period for which an
amount is paid as an annuity or any other form. The Committee shall notify the
Participant and the Participant's Spouse of the right to defer any distribution
until the Participant's Accrued Benefit is no longer immediately distributable.
Such notification shall include a general description of the material features,
and an explanation of the relative values of the optional forms of benefit
available under the Plan in a manner that would satisfy the notice requirements
of section 417(a)(3) of the Code, and shall be provided no
<PAGE> 39
less than thirty (30) days and no more than ninety (90) days prior to the
Annuity Starting Date.
Notwithstanding the foregoing, only the Participant need consent to the
commencement of a distribution in the form of a Qualified Joint and Survivor
Annuity while the Accrued Benefit is immediately distributable. Furthermore, if
payment in the form of a Qualified Joint and Survivor Annuity is not required
with respect to the Participant pursuant to Section 5.06(b)(6), only the
Participant need consent to the distribution of an Accrued Benefit that is
immediately distributable. Neither the consent of the Participant nor the
Participant's Spouse shall be required to the extent that a distribution is
required to satisfy section 401(a)(9) or section 415 of the Code. In addition,
upon termination of the Plan if the Plan does not offer an annuity option
purchased from a commercial Insurer, and if the Employer or any entity within
the same controlled group as the Employer does not maintain another defined
contribution plan, other than an employee stock ownership plan as defined in
section 4975(e)(7) of the Code the Participant's Accrued Benefit will, without
the Participant's consent, be distributed to the Participant. However, if any
entity within the same controlled group as the Employer maintains another
defined contribution plan, other than an employee stock ownership plan as
defined in section 4975(e)(7) of the Code, then the Participant's Accrued
Benefit will be transferred, without the Participant's consent, to the other
plan if the Participant does not consent to an immediate distribution.
An Accrued Benefit is immediately distributable if any part of the Accrued
Benefit could be distributed to the Participant or surviving Spouse before the
Participant attains or would have attained if not deceased the later of Normal
Retirement Age or Age sixty-two (62).
(b) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the first
Plan Year beginning after December 31, 1988, the Participant's vested Accrued
Benefit shall not include amounts attributable to accumulated deductible
Employee contributions within the meaning of section 72(o)(5)(B) of the Code.
5.14 Distribution of Elective Deferrals
5.14 Elective Deferrals, Qualified Non-elective Contributions, and
Qualified Matching Contributions, and income allocable to each are not
distributable to a Participant or his or her Beneficiary or Beneficiaries, in
accordance with such Participant's or Beneficiary or Beneficiaries' election,
earlier than upon separation from service, death or Disability. Such amounts may
also be distributed upon:
(a) termination of the Plan without the establishment of another
defined contribution plan, other than an employee stock ownership plan as
defined in section 4975(e) or section 409 of the Code, or a simplified employee
pension plan as defined in section 408(k);
(b) the disposition by a corporation to an unrelated corporation of
substantially all of the assets, within the meaning of section 409(d)(2) of the
Code, used in a trade or business of such corporation if such corporation
continues to maintain this Plan after the disposition, but only with respect to
Employees who continue employment with the corporation acquiring such assets;
(c) the disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary, within the meaning of section 409(d)(3)
of the Code, if such corporation continues to maintain this Plan,
<PAGE> 40
but only with respect to Employees who continue employment with such subsidiary;
(d) the attainment of Age fifty nine and one-half (59 1/2) in the
case of a profit sharing Plan;
(e) the Hardship of the Participant as described in Section 5.15.
All distributions that may be made pursuant to one or more of the foregoing
distributable events are subject to spousal and Participant consent
requirements, if applicable, contained in sections 411(a)(11) and 417 of the
Code. In addition, distributions after March 31, 1988, that are triggered by any
of the first three (3) events enumerated above must be made in a lump sum.
5.15 Hardship Distributions
5.15 (a) Distributions of Elective Deferrals, and any earnings credited to
a Participant's Account as of the end of the last Plan Year ending before July
1, 1989, may be made to a Participant in the event of Hardship. For the purposes
of this Section, Hardship is defined as an immediate and heavy financial need of
the Employee where such Employee lacks other available resources. Hardship
distributions are subject to the spousal consent requirements contained in
sections 411(a)(11) and 417 of the Code.
(b) Special Rules:
(1) The following are the only financial needs considered
immediate and heavy: expenses incurred or necessary for medical care, within the
meaning of section 213(d) of the Code, of the Employee, the Employee's Spouse or
dependents; the purchase, excluding mortgage payments, of a principal residence
for the Employee; payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the Employee, the Employee's
Spouse, children or dependents; or the need to prevent the eviction of the
Employee from, or a foreclosure on the mortgage of, the Employee's principal
residence.
(2) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the employee only if:
(A) the Employee has obtained all distributions, other than
Hardship distributions, and all nontaxable loans under all plans maintained by
the Employer;
(B) all plans maintained by the Employer provide that the
Employee's Elective Deferrals and Employee Contributions will be suspended for
twelve (12) months after the receipt of the Hardship distribution;
(C) the distribution is not in excess of the amount of an
immediate and heavy financial need, including amounts necessary to pay any
Federal, state or local income taxes or penalties reasonably anticipated to
result from the distribution; and
(D) all plans maintained by the Employer provide that the
Employee may not make Elective Deferrals for the Employee's taxable year
immediately following the taxable year of the Hardship distribution in excess of
the applicable limit under section 402(g) of the Code for such taxable year less
the amount of such Employee's Elective Deferrals for the taxable year of the
Hardship distribution.
(3) The Elective Deferrals and Employee Contributions of an
<PAGE> 41
Employee shall be suspended for twelve (12) months after such Employee receives
a Hardship distribution. In addition, an Employee who receives a Hardship
distribution may not make Elective Deferral's for his or her taxable year
immediately following the taxable year of the Hardship distribution to the
extent such Elective Deferral would exceed the difference between the applicable
limit under section 402(g) of the Code and the Employee's Elective Deferrals for
the taxable year of the Hardship distribution.
5.16 Withholding Requirements After 1992
5.16 This Section applied to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this section, a distributee may
elect, at the time and in the manner prescribed by the Plan administrator, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
An eligible rollover distribution is any distribution of all or any portion
of the balance to the credit of the distributee, except that an eligible
rollover distribution does not include: any distribution that is one of a series
of substantially equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the distributee or the joint lives (or
joint life expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any distribution to
the extent such distribution is required under section 401(a)(9) of the Internal
Revenue Code; and the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an individual retirement account described
in section 408(a) of the Code, an individual retirement annuity described in
section 408(b) of the Code, an annuity plan described in section 403(a) of the
Code, or a qualified trust described in section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual retirement annuity.
A distributee includes an employee or former employee. In addition, the
employee's or former employee's surviving spouse and the employee's or former
employee's spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in section 414(p) of the Code, are
distributees with regard to the interest of the spouse or former spouse. A
direct rollover is a payment by the plan to the eligible retirement plan
specified by the distributee.
ARTICLE VI - TERMINATION OF EMPLOYMENT
6.01 Vesting on Termination
6.01 A Participant shall have a nonforfeitable interest in the Employer's
contributions made on his behalf based upon the percentage selected in Item 15
of the Adoption Agreement. Employee contributions made hereunder and earnings
thereon will be nonforfeitable at all times.
6.02 Form and Timing of Distributions
6.02 (a) Benefits may be distributed in any form permitted under Item 20
<PAGE> 42
of the Adoption Agreement subject to the provisions of Section 5.06.
(b) (1) No distribution of vested benefit shall be made to a
Participant prior to his of her death or Normal Retirement Date, whichever
occurs first, except to the extent permitted under Item 19C of the Adoption
Agreement. For purposes of this Section 6.02(b), if the value of an Employee's
vested Accrued Benefit is zero, the Employee shall be deemed to have received a
distribution of such vested Accrued Benefit. A Participant's vested Accrued
Benefit shall not include accumulated deductible Employee contributions within
the meaning of section 72(o)(5)(B) of the Code for Plan Years beginning prior to
January 1, 1989.
(2) If an Employee terminates service, and is eligible to and
elects to receive the value of his or her vested Accrued Benefit, the nonvested
portion will be treated as a forfeiture. If the Employee elects to have
distributed less than the entire vested portion of his or her Accrued Benefit
derived from Employer contributions, the part of the nonvested portion that will
be treated as a forfeiture is the total nonvested portion multiplied by a
fraction, the numerator of which is the amount of the distribution attributable
to Employer contributions and the denominator of which is the total value of the
vested Employer derived Accrued Benefit.
(c) If an Employee receives a distribution pursuant to this Section
and the Employee resumes employment covered under the Plan, the Employee's
Employer-derived Accrued Benefit will be restored to the amount on the date of
distribution if the Employee repays to the Plan the full amount of the
distribution attributable to Employer contributions before the earlier of five
(5) years after the first date on which the Participant is subsequently
reemployed by the Employer, or the date the Participant incurs five (5)
consecutive one-year Breaks in Service following the date of the distribution.
If an Employee is deemed to receive a distribution pursuant to this Section, and
the Employee resumes employment covered under the Plan before the date the
Participant incurs five (5) consecutive one-year Breaks in Service, upon the
reemployment of such Employee, the Employer-derived Accrued Benefit of the
Employee will be restored to the amount on the date of such deemed distribution.
(d) If the Employer elects in Item 19G of the Adoption to permit
distributions from a profit sharing Plan while the Employee remains an Employee,
or if a distribution is otherwise made at a time when a Participant has a
nonforfeitable right to less than one hundred (100%) percent of his Accrued
Benefit attributable to Employer contributions and the Participant may increase
the nonforfeitable percentage in his Accrued Benefit:
(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 nonforfeitable portion
of the separate account shall be equal to an amount ("X") determined by the
formula:
X=P(AB + (RxD)) - (R x D)
For purposes of applying the formula: P is the nonforfeitable percentage at
the relevant time; AB is the Participant's Accrued Benefit at the relevant time;
D is the amount of the distribution; and R is the ratio of the Accrued Benefit
at the relevant time to the Account balance after distribution.
(e) All Accrued Benefits not vested in the terminated Participant
shall be held in the Trust and shall be applied as stated in Section 7.06.
<PAGE> 43
6.03 Vested Benefits Nonforfeitable
6.03 The rights of a Participant in the benefit set forth in Sections 5.02
and 6.01 shall be nonforfeitable, unconditional and legally enforceable against
the Plan to the extent of Trust assets.
6.04 Leaves of Absence
6.04 A leave of absence shall not be considered a termination of
employment, provided the Employee returns to the service of the Employer on or
prior to the expiration of such leave of absence. The term "leave of absence"
shall mean absence from the employ of the Employer in accordance with the
established leave policy of the Employer. In granting leaves of absence, the
Employer shall treat Employees in similar circumstances in a similar manner.
6.05 Break in Service Rule for Vesting
6.05 (a) A former Participant who had a nonforfeitable right to all or a
portion of his Accrued Benefit derived from Employer contributions at the time
of his termination shall receive credit for Years of Service prior to his Break
in Service if he completes a Year of Service after his return to the employ of
the Employer.
(b) A former Participant who did not have a nonforfeitable right to
any portion of his Accrued Benefit derived from Employer contributions at the
time of his termination shall receive credit for Years of Service prior to his
Break in Service if:
(1) he completes a Year of Service after his return to the
employ of the Employer, and
(2) the number of consecutive one (1) year Breaks in Service is
less than the greater of five (5) or the aggregate number of Years of Service
before such Break.
(c) In the case of a Participant who has five (5) or more consecutive
1-year Breaks in Service all Service after such Breaks in Service will be
disregarded for the purpose of vesting in the Employer derived Accrued Benefit
that accrued before such Breaks in Service. Such Participant's pre-Break Service
will count in vesting the post-Break Employer derived Accrued Benefit only if
either:
(1) such Participant has any nonforfeitable interest in the
Accrued Benefit attributable to Employer contributions at the time of separation
from service; or
(2) upon returning to service the number of consecutive 1-year
Breaks in Service is less than the number of Years of Service.
(d) Separate accounts will be maintained for the Participant's
pre-Break and post-Break Employer-derived Accrued Benefit. Both accounts will
share in the earnings and losses of the Investment Fund.
(e) In the case of a Participant who has incurred a one (1) Year Break
in Service, Years of Service before such Break will not be taken into account
until the Participant has completed a Year of Service after such Break in
Service.
6.06 Nonforfeitability of Mandatory Contributions
<PAGE> 44
6.06 No forfeitures will occur solely as a result of an Employee's
withdrawal of Employee contributions. Regardless of a Participant's
nonforfeitable percentage, a withdrawal of Employee contributions will not
result in a forfeiture of the minimum if any, provided under Section 7.01(c).
6.07 Inability to Locate Beneficiary
6.07 The Committee may determine, in its sole discretion, that a benefit is
forfeited if a Participant or Beneficiary cannot be found. If a benefit is
forfeited because the Participant or Beneficiary cannot be found, such benefit
will be reinstated if a claim is made by the Participant or Beneficiary.
6.08 Top-Heavy Vesting Rules
6.08 For any Plan Year in which the Plan is a Top-Heavy Plan, one of the
minimum vesting schedules as elected by the Employer in Item 15A of the Adoption
Agreement will automatically apply to the Plan. The minimum vesting schedule
applies to all benefits within the meaning of section 411(a)(7) of the Code
except those attributable to Employee contributions, including benefits accrued
before the effective date of section 416 of the Code and benefits accrued before
the Plan became a Top-Heavy Plan. Further, no decrease in a Participant's
nonforfeitable percentage may occur in the event the Plan's status as a
Top-Heavy Plan changes for any Plan Year. However, this Section 6.08 does not
apply to the Accrued Benefits of any Employee who does not have an Hour of
Service after the Plan has initially become a Top-Heavy Plan and such Employee's
Accrued Benefit attributable to Employer contributions and forfeitures will be
determined without regard to this Section 6.08.
ARTICLE VII - CONTRIBUTIONS AND ALLOCATIONS
7.01 Employer Contributions and Allocations
7.01 (a) Subject to the provisions of Section 7.01(b) and Section 8.01, the
Employer agrees to pay to the Trust annually the amount determined in Item 7 of
the Adoption Agreement. The minimum and maximum annual contribution, if any,
shall be as stated in Item 9 of the Adoption Agreement. If the Plan is a target
benefit Plan, Employer contributions shall be determined in accordance with
Section 7.01(g).
(b) Except as set forth in Section 7.01(c), Employer contributions and
forfeitures shall be allocated to each Employee's Account as of the Allocation
Date selected in Item 8C of the Adoption Agreement. If no election is made in
Item 8C of the Adoption Agreement, the allocation shall be made as of the last
day of each Plan Year. If the Plan is a profit sharing Plan, and the Employer so
elects in Item 7B of the Adoption Agreement, contributions must be made out of
Net Profits. Contributions to a profit sharing Plan shall be allocated in
accordance with Item 8 of the Adoption Agreement. Forfeitures shall be allocated
only to the Employees of the Employer who adopted the Plan.
(c) Except as otherwise provided in Sections 7.01(c)(4) and (5),
Employer contributions and forfeitures allocated in a Plan Year in which the
Plan is a Top-Heavy Plan on behalf of any Participant who is not a Key Employee
shall not be less than the lesser of
(1) three (3%) percent of such Participant's Compensation or
(2) in the case where the Employer has no defined benefit plan
<PAGE> 45
which designates this Plan to satisfy the requirements of section 401 of the
Code, the largest percentage of Employer contributions and forfeitures, as a
percentage of the Key Employee's Compensation, allocated on behalf of any Key
Employee for that Plan year. The minimum allocation is determined without regard
to any Social Security contribution. This minimum allocation shall be made even
though, under other Plan provisions, the Participant would not otherwise be
entitled to receive an allocation, or would have received a lesser allocation
for the year because of
(A) the Participant's failure to complete one thousand
(1,000) Hours of Service (or any equivalent provided in the Plan), or
(B) the Participant's failure to make mandatory Employee
contributions to the Plan, or
(C) Compensation less than a stated amount.
(3) For purposes of computing the minimum allocation,
Compensation will mean Compensation as defined in Item 4 of the Adoption
Agreement before any exclusions selected under that Item.
(4) The provisions of Section 7.01(c) shall not apply to any
Participant who was not employed by the Employer on the last day of the Plan
Year.
(5) The provisions of this Section 7.01(c) shall not apply to any
Participant to the extent the Participant is covered under any other plan or
plans of the Employer and the Employer has provided in Item 17C of the Adoption
Agreement that the minimum allocation or benefit requirement applicable to
Top-Heavy Plans will be met in the other plan or plans.
(6) The minimum allocation here set forth to the extent required
to be nonforfeitable under section 416(b) of the Code may not be forfeited under
sections 411(a)(3)(B) or 411(a)(3)(D) of the Code. Neither Elective Deferrals
nor Matching Contributions may be taken into account for the purpose of
satisfying the minimum Top-Heavy contribution requirement.
(d) If the Plan is a profit sharing Plan using permitted disparity,
Employer contributions for the Plan Year plus any forfeitures will be allocated
to Participants' Accounts as follows:
(1) First, the contributions and forfeitures in any Year the Plan
is Top-Heavy will be allocated to all Participants in the ratio that each
Participant's Compensation as determined under Section 7.01(c) bears to all
Participants' Compensation, but not in excess of three (3%) percent of such
Compensation unless a higher percentage is selected in Item 17D of the Adoption
Agreement.
(2) Next, in any Year the Plan is Top-Heavy, the remaining
contributions and forfeitures will be allocated to each Participant's Account in
the ratio that each Participant's Compensation in excess of the Integration
Level selected in Item 8B of the Adoption Agreement bears to the sum of all
Participant's Compensation in excess of the Integration Level, up to three (3%)
percent of such excess Compensation.
(3) Next, the remaining contributions and forfeitures will be
allocated to each Participant's Account in the ratio that the sum of each
Participant's total Compensation and Compensation in excess of the Integration
Level selected in Item 8B of the Adoption Agreement bears to the sum of all
Participant's total Compensation and Compensation in excess of the Integration
<PAGE> 46
Level, but not in excess of the profit sharing maximum disparity rate.
(4) Next, any remaining Employer contributions or forfeitures
after allocations under Section 7.01(d)(1) and (d)(2) will be allocated to each
Participant's Account in the ratio that each Participant's total Compensation
for the Plan Year bears to all Participants' total Compensation for that Year.
For purposes of this Section 7.01(d), Compensation shall mean Compensation as
defined in Section 7.01(c)(3).
(5) The maximum profit sharing disparity rate is equal to the
lesser of (A) or (B), reduced by the percentage of Compensation allocated under
Section 7.01(d)(1):
(A) 5.7%, reduced by the maximum percentage allocted in
accordance with Section 7.01(d)(1), or
(B) the applicable percentage determined in accordance with
the table below:
(i) If the Integration Level selected in Item 8B of the
Adoption Agreement is some amount not in excess of the greater of Ten Thousand
($10,000) Dollars or twenty (20%) percent of the Taxable Wage Base, the
applicable percentage is 5.7%;
(ii) If the Integration Level is more than the greater
of Ten Thousand ($10,000) Dollars or twenty (20%) percent of the Taxable Wage
Base, but less than eighty (80%) percent of the Taxable Wage Base, the
applicable percentage is 4.3%;
(iii) If the Integration Level is more than eighty
(80%) percent of the Taxable Wage Base, but less than the Taxable Wage Base, the
applicable percentage is 5.4%;
(iv) If the Integration Level is the Taxable Wage Base,
the applicable percentage is 5.7%.
The Integration Level shall be equal to the Taxable Wage Base or such
lesser amount elected by the Employer in the Adoption Agreement. The Taxable
Wage Base is the contribution and benefit base in effect under Section 230 of
the Social Security Act at the beginning of the Plan Year.
