SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 (No Fee Required)
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from _____________ to _____________
For fiscal year ended Commission file number
December 31, 1998 001-14417
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BANKFIRST CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee 58-1790903
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
625 Market Street 37902
Knoxville, Tennessee (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code:
(423) 595-1100
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Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Par Value $2.50)
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant was $75,579,798 as of March 15, 1999. For purposes of the foregoing
calculation only, all directors and executive officers and the Registrant have
been deemed affiliates.
11,375,600
(Number of shares of common stock outstanding as of March 15, 1999)
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<PAGE>
DOCUMENT INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference into the
Form 10-K.
Document Form 10-K
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(1) Proxy statement for the annual meeting Part III
of shareholders to be held April 19, 1999
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<PAGE>
TABLE OF CONTENTS
PAGE
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PART I
ITEM 1. Business ......................................................... 4
ITEM 2. Properties ....................................................... 6
ITEM 3. Legal Proceedings ................................................ 9
ITEM 4. Submission of Matters to a Vote of Security Holders .............. 9
PART II
ITEM 5. Market for the Registrant's Common Stock and Related
Stockholder Matters ............................................ 10
ITEM 6. Selected Financial Data .......................................... 10
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 12
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk ....... 26
ITEM 8. Financial Statements and Supplementary Data ...................... 30
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ......................... 53
PART III
ITEM 10. Directors and Executive Officers of the Registrant ............... 54
ITEM 11. Executive Compensation ........................................... 54
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management ................................................. 54
ITEM 13. Certain Relationships and Related Transactions ................... 54
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K .................................................... 55
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<PAGE>
PART I
ITEM 1. BUSINESS
BankFirst Corporation, a Tennessee corporation (the "Company") is a bank
holding company headquartered in Knoxville, Tennessee that focuses on meeting
the banking needs of East Tennessee businesses and residents through a
relationship oriented, community bank business strategy. The Company conducts
its banking business through BankFirst, a Tennessee banking corporation
("BankFirst"), which has 24 offices in Knox, Sevier, Blount, Loudon and
Jefferson Counties, and through The First National Bank and Trust Company
("Athens"), a national banking association acquired on July 2, 1998, with eight
offices in McMinn County. The Company's operations principally involve
commercial and residential real estate lending, commercial business lending,
consumer lending, mortgage servicing, construction lending and other financial
services, including trust operations, credit cards services and brokerage
services.
From 1992 to December 31, 1998, the organization has grown from a single
community bank with five offices and approximately $66 million in assets, to a
multi-bank organization with an established local banking presence in six
counties with 32 offices and approximately $748 million in assets. The Company
has broadened its mix of products and expanded its customer base through a
combination of internal growth and the consolidation of well-established East
Tennessee banks and financial service companies. The Company's Athens subsidiary
has been in business for over 125 years, its BankFirst subsidiary traces its
history to the 1920's and BankFirst's subsidiary, Curtis Mortgage Company, Inc.,
("Curtis Mortgage") was established in 1944. The Company's growth has been
directed by a senior management team composed of individuals with established
networks of customers and an average of 25 years of experience in East Tennessee
banking.
During 1998 management completed several steps in building the Company and
its product base. In January 1998, BankFirst purchased Curtis Mortgage for $7.5
million as an opportunity to increase mortgage originations, which had not been
a significant line of business, and as an opportunity to diversify revenues
through loan servicing. Curtis Mortgage is a 54-year-old mortgage company that
originates and purchases mortgage loans for sale and servicing. At year-end 1998
Curtis Mortgage's loan portfolio, which consists of loans held for sale and
loans serviced for others, totaled $542 million. At year-end 1997 this loan
portfolio totaled approximately $451 million. This transaction was accounted for
as a purchase, and accordingly, is not reflected in the historical financial
statements of the Company for periods prior to that time.
On July 2, 1998, the Company acquired First Franklin in a statutory merger
accounted for as a pooling of interests and effected a five-for-one stock split.
At year-end 1997, First Franklin had total assets of $182 million, total equity
of $21 million, and net income of $2.6 million. Shareholders of First Franklin
received 22.05 shares of Company common stock, $2.50 par value per share (the
"Common Stock"), for each share of First Franklin common stock, giving effect to
the subsequent five-for-one stock split. As a consequence of the merger, The
First National Bank and Trust Company located in McMinn County, Tennessee, a
subsidiary of First Franklin, became a separate subsidiary of the Company,
adding risk diversification and trust expertise to the combined entity.
On August 27, 1998, the Company completed its initial public offering (the
"IPO") and began trading its shares of Common Stock on the NASDAQ Stock Market's
National Market under the symbol "BKFR". In September 1998 the Company received
net proceeds of $13.5 million from its offering of 1,270,000 shares.
The BankFirst Trust Company was formed on December 21, 1998 as a wholly
owned subsidiary of the Company and consolidated the Athens and BankFirst trust
departments. It was capitalized at $1.0 million. BankFirst Trust Company
provides a full array of trust services including personal trusts and estates,
employee benefit programs and individual retirement accounts. On December 31,
1998, BankFirst Trust Company had approximately $315 million in assets under
administration in approximately 500 accounts and also offers a full array of
brokerage products, including stocks, bonds, mutual funds, IRAs and annuities.
Licensed Bank employees take orders directly from customers and then place the
orders through a third party discount brokerage firm. The Company receives a
commission for each transaction.
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<PAGE>
COMPETITION
The Company and its subsidiaries have substantial competition in
attracting and retaining deposits and in lending funds. The primary factors in
competing for deposits are the range and quality of financial services offered
the ability to offer attractive rates and the availability of convenient office
locations. There is direct competition for deposits from credit unions and
commercial banks and other savings institutions. Additional significant
competition for savings deposits comes from other investment alternatives, such
as money market mutual funds and corporate and government securities. The
primary factors in competing for loans are the range and quality of lending
services offered, interest rates and loan origination fees. Competition for the
origination of loans normally comes from other savings and financial
institutions, commercial banks, credit unions, insurance companies and other
financial service companies. The Company believes that its strategy of
relationship banking and local autonomy in the communities it serves allows
flexibility in rates and products offered in response to local needs. The
Company believes this is its most effective method of competing with both the
larger regional bank holding companies and with smaller community banks.
EMPLOYEES
As of December 31, 1998, the Company and its subsidiaries employed 368
full-time equivalent employees. Management believes that its relations with its
employees are good. The Company does not have any collective agreement.
SUPERVISION AND REGULATION
The Company is a registered bank holding company under the Bank Holding
Company Act of 1956 (the "BHCA"). Under the BHCA, the Company is subject to
periodic examination by the Federal Reserve and is required to file periodic
reports of its operations and such additional information as the Federal Reserve
may require. The Company's activities are limited to managing or controlling
banks, furnishing services to or performing services for its subsidiaries, and
engaging in other activities that the Federal Reserve determines to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto.
BankFirst and BankFirst Trust Company are incorporated under the banking
laws of the State of Tennessee and, as such, are subject to the applicable
provisions of those laws. BankFirst and BankFirst Trust Company are subject to
the supervision of the Tennessee Department of Financial Institutions and to
regular examination by that department. Athens is incorporated under the
National Bank Act, as amended, and is subject to the applicable provisions of
that law. Athens is also subject to the supervision of the Office of the
Comptroller of the Currency and to regular examination by that agency. Both
BankFirst's and Athens' deposits are insured by the FDIC through the Bank
Insurance Fund ("BIF"), and they are therefore subject to the provisions of the
Federal Deposit Insurance Act and to examination by the Federal Deposit
Insurance Corporation.
The Tennessee Department of Financial Institutions, the Office of the
Comptroller of the Currency, and the Federal Deposit Insurance Corporation (the
"Bank Regulatory Authorities") will regulate or monitor virtually all areas of
the Banks' operations, including security devices and procedures, adequacy of
capitalization and loss reserves, loans, investments, borrowings, deposits,
mergers, issuance of securities, payment of dividends, interest rates payable on
deposits, interest rates or fees chargeable on loans, establishment of branches,
corporate reorganizations, maintenance of books and records, and adequacy of
staff training to carry on safe lending and deposit gathering practices. The
federal Bank Regulatory Authorities have established regulatory standards for
all insured depository institutions and depository institution holding companies
relating, among other things, to: (i) internal controls, information systems,
and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv)
interest rate risk exposure; and (v) asset quality. The Bank Regulatory
Authorities also require the Banks to maintain certain capital ratios. The Banks
are required to prepare periodic reports on their financial condition and to
conduct an annual audit of their financial affairs in compliance with minimum
standards and procedures prescribed by the Bank Regulatory Authorities. The
Banks undergo regular on-site examinations by each Bank Regulatory Authority
having jurisdiction over them.
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<PAGE>
ITEM 2. PROPERTIES
Owned/Leased
BankFirst Locations Address Lease Expiration
- ------------------- ------- ----------------
Lenoir City Branch 391 Highway 321/95 North Owned
Lenoir City, TN 37771
Loudon Branch 406 Grove Street Owned
Loudon, TN 37774
Philadelphia Branch 22730 West Lee Highway Owned
Philadelphia, TN 37846
Tellico Village Branch 302 Village Square Owned
Loudon, TN 37774
Main Office Branch 625 Market Street Owned
Knoxville, TN 37902
Farragut Branch 11140 Kingston Pike Owned
Knoxville, TN 37922
Knoxville Center Branch 3013-A Mall Road N Leased
Knoxville, TN 37924 November 2006
Bearden Branch 4611 Kingston Pike Owned
Knoxville, TN 37919
Halls Branch 7108 Maynardville Hwy Leased
Knoxville TN 37918 May 2015
Cedar Bluff Branch 330 N Cedar Bluff Road Leased
Knoxville, TN 37923 January 2016
Rocky Hill Branch 7709 Northshore Drive Leased
Knoxville, TN 37919 September 2016
Weisgarber Branch 1235 Weisgarber Road Owned
Knoxville, TN 37909
Maryville Branch 710 South Foothills Plaza Drive Owned
Maryville, TN 37801
Alcoa Branch 109 Associates Boulevard Owned
Alcoa, TN 37701
Seymour Branch 10232 Chapman Highway Owned
Seymour, TN 37865
-6-
<PAGE>
Owned/Leased
Lease Expiration
BankFirst Locations Address Date
- ------------------- ------- ----------------
Gatlinburg Branch 811 parkway Owned
Gatlinburg, TN 37738
Dudley Creek Branch 912 E. Parkway Owned
Gatlinburg, TN 37738
Pigeon Forge Branch 3416 South River Road Owned
Pigeon Forge, TN 37863
Adjacent parking lot Leased December 2040
Sevierville Branch 430 Forks of the River Parkway Leased
Sevierville TN 37862 December 1999
Sevierville Branch East Main Owned
Sevierville TN 37862 Under Construction
Dolly Parton Branch 710 Dolly Parton Parkway Owned
Sevierville, TN 37862
Kodak Branch 2950 Winfield Dunn Parkway Owned
Kodak, TN 37764
Governors Crossing Governors Crossing Owned
Sevierville, Tennessee 37862 Under Construction
Merchants Road Branch 310 Merchants Drive Owned
Knoxville, TN 37912 Under Construction
Jefferson City Branch 263 East Broadway Blvd Owned
Jefferson City, TN 37760
Dandridge Branch 858 S. Hwy 92 Owned
Dandridge, TN 37725
Curtis Mortgage 249 Peters Road Leased
Knoxville, TN 37939 January 2003
The First National Bank and Trust Company Locations
Main Office 204 Washington Ave. Owned
Athens, TN 37303
Operations Center 3 South Hill Street Leased
Athens, TN 37303 January 1999
Plaza Branch 1604 Decatur Pike Leased
Athens, TN 37303 November 2003
-7-
<PAGE>
Owned/Leased
Lease Expiration
BankFirst Locations Address Date
- ------------------- ------- ----------------
Etowah Branch 601 Tennessee Ave. Owned
Etowah TN 37331
Riceville Branch 3809 Highway 11 Owned
Riceville, TN 37370
Calhoun Branch 3099 Highway 11 Owned
Calhoun, TN 37309
Englewood Branch 111 S. Niota Road Leased
Englewood, TN 37329 March 2001
Friendly Finance Co., Inc. 620 Decatur Pike Leased
Athens, TN 37303 July 1999
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The nature of the banking business generates a certain amount of
litigation against the Company and its subsidiaries involving matters in the
ordinary course of business. None of the legal proceedings currently pending or
threatened to which the Company or its subsidiaries is a party or to which any
of their properties are subject will have, or have, in the opinion of
management, a material effect on the business or financial condition of the
Company.
On November 24, 1997, BankFirst filed a lawsuit in the Chancery Court for
Sevier County, Tennessee, (the "Court") against Electronic Communications
Corporation ("ECC") and Steve Newland, bearing Case No. 97-11-328, which was
later amended to join Paymentech Merchant Services, Inc. ("Paymentech") as a
defendant. The lawsuit alleges that Paymentech made unauthorized and unreported
deletions from wire transfers to BankFirst in the aggregate amount of $544,393.
Paymentech filed a counterclaim and a cross-claim against ECC in the lawsuit,
alleging that Paymentech inadvertently overpaid BankFirst the total sum of
$3,967,907. On March 18, 1998, the parties reached a partial settlement in which
Paymentech agreed to reduce its counterclaim to $544,393 and BankFirst agreed to
transfer $3,423,514 to Paymentech which had been retained by BankFirst.
BankFirst has filed with the Court a Motion for Partial Summary Judgement in the
amount of $521,827. This motion is scheduled to be heard in 1999. Management has
established reserves against possible losses in amounts it deems adequate and
believes that the possibility of any additional exposure is remote.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through
solicitation of proxies or otherwise, during the fourth quarter of 1998.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Since the IPO, the Common Stock has been traded on The NASDAQ National Market
System with the symbol BKFR. There were 605 holders of Common Stock of record on
March 15, 1999. Prior to such offering, there had been no established public
trading market for the Common Stock.
The high and low sales prices of the Company's Common Stock in the fourth
quarter of 1998 were $11.875 and $8.125.
The Company had paid no cash dividends on its Common Stock since the initial
public offering and has no present intention of paying cash dividends in the
foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
Information on the use of proceeds from the Company's IPO was previously
disclosed in Amendment No. 2 to the Registration Statement on Form S-1 (File No.
333-57147), the effective date of which was August 24, 1998. In the IPO J. C.
Bradford & Co. and Morgan Keegan & Co., Inc. were the managing underwriters and
the class of securities registered were shares of Common Stock, $2.50 par value
per share. The Company registered and sold 1,270,000 shares of Common Stock,
with aggregate proceeds to the Company amounting to $15,240,000. In connection
with the issuance and distribution of the shares of Common Stock in the IPO, the
amount of expenses incurred was $1,226,450 for the underwriters' discount and
$475,000 for other expenses, such that total expenses for the issuance of the
shares of Common Stock were $1,701,450. After deducting total expenses, the net
offering proceeds to the Company were approximately $13.5 million. These net
proceeds were added to the general funds of the Company and used for general
corporate purposes. The Company intends to use the funds it retains to support
future expansion of operations or diversification into other banking-related
businesses and for other business or investment purposes, although the Company
has yet to identify any specific acquisition, expansion, diversification or
investment opportunity. A portion of the net proceeds may be transferred to the
subsidiaries of the Company and used for their general corporate purposes,
including, the origination of loans, funding the construction and/or the
acquisition costs of establishing new branch locations, enhancing the
subsidiaries of the Company's liquidity ratios and enhancing future access to
capital markets. It is expected that until needed for other purposes, all or
part of the net proceeds retained by the Company will be invested through the
investment program of the Company or used to reduce borrowing from other
financial institutions and the Federal Home Loan Bank of Cincinnati.
<TABLE>
<CAPTION>
For the years ended December 31,
(Dollars in thousands) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Summary of operations
Interest income - tax equivalent ......... $ 56,745 $ 51,893 $ 47,311 $ 42,677 $ 34,317
Interest expense ......................... 24,927 22,652 21,238 19,082 13,537
-------------------------------------------------------------------------------
Net interest income ................... 31,818 29,241 26,073 23,595 20,780
Tax equivalent adjustment (1) ............ (830) (606) (613) (558) (600)
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Net interest income .................... 30,988 28,635 25,460 23,037 20,180
Provision for credit losses
(1,706) (2,935) (667) (553) (703)
Noninterest income ....................... 9,303 5,657 5,243 4,369 4,382
Noninterest expenses ..................... (28,218) (21,323) (20,799) (19,157) (17,203)
-------------------------------------------------------------------------------
Income before income taxes ............... 10,367 10,034 9,237 7,696 6,656
Income tax expense ....................... 3,558 3,406 3,188 2,517 1,727
-------------------------------------------------------------------------------
Net income ............................... $ 6,809 $ 6,628 $ 6,049 $ 5,179 $ 4,929
===============================================================================
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Basic earnings per share ................. $ 0.64 $ 0.66 $ 0.63 $ 0.63 $ 0.66
Diluted earnings per share ............... 0.59 0.61 0.59 0.59 0.61
Dividends per common share ............... 0.01 0.12 0.09 0.14 0.15
Cash dividends declared - common ......... $ 115 $ 1,214 $ 876 $ 1,152 $ 1,133
Cash dividends declared - preferred ...... 146 161 162 74 73
Average common shares outstanding ........ 10,446,779 9,876,735 9,347,725 8,098,170 7,346,505
Average preferred shares outstanding
"if converted" (2) ...................... 635,516 685,830 696,415 397,610 396,009
Book value per common share (3) .......... 7.48 5.82 5.49 5.20 4.57
Selected year-end balances
Total assets ............................. $ 748,301 $ 650,717 $ 595,284 $ 545,718 $ 480,687
Earning assets ........................... 677,397 604,031 559,927 504,430 444,866
Total Securities ......................... 127,862 127,736 134,781 135,127 121,390
Loans - net of unearned income ........... 508,552 464,572 412,793 350,652 306,905
Mortgage loans held for sale ............. 25,642 395 -- -- --
Allowance for credit losses .............. 6,602 6,098 4,723 4,690 4,526
Total deposits ........................... 617,966 549,769 516,339 480,346 430,407
Repurchase agreements and other .......... 36,374 18,261 5,966 7,632 1,363
borrowed funds
Long-term debt ........................... 1,884 12,121 12,154 8,407 8,416
Stockholders' equity ..................... 82,841 61,432 55,215 44,222 35,399
Selected average balances
Total assets ............................. $ 703,826 $ 621,719 $ 566,616 $ 527,495 $ 467,616
Earning assets ........................... 642,233 577,178 528,179 488,834 419,005
Total Securities ......................... 128,833 128,796 136,600 135,509 121,352
Loans - net of unearned income ........... 487,490 442,098 379,930 339,989 282,812
Mortgage loans held for sale ............. 14,179 198 -- -- --
Allowance for credit losses .............. 6,613 4,796 4,802 4,541 4,384
Total deposits ........................... 586,049 529,820 492,435 468,068 416,426
Stockholders' equity ..................... 69,099 57,082 49,176 39,992 32,520
Ratio based on average balances
Loans to deposits (4) .................... 83.18% 83.44% 77.15% 72.64% 67.91%
Allowance to year end loans .............. 1.30 1.31 1.14 1.34 1.47
Equity to assets ......................... 9.82 9.18 8.68 7.58 6.95
Leverage capital ratio ................... 10.71 9.73 9.60 7.80 7.77
Return on assets ......................... 0.97 1.07 1.07 0.98 1.05
Return on equity ......................... 9.85 11.61 12.30 12.95 15.16
Dividends payout ratio (5) ............... 1.71 18.77 14.88 22.56 23.33
</TABLE>
(1) Tax equivalent basis was calculated using 38% for1998 and 34% for all
other periods presented.
(2) Additional indicates number of common shares outstanding if converted at a
3.0875-to-1 ratio.
(3) Total equity divided by sum : a) average common shares outstanding, and b)
average preferred shares at 3.0875-to-1 ratio.
(4) Mortgage loans held for sale are not included in this calculation.
(5) Dividends declared on common shares divided by net income available to
common shareholders.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The consolidated financial information discussed herein primarily
identifies trends and material changes that occurred during the reported periods
and should be read in conjunction with the consolidated financial statements and
accompanying notes appearing elsewhere herein.
This discussion includes various forward-looking statements with respect
to credit quality (including delinquency trends and the allowance for credit
losses), corporate objectives and other financial and business matters. When
used in this discussion the words "anticipate," "project," "expect," "believe,"
and similar expressions are intended to identify forward-looking statements. The
Company cautions that these forward-looking statements are subject to numerous
assumptions, risks and uncertainties, all of which may change over time. Actual
results could differ materially from forward-looking statements.
In addition to factors disclosed by the Company elsewhere in this
discussion, the following factors, among others, could cause actual results to
differ materially from such forward-looking statements: pricing pressures on
loan and deposit products; competition; changes in economic conditions both
nationally and in the Company's markets; the extent and timing of actions of the
Federal Reserve Board; clients' acceptance of the Company's products and
services; Year 2000 issues experienced by the Company or by governmental or
private entities; and the extent and timing of legislative and regulatory
actions and reforms.
Overview
The Company is a community banking organization, headquartered in
Knoxville, Tennessee, which generates loans and deposits through its 32 offices
throughout East Tennessee. The Company's operations principally involve
commercial and residential real estate lending, commercial business lending,
mortgage servicing, consumer lending, construction lending and other financial
services, including trust operations, credit card services and brokerage
services.
In January 1998, BankFirst purchased Curtis Mortgage Co. for $7.5 million
as an opportunity to increase mortgage originations, and as an opportunity to
diversify revenues through loan servicing. Curtis Mortgage is a 55-year-old
mortgage company that originates and purchases mortgage loans for sale and
servicing. This transaction was accounted for as a purchase, and accordingly, is
not reflected in the historical financial statements of the Company for periods
prior to that time. At the date of purchase Curtis Mortgage's loan servicing
portfolio was $451 million. During 1998, Curtis Mortgage purchased and
originated $225.1 million of loans, had payoffs and repayments of $127.6
million, and at year-end 1998, the servicing portfolio was $542 million.
On July 2, 1998, the Company acquired First Franklin Bancshares, Inc.
("First Franklin") in a statutory merger accounted for as a pooling of
interests, and subsequently effected a five for one stock split. Shareholders of
First Franklin received 22.05 shares of Company common stock for each share of
First Franklin common stock, giving effect to the subsequent five for one stock
split. As a consequence of the merger, The First National Bank and Trust
Company, the subsidiary of First Franklin Bancshares, Inc. of Athens, Tennessee,
became a separate subsidiary of the Company, adding risk diversification and
trust expertise to the combined entity.
On August 27, 1998, BankFirst Corporation completed its initial public
offering and began trading its common shares on The Nasdaq Stock Market's
National Market under the symbol "BKFR". In September 1998 the Company received
net proceeds of $13.5 million from its offering of 1,600,000 shares. The Company
sold 1,200,000 shares while the selling shareholders sold the remaining 400,000
shares. The Company later sold 70,000 shares in the over-allotment.
On December 21, 1998, the Company consolidated the trust departments of
the two banks into BankFirst Trust Company, a wholly owned subsidiary of the
Corporation, with an initial capitalization of $1.0 million. On December 31,
1998, BankFirst Trust Company had approximately $315 million in assets under
administration in approximately 500 accounts.
Total assets grew 15.0% from $650.7 million at year-end 1997 to $748.3
million at year-end 1998, a $97.6 million increase. The primary changes in
assets included a $25.2 million increase in loans held for sale, a $43.5 million
increase in net loans, $7.4 million of mortgage servicing assets, and other
intangible assets which were attributable to the purchase of Curtis Mortgage.
Total liabilities grew from $589.3 million at year-end 1997 to $665.5
million at December 31, 1998, an increase of $76.2 million. Of this growth,
deposits accounted for $68.2 million, federal funds purchased were $2.2 million,
and repurchase agreements accounted for $5.9 million.
From year-end 1997 to December 31, 1998, equity grew $21.4 million, due
primarily to the initial public offering and earnings of $6.8 million.
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<PAGE>
Results of Operations
Net income increased $181,000, or 2.7%, to $6.8 million for the year ended
December 31, 1998, from $6.6 million for 1997. The increase in net income was
primarily due to increases in net interest income, noninterest income, and a
reduction in the provision for loan losses. Noninterest expense grew due to
increases in salaries and benefits resulting from both internal and external
growth, merger costs, costs associated with the integration of Curtis Mortgage,
the opening of three branches, computer system conversion costs and Year 2000
costs.
Earnings per share have been restated to reflect the business combination
accounted for as a pooling of interests with First Franklin Bancshares, Inc.
Basic earnings per share for 1998 were $.64 compared to $.66 for 1997. Diluted
earnings per share decreased from $.61 in 1997 to $.59 in 1998.
Return on average assets decreased from 1.07% in 1997 to $.97 in 1998.
Return on average equity decreased from 11.61% in 1997 to 9.85% in 1998.
Net Interest Income
Even though fully tax equivalent net interest income increased $2.5
million, or 8.8%, from 1997 to 1998, net interest margin decreased during the
period, from 5.07% in 1997, to 4.95% in 1998. The increase in net interest
income, and decrease in net interest margin, is primarily attributable to an
increase in loan volume at lower yields. Changes attributable to the combined
impact of volume and rate have been allocated proportionately to the changes due
to volume and the change due to rate.
Volume/Rate Analysis
<TABLE>
<CAPTION>
1998 change from 1997 due to 1997 change from 1996 due to
------------------------------------------------------------
(Dollars in thousands) Volume Rate Total Volume Rate Total
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income
Loans .................................... $ 5,840 $ (874) $ 4,966 $ 6,281 $ (989) $ 5,292
Securities
Taxable ................................ (1,001) (243) (1,244) (515) 85 (430)
Tax-exempt ............................ 1,168 (327) 841 (1) (17) (18)
Total securities interest .......... 167 (570) (403) (516) 68 (448)
Interest-bearing deposits with other bank 202 (121) 81 (33) (13) (46)
Federal funds sold ...................... 274 (155) 119 (194) (22) (216)
--------------------------------------------------------------
Total interest income ............. 6,483 (1,720) 4,763 5,538 (956) 4,582
Interest expense
Interest-bearing demand deposits ........ 392 (425) (33) 596 (774) (178)
Saving deposits ......................... (166) 207 41 (34) (39) (73)
Time deposits ........................... 1,482 126 1,608 902 356 1,258
Repurchase agreements ................... 670 (48) 622 85 6 91
Other borrowings ........................ 99 482 581 141 19 160
Long-term borrowings .................... (282) (262) (544) 251 (95) 156
--------------------------------------------------------------
Total interest expense .......... 2,195 80 2,275 1,941 (527) 1,414
--------------------------------------------------------------
Net interest income ............. $ 4,288 $(1,800) $ 2,488 $ 3,597 $ (429) $ 3,168
==============================================================
</TABLE>
Average earning assets increased from $577 million to $642 million, or
11.3%, from 1997 to 1998. Loan growth, which was 13.4% in 1998, was the primary
cause of the overall growth in earning assets. Management has been able to
achieve this growth in loans because of long term relationships developed by
current management while at other financial institutions and most recently, as a
result of strong economic conditions in the Banks' primary markets.
During 1997, average loans represented 76.6% of average earning assets.
During 1998 this ratio increased to 78.11% while loan yields decreased from
9.70% in 1997 to 9.54% in 1998. Yields on securities also fell from 6.66% in
1997 to 6.35% in 1998. The decrease in loan and security yields was consistent
with general market rate decreases, and shortening of overall maturities in the
portfolio.
-13-
<PAGE>
Most of the Company's asset growth has continued to be funded with
deposits, the least costly source of funding. Average interest-bearing deposits
grew 7.3% from 1997 to 1998, almost keeping pace with the growth in earning
assets. The average rate paid on interest bearing deposits rose from 4.69% in
1997 to 4.71% in 1998. The Company is generally asset driven, managing funding
to support assets gathered.
The portion of earning assets funded by non-interest bearing deposits,
other liabilities and equity has increased from 24.9% in 1997 to 28.2% in 1998.
These sources of funding do not carry an interest cost, and thus the amount of
interest earning assets supported by non interest-bearing liabilities has
increased. This factor does not impact net interest spread, but has a positive
impact on net interest margin.
The increase in deposits plus non-interest bearing sources of funding has
been lower than the growth in earning assets. As a result, borrowed funds have
increased from 4.9% of average earning assets in 1997 to 6.3% in 1998. These
funds are more costly than deposits and their increase relative to total funding
has put some downward pressure on net interest margin and spread.
-14-
<PAGE>
Average Balance Sheets and Interest Rates
<TABLE>
<CAPTION>
Years ended December 31,
(Dollars in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earnings assets
Securities
Taxable ........................ $ 88,941 $ 5,539 6.23% $105,180 $ 6,783 6.45% $113,420 $ 7,213 6.36%
Tax-exempt (1) ................. 37,456 2,669 7.13 23,328 1,795 7.69 23,336 1,813 7.77
Unrealized gain o A.F.S ........ 2,436 288 (156)
--------- ------- ---- -------- ------- ---- -------- ------- ----
Total securities ............ 128,833 8,208 6.35 128,796 8,578 6.66 136,600 9,026 6.61
Loans (2) ........................ 501,669 47,846 9.54 442,296 42,880 9.70 379,930 37,589 9.89
Interest bearing deposits
with other banks ............... 2,524 96 3.80 236 15 6.36 1,180 61 5.17
Federal funds sold and other ..... 9,207 595 6.46 5,850 419 7.16 10,469 635 6.07
--------- ------- ---- -------- ------- ---- -------- ------- ----
Total earnings assets ............ 642,233 56,745 8.83 577,178 51,892 8.99 528,179 47,311 8.96
Noninterest earning assets
Allowance for loans losses ....... (6,613) (4,796) (4,802)
Premises and equipment ........... 23,022 19,769 16,961
Cash and due from banks .......... 25,545 20,876 17,942
Accrued interest and other
assets ......................... 19,639 8,692 8,336
--------- -------- --------
Total assets ..................... $ 703,826 $621,719 $566,616
========= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities
Deposits
Interest-bearing demand ........ $ 152,645 $ 4,974 3.26% $141,941 $ 5,007 3.53% $128,048 $ 5,185 4.05%
deposits
Savings deposits ............... 32,430 1,075 3.31 36,803 1,034 2.81 37,855 1,107 2.92
Time deposits .................. 297,210 16,685 5.61 270,782 15,063 5.56 254,448 13,805 5.43
--------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-bearing
deposits ................. 482,285 22,734 4.71 449,526 21,104 4.69 420,351 20,097 4.78
Borrowed funds
Repurchase agreements .......... 22,682 1,060 4.67 9,110 438 4.81 7,346 347 4.72
Other borrowings ............... 8,634 490 5.68 7,173 414 5.77 4,710 254 5.39
Long-term borrowings ........... 8,826 643 7.29 12,214 696 5.70 8,544 540 6.32
--------- ------- ---- -------- ------- ---- -------- ------- ----
Total borrowed funds ........ 40,142 2,193 5.46 28,497 1,548 5.43 20,600 1,141 5.54
--------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-bearing
liabilities .................... 522,427 $24,927 4.77 478,023 22,652 4.74 440,951 21,238 4.82
Noninterest-bearing
liabilities
Noninterest-bearing demand
deposit ........................ 103,764 80,294 72,084
Other liabilities ................ 8,536 6,320 4,405
Stockholders' equity ............. 69,099 57,082 49,176
--------- -------- --------
Total liabilities and
stockholders' equity ............. $ 703,826 $621,719 $566,616
========= ======== ========
Interest margin recap
Net interest income and
interest rate spread ............. $31,818 4.06% $29,240 4.25% $26,073 4.14%
======= ======= =======
Net interest income margin ....... 4.95% 5.07% 4.94%
</TABLE>
(1) Interest income on tax-exempt securities has been adjusted to a tax
equivalent basis using a marginal federal income tax rate of 38% for 1998
and 34% for 1997 and 1996. Tax equivalent adjustment was $830 for 1998,
$606 for 1997, and $613 for 1996.
(2) Nonaccrual loans are included in average loan balances and loan fees are
included in interest income. Loan fees were $1,403 for 1998, $1,113 for
1997, and $1,327 for 1996.
-15-
<PAGE>
Provision for Credit Losses
The provision for credit losses was $1.7 million in 1998 compared to $2.9
million in 1997. The Company experienced net charge-offs of $1.2 million in
1998, resulting in a ratio of net charge-offs to average loans of 0.25%. This
compares to net charge-offs in 1997 of $1.6 million, resulting in a ratio of net
charge-offs to average loans of 0.35%. The decrease in the provision in 1998 vs.
1997 is reflective of the decline in charge-offs and nonperforming loans during
the year. Provisions in 1999 are expected to be similar to 1998. Factors which
gave rise to the 1997 provision included a 36.6% increase in commercial loans
during the year and a 146.1% increase in net charge-offs during the year which
increased historical loss factors applied to the portfolio. The Company charges
off any loan or portion of a loan, when management determines that a loss is
imminent irrespective of its due date. All loans recommended for charge off be
reviewed by the Senior Loan Officer and approved by the President before final
approval by the Board of Directors of the Banks. Prior years' accrued interest
is charged off and current years' accrued interest is reversed against income.
Analysis of Allowance for Credit Losses
<TABLE>
<CAPTION>
As of December 31,
(Dollars in thousands) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year ........ $ 6,098 $ 4,723 $ 4,690 $ 4,526 $ 4,054
Loans charged off
Commercial, financial, and
agricultural.................... (353) (1,079) (182) (203) (234)
Commercial real estate ............ (115) (161) (6) -- --
Real Estate-construction .......... -- -- -- -- (45)
Real Estate-residential ........... (310) (76) (55) (44) (1)
Installment ....................... (727) (503) (661) (454) (291)
Lease financing ................... (19) (14) -- -- --
-----------------------------------------------------------------
Total charge-offs........... (1,524) (1,833) (904) (701) (571)
-----------------------------------------------------------------
Charge-offs recovered
Commercial, financial, and
agricultural ................... 41 41 53 146 149
Commercial real estate ............ 1 2 -- -- 7
Real estate-construction .......... -- 33 12 -- --
Real estate-residential ........... 60 39 21 13 42
Installment ....................... 217 158 184 153 141
Lease financing ................... 3 -- -- -- --
-----------------------------------------------------------------
Total recoveries ........... 322 273 270 312 339
Net loans charged off ............... (1,202) (1,560) (634) (389) (232)
Current year provision .............. 1,706 2,935 667 553 704
-----------------------------------------------------------------
Balance at end of year .............. $ 6,602 $ 6,098 $ 4,723 $ 4,690 $ 4,526
=================================================================
Loans, net at year end .............. $ 508,552 $ 464,967 $ 412,793 $ 350,652 $ 306,905
Ratio of allowance to
loans at year end ................. 1.30% 1.31% 1.14% 1.34% 1.47%
Average loans ....................... $ 487,490 $ 442,296 $ 379,930 $ 339,989 $ 282,812
Ratio of net loans charged off to
average loans ....................... 0.25% 0.35% 0.17% 0.11% 0.08%
</TABLE>
A banking company's credit risk profile is generally reflected in the
level and types of loans held, since loans are usually the highest risk assets
owned. Even though the majority of the Company's loans are commercial, which is
typically the highest risk loan type, management believes that two factors
mitigate the credit risk in this portfolio. First, 70.6% of commercial loans are
secured primarily by income-producing real estate, and secondly, BankFirst's
early growth was
-16-
<PAGE>
generated through seasoned loan relationships. The Company's relatively low
levels of charge-offs and non-performing loans reflect the effect of these
mitigating factors. Nonperforming loans at December 31, 1998, were $2.5 million
as compared to $2.8 million at year-end 1997. Nonperforming loans, as a percent
of loans was 0.49% at year-end 1998 and 0.61% at December 31, 1997. Nonaccrual
loans amounted to $537,000 of the nonperforming total in 1998 and $1.1 million
in 1997. The decline is attributable to the foreclosure of one credit during
1998. A loan is reviewed at least when it becomes 90 days delinquent for
placement on a nonaccrual status. If the prospects for collection are good and
the collateral is adequate to cover both principal and interest, then the loan
can continue to accrue interest. When any loan becomes 180 days delinquent it is
placed on nonaccrual. Accrued interest for the current year is reversed
immediately against interest income and prior year's interest is charged off.
Non-Performing Assets
<TABLE>
<CAPTION>
as of December 31,
(Dollars in thousands) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Principal balance
Nonaccrual .......................... $ 537 $1,141 $ 900 $ 581 $ 871
90 days or more past due and still
accruing ......................... 1,971 1,705 1,518 461 264
----------------------------------------------
Total nonperforming loans ..... $2,508 $2,846 $2,418 $1,042 $1,135
==============================================
Nonperforming as a percent of loans ... 0.49% 0.61% 0.59% 0.30% 0.37%
Other real estate owned ............... $1,290 $ 878 $ 309 $ 770 $ 317
OREO as a percent of loans ............ 0.25% 0.19% 0.07% 0.22% 0.10%
Allowance as a percent of
nonperforming loans ................. 263.24% 214.27% 195.33% 450.10% 398.77%
</TABLE>
Future provisions for credit losses will be dependent on loan growth, loan
mix, portfolio credit risk and actual losses incurred. Management has determined
that a total allowance of $6.6 million, or 1.30% of total loans exclusive of
loans held for sale for 1998, is adequate for credit losses inherent in the
total portfolio.
Allowance Allocation
at December 31,
(Dollars in thousands) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
Commercial, financial, ............ $1,312 $1,231 $ 801 $ 714 $ 617
and agricultural
Commercial real estate ............ 2,442 1,874 1,366 1,263 1,187
Real Estate-construction .......... 268 244 338 276 273
Real Estate-residential ........... 821 839 1,126 1,227 1,063
Installment ....................... 600 986 666 709 764
Unallocated ....................... 1,159 924 426 501 622
------------------------------------------
Total ............................. $6,602 $6,098 $4,723 $4,690 $4,526
==========================================
Noninterest Income
Noninterest income increased 63.2% from $5.7 million in 1997 to $9.3
million in 1998, primarily attributable to mortgage banking activities. Service
charges on deposit-related products generated $4.3 million for the year, an
increase of $446,000 over the previous year. Trust income increased from
$704,000 in 1997 to $903,000 in 1998 as the trust assets under management
increased during the year. Loan servicing income increased $2.4 million in 1998
which was primarily attributable to Curtis Mortgage's mortgage banking
activities. Net gain (loss) on sale of residential mortgage loans increased from
$226,000 in 1997 to $1.0 million in 1998 also as a result of mortgage banking
activities. Securities gains were $124,000 in 1998 and $309,000 in 1997.
-17-
<PAGE>
Noninterest Income
% change % change
(Dollars in thousands) 1998 from `97 1997 from `96 1996
- --------------------------------------------------------------------------------
Noninterest Income
Deposit service charges and fees $ 4,257 11.70% $ 3,811 0.40% $ 3,796
Trust department income ........ 903 28.27 704 13.55 620
Loan servicing income, net of
amortization ................... 2,402 NM -- NM --
Other .......................... 605 (.33) 607 (0.98) 613
--------------------------------------------
8,167 59.45 5,122 1.85 5,029
Realized gain on sale of loans . 1,012 347.79 226 (3.42) 234
Security gains/(losses) ........ 124 (59.87) 309 1,645 (20)
--------------------------------------------
Total Noninterest income ....... $ 9,303 64.45% $ 5,657 7.90% $ 5,243
============================================
Noninterest Expense
Noninterest expense increased $6.9 million, or 32.3%, to $28.2 million in 1998
from $21.3 million in 1997. The primary component of noninterest expense is
salaries and benefits, which increased $3.9 million, or 35.5%, to $15.0 million
in 1998 from $11.1 million in 1997. The increase in salaries and benefits is
primarily attributable to the expenses of newly acquired Curtis Mortgage and the
overall growth of the Company. Occupancy expense increased $775,000, or 45.2%,
to $2.5 million in 1998 from $1.7 million in 1997. Office expenses rose 107.2%
to $1.6 million in 1998 from $775,000 in 1997. These increases are primarily
attributable to the addition of three new branches, year 2000 expenditures, and
computer conversion costs. The Company's efficiency ratio in 1998 was 68.6%,
compared to 61.1% in 1997.
Noninterest Expense
% change % change
(Dollars in thousands) 1998 from `97 1997 from `96 1996
- --------------------------------------------------------------------------------
Noninterest Expense
Salaries and employee benefit $15,054 35.50% $11,110 5.42% $10,539
Occupancy expenses .......... 2,491 45.16 1,716 (19.40) 2,129
Equipment expenses .......... 2,285 (9.93) 2,537 6.51 2,382
Office Expenses ............. 1,606 107.23 775 108.90 371
Data processing expenses .... 1,364 8.86 1,253 39.69 897
Advertising ................. 411 (26.34) 558 (2.79) 574
Other ....................... 5,007 48.40 3,374 (7.18) 3,907
--------------------------------------------
Total noninterest expense ... $28,218 32.34% $21,323 2.52% $20,799
============================================
Provision for Income Taxes
The total provision for income taxes equaled $3.6 million for 1998,
reflecting an increase of $152,000 when compared to $3.4 million for 1997. The
increase in 1998 was due to a higher level of pre-tax income. The effective tax
rate was 34.3% in 1998 and 33.9% in 1997.
Year Ended December 31, 1997, Compared to Year Ended December 31, 1996
Net interest income increased $3.1 million, or 12.2%, to $28.6 million in
1997 from $25.5 million in 1996. The increase in net interest income was due
primarily to an increase in average earning assets and an increase in the
percentage of average earning assets invested in loans. Average earning assets
increased $49.0 million, or 9.3%, primarily as a result of loan growth,
particularly growth of commercial business loans.
-18-
<PAGE>
The Company's net interest spread and net interest margin were 4.25% and
5.07%, respectively, in 1997 as compared to 4.14% and 4.94% in 1996. The
increase in the net interest spread and the net interest margin was primarily
the result of the growth in the volume of loans, which are traditionally higher
yielding assets than investment securities, as a percentage of average earning
assets.
The provision for credit losses was $2.9 million in 1997 compared to
$667,000 in 1996. The increase in the provision was attributable to additional
reserves established for the risks associated with the commercial real estate
loan portfolio acquired in the merger with Smoky Mountain in December 31, 1996
and the increase in 1997 charge-offs. The Company experienced net charge-offs of
$1.6 million in 1997, resulting in a ratio of net charge-offs to average loans
of 0.35%, verses net charge-offs of $634,000 in 1996.
Noninterest income increased $414,000, or 7.89%, to $5.7 million in 1997
from $5.2 million in 1996, primarily as a result of security gains of $309,000.
Noninterest expense increased $524,000, or 2.5%, to $21.3 million in 1997
from $20.8 million in 1996. The primary component of noninterest expense is
salaries and benefits, which increased $571,000, or 5.4%, to $11.1 million in
1997 from $10.5 million in 1996. The increase in salaries and benefits is
primarily attributable to overall growth of the Company. Data processing
expenses also increased $356,000, or 39.7%, to $1.3 million in 1997 from
$897,000 in 1996 primarily as a result of volume growth and adjustments
necessitated by the merger with Smoky Mountain.
Net income increased $579,000 or 9.6%, to $6.6 million in 1997 from $6.0
million in 1996. The increase in net income was due primarily to an increase in
net interest income, and was reduced by the impact of increased loan loss
provisions. Return on average assets during 1997 and 1996 was 1.07%, and return
on average equity was 11.61% for 1997 compared to 12.30% for 1996.
Investment Securities
BankFirst and The First National Bank and Trust Company, subsidiaries of
the Company, use their securities portfolios primarily as a source of liquidity
and a base from which to pledge assets for repurchase agreements and public
deposits. Generation of income from securities is not a primary focus of the
Banks. Total securities were $127.9 million at year-end 1998, which is slightly
higher than the $127.7 million balance in 1997. The Banks' policy guidelines are
designed to minimize credit, market, and liquidity risk, and securities
generally must be "investment grade" or higher to be purchased. All securities
are classified as "available for sale" to provide flexibility for asset
liability management. Approximately 60.12% of year-end 1998 securities were
pledged for public deposits and repurchase agreements. Other than commitments to
originate or sell mortgage loans, the Banks do not invest in off-balance sheet
derivative financial instruments, such as interest rate swaps.
Securities
as of December 31,
(Dollars in thousands) 1998 1997 1996
-----------------------------------------------------------------
Available for sale
U.S. Government & Agencies ..... $ 71,504 $ 77,969 $ 91,520
State and municipal ............ 39,008 38,999 22,971
Mortgage-backed and asset-backed 17,350 10,768 20,290
------------------------------
Total available for sale ....... $127,862 $127,736 $134,781
==============================
Securities Maturity Schedule
<TABLE>
<CAPTION>
(Dollars in thousands) 1 Year and Less 1 to 5 Years 5 to 10 Years Over 10 Years Total
- -------------------------------------------------------------------------------------------------------------------------
Balance Rate Balance Rate Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale
U.S. Government & Agencies.. $13,562 6.13% $39,132 6.08% $ 18,810 6.61% $ -- 0.00% $71,504 6.00%
State and municipal......... 2,688 5.04 6,941 5.16 18,361 4.99 11,018 5.80 39,008 5.63
Mortgage-backed and
asset-backed ............. 17,350 5.63
------- ------- ------- ------- -------- ----
Total available for sale ... $16,250 $46,073 $37,171 $11,018 $127,862 5.84%
======= ======= ======= ======= ======== ====
</TABLE>
-19-
<PAGE>
Loans
Total loans, exclusive of loans held for sale, were $508.6 million at
year-end 1998, and $464.6 million at year-end 1997. Loan growth was $43.6
million, or 9.4%, during 1998, and $52.2 million, or 12.6%, during 1997.
Management was able to achieve growth from 1994 through 1997 because of long
term relationships developed by current management while at other financial
institutions. Loans in all categories continued to grow during 1998 primarily as
a result of strong economic conditions in the Banks' primary markets, with
commercial lending experiencing the largest growth. Management expects loan
growth in 1999 to continue at a rate comparable to 1998. Commercial lending will
continue to be the primary focus, although management will work to generate
additional consumer loans, as well as additional residential mortgage loans
through Curtis Mortgage. Mortgage loans held for sale increased to $25.6 million
in 1998 due to the acquisition of Curtis Mortgage and an increase in
originations. Included in loans held for sale at December 31, 1998 were $20.3
million of loans either committed and not delivered or delivered but not
settled.
Lending activities are under the direct supervision of the Boards of
Directors and senior management of the Banks. The Banks operate under loan
policies that state, among other things, guidelines for underwriting, credit
criteria, loan composition, concentrations and administration.
Loans Outstanding
<TABLE>
<CAPTION>
at December 31,
(Dollars in thousands) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financing and
agricultural ............ $ 87,793 $ 95,143 $ 69,614 $ 53,430 $ 57,680
Commercial real estate .. 211,114 164,102 155,389 116,372 103,312
Real estate-construction 36,779 24,977 26,379 22,021 19,431
Real estate-residential . 115,115 119,748 110,636 108,276 81,472
Installment ............. 57,497 59,947 50,277 50,569 45,093
Other ................... 1,614 2,623 2,035 1,754 1,918
-------------------------------------------------------------
Total loans ........... 509,912 466,540 414,330 352,422 308,906
Unearned income ......... (1,360) (1,968) (1,537) (1,770) (2,001)
-------------------------------------------------------------
Total loans, net ... $ 508,552 $ 464,572 $ 412,793 $ 350,652 $ 306,905
=============================================================
Composition of loan portfolio by type
<CAPTION>
at December 31,
1998 1997 1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial, and
agricultural ............. 17.22% 20.39% 16.80% 15.16% 18.67%
Commercial real estate ... 41.40 35.17 37.50 33.02 33.44
Real Estate-construction . 7.21 5.35 6.37 6.25 6.29
Real Estate-residential .. 22.58 25.67 26.70 30.72 26.37
Installment .............. 11.28 12.85 12.13 14.35 14.60
Other .................... 0.31 0.57 0.50 0.50 0.63
-------------------------------------------------------------
Total .................... 100.00% 100.00% 100.00% 100.00% 100.00%
=============================================================
</TABLE>
-20-
<PAGE>
Deposits and Borrowings
Deposits have been the Company's primary source of funding for loans,
although the Company also utilizes borrowed funds, including customer repurchase
agreements. The Company believes it has the ability to raise deposits quickly
within its market areas by slightly raising interest rates. The Company's
deposit strategy, however, has been to remain competitive in its markets,
without paying the highest yield, because of the availability and attractiveness
of other sources of funding. Customer repurchase agreements and FHLB advances,
while more costly than deposit funding, are typically the lowest cost borrowed
funds available in the marketplace, and are utilized by management to raise
identified amounts of funds with more precision than deposit solicitations.
Although management expects to continue using repurchase agreements, short-term
borrowings and FHLB advances, deposits will continue to be the Company's primary
funding source.
Total deposits grew at a rate of 12.4% during 1998 and 6.5% during 1997,
resulting from an increase in deposit taking branch locations and effective
marketing strategies. Despite the increase in deposit growth, loan growth,
including loans held for sale, outpaced the growth of deposit sources, resulting
in an increase in the loan to deposit ratio to 86.4% at year-end 1998, from
84.6% at year-end 1997. To supply the needed liquidity, the Company increased
its repurchase agreements from $16.3 million in 1997 to $22.2 million in 1998.
These accounts are considered volatile under regulatory requirements, although
the Company has found them to be a steady source of funding. The Company has
utilized the Federal Home Loan Bank of Cincinnati ("FHLB") as a borrowing
source. FHLB borrowings were $11.9 million at year-end 1998 and $12.1 million at
year-end 1997. The FHLB will continue to be a source for funding loan growth in
the future, as the Company intends to draw additional borrowings to fund loan
growth.
Deposit Information
at December 31,
(Dollars in thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
Noninterest bearing ............... $117,823 $ 92,749 $ 74,161
Interest bearing demand ........... 159,890 150,761 139,152
Saving deposits ................... 33,862 37,270 36,576
Time .............................. 306,391 268,989 266,450
--------------------------------------
Total deposits .................... $617,966 $549,769 $516,339
======================================
Maturity Ranges of Time Deposits
With Balances of $100,000 or More at December 31,
(Dollars in thousands) 1998 1997 1996
- --------------------------------------------------------------------------
3 months or less ............ $23,642 $25,686 $28,578
3 through 6 months .......... 22,623 14,324 11,182
6 through 12 months ......... 24,231 21,167 19,619
Over 12 months .............. 10,906 17,083 10,089
-------------------------------------
$81,402 $78,260 $69,468
=====================================
In general, large certificate of deposit customers tend to be extremely
sensitive to interest rate levels, making these deposits less reliable sources
of funding from liquidity planning purposes than core deposits. However, the
Company does not believe that its deposits of this type are materially more
sensitive to interest rate changes than its other certificates of deposits
because such certificates are principally held by long-term customers located in
the Banks' market areas. Certificates of deposit of this type rose $3.1 million
from year-end 1997 to December 31, 1998. This compares to a $8.8 million
increase in the previous year.
-21-
<PAGE>
Equity and Capital Resources
The Company was "well capitalized" for regulatory purposes during 1998 and
1997. Please refer to Note 12, "Capital Requirements and Restrictions on
Retained Earnings", in the Financial Statements. The Company has issued stock
upon the exercise of stock options, conversion of preferred stock to common
stock, and in connection with a five for four common stock split in 1997 and
five for one split in 1998. In September 1998 the Company received net proceeds
from its initial public offering. The increase in capital from the offering will
be utilized to support future growth. The cash dividends on common stock
reflected in the Company's 1997 and 1996 Financial Statements, was paid by First
Franklin prior to the merger. The Company does not intend to pay cash dividends
on common stock in the foreseeable future. The Company's current strategy is to
support equity growth by retaining net profits rather than paying cash dividends
on common stock.
Items that represent common stock equivalents include 181,050 shares of 5%
preferred stock, $5.00 par value per share (the "Preferred Stock"), and 977,185
common stock options outstanding at year-end 1998. Each share of the Preferred
Stock is convertible into 3.0875 shares of common stock, adjustable for stock
splits and future recapitalizations. There are 1,000,000 authorized shares of
Preferred Stock; however, management currently has no plans to issue additional
shares. There are 1,947,285 additional common shares available for grant under
the stock option plan. The Company plans to continue granting stock options to
selected officers, directors and other key employees.
Interest Rate Sensitivity
A key element in the financial performance of financial institutions is
the level and type of interest rate risk assumed. The single most significant
measure of interest rate risk is the relationship of the repricing periods of
earning assets and interest-bearing liabilities. The more closely the repricing
periods are correlated, the less interest rate risk assumed by the Company. In
general, community bank customer preferences tend to push the average repricing
period for costing liabilities to a shorter time frame than the average
repricing period of earning assets, resulting in a net liability sensitive
position in time frames less than one year
Liquidity and Interest Rate Sensitivity
<TABLE>
<CAPTION>
at December 31, 1998
(Dollars in thousands) 1-90 Days 91-365 Days 1-5 Years Over 5 Years Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest earning assets
Loans, net ............................. $ 197,741 $ 94,574 $ 175,289 $ 66,590 $ 534,194
Securities available for sale
Taxable .............................. 2,965 10,700 42,217 36,251 92,133
Tax-exempt ........................... 545 1,542 4,529 29,113 35,729
---------------------------------------------------------------
Total securities .................. 3,510 12,242 46,746 65,364 127,862
Federal funds sold and other ........... 8,926 2,600 500 3,315 15,341
---------------------------------------------------------------
Total interest earning assets ............ $ 210,177 $ 109,416 $ 222,535 $ 135,269 $ 677,397
===============================================================
Interest bearing liabilities
Interest-bearing demand deposits ....... $ 152,789 $ -- $ -- $ -- $ 152,789
Savings deposits ....................... 40,964 -- -- -- 40,964
Time Deposits .......................... 58,853 156,540 86,455 4,543 306,391
Repurchase agreements and other borrowed
funds ................................ 35,874 500 -- -- 36,374
Long-term borrowings ................... 27 81 499 1,277 1,884
---------------------------------------------------------------
Total interest bearing liabilities ....... $ 288,507 $ 157,121 $ 86,954 $ 5,820 $ 538,402
===============================================================
Rate sensitive gap ....................... (78,330) (47,705) 135,581 129,449 138,995
Rate sensitive cumulative gap ............ (78,330) (126,035) 9,546 138,995
Cumulative gap as a percentage of earning
assets ................................... (11.56)% (18.61)% 1.41% 20.52%
</TABLE>
-22-
<PAGE>
The Company has a cumulative negative GAP of approximately 11.6% and 18.6%
at the end of 90 days and one year, respectively as of December 31, 1998. This
compares with a cumulative negative GAP of 12.8% and 22.3% at the end of 90 days
and one year, as of year-end 1997. Management believes that this level of
negative GAP is appropriate since many of the liabilities that are contractually
immediately repricable can be effectively repriced more slowly than the assets
which are contractually immediately repricable in a rising rate environment.
Conversely, those liabilities can often be repriced downward more rapidly than
contractually required assets repricing in a downward rate environment. The
degree to which management can control the rate of change in deposit liabilities
which are contractually immediately repricable is affected to a large extent by
the speed and amount of interest rate movements. Management's estimates
regarding the actual repricing of contractually immediately repricable
liabilities is incorporated into the Company's earnings simulation model.
The Company uses an earnings simulation model to analyze the net interest
income sensitivity. Potential changes in market interest rates and their
subsequent effect on interest income is then evaluated. The model projects the
effect of instantaneous movements in interest rates of 100 and 200 bp.
Assumptions based on the historical behavior of the Company's deposit rates and
balances in relation to interest rates are also incorporated in the model. These
assumptions are inherently uncertain and, as a result, the model cannot
precisely measure net interest income or precisely predict the impact of
fluctuations in market interest rates on net interest income. Actual results
will differ from the model's simulated results due to timing, magnitude and
frequency of interest rate changes, as well as changes in market conditions and
the application of various management strategies.
Market Risk Analysis
at December 31, 1998
<TABLE>
<CAPTION>
Decrease in Rates Increase in Rates
(Dollars in thousands) 200 Basis Points 100 Basis Points Level Rates 100 Basis Points 200 Basis Points
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Projected Interest Income
Loans .................... $41,937 $43,952 $45,953 $47,968 $49,969
Investments .............. 7,314 7,463 7,599 7,747 7,882
Federal funds sold ....... 416 473 533 618 695
Total interest income .... $49,667 $51,888 $54,085 $56,333 $58,546
Projected Interest Expense
Deposits ................. $19,312 $20,843 $21,593 $22,902 $24,054
FHLB term advances ....... 367 482 597 712 828
Fed funds purchased
& other borrowings ....... 1,145 1,269 1,334 1,418 1,512
Total interest expense ... $20,824 $22,594 $23,524 $25,032 $26,394
Net interest income ...... $28,843 $29,294 $30,561 $31,301 $32,152
Change from level rates (1,738) (1,287) 720 1,571
% change from level
rates .................... (5.68)% (4.21)% 2.35% 5.14%
Summarized Market Risk Analysis
at December 31, 1997
<CAPTION>
Decrease in Rates Increase in Rates
(Dollars in thousands) 200 Basis Points 100 Basis Points Level Rates 100 Basis Points 200 Basis Points
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Projected total interest
income ................... $51,936 $54,602 $57,274 $59,944 $62,617
Projected total interest
expense .................. 20,852 22,727 24,495 26,369 28,234
Net interest income ...... 31,084 31,875 32,779 33,575 34,383
Change from level rates .. (1,695) (904) 796 1,604
% change from level
rates .................... (5.17)% (2.76)% 2.43% 4.89%
</TABLE>
-23-
<PAGE>
In the event of an immediate 100 bp upward shift in the yield curve, it is
estimated that net interest income would increase by $720,000 compared to an
increase of $1.6 million in the event of a similar 200 bp rate movement. These
changes represent 2.3% and 5.1% of net interest income, respectively. This
compares to December 31, 1997, when an immediate 100 bp upward shift resulted in
net interest income increasing $796,000 and an increase of $1.6 million when
there was an upward movement of 200 bp. Downward rate movements result in
estimated decreases in net interest income of reasonably similar amounts and
percentages.
Even though the Company's cumulative GAP at one year is negative, the
earnings simulation model indicates that an increase in interest rates of 100 bp
and 200 bp would result in increased net interest income. This occurs because
management believes that if overall market interest rates increase modestly, the
market would not require an immediate, corresponding repricing of non-term
deposit liabilities.
Liquidity
Liquidity management is both a daily and long-term responsibility of
management. The Company adjusts its investments in liquid assets and long and
short term borrowing, based upon management's consideration of expected loan
demand, expected deposit flows and securities sold under repurchase agreements
(which are generally deposit equivalents arising from a corporate cash
management program offered by the Company). Management looks to deposits and
other borrowings as its primary sources of liquidity. The Banks' Asset/Liability
Committees evaluate funding sources on a quarterly basis, set funding policy,
and evaluate repricing and maturity of the Banks' assets and liabilities in
order to diminish the potential adverse impact that changes in interest rates
could have on the Banks' net interest income.
The Company believes it has the ability to raise deposits quickly within
its market area by slightly raising interest rates, but has typically been able
to achieve deposit growth without paying above market interest rates. Deposit
growth has funded most of the significant asset growth in the past several
years, but has decreased modestly as a percent of total funding. The Company
actively solicits customer cash management relationships which often includes a
securities repurchase agreement feature. Under these agreements, commercial
customers are able to generate earnings on otherwise idle funds on deposits with
the Banks. These accounts are considered volatile under regulatory requirements,
although the Company has found them to be a steady source of funding. The
Company has been able to increase customer relationships because of its strong
business-lending program. While more costly than deposit funding, these
deposit-related accounts are typically the lowest cost borrowed funds available
to the Company.
The Company maintains significant lines of credit with other financial
institutions. At December 31, 1998, total borrowing capacity under those lines
amounted to approximately $30 million under agreements with five commercial
banks and an additional $16.7 million with the Federal Home Loan Bank of
Cincinnati and $2 million with the Federal Reserve Bank.
While management is currently extending the average maturity of its
securities for interest rate risk purposes, substantial liquidity is available
from normal maturities of securities. The Company also has $128.0 million in
securities classified as "available for sale" at year-end 1998. The ability to
sell such securities is another potential source of liquidity, although
management generally does not use this source of funding frequently. To the
extent such securities are pledged to outstanding borrowings, they are not
available for liquidity purposes. Proceeds from the maturities of loans are
another steady source of funding, although on a net basis the demands for new
loans and renewal have exceeded funds provided by maturing loans.
Loan Liquidity
As of December 31, 1998
<TABLE>
<CAPTION>
(Dollars in thousands) Loan Maturities
- -------------------------------------------------------------------------------------------------
1 year and less 1-5 years Over 5 years Total
--------------- --------- ------------ -----
<S> <C> <C> <C> <C>
Commercial, financial, and
agricultural ................... $ 35,701 $ 40,658 $ 11,434 $ 87,793
Commercial real estate.......... 30,740 117,677 62,697 211,114
Real Estate - construction and
residential..................... 55,030 55,968 65,178 176,176
Installment & Other............. 13,081 40,999 5,031 59,111
-------- -------- -------- --------
Total selected loans............ $134,552 $255,302 $144,340 $534,194
======== ======== ======== ========
</TABLE>
Loans maturing after 1 year with:
Fixed interest rates................ $244,753
Floating interest rates............. 154,889
========
$399,642
========
-24-
<PAGE>
The liquidity discussion above has described the Company's liquidity needs
on a consolidated basis. In general, the deposit and borrowing capacity
described above is at the bank level, while the equity based sources of funding
are at the holding company level. Substantial liquidity can be moved between the
Banks and the holding company, although there are certain regulatory
restrictions on such flows, particularly from the Banks to the holding company,
as described in Note 12 to the financial statements. The holding company
currently has no borrowings, and management's current policy is to not pay
dividends on common stock; rather earnings are retained to provide capital to
support the Company's growth. As a result, the holding company's independent
liquidity needs result primarily from holding company only expenses, which are
quite small in relation to its sources of liquidity.
Year 2000 Compliance
The Company has implemented plans to address Year 2000 compliance. The
issue arises from the fact that many existing computer programs use only a
two-digit field to identify the year. These programs were designed without
considering the impact once the calendar year rolls over to "00". If not
corrected, computer applications could fail or create inaccurate results by or
at the Year 2000.
The Company initiated a comprehensive Year 2000 compliance program in
mid-1997. They completed an Awareness and Assessment phase, a Remediation phase
and began a comprehensive Testing phase during 1998. BankFirst's data processing
service bureau implemented new software, which has been Year 2000 certified, and
BankFirst completed its conversion to this new software in April 1998.