(e) If the Plan is a money purchase Plan using permitted disparity,
Employer contributions for the Plan Year plus any forfeitures will first be
allocated to Participants' Accounts as follows:
(1) First, the contributions and any forfeitures in any Year the
Plan is Top-Heavy will be allocated to all Participants in the ratio that each
Participant's Compensation as determined under Section 7.01(c) bears to all
Participants' Compensation, but not in excess of three (3%) percent of such
Compensation unless a higher percentage is selected in Item 17D of the Adoption
Agreement.
(2) Next, the remaining contributions and forfeitures will be
allocated to each Participant's Account in accordance with the formula selected
in Item 7 of the Adoption Agreement.
(3) In no event shall the allocation of contributions and
forfeitures with reference to Compensation in excess of the Integration Level
<PAGE> 47
exceed the money purchase maximum disparity rate.
(4) The maximum money purchase disparity rate is equal to the
lesser of (A) or (B), reduced by the percentage of Compensation allocated under
Section 7.01(e)(1):
(A) 5.7%, or
(B) the applicable percentage determined in accordance with
the table below:
(i) If the Integration Level selected in Item 8B of the
Adoption Agreement is some amount not in excess of the greater of Ten Thousand
($10,000) Dollars or twenty (20%) percent of the Taxable Wage Base, the
applicable percentage is 5.7%;
(ii) If the Integration Level is more than the greater
of Ten Thousand ($10,000) Dollars or twenty (20%) percent of the Taxable Wage
Base, but less than eighty (80%) percent of the Taxable Wage Base, the
applicable percentage is 4.3%;
(iii) If the Integration Level is more than eighty
(80%) percent of the Taxable Wage Base, but less than the Taxable Wage Base, the
applicable percentage is 5.4%;
(iv) If the Integration Level is the Taxable Wage Base,
the applicable percentage is 5.7%.
(f) (1) If the Employer elects in Item 7A of the Adoption Agreement to
permit Employees to make Elective Deferrals, the amount of Elective Deferrals
that may be made for each Participant shall equal the percentage of Compensation
equal to the Salary Reduction Contributions Percentage as selected by the
Participant in his or her Salary Reduction Agreement. The Employer may elect, in
Item 7C of the Adoption Agreement, to make Qualified Non-elective Contributions
to the Plan on behalf of its Employees. Such contributions shall be allocated as
determined pursuant to the election of the Employer in Item 8A of the Adoption
Agreement. To the extent elections are made pursuant to this Section 7.01(f),
contributions and allocations shall be made in accordance with such elections
and not in accordance with other provisions of the Plan. Elective Deferrals
shall be treated as Employer contributions in this Plan.
(2) If the Employer elects in Item 7A of the Adoption Agreement
to permit Employees to make Elective Deferrals, the provisions of Section 7.11
shall apply.
(g) A Plan may not provide for permitted disparity if the Employer
maintains any other plan qualified under section 401(a) of the Code which
provides for permitted disparity and benefits any of the same individuals who
are Participants in the Plan.
7.02 Payment of Premiums in Insured Plan
7.02 If the Plan is an Insured Plan, the Trustee shall pay Policy premiums
from the Account of the Participant on whose life the Policy was purchased, or
on whose life the Participant directed such purchase. If funds are insufficient,
the Committee may direct the Trustee to borrow to pay the premiums, provided
that if a loan is made on the Policies, it shall be proportional to the premium
providing there is a sufficient cash value. If there is insufficient cash value,
the deficiency shall be borrowed on the same
<PAGE> 48
proportional basis. Any repayment of loans shall also be made on the same
proportional basis used in making the loans. The Trustee shall have no duty to
pay premiums in excess of the available funds.
7.03 Contributions Irrevocable
7.03 All amounts which are contributed by the Employer to the Trust shall
be irrevocable contributions to this Trust, except under the circumstances set
forth in Section 14.08.
7.04 No Obligation to Contribute
7.04 Except as required by law, the Employer shall not be obligated to make
any contribution to the Trust.
7.05 Net Profits Requirement
7.05 If the Plan is a profit sharing Plan, and the Employer so elects in
Item 7B of the Adoption Agreement, contributions must be made out of Net Profits
and forfeitures will be allocated in the same manner as Employer contributions,
and shall be allocated only for the benefit of Employees of the Employer who
adopted this Plan.
7.06 Pension Forfeitures
7.06 If the Plan is a money purchase Plan, unless the Employer elects
otherwise in Item 7B of the Adoption Agreement, all forfeitures shall be used to
reduce Employer contributions in the next Plan Year for the Employer who adopts
the Plan. No forfeiture will occur solely as a result of an Employee's
withdrawal of his own contributions.
7.07 Employees Terminating During Year
7.07 Subject to the provisions of Section 2.10, a Participant whose
employment is terminated before the end of a Plan Year but after he has
completed one thousand (1,000) Hours of Service (five hundred (500) Hours in a
Standardized Plan or a Plan utilizing an Easier Than Ever Adoption Agreement)
within such Plan Year shall or shall not share in the Employer's Contribution
for such Plan Year as designated in Item 8 of the Adoption Agreement.
7.08 Mandatory Employee Contributions Prohibited.6
7.08 (a) Beginning with the Plan Year as of which this Prototype is adopted
by an Employer, no nondeductible Employee contributions or Employer
contributions matching such nondeductible Employee contributions which are
allocated to a separate account can be made. Employee contributions for Plan
Years beginning after December 31, 1986, together with any matching
contributions as defined in section 401(m) of the Code, will be limited so as to
meet the nondiscrimination test of section 401(m).
(b) Employee voluntary contributions made hereunder, as adjusted for
investment experience, shall be nonforfeitable at all times.
(c) A separate account shall be maintained by the Trustee for the
nondeductible voluntary Employee contributions of each Participant made prior to
the date Section 7.08(a) first applies. The assets of the Trust will be valued
annually at fair market value as of the last day of the Plan Year. On such date,
the earnings and losses of the Trust attributable to the accumulated
nondeductible voluntary contributions will be allocated to each Participant's
nondeductible voluntary contributions account in the ratio that
<PAGE> 49
such account balance bears to all such account balances. Alternatively, if
elected in Item 14C of the Adoption Agreement, where directed by the Participant
for whom a separate account is maintained, the Trustee may make whatever
investment is requested, including the purchase of insurance or annuity
Policies. If all or a portion of the Participant's separate account is invested
at the direction of the Participant, to the extent of such direction the account
shall consist of the assets in which such investment was directed. Any
withdrawal of non-deductible contributions shall be subject to the consent of
the Participant's spouse as provided in Section 5.06.
7.09 Deductible Employee Contributions Prohibited
7.09 The Plan will not accept deductible Employee contributions which are
made for a taxable year beginning after December 31, 1986, except Elective
Deferrals determined to be Excess Contributions and recharacterized under
Section 7.10(f). Contributions made prior to that date will be maintained in a
separate account which will be nonforfeitable at all times. The assets of the
Trust will be valued annually at fair market value as of the last day of the
Plan Year. On such date, the earnings and losses of the Trust attributable to
the accumulated deductible voluntary contributions will be allocated to each
Participant's deductible voluntary contributions account in the ratio that such
account balance bears to all such account balances. No part of the deductible
voluntary contributions account will be used to purchased life insurance.
7.10 Provisions Concerning Elective Deferrals
7.10 (a) If the Employer elects in Item 7A of the Adoption Agreement to
permit Employees to make Elective Deferrals, each Participant may elect to have
the Employer make Elective Deferrals on his or her behalf by executing a Salary
Reduction Agreement. The amount of Elective Deferrals that may be made on behalf
of a Participant for a Plan Year shall equal the Salary Reduction Contributions
Percentage selected by the Participant in the Salary Reduction Agreement. If the
Employer elects in Item 7B of the Adoption Agreement to make additional
contributions to the Plan for its Employees, such contributions may be allocated
irrespective of whether or not the Employee has executed a Salary Reduction for
such Plan Year or, if the Employer is using a non-Standardized Plan, may be
allocated only to those Employees who executed a Salary Reduction Agreement. If
the contribution is to be allocated irrespective of whether or not the Employee
has executed a Salary Reduction Agreement, the Employer shall advise the Trustee
at the time the contribution is made as to whether the contribution is to be
considered a Qualified Employer Contribution. If the Employer determines to make
a contribution only for those Employees who execute a Salary Reduction
Agreement, such contribution shall be based on a percentage selected by the
Employer in Item 7C of the Adoption Agreement of the amount the Employee has
elected under the Salary Reduction Agreement.
(b) The reduction in a Participant's annual Compensation shall be made
by the Employer as of each payroll period and upon payment of any bonus, unless
the Employer elects to withhold the amounts on another consistent and
nondiscriminatory basis.
(c) A Salary Reduction Agreement shall be valid until modified by the
Participant. A Participant shall modify a Salary Reduction Agreement by filing a
written notice with the Committee that the Salary Reduction Agreement shall be
modified. Such modification shall be effective not sooner than thirty (30) days
after the notice is delivered. To the extent the Committee does not establish
rules to the contrary, a Salary Reduction Agreement must be executed no later
than the last day of the Plan Year. No Salary Reduction
<PAGE> 50
Agreement shall have retroactive effect. Except to the extent the Employer
otherwise elects in Item 7F of the Adoption Agreement, the Committee may, in its
sole discretion, allow a Participant to change the percentage of Elective
Deferrals selected in a Salary Reduction Agreement during a Plan Year provided
they treat all Participants similarly situated in a similar manner. In all
events, a Participant shall have the right at least once during each calendar
year to modify the amount or frequency of his or her Elective Deferrals, or to
discontinue such Contributions.
(d) Notwithstanding the provisions of Section 7.10(c), the Salary
Reduction Agreement shall be deemed amended upon notice to the Employer and the
Employee from the Committee that a reduction in the Salary Reduction
Contributions Percentage selected in the Salary Reduction Agreement is required
to prevent
(1) the Elective Deferrals from exceeding the amount set forth in
Section 7.12(b); or
(2) the Annual Additions from exceeding the Maximum Permissible
Amount; or
(3) the sum of the Elective Deferrals and, if applicable,
Qualified Employer Contributions, from exceeding an amount which would cause the
Plan to violate the discrimination tests set forth in section 401(k) of the Code
as set forth in Section 7.12(b)
(e) A Participant may assign to this Plan any Excess Elective
Deferrals made during a taxable year of the Participant by notifying the
Committee on or before the date specified in Item 7H of the Adoption Agreement
of the amount of the Excess Elective Deferrals to be assigned to the Plan.
Notwithstanding any other provision in the Plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto, shall be
distributed no later than April 15 to any Participant to whose accounts such
Excess Elective Deferrals were assigned for the preceding Year and who claims
Excess Elective Deferrals for such taxable year.
Excess Elective Deferrals shall be adjusted for income or loss up to
the date of distribution. The income or loss allocable to Excess Elective
Deferrals is the sum of:
(1) income or loss allocable to the Participant's Elective
Deferral account for the taxable year multiplied by a fraction, the numerator of
which is such Participant's Excess Elective Deferrals for the year and the
denominator of which is the Participant's Accrued Benefit attributable to
Elective Deferrals without regard to any income or loss occurring during such
taxable year; and
(2) ten (10%) percent of the amount determined under (1)
multiplied by the number of whole calendar months between the end of the
Participant's taxable year and the date of distribution, counting the month of
distribution if distribution occurs after the fifteenth (15th) of such month.
A Participant is deemed to notify the Committee of any Excess Elective Deferrals
that arise by taking into account only those Elective Deferrals made to this
Plan and any other plans of the Employer.
(f) Notwithstanding any other provision of the Plan, Excess
Contributions, plus any income and minus any loss allocable thereto, shall be
distributed no later than the last day of each Plan Year to Participants to
<PAGE> 51
whose accounts such Excess Contributions were allocated for the preceding Plan
Year. If such excess amounts are distributed more than two and one-half (2 1/2)
months after the last day of the Plan Year in which such excess amounts arose, a
ten (10%) percent excise tax will be imposed on the employer maintaining the
Plan with respect to such amounts. Such distributions shall be made to Highly
Compensated Employees on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees. Excess Contributions shall
be allocated to Participants who are subject to the Family Member aggregation
rules of section 414(q)(6) of the Code in the manner prescribed by Income Tax
Regulations.
Excess Contributions, including the amounts recharacterized,
shall be treated as Annual Additions under the Plan.
Excess Contributions shall be adjusted for any income or loss up
to the date of distribution. The income or loss allocable to Excess
Contributions is the sum of:
(A) income or loss allocable to the Participant's Elective
Deferral account and, if applicable, the Qualified Non-elective Contribution
account or the Qualified Matching Contributions account or both for the Plan
Year multiplied by a fraction, the numerator of which is such Participant's
Excess Contributions for the year and the denominator of which is the
Participant's Accrued Benefit attributable to Elective Deferrals and Qualified
Non-elective Contributions or Qualified Matching Contributions, or both, if any
of such contributions are included in the ADP test, without regard to any income
or loss occurring during such Plan Year; and
(B) ten (10%) percent of the amount determined under (A)
multiplied by the number of whole calendar months between the end of the Plan
Year and the date of distribution, counting the month of distribution if
distribution occurs after the fifteenth (15th) of such month.
Excess Contributions shall be distributed from the Participant's Elective
Deferral account and Qualified Matching Contribution account, if applicable, in
proportion to the Participant's Elective Deferrals and Qualified Matching
Contributions to the extent used in the ADP test for the Plan Year. Excess
Contributions shall be distributed from the Participant's Qualified Non-elective
Contribution account only to the extent that such Excess Contributions exceed
the balance in the Participant's Elective Deferral account and Qualified
Matching Contribution account.
A Participant may treat his or her Excess Contributions as an
amount distributed to the Participant and then contributed by the Participant to
the Plan. Recharacterized amounts will remain nonforfeitable and subject to the
same distribution requirements as Elective Deferrals. Amounts may not be
recharacterized by a Highly Compensated Employee to the extent that such amount
in combination with other Employee Contributions made by that Employee would
exceed any stated limit under the Plan on Employee Contributions.
Recharacterization must occur no later than two and one-half (2 1/2) months
after the last day of the Plan Year in which such Excess Contributions arose and
is deemed to occur no earlier than the date the last Highly Compensated Employee
is informed in writing of the amount recharacterized and the consequences
thereof. Recharacterized amounts will be taxable to the Participant for the
Participant's tax year in which the Participant would have received them in
cash.
(g) Notwithstanding any other provision of the Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall be
forfeited, if forfeitable, or if not forfeitable, distributed no
<PAGE> 52
later than the last day of each Plan Year to Participants to whose accounts such
Excess Aggregate Contributions were allocated for the preceding Plan Year.
Excess Aggregate Contributions shall be allocated to Participants who are
subject to the Family Member aggregation rules of section 414(q)(6) of the Code
in the manner prescribed by Income Tax Regulations. If such Excess Aggregate
Contributions are distributed more than two and one-half (2 1/2) months after
the last day of the Plan Year in which such excess amounts arose, a ten (10%)
percent excise tax will be imposed on the Employer maintaining the Plan with
respect to those amounts. Excess Aggregate Contributions shall be treated as
Annual Additions under the Plan.
(1) Excess Aggregate Contributions shall be adjusted for income
or loss up to the date of distribution. The income or loss allocable to Excess
Aggregate Contributions is the sum of:
(A) income or loss allocable to the Participant's Employee
Contribution account, Matching Contribution account or Qualified Matching
Contribution Account, if any, and if all amounts therein are not used in the ADP
test, and, if applicable, Qualified Non-elective Contribution account and
Elective Deferral account for the Plan Year multiplied by a fraction, the
numerator of which is such Participant's Excess Aggregate Contributions for the
year and the denominator of which is the Participant's account balance or
balances attributable to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and
(B) ten (10%) percent of the amount determined under (A)
multiplied by the number of whole calendar months between the end of the Plan
Year and the date of distribution, counting the month of distribution if
distribution occurs after the fifteenth (15th) of such month.
(2) Forfeitures of Excess Aggregate Contributions may either be
reallocated to the accounts of not Highly Compensated Employees or applied to
reduce Employer Contributions, as elected by the Employer in Item 7I of the
Adoption Agreement. Excess Aggregate Contributions shall be forfeited, if
forfeitable or distributed on a pro rata basis from the Participant's Employee
Contribution account, Matching Contribution account, and Qualified Matching
Contribution account and, if applicable, the Participant's Qualified
Non-elective Contribution account or Elective Deferral account, or both.
(h) Matching Contributions shall be vested in accordance with the
election made in Item 7C of the Adoption Agreement. In any event, Matching
Contributions shall be fully vested at Normal Retirement Age, upon the complete
or partial termination of the Plan, or upon the complete discontinuance of
Employer contributions. Forfeitures of Matching Contributions, other than Excess
Aggregate Contributions, shall be made in accordance with the election made by
the Employer in Item 7D of the Adoption Agreement.
(i) If elected by the Employer in Item 7C of the Adoption Agreement,
the Employer will make Qualified Matching Contributions to the Plan.
7.11 The Average Contribution Percentage Test
7.11 (a) The Average Contribution Percentage (also known as "ACP") for
Participants who are Highly Compensated Employees for each Plan Year and the
Average Contribution Percentage for Participants who are not Highly Compensated
Employees for the same Plan Year must satisfy one of the following tests:
(1) the Average Contribution Percentage for Participants who
<PAGE> 53
are Highly Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Participants who are not Highly Compensated
Employees for the same Plan year by more than 1.25; or
(2) the Average Contribution Percentage for Participants who are
Highly Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for the Participants who are not Highly Compensated
Employees for the same Plan Year multiplied by two (2), provided that the
Average Contribution Percentage for Participants who are Highly Compensated
Employees does not exceed the Average Contribution Percentage for Participants
who are not Highly Compensated Employees by more than two (2) percentage points
or such lesser amount as the Secretary of the Treasury shall prescribe to
prevent the multiple use of this alternative limitation with respect to any
Highly Compensated Employee.
(b) If one or more Highly Compensated Employees participate in both a
cash or deferred arrangement and a plan subject to the ACP test maintained by
the Employer and the sum of the ADP and ACP of those Highly Compensated
Employees subject to either or both tests exceeds the Aggregate Limit, then the
ACP of those Highly Compensated Employees who also participate in a cash or
deferred arrangement will be reduced, beginning with such Highly Compensated
Employee whose ACP is the highest, so that the limit is not exceeded. The amount
by which each Highly Compensated Employee's Contribution Percentage Amounts is
reduced shall be treated as an Excess Aggregate Contribution. The ADP and ACP of
the Highly Compensated Employees are determined after any corrections required
to meet the ADP and ACP tests. Multiple use does not occur if both the ADP and
ACP of the Highly Compensated Employees does not exceed 1.25 multiplied by the
ADP and ACP of the not Highly Compensated Employees.
(c) For purposes of this Section 7.11, the Contribution Percentage for
any Participant who is a Highly Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his or her account under two or
more plans described in section 401(a) of the Code, or arrangements described in
section 401(k) of the Code, that are maintained by the Employer, shall be
determined as if the total of such Contribution Percentage Amounts was made
under each Plan. If a Highly Compensated Employee participates in two or more
cash or deferred arrangements that have different Plan Years, all cash or
deferred arrangements ending with or within the same calendar year shall be
treated as a single arrangement. Notwithstanding the foregoing, certain plans
shall be treated as separate if mandatorily disaggregated under regulations
under section 4.01(m) of the Code.
(d) In the event that this Plan satisfies the requirements of section
410(b) of the Code only if aggregated with one or more other plans, or if one or
more other plans satisfy the requirements of section 410(b) of the Code only if
aggregated with this Plan, then Section 7.11 shall be applied by determining the
Contribution Percentage of Employees as if all such plans were a single plan.
For Plan Years beginning after December 31, 1989, plans may be aggregated in
order to satisfy section 401(m) of the Code only if they have the same Plan
Year.
(e) For purposes of determining the Contribution Percentage of an
Employee who is a 5-percent owner or one of the ten (10) most highly paid Highly
Compensated Employees, the Contribution Percentage Amounts and Compensation of
such Employee shall include the Contribution Percentage Amounts and Compensation
for the Plan Year of Family Members, as defined in section 414(q)(6) of the
Code. Family Members, with respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the Contribution Percentage
both for Employees who are not Highly
<PAGE> 54
Compensated Employees and for Employees who are Highly Compensated Employees.