Conversion to the new host system necessitated an upgrade of BankFirst's
personal computers and their operating systems, which have been tested for Year
2000 compliance. A new servicing system for Curtis Mortgage that is Year 2000
compliant is scheduled for implementation by June 30, 1999. Management believes
the plan is on target with the goals established by its regulators, in that it
is has 100% of its mission-critical testing complete in out-sourced , host-based
services and 85% of its internal and third-party supported, mission-critical
software testing complete. Facilities, office equipment, supplies, security
equipment, HVAC and elevator systems have all been assessed and, where possible,
tested. All testing of both internal and external systems is expected to be
completed by June 30, 1999.
The Company has evaluated its Year 2000 compliance-related credit risk and
found that the overall risk is low due to the high concentration of hotel/motel
and real estate credit relationships. Larger Commercial Loan customers
maintaining total credit relationships of $500,000, or more have been
aggressively evaluated by their relationship manager regarding their possible
Y2K credit risk. Year 2000 credit risk analysis is an ongoing monitoring and
evaluation effort within the Company. The Company has determined that the Year
2000 issue may be critical to its operations; however management does not
believe customer readiness is or will be material to its overall performance.
Management believes that the total costs of becoming Year 2000 compliant
will not be material. During 1998, The Company projected Year 2000 project costs
to be $295,700 and realized approximately $163,750 in both hard and soft costs
relative to the Year 2000 effort. Several vendor charges relating to Year 2000
compliance testing and software modifications incurred during 1998 are expected
to be realized by the first half of 1999. The Company has attempted to calculate
internal salary hours applied to this effort, and this value is included the
1998 expense. Year 2000 project costs for 1999 are projected to be $150,000.
Management understands the broad scope of the Year 2000 issue and thus has
developed a plan which includes monitoring of those other entities with which it
routinely interacts including suppliers, creditors, borrowers, customers and
other financial service organizations. While monitoring of these entities allows
the Company to assess its possible Year 2000-related risks, the Company also has
been developing a broad-spectrum contingency plan designed to minimize adverse
impact to mission critical systems. The plan includes analysis of customer
demand for currency and funds availability. The plan also consists of developing
and testing alternative methods and locations for core service delivery and
operations support. Additionally, the Company's service bureaus maintain a
contingency plan for data processing. The service bureaus house a second,
tested, Year 2000 compliant system in the event of system failure. The service
bureaus also maintain an off-site data processing system with a third-party data
processor in the event of critical power failure. Both contingency systems have
been certified Year 2000 compliant and have been tested by the Company using
post-January 2000 dates.
Management believes that the Company and its affiliates are currently in
compliance with each applicable directive issued by Regulatory Authorities.
-25-
<PAGE>
Effects of Inflation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time due to inflation. The impact of inflation is reflected in the
increased cost of the Company's operations. Nearly all of the assets and
liabilities of the Company are financial, unlike most industrial companies. As a
result, the Company's performance is directly impacted by changes in interest
rates, which are indirectly influenced by inflationary expectations. The
Company's ability to match the interest sensitivity of its financial assets to
the interest sensitivity of its financial liabilities in its asset/liability
management may tend to minimize the effect of change in interest rates on the
Company's performance. Changes in interest rates do not necessarily move to the
same extent as changes in the prices of goods and services.
New Reporting Requirements
FDIC Improvement Act (FDICIA) of 1991. The FDICIA stipulates many
responsibilities of financial institutions, its boards of directors and
accountants. Many of the provisions have already been effective for the Company;
however there are certain filing requirements which are only applicable to banks
with assets over $500 million. This threshold is measured on an individual
basis, not on consolidated assets. BankFirst, taken alone, exceeded $500 million
during 1998 and as a result is required to comply with the FIDICIA reporting
requirements during 1999. The First National Bank and Trust Company had total
year-end assets of $196 million, and will not be subject to the FDICIA reporting
requirements for the foreseeable future.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information for this item is incorporated by reference to the Liquidity and
Interest Rate Sensitivity section of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
-26-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
BankFirst Corporation
Knoxville, Tennessee
We have audited the accompanying consolidated balance sheets of BankFirst
Corporation as of December 31, 1998 and 1997, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the 1997 financial
statement of First Franklin Bancshares, Inc. which statements reflect total
assets constituting approximately 28% of the related 1997 total and net income
constituting 39% of the related 1997 total. The First Franklin Bancshares, Inc.
1997 financial statements were audited by other auditors, whose report dated
January 22, 1998 thereon has been furnished to us and our opinion expressed
herein, insofar as it relates to the amounts included for First Franklin
Bancshares, Inc. in the consolidated financial statements, is based solely on
the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 balance sheet presentation. We
believe our audits provide a reasonable basis for our opinion.
The financial statements for 1997 and 1996 give retroactive effect to a business
combination with First Franklin Bancshares, Inc. on July 2, 1998 which has been
accounted for using the pooling of interest method, as described in Note 2 to
the consolidated financial statements.
In our opinion, based on our audits and the report of other auditors, the 1998
and 1997 consolidated financial statements referred to above present fairly, in
all material respects, the financial position of BankFirst Corporation as of
December 31, 1998 and 1997, and its results of operations and cash flows for the
years then ended in conformity with generally accepted accounting principles.
The 1996 financial statements of BankFirst Corporation were audited by other
auditors whose report, dated February 6, 1997, expressed an unqualified opinion
on those statements. The 1996 financial statements of First Franklin Bancshares,
Inc. were audited by other auditors whose report, dated January 22, 1998,
expressed an unqualified opinion on those statements. We audited the combination
of the accompanying consolidated statements of income, changes in stockholders'
equity and cash flows for the year ended December 31, 1996 after restatement,
for the July 2, 1998 pooling of interest between BankFirst Corporation and First
Franklin Bancshares, Inc. as discussed above. In our opinion, such consolidated
statements for 1996 have been properly combined on the basis described in Note 2
of the notes to the consolidated financial statements.
Crowe, Chizek and Company LLP
Louisville, Kentucky
January 15, 1999
-27-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
BankFirst Corporation (formerly known as Smoky Mountain Bancorp, Inc.)
We have audited the consolidated statements of income, changes in stockholders'
equity, and cash flows of BankFirst Corporation (formerly known as Smoky
Mountain Bancorp, Inc.) and Subsidiaries, for the year ended December 31, 1996,
prior to the restatement for the 1998 combination with First Franklin
Bancshares, Inc. accounted for using the pooling of interests method. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of BankFirst Corporation (formerly known as Smoky Mountain Bancorp,
Inc.) and Subsidiaries for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
February 6, 1997
-28-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
First Franklin Bancshares, Inc. and Subsidiary
Athens, Tennessee
We have audited the consolidated balance sheets of First Franklin Bancshares,
Inc. and Subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform these audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Franklin
Bancshares, Inc. and Subsidiary as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
G. R. RUSH & COMPANY, P.C.
Chattanooga, Tennessee
January 22, 1998
-29-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
1998 1997
---- ----
ASSETS
Cash and due from banks $ 36,136 $ 24,290
Federal funds sold 8,850 7,000
-------- --------
Total cash and cash equivalents 44,986 31,290
Securities available for sale 127,862 127,736
Mortgage loans held for sale 25,642 395
Loans, net 501,950 458,474
Premises and equipment, net 24,927 21,466
Mortgage servicing rights 7,484 --
Federal Home Loan Bank Stock, at cost 3,189 3,046
Intangible assets 2,002 289
Accrued interest receivable and other assets 10,259 8,021
-------- --------
Total assets $748,301 $650,717
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Noninterest-bearing deposits $117,823 $ 92,749
Interest-bearing deposits 500,143 457,020
-------- --------
Total deposits 617,966 549,769
Securities sold under agreements to repurchase 22,208 16,302
Federal funds purchased and other borrowings 4,166 1,959
Advances from the Federal Home Loan Bank 11,884 12,121
Accrued interest payable and other liabilities 9,236 9,134
-------- --------
Total liabilities 665,460 589,285
Stockholders' equity
Common stock: $2.50 par value, 15,000,000
shares authorized, 11,375,600 and 9,995,091
shares outstanding 28,439 24,989
Noncumulative convertible preferred stock:
$5 par value, 1,000,000 shares authorized,
181,050 and 218,508 shares outstanding 905 1,093
Additional paid-in capital 34,093 23,777
Retained earnings 17,160 10,612
Accumulated other comprehensive income 2,244 961
-------- --------
Total stockholders' equity 82,841 61,432
-------- --------
Total liabilities and stockholders'
equity $748,301 $650,717
======== ========
- --------------------------------------------------------------------------------
-30-
See accompanying notes.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1998, 1997 and 1996
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
Interest income
Interest and fees on loans $47,846 $42,880 $ 37,589
Taxable securities 5,539 6,874 7,288
Nontaxable securities 1,839 1,173 1,188
Other 691 360 633
------- ------- --------
55,915 51,287 46,698
Interest expense
Deposits 22,734 21,104 20,097
Short-term borrowings 1,550 744 562
Long-term borrowings 643 804 579
------- ------- --------
24,927 22,652 21,238
Net interest income 30,988 28,635 25,460
Provision for credit losses 1,706 2,935 667
------- ------- --------
Net interest income after provision
for credit losses 29,282 25,700 24,793
Noninterest income
Service charges and fees 4,257 3,811 3,796
Net securities gains 124 309 (20)
Net gain on loan sales 1,012 226 234
Loan servicing income, net
of amortization 2,402 -- --
Trust department income 903 704 620
Other 605 607 613
------- ------- --------
9,303 5,657 5,243
Noninterest expense
Salaries and employee benefits 15,054 11,110 10,539
Occupancy expense 2,491 1,716 2,129
Equipment expense 2,285 2,537 2,382
Office expense 1,606 775 371
Data processing fees 1,364 1,253 897
Advertising 411 558 574
Other 5,007 3,374 3,907
------- ------- --------
28,218 21,323 20,799
Income before income taxes 10,367 10,034 9,237
Provision for income taxes 3,558 3,406 3,188
------- ------- --------
Net income $ 6,809 $ 6,628 $ 6,049
======= ======= ========
Earnings per share:
Basic $ .64 $ .66 $ .63
Diluted $ .59 $ .61 $ .59
- --------------------------------------------------------------------------------
-31-
See accompanying notes.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1998, 1997 and 1996
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
Unrealized Total
Additional Gains Stock-
Common Preferred Paid-in Retained (Losses) holders'
Stock Stock Capital Earnings on Securities Equity
----- ----- ------- -------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ 3,374 $ 641 $ 16,003 $ 21,552 $ 941 $ 42,511
Reclassification of ESOP shares 475 -- 1,235 -- -- 1,710
-------- ------- -------- -------- ----- --------
Balance, January 1, 1996, as restated 3,849 641 17,238 21,552 941 44,221
Sales of preferred stock, 97,297 shares -- 487 1,314 -- -- 1,801
Sales of common stock, 159,606 shares 399 -- 4,073 -- -- 4,472
Conversion of debenture into
common stock, 25,000 shares 63 -- 437 -- -- 500
Cash dividends on preferred stock -- -- -- (162) -- (162)
Cash dividend on common stock -- -- -- (876) -- (876)
Common stock dividend, 12,695 shares 31 -- 540 (571) -- --
Repurchased common stock, 5,402 shares (14) -- (171) -- -- (185)
Comprehensive income:
Net income -- -- -- 6,049 -- 6,049
Change in unrealized gains (losses),
net of reclassification -- -- -- -- (605) (605)
--------
Total comprehensive income 5,444
-------- ------- -------- -------- ----- --------
Balance, December 31, 1996 4,328 1,128 23,431 25,992 336 55,215
Sales of common stock, 1,177 shares 4 -- 39 -- -- 43
Stock options exercised, 23,659 shares 59 -- 465 -- -- 524
Conversion of 7,051 shares preferred
stock into 3,482 shares common stock 9 (35) 26 -- -- --
Cash dividends on preferred stock -- -- -- (161) -- (161)
Cash dividends on common stock -- -- -- (1,214) -- (1,214)
Common stock split, 253,727 shares 634 -- -- (634) -- --
Cash paid for fractional shares in stock split -- -- -- (3) -- (3)
Repurchased common stock, 6,173 shares, as
restated for pooling of interests (16) -- (209) -- -- (225)
Common stock split, 7,988,436 shares 19,971 -- 25 (19,996) -- --
Comprehensive income:
Net income -- -- -- 6,628 -- 6,628
Change in unrealized gains (losses),
net of reclassification -- -- -- -- 625 625
--------
Total comprehensive income 7,253
-------- ------- -------- -------- ----- --------
Balance, December 31, 1997 $ 24,989 $ 1,093 $ 23,777 $ 10,612 $ 961 $ 61,432
</TABLE>
- --------------------------------------------------------------------------------
-32-
See accompanying notes.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1998, 1997 and 1996
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
Unrealized Total
Additional Gains Stock-
Common Preferred Paid-in Retained (Losses) holders'
Stock Stock Capital Earnings on Securities Equity
----- ----- ------- -------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1998 $24,989 $ 1,093 $ 23,777 $ 10,612 $ 961 $ 61,432
Sale of common stock, 428 shares 1 -- 15 -- -- 16
Stock options exercised, 1,107 shares 2 -- 28 -- -- 30
Conversion of 37,458 shares of
preferred stock into 108,974
shares of common stock 272 (188) (84) -- -- --
Cash dividend on preferred stock -- -- -- (146) -- (146)
Cash dividend on common stock -- -- -- (115) -- (115)
Proceeds from issuance of
1,270,000 common shares, net
of related costs 3,175 -- 10,357 -- -- 13,532
Comprehensive income:
Net income -- -- -- 6,809 -- 6,809
Change in unrealized gains (losses),
net of reclassification -- -- -- -- 1,283 1,283
--------
Total comprehensive income 8,092
------- ------- -------- -------- ------ --------
Balance, December 31, 1998 $28,439 $ 905 $ 34,093 $ 17,160 $2,244 $ 82,841
======= ======= ======== ======== ====== ========
</TABLE>
- --------------------------------------------------------------------------------
-33-
See accompanying notes.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1997 and 1996
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
Cash flows from operating activities
Net income $ 6,809 $ 6,628 $ 6,049
Adjustments to reconcile net
income to net cash from
operating activities
Provision for credit losses 1,706 2,935 667
Depreciation 1,936 1,754 1,415
Amortization of mortgage
servicing rights 1,787 -- --
Security amortization and
accretion, net (35) (120) (293)
Net (gains) losses on securities
sales (124) (309) 20
Net gain on sale of
mortgage loans (1,012) (226) (234)
Proceeds from sales of
mortgage loans 207,119 15,491 12,297
Originations of mortgage loans
held for sale (225,087) (15,562) (12,267)
Increase in mortgage
servicing rights (484) -- --
Net (gains) losses on sales
of assets -- 77 620
Changes in assets and liabilities:
Accrued interest receivable
and other assets (2,260) (571) (116)
Accrued interest payable and
other liabilities (2,358) 4,340 174
--------- -------- ---------
Net cash flows from operating
activities (12,003) 14,437 8,332
Cash flows from investing activities
Purchase of securities (57,152) (59,276) (100,924)
Proceeds from maturities of securities 41,906 32,224 87,269
Proceeds from sales of securities 14,335 35,530 12,995
Net increase in loans (43,583) (53,437) (62,737)
Purchase of FHLB stock (219) (494) --
Premises and equipment
expenditures, net (5,731) (6,255) (2,242)
Net cash paid for mortgage company (7,449) -- --
--------- -------- ---------
Net cash from investing
activities (57,893) (51,708) (65,639)
Cash flows from financing activities
Net change in deposits 68,197 33,430 35,993
Net change in repurchase agreements
and other borrowings 8,113 11,068 (554)
Advances from the Federal Home
Loan Bank 10,000 2,000 10,000
Repayments of advances from Federal
Home Loan Bank (10,237) (2,033) (3,009)
Repayments of notes payable (5,798) -- (3,244)
Preferred stock dividends paid (146) (161) (162)
Common stock dividends paid (115) (1,214) (876)
Sales of stock and stock options
exercised 46 564 6,273
Proceeds from public offering
of common stock 13,532
Repurchase of common stock -- (225) (185)
--------- -------- ---------
Net cash from financing
activities 83,592 43,429 44,236
--------- -------- ---------
Net change in cash and cash equivalents 13,696 6,158 (13,071)
Cash and cash equivalents, beginning
of year 31,290 25,132 38,203
--------- -------- ---------
Cash and cash equivalents, end of year $ 44,986 $ 31,290 $ 25,132
========= ======== =========
Supplemental disclosures - cash
and noncash
Interest paid $ 25,334 $ 22,619 $ 21,312
Income taxes paid 3,100 3,186 3,473
Loans converted to other
real estate 1,096 1,082 373
Debenture converted to
common stock -- -- 500
Preferred stock converted
to common stock 272 35 --
- --------------------------------------------------------------------------------
-34-
See accompanying notes.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of BankFirst Corporation and its wholly-owned subsidiaries, BankFirst,
First National Bank and Trust Company (together referred to as the "Banks") and
BankFirst Trust Company, and BankFirst's wholly-owned subsidiary, Curtis
Mortgage Company, collectively referred to as the "Company". All significant
inter-company balances and transactions have been eliminated in consolidation.
Nature of Operations: The Company provides financial services through its
offices in Eastern and Southeastern Tennessee. Its primary deposit products are
checking, savings, and term certificate accounts, and its primary lending
products are residential mortgage, commercial, and installment loans.
Substantially all loans are secured by specific items of collateral including
business assets, consumer assets and real estate. Commercial loans are expected
to be repaid from cash flow from operations of businesses. Real estate loans are
secured by both residential and commercial real estate. Other financial
instruments which potentially represent concentrations of credit risk include
deposit accounts in other financial institutions.
Use of Estimates: To prepare financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided, and future
results could differ. Mortgage servicing rights, allowance for credit losses,
and fair values of financial instruments are particularly subject to change.
Cash Flows: Cash and cash equivalents includes cash, deposits with other
financial institutions under 90 days, and federal funds sold. Net cash flows are
reported for loan, deposit and other borrowing transactions.
Securities: Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported in accumulated other
comprehensive income. All securities are currently classified as available for
sale.
Interest income includes amortization of purchase premium or discount. Gains and
losses on sales are based on the amortized cost of the security sold. Securities
are written down to fair value when a decline in fair value is not temporary.
Loans: Loans are reported at the principal balance outstanding, net of unearned
interest, deferred loan fees and costs, and an allowance for credit losses.
Loans held for sale are reported at the lower of cost or market, on an aggregate
basis.
The aggregate cost of mortgage loans held for sale at year-end 1998 and 1997 is
less than their aggregate net realizable value.
Interest income is reported on the interest method and includes amortization of
net deferred loan fees and costs over the loan term. Interest income is not
reported when full loan repayment is in doubt, typically when the loan is
impaired or payments are past due over 90 days. Payments received on such loans
are reported as principal reductions.
Allowance for Credit Losses: The allowance for credit losses is a valuation
allowance for probable credit losses, increased by the provision for credit
losses and decreased by charge-offs less recoveries. Management estimates the
allowance balance required using past credit loss experience, known and inherent
risks in the nature and volume of the portfolio, information about specific
borrower situations and estimated collateral values, economic conditions, and
other factors. Allocations of the allowance may be made for specific loans, but
the entire allowance is available for any loan that, in management's judgment,
should be charged-off.
- --------------------------------------------------------------------------------
-35-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
A loan is impaired when full payment under the loan terms is not expected. The
Company has defined its population of impaired loans for individual evaluation
of impairment to be those commercial real estate and commercial loans over
$250,000. Impairment is evaluated in total for smaller-balance loans of similar
nature such as residential mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral.
Foreclosed Assets: Assets acquired through or instead of loan foreclosure are
initially recorded at fair value when acquired, establishing a new cost basis.
If fair value declines, a valuation allowance is recorded through expense. Costs
after acquisition are expensed.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed over the asset useful lives
on an accelerated basis, except for buildings for which the straight line basis
is used.
Servicing Rights: Servicing rights are recognized as assets for purchased rights
and for the allocated cost of retained servicing rights on loans sold. Servicing
rights are expensed in proportion to, and over the period of, estimated net
servicing revenues. Impairment is evaluated based on the fair value of the
rights, using groupings of the underlying loans as to interest rates and then,
secondarily, as to geographic and prepayment characteristics. Any impairment of
a grouping is reported as a valuation allowance.
Intangibles: Purchased intangibles, primarily goodwill, are recorded at cost and
amortized over the estimated life. Goodwill amortization is straight-line over
15 years.
Long-term Assets: These assets are reviewed for impairment when events indicate
their carrying amount may not be recoverable from future undiscounted cash
flows. If impaired, the assets are recorded at discounted amounts.
Repurchase Agreements: Substantially all repurchase agreement liabilities
represent amounts advanced by various customers. Securities are pledged to cover
these liabilities, which are not covered by federal deposit insurance.
Benefit Plans: Pension expense is the net of service and interest cost, return
on plan assets, and amortization of gains and losses not immediately recognized.
The 401k plan expense is the amount contributed to the plan as determined by
Board decision. Deferred compensation plan expense allocates the benefits over
years of service.
Stock Compensation: Pro forma disclosures of net income and earnings per share
are shown using the fair value method of SFAS No. 123 to measure expense for
options granted after 1995, using an option pricing model to estimate fair
value.
Income Taxes: Income tax expense is the total of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax amounts for the temporary
differences between carrying amounts and tax bases of assets and liabilities,
computed using enacted tax rates. A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized.
- --------------------------------------------------------------------------------
-36-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
Financial Instruments: Financial instruments include credit instruments, such as
commitments to make loans and standby letters of credit, issued to meet customer
financing needs. The face amount for these items represents the exposure to
loss, before considering customer collateral or ability to repay.
Earnings Per Common Share: Basic earnings per common share is net income divided
by the weighted average number of common shares outstanding during the period.
Diluted earnings per common share includes the dilutive effect of additional
potential common shares issuable under stock options, preferred stock, or
convertible debentures. Earnings and dividends per share are restated for all
stock splits and dividends through the date of issue of the financial
statements.
Comprehensive Income: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale which are also recognized as separate
components of equity. The accounting standard that requires reporting
comprehensive income first applies for 1998, with prior information restated to
be comparable. Comprehensive income is presented in the consolidated statements
of changes in stockholders' equity.
New Accounting Pronouncements: Beginning January 1, 2000, a new accounting
standard will require all derivatives to be recorded at fair value. Unless
designated as hedges, changes in these fair values will be recorded in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded. Application of this
statement is not expected to have a material effect but the effect will depend
on derivative holdings when this standard applies.
Loss Contingencies: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there are any such matters that will have
a material effect on the financial statements.
Preferred Stock: The preferred stock earns dividends at a rate of 5%, and is
noncumulative, nonvoting, and each share is convertible into 3.0875 shares of
common stock at the option of the holder. The conversion ratio of preferred
stock into common stock is adjusted for common stock dividends and splits.
Preferred stock has equal liquidation rights to common stock.
Dividend Restriction: Banking regulations require maintaining certain capital
levels and may limit the dividends paid by the bank to the holding company or by
the holding company to shareholders.
Segments: The Company's primary segment is banking, which accounts for 98.5% of
revenues at year-end 1998. Other operating segments include mortgage banking and
trust services.
Fair Value of Financial Instruments: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.
Reclassifications: Certain items in the 1997 and 1996 financial statements have
been reclassified to conform with the 1998 presentation.
- --------------------------------------------------------------------------------
-37-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
NOTE 2 - BUSINESS COMBINATIONS
On July 2, 1998, BankFirst Corporation acquired all of the outstanding common
stock of First Franklin Bancshares, Inc. ("First Franklin") in a business
combination accounted for as a pooling of interest. Stockholders of First
Franklin exchanged 164,125 shares of stock for 723,673 shares of the Company's
common stock. In the business combination, First Franklin was merged into
BankFirst Corporation, and its wholly-owned subsidiary, First National Bank and
Trust Company, remains a subsidiary of BankFirst Corporation. These consolidated
financial statements give retroactive effect to the merger, and as a result, the
financial statements are presented as if the combined companies had been
consolidated for all periods presented.
Separate interest income and net income of the merged entities are as follows:
1998 1997 1996
---- ---- ----
Interest income
BankFirst Corporation $ 41,526 $ 37,625 $ 33,584
First Franklin 14,389 13,662 13,114
-------- -------- --------
$ 55,915 $ 51,287 $ 46,698
======== ======== ========
Net income
BankFirst Corporation $ 4,480 $ 4,066 $ 3,664
First Franklin 2,329 2,562 2,385
-------- -------- --------
$ 6,809 $ 6,628 $ 6,049
======== ======== ========
On January 16, 1998, the Bank acquired Curtis Mortgage Company, a mortgage loan
origination and servicing company, for $7.5 million in a business combination
accounted for as a purchase. The results of operations of Curtis Mortgage
Company is included in the accompanying financial statements since the date of
acquisition. The excess of the purchase price over the fair value of net assets
acquired resulted in $1.9 million of goodwill, which is being amortized on a
straight-line basis over 15 years.
Assets and liabilities acquired were:
Cash $ 51
Loans held for sale 6,267
Mortgage servicing rights 7,000
Furniture and equipment 165
Accrued interest receivable and other assets 375
Notes payable (5,798)
Accrued and other liabilities (2,460)
- --------------------------------------------------------------------------------
-38-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
NOTE 3 - SECURITIES AVAILABLE FOR SALE
Securities are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
1998 Cost Gains Losses Value
- ---- ---- ----- ------ -----
U.S. Treasury securities $ 25,258 $ 601 $ $ 25,859
Obligations of U.S.
government agencies 44,197 1,448 45,645
Obligations of states and
political subdivisions 37,455 1,553 39,008
Mortgage-backed securities 17,335 61 (46) 17,350
-------- ------- --------- --------
$124,245 $ 3,663 $ (46) $127,862
======== ======= ========= ========
1997
- ----
U.S. Treasury securities $ 31,250 $ 360 $ (41) $ 31,569
Obligations of U.S.
government agencies 45,948 492 (40) 46,400
Obligations of states and
political subdivisions 38,292 715 (8) 38,999
Mortgage-backed securities 10,696 134 (62) 10,768
-------- ------- --------- --------
$126,186 $ 1,701 $ (151) $127,736
======== ======= ========= ========
Contractual maturities of securities at year-end 1998 are shown below.
Securities not due at a single maturity date, primarily mortgage-backed
securities, are shown separately.
Amortized Fair
Cost Value
---- -----
Due in one year or less $ 16,621 16,250
Due after one year through five years 44,583 46,073
Due after five years through ten years 34,919 37,171
Due after ten years 10,787 11,018
Mortgage-backed securities 17,335 17,350
-------- --------
Total maturities $124,245 $127,862
======== ========
1998 1997 1996
---- ---- ----
Sales of securities available
for sale were as follows:
Proceeds $14,335 $35,530 $12,995
Realized gains 125 343 33
Realized losses 1 34 53
Securities with a carrying value of $74,691 and $79,650 at year-end 1998 and
1997, were pledged for public deposits and securities sold under agreements to
repurchase.
- --------------------------------------------------------------------------------
-39-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
NOTE 4 - LOANS
At year-end 1998 and 1997, loans consisted of the following:
1998 1997
---- ----
Commercial, industrial and agricultural $ 87,793 $ 95,143
Commercial real estate 211,114 164,102
Real estate construction 36,779 24,977
Residential real estate 115,115 120,143
Loans to individuals 57,497 59,947
Lease financing 1,492 1,845
Other 122 383
Total loans $509,912 466,540
Less: Unearned interest income and fees (1,360) (1,968)
Allowance for credit losses (6,602) (6,098)
-------- --------
$501,950 $458,474
======== ========
Activity in the allowance for credit losses is as follows:
1998 1997 1996
---- ---- ----
Beginning balance $ 6,098 $ 4,723 $ 4,690
Provision 1,706 2,935 667
Loans charged off (1,524) (1,833) (904)
Recoveries of loans charged off 322 273 270
------- ------- -------
Balance, end of year $ 6,602 $ 6,098 $ 4,723
======= ======= =======
Impaired loans were as follows:
1998 1997
---- ----
Loans with allowance allocated $ -- $ 552
Amount of allowance for credit losses
allocated -- 61
Loans with no allowance allocated -- 615
1998 1997 1996
---- ---- ----
Average balance during the year $ 855 $ 1,312 $ 941
Interest income recognized during impairment -- 30 50
Cash-basis interest income recognized -- 30 50
Loans past due 90 days still on accrual 1,971 1,705 1,518
The aggregate amount of loans to executive officers and directors of the Company
and their related interests was approximately $17,772 and $18,443 at year-end
1998 and 1997. During 1998 and 1997, new loans aggregating approximately $7,156
and $9,761 and amounts collected of approximately $7,827 and $2,139 were
transacted with such parties.
- --------------------------------------------------------------------------------
-40-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
Loans serviced for others, which are not reported as assets, total $516,835 at
year-end 1998.
Activity for capitalized mortgage servicing rights was as follows:
1998
----
Servicing rights:
Beginning of year $ --
Acquired in purchase transaction 7,000
Additions 2,271
Amortized to expense (1,787)
-------
End of year $ 7,484
=======
NOTE 5 - PREMISES AND EQUIPMENT
A summary of premises and equipment as of year-end 1998 and 1997 is as follows:
1998 1997
---- ----
Land $ 6,798 $ 5,246
Premises 15,087 14,255
Furniture, fixtures and equipment 11,721 10,390
Construction in progress 2,645 963
-------- --------
Total cost 36,251 30,854
Accumulated depreciation (11,324) (9,388)
-------- --------
$ 24,927 $ 21,466
======== ========
NOTE 6 - DEPOSITS
Time deposits of $100 thousand or more were $81,402 and $78,260 at year-end 1998
and 1997.
At year-end 1998, maturities of total time deposits were as follows:
One year or less $246,257
Over one year through three years 48,984
Over three years 11,158
The aggregate amount of deposits to executive officers and directors of the
Company and their related interests was approximately $3,114 and $2,477 at
year-end 1998 and 1997.
- --------------------------------------------------------------------------------
-41-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
NOTE 7 - BORROWINGS
Federal funds purchased, securities sold under agreements to repurchase and
treasury tax and loan deposits are financing arrangements. Securities involved
with the agreements are recorded as assets and are held by a safekeeping agent
and the obligations to repurchase the securities are reflected as liabilities.
Securities sold under agreements to repurchase consist of short term excess
funds and overnight liabilities to deposit customers arising from a cash
management program. While effectively deposit equivalents, such arrangements are
in the form of repurchase agreements. Other borrowed funds were comprised of fed
funds purchased as well as treasury tax and loan deposits which bear interest at
the federal funds rate less .25%.
Information concerning securities sold under agreements to repurchase at
year-end 1998 and 1997 is as follows:
1998 1997
---- ----
Average month-end balance during the year $ 22,834 $ 9,137
Average interest rate during the year 4.48% 4.76%
Maximum month-end balance during the year $ 27,407 $ 16,302
The aggregate amount of securities sold under agreements to repurchase from
executive officers and directors of the Company and their related interests were
$1,786 and $4,014 at year-end 1998 and 1997.
Federal Home Loan Bank advances consist of the following at year-end 1998 and
1997:
1998 1997
---- ----
Fixed rate advances, from 5.7% to 7.2%, maturities
from March 2008 to January 2013 $ 1,884 $ 2,121
Variable rate "overnight" note advances currently
at 5.02% 10,000 10,000
------- -------
$11,884 $12,121
These advances are collateralized by a blanket pledge of qualifying mortgage
loans totaling $17,826 and $18,182 at year-end 1998 and 1997.
At year-end 1998, the Company had approximately $30,000 of federal funds lines
of credit available from correspondent institutions, $16,716 unused lines of
credit with the Federal Home Loan Bank, and $2,000 unused lines of credit with
the Federal Reserve Bank of Atlanta.
- --------------------------------------------------------------------------------
-42-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
NOTE 8 - RETIREMENT PLANS
BankFirst Corporation has two separate 401(k) profit sharing plans. The
BankFirst profit sharing plan covers employees of BankFirst and Curtis Mortgage,
and allows employees to contribute up to 15% of their compensation, which is
matched at a discretionary rate established by the Corporate Board of Directors
annually. The First National Bank and Trust Company 401(k) profit sharing plan
covers employees of The First National Bank and Trust Company and allows
employees to contribute up to 10% of their compensation, which is matched equal
to 50% of the first 6% of the compensation contributed. Expense for both Plans
was $275, $218, and $187 for 1998, 1997 and 1996.
The Company had an Employee Stock Ownership Plan (ESOP) which was discontinued
in 1998. The ESOP sold all Company common stock owned in the 1998 public
offering. The Company's contribution to the ESOP was $30 in 1996. There was no
contribution in 1998 or 1997. All shares under the plan were allocated at
year-end 1997.
Information about the First National Bank and Trust Company defined benefit
pension plan was as follows:
1998 1997
---- ----
Change in benefit obligation:
Beginning benefit obligation $(5,239) $(3,786)
Service cost (196) (173)
Interest cost (361) (318)
Actuarial gain (33) (1,080)
Benefits paid 151 118
------- -------
Ending benefit obligation (5,678) (5,239)
Change in plan assets, at fair value:
Beginning plan assets 4,927 4,178
Actual return 527 629
Employer contribution 242 238
Benefits paid (150) (118)
------- -------
Ending plan assets 5,546 4,927
------- -------
Funded status (132) (312)
Unrecognized net actuarial loss 748 809
------- -------
Prepaid (accrued) benefit cost $ 616 $ 497
======= =======
Plan assets held include common stocks, corporate bonds, government securities,
and other investments.
The components of pension expense and related actuarial assumptions were as
follows:
1998 1997 1996
---- ---- ----
Service cost $ 196 $ 173 $ 159
Interest cost 361 318 287
Expected return on plan assets (420) (358) (323)
Recognized net actuarial (gain) loss (13) (22) (3)
----- ----- -----
Net $ 124 $ 111 $ 120
===== ===== =====
Discount rate on benefit obligation 7.5% 7.5% 8.5%
Long-term expected rate of return
on assets 8.5 8.5 8.5
Rate of compensation increase 5.5 6.5 6.5
Contribution expense was $242, $238, and $229 for the years ending 1998, 1997,
and 1996.
- --------------------------------------------------------------------------------
-43-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES
Income tax expense is summarized as follows:
1998 1997 1996
---- ---- ----
Current $ 3,699 $ 3,612 $ 3,134
Deferred (141) (206) 54
----------- ----------- -----------
$ 3,558 $ 3,406 $ 3,188
=========== =========== ===========
Federal $ 2,914 $ 2,817 $ 2,643
State 644 589 545
----------- ----------- -----------
$ 3,558 $ 3,406 $ 3,188
=========== =========== ===========
Deferred income taxes reflect the effect of "temporary differences" between
values recorded for assets and liabilities for financial reporting purposes and
values utilized for measurement in accordance with tax laws. The tax effects of
the primary temporary differences giving rise to the Company's net deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7
------- -------
Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C>
Allowance for credit losses $ 1,461 $ - $ 1,154 $ -
Mortgage Servicing Rights - (2,841) - -
Depreciation - (763) - (832)
FHLB dividends - (284) - (201)
Defined benefit plan - (233) - (189)
Other real estate 84 - 19 -
Unrealized gain on securities - (1,374) - (589)
Unearned loan income 64 - 57 -
Other 260 (120) 86 (261)
----------- ----------- ----------- -----------
Total deferred income taxes $ 1,869 $ (5,615) $ 1,316 $ (2,072)
=========== =========== =========== ===========
</TABLE>
Upon the acquisition of Curtis Mortgage Company, a deferred tax liability of
$2,231 was established which was attributable to purchased mortgage servicing
rights.
A reconciliation of expected income tax expense at the statutory federal income
tax rate of 34% with the actual effective income tax rates, is as follows:
1998 1997 1996
---- ---- ----
Statutory federal tax rate 34.0% 34.0% 34.0%
State income tax, net of federal benefit 4.0 4.0 4.0
Tax exempt income (5.1) (3.7) (4.6)
Other 1.4 (0.4) 1.1
------ ------ ------
34.3% 33.9% 34.5%
====== ====== ======
- --------------------------------------------------------------------------------
-44-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
NOTE 10 - COMMITMENTS AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK
Some financial instruments, such as loan commitments, credit lines, letters of
credit, and overdraft protection, are issued to meet customer financing needs.
These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have
expiration dates. Commitments may expire without being used. Off-balance-sheet
risk to credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make
such commitments as are used for loans, including obtaining collateral at
exercise of the commitment.
Financial instruments with off-balance-sheet risk were as follows at year end.
1998 1997
---- ----
Commitments to make loans (at market rates) $39,005 $ 9,016
Unused lines of credit and letters of credit 72,417 71,427
The majority of commitments to make loans have a variable interest rate. The
fixed rate loan commitments have interest rates ranging from 6.0% to 12.7% and
maturities ranging from 1 year to 30 years.
NOTE 11 - RELATED PARTY TRANSACTIONS
BankFirst was a 50% partner with a related party, the purpose of which was to
own and operate a building in downtown Knoxville, Tennessee. BankFirst's main
offices occupied a portion of this building. During 1997, BankFirst purchased
the other partner's interest in the building at a fair market value of $924
based on an independent appraisal. The partnership was dissolved following the
consummation of the transaction, with BankFirst remaining as a 100% owner and
tenants. Total payments received from tenant of the buildings other than
BankFirst totaled $105 in 1997. BankFirst's contributions to the partnership
expenses were approximately $169 and $313 in 1997 and 1996.
- --------------------------------------------------------------------------------
-45-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
NOTE 12 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS
Banks and bank holding companies are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and,
additionally for banks, prompt corrective action regulations involve
quantitative measures of assets, liabilities, and certain off-balance-sheet
items calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgements by regulators.
Failure to meet capital requirements can initiate regulatory action.
Prompt corrective action regulations provide five classifications: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and capital restoration plans are required.
At year-end, the capital requirements were met, as the Company and banks were
considered well capitalized under regulations. Actual capital levels and minimum
required levels (in millions) were:
<TABLE>
<CAPTION>
Minimum Amounts to be
Minimum Required Well Capitalized Under
for Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------- ----------------- ----------------------
Actual Ratio Actual Ratio Actual Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
1998
Total Capital (to Risk Weighted Assets)
Consolidated $ 83.4 18.9% $ 44.9 8.0% $ 56.1 10.0%
BankFirst 45.4 10.2 35.4 8.0 44.3 10.0
First National Bank and Trust Co. 24.1 20.1 9.6 8.0 12.0 10.0
Tier 1 Capital (to Risk Weighted Assets)
Consolidated $ 77.8 17.6% $ 22.5 4.0% $ 33.8 6.0%
BankFirst 40.3 9.1 17.7 4.0 26.6 6.0
First National Bank and Trust Co. 22.6 18.9 4.8 4.0 7.2 6.0
Tier 1 Capital (to Average Assets)
Consolidated $ 77.8 10.7% $ 29.1 4.0% $ 36.3 5.0%
BankFirst 40.3 7.5 21.4 4.0 26.7 5.0
First National Bank and Trust Co. 22.6 11.8 7.7 4.0 9.6 5.0
1997
Total Capital (to Risk Weighted Assets)
Consolidated $ 61.4 12.8% $ 38.4 8.0% $ 48.0 10.0%
BankFirst 42.5 11.6 29.2 8.0 36.5 10.0
First National Bank and Trust Co. 21.3 18.8 9.1 8.0 11.3 10.0
Tier 1 Capital (to Risk Weighted Assets)
Consolidated $ 60.1 12.5% $ 19.2 4.0% $ 28.8 6.0%
BankFirst 37.9 10.4 14.6 4.0 21.9 6.0
First National Bank and Trust Co. 20.2 17.8 4.5 4.0 6.8 6.0
Tier 1 Capital (to Average Assets)
Consolidated $ 60.1 9.7% $ 24.9 4.0% $ 31.1 5.0%
BankFirst 37.9 8.3 18.3 4.0 22.9 5.0
First National Bank and Trust Co. 20.2 11.2 7.2 4.0 9.0 5.0
</TABLE>
- --------------------------------------------------------------------------------
-46-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
The Company's primary source of funds to pay dividends to stockholders is the
dividends it receives from the Banks. The Banks are subject to certain
regulations on the amount of dividends it may declare without prior regulatory
approval. Under these regulations, the amount of dividends that may be paid in
any year is limited to that year's net profits, as defined, combined with the
retained net profits of the preceding two years, less dividends declared during
those periods. At year-end 1998, $17,260 of retained earnings was available for
dividends in future periods.
The Banks were required to have approximately $9,659 and $4,569 of cash on hand
to meet regulatory reserve requirements at year-end 1998 and 1997.
NOTE 13 - STOCK OPTIONS
The Company maintains a stock option plan, whereby a maximum of 3,125,000 stock
options may be issued to selected directors, officers, and other key employees.
The exercise price of each option is the fair market value of the Company's
common stock on the date of grant. The maximum term of the options is ten years.
Certain options may be exercised immediately upon grant, and certain options
vest at an annual rate of 20%. At year-end 1998, 1,947,285 shares are authorized
for future grant.
A summary of the Company's option activity, and related information for the
year-ended 1998, 1997, and 1996 is presented below:
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7 1 9 9 6
------- ------- -------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 862,000 $ 6.19 887,645 $ 5.21 547,020 $ 4.25
Granted 142,000 8.80 164,380 7.68 340,625 6.96
Exercised (4,535) 6.59 (140,765) 3.72 - -
Forfeited (22,280) 8.21 (49,260) 7.12 - -
------- ---- ------- ---- ------- ------
Outstanding at end of year 977,185 6.19 862,000 6.19 887,645 5.21
Options exercisable at year-end 548,706 5.01 461,030 4.55 541,590 4.09
------- ------- -------
Weighted-average fair value of
options granted during the year $ 2.97 $ 3.09 $ 2.46
======== ======== ========
</TABLE>
Options outstanding at year-end 1998 were as follows:
Outstanding Exercisable
---------------------- ---------------------
Weighted Average Weighted
Range of Remaining Average
Exercise Contractual Exercise
Prices Number Life Number Price
- ------ ------ ---- ------ -----
$3.50-$5.00 329,055 5.0 329,055 $3.72
$6.00-$7.00 372,690 7.7 190,763 6.79
$7.50-$9.00 275,440 8.6 28,888 7.68
------- --- ------- ---------
Outstanding at year end 977,185 7.0 548,706 $5.01
======= === ======= ========
- --------------------------------------------------------------------------------
-47-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1998, 1997, and 1996: risk-free interest rate of
5.76%, 6.75% and 7.03%, and expected lives of seven, seven, and eight years and
estimated volatility of 10% for 1998. No assumption was made for estimated
volatility for 1997 or 1996 since it was not feasible to determine this
assumption for a non-public entity whose stock was not actively traded. With
estimated volatility excluded, the option pricing model produces the option's
minimum value for 1997 and 1996.
No expense for stock options is recorded, as the grant price equals the market
price of the stock at grant date. The following disclosures show the effect on
income and earnings per share had the options' fair value been recorded using an
option pricing model. If additional options are granted, the pro forma effect
will increase in the future.
1 9 9 8 1 9 9 7 1 9 9 6
------------------ ------------------ ------------------
As As As
Reported Pro forma Reported Pro forma Reported Pro forma
-------- --------- -------------------------------------
Net income $6,809 $6,484 $6,628 $6,400 $6,049 $6,046
Basic earnings per
share $ .64 $ .61 $ .66 $ .63 $ .63 $.63
Diluted earnings per
share .59 .55 .61 .58 .59 . 58
- --------------------------------------------------------------------------------
-48-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
NOTE 14 - EARNINGS PER SHARE
A reconciliation of the numerators and denominators of the earnings per common
share and earnings per common share assuming dilution computations are presented
below.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Basic Earnings Per Share
Net income $ 6,809 $ 6,628 $ 6,049
Less: Dividends declared on preferred stock (146) (161) (162)
------------ ------------ ------------
Net income available to common
stockholders $ 6,663 $ 6,467 $ 5,887
============ ============ ============
Weighted average common shares outstanding 10,446,779 9,876,735 9,347,725
============ ============ ============
Basic Earnings Per share $ .64 $ .66 $ .63
============ ============ ============
Diluted Earnings Per Share
Net income available to common stockholders $ 6,663 $ 6,467 $ 5,887
Add back dividends upon assumed conversion
of preferred stock 146 161 162
------------ ------------ ------------
Net income available to common
stockholders assuming conversion $ 6,809 $ 6,628 $ 6,049
============ ============ ============
Weighted average common shares outstanding 10,446,779 9,876,735 9,347,725
Add: Dilutive effects of assumed conversions
and exercises:
Convertible preferred stock 635,516 685,830 696,415
Convertible debenture -- -- 39,065
Stock options 383,819 313,025 158,165
------------ ------------ ------------
Weighted average common and dilutive
potential common shares outstanding 11,466,114 10,875,590 10,241,370
------------ ------------ ------------
Diluted Earnings Per Share $ .59 $ .61 $ .59
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
-49-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value and estimated fair value of the Company's financial
instruments are as follows at year-end 1998 and 1997.
1 9 9 8 1 9 9 7
------------------ --------------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial assets:
Cash and cash equivalents $ 44,986 $ 44,986 $ 31,290 $ 31,290
Securities available for sale 127,862 127,862 127,736 127,736
Mortgage loans held for sale 25,642 26,037 395 395
Loans, net 501,950 503,397 458,474 461,773
Mortgage servicing rights 7,484 7,484 -- --
Federal Home Loan Bank stock 3,189 3,189 3,046 3,046
Accrued interest receivable 4,653 4,653 4,723 4,723
Financial liabilities:
Demand, savings, and money
market accounts $311,575 $311,568 $280,781 $280,781
Certificate of deposits 306,391 307,060 268,988 268,347
Advances from Federal Home Loan
Bank 11,884 11,993 12,121 12,005
Repurchase agreement and other
borrowings 26,374 26,479 18,261 18,261
Accrued interest payable 3,113 3,113 3,521 3,521
The following methods and assumptions were used to estimate the fair values for
financial instruments. The carrying amount is considered to estimate fair value
for cash and short-term instruments, demand deposits, liabilities for borrowed
money, variable rate loans or deposits that reprice frequently and fully, and
accrued interest receivable and payable. Securities available for sale fair
values are based on quoted market prices or, if no quotes are available, on the
rate and term of the security and on information about the issuer. For fixed
rate loans or deposits and for variable rate loans or deposits with infrequent
repricing or repricing limits, the fair value is estimated by discounted cash
flow analysis using current market rates for the estimated life and credit risk.
Fair values for impaired loans are estimated using discounted cash flow analyses
or underlying collateral values, where applicable. Fair value of mortgage loans
held for sale is based on current quoted secondary interest price for such
loans. For mortgage servicing rights the fair value of the allocated cost of
retained servicing rights approximates cost. Liabilities for borrowed money are
estimated using rates of debt with similar terms and remaining maturities. The
fair value of off-balance sheet items is based on current fees or costs that
would be charged to enter into or terminate such arrangements. The fair value of
commitments to sell loans is based on the difference between the interest rates
committed to sell at and the quoted secondary market price for similar loans,
which is not material.
- --------------------------------------------------------------------------------
-50-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
NOTE 16 - PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
BALANCE SHEETS
Years ended December 31, 1998 and 1997
1998 1997
---- ----
Assets
Cash and cash equivalents $13,265 $ 2,019
Interest bearing deposits 454 --
Investment in subsidiary banks 68,904 59,329
Other 359 516
------- -------
Total assets $82,982 $61,864
======= =======
Total liabilities 141 432
Stockholders' equity
Common stock 28,439 24,989
Preferred stock 905 1,093
Additional paid-in capital 34,093 23,777
Retained earnings 17,160 10,612
Accumulated other comprehensive income 2,244 961
------- -------
Total stockholders' equity 82,841 61,432
------- -------
Total liabilities and stockholders' equity $82,982 $61,864
======= =======
STATEMENTS OF INCOME
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
---- ---- ----
Dividends from subsidiary banks $ 215 $1,593 $ 1,470
Other income 201 220 178
------- ------ -------
Total income 416 1,813 1,648
Interest expense -- -- 120
Other expense 909 213 350
------- ------ -------
Total expenses 909 213 470
------- ------ -------
(Loss)/Income before income taxes (493) 1,600 1,178
Income tax expense (benefit) (59) 2 (105)
------- ------ -------
(Loss)/Income before equity in undistributed
income of subsidiaries (434) 1,598 1,283
Equity in undistributed net income of subsidiaries 7,243 5,030 4,766
------- ------ -------
Net income $ 6,809 $6,628 $ 6,049
======= ====== =======
- --------------------------------------------------------------------------------
-51-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
---- ---- ----
Operating activities
Net income $ 6,809 $ 6,628 $ 6,049
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed net income of subsidiaries (7,243) (5,030) (4,766)
Change in assets 157 (160) 7
Change in liabilities (291) 293 (10)
-------- ------- -------
Net cash provided by (used in)
operating activities (568) 1,731 1,280
Net cash used in investment activities
Change in time deposit with other banks (454) 1,200 (1,200)
-------- ------- -------
Financing activities
Payments of notes payable -- -- (3,244)
Preferred stock dividends paid (146) (161) (162)
Common stock dividends paid (115) (1,214) (876)
Effect of internal reorganization (1,049) -- (1,846)
Sales of common stock and stock options
exercised 46 567 6,273
Proceeds from public offering of common
stock 13,532 -- --
Repurchase of common stock -- (225) (185)
-------- ------- -------
Net cash provided by (used in)
financing activities 12,268 (1,033) (40)
-------- ------- -------
Net change in cash and cash equivalents 11,246 1,898 40
Cash and cash equivalents, beginning of year 2,019 121 81
-------- ------- -------
Cash and cash equivalents, end of year $ 13,265 $ 2,019 $ 121
======== ======= =======
NOTE 17 - OTHER COMPREHENSIVE INCOME
Other comprehensive income components were as follows.
1998 1997 1996
---- ---- ----
Unrealized holding gains and losses on
securities available for sale $ 1,365 $ 829 $(618)
Less reclassification adjustments for gains
and losses later recognized in income (82) (204) 13
------- ----- -----
Other comprehensive income $ 1,283 $ 625 $(605)
======= ===== =====
- --------------------------------------------------------------------------------
-52-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
NOTE 18. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Presented below is a summary of the consolidated quarterly financial data:
<TABLE>
<CAPTION>
For the three months ended
3/31/98 6/30/98 9/30/98 12/31/98
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Summary of operations
Interest income - tax equivalent $ 13,786 $ 14,339 $ 14,330 $ 14,290
Net interest income 7,784 7,885 7,978 8,171
Tax equivalent adjustment (1) (236) (236) (217) (141)
----------- ----------- ------------ ------------
Net interest income 7,548 7,649 7,761 8,030
Provision for credit losses (524) (540) (320) (322)
Income before income taxes 2,583 2,343 2,675 2,765
Net income 1,703 1,477 1,677 1,952
Basic earnings per share 0.14 0.17 0.16 0.17
Diluted earning per share 0.13 0.16 0.14 0.16
Dividends per common share (2) -- 0.01 -- --
Average common shares 9,988,427 9,998,012 10,410,370 11,375,600
outstanding
</TABLE>
<TABLE>
<CAPTION>
For the three months ended
3/31/97 6/30/97 9/30/97 12/31/97
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Summary of operations
Interest income - tax equivalent $ 12,042 $ 13,919 $ 13,243 $ 13,329
Net interest income 6,900 7,309 7,452 7,580
Tax equivalent adjustment (1)
(151) (152) (136) (167)
----------- ----------- ----------- -----------
Net interest income 6,749 7,157 7,316 7,413
Provision for credit losses
(360) (360) (376) (1,839)
Income before income taxes 2,446 2,502 3,078 2,008
Net income 1,588 1,798 1,882 1,360
Basic earnings per share 0.16 0.18 0.19 0.13
Diluted earnings per share 0.15 0.16 0.17 0.13
Dividends per common share (2) -- 0.03 -- 0.09
Average common shares 9,829,470 9,829,962 9,863,988 9,961,524
outstanding
</TABLE>
(1) Tax equivalent basis was calculated using a 38% tax rate for 1998 and 34%
for 1997.
(2) Dividends declared on common shares divided by net income available to
common shareholders.
Note: Certain amounts above which have been presented in prior financial
information have been reclassified, causing minor differences from prior
presentations.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
- --------------------------------------------------------------------------------
-53-
(Continued)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per date)
- --------------------------------------------------------------------------------
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors of the
Company is incorporated herein by reference to the section entitled Election of
Directors in the Company's definitive proxy statement for its 1999 Annual
meeting of Shareholders (the 1999 Proxy Statement). The information required by
this item with respect to executive officers of the Company is set forth herein
below.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officer Age Position With Company
James L. Clayton 65 Chairman of the Board of Directors since 1996 and
Chairman of the Board of Directors of BankFirst
since 1992
Fred R. Lawson 62 Director, President and Chief Executive Officer since
1996; Director, President and Chief Executive Officer
of BankFirst since 1993.
L. A. Walker, Jr. 63 Director, Executive Vice President since 1998;
Chairman Of the Board of Directors and Chief
Executive Officer of The First National Bank and
Trust Company since 1980.
R. Stephen Hagood 48 Executive Vice President of BankFirst since 1993.
C. David Allen 48 Chief Financial Officer and Secretary since 1998;
Senior Vice President and Chief Financial Officer of
BankFirst since 1993.
The ages listed for the Company's executive officers are as of March 15, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the section entitled Executive Compensation in the Company's 1999
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to the section entitled Security Ownership of Management in the
Company's 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the section entitled Interest of Management in Certain
Transactions in the Company's 1999 Proxy Statement.
-54-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are files as a part of this Report:
1. Financial Statements: The Consolidated Financial Statements of
BankFirst Corporation and Reports of Independent Accountants have
been included as Part II, ITEM 8 of this filing and are hereby
incorporated by reference. These financial statements consist of the
following:
Page(s)
Report of Independent Accountants 27-29
Consolidated Balance Sheets as of December 31, 1998 and 1997 30
Consolidated Statements of Income for the years ended December 31,
1998, 1997, and 1996 31
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1998, 1997, and 1996 32,33
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996 34
Notes to Consolidated Financial Statements 35-53
2. Financial Statement Schedules and Exhibits not listed above have
been omitted because they are not applicable or are not required, or
the information required to be set forth therein is included in the
Consolidated Financial Statements or Notes thereto, included in Part
II, ITEM 8, and are hereby incorporated by reference.
(b) No Reports on Form 8-K have been filed by the Company during the last
quarter of 1998.
(c) Exhibits: The list of exhibits in the Index To Exhibits appearing on page
57 is incorporated herein by reference.
-55-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BANKFIRST CORPORATION
(Registrant)
BY:/s/ FRED R. LAWSON
---------------------------
Fred R. Lawson
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange of 1934, as amended,
this Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Date Signature Capacity
March 24, 1999 /s/ James L. Clayton Chairman of The
-------------------------- Board of
James L. Clayton Directors
March 24, 1999 /s/ Fred R. Lawson Director and
-------------------------- President &
Fred R. Lawson CEO
(Principal Executive Officer)
March 24, 1999 /s/ C. David Allen Vice President and
-------------------------- Chief Financial Officer
C. David Allen (Principal Financial Officer)
March 24, 1999 /s/ Scot M. Braun Corporate Controller
-------------------------- (Principal Accounting Officer)
Scot M. Braun
March 24, 1999 /s/ C. Scott Mayfield, Jr. Director
--------------------------
C. Scott Mayfield, Jr.
March 24, 1999 /s/ C. Warren Neel Director
--------------------------
C. Warren Neel
March 24, 1999 /s/ Charles Earl Ogle, Jr. Director
--------------------------
Charles Earl Ogle, Jr.
March 24, 1999 /s/ W. David Sullins, Jr. Director
--------------------------
W. David Sullins, Jr.
March 24, 1999 /s/ L. A. Walker, Jr. Director &
-------------------------- Executive Vice
L. A. Walker, Jr. President of
BankFirst Corporation
March 24, 1999 /s/ Geoffrey A. Wolpert Director
--------------------------
Geoffrey A. Wolpert
-56-
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description
- ------- -----------
3.1 Amended and Restated Charter of BankFirst Corporation, as amended.
3.2* Bylaws of BankFirst Corporation.
4* Form of Common Stock Certificate of BankFirst Corporation.
10.1* BankFirst Corporation Incentive Stock Option Plan.
10.2* Agreement and Plan of Merger between Smoky Mountain Bancorp, Inc.
and First Franklin Bancshares, Inc. dated March 19, 1998.
10.3* BankFirst v. Electronic Communication Corporation, et.al., Partial
Settlement Agreement, dated March 18, 1998, between BankFirst
Corporation and Paymentech Merchant Services, Inc.
10.4* Lease Agreement between BankFirst and Clayton Homes, Inc., dated
July 1, 1997.
10.5* First National Bank and Trust Company Pension Plan.
10.6* Stock Purchase Agreement, dated January 13, 1998, by and between
BankFirst, Curtis Mortgage Company, William H. Curtis and Gordon C.
Curtis.
10.7 BankFirst 401(k) Profit Sharing Plan.
10.8 First National Bank & Trust Profit Sharing Plan
11 Statement re computation of per share earnings is incorporated by
reference as ITEM 8, Financial Statement footnote #13
21 List of Subsidiaries is files as Exhibit 21 of this Form 10-K
23.1 Consent of Crowe, Chizek and Company LLP - see page 27 of this
Form 10-K.
23.2 Consent of Coopers & Lybrand LLP - see page 28 of this Form 10-K.
23.3 Consent of G.R. Rush & Company P.C. - see page 29 of this
Form 10-K.
27 Financial Data Schedule is filed as Exhibit 27 of this Form 10-K.
- --------------------------------------------------------------------------------
* Filed previously with S-4 Registration Statement (File No. 333-52051) dated
May 7, 1998.
-57-
FILED EXHIBIT 3.1
RECEIVED STEVE HALL
SECRETARY OF STATE REGISTER OF DEEDS
98 APR 28 PM 1:50 KNOX COUNTY
REILLY DARNELL
SECRETARY OF STATE
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED CHAPTER
OF
SMOKY MOUNTAIN BANCORP, INC.
TO THE SECRETARY OF STATE OF THE STATE OF TENNESSEE:
Pursuant to the provisions of Section 48-20-106 06 of the Tennessee
Business Corporation Act, the undersigned corporation adopts the following
Articles of Amendment to its Charter:
1. The name of the Corporation is SMOKY MOUNTAIN BANCORP, INC.
2. The amendment is to be effective when filed with the Secretary of
State.
3. Article 1 of the Charter shall be deleted in its entirety and
replaced with the following:
1. NAME:. The name of the Corporation is BankFirst
Corporation.
4. Article 2.(a) of the Charter shall be deleted in its entirely and
replaced with the following:
2. AUTHORIZED SHARES.
(a) The total number of shares of capital stock which the
corporation shall have authority to issue is 16,000,000, of which
15,000,000 shares shall be voting common stock of par value of Two Dollars
and Fifty Cents ($2.50) per share (hereafter called the "Common Stock"),
and 1,000,000 shares shall be preferred stock of par value of Five Dollars
($5.00) per share (hereafter called the "Preferred Stock").
5. The amendment was adopted by the vote of a majority of the outstanding
voting common stock at the Annual Meeting of the Stockholders held on April 27,
1998.
Dated: April 27, 1998
SMOKY MOUNTAIN BANCORP, INC.
By: Fred R. Lawson
----------------------------------
Fred R. Lawson, President
and Chief Executive Officer
EXHIBIT 10.1
SMOKY MOUNTAIN BANCORP, INC.
INCENTIVE STOCK OPTION PLAN
SMOKY MOUNTAIN BANCORP, INC., a Tennessee bank holding corporation, with
principal offices at 625 Market Street, Knoxville, Knox County, Tennessee, is
establishing a STOCK OPTION PLAN as follows:
ARTICLE I
PLAN INTRODUCTION
1.1 Name. This Plan shall be known as the "Smoky Mountain Bancorp, Inc.
Incentive Stock Option Plan."
1.2. Purpose. The purpose of the Smoky Mountain Bancorp, Inc. Incentive
Stock Option Plan is to secure for the Corporation and its shareholders the
benefits which flow from providing selected directors, officers, and other key
employees of Smoky Mountain and/or BankFirst, Smoky Mountain's wholly owned
subsidiary (herein collectively referred to as "directors, officers, key
employees and/or employees") with the incentive inherent in common stock
ownership. By so encouraging and enabling such employees to become owners of the
Corporation's shares, the Corporation seeks to motivate, retain, and attract
those highly competent individuals upon whose judgment, initiative, leadership
and continued efforts the success of the Corporation in large measure depends.
1.3. Form of Plan. With of a view of providing these employees with an
attractive incentive for continued faithful service with the Corporation and/or
BankFirst, its wholly owned subsidiary, the Corporation intends the stock
options granted hereunder to qualify as incentive stock options within the
meaning of Code Section 422A of the Internal Revenue Code of 1986, as amended
(the "Code"), such that the exercise of the options will not be a taxable event
for the employee until such time that he or she actuallry disposes of the
shares.
1.4. Effective Date. The effective date of the Plan is December 31, 1996,
the date of its approval by the Executive Committee of the Board, provided,
however, if the Plan is not approved by the shareholders of the Corporation at
the next Shareholders Meeting, or if the Plan is not approved by such
shareholders before December 31, 1997, the Plan shall terminate and any options
granted thereunder shall be void and have no force or effect, except as
expressly provided otherwise herein.
1.5. Definitions. As used herein the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of Smoky Mountain
Bancorp, Inc.
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(b) "Committee" shall mean the Executive Committee of the Board of
Directors.
(c) "Corporation" shall mean Smoky Mountain Bancorp, Inc.
(d) "Fair Market Value" shall mean the fair market value of the
stock established by the Board of Directors quarterly immediately prior to
the grant of any option hereunder.
(e) "Grantee" shall mean an employee of the Corporation to whom an
Award has been granted hereunder.
(f) "Optionee" shall mean a director, officer, or other key employee
to whom an Option has been granted hereunder.
(g) "Plan" shall mean the Smoky Mountain Bancorp, Inc. Incentive
Stock Option Plan, the terms of which are set forth herein.
(h) "Stock" shall mean the Common Stock of Smoky Mountain Bancorp,
Inc. or, in the event that such outstanding shares of stock are hereafter
changed into or exchanged for shares of a different stock or securities of
the Corporation or some other corporation or company, such other stock or
securities.
(i) "Stock Option Agreement" shall mean the agreement between the
Corporation and the Optionee under which the Optionee may purchase Stock
hereunder.
ARTICLE II
PLAN PARTICIPATION. ADMINISTRATION. TERMINATION
2.1. Eligibility and Plan Participation. Any director, officer or other
key employee of the Corporation shall be eligible to participate in the Plan.
The Committee may grant Options to any eligible participant in accordance with
such determinations as the Committee from time to time in its sole discretion
shall make.
(a) Options Discretionary. The granting of options hereunder shall be
entirely discretionary with the Committee and nothing in the Plan shall be
deemed to give any director, officer, or other key employee of the Corporation
any right to participate in the Plan or to receive options.
2.2. Plan Administration. The Plan shall be administered by the Committee
in accordance with the following provisions:
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(a) Duties and Powers of Committee. Subject to the express
provisions of the Plan, the Committee shall have sole discretion and
authority to determine from among the directors and the Chief Executive
Officer of the Corporation those to whom and the time or times at which an
Option may be granted hereunder, and the number of shares of Stock to be
subject to each Option. The President and Chief Executive Officer shall in
accordance with the authorization of the Committee have sole discretion
and authority to determine from among the officers and key employees those
to whom and the time or times at which an Option may be granted hereunder,
and the number of shares of Stock to be subject to each Option. Subject to
the express provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend, and rescind rules
and regulations relating to it, to determine the details and provisions of
each Stock Option Agreement, and to make all other determinations
necessary or advisable in the administration of the Plan.
(b) Majority Rule. A majority of the disinterested members of the
Committee shall constitute a quorum, and any action taken by a majority
present at a meeting at which a quorum is present or any action taken
without a meeting evidenced by a writing executed by a majority of the
disinterested members of the whole Committee shall constitute the action
of the Committee.
(c) Corporation Assistance. The Corporation shall supply full and
timely information to the Committee on all matters relating to employees,
their employment, death, retirement, disability or other termination of
employment, and such other pertinent facts as the Committee may require.
The Corporation shall furnish the Committee with such clerical and other
assistance as is necessary in the performance of its duties.
ARTICLE III
STOCK OPTION SHARES
3.1. Stock Limitations. Subject to adjustment pursuant to the provisions
of Section 3.4 hereof, the number of shares of Stock which may be issued and
sold hereunder shall not exceed 500,000 shares. Such shares may be authorized
and unissued shares or shares issued and thereafter acquired by the Corporation.
3.2. Options Granted Under the Plan. Shares of Stock with respect to which
an Option granted hereunder have been exercised shall not again be available for
Option hereunder. If Options granted hereunder shall terminate or expire for any
reason without being wholly exercised, new Options may be granted hereunder
covering the number of shares to which such Option termination relates.
3.3. Antidilution. In the event that the outstanding shares of Stock
hereafter are changed into or exchanged for a different number or kind of shares
or other securities of the Corporation or of another corporation by reason of
merger, consolidation, other reorganization, recapitalization, reclassification,
combination of shares, stock split-up, or stock dividend:
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(a) The aggregate number and kind of shares subject to Options which
may be granted hereunder shall be adjusted accordingly.
(b) Rights under outstanding Options granted hereunder, both as to
the number of subject shares and the Option price, shall be adjusted
accordingly.
(c) Where dissolution or liquidation of the Corporation or any
merger or combination in which the Corporation is not a surviving
corporation is involved, each outstanding Option granted hereunder shall
terminate, but the Optionee shall be fully vested and shall have the
right, immediately prior to such dissolution, liquidation, merger, or
combination, to exercise his/her Option in whole or in part.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined solely by the Committee, and any
such adjustment may provide for the elimination of fractional share
interests.
3.4. Termination, Amendment and Modification of the Plan. The Board of
Directors may at any time suspend, discontinue, or terminate the Plan, and may
at any time and from time to time and in any respect amend or modify the Plan
and make rules for its administration; provided, however, that no such action of
the Board without approval of the majority of the shareholders of the
Corporation may:
(a) Increase the total number of shares of Stock subject to the Plan
except as contemplated in Section 3.4 hereof;
(b) Withdraw the administration of the Plan from the Committee,
and
provided further, that no termination, amendment, or modification of the Plan
shall in any manner (1) affect any Option theretofore granted under the Plan
without the consent of the Optionee or permitted transferee of the Option' or
(2) prevent Options issued under the Plan from being "incentive stock options"
as defined in Section 422A of the Code.
ARTICLE IV
STOCK OPTIONS
4.1. Stock Option Grants and Agreements. Each Option granted hereunder
shall be evidenced by minutes of a meeting or the written consent of the
Committee, and by a written Stock Option Agreement dated as of the date of grant
and executed by the Corporation and the Optionee. The Stock Option Agreement may
be in such form as shall be approved by the Board of Directors.
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(a) Additional Terms. Such Stock Option Agreement and any Option granted
thereunder shall contain such other and additional terms, not inconsistent with
the terms of this Plan, which are deemed necessary and desirable by the Board of
Directors, the Committee, or by legal counsel to the Corporation, and such other
terms shall include those which, together with the terms of this Plan, shall
constitute such option as an "incentive stock option" within the meaning of
Section 422A of Code.
4.2. Option Price. The per share Option price of the Stock subject to each
Option shall be the Fair Market Value per share.
4.3. Option Vesting. No portion of the Option may be exercised unless
vested in accordance with the provisions of the Stock Option Agreement and this
Plan. Options shall vest at an annual rate of twenty percent (20%), allowing the
exercise of the stock options in accordance with the following schedule:
Date of Grant of Option Vesting Schedule
------------------------ ----------------
One (1) Year from Option Date 20%
Two (2) Years from Option Date 40%
Three (3) Years from Option Date 60%
Four (4) Years from Option Date 80%
Five (5) Years from Option Date 100%
"Vesting" as used in the Stock Option Agreement and this Plan shall act to give
the Optionee those rights determined by the Committee and no others. Both
unvested and vested portions of Options shall be subject to early termination.
All Optionees shall become fully vested upon the dissolution or liquidation of
the Corporation, or any merger or combination in which the Corporation is not a
surviving corporation. All Optionees shall become fully vested upon the
Corporation making a public offering of its stock.
4.4. Option Period. Each Option granted hereunder must be granted within
ten years from the effective date of the Plan.
4.5. Natural Termination and Expiration of Options. The period for the
exercise of each Option shall be determined by the Committee, but in no instance
shall such period exceed ten years from the date of grant of the Option.
4.6. Early Termination and Expiration of Options; Effect Thereof Each of
the following shall be a "Terminating Event", the occurrence of which shall act
to terminate the Option prior to its natural expiration to the extent not
previously exercised:
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(a) Additional Terms. Such Stock Option Agreement and any Option
granted thereunder shall contain such other and additional terms, not
inconsistent with the terms of this Plan, which are deemed necessary and
desirable by the Board of Directors, the Committee, or by legal coursel to
the Corporation, and such other terms shall include those which, together
with the terms of this Plan, shad constitute such option as an "incentive
stock option" within the meaning of Section 422A of Code.
4.2. Option Price. The per share Option price of the Stock subject to each
Option shall be the Fair Market Value per share.
4.3. Option Vesting. No portion of the Option may be exercised unless
vested in accordance with the provisions of the Stock Option Agreement and this
Plan. Options shall vest at an annual rate of twenty percent (20%), allowing the
exercise of the stock options in accordance with the following schedule:
Date of Grant of Option Vesting Schedule
----------------------- ----------------
One (1) Year from Option Date 20%
Two (2) Years from Option Date 40%
Three (3) Years from Option Date 60%
Four (4) Years from Option Date 80%
Five (5) Years from Option Date 100%
"Vesting" as used in the Stock Option Agreement and this Plan shall act to give
the Optionee those rights determined by the Committee and no others. Both
untested and vested portions of Options shad be subject to early termination.
All Optionees shall become fully vested upon the dissolution or liquidation of
the Corporation, or any merger or combination in which the Corporation is not a
surviving corporation.
4.4. Option Period. Each Option granted hereunder must be granted within
ten years from the effective date of the Plan.
4.5. Natural Termination and Expiration of Options. The period for the
exercise of each Option shall be determined by the Committee, but in no instance
shall such period exceed ten years from the date of grant of the Option.
4.6. Early Termination and Expiration of Options; Effect Thereof. Each of
the following shall be a "Terminating Event", the occurrence of which shall act
to terminate the Option prior to its natural expiration to the extent not
previously exercised:
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(i) Termination of Employment. The termination of employment or
directorship of the Optionee for cause, the date of termination being the
date the optionee is notified of the termination.
(ii) Reduction of Position. The reduction of the Optionee's position
for any reason whatsoever, the date of termination being the date the
Optionee is notified of the reduction. The Option shall not be affected by
any change in duties or position as long as the Optionee continues to be
an Optionee of the Corporation at the same or higher position as that held
on the Grant Date.
Upon the occurrence of a Terminating Event, the unvested portion of the Option
shall expire on the date of termination set forth above. To the extent that the
Optionee shall have been otherwise entitled to do so, the vested portion may
continue to be exercised by the Optionee (or, should the Optionee be decease,
by the legatee or legatees of the Optionee under such Optionee's Last Will or
by such Optionee's personal representative or distributees), during a
Transitory Period to be determined by the Committee but in no event later than
three (3) months after the date of termination set forth above. No further
vesting shall occur during the Transitory Period, and the Option shall fully
expire at the conclusion of the Transitory Period.
4.7. Effect of Option Termination and Expiration. Once any Option granted
hereunder has terminated or expired, such Option shall be deemed irrevocably
expired. Regardless of any efforts by the Optionee to cure the event causing
such termination and/or expiration, such Option may not be revived unless
specifically reinstated in writing by an officer of the Corporation duly
authorized by disinterested members of the Board of Directors.
4.8. Option Exercise. Options may be exercised in whole at any time, or in
part from time to time with respect to whole shares only, to the extent that the
Option has vested, and within the period permitted for the exercise thereof.
Further, except as otherwise provided herein, the Option may not be exercised at
any time unless the Optionee shall have been in the continuous employ of the
Corporation from the date the Option is granted to the date of exercising the
Option.
(a) Method of Option Exercise. Any Option granted pursuant to this Plan
shall contain provisions established by the Board of Directors setting forth the
manner of exercise of such Option. Notwithstanding the foregoing, Options shall
be exercised by providing (1) written notice of intent to exercise the Option
with respect to a specified number of shares delivered to the Corporation at its
principal office in Knoxville, Tennessee, and (2) payment in full to the
Corporation at said office of the amount of the Option price for the number of
shares of Stock with respect to which the Option is then being exercised, such
payment to be in cash or certified funds made payable to the order of the
Corporation.
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4.9. Nontransferability of Option. No Option shall be transferred by an
Optionee otherwise than by Will or the laws of descent and distribution. During
the lifetime of an Optionee the Option shall be exercised only by him/her. No
tranfer of an Option by the Optionee by Will or by the laws of descent and
distribution shall be effective to bind the Corporation unless the Corporation
shall have been furnished with written notice thereof and an authenticated copy
of the will and/or such other evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of such Option.
4. 10. Rights as Shareholder. An Optionee or a transferee of an Option
shall have no rights as a shareholder with respect to any shares subject to such
Option prior to purchase of such shares by valid exercise of such Option as
provided herein and a stock certificate is issued and delivered by the
Corporation therefor.
4.11. Stock Certificates; Refunds. The Corporation shall issue and deliver
the certificate or certificates for shares of Stock purchased upon the valid
exercise of any Option granted hereunder or any portion thereof within fifteen
(15) business days of the exercise of the Option and payment therefor. In the
event the Option or a portion thereof is not validly exercised or is otherwise
not available in accordance with the terms of this Plan, the Corporation shall
refund the purchase price for that portion of the Option not validly exercised
or otherwise not available within fifteen (15) business days of the exercise of
the Option and payment therefor. No refund of the purchase price will be made
for a validly exercised Option after share certificates issue.
ARTICLE V
MISCELLANEOUS
5.1 . Employment and Directorship. Nothing in the Plan or in any Option
granted hereunder or in any Stock Option Agreement relating thereto shall confer
upon any employee the right to continue in the employ of the Corporation, or the
director the right to serve on the Board of Directors.
5.2. Tax Obligations of Optionee. If for any reason the exercise of any
portion of any Option granted hereunder shall be determined to be a taxable
event, the Optionee shall be solely responsible for all employment related taxes
that may be incurred thereby.
5.3. Stock for Investment. The Stock Option Agreement shall provide that
the Optionee shall upon each exercise of a part or all of the Option granted
represent and warrant, or be deemed to represent and warrant, that his/her
purchase of stock pursuant to such Option is for investment only. At any time
the Board of Directors may waive the requirement of such a provision in any
Stock Option Agreement entered into under any stock option plan of the
Corporation.
5.4. Other Securities Law Restrictions. The Board of Directors shall
include Securities Law-related provisions in any Stock Option Agreement that, in
its discretion, is necessary to protect the interests of the Corporation.
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5.5. Other Compensation Plans. The adoption of the Plan shall not affect
any other stock option or incentive or other compensation plans in effect for
the Corporation, nor shall the Plan preclude the Corporation from establishing
any other forms of incentive or other compensation for employees of the
Corporation.
5.6. Obligation to Sell Subject to Governmental Approval. The
Corporation's obligation to sell and deliver stock under the Plan in accordance
with the terms of this Agreement is at all times subject to all approvals of any
governmental authorities required in connection with the authorization,
issuance, sale or delivery of the stock.
5.7. Plan Binding on Successors. The Plan shall inure to the benefit of
and be binding upon the successors and assigns of the Corporation. The Plan
shall inure to the benefit of and be binding upon the respective heirs,
successors, administrators, and representatives as permitted herein.
5.8 Headings. The headings of each of the provisions hereof are for
convenience and reference only and are not substantive. They are not be used in
the interpretation hereof or to modify any of the terms or provisions of this
Plan.
5.9. Singular, Plural; Gender. Whenever used herein, nouns in the singular
shall include the plural and the masculine pronoun shall include the feminine
gender, and vice versa.
5.10. Shareholder Approval. The Plan will be submitted to the Common
shareholders of the Corporation at the next annual meeting of shareholders, for
approval by the holders of a majority of the outstanding shares of Common Stock
of the Corporation. If the Plan is not approved by the holders of a majority of
the outstanding shares of Common Stock of the Corporation by December 3 I, 1997,
then the Plan shall terminate and any Options granted hereunder shall be void,
forfeited and of no further force or effect.
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BANKFIRST PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST
BankFirst hereby establishes this Prototype Plan and Trust for Employers
wishing to establish or continue to maintain profit sharing or money purchase
pension plans.
An Employer may adopt this Prototype Plan as part of its Plan by
completing and signing an Adoption Agreement, which adoption shall be effective
when executed by the Trustee.
Defined Contribution Basic Plan Document #01
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TABLE OF CONTENTS
ARTICLE 1, PURPOSE OF PLAN AND TRUST AND IMPLEMENTING PROVISIONS
1.01 Purpose ....................................................... 1
1.02 Tax Aspects ................................................... 1
1.03 Adoption Agreement ............................................ 1
ARTICLE 2, DEFINITIONS .................................................... 1
ARTICLE 3, ELIGIBILITY AND PARTICIPATION
3.01 Eligibility ................................................... 7
3.02 Participation ................................................. 7
3.03 Return to Eligible Class ...................................... 8
3.04 Transfers Among Adopting Employers Which Are Controlled
Group Members ................................................. 8
3.05 Controlled Trades or Businesses ............................... 8
3.06 Acceptance .................................................... 8
ARTICLE 4, CONTRIBUTION
4.01 Employer Contributions ........................................ 8
4.02 Employee Contributions ........................................ 9
4.03 Elective Deferrals ............................................ 9
4.04 Rollover Contributions ........................................ 9
4.05 Trustee-To-Trustee Transfers .................................. 10
4.06 Prohibition of Reversion ...................................... 10
ARTICLE 5, PARTICIPANTS' ACCOUNTS
5.01 Establishment of Participants' Accounts ....................... 10
5.02 Valuation of Trust Fund ....................................... 11
5.03 Allocation of Employer Contributions .......................... 11
5.04 Forfeitures ................................................... 12
5.05 Trust Earnings and Losses ..................................... 12
5.06 Inactive Participants ......................................... 12
5.07 Limitations on Allocations .................................... 12
5.08 Participant-Directed Investments .............................. 17
ARTICLE 6, CASH OR DEFERRED ARRANGEMENT
6.01 Salary Reduction Agreement .................................... 17
6.02 Annual Limit on Elective Deferrals ............................ 18
6.03 Distribution of Excess Elective Deferrals ..................... 18
6.04 Actual Deferral Percentage Test ............................... 18
6.05 Distribution of Excess Contributions .......................... 19
6.06 Recharacterization ............................................ 20
6.07 Voluntary Non-deductible Contributions ........................ 20
6.08 Matching Contributions ........................................ 20
6.09 Forfeitures and Vesting of Matching Contributions ............. 20
6.10 Qualified Matching Contributions .............................. 20
6.11 Limitations on Employee Contributions and Matching
Contributions ................................................. 20
6.12 Distribution of Excess Aggregate Contributions ................ 22
6.13 Qualified Non-elective Contributions .......................... 23
6.14 Nonforfeitability and Vesting ................................. 23
6.15 Distribution Requirements ..................................... 23
6.16 Hardship Distribution ......................................... 23
6.17 Top-Heavy Requirements ........................................ 24
ARTICLE 7, RETIREMENT BENEFITS
7.01 Normal Retirement ............................................. 24
7.02 Early Retirement .............................................. 24
7.03 Disability Retirement ......................................... 24
ARTICLE 8, DEATH BENEFITS
8.01 Death Benefit ................................................. 24
8.02 Insured Death Benefit ......................................... 24
ARTICLE 9, BENEFITS ON SEPARATION FROM SERVICE
9.01 Vested Benefit ................................................ 26
9.02 Forfeitures ................................................... 26
ARTICLE 10, PAYMENT OF BENEFITS
10.01 Payment of Benefits ........................................... 26
10.02 Time of Payment ............................................... 27
10.03 Restrictions on Immediate Distribution. ....................... 27
10.04 Termination of Employment Prior to Early Retirement ........... 27
10.05 In-Service Withdrawals ........................................ 28
10.06 Distribution Requirements ..................................... 29
10.07 Required Beginning Date ....................................... 29
10.08 Limits on Distribution Periods ................................ 29
10.09 Determination of Amount to 29 Distributed Each Year ........... 29
10.10 Death Distribution Provisions ................................. 30
10.11 Definitions ................................................... 30
10.12 Transitional Rule ............................................. 31
10.13 Failure to Locate ............................................. 32
10.14 Premature Distributions ....................................... 32
ARTICLE 11, JOINT AND SURVIVOR ANNUITY REQUIREMENTS
11.01 Controlling Article ........................................... 32
11.02 Qualified Joint and Survivor Annuity .......................... 33
11.03 Qualified Pre-Retirement Surviv Annuity ....................... 33
11.04 Definitions ................................................... 33
11.05 Notice Requirements ........................................... 34
11.06 Safe Harbor Rules ............................................. 34
11.07 Transitional Rules ............................................ 35
ARTICLE 12, LOANS ......................................................... 36
ARTICLE 13, TOP-HEAVY PLANS
13.01 Definitions ................................................... 37
13.02 Minimum Allocation ............................................ 38
13.03 Minimum Vesting Schedule ...................................... 38
13.04 Special Limitation on Top Heavy Allocations in Multiple
Plans: "Code Section 415(e) Buy-Back" ......................... 39
ARTICLE 14, PAIRED PLANS
14.01 Paired Plans .................................................. 39
14.02 Multiple Benefits from Super Top Heavy Paired Plans ........... 39
14.03 Minimum Defined Contribution Plan Allocations Under Top
Heavy Paired Plans with Code Section 415(e) Buy-Back .......... 39
14.04 Minimum Defined Contribution Plan Allocations Under Super Top
Heavy Paired Plans or Without Code Section 415(e) Buy-Back .... 40
14.05 Defined Contribution Paired Plan Prevention of Duplication of
Allocations ................................................... 40
14.06 Forfeitures in Profit-Sharing Plans ........................... 40
14.07 Integrated Paired Plans ....................................... 40
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ARTICLE 15, PLAN ADMINISTRATION
15.01 Administrator ................................................. 40
15.02 Claims Procedure .............................................. 41
15.03 Records ....................................................... 41
15.04 Delegation of Authority ....................................... 41
15.05 Correction of Errors .......................................... 42
15.06 Domestic Relations Orders ..................................... 42
ARTICLE 16, THE TRUST
16.01 The Trust ..................................................... 43
16.02 Contributions to Trustee ...................................... 43
16.03 Investment Powers ............................................. 43
16.04 Appointment of Investment Manager ............................. 44
16.05 Employer-Directed Investments ................................. 45
16.06 Insurance Contracts ........................................... 45
16.07 Custodial Role ................................................ 45
16.08 Liability of Trustee .......................................... 45
16.09 Court Actions ................................................. 45
16.10 Prudent Man Rule .............................................. 45
16.11 Prohibited Transactions ....................................... 45
16.12 Conflict of Interest .......................................... 45
16.13 Exemptions .................................................... 46
16.14 Insurance ..................................................... 46
16.15 Accounts ...................................................... 46
16.16 Reports ....................................................... 46
16.17 Payments ...................................................... 46
16.18 Direction of Committee ........................................ 46
16.19 Impossibility of Performance .................................. 46
16.20 Expenses ...................................................... 46
16.21 Taxes ......................................................... 47
16.22 Resignation or Removal of Trustee ............................. 47
16.23 Transfer of Assets to a Successor Trustee or Other Medium
of Funding .................................................... 47
16.24 Assets of Controlled Group Members ............................ 47
ARTICLE 17, AMENDMENT OR TERMINATION
17.01 Employer's Right to Amend Plan ................................ 47
17.02 Sponsor's Right to Amend Plan ................................. 48
17.03 Limitation of Right to Amend .................................. 48
17.04 Termination of Plan by Employer ............................... 48
17.05 Sponsor's Withdrawal of Participation in Master Plan .......... 48
17.06 Failure of Qualification ...................................... 49
17.07 Mergers ....................................................... 49
ARTICLE 18, MISCELLANEOUS
18.01 Liability of Employer ......................................... 49
18.02 Spendthrift Clause ............................................ 49
18.03 Successor Business of Employer ................................ 49
18.04 Qualification by the Internal Revenue Service ................. 49
18.05 Use Limited to Qualified Trusts ............................... 49
18.06 Conflict of Provisions ........................................ 49
18.07 Definition of Words ........................................... 49
18.08 Titles ........................................................ 50
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ARTICLE 1
PURPOSE OF PLAN AND TRUST AND
IMPLEMENTING PROVISIONS
1.01 Purpose. The purpose of this Plan and Trust is to enable the Employer to
establish or continue a defined contribution plan for its employees.
1.02 Tax Aspects. It is the intent of the Sponsor in establishing this Plan and
Trust that it qualify and remain qualified under Sections 401(a) and 501(a) of
the Internal Revenue Code of 1986, as amended. However, in the event that the
Trust hereunder after once having been qualified, fails to retain qualification,
the provisions of Section 17.06 hereof shall be applicable as of the date said
Trust is no longer qualified.
1.03 Adoption Agreement. For purposes of facilitating the creation of this Plan
and Trust under procedures promulgated by the Internal Revenue Service for
establishing a variable form master defined contribution plan and trust, the
Adoption Agreement executed by the Employer and the Trustee is hereby made a
part hereof by reference as if fully set forth herein, and the definitions and
provisions thereof elected by the Employer shall be applicable to the Plan and
Trust of the Employer.
ARTICLE 2
DEFINITIONS
Unless otherwise explicitly specified, the following words and phrases as
used herein shall have the meanings set forth below and shall be interpreted as
stated in this ARTICLE.
2.01 "Account or Accounts" shall mean a Participant's Employer Contributions
Account, Voluntary Contributions Account, Deductible Contributions Account,
Elective Deferral Account, Rollover Account, Trustee-to-Trustee Transfer Account
and Participant-Directed Investment Account, as described in Section 5.01.
2.02 "Accumulated Net Profits" shall mean that part of the surplus of the
Employer derived from Net Profits and retained from time to time by the
Employer.
2.03 "Administrator" shall mean, with respect to the Plan, the party to which
the Employer shall delegate its administrative duties and responsibilities in
accordance with ARTICLE 15 of the Plan and Section 3 of the Adoption Agreement.
If the Employer does not delegate its administrative duties and
responsibilities, the Employer shall be the Administrator.
2.04 "Adoption Agreement" shall mean the instrument by which the Employer elects
to establish or continue its Plan by adoption of this prototype plan document.
2.05 "Allocation Date" shall mean the last day of each Plan Year. The Employer
may establish such other Allocation Dates during a Plan Year; provided, however,
that the use of more than one Allocation Date during a Plan Year shall not be
applied so as to result in discrimination in favor of Employees who are
officers, shareholders or highly compensated.
2.06 "Anniversary Date" shall mean the first day of a Plan Year.
2.07 "Beneficiary" shall mean the recipient or recipients last designated by the
Participant in writing on forms provided by the Employer who shall receive any
benefits payable under the Plan upon the death of such Participant, subject,
however, to the requirements of ARTICLES 8 and 11. If no such designation of
Beneficiary has been received by the Employer prior to the date of death of the
Participant, then such benefit shall be payable to the estate of the
Participant.
2.08 "Board" shall mean the board of directors of the Employer.
2.09 "Break in Service" shall mean a twelve (12) consecutive month period during
which an Employee has not been credited with more than five hundred (500) Hours
of Service. For eligibility purposes, the period shall mean the Eligibility
Computation Period. For purposes of computing an Employee's nonforfeitable right
to the Account balance derived from Employer Contributions, Breaks in Service
will be measured by the twelve (12) consecutive month period designated by the
Employer in Section 11(b) of the Adoption Agreement.
2.10 "CODA" shall mean a qualified cash or deferred arrangement as described in
Section 401(k) of the Code, ARTICLE VI of the Plan, and Section 24 of the profit
sharing plan Adoption Agreement.
2.11 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.12 "Committee" shall mean the committee to which the Employer may delegate its
administrative duties and responsibilities in accordance with ARTICLE 15.
2.13 "Compensation" shall mean all of each Participant's compensation as that
term is defined in Section 5.07(e)(ii) of the Plan. For any Self-Employed
Individual covered under the Plan, Compensation will mean Earned Income.
Compensation shall include only that Compensation which is actually paid to the
Partici-
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pant during the applicable period. Except as provided elsewhere in this Plan,
the applicable period shall be the period elected by the Employer in Section 9
of the Adoption Agreement. If the Employer makes no election, the applicable
period shall be the Plan Year.
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed by the
Employer pursuant to a salary reduction agreement which is not includible in the
gross income of the Employee under Section 125, 402(a)(8), 402(h) or 403(b) of
the Code.
For years beginning after December 31, 1988, the annual Compensation of
each Participant taken into account under the Plan for any Year shall not exceed
$200,000, as adjusted by the Secretary at the same time and in the same manner
as under Section 415(d) of the Code, except that the dollar increase in effect
on January 1 of any calendar year is effective for years beginning in such
calendar year and the first adjustment to the $200,000 limitation is effected on
January 1, 1990. If the Plan determines Compensation on a period of time that
contains fewer than 12 calendar months, then the annual Compensation limit is an
amount equal to the annual Compensation limit for the calendar year in which the
Compensation period begins multiplied by the ratio obtained by dividing the
number of full months in the period by 12.
If Compensation for any prior Plan Year is taken into account in
determining an Employee's Contributions or benefits for the current year, the
Compensation for such prior year is subject to the applicable annual
Compensation limit in effect for that prior year. For this purpose, for years
beginning before January 1, 1990, the applicable annual Compensation limit is
$200,000.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except in
applying such rules, the term "family" shall include only the Spouse of the
Participant and any lineal descendants of the Participant who have not attained
age nineteen (19) before the close of the Year.
If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then (except for purposes of determining the portion of
Compensation up to the integration level if this Plan provides for permitted
disparity), the limitation shall be prorated among the affected individuals in
proportion to each such individual's Compensation as determined under this
Section prior to the application of this limitation.
2.14 "Controlled Group Member" shall mean, except as modified in Section
5.07(f)(vi), as follows: (a) any corporation which is a member of a controlled
group of corporations (as defined in Section 414(b) of the Code) of which the
Employer is a member, (b) any organization which is a member of a group of
trades or businesses (whether or not incorporated) which is under common control
with respect to the Employer (as defined in Section 414(c) of the Code), (c) any
organization which is a member of an affiliated service group (as defined by
Section 414(m) of the Code), or (d) any other entity required to be aggregated
with the Employer pursuant to Section 414(o) of the Code and the regulations
thereunder; but only for the period during which such other corporation, trade
or business, organization or entity and the Employer are members of such
controlled group of corporations, are under such common control, are serving as
such affiliated service group or are required to be aggregated. All employees of
Controlled Group Members shall be treated as employed by a single employer.
2.15 "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.
If elected by the Employer in Section 8 of the Adoption Agreement,
nonforfeitable contributions will be made to the Plan on behalf of each disabled
Participant who is not a Highly Compensated Employee (within the meaning of
Section 414(q) of the Code).
2.16 "Early Retirement Age" shall mean the age selected in Section 13(b) of the
Adoption Agreement, at which time a Participant shall be entitled to receive an
Early Retirement Benefit.
2.17 "Early Retirement Benefit" shall mean the benefit to which a Participant is
entitled at his Early Retirement Date.
2.18 "Early Retirement Date" shall mean the date the Participant attains his
Early Retirement Age and is fully vested pursuant to Section 9.01 of the Plan
and Section 11 of the Adoption Agreement.
2.19 "Earned Income" shall mean the net earnings from self-employment in the
trade or business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing factor. Net
earnings shall be determined without regard to items not included in gross
income and the deductions allocable to such items. Net earnings are reduced by
contributions by the Employer to a qualified plan to the extent deductible under
Section 404 of the Code. Net earnings shall be determined with regard to the
deduction allowed to the Employer by Section 164(f) of the Code for taxable
years beginning after December 31, 1989.
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2.20 "Effective Date" shall mean, as to the Employer, the Effective Date of the
Plan as specified in Section 1(b) of the Adoption Agreement.
2.21 "Elective Deferrals" shall mean contributions made at the election of the
Participant by the Employer pursuant to ARTICLE 6 of the Plan.
2.22 "Eligibility Computation Period" shall mean, for purposes of determining
Years of Service and Breaks in Service for purposes of eligibility, the
following;
(a) The initial Eligibility Computation Period is the twelve (12)
consecutive month period beginning on the Employment Commencement Date.
(b) The succeeding twelve (12) consecutive month periods shall
commence on one of the following dates, as elected by the Employer in
Section 5 of the Adoption Agreement:
(i) The first anniversary of the Employee's Employment
Commencement Date; or
(ii) The first Plan Year which commences prior to the first
anniversary of the Employee's Employment Commencement Date
regardless of whether the Employee is entitled to be credited with
one thousand (1,000) Hours of Service during the initial Eligibility
Computation Period. An Employee who is credited with one thousand
(1,000) Hours of Service in both the initial Eligibility Computation
Period and the first Plan Year which commences prior to the first
anniversary of the Employee's initial Eligibility Computation Period
will be credited with two (2) Years of Service for purposes of
eligibility to participate.
Years of Service and Breaks in Service will be measured on the same
Eligibility Computation Period.
2.23 "Employee" shall mean any employee of the Employer maintaining the Plan or
of any other employer required to be aggregated with the Employer under Section
414(b), (c), (m) or (o) of the Code. The term Employee shall also include any
Leased Employee deemed to be an employee of any employer described in the
preceding sentence as provided in Section 414(n) or (o) of the Code. For
purposes of this Section, Employee shall also include an Owner-Employee or
Self-Employed Individual. An individual who is classified in one or more of the
categories specifically excluded in Section 4 of the Adoption Agreement shall
not be defined as an Employee for purposes of the Plan unless and until he
ceases to be so classified; provided, however, that any such excluded individual
shall be credited with Hours of Service hereunder during the period he is
excluded for purposes of determining his Years of Vesting Service and the time
of his participation in the Plan in the event he ceases to be so classified.
2.24 "Employee Contributions" shall mean contributions made by the Employee
pursuant to Section 4.02 of the Plan and Section 10 of the Adoption Agreement.
2.25 "Employer" shall mean that business organization, its predecessors (if, and
to the extent, Years of Service thereunder is to be included pursuant to Section
2.61 of the Plan and Section 12 of the Adoption Agreement), successors and/or
assigns, which have duly executed an Adoption Agreement. The Employer also
includes any Controlled Group Member that adopts the Plan as provided in Section
23 of the Adoption Agreement.
2.26 "Employer Contributions" shall mean contributions made by the Employer
pursuant to Section 4.01 of the Plan and Section 7 of the Adoption Agreement.
2.27 "Employment Commencement Date" shall mean the date on which an Employee
first performs an Hour of Service.
2.28 "Entry Date" shall mean the date on which an Employee enters the Plan
pursuant to Section 5(d) of the Adoption Agreement.
2.29 "ERISA" shall mean Public Law 93-406, popularly known as the Employee
Retirement Income Security Act, as amended.
2.30 "Five-Percent Owner" shall mean any person who owns (or is considered as
owning within the meaning of Section 318 of the Code) more than five (5) percent
of the outstanding stock of a corporate Employer or stock possessing more than
five (5) percent of the total combined voting power of all stock of the Employer
or more than five (5) percent of the interest in the non-corporate Employer.
2.31 "Forfeiture" shall mean the non-vested portion of a Participant's Employer
Contributions Account which is forfeited pursuant to Sections 5.04 and 9.02.
2.32 "Highly Compensated 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 $75,000 (as
adjusted pursuant to Section 415(d) of the Code); (b) received Compensation from
the Employer in excess of $50,000 (as adjusted pursuant to Section 415(d) of the
Code) and was a member of the top-paid group for such year; or (c) was an
officer of the Employer and received
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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. The term
Highly Compensated Employee also includes: (i) Employees who are both described
in the preceding sentence if the term "determination year" is substituted for
the term "look-back year" and the Employee is one of the one hundred (100)
Employees who received the most Compensation from the Employer during the
determination year; and (ii) Employees who are Five-Percent Owners at any time
during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c) above
during either a determination year or look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year and the look-back year shall be
one of the following, as selected in Section 24, Item 14 of Adoption Agreement
#001 or #002:
(1) The "determination year" shall be the Plan Year for which
testing is being performed, and the "look-back year" shall be the
twelve-month period immediately preceding the determination year.
(2) The "look-back year" shall be the calendar year ending with or
within the Plan Year for which testing is being performed (or, in the case
of a Plan Year that is shorter than twelve months, the calendar year
ending with or within the twelve-month period ending with the end of the
Plan year). The "determination year" (if applicable) shall be the period
of time, if any, by which the applicable determination year extends beyond
the "look-back year" (the "lag period"). If the "lag period" is less than
twelve months long, the dollar threshold amounts specified in (a), (b) and
(c) above shall be adjusted by multiplying such dollar amounts by a
fraction, the numerator of which is the number of calendar months that are
included in the "lag period" and the denominator of which is twelve.
A Highly Compensated Employee includes any Employee whose Termination of
Employment occurred (or who was deemed to have incurred a Termination of
Employment) 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 Termination year or any determination year ending on or
after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a Family
Member of either a Five-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-Percent Owner or top-ten Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
Five-Percent Owner or top-ten Highly Compensated Employee shall be treated as a
single Employee receiving Compensation and Plan contributions or benefits equal
to the sum of such Compensation and contributions or benefits of the Family
Member and Five-Percent Owner or top-ten Highly Compensated Employee. For
purposes of this Section, Family Member includes the Spouse, lineal ascendants
and descendants of the Employee or former Employee and the spouses of such
lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top 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.
If elected by the Employer in Section 24, Item 15 of Adoption Agreement
#001 or #002, the first paragraph of this Section 2.32 shall be modified by
substituting "$50,000" for "$75,000" in (a) and by disregarding (b). This
simplified definition of Highly Compensated Employee will apply only to
Employers that maintain significant business activities (and employ employees)
in at least two significantly separate geographic areas.
2.33 "Hour of Service" shall mean the following;
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer and/or a Controlled Group Member.
These Hours will be credited to the Employee for the computation period in which
the duties are performed.
(b) Each hour for which an Employee is paid, or entitled to payment, by
the Employer and/or a Controlled Group Member on account of a period of time
during which no duties were 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 (b) for any single continuous period (whether or not such period
occurs in a single computation period). Hours under this subsection (b) will be
calculated and credited pursuant to Section 2530.200b-2 of the Department of
Labor Regulations which is incorporated herein by this reference.
(c) Each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer. The same hours shall not be
credited both under subsection (a) or (b) and under this subsection (c). These
hours shall be credited to the Employee
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for the computation period or periods to which the award or agreement pertains
rather than the computation period in which the award, agreement or payment is
made.
Hours of Service will be credited for employment with Controlled Group
Members.
Hours of Service will also be credited for any individual considered an
Employee for purposes of this Plan under Section 414(n) or (o) of the Code and
the regulations thereunder.
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 or is on
an authorized leave of absence (defined below) 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 paragraph, an
absence from work for maternity or paternity reasons means an absence (i) by
reason of the pregnancy of the individual, (ii) by reason of a birth of a child
of the individual, (iii) by reason of the placement of a child with the
individual in connection with the adoption of such child by such individual, or
(iv) for purposes of caring for such child for a period beginning immediately
following such birth or placement. An "authorized leave of absence" means any
unpaid absence authorized by the Employer under the Employer's standard
personnel practices, provided that all persons under similar circumstances must
be treated alike in the granting of such Authorized Leaves of Absence. An
absence due to service in the Armed Forces of the United States shall be
considered an authorized leave of absence provided that the absence is caused by
war or other emergency, or provided that the Employee is required to serve under
the laws of conscription in time of peace. The Hours of Service credited under
this paragraph for maternity or paternity reasons will be credited (1) in the
computation period in which the absence begins if the crediting is necessary to
prevent a Break in Service in that period, or (2) in all other cases, in the
following computation period.
Hours of Service shall be determined on the basis of the method selected
in Section 6 of the Adoption Agreement.
2.34 "Inactive Participant" shall mean a Participant (or former Participant who
has a balance remaining in his Accounts) who is not entitled to share in the
allocation of Employer Contributions because the Participant is excluded
pursuant to the option selected in Section 7(a) of the money purchase pension
plan Adoption Agreement or Section 8(a) of the profit sharing plan Adoption
Agreement.
2.35 "Investment Manager" shall mean
(a) a registered investment advisor under the Investment Advisors Act of
1940, a bank as defined in that Act or an insurance company that:
(i) is qualified to perform services relating to the management,
acquisition or disposition of Plan assets, and
(ii) has acknowledged fiduciary responsibility to the Plan in
writing, or
(b) a bank or trust company that is subject to supervision by the United
States or a State, a broker or dealer registered under the Securities Exchange
Act of 1934 or a "leasing agency" as defined in Section 3(a)(23) of the
Securities Exchange Act of 1934, or a nominee of such bank, trust company,
broker or dealer, or clearing agency.
2.36 "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. Contributions or
benefits provided a Leased Employee by the leasing organization which are
attributable to services performed for the recipient employer shall be treated
as provided by the recipient employer.
A Leased Employee shall not be considered an employee of the recipient if:
(a) such employee is covered by a money purchase pension plan providing: (i) 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 excludible from
the employee's gross income under Section 125, 402(a)(8), 402(h) or 403(b) of
the Code, (ii) immediate participation, and (iii) full and immediate vesting;
and (b) Leased Employees do not constitute more than twenty (20) percent of the
recipient's nonhighly compensated work force.
2.37 "Net Profits" shall mean the Net Profits of the Employer as defined in
Section 7 of the Adoption Agreement (for Profit-Sharing Plans).
2.38 "Normal Retirement Age" shall mean the age selected in Section 13 of the
Adoption Agreement, at which time a Participant shall be entitled to receive a
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Normal Retirement Benefit. If the Employer enforces a mandatory retirement age,
the Normal Retirement Age is the lesser of that mandatory age or the age
specified in the Adoption Agreement.
2.39 "Normal Retirement Benefit" shall mean the benefit to which a Participant
is entitled at his Normal Retirement Date.
2.40 "Normal Retirement Date" shall mean the first day of the month coincident
with or next following a Participant's Normal Retirement Age.
2.41 "Owner-Employee" shall mean an individual who is a sole proprietor, or who
is a partner owning more than ten (10) percent of the capital or profits
interest of the partnership.
2.42 "Paired Plans" shall mean two (2) defined contribution plans adopted by the
Employer pursuant to Adoption Agreements #001 and #003 under this prototype
plan, the Defined Contribution Basic Plan Document #01, when paired under
ARTICLE 14. Paired Plans shall be standardized plans established by the Employer
pursuant to Revenue Procedure 84-23, as updated by Revenue Procedure 89-9.
2.43 "Participant" shall mean an Employee who meets all applicable conditions of
eligibility of Section 5 of the Adoption Agreement and has commenced
participation in accordance with such Section and ARTICLE 3 hereof.
2.44 "Plan" shall mean the defined contribution plan established by the Employer
as described in the Adoption Agreement, together with the applicable provisions
of this Plan, including the Trust established pursuant to ARTICLE 16 hereof, and
any and all amendments thereto.
2.45 "Plan Year" shall mean the twelve (12) consecutive month period designated
by the Employer in Section 1(d) of the Adoption Agreement.
2.46 "Predecessor Employer" shall mean the same business of the Employer prior
to its present form. For example, if the Employer is presently in corporate
form, it shall mean the same business operated as a proprietorship or
partnership.
2.47 "Predecessor Plan" shall mean the plan of deferred compensation, if any,
which has been amended and restated by adoption of this Plan.
2.48 "Qualified Joint and Survivor Annuity" shall mean an immediate annuity for
the life of the Participant with a survivor annuity for the life of the Spouse
as described in Section 11.04(d).
2.49 "Qualified Life Insurance Company" shall mean a legal reserve life
insurance company licensed to do business in the State in which the Employer
maintains its principal place of business.
2.50 "Retired Participant" shall mean any Participant whose Termination of
Employment entitles the Participant to receive benefits under Section 7.01, 7.02
or 7.03, subject to ARTICLE 11.
2.51 "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; also, 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.
2.52 "Service" shall mean service as an Employee of the Employer.
2.53 "Sponsor" shall mean BankFirst, the sponsoring organization.
2.54 "TEFRA" shall mean the Tax Equity and Fiscal Responsibility Act of 1982.
2.55 "Termination of Employment" shall mean the cessation of active work for the
Employer. However, should an Employee cease active work due to sickness, injury,
leave of absence, or temporary layoff, employment shall be deemed to be
continued until receipt by the Trustee, from the Employer, of a written notice
of termination. In the giving of such notice of the Employer to the Trustee, all
Participants in similar situations shall be treated alike.
2.56 "Trust Fund" shall mean the assets of the Trust established pursuant to
ARTICLE 16 hereunder, held and administered by the Trustee for purposes of this
Plan.
2.57 "Trust Fund Earnings" shall mean (a) the fair market value of the Trust
Fund on the current Allocation Date, minus (b) the fair market value of the
Trust Fund on the Allocation Date that immediately precedes the current
Allocation Date, minus (c) all contributions paid to the Trust Fund from such
preceding Allocation Date through the current Allocation Date (including any
dividends or credits earned on insurance contracts), plus (d) all benefits paid
to Participants from such preceding Allocation Date through the current
Allocation Date (including any insurance premiums paid or accrued).
2.58 "Trustee" shall mean the individual or, jointly and severally, the
individuals as specified in Section 3 of the Adoption Agreement who have
accepted the duties and responsibilities of this position by execution of the
Adoption Agreement or such other writing as will
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evidence such acceptance. The Trustee shall be specifically limited to those
other affiliates of the Sponsor which are legally authorized to perform
fiduciary trust services and to those individuals and organizations permitted by
law and authorized in writing by the Sponsor to act as Trustee to the extent so
authorized.
2.59 "Vested Benefit" shall mean the portion of an Account to which a
Participant is entitled as determined under Section 9.01 of the Plan and Section
11 of the Adoption Agreement.
2.60 "Year of Service" shall mean a twelve (12) consecutive month period during
which an Employee has been credited with at least one thousand (1,000) Hours of
Service. For eligibility purposes, the period shall be the Eligibility
Computation Period. For vesting purposes, the period will be measured by the
Plan Year, or the twelve (12) consecutive month period commencing on the date
the Employee first performs on Hour of Service and each subsequent twelve (12)
consecutive month period commencing on the anniversary of such date, as elected
by the Employer in Section 11 of the Adoption Agreement. For all other purposes,
the period will be measured by the Plan Year.
If the Employer maintains the plan of a Predecessor Employer, years of
service with such Predecessor Employer will be treated as Years of Service for
the Employer.
If the first Plan Year is a Short Plan Year (less than twelve (12)
consecutive months) or the Plan Year is changed creating a Short Plan Year, the
following special rules apply for determining Years of Service:
(a) A Participant receives credit for a Year of Service for purposes
of receiving an allocation of Employer Contributions (and Forfeitures, if
applicable), and for purposes of computing Years of Service for vesting
purposes and Years of Service for eligibility purposes, if the Participant
receives credit for the Applicable Hours during the Short Plan Year. The
term Applicable Hours shall equal "X" where X is defined as H/12 times Y
where Y equals the number of complete months in the Short Plan Year, and H
equals 1,000 Hours of Service.
(b) Notwithstanding the above, if a Participant would have been
credited with a Year of Service for vesting purposes during the 12 month
period beginning on the first day of the Short Plan Year, then the
Participant will receive a Year of Service for vesting purposes for the
Short Plan Year.
2.61 "Years of Vesting Service" shall mean the sum of an Employee's Years of
Service expressed in whole years; excluding, however, any Years of Service
excluded under Section 12 of the Adoption Agreement.
ARTICLE 3
ELIGIBILITY AND PARTICIPATION
3.01 Eligibility. Each Employee who is not excluded from participation under
Section 4 of the Adoption Agreement and who has met the eligibility requirements
set forth in Section 5 of the Adoption Agreement shall be eligible to become a
Participant on the Entry Date. Notwithstanding the foregoing, an Employee shall
enter the Plan no later than the earlier of:
(a) the first day of the Plan Year beginning after the date on which
the Employee has met the minimum age and service requirements; or
(b) six (6) months after the date the requirements are met.
3.02 Participation. Each Employee who has met the eligibility requirements for
participation shall become a Participant as set forth in Section 5 of the
Adoption Agreement, with the following exceptions:
(a) In the case of an Employer which maintained a Predecessor Plan,
each Employee participating in such plan immediately prior to the
Effective Date hereof shall become a Participant on the Effective Date
hereof.
(b) If the Plan provides one hundred (100) percent vesting
immediately after an Employee completes the eligibility requirements set
forth in Section 5 of the Adoption Agreement, and an Employee has a one
(1) year Break in Service before satisfying the Plan's requirements for
eligibility, Service before such Break will not be taken into account.
(c) In the case of a Participant who does not have any
nonforfeitable right to the Account balance derived from Employer
Contributions, Years of Service before a period of consecutive one (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 subsection
(c), 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 subsection (c), such Participant shall continue to
participate in the Plan, or, if terminated, shall participate immediately
upon reemployment.
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3.03 Return to Eligible Class. In the event a Participant is no longer a member
of an eligible class of Employees and becomes ineligible to participate but has
not incurred a Break in Service, such Employee will participate immediately upon
returning to an eligible class of Employees. If such Participant incurs a Break
in Service, eligibility will be determined pursuant to Section 3.02.
In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee will participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have otherwise previously become a Participant.
3.04 Transfers Among Adopting Employers Which Are Controlled Group Members. A
transfer of an Employee directly from one adopting Employer which is a
Controlled Group Member to another shall not constitute a termination of
employment or an interruption in Years of Service; provided, however, that there
shall be no duplication of benefits. The Accounts, if any, attributable to a
Participant's Service with an Employer which is a Controlled Group Member from
which he transferred shall be retained in such Employer's Plan, shall be
credited with any Trust Fund Earnings or other adjustments attributable thereto
in accordance with Section 5.05 and shall continue to vest based on his
continued Years of Service under that Controlled Group Member to which he
transferred. Immediately upon his transfer, such Employee shall participate in
the plan of the Controlled Group Member to which he transferred; provided,
however, that his Years of Service for determining his nonforfeitable benefit
under the Plan of the Employer from which he transferred shall count as Years of
Service under the Plan of the Controlled Group Member to which he transferred.
3.05 Controlled Trades or Businesses.
(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, the Plan and the plan established
for other trades or businesses must, when looked at as a single plan, satisfy
Sections 401(a) and (d) of the Code for the employees of this and all other
trades or businesses.
(b) If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more trades or businesses, the employees of
the other trades or businesses must be included in a plan which satisfies
Section 401(a) and (d) of the Code and which provides contributions and benefits
not less favorable than provided for such Owner-Employee under this 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 for the
employees under the plan of the trade or business which are controlled must be
as favorable as those provided for him under the most favorable plan of the
trades or businesses which are not controlled.
(d) For purposes of subsections (a), (b) and (c), an Owner-Employee, or
two or more Owner-Employees shall be considered to control a trade or business
if such Owner-Employee, or such two or more Owner-Employees together:
(i) own the entire interest in an unincorporated trade or business,
or
(ii) in the case of a partnership, own more than 50 percent of
either the capital interest or the profits interest in the partnership.
For purposes 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.
3.06 Acceptance. The Plan shall not be deemed either to constitute a contract
between the Employer and any Participant or to be a consideration or an
inducement for the employment of any Employee. No provision of the Plan shall be
deemed to abridge or limit any managerial right of the Employer or to give any
Employee or Participant the right to be retained in employment, or to interfere
with the right of the Employer to discharge any Employee or Participant at any
time, regardless of the effect which such discharge may have upon him as a
Participant. By his act of participation herein, each Participant, on behalf of
himself, his heirs, assigns and Beneficiary or Beneficiaries shall be deemed
conclusively to have agreed to and accepted the terms and conditions of the
Plan.
ARTICLE 4
CONTRIBUTIONS
4.01 Employer Contributions. If the Plan is a profit sharing plan, then each
Plan Year the Employer shall make a contribution computed under Section 7 of the
Adoption Agreement. Such contribution may be made either in cash or in other
property acceptable to the Trustee.
If the Plan is a money purchase pension plan, then each Plan Year the
Employer shall make a contribution as a minimum funding standard computed under
Section
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7 of the Adoption Agreement on behalf of Participants who are entitled to
receive an allocation pursuant to Section 7 of the Adoption Agreement. The
Employer Contribution may be made either in cash or in other property acceptable
to the Trustee.
Notwithstanding the foregoing, if the Plan is a non-standardized plan,
then a Self-Employed Individual, an Owner-Employee or an Employee who is not an
officer, shareholder or highly compensated individual may elect not to
participate in the Plan in a Plan Year or, at his election, may direct the
Employer not to contribute on his behalf for a Plan Year, or to contribute for a
Plan Year a lesser portion than that to be contributed on behalf of other
Participants for the Plan Year according to the contribution and allocation
formulas of the Plan. Such an election shall be in writing and shall be made in
such form, and at such time, as the Employer may require. An Employee who is a
partner in a partnership Employer that adopts the Plan may elect to make a
one-time irrevocable election upon the Employee's Employment Commencement Date
or upon the Employee's date of Plan participation not to participate in the Plan
or to direct the Employer not to contribute on his behalf. Such an election
shall be in writing and shall be made in such form, and at such time, as the
Employer may require.
4.02 Employee Contributions.
(a) Voluntary Contributions. Except as provided for in Section 6.07, this
Plan will not accept nondeductible Voluntary Contributions for Plan Years
beginning after the Plan Year in which this Plan is adopted by the Employer.
Voluntary 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) Deductible Contributions. The Administrator will not accept Deductible
Contributions which are made for a taxable year beginning after December 31,
1986. Deductible Contributions made prior to that date will be maintained in a
separate Account which will be nonforfeitable at all times. The Account will
share in the gains and losses of the Trust Fund in the same manner as described
in Section 5.05. No part of the Deductible Contributions Account will be used to
purchase life insurance. Subject to ARTICLE 11 (if applicable), the Participant
may withdraw any part of the Deductible Contributions Account by making a
written application to the Administrator.
4.03 Elective Deferrals. If the Plan is a profit sharing plan and the Employer
selects the CODA option under Section 24 of the Adoption Agreement, subject to
the limitations and requirements of ARTICLE 6, beginning with the first full
payroll period beginning after the later of (a) the Effective Date or (b) the
date this Plan is communicated to the Participants, each Employee who is
eligible to participate in the Plan and who desires to make Elective Deferrals
shall sign a written participation form (hereinafter referred to as the "Salary
Reduction Agreement"). The terms of the Salary Reduction Agreement shall provide
that the Participant agrees to accept a reduction in Compensation from the
Employer in whole percentages or specified dollar amounts as provided in Section
24, Item 2 of the Adoption Agreement; provided, however, that in no event shall
the reduction in Compensation, when added to the amount allocated to the
Participant's Employer Contributions Account pursuant to Section 8 of the
Adoption Agreement, exceed the limits outlined in Section 5.07. In consideration
of such Agreement, the Employer will make a contribution (referred to as an
Elective Deferral) to the Plan on behalf of the Participant for such payroll
period in an amount equal to the total amount by which the Participant's
Compensation was reduced during the payroll period pursuant to the Salary
Reduction Agreement.
4.04 Rollover Contributions. If so authorized under Section 10 of the Adoption
Agreement, an Employee may roll over to this Plan the following.
(a) His interest in a pension, profit-sharing or stock bonus plan
qualified under Section 401(a) or 403(a) of the Code to this Plan,
provided that:
(i) the amount distributed from such plan is transferred to
this Plan no later than the 60th day after such distribution was
received by the Employee;
(ii) the distribution constituted the Employee's entire
nonforfeitable interest in such plan and was made within one taxable
year to the Employee as a lump sum distribution; and
(iii) the amount transferred to this Plan does not include any
voluntary employee contributions made by the Employee to the prior
plan.
(b) An Individual Retirement Plan qualified under Section 408 of the
Code, where the Individual Retirement Plan was used as a conduit from the
plan from which the distribution was made and the rollover is made in
accordance with subsection (a), provided that the amount so transferred
does not include:
(i) amounts received by the Individual Retirement Plan that
were attributable to contributions made on behalf of a Self-Employed
Individual, and
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(ii) contributions made by the Employee to the Individual
Retirement Plan or earnings on such contributions.
Furthermore, a rollover of "accumulated Deductible Employee Contributions"
(as defined by Section 72(o) of the Code) may be made if and to the extent
permitted by the Secretary of the Treasury. An Employee's interest in such
rollover and earnings thereon shall remain 100 percent vested and nonforfeitable
at all times.
4.05 Trustee-To-Trustee Transfers. If so authorized under Section 10 of the
Adoption Agreement, an Employee may make a direct transfer of plan assets
attributable to his participation in a pension, profit-sharing or stock bonus
plan qualified under Section 401(a) of the Code to the Plan from such other plan
by that plan's trustee. A separate account shall be established for such assets
in the name of the Employee. Such assets, together with all records relating to
accrued benefits, contributions and account balances shall be accepted from the
trustee or custodian under the qualified plan, or, in the case of insurance
policies, from the owner thereof if different from the trustee or custodian. An
Employee's interest in the separate account and earnings thereon shall remain
100 percent vested and nonforfeitable at all times. Such account shall be
subject to the requirements set forth in ARTICLE 11.
Assets attributable to employment as an Owner-Employee under an H.R.-10
plan (exclusive of the portion attributable to voluntary contributions
thereunder) shall not begin to be distributed before the Employee dies, incurs a
Disability or attains age 59-1/2, nor later than the taxable year in which the
Employee attains age 70-1/2.
No part of such direct transfer may consist of Voluntary Contributions.
Likewise, the Trustee may make such a direct transfer from this Plan of assets
attributable to a Participant's participation in this Plan to another pension,
profit-sharing or stock bonus plan qualified under Section 401(a) of the Code.
Such direct trustee-to-trustee transfers shall not be considered either in
determining the maximum benefits permissible under the Plan pursuant to Section
5.07 hereof or as contributions by the Employer under Section 7 of the Adoption
Agreement.
4.06 Prohibition of Reversion. Contributions made by the Employer to the Plan
shall be made irrevocably and it shall be impossible for the assets of the Plan
to inure to the benefit of the Employer or to be used in any manner other than
for the exclusive purpose of providing benefits to Participants, Inactive
Participants, Retired Participants and Beneficiaries, and for defraying
reasonable expenses of administering the Plan; provided, however, that nothing
herein shall be construed to prohibit the return to the Employer of all or part
of a Contribution:
(a) which is made by the Employer due to a mistake of fact, provided
the return of such Contribution is made within one (1) year after the date
of payment thereof, or
(b) which is conditioned upon initial qualification of the Plan
under the Code pursuant to Section 17.06, provided the return is made, if
the Plan does not qualify, within one year after the denial of
qualification by the Internal Revenue Service, but only if the application
for the qualification is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan is adopted, or
such later date as the Secretary of the Treasurer may prescribe, or
(c) to the extent a deduction thereof under Section 404 of the Code
is disallowed, provided the return of such Contribution is limited to the
amount disallowed and is made within one year after the disallowance.
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 Establishment of Participants' Accounts. The Trustee shall maintain
separate Accounts for each Employee to which will be credited contributions and
earnings as follows:
(a) Employer Contributions Account. Employer Contributions made on
the Participant's behalf pursuant to Section 7 of the Adoption Agreement
and Forfeitures reallocated pursuant to Section 7 of the Adoption
Agreement, if applicable, will be maintained in a separate Account.
(b) Voluntary Contributions Account. Voluntary Contributions made by
the Participant pursuant to Section 6.07, if any, will be maintained in a
separate Account which will be nonforfeitable at all times.
(c) Matching Contributions Account. Matching Contributions made by
the Employer on the Participant's behalf pursuant to Section 6.08, will be
maintained in a separate Account.
(d) Deductible Contributions Account. Deductible Contributions which
are made for taxable years beginning before January 1, 1987 will be
maintained in a separate Account which will be nonforfeitable at all
times. No part of the Deductible Contribution Account will be used to
purchase life insurance. Subject to ARTICLE 11 (if applica-
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ble), the Participant may withdraw any part of the Deductible Contribution
Account by making a written application to the Administrator.
(e) Elective Deferral Account. Elective Deferrals made on the
Participant's behalf through an applicable Salary Reduction Agreement
pursuant to Section 6.01, and the interest, dividends, earnings or
proceeds of any insurance policy(ies) purchased with funds from this
Account will be maintained in a separate Account which will be
nonforfeitable at all times.
(f) Rollover Account. Rollover Contributions made by an Employee
pursuant to Section 4.04 will be maintained in a separate Account which
will be nonforfeitable at all times.
(g) Trustee-to-Trustee Transfer Account. Trustee-to-Trustee
Transfers made by an Employee pursuant to Section 4.05 will be maintained
in a separate Account which will be nonforfeitable at all times. Such
Account shall be subject to the rules of ARTICLE 11.
(h) Participant-Directed Investment Account. Participant-Directed
Investments, if elected by the Employer in Section 17 of the Adoption
Agreement, will be maintained in a separate Account, but such Account
shall not be segregated and shall be maintained separately only for
bookkeeping purposes.
Each of the Accounts described above, except for Participant-Directed
Investment Accounts, will share in the gains and losses of the Trust Fund in the
same manner as described in Section 5.05. Each of the Accounts described above
shall be debited with all disbursements to the Participant or his Beneficiary
and, except for Deductible Contributions Accounts, the purchases of insurance
policies from this Account.
5.02 Valuation of Trust Fund.
(a) The assets of the Trust Fund 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 Fund will be allocated to each Participant's Accounts in the ratio
that such Account balances bear to all Account balances.
(b) If the Plan is fully insured, any dividends or credits earned on
insurance contracts will be applied, within the taxable year of the Employer in
which received or within the next succeeding taxable year, toward the next
premiums due before any further Employer Contributions are so applied.
(c) If the Plan is trusteed, any dividends or credits earned on insurance
contracts will be allocated to the Participant's Account derived from Employer
Contributions for whose benefit the contract is held.
5.03 Allocation of Employer Contributions. On each Allocation Date, on behalf of
each eligible Participant, Employer Contributions shall be allocated to such
Participant's Employer Contributions Account in accordance with Section 8 of the
Adoption Agreement.
If the Plan is a profit-sharing plan and the Plan is integrated with
Social Security, as elected in Section 8 of the Adoption Agreement, Employer
Contributions for the Plan Year plus any Forfeitures will be allocated to
Participants' Accounts as follows:
STEP ONE: Contributions and Forfeitures will be allocated to each
Participant's Account in the ratio that each Participant's total
Compensation bears to all Participant's total Compensation, but not in
excess of 3% of each Participant's Compensation.
STEP TWO: Any Contributions and Forfeitures remaining after the
allocation in Step One will be allocated to each Participant's Account in
the ratio that each Participant's Compensation for the Plan Year in excess
of the integration level bears to the excess Compensation of all
Participants, but not in excess of 3%.
STEP THREE: Any Contributions and Forfeitures remaining after the
allocation in Step Two will be allocated to each Participant's Account in
the ratio that the sum of each Participant's total Compensation and
Compensation in excess of the integration level bears to the sum of all
Participants total Compensation and Compensation in excess of the
integration level, but not in excess of the maximum profit-sharing
disparity rate.
STEP FOUR: Any remaining Employer Contributions or Forfeitures will
be allocated to each Participant's Account in the ratio that each
Participant's total Compensation for the Plan Year bears to all
Participants' total Compensation for that Year.
The integration level shall be equal to the taxable wage base or such
lesser amount elected by the Employer in Section 8 of the Adoption Agreement.
The taxable wage base is the maximum amount of earnings which may be considered
wages for a Year under Section 3121(a)(1) of the Code in effect as of the
beginning of the Plan Year.
Compensation shall mean Compensation as defined in Section 13.02.
The maximum profit-sharing disparity rate is equal to the lesser of:
(a) 2.7%
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(b) the applicable percentage determined in accordance with the
table below:
If the integration level
the applicable
is more than but not more than percentage is:
- ------------ ----------------- --------------
$0 X* 2.7%
X* of TWB 80% of TWB 1.3%
80% of TWB Y** 2.4%
*X = the greater of $10,000 or 20% of the TWB
**Y = any amount more than 80% of the TWB but less than 100% of the TWB.
If the integration level used is equal to the taxable wage base, the
applicable percentage is 2.7%.