(f) For purposes of determining the Contribution Percentage test,
Employee Contributions are considered to have been made in the Plan Year in
which contributed to the Trust. Matching Contributions and Qualified
Non-elective Contributions will be considered made for a Plan Year if made no
later than the end of the twelve (12) month period beginning on the day after
the close of the Plan Year.
(g) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Non-elective
Contributions or Qualified Matching Contributions, or both, used in such test.
(h) The determination and treatment of the Contribution Percentage of
any Employee shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
(i) The Employer may elect to make Qualified Non-elective
Contributions under the Plan on behalf of Employees to the extent elected in
Item 7C of the Adoption Agreement. In addition, in lieu of distributing Excess
Contributions or Excess Aggregate Contributions, and the to extent elected by
the Employer in Item 7C of the Adoption Agreement, the Employer may make
Qualified Non-elective Contributions on behalf of not Highly Compensated
Employees that are sufficient to satisfy either the ADP test or the ACP test, or
both, pursuant to Income Tax Regulations.
7.12 The Actual Deferral Percentage Test
7.12 (a) No Participant shall be permitted to make Elective Deferrals under
this Plan, or any other qualified plan maintained by the Employer, during any
taxable year, in excess of the dollar limitation contained in section 402(g) of
the Code in effect at the beginning of such taxable year.
(b) The Actual Deferral Percentage for Participants who are Highly
Compensated Employees for each Plan Year, and the ADP for Participants who are
not Highly Compensated Employees for the same Plan Year must satisfy one of the
following tests:
(1) the ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants who are not Highly
Compensated Employees for the same Plan Year multiplied by 1.25; or
(2) the ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants who are not Highly
Compensated Employees for the same Plan Year multiplied by 2.0, provided that
the ADP for Participants who are Highly Compensated Employees does not exceed
the ADP for Participants who are not Highly Compensated Employees by more than
two (2) percentage points.
(3) Special Rules:
(A) The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have Elective Deferrals and
Qualified Non-elective Contributions or Qualified Matching Contributions, or
both, if treated as Employer contributions for purposes of the ADP test,
allocated to his or her accounts under two or more arrangements described in
section 401(k) of the Code, that are maintained by the Employer, shall be
determined as if such Elective Deferrals and, if applicable, such Qualified
Non-elective Contributions, Qualified Matching Contributions, or both, were made
under a single arrangement. If a Highly Compensated Employee
<PAGE> 55
participates in two or more cash or deferred arrangements that have different
Plan Years, all cash or deferred arrangements ending with or within the same
calendar year shall be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under regulations under section 401(k) of the Code.
(B) In the event that this Plan satisfies the requirements
of sections 401(k), 401(a)(4), or 410(b) of the Code only if aggregated with one
or more other plans, or if one or more other plans satisfy the requirements of
such sections of the Code only if aggregated with this Plan, then this Section
shall be applied by determining the ADP of Employees as if all such plans were a
single plan. For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy section 401(k) of the Code only if they have the
same Plan Year.
(C) For purposes of determining the ADP of a Participant who
is a 5-percent owner or one of the ten (10) most highly paid Highly Compensated
Employees, the Elective Deferrals and Qualified Non-elective Contributions or
Qualified Matching Contributions, or both, if treated as Elective Deferrals for
purposes of the ADP test, and Compensation of such Participant shall include the
Elective Deferrals and, if applicable, Qualified Non-elective Contributions and
Qualified Matching Contributions, or both, and Compensation for the Plan Year of
Family Members, as defined in section 414(q)(6) of the Code. Family Members,
with respect to such Highly Compensated Employees, shall be disregarded as
separate employees in determining the ADP both for Participants who are not
Highly Compensated Employees and Participants who are Highly Compensated
Employees.
(D) For purposes of determining the ADP test, Elective
Deferrals, Qualified Non-elective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve (12) month period
immediately following the Plan Year to which contributions relate.
(E) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount of Qualified
Non-elective Contributions or Qualified Matching Contributions, or both, used in
such test.
(F) The determination and treatment of the ADP amounts of
any Participant shall satisfy such other requirements as may be prescribed by
the Secretary of the Treasury.
7.13 Service Requirement for Elective Deferrals
7.13 An Employee's eligibility to make Elective Deferrals may not be
conditioned upon his or her completion of more than one (1) Year of Service. An
Employee's eligibility to receive Matching Contributions, Qualified Matching
Contributions or Qualified Non-elective Contributions may be conditioned upon
his or her completion of up to two (2) Years of Service. No contributions or
benefits, other than Matching Contributions or Qualified Matching Contributions,
may be conditioned upon an Employee's Elective Deferrals.
ARTICLE VIII - LIMITATIONS ON ALLOCATIONS
8.01 Limitation for One Plan
8.01 If the Participant does not participate in, and has never participated
in another qualified plan or a welfare benefit fund, as defined
<PAGE> 56
in section 419(e) of the Code maintained by the Employer, or an individual
medical account, as defined in section 415(l)(2) of the Code, maintained by the
Employer, which provides an Annual Addition, the amount of Annual Additions
which may be credited to the Participant's Accrued Benefit for any Limitation
Year will not exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in this Plan. If the Employer contribution that would
otherwise be contributed or allocated to the Participant's Accrued Benefit would
cause the Annual Additions for the Limitation Year to exceed the Maximum
Permissible Amount, the amount contributed or allocated will be reduced so that
the Annual Additions for the Limitation Year will equal the Maximum Permissible
Amount.
(a) Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible Amount for a
Participant on the basis of a reasonable estimation of the Participant's
Compensation for the Limitation Year, uniformly determined for all Participants
similarly situated.
(b) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation Year will be
determined on the basis of the Participant's actual Compensation for the
Limitation Year.
(c) If, pursuant to Section 8.01(b) or as a result of the allocation
of forfeitures, there is an Excess Amount the excess will be disposed of as
follows:
(1) any nondeductible voluntary Employee contributions, to the
extent they would reduce the Excess Amount, will be returned to the Participant;
(2) if, after the application of Section 8.01(c)(1), an Excess
Amount still exists, and the Participant is covered by the Plan at the end of
the Limitation Year, the Excess Amount in the Participant's Account will be used
to reduce Employer contributions (including any allocation of forfeitures) for
such Participant in the next Limitation Year, and each succeeding Limitation
Year if necessary.
(3) if after the application of Section 8.01(c)(1) an Excess
Amount still exists, and the Participant is not covered by the Plan at the end
of a Limitation Year, the Excess Amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future Employer
contributions (including allocation of any forfeitures) for all remaining
Participants in the next Limitation Year, and each succeeding Limitation Year if
necessary;
(4) if a suspense account is in existence at any time during a
Limitation Year pursuant to this Section 8.01, it will not participate in the
allocation of the Trust's investment gains or losses. If a suspense account is
in existence at any time during a particular Limitation Year, all amounts in the
suspense account must be allocated and reallocated to Participants' Accounts
before any Employer or any Employee contributions may be made to the Plan for
that Limitation Year. Excess amounts may not be distributed to Participants or
former Participants.
8.02 Limitation for More than One Plan
8.02 This Section 8.02 applies if, in addition to this Plan, the
Participant is covered under another qualified master of prototype defined
contribution plan maintained by the Employer or a welfare benefit fund, as
<PAGE> 57
defined in section 419(e) of the Code, maintained by the Employer, or an
individual medical account, as defined in section 415(l)(2) of the Code,
maintained by the Employer, which provides an Annual Addition, during any
Limitation Year. Except as otherwise provided in Item 25 of the Adoption
Agreement, the Annual Additions which may be credited to a Participant's Accrued
Benefit under this Plan for any such Limitation Year will not exceed the Maximum
Permissible Amount reduced by the Annual Additions credited to a Participant's
account under the other plans and welfare benefit funds for the same Limitation
Year. If the Annual Additions with respect to the Participant under other
defined contribution plans and welfare benefit funds maintained by the Employer
are less than the Maximum Permissible Amount and the Employer contribution that
would otherwise be contributed or allocated to the Participant's Accrued Benefit
under this Plan would cause the Annual Additions for the Limitation Year to
exceed this limitation, the amount contributed or allocated will be reduced so
that the Annual Additions under all such plans and funds for the Limitation Year
will equal the Maximum Permissible Amount. If the Annual Additions with respect
to the Participant under such other defined contribution plans and welfare
benefit funds in the aggregate are equal to or greater than the Maximum
Permissible Amount, no amount will be contributed or allocated to the
Participant's Account under this Plan for the Limitation Year.
(a) Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible Amount for a
Participant in the manner described in Section 8.01(a).
(b) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation year will be
determined on the basis of the Participant's actual Compensation for the
Limitation Year.
(c) If, pursuant to Section 8.02(b) or as a result of the allocation
of forfeitures a Participant's Annual Addition under this Plan and such other
plans would result in an Excess Amount for a Limitation Year, the Excess Amount
will be deemed to consist of the Annual Additions last allocated except that
Annual Additions attributable to a welfare benefit fund or individual medical
account will be deemed to have been allocated first regardless of the actual
allocation date.
(d) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of another
plan, the Excess Amount attributed to this plan will be the product of,
(1) the total Excess Amount allocated as of such date, times
(2) the ratio of
(A) the Annual Additions allocated to the Participant for
the Limitation Year as of such date under this Plan to
(B) the total Annual Additions allocated to the Participant
for the Limitation Year as of such date under this and all the other qualified
master or prototype defined contribution plans.
(e) Any Excess Amount attributed to this Plan will be disposed in the
manner described in Section 8.01 (c).
8.03 Limitation for Non-Prototype Plan
<PAGE> 58
8.03 If the Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a master or prototype
plan, Annual Additions which may be credited to the Participant's Account under
this Plan for any Limitation Year will be limited in accordance with Section
8.02 as though the other plan was a master or prototype plan unless the Employer
provides other limitations in Item 25 of the Adoption Agreement.
8.04 Combined Plan Limit
8.04 If the Employer maintains or at any time maintained, a qualified
defined benefit plan other than a Paired Plan 02-001 or 02-003 covering any
Participant in this Plan, the sum of the Participant's Defined Benefit Plan
Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any
Limitation Year. The Annual Additions which may be credited to the Participant's
Account under this Plan for any Limitation Year will be limited in accordance
with Item 25 of the Adoption Agreement.
8.05 Definitions
8.05 Definitions.
(a) Annual Additions: The sum of the following amounts credited to a
Participant's Account for the Limitation Year:
(1) Employer contributions;
(2) forfeitures; and
(3) Employee contributions; and
(4) amounts allocated, after March 31, 1984, to an individual
medical account, as defined in section 415(l)(2) of the Code, which is part of a
pension or annuity plan maintained by the Employer are treated as Annual
Additions to a defined contribution Plan. Also amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to post-retirement medical benefits,
allocated to the separate account of a Key Employee, as defined in section
419A(d)(3) of the Code, under a welfare benefit fund, as defined in section
419(e) of the Code, maintained by the Employer are treated as Annual Additions
to a defined contribution Plan.
For this purpose, any Excess Amount applied under Sections 8.01(c) or
8.02(e) in the Limitation Year to reduce Employer contributions will be
considered Annual Additions for such Limitation Year.
(b) Compensation: As elected by the Employer in Item 4A of the
Adoption Agreement, Compensation shall mean all of a Participant's:
(1) Section 3121 wages. Section 3121 wages are wages as defined
in section 3121(a) of the Code, for purposes of calculating Social Security
taxes, but determined without regard to the wage base limitation in section
3121(a)(1), the limitations on the exclusions from wages in section
3121(a)(5)(C) and (D) for elective contributions and payments by reason of
salary reduction agreements, the special rules in section 3121(v), any rules
that limit covered employment based on the type or location of an Employee's
Employer, and any rules that limit the remuneration included in wages based on
familial relationship or based on the nature or location of the employment or
the services performed, such as the exceptions to the definition of employment
in section 3121(b)(1) through section 3121(b)(20).
<PAGE> 59
(2) Section 3401(a) wages. Section 3401(a) wages are wages as
defined in section 3401(a) of the Code for the purposes of income tax
withholding at the source, but determined without regard to any rules that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed, such as the exception for agricultural
labor in section 3401(a)(2).
(3) 415 safe harbor Compensation. 415 safe harbor compensation
shall mean a Participant's Earned Income, wages, salaries, and fees for
professional services, and other amounts received (without regard for whether or
not an amount is paid in cash) for personal services actually rendered in the
course of employment with the Employer maintaining the Plan to the extent that
the amounts are includable in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, reimbursements and expense allowances) excluding the following:
(A) Employer contributions to a plan of deferred
compensation which are not included in the Employee's gross income for the
taxable year in which contributed, or Employer contributions under a Simplified
Employee Pension Plan to the extent such contributions are deductible by the
Employee, or any distributions from a plan of deferred compensation;
(B) Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property) held by the Employee either
becomes freely transferable or is no longer subject to a substantial risk of
forfeiture;
(C) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(D) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity described in section 403(b) of the
Code (whether or not the amounts are actually excludable from the gross income
of the Employee).
For Limitation Years beginning after December 31, 1991, for purposes of applying
the limitations of Section 8.05(b), Compensation for any Limitation Year is the
Compensation actually paid or includable in gross income during such Limitation
Year.
Notwithstanding the preceding sentence, if the Employer so elects in Item
6C of the Adoption Agreement, Compensation for a Participant in a defined
contribution Plan who is permanently and totally disabled (as defined in section
22(e)(3) of the Code) is the Compensation such Participant would have received
for the Limitation Year if the Participant was paid at the rate of Compensation
paid immediately before becoming permanently and totally disabled; such imputed
Compensation for the disabled Participant may be taken into account only if the
Participant is not a Highly Compensated Employee, as defined in section 414(q)
of the Code, and contributions made on behalf of such Participant are
nonforfeitable when made.
(c) Defined Benefit Fraction: 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 the Employer, and the
denominator of which is the lesser of one hundred twenty-five (125%) percent
<PAGE> 60
of the dollar limitation determined for the Limitation Year under section 415(b)
and (d) of the Code or one hundred forty (140%) percent of the highest average
Compensation, including any adjustments under section 415(b) of the Code.
Notwithstanding the above if the Participant was a Participant as of the
first day of the first Limitation Year beginning after December 31, 1986, in one
or more defined benefit plans maintained by the Employer which were in existence
on or before May 6, 1986, the denominator of this fraction will not be less than
one hundred twenty-five (125%) percent of the sum of the annual benefits under
such plans which the Participant had accrued as of the the close of the last
Limitation Year beginning before January 1, 1987, disregarding any changes in
the terms and conditions of the Plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of section 415 of the Code for all Limitation Years
beginning before January 1, 1987.
(d) Defined Contribution Fraction: A fraction, the numerator of which
is the sum of the Annual Additions to the Participant's Account under all the
defined contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years, (including the Annual
Additions attributable to the Participant's nondeductible Employee contributions
to this and all other defined benefit plans, whether or not terminated,
maintained by the Employer, and the Annual Additions attributable to all welfare
benefit funds, as defined in section 419(e) of the Code, and individual medical
accounts as defined in section 415(l)(2) of the Code maintained by the
Employer), and the denominator of which is the sum of the Maximum Aggregate
Amounts for the current and all prior Limitation Years of Service with the
Employer (regardless of whether a defined contribution plan was maintained by
the Employer). The Maximum Aggregate Amount in any Limitation Year is the lesser
of one hundred twenty-five (125%) percent of the dollar limitation in effect
under section 415(c)(1)(A) of the Code or thirty-five (35%) percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more defined
contribution plans maintained by the Employer which were in existence on or
before May 6, 1986, the numerator of this fraction will be adjusted if the sum
of this fraction and the Defined Benefit Fraction would otherwise exceed 1.0
under the terms of this Plan. Under the adjustment, an amount equal to the
product of
(1) the excess of the sum of the fractions over 1.0 times
(2) the denominator of this fraction, will be permanently
subtracted from the numerator of this fraction.
The adjustment is calculated using the fractions as they would be computed as of
the end of the last Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan made after May
5, 1986, but using the section 415 limitation applicable to the first Limitation
Year beginning on or after January 1, 1987.
The Annual Addition for any Limitation Year beginning before January 1, 1987,
shall not be recomputed to treat all Employee contributions as Annual Additions.
(e) Employer: For purposes of this Article VIII, Employer shall mean
the Employer that adopts this Plan, and all members of a controlled group of
corporations (as defined in section 414(b) of the Internal Revenue Code as
<PAGE> 61
modified by section 415(h)), all commonly controlled trades or businesses (as
defined in section 414(c) as modified by section 415(h)) or affiliated service
groups (as defined in section 414(m)) of which the adopting Employer is a part,
and any other entity required to be aggregated with the Employer pursuant to
regulations under section 414(o) of the Code.
(f) Excess Amount: The excess of the Participant's Annual Additions
for the Limitation Year over the Maximum Permissible Amount.
(g) Highest Average Compensation: The average Compensation for the
three (3) consecutive Years of Service with the Employer that produces the
highest average. A Year of Service for this purpose shall be measured by the
Limitation Year.
(h) Limitation Year: A calendar year, or the twelve (12) consecutive
month period elected by the Employer in Item 16 of the Adoption Agreement. All
qualified plans maintained by the Employer must use the same Limitation Year. If
the Limitation Year is amended to a different twelve (12) consecutive month
period, the new Limitation Year must begin on a date within the Limitation Year
in which the amendment is made.
(i) Master or Prototype Plan: A plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(j) Maximum Permissible Amount: The maximum Annual Addition that may
be contributed or allocated to a Participant's Account under the Plan for any
Limitation Year which shall not exceed the lesser of:
(1) the defined contribution dollar limitation, or
(2) twenty-five (25%) percent of the Participant's
Compensation for the Limitation Year.
The Compensation limitation referred to above shall not apply to any
contribution for medical benefits, within the meaning of section 401(h) of the
Code or section 419A(f)(2) of the Code which is otherwise treated as an Annual
Addition under section 415(l)(2) or 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment changing the
Limitation Year to a different 12 consecutive month period, the Maximum
Permissible Amount will not exceed the defined contribution dollar limitation
multiplied by the following fraction:
number of months in the short Limitation Year
---------------------------------------------
12
(k) Projected Annual Benefit: The annual retirement benefit (adjusted
to an actuarially equivalent straight life annuity if such benefit is expressed
in a form other than a straight life annuity or qualified Joint and Survivor
Annuity) to which the Participant would be entitled under the terms of the plan
assuming:
(1) the Participant will continue employment until Normal
Retirement Age under the plan (or current Age, if later), and
(2) the Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine benefits under the plan
will remain constant for all future Limitation Years.
<PAGE> 62
(l) Defined Contribution Dollar Limitation: Thirty Thousand
($30,000) Dollars or, if greater, one-fourth of the defined benefit dollar
limitation set forth in section 415(b)(1) of the Code as in effect for the
limitation year.
ARTICLE IX - INVESTMENT FUND
9.01 Maintenance of Investment Fund
9.01 The Trustee shall maintain an Investment Fund for the purposes of
accumulating funds necessary to pay benefits under the Plan. Subject to the
terms of the Trust if a separate Trust agreement is executed, the Trustee shall
invest and reinvest the principal and income of the Investment Fund, without
distinction between principal and income, in such property, real or personal,
wherever situated, as the Trustee may deem advisable, including, but not limited
to, variable annuity contracts, stocks, common or preferred, bonds and
mortgages, mutual funds, and other evidences of indebtedness or ownership. In
making such investment, the Trustee shall not be restricted to securities or
other property of the character authorized or required by applicable law from
time to time for trust investments, but shall be controlled by the provisions of
Sections 14.04 and 14.05.