5.04 Forfeitures. On each Allocation Date, any Forfeitures occurring will be
disposed of in the following manner:
(a) If the Plan is a profit sharing plan, any Forfeitures occurring
will be aggregated with any Employer Contributions for the Plan Year and
allocated in accordance with Section 8 of the Adoption Agreement;
provided, however, that, if the Plan is a CODA, then Forfeitures
attributable to Matching Employer Contributions made pursuant to Section
6.08 of the Plan shall be allocated pursuant to Section 24, Item 9(b) of
the Adoption Agreement.
(b) If the Plan is a money purchase pension plan, as elected by the
Employer in Section 11 of the Adoption Agreement:
(i) any Forfeitures occurring will reduce Employer
Contributions for the Plan Year, or
(ii) Forfeitures will be allocated in the ratio that the
Compensation of each Participant bears to that of all Participants.
No Forfeitures will occur solely as a result of an Employee's withdrawal
of Voluntary Contributions.
5.05 Trust Earnings and Losses. On each Allocation Date, each Participant's
Account shall be credited or charged with such Account's share of the Trust Fund
Earnings or losses since the last Allocation Date. With respect to
Participant-Directed Investment Accounts, earnings and losses shall be credited
or charged to these Accounts as set forth in Section 5.08 hereof. With respect
to the other Accounts of the Participant not directed pursuant to Section 5.08
hereof, earnings and losses shall be in the same proportion to such Trust Fund
Earnings that such Account balance on the last Allocation Date bears to the
total of the non-directed Account balances on the last Allocation Date of all
Participants who were Participants on the last Allocation Date and who are
Participants on the current Allocation Date. In determining the Account balances
on the last Allocation Date, (i) the Elective Deferral Account shall be
increased by one-half of any Elective Deferrals (excluding any additional
Elective Deferrals made during the last complete payroll period of a Plan Year)
credited to the Elective Deferral Account since the preceding Allocation Date,
(ii) each Employer Contributions Account balance shall be reduced by the cash
surrender value of any life insurance policies included in the Employer
Contributions Account balance on the last Allocation Date, and (iii) each
Account shall be reduced by the amount of any disbursements from such Account
during the Plan Year. Alternatively, if approved by the Trustee (or custodian)
and the Administrator, Trust Fund Earnings may be allocated in any equitable,
uniform and nondiscriminatory manner which is selected for the purpose of
recognizing the timing of contributions, withdrawals, distributions, transfers,
Participant or Employer directed investments or other temporal events affecting
Account value as adjustments to Account balances.
If a Participant rolls over or transfers funds pursuant to Section 4.04 or
4.05 during the Plan Year, then for purposes of allocating the Participant's
share of the Trust Fund Earnings and losses for that same Plan Year, the
Participant's Rollover Account balance or Trustee-to-Trustee Transfer Account
balance as of the preceding Allocation Date shall include the amount the
Participant rolls over or transfers during the Plan Year, times the number of
days in the Plan Year in which the rollover or transfer occurs, beginning with
the day of the transfer or rollover, divided by 365.
5.06 Inactive Participants. Unless otherwise provided under Section 8(b) of the
Adoption Agreement, an Inactive Participant shall not be entitled to share in
Employer Contributions, or Forfeitures if applicable, for a Plan Year.
Nevertheless, his Accounts shall be maintained and credited or charged with
Trust Fund Earnings in accordance with Section 5.05 hereof, until the balance
thereof (to the extent vested) shall have been fully distributed.
5.07 Limitations on Allocations.
(a) Participant in One Defined Contribution Plan.
(i) If the Participant does not participate in, and has never
participated in, another qualified plan, a welfare benefit fund as
described in Section 419(e) of the Code maintained by the Employer, or an
individual medical account as described in Section 415(1)(2) of the Code
maintained by the Employer, which provides an Annual Addition as defined
in subsection (e)(i), the amount of Annual Additions which may be credited
to the Participant's Individual Account for any Limitation Year will not
exceed the lesser of the Maximum Permissible Amount or any other
limitation con-
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tained in this Plan, If the Employer Contribution that would otherwise be
contributed or allocated to the Participant's Employer Contributions
Account 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. If the Plan provides for the allocation of
Forfeitures in the same manner as Employer Contributions or Matching
Employer Contributions, then the amount reflecting this reduction shall be
allocated and reallocated to other Participant Accounts in accordance with
the Plan formula allocating Employer Contributions and Forfeitures to the
extent that such allocations do not cause the Annual Additions to any such
Participants' Accounts to exceed the lesser of the Maximum Permissible
Amount or any other limitation provided in the Plan.
(ii) 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.
(iii) 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.
(iv) If pursuant to subsection (iii) 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 Contributions, to the extent
they would reduce the Excess Amount, will be returned to the
Participant;
(2) If after the application of paragraph (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
Employer Contributions 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 paragraph (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, it will not participate in
the allocation of the Trust's investment gains and losses. If a
suspense account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be
allocated and reallocated to Participants' Accounts before any
Employer Contributions or any Employee Contributions may be made to
the Plan for that Limitation Year. Excess amounts may not be
distributed to Participants or former Participants.
(b) Participant Covered Under Another Defined Contribution Plan.
(i) This Section applies if, in addition to this Plan, the
Participant is covered under another qualified Master or Prototype defined
contribution plan maintained by the Employer, a welfare benefit fund as
defined in Section 419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section 415(1)(2) of the Code
maintained by the Employer, which provides an Annual Addition as defined
in subsection (e)(i), during any Limitation Year. The Annual Additions
which may be credited to a Participant's Accounts 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 individual
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 Employer Contributions Account 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 Accounts under this Plan for
the Limitation Year.
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<PAGE>
(ii) 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 subsection (a) (ii).
(iii) 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.
(iv) If pursuant to subparagraph (iii) or as a result of the
allocation of Forfeitures, a Participant's Annual Additions 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.
(v) 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.
(vi) Any Excess Amount attributed to this Plan will be disposed in
the manner described in subsection (a) (iv).
(c) Participant Covered Under Another Defined Contribution Plan Which Is
Not A Master Or Prototype Plan. 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 Accounts under this Plan for any Limitation Year will be limited
in accordance with subsections (b) and (c) as though the other plan was a Master
or Prototype Plan unless the Employer provides other limitations in Section 19
of the Adoption Agreement.
(d) Participant Covered Under A Defined Benefit Plan. If the Employer
maintains, or at any time maintained, a qualified defined benefit plan 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
Accounts under this Plan for any Limitation Year will be limited in accordance
with Section 19 of the Adoption Agreement.
(e) Definitions.
(i) Annual Additions: The sum of the following amounts credited to a
Participant's Accounts for the Limitation Year:
(1) Employer Contributions, including Elective Deferrals;
(2) Employee Contributions;
(3) Forfeitures, if applicable; and
(4) Amounts allocated, after March 31, 1984, to an individual
medical account as defined in Section 415(1)(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 subsection (a)
(iv) or (1) (iv) in the Limitation Year to reduce Employer Contributions
will be considered Annual Additions for such Limitation Year.
(ii) Compensation: One of the following as elected by the Employer
in Section 9 of the Adoption Agreement:
(1) Information required to be reported under Sections 6041
and 6051 of the Code. (Wages, Tips and Other Compensation Box on
Form W-2) Compensation is defined as wages as defined in Section
3401(a) of the Code and all other payments of compensation to an
Employee by the Employer (in the course of the Employer's trade or
business) for which the Employer is required to furnish the Employee
a written statement under Sections 6041(d) and 6051(a)(3) of the
Code. Compensation must be determined without regard to any rules
under Section 3401(a) of the Code that limit remuneration included
in wages based on the nature or
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<PAGE>
location of the employment or the services performed (such as the
exception for agricultural labor in Section 3401(a)(2)).
(2) Section 3401(a) wages. Compensation is defined as wages
within the meaning of 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. Compensation is defined as
wages, salaries, and fees for professional services and other
amounts received (without regard to 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 includible in gross income (including, but not
limited to, commissions paid to salesmen, compensation for services
on the basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, and reimbursements or
other expense allowances under a nonaccountable plan (as described
in Treasury Regulations ss.1.62-2(c)), and excluding the following:
(A) Employer contributions to a plan of deferred
compensation which are not includible in the Employee's gross
income for the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to the
extent such contributions are deductible by the Employee, or
any distributions from a plan of deferred compensation;
(B) Amounts realized from the exercise of a
non-qualified 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 excludible from the gross income of the
Employee).
For any Self-Employed Individual, Compensation shall mean
Earned Income.
For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of this Section 5.07,
Compensation for a Limitation Year is the Compensation actually paid
or made available during such Limitation Year.
Notwithstanding the preceding sentence, Compensation for a
Participant in a defined contribution plan who has incurred a
Disability is the Compensation such Participant would have received
for the Limitation Year if the Participant had been paid at the rate
of Compensation paid immediately before incurring the Disability;
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 are
nonforfeitable when made.
(iii) 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 125 percent of the
dollar limitation determined for the Limitation Year under Sections 415(b)
and (d) of the Code or 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 May 6, 1986, the denominator of this fraction
will not be less than 125 percent of the sum of the Annual Benefits under
such plans which the Participant had accrued as of the close of the last
Limitation Year beginning before January 1, 1987, disregarding any changes
in 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 for all Limitation
Years beginning before January 1, 1987.
(iv) Defined Contribution Dollar Limitation: $30,000 or if greater,
one-fourth of the defined benefit dollar limitation set forth in Section
415(b)(1) of the Code as in effect for the Limitation Year.
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(v) Defined Contribution Fraction: A fraction, the numerator of
which is the sum of the Annual Additions to the Participant's accounts
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 voluntary employee contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer, and the
Annual Additions attributable to all welfare benefit funds, as defined in
Section 419(e) of the Code, and individual medical accounts, as defined in
Section 415(1)(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 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 125
percent of the dollar limitation determined under Sections 415(b) and (d)
of the Code in effect under Section 415(c)(1)(A) of the Code or 35 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 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 Participant contributions as
Annual Additions.
(vi) Employer: For purposes of this Section 5.07, Employer shall
mean the Employer that adopts this Plan, and all Controlled Group Members
as that term is modified by Section 415(h) of the Code.
(vii) Excess Amount: The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(viii) Highest Average Compensation: The Average Compensation for
the three consecutive Years of Service that produces the highest average.
A Year of Service is the 12-consecutive month period defined in Section 11
of the Adoption Agreement.
(ix) Limitation Year: A calendar year, or the twelve (12)
consecutive month period elected by the Employer in Section 1(c) of the
Adoption Agreement. All qualified plans maintained by the Employer must
use the same Limitation Year. If the Limitation Year is amended to a
different 12-consecutive month period, the new Limitation Year must begin
on a date within the Limitation Year in which the amendment is made.
(x) Master or Prototype Plan: A Plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(xi) Maximum Permissible Amount: The maximum Annual Addition that
may be contributed or allocated to a Participant's Accounts under the Plan
for any Limitation Year shall not exceed the lesser of:
(1) The Defined Contribution Dollar limitation; or
(2) 25 percent of the Participant's Compensation for the
Limitation Year.
The Compensation limitation referred to in (2) shall not apply to
any contribution for medical benefits (within the meaning of Section
401(h) or 419A(f)(2) of the Code) which is otherwise treated as an Annual
Addition under Section 415(1)(1) or 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve 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
(xii) 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:
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(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.
5.08 Participant-Directed Investments. If elected by the Employer in Section
17(a) or (b) of the Adoption Agreement, each Participant may direct the Trustee
as to the type of investment to be purchased with the Participant's Accounts.
Any directions to the Trustee with respect to investments shall be delivered in
writing to the Trustee and shall be on a form for such purpose provided by the
Trustee. Directed investments to be executed by the Trustee shall be made by the
Trustee as soon as reasonably possible after actual receipt of such direction;
provided, however, that the Trustee shall not be liable for any loss to the
Account due to reasonable delay in the execution of such directions. Such
directed investments shall be limited to those investments set forth in Section
16.03(a) hereof, and may be made without any duty to diversify. The Trustee may
leave earnings on any securities so obtained for reinvestment in accordance with
the direction of the Participant. Notwithstanding the foregoing, in no event
shall a directed investment of a Participant be permitted in such an investment
that the Trustee, in its sole discretion, deems itself unable to administer
efficiently, properly and conveniently with respect thereto; provided, however,
that the Trustee's acceptance of the administration of a directed investment
shall not be unreasonably withheld. Upon establishing such separate account, it
shall be credited or charged only with the increases or decreases resulting from
the administration and investment thereof as a separate unit, except that the
Trustee shall charge against such account a pro rata portion of the fees and
expenses incurred in the administration of the Plan in general, as well as the
fees and expenses properly chargeable only to such segregated account.
Thereafter, the value of the Accounts of a Participant who directs the
segregation thereof under this Section shall be determined by reference to the
value of the Accounts as of any applicable date of determination,
notwithstanding any other provision of the Plan. The Trustee shall be under no
duty to question any such direction of a Participant with respect to
investments, nor shall the Trustee be required to review any securities or the
property held in the Account. Neither the Trustee nor the Employer shall have
any liability whatsoever for any losses which may result from either the
Participant's direction or any investment decision made pursuant to this
Section, or for any loss which may result by reason of the failure of a
Participant to make such directions. Nor shall the Trustee or the Employer have
any liability or responsibility whatsoever for any disparity between the
performance or rates of investment return of Participant-Directed Accounts and
the Trust Fund in general. A Participant shall be entitled to direct the
investment of his Account hereunder at such time and in such manner as may be
non-discriminatorily established by the Employer.
ARTICLE 6
CASH OR DEFERRED ARRANGEMENT
6.01 Salary Reduction Agreement.
(a) Unless the Employer specifies otherwise, the Salary Reduction
Agreement described in Section 4.03 shall apply to each payroll period,
beginning with the first payroll period after the Entry Date following the
execution of the Salary Reduction Agreement, and continuing until such time as
the Participant elects otherwise or terminates employment.
(b) The Salary Reduction Agreement may be amended by the Participant to
change the amount of the Compensation reduction. A change in the amount of the
Compensation reduction can be made for the first payroll period of the Plan Year
next following the timely notice of change, or any other date selected by the
Employer in the Adoption Agreement. Such notice of change must be filed with the
Administrator prior to the date the change is effective.
(c) If elected by the Employer in the Adoption Agreement, the Salary
Reduction Agreement may be amended by the Participant to increase the amount of
the Compensation reduction for the last complete payroll period of the Plan
Year.
(d) A separate Salary Reduction Agreement may be executed whereby the
Participant elects to accept a reduction in Compensation which is attributable
to a bonus. Such election may be made and the Salary Reduction Agreement
executed at any time prior to the payment of the bonus.
(e) A Participant may elect to suspend the Compensation reduction at any
time. A notice of suspension shall be effective until it is revoked by the
Participant. A suspension revocation shall be accomplished by filing a new
Salary Reduction Agreement in accordance with the terms of the Adoption
Agreement.
(f) The Salary Reduction Agreement of a Participant who is a Highly
Compensated Employee may be amended by the Participant to decrease the amount of
the Compensation reduction for the balance of a Plan Year if a mid-year or
interim Actual Deferral Percentage test indicates that the Participant will have
Excess Contributions for the Plan Year.
(g) If the Employer elects in the Adoption Agreement to permit withdrawals
and a Participant makes
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such a withdrawal, the Participant's Elective Deferrals will be suspended during
the 12-month period following the withdrawal.
In accordance with Section 401(k) of the Code, all amounts withheld from a
Participant's Compensation in accordance with this Section and contributed as
Elective Deferrals to the Plan shall not be included in the gross income for the
Participant for federal tax purposes, and shall be deemed for tax purposes to be
an Employer Contribution to the Plan. Such Contributions shall be included in
gross income for FICA and FUTA tax purposes.
6.02 Annual Limit on Elective Deferrals. No Participant shall be permitted to
have Elective Deferrals made under this Plan, or any other qualified plan
maintained by the Employer, during any taxable year, in excess of the dollar
limitation contained in Section 402(g) of the Code in effect at the beginning of
such taxable year.
If a Participant receives a hardship distribution pursuant to Section
6.16, the dollar limitation described above, for the Participant's taxable year
immediately following the taxable year of the hardship distribution shall be
reduced by the amount of the Participant's Elective Deferrals for the taxable
year of the hardship distribution.
6.03 Distribution of Excess Elective Deferrals. A Participant may assign to this
Plan any Excess Elective Deferrals made during a taxable year of the Participant
by notifying the Administrator on or before the date specified in the Adoption
Agreement of the amount of the Excess Elective Deferrals to be assigned to the
Plan.
Notwithstanding any other provision of the Plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto, shall be
distributed no later than April 15 to any Participant to whose account Excess
Elective Deferrals were assigned for the preceding year and who claims Excess
Elective Deferrals for such taxable year.
Definitions:
(a) "Elective Deferrals" shall mean any Employer Contributions made to the
Plan at the election of the Participant, in lieu of cash Compensation, and shall
include Contributions made pursuant to a Salary Reduction Agreement or other
deferral mechanism. With respect to any taxable year, a Participant's Elective
Deferral is the sum of all Employer Contributions made on behalf of such
Participant pursuant to an election to defer under any qualified CODA as
described in Section 401(k) of the Code, any simplified employee pension cash or
deferred arrangement as described in Section 402(h)(1)(B) 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 the behalf of a Participant for the purchase of an annuity contract
under Section 403(b) of the Code pursuant to a Salary Reduction Agreement.
(b) "Excess Elective Deferrals" shall mean those Elective Deferrals that
are includible in a Participant's gross income under Section 402(g) of the Code
to the extent such Participant's Elective Deferrals for a taxable year exceed
the dollar limitation under such Code section. Excess Elective Deferrals shall
be treated as Annual Additions under the Plan.
Determination of income or loss: Excess Elective Deferrals shall be
adjusted for any income or loss up to the date of distribution. The income or
loss allocable to Excess Elective Deferrals is the sum of: (1) income or loss
allocable to the Participant's Elective Deferral Account for the taxable year
multiplied by a fraction, the numerator of which is such Participant's Excess
Elective Deferrals for the year and the denominator is the Participant's Account
balance attributable to Elective Deferrals without regard to any income or loss
occurring during such taxable year; and (2) ten percent of the amount determined
under (1) multiplied by the number of whole calendar months between the end of
the Participant's taxable year and the date of distribution, counting the month
of distribution if distribution occurs after the 15th of such month.
6.04 Actual Deferral Percentage Test.
(a) The Actual Deferral Percentage (hereinafter "ADP") for participants
who are Highly Compensated Employees for each Plan Year and the ADP for
Participants who are Non-highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
(i) The ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(ii) The ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants who are
Non-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 Non-highly
Compensated Employees by more than two (2) percentage points.
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(b) Special Rules:
(i) The ADP for any Participant who is a Highly Compensated Employee
for the Plan Year and who is eligible to have Elective Deferrals (and
Qualified Non-elective Contributions or Qualified Matching Contributions,
or both, if treated as Elective Deferrals for purposes of the ADP test)
allocated to his or her accounts under two or more arrangements described
in Section 401(k) of the Code, that are maintained by the Employer, shall
be determined as if such Elective Deferrals (and, if applicable, such
Qualified Non-elective Contributions or Qualified Matching Contributions,
or both) were made under a single arrangement. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements that
have different Plan Years, all cash or deferred arrangements ending with
or within the same calendar year shall be treated as a single arrangement.
(ii) In the event that this Plan satisfies the requirements of
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.
(iii) For purposes of determining the ADP of a Participant who is a
Five-Percent Owner or one of the ten 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 Non-highly
Compensated Employees and for Participants who are Highly Compensated
Employees.
(iv) 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-month period immediately
following the Plan Year to which contributions relate.
(v) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Non-elective
Contributions or Qualified Matching Contributions, or both, used in such
test.
(vi) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be prescribed by
the Secretary of the Treasury.
(c) "Actual Deferral Percentage" shall mean, for a specified group of
Participants for a Plan Year, the average of the ratios (calculated separately
for each Participant in such group) of (i) the amount of Employer Contributions
actually paid over to the Trust Fund on behalf of such Participant for the
period selected by the Employer in Section 9 of the Adoption Agreement to (ii)
the Participant's Compensation for such period. Employer Contributions on behalf
of any Participant shall include: (1) any Elective Deferrals made pursuant to
the Participant's Salary Reduction Agreement, including Excess Elective
Deferrals of Highly Compensated Employees, but excluding Elective Deferrals that
are taken into account in the Contribution Percentage test (provided the ADP
test is satisfied both with and without exclusion of these Elective Deferrals):
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.
6.05 Distribution of Excess Contributions. Notwithstanding any other provision
of this plan, Excess Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Excess Contributions were allocated for the
preceding Plan Year. If such excess amounts are distributed more than 2-1/2
months after the last day of the Plan Year in which such excess amounts arose, a
ten (10) percent excise tax will be imposed on the Employer maintaining the Plan
with respect to such amounts. Such distributions shall be made to Highly
Compensated Employees on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees. Excess Contributions 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 the
regulations.
Excess Contributions (including the amounts recharacterized) shall be
treated as Annual Additions under the Plan.
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Determination of Income or Loss: Excess Contributions shall be adjusted
for any income or loss up to the date of distribution. The income or loss
allocable to Excess Contributions is the sum of: (1) income or loss allocable to
the participant's Elective Deferral Account (and, if applicable, the Qualified
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 is the Participant's Account balance 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
(2) ten percent of the amount determined under (1) multiplied by the number of
whole calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution occurs after
the 15th of such month.
Accounting for Excess Contributions: Excess Contributions shall be
distributed from the Participant's Elective Deferral Account and Qualified
Matching Contribution account (if applicable) in proportion to the Participant's
Elective Deferrals and Qualified Matching Contributions (to the extent used in
the ADP test) for the Plan Year. Excess Contributions shall be distributed from
the Participant's Qualified 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.
"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).
6.06 Recharacterization. If the Employer elects in Section 24, Item 7 of the
Adoption Agreement to permit Employees to make Voluntary Non-deductible
Contributions to the Plan, a Participant may treat his or her Excess
Contributions as an amount distributed to the Participant and then contributed
by the Participant to the Plan. Recharacterized amounts will remain
nonforfeitable and subject to the same distribution requirements as Elective
Deferrals. Amounts may not be recharacterized by a Highly Compensated Employee
to the extent that such amount in combination with other Employee Contributions
made by that Employee would exceed any stated limit under the plan on Employee
Contributions. Recharacterization must occur no later than two and one-half
months after the last day of the Plan Year in which such Excess Contributions
arose and is deemed to occur no earlier than the date the last Highly
Compensated Employee is informed in writing of the amount recharacterized and
the consequences thereof. Recharacterized amounts will be taxable to the
Participant for the Participant's tax year in which the Participant would have
received them in cash.
6.07 Voluntary Non-deductible Contributions. If elected by the Employer in
Section 24, Item 7 of the Adoption Agreement, Employees will be permitted to
make Voluntary Non-deductible Contributions to the Plan. Voluntary
Non-deductible Contributions shall be maintained in a separate Account pursuant
to Section 5.01(b).
6.08 Matching Contributions. If elected by the Employer in Section 24, Item 8 of
the Adoption Agreement, the Employer will make Matching Contributions to the
Plan. Matching Contributions will be maintained in a separate Account pursuant
to Section 5.01(c).
6.09 Forfeitures and Vesting of Matching Contributions. Matching Contributions
shall be vested in accordance with Section 24, Item 9 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 profit sharing plan, or
upon the complete discontinuance of Employer Contributions. Forfeitures of
Matching Contributions, other than Excess Aggregate Contributions, shall be made
in accordance with Section 5.04.
6.10 Qualified Matching Contributions. If elected by the Employer in Section 24,
Item 4 of the Adoption Agreement, the Employer will make Qualified Matching
Contributions to the Plan. "Qualified Matching Contributions" shall mean
Matching Contributions which are subject to the distribution and
nonforfeitabiity requirements under Section 401(k) of the Code when made.
6.11 Limitations on Employee Contributions and Matching Contributions.
(a) The ACP for Participants who are Highly Compensated Employees for each
Plan Year and the ACP for Participants who are Non-highly Compensated Employees
for the same Plan Year must satisfy one of the following tests:
(i) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants who are
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Non-highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(ii) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by two
(2), provided that the ACP for Participants who are Highly Compensated
Employees does not exceed the ACP for Participants who are Non-highly
Compensated Employees by more than two (2) percentage points.
(b) Special Rules:
(i) Multiple Use: If one or more Highly Compensated Employees
participate in both a CODA and a plan subject to the ACP test maintained
by the Employer and the sum of the ADP and ACP of those Highly Compensated
Employees subject to either or both tests exceeds the Aggregate Limit,
then the ACP of those Highly Compensated Employees who also participate in
a CODA will be reduced (beginning with such Highly Compensated Employee
whose ACP is the highest) so that the limit is not exceeded. The amount by
which each Highly Compensated Employee's Contribution Percentage Amounts
is reduced shall be treated as an Excess Aggregate Contribution. The ADP
and ACP of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does not
occur if either the ADP and ACP of the Highly Compensated Employees does
not exceed 1.25 multiplied by the ADP and ACP of the Non-highly
Compensated Employees.
(ii) For purposes of this Section, the Contribution Percentage for
any Participant who is a Highly Compensated Employee and who is eligible
to have Contribution Percentage Amounts allocated to his or her account
under two or more plans described in Section 401(a) of the Code, or
arrangements described in Section 401(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.
(iii) In the event that this Plan satisfies the requirements of
Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated with
one or more other plans, or if one or more other plans satisfy the
requirements of such sections of the Code only if aggregated with this
Plan, then this Section shall be applied by determining the Contribution
Percentage of employees as if all such plans were a single plan. For plan
years beginning after December 31, 1989, plans may be aggregated in order
to satisfy Section 401(m) of the Code only if they have the same plan
year.
(iv) For purposes of determining the Contribution Percentage of a
Participant who is a Five-Percent Owner or one of the ten most highly-paid
Highly Compensated Employees, the Contribution Percentage Amounts and
Compensation of such Participant shall include the Contribution Percentage
Amounts and Compensation for the Plan Year of Family Members (as defined
in Section 414(q)(6) of the Code). Family Members, with respect to Highly
Compensated Employees, shall be disregarded as separate Employees in
determining the Contribution Percentage both for Participants who are
Non-highly Compensated Employees and for Participants who are Highly
Compensated Employees.
(v) 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-month period beginning on the day
after the close of the Plan Year.
(vi) 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.
(vii) The determination and treatment of the Contribution Percentage
of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(c) Definitions:
(i) "Aggregate Limit" shall mean the sum of (1) 125 percent of the
greater of the ADP of the Non-highly Compensated Employees for the Plan
Year or the ACP of Non-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 CODA and (2) the lesser of 200% or two plus the
lesser of such ADP or ACP. "Lesser" is substituted for "greater" in ("1"),
above, and "greater" is substituted for "lesser" after "two plus the" in
"(2)" if it would result in a larger Aggregate Limit.
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(ii) "Average Contribution Percentage" shall mean the average of the
Contribution Percentages of the Eligible Participants in a group.
(iii) "Contribution Percentage" shall mean the ratio (expressed as a
percentage) of the Participant's Contribution Percentage Amounts to the
Participant's Compensation for the period selected by the Employer in
Section 9 of the Adoption Agreement.
(iv) "Contribution Percentage Amounts" shall mean the sum of the
Employee Contributions, Matching Contributions, and Qualified Matching
Contributions (to the extent not taken into account for purposes of the
ADP test) made under the Plan on behalf of the Participant for the Plan
Year. Such Contribution Percentage Amounts shall include Forfeitures of
Excess Aggregate Contributions or Matching Contributions allocated to the
Participant's Account which shall be taken into account in the year in
which such Forfeiture is allocated. If so elected in the Adoption
Agreement the Employer may include Qualified Non-elective Contributions in
the Contribution Percentage Amounts. The Employer also may elect to use
Elective Deferrals in the Contribution Percentage Amounts so long as the
ADP test is met before the Elective Deferrals are used in the ACP test and
continues to be met following the exclusion of those Elective Deferrals
that are used to meet the ACP test.
(v) "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.
(vi) "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.
(vii) "Matching Contribution" shall mean an Employer Contribution
made to this or any other defined contribution plan on behalf of a
Participant on account of an Employee Contribution made by such
Participant, or on account of a Participant's Elective Deferral, under a
plan maintained by the Employer.
6.12 Distribution of Excess Aggregate Contributions. Notwithstanding any other
provision of this Plan, Excess Aggregate Contributions, plus any income and
minus any loss allocable thereto, shall be forfeited, if forfeitable, or if not
forfeitable, distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Excess Aggregate Contributions were
allocated for the preceding Plan Year. Excess Aggregate Contributions 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 the regulations. If
such Excess Aggregate Contributions are distributed more than 2-1/2 months after
the last day of the Plan Year in which such excess amounts arose, a ten (10)
percent excise tax will be imposed on the Employer maintaining the Plan with
respect to those amounts. Excess Aggregate Contributions shall be treated as
Annual Additions under the Plan.
Determination of Income or Loss: Excess Aggregate Contributions shall be
adjusted for any income or loss up to the date of distribution. The income or
loss allocable to Excess Aggregate Contributions is the sum of: (a) income or
loss allocable to the Participant's Voluntary Contributions Account, Matching
Contributions 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 is the Participant's Account balance(s) attributable to
Contribution Percentage Amounts without regard to any income or loss occurring
during such Plan Year; and (b) ten 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 15th of such month.
Forfeitures of Excess Aggregate Contributions: Forfeitures of Excess
Aggregate Contributions may either be reallocated to the Accounts of Non-highly
Compensated Employees or applied to reduce Employer Contributions, as elected by
the Employer in Section 24, Item 10(d) of the Adoption Agreement.
Accounting for Excess Aggregate Contributions: Excess Aggregate
Contributions shall be forfeited, if forfeitable or distributed on a pro-rata
basis from the Participant's Voluntary Contributions Account, Matching
Contributions Account, and Qualified Matching Contributions Account (and, if
applicable, the Participant's Qualified Non-elective Contributions Account or
Elective Deferral Account, or both).
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"Excess Aggregate Contributions" shall mean, with respect to any Plan
Year, the excess of:
(a) The aggregate Contribution Percentage Amounts taken into account
in computing the numerator of the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by the ACP
test (determined by reducing contributions made on behalf of Highly
Compensated Employees in order of their Contribution Percentages beginning
with the highest of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to Section 6.03 and then determining Excess Contributions
pursuant to Section 6.05.
6.13 Qualified Non-elective Contributions. The Employer may elect to make
Qualified Non-elective Contributions under the Plan on behalf of Employees as
provided in Section 24, Item 3 of the Adoption Agreement.
In addition, in lieu of distributing Excess Contributions as provided in
Section 6.05, or Excess Aggregate Contributions as provided in Section 6.12 of
the Plan, and to the extent elected by the Employer in Section 24, Item 3 of the
Adoption Agreement, the Employer may make Qualified Non-elective Contributions
on behalf of Non-highly Compensated Employees that are sufficient to satisfy
either the Actual Deferral Percentage test or the Average Contribution
Percentage test, or both, pursuant to regulations under the Code.
"Qualified Non-elective Contributions" shall mean contributions (other
than Matching Contributions or Qualified Matching Contributions) made by the
Employer and allocated to Participants' Accounts that the Participants may not
elect to receive in cash until distributed from the Plan; that are
nonforfeitable when made; and that are distributable only in accordance with the
distribution provisions that are applicable to Elective Deferrals and Qualified
Matching Contributions.
6.14 Nonforfeitability and Vesting. 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.
6.15 Distribution Requirements. 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 Termination of Employment, death, or
Disability. Such amounts may also be distributed upon:
(a) Termination of the Plan without the establishment of another
defined contribution plan.
(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, but only with respect to Employees who continue employment with such
subsidiary.
(d) The attainment of age 59-1/2 in the case of a profit-sharing
plan.
(e) The hardship of the participant as described in Section 6.15.
All distributions that may be made pursuant to one or more of the
foregoing distributable events are subject to the spousal and Participant
consent requirements (if applicable) contained in Sections 401(a)(11) and 417 of
the Code.
6.16 Hardship Distribution. Distribution of Elective Deferrals (and earnings
thereon accrued as of December 31, 1988) may be made to a Participant in the
event of hardship. For the purposes of this Section, hardship is defined as an
immediate and heavy financial need of the Employee where such Employee lacks
other available resources. Hardship distributions are subject to the spousal
consent requirements contained in Sections 401(a)(11) and 417 of the Code.
Special Rules:
(a) The following are the only financial needs considered immediate
and heavy deductible medical expenses (within the meaning of Section
213(d) of the Code) of the Employee, the Employee's Spouse, children, or
dependents; the purchase (excluding mortgage payments) of a principal
residence for the Employee; payment of tuition for the next quarter or
semester of post-secondary education for the
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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.
(b) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
(i) The Employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all plans
maintained by the Employer;
(ii) All plans maintained by the Employer provide that the
Employee's Elective Deferrals (and Employee Contributions) will be
suspended for twelve months after the receipt of the hardship
distribution;
(iii) The distribution is not in excess of the amount of an
immediate and heavy financial need; and
(iv) 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 referrals for the taxable year of the hardship
distribution.
6.17 Top-Heavy Requirements. Neither Elective Deferrals nor Matching
Contributions may be taken into account for the purpose of satisfying the
minimum top-heavy contribution requirement.
ARTICLE 7
RETIREMENT BENEFITS
7.01 Normal Retirement. Each Participant shall be eligible to retire on his
Normal Retirement Date. Such Participant's Account balance shall be paid in
accordance with ARTICLES 10 and 11. Notwithstanding the other requirements of
this Plan, a Participant who attains his Normal Retirement Age may retire on his
Normal Retirement Date or may elect to continue in Service subject to the
Employer's retirement policy, if any, and the provisions of the Age
Discrimination in Employment Act of 1986. If such Participant continues in
Service, then he shall be eligible to continue in all respects as a Participant
in the Plan until his actual retirement Subject to Section 10.07, no retirement
benefit shall be payable until actual retirement unless such Participant who
could take normal retirement requests that his retirement benefits commence
before his actual retirement. In such case, the Committee shall direct the
Trustee to commence payment of retirement benefits as soon as practicable
following such request.
7.02 Early Retirement. If a Participant's Termination of Employment occurs
before the Participant attains his Normal Retirement Age, but after he has
attained his Early Retirement Age as set forth in Section 13(b) of the Adoption
Agreement, if applicable, and he has completed the required Years of Service set
forth in such Section, if any, the Participant shall be entitled to an Early
Retirement Benefit equal to the value of his Accounts. If the Employer elected
both an age and Service requirement for Early Retirement in Section 13 of the
Adoption Agreement and a Participant's Termination of Employment occurs before
he satisfies the age requirement for Early Retirement, but after he satisfies
the Service requirement, the Participant will be entitled to elect an Early
Retirement Benefit upon satisfaction of such age requirement. Such Account
balance shall be paid in accordance with ARTICLES 10 and 11.
7.03 Disability Retirement. A Participant who has incurred a Disability shall be
eligible to retire on the first day of the month next following the Employer's
determination of the Employee's Disability. Notwithstanding the vesting schedule
elected by the Employer in Section 11 of the Adoption Agreement, an Employee's
right to his or her Account balance shall be nonforfeitable in the event of
Disability. Such Account balance shall be paid in accordance with ARTICLES 10
and 11.
ARTICLE 8
DEATH BENEFITS
8.01 Death Benefit. In the event of the death of a Participant before his
retirement, as provided in ARTICLE 7, or other Termination of Employment prior
to any distribution to him of his Accounts, 100 percent of the balance of the
Participant's Accounts shall be paid as provided below, less any amounts to be
paid pursuant to ARTICLE 11:
(a) If the Plan is a profit-sharing plan, then, at the direction of
the Committee, the Trustee shall pay the death benefit pursuant to Section
10.10 to the deceased Participant's surviving Spouse unless there is a
Qualified Election, as defined in Section 11.04(c), and, in that case, to
the party or parties designated as Beneficiary.
(b) If the Plan is a money purchase pension plan, then the Trustee
shall pay the death benefit pursuant to Section 10.10.
8.02 Insured Death Benefit. An additional Death Benefit may be provided through
the purchase of life insurance policies if, and as, so provided in Section 18 of
the Adoption Agreement.
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(a) Governing Provisions. The following provisions shall govern the
purchase and administration of life insurance policies hereunder:
(i) Each Participant may request the Employer to purchase ordinary
life, term or universal life insurance policies on his life as follows:
(1) Ordinary life - For purposes of these incidental insurance
provisions, ordinary life insurance contracts are contracts with
both nondecreasing death benefits and nonincreasing premiums. If
such contracts are purchased, less than 1/2 of the aggregate
Employer Contributions allocated to any Participant will be used to
pay the premiums attributable to them.
(2) Term and universal life - No more than 1/4 of the
aggregate Employer Contributions allocated to any Participant will
be used to pay the premiums on term life insurance contracts,
universal life insurance contracts, and all other life insurance
contracts which are not ordinary life.
(3) Combination - The sum of 1/2 of the ordinary life
insurance premiums and all other life insurance premiums will not
exceed 1/4 of the aggregate Employer Contributions allocated to any
Participant.
(ii) Subject to ARTICLE 11, the contracts on a Participant's life
will be converted to cash or an annuity or distributed to the Participant
upon commencement of benefits.
(iii) The Trustee shall apply for and will be the owner of any
insurance contract purchased under the terms of this Plan. The insurance
contract(s) must provide that proceeds will be payable to the Trustee,
however the Trustee shall be required to pay over all proceeds of the
contract(s) to the Participant's designated Beneficiary in accordance with
the distribution provisions of this 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 11.04(c), if
applicable. Under no circumstances shall the Trust Fund retain any part of
the proceeds. In the event of any conflict between the terms of this Plan
and the terms of any insurance contract purchased hereunder, the Plan
provisions shall control.
(iv) Any dividends or credits earned on life insurance policies will
be allocated to the Accounts derived from Employer Contributions for whose
benefit the policy is held to reduce premium payments.
(v) Policies shall be purchased for a Participant only if he
provides such evidence of insurability as may be required by the insurer.
If he is not insurable at standard rates, the policy purchased shall be
for such face amount as can be provided by the amount of premium which
would have been paid if the Participant had been insurable at standard
rates. If the Participant is uninsurable, then no policies shall be
purchased;
(vi) Additional life insurance policies shall be purchased as of any
premium due date only if the face amount of each additional policy will be
at least $1,000.
(vii) Upon a Participant's Termination of Employment other than by
death or Normal, Early or Disability Retirement, any nonvested portion of
the cash value of any life insurance policy shall be subject to Forfeiture
and treated in the manner provided in Section 5.04 hereof.
(b) Vesting and Disposition of Policies.
(i) If there are no Employee Contributions, the cash value of any
life insurance policies issued on the life of a Participant shall be
vested as provided in Section 11 of the Adoption Agreement, but the
Trustee shall offer the policies to the Participant upon his Termination
of Employment for any reason other than death or retirement in exchange
for an amount equal to the nonvested portion of the total cash value of
the policies, if such amount is paid to the Trustee within 30 days of the
date such policies are offered to the Participant. Subject to the
requirements of ARTICLE 11, if the policies are distributed to him upon
his Termination of Employment without payment by the Participant of the
nonvested portion of the cash value thereof, such portion shall be charged
to the Participant's Employer Contributions Account.
(ii) If there are Employee Contributions, the portion of the cash
value of any life insurance policies which is attributable to Employee
Contributions shall be 100 percent vested. The portion attributable to
Employee Contributions shall be equal to the percentage of said cash value
which equals (1) the sum of Employee Contributions applied to the payment
of premiums on said policies divided by (2) the total premiums paid on
said policies. The balance of the cash value of the life insurance
policies which is attributable to the Employer Contribu-
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tions shall be vested as provided in Section 11 of the Adoption Agreement
The Trustee shall offer the policies to the Participant upon his
Termination of Employment for any reason other than death or retirement in
exchange for an amount equal to the total nonvested portion of the cash
value of the policies, if such amount is paid to the Trustee within a
reasonable time after the date of his Termination of Employment. Subject
to the provisions of ARTICLE 11, if the policies are distributed to him
upon his Termination of Employment without payment by the Participant of
the nonvested portion of the cash value thereof, such portion shall be
charged to the Participant's Employer Contributions Account.
(iii) Any policies on the life of a Participant, the premiums for
which have been paid entirely by Employee Contributions, shall be vested
in him upon Termination of Employment and shall be in addition to all
other benefits provided by the Plan.
ARTICLE 9
BENEFITS ON SEPARATION
FROM SERVICE
9.01 Vested Benefit.
(a) If at a Participant's Termination of Employment for reasons other than
on account of his death he then does not become entitled to a benefit under
ARTICLE 7, he may be entitled to a Vested Benefit under this Section. Such
Vested Benefit shall be equal to the nonforfeitable percentage of his
Employer-derived Account balance determined in accordance with the vesting
schedule selected in Section 11 of the Adoption Agreement. Notwithstanding such
vesting schedule, an Employee's right to his or her other Account balances shall
be nonforfeitable upon the attainment of Normal Retirement Age. Employee-derived
Account balances shall be nonforfeitable at all-times.
(b) In the case of a Participant who has five (5) or more consecutive one
(1) year Breaks in Service, all Years of Service after such Breaks in Service
will be disregarded for the purpose of vesting the Employer-derived Account
balance that accrued before such Breaks in Service. Such Participant's pre-break
Service will count in vesting the post-break Employer-derived Account balance
only if either:
(i) such Participant has any nonforfeitable interest in the Account
balance attributable to Employer Contributions at the time of Termination
of Employment; or
(ii) upon returning to Service the number of consecutive one (1)
year Breaks in Service is less than the number of Years of Service.
Separate Accounts will be maintained for the Participant's pre-break and
post-break Employer-derived Account balance. Both Accounts will share in the
earnings and losses of the Trust Fund.
9.02 Forfeitures. If a Participant incurs a Termination of Employment, the
non-vested portion of the Participant's Employer Account or Matching Account,
pursuant to Section 9.01, shall be forfeited on the earlier of the following
dates:
(a) the date the Participant receives a distribution of the entire
vested balance of such Accounts, pursuant to ARTICLE 10; or
(b) the date the Participant incurs his fifth consecutive one-year
Break in Service.
ARTICLE 10
PAYMENT OF BENEFITS
10.01 Payment of Benefits.
(a) The determination as to the value of an Account with respect to any
benefit hereunder to which a Participant, Retired Participant or Beneficiary
shall have become entitled shall be based on the balance in the Account on the
Allocation Date preceding the date benefits are paid or commence to be paid,
plus contributions allocated to his Account after such Allocation Date, less any
payments from such Account since such Allocation Date.
(b) Before payment of any benefit hereunder, written application therefor
shall be made by the Participant or Beneficiary, as the case may be, and
submitted to the Employer in such form and manner as the Employer shall
uniformly prescribe. Any payment made in accordance with the provisions of the
Plan to a Participant or Beneficiary, or to their legal representative shall, to
the extent of the method of computation as well as the amount thereof,
constitute full satisfaction of all claims hereunder against the Trustee, the
Administrator and the Employer, any of whom may require such Participant,
Beneficiary or legal representative, as a condition precedent to such payment,
to execute a receipt and release therefor in such form as shall be determined by
the Trustee, the Administrator or the Employer, as the case may be. In the event
any benefits are distributed in the form of annuity contracts, any such contract
or contracts shall be endorsed as nontransferable.
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<PAGE>
10.02 Time or Payment. Payment of benefits under the Plan shall commence in
accordance with the following:
(a) Payment of benefits provided in ARTICLE 7 or ARTICLE 8 shall
commence after the value of the Participant's Accounts shall have been
determined following the date the Participant is eligible to receive such
benefits.
(b) Payment of benefits provided in Section 7.03 or ARTICLE 9 shall
commence at the time selected by the Employer pursuant to Section 13(d) of
the Adoption Agreement.
(c) Notwithstanding the foregoing, unless the Participant elects
otherwise, distribution of benefits will begin no later than the 60th day
after the latest of the close of the Plan Year in which:
(i) the Participant attains age 65 (or Normal Retirement Age,
if earlier);
(ii) occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan; or,
(iii) occurs the Participant's Termination of Employment.
Notwithstanding the foregoing, the failure of a Participant and Spouse to
consent to a distribution while a benefit is immediately distributable, within
the meaning of Section 10.03, shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy this Section.
10.03 Restrictions on Immediate Distribution.
(a) If the value of a Participant's vested Account balance derived from
Employer and Employee Contributions exceeds (or at the time of any prior
distribution exceeded) $3,500, and the Account balance is immediately
distributable, the Participant and the Participant's Spouse (or where either the
Participant or the Spouse has died, the survivor) must consent to any
distribution of such Account balance. The consent of the Participant and the
Participant's Spouse shall be obtained in writing within the 90-day period
ending on the Annuity Starting Date. The Annuity Starting Date is the first day
of the first period for which an amount is paid as an annuity or any other form.
The Administrator shall notify the Participant and the Participant's Spouse of
the right to defer any distribution until the Participant's Account balance is
no longer immediately distributable. Such notification shall include a general
description of the material features, and an explanation of the relative values
of, the optional forms of benefit available under the Plan in a manner that
would satisfy the notice requirements of Section 417(a)(3) of the Code, and
shall be provided no less than 30 days and no more than 90 days prior to the
Annuity Starting Date.
(b) Notwithstanding the foregoing, only the Participant need consent to
the commencement of a distribution in the form of a Qualified Joint and Survivor
Annuity while the Account balance is immediately distributable. (Furthermore, if
payment in the form of a Qualified Joint and Survivor Annuity is not required
with respect to the Participant pursuant to Section 11.06 of the Plan, only the
Participant need consent to the distribution of an Account balance that is
immediately distributable.) Neither the consent of the Participant nor the
Participant's Spouse shall be required to the extent that a distribution is
required to satisfy Section 401(a)(9) or 415 of the Code. In addition, upon
termination of this Plan if the Plan does not offer an annuity option (purchased
from a commercial provider) and if the Employer or any Controlled Group Member
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 Account balance will, without the Participant's consent, be
distributed to the Participant. However, if any Controlled Group Member
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 Account balance will be transferred, without the Participant's
consent, to the other plan if the Participant does not consent to an immediate
distribution, or transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the Code)
within the same controlled group.
An Account balance is immediately distributable if any part of the Account
balance could be distributed to the Participant (or surviving Spouse) before the
Participant attains or would have attained if not deceased) the later of Normal
Retirement Age or age 62.
(c) For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first Plan Year
beginning after December 31, 1988, the Participant's vested Account balance
shall not include amounts attributable to accumulated Deductible Contributions
within the meaning of Section 72(o)(5)(B) of the Code.
10.04 Termination of Employment Prior to Early Retirement.
(a) If, at an Employee's Termination of Employment, the value of the
Employee's vested Account balance derived from Employer and Employee
Contributions is not greater than $3,500, the Employee will receive a
distribution of the value of the entire vested portion of such Account balance
and the nonvested
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portion will be treated as a Forfeiture. For purposes of this Section, if the
value of an Employee's vested Account balance is zero, the Employee shall be
deemed to have received a distribution of such vested Account balance. A
Participant's vested Account balance shall not include accumulated Deductible
Contributions within the meaning of Section 72(o)(5)(B) of the Code for Plan
Years beginning prior to January 1, 1989.
(b) If at an Employee's Termination of Employment, the Employee elects, in
accordance with the requirements of Section 10.03, to receive the value of his
vested Account balance, the nonvested portion will be treated as a Forfeiture.
If the Employee elects to have distributed less than the entire vested portion
of the Account balance derived from Employer Contributions, the part of the
nonvested portion that will be treated as a Forfeiture is the total nonvested
portion multiplied by a fraction, the numerator of which is the amount of the
distribution attributable to Employer Contributions and the denominator of which
is the total value of the vested Employer derived Account balance.
(c) If, an Employee receives a distribution pursuant to this Section and
the Employee resumes employment covered under this Plan, the Employee's
Employer-derived Account balance will be restored to the amount on the date of
distribution if the Employee repays to the Plan the full amount of the
distribution attributable to Employer Contributions before the earlier of 5
years after the first date on which the Participant is subsequently reemployed
by the Employer, or the date the Participant incurs 5 consecutive 1-year Breaks
in Service following the date of the distribution. If an Employee is deemed to
receive a distribution pursuant to this Section, and the Employee resumes
employment covered under this Plan before the date the Participant incurs 5
consecutive 1-year Breaks in Service, upon the reemployment of such Employee,
the Employer-derived Account balance of the Employee will be restored to the
amount on the date of such deemed contribution.
10.05 In-Service Withdrawals.
(a) In General. If elected by the Employer in Section 15 of the Adoption
Agreement, withdrawals from a Participant's Employer Account, Employee Account
or Rollover Account shall be permitted subject to the provisions of this Section
10.05 and Section 10.06. Withdrawals shall be made in such manner and form as
required by the Employer and shall be made in a uniform and non-discriminatory
manner. A Participant must obtain the consent of his or her Spouse, if any, in
order to make a withdrawal. Spousal consent shall be obtained no earlier than
the beginning of the 90-day period that ends on the date of the withdrawal. The
consent must be in writing and must be witnessed by a Plan representative or
notary public. Notwithstanding the foregoing, spousal consent shall not be
required in the case of a profit-sharing plan that meets the conditions
described in Section 11.06.
(b) Withdrawals from Employer Account (profit sharing plans only).
(i) If elected by the Employer in the Adoption Agreement, a
Participant may withdraw all or any part of his vested interest in his
Employer Account; provided, however, that such withdrawals shall be
allowed only:
(1) from monies that have been in the Plan for at least two
years, or
(2) if the Participant has financial need due to a hardship.
(ii) Hardship may include, but is not limited to, expenses incurred
by the Participant for:
(1) education, illness, medical treatment or hospitalization
for the Participant, his Spouse, their respective parents or
dependent children,
(2) the purchase of a home,
(3) a casualty loss, or
(4) an unexpected or unusual expense.
(iii) In the event a Participant withdraws funds from his Employer
Contributions Account which is less than 100 percent vested at the time of
withdrawal, the Committee shall establish a separate Account for the
Participant and the Participant's vested portion of the separate Account
shall not at any relevant time be less than an account ("X") determined by
the formula: X = P(AB + (R x D)) - (R x D). For purposes of applying the
formula, P is the vested percentage at the relevant time; D is the amount
of the withdrawal; R is the ratio of the Account balance at the relevant
time to the Account balance after withdrawal; and the relevant time is the
time at which, under the Plan, the vested percentage in the Account cannot
increase.
(c) Withdrawals from Employee Account or Rollover Account. If elected by
the Employer in the Adoption Agreement, a Participant may withdraw any part of
his Employee Account or Rollover Account. A withdrawal from a Rollover Account
made by a Participant who has not attained age fifty-nine and one-half (59-1/2)
or who is not subject to Disability may be subject to a federal income tax
penalty unless the withdrawal is rolled over to a qualified plan or Individual
Retirement Account within sixty (60) days of the date of the withdrawal.
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10.06 Distribution Requirements.
(a) Subject to ARTICLE 11, the requirements of this Section 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 apply to calendar years beginning after December 31, 1984.
(b) All distributions required under this Section shall be determined and
made in accordance with the Proposed Regulations under Section 401(a)(9) of the
Code, including the minimum distribution incidental benefit requirement of
Section 1.401(a)(9)-2 of the Proposed Regulations.
(c) Except as provided in subsection (d), the Participant shall, subject
to the requirements of ARTICLE 11, select the method of payment of benefits from
his Accounts. The optional forms of benefit provided by this Plan are as
follows: (i) a lump-sum distribution, (ii) substantially equal, periodic,
monthly, quarterly, semi-annual or annual installments over a period not
exceeding the life expectancy of the Participant or the life expectancy of the
Participant and his designated Beneficiary, or (iii) the purchase of a single
premium non-transferable annuity contract from a life insurance company, or (iv)
in the case of a profit-sharing plan, non-periodic installments to the extent
this method complies with Section 401(a)(9) of the Code and Regulations
thereunder; provided, however, that if the contract provides for continuance of
annuity payments after a Participant's death to a Beneficiary other than the
Participant's Spouse, the value of such death benefit shall be less than the
value of the Participant's annuity.
(d) In the case of a profit-sharing plan or distribution that meets the
safe-harbor requirements pursuant to Section 11.06, the optional forms of
benefit provided by this Plan are as follows: (i) a lump-sum distribution, (ii)
substantially equal, periodic, monthly, quarterly, semi-annual or annual
installments over a period not exceeding the life expectancy of the Participant
or the life expectancy of the Participant and his designated Beneficiary, or
(iii) non-periodic installments to the extent this method complies with Section
401(a)(9) of the Code and Regulations thereunder.
If the Participant elects to receive his benefits over a period in excess
of the Participant's then life expectancy, the then present value of the
payments to be made over the period, of the Participant's then life expectancy
must be more than 50 percent of the then present value of the total payments to
be made to the Participant and his Beneficiary.
10.07 Required Beginning Date. The entire interest of a participant must be
distributed or begin to be distributed no later than the Participant's Required
Beginning Date (defined below).
10.08 Limits on Distribution Periods. As of the first Distribution Calendar Year
(deemed below), distributions, if not made in a single-sum, may only be made
over one of the following periods (or a combination thereof):
(a) the life of the Participant,
(b) the life of the Participant and a designated Beneficiary,
(c) a period certain not extending beyond the life expectancy of the
Participant, or
(d) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated Beneficiary.
10.09 Determination or 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:
(a) Individual account.
(i) If a Participant's benefit is to be distributed over (1) a
period not extending beyond the Life Expectancy (defined below) of the
Participant or the joint life and last survivor expectancy of the
Participant and the Participant's designated Beneficiary or (2) 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.
(ii) 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.
(iii) 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 (1) the
Applicable Life Expectancy or (2) 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 subsection (i) as the
relevant
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divisor without regard to Regulations Section 1.401(a)(9)-2.
(iv) 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.
(b) Other forms. If the Participant's benefit is distributed in the form
of an annuity purchased from an insurance company, distributions thereunder
shall be made in accordance with the requirements of Section 401(a)(9) of the
Code and the proposed regulations thereunder.
10.10 Death Distribution Provisions.
(a) Distribution beginning before death. If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
(b) Distribution beginning after death. If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death except to the extent
that an election is made to receive distributions in accordance with (i) or (ii)
below:
(i) 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,
(ii) if the designated Beneficiary is the Participant's surviving
Spouse, the date distributions are required to begin in accordance with
(i) above shall not be earlier than the later of (1) December 31 of the
calendar year immediately following the calendar year in which the
Participant died and (2) December 31 of the calendar year in which the
Participant would have attained age 70-1/2.
If the Participant has not made an election pursuant to this subsection
(b) 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 (A) December
31 of the calendar year in which distributions would be required to begin under
this Section, or (B) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does not elect a method
of distribution, distribution of the Participant's entire interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
(c) For purposes of subsection (b), if the surviving Spouse dies after the
Participant, but before payments to such Spouse begin, the provisions of
subsection (b), with the exception of paragraph (ii) therein, shall be applied
as if the surviving Spouse were the Participant.
(d) For purposes of this Section 10.10, 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 this Section 10.10, distribution of a
Participant's interest is considered to begin on the Participant's Required
Beginning Date (or, if subsection (c) is applicable, the date distribution is
required to begin to the surviving Spouse pursuant to subsection (b)). If
distribution in the form of an annuity irrevocably commences to the Participant
before the Required Beginning Date, the date distribution is considered to begin
is the date distribution actually commences.
10.11 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 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 who is designated as the
Beneficiary under the Plan in accordance with Section 401(a)(9) of the Code and
the regulations thereunder.
(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
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distributions are required to begin pursuant to Section 10.10.
(d) Life Expectance 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 10.10(b)(ii)) 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.
(i) The account balance as of the last Allocation Date in the
calendar year immediately preceding the Distribution Calendar Year
(Allocation Calendar Year) increased by the amount of any Contributions or
Forfeitures allocated to the Account balance as of dates in the Allocation
Calendar Year after the Allocation Date and decreased by distributions
made in the Allocation Calendar Year after the Allocation Date.
(ii) Exception for second Distribution Calendar Year. For purposes
of paragraph (i), 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.
(f) Required Beginning Date.
(i) General rule. The Required Beginning Date of a Participant is
the first day of April of the calendar year following the calendar year in
which the Participant attains age 70-1/2.
(ii) Transitional rules. The Required Beginning Date of a
Participant who attains age 70-1/2 before January 1, 1988, shall be
determined in accordance with (1) or (2) below:
(1) Non-Five-Percent Owners. The Required Beginning Date of a
Participant who is not a Five-Percent Owner is the first day of
April of the calendar year following the calendar year in which the
later of retirement or attainment of age 70-1/2 occurs.
(2) Five-Percent Owners. The Required Beginning Date of a
Participant who is a Five-Percent Owner during any year beginning
after December 31, 1979, is the first day of April following the
later of:
(A) the calendar year in which the Participant attains
age 70-1/2, or
(B) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant becomes a
Five-Percent Owner, or the calendar year in which the
Participant retires.
The Required Beginning Date of a Participant who is not a
Five-Percent Owner who attains age 70-1/2 during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
(iii) Five-Percent Owner. A Participant is treated as a Five-Percent
Owner for purposes of this Section if such Participant is a Five-Percent
Owner as defined in Section 416(i) of the Code (determined in accordance
with Section 416 of the Code but without regard to whether the Plan is
Top-Heavy) at any time during the Plan Year ending with or within the
calendar year in which such Five-Percent Owner attains age 66-1/2 or any
subsequent Plan Year.
(iv) Once distributions have begun to a Five-Percent Owner under
this Section, they must continue to be distributed, even if the
Participant ceases to be a Five-Percent Owner in a subsequent year.
10.12 Transitional Rule.
(a) Notwithstanding the other requirements of this ARTICLE and subject to
the requirements of ARTICLE 11, distribution on behalf of any Employee,
including a Five-Percent Owner, may be made in accordance with all of the
following requirements (regardless of when such distribution commences):
(i) 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.
(ii) 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.
(iii) Such designation was in writing, was signed by the Employee or
the Beneficiary, and was made before January 1, 1984.
(iv) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
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(v) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will commence, the
period over which distributions will be made, and in the case of any
distribution upon the Employee's death, the Beneficiaries of the Employee
listed in order of priority.
(b) 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.
(c) 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)(i) and (v).
(d) If a designation is revoked any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code and the proposed regulations
thereunder. If a designation is revoke d subsequent to the date distributions
are required to begin, the trust must distribute by the end of the calendar year
following the calendar year in which the revocation occurs the total amount not
yet distributed which would have been required to have been distributed to
satisfy Section 401(a)(9) of the Code and the proposed regulations thereunder,
but for the Section 242(b)(2) election. For calendar years beginning after
December 31, 1988, such distributions must meet the minimum distribution
incidental benefit requirements in Section 1.401(a)(9)-2 of the proposed
regulations. Any changes in the designation will be considered to be a
revocation of the designation. However, the mere substitution or addition of
another Beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions are
to be made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount is
transferred or rolled over from one plan to another plan, the rules in Q&A J-2
and Q&A J-3 shall apply.
10.13 Failure to Locate. If the Participant or Beneficiary to whom benefits are
to be distributed cannot be located, and reasonable efforts have been made to
find him, including the sending of notification by certified or registered mail
to his last known address, the Administrator may direct the Trustee to treat the
benefits as a Forfeiture for the Plan Year in which the benefit is no longer
immediately distributable (after the Participant attains the later of (i) Normal
Retirement Age or (ii) age 62), provided, however, that if a benefit is
forfeited pursuant to this Section 10.13, such benefit will be reinstated if a
claim is made by the Participant or Beneficiary.
10.14 Premature Distributions. Any distribution to a Participant shall be
considered premature, and an additional income tax shall be imposed which is
equal to ten percent of the amount which is includible in the Participant's
gross income, unless the distribution is:
(a) made on or after the date on which the Participant attains age
59-1/2,
(b) made to a Beneficiary of the Participant after the Participant's
death and pursuant to ARTICLE 8;
(c) made to the Participant due to his Disability;
(d) made in a series of substantially equal periodic payments (not
less frequently than annually) for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of the
Participant and his Beneficiary after the Participant's Termination of
Employment;
(e) made on or after the date on which the Participant attains age
55 and his subsequent Termination of Employment;
(f) made to the Participant in an amount not in excess of the amount
allowable as a deduction for federal income tax purposes for amounts paid
during the taxable year for medical care (determined without regard to
whether the Participant itemizes deductions for such taxable year);
(g) made to an alternate payee pursuant to a qualified domestic
relations order as defined in Section 414(p) of the Code; or
(h) qualified and is rolled over or transferred to an individual
retirement account or qualified pension or profit-sharing plan pursuant to
Section 402 or 408 of the Code, whichever is applicable.
ARTICLE 11
JOINT AND SURVIVOR ANNUITY
REQUIREMENTS
11.01 Controlling Article. The provisions of this ARTICLE shall apply to any
Participant who is credited with at least one (1) Hour of Service on or after
August 23, 1984, and such other Participants as provided in Section 11.07. Any
annuity contract distributed herefrom must be nontransferable. The terms of any
annuity contract purchased and distributed by the Plan
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to a Participant or Spouse shall comply with the requirements of this Plan.
11.02 Qualified Joint and Survivor Annuity. Unless an optional form of benefit
is selected pursuant to a Qualified Election within the ninety (90) day period
ending on the Annuity Starting Date, a married Participant's vested Account
balances will be paid in the form of a Qualified Joint and Survivor Annuity and
an unmarried Participant's vested Account balances will be paid in the form of a
life annuity. The Participant may elect to have such annuity distributed upon
attainment of the Earliest Retirement Age under the Plan.
11.03 Qualified Pre-Retirement Survivor Annuity. Unless an optional form of
benefit has been selected within the Election Period pursuant to a Qualified
Election, if a Participant dies before the Annuity Starting Date then the
Participant's vested Account balances will 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. In lieu of the purchase of an annuity for the life of the surviving
Spouse, the surviving Spouse may elect to have the benefits paid by one of the
methods described in Section 10.06(c).
11.04 Definitions.
(a) Election Period: The period which begins on the first day of the Plan
Year in which the Participant attains age 35 and ends on the date of the
Participant's death. If a Participant's Termination of Employment occurs prior
to the first day of the Plan Year in which age 35 is attained, with respect to
the Account balances as of the date of separation, the election period shall
begin on the date of Termination.
Pre-age 35 waiver: A Participant who will not yet attain age 35 as of the
end of any current Plan Year may make a special Qualified Election to waive the
Qualified Pre-Retirement 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 35. Such election shall not be valid unless the
Participant receives a written explanation of the Qualified Pre-Retirement
Survivor Annuity in such terms as are comparable to the explanation required
under Section 11.05(a). Qualified Pre-Retirement Survivor Annuity coverage will
be automatically reinstated as of the first day of the Plan Year in which the
Participant attains age 35. Any new waiver on or after such date shall be
subject to the full requirements of this ARTICLE.
(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 Pre-Retirement Survivor Annuity may be made. Any waiver of a
Qualified Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor
Annuity shall not be effective unless: (i) the Participant's Spouse consents in
writing to the election; (ii) the election designates a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal consent); (iii) the
Spouse's consent acknowledges the effect of the election; and (iv) the Spouse's
consent is witnessed by a Plan representative or 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 this subsection (c) (or
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 this provision shall
be valid unless the Participant has received notice as provided in Section
11.05.
(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 50 percent and not more than 100 percent of the amount of the
annuity which is payable during the joint lives of the Participant and the
Spouse and which is the amount of benefit which can be purchased with the
Participant's vested Account balances. The percentage of the survivor annuity
under the Plan shall be 50% (unless a different percentage is elected by the
Employer in Section 19 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
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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 Account balances: The aggregate value of the Participant's
vested Account balances derived from Employer and Employee Contributions
(including rollovers), whether vested before or upon death, including the
proceeds of insurance contracts, if any, on the Participant's life. The
provisions of this Section 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.
11.05 Notice Requirements.
(a) In the case of a Qualified Joint and Survivor Annuity as described in
Section 11.02, the Administrator shall no less than 30 days and no more than 90
days prior to the Annuity Starting Date provide each Participant 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 Pre-Retirement Survivor Annuity as
described in Section 11.03, the Administrator shall provide each Participant,
within the applicable period for such Participant a written explanation of the
Qualified Pre-Retirement Survivor Annuity in such terms and in such manner as
would be comparable to the explanation provided for meeting the requirements of
subsection (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 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains age 35; (ii) a
reasonable period ending after the individual becomes a Participant; (iii) a
reasonable period ending after Section 417(a)(5) of the Code ceases to apply to
the Participant; (iv) a reasonable period ending after this Section 11.05 first
applies to the Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after Termination of Employment in
the case of a Participant whose Termination of Employment occurred before
attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period
ending after the enumerated events described in (ii), (iii) and (iv) is the end
of the two-year period beginning one year prior to the date the applicable event
occurs, and ending one year after that date. In the case of a Participant's
Termination of Employment before the Plan Year in which age 35 is attained,
notice shall be provided within the two-year period beginning one year prior to
Termination and ending one year after Termination. 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 11.05, the
respective notices prescribed by this Section need not be given to a Participant
if (i) the plan "fully subsidizes" the costs of a Qualified Joint and Survivor
Annuity or Qualified Pre-Retirement Survivor Annuity, and (II) the Plan does not
allow the Participant to waive the Qualified Joint and Survivor Annuity or
Qualified Pre-Retirement Survivor Annuity and does not allow a married
Participant to designate a nonspouse Beneficiary. For purposes of this
subsection (c), a plan fully subsidizes the costs of a benefit if no increase in
cost, or decrease in benefits to the Participant may result from the
Participant's failure to elect another benefit.
11.06 Safe Harbor Rules.
(a) This Section shall apply to a Participant in a profit-sharing plan,
and to any distribution, made on or after the first day of the first Plan Year
beginning after December 31, 1988, from or under a separate Account attributable
solely to accumulated Deductible Employee Contributions, and maintained on
behalf of a Participant in a money purchase pension plan, (including a target
benefit plan) if the following conditions are satisfied: (i) the Participant
does not or cannot elect payments in the form of a life annuity; and (ii) on the
death of a Participant, the Participant's vested Account balances will be paid
to the Participant's surviving Spouse, but if there is no surviving Spouse, or
if the surviving Spouse has consented in a manner conforming to a Qualified
Election, then to the Participant's designated Beneficiary. The surviving Spouse
may elect to have distribution of the vested Account balances commence within
the 90-day period following the date of the Participant's death. The Account
balances shall be adjusted for gains or losses occurring after the Participant's
death in accordance with the provisions of the Plan governing the adjustment of
Account balances for other types of distributions. This Section 11.06 shall not
be operative with respect to a Participant in a profit-sharing plan if the Plan
is a direct or indirect transferee of a defined benefit plan, money purchase
plan, a target benefit plan,
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stock bonus, or profit-sharing plan which is subject to the survivor annuity
requirements of Sections 401(a)(11) and 417 of the Code. If this Section 11.06
is operative, then the provisions of this ARTICLE, other than Section 11.07,
shall be inoperative.
(b) The Participant may waive the spousal death benefit described in this
Section at any time provided that no such waiver shall be effective unless it
satisfies the conditions of Section 11.04(c) (other than the notification
requirement referred to therein) that would apply to the Participant's waiver of
the Qualified Pre-Retirement Survivor Annuity.
(c) For purposes of this Section 11.06, vested Account balances shall mean
in the case of a money purchase pension plan or a target benefit plan, the
Participant's separate Account balances attributable solely to accumulated
Deductible Contributions. In the case of a profit-sharing plan, vested Account
balances shall have the same meaning as provided in Section 11.04(g).
11.07 Transitional Rules.
(a) Any living Participant not receiving benefits on August 23, 1984, who
would otherwise not receive the benefits prescribed by the previous Sections of
this ARTICLE must be given the opportunity to elect to have the prior Sections
of this ARTICLE apply if such Participant is credited with at least one (1) Hour
of Service under this Plan or the predecessor plan (if any) in a Plan Year
beginning on or after January 1, 1976, and such Participant had at least ten
(10) Years of Service at his Termination of Employment.
(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 (if any) 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 subsection (d).
(c) The respective opportunities to elect (as described in subsections (a)
and (b)) must be afforded to the appropriate Participants during the period
commencing on August 23, 1984, and ending on the date benefits would otherwise
commence to said Participants.
(d) Any Participant who has elected pursuant to subsection (b) and any
Participant who does not elect under subsection (a) or who meets the
requirements of subsection (a) except that such Participant does not have at
least ten (10) Years of Service at his Termination of Employment, shall have his
benefits distributed in accordance with all of the following requirements if
benefits would have been payable in the form of a life annuity:
(i) Automatic joint and survivor annuity. If benefits in the form of
a life annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or after his
Normal Retirement Age; or
(2) dies on or after Normal Retirement Age while still working
for the Employer, or
(3) begins to receive payment on or after the Qualified Early
Retirement Age; or
(4) at his Termination of Employment on or after attaining his
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.
(ii) Election of early survivor annuity. A Participant who is
employed after attaining the Qualified Early Retirement Age will be given
the opportunity to elect, during the Election Period, to have a survivor
annuity payable on death. If the Participant elects the survivor annuity,
payments under such annuity must not be less than the payments which would
have been made to the Spouse under the Qualified Joint and Survivor
Annuity if the Participant had retired on the day before his death. Any
election under this provision will be in writing and may be changed by the
Participant at any time. The Election Period begins on the later of (1)
the 90th day before the Participant attains the Qualified Early Retirement
Age, or (2) the date on which participation begins, and ends on the date
of the Participant's Termination of Employment.
(iii) For purposes of subsection (d):
(1) Qualified Early Retirement Age is the latest of:
(A) the earliest date under the Plan, on which the
Participant may elect to receive retirement benefits,
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(B) the first day of the 120th month beginning before
the Participant reaches Normal Retirement Age, or
(C) the date the Participant begins participation.
(2) Qualified Joint and Survivor Annuity is an annuity for the
life of the Participant with a survivor annuity for the life of the
Spouse as described in Section 11.04(d).
ARTICLE 12
LOANS
If permitted in Section 14 of the Adoption Agreement, the Employer, upon
written application of a Participant in such manner and form as required by the
Employer, may, in its sole discretion, authorize and direct the Trustee to make
a loan from the Trust Fund to the Participant. All loans shall comply with the
following terms and conditions:
(a) Loans shall be made available to all Participants and Beneficiaries on
a reasonably equivalent basis.
(b) Loans shall not be made available to Highly Compensated Employees in
an amount greater than the amount made available to other Employees.
(c) Loans must be adequately secured and bear a reasonable interest rate.
(d) No Participant loan shall exceed the amount of the Participant's
vested Account balance.
(e) A Participant must obtain the consent of his or her Spouse, if any, to
use of the Account balance as security for the loan. Spousal consent shall be
obtained no earlier than the beginning of the 90-day period that ends on the
date on which the loan is to be so secured. The consent must be in writing, must
acknowledge the effect of the loan, and must be witnessed by a Plan
representative or notary public. Such consent shall thereafter be binding with
respect to the consenting Spouse or any subsequent Spouse with respect to that
loan. A new consent shall be required if the Account balance is used for
renegotiation, extension, renewal, or other revision of the loan.
Notwithstanding the foregoing, this subsection (e) shall not apply in the case
of a profit-sharing plan that meets the conditions described in Section 11.06.
(f) In the event of default, foreclosure on the note and attachment of
security will not occur until a distributable event occurs in the Plan.
(g) No loans will be made to any shareholder-employee or Owner-Employee.
For purposes of this requirement, a shareholder-employee means an employee or
officer of an electing small business (Subchapter 5) 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-percent of
the outstanding stock of the corporation.
If a valid spousal consent has been obtained in accordance with (e), then,
notwithstanding any other provision of this Plan, the portion of the
Participant's vested Account balance used as a security interest held by the
Plan by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the Account balance payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's vested Account
balance (determined without regard to the preceding sentence) is payable to the
surviving Spouse, then the Account balance shall be adjusted by first reducing
the vested Account balance by the amount of the security used as repayment of
the loan, and then determining the benefit payable to the surviving Spouse.
No loan to any Participant or Beneficiary can be made to the extent that
such loan when added to the outstanding balance of all other loans to the
Participant or Beneficiary would exceed the lesser of (i) $50,000 reduced by the
excess (if any) of the highest outstanding balance of loans during the one year
period ending on the day before the loan is made, over the outstanding balance
of loans from the Plan on the date the loan is made, or (ii) one-half the
present value of the nonforfeitable accrued benefit of the Participant or, if
greater, the total accrued benefit up to $10,000. For the purpose of the above
limitation, all loans from all plans of the Employer and other Controlled Group
Members are aggregated. Furthermore, any loan shall by its terms require that
repayment (principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond five years from
the date of the loan, unless such loan is used to acquire a dwelling unit which
within a reasonable time (determined at the time the loan is made) will be used
as the principal residence of the Participant. An assignment or pledge of any
portion of the Participant's interest in the Plan and a loan, pledge, or
assignment with respect to any insurance contract purchased under the Plan, will
be treated as a loan under this paragraph.
ARTICLE 13
TOP-HEAVY PLANS
If the Plan is or becomes Top-Heavy in any Plan Year beginning after
December 31, 1983, the provisions of this ARTICLE 13 will supersede any
conflicting provisions in the Plan or Adoption Agreement.
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13.01 Definitions.
(a) Key Employee: Any Employee or former Employee (and the Beneficiaries
of such Employee) who at any time during the determination period was (i) an
officer of the Employer if such individual's Compensation exceeds fifty (50)
percent of the dollar limitation under Section 415(b)(1)(A) of the Code, (ii) an
owner (or considered an owner under Section 318 of the Code) of one of the ten
largest interests in the Employer if such individual's Compensation exceeds the
dollar limitation under Section 415(c) (1)(A) of the Code, (iii) a Five-Percent
Owner, or (iv) a one-percent owner of the Employer who has Compensation of more
than $150,000. For purposes of this subsection (a), 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 [25, 402(a)(8), 402(h)
or 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 will be made in accordance with Section 416(i)(1) of the
Code and the regulations thereunder.
(b) Top-Heavy Plans: For any Plan Year beginning after December 31, 1983,
this Plan is Top-Heavy if any of the following conditions exists:
(i) 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.
(ii) If this Plan is a part of a Required Aggregation Group of plans
but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for
the group of plans exceeds sixty (60) percent.
(iii) If this Plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio
for the Permissive Aggregation Group exceeds sixty (60) percent.
(c) Top-Heavy Ratio:
(i) 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 plans which during the five (5) year period
ending on the Determination Date(s) 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 account balances of all Key Employees as of the
Determination Date(s) (including any part of any account balance
distributed in the five (5) year period ending on the Determination
Date(s)), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5)
year period ending on the Determination Date(s)), 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.
(ii) 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 Date(s) 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 the account balances under the aggregate defined
contribution plan or plans for all Key Employees determined in accordance
with (i), and the present value of accrued benefits under the aggregated
defined benefit plan or plans for all Key Employees as of the
Determination Date(s), and the denominator of which is the sum of the
account balances under the aggregated defined contribution plan or plans
for all Participants, determined in accordance with (i), and the present
value of accrued benefits under the defined benefit plan or plans for all
Participants as of the Determination Date(s), 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.
(iii) For purposes of (i) and (ii), 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 (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 (1) who is not a Key Employee but who
was a Key Employee in a prior year, or (2) who has not been credited with
at least one 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
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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
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 (A) the method, if any, that uniformly applies for
accrual purposes under all defined benefit plans maintained by the
Employer, or (B) 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: (i) 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 has terminated), and
(ii) any other qualified plan of the Employer which enables a Plan described in
(i) to meet the requirements of Section 401(a)(4) or 410 of the Code.
(f) Determination Date: For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan Year, the last
day of that Plan Year.
(g) Valuation Date: The date elected by the Employer in Section 16 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 in Section 16 of the Adoption Agreement.
(i) Super Top Heavy Plan: The Plan if it would be a Top Heavy Plan under
Section 13.01(b) hereof if the words "ninety (90) percent" were substituted for
the words "sixty (60) percent" in Section 13.01(b) hereof
13.02 Minimum Allocation.
(a) Except as otherwise provided in subsections (b) and (c), the Employer
Contributions and Forfeitures allocated on behalf of any Participant who is not
a Key Employee shall not be less than the lesser of three percent of such
Participant's Compensation or in the case where the Employer has no defined
benefit plan which designates this Plan to satisfy Section 401 of the Code, the
largest percentage of Employer Contributions and Forfeitures, as a percentage of
the first $200,000 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 Plan Year because of (i) the Participant's failure to
complete 1,000 Hours of Service (or any equivalent provided in the Plan), or
(ii) in the case of a CODA, the Participant's failure to have Elective Deferrals
made to the Plan on his behalf, or (iii) Compensation less than a stated amount.
(b) For purposes of computing the minimum allocation, Compensation shall
mean compensation as defined in Section 2.13. If the Plan is a non-standardized
plan, Compensation is to be computed without reference to the exclusions
otherwise permitted in Section 9 of the Adoption Agreement.
(c) The provision in subsection (a) shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
(d) The provision in subsection (a) 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 Section 16 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.
(e) The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b) of the Code) may not be forfeited under
Section 411(a)(3)(B) or (D) of the Code. For each Plan Year in which the Paired
Plans are Top-Heavy, the Employer will provide a minimum contribution equal to
three (3) percent of total Compensation for each non-Key Employee who is
entitled to a minimum contribution under Paired Plans #001 or #003.
13.03 Minimum Vesting Schedule. For any Plan Year in which this Plan is
Top-Heavy, one of the minimum vesting schedules as elected by the Employer in
Section 16 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 Top-Heavy. Further, no decrease in a
Participant's nonforfeitable
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percentage may occur in the event the Plan's status as Top-Heavy changes for any
Plan Year. However, this Section does not apply to the Account balances of any
Employee who does not have an Hour of Service after the Plan has initially
become Top-Heavy and such Employee's Account balance attributable to Employer
Contributions and Forfeitures will be determined without regard to this Section
13.03.
13.04 Special Limitations on Top Heavy Allocations in Multiple Plans: "Code
Section 4 15(e) Buy-Back". If for any Plan Year the Plan is a Top Heavy Plan,
and the Employer maintains or has ever maintained a qualified defined benefit
pension plan, then in applying the limitations of Section (pound)07 the words
"100 percent" shall be substituted for the words "125 percent" in both the
Defined Benefit Fraction and the Defined Contribution Fraction, as such terms
are defined in Section 5.07, unless the Employer elects to "buy-back" the use of
the "125 percent" limit with respect to any Plan Year in which the Plan is not
Super Top Heavy by providing minimum benefits in excess of those otherwise
required pursuant to the provisions of Section 13.02. An Employer accomplishes
this "Code Section 415(e) Buy-Back" by electing to retain the use of the "125
percent" limit in Section 16(c)(i) of a non-standardized Adoption Agreement or
Section 16(b)(i) of a standardized Adoption Agreement and by agreeing to provide
the required increased minimum benefits according to one (1) of the following
methods.
(a) If the Plan is a Paired Plan, then the minimum accrual provisions of
Sections 14.03 shall apply automatically.
(b) If the Plan is not a Paired Plan, the Employer may nevertheless elect
to provide the minimum accruals set out in Section 14.03 by electing in Section
16(c)(ii) of a non-standardized Adoption Agreement or Section 16(b)(ii) of a
standardized Adoption Agreement to be subject to the Paired Plan provisions of
ARTICLE 14.
(c) If the Plan is not a Paired Plan, the Employer may elect (by setting
out overriding provisions in Section 16(c)(ii) of a non-standardized Adoption
Agreement or Section 16(b)(ii) of a standardized Adoption Agreement) to provide
the minimum accruals required by Section 416(h)(2) of the Code by some method
other than that set out in Section 14.03.
If the Plan is one (1) of multiple qualified plans maintained by the
Employer and is not a Paired Plan, nor is to be considered to be a Paired Plan,
and the Employer has not elected to utilize the Code Section 415(e) Buy-Back
provisions, then the Employer shall provide (by setting out overriding
provisions in Section 16(c)(ii) of a non-standardized Adoption Agreement or
Section 16(b)(ii) of a standardized Adoption Agreement) minimum benefit accruals
pursuant to Section 416(f) of the Code.
ARTICLE 14
PAIRED PLANS
14.01 Paired Plans. The provisions of this ARTICLE shall apply if either:
(a) this Plan is a Paired Plan or,
(b) this Plan is not a Paired Plan, but is to be considered to be subject
to the Paired Plan provisions of this ARTICLE under Section 16(c)(ii) of the
Adoption Agreement.
Under this ARTICLE, Sections 14.03 and 14.04 shall apply with respect to
Plan Years in which the Plan is considered as paired hereunder with a defined
benefit pension plan maintained by the Employer, while Sections 14.05 and 14.06
shall apply with respect to Plan Years in which the Plan is paired, or
considered as paired hereunder with another defined contribution plan maintained
by the Employer, whether or not the Plan is also considered as paired hereunder
with a defined benefit pension plan.
With respect to such Paired Plans, the term "Compensation" shall have the
meaning set forth in Section 415(c)(3) of the Code.
14.02 Multiple Benefits from Super Top Heavy Paired Plans. In any Plan Year in
which the Plan is considered to be a Paired Plan with a defined benefit pension
plan, and the Plan is or becomes a Super Top Heavy Plan, as defined in Section
13.01(i), then the "Code Section 415(e) Buy-Back", as that term is defined in
Section 13.04 hereof, shall not be available.
14.03 Minimum Defined Contribution Plan Allocations Under Top Heavy Paired Plans
with Code Section 4 15(e) Buy-Back. In any Plan Year in which the Plan is
considered to be a Paired Plan (or has elected to be treated as a Paired Plan)
with a qualified defined benefit pension plan, when the Plans are considered Top
Heavy Plans, but are not Super Top Heavy Plans, and the Employer has elected to
utilize the Code Section 415(e) Buy-Back, minimum nonintegrated allocations
shall be made under this Section. Each Employee who participates in this Paired
Plan and who also participates in the defined benefit pension plan considered to
be a Paired Plan shall receive a minimum nonintegrated allocation of seven and
one-half percent (7-1/2%) of Compensation under Section 13.02 of this Paired
Plan instead of three percent (3%) of Compensation. Any Employee who is a
Participant otherwise entitled to receive top heavy allocations from this Paired
Plan, but who is not entitled to receive a minimum
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benefit from the defined benefit pension plan considered to be Paired Plan,
shall receive a minimum nonintegrated allocation of four percent (4%) of
Compensation under Section 13.02 of this Paired Plan instead of three percent
(3%) of Compensation. Any Employee who is a Participant not entitled to receive
top heavy allocations from this Paired Plan, but who is entitled to receive a
minimum benefit from the defined benefit pension plan considered to be a Paired
Plan, shall receive a minimum non-integrated accrued benefit of 3% of the
highest five (5) consecutive year average compensation (not to exceed a
cumulative accrued benefit of thirty percent (30%)).
14.04 Minimum Defined Contribution Plan Allocations Under Super Top Heavy Paired
Plans or Without Code Section 415(e) Buy-Back. In any Plan Year in which the
Plan is considered to be a Paired Plan (or has elected to be treated as a Paired
Plan) with a qualified defined benefit pension plan, if the Paired Plans are
considered Super Top Heavy or if the Employer has elected not to utilize the
Code Section 415(e) Buy-Back, then minimum nonintegrated allocations shall be
made under this Section. Each Employee who is a Participant in this Paired Plan
and who also participates in the defined benefit pension Paired Plan shall
receive a minimum nonintegrated allocation of five percent (5%) of such
Participant's Compensation under Section 13.02 of this Paired Plan instead of
three percent (3%) of Compensation. Any Employee who is a Participant otherwise
entitled to receive top heavy allocations from this Paired Plan, but who does
not participate in the defined benefit pension Paired Plan, shall receive a
minimum nonintegrated allocation of three percent (3%) of Compensation under
13.02 of this Paired Plan.
The minimum nonintegrated allocations provided hereunder shall be made
without reference to, or limitation by, any lesser Employer contribution having
been allocated on behalf of any Key Employee in the Plan.
14.05 Defined Contribution Paired Plan Prevention of Duplication of Allocations.
In any Plan Year in which the Plan is a Paired Plan with a defined contribution
plan, the Employer shall provide each Employee who is a Participant in this
Paired Plan and who participates in the other defined contribution Paired Plan,
the minimum nonintegrated allocation specified under this ARTICLE only in that
Paired Plan indicated in Section 16(c)(iii) of the Adoption Agreement.
14.06 Forfeitures in Profit-Sharing Plans. If this Plan is a profit-sharing
Paired Plan, then the minimum nonintegrated allocations provided by this Plan
under this ARTICLE shall include in their computation Forfeitures.
14.07 Integrated Paired Plans. If the Paired Plans involve integration with
Social Security, then only one (1) Paired Plan shall be integrated.
ARTICLE 15
PLAN ADMINISTRATION
15.01 Administrator. The Employer shall be the Administrator of the Plan and
shall have the sole power, duty and responsibility of directing the
administration of the Plan in accordance with the provisions herein set forth.
Except with respect to rights and powers expressly or impliedly reserved in the
Sponsor to amend the Plan in order to maintain its status as a Plan qualified
and approved under the Code, and to assist in its interpretation and
administration, the Employer shall have the sole and absolute right and power to
construe and interpret the provisions of the Plan and administer it for the best
interest of its Employees including, but not limited to, the following powers
and duties:
(a) to construe any ambiguity and interpret any provision of the
Plan or supply any omission or reconcile any inconsistencies in such
manner as it deems proper;
(b) to determine eligibility to become a Participant in the Plan in
accordance with its terms;
(c) to decide all questions of eligibility for, and determine the
amount, manner, and time of payment of any benefits hereunder, and to
afford any person dissatisfied with such decision or determination, upon
written notice thereof, the right to a full and fair hearing thereon;
(d) to establish uniform rules and procedures to be followed by
Participants and Beneficiaries in filing applications for benefits, in
furnishing and verifying proofs necessary to determine age, and in any
other matters required to administer the Plan;
(e) to adopt such reasonable accounting methods as it deems
necessary or desirable, to receive and review the annual allocation report
on the Plan and to bring up to date the balances of all Accounts;
(f) to receive and review reports of the financial condition and of
the receipts and disbursements of the Trust Fund from the Trustee, and to
determine and communicate to the Trustee the long-term and short-term
financial goals of the Plan;
(g) to file such reports and statements, and to make such
disclosures as required by law, and
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(h) to furnish to Participants and Beneficiaries such information
and statements, with respect to the Plan and their individual interests
therein as required by law, and any additional information as deemed to be
appropriate by the Employer.
All directions by the Employer shall be conclusive on all parties
concerned; including the Trustee, and all decisions of the Employer as to the
facts of any case and the meaning, intent, or proper construction of any
provision of the Plan, or as to any rule or regulation in its application to any
case shall be final and conclusive; provided, however, that all rules and
decisions of the Employer shall be uniformly and consistently applied to all
Employees in similar circumstances, and the Employer shall have no power to
administratively add to, subtract from or modify any of the terms of the Plan,
or to change, add to or subtract from any benefits provided by the Plan, or to
waive or fail to apply any requirements of eligibility for participation or for
benefits under the Plan.
15.02 Claims Procedure. If, upon application for benefits made by a Participant
or Beneficiary pursuant to Section 10.01(b), the Employer shall determine that
benefits applied for shall be denied either in whole or in part, the following
provisions shall govern:
(a) Notice of Denial. The Employer shall, upon its denial of a claim
for benefits under the Plan, provide the applicant with written notice of
such denial setting forth:
(i) the specific reason or reasons for the denial;
(ii) specific reference to pertinent Plan provisions upon
which the denial is based;
(iii) material claimant a description of any additional or
information necessary for the to perfect the claim, and
(iv) an explanation of the claimant's rights with respect to
the claims review procedure as provided in subsection (b) of this
Section.
(b) Claims Review. Every claimant with respect to whom a claim is
denied shall; upon written notice of such denial, have the right to:
(i) request a review of the denial of benefits by written
notice delivered to the Employer,
(ii) review pertinent documents, and
(iii) submit issues and comments in writing.
(c) Decision on Review. The Employer shall upon receipt of a request
for review submitted by the claimant in accordance with subsection (b),
appoint a committee for the purpose of conducting such review, and provide
the claimant with written notice of the decision reached by the said
Committee setting forth the specific reasons for the decision and specific
references to the provisions of the Plan upon which the decision is based.
Such notice shall be delivered to the claimant not later than 60 days
following the receipt of the claimant's request, or, in the event that the
Employer shall determine that a hearing is needed no later than 120 days
following the receipt of such request.
15.03 Records. All acts, determinations and correspondence with respect to the
Plan shall be duly recorded and all such records, together with such other
documents, including the Plan and all amendments thereto, if any, pertinent to
the Plan or the administration thereof, shall be preserved in the custody of the
Employer and shall at all reasonable times be made available to Participants and
Beneficiaries for examination.
15.04 Delegation of Authority. The administrative duties and responsibilities of
the Employer as set forth in this ARTICLE may be delegated by the Employer in
whatever manner it chooses, in whole or in part, to either a Plan Committee
consisting of such persons as the Employer shall select or an Administrator. The
Employer shall certify to the Trustee in writing as to the membership and extent
of authority of such Committee, or the identity and extent of authority of such
Administrator, and any changes relative thereto as may occur from time to time.
The authority of either the Committee or the Administrator shall be deemed to be
that of the Employer to the extent so certified by the Employer. The Trustee
shall be entitled to rely on the last such certification received and to
continue to rely thereon until subsequent written certification to the contrary
is received from the Employer. The Employer shall indemnify and save harmless
either the members of the Committee, and each of them, or the Administrator from
any liability arising from the effects and consequences of their acts, omissions
and conduct in their official capacity with respect to the Plan and the
administration thereof except to the extent that such liability shall result
from their own willful misconduct or gross negligence.
The Employer, or either the Plan Committee or the, Administrator to which
it has delegated its duties and responsibilities hereunder, may employ such
competent agent or agents as it may deem appropriate or desirable to perform
such ministerial duties or consultative or other services as the Employer or
either its Committee or Administrator may in its discretion deem necessary to
facilitate the efficient and proper administration of the Plan. The Employer and
either its Committee or Administrator shall be entitled to rely upon all
reports,
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advice and information furnished by such agent or agents, and all action taken
or suffered by them in good faith in reliance thereon shall be conclusive upon
all agents, Participants, Retired Participants, Beneficiaries and other persons
interested in the Plan.
15.05 Correction of Errors. If any change in records or error results in any
Participant, Retired Participant or Beneficiary receiving from the Plan more or
less than he would have been entitled to receive had the records been correct or
had the error not been made, the Employer, upon discovery of such error, shall
correct the error by adjusting, as far as is practicable, the payments in such a
manner that the benefits to which such person was correctly entitled shall be
paid.
15.06 Domestic Relations Orders.
(a) If the Trustee, the Employer, or the Committee receives a domestic
relations order that purports to require the payment of a Participant's benefits
to a person other than the Participant, the Committee shall take the following
steps:
(i) If benefits are in pay status, the Committee shall direct the
Trustee to account separately for the amounts that will be payable to the
Alternate Payees (defined below) if the order is a Qualified Domestic
Relations Order (defined below).
(ii) The Committee shall promptly notify the named Participant and
any Alternate Payees of the receipt of the domestic relations order and of
the Committee's procedures for determining if the order is a Qualified
Domestic Relations Order.
(iii) The Committee shall determine whether the order is a Qualified
Domestic Relations Order under the provisions of Section 414(p) of the
Code.
(iv) The Committee shall notify the named Participant and any
Alternate Payees of its determination as to whether the order meets the
requirements of a Qualified Domestic Relations Order.
(b) If, within 18 months beginning on the date the first payment would be
made under the domestic relations order (the "18-Month Period 9, the order is
determined to be a Qualified Domestic Relations Order, the Committee shall
direct the Trustee to pay the specified amounts to the persons entitled to
receive the amounts pursuant to the order.
(c) If, within the 18-Month Period (i) the order is determined not to be a
Qualified Domestic Relations Order or (ii) the issue as to whether the order is
a Qualified Domestic Relations Order has not been resolved, the Committee shall
direct the Trustee to pay the amounts (and any interest thereon) to the
Participant or other person who would have been entitled to such amounts if
there had been no order.
(d) If an order is determined to be a Qualified Domestic Relations Order
after the end of the 18-Month Period, the determination shall be applied
prospectively only.
(e) A Qualified Domestic Relation Order shall not require:
(i) the Plan to provide any type or form of benefits, or any option,
not otherwise provided under the Plan, or
(ii) the payment of benefits to an Alternate Payee which are
required to be paid to another Alternate Payee under another order
previously determined to be a Qualified Domestic Relations Order.
(f) In the case of any payment before a Participant has terminated
employment, a Qualified Domestic Relations Order shall not be treated as failing
to meet the requirements of subparagraph (e)(i) above solely because such order
requires that payment of benefits be made to an Alternate Payee:
(i) on or after the date on which the Participant attains (or would
have attained) the earliest retirement date, or
(ii) as if the Participant had retired on the date on which such
payment is to begin under such order (but taking into account only the
value of the Participant's Account on such date).
For this purpose, "earliest retirement date" shall mean the earlier of:
(1) the date on which the Participant is entitled to a distribution under the
Plan, or (2) the later of the date the Participant attains age fifty (50), or
the earliest date on which the Participant could begin receiving benefits under
the Plan if he terminated employment.
(g) To the extent provided in a Qualified Domestic Relations Order, the
former spouse of a Participant shall be treated as a Surviving Spouse for
purposes of Sections 401(a)(11) and 417 of the Code.
(h) For the purposes of this Section, the following terms shall have the
following definitions:
(i) Alternate Payee. Any spouse, former spouse, child or other
dependent of a Participant who is recognized by a domestic relations order
as having a right to all or a portion of the benefits payable under the
Plan to the Participant.
(ii) Qualified Domestic Relations Order. Any domestic relations
order or judgment that meets the
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requirements set forth in Section 414(p) of the Code.
(i) In addition to the right to all or a portion of the benefits payable
under the Plan to a Participant, an Alternate Payee shall have the same option
of obtaining a loan from the Plan, pursuant to ARTICLE 12, or directing the
investment of his Account, pursuant to Section 5.08, if such options are
available to Participants.
ARTICLE 16
THE TRUST
16.01 The Trust. The Employer which executed an Adoption Agreement and thus
adopted the Plan, thereby established a Trust. By execution of the Adoption
Agreement, the Trustee accepted the position of trustee thereof; and all the
duties and responsibilities of that position. The Trust Fund shall consist of
such cash and other property as shall be paid or delivered from time to tune by
the Employer to the Trustee, together with the earnings and profits thereon. The
Trust Fund shall be held, managed and administered by the Trustee in trust
without distinction between principal and income in accordance with the
provisions of this Plan, but shall be accounted for separately by the Trustee as
to each Employer which adopts the Plan.
16.02 Contributions to Trustee. Contributions shall be paid to the Trustee in
accordance with the terms of the Plan. It shall be the duty of the Trustee to
receive, hold, invest, reinvest and distribute the Trust Fund in accordance with
the provisions of this Plan. The Trustee shall be under no duty to enforce
payment of any contribution to the Trust Fund and shall not be responsible for
the adequacy of the Trust Fund to meet and discharge any liabilities under the
Plan.
16.03 Investment Powers. The Trustee, upon its own discretion with respect to
Trust Fund investments, shall, except as otherwise restricted by law and the
provisions hereof and except as provided in Section 16.04, be authorized and
empowered:
(a) to invest and reinvest the principal and income of the Trust
Fund in any and all stocks, bonds, mutual funds, notes, debentures,
mortgages, equipment trust certificates, insurance company contracts and
in such other property, real or personal, investments and securities of
any kind, class or character, including investments and qualifying
securities or realty of the Employer, whether income-producing or not,
units of any commingled, common pooled or mutual trust fund described in
this Section, including securities issued by the Trustee (if the option
under Section 5.08 is available to a Participant), savings accounts,
certificates of deposit and time deposits of the Trustee or other
institutions and securities as the Trustee may at some future date be
authorized to make available to the Trust customer by the Securities and
Exchange Commissioner within the guidelines, policies, procedures or
approvals of the Comptroller of the Currency or the Federal Deposit
Insurance Corporation; and in making such investments and reinvestments,
the Trustee shall not be restricted to properties and securities
authorized for investment by Trustees or other fiduciaries by the
applicable statutory legal list of such properties and securities;
(b) to keep such portion of the Trust Fund in cash or cash balances
as deemed to be in the best interest of the Trust;
(c) to sell, exchange, convey, transfer or otherwise dispose of any
property held by it, by private contract or at public auction;
(d) to vote or to refrain from voting upon any stocks, bonds or
other securities; to give general or special proxies or powers of attorney
with or without power of substitution; to exercise any conversion
privileges, subscription rights, or other options and to make any payments
incidental thereto; to consent to or otherwise participate in corporate
reorganizations or other changes affecting corporate securities and to
delegate discretionary powers and to pay any assessments or charges in
connection therewith, and generally to exercise any of the powers of any
owner with respect to stocks, bonds, securities or other property held in
the Fund;
(e) to make, execute, acknowledge and deliver any and all documents
of transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(f) to register any investment of the Trust Fund in its own name or
in the name of a nominee or nominees and to hold any investment in bearer
form, but the books and records of the Trustee shall at all times show
that all such investments are part of the Trust Fund;
(g) to employ suitable agents and counsel, and to pay their
reasonable expenses and compensation;
(h) to borrow money from time to time for the purposes of the Trust
on such terms and conditions as may be deemed to be advisable, and for any
sum so borrowed to issue its promissory note as Trustee and to secure the
repayment thereof by pledging all of any part of the Fund; and
(i) to make loans to Participants pursuant to ARTICLE 12 of the Plan
and Section 14 of the Adoption Agreement.
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Notwithstanding the foregoing, the Trustee is specifically authorized to
invest the assets of the Trust Fund in any and all funds, whether or not
presently in existence, which are, or shall be, maintained by the Trustee,
including, without limiting the generality of the foregoing, mutual commingled,
pooled or common Trust Funds, the terms and conditions of which are, and shall
be on a continuing basis, hereby incorporated by reference as if fully set forth
herein. Further provided, however, that notwithstanding any provision of the
Plan to the contrary, no Trust Fund assets attributable to individual retirement
accounts, if any, shall be invested in life insurance contracts, and no Trust
Fund assets attributable to either individual retirement accounts or
individually directed account amounts, if any, shall be invested in
"collectibles" (as defined by Section 408(n) of the Code).
16.04 Appointment of Investment Manager. The Employer, if it has so elected in
Section 17(a) of the Adoption Agreement, may at any time and from time to time
appoint in writing an Investment Manager or Managers to manage all or any
portion of the assets of the Plan, and may revoke any such appointment
previously made. For purposes hereof, the Employer shall mean only the entity
executing the Adoption Agreement as "Employer," but shall not mean any
organization executing the Plan as an "Adopting Employer." While such an
appointment is in effect, the relations among the Administrator, Employer,
Investment Manager and Trustee shall be governed by the following provisions:
(a) The Employer shall certify to the Trustee the name or names of
any Investment Manager appointed by it to manage the investment or
reinvestment of all or any portion of the Trust Fund. Such certificate
shall also state that the Investment Manager has acknowledged his
fiduciary status with respect to the Plan in writing.
(b) The Trustee shall segregate any portion of the Trust Fund held
by it which will be subject to the management of an Investment Manager
into one or more separate accounts to be known as investment manager
accounts and shall charge any expenses related to investments directed by
an Investment Manager against such accounts. Each Investment Manager shall
have the right and power to manage the investment and reinvestment of his
investment manager account. The Trustee shall follow the directions of the
Investment Manager with respect to the account of such Investment Manager
and shall not be obligated to invest or otherwise manage any such
investment manager account. All directions given by an Investment Manager
to the Trustee shall be in writing, signed by an officer or a partner of
the Investment Manager or by such other person or persons as may be
designated by such officer or partner. Subject to such conditions as may
be approved by the Employer and Trustee, the Investment Manager may place
direct orders for the purchase or sale of securities or other property for
its investment manager account, provided, however, that, in the case of an
Investment Manager as defined in Section 235(a), the Trustee shall
nevertheless retain custody of the assets comprising said account. In the
case of an Investment Manager defined in Section 2.35%, the Investment
Manager may be permitted to retain custody of the assets comprising said
account.
(c) If the Employer, by written notice to the Trustee, terminates
the authority of an Investment Manager but does not appoint a successor to
manage the investment and reinvestment of the account of such Investment
Manager, the portion of the fund then held in such investment manager
account shall return to the unsegregated portion of the Trust Fund and the
Trustee shall have authority to manage the investment and reinvestment of
such account. Until receipt of a written notice terminating the authority
of an Investment Manager, the Trustee shall be fully protected in relying
upon the latest prior written notice of appointment of an Investment
Manager.
(d) Any Investment Manager may, in writing, authorize the Trustee to
invest any portion of his investment manager account in short-term
investments. The Trustee, in its sole discretion, may make such
investments either directly or by investment collectively with other
assets, including but not limited to investment in any common, commingled,
mutual or pooled trust fund established and maintained by the Trustee for
the investment of funds administered in a fiduciary capacity.
(e) The Trustee shall not be responsible for any loss caused by its
acting upon any notice, direction or certification of any Investment
Manager appointed by the Employer which the Trustee reasonably believes to
be genuine. The Trustee shall have no duty to question any direction,
action or inaction of any Investment Manager taken as provided in this
Section 16.04. The Trustee shall have no duty to review the securities or
other property held in any investment manager account or to make any
suggestions to any Investment Manager or to the Employer with respect to
the investment, reinvestment, or disposition of investments in any
investment manager account. The Trustee shall not be responsible for the
results arising from the Trustee's compliance with the instructions of any
Investment Manager.
(f) The Trustee shall not be responsible for determining the
reasonableness of any compensa-
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tion paid to or agreed to be paid to an Investment Manager. Any such
compensation to an Investment Manager shall be paid from the Trust Fund,
if the Administrator so directs.
16.05 Employer-Directed Investments. Notwithstanding any other provision of this
Plan except Section 5.08, the Employer shall have the right to direct in writing
the Trustee from time to time to invest the assets of the Fund in such
securities or other investments as the Employer shall specify in its direction,
which may include, but shall not be limited to, specifying the percentage of
assets to be invested in and among the trust funds authorized for investment
under Section 16.03 hereof. Such direction shall be made in such form and manner
as shall be required by the Trustee of the individual or individuals duly
authorized by the Employer.
Directed investments shall be made by the Trustee as soon as reasonably
possible after actual receipt of such direction; provided, however, the Trustee
shall not be liable for losses due to reasonable delay in the execution of such
directions. Notwithstanding the foregoing, in no event shall a directed
investment be permitted in such an investment that the Trustee, in its sole
discretion, deems itself unable to administer efficiently, properly and
conveniently with respect thereto; provided, however, that the Trustee's
acceptance of the administration of a directed investment shall not be
unreasonably withheld. The Trustee shall be under no duty to question any such
direction of an Employer with respect to investments, nor shall the Trustee be
required to review any securities or other property held pursuant to written
notice. The Trustee shall not have any liability whatsoever for any losses which
may result from either the Employer's direction or any investment decision made
pursuant to this Section, or for any loss which may result by reason of the
failure of the Employer to make such directions. Nor shall the Trustee have any
liability or responsibility whatsoever for any disparity between the performance
or rates of investment return of Employer-directed investments and the Trust
Fund in general.
16.06 Insurance Contracts. The Trustee may either invest in life insurance
contracts or may purchase from the life insurance company specified by the
Employer non-transferable annuity contracts if deemed appropriate and directed
by the Employer either to carry out properly or to safeguard the obligations
under the Plan.
16.07 Custodial Role. Notwithstanding any other provisions in this Plan, if the
Trustee is a bank and the bank does not have trust powers under State and/or
Federal banking laws and regulations, but otherwise qualifies as a Bank under
Section 581 of the Code, then the Trustee will assume the role as a custodian
under this Plan, and all investments shall be handled in accordance with Section
16.04 and/or Section 5.08, if selected. Furthermore, a bank or trust company
having trust powers shall act as custodian where Participant or
Employer-directed investments are made under Sections 16.04 and 5.08. The
Trustee's responsibilities will be as provided in Sections 16.04 and 5.08.
16.08 Liability of Trustee. The Trustee shall not be liable for its failure to
carry out the terms of this Agreement, or any instruction or direction of the
Employer (or its agent), or a Participant, when issued in accordance with this
Plan, or for relying upon advice given by any competent counsel or other agent
employed by the Trustee or Employer, or for the making, retention or sale of any
investment or reinvestment, or for any loss to or diminution of the Trust Fund,
except due to its own negligence, willful misconduct, lack of good faith or
conduct otherwise constituting a breach of fiduciary duty.
16.09 Court Actions. As a prerequisite to taking any action hereunder, the
Trustee shall neither be required to receive either any order to consent of any
court, nor shall the Trustee be required to file any court return or to report
to any court.
16.10 Prudent Man Rule. In discharging its duties, the Trustee shall act with
the skill, prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of like character and with like aims:
(a) by diversifying the investments of the Trust, to the extent the
Trustee has the discretionary authority and responsibility for such
investments, so as to minimize the risk of large losses, unless under the
circumstances it is dearly prudent not to do so; and
(b) in accordance with the documents and instruments governing the
Plan, insofar as such documents and instruments are consistent with the
provisions of ERISA.
16.11 Prohibited Transactions. Any other provisions of the Plan and Trust
Agreement to the contrary notwithstanding, neither the Employer, the Trustee nor
any Disqualified Person as defined in Section 4975(d) of the Code may engage,
directly or indirectly, in any of the acts or transactions under Section 4975(c)
of the Code and Section 406 of ERISA for which no exemption is provided by
Section 4975(d) of the Code or Section 408 of ERISA.
16.12 Conflict of Interest. The Trustee, except as expressly permitted in
Section 16.03(a), shall not:
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(a) deal with the assets of the Plan in its own interest or for its
own account;
(b) in its individual or in any other capacity, act in any
transaction involving the Plan (or on behalf of a party or representing a
party) where interests are adverse to the interest of the Plan or the
interest of its Participants or Beneficiaries; or
(c) receive any consideration for its own account from any party
dealing with the Plan in connection with a transaction involving the
assets of the Plan.
Provided, however, that nothing in this Section shall be construed to
preclude the Trustee from receiving reasonable compensation for services
rendered, or for reimbursement of expenses properly and actually incurred in the
performance of its duties under the Plan.
16.13 Exemptions. Nothing in this ARTICLE shall be construed to preclude a
transaction which is otherwise prohibited hereunder or under the Act, provided
that the Trustee, or any other interested party or parties, shall first apply
to, and secure from the Secretary of Labor, an exemption with respect to such
transaction.
16.14 Insurance. The Trustee may purchase insurance to insure itself, the Trust
Fund, or other fiduciary against liability or losses occurring by reason of an
act or omission of any fiduciary, provided that such insurance shall permit
recourse by the insurer against the fiduciary in the case of a breach of
fiduciary duty.
16.15 Accounts. The Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions hereunder, and all
accounts, books and records relating thereto shall be open to inspection and
audit at all reasonable times by any person designated by the Employer. The
Trust Fund may, at the Trustee's discretion, be administered on a unit
accounting basis and the value of a unit on the date of adoption or amendment of
the Plan shall be as determined by the Trustee.
16.16 Reports. Annually, or more frequently if determined by either the Employer
or the Trustee, or as shall be required by law, the Trustee shall cause a
valuation to be made of the Trust Fund at its fair market value. Within 120 days
after the end of the Plan Year (or on such other date as may be prescribed under
regulations of the Secretary of Labor) and at the time of each valuation during
the Plan Year, the Trustee shall file with the Employer and certify the accuracy
of a written statement setting forth, for the valuation period, all investments,
receipts, disbursements, and such other information as the Trustee maintains
which the Employer may require from time to time in order to fulfill its
obligations under applicable law. Upon expiration of 90 days from the date of
filing of the statement as provided herein, the Trustee's liability for any
inaccuracies or omissions appearing upon the face of such statement shall cease,
except as otherwise may be provided by law, and except with respect to any
inaccuracies or omissions as to which the Employer shall file with the Trustee
written objection before the expiration of such 90-day period.
To the extent consistent with applicable law, each transaction, whether an
increase or a decrease to the Trust Fund, may be expressed in terms of a number
of units computed on the basis of the unit value determined on the preceding
valuation date. In the event that transactions are reported in this manner, the
Trustee shall state, in addition to such other information as is required by
law, the number of units in the Trust Fund and the value of a unit on the date
of the statement.
16.17 Payments. The Trustee shall make payment from the Trust Fund to such
persons, in such manner and in such amounts as the Employer may direct in
writing from time to time. The Trustee shall be fully protected in acting upon
any such written direction without inquiry or investigation, and shall have no
duty or authority to determine the rights or benefits of any Participant or
Beneficiary under the Plan, or to inquire into the right or power of the
Employer to direct any payment from the Fund.
16.18 Direction of Committee. The Trustee shall be fully protected in relying
upon the written certification of the Employer as to the membership and extent
of authority of any committee duly authorized to act on its behalf and in
continuing to rely thereon until subsequent certification has been delivered to
the Trustee. The Trustee shall be fully protected in relying and acting upon any
written direction of such committee whose membership and authority has been
certified to the Trustee, and in continuing to so act and rely until subsequent
certification that said authority has been revoked or modified has been
delivered to the Trustee.
16.19 Impossibility of Performance. In case it becomes impossible for either the
Employer or the Trustee to perform any act under the Plan, that act shall be
performed which in the judgment of the Trustee will most nearly carry out the
intent and purpose of the Plan. All parties to this Plan or all parties in any
way interested in the Plan shall be bound by any acts performed under such
conditions.
16.20 Expenses. The expenses incurred by the Employer in the installation,
administration and amendment of the Plan shall be paid from the Trust Fund,
unless paid directly by the Employer. Such compensation to the Trustee as may be
set forth in its published fee schedule or as from time to time agreed upon in
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writing from time to time between the Employer and the Trustee and the expenses
incurred by the Trustee in the performance of its duties, including professional
fees of any person, firm or agent employed by the Trustee to carry out the
investment, management or administrative functions hereunder, and all other
proper charges and disbursements of the Trustee, shall be paid from the Trust
Fund, unless paid directly by the Employer.
16.21 Taxes. The Trustee shall pay out of the Trust Fund taxes of any and all
kinds including, without limiting the generality of the foregoing, property
taxes and income taxes levied or assessed under existing or future laws upon or
with respect to the Trust, or any monies, securities or other property forming a
part thereof, or the income therefrom, subject to the terms of any agreements or
contracts made with respect to trust investments which make other provisions for
such tax payments. The Trustee may assume that any taxes assessed on or with
respect to the Trust or its income are lawfully assessed unless the Employer
shall in writing advise the Trustee that in the opinion of counsel for the
Employer, such taxes are or may be unlawfully assessed. In the event that the
Employer shall so advise the Trustee, the Trustee shall, if so requested in
writing by the Employer, contest the validity of such taxes in any manner deemed
appropriate by the Employer or its counsel for the refund, abatement, reduction
or elimination of any such taxes.
16.22 Resignation or Removal of Trustee. The Trustee may resign at any time upon
90 days' written notice to the Employer. The Trustee may be removed by the
Employer, or the Employer may increase or decrease the number of Trustees, at
any time upon 90 days' written notice delivered to the Trustee. In the event of
such removal or resignation, the Employer shall designate a Successor Trustee or
other medium of funding under an agreement executed for such purpose. If the
Employer does not so designate such Successor Trustee or medium of funding
within 60 days, the Trustee may apply to a court of competent jurisdiction for
the purpose of securing the designation of same. Upon the expiration of 90 days
from resignation or removal of the Trustee, the Trustee's liability for any
inaccuracies or omissions shall cease, except as otherwise may be provided by
law, and except with respect to any inaccuracies or omissions as to which the
Employer shall file with the Trustee written objection before the expiration of
such 90-day period.
16.23 Transfer of Assets to a Successor Trustee or Other Medium of Funding. In
the event the Employer wishes to continue the Plan through a Successor Trustee
or through another medium of funding, it may, upon 90 days' written notice and
upon furnishing evidence of the continuation of the Plan through a Successor
Trustee or medium of funding, direct the Trustee to transfer the assets of the
Trust Fund to such Successor Trustee or medium of funding, in which event the
Trustee shall deliver in cash or in kind the assets of the Trust Fund (less
expenses), including such instruments of conveyance and further assurance as may
be reasonably required for vesting in such Successor Trustee or other medium of
funding all right, title and interest of the Trustee in assets of the Trust Fund
attributable to the Employer. The transfer of assets under the circumstances
above shall not, within itself, be deemed a termination of the Plan, or a
cessation of Employer Contributions to the Plan. Upon completion of such
transfer of assets, the terms and provisions of the Plan and of this Agreement
shall no longer control with respect to the Employer or the Plan (or its
successor) as it may be continued by the Employer.
16.24 Assets of Controlled Group Members. A Controlled Group Member with the
written approval of the other Controlled Group Members may direct the Trustee to
commingle the Trust Fund assets of its Plan with those of the assets of other
Controlled Group Members held by the Trustee in a mutual, commingled, pooled or
common Trust Fund; provided, however, that adequate records shall be maintained
at all times so that it is possible to ascertain and separate the Trust Fund
assets of each Controlled Group Member.
ARTICLE 17
AMENDMENT OR TERMINATION
17.01 Employer's Right to Amend Plan.
(a) The Sponsor may amend any part of the Plan. For purposes of Sponsor
amendments, the mass submitter shall be recognized as the agent of the Sponsor.
If the Sponsor does not adopt the amendments made by the mass submitter, it will
no longer be identical to or a minor modifier of the mass submitter plan.
(b) The Employer may (i) change the choice of options in the Adoption
Agreement, (ii) 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 (iii) add certain model amendments
published by the Internal Revenue Service which specifically provide that their
adoption will not cause the Plan to be treated as individually designed. An
Employer that amends the Plan for any other reason, including a waiver of the
minimum funding requirement under Section 412(d) of the Code, will no longer
participate in this master or prototype Plan and will be considered to have an
individually designed plan.
(c) If the Plan's vesting schedule is amended, or the Plan is amended in
any way that directly or indirect-
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ly affects the computation of the 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 the 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:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written notice
of the amendment by the Employer or Administrator.
(d) 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 Account balance may be reduced to the extent
permitted under Section 412(c)(8) of the Code. For purposes of this subsection,
a Plan amendment which has the effect of decreasing a Participant's Account
balance 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 of a Plan is amended, in
the case of an Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Employee's Employer-derived
Accrued Benefit will not be less than the percentage computed under the Plan
without regard to such amendment.
17.02 Sponsor's Right to Amend Plan. The Employer, by its act of adopting the
Plan, expressly delegates to the Sponsor the power and authority to amend this
Master Plan, in whole or in part, at such time or times and in such manner as
the Sponsor shall deem necessary or desirable. The Sponsor shall promptly notify
in writing the Employer of any such amendment, and upon receipt of such
notification the Employer shall be bound thereby.
17.03 Limitation of Right to Amend. No amendment shall have the effect of
causing or permitting any part of the Trust Fund to be used for or diverted to,
purposes other than for the exclusive benefit of Participants, Retired
Participants and Beneficiaries, and no amendment shall have the effect of
revesting in the Employer any portion of the Trust Fund.
17.04 Termination of Plan by Employer.
(a) Right Reserved. Although the Employer expects the Plan to be continued
indefinitely, it reserves the right to terminate the Plan at any time by action
by the Board and to discontinue all contributions hereunder in the case of a
profit sharing plan. If the Plan is a profit-sharing plan, the Employer reserves
the right to temporarily suspend contributions from time to time as it shall
deem appropriate and necessary, and such suspension of contributions shall not
be considered to be a termination of the Plan. In the event of termination or
partial termination of the Plan, or a complete discontinuance of contributions
to the Plan, the Employer shall notify the Trustee in writing of such
termination and, prior to any distribution of assets hereunder, shall file
notice, in such form and manner as is required by law, with the Internal Revenue
Service.
(b) Distribution upon Termination. In the event of the termination or
partial termination of the Plan, the Account balances of each affected
Participant shall be nonforfeitable. In the event of a complete discontinuance
of contributions under a profit-sharing plan, the Account balances of each
affected Participant will be nonforfeitable. The Employer, by written notice of
termination of the Plan, shall direct the Trustee to reduce such assets of the
Trust Fund to cash which are not designated by the Employer, or, in the case of
a Participant-Directed Investment Account, as provided in Section 5.08, by the
Participant, to be retained for distribution in kind. The Trustee shall cause a
valuation of the Trust Fund to be made as of the date such assets are reduced to
cash, at which time the balances of Accounts shall be brought up to date in
accordance with Section 5.05. Upon completion of such accounting and receipt
from the Employer of directions as to the form of distributions, the Trustee
shall distribute the assets of the Trust Fund to the Participants or
Beneficiaries, as the case may be, in accordance with such directions. Each
Participant or Beneficiary who is entitled to receive a distribution may elect
an option in accordance with Section 10.06(c) or (d), whichever applies. The
manner in which the funds are applied in the case of a termination shall be
subject to the requirements of ARTICLE 11.
17.05 Sponsor's Withdrawal of Participation in Master Plan. The Sponsor may
withdraw its participation as a Sponsor of this Plan as a Master Plan. The
Sponsor shall notify each Employer who has
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adopted the Plan that the Sponsor has withdrawn its participation. Such an
Employer will be deemed to have an individually-designed plan at that point.
17.06 Failure of Qualification. If the Employer's Plan fails to attain or retain
qualification, such Plan will no longer participate in this Master/Prototype
Plan and will be considered an individually-designed Plan. If the Employer's
Plan fails to attain or retain qualification, the funds of such plan will be
removed from this Master Trust as soon as administratively feasible.
17.07 Mergers. In the event of any merger or consolidation with, or transfer of
assets to any other plan, each Participant will receive a benefit immediately
after such merger, consolidation or transfer (if the Plan then terminated) which
is at least equal to the benefit the Participant was entitled to immediately
before such merger, consolidation or transfer (if the Plan had then terminated).
ARTICLE 18
MISCELLANEOUS
18.01 Liability of Employer. No Employee, Participant, Retired Participant or
Beneficiary shall have any right or claim to any benefit under the Plan except
in accordance with its provisions. The adoption of the Plan shall neither be
construed as creating any contract of employment between the Employer and any
Employee or otherwise conferring upon any Employee or other person any legal
right to continuation of employment, nor as limiting or qualifying the right of
the Employer to discharge any Employee without regard to the effect that such
discharge might have upon his rights under the Plan.
18.02 Spendthrift Clause. Except for Plan loans to Participants as permitted by
ARTICLE 12 and the assignments provided therefor, no benefit or interest
available hereunder will be subject to assignment or alienation, either
voluntarily or involuntarily. The preceding sentence 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 4l4(p) of the Code, or any domestic relations order entered before
January 1, 1985.
18.03 Successor Business of Employer. Unless this Plan is sooner terminated, any
incorporated successor to the business of the Employer may continue the Plan and
such successor shall thereupon succeed to all the rights, powers and duties of
the Employer hereunder. The employment of any Employee who has continued in the
employ of such successor shall not be purpose hereunder.
In the event that the Employer is reorganized or dissolved for any reason
without any provision being made for the continuance of this Plan by a successor
to the business of the Employer, the Plan shall terminate and the assets shall
be distributed as provided in Section 17.04(b) hereof.
18.04 Qualification by the Internal Revenue Service. This Plan is adopted by the
Employer with the intent that it shall qualify, as provided in Sections 4.01(a)
and 501(a) of the Code. Therefore, notwithstanding any provision of the Plan to
the contrary, the Employer reserves the right, in the event of the failure of
the Plan to qualify initially, as evidenced by receipt of a letter from the
Internal Revenue Service that the Plan does not qualify, at its option to do
either of the following:
(a) to withdraw and terminate the Plan and Trust hereunder, in which
event no Participant or Beneficiary shall, except with respect to a refund
of his Employee Account, have any right or claim hereunder or to any
benefit from the Plan without regard to the provisions of ARTICLE 17
hereof, whereupon all contributions shall be returned to the Employer, and
the Trustee shall be discharged from all obligations hereunder; or
(b) to amend the Plan in whole or in part, retroactively or
otherwise, as is necessary or advisable so that the Plan shall qualify and
continue to qualify.
18.05 Use Limited to Qualified Trusts. This Master Plan shall be made available
by the Sponsor only to Plans established hereunder which shall meet, and
continue to meet, the requirements of Sections 401(a) and 501(a) of the Code.
Should this Master Plan be disqualified as to any adopting Employer, the funds
held in Trust on behalf of said adopting Employer shall be segregated and
appropriate disposition made thereof within a reasonable time after notice of
such adverse determination of disqualification by the Internal Revenue Service.
18.06 Conflict of Provisions. If any provision or term of this Plan, or of the
Trust Agreement entered into pursuant hereto, is deemed to be at variance with,
or contrary to, any law of the United States or applicable state law, said
provision shall be severable to the extent it does not disqualify the Plan under
Sections 401(a) and 501(a) of the Code and the provision of the law shall be
deemed to govern.
18.07 Definition of Words. Feminine or neuter pronouns shall be substituted for
those of the masculine
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form, and the plural shall be substituted for the singular, in any place or
places herein where the context may require such substitution or substitutions.
18.08 Titles. The titles of ARTICLES and Sections are included only for
convenience and shall not be construed as a part of the Plan or in any respect
to affect or modify its provisions.
* * * * *
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IN WITNESS WHEREOF, the Sponsor hereby establishes this Plan on this 15th
day of September, 1993.
THE SPONSOR:
BANKFIRST
-----------------------------------------
ATTEST: By: /s/ Sheila H. Sterling
--------------------------------------
/s/ Rosemary L. Collins Title: Sr. Vice President & Trust Officer
- ---------------------------- -----------------------------------
Address: 625 Market Street
Knoxville, Tennessee 37902
Telephone: (615) 595-1125
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BANKFIRST
PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST
ADOPTION AGREEMENT #002
NON-STANDARDIZED
PROFIT SHARING PLAN
BANKFIRST
- --------------------------------------------------------------------------------
(Name of Employer)
BANKFIRST 401 (K) PROFIT SHARING PLAN
- --------------------------------------------------------------------------------
(Name of Plan)
Defined Contribution Basic Plan Document #01
<PAGE>
ADOPTION AGREEMENT
PLAN SPONSOR INFORMATION
Name and Address: BankFirst
625 Market Street
Knoxville, Tennessee 37902
Telephone: (615) 595-1125
Authorized Representative: SHEILA H. STERLING
The undersigned Employer by executing this Adoption Agreement hereby
adopts the BANKFIRST PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST of which this
Adoption Agreement forms an integral part.
The undersigned Trustee by executing this Adoption Agreement hereby
accepts the duties and responsibilities of this position with respect to the
Prototype Plan.
Wherever the word "Plan" appears herein or in the Prototype Plan, it
shall be deemed to mean the Prototype Plan as adopted by the Employer, together
with all of the definitions and provisions applicable to it as elected herein.
Limitations with respect to provisions available to the Employer are set
out in parentheses. Marked brackets (x) indicate the provisions which do apply
to the Plan. Brackets left unmarked ( ) indicate the provisions which do not
apply to the Plan. Failure to properly fill out the Adoption Agreement may
result in disqualification of the Plan.
The Plan Sponsor will inform the Employer of any amendments made to
the Prototype Plan or of the discontinuance or abandonment of the Prototype
Plan.
Plan Name: BANKFIRST 401 (K) PROFIT SHARING PLAN
SECTION 1. PLAN INFORMATION.
(a) The Employer hereby
( ) establishes the above named Plan
(X) amends, restates, and continues the above named Plan, which was
originally effective on JULY 1, 1993,
( ) amends, restates, and continues the above named Plan, which was
previously named the _____________________________________________
and which was originally effective on __________________, 19______,
by adopting the BANKFIRST PROTOTYPE DEFINED CONTRIBUTION PLAN AND
TRUST.
(b) The Effective Date of this Plan adoption or amendment shall be
JULY 1, 1994
(c) The Limitation Year shall be
(X) a calendar year ending on each December 31.
( ) the twelve (12) consecutive month period ending
on _______________________________________________.
If the Employer elects a year other than the calendar year, such period
must be the same for all qualified plans of the Employer. 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.
(d) The Plan Year shall be
(X) the twelve (12) consecutive month period which coincides with the
Limitation Year.
( ) the twelve (12) consecutive month period commencing on
___________________ and each anniversary thereof.
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If the first Plan Year is a Short Plan Year (less than twelve (12)
consecutive months), the first day of the short Plan Year shall be
__________________________________________.
(e) Three-digit number assigned to the Plan: 0 0 2
SECTION 2. EMPLOYER INFORMATION.