Notwithstanding the provisions of the preceding paragraph, if the Employer
so elects in Item 8E of the Adoption Agreement, the Committee shall establish a
selection of investment alternatives and give each Participant the opportunity
to determine the extent to which his or her Accrued Benefit is to be invested in
each alternative. If the Committee provides such a selection, the Committee and
the Trustee shall have no responsibility for the prudence or diversity of the
investment selection made by the Participant, and the Participant's Accrued
Benefit shall consist of the assets in which such investment is directed to the
extent of such direction. To the extent the Participant does not select the
investment of his or her Accrued Benefit, such amounts shall be invested in
accordance with the other provisions of the Plan and Trust.
9.02 Powers of Trustee
9.02 Subject to the terms of the Trust if a separate Trust agreement is
executed, the Trustee shall have the following powers and authority in the
administration and investment of the Investment Fund.
(a) To purchase, or subscribe for, securities or other property, and
to retain the same in trust;
(b) To sell, exchange, convey, transfer or otherwise dispose of
securities or other property held by the Trustee by private contract or at
public auction. No person dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the validity, expedience,
or propriety of any such sale or other disposition;
(c) To vote upon stocks, bonds or other securities; to give general or
special proxies or powers of attorney with or without power of substitution; to
exercise conversion privileges, subscription rights, or other options, and to
make payments incidental thereto; to oppose, or to consent to, or otherwise
participate in, corporate reorganizations or other changes affecting corporate
securities, and to delegate discretionary powers, and to pay assessments or
charges in connection therewith; and generally to exercise any of the powers of
an owner with respect to stocks, bonds, securities or other property held as
part of the investment.
<PAGE> 63
(d) To cause securities or other property held as part of the
Investment Fund to be registered in its own name or names, or in the name of one
or more of their nominees, and to hold investments in bearer form, but the books
and records of the Trustee shall at all times show that all such investments are
part of the Investment Fund;
(e) To borrow or raise money for the purpose of the Trust in such
amount, and upon such terms and conditions, as the Trustee may deem advisable;
and for any sum so borrowed to issue its promissory note as Trustee, and to
secure the repayment thereof by pledging all, or any part, of the Investment
Fund; and no person lending money to the Trustee shall be bound to see to the
applications of the money lent or to inquire into the validity, expedience, or
propriety of any such borrowing.
(f) To keep such portion of the Investment Fund in cash as the Trustee
may, from time to time, determine to be in the best interest of this Trust,
without liability for interest thereon.
(g) Except as otherwise permitted by law, under no circumstances shall
the Trustee(s) maintain the indicia of ownership of any Trust assets outside the
jurisdiction of the district courts of the United States.
(h) Except as otherwise permitted by law, under no circumstances shall
the Trustee purchase any form of security issued by the Employer, or any real
property owned by or leased to the Employer.
9.03 Assets to be Valued at Fair Market Value
9.03 The Trustee shall value the Trust assets and liabilities annually at
fair market value as of the last day of each Plan Year, unless a different
Valuation Date or Dates has been selected by the Employer in Item 10 of the
Adoption Agreement. Such gains and losses shall be allocated to each
Participant's Account in the ratio that such Account bears to all Account
balances.
9.04 Deposit of Funds with Depository
9.04 At the direction of the Committee, or as otherwise provided in the
Trust if a separate Trust agreement is executed, the Trustee shall have the
power to enter into arrangements for the deposit of funds with an Insurer, bank
or trust company, and in connection therewith:
(a) to authorize such depository to act as custodian of the cash,
securities or other property comprising such funds;
(b) to authorize such depository to convert the funds in whole or in
part into, or to invest and reinvest the same in, securities of any kind and
nature whatsoever;
(c) if deemed advisable, to authorize such depository to invest such
funds in any trust fund created and maintained by such depository as trustee for
the collective investment of funds of trusts for employee benefit plans
qualified under section 401(a) of the Internal Revenue Code of 1986 (or
corresponding provision of any Federal Revenue law at the time in effect), the
instrument creating such collective trust, together with any amendments,
modifications or supplements thereto at the time in effect being hereby
effective when and as any such investment is made, incorporated in, and make a
part hereof; and
<PAGE> 64
(d) to provide for the payment to the depository of reasonable
compensation for its services.
9.05 Appointment of Investment Manager
9.05 At the direction of the Committee, or as otherwise provided in the
Trust if a separate Trust agreement is executed, the Trustee shall have the
authority to enter into arrangements with an investment manager or managers to
manage assets of the Trust, and such appointment may include the power to
acquire and dispose of such assets. Such investment managers shall be entitled
to reasonable compensation for their services, payable from Trust assets.
ARTICLE X - ACCOUNT
10.01 Allocation of Gains and Losses
10.01 The Account established and maintained for each Participant covering
the amounts allocated from Employer and Employee contributions shall reflect all
credits to the Investment Fund by reason of:
(a) income and realized and unrealized gains to the Investment Fund;
(b) allocation to the Investment Fund from contributions to the
Plan;
(c) any Policy dividends or other credits on the insurance
contracts;
and shall reflect all charges to the Investment Fund by reason of:
(x) realized and unrealized losses of the Investment Fund;
(y) expenses of the Trustee allocated to the Investment Fund;
(z) any amount withdrawn from the Investment Fund in accordance with
the provisions of the Plan.
The credits set forth in Section 10.01(b) and (c) will be allocated
only after all other credits and charges have been allocated.
10.02 Method of Allocation of Gains
10.02 Except to the extent elected in Item 8F of the Adoption Agreement,
income and realized and unrealized gains to the Investment Fund will be
allocated to each Participant's Account in the proportion that his or her
Account at the last preceding Valuation Date bears to the aggregate of all
Participants' Accounts at that time.
10.03 Method of Allocation of Losses
10.03 Except to the extent elected in Item 8F of the Adoption Agreement,
expenses and any realized and unrealized losses of the Investment Fund will be
charged to each Participant's Account in the proportion that his or her Account
at the last preceding Valuation Date bears to the aggregate of all Participants'
Accounts at that time.
ARTICLE XI - THE COMMITTEE
<PAGE> 65
11.01 Designation of Committee Members
11.01 The board of directors of the Employer or, if the Employer is not
incorporated, a partner or proprietor of the Employer, shall appoint one or more
persons who shall be designated as the Committee. The initial Committee members
shall be designated in the Adoption Agreement. The Committee shall have all
powers necessary for the performance of its duties hereunder. A Committee member
may, but need not, be an officer or Employee of the Employer. The Committee
shall be the fiduciary with the sole power to control and manage the operation
and administration of the Plan. Except as provided in Sections 9.04 and 9.05,
the Committee shall not delegate any of the power and authority vested in it.
11.02 Resignation and Replacement of Committee
11.02 The members of the Committee shall serve at the pleasure of the
Employer with such compensation as may be prescribed by such Employer. Any
Committee member may resign by a written notice addressed to the Employer. The
Employer shall fill any vacancy in the Committee which may occur from time to
time. The appointment of a Committee member shall become effective upon his or
her acceptance, in writing, addressed to the Employer, and upon such acceptance
such Committee member shall be vested with all the rights, powers, and duties of
his or her predecessor. No Committee member who receives full-time compensation
from the Employer shall be compensated for his or her services as a Committee
member.
11.03 Committee to Interpret Plan
11.03 The Committee shall have the power and authority either alone or on
advice of counsel to reconcile any inconsistencies and to construe and interpret
the provisions of the Plan, and to determine all questions with respect to the
individual rights of Participants, Retired Participants and their Beneficiaries.
11.04 Committee to Establish Funding Policy
11.04 The Committee shall establish a funding policy and method consistent
with the objectives of the Plan, and shall communicate same to the Trustee. The
Committee shall discharge its duties solely in the interest of the Participants
and their Beneficiaries.
11.05 Prudent Man Rule
11.05 The Committee shall act at all times with the care, skill, prudence
and diligence under the circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, and shall direct the Trustee
to diversify the investments so as to minimize the risk of large losses unless
under the circumstances it is prudent not to do so.
11.06 Committee Not Liable If Prudent
11.06 Provided the Committee acts in accordance with the provisions of
Sections 11.04 and 11.05, the Committee shall be free of any liability, joint or
several, to the Employer, any Employee, any Participant, Retired Participant or
Beneficiary for the making, retention or sale of any investment or reinvestment
made by it as herein provided or for any loss to or diminution of the assets of
the Trust. In addition, should the Committee select a custodian as provided in
Section 9.04, or an investment manager as provided in
<PAGE> 66
Section 9.05, to the extent that such selection is prudent, the Committee shall
be free of any liability for any acts or omissions of such custodian or
investment manager.
11.07 Vote of Committee
11.07 If more than one Committee member is appointed, they shall act by
majority vote, and action may be taken either by a vote at a meeting or in
writing without a meeting. Any one Committee member may sign, on behalf of all,
any papers which may be required.
11.08 Committee Members May Participate in Plan
11.08 No Committee member shall be precluded from becoming a Participant
under the Plan upon his or her meeting the eligibility requirements set forth in
Section 2.01.
11.09 Reimbursement of Committee Expenses
11.09 The Employer shall reimburse the Committee and its members for any
reasonable expense, including counsel fees, incurred in the administration of
the Plan.
11.10 Committee to Keep Records
11.10 The Committee shall keep accurate and detailed accounts of the
transactions effected hereunder and all accounts, books and records relating
thereto shall be open for inspection at all reasonable times by the Employer, or
any person designated by it. A Participant may inspect the Committee's records
only insofar as they relate to such Participant's own participation.
11.11 No Security Required
11.11 The Committee members shall not be required to give bond or other
security for the faithful performance of duties, unless required by Law.
11.12 Reliance Upon Written Authority
11.12 The Committee shall be fully protected in relying upon any written
instructions and direction of the Employer, and in taking any action upon any
instrument believed by the Committee to be genuine and signed and presented by
the proper person or persons. The Committee shall be under no duty to make any
investigation or inquiry as to any statement contained in any such writing, but
may accept the same as conclusive evidence of the truth and accuracy of the
statement therein contained.
11.13 Resolution of Disputes
11.13 In the event that any dispute shall arise as to any act to be
performed by the Committee, they may postpone performance until adjudication of
such dispute in a court of competent jurisdiction or until indemnified against
loss to their satisfaction.
11.14 Prohibition on Self Dealing
11.14 The Committee, any custodian designated in accordance with Section
9.04, and any investment manager designated in accordance with Section 9.05,
shall not, either directly or indirectly, deal with the assets of the Trust for
it, his or her own interest or account; act in any transaction involving the
Plan on behalf of a party whose interests are adverse to the interests of
<PAGE> 67
the Plan, or any Participant or Beneficiary; or receive any consideration for
it, his or her own account from any party dealing with the Plan in connection
with a transaction involving Trust assets.
11.15 Prohibition Against Prohibited Transactions
11.15 (a) Neither the Committee, the Trustee nor any custodian designated
in accordance with Section 9.04, nor any investment manager designated in
accordance with Section 9.05, shall engage in any transaction he, she or they
know or should know constitutes a direct or indirect
(1) sale, exchange or lease of any property between the Trust
and a party-in-interest;
(2) lending of money or other extension of credit between the
Trust and a party-in-interest;
(3) furnishing of goods, services or facilities (other than
reasonable arrangements for office space, or legal, accounting or other services
necessary for the establishment or operation of the Plan or Trust) between the
Trust and a party-in-interest;
(4) transfer to, or use by or for the benefit of, a
party-in-interest any assets of the Trust.
(b) The term "party-in-interest" shall mean:
(1) The Committee and the Trustee;
(2) Any custodian designated in accordance with Section 9.04; or
any investment manager designated in accordance with Section 9.05;
(3) Anyone performing services, including legal or accounting
services, to the Plan or Trust;
(4) The Employer;
(5) Anyone who, directly or indirectly, owns fifty (50%) percent
or more of the combined voting power of all classes of stock, or fifty (50%)
percent of the total value of all classes of stock of the Employer;
(6) A spouse, ancestor, lineal descendant or spouse of a lineal
descendant of any individual described in Sections 11.15(b)(1), (2), (3), (4),
or (5);
(7) A corporation, partnership, trust or estate of which at least
fifty (50%) percent of the combined voting power of all classes of stock
entitled to vote or the total value of shares of all classes of stock of such
corporation, or at least fifty (50%) percent of the capital interest or profits
of such partnership, or at least fifty (50%) percent of the beneficial interest
of such Trust or estate is owned directly or indirectly by a party-in-interest
(other than as defined in Sections 11.15(b)(6), (7), (8) or (9);
(8) A ten (10%) percent or more (directly or indirectly in
capital or profits) partner or joint venture of a person described in Sections
11.15(b)(3), (4), (5), (6) or (7); and
(9) An employee, officer, director or owner, directly or
indirectly, of ten (10%) percent or more of the issued and outstanding shares
<PAGE> 68
of a person described in Section 11.15(b)(3), (4), (5), (6), (7) or (8).
ARTICLE XII - AMENDMENT
12.01 Sponsor or Mass Submitter to Amend Plan
12.01 Subject to the provisions of Sections 12.04 and 12.05, the Employer
the Committee and the Trustee, as initially and subsequently designated, hereby
delegate authority to the Sponsor to amend this Plan and Adoption Agreement at
any time and such amendments are deemed made with the consent of the Employer,
Committee and Trustee and on their behalf. Such amendments by the Sponsor may be
executed without the consent of any other party and shall be stated in
instruments executed by the Sponsor, copies of which shall be provided to each
Employer who shall provide copies of same to the the Committee and the Trustee.
Such amendments by the Sponsor shall bind each Employer, the Committee and the
Trustee, and all Participants and their Beneficiaries hereunder. The power to
amend granted to the Sponsor is in no way intended to, nor shall it be deemed
to, grant the Sponsor any discretionary power in the operation or management of
the Plan.
The amendments made by the Sponsor are limited solely to the form of the
Plan and Adoption Agreement. The Sponsor may not change an election previously
made by the Employer, and may not amend any provision of the Trust without the
consent of the Trustee.
12.02 Employer Amendments for Code 415 and 416
12.02 Subject to the provisions of Section 12.04 and 12.05, the Employer
may change the choice of options in the Adoption Agreement, add overriding
language in the Adoption Agreement when such language is necessary to satisfy
section 415 or 416 of the Code because of the required aggregation of multiple
plans, and add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause the Plan
to be treated as individually designed. The Employer may also attach to the Plan
a list of benefits protected under section 411(d)(6) of the Code if such
benefits must be protected as a result of a restatement of the Plan from an
individually designed plan to this prototype, or from another prototype to this
prototype. An Employer that amends the Plan for any other reason will no longer
participate in this Prototype and will be considered to have an individually
designed plan.
12.03 No Amendment to Violate Exclusive Benefit Rule
12.03 No amendment shall vest in the Employer, directly or indirectly, any
right, title, interest, or control over Policies purchased hereunder, or over
Trust funds subject to the terms of this Plan. No trust asset shall, by reason
of any amendment, be used for or diverted to purposes other than for the
exclusive benefit of Participants, Retired Participants, and their
Beneficiaries. No amendment shall reduce any vested right or interest to which
any Participant, Retired Participant or Beneficiary is then entitled hereunder.
The Employer may, however, make such retroactive amendments as may be required
by the Internal Revenue Service in order to initially qualify or maintain the
qualification of the Plan under the appropriate provisions of the Internal
Revenue Code of 1954, as amended, and of any other applicable statute.
12.04 Amendments Reducing Account
12.04 Notwithstanding the provisions of Section 12.03, a Participant's
<PAGE> 69
Account balance may be reduced to the extent permitted under section 412(c)(8)
of the Code.
An adopting Employer may amend the Plan by adding language to allow the
Plan to operate under a waiver of the minimum funding requirement.
12.05 Amendments Needing Committee or Trustee Consent
12.05 If any amendment by the Employer affects the rights, duties,
responsibilities, or obligations of the Committee or the Trustee hereunder, such
amendment may be made only with the consent of the Committee or the Trustee, as
the case may be. Any amendment to the Plan made by the Employer in accordance
with the provisions of this Section 12.05 shall become effective when a signed
copy has been delivered to the affected party.
12.06 Plan as Restatement
12.06 Subject to the provisions of Sections 12.04 and 12.05, an Employer
may adopt this Plan and Trust and the Adoption Agreement as a restatement of a
previously adopted pension plan other than this prototype. To do so, the
Employer must check Item C in the Introduction of the Adoption Agreement and
complete all Items in the Adoption Agreement.
12.07 Amendments to Vesting Schedule
12.07 No amendment to a Vesting Schedule shall deprive a Participant of his
or her nonforfeitable rights to benefits accrued to the date of the amendment.
Further, if the vesting schedule of the Plan is amended, or the Plan is amended
in any way that directly or indirectly affects the computation of a
Participant's nonforfeitable percentage, or if the Plan is deemed amended by an
automatic change to or from a Top-Heavy vesting schedule, each Participant with
at least three (3) Years of Service with the Employer may elect, within a
reasonable period after the adoption of the amendment or change, to have his or
her nonforfeitable percentage computed under the Plan without regard to such
amendment or change. For Participants who do not have at least one (1) Hour of
Service in any Plan Year beginning after December 31, 1988, the preceding
sentence shall be applied by substituting "five (5)" Years of Service" for
"three (3) Years of Service" where such language appears.
The period during which the election may be made shall commence with
the date the amendment is adopted or deemed to be made and shall end on the
latest of:
(a) sixty (60) days after the amendment is adopted;
(b) sixty (60) days after the amendment becomes effective; or
(c) sixty (60) days after the Participant is issued written notice of
the amendment by the Employer or the Committee.
12.08 No Decrease in Accrued Benefits
12.08 No amendment to the Plan shall be effective to the extent that it
has the effect of decreasing a Participant's Accrued Benefit. Notwithstanding
the preceding sentence, a Participant's Accrued Benefit may be reduced to the
extent permitted under section 412(c)(8) of the Code. For purposes of this
Section 12.08, a Plan amendment which has the effect of decreasing a
Participant's Accrued Benefit or eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment shall be
treated as reducing an Accrued Benefit. Furthermore, if the vesting schedule
<PAGE> 70
of the Plan is amended, in the case of an Employee who is a Participant as of
the later of the date such amendment is adopted or the date it becomes
effective, the nonforfeitable percentage determined as of such date of such
Employee's right to his or her Employer-derived Accrued Benefit will not be less
than his or her percentage computed under the Plan without regard to such
amendment.
ARTICLE XIII - TERMINATION OF PLAN
13.01 Employer Right to Terminate Plan
13.01 The Employer reserves the right at any time to terminate the Plan
and/or Trust for any reason or for no reason. The Employer shall notify the
Committee and the Trustee that it desires to terminate the Plan and/or Trust.
Upon termination or partial termination of the Plan, or the complete
discontinuance of contributions if the Plan is a profit sharing Plan, the rights
of all Participants to their Accrued Benefits shall be fully vested and
nonforfeitable.
13.02 Distribution on Termination
13.02 Subject to the provisions of Article V and upon termination of the
Employer's participation in the Plan under Section 13.01, the Committee shall
direct the Trustee to deliver all Policies acquired for the benefit of each
Participant to each Participant, and Trust funds subject to the provisions of
this Plan shall be distributed to each Participant according to the value of his
or her Account. Upon such distribution, the Trustee shall be discharged from all
obligations under the Plan, subject to the provisions of the Trust. Assets shall
be distributed on termination as soon as administratively feasible.
13.03 Events Resulting in Plan Termination
13.03 The Employer's participation under the Plan shall terminate in the
event of a legal adjudication of the Employer as a bankrupt; a general
assignment by the Employer to or for the benefit of its creditors; dissolution
of the Employer; sale or transfer of the Employer to another business
organization; or merger or consolidation of the Employer with another business
organization; unless the Plan is continued by a successor of the Employer by
agreement with the Trustee assuming the liabilities of the Plan. This Plan shall
not merge or consolidate with, or transfer assets or liabilities to, any other
plan unless each Participant in this Plan would (if the Plan 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).
ARTICLE XIV - MISCELLANEOUS
14.01 Plan Not Employment Contract
14.01 The adoption and maintenance of the Plan shall not be deemed to
constitute a contract between the Employer and any Participant or Employee, or
to be a consideration for, inducement to, or condition of employment of any
person. Nothing herein contained shall be construed to give any Participant the
right to be retained in the employ of the Employer or to interfere with the
right of the Employer to terminate the employment of any Participant at any
time.