Name and Address: BANKFIRST
625 MARKET STREET
KNOXVILLE, TENNESSEE 37902
Telephone: (615) 595-1100
Date of incorporation or
commencement of business: January 02, 1922
Federal tax identification number: 62-0201360
Employer's fiscal year end: DECEMBER
Type of entity:
(X) Corporation ( ) Subchapter S Corporation
( ) Sole Proprietorship ( ) Partnership
( ) Tax Exempt Organization
( ) Professional Corporation
( ) Professional Association
( ) Governmental Entity
The Employer contributes to the following additional pension or profit-sharing
plans:
______________________________________________________________________________
Prior Trustee, if applicable: ________________________________________________
SECTION 3. PLAN ADMINISTRATION.
(a) The Trustee shall be:
(X) BANKFIRST
( ) Name:______________________________________________________________
Address:___________________________________________________________
( ) Name:______________________________________________________________
Address:___________________________________________________________
(b) The Plan Administrator shall be:
(X) The Employer, ATTN: C. SUZI RAY
Telephone: (615) 595-1160
( ) Other: (specify)___________________________________________________
Address:___________________________________________________________
Telephone:( )___________________________________________________
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SECTION 4. EMPLOYEE CLASSES EXCLUDED. The following class(es), of individuals
employed by the Employer shall not be eligible to participate in the Plan:
(X) no exclusions ( ) hourly paid ( ) salaried ( ) commission paid
( ) employees included in a unit of employees covered by a collective
bargaining agreement between the Employer and Employee
representatives, if retirement benefits were the subject of good
faith bargaining and if two 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 representatives"
does not include any organization more than half of whose members
are employees who are owners, officers or executives of the
Employer.
( ) employees who are nonresident aliens and who receive no earned
income from the Employer which constitutes income from sources
within the United States.
( ) other (specify):________________________________________________
SECTION 5. ELIGIBILITY.
(a) Each Employee who is employed on the Effective Date of the Plan shall be
eligible to participate in the Plan upon meeting the following
eligibility requirements:
(X) attained the age of 18 (cannot exceed 21).
(X) completed 6 MONTHS of Service (cannot exceed one (1) Year unless the
Plan provides a nonforfeitable right to one hundred percent (100%)
of the Participant's Account balance derived from Employer
Contributions after not more than two (2) Years of Service in which
case up to two (2) Years is permissible. In addition, if the
Employer adopts the CODA permitting Elective Deferrals under the
Plan, the minimum number of Years of Service required for
participation in the CODA cannot exceed one (1). If the Year(s) of
Service selected is or includes a fractional Year, an Employee will
not be required to complete any specified number of Hours of Service
to receive credit for such fractional Year.)
If this is a continuation of a Predecessor Plan, no Employee who has been
a Participant under the Predecessor Plan and who is otherwise eligible to
participate in this Plan shall be excluded from participation because of
failure to satisfy the above age and Service requirements.
(b) Each Employee who is first employed after the Effective Date of the Plan
shall be eligible to participate in the Plan upon meeting the following
eligibility requirements:
(X) attained the age of 18 (cannot exceed 21).
(X) completed 6 months of Service (cannot exceed one (1) Year unless
the Plan provides a nonforfeitable right to one hundred percent
(100%) of the Participant's Account balance derived from Employer
Contributions after not more than two (2) Years of Service in which
case up to two (2) Years is permissible. In addition, if the
Employer adopts the CODA permitting Elective Deferrals under the
Plan, the minimum number of Years of Service required for
participation in the CODA cannot exceed one (1). If the Year(s) of
Service selected is or includes a fractional Year, an Employee will
not be required to complete any specified number of Hours of
Service to receive credit for such fractional Year.)
(Note: The selection of eligibility requirements in subsections (a) and (b)
cannot discriminate in favor of Highly Compensated Employees.)
(c) The initial Eligibility Computation Period shall be the twelve (12)
consecutive month period beginning on the Employment Commencement Date.
The succeeding twelve (12) consecutive month periods shall be as follows:
(X) The twelve (12) consecutive month period beginning on each
anniversary of the Employee's Employment Commencement Date.
( ) Plan Years beginning with the Plan Year in which occurs the first
anniversary of the Employee's Employment Commencement Date.
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(d) The Plan Entry Date shall be as follows:
( ) The Employee's date of hire.
( ) The first day of the Plan Year in which the Employee meets the
Plan's eligibility requirements.
(X) The first day of the Plan Year coincident with or immediately
following the date the Employee meets the Plan's eligibility
requirements (note: this option cannot be selected if the
eligibility requirements stated in Sections 5(a) and (b) exceed
age 20-1/2 and/or 1/2 Year of Service).
( ) The first day of the Plan Year or the date six (6) months after the
first day of the Plan Year coincident with or immediately following
the date the Employee meets the Plan's eligibility requirements.
If the first Plan Year is a short Plan Year (less than twelve (12)
consecutive months), the Entry Date(s) for the short Plan Year
shall be the first day of the short Plan Year (if the short Plan
Year is six (6) consecutive months or less) OR the first day of
the short Plan Year or the date six (6) months after the first day
of the short Plan Year (if the short Plan Year is more than six (6)
but less than twelve (12) consecutive months).
( ) The first day of the Plan Year or the date six (6) months after the
first day of the Plan Year or the last day of the Plan Year
coincident with or immediately following the date the Employee
meets the Plan's eligibility requirements. If the first Plan Year
is a short Plan Year (less than twelve (12) consecutive months),
the Entry Date(s) for the short Plan Year shall be the first day of
the short Plan Year or the last day of the short Plan Year (if the
short Plan Year is six (6) consecutive months or less) OR the first
day of the short Plan Year or the date six (6) months after the
first day of the short Plan Year or the last day of the short Plan
Year (if the short Plan Year is more than six (6) but less than
twelve (12) consecutive months).
( ) The first day of the Plan Year nearest the date the Employee meets
the Plan's eligibility requirements.
SECTION 6. HOURS OF SERVICE. Service shall be determined on the basis of the
method selected below. Only one method may be selected. The method selected
shall be applied to all Employees covered under the Plan.
(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 10
Hours of Service per day if under Section 2.33 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 per week if under Section 2.33
of the Plan such Employee would be credited with at least one
(1) Hour of Service during the week.
( ) On the basis of semi-monthly payroll periods. An Employee shall be
credited with ninety-five (95) Hours of Service per semi-monthly
payroll period if under Section 2.33 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 per month if under
Section 2.33 of the Plan such Employee would be credited with at
least one (1) Hour of Service during the month.
SECTION 7. EMPLOYER CONTRIBUTIONS.
(a) The Employer shall contribute an amount for each Plan Year as follows:
(X) a discretionary amount to be determined annually by the Employer.
( ) _______ % of each Participant's Compensation (maximum of 15%).
( ) ________% of profits in excess of $_____________
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( ) other (describe, but notes must be in accordance with generally
acceptable accounting principles):
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(b) Such contribution shall be ( ) out of Net Profits. (X) without regard to Net
Profits.
(c) (Note: The following selections are optional.) Net Profits shall be
defined as the amount of net income of the Employer
( ) determined before contributions to this Plan in accordance with
accounting practices normally utilized by the Employer
( ) determined before contributions to this Plan in accordance with
accounting practices normally utilized by the Employer and
before adjustments for
( ) dividends ( ) state income taxes ( ) federal income taxes
( ) excise taxes ( ) other:_______________________
( ) excluding, however
( ) gains or losses on the sale of capital assets
( ) income or losses from the sale of marketable securities
( ) dividends from shares of publicly owned companies
( ) net proceeds of any life insurance policies held by the
Employer
SECTION 8. ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES.
(a) Active Participants. Each Participant shall be eligible to share in
Employer Contributions and Forfeitures for the Plan Year upon meeting
the following requirements (note: choose one or both):
( ) employed by the Employer on the last day of the Plan Year.
(X) completed at least 1,000 Hours of Service during the Plan Year.
(b) Allocation of Employer Contributions and Forfeitures. Employer
Contributions and Forfeitures shall be allocated as follows (Note: choose
only one method):
(X) NON-INTEGRATED. Employer Contributions and Forfeitures shall be
allocated to each eligible Participant in the ratio that such
Participant's Compensation bears to the Compensation of all
Participants. (Note: The additional participation requirements of
Section 13.02 (a) of the Plan must be met unless the Employer
maintains a Money Purchase or Target Benefit Pension Plan and makes
the minimum Top-Heavy allocations to such Plan.)
( ) INTEGRATED. The integration level is equal to:
( ) taxable wage base (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).
( ) $____________ (a dollar amount less than the taxable wage
base).
( ) ________% of the taxable wage base (not to exceed 100%).
Employer Contributions for the Plan Year plus any Forfeitures will
be allocated to eligible Participants' Accounts as follows:
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STEP ONE: Employer Contributions and Forfeitures will be allocated
to each eligible Participant's Account in the ratio that each
Participant's total Compensation bears to all Participant's total
Compensation, but not in excess of 3% of each Participant's
Compensation.
STEP TWO: Any Employer Contributions and Forfeitures remaining
after the allocation in Step One will be allocated to each eligible
Participant's Account in the ratio that each Participant's
Compensation for the Plan Year in excess of the integration level
bears to the excess Compensation of all Participants, but not in
excess of 3%.
STEP THREE: Any Employer Contributions and Forfeitures remaining
after the allocation in Step Two will be allocated to each
Participant's Account in the ratio that the sum of each
Participant's total Compensation and Compensation in excess of the
integration level bears to the sum of all Participants' total
Compensation and Compensation in excess of the integration level,
but not in excess of the maximum profit-sharing disparity rate.
If the integration level is equal to the taxable wage base, the
maximum profit-sharing disparity rate is equal to 2.7%.
If the integration level is not equal to the taxable wage base, the
maximum profit-sharing disparity rate is equal to the percentage
determined in accordance with the table below:
If the integration level:
the applicable
is more than but not more than percentage is:
------------ ----------------- --------------
$0 X* 2.7%
X* of TWB 80% of TWB 1.3%
80% of TWB Y** 2.4%
*X = the greater of $10,000 or 20% of the TWB
**Y = any amount more than 80% of the TWB but less than 100% of
the TWB.
STEP FOUR: Any remaining Employer Contributions and Forfeitures
will be allocated to each Participant's Account in the ratio that
each Participant's total Compensation for the Plan Year bears to
all Participants' total Compensation for that Year.
If an Employee's entry date for participation in the Plan is not
the first day of the Plan Year, then the integration level ( )
shall ( ) shall not be prorated in the Plan Year in which the
Participant enters or reenters the Plan in the ratio that the
length of the Participant's participation in the Plan that Plan
Year bears to the length of that entire Plan Year.
(c) Terminated Participants. (Note: These selections are optional)
Participants who do not meet the requirements of (a) during the Plan Year
shall not share in Employer Contributions and Forfeitures for such Plan
Year except as provided below:
( ) if the Employer selected the first option in (a) only, then a
Participant who terminates employment during the Plan Year on
account of (choose as many as apply)
( ) death ( ) disability ( ) retirement
shall be entitled to share in the Employer Contributions and
Forfeitures.
( ) if the Employer selected both options in (a), then a Participant
who completes 1,000 Hours of Service during the Plan Year but
who terminates employment during the Plan Year on account of
(choose as many as apply)
( ) death ( ) disability ( ) retirement
shall be entitled to share in the Employer Contributions and
Forfeitures.
(X) if the Employer selected both options in (a) or the second option
in (a) only, then a Participant who terminates employment during
the Plan Year on account of (choose as many as apply)
(X) death (X) disability (X) retirement
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and who does not complete 1,000 Hours of Service during the Plan
Year shall be entitled to share in the Employer Contributions and
Forfeitures.
(d) Disabled Participants. The Employer may elect to make non-forfeitable
contributions on behalf of Non-highly Compensated Employees who become
disabled. Such contributions will be made on the basis of the
compensation each such Participant would have received for the Limitation
Year if the Participant had been paid at the rate of compensation paid
immediately before becoming totally disabled. The Employer ( ) will ( )
will not make contributions on behalf of disabled Participants.
SECTION 9. COMPENSATION; SPECIAL DEFINITIONS. Compensation shall mean all of
each Participant's:
(X) Wages, Tips and Other Compensation Box on Form W-2
( ) Section 3401(a) wages
( ) 415 safe-harbor compensation
which is actually paid to the Participant during
( ) the Plan Year
(X) the calendar year ending with or within the Plan Year
( ) the Limitation Year ending with or within the Plan Year
( ) the period during the Plan Year the Employee is a Participant in
the Plan
excluding (note: if the Plan is integrated with Social Security, option (f)
must be selected)
( ) (a) overtime compensation ( ) (b) discretionary bonuses
( ) (c) contractual bonuses ( ) (d) _________% of commissions
( ) (e) other (specify): ________________________________________
(X) (f) none of the above exclusions
Compensation (x) shall ( ) shall not include Employer Contributions made
pursuant to a Salary Reduction Agreement which are not includible in the gross
income of the Employee under Section 125, 402(a)(8), 402(h) or 403(b) of the
Code.
SECTION 10. EMPLOYEE CONTRIBUTIONS.
(a) Voluntary Contributions (non-deductible), unless elected in the CODA
Adoption Agreement, are not permitted for Plan Years beginning after
the Plan Year in which the Plan was adopted. Voluntary Contributions,
and matching contributions as defined in Section 401(m) of the Code,
if any, for Plan Years beginning after December 31, 1986 will be
limited so as to meet the nondiscrimination test of Section 401(m) of
the Code. If, under a previous plan, nondeductible employee contributions
were allowed, this Plan will maintain a separate account for the
nondeductible employee contributions of Participants.
(b) Deductible Contributions are not permitted for Plan Years beginning after
1986.
(c) Rollover Contributions
( ) shall not be permitted. ( ) shall be permitted.
(X) shall be permitted only for those Employees who have met the
eligibility requirements set forth in Section 5.
(d) Trustee-to-Trustee Transfers
( ) shall be permitted. The Plan ( ) shall (X) shall not accept the
transfer of assets from a defined benefit plan or money purchase
pension plan (including a target benefit plan), or from a stock
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bonus plan or profit-sharing plan which would otherwise provide for
life annuity form of payment to the Participant.
( ) shall be permitted only for those Employees who have met the
eligibility requirements set forth in Section 5. The Plan ( ) shall
( ) shall not accept the transfer of assets from a defined benefit
plan or money purchase pension plan (including a target benefit
plan), or from a stock bonus plan or profit-sharing plan which
would otherwise provide for a life annuity form of payment to the
Participant.
( ) shall not be permitted.
SECTION 11. VESTING SCHEDULE.
(a) The nonforfeitable interest of each Employee in his or her Employer
Contributions Account balance shall be determined on the basis of the
following (note: if, under Section 5(a) and (b), more than one (1) Year
of Service is required, "Nonforfeitable when made" must be checked):
( ) Nonforfeitable when made.
( ) 100% vesting after ______ (not to exceed 5) Years of Vesting
Service.
(X) 20% vesting after 1 Year of Vesting Service.
40% vesting after 2 Years of Vesting Service.
60% (not less than 20) vesting after 3 Years of Vesting Service.
80% (not less than 40) vesting after 4 Years of Vesting
Service.
100% (not less than 60) vesting after 5 Years of Vesting Service.
100% (not less than 80) vesting after 6 Years of Vesting Service.
100% vesting after 7 Years of Vesting Service.
(b) For vesting purposes, a Year of Service will be measured by
( ) the Plan Year.
(X) the twelve (12) consecutive month period commencing on the
Employee's Employment Commencement Date and each subsequent twelve
(12) consecutive month period commencing on the anniversary of such
date.
SECTION 12. RESTRICTIONS ON YEARS OF VESTING SERVICE. All of an Employee's
Years of Service with the Employer are counted to determine the nonforfeitable
percentage in the Employee's Account balance derived from Employer
Contributions except:
(X) Years of Service before age 18;
( ) Years of Service during a period for which the Employee made no
mandatory contributions under a predecessor plan;
( ) Years of Service before the Employer maintained this Plan;
( ) Years of Service before the Employer maintained this Plan or a
predecessor plan;
( ) Years of Service before January 1, 1971, unless the Employee has
had at least three (3) Years of Service after December 31, 1970;
( ) Years of Service before the effective date of ERISA if such
Service would have been disregarded under the break in service
rules of the prior plan in effect from time to time before such
date. For this purpose, break in service rules are rules which
result in the loss of prior vesting or benefit accruals, or
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which deny an Employee eligibility to participate, by reason of
separation or failure to complete a required period of service
within a specific period of time.
(Note: If tile Employer adopts the CODA option permitting Elective Deferrals
under the Plan (Section 24), the "Rule of Parity" will not be applicable to
Employees who make Elective Deferrals.)
SECTION 13. RETIREMENT AGES.
(a) Normal Retirement. For each Participant, Normal Retirement Age shall be
(X) age 65 (not to exceed 65) years.
( ) the later of age___ (not to exceed 65) years or the _____ (not to
exceed 5th) anniversary of the first day of the participation
commencement date. If, for Plan Years beginning before January 1,
1988, Normal Retirement Age was determined with reference to the
anniversary of the participation commencement date (more than 5 but
not to exceed 10 years), the anniversary date for Participants who
first commenced participation under the Plan before the first Plan
Year beginning on or after January 1, 1988, shall be the earlier of
(i) the tenth anniversary of the date the Participant commenced
participation in the Plan (or such anniversary as had been elected
by the Employer, if less than 10) or (ii) the fifth anniversary of
the first day of the first Plan Year beginning on or after January
1, 1988. The participation commencement date is the first day of
the first Plan Year in which the Participant commenced
participation in the Plan.
(b) Early Retirement.
(X) Not applicable.
( ) The Early Retirement Age for each Participant shall be
( ) age ____ years.
( ) the later of age ___ years and/or the date he is credited
with ___ Years of Service.
(c) Disability. (Note: This selection is optional) For purposes of the Plan,
Disability shall not include a physical or mental condition which results
directly or indirectly from
( ) injury intentionally self-inflicted,
( ) injury or disease resulting from military service, or
( ) injury or disease suffered or contracted prior to the Employee's
Employment Commencement Date.
( ) other (specify):
(d) Payment of Benefits. Benefits under ARTICLE 10 of the Plan due a
Participant upon Termination of Employment for a reason other than death,
Disability or Normal or Early Retirement shall be paid to the terminated
Participant or applied for his benefit from his Account(s) as follows
(note: select only one):
( ) not later than 60 days following the close of the Plan Year in which
the Participant's Termination of Employment occurs, or as soon as
practicable thereafter.
( ) not later than 60 days following the close of the Plan Year during
which the Participant incurs a one (1) year Break in Service, or as
soon as practicable thereafter.
( ) not later than 60 days following the close of the Plan Year during
which the terminated Participant attains what would have been his
Normal Retirement Age.
( ) in a manner uniformly and nondiscriminatorily established by the
Administrator and not otherwise in contravention of Section 10.02 of
the Plan.
SECTION 14, PARTICIPANT LOANS. Participant loans
( ) shall be permitted (complete attached Exhibit 1).
(X) shall not be permitted.
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SECTION 15. WITHDRAWALS.
(a) Employer Contributions.
(X) Withdrawals from a Participant's Employer Contributions Account
shall not be permitted.
( ) Withdrawals of up to _______% (note: not more than 100%) of a
Participant's vested interest in his Employer Contributions
Account shall be permitted in accordance with Section 10.05 of
the Plan.
(b) Employee Contributions. (Note: This section of the Adoption Agreement
should be filled out only if the Plan permitted Voluntary Contributions
for Plan Years beginning on or before the Effective Date and/or if
Section 24, Item 7 is selected.)
( ) Withdrawals from a Participant's Voluntary Contributions
Account shall not be permitted.
(X) Withdrawals of up to 100 % (note: not more than 100%) of a
Participant's Voluntary Contributions Account shall be permitted.
(c) Rollover Contributions. (Note: This section of the Adoption Agreement
should be filled out only if Rollover Contributions are a feature of this
Plan.)
( ) Withdrawals from a Participant's Rollover Account shall not be
permitted.
(X) Withdrawals of up to 100% (note: not more than 100%) of a
Participant's Rollover Account shall be permitted.
SECTION 16. TOP-HEAVY PLANS. This section automatically applies only in Plan
Years in which the Plan is Top-Heavy, but all options herein must be completed
in case the Plan ever becomes Top-Heavy.
(a) Single Plan-Minimum Contributions and Allocations. Notwithstanding the
provisions of Section 8, and before any contributions are allocated
thereunder, minimum Employer Contributions shall be made and allocated
pursuant to Section 13.02 of the Plan in a Plan Year in which the Plan is
Top-Heavy.
(b) Minimum Vesting. Notwithstanding the provisions of Section 11, the vested
interest of each Employee in his Employer Contributions Account in a Plan
Year in which the Plan is Top Heavy shall be determined, pursuant to
Section 13.03 of the Plan, on the basis of the following vesting
schedule, unless an equal or a more rapid vesting schedule has been
selected in Section 11:
( ) 100% vesting after ______ (not to exceed 3) Years of Vesting
Service.
( X) 20% vesting after 1 Year of Vesting Service.
40% (not less than 20) vesting after 2 Years of Vesting Service.
60% (not less than 40) vesting after 3 Years of Vesting Service.
80% (not less than 60) vesting after 4 Years of Vesting Service.
100% (not less than 80) vesting after 5 Years of Vesting Service.
100% vesting after 6 Years of Vesting Service.
If the vesting schedule under the Plan shifts in or out of the above
schedule for any Plan Year because of the Plan's Top-Heavy status, such
shift is an amendment to the vesting schedule and the election rule in
Section 17.01(c) of the Plan applies.
(c) Multiple Plans-Minimum Contributions and Allocations. This subsection
shall only apply if you sponsor another qualified retirement plan.
(i) Code Section 415(e) Buy-Backs. If another retirement plan is a
qualified defined benefit plan, and if for a Plan Year the plans
are Top-Heavy (but not Super Top Heavy), then the "Code Section
415(e) buy back" provisions, as defined in Section 13.04 of the
Plan,
( ) shall be utilized, so that 125%
( ) shall not be utilized, so that 100%
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of the dollar limitations set out in Section 5.07 of the Plan
shall be used in computing the Defined Benefit Fraction and the
Defined Contributions Fraction.
(ii) Minimum Accruals.
( ) Even though the Plan is not a Paired Plan, the Plan shall
be considered to be subject to the Paired Plan minimum
allocation provisions of ARTICLE 14 of the Plan as if it
were a Paired Plan.
( ) The following overriding provisions shall control instead
of the Paired Plan provisions regarding minimum accruals:
____________________________________________________________
____________________________________________________________
____________________________________________________________
(iii) No Duplicate Benefits. For Plan Years beginning before January 1,
1992, if another retirement plan is a qualified defined
contribution plan which is to be treated as a Paired Plan, then the
required minimum Employer Contributions and allocations shall be
provided only under
( ) this Plan. ( ) the other qualified defined
contribution plan.
For Plan Years beginning after December 31, 1991, if another
retirement plan is a qualified defined contribution or defined
benefit plan which is to be treated as a Paired Plan, then the
required minimum Employer Contributions and allocations shall be
provided under each paired plan.
(iv) Present Value. For purposes of establishing Present Value to
compute the Top-Heavy Ratio for the Plan as set forth in Section
13.01(c) of the Plan, any benefit under a qualified defined benefit
pension plan maintained by the Employer shall be discounted only
for mortality and interest based on the following factors which, if
a lump sum benefit is available, should be the factors used to
compute a lump sum benefit:
Mortality Table:
( ) the UP-1984 Mortality Table
( ) as provided in the qualified defined benefit pension plan
( ) other:___________________________________________
Interest Rate:
( ) the current rate specified for the purchase of immediate
annuities by the Pension Benefit Guaranty Corporation
( ) as provided in the qualified defined benefit pension plan
( ) other:___________________________________________
(v) Valuation Date. For purposes of computing the Top-Heavy Ratio, the
Valuation Date shall be:
( ) The Limitation Year selected in Section 1(c).
( ) The twelve (12) consecutive month period ending on
__________________________________________
SECTION 17. INVESTMENTS. (Note: Choose any one option or permitted combination
of options.)
(a) Investment decisions with respect to the portion of the assets of the
Plan indicated below shall be controlled as follows (note: all selections
must total 100% of assets and shall be measured as of the execution date
of this Adoption Agreement, or such other date as set by tire Employer):
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( ) ______% (not more than 100%) controlled by the Trustee in
its sole discretion.
( ) _____% (not more than 100%) controlled by an Investment
Manager appointed by the Employer pursuant to the provisions
of Section 16.04 of the Plan.
( ) _____% (not more than 100%) controlled by each Participant,
with respect to his Accounts other than his Employer
Contributions Account pursuant to the provisions of Section
5.08 of the Plan.
(X) other: 100% CONTROLLED BY TRUSTEE AT DIRECTION OF ADVISORY
COMMITTEE
(b) ( ) Although the Trustee or an Investment Manager has been
designated above to control a portion of the investments,
notwithstanding the portion of investment control designated
above, the Administrator may elect to permit each Participant
to have the right, at the Participant's discretion, to
control the investment of the:
( ) full value of his Accounts.
( ) vested amount of his Employer Contributions Account and
the amount of his other Accounts.
(c) ( ) The Trustee may delegate its duty physically to hold and
safeguard the assets of the Plan to the Sponsor as custodian.
(d) (X) Investment by the Plan in Qualifying Employer Securities
shall be permitted, provided the requirements of Sections
406, 407 and 408 of ERISA are met, to a maximum of 20 %
(note: not more than 100%) of:
(X) that portion of the Trust Fund attributable to Employer
Contributions and Forfeitures.
( ) the value of the entire Trust Fund (note: election of
this second option may require the registration of such
securities with the Securities and Exchange
Commission).
With respect to the voting of such Qualifying Employer Securities,
the following entity shall vote such shares (note: select only
one):
(X) the Trustee.
( ) the Participant to whose Account the shares have been
allocated.
( ) the Administrator or, if appointed, the Committee.
SECTION 18. INSURED DEATH BENEFIT.
(X) No life insurance shall be provided under the Plan.
( ) An additional death benefit may be provided through the
purchase of life insurance policies at the election of a
Participant in accordance with Section 8.02 of the Plan.
SECTION 19. JOINT AND SURVIVOR ANNUITY.
(a) Benefits under the Plan ( ) may (X) may not be paid in the form of an
annuity involving life contingencies. (Note: Optional forms of benefit
payment may not be eliminated.)
(b) If benefits may be paid in the form of an annuity, then the Qualified
Joint and Survivor Annuity shall be an annuity with 50% of the annuity
benefit continuing to a Participant's surviving Spouse at the
Participant's death, unless a greater percentage is elected below:
( ) 75% ( ) 100%.
SECTION 20. LIMITATION ON ALLOCATIONS. If you maintain or ever maintained
another qualified plan (other than Paired Plan #003 or #005) in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this Section. You must also complete this Section
if you maintain a welfare
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<PAGE>
benefit fund, as defined in Section 419(e) of the Code, or an individual medical
account as defined in Section 415(1)(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 (note: select only one option):
( ) The provisions of Sections 5.07(b) and (c) of the Plan
will apply as if the other plan were a master or prototype
plan.
( ) The amount of Annual Additions allocated to any Participant's
Accounts under this Plan shall be limited to the Maximum
Permissible Amount, and excess amounts will be properly
reduced, as follows:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
( ) This situation is not applicable.
(b) ( ) If the Participant is or has ever been a Participant in a defined
benefit plan maintained by the Employer (note: select only one
option):
( ) In any Limitation Year, the Annual Additions credited
under this Plan to the Participant may not cause the sum
of the Defined Benefit Fraction and Defined Contribution
Fraction to exceed 1.0. If the Employer's contribution
that would otherwise be made on the Participant's behalf
during the Limitation Year would cause the 1.0 limitation
to be exceeded, the rate of contribution under this Plan
will be reduced so that the sum of the fractions equals
1.0. If the 1.0 limitation is exceeded because of an
Excess Amount, such Excess Amount will be reduced in
accordance with Section 5.07(a)(iv) of the Plan.
( ) The amount of Annual Additions allocated to any
Participant's Accounts under this Plan shall be limited
to the Maximum Permissible Amount, and Excess Amounts will
be properly reduced, as follows:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
( ) This situation is not applicable.
(c) The Limitation Year is the following twelve (12) consecutive month
period:
( ) The Limitation Year selected in Section 1(c).
( ) The twelve (12) consecutive month period ending on
_________________________________________.
SECTION 21. SERVICE WITH PREDECESSOR EMPLOYER. Employment with the following
Predecessor Employer(s) shall be considered Service with the Employer for all
purposes of the Plan. (Note: If the Employer is maintaining a tax-qualified plan
of a Predecessor Employer, that Predecessor Employer must be listed; place an
asterisk (*) after the name of any such Predecessor Employer.):
(X) There are no such predecessor employers.
( ) (1)___________________________________________
(2)___________________________________________
(3)___________________________________________
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SECTION 22. CONTROLLED GROUP MEMBERS. The following employers are Controlled
Group Members:
(X) There are no such employers.
( ) (1)___________________________________________
(2)___________________________________________
(3)___________________________________________
SECTION 23. CONTROLLED GROUP MEMBERS WHO ARE ADOPTING EMPLOYERS. The following
Controlled Group Members have adopted the Plan for which a single Trust Fund may
be used for the investment of the Trust Fund:
(x) There are no such Employers.
( ) (1)___________________________________________
(2)___________________________________________
(3)___________________________________________
SECTION 24. CODA OPTION.
(X) Check here and complete the following provisions if Elective Deferrals
are permitted under this Plan.
Item 1. Employer Contributions Under the CODA Option.
(x) Check here if the Employer may make contributions to the CODA without
regard to current or accumulated earnings and profits for the taxable
year or years ending with or within the Plan Year.
Item 2. Elective Deferrals.
(a) A Participant may elect pursuant to a Salary Reduction Agreement to have
his or her Compensation reduced by the following percentage or amount per
pay period as designated in writing to the Administrator (check the
applicable option and fill in the appropriate blank):
(x) An amount not in excess of 10 % of a Participant's Compensation.
( ) An amount not in excess of $_____ (enter a specified dollar
amount) of a Participant's Compensation.
No Participant shall be permitted to have Elective Deferrals made under
this Plan during any calendar year in excess of $7,000, multiplied by the
Adjustment Factor.
(b) (i) A Participant may elect to commence Elective Deferrals as of
Jan 1 & July 1 (enter at least one date or period during a calendar
year). Such election shall become effective as of the first pay
period following the pay period during which the Participant's
election to commence Elective Deferrals was made, or as soon as
administratively feasible thereafter.
(ii) A Participant's election to have Elective Deferrals made shall
remain in effect until the Salary Reduction Agreement is modified
or terminated. A Participant may (1) modify the amount of Elective
Deferrals as of Jan 1 & July 1 (enter at least one date or period
during a calendar year) or (2) terminate Elective Deferrals at any
time. Such election shall become effective as of the first pay
period following the pay period during which the Participant's
election to modify or terminate Elective Deferrals was made, or as
soon as administratively feasible thereafter.
(c) ( ) Check here if a Participant may amend his salary reduction
agreement to increase the amount of the Compensation reduction for
the last complete payroll period of the Plan Year.
(d) ( ) Check here if a Participant may base Elective Deferrals on cash
bonuses that, at the Participant's election, may be contributed to
the CODA or received by the Participant in cash. A Participant
shall
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<PAGE>
be afforded a reasonable period to elect to defer amounts described
in this subsection (d). Such election shall become effective as of
the first pay period following the pay period during which the
Participant's election to make such Elective Deferrals was made,
or as soon as administratively feasible thereafter.
(e) A Participant shall designate the amount and frequency of his or her
Elective Deferrals in the form and manner specified by the Administrator.
Item 3. Qualified Non-elective Contributions.
(a) The Employer (X) will ( ) will not make Qualified Non-elective
Contributions to the Plan. If the Employer does make such Contributions
to the Plan, then the amount of such Contributions for each Plan Year
shall be (elect one):
( ) an amount equal to ______% (not to exceed 15%) of the
Compensation of all Participants eligible to share in the
allocation.
( ) _____% of the net profits, but in no event more than $__________
for any Plan Year.
(X) an amount as determined by the Employer.
(b) Allocation of Qualified Non-elective Contributions shall be made to the
Accounts of (elect one):
(X) all Participants ( ) only Participants who are Non-highly
Compensated Employees
who (elect one):
( ) are eligible to make Elective Deferrals at any time during the
Plan Year.
(X) are eligible to make Elective Deferrals at any time during the Plan
Year and who satisfy the requirements of Section 8(a) or (c).
(c) Allocation of Qualified Non-elective Contributions shall be made (elect
one):
(X) in the ratio in which each eligible Participant's Compensation for
the Plan Year bears to the total Compensation of all eligible
Participants for such Plan Year.
( ) in the ratio in which each eligible Participant's Compensation
not in excess of $____ for the Plan Year bears to the total
Compensation of all eligible Participants not in excess of $____
for such Plan Year.
(d) In accordance with Section 6.13 of the Plan, allocations of special
Qualified Non-elective Contributions to each Non-highly Compensated
Employee's Account shall be made (elect one)
(X) in the ratio which each Non-highly Compensated Employee's
Compensation for the Plan Year bears to the total Compensation of
all Non-highly Compensated Employees for such Plan Year.
( ) in the ratio in which each Non-highly Compensated Employee's
Compensation not in excess of $_______ for the Plan Year bears
to the total Compensation of all Non-highly Compensated
Employees not in excess of $________ for such Plan Year.
Item 4. Qualified Matching Contributions.
(a) The Employer ( ) will ( X) will not make Qualified Matching Contributions
to the Plan. If the Employer does make such Contributions to the Plan for
a Plan Year, then such contributions shall be made on behalf of (elect
one):
( ) all Participants ( ) all Participants who are Non-highly
Compensated Employees
who make (elect one):
( ) eligible contributions during the Plan Year.
( ) eligible contributions during the Plan Year and who satisfy the
requirements of Section 8(a) or (c).
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(b) "Eligible contributions" shall include (elect one or both)
(X) Elective Deferrals ( ) Employee Contributions
(c) The Employer shall contribute and allocate to each Participant's
Qualified Matching Contributions Account as follows:
( ) an amount equal to ____% of the Participant's eligible
contributions for the Plan Year.
( ) an amount equal to _____% of the Participant's eligible
contributions for the Plan Year up to ____% of the
Participant's Compensation for the Plan Year.
PLUS
an amount equal to ________% (note: must be less than the % first
indicated above) of eligible contributions for the Plan Year which
exceeds ________% of Compensation for the Plan Year but does not
exceed ________% of Compensation for the Plan Year.
( ) an amount to be determined annually by the Employer based on
(optional):
( ) the Participant's eligible contributions not exceeding
________% of the Participant's Compensation for the Plan
Year.
( ) the first $____________ of the Participant's eligible
contributions for the Plan Year.
(d) Qualified Matching Contributions shall be 100% vested when made.
Item 5. Actual Deferral Percentage.
(a) 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
(elect, as appropriate)
( ) 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.
(b) The amount of Qualified Matching Contributions made under Item 4 of this
CODA Option 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
( ) all such Qualified Matching Contributions
( ) such Qualified Matching Contributions that are needed to meet
the Actual Deferral Percentage test stated in Section 6.04 of
the Plan.
(c) The amount of Qualified Non-elective Contributions made under Item 3 of
this Section 24 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
(X) all such Qualified Non-elective Contributions.
( ) such Qualified Non-elective Contributions that are needed to
meet the Actual Deferral Percentage test stated in Section 6.04
of the Plan.
Item 6. Claims for Excess Elective Deferrals. Participants who claim
Excess Elective Deferrals for the preceding taxable year must submit their
claims in writing to the Administrator by ______(SPECIFY A DATE BEFORE APRIL
15).
Item 7. Voluntary Non-deductible Contributions.
( ) Check here and complete the provisions below if Employees may
make Voluntary Non-deductible Contributions to the Plan.
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Voluntary Non-deductible Contributions shall be made
( ) regularly by payroll deduction, and shall share in investment
income for the Plan Year for which made
( ) as determined by the Participant, and shall not share in investment
income for the Plan Year for which made
and shall be
( ) combined with other Plan assets for investment purposes.
( ) invested separately from other Plan assets in an account
consisting of certificates of deposit, money market
certificates, collective investment trusts, other short-term
debt security instruments or any other investments acceptable to
the Trustee.
Item 8. Matching Contributions.
(a) The Employer (X)) will ( ) will not make Matching Contributions to the
Plan. If the Employer does make such Contributions to the Plan for a Plan
Year, then such Contributions shall be made on behalf of (elect one):
(X) all Participants ( ) all Participants who are Non-highly
Compensated Employees
who make (elect one):
( ) eligible contributions during the Plan Year.
(X) eligible contributions during the Plan Year and who satisfy the
requirements of Section 8(a) or (c).
(b) "Eligible contributions" shall include (elect one or both)
(X) Elective Deferrals ( ) Employee Contributions
(c) The Employer shall contribute and allocate to each eligible Participant's
Matching Contributions Account as follows:
( ) an amount equal to ____% of the Participant's eligible
contributions for the Plan Year.
(X) an amount equal to 100% of the Participant's eligible contributions
for the Plan Year up to 4% of the Participant's Compensation for
the Plan Year
PLUS
an amount equal to _________% (note must be less than the % first
indicated above) of eligible contributions for the Plan Year which
exceeds ________% of Compensation for the Plan Year but does not
exceed ________% of Compensation for the Plan Year.
( ) an amount to be determined annually by the Employer based on
(optional):
( ) the Participant's eligible contributions not exceeding
_________% of the Participant's Compensation for the Plan
Year.
( ) the first $_____________ of the Participant's eligible
contributions for the Plan Year.
Item 9. Vesting of Matching Contributions.
(a) Matching Contributions will be vested in accordance with the following
schedule (elect one)
( ) Nonforfeitable when made.
( ) The profit-sharing plan's general vesting schedule, other than that
for Elective Deferrals.
( ) 100% vesting after ___ (not to exceed 5) Years of Vesting Service.
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(X) 20% vesting after 1 Year of Vesting Service.
40% vesting after 2 Years of Vesting Service.
60% (not less than 20) vesting after 3 Years of Vesting Service.
80% (not less than 40) vesting after 4 Years of Vesting Service.
100% (not less than 60) vesting after 5 Years of Vesting Service.
100% (not less than 80) vesting after 6 Years of Vesting Service.
100% vesting after 7 Years of Vesting Service.
If the Plan is Top Heavy pursuant to ARTICLE 13 of the Plan, the vesting
schedule selected in Section 16(b) shall apply.
(b) (X) Check here if Forfeitures of Matching Employer Contributions are to
be applied to reduce the Matching Employer Contributions for the
Plan Year in which such Forfeitures occur.
(Note: If this option is not selected, Forfeitures of Matching Employer
Contributions will be allocated as additional Employer Contributions in
accordance with Section 8.)
Item 10. Average Contribution Percentage.
(a) In computing the Average Contribution Percentage, the Employer shall take
into account, and include as Contribution Percentage Amounts,
(X) Elective Deferrals (X) Qualified Non-elective Contributions
under this Plan or any other plan of the Employer, as provided +by
regulations.
(b) The amount of Qualified Non-elective Contributions that are made under
Item 3 of this CODA Option 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
(X) all such Qualified Non-elective Contributions.
( ) such Qualified Non-elective Contributions that are needed to meet
the Average Contribution Percentage test stated in Section 6.11 of
the Plan.
(c) The amount of Elective Deferrals made under Item 2 of this CODA option
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
(X) all such Elective Deferrals.
( ) such Elective Deferrals that are needed to meet the Average
Contribution Percentage test stated in Section 6.11 of the Plan.
(d) Forfeitures of Excess Aggregate Contributions shall be
(X) applied to reduce Employer Contributions for the Plan Year in which
the Excess arose, but allocated as in the following option, to the
extent the Excess exceeds Employer Contributions or the Employer
has already contributed for such Plan Year.
( ) allocated, after all other Forfeitures under the Plan, to the
Matching Contributions Account of each Non-highly Compensated
Employee who made Elective Deferrals or Employee Contributions in
the ratio which each such Participant's Compensation for the Plan
Year bears to the total Compensation of all such Participants for
such Plan Year.
Item 11. Hardship Distributions.
(X) Check here if the Employer permits distributions of Elective
Deferrals (and earnings thereon accrued as of December 31, 1988) in
the event of hardship. In the event a Participant receives a
hardship distribution:
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(a) the Participant's Elective Deferrals (and Voluntary Non-Deductible
Contributions) will be suspended for twelve (12) months after the
receipt of the hardship distribution, and
(b) the Participant may not make Elective Deferrals for the
Participant's taxable year immediately following the taxable year
of the hardship distribution in excess of the applicable limit
under Section 402(g) of the Code for such taxable year less that
amount of such Participant's Elective Deferrals for the taxable
year of the hardship distribution.
Item 12. Limitations on Contributions. Amounts that are contributed or
allocated to the Accounts of each Participant under the Plan must not, when
aggregated with amounts that are contributed or allocated to the accounts of
each Participant under any other plan or plans in accordance with the provisions
of the underlying Plan document, exceed the applicable limitations on
contributions and allocations as stated in the underlying Plan document and
otherwise required under Section 415 of the Code and the regulations thereunder.
Item 13. Compensation.
(x) Check here if, in addition to Compensation as defined in Section 2.13 of
the Plan, Compensation shall also include Compensation which is not
currently includible in the Participant's gross income by reason of the
application of Section 125, 402(a)(8), 402(h)(l)(B), or 403(b) of the
Code.
Item 14. Look-Back Year.
( ) Check here if the "look-back" year is to be the twelve-month period
immediately preceding the Plan Year for which testing is performed,
pursuant to Section 2.32(1). of the Plan.
( ) Check here if the "look-back year" is to be the calendar year ending with
or within the Plan Year for which testing is being performed, pursuant to
Section 2.32(2) of the Plan.
Item 15. Highly Compensated Employee.
( ) The simplified definition of Highly Compensated Employee in Section 2.32
of the Plan for Employers that maintain significant business activities
(and employ employees) in at least two significantly separate geographic
areas will apply.
The adopting Employer may not rely on an opinion letter issued by the National
Office of the Internal Revenue Service as evidence that this Plan is qualified
under Section 401 of the Internal Revenue Code. In order to obtain reliance with
respect to Plan qualification, the Employer must apply to the appropriate Key
District Office for a determination letter.
This Adoption Agreement may be used only in conjunction with Basic Plan document
#01.
* * * * *
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IN WITNESS WHEREOF, the Employer and the undersigned Trustee(s) have
caused this Adoption Agreement to be executed this 12th day of July, 1994.
THE EMPLOYER:
BankFirst
--------------------------------------------------
ATTEST:
/s/ Vickie T. Mynatt By: /s/ Fred R. Lawson
- ---------------------- -----------------------------------------------
Vickie T. Mynatt Title: President & CEO
--------------------------------------------
ADOPTING EMPLOYER:
BankFirst
--------------------------------------------------
ATTEST:
/s/ Vickie T. Mynatt By: /s/ David Allen
- ---------------------- -----------------------------------------------
Vickie T. Mynatt Title: Senior Vice President--Financial Officer
--------------------------------------------
ADOPTING EMPLOYER:
BankFirst
--------------------------------------------------
ATTEST:
/s/ Vickie T. Mynatt By: /s/ C. Suzi Ray
- ---------------------- -----------------------------------------------
Vickie T. Mynatt Title: Senior Vice President--Human Resources
--------------------------------------------
THE TRUSTEE:
BankFirst
--------------------------------------------------
ATTEST:
/s/ Vickie T. Mynatt By: /s/ Sheila H. Sterling
- ---------------------- -----------------------------------------------
Vickie T. Mynatt Title: Senior Vice President & Trust Officer
--------------------------------------------
THE CUSTODIAN (only if Sponsor named custodian):
--------------------------------------------------
ATTEST:
By:
- ---------------------- -----------------------------------------------
Title:
-------------------------------------------
-20-
<PAGE>
FIRST AMENDMENT TO THE
BANKFIRST PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST
BASIC DOCUMENT #01
- --------------------------------------------------------------------------------
WHEREAS, BankFirst (Sponsor) established the BankFirst Prototype Defined
Contribution Plan and Trust #01 (Prototype Plan); and
WHEREAS, the Sponsor has been expressly delegated the authority by the
adopting Employers of the Prototype Plan to amend the Prototype Plan as the
Sponsor deems necessary or desirable; and
WHEREAS, the Internal Revenue Service, under Revenue Procedure 93-12,
requires that the Prototype Plan be amended to comply with the Unemployment
Compensation Amendments of 1992;
NOW, THEREFORE, the Prototype Plan is hereby amended as follows:
I.
Add to the end of the Prototype Plan new ARTICLE 19 to read as follows:
ARTICLE 19
DIRECT ROLLOVERS
19.01 Election of Direct Rollover. This ARTICLE applies to
distributions made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a
Distributee's election under this ARTICLE, a Distributee may elect, at the
time and in the manner prescribed by the 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.
19.02 Definitions.
(a) Eligible Rollover Distribution: An Eligible Rollover
Distribution is any distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover Distribution does
not include:
(i) 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 expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the Distributee and the Distributee's
Beneficiary, or for a specified period of ten years or more; or
(ii) any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and
-1-
<PAGE>
(iii) 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).
(b) Eligible Retirement Plan: An Eligible Retirement Plan is an
individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code or a qualified trust
described in Section 401(a) of the Code, that accepts the Distributee's Eligible
Rollover Distribution. However, in the case of an Eligible Rollover Distribution
to the surviving spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
(c) Distributee: A Distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are Distributees with regard to the interest of the spouse or
former spouse.
(d) Direct Rollover: A Direct Rollover is a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
II.
The effective date of this First Amendment shall be January 1, 1993.
III.
In all other respects, the Prototype Plan is ratified and confirmed.
* * * * *
-2-
<PAGE>
IN WITNESS WHEREOF, the Sponsor hereby adopts this First Amendment on this
15th day of September, 1993.
THE SPONSOR:
BANKFIRST
-----------------------------------------
ATTEST: By: /s/ Sheila H. Sterling
--------------------------------------
/s/ Rosemary L. Collins Title: Sr. Vice President & Trust Officer
- ---------------------------- -----------------------------------
-3-
<PAGE>
SECOND AMENDMENT TO THE
BANKFIRST
PROTOTYPE DEFINED CONTRIBUTION PLAY AND TRUST
BASIC DOCUMENT #01
- --------------------------------------------------------------------------------
WHEREAS, BankFirst (Sponsor) established the BankFirst Prototype Defined
Contribution Plan and Trust #01 (Prototype Plan), and the Adoption Agreements
for such Prototype Plan having received favorable opinion letters from the
Internal Revenue Service, dated as of May 10, 1990; and
WHEREAS, the Sponsor has been expressly delegated the authority by the
adopting Employers of the Prototype Plan to amend the Prototype Plan as the
Sponsor deems necessary or desirable; and
WHEREAS, the Internal Revenue Service, under Revenue Procedure 94-13,
requires that the Prototype Plan be amended to comply with the Omnibus Budget
Reconciliation Act of 1993 (OBRA '93);
NOW, THEREFORE, the Prototype Plan is hereby amended as follows:
I.
Add to the end of Section 2.13, entitled Compensation, to read as follows:
In addition to other applicable limitations set forth in the plan,
and notwithstanding any other provision of the plan to the contrary, for
plan years beginning on or after January 1, 1994, the annual compensation
of each employee taken into account under the plan shall not exceed the
OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit
is $150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies
to any period, not exceeding 12 months, over which compensation is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the
denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference
in this plan to the limitation under section 401(a)(17) of the Code shall
mean the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the
<PAGE>
compensation for that prior determination period is subject to the OBRA
'93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first plan year beginning on or after January 1, 1994,
the OBRA '93 annual compensation limit is $150,000.
II.
The effective date of this Second Amendment shall be January 1, 1994.
III.
In all other respects, the Prototype Plan is ratified and confirmed.
* * * * *
-2-
<PAGE>
IN WITNESS WHEREOF, the Sponsor hereby adopts the Second Amendment on this
15th day of June, 1994.
THE SPONSOR:
BANKFIRST
ATTEST: By: /s/ Sheila H. Sterling
--------------------------------------
/s/ [ILLEGIBLE] Title: Sr. Vice President & Trust Officer
- ---------------------------- -----------------------------------
-3-
<PAGE>
THIRD AMENDMENT TO THE
BANKFIRST
PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST
BASIC DOCUMENT #01
- --------------------------------------------------------------------------------
WHEREAS, BankFirst (Sponsor) established the BankFirst Prototype Defined
Contribution Plan and Trust #01 (Prototype Plan), and the Adoption Agreements
for such Prototype Plan having received favorable opinion letters from the
Internal Revenue Service, dated as of May 10, 1990; and
WHEREAS, the Sponsor has been expressly delegated the authority by the
adopting Employers of the Prototype Plan to amend the Prototype Plan as the
Sponsor deems necessary or desirable; and
WHEREAS, the Internal Revenue Service, under Revenue Procedure 9347,
requires that the Prototype Plan be amended to reflect the modifications made by
Notice 93-26, 1993-18 L.R.B. 11, to the 30-day notice requirement under Section
1.411(a)-11(c) of the Income Tax Regulations;
NOW, THEREFORE, the Prototype Plan is hereby amended as follows:
I.
Add a new paragraph to the end of Section 10.03(a), entitled Restrictions
on Immediate Distribution, to read as follows:
If a distribution is one to which Sections 401(a)(11) and 417 of the
Code do not apply, such distribution may commence less than 30 days after
the notice required under Section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the plan administrator clearly informs the participant
that the participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether or
not to elect a distribution (and, if applicable, a particular
distribution option), and
(2) the participant, after receiving the notice, affirmatively
elects a distribution.
<PAGE>
II.
The effective date of this Third Amendment shall be January 1, 1994.
III.
In all other respects, the Prototype Plan is ratified and confirmed.
* * * * *
-2-
<PAGE>
IN WITNESS WHEREOF, the Sponsor hereby adopts this Third Amendment on this
10th day of October, 1995.
THE SPONSOR:
BANKFIRST
ATTEST: By: /s/ Sheila H. Sterling
--------------------------------------
/s/ Mary Jane Disney Title: Sr. Vice President & Trust Officer
- ---------------------------- -----------------------------------
-3-
<PAGE>
BANKFIRST
BOARD RESOLUTION
May 12,1998
Merger of Curtis Mortgage Company Profit Sharing
Plan into BankFirst 401(k) Profit Sharing Plan
WHEREAS, in connection with the acquisition by BankFirst of Curtis Mortgage
Company, staff and counsel have proposed that the Curtis Mortgage Company Plan
be merged into the BankFirst 401(k) Profit Sharing Plan upon the completion of
satisfactory due diligence review of the Curtis Mortgage Plan.
WHEREAS, the intention and purpose of the merger is to preserve all account
balances and benefits and rights under the Curtis Mortgage Company Plan with
respect to the merger of these accounts into the BankFirst 401(k) Profit Sharing
Plan, as required by IRS Regs. 1.414(1)-1;
RESOLVED, the Board of Directors hereby approves the merger into the BankFirst
401(k) Profit Sharing Plan of the Curtis Mortgage Company Plan, effective as of
June 1, 1998, pursuant to the general terms of the Merger Agreement, a copy of
which is attached hereto as Exhibit II; and authorizes and directs the President
or his designee to complete the due diligence review, and subject to such
amendments as he deems appropriate or necessary, to execute the Merger Agreement
on behalf of BankFirst and to take all actions necessary or appropriate to put
the Merger Agreement into full force and effect.
Vickie L. Mynatt
---------------------------
Secretary
May 12, 1998
---------------------------
Date
<PAGE>
CURTIS MORTGAGE COMPANY, INC.
BOARD RESOLUTION
A meeting of the Board of Directors was held at the office of BankFirst on April
13, 1998.
All Directors were present.
Upon motion duly made, seconded and unanimously adopted, the following
resolutions were enacted:
Freeze of Contributions to Curtis Mortgage Company, Inc. Profit Sharing Plan
WHEREAS, Curtis Mortgage Company, Inc., sponsors the Curtis Mortgage
Company, Inc. Profit Sharing Plan ("Plan"); and
WHEREAS, due to the acquisition of Curtis Mortgage by BankFirst and the
consolidation of their employee retirement plans, the President has recommended
that it is in the best interest of Curtis Mortgage Company, Inc. to freeze
Employee and Employer contributions to the Plan as of February 28, 1998, being
the date Curtis Mortgage eligible employees became participants in the BankFirst
401(k) Plan;
RESOLVED, THAT Curtis Mortgage Company, Inc. hereby approves and adopts an
amendment to the Plan in substantially such form as is attached hereto as
Exhibit I, which amendment, upon execution by Curtis Mortgage Company, Inc.,
confirms and ratifies the freeze of all Employer and Employee contributions to
the Plan as of February 28, 1998.
FURTHER RESOLVED, that the President of Curtis Mortgage Company, Inc. be,
and hereby is, authorized and directed to execute and deliver the amendment to
the Plan in substantially such form as is attached hereto as Exhibit I.
Appointment of BankFirst as Successor Trustee of Profit Sharing Plan
RESOLVED, that the resignation or removal of SunTrust Bank, Knoxville, as
Trustee of the Curtis Mortgage Company, Inc. Profit Sharing Plan, effective as
of April 1, 1998, should be accepted, ratified and confirmed;
FURTHER RESOLVED, that the appointment of BankFirst as Trustee of the
Curtis Mortgage Company, Inc. Profit Sharing Plan, is hereby approved, ratified
and confirmed, effective as of April 1, 1998;
FURTHER RESOLVED, that the President is authorized and directed to take
all actions necessary or appropriate to put the foregoing resolutions into full
force and effect, and his prior actions are hereby ratified and endorsed.
<PAGE>
Transfer of Curtis Mortgage Company. Inc. Profit Sharing Plan into BankFirst
401(k) Profit Sharing Plan.
WHEREAS, in connection with the acquisition of Curtis Mortgage Company,
Inc. by BankFirst, staff and counsel have proposed that the Curtis Mortgage
Company, Inc. Profit Sharing Plan be merged into the BankFirst 401(k) Profit
Sharing Plan; and
WHEREAS, the intention and purpose of the merger is to preserve all
account balances and benefits and rights under the Curtis Mortgage Company, Inc.
Profit Sharing Plan with respect to the merger of the Curtis Mortgage Plan into
the BankFirst 401(k) Profit Sharing Plan, as required by IRS Regs. 1.414(1)-1;
RESOLVED, the Board of Directors hereby approves the merger of the Curtis
Mortgage Company, Inc. Plan into the BankFirst 401(k) Profit Sharing Plan,
effective as of June l, 1998, pursuant generally to the terms of the Merger
Agreement, a copy of which is attached hereto as Exhibit II; and authorizes and
directs the President or his designee to agree to such appropriate or necessary
terms and to execute the Merger Agreement on behalf of Curtis Mortgage and to
take all actions necessary or appropriate to put the Merger Agreement into full
force and effect.
There being no further business, the meeting was adjourned.
Leslie Ruhm
-----------------------
Secretary
<PAGE>
RESIGNATION OF OFFICE OF TRUSTEE
CURTIS MORTGAGE COMPANY, INC. PROFIT SHARING PLAN
The undersigned, Trustee of Curtis Mortgage Company, Inc., Profit Sharing Plan
(Plan), does hereby give notice of resignation as Trustee as provided under the
Plan. This resignation is effective April 1, 1998.
Dated this 1st day of April, 1998.
SunTrust Bank, Knoxville, Trustee
By: [ILLEGIBLE]
---------------------------------
Its: Vice President
Subscribed and sworn to before me this 16th day of April, 1998
[ILLEGIBLE]
---------------------------------
Notary Public
My commission expires: 3/3/99
ACCEPTANCE OF RESIGNATION
Curtis Mortgage Company, Inc., Employer-sponsor of the Curtis Mortgage Company,
Inc., Profit Sharing Plan, does accept, pursuant to the Plan, the resignation of
SunTrust Bank, Knoxvillle as Trustee and hereby waives the requirement of
written notice of resignation.
Dated this 1st day of April, 1998.
Curtis Mortgage Company, Inc.
By: William Curtis
---------------------------------
Its: Pres/Chairman
<PAGE>
APPOINTMENT OF TRUSTEE
CURTIS MORTGAGE COMPANY, INC. PROFIT SHARING PLAN
Curtis Mortgage Company, Inc., Employer Sponsor of Curtis Mortgage Company, Inc.
Profit Sharing Plan (Plan), in accordance with the Plan, appoints BankFirst as
the Trustee of the Plan effective as of April 1st, 1998.
EMPLOYER:
Curtis Mortgage Company, Inc.
By: William Curtis
---------------------------------
Its: Pres/Chairman
ACCEPTANCE OF OFFICE OF TRUSTEE
The undersigned accepts the above appointment to the office of Successor Trustee
of the Curtis Mortgage Company, Inc. Profit Sharing Plan (Plan), and agrees to
all of the obligations, responsibilities and duties imposed upon the Trustee
under the Plan and Trust Agreement, effective April 1, 1998.
Dated this 1st day of April, 1998.
BANKFIRST, TRUSTEE
By: Randy Baker
---------------------------------
Its: Sr VP - TO
Subscribed and sworn to before me 14th day of April, 1998.
Beth A. Hodge
---------------------------------
Notary Public
My commission expires: 02-02-2002
<PAGE>
EXHIBIT I
CURTIS MORTGAGE COMPANY, INC. PROFIT SHARING PLAN
FREEZE AMENDMENT
This Freeze Amendment to the Curtis Mortgage Company, Inc. Profit Sharing Plan
is effective as of March 1, 1998, by Curtis Mortgage Company, Inc. (Employer).
RECITALS
WHEREAS, Curtis Mortgage Company, Inc. maintains the Curtis Mortgage
Company, Inc. Profit Sharing Plan (the "Plan");
WHEREAS, due to the acquisition of Curtis Mortgage by BankFirst and the
consolidation of their employee retirement plans, the Employer deems it
desirable to freeze Employee and Employer contributions to the Plan, effective
after February 28, 1998; and
WHEREAS, eligible Employees of Employer begin participation in the
BankFirst 401(k) Plan as of March 1, 1998;
NOW THEREFORE, effective as of March 1, 1998, in accordance with the
provisions of the Plan pertaining to amendments thereof, Curtis Mortgage
Company, Inc. hereby amends the Plan to provide as follows:
Freeze Amendment
The Curtis Mortgage Company, Inc. Profit Sharing Plan is hereby amended to
freeze the Plan, effective as of the close of business February 28, 1998, such
that no contributions shall be made or accrue to the Plan by Curtis Mortgage
Company, Inc. or its employees from and after said date. The Plan shall continue
to credit earnings or losses to Participant's accounts.
IN WITNESS WHEREOF, Curtis Mortgage Company, Inc. has caused this Freeze
Amendment to be executed as of the day and year first above written.
CURTIS MORTGAGE COMPANY, INC.
By: William Curtis
---------------------------------
Its: President
<PAGE>
EXHIBIT II
MERGER AGREEMENT
BETWEEN THE TRUSTEES OF THE
BANKFIRST 401(k) PROFIT SHARING PLAN
AND
CURTIS MORTGAGE COMPANY, INC. PROFIT SHARING PLAN
BankFirst ("BankFirst Trustee") makes this Qualified Plan Merger Agreement
("Merger Agreement") in its capacity as Trustee of the BankFirst 401(k) Profit
Sharing Plan ("BankFirst Plan"), with Bankfirst ("Curtis Mortgage Trustee") in
its capacity as Trustee of the Curtis Mortgage Company, Inc. Profit Sharing Plan
("Curtis Plan").
W I T N E S S E T H:
WHEREAS, BankFirst acquired Curtis Mortgage Company, Inc. ("Curtis
Mortgage") and both parties are now members of the same control group of
corporations for Internal Revenue Code employee benefit purposes; and
WHEREAS, BankFirst sponsors the BankFirst Plan and Curtis Mortgage
sponsors the Curtis Mortgage Plan; and
WHEREAS, the parties wish to merge the qualified plan assets and benefit
obligations of the Curtis Mortgage Plan into the BankFirst Plan;
WHEREAS, under the BankFirst Plan and the Curtis Mortgage Plan, the
Trustee of each Plan has specific authority to enter into Merger Agreements and
to accept the transfer of Plan assets, or to transfer Plan assets, as a party to
any such agreement; and
WHEREAS, the Trustees and the respective Employers deem it in the best
interest of the administration of the BankFirst Plan and the Curtis Mortgage
Plan to merge the Curtis Mortgage Plan into the BankFirst Plan; and
NOW THEREFORE, for and in consideration of the premises, the BankFirst
Trustee, acting in its respective capacity on behalf of the BankFirst Plan, and
the Curtis Mortgage Trustee, acting in its respective capacity on behalf of the
Curtis Mortgage Plan, hereby agrees as follows:
(1) TRANSFER OF ASSETS. The Curtis Mortgage Trustee shall transfer and
assign directly to the BankFirst Trustee all Curtis Mortgage Plan assets and
associated benefit obligations under the Curtis Plan into the BankFirst Plan.
(2) HOLDING AND INVESTMENT OF ASSETS. The BankFirst Plan Trustee shall
hold, invest, administer and distribute the Curtis Mortgage Plan Assets merged
into the BankFirst Plan in accordance with the terms of the BankFirst Plan.
<PAGE>
Merger Agreement of
Curtis Mortgage Company, Inc. Profit Sharing Plan into
BankFirst 401(k) Profit Sharing Plan
Page 2
(3) SERVICE FOR PREDECESSOR EMPLOYER. For purposes of eligibility,
participation, vesting and benefit accrual under the BankFirst Plan, all Curtis
Mortgage Employees, in accordance with Code ss.ss. 414(a)(1) and 414(1)(1),
receive credit for years of service with Curtis Mortgage under the BankFirst
Plan.
(4) PARTICIPANTS' ACCOUNTS. With respect to the account balance of any
Curtis Mortgage Plan Participant under the BankFirst Plan, the following
conditions shall apply:
(a) Immediately after the merger' Curtis Mortgage Employees shall
have balances in the BankFirst Plan equal to the sum of the account balances the
Employees had in the Curtis Mortgage Plan and in the BankFirst Plan immediately
prior to the transfer;
(b) The transfer of the Accounts shall not eliminate any Code ss.
411(d)( 6) protected benefit provided by the Curtis Mortgage Plan; and
(c) Unless and until the Employees' Accounts under the BankFirst
Plan are 100% nonforfeitable, the BankFirst Trustee shall maintain separate
accounts for the Curtis Mortgage Employees to reflect properly the different
percentages of vesting the Curtis Mortgage Employees may have in their Accounts
after the direct transfer. Curtis Mortgage Employees shall vest in their
BankFirst assets based on service with both BankFirst and Curtis Mortgage.
(5) BINDING EFFECT. The terms and conditions of this Merger Agreement
shall bind the Trustees (and successors) of the BankFirst Plan and of the Curtis
Mortgage Plan and shall operate as if fully set forth within the BankFirst Plan
and within the Curtis Mortgage Plan.
(6) EFFECTIVE DATE. The merger of the account balances of the Curtis
Mortgage Plan into the BankFirst Plan shall take place as soon as practical on
or after June 1, 1998.
<PAGE>
Merger Agreement of
Curtis Mortgage Company, Inc. Profit Sharing Plan into
BankFirst 401(k) Profit Sharing Plan
Page 3
IN WITNESS WHEREOF, the BankFirst Trustee has signed the Agreement in its
respective fiduciary capacity on behalf of the BankFirst Plan and the Curtis
Mortgage Trustee has signed this Agreement in its respective fiduciary capacity
on behalf of the Curtis Mortgage Plan on this 13th day of April, 1998
BankFirst 401(k) Profit Sharing Plan
Trustee, BankFirst
By: Randy Baker
------------------------------------------
Its: Senior Vice President - Trust Officer
Curtis Mortgage Company, Inc. Profit
Sharing Plan Trustee, BankFirst
By: William Curtis
------------------------------------------
Its: Pres/Chairman
Merger Agreement Approved as to Form and Purpose
BankFirst Curtis Mortgage Company, Inc.
By: Fred R. Lawson By: William Curtis
- ------------------------------ ------------------------------
Its: President Its: Pres/Chairman
<PAGE>
SMOKY MOUNTAIN BANCORP, INC. (CORPORATION)
ACTION OF BOARD OF DIRECTORS
March 20 ,1997
CERTIFICATE OF BOARD ACTION
The undersigned, being the President of the Corporation, hereby certifies that
the Board of Directors of the Corporation adopted the following actions at a
duly called meeting of the Board of Directors of the Corporation, at which a
quorum was present, and that such action has not been rescinded and is still in
full force and effect.
Amendment of the First National Bank of Gatlinburg 401(k) Profit Sharing Plan
(Plan) and Merger of Plan into
BankFirst 401(k) Plan
WHEREAS, Corporation maintains the Plan, originally adopted January 1, 1995, for
the benefit of employees of First National Bank of Gatlinburg; and
WHEREAS, it is anticipated that First National Bank of Gatlinburg will merge
with BankFirst on or about March 2l, 1997; and
WHEREAS, the Corporation has determined that it is in the best interests of the
Corporation and the Plan Participants for eligible employees to participate in
the existing BankFirst 401(k) Profit Sharing Plan and for the Corporation to
amend this Plan, effective April 1, 1997, and subject to the completion of the
merger of First National Bank of Gatlinburg and BankFirst, to freeze the Plan to
the accrual of additional contributions and benefits; and to merge the Plan into
the BankFirst 401(k) Profit Sharing Plan effective April 1, 1997, while
maintaining separate accounts for the Plan funds;
RESOLVED, that the Board of Directors hereby approves and adopts: (1) the First
Amendment of the Plan, consistent with all other and other requirements of
applicable laws, to freeze further accrual of contributions or benefits under
the Plan, effective April 1, 1997, subject to the completion of the contemplated
corporate merger; and (2) the Merger and Transfer Agreement for the merger of
the Plan into the BankFirst Plan, consistent with all IRS and ERISA requirements
as set out in that Agreement, effective April 1, 1997;
RESOLVED FURTHER, that the President of the Corporation or his designee is
hereby authorized and directed to execute and deliver the First Amendment and
the Merger Agreement to carry out the purposes of the foregoing resolution; and
to take such steps necessary to carry the foregoing resolution into full force
and effect, including notifying employees of the changes.
IN WITNESS WHEREOF, I have executed this instrument as of the date first written
above.
/s/ Fred R. Lawson
- ------------------------
President
<PAGE>
BANKFIRST 401(k) PROFIT SHARING PLAN
FIRST AMENDMENT TO 401(k) PLAN ADOPTION AGREEMENT
The undersigned, BANKFIRST, Knoxville, Tennessee, the Signatory Employer,
hereby adopts this First Amendment to the BankFirst 401(k) Profit Sharing Plan
Adoption Agreement, as amended and restated effective July 1, 1994 ("Plan").
WITNESSETH:
WHEREAS the Signatory Employer and First National Bank of Gatlinburg have
agreed to merge, subject to the fulfillment of certain conditions, effective on
or about March 2l, 1997 (the actual date of such merger hereinafter being
referred to as the Merger Date); and
WHEREAS the parties and the respective Trustees have agreed to merge the
First National Bank of Gatlinburg 401(k) Profit Sharing Plan into the Plan
effective April 1, 1997; and
WHEREAS the Signatory Employer wishes eligible employees of First National
Bank of Gatlinburg to be eligible to participate in the Plan, to enter the Plan
and elect to commence Elective Deferrals on April 1, 1997, following the Merger
Date, with credit for any Service with First National Bank of Gatlinburg being
credited for all purposes under the Plan; and
WHEREAS the Signatory Employer reserved the right in Article 17 of the
Plan Document to amend the Plan from time to time;
NOW THEREFORE, this First Amendment to the Adoption Agreement amends the
Plan, effective as of the Merger Date, as follows:
1. The attached page 13 is substituted for the same numbered page in the
Adoption Agreement.
2. Transfer Accounts shall be maintained for contributions and earnings
(losses) accrued under the former First National Plan pursuant to the
Merger and Transfer of Assets Agreement.
3. Section 5(d) is amended to include the following additional provision:
Each Employee on the Merger Date who meets the eligibility conditions of
Section 5(b) with Service which includes at least one Hour of Service with
First National Bank of Gatlinburg shall enter the Plan as of April 1,
1997. After April 1, 1997, the Entry Dates for the Plan shall be July 1
and January 1 of each year.
4. Section 24(b)(i) is amended to include the following additional provision:
Each Employee who enters the Plan as of April 1, 1997, may elect to
commence Elective Deferrals as of April 1, 1997. After April 1, 1997,
Participants may elect to commence Elective Deferrals as of July 1 and
January 1 of each year.
<PAGE>
Adoption Agreement
Page 2
5. All other provisions of the Plan not hereby specifically amended by this
First Amendment shall remain in full force and effect.
6. If for any reason the anticipated Merger does not occur, this First
Amendment shall be null and void and of no force or effect.
IN WITNESS WHEREOF, the undersigned have executed this First Amendment as
of this March , 1997.
SIGNATORY EMPLOYER:
BANKFIRST
By: Fred R. Lawson
---------------------------------------
Its: President
TRUSTEE:
BANKFIRST
By: Sheila H. Sterling
Its: Sr. Vice President & First Officer
Attachment - Adoption Agreement Page 13
<PAGE>
benefit fund, as defined in Section 419(e) of the Code, or an individual medical
account, as defined in Section 415(1)(2) of the Code, under which amount
[ILLEGIBLE] 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 (note: select only one option):
( ) The provisions of Sections 5.07(b) and (c) of the Plan will
apply as if the other plan were a master or prototype plan.
( ) The amount of Annual Additions allocated to any
Participant's Accounts under this Plan shall be limited to the
Maximum Permissible Amount, and excess amounts will be
properly reduced, as follows:
______________________________________________________________
______________________________________________________________
______________________________________________________________
( ) This situation is not applicable.
(b) ( ) If the Participant is or has ever been a Participant in a defined
benefit plan maintained by the Employer (note: select only one
option):
( ) In any Limitation Year, the Annual Additions credited under
this Plan to the Participant may not cause the sum of the
Defined Benefit Fraction and Defined Contribution Fraction to
exceed 1.0. If the Employer's contribution that would
otherwise be made on the Participant's behalf during the
Limitation Year would cause the 1.0 limitation to be exceeded,
the rate of contribution under this Plan will be reduced so
that the sum of the fractions equals 1.0. If the 1.0
limitation is exceeded because of an Excess Amount, such
Excess Amount will be reduced in accordance Section
5.07(a)(iv) of the Plan.
( ) The amount of Annual Additions allocated to any
Participant's Accounts under this Plan shall be limited to the
Maximum Permissible Amount, and Excess Amounts will be
properly reduced, as follows:
______________________________________________________________
______________________________________________________________
______________________________________________________________
( ) This situation is not applicable.
(c) The Limitation Year is the following twelve (12) consecutive month period:
( ) The Limitation Year selected in Section 1(c).
( ) The twelve (12) consecutive month period ending on__________________
SECTION 21. SERVICE WITH PREDECESSOR EMPLOYER Employment with the following
Predecessor Employer(s) shall be considered Service with the Employer for all
purposes of the Plan. (Note: If the Employer is maintaining a tax-qualified plan
of a Predeccessor Employer, that Predecessor Employer must be listed; place an
asterisk (*) after the name of any such Predecessor Employer.):
( ) There are no such predecessor employers.
(XX) (1) First Heritage Bank
(2) First National Bank of Gatlinburg
(3) _____________________________________________________________
-13-
<PAGE>
FIRST NATIONAL BANK OF GATLINBURG 401(k) PROFIT SHARING PLAN
FIRST AMENDMENT TO 401(k) PLAN ADOPTION AGREEMENT
The undersigned, Smoky Mountain Bancorp, Knoxville, Tennessee, the
Signatory Employer, hereby adopts this First Amendment to the First National
Bank of Gatlinburg 401(k) Profit Sharing Plan Adoption Agreement, originally
effective January 1, 1995 ("PIan").
W I T N E S S E T H:
WHEREAS BankFirst, Knoxville, Tennessee, and First National Bank of
Gatlinburg have agreed to merge, subject to the fulfillment to certain
conditions, effective on or about March 21, 1997 (the actual date of such Merger
hereinafter being referred to as the Merger Date); and
WHEREAS subject to the completion of the merger, the Signatory Employer
wishes to freeze accrual of additional contributions and benefits under the
Plan, effective on and after April 1, 1997; and
WHEREAS the Signatory Employer reserved the right in Article XIII of the
Plan Document to amend the Plan from time to time;
NOW THEREFORE, this First Amendment to the Adoption Agreement amends the
Plan, effective as of the Merger Date, as follows:
1. No additional Employee Elective Deferrals shall be permitted to the Plan
with respect to Compensation accrued or earned on or after April 1, 1997.
The attached pages 7 and 8 are substituted for the same numbered pages in
the Adoption Agreement.
2. All other provisions of the Plan not hereby specifically amended by this
First Amendment shall remain in full force and effect.
3. If for any reason the anticipated Merger does not occur, this First
Amendment shall be null and void and of no force or effect.
IN WITNESS WHEREOF, the undersigned have executed this First Amendment as
of March 20, 1997.
SMOKY MOUNTAIN BANCORP, INC.
By: Fred R. Lawson
-----------------------------------
Its: President
Attachment - Adoption Agreement Pages 7 and 8
<PAGE>
(3) Following a re-election to participate, the Employee or Participant:
[N/A] (i) May not again elect not to participate for any subsequent Plan Year.
[N/A] (ii) May again elect not to participate, but not earlier than the Plan
Year following the Plan Year in which the re-election first was
effective.
(4) Specify N/A [Insert "N/A" if no other rules apply].
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
Part I. [Options (a) through (g)] Amount of Employer's contribution. The
Employer's annual contnbution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this Section
3.01. (Choose any combination of (a) (b), (c) and (d), or choose (e))
[N/A] (a) Deferral contributions (Code ss.401(k) arrangement). (Choose (1) or
(2) or both)
[N/A] (1) Salary reduction arrangement. The Employer must contribute the
amount by which the Participants have reduced their Compensation for
the Plan Year pursuant to their salary reduction agreements on file
with the Advisory Cornmittee. A reference in the Plan to salary
reduction contributions is a reference to these amounts.
[N/A] (2) Cash or deferred arrangement. The Employer will contribute on
behalf of each Participant the portion of the Participant's
proportionate share of the cash or deferred contribution which he
has not elected to receive in cash. See Section 14.02 of the Plan.
The Employer's cash or deferred contribution is the amount the
Employer may from time to time deem advisable which the Employer
designates as a cash or deferred contribution prior to making that
contribution to the Trust.
[N/A] (b) Matching contributions. The Employer will make matching
contributions in accordance with the formula(s) elected in Part II
of this Adoption Agreement Section 3.01.
[N/A] (c) Designated qualified nonelective contributions. The Employer, in.
its sole discretion, may contribute an amount which it designates as
a qualified nonelective contribution.
[N/A] (d) Nonelective contributions. (Choose any combination of (1)
through(4))
[N/A] (1) Discretionary contribution. The amount (or additional amount)
the Employer may from time to time deem advisable.
[N/A] (2) The amount (or additional amount) the Employer may from time to
time deem advisable, separately determined for each of the following
classifications of Participants: (Choose (i) or (ii))
[N/A] (i) Nonhighly Compensated Employees and Highly Compensated
Employees.
[N/A] (ii) (Specify classifications)_______________________________.
Under this Option (2), the advisory Committee will allocate the
amount contributed for each Participant classification in accordance
with Part II of Adoption Agreement Section 3.04, as if the
Participants that classification were the only Participants in the
Plan.
7
<PAGE>
[N/A] (3) __% of the Compensation of all Participants under the Plan,
determined for the Employer's taxable year for which it makes the
contribution. [Note: The percentage selected may not exceed 15%.]
[N/A] (4) ___% of Net Profits but not more than $________________.
[X] (e) Frozen Plan. This Plan is a frozen Plan effective after March 31, 1997.
The Employer will not contribute to the Plan with respect to any period
following the stated date.
Net Profits. The Employer: (Choose (f) or (g))
[X] (f) Need not have Net Profits to make its annual contribution under this
Plan.
[N/A] (g) Must have current or accumulated Net Profits exceeding $____ to make
the following contributions: (Choose at least one)
[N/A] (1) Cash or deferred contributions described in Option (a)(2).
[N/A] (2) Matching contributions described in Option (b), except:
__________.
[N/A] (3) Qualified nonelective contributions described in Option (c).
[N/A] (4) Nonelective contributions described in Option (d).
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. The term "Net Profits" specifically
excludes ___________________________________________________________[Note: Enter
"N/A" if no exclusions apply.]
If the Employer requires Net Profits for matching contributions and the Employer
does not have sufficient Net Profits under Option (g), it will reduce the
matching contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced contribution will be the same
rate as the matching contribution the Participant would have received if Net
Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this Adoption
Agreement, each participating member will determine Net Profits separately but
will not apply this reduction unless, after combining the separately determined
Net Profits, the aggregate Net Profits are insufficient to satisfy the matching
contribution liability. "Net Profits" includes both current and accumulated Net
Profits.
Part II. [Options (h) through (J)] Matching contribution formula. [Note: if the
Employer elected Option (b), complete Options (h), (i) and (j).]
[X] (h) Amount of matching contributions. For each Plan Year, the Employer's
matching contribution is: (Choose any combination of (1), (2), (3),
(4) and (5))
[N/A] (1) An amount equal to ___% of each Participant's eligible
contributions for the Plan Year.
{N/A] (2) An amount equal to ___% of each Participant's first tier
of eligible contributions for the Plan Year, plus the
following matching percentage(s) for the following subsequent
tiers of eligible contributions for the Plan
____________________________________________________.
8
<PAGE>
BANKFIRST 401(k)
PROFIT SHARING PLAN
Amendment to Adoption Agreement
(IRS Model Amendments)
The Employer, BankFirst, hereby adopts this Amendment to the BankFirst
401(k) Profit Sharing Plan.
WITNESSETH
WHEREAS the IRS has provided for mode amendments with respect to the
Uniformed Services Employment and Reemployment Act of 1994 and for other
required document maintenance provisions on profit sharing plan mergers with
money purchase plans
NOW THEREFORE the Plan is hereby amended as follows:
1. Rev. Rul. 94-76 Model Amendment. This Section 1 is effective on the first
day of the first Plan Year beginning on or after December 12, 1994, or, if
later, March 12, 1995. Notwithstanding any provision of this Plan to the
contrary, to the extent that any optional form of benefit under this Plan
permits a distribution prior to the Employee's retirement, death,
disability, or severance from employment, and prior to plan termination,
the optional form of benefits is not available with respect to benefits
attributable to assets (including the post-transfer earnings thereon) and
liabilities that are transferred, within the meaning of Code ss. 414(1) to
this Plan from a money purchase pension plan qualified under Code ss.
401(a) (other than any portion of those assets and liabilities
attributable to voluntary Employee contributions).
2. USERRA Model Amendment. This Section 2 is effective as of December 12,
1994. Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with Code ss. 4 14(u).
Loan repayments will be suspended under this Plan as permitted under Code
ss. 414(u)(4).
3. Except as specifically amended herein, the other provisions of the Plan
shall continue in full force and effect.
IN WITNESS WHEREOF a duly authorized officer of the Employer has executed
this Amendment as of this 22 day of May, 1997.
BANKFIRST
By: Fred R. Lawson
------------------------------
Its: President
<PAGE>
SUMMARY OF MATERIAL MODIFICATIONS
Employer: BankFirst
Address: 625 Market Street
Knoxville, Tennessee 37901
EIN: 62-0201360
Plan Name: BankFirst 401(k) Profit Sharing Plan
Plan Number: 002
Change: Subject to the completion of the merger, the Plan has
been amended effective as of the date of the merger of
First National Bank of Gatlinburg into BankFirst, on or
about March 2l, 1997, to provide that service with First
National Bank of Gatlinburg shall count for all purposes
as service under the Plan, and that all employees with
at least one hour of service with First National Bank of
Gatlinburg who are eligible under the terms of the Plan
to participate in the Plan shall enter the Plan as of
April 1, 1997, and may elect to begin Elective Deferrals
as of that date.
The former First National Bank of Gatlinburg 401(k)
Profit Sharing Plan has been merged into the BankFirst
Plan. All contributions to and earnings (losses) on
Participant's First National Plan accounts are held in
separate transfer accounts subject to the distribution,
payment features, vesting and other requirements of the
former First National Plan.
Plan
Administrator: The Employer is the Plan Administrator. Employees with
questions may contact C. Suzi Ray at (423) 595-1100.
<PAGE>
BANKFIRST 401(K) PROFIT SHARING PLAN
SUMMARY PLAN DESCRIPTION
TABLE OF CONTENTS
I
INTRODUCTION TO YOUR PLAN
II
GENERAL INFORMATION ABOUT YOUR PLAN
1. GENERAL PLAN INFORMATION ................................................ 1
2. EMPLOYER INFORMATION .................................................... 2
3. PLAN ADMINISTRATOR INFORMATION .......................................... 2
4. PLAN TRUSTEE INFORMATION ................................................ 2
5. SERVICE OF LEGAL PROCESS ................................................ 3
III
PARTICIPATION IN YOUR PLAN
1. ELIGIBILITY REQUIREMENTS ................................................ 3
2. PARTICIPATION REQUIREMENTS .............................................. 3
IV
CONTRIBUTIONS TO YOUR PLAN
1. EMPLOYER CONTRIBUTIONS TO THE PLAN ...................................... 4
<PAGE>
2. PARTICIPANT SALARY REDUCTION ELECTION ................................... 5
3. YOUR SHARE OF EMPLOYER CONTRIBUTIONS .................................... 6
4. COMPENSATION ............................................................ 6
5. FORFEITURES ............................................................. 7
6. TRANSFERS FROM QUALIFIED PLANS (ROLLOVERS)
V
BENEFITS UNDER YOUR PLAN
1. DISTRIBUTION OF BENEFITS UPON NORMAL RETIREMENT ........................ 7
2. DISTRIBUTION OF BENEFITS UPON LATE RETIREMENT .......................... 7
3. DISTRIBUTION OF BENEFITS UPON DEATH .................................... 8
4. DISTRIBUTION OF BENEFITS UPON DISABILITY ............................... 8
5. DISTRIBUTION OF BENEFITS UPON TERMINATION OF EMPLOYMENT ................ 9
6. VESTING IN YOUR PLAN ................................................... 9
7. BENEFIT PAYMENT OPTIONS ................................................ 9
8. HARDSHIP DISTRIBUTION OF BENEFITS ...................................... 10
9. TREATMENT OF DISTRIBUTIONS FROM YOUR PLAN .............................. 11
10. DOMESTIC RELATIONS ORDER .............................................. 11
11. PENSION BENEFIT GUARANTY CORPORATION .................................. 12
VI
YEAR OF SERVICE RULES
1. YEARS OF SERVICE AND HOURS OF SERVICE .................................. 12
2. 1 - YEAR BREAK IN SERVICE .............................................. 13
<PAGE>
VII
YOUR PLAN'S "TOP HEAVY RULES"
1. EXPLANATION OF "TOP HEAVY RULES" ....................................... 13
VIII
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
1. THE CLAIMS REVIEW PROCEDURE ............................................ 14
IX
STATEMENT OF ERISA RIGHTS
1. EXPLANATION OF YOUR ERISA RIGHTS ....................................... 15
X
AMENDMENT AND TERMINATION OF YOUR PLAN
1. AMENDMENT .............................................................. 16
2. TERMINATION ............................................................ 16
<PAGE>
BANKFIRST 401(K) PROFIT SHARING PLAN
SUMMARY PLAN DESCRIPTION
I
INTRODUCTION TO YOUR PLAN
BankFirst has amended your 401(k) Profit Sharing Plan and Trust as of
January 1, 1998. BankFirst continues to recognize the efforts you have made to
its success. This amended 401(k) Profit Sharing Plan and Trust is for the
exclusive benefit of eligible employees and their beneficiaries.
Your Plan is a "salary reduction plan." It is also called a "401(k) plan."
Under this type of plan, you may choose to reduce your compensation and have
these amounts contributed to this Plan on your behalf.
The purpose of this Plan is to reward eligible employees for long and
loyal service by providing them with retirement benefits.
Between now and your retirement, your Employer intends to make
contributions for you and other eligible employees. When you retire, you will be
eligible to receive the value of the amounts which have accumulated in your
account.
Your Employer has submitted this Plan to the Internal Revenue Service for
approval. The Internal Revenue Service will issue a "determination letter" to
your Employer approving this Plan as a "qualified" retirement plan because this
Plan meets specific legal requirements.
This Summary Plan Description is a brief description of your Plan and your
rights, obligations, and benefits under that Plan. Some of the statements made
in this Summary Plan Description are dependent upon this Plan being "qualified"
under the provisions of the Internal Revenue Code. This Summary Plan Description
is not meant to interpret, extend, or change the provisions of your Plan in any
way. The provisions of your Plan may only be determined accurately by reading
the actual Plan document, including the Adoption Agreement.
A copy of your Plan and the Adoption Agreement are on file at your
Employer's office and may be read by you, your beneficiaries, or your legal
representatives at any reasonable time. If you have any questions regarding
either your Plan, the Adoption Agreement or this Summary Plan Description, you
should ask your Plan's Administrator. In the event of any discrepancy between
this Summary Plan Description and the actual provisions of the Plan, the Plan
will govern.
II
GENERAL INFORMATION ABOUT YOUR PLAN
There is certain general information which you may need to know about your
Plan. This information has been summarized for you in this Section.
1. General Plan Information
BankFirst 401(k) Profit Sharing Plan is the name of your Plan
Your Employer has assigned Plan Number 002 to your Plan.
1
<PAGE>
If you have questions about the Plan after reviewing this summary, please
call Randy Baker at (423) 595-1125 in Knoxville, TN.
The amended provisions of your Plan become effective on January 1, 1998.
Your Plan's records are maintained on a twelve-month period of time. This
is known as the Plan Year. The Plan Year begins on January 1st and ends on
December 31st.
Certain valuations and distributions are made on the Anniversary Date of
your Plan. This date is December 31st.
The contributions made to your Plan will be held and invested by the
Trustee of your Plan.
Your Plan and Trust will be governed by ERISA and the laws of the State of
Tennessee.
2. Employer Information
Your Employer's name, address and tax identification number are:
BankFirst
P.O. Box 10
Knoxville, TN 37901-0010
TIN 62-0201360
Your Plan allows other employers, including Curtis Mortgage Company, Inc.
to adopt these provisions. You or your beneficiaries may examine or obtain a
complete list of employers, if any, who have adopted your Plan by making a
written request to the Administrator.
3. Plan Administrator Information
The name, address and business telephone number of your Plan's
administrator are:
BankFirst
P.O. Box 10
Knoxville, TN 37901-0010
(423) 595-1100
Your Plan's Administrator keeps the records for the Plan and is
responsible for the administration of the Plan. The Administrator has
discretionary authority to construe the terms of the Plan and make
determinations on questions which may affect your eligibility for benefits. Your
Plan's Administrator will also answer any questions you may have about your
Plan.
4. Plan Trustee Information
The name of your Plan's Trustee is:
BankFirst
2
<PAGE>
The principal place of business of your Plan's Trustee is:
625 Market Street
Knoxville, TN 37902
Your Plan's Trustee has been designated to hold and invest Plan assets for
the benefit of you and other Plan participants. The trust fund established by
the Plan's Trustee will be the funding medium used for the accumulation of
assets from which benefits will be distributed.
5. Service of Legal Process
The name and address of your Plan's agent for service of legal process
are:
BankFirst
PO Box 10
Knoxville, TN 37901-0010
Service of legal process may also be made upon the Trustee or
Administrator.
III
PARTICIPATION IN YOUR PLAN
Before you become a member or a "participant" in the Plan, there are
certain eligibility and participation rules which you must meet. These rules are
explained in this Section.
1. Eligibility Requirements
You will be eligible to participate in the Plan if you have completed
one-half Year of Service and have attained age 18.
You will have completed one-half of one Year of Service if you are in the
employ of your Employer six (6) months after your employment commencement date.
Continuous service with an entity acquired by or merged with BankFirst or its
related entities counts for eligibility purposes in certain cases.
2. Participation Requirements
Once you have satisfied your Plan's eligibility requirements, your next
step will be to actually become a member or a "participant" in the Plan. You
will become a participant on a specified day of the Plan Year. This day is
called the Effective Date of Participation.
You will become a participant on the earlier of the first day of the Plan
Year or the first day of the seventh month of the Plan Year coinciding with or
next following the date you satisfy your Plan's eligibility requirements.
For employees of newly acquired entities, one-time special entry dates may
apply. The Plan Administrator will advise you if a special entry date applies to
you.
3
<PAGE>
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan
Each year, your employer will contribute to your Plan the following
amounts:
(a) The total amount of the salary reduction you elected to defer. (See
the Section in this Article entitled "Participant Salary Reduction
Election.")
(b) A discretionary matching contribution equal to a percentage of the
amount of the salary reduction you elected to defer, which
percentage will be determined each year by the Employer.
For a participant to qualify for a matching contribution, the following
conditions apply:
o If you complete at least 1,000 hours of service during the Plan
Year, you will share in the allocation.
o You will share in the matching contributions for the year regardless
of the number of Hours of Service credited in the year of your
death, disability or retirement.
These rules may have been different for Plan Years beginning prior to the
date your Employer actually adopted this amendment. You should refer to any
prior Summary Plan Description or your Administrator if you have any questions.
(c) On behalf of each participant a special discretionary contribution
equal to a percentage of your compensation. This contribution is not
required, but if such a contribution is made the percentage
contributed will be determined each year by the Employer.
(d) A discretionary amount in addition to the special contribution,
which amount, if any, will be determined each year by your Employer.
For a participant to qualify for the discretionary and special
contributions, the following conditions apply:
o If you complete at least 1,000 hours of service during the Plan
Year, you will share in the allocation.
o You will share for the year regardless of the number of Hours of
Service credited in the year of your death, disability or
retirement.
These rules may have been different for Plan years beginning prior
to the date your Employer actually adopted this amendment. You should
refer to any prior Summary Plan Description or your Administrator if you
have any questions.
Service with an entity acquired by, or merged with BankFirst or its
related entities counts for accrual purposes in certain cases.
4
<PAGE>
2. Participant Salary Reduction Election
As a participant, you may elect to defer up to 15% of your compensation
each year instead of receiving that amount in cash. However, your total
deferrals in any taxable year may not exceed a dollar limit which is set by law.
The limit for 1998 is $10,000. This limit will be increased in future years for
cost of living changes.
You may elect to defer your salary as of January 1 and July 1. Such
election will become effective as soon as administratively feasible. Your
election will remain in effect until you modify or terminate it. You may modify
your election as of January 1 and July 1 of any year. The modification will
become effective as soon as administratively feasible.
The amount you elect to defer, and any earnings on that amount, will not
be subject to income tax until actually distributed to you. The deferral will,
however, be subject to Social Security taxes at all times.
You should also be aware that the annual dollar limit is an aggregate
limit which applies to all deferrals you may make under this plan or other cash
or deferred arrangements (including tax-sheltered 403(b) annuity contracts,
simplified employee pensions or other 401(k) plans in which you may be
participating). Generally, if your total deferrals under all cash or deferred
arrangements for a calendar year exceed the annual dollar limit, the excess must
be included in your income for the year. For this reason, it is desirable to
request in writing that the excess deferrals be returned to you. If you fail to
request such a return, you may be taxed a second time when the excess deferral
is ultimately distributed from the Plan.
You must decide which plan or arrangement you would like to have return
the excess. If you decide that the excess should be distributed from this Plan,
you should communicate this in writing to the Administrator no later than the
March 1st following the close of the calendar year in which such excess
deferrals were made. The Administrator may then return the excess deferral and
any earnings to you by April 15th.
In the event you receive a hardship distribution from your deferrals to
this Plan or any other plan maintained by your Employer, you will not be allowed
to make additional salary reductions for a period of twelve (12) months after
you receive the distribution. Furthermore, the dollar limitation set by law with
respect to your taxable year following the year in which you received the
distribution, will be reduced by your salary reductions, if any, for the taxable
year of the distribution.
You will always be 100% vested in the amount you deferred. This means that
you will always be entitled to all of the deferred amount. This money will,
however, be affected by any investment gains or losses. If the Trustee invested
this money and there was a gain, the balance in your account would increase. Of
course, if there was a loss, the balance in your account would decrease.
Distributions from your deferred account are not permitted before age 59
1/2 EXCEPT in the event of:
(a) death;
(b) disability;
(c) termination of employment; or
(d) reasons of proven financial hardship (See the Section in Article V
entitled "Hardship Distribution of Benefits").
5
<PAGE>
In addition, if you are a highly compensated employee (generally owners,
officers or individuals receiving wages in excess of certain amounts established
by law), a distribution from your deferred account or certain excess
contributions may be required to comply with the law. The Administrator will
notify you when a distribution is required.
3. Your Share of Employer Contributions
Your Employer will allocate the amount you elect to defer to an account
maintained on your behalf.
If you are eligible, your Employer will also allocate the matching
contribution and the special contribution made to the Plan on your behalf. (See
the Section in this Article entitled "Employer Contributions to the Plan.")
Your Employer's discretionary contribution will be "allocated" or divided
among participants eligible to share in the contribution for the Plan Year. Your
share of the contribution will depend upon how much compensation you received
during the year and the compensation received by other eligible participants.
Your share of your Employer's discretionary contribution is determined by
the following fraction:
Employer's X Your compensation
Discretionary Contribution ----------------------------------
Total Compensation of All
Participants Eligible to Share
For example:
Suppose the Employer's discretionary contribution for the Plan Year is
$20,000. Employee A's compensation for the Plan Year is $25,000. The total
compensation of all participants eligible to share, including Employee A,
is $800,000. Employee A's share will be:
X $25,000
--------
$20,000 $800,000 or $625.00
In addition to the Employer's contribution made to your account, your
account will be credited annually with a share of the investment earnings or
losses of the trust fund.
You should also be aware that the law imposes certain limits on how much
money may be allocated to your account for a year. These limits are extremely
complex, but generally no more than the lesser of $30,000 or 25% of your
compensation may be allocated to you (excluding earnings) in any year. The
Administrator will inform you if these limits have affected you.
4. Compensation
For the purposes of your Plan, compensation has a special meaning.
Compensation is defined as your total salary, wages and other amounts which are
includable in your income for purposes of income taxes that is paid during the
Plan Year.
In addition, salary reduction contributions to any cafeteria plan, tax
sheltered annuity, SEP or 401(k) plan will be included as compensation for Plan
purposes.
6
<PAGE>
For the first year of your participation in the Plan, your compensation
will be recognized for benefit purposes for the entire Plan Year.
For the Plan Year 1998, the Plan, by law, cannot recognize compensation in
excess of $160,000. This amount will be adjusted in future years for cost of
living increases. It will also be applied to certain highly compensated
employees, and their family members as if they were a single participant. If you
or a member of your family may be affected by this rule, ask your Administrator
for further details.
5. Forfeitures
Forfeitures are created when participants terminate employment before
becoming entitled to their full benefits under the Plan. Your account may grow
from the forfeitures of other participants. Forfeitures will be "allocated" or
divided among participants eligible to share for a Plan Year. However, a portion
of forfeited amounts will be used to reduce your Employer's contributions to the
Plan.
6. Transfers From Qualified Plans (Rollovers)
At the discretion of the Administrator. You may be permitted to deposit
into your Plan distributions you have received from other plans. Such a deposit
is called a "rollover" and may result in tax savings to you. You should consult
qualified counsel to determine if a rollover is in your best interest.
Your rollover will be placed in a separate account called a "participant's
rollover account." The Administrator may establish rules for investment.
You will always be 100% vested in your "rollover account." This means that
you will always be entitled to all of your rollover contributions. Rollover
contributions will be affected by any investment gains or losses. If the Trustee
invested this money and there was a gain, the balance in your account would
increase. Of course, if there was a loss from an investment, the balance in your
account would decrease.
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement
Your Normal Retirement Date is the first day of the month coinciding with
or next following your 65th birthday (Normal Retirement Age).
At your Normal Retirement Age, you will be entitled to 100% of your
account balance. Payment of your benefits will begin as soon as practicable
following your Normal Retirement Date.
2. Distribution of Benefits Upon Late Retirement
You may remain employed past your Plan's Normal Retirement Date and retire
instead on your Late Retirement Date. Your Late Retirement Date is the first day
of the month coinciding with or next following the date you choose to retire
after first having reached your Normal Retirement Date. On your Late Retirement
Date, you will be entitled to 100% of your account balance. Actual benefit
payments will begin as soon as practicable following your Late Retirement Date.
7
<PAGE>
3. Distribution of Benefits Upon Death
Your beneficiary will be entitled to 100% of your account balance upon
your death.
If you are married at the time of your death, your spouse will be the
beneficiary of the death benefit, unless you otherwise elect in writing on a
form to be furnished to you by the Administrator. IF YOU WISH TO DESIGNATE A
BENEFICIARY OTHER THAN YOUR SPOUSE, HOWEVER, YOUR SPOUSE MUST IRREVOCABLY
CONSENT TO WAIVE ANY RIGHT TO THE DEATH BENEFIT. YOUR SPOUSE'S CONSENT MUST BE
IN WRITING, BE WITNESSED BY A NOTARY OR A PLAN REPRESENTATIVE AND ACKNOWLEDGE
THE SPECIFIC NONSPOUSE BENEFICIARY.
If, however,
(a) your spouse had validly waived any right to the death benefit in the
manner outlined above,
(b) your spouse cannot be located; or
(c) you are not married at the time of your death,
then your death benefit will be paid to the beneficiary of your own choosing in
installments or as a single lump sum, as you or your beneficiary may elect. You
may designate the beneficiary on a form supplied to you by the Administrator. If
you change your designation, your spouse must again consent to the change.
Regardless of the method of distribution selected, your entire death
benefit must generally be paid to your beneficiaries within five years after
your death (the "5-year rule"). However, if your designated beneficiary is a
person (instead of your estate or most trusts), then your beneficiary may elect
to have minimum distributions begin within one year of your death and it may be
paid over the designated beneficiary's life expectancy (the "l-year rule"). If
your spouse is the beneficiary, then under the "1-year rule" the start of
payments may be delayed until the year in which you would have attained age 70
1/2 The election to have death benefits distributed under the "l-year rule"
instead of the "5-year rule" must be made no later than the time at which
minimum distributions must commence under the "1-year rule" (or, in the case of
a surviving spouse, the "5-year rule" if earlier).
Since your spouse participates in these elections and has certain rights
in the death benefit, you should immediately report any change in your marital
status to the Administrator.
4. Distribution of Benefits Upon Disability
Under your Plan, disability is defined as the inability to engage in any
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 12 months, as
supported by medical evidence.
If you become disabled while a participant, you will be entitled to 100%
of your account balance. Payment of your disability benefits will be made to you
as if you had retired. (See the Section in the Article entitled "Benefit Payment
Options.")
8
<PAGE>
5. Distribution of Benefits Upon Termination of Employment
Your Plan is designed to encourage you to stay with your Employer until
retirement. Payment of your account balance under your Plan is generally only
available upon your death, disability or retirement.
If your employment terminates for reasons other than those listed above,
you will be entitled to receive only your "vested percentage" of your account
balance and the remainder of your account will be forfeited. Only contributions
made by your Employer are subject to forfeiture. (See the Section in this
Article entitle "Vesting in Your Plan.") This will be done in a manner uniformly
and nondiscriminatory established by the Administrator.
If your vested benefit under the Plan at the time of any prior
distribution exceeded $5,000 or currently exceeds $5,000, you must give written
consent before the distribution may be made. Amounts of $5,000 or less will be
distributed early without the need for consent.
6. Vesting in Your Plan
Your "vested percentage" in your account is determined under the following
schedule and is based on vesting Years of Service. You will always, however, be
100% vested upon your Normal Retirement Age. (See the Section in this Article
entitled "Distribution of Benefits Upon Normal Retirement.")
Vesting Schedule
Years of Service Percentage
1 20%
2 40%
3 60%
4 80%
5 100%
Regardless of this vesting schedule, you are always 100% vested in your
salary reduction amounts contributed to the Plan.
Additionally, you are always 100% vested in your Employer's special
contributions made to the Plan.
Your vested percentage will not be less than your vested percentage under
the Plan before this amendment and restatement.
Years of Service prior to the time you reached age 18 will not be counted
for vesting purposes.
Service with an entity acquired by, or merged with BankFirst or a related
entity, counts for vesting purposes in certain cases.
7. Benefit Payment Options
The Administrator, in accordance with your election, will direct the
distribution of your benefits to you under one or more of the following options:
9
<PAGE>
(a) a single lump-sum payment in cash or in property;
(b) installments over a period of not more than your assumed life
expectancy (or your and your beneficiary's assumed life
expectancies) determined at the time of distribution. You may also
elect to have your life expectancy and the life expectancy of a
designated beneficiary who is your spouse recalculated each year.
You must make this election before the time that distributions are
to begin. Failure to make this election will result in life
expectancies not being recalculated.
GENERALLY, WHENEVER A DISTRIBUTION IS TO BE MADE TO YOU ON OR BEFORE AN
ANNIVERSARY DATE, IT MAY BE POSTPONED BY THE PLAN FOR A PERIOD OF UP TO 180
DAYS, FOR ADMINISTRATIVE CONVENIENCE. HOWEVER, UNLESS YOU ELECT IN WRITING TO
DEFER THE RECEIPT OF BENEFITS, NO DISTRIBUTION MAY BEGIN LATER THAN THE 60TH DAY
AFTER THE CLOSE OF THE PLAN YEAR IN WHICH THE LATEST OF THE FOLLOWING EVENTS
OCCURS:
(a) the date on which you reach the age of 65 or your Normal Retirement
Age;
(b) the 10th anniversary of the year in which you became a participant
in the plan;
(c) the date you terminated employment with your Employer.
Regardless of whether you elect to delay the receipt of benefits, there
are other rules which generally require the minimum payments to begin no later
than the April 1st following the year in which you reach age 70 1/2 unless you
are still employed by BankFirst, and if you are not a 5% stockholder. You should
see the Administrator if you feel you may be affected by this rule.
8. Hardship Distribution of Benefits
The Administrator may direct the Trustee to distribute up to 100% of your
account balance attributable to your salary reduction election in the event of
immediate and heavy financial need. This hardship distribution is not in
addition to your other benefits and will therefore reduce the value of the
benefits you will receive at normal retirement.
Withdrawal will be authorized only if the distribution is to be used for
one of the following purposes:
(a) The payment of medical expenses (described in Section 213(d) of the
Internal Revenue Code) previously incurred by you or your dependent
or necessary for you or your dependent to obtain medical care;
(b) The costs directly related to the purchase of your principal
residence (excluding mortgage payments);
(c) The payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for yourself, your
spouse or dependent;
(d) The payment necessary to prevent your eviction from you principal
residence or foreclosure on the mortgage of your principal
residence.
There are restrictions placed on hardship distributions which are made
from certain accounts. These accounts are generally the accounts which receive
your salary reduction contributions and other Employer contributions which are
used to satisfy special rules that apply to 401(k) plans. Any hardship
distribution from these accounts will be limited to your salary reduction
contributions. Ask your administrator if you need further details.
10
<PAGE>
In addition, a distribution will be made from these accounts only if you
certify and agree that all of the following conditions are satisfied:
(a) The distribution is not in excess of the amount of your immediate
and heavy financial need;
(b) You have obtained all distributions, other than hardship
distributions, and all nontaxable loans currently available under
all plans maintained by your Employer;
(c) That your elective contributions and employee contributions will be
suspended for at least twelve ( 12) months after your receipt of the
hardship distribution; and
(d) That you will not make elective contributions for your taxable year
immediately following the taxable year of the hardship distribution,
except to the extent permitted by the Plan.
9. Treatment of Distributions From Your Plan
Whenever you receive a distribution from your Plan, it will normally be
subject to income taxes. You may, however, reduce, or defer entirely, the tax
due on your distribution through use of one of the following methods:
(a) The rollover of all or a portion of the distribution to an
Individual Retirement Account (IRA) or another qualified employer
plan. This will result in no tax being due until you begin
withdrawing funds from the IRA or other qualified employer plan. The
rollover of the distribution, however, MUST be made within strict
time frames (normally, within 60 days after you receive your
distribution). Under certain circumstances all or a portion of a
distribution may not qualify for this rollover treatment. In
addition, most distributions will be subject to mandatory federal
income tax withholding at a rate of 20%. This will reduce the amount
you actually receive. For this reason, if you wish to roll over all
or a portion of your distribution amount, the direct transfer option
described in paragraph (b) below would be the better choice.
(b) You may request that a direct transfer of all or a portion of your
distribution amount be made to either an Individual Retirement
Account (IRA) or another qualified employer plan willing to accept
the transfer. A direct transfer will result in no tax being due
until you withdraw funds from the IRA or other qualified employer
plan. Like the rollover, under certain circumstances all or a
portion of the amount to be distributed may not qualify for this
direct transfer. If you elect to actually receive the distribution
rather than request a direct transfer, then in most cases 20% of the
distribution amount will be withheld for federal income tax
purposes.
(c) The election of favorable income tax treatment under "10-year
forward averaging," "5-year forward averaging" or, if you quality,
"capital gains" method of taxation.
WHENEVER YOU RECEIVE A DISTRIBUTION, THE ADMINISTRATOR WILL DELIVER TO YOU
A MORE DETAILED EXPLANATION OF THESE OPTIONS. HOWEVER, THE RULES WHICH DETERMINE
WHETHER YOU QUALIFY FOR FAVORABLE TAX TREATMENT ARE VERY COMPLEX. YOU SHOULD
CONSULT WITH QUALIFIED TAX COUNSEL BEFORE MAKING A CHOICE.
10. Domestic Relations Order
11
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As a general rule, your interest in your account including your "vested
interest," may not be alienated. This means that your interest may not be sold,
used as collateral for a loan, given away or otherwise transferred. In addition,
your creditors may not attach, garnish or otherwise interfere with your account.
There is an exception, however, to this general rule. The Administrator
may be required by law to recognize obligations you incur as a result of court
ordered child support or alimony payments. The Administrator must honor a
"qualified domestic relations order." A "qualified domestic relations order" is
defined as a decree or order issued by a court that obligates you to pay child
support or alimony, or otherwise allocates a portion of your assets in the Plan
to your spouse, former spouse, child or other dependent. If a qualified domestic
relations order is received by the Administrator, all or a portion of your
benefits may be used to satisfy the obligation. The Administrator will determine
the validity of any domestic relations order received.
11. Pension Benefit Guaranty Corporation
Benefits provided by your Plan are NOT insured by the Pension Benefit
Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income
Security Act of 1974 because the insurance provisions under ERISA are not
applicable to your Plan.
VI
YEAR OF SERVICE RULES
1. Year of Service and Hour of Service
You will have completed a Year of Service for vesting purposes if you are
credited with 1000 Hours of Service during a Plan Year, even if you were not
employed on the first or last day of the Plan Year.
You will have completed a Year of Service for purposes of sharing in
Employer contributions if you are credited with 1000 Hours of Service during a
Plan Year.
Also, for the purposes of the Plan, your Years of Service with First
Heritage Bank, First National Bank of Gatlinburg, Curtis Mortgage Co. Inc., or
any other entity which is acquired in the future through a merger or acquisition
by the plan sponsor or any other controlled group member will be recognized.
An "Hour of Service" has a special meaning for Plan purposes. You will be
credited with an Hour of Service for:
(a) each hour for which you are directly or indirectly compensated by
your Employer for the performance of duties during the Plan Year;
(b) each hour for which you are directly or indirectly compensated by
your Employer for reasons other than performance of duties (such as
vacation, holidays, sickness, disability, lay-off, military duty,
jury duty or leave of absence during the Plan Year); and
(c) each hour for back pay awarded or agreed to by your employer.
You will not be credited for the same Hours of Service both under (a) or
(b), as the case may be, and under (c).
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<PAGE>
2. 1-Year Break in Service
A l-Year Break in Service is a computation period during which you have
not completed more than 500 Hours of Service with your Employer.
A 1-Year Break in Service does NOT occur, however, in the computation
period in which you enter or leave the Plan for reasons of:
(a) an authorized leave of absence; (b) certain maternity or paternity
absences.
The Administrator will be required to credit you with Hours of Service for
a maternity or paternity absence. These are absences taken on account of
pregnancy, birth, or adoption of your child. No more than 501 Hours of Service
will be credited for this purpose and these Hours of Service will be credited
solely to avoid your incurring a 1-Year Break in Service. The Administrator may
require you to furnish proof that your absence qualifies as a maternity or
paternity absence.
These break in service rules may be illustrated by the following examples:
Employee A works 300 hours in a Plan Year. At the end of the Plan Year,
Employee A will have a 1-Year Break in Service because she has worked less
than 501 hours in a Plan Year. Employee B works 300 hours in a Plan Year
and takes an authorized leave of absence for which he is credited with an
additional 250 hours. Employee B will NOT have a 1-Year Break in Service
because he is credited with more than 500 hours in a Plan Year.
If you are reemployed after a 1-Year Break in Service and were vested in
any portion of your account derived from Employer contributions, you will
receive credit for all Years of Service credited to you before your 1-Year Break
in Service.
If you do not have a "vested interest" in the Employer contributions
allocated to your account when you terminate your employment, you will lose
credit for your pre-Break Years of Service when your consecutive 1-Year Breaks
in Service equal or exceed the greater of 5 years, or your pre-break Years of
Service. For example:
Employee B terminated employment on January 1, 2000 with 2 Years of
Service. Employee B was not vested at the time of his termination of
employment. Employee B returns to work on January 1, 2003. Employee B will
be credited with his 2 pre-break Years of Service because his period of
termination (3 years) did not exceed 5 years.
VII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules"
A 401(k) Profit Sharing Plan that primarily benefits "key employees" is
called a "top heavy plan." Key employees are certain owners or officers of your
Employer. A Plan is a "top heavy plan," when more than 60% of the contributions
or benefits have been allocated to key employees.
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<PAGE>
Each Year, the Administrator is responsible for determining whether your
plan is a "top-heavy plan."
If your Plan becomes top heavy in any Plan Year, then non-key employees
will be entitled to certain "top heavy minimum benefits," and other special
rules will apply. Among, these top heavy rules are the following:
(a) Your Employer may be required to make a contribution equal to 3% of
your compensation to your account;
(b) If you are a participant in more than one Plan, you may not be
entitled to minimum benefits under both Plans.
VIII
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
Benefits will be paid to participants and their beneficiaries without the
necessity of formal claims. You or your beneficiaries, however, may make a
request for any Plan benefits to which you may be entitled. Any such request
must be made in writing, and it should be made to the Administrator. (See the
Article in this Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN.")
Your request for Plan benefits will be considered a claim for Plan
benefits, and it will be subject to a full and fair review. If your claim is
wholly or partially denied, the Administrator will furnish you with a written
notice of this denial. This written notice must be provided to you within a
reasonable period of time (generally 90 days) after the receipt of your claim by
the Administrator. The written notice must contain the following information:
(a) the specific reason or reasons for the denial;
(b) specific reference to those Plan provisions on which the denial is
based;
(c) a description of any additional information or material necessary to
correct your claim and an explanation of why such material or
information is necessary; and
(d) appropriate information as to the steps to be taken if you or your
beneficiary wishes to submit your claim for review.
If notice of the denial of a claim is not furnished to you in accordance
with the above within a reasonable period of time, your claim will be deemed
denied. You will then be permitted to proceed to the review stage described in
the following paragraphs.
If your claim has been denied, and you wish to submit your claim for
review, you must follow the Claims Review Procedure.
1. The Claims Review Procedure
(a) Upon the denial of your claim for benefits, you may file your claim
for review, in writing, with the Administrator.
(b) YOU MUST FILE THE CLAIM FOR REVIEW NO LATER THAN 60 DAYS AFTER YOU
HAVE RECEIVED WRITTEN NOTIFICATION OF THE DENIAL OF YOUR CLAIM FOR
BENEFITS OR, IF NO WRITTEN DENIAL OF YOUR CLAIM WAS PROVIDED, NO
LATER THAN 60 DAYS AFTER THE DEEMED DENIAL OF YOUR CLAIM.
(c) You may review all pertinent documents relating to the denial of
your claim and submit any issues and comments, in writing, to the
Administrator.
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<PAGE>
(d) Your claim for review must be given a full and fair review. If your
claim is denied, the Administrator must provide you with written
notice of this denial within 60 days after the Administrator's
receipt of your written claim for review. There may be times when
this 60-day period may be extended. This extension my only be made,
however, where there are special circumstances which are
communicated to you in writing within the 60-day period. If there is
an extension, a decision will be made as soon as possible, but not
later than 120 days after receipt by the Administrator of your claim
for review.
(e) The Administrator's decision on your claim for review will be
communicated to you in writing and will include specific references
to the pertinent Plan provisions on which the decision was based.
(f) If the Administrator's decision on review is not furnished to you
within the time limitations described above, your claim will be
deemed denied on review.
(g) If benefits are provided or administered by an insurance company,
insurance service, or other similar organization which is subject to
regulation under the insurance laws, the claims procedure relating
to these benefits may provide for review. If so, that company,
service, or organization will be the entity to which claims are
addressed. If you have any questions regarding the proper person or
entity to address claims, you should ask the Administrator.
IX
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights
As a participant in this Plan you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974, also
called ERISA. ERISA provides that all Plan participants are entitled to:
(a) examine, without charge, all Plan documents, including:
(1) insurance contracts;
(2) collective bargaining agreements; and
(3) copies of all documents filed by the Plan with the U.S.
Department of Labor, such as detailed annual reports.
This examination may take place at the Administrator's office
and at other specified employment locations of the Employer. (See Article
in this Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN");
(b) obtain copies of all Plan documents and other Plan information upon
written request to the Plan administrator. The Administrator may
make a reasonable charge for the copies;
(c) receive a summary of the Plan's annual financial report. The
Administrator is required by law to furnish each participant with a
copy of the summary annual report;
(d) obtain a statement telling you whether you have a right to receive a
retirement benefit at Normal Retirement Age and, if so, what your
benefits would be at Normal Retirement Age if you stop working under
the Plan now. If you do not have a right to a retirement benefit,
the statement will tell you how many years you have to work to get a
right to a retirement benefit. THIS STATEMENT MUST BE REQUESTED IN
WRITING AND IS NOT REQUIRED TO BE
15
<PAGE>
GIVEN MORE THAN ONCE A YEAR. The Plan must provide the statement
free of charge.
In addition to creating rights for Plan participants, ERISA imposes duties
upon the people who are responsible for the operation of the Plan. The people
who operate your Plan, called "fiduciaries" of the Plan, have a duty to do so
prudently and in the interest of you and other Plan participants and
beneficiaries. No one, including your employer or any other person, may fire you
or otherwise discriminate against you in any way to prevent you from obtaining a
pension benefit or exercising your rights under ERISA.
If your claim for a retirement benefit is denied in whole or in part, you
must receive a written explanation of the reason for the denial. You have he
right to have the Administrator review and reconsider your claim. (See the
Article in this Summary entitled "CLAIMS BY PARTICIPANTS AND BENEFICIARIES.")
Under ERISA, there are steps you can take to enforce the above rights, For
instance, if you request materials from the Plan and do not receive them within
30 days, you may file suit in a federal court. In such a case, the court may
require the Administrator to provide the materials and pay you up to $100.00 a
day until you receive the materials, unless the materials were not sent because
of reasons beyond the control of the Administrator.
If you have a claim for benefits which is denied or ignored, in whole or
in part, you may file suit in a state or federal court.
If the Plan's fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If your are successful,
the court may order the person you have sued to pay these cost and fees. If you
lose, the court may order you to pay these costs and fees if, for example, it
finds your claim is frivolous.
If you have any questions about this statement, or about your rights under
ERISA, you should contact the nearest Regional Office of the U.S Department of
Labor's Pension and Welfare Benefits Administration.
X
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment
Your Employer has the right to amend your Plan at any time. In no event,
however, will any amendment:
(a) authorize or permit any part of the Plan assets to be used for
purposes other than the exclusive benefit of participants or their
beneficiaries; or
(b) cause any reduction in the amount credited to your account; or (c)
cause any part of your Plan assets to revert to the Employer.
2. Termination
Your employer has the right to terminate the Plan at any time. Upon
termination, all amounts credited to your accounts will become 100% vested.
16
- --------------------------------------------------------------------------------
SUMMARY OF PLAN PROVISIONS
- --------------------------------------------------------------------------------
This is a brief summary of your Employer's Nonstandard Profit Sharing Plan
Provisions. For a more detailed explanation, please refer to the Summary Plan
Description which follows this summary.
- --------------------------------------------------------------------------------
ACCOUNTING, EFFECTIVE DATE, AND OTHER DATA
- --------------------------------------------------------------------------------
EMPLOYER'S NAME First National Bank and Trust Co.
ADDRESS 204 Washington Ave., P.O. Box 100 Athens, TN 37303
PHONE NUMBER (423) 745-2452
PLAN NAME First National Bank & Trust 401(k) Profit Sharing
Plan
BUSINESS ORGANIZATION Corporation
EFFECTIVE DATE January 1, 1984
RESTATED DATE January 1, 1997
EMPLOYER TAX YEAR END December 31
PLAN YEAR END December 31
EMPLOYER IDENTIFICATION 62-0201190
NUMBER
PLAN NUMBER 002
DESCRIPTION OF TRADE Banking
OR BUSINESS
LIMITATION YEAR END December 31
TYPE OF PLAN Contract (Third Party) Administration
ADMINISTRATION
- --------------------------------------------------------------------------------
ELIGIBILITY
- --------------------------------------------------------------------------------
SERVICE REQUIREMENT 1 year of service.
MINIMUM AGE The minimum age requirement is 21
REQUIREMENT
Page 1
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ELIGIBILITY FOR A participant shall be eligible to receive an
EMPLOYER CONTRIBUTIONS allocation of Employer contributions for a Plan Year if
the following conditions are met:
The participant must be employed on the last day of the
Plan Year.
The participant must complete 1,000 Hours of Service
during the Plan Year unless the Plan is Top-Heavy for
such Plan Year.
The requirement(s) above shall be waived and the
participant shall be eligible for Employer
contributions if the participant separates from service
due to death, disability or retirement.
The requirement(s) above shall not apply to Employer
contributions (salary deferrals) made pursuant to a
salary reduction agreement.
The requirement(s) shall not apply to the Employer
matching contributions.
ENTRY DATES The Plan entry dates are January 1 and July 1.
PLAN ENTRY An employee shall enter the Plan on the Plan
entry date following the date on which the employee
meets the eligibility requirements of the Plan.
- --------------------------------------------------------------------------------
DEFINITION OF COMPENSATION
- --------------------------------------------------------------------------------
Compensation shall mean W-2 earnings.
Compensation shall mean the amount which is actually
paid to the participant during the Plan Year.
Compensation shall include Employer contributions
(salary deferrals) made pursuant to a salary reduction
agreement which are not includible in the gross income
of the employee under Sections 125, 402(e)(3), 402(h)
or 403(b) of the Code.
This definition of Compensation shall be effective
as of January 1, 1994.
Compensation shall be taken into account from a
participant's date of entry into the Plan.
Page 2
<PAGE>
- --------------------------------------------------------------------------------
ELECTIVE DEFERRALS
- --------------------------------------------------------------------------------
ELECTIVE DEFERRALS A participant may elect to have part of his/her
compensation deferred and contributed to his/her
retirement plan. The amount deferred cannot exceed 10%
of the participant's compensation.
CASH OR DEFERRED A participant may make a separate election to base
ELECTIONS elective deferrals on cash bonuses that, at the
participant's election, may be contributed to the CODA
or received by the participant in cash.
ELECTIONS A participant may elect to commence deferrals as of
January 1 and July 1.
A participant may elect to terminate or modify the
amount of deferrals as of January 1 and July 1.
MATCHING The Employer will make matching contributions to the
CONTRIBUTIONS Plan on behalf of all participants.
Matching contributions will be made on behalf of each
participant in the amount of 50% of the elective
deferral made for each Plan Year.
The Employer shall not match elective deferrals in
excess of 6% of the participant's compensation.
All Employer matching contributions shall be
nonqualified and are therefore subject to the vesting
schedule applicable to Employer contributions.
Forfeitures of excess aggregate contributions and
forfeitures of any nonqualified matching contributions
shall be allocated after all other forfeitures under
the Plan, to each participant's matching contribution
account in the ratio which each participant's
compensation for the Plan Year bears to the total
compensation of all participants for such Plan Year.
QUALIFIED NONELECTIVE The Employer will make qualified nonelective
CONTRIBUTIONS contributions to the Plan if necessary. The amount of
such contributions for each Plan Year shall be an
amount determined by the Employer.
The allocation of qualified nonelective contributions
shall be made to the accounts of nonhighly compensated
participants only.
Page 3
<PAGE>
VOLUNTARY Participants will not be allowed to make nondeductible
NONDEDUCTIBLE voluntary employee contributions.
CONTRIBUTIONS
HARDSHIP WITHDRAWALS Hardship Withdrawals of elective deferrals shall be
permitted.
EXCESS ELECTIVE Participants who claim excess elective deferrals (over
DEFERRALS the annual dollar limit - $9,500 for 1997) for the
preceding calendar year must submit their claims in
writing to the Plan Administrator by March 1.
- --------------------------------------------------------------------------------
VESTING
- --------------------------------------------------------------------------------
A participant is vested in that portion of his/her
participant's accounts attributable to Employer
contributions in accordance with the following
schedule:
Years of Service Vested Percentage
VESTING SCHEDULE 1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
The 2/20 Vesting Schedule will apply as of the first
day of the Plan Year for which the Plan is Top-Heavy.
Years of Service Vested Percentage
TOP-HEAVY VESTING 1 0%
SCHEDULE 2 20%
3 40%
4 60%
5 80%
6 100%
- --------------------------------------------------------------------------------
NORMAL RETIREMENT AGE
- --------------------------------------------------------------------------------
The normal retirement age is 65.
- --------------------------------------------------------------------------------
EARLY RETIREMENT AGE
- --------------------------------------------------------------------------------
The early retirement age is 55.
Early retirement shall only be available to
participants who have completed 15 Years of Service.
Page 4
<PAGE>
- --------------------------------------------------------------------------------
SERVICE WITH PREVIOUS EMPLOYER
- --------------------------------------------------------------------------------
Service with a previous Employer will not be taken into
account except to the extent service is required to be
given pursuant to Code Section 414(a) and the
regulations thereunder.
- --------------------------------------------------------------------------------
ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES
- --------------------------------------------------------------------------------
INTEGRATED ALLOCATION Contributions will be allocated under an integrated
FORMULA formula. The integration level shall be equal to
$20,000.
- --------------------------------------------------------------------------------
ADMINISTRATIVE ELECTIONS
- --------------------------------------------------------------------------------
PAYOUTS OF SMALL The Employer will automatically make a total
ACCOUNT BALANCES distribution of the participant's vested interest if it
is $3,500 or less upon retirement, termination of
employment, or disability.
DISTRIBUTIONS AT A participant may take a total distribution of his/her
TERMINATION OF vested account balance if he/she terminates employment
EMPLOYMENT for reasons other than death, disability, or
retirement.
HARDSHIP WITHDRAWALS Hardship withdrawals shall be allowed.
PARTICIPANT LOANS Plan loans to participants shall not be allowed.
PARTICIPANT-DIRECTED Participant-directed investments shall not be allowed.
INVESTMENTS
ROLLOVERS Rollovers of funds, by participants, from other
plans to this Plan shall be allowed. Excluding
Defined Benefit, Target Benefit and Money Purchase
Plans.
TRANSFERS Transfers of funds, by participants, from other
plans to this Plan shall be allowed. Excluding
Defined Benefit, Target Benefit and Money Purchase
Plans.
HOURS OF SERVICE Service will be based upon actual hours worked.
- --------------------------------------------------------------------------------
SPECIAL RULES FOR TOP-HEAVY PLANS
- --------------------------------------------------------------------------------
The minimum contribution and benefit requirements of
Code Section 416 will be satisfied as provided in
Section 5.4 of the Plan Document.
Page 5
<PAGE>
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
TRUSTEE(S) First National Bank & Trust Co.
204 Washington Ave., P.O. Box 100
Athens, TN 37303
PROTOTYPE SPONSOR First National Bank & Trust Co.
AGENT FOR SERVICE OF Dean Key
LEGAL PROCESS 204 Washington Ave.
Athens, TN 37303
Legal process may also be served upon a Plan Trustee or
the Plan Administrator.