<PAGE> 71
14.02 Nondiscriminatory Exercise of Discretion
14.02 Wherever it is herein provided that any person or persons concerned
with the administration of the Plan shall exercise discretion in the making of
any decision, such discretion shall be exercised so as not to discriminate among
persons similarly situated.
14.03 Plan Available for Inspection
14.03 A copy of the Plan and any and all future amendments thereto shall be
available to the Plan Participants for inspection at all reasonable times.
14.04 Prohibition Against Assignment
14.04 No right or interest of any kind in any Trust asset shall be
transferable or assignable by a Participant, or Retired Participant or their
Beneficiaries, or be subject to alienation, encumbrance, garnishment,
attachment, execution or levy of any kind, voluntary or involuntary. If any
Participant attempts to alienate or assign such benefits or should such benefits
be subject to any of the above legal or equitable processes, the Committee shall
direct the Trustee to take the necessary steps so that such benefits shall not
be available to the Participant, and such benefits shall be used as the
Committee shall direct for the benefit of the Participant or for his
Beneficiaries. This Section 14.04 shall also apply to the creation, assignment,
or recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to be a
qualified domestic relations order as defined in section 414(p) of the Code, or
any domestic relations order entered before January 1, 1985.
14.05 No Responsibility for Policies
14.05 Neither the Employer, the Committee or the Trustee shall be
responsible for the validity of a Policy or for the failure on the part of an
Insurer to make any payment or to provide any benefit under any Policy or for
the action of any person which may render any Policy invalid or unenforceable.
The Employer, the Committee and the Trustee shall not be responsible for any
failure to perform or delay in performing any act occasioned by any Policy
provisions or restrictions imposed by an Insurer or any other person. In the
event that it becomes impossible for the Employer, the Committee or the Trustee
to perform any act under the Plan, that act shall be performed which, in the
judgment of the Employer, the Committee or the Trustee, as the case may be, will
most nearly execute the provisions of the Plan.
14.06 Diversion of Assets Prohibited
14.06 Except as provided in Section 14.08, under no circumstances shall any
part of the corpus or income of the Plan be used for, or diverted to, purposes
other than for the exclusive benefit of the Employees and their Beneficiaries
and to defray reasonable expenses of administration. The Plan shall at all times
be interpreted and administered in accordance with the applicable provisions of
the Internal Revenue Code of 1986, as now in effect or as hereafter amended, or
of any other applicable statute. Any funds contributed to the Plan and any
assets of the Plan shall not revert to, or be used by or for the benefit of the
Employer, except as provided in Section 14.08.
14.07 Plan Subject to State Law
<PAGE> 72
14.07 The Plan embodied herein and the Trust through which it is funded
shall be construed according to the laws of the State in which the Employer has
its principal office.
14.08 Return of Contributions
14.08 (a) Anything to the contrary herein contained notwithstanding, if the
District Director of Internal Revenue having jurisdiction over the Employer
shall determine that the Plan is not qualified under section 401(a) of the Code,
the Plan shall be of no force or effect as to the Employer, and, without the
assent of any other party the Employer shall be entitled to recover all
contributions paid into the Plan, with the exception of amounts paid for life
insurance protection, any expense or commission incurred by the Insurer, and
other administrative expenses incurred by the Committee and/or the Trustee. Any
funds contributed to the Plan which are attributable to Employee contributions
shall be returned to the respective Employee. Such recovery must be completed
not more than one (1) year after the denial of qualification of the Plan.
(b) In the case of a contribution which is made by an Employer by a
mistake of fact, Section 14.06 shall not prohibit the return of such
contribution to the Employer within one (1) year after the time it is made.
(c) If a contribution is conditioned on the deductibility of the
contribution under section 404 of the Code, then to the extent the deduction is
disallowed, Section 12.06 shall not prohibit the return to the Employer of such
contribution (to the extent disallowed) within one (1) year after the
disallowance of the deduction. Unless the Employer provides otherwise at the
time a contribution is made, all contributions shall be made on the condition
they are deductible.
14.09 Loss of Plan Qualification
14.09 If, after initial approval of this Plan by the Internal Revenue
Service or, if the Plan is a Standardized Plan, after the Plan is established or
amended, the Employer at a later date fails to attain or retain the Plan's
qualified status, it shall no longer be regarded as participating in a Prototype
Plan, and the Plan for such Employer shall be regarded as an individually drawn
plan.
14.10 Claims Procedure
14.10 The Committee shall provide adequate notice in writing to any
Participant or Beneficiary whose claim for benefits has been denied, setting
forth the specific reasons for such denial written in a manner calculated to be
understood by the Participant or Beneficiary. The Committee shall afford a
reasonable opportunity to any Participant or Beneficiary whose claim for
benefits has been denied for a full and fair review by at least one Committee
member of the decision denying the claim.
14.11 Related Employer Participation
14.11 Except as provided in Section 8.05(e), all Employees of all
corporations which are members of a controlled groups of corporations (as
defined in section 414(b) of the Code), all Employees of all trades and
businesses, whether or not incorporated, which are under common control (as
defined in section 414(c) of the Code), and all Employees of all members of
affiliated service groups (as defined in section 414(m) of the Code) shall be
treated as the Employees of a single employer. Any individual deemed under
section 414(n) of the Code to be an Employee of an Employer described in the
<PAGE> 73
previous sentences shall also be considered an Employee.
14.12 Adoption of Plan by Related Employers
14.12 (a) The Employer listed as the Employer on the first page of the
Adoption Agreement shall be the Employer whose Board of Directors or, if such
Employer is a proprietorship or partnership, whose proprietor or partners, shall
have the power to amend the Plan as to all Employers under Article XII, although
each Employer listed on the Appendix to the Adoption Agreement shall retain the
right to amend the Plan as to its Employees. The Employer listed on the first
page of the Adoption Agreement shall be the Employer whose Board of Directors
or, if such Employer is a proprietorship or partnership, whose proprietor or
partners, shall appoint the Committee and the Trustee and shall be the Employer
exercising all of the powers set forth in Article XII to be exercised by an
Employer.
(b) Each Employer retains the right under Article XIII to terminate
the Plan as to its Employees and no Employer shall have the right to terminate
the Plan as to Employees of another Employer.
(c) If a Participant is employed by more than one participating
Employer in the same Plan, his or her Compensation from all such Employers shall
be aggregated prior to the calculation of the contribution to be made to his or
her Account, and the contribution shall be allocated pro rata between or among
the Employers of such Participant based on his Compensation from each such
Employer.
(d) In a money purchase Plan, unless the Employer has elected
otherwise in Item 7I of the Adoption Agreement, forfeitures shall be used to
reduce the contributions of the Employer by whom the Participant was employed
and in a profit sharing Plan shall be allocated to Employees of the Employer by
whom the terminating Participant was employed.
14.13 Participant Loans
14.13 (a) If the Employer so selects in Item 20 of the Adoption Agreement,
loans may be made to a Participant or a Beneficiary provided they are made
available to all Participants and Beneficiaries on a reasonably equivalent
basis, they are adequately secured and bear a reasonable interest rate, no
Participant loan exceeds the present value of the Participant's vested Accrued
Benefit, and in the event of default foreclosure on the note and attachment of
the security will not occur until a distributable event occurs in the Plan.
Loans shall not be made available to Highly Compensated Employees as defined in
section 414(q) of the Code in amounts greater than the amount made available to
other Employees.
(b) No loan to any Participant or Beneficiary can be made to the
extent that such loan when added to the outstanding balance of all other loans
to the Participant or Beneficiary would exceed the lesser of (i) Fifty Thousand
($50000) Dollars reduced by the excess, if any, of the highest outstanding
balance of loans during the one (1) year period ending on the day before the
loan is made over the outstanding balance of loans from the Plan on the date the
loan is made, or (ii) one-half (1/2) of the present value of the nonforfeitable
Accrued Benefit of the Participant or, if greater, the total Accrued Benefit up
to Ten Thousand ($10000) Dollars. For the purpose of the above limitation, all
loans from all plans of the Employer and other members of a group of employers
described in sections 414(b), 414(c), 414(m) and 414(o) of the Code are
aggregated. Furthermore, any loan shall by its terms require that repayment of
principal and interest be amortized in level payments, no less frequently than
quarterly, over a period not extending
<PAGE> 74
beyond five (5) years from the date of the loan, unless such loan is used to
acquire a dwelling unit which within a reasonable time, determined at the time
the loan is made, will be used as the principal residence of the Participant. An
assignment or pledge of any portion of the Participant's interest in the Plan,
and a loan, pledge, or assignment with respect to any insurance Policy purchased
under the Plan, will be treated as a loan under this Section 14.13.
(c) No loans will be made to any Shareholder-Employees of an S
corporation or to Owner-Employees, or to any Participant in a Fully Insured
Plan.
(d) A Participant must obtain the consent of his or her spouse, if
any, to use of the Accrued Benefit as security for the loan. Spousal consent
shall be obtained no earlier than the beginning of the ninety (90) day period
that ends on the date on which the loan is to be so secured. The consent must be
in writing, must acknowledge the effect of the loan, and must be witnessed by a
Plan representative or notary public. Such consent shall thereafter be binding
with respect to the consenting Spouse or any subsequent Spouse with respect to
that loan. A new consent shall be required if the Accrued Benefit is used for
renegotiation, extension, renewal or other revision of the loan.
(e) If a valid spousal consent has been obtained in accordance with
Section 14.13(d), then, notwithstanding any other provision of the Plan, the
portion of the Participant's vested Accrued Benefit used as a security interest
held by the Plan by reason of a loan outstanding to the Participant shall be
taken into account for purposes of determining the amount of the Accrued Benefit
payable at the time of death or distribution, but only if the reduction is used
as a repayment of the loan. If less than one hundred (100%) percent of the
Participant's vested Accrued Benefit, determined without regard to the preceding
sentence, is payable to the surviving Spouse, then the Accrued Benefit shall be
adjusted by first reducing the vested Accrued Benefit by the amount of the
security used as repayment of the loan, and then determining the benefit payable
to the surviving Spouse.
14.14 Leased Employees
14.14 Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to the services performed for the recipient
employer shall be treated as provided by the recipient Employer. A Leased
Employee shall not be considered an Employee of the recipient if such individual
is
(a) covered by a money purchase pension plan providing
(1) a nonintegrated Employer contribution rate of at least ten
(10%) percent of compensation as defined in section 415(c)(3) of the Code, but
including amounts contributed pursuant to a salary reduction agreement which are
excludable from the employee's gross income under section 125, section
402(a)(8), section 402(h) or section 403(b) of the Code;
(2) immediate participation;
(3) full and immediate vesting; and
(b) Leased Employees do not constitute more than twenty (20%) percent
of the recipient's Employees who are not Highly Compensated Employees.
For purposes of this Section 14.14, the term "Leased Employee" shall have the
meaning set forth in Section 1.45.
<PAGE> 75
14.15 Owner-Employees
14.15 (a) If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan is established
and one or more other trades or businesses, this Plan and the plan established
for other trades or businesses must, when looked at as a single plan, satisfy
sections 401(a) and 401(d) of the Code for the Employees of this and all such
other trades or businesses.
(b) If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan which
satisfies sections 401(a) and 401(d) of the Code and which provides
contributions and benefits not less favorable than provided for Owner-Employees
under the Plan.
(c) If an individual is covered as an Owner-Employee under the plans
of two or more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits provided for
the employees under the plan of the trade or business which are controlled must
be as favorable as those provided for him or her under the most favorable plan
of the trade or business which is not controlled.
(d) For the purpose of the preceding paragraphs, an Owner-Employee, or
two or more Owner-Employees, will be considered to control a trade or business
if the Owner-Employee, or two or more Owner-Employees, together own the entire
interest in an unincorporated trade or business, or in the case of a
partnership, own more than fifty (50%) percent of either the capital interest or
the profits interest in the partnership. For the purpose of the preceding
sentence, an Owner-Employee, or two or more Owner-Employees, shall be treated as
owning any interest in a partnership which is owned, directly or indirectly, by
a partnership which such Owner-Employee, or such two or more Owner-Employees,
are considered to control within the meaning of the preceding sentence.
14.16 Funding Waiver Rules
14.16 An Employer that amends its Plan because of a waiver of the minimum
funding requirement of section 412(a) of the Code will be considered to ba
maintaining an individually designed Plan and shall no longer be considered to
particiate in The Guardian Defined Contribution Prototype Plan.
ARTICLE XV - STANDARDIZED AND PAIRED PLANS
15.01 Standardized Plan Defined
15.01 The term "Standardized Form Plan" shall mean a Plan which satisfies
the following conditions:
(a) the provisions governing eligibility and participation are such
that the Plan by its terms must cover all Employees except those that may be
excluded under section 410(a)(1) or (b)(3) of the Code. Eligibility and
participation conditions shall be determined in Items 2 and 3 of the Adoption
Agreement. If this plan is paired, all the paired plans must have the same
eligibility requirements;
(b) the eligibility requirements under the Plan are not more favorable
for officers, owners, or highly compensated Employees than for other Employees;
<PAGE> 76
(c) the vesting schedule selected in Item 15 of the Adoption Agreement
is either of the schedules set forth in Item 15A. Those schedules are the ones
that provide vesting at a rate at least as favorable for every year as would be
required by the schedules set forth in section 416(b)(1)(A) or (B) of the Code
if the Plan were a Top-Heavy Plan for every Plan Year after the Plan Year
beginning in 1983;
(d) the contribution formula selected in Item 6 of the Adoption
Agreement must provide contributions which are a uniform percentage of each
Participant's total Compensation, and in Item 4 of the Adoption Agreement the
definition of Compensation selected must not exclude any part of the
Participant's Compensation. In determining whether or not contributions are a
uniform percentage of each Participant's total Compensation, contributions which
are not a uniform percentage of Compensation solely because of the permitted
disparity under section 401(a)(5) and 401(l) of the Code are not taken into
account.
15.02 Paired Plans Defined
15.02 The term "Paired Plans" means a combination of one or two defined
contribution Standardized Form Plans and one defined benefit Standardized Form
Plan so designed that if any single Plan, or combination of Plans, is adopted by
an Employer, each Plan by itself, or the Plans together, will meet the
antidiscrimination rules set forth in section 401(a)(4) of the Code, the
contribution and benefit limitations set forth in section 415, and the
provisions relating to Top-Heavy Plans set forth in section 416. For purposes of
this Plan, only Plans maintained pursuant to prototype documents sponsored by
the Sponsor may be paired, and only the Sponsor's Defined Benefit Prototype Plan
and the Sponsor's Defined Contribution Prototype Plan may be paired.
15.03 Top-Heavy Minimums in Paired Plans
15.03 When the Paired Plans are Super Top-Heavy as defined in Section
15.04, the Top-Heavy requirements set forth in Section 7.01 of this Plan shall
apply except that each non-Key Employee who is a Participant in a Paired Defined
Contribution Money Purchase Plan and who is also a Participant in the Sponsor's
Defined Benefit Prototype Plan shall receive a minimum contribution of five (5%)
percent of such Employee's total Compensation, unless the paired defined benefit
plan has been selected in sections 17C and 17D of the adoption agreement.
15.04 Adjustment for Super Top-Heavy Plan
15.04 In any Plan Year in which the Top-Heavy Ratio exceeds ninety (90%)
percent, which shall mean that the Plan is a Super Top-Heavy Plan, the
denominators of the Defined Benefit Fraction as defined in Section 8.05(c) of
the Plan and the Defined Contribution Fraction as defined in Section 8.05(d) of
the Plan shall be computed using one hundred (100%) percent of the dollar
limitation instead of one hundred twenty-five (125%) percent.
15.05 Adjustment for Two Top-Heavy Plans
15.05 When the Paired Plans are Top-Heavy, but are not Super Top-Heavy, the
Employer will provide each non-Key Employee who is a Participant in the paired
defined contribution money purchase Plan or paired defined contribution profit
sharing plan and the paired Sponsor's Benefit Prototype Plan a minimum
nonintegrated contribution of seven and one-half (7 1/2%) percent of total
Compensation, unless a different election has been made in Item 17D.
<PAGE> 77
15.06 Adjustment for One Top-heavy Plan
15.06 When the Paired Plans are Top-Heavy, but are not Super Top-Heavy, the
Employer will provide a minimum nonintegrated contribution of four (4%) percent
of total Compensation for each non-Key Employee who participates in this Plan or
paired defined contribution money purchase or profit sharing plan but does not
participate in the paired Sponsor's Defined Benefit Prototype Plan, unless a
different election has been made in Item 17D.
15.07 Permitted Disparity in Paired Plans
15.07 Only one of the Paired Plans may be integrated with Social Security
benefits.
15.08 Exclusive Coverage in Paired Plans
15.08 In the event that the paired plans do not benefit the same
participants in any given year, then the provisions of sections 15.03, 15.05 and
15.06 of the plan are not applicable, Item 17C and 17D of the Adoption Agreement
are not applicable, and each paired plan will provide the required minimums.
This Section applies to Plan Years beginning after December 31, 1991. In such
event, the participant will receive the minimum contribution provided in section
7.01 of this Plan, regardless of whether he/she participates in both plans.
ARTICLE XVI - THE TRUSTEE
16.01 Designation of Trustee
16.01 The board of directors of the Employer or, if the Employer is not
incorporated, a partner or proprietor of the Employer, shall appoint one or more
Trustees (herein referred to as the Trustee) who shall have powers necessary for
the performance of the duties hereunder. The initial Trustee shall be designated
in the Adoption Agreement. Except as provided in Sections 13.04 and 13.05, or in
a separate trust agreement, the Trustee shall not delegate any of its power and
authority. A separate trust agreement may be entered into between the Employer
and any institutional Trustee, in which event the terms of such separate trust
agreement shall be the Trust and shall supersede any conflicting terms in this
document as to the Trustee.
16.02 Resignation and Replacement of Trustee
16.02 The Trustee shall serve at the pleasure of the Employer with such
compensation as may be prescribed by agreement between the Employer and the
Trustee. Any Trustee may resign by a written notice addressed to the Employer.
The Employer shall fill any Trustee's vacancy which may occur from time to time.
The appointment of a Trustee shall become effective upon the acceptance of the
Trustee, in writing, addressed to the Employer, and upon such acceptance such
Trustee shall be vested with all the rights, powers, and duties of the
predecessor Trustee. No Trustee who receives full time compensation from the
Employer shall be compensated for services as Trustee.
16.03 Trustee to Establish Funding Policy
16.03 The Trustee shall establish a funding policy and method consistent
with the objectives of the Plan. The Trustee shall manage the assets of this
Trust and otherwise discharge duties solely in the interest of the Participants
and their Beneficiaries. The assets of the Trust shall be used solely for the
exclusive purpose of providing benefits to Participants and
<PAGE> 78
their Beneficiaries and defraying reasonable expenses of administering the Plan.
16.04 Prudent Man Rule
16.04 The Trustee shall act at all times with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, and shall diversify the
investments so as to minimize the risk of large losses unless under the
circumstances it is prudent not to do so.
16.05 Trustee Not Liable If Prudent
16.05 Provided the Trustee act in accordance with the provisions of
Sections 16.03 and 16.04, the Trustee shall be free of any liability, joint or
several, to the Employer, any Employee, the Committee, any Participant, Retired
Participant or Beneficiary for the making, retention or sale of any investment
or reinvestment made by him as herein provided or for any loss to or diminution
of the assets of the Trustee. In addition, should the Trustee select a custodian
as provided in Section 13.04, or an investment manager as provided in Section
13.05, to the extent that such selection is prudent, the Trustee shall be free
of any liability for any acts or omissions of such custodian or investment
manager.
16.06 Vote of Trustee
16.06 Except as provided in a separate agreement between the Trustee and
the Employer, if more than one Trustee is appointed, they shall act by majority
vote, and action may be taken either by a vote at a meeting or in writing
without a meeting. Any one Trustee may sign, on behalf of all, any papers which
may be required.
16.07 Trustee to Receive Contributions
16.07 The Trustee shall receive all contributions to the Plan, and such
contributions, together with all Policy dividends and refunds, amounts received
by the Trustee under any Policies that are not distributed to Participants or
their Beneficiaries and all other property held from time to time hereunder,
shall be held, managed, and administered in trust pursuant to the terms of the
Plan and, if applicable, at the direction of the Committee.
16.08 Trustee May Participate in Plan
16.08 No Trustee shall be precluded from becoming a Participant under the
Plan upon his meeting the eligibility requirements.
16.09 Reimbursement of Expenses
16.09 The Employer shall reimburse the Trustee for any reasonable expense,
including counsel fees, incurred in the performance of duties as Trustee.
16.10 Trustee to Keep Records
16.10 The Trustee shall keep accurate and detailed accounts of the
transactions effected hereunder and all accounts, books and records relating
thereto shall be open for inspection at all reasonable times by the Employer,
the Committee or any person designated by either of them. A Participant may
inspect the Trustee's records only insofar as they relate to his or her own
<PAGE> 79
participation.
16.11 Trustee to Submit Written Accounts
16.11 Except to the extent otherwise provided by agreement between the
Trustee and the Employer, as soon as practicable after the close of each Plan
Year, and at such other times as the or Committee may direct, the Trustee shall
file with the Committee a written account, setting forth all receipts,
expenditures, and other operations of the Plan during the period since the date
of the last previous accounting. Upon the expiration of thirty (30) days after
the date of filing such accounting with the Committee, the Trustee shall be
forever released and discharged from all liability and accountability to anyone
with respect to the propriety of the acts and transactions shown in such
account, except with respect to any such act or transaction as to which the
Committee shall file with the Trustee written objections within such thirty (30)
day period, or except if such transaction violates the provisions of Section
16.03 or 16.04. Nothing herein contained, however, shall deprive the Trustee of
the right to have any of accounts settled by a court of competent jurisdiction.
16.12 No Security Required
16.12 Except to the extent otherwise provided by agreement between the
Trustee and the Employer, the Trustee shall not be required to give bond or
other security for the faithful performance of duties, unless required by Law.
16.13 Reliance Upon Written Authority
16.13 The Trustee shall be fully protected in relying upon any written
instructions and direction of the Committee or the Employer, and in taking any
action upon any instrument believed by the Trustee to be genuine and signed and
presented by the proper person or persons. The Trustee shall be under no duty to
make any investigation or inquiry as to any statement contained in any such
writing, but may accept the same as conclusive evidence of the truth and
accuracy of the statement therein contained.
16.14 Resolution of Disputes
16.14 Except to the extent otherwise provided by agreement between the
Trustee and the Employer, in the event that any dispute shall arise as to any
act to be performed by the Trustee, the Trustee may postpone performance until
adjudication of such dispute in a court of competent jurisdiction or until
indemnified against loss to the Trustee's satisfaction.
16.15 Prohibition on Self Dealing
16.15 The Trustee, any custodian designated in accordance with Section
13.04, and any investment manager designated in accordance with Section 13.05,
shall not, either directly or indirectly, deal with the assets of the Trust for
their own interest or account; act in any transaction involving the Plan on
behalf of a party whose interests are adverse to the interests of the Plan, or
any Participant or Beneficiary; or receive any consideration for their own
account from any party dealing with the Plan in connection with a transaction
involving Trust assets.
16.16 Prohibition Against Prohibited Transactions
16.16 (a) Neither the Trustee nor any custodian designated in accordance
with Section 13.04, nor any investment manager designated in accordance with
Section 13.05, shall engage in any transaction he or they know or should know
<PAGE> 80
constitutes a direct or indirect
(1) sale, exchange or lease of any property between the Trust
and a party-in-interest;
(2) lending of money or other extension of credit between the
Trust and a party-in-interest;
(3) furnishing of goods, services or facilities (other than
reasonable arrangements for office space, or legal, accounting or other services
necessary for the establishment or operation of the Plan or Trust) between the
Trust and a party-in-interest;
(4) transfer to, or use by or for the benefit of, a
party-in-interest any assets of the Trust.
(b) The term "party-in-interest" shall mean:
(1) The Committee and the Trustee;
(2) Any custodian designated in accordance with Section 13.04; or
any investment manager designated in accordance with Section 13.05;
(3) Anyone performing services, including legal or accounting
services, to the Plan or Trust;
(4) The Employer;
(5) Anyone who, directly or indirectly, owns fifty (50%) percent
or more of the combined voting power of all classes of stock, or fifty (50%)
percent of the total value of all classes of stock of the Employer;
(6) A spouse, ancestor, lineal descendant or spouse of a lineal
descendant of any individual described in Section 16.16(b)(1), (2), (3), (4), or
(5);
(7) A corporation, partnership, trust or estate of which at least
fifty (50%) percent of the combined voting power of all classes of stock
entitled to vote or the total value of shares of all classes of stock of such
corporation, or at least fifty (50%) percent of the capital interest or profits
of such partnership, or at least fifty (50%) percent of the beneficial interest
of such Trust or estate is owned directly or indirectly by a party-in-interest
(other than as defined in Section 16.16(b)(6), (7), (8) or (9);
(8) A ten (10%) percent or more (directly or indirectly in
capital or profits) partner or joint venture of a person described in Section
(3), (4), (5), (6) or (7); and
(9) An employee, officer, director or owner, directly or
indirectly, of ten (10%) percent or more of the issued and outstanding shares of
a person described in Section 16.16(b)(3), (4), (5), (6), (7) or (8).
<PAGE> 81
ADOPTION AGREEMENT TO
THE GUARDIAN DEFINED CONTRIBUTION
PROTOTYPE PLAN AND TRUST AGREEMENT
FOR A STANDARDIZED PROFIT SHARING 401(K) PLAN
NAME OF EMPLOYER [ Mikron Instrument Company, Inc. ]
[ ]
ADDRESS [ 445 West Main Street -- P.O. Box 365 ]
[ Number and Street ]
[ Wyckoff ] [ NJ 07481 ]
[ City ] [State and Zip Code]
NAME OF PLAN [ Mikron Instrument Company, Inc. 401(k) Profit Sharing
Plan]
[ ]
NAME OF TRUSTEE(S) [ Jacqueline Michael, Donald Michael, K. Irani ]
[ ]
[ ]
NAMES OF COMMITTEE [ ]
[ ]
[ ]
INTRODUCTION
This Adoption Agreement and the provisions of The GUARDIAN Defined
Contribution Prototype Plan and Trust Agreement of which this Agreement is a
part, are hereby adopted by the Employer or Employers executing this Agreement
for the benefit of Employees and their Beneficiaries.
Complete (A), (B), or (C) below:
[ ] (A) This Adoption Agreement is part of the adoption of a new Plan.
[ ] (B) This Adoption Agreement is an amendment to The GUARDIAN Defined
Contribution Prototype Plan, previously adopted, as provided in
Section 12.02. Complete only Items amended.
[ X ] (C) This Adoption Agreement is a restatement of a previously adopted
Plan, other than The GUARDIAN Defined Contribution Prototype
Plan, as provided in Section 12.06.
The PLAN ADMINISTRATOR shall be [select one]
[ ] the Committee.
[ X ] the Employer.
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<PAGE> 82
[ ] the following individuals: [insert names]
[ ] [ ] [ ]
Item 1: EFFECTIVE DATE
EFFECTIVE DATE shall mean [insert date] [ 1/1/95 ].
If this Agreement is a restatement of a previously adopted plan, the EFFECTIVE
DATE of the previously adopted Plan is [insert date] [ 1/1/93 ].
Item 2: ELIGIBLE EMPLOYEE
A. ELIGIBLE EMPLOYEE means any Employee who satisfies the ELIGIBILITY
CONDITIONS set forth in Item 3. If elected in this Item, the term
"ELIGIBLE EMPLOYEE" shall include [check only if Employees in the listed
category are to be included]
[ X ] any Employee who is a member of a unit of Employees covered by a
collective bargaining agreement with an Employee representative if
the Employer and the Employee representative have engaged in good
faith bargaining for retirement benefits and if two (2%) percent or
less of the Employees of the Employer who are covered pursuant to
that agreement are professionals as defined in section 1.410(b)-9(g)
of the Regulations. For this purpose, the term "employee
representative" does not include any organization more than half of
whose members are Employees who are officers, owners or executives of
the Employer.
[ X ] any Employee who is a nonresident alien provided the Employee
receives no earned income from the Employer, within the meaning of
section 911(d)(2) of the Code, which constitutes income from sources
within the United States within the meaning of section 861(a)(3) of
the Code.
B. [Not Applicable]
C. [Not Applicable]
D. [Not Applicable]
Item 3: ELIGIBILITY CONDITIONS
A. AGE REQUIREMENT: An Employee who qualifies as an ELIGIBLE EMPLOYEE under
Item 2 shall be eligible to participate on the EFFECTIVE DATE only if he
or she has attained Age [ 21 ]. [do not insert Age above 21]
An Employee who does not qualify as an ELIGIBLE EMPLOYEE on the EFFECTIVE
DATE shall be eligible to participate as of the first Entry Date on which
he or she otherwise qualifies for participation and only if he or she has
then attained Age [ 21 ]. [do not insert Age above 21]
B. SERVICE REQUIREMENT: An Employee who qualifies as an ELIGIBLE EMPLOYEE
under Item 2 shall be eligible to participate on the EFFECTIVE DATE only
if he or she has completed [ 1 ] Years of Service. [do not insert more
than one (1) Year unless all Participants are immediately fully vested; do
not insert more than two (2) Years in any event]
An Employee who does not qualify as an ELIGIBLE EMPLOYEE on the EFFECTIVE
DATE shall be eligible to participate as of the first Entry Date on which
he or she otherwise qualifies for participation and only if as of such
Entry Date he or she has completed [ 1 ] Years of Service. [do not insert
more than one (1) Year unless all Participants are immediately fully
vested; do not insert more than two (2) Years in any event]
C. For 401(k) Plans only, an Employee who qualifies as an Eligible Employee
under Item 2 shall be eligible to participate on an Entry Date determined
as follows: [select one]
[ X ] the Entry Date shall be the first day of the PLAN YEAR.
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<PAGE> 83
[ ] the Entry Date shall be [ ] [insert day and month] in
[ ] each PLAN YEAR.
[ ] the Entry Date shall be twice each PLAN YEAR, on the first day of
the PLAN YEAR and six (6) months following the first day of the PLAN
YEAR.
[ ] the Entry Date shall be twice each PLAN YEAR, on [ ] [insert day
and month] and six (6) months after such date.
[ ] the Entry Date shall be the first day of the month coincident
with or next following the Employee's completion of the eligibility
requirements selected in Item 1.
[ ] the Entry Date shall be the day the Employee completes his or her
first Hour of Service.
[ ] the Entry Date shall be the first day of the sixth (6th) month
following the day the Employee completes his or her first Hour of
Service.
[ ] the Entry Date shall be the following date(s) [insert date or series of
dates]:
[ ]
C. [Complete if applicable] For purposes of measuring a Year of Service for
eligibility purposes, an Employee will be credited with a Year of Service
only if he or she completes at least [1,000] [insert number of Hours not
greater than 1000] Hours of Service during the eligibility computation
period defined in Section 1.78.
D. For purposes of the SERVICE REQUIREMENT, Years of Service as a Proprietor or
Partner, or Years of Service with a corporate predecessor [check one if
applicable, otherwise leave blank]
[ X ] shall be taken into account.
[ ] shall not be taken into account.
[ ] shall be taken into account only for Years of Service completed after
[ ] [ ] [insert date].
If Years of Service with a predecessor are to be counted, the name of the
predecessor is [ ].
E. YEARS OF SERVICE shall be determined [select one]
[ X ] on the basis of actual Hours for which an Employee is paid or entitled
to payment.
[ ] on the basis of days worked. An Employee shall be credited with ten
(10) Hours of Service if under Section 1.41 of the Plan such Employee
would be credited with at least one (1) Hour of Service during the day.
[ ] on the basis of weeks worked. An Employee shall be credited with
forty-five (45) Hours of Service if under Section 1.41 of the Plan such
Employee would be credited with at least one (1) Hour of Service during
the week.
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<PAGE> 84
[ ] on the basis of semi-monthly payroll periods. An Employee shall be
credited with ninety-five (95) Hours of Service if under Section 1.41
of the Plan such Employee would be credited with at least one (1) Hour
of Service during the semi-monthly payroll period.
[ ] on the basis of months worked. An Employee shall be credited with one
hundred ninety (190) Hours of Service if under Section 1.41 of the Plan
such Employee would be credited with at least one (1) Hour of Service
during the month.
F. Hours of Service [select one]
[ X ] shall
[ ] shall not
be credited for periods prior to the date an employer was part of an
affiliated service group, controlled group of corporations, or a group of
trades or businesses under common control with a participating Employer.
If such Hours of Service shall be credited,
[ X ] all Hours of Service with such employer
[ ] Hours of Service with such employer after [ ] [insert date] shall
be counted.
Item 4: COMPENSATION
A. Employer contributions made pursuant to a salary reduction agreement
which are not includible in the gross income of the Employee under [check
where applicable]
[ X ] section 125,
[ X ] section 402(a)(8),
[ X ] section 402(h), or
[ X ] section 403(b)
of the Code shall be included as COMPENSATION for Plan purposes.
B. COMPENSATION
[ ] shall
[ X ] shall not
include COMPENSATION earned by a Participant prior to his or her ENTRY
DATE.
C. COMPENSATION for purposes of determining Employer contributions shall be
measured over a twelve (12) consecutive month period [select one]
[ ] measured by the PLAN YEAR beginning in the fiscal year of the Employer.
[ ] measured by the PLAN YEAR ending in the fiscal year of the Employer.
[ ] measured by the calendar year beginning in the fiscal year of the
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<PAGE> 85
Employer.
[ ] measured by the calendar year ending in the fiscal year of the
Employer.
[ X ] measured by the calendar year [select one]
[ ] ending immediately prior to
[ X ] ending during
the PLAN YEAR for which the determination is made.
[ ] beginning with each [ ] [insert month and day].
D. If the COMPENSATION of a Highly Compensated Employee and certain Family
Members is limited by the provisions of Section 1.15(d), COMPENSATION
available for Plan purposes shall be allocated as follows: [complete as
applicable]
[ %] of available COMPENSATION to the oldest Highly Compensated Employee
in the family unit;
[ %] of available COMPENSATION to such oldest Highly Compensated Employee's
spouse;
[ %] of available COMPENSATION to [ ]; [insert name of such oldest
Highly Compensated Employee's child]
[ %] of available COMPENSATION to [ ]; [insert name of such oldest
Highly Compensated Employee's child]
[ X ] as determined in accordance with the provisions of Section 1.15(d)
which apply if no election is made.
If specific percentages are selected, and a Family Member ceases to be a
Participant, the remaining percentages shall be adjusted proportionately.
Item 5: NORMAL RETIREMENT AGE
NORMAL RETIREMENT AGE shall mean [select one]
[ X ] the day and month of the Participant's [ 65th ] [insert Age not later
than 65] birthday]. All Participants who reach the Plan's Normal
Retirement Age shall be entitled to the Employer Match for the Plan
Year in which they reach Normal Retirement Age, without regard to
employment on the last day of the Plan Year.
[ ] the later of the day on which the Participant attains Age [ ]
[insert Age no later than 65] or the [ ] [insert number no greater
than 5] anniversary of the Participation Commencement Date. [ ]the
later of the day on which the Participant attains Age [ ] [insert
Age no later than 65] or the Anniversary Date following his or her
completion of [ ] Years of Service, but in no event later than
the Participant's attainment of Age sixty-five (65).
[ ] the later of the day on which the Participant attains Age [ ]
[insert Age no later than 65] or the Anniversary Date following his
or her completion of [ ] Years of Service, but in no event later
than the later of the Participant's attainment of Age sixty-five (65)
or the fifth (5th) anniversary of the Participation Commencement
Date.
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<PAGE> 86
[ ] the day on which the Participant attains Age [ ] [insert Age no
later than 65] and completes [ ] Years of Participation, but in no
event later than the Participant's attainment of Age sixty-five (65).
[ ] the day on which the Participant attains Age [ ] [insert Age no
later than 65] and completes [ ] Years of Participation, but in no
event later than the later of the Participant's attainment of Age
sixty-five (65) or the fifth (5th) anniversary of the Participation
Commencement Date.
[ ] [check if applicable] if, for PLAN YEARS beginning before January 1,
1988, a Participant's Normal Retirement Age was determined with
reference to an anniversary of his or her Participation Commencement
Date that was more than five (5) but no greater than ten (10) years,
and an anniversary of the Participation Commencement Date is relevant
in determining a Participant's Normal Retirement Age, the anniversary
of a Participant's Participation Commencement Date used to determine
the Participant's Normal Retirement Age for a Participant who first
commenced participation under the Plan before the first PLAN YEAR
beginning on or after January 1, 1988, shall be the earlier of the
tenth (10th) anniversary of the Participant's Participation
Commencement Date (or the anniversary set forth in the Plan as
applicable prior to that PLAN YEAR) or the fifth (5th) anniversary of
the first day of the first PLAN YEAR beginning on or after January 1,
1988.
Item 6: DISABILITY PROVISION [select one]
A. Except as to any Elective Deferrals made by a Participant
[ ] A Participant shall be fully vested on disability in accordance
with Section 5.02.
[ X ] A Participant's vesting and distribution rights in the event of
his or her disability will be the same as the benefits and
distribution rights applicable on his or her termination of
employment.
B. A Participant who makes Elective Deferrals [select one]
[ X ] shall
[ ] shall not
receive the value of his Accrued Benefit on his Disability Date.
Item 7: EMPLOYER CONTRIBUTION
A. This Plan [select one]
[ X ] shall
[ ] shall not
include a cash or deferred arrangement.
The provisions of the cash or deferred arrangement may be made effective
as of the first day of the PLAN YEAR in which the cash or deferred
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<PAGE> 87
arrangement is adopted. However, under no circumstances may a Salary
Reduction Agreement or other deferral mechanism be adopted retroactively.
NOTE: If the Plan does not include a cash or deferred arrangement, Items
7C through 7J should be left blank.
B. The Employer shall contribute for each Participant who either completes
more than five hundred (500) Hours of Service during the PLAN YEAR or is
employed on the last day of the PLAN YEAR [select one]
[ X ] the amount determined each year by its governing body.
[ %] [insert percentage] of each Participant's COMPENSATION.
[ %] [insert percentage] of the Employer's Net Profits for the fiscal
year ending with or within the PLAN YEAR in excess of $[ ].
[ ] no contribution.
The Employer contribution shall be made [select one]
[ X ] whether or not the Employer has Net Profits for the year.
[ ] only if the Employer has Net Profits for the year.
The Employer contribution shall be allocated [select one]
[ X ] to all ELIGIBLE EMPLOYEES, whether or not the Employee has
executed a Salary Reduction Agreement.
[ ] only to those Employees who have executed a Salary Reduction
Agreement.
C. If the Employer shall make contributions, such contributions may include
[check applicable selections]
[ X ] Matching Contributions.
[ X ] Qualified Non-elective Contributions.
[ ] Non-Qualified Employer Contributions.
C.1. If the Employer shall make Matching Contributions, such contributions
shall be [select one]
[ ] Qualified Matching Contributions at all times.
[ X ] Qualified Matching Contributions only if, at the time the contribution
is made, the Employer advises the Committee that such contributions are
Qualified Matching Contributions; otherwise, such contributions shall
be Non-qualified Matching Contributions.
[ ] Non-qualified Matching Contributions.
C.2 If the Employer shall make contributions other than Matching
Contributions, such contributions shall be [select one]
[ ] Qualified Non-elective Contributions at all times.
[ X ] Qualified Non-elective Contributions only if, at the time the
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<PAGE> 88
contribution is made, the Employer advises the Committee that such
contributions are Qualified Non-elective Contributions; otherwise
such contributions shall be Non-qualified Matching Contributions.