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TABLE OF CONTENTS
I. ELIGIBILITY FOR PARTICIPATION ..................................... 1
In General ........................................................ 1
Eligibility Requirements .......................................... 1
Computing Service for Eligibility ................................. 1
II. PARTICIPATION ..................................................... 1
III. CONTRIBUTIONS TO THE PLAN ......................................... 1
In General ........................................................ 1
Computing Your Share of the Contribution .......................... 2
Basic Formula (Nonintegrated) ..................................... 2
Integrated Formula ................................................ 2
Employee Elective Deferrals ....................................... 4
Employer-Matching Contributions ................................... 5
Excess Elective Deferrals ......................................... 5
Hardship Withdrawal of Your Elective Deferrals .................... 5
Employee Contributions ............................................ 6
Rollovers ......................................................... 6
IV. INVESTMENTS, GAINS AND LOSSES ..................................... 6
In General ........................................................ 6
Participant-Directed Investments .................................. 7
V. VESTING ........................................................... 7
In General ........................................................ 7
Computing Years of Service for Vesting ............................ 7
Years That Do Not Count for Vesting ............................... 7
Additional Years That May Count for Vesting ....................... 7
Forfeiture of Nonvested Amounts ................................... 7
VI. TOP-HEAVY RULES ................................................... 8
VII. BENEFITS .......................................................... 8
Eligibility ....................................................... 8
When and How Benefits Are Paid .................................... 9
Eligible Rollover Distributions ................................... 10
Special Rules for Transfers/Conversions from Certain Plans ........ 10
VIII. WITHDRAWALS AND LOANS ............................................. 11
Employee Contributions ............................................ 11
Hardship Withdrawal ............................................... 11
Loans ............................................................. 11
IX. MISCELLANEOUS ..................................................... 12
Termination and Amendment of the Plan ............................. 12
Protection from Creditors ......................................... 12
Termination Insurance ............................................. 12
X. PROCEDURE FOR PROCESSING CLAIMS ................................... 12
XI. YOUR RIGHTS UNDER ERISA ........................................... 13
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YOUR PLAN IN DETAIL
I. ELIGIBILITY FOR PARTICIPATION
In General
In general, all employees of the employer will have the chance to
participate in the plan. The only exceptions are:
(1) Employees who are covered by a collective bargaining agreement, unless
the collective bargaining agreement provides for their participation,
(2) Employees who are nonresident aliens and who have no income from
sources in this country; and
(3) Employees who are specified as an excluded class in the "Eligibility"
section of the "Summary of Plan Provisions".
Eligibility Requirements
In order to be eligible to participate in the plan, you must satisfy the
years-of-service and minimum age requirements described under "Eligibility" in
the "Summary of Plan Provisions" part of this booklet. Also, you should review
the "Service With a Previous Employer" section in the "Summary of Plan
Provisions" to see if your employer counts service with any other employer for
eligibility purposes.
Computing Service for Eligibility
If the plan requires you to complete a certain period of service to be
eligible, you must become familiar with several important terms.
(1) Year of Service: A "year of service" is defined by the plan as a
12-month period in which you are credited with at least 1,000 hours of service.
The 12-month period is your employment year; that is, a 12-month period measured
from the date you are first employed by the business (or reemployed if you leave
and then come back) or any anniversary of your employment date.
You must complete at least 1,000 hours of service during an employment
year to receive any credit for that year. Partial credit is not given nor may
you carry over hours from one year to the next.
(2) Month of Service: A "month of service" is a calendar month in which
you complete at least one hour of service."
(3) Hour of Service: An "hour of service" is any hour for which you are
paid or entitled to payment for work you have completed for the employer. It
includes periods of time when you are away from work, but for which you get
paid, like vacations and holidays. No more than 501 hours of service are
credited for any continuous period when you are away from work and get paid.
II. PARTICIPATION
You will enter the plan and become a participant on the entry date either
preceding or immediately following the date you satisfy the plan's eligibility
requirements. The entry date(s) and plan entry information are found in the
"Eligibility" section of the "Summary of Plan Provisions."
If you are a participant in the plan and you terminate employment, then
later come back to work, you will participate in the plan immediately on the day
you are reemployed.
III. CONTRIBUTIONS TO THE PLAN
In General
When you become a participant in the plan, a special account is set up in
your name. All contributions the employer makes for you will be credited to this
account.
Generally, as a plan participant, you will share in any employer
contributions that are made to the plan. However, if this is a Standard plan as
indicated in the heading of the "Summary of Plan Provisions," and the employer
chooses, it's possible you will not be eligible for employer contributions if
you are not employed on the last day of the plan year and you work less than 501
hours during the year. To find out if
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this rule applies to you, refer to "Eligibility For Employer Contributions" in
the "Eligibility" section of the "Summary of Plan Provisions." If there is no
"Eligibility For Employer Contributions" section, this rule does not apply.
If this is a Nonstandard plan as indicated in the heading of the "Summary
of Plan Provisions," and the employer chooses, it's possible you will not be
eligible for an employer contribution if you are not employed on the last day of
the plan year or if you do not complete 1,000 hours of service during the plan
year. Note that the 1,000 hour requirement does not apply if the plan is
top-heavy. Refer to "Eligibility for Employer Contributions" under the
"Eligibility" section of the "Summary of Plan Provisions" to see if these rules
apply to you. If there is no "Eligibility for Employer Contributions" section,
these rules do not apply.
In a profit sharing plan, the contributions made by the employer may vary
from year to year. The amount to be contributed for the year depends on a number
of factors, such as the profit for the year and the future prospects for the
business. The employer has the discretion under the plan to omit a contribution
for any given year. Generally, the contribution will not exceed a maximum of 15%
of the compensation of all participants for a plan year, although certain
make-up contributions may be made if the employer has contributed less than the
15% maximum in prior years.
Computing Your Share of the Contribution
The amount of employer contributions allocated to your account for a plan
year depends on the formula your employer has selected. In a general sense, your
share of employer contributions depends on your compensation and how it compares
to the compensation of all the participants in the plan. "Compensation" includes
all the amounts you receive for working for the employer, with some minor
exceptions. Compensation for plan purposes will be limited to $150,000 (1996
amount - adjusted for cost of living increases). To find out how the plan
defines compensation, see the "Definition of Compensation" section of the
"Summary of Plan Provisions." If you are the owner or part owner of the employer
and the employer is an unincorporated business, compensation means your earned
income from the business. Deductions for contributions to the plan are taken
into account for purposes of computing income from the business.
Basic Formula (Nonintegrated)
Employer contributions are divided among all participants. Your share is
an amount equal to the proportion that your compensation for the plan year bears
to the compensation of all participants for the plan year.
Example: Bill makes $10,000. The total compensation of all participants in
the plan for the plan year is $50,000. If the employer makes a profit
sharing contribution of $5,000, Bill's share is $1,000 ($l0,000/$50,000 X
$5,000).
Integrated Formula
If your employer has chosen this type of formula it is called "integrated"
because the formula for allocating profit sharing contributions takes into
account the fact that the employer makes Social Security contributions on your
behalf. The formula allocates the contributions in a top-heavy profit sharing
plan in up to four stages.
(1) First, a minimum or "floor" amount is divided among all participants.
Your share is an amount equal to the proportion that your compensation for the
plan year bears to the compensation of all participants for the plan year.
Generally, the amount allocated to your account in this stage will be 3% of your
compensation. However, it may be more or less depending on whether the employer
maintains any other plans, whether contributions are made for you under any
other plan, and a number of other factors. It also assumes that the employer
makes a contribution sufficient to allocate at least 3% of compensation to all
participants.
(2) Next, the contribution is divided among participants who have
compensation above the integration level. If you have compensation above the
integration level, your share of the contribution is an amount equal to the
proportion that your compensation for the plan year above the integration level
bears to all participants' compensation for the plan year above the integration
level. However, the contribution in this stage cannot exceed 3% of total
compensation above the integration level.
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(3) Next, the remaining portion of the contribution is divided among all
participants in the ratio that the sum of each participant's total compensation
and compensation above the integration level bears to the sum of all
participant's total compensation and compensation above the integration level,
but not in excess of the profit sharing maximum permitted disparity rate. The
maximum permitted disparity rate varies depending upon the integration level
chosen.
a. If the integration level is equal to the taxable wage base, the
maximum disparity rate is 2.7%.
b. If the integration level is no more than the 20% of the taxable
wage base, the maximum disparity rate is 2.7%.
c. If the integration level is at least 80% of the taxable wage
base, the maximum disparity rate is 2.4%.
d. If the integration level is less than 80% of the taxable wage
base but greater than the amount described in (b) above, the maximum
disparity rate is 1.3%.
(4) Finally, the balance of employer contributions which have not been
divided in stages 1, 2, and 3 above are allocated among all participants. Your
share is an amount equal to the proportion that your compensation for the plan
year bears to all participants' compensation for the plan year.
Example: Bill and Joan are the only participants in the plan. Bill earned
$70,000 and Joan made $90,000. The integration level is set at the Social
Security taxable wage base of $62,700 (1996 amount adjusted annually for
cost of living increases) and the disparity rate is 2.7%. The employer
makes a $15,000 profit sharing contribution and has no other plans. Bill's
and Joan's share of the contribution is computed as follows:
Stage 1-Joan
a. The total compensation for all participants is $160,000 ($70,000 +
$90,000).
b. Joan's percentage of the total compensation is 56.25%
($90,000/$160,000).
c. Joan's share of the contribution is $8,437.50 (56.25% of $15,000).
d. But no more than 3% of Joan's compensation is allocated in Stage I.
e. The amount of Joan's allocation in Stage I is $2,700 (3% of $90,000).
Stage 1 - Bill
a. The total compensation for all participants is $160,000 ($70,000 +
$90,000).
b. Bill's percentage of the total compensation is 43.75% ($70,000/$
160,000).
c. Bill's share of the contribution is $6,562.50 (43.75% of $15,000).
d. But no more than 3% of Bill's Compensation is allocated in Stage 1.
c. The amount of Bill's allocation in Stage 1 is $2,100 (3% of $70,000).
Of the $15,000 contribution, $4,800 ($2,700 + $2,100) is allocated in
Stage 1. A remaining contribution of $10,200 needs to be allocated.
Stage 2 - Joan
a. The total amount of compensation above the integration level is $34,600
[Joan's $27,300 ($90,000 - $62,700) plus Bill's $7,300 ($70,000 - $62,700)].
b. The percentage of Joan's compensation above the integration level as it
relates to the total compensation above the integration level is 78.9%
($27,300/$34,600).
c. Of the remaining $10,200 contribution, Joan gets 78.9% or $8,047.80.
d. But the amount allocated to Joan in this stage cannot exceed 3% of her
compensation above the integration level.
e. Joan's allocation in Stage 2 is $819 (3% of $27,300).
Stage 2 - Bill
a. The percentage of Bill's compensation above the integration level as it
relates to the total compensation above the integration level is 21.1%
($7,300/$34,600).
b. Of the remaining $10,200 contribution, Bill gets 21.1% or $2,152.20.
c. But the amount allocated to Bill in this stage cannot exceed 3% of his
compensation above the integration level.
d. Bill's allocation in Stage 2 is $219 (3% of $7,300).
The total amount allocated Stage 2 is $1,038 ($819 + $219 remaining
contribution of $9,162 needs to be allocated.
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Stage 3 - Joan
a. The balance of $9,162 is allocated based on the ratio that Joan's total
compensation plus compensation above the integration level bears to the sum of
all participants' total compensation plus compensation above the integration
level. The allocation is limited to a maximum of 2.7% of total compensation plus
compensation above the integration level.
b. The ratio of Joan's total compensation plus compensation above the
integration level to all participants is 60.28% [($90,000 + $27,300)/$90,000 +
$27,300 + $70,000 + $7,300].
c. Joan gets 60.28% of the remaining $9,162 or $5,522.85.
d. But the amount allocated to Joan in this stage can't exceed 2.7% of her
total compensation plus her compensation above the integration level.
e. Joan's allocation in Stage 3 is $3,167.10 [2.7% of $117,300 ($90,000 +
$27,300)].
Stage 3 - Bill
a. The ratio of Bill's total compensation plus compensation above the
integration level to all participants is 39.72% [($70,000 + $7,300)/$90,000 +
$27,300 + $70,000 + $7,300].
b. Bill gets 39.72% of the remaining $9,162 or $3,639.15.
c. But the amount allocated to Bill in this stage can't exceed 2.7% of his
total compensation plus his compensation above the integration level.
d. Bill's allocation in Stage 3 is $2,087.10 [2.7% of $77,300 ($70,000 +
$7,300)].
The total amount allocated in Stage 3 is $5,254.20 ($3,167.10 +
$2,087.10). The balance to be allocated is $3,907.80.
Stage 4 - Joan
a. The remaining contribution of $3,907.80 is allocated in the proportion
of each participant's compensation to the total compensation of all
participants.
b. Joan's percentage of the total compensation is 56.25% ($90,000/
$160,000).
c. Joan gets $2,198.14 (56.25% of $3,907.80) allocated to her account in
Stage 4.
Stage 4 - Bill
a. Bill's percentage of the total compensation is 43.75%
($70,000/$160,000).
b. Bill gets $1,709.66 (43.75% of $3,907.80) allocated to his account in
Stage 4.
Total Contribution - Joan
$8,884.24 = [$2,700 (Stage 1) + $819 (Stage 2) + $3,167.10 (Stage 3) + $2,198.14
(Stage 4)]
Total Contribution - Bill
$6,115.76 = [$2,100 (Stage 1) + $219 (Stage 2) + $2,087.10 (Stage 3) + $1,709.66
(Stage 4)]
Note: For any year in which the plan is not top-heavy, the integration
formula begins at Step 3 and the maximum permitted disparity rate is increased
3%. In this case, 2.7% becomes 5.7%, 2.4% becomes 5.4% and l.3% becomes 4.3%.
Employee Elective Deferrals
If the plan includes 401(k) provisions, you may be able to have a part of
your wages taken out of each paycheck and contributed to the plan. Refer to the
"Elective Deferrals" section of the "Summary of Plan Provisions" to find out if
you are allowed to make 401(k) contributions. If there is no "Elective
Deferrals" section, this plan does not allow for 401(k) contributions.
Contributions that you make to the plan under the 401(k) provisions are
called "elective deferrals." Every dollar you contribute as an elective deferral
reduces your W-2 wages--thereby reducing your taxable income for federal tax
purposes. In most cases, elective deferrals also reduce your income for state
and local tax purposes, although you should check to make sure this is true for
the state and city in which you live. All elective deferrals are subject to FICA
and FUTA withholding.
Example: John earns $30,000 and contributes $2,500 to the plan as an
elective deferral. For federal tax purposes, John has gross wages of
$27,500. But for FICA and FUTA tax purposes, John has $30,000 of income.
The most you can contribute to a 401(k) plan is $9,500 per year (1996
amount - adjusted annually for cost of living increases). If you are a "highly
compensated employee," as defined by IRS regulations, the amount you can
contribute may be limited by the actual deferral percentage test. Your
employer can tell you if you are a highly compensated employee.
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The employer can also set a limit on the amount of elective deferrals. To
find out if your employer has set a limit on how much you can contribute to the
plan, refer to the "Elective Deferrals" section of the "Summary of Plan
Provisions."
Besides having amounts taken out of your paycheck, if your employer
chooses, you may also be able to defer all or part of any employer-paid bonus.
To see if bonus deferrals are allowed, refer to the "Elective Deferral" section
of the "Summary of Plan Provisions."
Elective and bonus deferrals and earnings on the contributions are not
taxable until withdrawn. At that time, amounts withdrawn are added to the rest
of your income for tax purposes.
Before you can have amounts taken out of your paycheck and contributed to
the plan, you must sign a form provided by your employer. This form lets you
choose the dollar amount or percentage of wages you want withheld from each
paycheck and contributed to the plan. You can change or stop making elective
deferrals, but only on the date(s) allowed by the employer. These dates are
found under "Elections" in the "Elective Deferral" section of the "Summary of
Plan Provisions."
Employer-Matching Contributions
In addition to what you contribute to the plan as elective deferrals, it's
possible your employer will make matching contributions. To find out if the
employer will make matching contributions and the limits on matching
contributions, if any are made, see "Matching Contributions" in the "Elective
Deferral" section of the "Summary of Plan Provisions." If there is no "Matching
Contributions" section, the employer will not make matching contributions.
If the employer has elected to make matching contributions, your elective
deferral contribution will be matched with a contribution by the employer.
Employer-matching contributions are deposited in a special account under the
plan called the Employer-Matching Contribution Account.
Example: Joyce makes $20,000 per year. Her employer has elected to provide
matching contributions equal to 50% of the salary reduction contributions
Joyce makes to the plan. The maximum salary reduction contributions that
will be matched, however, are 5% of a participant's gross compensation.
Joyce decides to contribute 6% of her salary to the plan. Thus, Joyce's
salary is reduced $1,200 (6% of $20,000) and the $1,200 is contributed to
the plan. The employer will match 50% of the amount Joyce contributes, up
to 5% of her gross compensation. Five percent of Joyce's gross
compensation is $1,000 (5% of $20,000), so the employer's matching
contribution is 50% of $1,000, or $500.
If there are excess aggregate contributions to the plan, forfeitures of
these amounts and of any nonqualified matching contributions will either be used
to reduce future employer contributions or be allocated to each participant on a
compensation-to-compensation basis, as determined by the employer. To find out
which method the employer chose, see "Matching Contributions" in the "Elective
Deferrals" section of the "Summary of Plan Provisions."
Excess Elective Deferrals
You are responsible to make sure your elective deferral contributions do
not exceed the maximum limits. The annual limit on your elective deferral
contributions is $9,500 (1996 amount - adjusted annually for cost of living
increases). To find out what the limit is for any year, ask your employer.
If you do contribute more than the maximum limit, you must notify your
employer by a date specified by the employer. The date by which you must notify
the employer is indicated in the "Elective Deferral" section of the "Summary of
Plan Provisions."
This rule is especially relevant if you participate in a deferred
compensation plan of another company you may also work for.
Hardship Withdrawal of Your Elective Deferrals
Your employer may allow you to withdraw all or part of your elective
deferral contributions because of hardship. Refer to the "Elective Deferral"
section of the "Summary of Plan Provisions" to see if hardship withdrawals are
permitted.
If the employer allows hardship withdrawals, you may withdraw elective
deferrals for the following reasons:
(1) To pay medical expenses of yourself, spouse, children or dependents;
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(2) To purchase a principle residence (house) that you will live in;
(3) To pay tuition and related educational fees for the next 12 months of
post-secondary education for yourself, spouse, children or dependents;
(4) To prevent eviction from or foreclosure on the mortgage of your house.
At this time, these are the only reasons that qualify for hardship
withdrawals. Eventually the IRS may allow hardship withdrawals for other
reasons.
Any withdrawal you receive because of hardship is subject to income taxes,
and if you are under age 59 1/2, it is also subject to a 10% penalty tax
described later in the section titled, "Distributions Before Age 59 1/2.
Other restrictions apply to hardship withdrawals. This information can be
obtained from your employer.
Employee Contributions
Under the plan, the employer is authorized to establish uniform rules to
permit employee contributions. To determine whether employee contributions are
allowed, see the "Elective Deferral" section of the "Summary of Plan
Provisions." If the employer allows such contributions, they will be completely
voluntary. Note that any contributions you make as an employee under this plan
are not tax deductible; although any earnings on the contributions are
tax-deferred and not taxed until they are actually distributed to you. Any
voluntary contributions you might make to the plan are placed in your account.
Separate records are maintained to keep track of the contributions you have
made.
There are a number of different rules that apply to voluntary employee
contributions. A discussion of these rules follows. You should review them if
the employer permits voluntary employee contributions and you intend to make
voluntary contributions to the plan.
Only participants may make voluntary employee contributions. You may
voluntarily contribute up to 10% of your total compensation from the
employer--paid for all years you're a plan participant. The 10% limit is
cumulative; that is, if you contribute less than the 10% limit in one year, you
can make up that amount and contribute it in a later year, along with the 10%
allowed for the later year.
Rollovers
The plan gives the employer the right to establish uniform rules for
rollover contributions. To find out whether the plan allows for rollover
contributions, see the "Administrative Elections" section of the "Summary of
Plan Provisions." If the employer allows rollovers, you may roll over a
distribution received from another plan into this plan. There are a number of
rules that apply to rollovers. if you have a distribution from another plan
which you would like to deposit in this plan, you should check with the
employer. Any amounts received from another plan will be deposited in your
account. Separate records will be kept to show the amount in your account which
is attributable to rollovers from another plan.
IV. INVESTMENTS, GAINS AND LOSSES
In General
The earnings, gains and losses generated by plan investments will be
divided among the accounts of the participants in the plan. The extent to which
you share in the investment performance of the plan's assets depends on the size
of your account in relation to the size of all the other participants' accounts
in the plan.
Example: Assume the plan has a balance of $20,000 and your account has a
value of $5,000. One-fourth ($5,000/$20,000) of the earnings, gains and
losses experienced by the plan will be charged or credited to your
account.
Earnings, gains or losses are generally divided among the participants'
accounts once a year. This happens on the last day of the plan year. Your
employer may have this process take place more frequently, however, by asking
the trustee or custodian to do so.
When dividing earnings, gains and losses, the trustee or custodian will
use the value your account had as of the last time earnings, gains and losses
were divided, reduced by any distributions and increased by any contributions
which have been made to your account since that time.
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Participant-Directed Investments
The employer may allow you to choose how your account balance is invested.
The "Administrative Elections" section of the "Summary of Plan Provisions" will
indicate whether participant-directed investments are allowed under this plan.
If the employer allows this option, you should instruct the employer, following
the procedure the employer establishes, to invest your account as desired. The
employer, in turn, will advise the trustee.
If you direct the investment of your account, any earnings, gains or
losses produced by the investments you make will be credited or charged only to
your account. The general procedure for dividing earnings, gains or losses,
which is described on the previous page, will not apply.
If your plan uses a custodian and the employer permits participants to
choose investments, only the following choices are available: (1) a savings
account with the custodian, (2) a time deposit with the custodian, and (3) life
insurance.
V. VESTING
In General
"Vesting" means that you have a right to the balance in your account which
cannot be taken away, even if you terminate employment. You become vested in
accordance with the vesting schedule the employer has selected. The vesting
information is found in the "Vesting" section of the "Summary of Plan
Provisions." Regardless of the vesting schedule selected, you are always 100%
vested in any voluntary employee contributions you make to the plan as well as
any rollover or transfer contributions to this plan from another plan. You are
also 100% vested in your entire account, including amounts attributable to
employer contributions, when you reach your normal retirement age or if you
become disabled or die before you terminate employment with the employer.
Computing Years of Service for Vesting
If the employer has selected a vesting schedule other than 100% immediate
vesting, you will need to compute your years of service to determine your vested
percentage. Except as provided below, all of your years of service for the
employer will be added together to determine where you are on the vesting
schedule. A year of service for vesting is a plan year in which you have
completed 1,000 or more hours of service. Partial credit is not given, nor may
you carry over hours from one plan year to the next. An hour of service has the
same meaning that it has for eligibility.
Years That Do Not Count for Vesting
Depending on the options selected by the employer, certain years of
service may not be taken into account for vesting. Refer to "Exclusions" in the
"Vesting" section of the "Summary of Plan Provisions" to determine what years,
if any, are excluded.
Additional Years That May Count for Vesting
If the employer has so elected, years of service with a previous employer
may be taken into account for vesting. This information is found under "Service
with a Previous Employer" in the "Summary of Plan Provisions."
Forfeiture of Nonvested Amounts
If you terminate employment with the employer at a time when you are less
than 100% vested, the nonvested portion of your account will eventually be
forfeited. The amount forfeited will be allocated among the remaining plan
participants in the same manner as employer contributions. However, if you
return to work before you have five consecutive one-year breaks in service and
repay the amount distributed to you previously, the nonvested amount will be
restored to your account. There is a time limit for this repayment. A "break in
service" is a plan year in which you have 500 or fewer hours of service.
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For example, if you are 60% vested and you quit work, you will eventually
receive 60% of your account balance. The 40% nonvested portion is forfeited and
will be divided among the remaining participants.
If you have 500 or fewer hours of service in a plan year because you are
on maternity or paternity leave, (this includes a leave granted because of the
adoption of a child), you will be credited with the hours of service you would
have otherwise been credited with to determine whether you have a break in
service. The credit is given in the plan year the leave begins if you need it to
keep from having a break in service in that year. Otherwise, the credit will be
given in the next plan year.
VI. TOP-HEAVY RULES
There are certain rules that apply to the plan for any year the plan is
top-heavy. A plan is "top-heavy" if the total account balances of key employees
of the employer (and affiliates, if any) is more than 60% of the account
balances of all participants.
A key employee is an employee who:
(1) Is an officer of the employer having an annual compensation of more
than $60,000* for the plan year;
(2) Is one of ten employees having annual compensation of more than
$30,000* and ownership of the ten largest interests in the employer;
(3) Owns more than five percent of the employer; or
(4) Owns more than one percent of the employer and has annual compensation
of more than $150,000.
*1996 amount - adjusted for cost of living increase.
If the plan is top-heavy for any plan year, a minimum contribution of 3%
of compensation must be made for all employees eligible for an employer
contribution.
Note: The minimum contribution can be less than 3% as long as it is equal
to the highest percentage of any key employee. In addition, the plan must have
100% immediate vesting, the 2/20 vesting schedule or the 3-year cliff vesting
schedule.
VII. BENEFITS
Eligibility
You will be eligible to receive benefits from the plan under the
following circumstances:
(1) Termination of Employment: You may be eligible to receive benefits
when you terminate employment with the employer. The "Administrative Elections"
section of the "Summary of Plan Provisions" will tell you if you are allowed to
receive a distribution of the vested portion of your participant's account at
termination of employment. Regardless of this election by your employer, you
will be eligible to receive 100% of your voluntary contribution and rollover
accounts at termination of employment.
(2) Disability: You will be eligible to receive benefits if you terminate
employment with the employer on account of disability. You will be considered
disabled when, due to a physical or mental condition, you are no longer able to
work and your condition is expected to be permanent. The employer will determine
if you are disabled on the basis of medical evidence you submit.
(3) Death: If you die while you are a participant, your beneficiary will
be eligible to receive benefits from the plan. Your beneficiary is named by
filing a Beneficiary Designation form with the employer before your death,
naming the person or persons you want to receive benefits in case of your death.
Your employer has a supply of these forms on hand.
If you are married, your spouse will automatically be your beneficiary
unless your spouse consents to the designation of someone else as your
beneficiary. The consent of your spouse must be in writing, on the form provided
by the employer, and your spouse's signature must be witnessed by a plan
representative or notary public. Your spouse's consent to name someone else as
your beneficiary will only be effective for the spouse that signs the consent.
For example, if you are divorced and later remarry, consent by your former
spouse will only be effective with respect to him or her, and will not apply to
your new spouse.
8
<PAGE>
(4) Retirement: You will become eligible to receive benefits from the plan
on your normal retirement date. The normal retirement date is the first day of
the month following the date you reach your normal retirement age. The normal
retirement age can be found in the "Normal Retirement Age" section of the
"Summary of Plan Provisions."
When and How Benefits Are Paid
Once you become eligible for benefits, you may elect when and how benefits
are to be paid. The election is made by completing a form which the employer
will give you on request. In the case of death benefits, your beneficiary will
have the choice, unless you otherwise provide in your beneficiary designation.
If you terminate employment for a reason other than death, disability or
retirement, the employer has the option to defer payment of your benefit until
your normal retirement date or the date you become disabled or die, if that
occurs before your normal retirement date. The "Administrative Elections"
section of the "Summary of Plan Provisions" will indicate whether this option
was chosen under your plan.
Before you begin receiving benefits, it is strongly recommended that you
consult with your attorney, accountant or other advisor. They can help you make
the right decision and let you know the tax implications of the various
distribution options you have.
When you file an application with the employer to receive benefits, you
may select one of the following or a combination of the following options:
o Lump Sum: You may have your benefits paid in one single payment.
o Installments: You may have your benefits paid in equal, or nearly equal,
annual installments over a certain number of years or months.
o Annuity Contract: You may have the Trustee purchase an annuity contract
and have the contract distributed to you. Only certain kinds of annuity
contracts may be purchased. The restrictions are provided in the plan.
When you make your application for benefits, there are some limitations
that must be kept in mind:
(1) Limit on Installments: If you request installment payments, the
installments cannot exceed a period of time which is longer than your life
expectancy or the combined life expectancy of you and your beneficiary. The plan
measures life expectancy by using tables published by the IRS. In addition to
limitations on the number of installments which you may receive, certain rules
govern the minimum amount which you may receive in each installment.
(2) Distribution in Kind: The employer has the option of paying your
benefits in cash, in kind (actually distributing assets that are in the plan) or
a combination of the two, subject to your approval.
(3) Distribution at Age 70 1/2: You must start receiving benefits by
April 1 following the year in which you reach age 70 1/2, whether or not you
have retired.
(4) Distribution Before Age 59 1/2: Distributions before age 59 1/2 may be
subject to a 10% penalty tax. The 10% penalty tax is equal to 10% of that
portion of a distribution that is included in your gross income. It does not
apply if the distribution is payable: 1) on account of death; 2) due to
disability; 3) as part of a series of substantially equal periodic payments made
over your life expectancy or your joint-life expectancy calculated with your
beneficiary (beginning after you separate from service); or 4) due to separation
from service after age 55. Other exceptions may also apply.
(5) Payout of Smaller Accounts: If the balance of your account is $3,500
or less, the employer may elect to distribute your account in a single sum
regardless of the election you make. To find out if this is the case, refer to
the "Administrative Elections" section of the "Summary of Plan Provisions." If
you are not fully vested in your account at the time a distribution is made, the
nonvested portion of your account will be forfeited.
(6) Distributions After Your Death: Generally, if you die on or after
April 1 following the year in which you reach age 70 1/2, payments must continue
to your beneficiaries at least as rapidly as payments were being made under your
payment schedule. If you die before April 1 following the year in which you
reach age 70 1/2, the benefit payable on your death may not be paid over a
period that is longer than the life expectancy of your designated beneficiary,
provided payments to your beneficiary start within a year after you die. If your
spouse is your designated beneficiary, the same rule applies, but the payments
don't have to start until December 31 of the year you would have been age
70 1/2. In all other cases not covered by the
9
<PAGE>
foregoing rules, the benefits payable on your death may not be spread out over a
period of more than five years from the date of your death.
Eligible Rollover Distributions
If your retirement benefits to be paid will be an eligible rollover
distribution, you will have to choose how you want it distributed. You can have
the funds sent directly to another retirement plan in a direct rollover, or you
can take possession of the distribution after your employer withholds 20 percent
federal income tax.
An eligible rollover distribution is a distribution of all or any portion
of your account balance in the plan. However, it does not include the following:
(1) Substantially equal payments at least annually over your life (or
joint lives with your beneficiary) or for a period of 10 years or more;
(2) Distributions you are required to take from the plan because you are
age 70 1/2 or older; and
(3) Amounts that are not taxable to you when distributed.
These distributions are not "eligible rollover distributions"; therefore,
they cannot be rolled over to another retirement plan and are not subject to 20
percent tax withholding.
You can choose to have an eligible rollover distribution paid directly to
another employer's qualified plan that accepts these rollovers, or an IRA. This
is called a direct rollover.
If you choose to take possession of the distribution, rather than have it
directly rolled over to another retirement plan, your employer/plan
administrator must withhold 20 percent federal income tax from the amount of the
distribution. You may then be able to roll over the actual amount received (80
percent), within 60 days of receipt. To avoid taxes and penalties on the amount
withheld, you will have to obtain from other sources an amount equal to the 20
percent withheld and roll it over along with the 80 percent received.
Prior to receiving an eligible rollover distribution, your employer/plan
administrator must give you a written explanation of these rules, the choices
you will have available, and the tax implications.
Special Rules for Transfers/Conversions from Certain Plans
Special distribution rules apply if you were a participant in a pension
plan or a plan with special survivor annuity rules that has been transferred or
converted into this plan. You may ask the employer if this section applies to
you, and if the answer is yes, the employer will tell you whether the following
rules apply only to a subaccount of these transferred/converted funds and future
earnings or to all funds in the plan held for you.
If you are married on the date benefits are paid as a result of
termination of employment, disability or retirement, the benefits from your
subaccount will be paid in the form of a joint and survivor annuity. A joint and
survivor annuity is an annuity which pays a monthly income for your life, with
monthly payments continuing to your surviving spouse for the rest of his or her
life after your death. The payments to your spouse are equal to 50% of the
amount that was being paid to you. The annuity is provided by applying the
amount of your subaccount to purchase an annuity contract from a life insurance
company selected by the employer.
Instead of receiving these benefits in the form of a joint and survivor
annuity, you may elect (with your spouse's consent) to have the benefits paid in
one of the methods described earlier in the section titled, "When and How
Benefits Are Paid." About 90 days before benefits are scheduled to start, you
will receive a notice from the employer describing the joint and survivor
annuity and how an election can be made to receive benefits in one of these
optional methods.
The election to take an optional method of distribution must be made on a
form provided by the employer. The form must be signed by your spouse and your
spouse's signature must be witnessed by a plan representative or notary public.
You can revoke an election or make a new election to receive an optional method
of distribution at any time before your benefits commence. The number of
elections, or revocations of a prior election, is not limited. Your spouse's
consent is not necessary to revoke a prior election to take an optional method
of distribution.
Generally, you must be married to your spouse on the date benefits
commence in order for the joint and survivor annuity rules to apply. However, if
you are divorced, the joint and survivor rules will apply to the
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<PAGE>
extent provided in the divorce decree, if the divorce decree meets certain legal
requirements. Likewise, if you are divorced and remarried before benefits
commence, the joint and survivor annuity rules will apply to your subsequent
spouse to the extent not otherwise provided in a prior divorce decree.
If you die before benefits begin and you are married on the date of your
death, your surviving spouse will be entitled to a preretirement survivor
annuity, unless you have designated a beneficiary other than your spouse. If you
wish to name someone other than your spouse as beneficiary, you may do so (with
your spouse's consent) only during the applicable election period. This period
begins on the first day of the plan year in which you reach the age of 35 (or if
you leave employment before age 35, on the date you leave) and ends at death.
The preretirement survivor annuity is a monthly benefit payable to your
surviving spouse for the rest of his or her life. The amount of the benefit is
equal to the single life annuity that can be purchased from a life insurance
company selected by the employer by applying the full value of your subaccount
on the date you die.
If you have never been married or if you are divorced but you are not
subject to the joint and survivor annuity rules, benefits from your subaccount
will be paid to you in the form of a life annuity. Instead of a life annuity,
you may elect to have these benefits paid to you in one of the methods described
earlier, in the section titled, "When and How Benefits Are Paid."
VIII. WITHDRAWALS AND LOANS
Employee Contributions
Employee contributions, including gains or earnings on the contributions,
may be withdrawn. Withdrawal will be subject to rules established by the
employer governing how and when withdrawals may be made. You may be subject to
the 10% penalty described earlier in the section titled, "Distributions Before
Age 59 1/2" if the withdrawal takes place before age 59 1/2 and if the
withdrawal includes gains or earnings on the voluntary employee contributions.
If you are married and you are a participant in a plan which is a transfer or
conversion plan and your vested interest in your account exceeds $3,500, you
must obtain your spouse's consent to any withdrawal from the subaccount
established to keep track of the funds from the other plan. The spousal consent
rules are the same as those for electing an optional method of distribution.
Hardship Withdrawal
You may be permitted to make a withdrawal from the plan to meet financial
hardship. To find out if hardship withdrawals are permitted, refer to the
"Administrative Elections" section of the "Summary of Plan Provisions." Any
withdrawal may be made only in accordance with the rules provided by the
employer. A financial hardship is a situation where you have immediate and heavy
financial needs and funds are not reasonably available from other sources. The
amount you may withdraw may not exceed the amount necessary to meet the
hardship. The employer will determine whether you qualify for a hardship
withdrawal. The amount of the withdrawal may not exceed the vested interest in
your account made up of employer contributions. Any withdrawal you receive
because of hardship is subject to income taxes and, if you are under age 59 1/2,
the 10% penalty described earlier in the section titled, "Distributions Before
Age 59 1/2." If you are married and you are a participant in a plan which is a
transfer or conversion plan and your vested interest in your account exceeds
$3,500, you must obtain your spouse's consent to any withdrawal from the
subaccount established to keep track of the funds from the other plan. The
spousal consent rules are the same as those for electing an optional method of
distribution.
These hardship distribution rules are separate from the hardship rules
that apply to elective deferrals under a 401(k) plan.
Loans
The plan gives the employer the discretion to permit a plan participant to
borrow against the vested interest in his or her account if the plan has a
trustee. Loans are not permitted if the plan has a custodian. To find out if the
plan allows for loans to participants, refer to the "Administrative Elections"
section of the "Summary of Plan Provisions."
11
<PAGE>
Loans are subject to a number of restrictions including a maximum loan
amount of 50% of your vested account balance up to a maximum of $50,000, reduced
by the excess of the highest outstanding balance of the previous year over the
outstanding balance at the time the loan was made. If you are married, you must
obtain your spouse's consent before you can borrow against your account. Consent
must be obtained in accordance with the consent requirements set out in the
section covering transfers and conversions from pension plans, with some
differences which your Employer will explain to you should you request a loan.
if you want to borrow from your account, you should check with the employer
regarding the availability of loans, the terms and the restrictions that apply.
IX. MISCELLANEOUS
Termination and Amendment of the Plan
The employer has adopted the plan with the intention that it will continue
indefinitely. However, the employer has retained the right to terminate or amend
the plan at any time. The plan does not create a contract which requires the
employer to make future contributions nor does the plan create any kind of
employment contract between the employer and its employees. In the event the
plan is terminated, your entire account will be 100% vested, regardless of where
you are on the vesting schedule or how many years of service you have.
Termination or amendment will not decrease amounts already contributed to your
account.
Protection from Creditors
The assets in your account are protected from the claims of creditors, to
the full extent allowed by law. You, in turn, cannot assign or transfer the
assets of your account to satisfy the claims of creditors nor may you use your
account as security for a loan (except for loans which may be permitted from the
plan).
Termination Insurance
The plan falls into the category of plans known as "defined contribution"
plans. There is a government agency called the Pension Benefit Guarantee
Corporation which was established under Title IV of the Employee Retirement
Income Security Act of 1974 (ERISA). This insurance program guarantees the
benefits of certain plans but does not cover defined contribution plans.
Accordingly, this plan is not covered.
X. PROCEDURE FOR PROCESSING CLAIMS
The employer will notify you in writing within 90 days of your written
application for benefits whether or not you are eligible for benefits under the
plan. If the employer determines you are not eligible for the benefits
requested, the notice will set forth:
(1) The specific reasons for any denial of benefits;
(2) A specific reference to the provision of the plan on which denial is
based;
(3) A description of any additional information or material necessary for
you to perfect your claim (and an explanation why such information or material
is necessary); and
(4) An explanation of the plan's claim review procedure.
It may be that the employer will need more than the initial 90 days to
consider your application for benefits. If so, you will be notified of the
delay, the special circumstances that require additional time and when a
decision can be expected. If this procedure is followed, the employer will have
an additional 90 days to make a decision.
If the employer determines you are not eligible for benefits, or if you
believe that you are entitled to greater or different benefits, you will have
the opportunity to have your claim reviewed by the employer by filing a petition
for review with the employer within 60 days after you receive the notice issued
by the employer.
Your petition should state the specific reasons why you believe you are
entitled to benefits, or greater or different benefits. Within 60 days after the
petition is received, the employer will give you (and your
12
<PAGE>
counsel, if any) an opportunity to present your position to the employer orally
or in writing, and you (or your counsel) shall have the right to review the
pertinent documents. Within 60 days after the hearing or the date of receipt of
the petition (if you present your position in writing) the employer will notify
you of its decision in writing, stating the decision and the specific provisions
of the plan on which the decision is based. If, because of a hearing, the
employer needs more than 60 days to make a decision, you will be notified of the
delay. The employer will then have an additional 60 days to make a decision.
In the event of your death, the same procedure will apply to your
beneficiary or beneficiaries.
XI. YOUR RIGHTS UNDER ERISA
As a participant in the plan, you are entitled to certain rights and
protections under ERISA. ERISA provides that all plan participants shall be
entitled to:
(1) Examine, without charge, all plan documents, including copies of all
documents filed by the plan with the U.S. Department of Labor, such as detailed
annual reports and plan descriptions.
(2) Obtain copies of all plan documents and other plan information upon
written request to the Plan Administrator. The Plan Administrator may make a
reasonable charge for the copies.
(3) Receive a summary of the plan's annual financial report. The Plan
Administrator is required by law to furnish each participant with a copy of this
summary annual report.
(4) Obtain a statement telling you whether you have a right to receive
benefits at normal retirement age and, if so, what your benefits would be at
normal retirement age if you stop working under the plan now. If you do not have
a right to benefits, the statement will tell you how many years you have to work
to get a right to benefits. This statement must be requested in writing and is
not required to be given more than once a year. The Plan Administrator must
provide the statement free of charge.
In addition to creating rights for plan participants, ERISA imposes duties
upon the people who are responsible for the operation of the employee benefit
plan. The people who operate your plan, called "fiduciaries" of the plan, have a
duty to do so prudently and in the interest of you and other plan participants
and beneficiaries.
No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
benefit under the plan or exercising your rights under ERISA. If your claim for
a benefit is denied in whole or part, you must receive a written explanation of
the reason for the denial. You have the right to have the Plan Administrator
review and reconsider your claim. Under ERISA, there are steps you can take to
enforce the above rights. For instance, if you request materials which you are
entitled to receive from the Plan Administrator and do not receive them within
30 days, you may file suit in a federal court. In such a case, the court may
require the Plan Administrator to provide the materials and pay you up to $100 a
day until you receive the materials, unless the materials were not sent because
of reasons beyond the control of the Plan Administrator. If you have a claim for
benefits which is denied or ignored, in whole or part, you may file suit in a
state or federal court. If it should happen that plan fiduciaries misuse the
plan's money, or if you are discriminated against for asserting your rights, you
may seek assistance from the U.S. Department of Labor, or you may file suit in a
federal court.
The court will decide who should pay court costs and legal fees. If you
are successful, the court may order the person you have sued to pay these costs
and fees. If you lose, the court may order you to pay these costs and fees; for
example, if it finds your claim is frivolous.
If you have any questions about your plan, you should contact the Plan
Administrator, if you have any questions about this statement or about your
rights under ERISA, you should contact the nearest area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
13
<PAGE>
UNIPLAN
PROTOTYPE PROFIT SHARING PLAN AND TRUST/CUSTODIAL ACCOUNT
NONSTANDARD PLAN ADOPTION AGREEMENT AA #003
THE FIRST NATIONAL BANK
AND TRUST COMPANY
204 WASHINGTON P.O. BOX 100
ATHENS, TENNESSEE 37303
CUSTOMER NO. 1432962
The Employer named below adopts the UNIPLAN Prototype Profit Sharing Plan and
Trust/Custodial Account and makes the following specified elections under the
Adoption Agreement.
A. ACCOUNTING, EFFECTIVE DATE AND OTHER DATA
1. NAME AND ADDRESS OF EMPLOYER
Employer Name First National Bank and Trust Co.
Address 2O4 Washington Ave. (P.O. Box 100)
City, State, ZIP Athens, TN 37303 (37371-0100)
2. TYPE OF BUSINESS ORGANIZATION (Select one)
|_| Sole Proprietorship |_| Partnership
|X| Corporation |_| Subchapter S Corporation
3. EFFECTIVE DATE 1/1/84
(If the Employer is adopting this Plan as a restatement of an
existing plan, the date should be the original effective date of the
existing plan. Otherwise, the date should be the date the Employer
chooses the Plan to be effective.)
4. RESTATED DATE 1/1/97 (Complete only if this Plan is a restatement of
a plan previously adopted.)
If this Plan is a restatement of a previously existing plan, attach
an addendum listing any optional forms of benefit which must be
included in this Plan under Code Section 411(d)(6) and the
regulations thereunder which are not listed elsewhere in the Plan.
5. EMPLOYER TAX YEAR END 12/31
6. PLAN YEAR END 12/31
7. EMPLOYER IDENTIFICATION NUMBER 62-0201190
8. PLAN NUMBER (3 digits) 002
9. DESCRIPTION OF TRADE OR BUSINESS Banking
__________________________________________________________________________
10. LIMITATION YEAR END 12/31
(If this item is not completed, the limitation year end shall be the
calendar year end)
B. ELIGIBILITY
1. SERVICE REQUIREMENT (Specify whole years or months.)
a. Whole Years
|1| Year(s) of Service [Not more than 2 (1 if the Plan allows
401(k) contributions). If more than 1 Year of Service is
required, the Plan must provide 100% immediate vesting under
Section E.1.]
b. Months
|_| Months of Service [Not more than 24 (12 months if the Plan
allows 401(k) contributions). If more than 12 Months of
Service is elected, the Plan must provide 100% immediate
vesting under Section E.1.]
2. MINIMUM AGE REQUIREMENT (Specify.)
|21| (May not exceed age 21.)
3. EXCLUDED CLASSES OF EMPLOYEES
(Describe. Employees of an Affiliate must be specified as excluded
if the Affiliate, if any, does not adopt the Plan under Section O.)
____________________________________________________________________
____________________________________________________________________
4. ELIGIBILITY FOR EMPLOYER CONTRIBUTIONS (Check all that apply.)
A participant shall be eligible to receive an allocation of Employer
contributions for a Plan Year if he/she meets the following
requirements.
a. |X| The participant must be employed on the last day of the Plan
Year.
b. |X| The participant must complete 1,000 Hours of Service during
the Plan Year unless the Plan is Top-Heavy for such Plan
Year.
c. |X| The requirements of 4.a. and 4.b. (above) shall not apply if
the participant terminates employment due to |X| death |X|
disability |X| retirement.
d. If elective deferrals are elected under Section D. of this
Adoption Agreement, the requirements of 4.a. and 4.b. (above)
|_| shall |X| shall not apply to Employer contributions made
pursuant to a salary reduction agreement.
e. If elective deferrals are elected under Section D. of this
Adoption Agreement and matching contributions are elected
under Section D.4., the requirements of 4.a. and 4.b. above
|_| shall |X| shall not apply to such matching contributions.
5 ENTRY DATES
The Plan shall have the following entry dates:
a. |_| The Plan Anniversary Date.
b. |X| The Plan Anniversary Date and a date six months from the Plan
Anniversary Date.
c. |_| Other*_______________________________________________________
* If only one entry date per year is provided and an employee
enters the Plan on the entry date following the date on which
the employee satisfies the eligibility requirements, the
maximum age and service requirements in Sections B.1 and B.2.
(above) must be reduced by 1/2 year.
6. PLAN ENTRY
An employee shall enter the Plan on the Plan entry date |X|
following |_| prior to |_| closest to the date on which the employee
meets the eligibility requirements of the Plan.
C. DEFINITION OF COMPENSATION
1. "Compensation" shall mean:
|X| W-2 earnings.
|_| Compensation as defined in Section 415(c)(3) of the Code.
2. "Compensation" shall mean the amount which is actually paid to the
participant during:
|X| The Plan Year.
|_| The taxable year ending with or within the Plan Year.
|_| The limitation year ending with or within the Plan Year.
3. Compensation |X| shall |_| shall not include Employer contributions
made pursuant to a salary reduction agreement which are not includible
in the gross income of the employee under Sections 125, 402(a)(8),
402(h) or 403(b) of the Code.
4. Compensation shall not include:
|_| Bonuses
|_| Overtime
|_| Other (Specify.)________________________________________________
(NOTE: These exclusions shall not apply if the Plan is integrated
with social security or for purposes of determining the minimum
required contribution for years in which the Plan is Top-Heavy.)
5. This definition of compensation shall be effective as of 1/1/94.
6. Compensation shall be taken into account:
|X| From the date of entry into the Plan.
|_| For the entire period in which the employee becomes a
participant.
_______________________________________________________________________
D. ELECTIVE DEFERRALS
Complete this section only if elective deferrals or voluntary
nondeductible employee contributions are allowed under this Plan.
1. ELECTIVE DEFERRALS
A participant may elect to have his or her compensation reduced by
the following percentage or amount per pay period, or for a
specified pay period or periods, as designated in writing to the
plan administrator. (Check any applicable options and fill in the
appropriate blanks)
a. |X| An amount not in excess of 10% of a participant's
compensation
b. |_| An amount not in excess of $__________ (specify dollar
amount) of a participant's compensation per year.
2. CASH OR DEFERRED ELECTIONS
|X| Check here if a participant may base elective deferrals on cash
bonuses that, at the participant's election, may be contributed
to the CODA or received by the participant in cash.
3. ELECTIONS
a. A participant may elect to commence deferrals (under 1. or 2.
above) as of 1/1 & 7/1 (enter at least one date during the
calendar year).
b. A participant may elect to terminate or modify the amount of
deferrals as of 1/1 & 7/1 (enter at least one date during the
calendar year).
4. MATCHING CONTRIBUTIONS
a. The Employer will make matching contributions to the Plan on
behalf of:
|X| All participants. |_| All participants who are nonhighly
compensated employees.
b. Matching contributions will be made on behalf of each
participant in the amount of:
1) |X| 50% of the elective deferral made for each Plan Year.
2) |_| The sum of: ______% of the portion of the elective
deferral which does not exceed: ______% of the participant's
compensation; plus ______% of the portion of the elective
deferral which exceeds ______% of the participant's
compensation.
3) |_| An amount to be determined by the Employer each year.
c. The Employer shall not match elective deferrals in 1.a. or
1.b. above in excess of $_____________ or in excess of 6% of
the participant's compensation.
d. All Employer matching contributions shall be |_| qualified |X|
nonqualified.
e. Forfeitures of excess aggregate contributions and forfeitures
of any nonqualified matching contributions shall be:
|_| Used to reduce Employer contributions.
|X| Allocated after all other forfeitures under the Plan, to
each participant's matching contribution account in the
ratio which each participant's compensation for the Plan
Year bears to the total compensation of all participants
for such Plan Year. "Qualified Matching Contributions"
shall mean matching contributions which are subject to the
distribution and nonforfeitability requirements of
Section 401(k) of the Code when made.
- --------------------------------------------------------------------------------
1st Copy - Sponsor (Financial institution)
2nd Copy - Bankers Systems
3rd Copy - Employer/Plan Administrator
<PAGE>
- --------------------------------------------------------------------------------
Elective Deferrals Continued
5. QUALIFIED NONELECTIVE CONTRIBUTIONS
a. The Employer |X| will |_| will not make qualified nonelective
contributions to the Plan. If the Employer does not make such
contribution to the Plan, then the amount of such contributions for
each Plan Year shall be an amount determined by the Employer.
b. The allocation of qualified nonelective contributions shall be made
to the account of:
|_| All participants. |X| Only nonhighly compensated participants.
6. VOLUNTARY NONDEDUCTIBLE CONTRIBUTIONS
Participants |_| will |X| will not be allowed to make nondeductible
voluntary employee contributions.
7. HARDSHIP WITHDRAWALS
Hardship withdrawals of elective deferrals |X| shall |_| shall not
be permitted.
8. EXCESS ELECTIVE DEFERRALS
Participants who claim excess elective deferrals for the preceding
taxable year must submit their claims in writing to the plan
administrator by March 1st. (Specify a date before April 15.)
- --------------------------------------------------------------------------------
E. VESTING
1. SCHEDULE (Select one.)
Participants are vested in that portion of their participants'
accounts attributable to Employer contributions in accordance with
the following schedule:
<TABLE>
<CAPTION>
Year(s) of 100% 5-Year 3-7 Year Service % Specify %
Service |_| Immediate |_| Cliff |X| |_| |_|
<S> <C> <C> <C> <C> <C>
1 100% 0% 0% _______ ______
2 100% 0% 0% _______ ______
3 100% 0% 20% _______ ______ (not less than 20%)
4 100% 0% 40% _______ ______ (not less than 40%)
5 100% 100% 60% 100% ______ (not less than 60%)
6 100% 100% 80% 100% ______ (not less than 80%)
7 100% 100% 100% 100% 100%
</TABLE>
2. EXCLUSIONS (Check all applicable ones. Does not apply if 100% immediate
vesting in Section E.1. above has been selected.)
a. |_| Exclude Year(s) of Service prior to effective date of the Plan
(except periods during which the Employer maintained a predecessor
to this Plan).
b. |_| Exclude Year(s) of Service prior to or during the computation
year in which the employee attains age 18 (age 22 for Plan Years
beginning before 1/1/85).
3. Schedule to apply as of the first day of the Plan Year for which the
Plan is Top-Heavy. (Select one.)
|_| 100% Immediate |X| 2/20 Vesting
F. NORMAL RETIREMENT AGE
65 (May not be earlier than age 59 1/2 or later than age 65.)
G. EARLY RETIREMENT AGE
55 (May not be earlier than age 55.)
Early retirement shall only be available to participants who have
completed 15 Years of Service.
H. SERVICE WITH PREVIOUS EMPLOYER (Select one.)
1 |X| Service with a previous Employer will not be taken into account
except to the extent service is required to be given pursuant to
Code Section 414(a) and the regulations thereunder.
2 |_| Service with the following previous Employer(s) shall be taken into
account for purposes of eligibility
(Section B.1.) and vesting (Section E.1.).__________________________
__________________________________________________________________________
I. LIMITATIONS ON ALLOCATIONS
If the Employer maintains or has ever maintained another qualified plan in
which any participant in this Plan is (or was) a participant or could
become a participant, complete this section. The Employer must also
complete this section 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.
1. DEFINED CONTRIBUTION PLAN (Select one.)
If the participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or
prototype plan:
|X| The provisions of Article VII of the Plan Document will apply as
if the other plan were a master or prototype plan:
|_| Provide the 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.
2. DEFINED BENEFIT PLAN
If the participant is or has ever been a participant in a defined
benefit plan maintained by the Employer or an Affiliate, the annual
additions to this and/or another qualified defined contribution
plan, or projected annual benefit in one or more qualified defined
benefit plans shall be reduced so that the sum of the defined
contribution fraction and the defined benefit fraction will not
exceed 1.0. (Describe in an addendum attached to this Adoption
Agreement. The method specified shall preclude discretion by the
Employer or Affiliate)
J. ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES
(Complete only if an integrated allocation formula is chosen.)
Note: An integrated formula may not be elected if the Employer or an
Affiliate maintains any other plan integrated with social security and
such other plan covers employees who are also participants in the Plan.
INTEGRATION LEVEL (Select one.)
The integration level shall be equal to the taxable wage base or such
lesser amount elected below by the Employer. The taxable wage base is the
maximum amount of earnings which may be considered wages for a year under
Section 3121 (a)(1) of the Code in effect as of the beginning of the Plan
Year.
|_| Taxable Wage Base
|X| $20,000 (a dollar amount less than the taxable wage base)
|_| __________% of Taxable Wage Base (not to exceed 100%)
K. ADMINISTRATIVE ACTIONS
1. PAYOUTS OF SMALL ACCOUNT BALANCES
Employer |X| will |_| will not automatically make a total
distribution of the participant's vested interest if it is $3,500 or
less upon retirement, termination of employment or disability.
2. DISTRIBUTIONS AT TERMINATION OF EMPLOYMENT
|X| A participant |X| may |_| may not take a total distribution of
his/her vested account balance if he/she terminates employment for
reasons other than death, disability, or retirement.
|_| A participant may takes total distribution of his/her vested
account balance if he/she terminates employment for reasons other
than death, disability, or retirement if the total benefit is
$_________ or less.
3. HARDSHIP WITHDRAWALS
Hardship withdrawals |X| shall |_| shall not be allowed under the
Plan.
4. PARTICIPANT LOANS
Plan loans to participants |_| shall |X| shall not be allowed.
If loans are allowed, a minimum loan amount of $____________ shall
apply (Amount cannot exceed $1,000.)
5. PARTICIPANT-DIRECTED INVESTMENTS
*Excluding Def. Bene., Target Bene., Money Pur.
Paticipant-directed investments |_| shall |X| shall not be allowed.
6. ROLLOVERS*
Rollovers of funds, by participants, from other plans to this Plan
|X| shall |_| shall not be allowed.
7. TRANSFERS*
Transfers of funds, by participants, from other plans to this Plan
|X| shall |_| shall not be allowed.
8. HOURS OF SERVICE
Rather than compute service based upon actual Hours of Service, the
Employer may elect to compute service based upon one of the
alternatives listed below. If selected, this method will be applied
to all employees under the Plan. (Check one if desired. If no box is
checked, service will be based upon actual hours worked.)
|_| An employee will be credited with 10 Hours of Service for each
day in which the employee would be credited with 1 Hour of
Service.
|_| An employee will be credited with 45 Hours of Service for each
week in which the employee edited with at least 1 Hour of
Service.
|_| An employee will be credited with 190 Hours of Service for each
month in which the employee would be credited with at least 1
Hour of Service.
L. SPECIAL RULES FOR TOP-HEAVY PLANS (Select one.)
This section must be completed if the Plan is a Top-Heavy Plan (see
definition in Section 3.48 of the Plan Document) and the Employer or an
Affiliate maintains another plan or plans in addition to this Plan (other
than the Bankers Systems Financial Services' UNIPLAN Prototype Money
Purchase Plan and Trust designated Plan 004 and Basic Plan Document 02).
|X| The minimum contribution and benefit requirements of Code Section 416
will be satisfied as provided in Section 5.4 of the Plan Document.
|_| The minimum contribution and benefit requirements of Code Section 416
will be satisfied as provided in the addendum attached to the Adoption
Agreement. (Specify in an addendum attached to the Adoption Agreement
the method for coordinating all such plans with this Plan so that the
minimum contribution and benefit requirements will be met.)
M. FILING PLAN WITH INTERNAL REVENUE SERVICE
The adopting Employer may not rely on an opinion letter issued by the
National Office of the Internal Revenue Service as evidence that the Plan
is qualified under Section 401 of the Internal Revenue Code. In order to
obtain reliance with respect to Plan qualification, the Employer must
apply to the appropriate key district office for a determination letter.
This Adoption Agreement may be used only in conjunction with Basic Plan
Document 02.
N. ADOPTION AND ADVICE
By executing this document, the Employer agrees to be bound by all the
terms and conditions of the Plan (including the Adoption Agreement) and
further certifies and warrants that it has relied on the advice of an
independent adviser as to the legal and tax effects of adopting the Plan.
Failure to properly complete all items on this Adoption Agreement may
result in disqualification of the Plan.
The sponsoring organization will notify the adopting Employer of any
amendments made to the Plan or discontinuance or abandonment of the Plan.
The name, address and telephone number of the sponsoring organization or
its agent is imprinted on the top of the Adoption Agreement.
0. SIGNATURES AND DATE
Executed this 20 day of August, 1997
EMPLOYER
Name of Business First National Bank & Trust Co.
By /s/ Dean D. Key/Dean Key
Its (Title) Vice President/H.R. Director
AFFILIATES (Must be executed on behalf of any Affiliates. Attach addendum
with signatures if more than one Affiliate.)
Name of Business ___________________________________________________
By _________________________________________________________________
Its (Title) ________________________________________________________
P. CUSTODIAN/TRUSTEE (Select one.)
CAUTION: READ INSTRUCTIONS BEFORE COMPLETING.
Instructions: The Financial Institution may act as Custodian, but only if
the Employer and any Affiliates are sole proprietorships or partnerships.
A corporate plan may not use a Custodian. In addition, an individual may
not serve as a Custodian. Select "Financial Institution Trustee" only if
the Financial Institution has full trust powers under applicable state
and/or federal laws. By executing this Plan as Custodian or Trustee, the
Financial Institution warrants and represents that it is qualified to act
as Custodian or Trustee, as the case may be, under all applicable federal
and state laws and regulations.
|_| Financial Institution Custodian
|X| Financial Institution Trustee
|_| Self-Trusteed Plan
CUSTODIAN OR TRUSTEE
Name First National Bank & Trust Co.
Address 204 Washington Ave (P.O. Box 100)
City, State, ZIP Athens, TN 37303 (37371-0100)
Its (Title) /s/ Dallas H. Osborne/Dallas H. Osborne
Assistant Vice President and Trust Officer
Q. SPONSOR
Name First National Bank & Trust Co.
lst Copy - Sponsor (Financial Institution)
2nd Copy - Bankers Systems
3rd Copy - Employer/Plan Administrator
EXHIBIT 21
LIST OF SUBSIDIARIES
The Company owns the following subsidiaries as of December 31, 1998:
PERCENT
VOTING JURISDICTION
NAME STOCK HELD OF INCORPORATION
- --------------------------------------------------------------------------------
BankFirst (1) 100% Tennessee
First National Bank and Trust Company (2) 100% United States
BankFirst Trust Company 100% Tennessee
(1) BankFirst owns the following subsidiaries
as of December 31, 1998:
Curtis Mortgage Company, Inc. 100% Tennessee
Eastern Life Insurance Company, Inc. 100% Tennessee
(2) First National Bank and Trust Company owns
the following subsidiary as of December 31,
1998:
Friendly Finance Company, Inc. 100% Tennessee
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
These schedules contain summary financial information extracted from the
consolidated balance sheets, the consolidated statements of income, and Company
records, and are qualified in their entirety by reference to such financial
statements. All dollar amounts are in thousands, except per share data.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 36,136
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,850
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 127,862
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 501,950
<ALLOWANCE> 6,602
<TOTAL-ASSETS> 748,301
<DEPOSITS> 617,966
<SHORT-TERM> 36,374
<LIABILITIES-OTHER> 9,236
<LONG-TERM> 0
0
905
<COMMON> 28,439
<OTHER-SE> 53,497
<TOTAL-LIABILITIES-AND-EQUITY> 748,301
<INTEREST-LOAN> 47,846
<INTEREST-INVEST> 7,378
<INTEREST-OTHER> 691
<INTEREST-TOTAL> 55,915
<INTEREST-DEPOSIT> 22,734
<INTEREST-EXPENSE> 24,927
<INTEREST-INCOME-NET> 30,988
<LOAN-LOSSES> 1,706
<SECURITIES-GAINS> 124
<EXPENSE-OTHER> 5,007
<INCOME-PRETAX> 10,367
<INCOME-PRE-EXTRAORDINARY> 10,367
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,809
<EPS-PRIMARY> .64
<EPS-DILUTED> .59
<YIELD-ACTUAL> 8.83
<LOANS-NON> 537
<LOANS-PAST> 1,971
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,078
<CHARGE-OFFS> 1,524
<RECOVERIES> 322
<ALLOWANCE-CLOSE> 6,602
<ALLOWANCE-DOMESTIC> 6,602
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,159
</TABLE>