[ ] Non-Qualified Employer Contributions.
C.3. If the Employer shall make Matching Contributions, such contributions
[select one]
C.3.a. [ ] shall be determined to be Matching Contributions only if, at
the time the contribution is made, the Employer advises the
Committee that such contributions are Matching Contributions,
in which event such contributions shall be allocated to the
Account of each Participant in accordance with the Elective
Deferrals of such Participant for the PLAN YEAR for which the
Matching Contribution is made.
C.3.b. [ X ] shall equal [ 30% ] [insert percentage] of the Elective
Deferrals of each Participant for the PLAN YEAR, but in no
event greater than [ 1.5% ] [insert percentage, if applicable]
of the Participant's COMPENSATION determined for the PLAN YEAR
by the Employer.
C.3.c. [ ] shall equal [select one if applicable]
[ %] [insert percentage] of the Elective Deferrals of
each Participant for the PLAN YEAR up to [ %]
[insert percentage] of the Participant's
COMPENSATION,
[ %] [insert percentage] of the next [ %] [insert
percentage] of the Elective Deferrals of each
Participant for the PLAN YEAR up to [ %] [insert
percentage] of the Participant's COMPENSATION, and
[ %] [insert percentage] of the next [ %] [insert
percentage] of the Elective Deferrals of each
Participant for the PLAN YEAR up to [ %] [insert
percentage] of the Participant's COMPENSATION.
C.3.d. [ ] shall be equal to the percentage of Elective Deferrals of a
Participant based on his COMPENSATION for the PLAN YEAR as
follows: [select one if applicable]
[ %] [insert percentage] if his COMPENSATION is less than
$[ ]; [insert dollar amount]
[ %] [insert percentage] if his COMPENSATION is more than
the dollar amount chosen in the preceding selection,
but less than $[ ]; [insert dollar amount]
[ %] [insert percentage] if his COMPENSATION is more than
the dollar amount chosen in the preceding selection,
but less than $[ ]; [insert dollar amount]
[ %] [insert percentage] if his COMPENSATION is more than
the dollar amount chosen in the preceding selection.
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<PAGE> 89
C.3.e. [ ] shall be equal to the percentage of Elective Deferrals of a
Participant based on his [select one]
[ ] Years of Service
[ ] Years of Participation
as of the last day of the PLAN YEAR as follows: [select one if
applicable]
[ %] [insert percentage] if the number of Years is less
than [ ] [insert number of Years];
[ %] [insert percentage] if the number of Years is more
than the number of Years chosen in the preceding
selection, but less than[ ] [insert number of
Years];
[ %] [insert percentage] if the number of Years is more
than the number of Years chosen in the preceding
selection.
C.4. If the Employer shall make Matching Contributions which are not
qualified, such contributions shall be [select one]
[ X ] vested in accordance with the applicable schedule elected under
Item 15.
[ ] fully vested at all times.
C.5. In no event shall the Matching Contribution for any Employee exceed
[complete if applicable]
$[ ].
[ 1.5%] of the Participant's COMPENSATION.
[ %] of the Elective Deferral of the Participant.
D.1. The amount of Qualified Non-elective Contributions that are made under
Item 7C.2 of this Adoption Agreement and taken into account as
Contribution Percentage Amounts for purposes of calculating the Average
Contribution Percentage, subject to such other requirements as may be
prescribed by the Secretary of the Treasury, shall be:
[ ] All such Qualified Non-elective Contributions.
[ X ] Such Qualified Non-elective Contributions that are needed to meet the
Average Contribution Percentage test stated in Section 7.12 of the
Plan.
D.2. The amount of Elective Deferrals made under Item 7A of the Adoption
Agreement and taken into account as Contribution Percentage Amounts for
purposes of calculating the Average Contribution Percentage, subject to
such other requirements as may be prescribed by the Secretary of the
Treasury, shall be
[ ] All such Elective Deferrals.
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<PAGE> 90
[ X ] Such Elective Deferrals that are needed to meet the Average
Contribution Percentage test stated in Section 7.13 of the Plan.
E.1. Qualified Matching Contributions and Qualified Non-elective Contributions
may be taken into account as Elective Deferrals for purposes of
calculating the Actual Deferral Percentages. In determining Elective
Deferrals for the purpose of the ADP test, the Employer shall include:
[ X ] Qualified Matching Contributions
[ X ] Qualified Non-elective Contributions
under this Plan or any other plan of the Employer, as provided by
regulations under the Code.
E.2. The amount of Qualified Matching Contributions made under Item 7C.3. of
this Adoption Agreement and taken into account as Elective Deferrals for
purposes of calculating the Actual Deferral Percentage, subject to such
other requirements as may be prescribed by the Secretary of the Treasury,
shall be [select one]:
[ ] All such Qualified Matching Contributions.
[ X ] Such Qualified Matching Contributions that are needed to meet the
Actual Deferral Percentage test stated in Section 7.12 of the Plan.
E.3. The amount of Qualified Non-elective Contributions made under Item 7C.2.
of the Adoption Agreement and taken into account as Elective Deferrals
for purposes of calculating the Actual Deferral Percentages, subject to
such other requirements as may be prescribed by the Secretary of the
Treasury, shall be [select one]:
[ ] All such Qualified Non-elective Contributions.
[ X ] Such Qualified Non-elective Contributions that are needed to meet
the Actual Deferral Percentage test stated in Section 7.13 of the
Plan.
F. If Elective Deferrals are permitted, a Participant may change the
elections in his or her Salary Reduction Agreement [select one]
[ ] annually, on the last day of the prior PLAN YEAR.
[ X ] annually, on the first day of the PLAN YEAR.
[ ] on the last day of the sixth (6th) month of the PLAN YEAR, and on the
last day of the PLAN YEAR.
[ ] on the first day of the PLAN YEAR, and six months following the first
day of the PLAN YEAR.
[ ] on the last day of each quarter of the PLAN YEAR.
[ ] on the first day of each quarter of the PLAN YEAR.
[ ] at such times as the Committee may determine.
G. If Elective Deferrals are permitted, a Participant may elect to defer up
to [select one if applicable]
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<PAGE> 91
[ %] of his or her COMPENSATION.
[ %] of his or her COMPENSATION, up to $[ ].
In no event shall a Participant be permitted to make Elective Deferrals
unless the Elective Deferral selected is at least [complete if applicable]
[ %] [insert percentage, if applicable] of his or her COMPENSATION.
$[ ]. [insert dollar amount, if applicable]
H. A Participant [select one]
[ ] shall
[ X ] shall not
be able to assign Excess Elective Deferrals to the Plan.
If the Participant can assign Excess Elective Deferrals to the Plan, such
assignment must be made prior to [ ] [insert month and day] of
each year.
I. Forfeitures of Excess Aggregate Contributions shall be [select one]
[ ] reallocated to the accounts of Participants who are not Highly
Compensated Employees.
[ X ] applied to reduce Employer contributions.
J. Forfeitures of Matching Contributions shall be [select one]
[ ] reallocated to the accounts of Participants who are not Highly
Compensated Employees.
[ X ] applied to reduce Employer contributions.
K. All other forfeitures shall be [select one]
[ ] allocated to Participant Accounts in the same manner as
Non-qualified Employer Contributions in the PLAN YEAR in which the
forfeiture is first recognized.
[ ] used to reduce Non-qualified Employer Contributions in the PLAN
YEAR in which the forfeiture is recognized. [select only if
Non-qualified Employer Contributions are required]
[ X ] first used to reduce Matching Employer Contributions in the PLAN YEAR
in which the forfeiture is recognized, then to reduce Non-qualified
Employer Contributions, and then allocated to Participant Accounts in
the same manner as Non-Qualified Employer Contributions.
L. Forfeitures shall be deemed to occur [select one]
[ X ] on the last day of the PLAN YEAR in which termination of
employment occurs.
[ ] on the VALUATION DATE coincident with or next following a
Participant's termination of employment.
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<PAGE> 92
[ ] on the last day of the PLAN YEAR following a Participant's [ ]
[insert number not in excess of five (5)] consecutive one-year Breaks
in Service.
[ ] on the VALUATION DATE coincident with or next following a Participant's
[ ] [insert number not in excess of five (5)] consecutive one-year Breaks
in Service.
Item 8: ALLOCATION OF CONTRIBUTIONS
A. Employer contributions, other than Matching Contributions, shall be
allocated [select one]
[ X ] to each Participant in the same proportion as his or her COMPENSATION
bears to the COMPENSATION of all Participants.
[ ] on an integrated basis.
B. If Employer contributions other than Matching Contributions are to be
allocated on an integrated basis, the percentage of COMPENSATION in excess
of the Integration Level shall be [select one]
[ %] [insert percentage not greater than 5.7% if the Integration Level is
the Taxable Wage Base, less than 20% of the Taxable Wage Base or
$10,000]
[ %] [insert percentage not greater than 5.4% if the Integration Level
is more than 80% of the Taxable Wage Base but less than the Taxable
Wage Base]
[ %] [insert percentage not greater than 4.3% if the Integration Level
is more than $10,000 and more than 20% of the Taxable Wage Base but
less than 80% of the Taxable Wage Base]
[ ] 4.3% if the Integration Level is more than $10,000 and more than 20% of
the Taxable Wage Base but less than 80% of the Taxable Wage Base for
the Year, 5.4% if the Integration Level is more than 80% of the Taxable
Wage Base but less than the Taxable Wage Base, and 5.7% if the
Integration Level is either $10,000, 20% of the Taxable Wage Base or
the Taxable Wage Base.
The Integration Level shall be [select one]
[ ] the Taxable Wage Base.
[$ ] [insert dollar amount less than the Taxable Wage Base]
[ %] of the Taxable Wage Base [insert percentage not in excess of 100%]
C.1. Non-Qualified Employer Contributions shall be allocated to Participant
Accounts as of an Allocation Date, which shall be [select one]
[ X ] the last day of the PLAN YEAR.
[ ] the first day of the PLAN YEAR.
[ ] the following date or dates in each PLAN YEAR:
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<PAGE> 93
[ ] [insert date(s)].
Subject to the provisions of Section 2.09, an allocation of Non-qualified
Employer Contributions [select one]
[ ] shall
[ X ] shall not
be made to the Account of a Participant who completes less than five hundred
(500) Hours of Service during the PLAN YEAR.
Subject to the provisions of Section 2.09, an allocation of Non-qualified
Employer Contributions [select one]
[ ] shall
[ X ] shall not
be made to the account of a Participant who is not employed on the [select
one]
[ ] Allocation Date.
[ X ] last day of the PLAN YEAR.
C.2. Qualified Non-elective Contributions shall be allocated to Participant
Accounts as of an Allocation Date, which shall be [select one]
[ X ] the last day of the PLAN YEAR.
[ ] the first day of the PLAN YEAR.
[ ] the following date or dates in each PLAN YEAR:
[ ] [insert date(s)].
Subject to the provisions of Section 2.09, an allocation of Qualified Non-
elective Contributions [select one]
[ ] shall
[ X ] shall not
be made to the Account of a Participant who completes less than five
hundred (500) Hours of Service during the PLAN YEAR.
Subject to the provisions of Section 2.09, an allocation of Qualified
Non-elective Contributions [select one]
[ ] shall
[ X ] shall not
be made to the account of a Participant who is not employed on the last
day of the PLAN YEAR.
C.3. Matching Contributions shall be allocated to Participant Accounts as
of an Allocation Date, which shall be [select one]
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[ ] the last day of the PLAN YEAR.
[ ] the first day of the PLAN YEAR.
[ X ] the following date or dates in each PLAN YEAR:
[ 3/31, 6/30, 9/30, 12/31 ] [insert date(s)].
Subject to the provisions of Section 2.09, an allocation of Matching
Contributions [select one]
[ ] shall
[ X ] shall not
be made to the Account of a Participant who completes less than five
hundred (500) Hours of Service during the PLAN YEAR.
Subject to the provisions of Section 2.09, an allocation of Matching
Contributions [select one]
[ ] shall
[ X ] shall not
be made to the account of a Participant who is not employed on the [select
one]
[ ] VALUATION DATE.
[ X ] last day of the PLAN YEAR.
D. A Participant shall be permitted to direct the investment of [select one]
[ ] no part of his or her Account.
[ ] his or her Elective Deferrals only.
[ X ] his or her Account.
E. If directed investments are permitted, the investment alternatives shall
be [select one]
[ X ] selected by the Committee in its sole discretion.
[ ] such investments as the Participant may select.
If directed investments are permitted, changes in investment decisions
shall be made [select one]
[ X ] whenever the Participant wishes.
[ ] at such times during the PLAN YEAR as the Committee shall determine, in
its sole discretion.
F. For purposes of allocating gains and losses pursuant to Sections 10.02
and 10.03 [select one]
[ X ] a weighted average shall be used with reference to amounts
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attributable to contributions made during the PLAN YEAR.
[ ] all contributions shall be treated as made on the last day of the
PLAN YEAR.
Item 9: MINIMUM AND MAXIMUM CONTRIBUTIONS
A. In no event shall the Employer Contribution for the PLAN YEAR for any
Participant be in an amount less than [select one or leave blank]
[$ ] [insert dollar amount].
[ %] [insert percentage] of his or her COMPENSATION for the LIMITATION
YEAR which [select one]
[ ] ends
[ ] begins
in the PLAN YEAR.
B. In no event shall the Employer Contribution for the PLAN YEAR for any
Participant be in an amount greater than [select one or leave blank]
[$ ] [insert dollar amount].
[ %] [insert percentage] of his or her COMPENSATION for the LIMITATION
YEAR which [select one]
[ ] ends
[ ] begins
in the PLAN YEAR.
Item 10: VALUATION DATE
The VALUATION DATE shall be [check one and complete as necessary]
[ ] the first day of the PLAN YEAR.
[ X ] the last day of the PLAN YEAR.
[ ] the first day of the PLAN YEAR and the first day of the month beginning
six (6) months later.
[ ] the last day of the sixth (6th) month of the PLAN YEAR and the last day
of the PLAN YEAR.
[ ] the first day of each quarter of the PLAN YEAR.
[ ] the last day of each quarter of the PLAN YEAR.
[ ] [insert date or series of dates]
[ ]
Item 11: METHOD OF FUNDING
The Plan shall be funded as [select one]
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[ ] an Uninsured Plan.
[ X ] a Plan funded in part with life insurance or annuity Policies.
[ ] a Fully Insured Plan.
Item 12: PRERETIREMENT DEATH BENEFIT
A. If the Plan is an Uninsured Plan, the PRERETIREMENT DEATH BENEFIT shall
be [select one]
[ ] the Qualified Preretirement Survivor Annuity.
[ ] the Participant's vested Accrued Benefit.
[ X ] the Participant's Accrued Benefit.
B. If the Plan is a Plan funded in part with life insurance Policies the
PRERETIREMENT DEATH BENEFIT shall be [select one]
[ ] the death benefit provided under any life insurance Policies issued on
the Participant's life, but in no event less than the Qualified
Preretirement Survivor Annuity.
[ X ] the death benefit provided under any life insurance Policies issued on
the Participant's life, plus the value of the Participant's Account.
C. If the Plan is a Fully Insured Plan, the PRERETIREMENT DEATH BENEFIT
shall be [select one]
[ ] the death benefit provided under any life insurance Policies issued on
the Participant's life, but in no event less than the Qualified
Preretirement Survivor Annuity.
[ ] the death benefit provided under any life insurance Policies issued on
the Participant's life, plus the cash value of any annuity Policies
held in the Participant's Account.
In all cases, the Qualified Preretirement Survivor Annuity shall be paid
in accordance with the provisions of Section 5.06(b) and any PRERETIREMENT
DEATH BENEFIT in excess of the value of the Qualified Preretirement
Survivor Annuity shall be paid in accordance with the provisions of
Section 4.07.
D. The Spouse of a Participant [select one; if the guarantee is provided, the
spouse need not be the Beneficiary of all life insurance proceeds]
[ X ] shall
[ ] shall not
be paid at least one-half (1/2) of the total death benefit payable as a
result of the death of the Participant.
Item 13: LIFE INSURANCE
A. If the Plan is an Insured Plan, the amount of life insurance to be purchased
shall be [select one]
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[ ] determined in accordance with the elections made in Item 13B.
[ X ] determined by each Participant in accordance with the elections made in
Item 13C.
[ ] determined by the Committee in a nondiscriminatory manner.
B. In the event life insurance is to be purchased pursuant to the elections
made in this Item 13B, the Committee shall direct the Trustee to use
[select one if applicable]
[ %] [insert percentage] of each annual Employer contribution to purchase
ordinary life insurance.
[ %] [insert percentage] of each annual Employer contribution to
purchase term insurance.
[ %] [insert percentage] of each annual Employer contribution to
purchase a combination of ordinary life and term life insurance in
such proportion as shall be determined by the Committee.
In the event the percentage of annual Employer contribution set forth
above shall be insufficient to pay the premium on Policies in force
on a Participant's life during the PLAN YEAR immediately preceding
the PLAN YEAR for which the determination is being made, the
Committee shall, subject to the provisions of Section 3.07 [select
one]
[ ] direct the Trustee to pay such amount of the premium as is necessary
from the Account of the Participant.
[ ] direct the Trustee to surrender so much of the life insurance as is
necessary to prevent the premium from exceeding the percentages
elected in Item 13B.
[ ] exercise its discretion to determine whether the premium should be paid
or part of the life insurance surrendered.
In addition to amounts available for insurance under other elections in
the Adoption Agreement, amounts held in a Participant's Account for at
least two (2) years [select one]
[ ] shall
[ ] shall not
be available for the payment of life insurance premiums. If no election
is made, such amounts shall be available.
In addition to amounts available for insurance under other elections in
the Adoption Agreement, amounts held in the account of a Participant who
has been such for at least five (5) years [select one]
[ ] shall
[ ] shall not
be available for the payment of life insurance premiums. If no election
is made, such amounts shall be available.
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C. If the Participant elects to have part of his or her Account invested in
life insurance, such life insurance shall insure [select one]
[ ] only the Participant's life.
[ X ] the Participant's life and/or the lives of others in whom the
Participant has an insurable interest and on whose life the
Participant elects to purchase such insurance.
In the event the provisions of Section 3.07 shall prevent the payment of
the premiums on Policies purchased in accordance with the direction of a
Participant, the Committee shall direct the Trustee to surrender so much
of the life insurance as is necessary to prevent the premium from
exceeding the limitations set forth in Section 3.07 unless the Participant
or some other person agrees to purchase such insurance from the Plan in
accordance with the procedures set forth in applicable Prohibited
Transaction Exemptions.
D. [Complete if applicable] In the event a Participant is entitled on
initial entry to less than [$5,000] [insert amount not less than $2,000
or in excess of $5,000] of life insurance, until the Participant is
entitled to such amount no Policy shall be issued on the life of such
Participant.
E. [Complete if applicable] In the event a Participant is entitled as of
any date to an increase in life insurance benefits that is less than
[$1,000] [insert amount not more than $1,000] no life insurance Policy
need be purchased until the Participant is entitled to at least the amount
set forth as additional life insurance.
F. Additional life insurance shall be purchased on the life of a
Participant until the Participant [select one]
[ ] is within [ ] [insert number not greater than 5] years of his or
her NORMAL RETIREMENT DATE.
[ ] reaches his NORMAL RETIREMENT AGE.
[ X ] actually retires.
G. The Committee [select one]
[ ] shall purchase key man insurance.
[ X ] shall have the right to purchase key man insurance.
[ ] shall not have the right to purchase key man insurance.
Item 14: VOLUNTARY EMPLOYEE CONTRIBUTIONS
VOLUNTARY EMPLOYEE CONTRIBUTIONS [Complete if applicable]
If a voluntary contributions account is held under the Plan for a Participant,
the Participant [select one if applicable]
[ X ] shall
[ ] shall not
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have the right to direct the investment of such account.
Item 15: VESTING
A. The following vesting schedule shall apply: [select one]
[ X ] Vesting in the Accrued Benefit from Employer Contributions shall be
twenty (20%) percent after two (2) Years of Service, with an additional
twenty (20%) percent vesting for each additional Year of Service
thereafter, up to a maximum vesting in the Accrued Benefit of one
hundred (100%) percent.
[ ] Vesting in the Accrued Benefit from Employer Contributions shall be
[complete each percentage]
[ %] [insert any percentage not less than zero] after one (1) Year
of Service;
[ %] [not less than 20%] after two (2) Years of Service;
[ %] [not less than 40%] after three (3) Years of Service;
[ %] [not less than 60%] after four (4) Years of Service;
[ %] [not less than 80%] after five (5) Years of Service;
100% after six (6) Years of Service.
[ ] Vesting in the Accrued Benefit from Employer Contributions shall be
one hundred (100%) percent after [ ] [insert a number no greater
than 3] Years of Service.
[ ] Vesting in the Accrued Benefit from Employer Contributions shall be one
hundred (100%) percent at all times.
B. [Not applicable]
C. Years of Service with the Employer shall be counted to determine the
nonforfeitable percentage in such Employee's Accrued Benefit from Employer
Contributions based on the following elections: [select applicable
exclusions]
[ ] all Years of Service will be counted.
[ X ] Years of Service completed before the Participant attained Age eighteen
(18) shall not be included.
[ ] Years of Service during a period for which the Employee made no
mandatory contributions shall not be included.
[ ] Years of Service completed before the Employer maintained this Plan or
a predecessor Plan shall not be included.
[ ] Years of Service before January 1, 1971, unless the Employee has
at least three (3) Years of Service after December 31, 1970 shall not
be included.
[ ] Years of Service before the effective date of ERISA shall not be
included if such Years would have been disregarded under the break in
service rules of the Plan or prior plan in effect from time to time
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<PAGE> 100
before such date. For this purpose, break in service rules are rules
which result in the loss of prior vesting or benefit accruals, or
deny an Employee eligibility to participate by reason of separation
or failure to complete a required period of service within a specified
period of time.
D. Years of Service for purposes of determining a Participant's nonforfeitable
percentage in his or her Accrued Benefit (the vesting computation period)
shall be measured over [select one]
[ X ] the PLAN YEAR.
[ ] the twelve (12) consecutive month periods measured from the date the
Participant performs his or her first Hour of Service and each
anniversary thereof.
[ ] the twelve (12) consecutive month period measured from each [ ]
[insert month and day].
E. [Complete if applicable] For purposes of measuring a Year of Participation
or Service for accrual purposes, a Participant will be credited with a Year
of Participation or Service only if he or she completes at least [ ]
[insert number] Hours of Service during the accrual computation period.
[Complete if applicable] For purposes of measuring a Year of Participation
or Service for vesting purposes, a Participant will be credited with a Year
of Participation or Service only if he or she completes at least [ ]
[insert number not less than 1,000] Hours of Service during the vesting
computation period.
Item 16: PLAN YEAR and LIMITATION YEAR
The PLAN YEAR shall be [select one]
[ ] the twelve (12) consecutive month period which coincides with the
LIMITATION YEAR.
[ X ] the twelve (12) consecutive month period commencing on the EFFECTIVE
DATE and each anniversary thereof.
[ ] the twelve (12) consecutive month period commencing on [ ] [insert
month and day] and each anniversary thereof.
The LIMITATION YEAR shall be [select one]
[ X ] the PLAN YEAR.
[ ] the twelve (12) consecutive month period commencing on [ ] [insert
month and day] and each anniversary thereof.
Item 17: TOP-HEAVY DETERMINATIONS
A. For purposes of establishing present value to compute the Top-Heavy
Ratio, any benefit shall be discounted based on the following assumptions:
[select one]
[ X ] the UP-84 mortality table and interest at the rate of six (6%)
percent for both preretirement and post-retirement purposes.
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<PAGE> 101
[ ] Preretirement [complete both items; if no mortality table is used,
insert "None"]
Interest rate [ %]
Mortality Table [ ]
Other [insert assumptions]
[ ]
[ ] Post-Retirement [complete both interest and mortality items; complete
cost of living only if applicable]
Interest rate [ %]
Mortality Table [ ]
Cost of Living [ ]
Other [insert assumptions]
[ ]
B. For purposes of computing the Top-Heavy Ratio, the Valuation Date shall
be [select one]
[ 12/31 ] [insert date used for computing Plan costs for minimum funding,
regardless of whether a valuation is performed every year].
[ ] the Valuation Date of the defined benefit plan.
C. Top-Heavy Minimums will be satisfied by [select one]
[ X ] this Plan.
[ ] another Plan.
If the Top-Heavy Minimums will be satisfied by another plan, insert the
name of such other plan: [ ].
D. An Employer who maintains both a defined benefit and defined
contribution plan which are Top-Heavy Plans shall provide a minimum
benefit or contribution in the [select one]
[ ] defined benefit
[ X ] defined contribution
plan equal to
[if the defined benefit plan is selected]
[ %] of average COMPENSATION for the five (5) highest consecutive years
after January 1, 1984, expressed as a life annuity commencing at the
Participant's NORMAL RETIREMENT DATE, for each PLAN YEAR after
[insert date] [ ] [ ] up to a maximum monthly pension of
[ %] [insert percentage not less than 20%] of such average
COMPENSATION.
[if the defined contribution plan is selected]
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[ 5%] of Annual COMPENSATION for each PLAN YEAR after [insert date]
[ 1/1/93 ].
The provisions of this Item are subject to the provisions of Section
15.08.
Item 18: PARTICIPANT LOANS
Loans to Participants and their Beneficiaries [select one]
[ X ] are allowed.
[ ] are not allowed.
If loans are available to Participants, interest paid on such loans
[ X ] shall
[ ] shall not
be allocated to the Accrued Benefit of the Participant or Beneficiary
borrowing the amount.
Item 19: BENEFIT DISTRIBUTIONS
A. A Participant who reaches his or her NORMAL RETIREMENT AGE but does not
retire shall commence to receive his or her benefits [select one]
[ ] at his or her NORMAL RETIREMENT DATE.
[ ] at his or her Actual Retirement Date.
[ X ] at any time elected by the Participant after his or her NORMAL
RETIREMENT DATE.
B. If benefits are not paid to a Participant who reaches his or her NORMAL
RETIREMENT AGE but does not retire, such benefits shall be [select one]
[ ] invested as part of Trust assets, with gains and losses allocated
proportionately to the Participant's Account.
[ X ] invested in the manner directed by the Participant, with the assets
chosen by the Participant held in the Participant's Account.
C. A Participant who terminates employment prior to his or her NORMAL
RETIREMENT DATE shall be entitled to a distribution of his or her benefits
[select one]
[ X ] upon termination of employment.
[ ] upon the last day of the PLAN YEAR in which termination of
employment occurs.
[ ] upon termination of employment as a result of a disability as
defined in Section 5.03.
[ ] upon the occurrence of a one-year Break in Service.
[ ] upon the occurrence of five one-year Breaks in Service.
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<PAGE> 103
[ ] only upon the earlier of his or her death or attainment of his or
her NORMAL RETIREMENT AGE.
[ ] upon the VALUATION DATE coincident with or next following termination
of employment.
D. A Spouse who is entitled to a Qualified Preretirement Survivor Annuity
[select one]
[ X ] shall
[ ] shall not
be entitled to receive the Annuity in the form of a lump sum.
E. A Participant shall be entitled to receive a distribution of his rollover
account as defined in Section 5.12 [select one]
[ X ] at any time he or she requests.
[ ] at the same time as a distribution can be made from the Plan of all or
any part of his Accrued Benefit.
F. [Insert percentage if applicable] In lieu of a Qualified Joint and
Survivor Annuity paying a survivor annuity of fifty (50%) percent, the
survivor annuity payable under the Qualified Joint and Survivor Annuity
Form shall be [ %] [not less than fifty (50%) percent or more than one
hundred (100%) percent] of the amount of the annuity payable during the
joint lives of the Participant and spouse.
G. Distributions to a Participant in a profit sharing Plan shall be available
[select applicable choices]
[ ] of any amounts held in the Participant's Account for at least two (2)
years.
[ ] of any amounts held in the Participant's Account if the Participant has
participated in the Plan for at least five (5) years.
[ X ] only at the times and to the extent selected for distributions of
Employer contributions in other Items in the Adoption Agreement.
Item 20: OPTIONAL FORMS
A. Benefits shall be payable to a Participant only in one of the following
forms: [complete only if the safe harbor rule of Section 5.06(b)(6) is to
apply]
[ X ] a lump sum.
[ ] a period certain as elected by the Participant, but not in excess
of [ ] [insert period no greater than 20] years.
B. If the safe harbor rule of Section 5.06(b)(6) is not to apply, benefits
payable to a Participant shall be payable in any one of the following
forms, in addition to the form of a Qualified Joint and Survivor Annuity:
[check all applicable forms]
[ ] an annuity for the life of the Participant.
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[ ] an annuity for the life of the Participant, with up to [ ] [select
number of payments not in excess of 240] monthly payments guaranteed.
[ ] a lump sum.
[ ] a joint and survivor annuity with spouse with [ ] [insert % not
more than 100%, or insert the word "any"] of the monthly pension
payable to the Participant to be paid to the spouse following the
death of the Participant.
[ ] subject to the provisions of Section 5.06, a joint and survivor
annuity with any person with [ ] [insert % not more than 100%, or
insert the word "any"] of the monthly pension payable to the
Participant to be paid to such person on the death of the
Participant.
[ ] all of the optional forms listed above.
[ ] the following additional optional forms: [complete as applicable]
1. [ ]
2. [ ]
3. [ ]
4. [ ]
5. [ ]
C. If benefits are payable in a lump sum under any optional form, such
benefits shall be payable [select as applicable]
[ X ] in any case in which the Participant so elects.
[ ] only if the lump sum benefit has a value less than [$ ] [insert
dollar amount].
[ ] only if the Participant executes an agreement not to compete with
the Employer.
D. Benefits payable to a Participant
[ ] can only be paid in one of the optional forms set forth in Item 20A.
[ X ] can be converted to an account balance and paid in accordance with the
provisions of section 401(a)(9) of the Code, as they apply to
distributions from an account balance.
Item 21: ROLLOVER ACCOUNTS
A. Rollover accounts [select one]
[ X ] are permitted.
[ ] are not permitted.
B. If rollover accounts are permitted, the directed investment of rollover
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<PAGE> 105
accounts by the Participant [select one, if applicable]
[ X ] is permitted.
[ ] is not permitted.
Item 22: LIMITATIONS ON BENEFITS
If the Employer maintains or ever maintained another qualified plan other than
a paired plan 01-001, 01-005, 02-001 or 02-003 in which any Participant in
this Plan is or was a Participant or could possibly become a Participant, the
Employer adopting this Plan must complete this Item. The Employer must also
complete this Item if it maintains a welfare benefit fund, as defined in
section 419(e) of the Code, or an individual medical account, as defined in
section 415(l)(2) of the Code, under which amounts are treated as Annual
Additions with respect to any Participant in this Plan.
A. If the Participant is covered under another qualified defined
contribution Plan maintained by the Employer, other than a master or
prototype plan [select one]
[ X ] the provisions of Section 8.02 shall apply as if the other plan
were a master or prototype plan.
[ ] [state method under which the plans will limit total Annual
Additions to the Maximum Permissible Amount, and will properly reduce
any excess amounts, in a manner that precludes Employer discretion]
B. If the Participant is or has ever been a Participant in a defined
benefit plan maintained by the Employer [state method which satisfies the
1.0 limitation of section 415(e) of the Code and precludes Employer
discretion]
Item 23: MISCELLANEOUS
A. An Employer who has ever maintained or who later adopts any plan,
including a welfare benefit fund as defined in section 419(e) of the Code
which provides post-retirement medical benefits allocated to separate
accounts for Key Employees as defined in section 419A(d)(3) of the Code,
or an individual medical account as defined in section 415(l)(2) of the
Code, in addition to this Plan, other than a paired plan 01-001, 01-005,
02-001 or 02-003, may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this Plan
is qualified under section 401 of the Code. If the Employer who adopts or
maintains multiple plans wishes to obtain reliance that his or her plans
are qualified application for a determination letter should be made to the
appropriate Key District Director of Internal Revenue.
B. This Adoption Agreement may be used only in conjunction with The
GUARDIAN Defined Contribution Prototype Plan and Trust Agreement.
C. In the event this Adoption Agreement is improperly completed, the Plan
may not be qualified under section 401(a) of the Internal Revenue Code.
D. The Sponsor will inform each adopting Employer of any amendments made to
the Plan or the abandonment or discontinuance of the Plan.
E. The name, address and telephone number of the Sponsor are:
The Guardian Life Insurance Company of America
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<PAGE> 106
201 Park Avenue South
New York, New York 10003
(212) 598-8000
If life insurance policies have been purchased from the Guardian, ask for
the Pension Division Service Department.
If annuities or investments have been purchased from either the
Guardian Insurance & Annuity Company, Inc. or the Park Avenue Portfolio,
ask for the Equities Department.
If no products have been purchased from the Guardian, the Guardian can
not respond to any communications concerning this document.
THESE DOCUMENTS ARE INTENDED TO BE PART OF A PROTOTYPE PLAN. THE INTERNAL
REVENUE SERVICE GIVES PROTOTYPE PLANS SPECIAL RELIANCE BY PRE-APPROVING PLAN
LANGUAGE. THAT RELIANCE IS ONLY AVAILABLE IF EACH EMPLOYER SPONSORING THE
PLAN MAKES AMENDMENT S ON A TIMELY BASIS WHEN SUCH AMENDMENTS ARE REQUIRED.
SUCH AMENDMENTS ARE MADE BY THE PLAN SPONSOR, AND FORWARDED TO EACH INDIVIDUAL
EMPLOYER SPONSORING THE PLAN. THE PLAN CAN LOSE ITS QUALIFICATION IF THE
EMPLOYER FAILS TO MAKE THE NECESSARY AMENDMENTS.
AS SPONSOR OF THIS PROTOTYPE, THE GUARDIAN LIFE INSURANCE COMPANY OF
AMERICA WILL ACCEPT THE RESPONSIBILITY FOR ADVISING YOU OF THE AMENDMENTS MADE
TO THE PLAN ONLY IF YOU TAKE THE FOLLOWING STEPS:
1. AFTER YOU ADOPT THE PROTOTYPE, IF SUCH ADOPTION IS THE FIRST TIME
YOU HAVE USED THE GUARDIAN STANDARDIZED PROFIT SHARING 401 (K) PLAN,
YOU MUST FORWARD AN ORIGINAL COPY OF THE ADOPTION AGREEMENT TO THE
GUARDIAN AT THE ADDRESS LISTED BELOW:
The Guardian Life Insurance Company of America
201 Park Avenue South
New York, New York 10003
Attn: Executive Benefits Service Department 13-A
PLEASE NOTE: IF YOU HAVE PURCHASED NEITHER LIFE INSURANCE OR
INVESTMENTS FROM THE GUARDIAN LIFE INSURANCE COMPANY, THE GUARDIAN
INSURANCE & ANNUITY COMPANY, INC. OR THE PARK AVENUE PORTFOLIO AS
PART OF THE FUNDING OF THIS PLAN OR ANOTHER QUALIFIED PLAN YOU
MAINTAIN FOR YOUR EMPLOYEES, YOU MAY NOT USE THIS DOCUMENT AS A
PROTOTYPE PLAN.
2. WHEN THE GUARDIAN RECEIVES THE EXECUTED DOCUMENTS, THE DOCUMENTS
WILL BE COUNTERSIGNED AND A COPY RETURNED TO YOU. UNTIL YOU RECEIVE
THE COUNTERSIGNED COPY, YOU CAN NOT RELY UPON THE GUARDIAN TO NOTIFY
YOU OF ANY AMENDMENTS NECESSARY TO MAINTAIN THE QUALIFICATION OF YOUR
PLAN UNDER APPLICABLE PROVISIONS OF THE TAX AND PENSION LAW. THE
GUARDIAN WILL ACCEPT NO RESPONSIBILITY FOR SUCH COMPLIANCE UNLESS YOU
HAVE IN YOUR POSSESSION A COPY OF THE ADOPTION AGREEMENT
COUNTERSIGNED BY AN OFFICE R OF THE GUARDIAN. OFFICERS OF THE
GUARDIAN INCLUDE ONLY HOME OFFICE PERSONNEL, AND DO NOT INCLUDE ANY
FIELD SERVICE PERSONNEL.
3. THE GUARDIAN WILL ACCEPT NO RESPONSIBILITY IN THE EVENT YOU DO NOT
RECEIVE A COUNTERSIGNED COPY OF THE ADOPTION AGREEMENT AFTER
FORWARDING SAME TO THE GUARDIAN. YOU ARE SOLELY RESPONSIBLE FOR
OBTAINING SUCH COUNTERSIGNED COPY, AND IF YOU DO NOT OBTAIN SAME FOR
ANY REASON, WHETHER OR NOT THE FAULT OF THE GUARDIAN, THE GUARDIAN
SHALL HAVE NO RESPONSIBILITY FOR ANY DIRECT, INDIRECT OR
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<PAGE> 107
CONSEQUENTIAL DAMAGES RESULTING FROM THE FAILURE TO MAINTAIN PLAN
QUALIFICATION.
IN WITNESS WHEREOF, the Employer and the Committee, respectively, have
caused these presents to be signed by their duly authorized representatives
and have caused their respective corporate seals, where required, to be
hereunto affixed, the day an d year written below.
[ MAY 8, 1995 ]
(DATE) Employer
BY: s/ D.S. Michael
Authorized Signature Title
[ ]
Committee Member
[ ]
Committee Member
[ ]
Committee Member
If no separate trust agreement is signed, the Trustees should sign below.
Unless the Trustee is a corporate Trustee, there must be at least two
Trustees.
s/ D.S. Michael
Trustee
s/ Keikhosrow Irani
Trustee
s/ Jacqueline P. Michael
Trustee
This plan is a prototype sponsored by The Guardian Life Insurance Company of
America. However, the following counter-signature shall not be construed as
approval of the plan or its terms, nor a representation that the undersigned
has reviewed the plan in any manner or to any extent.
s/ Joyce V. Gordon
- ----------------------------
Authorized signature
Joyce V. Gordon
2nd Vice President, Pensions
APPENDIX
The following Employers, by execution of this Appendix, hereby adopt the terms
and conditions of the Plan to which this Appendix is attached:
Name of Employer: [ ]
Address of Employer: [ ]
[ ]
Signature of Authorized Representative: [ ]
Title
Name of Employer: [ ]
Address of Employer: [ ]
[ ]
Signature of Authorized Representative: [ ]
Title
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
REPORT ON AUDIT OF FINANCIAL STATEMENTS FOR TYE YEARS ENDED oCTOBER 31, 1995,
1994 AND 1993) FOR MIKRON INSTRUMENT COMPANY, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (R) FROM 10-K FOR MIKRON INSTRUMENT COMPANY, INC.
FOR THE HEAR ENDED OCTOBER 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<CASH> 463,832
<SECURITIES> 400,000
<RECEIVABLES> 1,253,121
<ALLOWANCES> (107,000)
<INVENTORY> 2,070,365
<CURRENT-ASSETS> 4,108,460
<PP&E> 795,603
<DEPRECIATION> (685,220)
<TOTAL-ASSETS> 4,356,343
<CURRENT-LIABILITIES> 830,686
<BONDS> 0
12,181
0
<COMMON> 0
<OTHER-SE> 3,413,476
<TOTAL-LIABILITY-AND-EQUITY> 4,356,343
<SALES> 6,326,397
<TOTAL-REVENUES> 6,499,969
<CGS> 2,702,339
<TOTAL-COSTS> 2,702,339
<OTHER-EXPENSES> 419,851
<LOSS-PROVISION> 60,005
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 196,338
<INCOME-TAX> 0
<INCOME-CONTINUING> 196,338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 196,338
<EPS-PRIMARY> $.05
<EPS-DILUTED> 0
</TABLE>
